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With Congress close to its summer recess and the midterms looming, there’s a good chance drafted tech industry legislation will go by the wayside © Bloomberg
Hello from California, where I’m filling in for Ed for the next couple of editions of Swamp Notes. In the tech world that I inhabit, I’m writing to you at a pivotal moment.
This Congress has seen drafts of some of the most consequential tech industry legislation that has been put forward in years. Some of it even has what passes these days for bipartisan support (in other words, not every single Republican has automatically lined up in opposition).
But right now, with Congress close to its summer recess and the midterms looming, there’s a good chance it will all go by the wayside, the casualty of legislative paralysis and a larger partisan agenda. If you believe that some policy modernisation is essential for the US to hang on to key areas of global tech leadership — while at the same time preventing a handful of big companies blocking any challenges to their own dominance — it looks like a serious miss.
Washington is in danger of falling down on two counts. One is to put some serious money into reversing the decline of the US chip manufacturing base. China is making inroads with its own chip production, and the US already faces a dangerous dependence on Taiwan on this front. There hasn’t been enough public debate about whether it’s right to put $52bn of taxpayers’ money into the pockets of private companies that have already made out very well following the recent chip boom. But the reality is, without financial sweeteners, the US chip companies are going to keep building their new fabs in Asia.
This isn’t just about semiconductors. The legislation, known as the United States Innovation and Competition Act, would also spread $200bn of research and development funding across a range of technologies considered strategic to long-term competition with China.
The other miss is the failure to adopt any of the assorted laws that have been proposed to keep Big Tech in check — in particular American Innovation and Choice Online Act, which could have forced the dominant tech platforms to open up, for instance by preventing them giving preferential treatment to their own services or forcing them to make their messaging services interoperable
Compare this stumbling legislative record to the far more coherent actions being pursued around the globe. The European Union is ploughing ahead with its efforts to limit tech power, for better or worse (I say for worse, because it’s still far from clear to me that landmark pieces of legislation like GDPR have done that much to enhance personal privacy — and may have just entrenched the power of the biggest companies.)
China has also shown plenty of resolve, cracking down on its domestic tech giants when their power started to rival that of the state. And its single-minded pursuit of global leadership in a range of next-generation technologies has rightly become a serious concern in both Washington and Silicon Valley.
Having said all that, I think there’s a danger of overstating the implications of the legislative dysfunction in the US. And there’s also a tendency to underestimate the many challenges China still faces. The devastation to Chinese tech share prices caused by heavy-handed state action, for instance, could easily prompt a generation of tech entrepreneurs to seek their fortunes elsewhere.
Congress could still get its act together and salvage something from the mess over chip subsidies. Republican senators in states like Ohio and Texas, which stand to reap billions of dollars from the constructions of new fabs, are highly motivated to act. Even if the legislation is stalled for now, chip companies have other strong reasons to reduce their over-dependence on Asia and increase local production.
Meanwhile, new antitrust laws aimed at tech might be on hold, but regulators like the Department of Justice and Federal Trade Commission are finally showing some spine when it comes to enforcing the current ones.
So things are probably not quite as bleak as Washington’s legislative foot-dragging might suggest. That said, it would still be really nice to see lawmakers advance some sort of programme that deals with such important issues.