Does the America COMPETES Act Really Help America Compete?

February 7, 2022 Updated: February 9, 2022

Commentary

A great aspect of American democracy is that legislation text is transparent and readily available for anyone to review before representatives vote on the bill. With Congress passing the America COMPETES Act on Feb. 4 and heading to the Senate, it is worth going through the legislation and see what is actually in the bill and whether it will help America compete better, specifically against China.

Before starting, there are a couple of limiting parameters in this exercise. First, no outside comments or evidence were used, only the text of the bill and the summary of each section as written by Congress. This means no comments, analysis, or input from either Democrats or Republicans were used. Second, I will use a narrower definition of competing and addressing China than is likely to be used by politicians. By definition, almost anything could be argued to help us compete better, but if we allow anything under that claim, it becomes meaningless. Third, any congressional bill will be imperfect but on balance. Does the bill materially address and move forward the policy concerns the United States has about China? We are not looking for perfection, we are looking for sound targeted legislation that is not a catch-all for every congressional spending desire.

So What Does the America COMPETES Act do?

The bill allocates more than $50 billion toward incentivizing domestic semiconductor manufacturing in the United States. This is a complicated issue. The reality is that sanctions or limitations on firms’ behavior are at best a stalling tactic, and they are actively being courted with lavish incentives by China seeking to obtain physical and human capital. With a global semiconductor shortage impacting American industry, firms with advanced technology are in the position to demand incentives.

Given these constraints, there is a valid debate about how best to deal with this problem. But the problem with the legislation is that it imposes minimal constraints on firms. If semiconductor firms are being implicitly pushed to not deal with China, more stringent terms and conditions should be placed in the legislation on their behavior rather than simply lavishing money.

After the subsidies to semiconductor manufacturers, the bill appears to lose any real focus on China or competition, turning into a motley grab bag of policies. This does not mean any is inherently good or bad as people will have reasonable policy differences, but the remaining 2,800 pages spends only minimal focus on policies directly dealing with China. Of the policies that do not directly deal with China, most are only vaguely linked to increasing competition and make minimal alteration to the policy landscape about how to deal with China, instead of simply providing money for grants and offices.

Epoch Times Photo
Workers are seen inside the production chain at a semiconductor manufacturing factory in Beijing, China, on May 14, 2020. (Nicolas Asfouri/AFP via Getty Images)

Most of the legislation focuses on funding universities’ scientific research on everything from biological research on “plants and microbes” to high energy physics. Though this does not really deal with China and would not begin to change anything for years into the future, at least an argument could be made that funding higher levels of research for advanced science is better for the United States. Where the bill fails is by providing more stringent requirements on universities and researchers in exchange for higher levels of funding.

For instance, other than review of personnel who belong to programs that have malign intent, alluding to China’s Thousand Talents Program that has already been phased out, there are no prohibitions on sharing U.S.-funded research or data with Chinese universities, companies, or even military entities. With universities having fought successfully to hide foreign donor names from public oversight despite black letter law to the contrary, this is an egregious shortcoming of the legislation as it is effectively a research-funding bill. An argument can be made that we should increase funding for research—if we are competing, then that also means who should tighten China’s access to that output.

The parts of the America COMPETES Act that do directly deal with China are rather minimal. Much of the legislation is filled with language reiterating American policy such as calling on China to respect international law in the South China Sea. The direct funding is allocated toward report writing and funding additional positions for work in the State Department and similar activities. Funding additional diplomatic positions is good policy, but it has no material impact on competing with China because it does materially alter the policy landscape or bring material resources to bear where diplomatic personnel are being assigned, for instance, in the Indo-Pacific region.

The bill also spends significant energy engaging in faculty lounge supervision away from anything that could remotely be considered increasing U.S. competition with China. From sexual harassment in science to rural education initiatives, enormous portions of this bill have nothing to do with China and/or more funding of key constituencies.

How to Fix the Deeply Flawed America COMPETES Act?

First, strip out funding and programs not directly tied to countering China. Out of nearly 3,000 pages, probably less than 20 percent directly link to countering China.

Second, attach stringent policy requirements to funding. Increased research funding in fundamental science is a defensible policy position. Not requiring that data and research to remain in the United States’ hands under increased security is nothing less than gross negligence.

Third, push America to take the lead in countering China rather than working through third-party agencies like the United Nations. The legislation gives the U.N. Green Climate Fund $8 billion. I am sympathetic to these objectives having advocated for America to fund a Green New Deal for emerging Asian countries with large energy needs, but would push for this to be funded through American institutions like the non-partisan Development Finance Corporation.

There are some things to like about the America COMPETES Act, but there are a lot of flaws that outweigh the positives. Probably the biggest problem is that the legislation provides significant funding, but no changes to behavior that brought us to where we are at. Without changing behavior, such as flows of U.S.-funded research to China, we will simply be funding the same problems at higher levels.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Christopher Balding was a professor at the Fulbright University Vietnam and the HSBC Business School of Peking University Graduate School. He specializes in the Chinese economy, financial markets, and technology. A senior fellow at the Henry Jackson Society, he lived in China and Vietnam for more than a decade before relocating to the United States.