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The combined legislation Senate committees have crafted to address the United States’ (U.S.) technology industry debuted in the Senate.
One of the few things on which Republicans and Democrats can agree is that action is needed against the People’s Republic of China (PRC).
Cocktail Party
The Senate is moving closer to sending a massive package to the House that would provide more than $50 billion for semiconductor incentives and programs and authorize more than $100 billion for a range of research and development programs. The impetus for the legislation is to ensure the U.S. maintains its place as the dominant power around the globe, especially in areas where the PRC has been encroaching. The House has started work on its own bill with an uncertain timeline.
Meeting
The Senate Majority Leader has pulled together a number of bills into a lengthy package of provisions that would ask the Biden Administration with implementing many new programs and initiatives. Odds of Senate passage look good, and the House may follow suit with its own bill soon. A conference committee could hammer out a final compromise bill.
Geek Out
Senate Majority Leader Chuck Schumer (D-NY) filed the consolidated tech bill, named the “United States Innovation and Competition Act of 2021” as a substitute amendment to S.1260. This new bill brings together the “Endless Frontier Act” (S.1260), the “Strategic Competition Act Of 2021” (S.1169) the “Securing America’s Future Act” (i.e., a number of bills the Senate Homeland Security and Governmental Affairs Committee marked up and reported out), and the “Meeting The China Challenge Act Of 2021.”
The impetus for the bill is succinctly explained in the U.S.-China Economic and Security Review Commission’s recent annual report to Congress:
In China’s most recent industrial policy wave, set by the 2016 Innovation-Driven Development Strategy, which includes the Made in China 2025 plan, policymakers have promoted the development of China’s digital ecosystem and accompanying regulatory architecture. The CCP believes China faces a rare historic opportunity to establish control over a cluster of revolutionary, networked technologies, including high-speed internet, sensors, telecommunications, artificial intelligence, robotics, and smart city infrastructure. Doing so could allow Beijing to leapfrog the United States and other powerful competitors and lead in the next generation of global innovation.
The Congressional Research Service (CRS) created this infographic to explain the PRC’s focus for the Made in China 2025 plan:
CRS further stated:
- The plan prioritizes upgrading manufacturing through advances in technology innovation (smart manufacturing) and manufacturing-tied services. Specifically, China aims to:
- By 2025. Boost manufacturing quality, innovation, and labor productivity; obtain an advanced level of technology integration; reduce energy and resource consumption; and develop globally competitive firms and industrial centers.
- By 2035. Reach parity with global industry at intermediate levels, improve innovation, make major breakthroughs, lead innovation in specific industries, and set global standards.
- By 2049. Lead global manufacturing and innovation with a competitive position in advanced technology and industrial systems. (This date coincides with the 100th anniversary of the founding of the People’s Republic of China.)
It is against the backdrop of PRC plans to leapfrog the U.S. in key technologies, this legislation has come together. Of course, there are a number of other U.S.-PRC issues the bill addresses, and many non-PRC specific technology provisions.
There appears to be broad support for this package. Earlier this week, the Senate voted 86-11 on a key procedural vote, suggesting widespread support for the package. If it clears the Senate, it will go to the House, which will likely add provisions of its own, necessitating a reconciling of the two bills.
Yesterday, I covered Titles A, B, and C (i.e. the CHIPS Act (P.L. 116-283), the “Endless Frontier Act” (S.1260), the “Strategic Competition Act Of 2021” (S.1169)).
Before we turn to Titles D and E, the “Securing America’s Future Act” and the “Meeting The China Challenge Act Of 2021,” it bears mention and some discussion that a House committee has started working on counterpart legislation. On 13 May, the House Science, Space, and Technology Committee’s Research and Technology Subcommittee marked up the National Science Foundation for the Future Act (H.R.2225), a bill that would reauthorize National Science Foundation (NSF) programs and increase the authorization of appropriations for the NSF up to $72.65 billion. In a future piece, I’ll get into this bill, especially since it may be the vehicle for the House’s counterpart to the “United States Innovation and Competition Act of 2021.” And, should that be the case, House Republicans are already clamoring to ensure they will be able to shape such a bill. In a letter written to Speaker of the House Nancy Pelosi (D-CA) and House Majority Leader Steny Hoyer (D-MD), all the Ranking Members of House Committees asked:
As Congress considers actions regarding strategic competition with China, we write to urge you to move any such legislation through the House of Representatives under a process of regular order, and that we do not waste this opportunity to develop strong and thoughtful policy by shoehorning it through using reconciliation. As Ranking Members of the Committees engaged in this work, we believe it is vital that any such legislation be developed in a bipartisan, bicameral, open, and transparent process.
Typically, the party that controls the House seeks to first craft a bill members of its party can accept and then seek minority input, often on issues of broad agreement. It has occurred that the majority party has shut out the minority party altogether (e.g. House Republican’s 2017 legislation to repeal and replace the Patient Protection and Affordable Care Act.) It may come to pass that House Democratic leadership works with its committee chairs and key blocs to develop a bill that is brought straight to the floor and Republicans would only get to propose the amendments on which Democrats will allow votes.
