The U.S. Senate approved a sweeping US$250-billion bill Tuesday afternoon that aims to help the country compete against China’s growing science and technology prowess. The Innovation and Competition Act passed 68-32 with bipartisan support, though it still faces a vote at the House of Representatives. Here’s what you need to know about the bill, and how it could affect Canada: 

Addressing the chip shortage: The bill authorizes US$52.7 billion for immediate funding to incentivize domestic semiconductor manufacturing; the chips are essential for military and consumer electronic devices, as well as vehicles. The funding is meant to stem a chip shortage, which could last until 2023, following a shift in production from the U.S. to China. 

Spurring regional innovation: The bill outlines plans to spend US$1.5 billion for 5G innovation and US$10 billion over five years to create at least 10 regional innovation hubs across the country. 

Bolstering the National Science Foundation: The government agency will get US$81 billion in new funding, including US$29 billion over five years for a new directorate of technology and innovation. The directorate will establish 10 focus areas for R&D, including artificial intelligence, robotics and biotechnology.

Forging alliances: The legislation would also create a technology-partnership office within the State Department to work with other “like-minded democratic countries,” said Senator Mark Warner of Virginia, on developing technologies in a bid to compete against China. 

Why it matters: The Senate’s approval comes on the heels of China’s new five-year plan, in which it introduced robust R&D investments in seven “frontier” technologies and in a push to fortify its self-reliance in the face of competition and alienation from the U.S.

Winston Ma, an adjunct professor at New York University focused on the global digital economy, said the bill signals the Biden administration’s shift to a more offensive approach to competition compared to the defensive stance the U.S. took under the Trump administration. “I think the administration realized you cannot stay in tech supremacy simply by trying to slow down China’s innovation,” said Ma. “Instead of blocking and sanctioning, you need to focus on tech innovation in the U.S., which may help the global digital economy as a whole.” 

Describing the superpowers’ recent legislations as an “innovation spending race,” Ma said the approach to bolstering innovation at home rather than blocking it in China could help ease tensions between the countries. In a display of that on Wednesday, Biden revoked Trump’s executive orders that would block Chinese firms TikTok and WeChat in favour of doing security reviews on the companies, instead. 

What it means for Canada: The more diplomatic approach to competition could have a ripple effect on Canada, which has been caught between the feuding countries. At the same time, Ma said that as the superpowers become more insular, Canada could attract businesses that may otherwise have done R&D in the U.S. or China to avoid possibly being shunned by one or the other. “It could be an opportunity for neutral countries to attract some tech innovations.”