Democrats and GOP are working collectively on a invoice towards China because the US suffers from a microchip scarcity

Senate Majority Leader Chuck Schumer, a Democrat from New York, speaks during a press conference after the weekly lunch on Democratic Senate politics on Capitol Hill in Washington, DC on Tuesday, April 27, 2021.

Al Drago | Bloomberg | Getty Images

These days, it can feel like there are very few topics that Democrats and Republicans agree on. That is, of course, unless someone proposes a bill to challenge Beijing’s growing global influence.

The US Innovation and Competition Act of 2021, a sweeping law expected to cost about $ 200 billion, seeks to do just that.

The bill was put together by Senate Majority Leader Chuck Schumer, DN.Y., and has united senators on both sides of the political aisle behind a set of provisions to encourage American research and technology manufacturing that is critical to economic and national US security interests.

The scope of the bill, the end result of contributions from at least six Senate committees, reflects the many fronts of rivalry between the U.S. and China as well as the urgency of a global semiconductor shortage affecting automakers, home appliance manufacturers, and phone makers.

Subject to definitive changes, the proposal would:

Dedicated $ 52 billion to support domestic semiconductor manufacturing; Authorized $ 81 billion to the National Science Foundation from FY 2022 to FY 2026; Authorized $ 16.9 billion to the Department of Energy during the same period for research and development and energy-related Supply chains in key technology areas. Approval of US $ 10 billion for NASA’s Human Landing Systems program

Most of the 1,400-page plan is a proposal previously known as the Endless Frontier Act.

Now, a change to that provision by Schumer and Senator Todd Young, R-Ind., Would breathe new life into the National Science Foundation, which provides $ 81 billion for the NSF between fiscal 2022 and 2026, and a directorate of technology and innovation set up.

Directorate would ensure that NSF funds are used to develop critical technologies, including artificial intelligence, high performance computing, robotics and semiconductors.

“This legislation will put our country on the path to outperform the world in the industries of the future, to produce and to compete,” said Schumer on Monday from the Senate.

“So far this bill has been scrutinized a bit, but it’s an incredibly important piece of legislation,” he added. “At its core, the US Innovation and Competition Act is about maintaining America’s role as a global business leader. Few issues could be more important.”

Some Senators believe Schumer’s schedule is ambitious in the face of a number of Republican amendments and haggling over some existing provisions, although it is widely expected that the bill will clear the Chamber at some point in the coming weeks.

For example, Senator Rand Paul, R-Ky., Has expressed support for an amendment to freeze American funds in China for research that increases the lethality of viruses. This is an implicit endorsement of the theories that Covid-19 escaped from a laboratory in Wuhan province.

Meanwhile, Republican Senator John Cornyn of Texas last week blew up an amendment made by Democrats Gary Peters and Debbie Stabenow of Michigan that federal contractors must pay their employees what are known as wages.

Despite the last-minute problems, Schumer remained optimistic as of Monday that the upper chamber can pass the measure until the end of the week. The Senate is scheduled to take a break next week. So if they cannot be ready by Friday, work on the legislation will be suspended until the week of June 7th.

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The seemingly inevitable trip to the House of Representatives is another reminder of the near-universal goal between the Biden administration and lawmakers to keep the US competitive in its economic and geopolitical feud with China.

Earlier this year, the White House began a government-wide review of key supply chains, instructing much of the executive branch to assess how dependent the US is on a key group of Chinese exports.

Many technologies that are critical to the US company’s future – electric vehicles, smart cities, faster computers, and cutting edge weapons – are made possible in large part by shipments of rare earths mined in China.

For example, Apple uses rare earths in its speakers and cameras and makes its phones vibrate.

According to the US Geological Survey, China supplied 80% of the rare earths imported by the US between 2016 and 2019.

Should economic competition accelerate or geopolitical tensions in the South China Sea intensify, national security advisers say it is imperative for the US to continue producing these technologies without trading with China.

