by Omar Nashashibi, co-founder, The Franklin Partnership, LLC
The US Congress and American manufacturers are one step closer to developing a domestic industrial strategy to counter China and invest in US supply chains. After months of delay, Democrats in the US House of Representatives released their counterproposal to the Senate’s bipartisan US Innovation and Competition Act (USICA) passed in June 2021 by a vote of 68 to 32. The 2,912-page legislation is titled the “America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act,” or the America COMPETES Act of 2022.
Designed in both chambers to combat China’s rise in manufacturing and technology, most in Washington, D.C. expect President Biden to sign a compromise bill into law by Memorial Day and possibly as soon as March. Following the supply chain challenges in the US starting at the onset of the pandemic, calls to invest more in domestic manufacturing grew on Capitol Hill.
As policymakers dug deeper, they recognized that by some estimates, China is spending up to $150 billion annually on technology investments. The Senate bill allocates $52 billion towards semiconductor manufacturing in the US and includes $100 billion for research and development, job training, education, science and technology. The bill, sponsored by Senate Majority Leader Charles Schumer (D-NY) and Sen. Todd Young (R-IN), creates a new National Science Foundation Directorate of Technology and Innovation
and sets aside $5.2 billion for STEM education and
Most critical for mold manufacturers, the Senate-passed legislation unilaterally extends expired exclusions granted under the Section 301 China tariffs. This would include the lifting, by Congress, of the 25% tariffs currently in place on plastic injection molds. As part of the tariffs installed by the previous administration and continued under President Biden, tariffs are in place on molds, dies and thousands of other Chinese imports. Prior to retaining The Franklin Partnership (TFP), the US Trade Representative (USTR) granted an exclusion request to importers for Chinese plastic injection molds, allowing products to enter the US without the 25% tariffs.
The American Mold Builders Association (AMBA) worked with TFP to develop a coordinated strategy to demonstrate a sufficient capacity to meet demand and have the tariffs on Chinese plastic injection mold imports reinstated. After failing to lift the tariffs through the formal process due to objections from the AMBA and others, importers are working to bypass a process yet to restart and have Congress lift the tariffs on products granted the exclusion, including the plastic injection molds.
The inclusion of this and other tariff provisions in the Senate-passed legislation led to the delays in the US House, as lead drafters of that legislation thought the Senate took too broad an approach. The House’s America COMPETES Act of 2022, also provides $52 billion to incentivize private-sector investments in semiconductor fabrication. The proposal will authorize $45 billion to improve our nation’s supply chains by preventing shortages of critical goods and ensuring that more of these goods are made in the US.
To support these initiatives, lawmakers included grants, loans and loan guarantees to support supply chain resilience and manufacturing of critical goods, industrial equipment and manufacturing technology. The bill also establishes a regional technology and innovation hub program to incentivize partnerships between local governments, colleges and universities, private industry and non-profits.
The US Department of Commerce is taking the lead under the House legislation and was provided $500 million to coordinate with stakeholders and incorporate industry expertise to identify approaches that domestic manufacturers could adopt voluntarily to manage supply chain risks and improve resilience. It will authorize a significant increase in funding and expansion of the Hollings Manufacturing Extension Partnership (MEP) program, including addressing the resilience of domestic supply chains and authorizing two new competitively awarded Manufacturing USA Institutes. The streamlining of trade adjustment assistance for firms and increased funding also will help many small businesses if that provision were to become law.
Manufacturers should welcome this new attention from lawmakers in Washington; the new programs and resources to support the industrial base are an important first step toward implementing a successful industrial policy. The other component is finding workers to produce the products and meet the new demand.
The Federal Government in January 2022 reported manufacturers had 858,000 job openings, and policymakers in Washington have taken notice of these well-paying career opportunities. To help address this shortage, the bill’s authors in the House created an initiative to support translational research and development to help scale up effective pre-K-12 STEM education innovations to improve the alignment
of undergraduate STEM education and training with workforce needs.
Most importantly, the legislation contains the National Apprenticeship Act of 2022, which is a slightly revised version of the National Apprenticeship Act of 2021, a bill the House passed in February 2021 and is pending in the Senate. A top priority for AMBA, the apprenticeship bill allows for the use of competency-based credentials and training in addition to hourly, while expanding funding opportunities for youth programs.
Now that the House has a measure, the real process of negotiating a final bill is underway. Republicans and Democrats in both the House and Senate agree the US must take action to counter the rise of Beijing. The focus is on the size of China’s economy and financial system and the financial risks it poses to global economies without a strong US industrial base and strategy.
The two chambers must first reconcile their differences and approaches, particularly when it comes to trade and the tariffs on China. President Biden is committed to signing a bill addressing supply chains and countering Beijing, which leads most to believe Washington will secure a bipartisan compromise bill this Spring.
Years ago, manufacturers in the US began calling for a coordinated strategy to strengthen the industrial base. While it has taken the rise of another superpower and a global pandemic, the politicians in Washington finally have gotten the message and are taking action.
Omar Nashashibi is a founding partner at The Franklin Partnership, LLC, a bipartisan government relations and lobbying firm retained by the American Mold Builders Association in Washington, D.C.