U.S. Congress seeks way forward for stalled China bill with chips funding

By Patricia Zengerle

WASHINGTON (Reuters) -Sweeping legislation to boost U.S. competitiveness with China and fund much-needed semiconductor production passed the Senate with bipartisan support in June but has stalled in the House of Representatives as backers struggle to find a way to pass it.

Although President Joe Biden’s Democrats control both chambers of Congress, House members said they wanted to write their own bill, not consider the Senate-passed U.S. Innovation and Competition Act, or USICA.

Five months later, the House has not voted on its own bill nor taken up USICA. And with a packed legislative agenda there is scant time to do so in 2021.

The Senate passed USICA by 68-32. The measure was a rare legislative foray into industrial policy, authorizing $190 billion to strengthen U.S. technology and research, and an additional $54 billion to increase U.S. production and research into semiconductors and telecommunications equipment.

China says USICA distorts facts and is based on “cold war thinking.” Chinese foreign ministry spokesman Zhao Lijian told a daily briefing in Beijing on Monday that it would harm relations. “China has always resolutely opposed this,” he said.

Sources told Reuters that China has been pushing U.S. executives, companies and business groups to fight against USICA and other China-related bills in Congress.

A worldwide shortage of computer chips is crimping production of everything from gaming consoles to vehicles. Money in USICA would help expand manufacturing.

Many issues addressed in USICA, including trade and human rights, are expected to feature at Monday’s virtual summit between Biden and Chinese leader Xi Jinping.

A House Democratic leadership aide would not give a timeline for House consideration of the measure, saying only there are still areas where the House and Senate must resolve differences.

Adding provisions to defense bill

Many senators are shifting their focus toward including USICA provisions in other legislation expected to pass within weeks, such as the National Defense Authorization Act, or NDAA, a must-pass annual defense policy bill.

On Sunday, Senate Majority Leader Chuck Schumer said in a letter that the Senate would likely take up NDAA this week and “may add the Senate-passed text of USICA to the NDAA.”

He added that “would enable a USICA negotiation with the House to be completed alongside NDAA before the end of the year.”

The House Foreign Affairs Committee advanced a China bill in July, but all 20 committee Republicans opposed the “Ensuring American Global Leadership and Engagement Act,” or Eagle Act. There has been no word on timing of a vote in the full House.

The Eagle Act is narrower than USICA, focusing on foreign policy. It also includes provisions, such as on climate, that Republicans said they will not support.

But generally, the desire for a hard line on China is one of the few truly bipartisan sentiments in Congress. Lawmakers and aides from both parties worry the bill could slip well into 2022 if something does not change quickly.

Senator Tim Kaine, a Democrat on both the foreign relations and armed services committees, expressed frustration. “I was happy to see this legislation pass the Senate in June on a broadly bipartisan basis and strongly urge the House to take it up swiftly and send it to the president’s desk without delay,” he said in a statement.

“It is critical Congress pass strong, bipartisan legislation to address the generational threat posed by the Chinese Communist Party,” said Representative Michael McCaul, the top Republican on the House Foreign Affairs Committee.

(Reporting by Patricia Zengerle, additional reporting by Michael Martina and David Shepardson; Editing by Chris Sanders, Dan Wallis and Lisa Shumaker)