For years, China has tried to assert its sovereignty over the South China Sea and the Paracel Islands, where Beijing has built missile bases, radars and an airfield. The US, seeking to challenge China’s interventions, often sends naval ships through the region to demonstrate their firepower.

While China does not have a technological advantage in manufacturing semiconductors, its geographic proximity to those who do so is also a potential problem.

Foundries using the most advanced manufacturing processes known as 5 nanometer knots are exclusively operated by Samsung in South Korea and Taiwan Semiconductor Manufacturing Company in Taiwan.

This is likely a primary reason the Senate bill also includes $ 52 billion in incentives for semiconductor companies to build new factories in the US, a priority identified by Sens. Mark Warner, D-Va. And Cornyn is supported.

The bill would fund a Department of Commerce-administered grant program that would, to an unspecified extent, balance state and local government financial incentives for chipmakers to upgrade or build new factories.

“If a state were to offer a company a benefit to build a foundry, the federal government would do so,” said Clete Willems, partner at Akin Gump law firm, whose clients include members of the chip industry.

Willems, a former trade official in the Trump and Obama administrations, said chipmaker Intel has extensive chip manufacturing capabilities in the US but tends to produce for its own established supply chains.

“We’re really good at semiconductor design; we’re really good at intellectual property. But we don’t really do that much here,” he said. “We don’t have a lot of new foundries for you to call and order and they can supply anyone.”

Modern chip factories can cost tens of billions of dollars and must be equipped with machines that can shape circuits that are only several atoms wide. Although the final amount the federal government will provide for such semiconductor grants has not yet been determined, Willems said it could be around $ 10 billion.

While Schumer may find it easier to find support for the plan thanks to the involvement of so many senators, legislation in the House could get a little tougher.

This is because some sections have better steered their dislike of the Chinese government towards pro-American targets, while other senators have adopted a more aggressive tone.

For example, the Strategic Competition Act approves $ 1.5 billion over five years for the Countering Chinese Influence Fund to counter the Chinese Communist Party’s malevolent influence around the world.

Authors Sens. Robert Menendez, DN.J., and Jim Risch, R-Idaho, of the Committee on Foreign Relations have made it clear that their goal is the disinformation spread by the Chinese government and material endeavors the US and undermine their allies.

But some progressive Democrats, like Minnesota MP Ilhan Omar, may object to what they see as a growing trend among US lawmakers to blame China for the country’s diseases.

Rep. Ilhan Omar (D-MN) will hold a press conference at the U.S. Capitol in Washington on July 25, 2019, to discuss legislation to create a “Federal Grant Program to Help Local Governments Invest in Waste Reduction Initiatives.”

Mary F. Calvert | Reuters

“We need to distinguish between legitimate criticism of the Chinese government’s human rights record and a Cold War mentality that uses China as a scapegoat for our own domestic problems and demonizes Chinese Americans,” Omar tweeted on Wednesday. “Racism has no place in political debates.”

Menendez and Risch representatives did not respond to CNBC’s requests for comment.

The Strategic Competitions Department also calls for a boycott of the 2022 Beijing Olympics by US officials, not athletes, and calls for an end to “ongoing human rights violations by the Chinese Communist Party, including the Uyghur genocide.”

House Speaker Nancy Pelosi, D-Calif., Last week expressed her support for a diplomatic boycott, saying, “We cannot pretend there is nothing wrong with the Olympics in China.”

Despite the possibility of objections from a handful of House lawmakers, Willems says large parts of the Senate bill are expected to receive broad support from both parties in both houses.

And that, in contrast to heated and polarizing discussions about infrastructure spending, could be one of the final glimpses of teamwork on Capitol Hill in 2021.

“I think you can still get a coalition for it because it plays with most of the members,” he said on Monday morning. “It’s about increasing the US’s competitiveness vis-à-vis China, but also vis-à-vis the rest of the world.”

“Given the context, some of these articles will still be incredibly popular,” he added.

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