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US Congress considers bills to boost competition with China

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US Congress considers bills to boost competition with China

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With President Joe Biden’s broader domestic agenda stalled in the Senate, Democratic congressional leaders have begun to seek legislative victories elsewhere, with a new focus on improving the United States’ ability to compete with China.

House Democrats are trying to reach agreement on legislation that would provide deep financial subsidies to the semiconductor industry as well as generous research and development grants to support supply chain resilience , supporting domestic manufacturing operations and supporting new scientific research.

The House effort follows a push in the Senate last year, which resulted in the bipartisan passage of the U.S. Innovation and Competition Act of 2021. That bill proposed $52 billion in assistance to the semiconductor industry as well as nearly $200 billion more for research. and development projects intended to strengthen the competitiveness of the United States.

The House will likely pass its own version of the legislation, which means the two chambers would have to reach agreement on the final language before a bill can be sent to the White House for signing into law. It remains unclear whether any eventual House bill would garner Republican support in this chamber, or whether the compromise language would continue to garner the Republican support that helped the original Senate bill go to a vote. .

But in a statement this week, the president made it clear he would like to see the legislation on his desk.

Biden hailed the “transformational investments” the legislation would make. With the bill, he said, “We have the opportunity to show China and the rest of the world that the 21st century will be the American century – forged by the ingenuity and hard work of our innovators. , workers and enterprises”.

Countering Chinese Subsidies

In Congress, even among conservative lawmakers who generally fear government intervention in the economy, there is recognition of the need to balance the scales of American companies that frequently find themselves in competition with Chinese companies that receive subsidies and other government preferences in Beijing.

When the Senate passed its version of the bill in June, Florida Republican Senator Marco Rubio said, “This kind of targeted investment in a critical industry was unthinkable just a few years ago, but the need of a smart industrial policy is now widely accepted. ”

This surprises many observers of American policy-making.

“There is a kind of ambivalence, or confusion, in DC where, on the one hand, people want to say that China’s industrial policies are both very unfair, and also very important in explaining competitive success. of China,” said senior researcher Gerard DiPippo. in the economics program at the Center for Strategic and International Studies, told VOA. “But then they also seem reluctant to actually engage in these policies because they think these policies are actually very distorting and ineffective. So it goes both ways.

Focus on semiconductors

Despite strong economic growth in the United States over the past year, a persistent shortage of semiconductors has lagged some sectors of the economy, including the automotive industry. Supply chain disruptions caused by the coronavirus pandemic have been difficult to resolve, leading many members of Congress to propose funding to “relocate” domestic semiconductor production.

The Senate bill and the version being considered by the House of Representatives would funnel $52 billion in grants and subsidies to the industry.

However, China is not a major semiconductor competitor to the United States. Although China manufactures some semiconductors, the largest manufacturer in the world is TSMC, Taiwan Semiconductor Manufacturing Corp. in Taiwan.

“Decoupling” perceived as worrying

Some U.S. companies doing business with China are concerned about the two countries’ long-term efforts to achieve economic independence from each other.

“China is upset with efforts to increase export restrictions on U.S. products, block Chinese companies from accessing certain U.S. products, and restrict certain direct investment in China,” said Doug Barry, senior director. of the US-China Business Council, to VOA. email exchange.

“They are concerned about the incentives to relocate production of certain critical goods to the United States. At the same time, China is trying to reduce its dependence on certain goods like advanced semiconductors, while walking slowly promising reform and opening up market access,” Barry said.

“Our members are concerned that these efforts signal a mutual economic decoupling that is not in the long-term interests of either country,” he said. “The two governments must engage in direct talks to better manage differences, adhere to WTO principles and ensure that the commitments of the phase one agreement are fully respected.”

‘Misguided’ government interference

Ryan Young, senior fellow at the Competitive Enterprise Institute, told VOA that Congress’s efforts to mimic China in trying to manipulate the US economy are “misguided” at best, and destructive at worst.

“It falls into what I consider to be the ‘But they do it too’ argument,” Young said. he says, it does not follow that the answer is that the United States does the same.

Despite government support, China’s big tech companies are burdened with substantial debt, operational inefficiencies and political interference, he said.

In addition, Young noted that the semiconductor industry, which legislative efforts are primarily aimed at, has already taken steps to bring some of its production into US territory, with chip giant Intel developing a complex of 50 billion dollar chip manufacturing facilities in Arizona.

US Congress considers bills to boost competition with China

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