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U.S. Chamber Newsletter-International Policy Update (7/29)

1 August 2022 Monday

U.S. Chamber of Commerce

International Policy Update

July 29, 2022

Chamber Welcomes Passage of CHIPS and Science Act

Brilliant, Barrera: A Digital Trade Deal Would Be a Win for California

Biden Administration Hosts Indo-Pacific Economic Framework Ministerial

From the Home Front

Chamber Warns Tax Increases, Prescription Drugs Price Controls Will Discourage Investment and Undermine Economic Growth and Innovation

Chamber Sues to Stop Securities and Exchange Commission Reversal of Proxy Advisor Rule

Commentary

Celebrating 75 Years of U.S.-India Partnership

Chamber Welcomes Passage of CHIPS and Science Act

On July 28, the House approved the “CHIPS and Science Act of 2022” in a 243-187 vote, with all the chamber’s Democrats and 24 Republicans voting in favor. The Senate approved the package on July 27 on a bipartisan vote of 64-33. The legislation will be signed by President Biden in the coming days.

The U.S. Chamber had labored for more than a year to secure the bill’s passage. Executive Vice President and Chief Policy Officer Neil Bradley welcomed final passage in a statement:

“Today’s passage of the CHIPS and Science Act sends a clear message to companies at home and around the globe—the American people are ready and able to make the necessary investments to spur economic growth, increase manufacturing, and safeguard our national security. The bill includes critical funding for research and development that will help American innovators compete on the global stage. We urge President Biden to sign the bill into law.

“The global shortage of semiconductors has meant decreased economic opportunity in America while contributing to the inflation crisis facing American families. That’s why the U.S. Chamber led more than 240 state and local chambers of commerce and other business associations urging Congress to act swiftly on this measure.”

The Chamber earlier sent a Key Vote letter to the House expressing strong support for the legislation.

The bill was expected to receive broader support from House Republicans, but House Republican leaders began whipping against the bill the night before the final vote after Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) announced an agreement to move forward on a budget reconciliation bill, which the Chamber opposes (see below).

The CHIPS and Science Act:

  • Appropriates $52 billion in grants for domestic semiconductor manufacturing under the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, which was enacted but not funded 18 months ago;
  • Creates a 25% investment tax credit for semiconductor manufacturing;
  • Establishes, for both of the above, “guardrails” on the grants and the investment tax credit to ensure that these benefits support semiconductor manufacturing investment in the United States;
  • Authorizes more than $100 billion ($52 billion above baseline) in funding for basic research and R&D at the National Science Foundation, the Department of Commerce’s Regional Technology Hubs, and the National Institute of Standards and Technology (NIST);
  • Includes language to develop processes to ensure research security; and
  • Provides $1.5 billion in funding for a Public Wireless Supply Chain Innovation Fund (including open architected networks) and $500 million for an American International Technology Security Fund, which will support secure and trusted telecommunication development and use of open, interoperable, software-based technologies.
  • (See also this Q&A document the Chamber had circulated in its advocacy efforts.)

A damaging shortage of semiconductors arose over the past two years as demand outstripped supply due to shifts arising from the COVID-19 pandemic, among other factors. Various sectors, including auto and appliance manufacturing, suffered substantially as a result. The U.S. share of global semiconductor manufacturing capacity has declined from 37% in 1990 to 12% today as a wide range of countries — including not just China but Ireland, Israel, Singapore, South Korea, Taiwan, as well as the EU — have provided subsidies for semiconductor investments. Analysts have argued that new support for domestic semiconductor manufacturing is essential to keep the U.S. in the game as an investment destination.

The bill’s science funding will reverse a decline in federal basic research and R&D expenditures as a percentage of the federal budget, which currently rests at 2.8%, a 60-year low. Of note, China’s growth rate in research spending since 1995 has averaged 15% annually and reached $463 billion in 2018 — a total more than twice that of the United States. One academic proponent of the bill’s science funding wrote it “slightly exceeds the R&D investments of the Apollo Project in inflation-adjusted terms.” The Chamber’s Tom Quaadman testified before the House Science, Space, and Technology Committee in February 2021 on the need to restore U.S. leadership in basic research and R&D.

