The two benches support an industrial development project to avoid the Asian giant's dependence on critical sectors such as microchips.
Both sides of the American political spectrum created a common front in Congress to preserve US hegemony in the face of China's technological competition. Overcoming the usual sharp differences between Democrats and Republicans, the two benches approved this Tuesday in the Senate, as a matter of state, a broad legislative package that seeks to reduce the dependence of the US on the Asian giant. China is President Joe Biden's number one priority. The legislation intends to empower the local industry so that the US is self-sufficient in products such as semiconductors, crucial parts for the activity of the automotive and telecommunications sector. The initiative demonstrates the strategic objective of countering China's competition and the government's intervention in the economy, decried by Republicans so far.
The bill includes a budget of nearly 250 billion dollars (1.26 trillion reais) that will allow, among other actions, to build ten semiconductor factories ―whose deficit slows down industrial activity and threatens recovery. At the end of May, the package surpassed a preliminary vote in the Senate with 68 votes in favor and 30 against, and this Tuesday, it got the definitive green light with an almost identical result (68 x 32). Firmness against China proved to be the only flag that unites a Senate where Democrats have a slim majority. The 2,400-page text must now pass to the House of Representatives (deputies) before being sanctioned by Biden.
The so-called US Innovation and Competition Act is a bipartisan proposal promoted by Democratic Senator Chuck Schumer and his Republican counterpart Todd Young. The project emerged in February, when Schumer, leader of the Democratic majority in the Upper Chamber, proposed the elaboration of a battery of measures to promote the technology sector, industry, and research as an answer to China's challenges, with investments in semiconductors, artificial intelligence, robotics, quantum computing, and other cutting-edge technologies. The draft received contributions from six Senate committees, which shows the bipartisan consensus after years of marked ideological polarization.
Among other measures, the bill allocates $54 billion to the semiconductor industry, nearly $17 billion to research and development to secure energy supply chains, and $10 billion to NASA's human landing system; in all, there is a sum of 195 billion dollars for research and development tasks. In addition, an underlying initiative, still pending, plans to allocate an additional 81 billion dollars to finance from 2022 to 2026, the National Science Foundation, a government agency that is the flagship of technological innovation in the country.
"Right now, the United States has regained control and has moved forward after several years of lagging, at best," Senator Schumer told Axios at the end of May. The veteran Democrat this week recalled that the US has so far allocated less than 1% of its GDP to research and technological development, less than half that of China. "Bipartisan legislation will be the biggest investment in research and innovation in generations, which will allow the US to lead the world in the industries of the future," he said Tuesday.
The bill also opens the door to new sanctions against Beijing for human rights violations in places like Xinjiang, the birthplace of the Uighur minority. In addition, it commissions a recent study on the origin of the coronavirus and proposes a diplomatic boycott of the next Winter Olympics, scheduled for 2022 in China. It even authorizes a specific budget of 300 million dollars to counteract the political influence of the Chinese Communist Party.
It is no coincidence that on the same day the package was approved in the Senate, the White House announced the creation of "a shock force," led by Secretary of Commerce, Gina Raimondo, to counter the short-term shortage of semiconductors and other essential materials in supply chains, that is, to combat the supposed unfair competition from China, to which Washington attributes the problems in the supply of inputs such as neodymium magnets, used in the automotive sector and other industries, whose collection depends on the Asian country.
The decision to create this shock force results from an assessment of critical sectors over 100 days. The investigation revealed four areas susceptible to supply disruption: semiconductor manufacturing, large-capacity batteries, such as those in electric cars, rare minerals, and active pharmaceutical ingredients. They are very different products but with a common denominator: dependence on third parties. A dependency became evident in the initial phase of the pandemic, with insufficient protective equipment and basic sanitary materials monopolized by China.
According to experts quoted Monday by the Financial Times newspaper, the semiconductor shortage is a global phenomenon that doesn't just affect the US. According to experts quoted Monday by the Financial Times newspaper, industry sources say it won't be resolved until mid-2022. With geopolitical consequences of unknown scope, Taiwan could find itself in the eye of the hurricane of Sino-US rivalry, given growing US pressure for Taiwan Semiconductor Manufacturing Company, the most reliable alternative supplier, to ramp up production, something the company considers that will only be possible in 2023, despite its millionaire plans to invest in a factory in Phoenix (Arizona). Also, the American giant Intel recently announced an investment of 20 billion dollars in two new factories in the same state. But the droughts that affect both Arizona and Taiwan are a severe impediment to increasing production, given the need for abundant water to make chips.
The fact that Taiwan becomes a hypothetical flashpoint of rivalry between Beijing and Washington helps to definitively shift the focus of the White House's foreign policy, while loosening ballast in Afghanistan and Iraq and dodging as far as it can from the Palestinian-Israeli conflict to not to speak of the situation in Venezuela, preferring instead to target directly and almost exclusively China and its sphere of influence. Around the tiny microchips, echoes of the Cold War raised to the nth power. "Around the world, authoritarian regimes smell blood," Schumer recently said in the Senate. "They think that democracies like ours cannot unite and invest in national priorities, as an authoritarian, centralized and hierarchical government [like the Chinese] does. So they are rooting for us to fail and thus take over the helm."
An element as small as a semiconductor has turned the global economy upside down, as this law demonstrates, probably the most comprehensive industrial program in US history and certainly since the 1980s, when competition with Japan ―an ally US military, unlike China-led Ronald Reagan to adopt specific small-scale initiatives to boost domestic production, which were then abandoned. But the threat is now more significant. China could use the technology at its disposal to increase surveillance and eventually use it as a weapon in a hybrid war is a possibility that did not happen with Japan. Lastly, the White House extended the veto to 59 Chinese companies suspected of ties to the defense industrial-military conglomerate.
As The New York Times recalled this week, the new law recognizes the Made in China 2025 program, introduced six years ago, and aimed to overcome the Asian country's technological dependence on the outside world. Six years behind schedule, four of them under Donald Trump, Washington is taking the same path, in a race that could decouple the world's two largest economies from the rest, even though global supremacy is at stake. Meanwhile, pressure groups representing the interests of big corporations in Washington are rubbing their hands, waiting for possible contracts.
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