Bolstering U.S. Economic & Geopolitical Competitiveness to Counter the Rise of China (S. 1260)

What is S. 1260?

(Updated September 27, 2021)

This bill — known as the United States Innovation and Competition Act — would aim to bolster U.S. competitiveness in economic, geopolitical, and military domains amid the rise of the People’s Republic of China (PRC). The package features several notable bills, including the Endless Frontier Act, Strategic Competition Act, and the Meeting the China Challenge Act of 2021. It would invest about $250 billion in a variety of initiatives, and a breakdown of the package’s major provisions can be found below.

CHIPS and O-RAN 5G Emergency Appropriations

This section would establish funds at the Treasury Dept. known as the Creating Helpful Incentives to Produce Semiconductors (CHIPS) funds along with a wireless technology fund, including:

• CHIPS for America Fund and appropriate $24 billion for the fund in fiscal year 2022; $7 billion in FY2023; $6.3 billion in FY2024; $6.1 billion in FY2025; and $6.8 billion in FY2026. Of the total, $2 billion would incentivize investment in facilities and equipment in the U.S. for the fabrication, testing, or advanced packaging of semiconductors at mature technology nodes. 

• CHIPS for America Defend Fund to provide for research, development, workforce development, and meet other requirements unique to the Dept. of Defense and intelligence community. It would receive $400 million annually for the fund in the FY2022-2026 period.

• CHIPS for America International Technology Security and Innovation Fund to provide for international information and communication security and semiconductor supply chain strengthening activities. It would receive $100 million annually for the FY2022-2026 period.

• The Public Wireless Supply Chain Innovation Fund would also be established at the Treasury Dept. and funded with $1.5 billion for FY2022.

Endless Frontier Act

This section would establish 10 “technology focus areas” for the National Science Foundation (NSF) to focus on, including: 1) Artificial intelligence, machine learning, autonomy, and other advances; 2) High-performance computing, semiconductors, and advanced computer hardware; 3) Quantum information science; 4) Robotics and advanced manufacturing; 5) Natural and anthropogenic disaster prevention or mitigation; 6) Advanced communications and immersive technology; 7) Biotechnology, medical technology, genomics, and synthetic biology; 8) Data storage, management, distributed ledger technologies, and cybersecurity (including biometrics); 9) Advanced energy, industrial efficiency technologies including batteries, and advanced nuclear technologies; and 10) Advanced material science, including composites and 2D materials.

NSF Technology and Innovation: A new NSF Directorate of Technology and Innovation would be created to strengthen U.S. leadership in critical technologies, accelerate commercialization, and engage more students. The directorate would support research and technology development in key focus areas; establish university technology centers, academic technology transfer centers, and award scholarships and fellowships to develop the science, technology, engineering, and math (STEM) workforce. 

This section would require that intellectual property developed through NSF not be transferred to foreign entities of concern. It would also authorize the following over the FY2022-2026 period:

• $81 billion for NSF, including $29 billion for the new directorate.

• $9.6 billion for university technology centers and innovation institutes to conduct research relevant key technology focus areas.

• $5.2 billion for STEM education and workforce development in the key technology focus areas.

• $4.4 billion for research and development awards in the key technology focus areas.

• $4.1 billion for an NSF program to improve technology transfer and academia in coordination with the National Institute of Standards and Technology (NIST).

• $2.9 billion for NSF to coordinate with NIST in establishing and operating testbeds.

• $16.9 billion for the Dept. of Energy for research and development and energy-related supply chain activities in key technology focus areas.

NSF Research, STEM, and Geographic Diversity Initiatives: This section would authorize $52 billion over the FY2022-2026 period for existing NSF activities, and also reauthorize and modernize the NSF Advanced Technological Education program. It would also: 

• Establish a Senate-confirmed chief diversity officer at NSF.

• Implement a National Engineering Biology Research and Development Initiative to advance societal well-being, national security, sustainability, and economic productivity.

• Create a five-year pilot program for emerging research institutions to build capacity in partnership with research intensive institutions. 

• Establish pilot programs to expand the number of institutions of higher education that can compete for NSF grants.

• Offer scholarships to undergraduate and graduate students studying AI and related fields in exchange for service in the public sector equal to the period of time of their scholarship upon completion of their degree.