The Chamber engaged in this Congress’s competitiveness bills from the early days of the “Endless Frontier” Act and supported the bipartisan USICA bill approved by the Senate in June 2021. The Chamber also led the business community’s opposition to a collection of poison pills included in the House analogue, the America COMPETES Act, including an extremely broad outbound investment screening mechanism, a dramatic expansion in the reach of U.S. trade remedy law, and a measure that would end de minimis treatment for some imports. These efforts helped block the inclusion of these elements in the final bill, though some may well reappear, perhaps in a different form, in future legislation. The Chamber will continue to press for the long-delayed renewal of elements included in USICA’s bipartisan trade title, including renewal of the Generalized System of Preferences, a new Miscellaneous Tariff Bill, and measures relating to tariff relief.

For further information, please contact Director for International Policy Isabelle Icso (iicso@uschamber.com) or Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com).

Brilliant, Barrera: A Digital Trade Deal Would Be a Win for California

Executive Vice President and Head of International Affairs Myron Brilliant co-wrote an op-ed with President and CEO of the California Chamber of Commerce Jennifer Barrera in the Pacific Coast Business Times advocating for a digital trade agreement. The industry leaders highlight that California is the leading ICT services exporter in the country, a trend that is expected to continue this year and add to the 293,000 direct and 201,000 indirect jobs created by the state’s digitally tradeable exports market, according to a U.S. Chamber of Commerce report.

Brilliant and Barrera assert that an enforceable digital trade agreement is imperative to protecting American businesses and competitiveness from protectionist digital trade policies proliferating globally. The pair underscores the necessity for a digital trade agreement, writing in part:

“Especially in the aftermath of the pandemic, demand has never been higher for digital services. In 2020, $84 billion of ICT services were digitally exported out of the United States. Of that $84 billion, California led the way, exporting approximately $21 billion worth of services — a quarter of total exports.

“The U.S. has not entered into an agreement with a new trade partner in a decade, and a digital trade agreement offers the perfect opportunity for new partnerships abroad. As a leader in digital trade, California should lend its support.”

The op-ed builds upon The Digital Trade Revolution: How U.S. Workers and Companies Can Benefit from a Digital Trade Agreement, a Chamber report showing how digital trade has the potential to benefit millions of Americans working in a wide range of sectors, including many far removed from what are generally thought of as “digital companies.” The report includes 50 state fact sheets that show the footprint of the digital trade economy across the country. It also discusses the rise of digital protectionism worldwide and policy recommendations to address that threat.

On a related note, Senators Todd Young (R-IN) and Tom Carper (D-DE) this week introduced a bipartisan, bicameral resolution on digital trade in the Senate. Representatives Darin LaHood (R-IL), Suzan DelBene (D-WA), and Ami Bera (D-CA) introduced a companion resolution in the House. The resolution outlines “the importance of the U.S. digital economy and the importance of greater U.S. leadership on digital trade negotiations with like-minded countries,” according to a press release.

For further information, please contact Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com).

Biden Administration Hosts Indo-Pacific Economic Framework Ministerial

On July 26, United States Trade Representative Katherine Tai and Secretary of Commerce Gina Raimondo hosted a virtual ministerial of the Indo-Pacific Economic Framework (IPEF). The participating ministers of the 14 participating countries “had positive and constructive discussions and reaffirmed their collective goal to pursue a high-standard and inclusive economic framework through ongoing and intensified engagements,” according to a readout of the ministerial.

The Chamber in April submitted comments to the Office of the U.S. Trade Representative and the Department of Commerce outlining suggested points for inclusion in the four pillars – (1) fair and resilient trade, (2) supply chain resilience, (3) infrastructure, clean energy, and decarbonization, and (4) tax and anti-corruption. The Chamber encouraged the administration to act quickly on IPEF, draw on trade disciplines the U.S. has developed in other contexts, take advantage of IPEF’s flexible framework to achieve desired outcomes, and engage with public and private stakeholders.

