On Friday, Democrats pushed through legislation in Congress that they claim positions the United States to be more competitive with China both economically and on a global stage. This includes strengthening the domestic semiconductor industry as well as shoring up tight supply chains.
The bill was approved by a vote 222-210. This is a significant step in a high priority area of the Biden administration. However, the legislation will likely be heavily revised by negotiators as they reconcile differences with the Senate’s eight-month-old bill. President Joe Biden encouraged lawmakers to quickly reach a deal, saying that “America cannot afford to wait.”
This nearly 3,000-page bill does not include scores of amendments that were added this week. It includes large investments to support semiconductor manufacturing in the U.S. The most important items are $52 billion in grants or subsidies to the semiconductor industry, and $45 billion to improve supply chains for high tech products.
However, Democrats have also included other priorities which raise concerns about the bill’s cost and scope. Rep. Adam Kinzinger, an Illinois Republican, voted for the measure. Rep. Stephanie Murphy, a Florida Democrat voted against it.
The bill contains $8 billion for a fund to assist developing countries adapt to climate change; $3Billion for facilities that make the U.S. less dependent on Chinese solar components; $4Billion to help communities with significantly more unemployment than the national average; $10.5Billion for states to stockpile medical equipment and drugs.
Democrats celebrated the recent jobs report that showed that employers added 467,000 jobs to January. They claimed that the legislation would bring more positive news.
Pelosi stated that the bill they are discussing today is a Jobs Bill, which is a bill to support manufacturing in America.
Democrats have a chance to address concerns of voters about the economy in a time when there is a shortage computer chips, which has resulted in higher prices for electronics and automobiles. Biden used Friday’s White House event to highlight the vote and remind Americans of Intel’s announcement two week ago about building two Ohio-based computer chip manufacturing plants.
Republicans who have for months criticized Democrats for rising inflation have called the measure “toothless” as they believe it is too weak to hold China responsible for various economic and human rights violations. It would also waste taxpayer money on unnecessary programs and environmental initiatives.
Rep. Michelle Fischbach (R-Minn) stated that “this bill is really just a longlist of progressive dream policies which have nothing to do China at all.”
This week, Gina Raimondo, Commerce Secretary, met with House Democratic legislators to discuss the bill. The bill’s $52 billion provision for domestic chip production is her most urgent need due to the impact of global chip shortages on the economy and national security consequences of so many semiconductors being made abroad.
She told reporters Friday that she couldn’t wait any longer. “We are so far behind. Because we rely on Taiwan for our most advanced, cutting-edge chips, we are in a very dangerous position.
Large chipmakers such as Intel or Samsung recently announced plans for new factories in the U.S. Raimondo pointed out that they also indicated that they could “go bigger and faster” with federal assistance.
The $8 billion legislation that will help developing countries cut their carbon emissions and deal with climate change is one of the most critical issues. The fund was established by former President Barack Obama, who pledged $3 billion. However, the current President Donald Trump has withheld $2 billion.
The ranking Republican in the House Foreign Affairs Committee is Rep. Michael McCaul. He called it an “unaccountable UN slush funds” that has provided at least $100 millions to China.
The US’s share in semiconductor manufacturing has been steadily declining from 37% in 1990, to around 12% today. Biden and Congress are working together to reverse this trend. Industry officials claim that it is due to foreign competitors receiving substantial government subsidies.
The supply chain for chips has been strained by the pandemic. Last week, the Commerce Department released a report that showed that some semiconductor products’ median inventories had dropped from 40 days in 2019, to less than five days by 2021. Stakeholders don’t expect the problem to go away over the next six-months, according to the report. The findings were cited by the administration to call for Congress’s action.
Many of the bills reflect tensions with China. The bill acknowledges concerns over the origins and challenges of COVID-19. It directs the president of the United States to submit to Congress a report on the most likely source of the virus, its level of confidence, and the challenges in making such an assessment.
Republicans dismissed the provision saying it was “no independent investigation. No sanctions. No punishment.” They want a committee of lawmakers to investigate the origins COVID-19. Kevin McCarthy, a Republican leader from California, stated that instead of taking action to ensure accountability, the committee will request a report.
A second provision would apply tariffs to lower-cost products manufactured in China. Imports less than $800 are currently exempted by tariffs and expedited processing. The bill removes certain thresholds, including China.
Senate passed the computer chips legislation in June with a vote of just 68 to 32. This is a rare instance of bipartisanship when it comes to major legislation. Negotiators will now attempt to reach a compromise that both chambers can agree on, although it is uncertain if they will do so before the midterm election.
Raimondo demanded swift negotiations with Senate. To be adopted into law, any compromise that emerges must have the support of 10 Republicans from the 50-50 Senate. She expressed confidence that a compromise would be reached.
Raimondo stated, “There are no irreconcilable disagreements, I can affirm that.”
“We’ll send House Republicans an even better option to vote upon in the next couple months,” stated Sen. Todd Young (Republican from Indiana), who collaborated with Senate Majority Leader Chuck Schumer for the Senate’s version.
