Congress Weighs Countering China on Chips, But GOP Wary of Cost

Republicans in Congress say they’re willing to work with Senate Majority Leader Chuck Schumer to counter China’s economic clout and address a global shortage of semiconductors, but the price tag of a Democratic-led proposal may drive away GOP support.

Schumer and Republicans have been discussing proposals to fund semiconductor research and development, as well as science and technology to compete with the government subsidies that Beijing offers its companies. Yet Republicans have been wary that the final proposal could end up costing a lot more than anticipated.

President Joe Biden included the China-related proposals in a sweeping $2.25 trillion infrastructure plan he unveiled in Pittsburgh on Wednesday, even though the bigger package has been broadly rejected by Republicans.

“American Jobs Plan is the biggest increase in our federal non-defense research and development spending on record,” Biden said in a speech in Pittsburgh. “It’s going to boost America’s innovative edge in markets where global leadership is up for grabs, markets like battery technology, biotechnology, computer chips, clean energy, competition with China in particular.”

Biden’s announcement could complicate efforts to build Republican support because it feeds into concerns that the bill will be a Democratic domestic wish list disguised as competition with China, one congressional aide said.

Schumer still plans to wrap several China-related bills into one standalone package that would go through a bipartisan committee debate and amendment process starting later this month, an aide to the New York Democrat said. This includes a $50 billion investment in semiconductor manufacturing and research, as well as $50 billion for the National Science Foundation to create a technology directorate.

If the congressional debate gets bogged down in committee, however, Democrats may decide to add the bill into the broader infrastructure bill.

Both Republicans and Democrats say the U.S. must counteract China’s explicit plans to challenge U.S. economic and technological might, a priority made increasingly urgent by a global shortage of chips that has idled U.S. automotive plants and disrupted the production of other consumer electronics. On Wednesday, the Ford Motor Co. cited the chip shortage when it said it had to idle production of its popular F-150 truck for two weeks, starting April 5.

But Senator Todd Young, an Indiana Republican, and others in his party have made clear to Schumer that adding more spending or additional proposals to the China bill is a potential obstacle to Republican support and Schumer has acknowledged the challenge, people familiar with the discussions said. The overall price tag currently stands at $100 billion, spent over five years.

GOP Frustration

Behind the scenes, some Republicans have been frustrated that they haven’t been able to get their ideas into the legislation, according to a person familiar with the matter. At the same time, the White House has begun reaching out to individual GOP senators amenable to working on bipartisan initiatives to find out what it would take to get a package over the finish line, the person said.

In the end, Republicans may be hard-pressed to vote against anything that hits back at China. Yet while some Democrats seem to bank on their GOP colleagues facing such a dilemma, Republicans are holding out for the final language to voice their support.

“We’ll see the specifics of what’s in it,” said Senator Ted Cruz of Texas. “I try to avoid making commitments on legislation until I actually see what it says.”

The bill will largely focus on science and technology funding and also appropriate money for semiconductor research and development, though many senators have advanced other proposals that could also make it into the package.

More than half a dozen committees are writing their portions of the legislation and the plan is to introduce the package next month.

Biden is supportive of that spending, and his White House has been engaged with lawmakers and foreign governments on the shortfall. The White House has also held discussions on the China-related provisions with several members of the House and Senate, including Young, an administration official pointed out.

The official said there may be some areas where Congress is able to move more quickly because lawmakers have already teed up certain pieces of legislation and the White House would encourage those efforts.

‘Own the Future’

Investing in American innovation -- in an effort to compete with China -- is also in line with Biden’s broader infrastructure proposal.

“The future lies in who can, in fact, own the future as it relates to technology, quantum computing, a whole range of things, including in medical fields. And so what I’m going to do is make sure we invest closer to 2%,” he said last week during his first formal press conference since taking office.

“So I see stiff competition with China. China has an overall goal, and I don’t criticize them for the goal, but they have an overall goal to become the leading country in the world, the wealthiest country in the world, and the most powerful country in the world. That’s not going to happen on my watch because the United States are going to continue to grow and expand.”

Semiconductor companies reeling from the global shortage expect funding for research and development grants that were authorized in the last defense spending bill. Biden has said he supports the roughly $30 billion for chips and his White House has been engaged with lawmakers and foreign governments on the shortfall. Senior Biden administration officials have been pleading with the Taiwanese government to allocate some of the capacity to supply U.S. automakers that had to idle production at multiple plants in North America.

Taiwan Semiconductor Manufacturing Co., the world’s leading manufacturer of advanced semiconductors, announced Thursday that it plans to spend $100 billion over the next three years to expand its chip fabrication capacity, a staggering financial commitment to address booming demand for new technologies.

The chips industry has also lobbied for refundable tax credits, but those won’t be included in the Schumer package because of a rule that requires revenue-related provisions to originate in the House, people familiar with the discussions said.

Senator Marco Rubio, a Florida Republican who has filed a number of bills related to China in recent years, said many of the proposals that will be included have bipartisan support and that the legislation could receive overwhelming approval. “There’s a lot of really good ideas out there that I think could be added to a comprehensive piece of law that I think would enjoy, if not unanimity, certainly 90-something votes,” Rubio said.

Senator Jim Risch of Idaho, the top Republican on the Foreign Relations Committee, said during a committee meeting last week that he was concerned about Chinese political influence in the U.S. and that any legislation would have to address Chinese efforts to steal intellectual property from universities and other research institutions.

“If we are going to invest more in R&D in the United States, we have to make sure we are protecting the results,” he said. “If we don’t have anything strong and actionable on political influence, we’re missing a big part of the problem.”

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