For further information, please contact Senior Vice President for Asia Charles Freeman (cfreeman@uschamber.com).

From the Home Front:

Chamber Warns Tax Increases, Prescription Drugs Price Controls Will Discourage Investment and Undermine Economic Growth and Innovation

U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley issued the following statement on July 28 as Senate Majority Leader Chuck Schumer (D-N.Y.) and Senator Joe Manchin (D-W.V.) announced a deal on budget reconciliation.

“This legislation includes taxes that would discourage investment and undermine economic growth, and price controls that would limit American innovation. Both will make our economic problems worse. Congress and the Administration should reject these policies and focus on unleashing American made energy.”

Chamber Sues to Stop Securities and Exchange Commission Reversal of Proxy Advisor Rule

The U.S. Chamber of Commerce on July 27 filed a lawsuit, with co-plaintiffs Business Roundtable and the Tennessee Chamber of Commerce & Industry, against the Securities and Exchange Commission (SEC) for not following proper procedures or providing adequate justification for its decision to roll back the 2020 Proxy Advisor Rule before it was allowed to take effect.

The Proxy Advisor Rule, finalized in 2020, created key investor protections regarding proxy voting advice, eliminated conflicts of interest and required new transparency and accountability measures for proxy advisory firms. The 2020 rule was rooted in a decade of evidentiary based deliberations at the SEC that spanned multiple administrations and led to common-sense reforms designed to ensure the accuracy of information informing proxy vote recommendations and establishing mechanisms to protect against bias and conflicts of interest.

“The 2020 Proxy Advisor Rule was put in place to protect investors and to boost the competitiveness of the U.S. public capital markets. The SEC’s harmful decision to roll back these reforms will allow proxy advisors to operate as a black box, as they have for decades, and create disincentives for companies to go, and stay, public,” said U.S. Chamber President and CEO Suzanne P. Clark. “Public companies are a key source of growth and innovation for our economy and an important source of wealth creation for main street investors. However, the SEC’s recent actions will deteriorate the public company model, ultimately depriving main street investors and everyday Americans dynamic growth opportunities to help build wealth and save for retirement.”

Over the last two decades the number of public companies declined by roughly 50%. There are a number of reasons for the decline in public companies, but an increase in the number of activists who have seized upon the proxy process is a chief concern. Robust capital formation and strong corporate governance are critical in order to promote the long-term performance of public companies. The 2020 Proxy Advisor Rule is an important part of the solution in reinvigorating the public company model.

The U.S. Chamber is suing the SEC for not following the proper procedures under the Administrative Procedure Act (APA) as mandated by Congress when reversing the 2020 Proxy Advisor Rule. Specifically:

The SEC failed to provide serious evidence of new or changed circumstances to justify its actions. Rather, the SEC deferred to completely voluntary disclosure rules that proxy advisors recently adopted, which do not match the disclosure requirements of the 2020 Rule and can be abandoned at any time.

The SEC failed to provide enhanced justifications for its policy reversal. Given the Amended Rule’s contradiction of factual findings underlying the 2020 Rule, as well as the Amended Rule’s impact on serious reliance interests, the SEC was required under the APA to provide these justifications.

The Amended Rule’s cost-benefit analysis is opportunistically framed. The analysis focuses on benefits to proxy advisors’ profitability while ignoring the substantial costs to companies and investors, in violation of the APA and the Securities Exchange Act of 1934.

“The SEC has failed to engage in reasoned decision-making and provided no serious evidence of new or changed circumstances to justify its actions. The Chamber will continue to fight on behalf of businesses to ensure the SEC holds proxy advisors accountable and does not move forward with regulation that harms companies, investors, and the capital markets." Clark said.

The U.S. Chamber's full complaint against the SEC can be found here

Commentary

Celebrating 75 Years of U.S.-India Partnership

U.S. Chamber (July 28) by Amy Hariani

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