China Competitiveness Bill Faces Hurdles as Time Runs Short

The flashpoints are worrying those who support the bill’s central goal of boosting U.S. high-tech research and manufacturing to counter advancements by China and other commercial rivals. The legislation would expand federal investment in technologies such as quantum computing and dedicate $52 billion in new subsidies to rebuild semiconductor manufacturing in the U.S., which has been eclipsed by Taiwan and other overseas competitors.

“If they delay too much, America loses out,” said Commerce Secretary

Gina Raimondo

last week, referring to U.S. lawmakers.

A spokesperson for the Chinese Embassy in Washington said of the legislation: “How the U.S. intends to develop and strengthen its competitiveness is its own business, but we are firmly against the U.S. making an issue out of China and perceiving it as an imaginary enemy.”

The November elections are also looming, limiting time for lawmakers to hammer out a compromise between House and Senate versions as political pressures mount.

Some Republicans are urging their colleagues to take their time. “Although I hope to see significant progress soon, we should not rush the conference process to meet arbitrary and politically motivated deadlines,” said Sen. Roger Wicker (R., Miss.), the top Republican on the Senate Commerce Committee.

If the debate goes on too long, Democrats worry that political motivations will ultimately lead Republicans to oppose the package, to deny an election-year victory to their opponents.

“I think both sides will be able to claim victory,” said House Majority Leader

Steny Hoyer

(D., Md.), who is helping to shepherd the legislation. But “am I worried about it? Yes, I am worried about it.”

Last Thursday, members of the joint House-Senate committee that will negotiate a compromise—which includes more than 100 lawmakers—held their initial meeting to discuss the legislation in a cavernous, column-lined Senate caucus room.

The task of this so-called conference committee: reconcile an initial Senate version of the bill, passed in a bipartisan vote last year, with a Democratic-backed House version that added major policy proposals on trade, climate change, supply-chain security, labor and workforce development, immigration and online commerce.

Some business lobbyists are calling on Congress to strike a narrow deal. “If you zoom out for a second, the real issue is that we have a fairly narrow bill passed on an overwhelmingly bipartisan basis in the Senate, and we have an everything-but-the-kitchen-sink bill passed on a partisan basis in the House,” said

Neil Bradley,

executive vice president of the U.S. Chamber of Commerce.

Legislative proposals in the mix aren’t all directly related to China policy and touch on areas as diverse as banking rules for marijuana merchants and domestic mink ranching (which would be effectively banned by the House bill). The legislation includes kitchen sinks, under the heading “Stainless steel handmade kitchen sinks,” in a section seeking lower tariffs on them.

The House version of the bill also included a provision to establish a government mechanism to review and restrict outbound U.S. investments on national-security grounds, despite opposition from industry—and concerns in both parties—about the measure’s potentially broad scope.

Proposals to address these concerns have emerged in recent weeks, but lawmakers haven’t unified behind any one.

Another controversy has arisen over House proposals that sponsors say aim to curb counterfeit imports that can shortchange U.S. businesses and consumers. The measures have drawn fire from the likes of

eBay Inc.

which has said it could pit small sellers against big brands.

The bill’s Senate sponsors, Sens. Chris Coons (D., Del.) and

Thom Tillis

(R., N.C.), said in a joint statement that the bill “provides a balanced approach to address the dangers of counterfeit goods, many of which come from China, that threaten Americans’ health and safety and harm American jobs and intellectual property.” They say the House version of the bill addresses many of the concerns raised, including for small sellers, and they remain open to further changes.

Among the most contentious provisions is a proposed requirement that the U.S. trade representative start a new process to grant tariff waivers, a step that could result in a significant erosion of the scope of goods subject to existing tariffs on $300 billion of Chinese imports.

Critics say the tariffs fall on U.S. businesses that pay duties on imported materials or parts, rather than Chinese exporters they were intended to punish, cutting into their profits and adding to inflation that hurts American consumers.

The debate comes at the same time Biden administration officials and businesses are sharply divided over whether the Trump-era tariffs should be removed as a way to ease inflation.

In Congress, Sen.

Pat Toomey

(R., Pa.) is leading the Senate effort to push for the provision allowing importers to request to waive certain tariffs. “Failure to allow this remedy will harm our own manufacturers, disadvantaging these companies relative to foreign competitors at a time when we should be enabling their success,” Mr. Toomey said last week.

Pushing against Mr. Toomey is the bipartisan pairing of

Katherine Tai,

the U.S. trade representative, and

Robert Lighthizer,

Ms. Tai’s predecessor under the Trump administration. The pair, in favor of maintaining the levies as leverage against Beijing in continuing trade talks, have separately asked senators to oppose the exclusion and successfully persuaded some to withdraw their earlier support, according to people familiar with the situation.

