US Senate greenlights $190bn tech competitiveness plan

Chinese tech companies such as Huawei and ZTE have frequently been used as proxies for their home country in the ongoing trade war between the US and China. Republicans and Democrats – which have otherwise agreed on little else – have taken a tough line against Beijing, and there has been considerable continuity between former President Donald Trump’s aggressive stance and that of President Joe Biden.

Among his first announcements in office, Biden promised to support the growth of industries for designing and manufacturing critical technologies domestically, particularly semiconductors and telecommunications hardware. At present, these areas are dominated by a small number of corporations, with manufacturing centred on East Asia, raising concerns about supply chain security (particularly in the context of the global chip shortage). The US share of global semiconductor manufacturing has fallen from 37 per cent in 1990 to 12 per cent today.

Biden aims to boost high-tech manufacturing in the US in order to establish resilient supply chains independent of China for national security purposes.

Now, the US Senate has approved a package of legislation aiming to boost US competitiveness in the tech sector to compete with China, while supporting the Covid-19 economic recovery. It authorises – among other funds – approximately $190bn to strengthen domestic R&D, such as with the establishment of a new AI and quantum science directorate with the National Science Foundation. Separately, an emergency fund of $54bn will be set aside for the commerce department to boost US production and research into semiconductors and telecommunications hardware. Most spending will occur in the next five years.

Commerce Secretary Gina Raimondo has said that the funding could support the creation of seven to 10 new chipmaking plants in the US. According to Senate Majority Leader Chuck Schumer, a Democrat, the US spends less than 1 per cent of GDP on basic research: less than half of what China does.

“The premise is simple: if we want American workers and American companies to keep leading the world, the federal government must invest in science, basic research, and innovation, just as we did decades after the Second World War,” he said. “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.

“If we do nothing, our days as the dominant superpower may be ending. We don’t mean to let those days end on our watch. We don’t mean to see America become a middling nation in this century.”

Senate Minority Leader Mitch McConnell supports the legislation but said he would have liked more Republican-sponsored amendments to have been included: “Final passage of this legislation cannot be the Senate’s final word on our competition with China. It certainly won’t be mine,” he said.

The bipartisan legislation was passed with a 68-32 procedural vote and will now go to the House of Representatives – which already approved an earlier iteration – before being passed to the White House for executive approval. The bill includes several other provisions related to China, such as prohibiting ByteDance-owned TikTok from being installed on government devices, blocking the purchase of drones from companies backed by the Chinese government, and permitting diplomats and Taiwanese military to display their flag on official business.

President Biden said: “We are in a competition to win the 21st century, and the starting gun has gone off. As other countries continue to invest in their own research and development, we cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth.”

The foreign affairs committee of China’s legislature, the National People’s Congress, criticised the passing of the bill, describing it as displaying a “Cold War mentality” and interfering in the country’s internal affairs.