In any event, turning back to the United States Innovation and Competition Act of 2021, Title D is the package of bills the Senate Homeland Security and Governmental Affairs Committee marked up earlier this month. The first section is titled the “Build America, Buy America Act,” (Subtitle A) that sets domestic content preferences for a range of infrastructure programs that U.S. agencies finance in whole or in part. “Infrastructure” is widely defined to include broadband and electrical transmission facilities and systems. Within six months of enactment, “the head of each Federal agency shall ensure that none of the funds made available for a Federal financial assistance program for infrastructure, including each deficient program, may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the United States.” There is a waiver process in case such materials are not available or produced in sufficient quantities. The Office of Management and Budget (OMB) “shall promulgate final regulations or other policy or management guidance, as appropriate, to standardize and simplify how Federal agencies comply with, report on, and enforce the Buy American Act.” If enacted before an infrastructure bill with funding for broadband, these provisions would likely be applicable and any recipients of funds would need to buy American products and materials or seek waivers.
Subtitle B of the first section has been titled the “BuyAmerican.gov Act of 2021,” that would require the General Services Administration (GSA) to establish a website to “include information on all waivers of and exceptions to Buy American laws since the date of the enactment of this Act that have been requested, are under consideration, or have been granted by executive agencies and be designed to enable manufacturers and other interested parties to easily identify waivers.” This website “website shall also include the results of routine audits to determine data errors and Buy American law violations after the award of a contract” and “provide publicly available con- tact information for the relevant contracting agencies.”
The next relevant section of Title D is the “Advancing American AI Act.” OMB would receive additional direction in drafting guidance for federal agencies in using AI as detailed in the FY 2020 omnibus appropriations bill[1] (P.L. 116-260.) Specifically, OMB would need to consider—
- the considerations and recommended practices identified by the National Security Commission on Artificial Intelligence in the report entitled ‘‘Key Considerations for the Responsible Development and Fielding of AI’’, as updated in April 2021;
- the principles articulated in Executive Order 13960 (85 Fed. Reg. 78939; relating to promoting the use of trustworthy artificial intelligence in Government); and
- the input of—
- the Privacy and Civil Liberties Oversight Board;
- relevant interagency councils, such as the Federal Privacy Council, the Chief Information Officers Council, and the Chief Data Officers Council;
- other governmental and nongovernmental privacy, civil rights, and civil liberties experts; and
- any other individual or entity the Director determines to be appropriate.
OMB would also need to require each agency to “prepare and maintain an inventory of the artificial intelligence use cases of the agency, including current and planned uses.” Agencies would then share these use cases with OMB which would then inventory them and determine which may be shared with other agencies.
This section tasks OMB with “identif[ing] 4 new use cases for the application of artificial intelligence-enabled systems to support interagency or intra-agency modernization initiatives that require linking multiple siloed internal and external data sources, consistent with applicable laws and policies, including those relating to the protection of privacy and of sensitive law enforcement, national security, and other protected information.” OMB would then conduct pilots of these 4 uses cases within three years of enactment.
The Department of Homeland Security (DHS) would have six months to draft and issue policies and procedures for DHS agencies for a range of AI considerations including how and when to buy and use these technologies.
The next section of this title, the “Cyber Response and Recovery Act” revises the Homeland Security Act of 2002 to authorize DHS, in consultation with the Cybersecurity and Infrastructure Security Agency (CISA), to declare that a “significant incident” has occurred, triggering a new suite of powers for these agencies to respond to events. And while the title of the section is clearly focused on cyber events, the definition of “significant incident” is so broadly written, other events could qualify. However, this definition explicitly excludes significant incidents that occur on U.S. government information systems, meaning only private sector and state, local, and tribal government systems are subject to these new powers. Moreover, DHS could declare a “significant incident” is about to occur, allowing the use of authority before something has actually happened.
Upon issuing such a declaration, DHS must “immediately notify the National Cyber Director and appropriate congressional committees.”
Once such a declaration is made, DHS can coordinate the “asset response activities” of all federal agencies. Additionally, a Cyber Response and Recovery Fund is established to coordinate activities during a declaration of a significant incident or to help private sector or state, local, and tribal governments respond and recover from such incidents. The fund would be financed by appropriations or reimbursement by entities which used DHS services. Nonetheless, $20 million would be authorized for appropriations to provide money for the fund.
Thereafter follow sections on federal technology workforce:
- The “Facilitating Federal Employee Reskilling Act” that would provide federal employees opportunities to get “reskilled”
- The “Federal Rotational Cyber Workforce Program Act of 2021” would allow and encourage federal cybersecurity personnel to have stints at different agencies
Another subsequent section, the “No TikTok on Government Devices Act” would, as the name indicates, bar the PRC app on U.S. government devices and require the removal from any such devices that currently have it.