• Direct NSF and the Commerce Dept. to improve STEM education in rural communities and establish a prize competition to encourage innovative ideas to deploy broadband connectivity to rural communities.

• Establish a grant program for pilot programs for the development of critical minerals and metals in the U.S. funded with $100 million annually for FY2022-2024.

Research Security: This section would establish a Research Security and Policy Office responsible for coordinating all research security policy issues for the NSF and authorize $5 million for the office annually over the FY2022-2026 period.

Regional Innovation Capacity: This section would direct the Commerce Dept. to designate regional technology hubs across the country to support regional economic development in innovation and authorize $10 billion over five years for the hubs. Agency heads would be required to establish policies in consultation with the commerce secretary that aim to promote domestic production of technologies within the Manufacturing USA Network. Additionally, this section would:

• Authorize $2.4 billion for the Manufacturing Extension Partnership over FY2022-2026.

• Authorize $1.2 billion for the Manufacturing USA Program over FY2022-2026.

• Create a National Manufacturing Advisory Council.

Miscellaneous: This section of the bill would:

• Require a report to Congress on interagency economic security strategy in conjunction with national security strategy.

• Prohibit Chinese military entities from participating in the programs authorized under this bill.

• Prohibit funding to institutions of higher education that maintain an agreement with a Confucius Institute, which have been linked to the Chinese Communist Party and used for foreign influence operations.

• Prohibit federal agencies from advancing political positions in awarding grants for scientific research.

• Prohibit the Federal Communications Commission from transferring, assigning, or disposing of construction permits and station licenses to entities subject to undue Chinese government influence.

• Prohibit the commerce secretary from removing Huawei technologies from the entity list unless the secretary certifies that Huawei no longer poses an ongoing threat to U.S. or allied critical infrastructure.

• Require country of origin labeling for products sold on the internet.

• Require prevailing wages be paid under the Davis-Bacon Act for financial incentives paid under this bill.

• Require the NSF to fund grants to accelerate Unmanned Maritime Systems research.

• Establish a supply chain resiliency program at the Commerce Dept. to mitigate or address supply chain vulnerabilities, including for semiconductors.

Space Matters: This section would direct the Commerce Dept. to conduct civil and commercial space situational awareness and basic space traffic management programs and authorize $20 million for an SSA center of excellence. It would also:

• Authorize NASA’s activities, including exploration, science, aeronautics, STEM education, and technology missions.

• Authorize $10 billion for NASA’s Human Landing System for FY2022-2026.

• Extend authorization for the International Space Station through 2030 and direct NASA to take steps to grow the space economy.

• Require the U.S. to maintain a continuous human presence in low-Earth orbit through and beyond the useful life of the ISS.

• Direct NASA to improve its planetary defense measures in order to protect Earth from asteroids and other near-Earth objects.

• Authorize NASA aeronautics research, including X-plane flight demonstration programs, efficient propulsion concepts, and advanced composites.

Strategic Competition Act

Investing in a Competitive Future: This section would authorize the State Dept. to provide assistance to U.S. companies with global supply chain diversification and management issues related to China. It would also authorize:

• $300 million from FY2022-2026 for the Countering Chinese Influence Fund to address the influence of the Chinese Communist Party globally.

• $170 million from FY2022-2026 for programs to support freedom of the press, in addition to $100 million for programs to support and build independent Chinese media and combat Chinese disinformation.

• $100 million from FY2022-2026 for the establishment of the Digital Connectivity and Cybersecurity Partnership to help countries expand digital infrastructure and strengthen cybersecurity.

• $75 million from FY2022-2026 to establish the Infrastructure Transaction and Assistance Network to advance development of infrastructure in the Indo-Pacific region.

Additionally, the Committee on Foreign Investment in the U.S. (CFIUS) would be authorized to review certain foreign gifts to and contracts with colleges and universities, including those that would provide potential access to critical technologies or influence over university departments, centers, or programs. Post-employment restrictions on senior State Dept. would be implemented to bar them from working for foreign governments.

