May 19, 2021

S.1260 – The United States Innovation and Competition Act

NOTEWORTHY

Background: The United States Innovation and Competition Act is comprised of bills reported out of the committees on Commerce, Science, and Transportation; Foreign Relations; Homeland Security and Governmental Affairs; Banking, Housing, and Urban Affairs; Health, Education, Labor, and Pensions; and the Judiciary. It is intended to help address the rising military, geopolitical, and economic competition from China. Notable bills in the package include versions of the Endless Frontier Act, the Strategic Competition Act, and the Meeting the China Challenge Act of 2021.

Floor Situation: On Monday, the Senate voted 86-11 in favor of the motion to invoke cloture on the motion to proceed to S.1260, the Endless Frontier Act. Majority Leader Schumer filed the text of the United States Innovation and Competition Act as an amendment in the nature of a substitute for the EFA. The Senate is expected to consider the legislation over the next two weeks.

Executive Summary: The USICA establishes a Directorate of Technology and Innovation at the National Science Foundation. It authorizes $81 billion for NSF, including $29 billion over five years for the new directorate. It directs the Department of Commerce to designate regional technology hubs across the country, and authorizes $10 billion over five years for these hubs. The bill appropriates $52.7 billion for incentivizing domestic semiconductor fabrication and $1.5 billion for 5G innovation. It takes steps to counter the Chinese Communist Party by addressing China’s political influence in universities, countering predatory economic practices like IP theft, and expanding and strengthening our alliances. The bill requires sanctions against foreign entities or people that the president identifies each year as having supported or engaged in cyberattacks or otherwise undermined U.S. cybersecurity on China’s behalf.

OVERVIEW OF THE ISSUE

China and the U.S. are locked in a competition that in some ways is already beginning to define the 21st century. The Chinese Communist Party sees liberal democracy and the fundamental values of freedom, free enterprise, and the rule of law espoused by democratic nations as a threat to its ascent. China is focusing research and investment on seven “frontier technologies” as it competes for economic superiority with the United States, including artificial intelligence, quantum computing, semiconductors, and space exploration. The country that leads the world in the research, development, design, and manufacturing of emerging technologies will have a significant advantage.

CONSIDERATIONS ON THE BILL

Senator Young has said the Endless Frontier Act “would help invest in innovative small businesses that create jobs, invest in critical emerging technologies, and put America in a position to outgrow, out-innovate, and out-compete our leading geopolitical foe.”

The bill includes Republican-sponsored and cosponsored legislation that focuses on research security, addressing geographic disparity in R&D funding, addressing IP theft and other predatory practices from China, and expanding cooperation with our allies in countering the emerging threat from China.

Some Republicans note the existence of programs focused on technology research and development at the Department of Energy, the Defense Advanced Research Projects Agency, and the National Institutes of Health and question the need for more spending and another federal agency focused on technology R&D.

NOTABLE BILL PROVISIONS

Division A: Chips and O-RAN 5G Emergency Appropriations

Establishes the Creating Helpful Incentives to Produce Semiconductors for America Fund at the Department of the Treasury to carry out sections 9902 and 9906 of the fiscal year 2021 NDAA. Appropriates $24 billion for the fund in FY 2022. Of this, $2 billion is allocated to incentivize investment in facilities and equipment in the U.S. for the fabrication, testing, or advanced packaging of semiconductors at mature technology nodes. It appropriates $7 billion for the fund in FY 2023, $6.3 billion in FY 2024, $6.1 billion in FY 2025, and $6.8 billion in FY 2026.

Establishes the Creating Helpful Incentives to Produce Semiconductors for America Defense Fund at Treasury to provide for research, development, workforce development and other requirements that are unique to the Department of Defense and the intelligence community. Appropriates $400 million per year for the fund in FY 2022 – FY 2026.

Establishes the Creating Helpful Incentives to Produce Semiconductors for America International Technology Security and Innovation Fund at Treasury to provide for international information and communication security and semiconductor supply chain strengthening activities. Appropriates $100 million per year for the fund in FY 2022 – FY 2026.

Appropriates $1.5 billion for the Public Wireless Supply Chain Innovation Fund for fiscal year 2022.