Write to John D. McKinnon at john.mckinnon@wsj.com and Yuka Hayashi at yuka.hayashi@wsj.com

The flashpoints are worrying those who support the bill’s central goal of boosting U.S. high-tech research and manufacturing to counter advancements by China and other commercial rivals. The legislation would expand federal investment in technologies such as quantum computing and dedicate $52 billion in new subsidies to rebuild semiconductor manufacturing in the U.S., which has been eclipsed by Taiwan and other overseas competitors.

“If they delay too much, America loses out,” said Commerce Secretary

Gina Raimondo

last week, referring to U.S. lawmakers.

A spokesperson for the Chinese Embassy in Washington said of the legislation: “How the U.S. intends to develop and strengthen its competitiveness is its own business, but we are firmly against the U.S. making an issue out of China and perceiving it as an imaginary enemy.”

The November elections are also looming, limiting time for lawmakers to hammer out a compromise between House and Senate versions as political pressures mount.

Some Republicans are urging their colleagues to take their time. “Although I hope to see significant progress soon, we should not rush the conference process to meet arbitrary and politically motivated deadlines,” said Sen. Roger Wicker (R., Miss.), the top Republican on the Senate Commerce Committee.

If the debate goes on too long, Democrats worry that political motivations will ultimately lead Republicans to oppose the package, to deny an election-year victory to their opponents.

“I think both sides will be able to claim victory,” said House Majority Leader

Steny Hoyer

(D., Md.), who is helping to shepherd the legislation. But “am I worried about it? Yes, I am worried about it.”

Last Thursday, members of the joint House-Senate committee that will negotiate a compromise—which includes more than 100 lawmakers—held their initial meeting to discuss the legislation in a cavernous, column-lined Senate caucus room.

The task of this so-called conference committee: reconcile an initial Senate version of the bill, passed in a bipartisan vote last year, with a Democratic-backed House version that added major policy proposals on trade, climate change, supply-chain security, labor and workforce development, immigration and online commerce.

Some business lobbyists are calling on Congress to strike a narrow deal. “If you zoom out for a second, the real issue is that we have a fairly narrow bill passed on an overwhelmingly bipartisan basis in the Senate, and we have an everything-but-the-kitchen-sink bill passed on a partisan basis in the House,” said

Neil Bradley,

executive vice president of the U.S. Chamber of Commerce.

Legislative proposals in the mix aren’t all directly related to China policy and touch on areas as diverse as banking rules for marijuana merchants and domestic mink ranching (which would be effectively banned by the House bill). The legislation includes kitchen sinks, under the heading “Stainless steel handmade kitchen sinks,” in a section seeking lower tariffs on them.

The House version of the bill also included a provision to establish a government mechanism to review and restrict outbound U.S. investments on national-security grounds, despite opposition from industry—and concerns in both parties—about the measure’s potentially broad scope.

Proposals to address these concerns have emerged in recent weeks, but lawmakers haven’t unified behind any one.

Another controversy has arisen over House proposals that sponsors say aim to curb counterfeit imports that can shortchange U.S. businesses and consumers. The measures have drawn fire from the likes of

eBay Inc.

which has said it could pit small sellers against big brands.

The bill’s Senate sponsors, Sens. Chris Coons (D., Del.) and

Thom Tillis

(R., N.C.), said in a joint statement that the bill “provides a balanced approach to address the dangers of counterfeit goods, many of which come from China, that threaten Americans’ health and safety and harm American jobs and intellectual property.” They say the House version of the bill addresses many of the concerns raised, including for small sellers, and they remain open to further changes.

Among the most contentious provisions is a proposed requirement that the U.S. trade representative start a new process to grant tariff waivers, a step that could result in a significant erosion of the scope of goods subject to existing tariffs on $300 billion of Chinese imports.

Critics say the tariffs fall on U.S. businesses that pay duties on imported materials or parts, rather than Chinese exporters they were intended to punish, cutting into their profits and adding to inflation that hurts American consumers.

The debate comes at the same time Biden administration officials and businesses are sharply divided over whether the Trump-era tariffs should be removed as a way to ease inflation.

In Congress, Sen.

Pat Toomey

(R., Pa.) is leading the Senate effort to push for the provision allowing importers to request to waive certain tariffs. “Failure to allow this remedy will harm our own manufacturers, disadvantaging these companies relative to foreign competitors at a time when we should be enabling their success,” Mr. Toomey said last week.

Pushing against Mr. Toomey is the bipartisan pairing of

Katherine Tai,

the U.S. trade representative, and

Robert Lighthizer,

Ms. Tai’s predecessor under the Trump administration. The pair, in favor of maintaining the levies as leverage against Beijing in continuing trade talks, have separately asked senators to oppose the exclusion and successfully persuaded some to withdraw their earlier support, according to people familiar with the situation.

Write to John D. McKinnon at john.mckinnon@wsj.com and Yuka Hayashi at yuka.hayashi@wsj.com