Investing in Alliances and Partnerships: This section would express the political will of the U.S. to continue to strengthen security relationships with allies and partners and groups like the Quad (the U.S., Australia, India, and Japan) in the Indo-Pacific region. It would emphasize the importance of sanctions and restrictions in the competition with China, and establish a technology partnership office to advance technology cooperation with other advanced democracies.

With regard to Taiwan, this section would:

• Declare the U.S.-Taiwan relationship as a vital part of U.S. Indo-Pacific strategy and reinforce commitments to Taiwan under the Taiwan Relations Act and the “Six Assurances.”

• Urge Taiwan to increase its defense spending and emphasize a strong U.S. commitment to Taiwan’s implementation of its asymmetric defense strategy.

• Call for the inclusion of Taiwan in international bodies like the United Nations, World Health Organization, and others.

Additionally, this section would:

• Require an unclassified U.S. government report on the origins of the COVID-19 pandemic.

• Authorize additional funding and an action plan to increase State Dept. personnel and resources devoted to the Indo-Pacific, including $2 billion for bilateral and regional assistance and $1.3 billion for diplomatic engagement.

• Authorize additional funding for international military education and training and foreign military financing for the Indo-Pacific region. 

• Prioritize advanced capability development with Indo-Pacific allies and partners and encourage cooperation within national technology and industrial base countries.

• Authorize U.S. representatives at international development banks to oppose additional assistance to China.

• Authorize funding for the Asia Reassurance Initiative Act through FY2026.

• Increase maximum contingent liability for the Development Finance Corporation from $60 billion to $100 billion.

• Support engaging allies and other countries around the globe to counter Chinese government influence.

Investing in Values: This section would impose sanctions on China for forced labor, forced abortion and sterilization, and other human rights abuses against Uyghur and other Muslim minorities. It would also direct the U.S. representative at the United Nations to oppose countries which have committed serious human rights abuses joining the Human Rights Council and push for other relevant reforms. Further, this section would:

• Repeal the sunset for the Global Magnitsky Human Rights Act, which allows financial and entry sanctions on foreign individuals engaged in human rights abuse or corruption.

• Authorize $10 million for the State Dept. to promote democracy in Hong Kong.

• Advocate for a diplomatic boycott of the 2022 Winter Olympics in Beijing.

• Require a report on corruption among Chinese officials.

Investing in Economic Statecraft: This section would require the Commerce Dept., State Dept., the U.S. Trade Representative, and the Director of National Intelligence (DNI) to identify Chinese state-owned entities that have benefited from intellectual property theft and forced technology transfers. It would also require a report on subsidies provided by the Chinese government to Chinese companies; along with a review of the presence in U.S. capital markets of Chinese companies that have contributed to undermining U.S. national security or serious human rights abuses. 

The U.S. would be required to engage with international financial institutes on issues surrounding debt relief, particularly those countries most economically impacted by the COVID-19 pandemic. The secretary of state would be authorized to deploy economic defense response teams to assist countries facing the threat or use of coercive economic measures by another country.

Ensuring Security Strategy: This section would require the U.S. government to produce a strategy for engaging Russia and China in strategic arms control. It would also highlight the expansion of China’s growing nuclear arsenal and related capabilities; advocate for the pursuit of arms control negotiations with China while the U.S. maintains extended nuclear deterrence and works with allies and partners on appropriate defense capabilities.

Ensuring Domestic Manufacturing Capabilities: All federal agencies would be required to identify programs that aren’t currently in compliance with domestic procurement rules. Federal agencies would be required to use domestic procurement for iron, steel, manufactured products, and construction materials in any project funded by a federal financial assistance program for infrastructure. That requirement could be waived if the agency gives written justification of why the outcome would be inconsistent with the public interest in a particular case, the use of domestic products would increase overall cost by more than 25%, or the necessary materials aren’t reasonably available from U.S. suppliers.

A Made in America Office would be created within the Office of Management and Budget. BuyAmerican.gov would be established as the central federal website for information about domestic content rules, and waivers to domestic content laws would be required to be posted on the website for brief informal comment before such laws can be granted. 

The Depts. of Homeland Security, Health and Human Services, and Veterans Affairs would be required to issue long-term contracts to produce personal protective equipment with domestic producers unless they certify it’s necessary to do otherwise in response to immediate needs of a public health emergency.

