Congress Tackling Competition with China
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Congress Tackling Competition with China

Brownstein Client Alert, March 24, 2021

Overwhelming bipartisan concern exists in Congress as China continues its growing influence and economic ascendency in critical sectors related to national security, technology and manufacturing. Through the capital injection of hundreds of billions of dollars into research and development, China has made it their top priority to lead in critical technology sectors such as semiconductors, artificial intelligence, quantum computing and robotics, among others.

In response, Senate Majority Leader Chuck Schumer (D-NY) announced during a February press conference that he was directing committee leaders to draft legislation to strengthen U.S. competitiveness with China. Work has begun on a comprehensive package expected to be introduced at the end of this month and potentially considered by Congress in April.

At the heart of the legislative package is the Endless Frontier Act, a bill to increase federal investment in critical and emerging technologies to support U.S. global leadership that was authored by Sens. Schumer and Todd Young (R-IN) during the 116th Congress. The bill would establish a new technology directorate within the National Science Foundation with broad powers to fund research in critical areas where China is outpacing the United States, including artificial intelligence, semiconductors, robotics, cybersecurity and biotechnology. One hundred billion dollars would be set aside over five years to fund these key technologies to increase American competitiveness, with another $10 billion set aside to fund hubs across the country dedicated to these initiatives.

With the Endless Frontiers Act serving as the base of a broader package, other legislation may be included to broaden the scope of influence and appeal of the package. The final legislation has yet to be developed, but overviews of some bills ripe for inclusion are below:

Funding, currently being discussed at $36 billion, may be included for a federal grant program authorized under the FY 2021 National Defense Authorization Act designed to incentivize semiconductor manufacturing and federal investments in semiconductor research. In addition, keep an eye out for language surrounding President Biden’s supply chain executive order, coupled with reforms proposed by congressional leaders to the Department of Commerce’s supply chain authority, including a White House proposal to create an assistant secretary position at the Department of Commerce to oversee development of critical supply chains.

Increasing the chance of bipartisan support for the legislative package, and ultimately passage, is the regular order and open amendment process that the package will follow as Majority Leader Schumer hopes to move the bill off the Senate floor. Importantly, the final scope of technologies and industries that could benefit from the legislation remains open for discussion. Congressional leaders and the business community have an opportunity to make their case of why their priorities should benefit from federal incentives to compete with Chinese industry counterparts. If you are in an industry that is experiencing heightened competition from China, or are threatened by their growing state-backed technological dominance in a certain sector, now is the right time to begin to engage Congress on your concerns and needs.

With an evenly divided Senate and a hyper-partisan atmosphere in Congress, the legislation will face hurdles, but ultimately, curbing Chinese economic influence seems to be one area where both parties in Congress want to make progress, with the full backing of the current administration. We should expect this opening legislative vehicle, focused on three pillars—investing in U.S. competitiveness, supporting allies and partners, and making China pay for coercive behavior—to be introduced in the Senate by the end of March or early April.

This document is intended to provide you with general information regarding upcoming legislation on China. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.

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