“I worry what the House could do” on Chinese investment screening, Sen. Bob Casey (D-Penn.), a sponsor of the Senate’s outbound investment bill, said on Capitol Hill in November.
Free traders have the opposite concern. As the Biden administration and Congress try to decrease exposure to the Chinese economy, lawmakers like Murphy warn that large American corporations could be at a disadvantage to firms in allied nations — particularly if they don’t follow Washington’s lead.
“If a U.S. company isn’t making as much profit as its competitors are, it’s gonna be really hard for it to … make bigger investments and out-innovate the Chinese,” she said, adding that the government’s push to subsidize chipmakers and other critical firms has perils in itself.
“The industrial policy, as we saw most recently with the CHIPS bill … relies on government to pick winners and losers, and it takes only one Solyndra to cause a real problem with our industrial policy,” she said, referencing the failed solar company that bedeviled the Obama administration’s clean energy efforts. “And so it’s a perilous time, and a perilous strategy that requires everything to go right.”
The decoupling conundrum
Murphy’s concerns point to a deeper question facing Biden and Congress in the new year — just how far to drive an economic wedge between the two economies.
While all agree that the administration has escalated U.S. action against China’s tech sector, there are those who want the moves to go further — and who criticize the administration for not already upping the stakes.
In issuing the chip rules, the Commerce Department let some chip firms in allied nations off the hook. Even though they use software from American firms, making them subject to U.S. export controls, the administration decided not to force firms in the Netherlands and Japan to stop shipping chip-making equipment to China.
The concern, the administration said at the time, was that if…