Division B: Endless Frontier Act

Establishes 10 “technology focus areas” for the National Science Foundation to focus on:

  1. Artificial intelligence, machine learning, autonomy, and related advances

  2. High-performance computing, semiconductors, and advanced computer hardware and software

  3. Quantum information science and technology

  4. Robotics, automation, and advanced manufacturing

  5. Natural and anthropogenic disaster prevention or mitigation

  6. Advanced communications technology and immersive technology

  7. Biotechnology, medical technology, genomics, and synthetic biology

  8. Data storage, data management, distributed ledger technologies, and cybersecurity, including biometrics

  9. Advanced energy, industrial efficiency technologies including batteries, and advanced nuclear technologies including for the purposes of electric generation

  10. Advanced materials science, including composites and 2D materials

Title I – NSF Technology and Innovation

Creates a new NSF Directorate of Technology and Innovation to strengthen U.S. leadership in critical technologies, accelerate technology commercialization, and engage more students. The directorate would support research and technology development in key technology focus areas; establish university technology centers, academic technology transfer centers, and technology testbeds; and award scholarships and fellowships to develop the STEM workforce. 

Authorizes $81 billion for NSF, including $29 billion over five years for the new directorate.

Authorizes $9.6 billion from FY 2022 – FY 2026 for university technology centers and innovation institutes to conduct research relevant to the key technology focus areas.

Authorizes $5.2 billion from FY 2022 – FY 2026 for STEM education and workforce development in the key technology focus areas.

Authorizes $4.4 billion from FY 2022 – FY 2026 for research and development awards in the key technology focus areas.

Authorizes $2.9 billion from FY 2022 – FY 2026 for NSF, in coordination with NIST, for the establishment and operation of testbeds.

Authorizes $4.1 billion from FY 2022 – FY 2026 for an NSF program to improve technology transfer in academia, to be carried out in coordination with The National Institute of Standards and Technology.

Requires that intellectual property developed through NSF not be transferred to foreign entities of concern.

Authorizes an increase of $33 million for the NSF inspector general over existing levels.

Authorizes $16.9 billion for the Energy Department from FY 2022 – FY 2026 for research and development and energy-related supply chain activities in the key technology focus areas.

Title II – NSF Research, STEM, and Geographic Diversity Initiatives

Authorizes $52 billion over FY 2022 – FY 2026 for existing NSF activities.

Establishes a Senate-confirmed chief diversity officer at NSF.

Directs the NSF director to establish a five-year pilot program for emerging research institutions to build research and education capacity in partnership with research intensive institutions that received more than $100 million in federal research funding in the last three years.

Reauthorizes and modernizes the NSF Advanced Technological Education program.

Directs the NSF director to establish a series of pilot programs to expand the number of institutions of higher education that can successfully compete for NSF grants.

Offers 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.

Directs the NSF and Department of Commerce to improve STEM education in rural communities and establish a prize competition to encourage innovative ideas to deploy broadband connectivity to rural communities.

Updates considerations for precision agriculture within the NSF’s advanced technology education program and requires the Government Accountability Office to assess precision agriculture innovations. 

Establishes a grant programs for pilot programs for the development of critical minerals and metals in the United States.

Authorizes $100 million annually for FY 2022 through FY 2024 for the grant program.

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

Title III – Research Security

Establishes a Research Security and Policy Office in the Office of the Director responsible for coordinating all research security policy issues for the NSF. Authorizes $5 million for the office per year from FY 2022 – FY 2026.

Requires the OSTP director to contract with an independent organization to establish a Research Security and Integrity Information Sharing Analysis Organization.

Requires the OSTP director and an interagency working group to develop a uniform set of policy guidelines covering federal science agencies that would prohibit all personnel of each covered agency from participating in a foreign government talent recruitment program.

Prohibits all awardees from participating in a Chinese foreign government talent recruitment program.

Requires the NSF director to work with institutions of higher education on initiatives to support IP protection, limit undue influence, and support domestic talent development.

Requires the comptroller general to conduct a study on federal funding made available to foreign entities of concern for research during the past five years.

Requires NSF to develop a plan to identify research areas that may contain sensitive information and to provide for background screening for individuals employed or funded by NSF.

