26/06/2022

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Senate passes China competition Bill to start talks with House

WASHINGTON (BLOOMBERG) – The Senate on Monday (March 28) passed its version of a long-stalled bill to aid the domestic semiconductor industry and bolster US competitiveness with China, a key step needed to kick off negotiations with the House on final legislation.

The Senate voted 68-28 for the plan, which includes US$52 billion (S$70.82 billion) in grants and incentives to bolster chip manufacturing as well as provisions aiming to jump-start innovation and bring key industries back to the US amid a global supply chain crunch.

“America cannot afford to come in second place when it comes to technologies like 5G, AI, quantum computing, semiconductors, bio-engineering and so much more,” Senate Majority Leader Chuck Schumer said before the vote

“This Bill is a necessary step towards securing the bright future of American ingenuity which has always helped us lead the way.”

Chinese Foreign Ministry spokesman Wang Wenbin said on Tuesday at a regular press conference in Beijing that the Bill “hyped up the China threat theory”.

“The US should work to uphold the stability of global industrial supply chains, including in the semiconductor industry, instead of making issues out of China and seeing China as an imaginary enemy,” he added.

Mr Schumer introduced the original version of the Bill with Senator Todd Young, an Indiana Republican, last year.

Despite backing from the semiconductor industry and the White House, the legislation was left in limbo as the House took a different approach on how to encourage innovation and manufacturing.

The Senate focused on developing new technology while the House emphasised basic research and development.

Both the House and Senate versions of the legislation include US$52 billion in emergency appropriations for semiconductor manufacturers, which have publicly pushed Congress as they prepare to invest in chip manufacturing facilities in states that include Arizona, Texas, Ohio and New York.

Mr Schumer and House Speaker Nancy Pelosi can now begin the process for negotiating a compromise that can draw enough support to pass in both chambers.

But a final measure is unlikely to be completed before the end of May.

The administration has urged Congress to pass the legislation, with President Joe Biden mentioning it during his State of the Union address.

Commerce Secretary Gina Raimondo has recruited a roster of former Trump administration officials to serve as boosters of the measure on Capitol Hill and in the press.

A bipartisan group of supporters including Ms Raimondo, Mr Young and Democratic Representative Doris Matsui of California, a sponsor of the chips funding, hosted former Trump advisers H.R. McMaster, Matt Pottinger and others on a recent call urging Congress to agree on a package that could help the US counter a rising China.

The legislation has attracted opposition from conservatives and progressives alike, who take issue with the legislation’s favourable treatment of companies seeking to invest in US manufacturing.

Senator Ron Johnson, a Wisconsin Republican, questioned why the US would create a new “industrial policy” where the government would invest in semiconductor manufacturing rather than simply slapping tariffs on goods from countries that subsidise their chip-producing industries.

Senator Bernie Sanders, an independent from Vermont who caucuses with Democrats, decried the “corporate welfare” in the legislation during a speech lambasting the chip companies for outsourcing manufacturing jobs over the past two decades.

Mr Sanders said he wanted votes on amendments to make the companies issue warrants or equity stakes if they receive taxpayer support and to eliminate a provision that would benefit Amazon.com Inc. founder Jeff Bezos’ Blue Origin space venture.

“Do we need to expand the enormously important microchip industry in this country so that we become less dependent on foreign nations?” Mr Sanders said. “Absolutely. But we can accomplish that goal without throwing money at these companies with no protections for the taxpayer.”

Representative Michael McCaul of Texas, the lead Republican sponsor of the chips funding, has decried a provision in the House-passed version that would spend US$8 billion over two years for the Green Climate Fund, a United Nations-overseen initiative to help developing countries address climate change, as an “unaccountable UN slush fund”.

The co-chairs of the Congressional Executive Committee on China wrote to the leaders of the House and Senate on Monday urging them to include measures designed to spotlight and combat what they described as human rights abuses in China, including a provision that would impose sanctions on individuals found to be forcing sterilisation and abortions on the Uighur Muslims in the Xinjiang region of China.

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