Cyber and Artificial Intelligence: The Office of Management and Budget (OMB) would be required to develop principles and policies for using artificial intelligence in government. OMB would instruct the head of each federal agency to prepare and maintain an inventory of the artificial intelligence use cases of the agency, including current and planned uses.

This section would authorize the director of the Cybersecurity and Infrastructure Security Agency (CISA) in consultation with the national cybersecurity director to declare that a significant incident has occurred. The director would be authorized to conduct and coordinate asset response activities to mitigate the incident. A Cyber Response and Recovery Fund for coordination, response, and recovery efforts would be established and $20 million would be authorized for the fund in FY2022, which would remain available until 2028.

Personnel: This section would establish requirements for a federal re-skilling program to provide federal employees with the technical skill or expertise to serve in a different position in federal service that requires such technical skill or expertise. A cyber workforce program would be established for qualified federal employees to rotate among federal agencies, and details to a rotational position would be at least 180 days and no more than one year.

Other matters: This section would:

• Prohibit federal agencies from procuring unmanned aircraft systems from certain foreign entities, including those domiciled in China or subject to influence from the Chinese Communist Party.

• Prohibit the use of the social network and application known as TikTok on government devices.

• Require the Dept. of Homeland Security to produce a report on national critical infrastructure risks and develop a national critical infrastructure resiliency strategy to address risks identified by the report.

• Establish a Federal Research Security Council to assess the risks posed by bad state actors and people to the security and integrity of U.S. research and development. 

• Authorize the State Dept. to deny admission to non-citizens who take actions to acquire export-controlled goods, technology, or sensitive information and for whom acquiring such things would be contrary to the interests of national security or economic security.

Meeting the China Challenge Act of 2021

Protecting U.S. National Security: This section would recommend that the president use all existing authorities to impose sanctions to combat malign actions by the Chinese government, people, or entities that the government owns or controls. 

It would also require sanctions on foreign entities or people who the president identifies each year as having supported or engaged in cyberattacks or otherwise undermined cybersecurity on China’s behalf. The sanctions against individuals would block property transactions and make them ineligible for visas, admission, or parole into the U.S. Sanctions against entities would include blocking Export-Import Bank assistance, loans from U.S. financial institutions, visas to corporate officers, and banking or property transactions.

Sanctions would be required against foreign individuals or entities that the president identifies as having stolen U.S. trade secrets, provided financial support for such theft, or benefited from such theft. The sanctions would be similar to those imposed on people or entities that undermine U.S. cybersecurity.

Export Control Review: This section would state that it’s U.S. policy to use export controls to protect internationally-recognized human rights. It would require the commerce secretary to review items that are subject to controls for crime control reasons and decide if more export controls are necessary. CFIUS would be prohibited from reviewing or investigating gifts that a foreign person gives to an institution of higher education or a contract the school has with a foreign person if it isn’t a covered transaction under the Defense Production Act.

Reports: This section would require the president to report to Congress on Chinese-state owned enterprises that are committing or facilitating human rights abuses, including against the Uyghurs and other religious or ethnic minorities, as well as those engaged in forced or child labor, or actions that undermine Hong Kong’s autonomy. The president must identify these state-owned enterprises, certain Chinese military companies, and their subsidiaries with a market capitalization of at least $5 billion and assess whether they have received any U.S. government financial assistance in the past five years.

Competitiveness and Security for Education and Medical Research: This section would require the disclosure of participation in foreign talent programs as a condition of receiving biomedical research funding from HHS. HHS, the National Institutes of Health, along with the Depts. of Defense and State would be required to ensure biomedical research involving the sequencing of human genomic information and other sensitive information is done in a manner that considers national security risks.

The NIH director would be required to consult with the national security adviser and other relevant agencies regarding research conducted or funded by NIH that may affect national security. Recipients of NIH funding would be required to have in place technology practices that protect identifiable and sensitive information. 

HHS would be required to identify ways to improve the protection of intellectual property and other trademarked information, as well as participants’ identifiable information in biomedical research and development from national security risks.