Title IV – Regional Innovation Capacity

Directs the Department of Commerce to designate regional technology hubs across the country to support regional economic development in innovation. Authorizes $10 billion over five years for the hubs.

Requires agency heads, in consultation with the secretary of commerce, to establish policies to promote domestic production of technologies developed by the Manufacturing USA Network.

Authorizes $2.4 billion for The Manufacturing Extension Partnership over FY 2022 – FY 2026.

Authorizes $1.2 billion for the Manufacturing USA Program over FY 2022 – FY 2026.

Creates a National Manufacturing Advisory Council.

Title V – Miscellaneous

Requires a report to Congress of an interagency economic security strategy in conjunction with each national security strategy.

Prohibits Chinese military entities from participating in the programs authorized under this legislation.

Requires the National Academies to study what are the top 10 technology areas of highest importance and recommend federal action to address them.

Requires the comptroller general to submit a report to Congress on the global semiconductor supply shortage and its impact on U.S. manufacturing.

Establishes a supply chain resiliency program at the Department of Commerce to mitigate or address supply chain vulnerabilities, including for semiconductors.

Authorizes $2 billion in additional financial incentives for manufacturing semiconductors at mature technology nodes, with priority for critical manufacturing industries, such as the automotive industry.

Applies Davis-Bacon requirements to the financial incentives.

Creates an Office of Manufacturing and Industrial Innovation Policy at the White House, headed by a Senate-confirmed chief manufacturing officer.

Authorizes $50 million for the office over FY 2022 – FY 2026.

Creates a grant program for telecom workforce training at the Office of Minority Broadband Initiatives.

Authorizes $100 million for this grant program over FY 2022 – FY 2027, specifies that at least 30% of grant funding go to historically Black colleges and universities, and at least 30% go to tribal colleges and universities.

Requires country of origin labeling for products sold on the internet.

Authorizes $35 million to the National Telecommunications and Information Administration to expand internet access to rural areas and tribal lands through the establishment of internet exchanges facilities and submarine cable landing station grants.

Prohibits the Federal Communications Commission from transferring, assigning, or disposing of construction permits and station licenses to an entity that is subject to undue Chinese government influence.

Prohibits the secretary of commerce from removing Huawei technologies from the entity list unless the secretary certifies that Huawei does not pose an ongoing threat to the U.S. or allied critical infrastructure.

Authorizes $50 million to the NTIA to create a testbed to develop open network architecture technologies and applications and increase U.S. participation in international standards-setting bodies.

Requires NSF to develop a biennial report on the funding provided to foreign entities. 

Prohibits funds to institutions of higher education that maintains an agreement with a Confucius Institute. 

Develops a public access policy for research papers across all federal agencies.

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

Requires NSF to fund grants to accelerate Unmanned Maritime Systems Research.

Title VI – Space Matters

Directs the Commerce Department to conduct civil and commercial space situational awareness and basic space traffic management programs and authorizes $20 million for an SSA center of excellence.  

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

Authorizes $10 billion for NASA’s Human Landing System for FY 2022 – FY 2026.

Extends authorization for the International Space Station through 2030 and directs NASA to take steps to grow the space economy.

Requires the United States to maintain a continuous human presence in low-Earth orbit through and beyond the useful life of the ISS.

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

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

Division C: Strategic Competition Act of 2021

Title I – Investing in a Competitive Future

Authorizes the U.S. State Department to provide assistance to U.S. companies with global supply chain diversification and management issues related to China.

Authorizes $75 million from FY 2022 – FY 2026 for the establishment of the Infrastructure Transaction and Assistance Network to advance the development of infrastructure in the Indo-Pacific region.

Authorizes $10o million from FY 2022 – FY 2026 for the establishment of the Digital Connectivity and Cybersecurity Partnership to help countries expand digital infrastructure and strengthen cybersecurity.

Authorizes $300 million from FY 2022 – FY 2026 for the Countering Chinese Influence Fund to address the influence of the Chinese Communist Party globally.

Authorizes $106 million for the Fulbright Hayes Program.

Authorizes $100 million for programs to support and build independent Chinese media and combat Chinese disinformation, and $170 million from FY 2022 – FY 2026 to support freedom of the press.

Authorizes the Committee on Foreign Investment in the United States 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.

