With Focus on China, US Senate Passes Major Industrial Policy Bill 

Flashpoints | Diplomacy | Politics | East Asia

If the bill ultimately passes both houses of Congress, it will represent a major shift in how the United States government manages its relations with the tech sector.

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On June 8, the Senate passed a major industrial policy bill that would direct government investment toward critical technological sectors. The bill is intended to foster the reinvigoration of the manufacturing side of the U.S. technology sector, providing alternatives to supply chains dependent on Chinese microchips. Some argue that it also lays the foundation for long-term economic and technological competition with China. 

The bill facilitates massive state investment in the U.S. technology sector, with an eye toward eliminating the supply chain vulnerabilities that the pandemic made plain. Proponents have justified the bill as necessary to countering China’s own industrial policy, the “Made in China 2025” project. The bill represented a rare modern instance of Congressional bipartisanship, as 19 Republicans joined 49 Democrats in supporting the measure. Democrats have historically been more comfortable than Republicans with industrial policy, but the legacy of the Trump administration and the perception of a growing Chinese threat helped convince many GOP senators that significant measures were required.  

Nevertheless, the bill faced criticism from both the right and the left. Conservative Republicans expressed concern about the cost, as well as the prospect of federal government intervention in the economy. Leftist critics, while acknowledging the need for industrial policy, have argued that the bill includes massive corporate giveaways, and that it represents a commitment to confrontation with China. All of these criticisms may play out more forcefully in the House than in the Senate. The House is already considering different versions of the bill. The Senate version faces criticism regarding the lack of significant oversight of the technology companies that will benefit from the bill. However, the extent of bipartisan support in the Senate suggests a big enough coalition to survive negotiations between the House and Senate versions. 

Assuming that some version of the bill eventually passes and is signed into law by President Joe Biden, it represents a major shift in how the United States government manages its relations with the tech sector. Both Republican and Democrats displayed an allergy to industrial policy after the 1970s; that both now seem interested in government intervention is a huge change from the long-standing consensus. The passage of the bill, during a period of nearly unprecedented partisan divide, also suggests that both parties are serious about the long-term threat represented by China’s technology sector. Whether this amounts to a new “Cold War Consensus” is altogether uncertain, but the fact that concern over China can bridge one of the most poisonous political divides in U.S. history should probably cause some concern in Beijing.

Source – thediplomat.com

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