Capitol Report: Senate passes bill that targets China and chips in 68-32 vote

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The Democratic-run Senate, with some Republican support, passed legislation on Tuesday that targets China and aims to support the American semiconductor industry, in a sign there’s bipartisan agreement on how to approach Beijing and a key U.S. sector.

The wide-ranging U.S. Innovation and Competition Act was approved by a 68-32 vote.

The measure, which incorporates an earlier bill known as the Endless Frontier Act, would provide $52 billion in emergency supplemental appropriations for semiconductor programs and $120 billion for the National Science Foundation, NASA and the departments of commerce and energy, according to Senate Majority Leader Chuck Schumer’s office.

“We should — and we will — pass this historic bill today,” Schumer said in a floor speech on Tuesday before the vote.

“Technology firms

currently make up a quarter — a quarter — of the global stock market
Whoever wins the race to the technologies of the future is going to be the global economic leader, with profound consequences for foreign policy and national security as well,” he added.

The New York Democrat had pushed for the Senate to pass the legislation this week after earlier trying to get it approved by the end of May. Analysts expected the Senate would give its OK, but they have suggested the bill’s fate after that isn’t as clear.

“The larger question is what happens in the House after Senate passage. There is no apples-to-apples companion bill in the House yet,” said analysts at Capital Alpha Partners in a recent note.

“We expect that the administration’s infrastructure plan would be the ultimate vehicle,” the analysts added.

President Joe Biden’s administration and a group of Republican senators led by West Virginia’s Shelley Moore Capito are no longer negotiating on a possible infrastructure

package, though Biden is still aiming to reach a deal on the issue with a different group that includes GOP senators.

The president’s initial infrastructure proposal, with a price tag of $2.3 trillion, had called for $50 billion in aid for the U.S. chip industry amid an ongoing shortage

but then the White House trimmed its package to $1.7 trillion, in part by shifting some of the spending to other pieces of legislation such as the U.S. Innovation and Competition Act. Most recently, Biden last week reportedly said he could accept $1 trillion in new spending.

The U.S. Innovation and Competition Act has drawn flak for being a sprawling bill that has been targeted successfully by lobbyists.

Capital Alpha’s analysts noted the measure “now has provisions on China relations, other international diplomacy matters, spaceflight, 5G wireless, Buy American, cybersecurity and artificial intelligence, drones, medical research, and antitrust filing fees (among many other subtopics).”

“Our favorite extraneous items are country of origin labeling for king crab and tanner crab and a drinking water well replacement for Chincoteague, Virginia,” the analysts said.

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An analysis from the conservative Heritage Foundation said the U.S. Innovation and Competition Act “has many positive elements, but it is weighed down by massive, unnecessary spending mandates, as well as domestic political issues having nothing to do with China,” so the bill “needs a great deal of revision.”

Sen. Todd Young of Indiana is among the Republicans pushing for the Endless Frontier Act. He said in a Fox Business interview last month that the Senate is “considering multiple pieces of legislation with our Endless Frontier Act as the base bill.”

“This is our opportunity to play offense against the Chinese,” Young said. “The Endless Frontier Act, by making these bold investments, will send a very strong message, if we can get this passed out of the Senate floor in the next couple of weeks — which I believe we will, in addition to some other pieces of legislation also pertaining to China and countering China’s malign behavior.”

Meanwhile, Senate Minority Leader Mitch McConnell, the Kentucky Republican, said in a floor speech on Tuesday that the U.S. Innovation and Competition Act has “several smart, targeted measures,” but it “cannot be the Senate’s final word on our competition with China.”

Biden administration officials are “strong supporters” of the Endless Frontier Act, White House press secretary Jen Psaki told reporters last month, adding that they hope that it gets signed into law.

This is an updated version of a report first published on May 20, 2021.

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