The next section, the “National Risk Management Act” would require CISA to “establish a recurring process by which to identify, assess, and prioritize risks to critical infrastructure, considering both cyber and physical threats, the associated likelihoods, vulnerabilities, and consequences, and the resources necessary to address them” within twelve months of enactment. This assessment would then be submitted to the President and Congress, and within one year the President would need to submit to Congress “a national critical infrastructure resilience strategy designed to address the risks identified” by CISA.
The section entitled the “Safeguarding American Innovation Act” would create a Federal Research Security Council that “shall develop federally funded research and development grant making policy and management guidance to protect the national and economic security interests of the United States.” This new body would consist of representatives from federal agencies , and they would implement policies and procedures to ensure U.S. science and research are not appropriated or stolen by other nations. This section is clearly meant to address the instances and allegations that the PRC is strategically pilfering U.S. university research through sending graduate and postdoctoral students to study in the U.S.
Nest is Division E, the “Meeting The China Challenge Act Of 2021,” the portion of the bill the Senate Banking, Housing, and Urban Affairs Committee contributed that would reorient U.S. sanctions and export control laws to address the PRC.
The first section of this title provides:
The Department of Justice, the Federal Trade Commission, the Department of the Treasury, and such other Federal agencies as the President determines appropriate shall establish a joint inter-agency task force to investigate allegations of systemic market manipulation and other potential violations of antitrust and competition laws in the United States by companies established in the People’s Republic of China, including allegations of efforts to illegally capture market share, fix or manipulate prices, and control the supply of goods in critical industries of the United States,
This bill expresses the sense of Congress that
The President should use the full range of authorities available to the President…to impose sanctions and other measures to combat malign behavior by the Government of the People’s Republic of China, entities owned or controlled by that Government, and other Chinese individuals and entities responsible for such behavior.
There are provisions directing the President to annually sanction individuals involved with PRC activities in “significant activities” to undermine the cybersecurity of any entity. Significant activities are defined to include:
- significant efforts—
- to deny access to or degrade, compromise, disrupt, or destroy an information and communications technology system or network; or
- to exfiltrate, degrade, corrupt, destroy, or release information from such a system or network without authorization for purposes of—
- conducting influence operations; or
- causing a significant misappropriation of funds, economic resources, trade secrets, personal identifications, or financial information for commercial or competitive ad- vantage or private financial gain;
- significant destructive malware attacks; or
- significant denial of service activities.
The President would also receive authority to use sanctions against entities that steal U.S. trade secrets.
The Department of Commerce is directed to “conduct a review of items subject to controls for crime control reasons pursuant to…the Export Administration Regulations,” The agency must then “determine whether additional export controls are needed to protect human rights, including whether—
- controls for crime control reasons pursuant to section 742.7 of the Export Administration Regulations should be imposed on additional items, including items with critical capabilities to enable human rights abuses involving—
- censorship or social control;
- surveillance, interception, or restriction of communications;
- monitoring or restricting access to or use of the internet;
- identification of individuals through facial or voice recognition or biometric indicators; or
- DNA sequencing; or
- end-use and end-user controls should be imposed on the export, reexport, or in-country transfer of certain items with critical capabilities to enable human rights abuses that are subject to the Export Administration Regulations if the person seeking to export, reexport, or transfer the item has knowledge, or the Secretary determines and so informs that person, that the end-user or ultimate consignee will use the item to enable human rights abuses.”
The executive branch would be charged with drafting and submitting a range of reports to Congress on the PRC, including:
- The PRC’s development and utilization of dual use technologies
- The PRC’s financial payment and messaging apps
- The PRC’s threat to global financial systems
- The implementation process for the Committee on Foreign Investment in the United States sharing information with U.S. allies
Finally, in Title F, among other provisions, Senators Amy Klobuchar (D-MN) and Chuck Grassley’s (R-IA) “Merger Filing Fee Modernization Act of 2021” (S.228) is included that would increase and index for inflation the fees companies must file for pre-merger review. This bill also authorizes $252 million for the Antitrust Division of the Department of Justice and $418 million for the Federal Trade Commission to handle the increased volume of pre-merger applications.
[1] SEC. 104. GUIDANCE FOR AGENCY USE OF ARTIFICIAL INTELLIGENCE.
(a) Guidance.–Not later than 270 days after the date of enactment of this Act, the Director, in coordination with the Director of the Office of Science and Technology Policy in consultation with the Administrator and any other relevant agencies and key stakeholders as determined by the Director, shall issue a memorandum to the head of each agency that shall–
(1) inform the development of policies regarding Federal acquisition and use by agencies regarding technologies that are empowered or enabled by artificial intelligence, including an identification of the responsibilities of agency officials managing the use of such technology;
(2) recommend approaches to remove barriers for use by agencies of artificial intelligence technologies in order to promote the innovative application of those technologies while protecting civil liberties, civil rights, and economic and national security;
(3) identify best practices for identifying, assessing, and mitigating any discriminatory impact or bias on the basis of any classification protected under Federal nondiscrimination laws, or any unintended consequence of the use of artificial intelligence, including policies to identify data used to train artificial intelligence algorithms as well as the data analyzed by artificial intelligence used by the agencies; and
(4) provide a template of the required contents of the agency plans described in subsection (c).
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