House Democrats are poised to approve legislation Friday that they say positions the United States to better compete with China economically and on the global stage by strengthening the domestic semiconductor industry, shoring up strained supply chains and bolstering international alliances.
Criticizing China has become a bipartisan playbook in Washington but Republicans are panning the measure as “toothless” and short of what is needed to hold the country accountable for a range of economic and human rights actions.
The nearly 3,000-page bill includes massive investments designed to boost semiconductor manufacturing in the U.S. The big-ticket items include about $52 billion in grants and subsidies to help the semiconductor industry and $45 billion to strengthen supply chains for high-tech products.
But Democrats also tucked in other priorities that have raised GOP concerns about the bill’s cost and scope.
It includes $8 billion for a fund that helps developing countries adjust to climate change; $3 billion for facilities to make the U.S. less reliant on Chinese solar components; $4 billion to help communities with significantly higher unemployment than the national average; and $10.5 billion for states to stockpile drugs and medical equipment.
That’s just a sliver of the package, which House Speaker Nancy Pelosi D-Calif., said was needed to ensure “America can out-compete any nation, today and for decades to come.”
The bill gives Democrats a chance to address voter concerns about the economy at a time when a shortage of computer chips has led to higher prices for automobiles, electronics and medical devices. Republicans, who for months have hammered Democrats over rising inflation, say the bill has little to do with winning the economic competition with China and wastes taxpayer dollars on environmental initiatives and other unnecessary programs.
“This bill is actually just a long list of progressive dream policies that have nothing to do with China at all,” said Rep. Michelle Fischbach, R-Minn.
Commerce Secretary Gina Raimondo met with House Democratic lawmakers Wednesday to discuss the bill. She said American manufacturing has been on a decline for more than three decades, leading to a loss of jobs and know-how.
“In the process of that slow atrophy we’ve become incredibly dependent on countries across the world,” Raimondo said. “And, so, what this bill is saying is stop the decline.”
One of the biggest flashpoints is the $8 billion in the legislation to help developing countries reduce their emissions and cope with climate change. President Barack Obama pledged $3 billion toward the fund, but former President Donald Trump withheld $2 billion of that.
Rep. Michael McCaul, the ranking Republican on the House Foreign Affairs Committee, called it an “unaccountable UN slush fund” that has already provided at least $100 million to China.
Meanwhile, America’s share of semiconductor manufacturing globally has steadily eroded from 37% in 1990 to about 12% now. The Biden administration and lawmakers are trying to reverse that trend, which industry officials say is driven by foreign competitors receiving significant government subsidies.
The pandemic has strained the supply chain for the chips. The Commerce Department issued a report last week that found the median inventory of some semiconductor products had fallen from 40 days in 2019 to less than five days in 2021. The report also said stakeholders don’t see the problem going away in the next six months. The administration cited the findings in calling for Congress to act.
Tensions with China are reflected in much the legislation. In a nod to concerns about the origins of COVID-19, the bill directs the president to submit a report to Congress on the most likely origin of the virus, the level of confidence in that assessment and the challenges of making such as assessment.
Republicans dismissed the provision as “no independent investigation, no sanctions, no punishment.” They want a select committee of lawmakers to look into the origins of COVID-19. “Instead of taking action to get a real accountability, it’s going to ask them for a report,” said Republican leader Kevin McCarthy of California.
Another provision would subject more lower-cost products made in China to tariffs. Currently, imports valued at less than $800 are exempted from expedited processing and tariffs. The bill eliminates the threshold for certain countries, most notably China.
“The investments that this bill makes in America — semiconductor manufacturing, supply chains, apprenticeships — enable America to compete effectively with China,” Raimondo said. “If you’re serious about competing with China, you must vote yes on this.”
The Senate passed its computer chips legislation in June by a vote of 68-32, representing a rare bout of bipartisanship on major legislation. If the House bill passes, negotiators would try to work out a compromise both chambers could accept, though it’s unclear they could do so before the midterm elections. That would deprive the Biden White House the chance to show progress on an important economic issue.
Raimondo called for swift negotiations with the Senate once the House bill passes. Whatever emerges will need support from 10 Republicans in the 50-50 Senate to be passed into law. She voiced confidence a compromise could be found.
“There’s no irreconcilable differences, I can say that,” Raimondo said.
“We’ll send House Republicans a much better option to vote on in the next couple of months,” said Sen. Todd Young, R-Ind., who worked with Senate Majority Leader Chuck Schumer on the Senate’s version of the legislation.