Senate Moves Bill to Expand Industrial Policy in Opposition to China

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Senate Moves Bill to Expand Industrial Policy in Opposition to China

Source : AUN News

In Washington, On Tuesday, the Senate voted to advance legislation that includes more than $52 billion in subsidies for businesses that manufacture semiconductors in the United States, taking a step toward completing a comprehensive industrial strategy measure to confront China’s technical and manufacturing dominance.

The 64-to-32 vote was an important milestone in a years-long, bipartisan effort that had seemed to fizzle in recent weeks to build a long-term American plan to compete with China through large expenditures in local manufacturing and scientific research and development.

In defiance of their party’s longstanding opposition to government involvement in the market, 17 Republicans voted to advance the bill, believing that a more activist role was required to boost national security and help American businesses compete with an emerging geopolitical foe.

Senator Chuck Schumer, a Democrat from New York and the majority leader, claimed that the legislation will “reawaken the spirit of discovery, creativity, and optimism that made America the envy of the world.”

The legislation’s passage, which might occur as soon as this week, is crucial in enhancing America’s semiconductor capabilities when the country’s share of current manufacturing capacity has fallen to only 12%. As a result, the government has become more dependent on foreign nations, and a chip shortage has rocked the global supply chain.

The bill, which chip manufacturers vigorously fought in favor of, is anticipated to open the door for developing additional factories around the nation and creating an estimated tens of thousands of jobs.

It should mean that Intel would construct up to eight factories at its Licking County location instead of just two, creating additional jobs at the facility and giving the construction and steel sectors a significant boost in Ohio. This state is fiercely competitive politically. As chip makers develop new sites or increase production at current facilities, similar tales are anticipated to unfold in Texas, Arizona, Idaho, and New York.

Additionally, the law would grant nearly $250 billion to study and develop vital technologies. It was written by Senator Todd Young, a Republican from Indiana, and Mr. Schumer, a New Yorker, to revitalize Midwesterner and New Yorker neighborhoods that had been devastated by corporate offshore.

The measure also creates a new technological directorate whose job is to ensure that advancements made in basic research are translated into practical technologies, in addition to funding $100 billion over five years for the National Science Foundation.

These steps seem to be Beijing’s tardy response to its “Made in China 2025” initiative, which is a crucial part of President Xi Jinping’s plan to master vital technologies and make China independent of the West.

The legislation, like “Made in China,” places a lot of money into future technology research and development while emphasizing semiconductors as a core technology. The list was recognizable: biotechnology, robotics, quantum computing, artificial intelligence, and other fields that seem essential to future competitiveness.

It also prohibits the expansion of existing factories or the construction of new ones in nations like China and Russia by chip manufacturers who accept the federal funds and tax subsidies made available by the legislation to stop the production of advanced chips in countries that pose a threat to national security.

President Biden attempted to boost the law by hosting a Monday virtual conference call with business and labor leaders to showcase its advantages. The action was essential to maintaining the United States as the most economically competitive country in the world, according to the president, who was recovering from Covid-19 and was brought in via video from the White House residence, where he is restraining himself.

He claimed that the CHIPS Act would strengthen the country’s competitiveness and technological edge. Congress needs to enact this legislation as quickly as possible, so I can sign it and get things started.

Few politicians voiced opposition, noting the pressing need to improve the country’s chip manufacturing capacity and lessen its dependency on foreign chips, particularly those from Taiwan.

The bill was opposed by just Senator Bernie Sanders, an independent from Vermont and a member of the Democratic caucus. He claimed that the protracted lobbying campaign by chip makers, in which they threatened to move their operations overseas if Congress did not support the law, amounted to “extortion.”

In Mr. Sanders’ opinion, industrial strategy entails collaboration between the public and private sectors. It does not imply that the government gives profitable firms enormous amounts of corporate welfare in exchange for nothing.

The vote was a sort of comeback for the ambitious law, which just a few weeks prior appeared in danger of being reduced to a one-time injection of public funds, albeit a big one, into a particular industry with minimal limits. That would have dealt with the fight to pass long-term, proactive legislation to oppose China’s last blow.

The legislation’s first challenges occurred as it moved through the Senate when members crammed it full of local initiatives to attract more comprehensive support, significantly expanding its size.

Republicans and Democrats in the House disagreed, claiming that the Senate plan was too prescriptive in identifying specific technologies to invest in. The House passed much distinct science and technology legislation instead of a parallel version.

It took House Democrats eight months to put through a more expansive version of the Senate plan on a largely party-line vote that garnered only one Republican favor, setting up a discussion to reconcile differences between the two chambers. The negotiations were extensive, involving 107 politicians (20% of all members of Congress), who had to reach agreements on more than 1,100 different measures involving trade, international relations, and industrial policy while being battered by a barrage of business lobbying.

Chip executives and their supporters in the car, medical, and defense industries had grown worried about when or if their federal incentives would materialize by the time the group convened its first meeting in May, 11 months after the Senate enacted its bill.

By June, executives from chip companies were yelling in public after pointing out that while Congress was wrangling, identical subsidies had already been granted in Europe, Japan, India, and South Korea. They threatened to move their operations abroad, where building facilities is typically 25% to 50% less expensive than in the US.

Members of Mr. Biden’s cabinet prompted lawmakers to pay attention. Mr. Schumer soon rushed to introduce a limited version of the measure that focused on chip manufacturers’ subsidies and tax breaks.

But after Mr. Young got the backing of 15 of his Republican colleagues, he restored the crucial investments in industry and technology. Mr. Schumer consented to reintroduce those components.

An authority for $19 million to counter threats to the Supreme Court was also buried away in the law.

Analysis by : Advocacy Unified Network

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