Implements post-employment restrictions on senior State Department officials to bar them from working for foreign governments.

Title II – Investing in Alliances and Partnerships

Expresses political will of the U.S. to continue to strengthen security relationships with allies and partners and groups like the Quad in the Indo-Pacific region.

Creates a Technology Partnership office within the State Department to advance technology cooperation with other advanced democracies. 

Emphasizes the importance of use of sanctions and restrictions in the competition with China.

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

Urges Taiwan to increase its defense spending and emphasizes a strong U.S. commitment to Taiwan’s implementation of its asymmetric defense strategy.

Calls for the inclusion of Taiwan in international bodies like the U.N., W.H.O., and others.

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

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

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

Prioritizes advanced capability development with Indo-Pacific allies and partners and encourages cooperation within national technology and industrial base countries.

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

Authorizes funding for the Asia Reassurance Initiative Act through FY 2026.

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

Authorizes the U.S. governor to the Inter-American Development Bank to vote in favor of a 10th general capital increase to help counter predatory bilateral lending.

Supports engaging and enhancing relationships with our allies and other countries around the globe to counter Chinese government influence.

Title III – Investing in Our Values

Authorizes $10 million for the State Department to promote democracy in Hong Kong.

Imposes sanctions on China for forced labor, forced abortion and sterilization, and other human rights abuses against Uyghur and other Muslim minorities.

Directs U.S. representative at the UN to oppose countries who have committed serious human rights abuses joining the Human Rights Council and to push for other relevant reforms.

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

Requires a report on corruption among Chinese officials.

Repeals the sunset for the Global Magnitsky Human Rights Act.

Title IV – Investing in Our Economic Statecraft

Requires State, Commerce, the United States trade representative, and the director of national intelligence to identify Chinese state owned entities that have benefitted from intellectual property theft and forced technology transfers.

Requires a report on subsidies provided by the Chinese government to Chinese companies.

Requires U.S. to engage with international financial institutes on issues surrounding debt relief, particularly those countries most economically effected by the COVID-19 pandemic.

Requires 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.

Authorizes the secretary of state to deploy economic defense response teams to assist countries facing the threat or use of coercive economic measures by another country.

Title V – Ensuring Security Strategy

Requires the U.S. to produce a strategy for engaging Russia and China in strategic arms control.

Highlights China’s growing nuclear arsenal and related capabilities, and advocates for the U.S. to pursue arms control negotiations with China while also maintaining U.S. extended nuclear deterrence and working with allies and partners on pursuing appropriate defense capabilities.

Division D: Homeland Security and Governmental Affairs Committee Provisions

Title I – Ensuring Domestic Manufacturing Capabilities

Requires all federal agencies to identify programs that are not currently in compliance with domestic procurement rules.

Requires all federal agencies to use domestic procurements for iron, steel, manufactured products, and construction materials in any project funded by a federal financial assistance program for infrastructure. The requirement can be waived if the agency gives a written justification of why the outcome would be inconsistent with the public interest in a particular case, the use of domestic products would increase the overall cost by more than 25%, or the necessary materials are not reasonably available from U.S. suppliers.

Creates an office within the Office of Management and Budget to be known as the Made in America Office.

Establishes BuyAmerican.gov as the central federal website for information about domestic content rules, and requirements waivers to domestic content laws to be posted on the website for brief informal comment before such laws can be granted.

Requires the Departments of Homeland Security, Health and Human Services, and Veterans Affairs to issue long-term contracts to produce personal protective equipment with domestic producers unless they certify that it is necessary to do otherwise in response to immediate needs of a public health emergency.

Title II – Cyber and Artificial Intelligence

Requires the Office of Management and Budget to develop principles and policies for the use of artificial intelligence in government.

Instructs OMB to require 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.

Authorizes the director of the Cybersecurity and Infrastructure Security Agency, in consultation with the national cybersecurity director, to declare that a significant incident has occurred. Authorize the director to conduct and coordinate asset response activities to mitigate the incident.

Establishes a Cyber Response and Recovery Fund for coordination, response, and recovery efforts. Authorizes $20 million for the fund in FY 2022, which shall remain available until 2028.

Title III – Personnel

Establishes 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.