Elementary and Secondary Education: A new competitive grant program would be established to encourage states to increase the postsecondary STEM education available for high school students. Such programs would have to provide at least 12 credit hours or equivalent coursework toward a degree or a recognized postsecondary credential for an in-demand industry or occupation. This section would authorize such funds as may be necessary for FY2022-2026 for the program.

A new state competitive grant program aimed at increasing K-12 students’ access to computer science education and opportunities to develop computational thinking skills, including those underrepresented in the computer science field. This section would authorize such funds as may be necessary for FY2022-2026 for the program.

Higher Education: Colleges with a Confucius Institute would be required to comply with transparency requirements. The Dept. of Education and National Academies would be required to ensure the school’s agreement with the Confucius Institute protects academic freedom, prevents foreign laws from applying to the school, and gives the school full management of the institute. Alternatively, the school may make the agreement publicly available. Schools that don’t comply would be ineligible for federal funding other than Title IV federal student aid. These requirements would expire September 20, 2027.

Institutions of higher education would be required to disclose foreign gifts and contracts each year that are worth $50,000 or more either alone or when combined with other gifts or contracts from the same foreign government, individual, or entity. This would lower the current reporting threshold, which is $250,000. The bill would also require new foreign gift reporting for faculty and staff involved in research and development at institutions of higher education that have more than $5 million in annual research expenditures to combat espionage.

Miscellaneous: The secretary of commerce would be required to work with partners at all relevant government agencies to conduct a comprehensive study into the underlying factors driving a slowdown in entrepreneurship.

Amendments

The following amendments were adopted during consideration of the bill:

Crapo (#1562): This amendment contains several sections which are summarized below:

• Trading Consistent With American Values: This section would require investigations of goods allegedly produced by forced labor; designate censorship as a trade barrier and expedite discriminatory digital trade measures taken by major U.S. trading partners; provide support for intellectual property rights infringement cases; improve anti-counterfeit measures; require a report on China’s use of Hong Kong to circumvent U.S. trade laws; and assess industrial overcapacity in the People’s Republic of China. 

• Ensuring Resiliency in Critical Supply Chains: This section would facilitate trade in essential supplies in the Strategic National Stockpile, including medical supplies and critical infrastructure items; and establish a supply chain database and toolkit for U.S. businesses to use on a voluntary basis.

• Improving Transparency and Administration of Trade Programs: This section would enhance congressional oversight of the U.S. Trade Representative and the Dept. of Commerce; protect personally identifiable information contained in manifests from public disclosure; and update the authority of Customs and Border Protection to consolidate, modify, or reorganize customs revenue functions.

• Promoting American Competitiveness: This section would temporarily suspend and reduce tariffs on a wide variety of goods, ranging from engine blocks to industrial chemicals to coconut water to footwear and sporting goods.

Paul (#2003): This amendment would prohibit U.S. funding for “gain of function” research on viruses in China.
Ernst (#1507): This amendment would prohibit U.S. funding for the Wuhan Institute of Virology.
Sasse (#2023): This amendment would instruct the Defense Advanced Research Projects Agency (DARPA) to conduct research in key technology focus areas identified by this bill.
Daines (#1787): This amendment would direct the president to enforce intellectual property provisions of the economic and trade agreement between the U.S. and China.
Coons (#1588): This amendment would establish the Foundation for Energy Security and Innovation.
Tillis (#1517): This amendment would require the voluntary collection of demographic information for patent inventors.

Argument in favor

This bipartisan legislation would ensure the U.S. remains a global leader amid competition from China by investing in research and technologies that will enhance America’s economic and national security for the next century. It would also implement policies that will strengthen alliances needed to counter the Chinese Communist Party’s efforts to reshape the rules-based international order to suit its goals.

Argument opposed

The federal government should not be attempting to direct scientific and technological research in an effort to bolster America’s competitiveness relative to China by spending more than $200 billion. Alternatively, the U.S. should stop trying to compete with China in economic and technological development and instead ought to focus on taking diplomatic steps to appease the Chinese Communist Party.

Impact

Federal agencies; research institutions; U.S. companies; the American workforce; U.S. allies and partners, including Taiwan; and the Chinese Communist Party and affiliated entities.

Cost of S. 1260

A CBO cost estimate is unavailable.

Additional Info