Establishes a cyber workforce program for qualified federal employees to rotate among federal agencies. Sets details to a rotational position at not less than 180 days and not more than one year.

Title IV – Other Matters

Prohibits federal agencies from procuring covered unmanned aircraft systems from covered foreign entities including entities domiciled in China or subject to influence from the Communist China Party.

Prohibits the use of the social network and application TikTok on government devices.

Requires DHS to produce a report on national critical infrastructure risks and to develop a national critical infrastructure resiliency strategy to address the risks identified by the report.

Establishes 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.

Authorizes the State Department to deny admission to aliens who take actions to acquire export-controlled goods, technology, or sensitive information and for whom acquiring such things would be contrary to an articulable national security, including economic security, interest.

Division E: Meeting the China Challenge Act Of 2021

Title II – Protecting United States National Security

Subtitle A – Sanctions with Respect to People’s Republic of China

Recommends 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.

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

Requires sanctions against foreign people or entities that the president identifies each year as having stolen U.S. trade secrets, provided financial or other support for such theft, or benefitted from such theft. The sanctions are similar to the ones the bill imposes against people or entities that undermine U.S. cybersecurity.

Subtitle B – Export Control Review and Other Matters

States that it is U.S. policy to use export controls to protect internationally recognized human rights. The bill requires the commerce secretary to review items that are subject to controls for crime control reasons and decide if more export controls are necessary to protect human rights. It establishes authority for end use controls related to human rights abuses.

Prohibits CFIUS from reviewing or investigating gifts that a foreign person gives to an institution of higher education or a contract that the school has with a foreign person, if it is not a covered transaction under the Defense Production Act.

Title III – Reports

Requires the president to report on Chinese state-owned enterprises that are committing or facilitating human rights abuses, including toward the Uyghurs or 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 SOEs, certain Communist 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. This report will include legislative or administrative recommendations.

Division F: Other Matters

Title I – Competitiveness and Security for Education and Medical Research

Subtitle A – Department of Health and Human Services Programs

Requires the disclosure of participation in foreign talent programs as a condition of receiving biomedical research funding from HHS.

Requires HHS along with the National Institutes of Health, Department of State, Department of Defense, and other appropriate national security experts, to ensure biomedical research that it supports that involves the sequencing of human genomic information and collection of sensitive information is done in a manner that considers national security risks.

Requires the NIH director to consult with the national security adviser and other appropriate agencies regarding research conducted or funded by the NIH that may affect national security.

Requires recipients of NIH funding to have in place and adhere to technology practices that protect identifiable and sensitive information.

Requires HHS 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 and other applicable threats.

Subtitle B – Elementary and Secondary Education

Establishes a new competitive grant program aimed at helping states increase the postsecondary STEM education available for high school students. The programs must provide at least 12 credit hours or the equivalent coursework toward a degree or a recognized postsecondary credential for an in-demand industry or occupation. Authorizes such sums as may be necessary for FY 2022 – FY 2026 for the program.

Establishes 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 students who are underrepresented in the computer science field. Authorizes such sums as may be necessary for FY 2022 – FY 2026 for the program.

Subtitle C – Higher Education

Sets transparency requirements for colleges with a Confucius Institute. The Department of Education and the National Academies must ensure that 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 do not comply would be ineligible for federal funding other than Title IV federal student aid. This expires September 20, 2027.

Requires institutions of higher education 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 threshold for reporting is lowered from $250,000. The bill also requires 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.

Title II – Committee on the Judiciary Provisions

Reduces filing fees for merger notifications to the Federal Trade Commission for mergers involving a total value of less than $1 billion, and creates several tiers of higher filing fees for mergers above $1 billion. Mergers of $5 billion or more, for example, are subject to a $2.25 million filing fee. The fees will be indexed to inflation in future years.

Authorizes $252 million for the Antitrust Division at the Department of Justice and $418 million for the FTC.

Title III – Miscellaneous

Require the secretary of commerce to work with partners at all relevant government agencies to conduct a comprehensive study into the underlying factors driving a slowdown in entrepreneurship.

ADMINISTRATION POSITION

The administration has released a Statement of Administration Policy supporting passage of the Endless Frontier Act.

COST

The Congressional Budget Office has not released a cost estimate for this bill.