What the U.S. Innovation and Competition Act Gets Right (and What It Gets Wrong)

The Senate’s recent adoption of the U.S. Innovation and Competition Act sent an important message that, even in a deeply divided Washington, challenging China’s efforts to displace the United States as the world’s technology superpower is an increasingly bipartisan issue. Although the bill—if passed by the House—would authorize a welcome boost of $250 billion of investment in a range of emerging technologies, this figure represents a mere drop in the bucket compared to the trillions that Beijing continues to pour into its own technology development. Simply put, the United States cannot and should not attempt to compete with China in a race of state-backed investments. Indeed, what could prove more valuable than the price tag of the Innovation and Competition Act is a series of counterintelligence and security enhancements intended to protect U.S. innovation and strengthen national competitiveness. And while the emphasis that Congress has put on improving research security and integrity in the bill is long overdue, the Innovation and Competition Act in many ways does not go far enough toward ensuring these efforts are thoughtfully implemented and properly resourced.

Overall, the intention of the Innovation and Competition Act is clear. Rather than trying to beat China at its own game, it seeks to strengthen the forces that have propelled decades of U.S. innovation: interconnectivity between academic research, government grants, venture capital, and free market competition. In a nod to the effectiveness of this model, the Innovation and Competition Act empowers and funds the National Science Foundation (NSF) to award grants targeting certain strategic technologies. This approach is logical. The NSF has been doing this for decades and produces strong results. In 1994, the NSF funded the research of two Stanford graduate students who prototyped a system to map and rank pages on the World Wide Web. Four years later, they received $100,000 in venture capital and incorporated as Google.

The Innovation and Competition Act is betting that by preserving the integrity and ingenuity of the U.S. model of innovation, the United States can replicate this kind of success and compete with China’s statist military-civil fusion national strategy. This is consistent with widely-shared confidence that the United States can and will out-innovate China in the long run, capitalizing on a system that Deputy Secretary of Defense Kathleen Hicks recently characterized as one of “collaborative disruption.” 

Despite confidence that the U.S. approach will prevail in the long term, its likelihood of success is greatly diminished when the competition does not take place on a level playing field. Citing examples of Chinese economic aggression, U.S. policymakers have repeatedly called out instances where Chinese state-backed entities have either stolen or simply purchased sensitive U.S. research and intellectual property to the detriment of national security. In remarks at CSIS last year, Bill Evanina—then the U.S. government’s senior counterintelligence official—attributed $300 to $600 billion per year in economic loss to Chinese economic espionage. And on June 23, in his testimony before the Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies, FBI director Christopher Wray cited a 1300 percent increase in Chinese economic espionage over the past decade, with the bureau opening a new investigation on the matter every 10 to 12 hours on average.

In response, several recent efforts have sought to limit Beijing’s ability to exploit U.S. openness and transparency to its strategic advantage. Congress strengthened the Committee on Foreign Investment in the United States (CFIUS) in 2018, modernizing that body’s ability to evaluate a wider range of foreign investment activities. Lawmakers on both sides of the aisle have jointly conducted extensive outreach to private industry and academia—in tandem with U.S. intelligence and law enforcement leaders—to expand awareness of China’s economic aggression and influence activities. And several related pieces of legislation have made the rounds on Capitol Hill in recent years.

The security provisions in the Innovation and Competition Act intend to expand these types of economic and research security efforts in a variety of ways. The bill includes several provisions that would restrict scholars with ties to certain foreign talent programs from participating in U.S. government-sponsored research. These measures were developed primarily in response to concerns about China’s Thousand Talents Program, which stirred up prominent controversies around researchers associated with both U.S. research institutions and the Chinese Communist Party.

By taking aim at policies that would restrict certain scholars from collaborating on government-funded research, Congress is renewing long-standing tension in the relationship between the national security community and academia. Close, productive, and trusted relationships between government and the research community are essential to an effective security strategy. However, several academic organizations have warned about how the Innovation and Competition Act may limit scientific collaboration with international partners and inhibit U.S. research capabilities. Academia is also concerned about a proposed requirement in the Innovation and Competition Act that would subject foreign gifts to universities of $1 million or more to be subject to CFIUS review, a process that could be prohibitively expensive and time-consuming.

A recent mistrial in an economic espionage investigation in Tennessee has also renewed allegations that the Department of Justice is inappropriately profiling researchers of Asian descent. Although the government routinely points to China-related prosecutions not involving individuals of Asian descent as evidence that it is not engaged in racial profiling, many scholars remain unconvinced. Intensifying distrust between the Justice Department and academia will reduce the likelihood of long-term success. Indeed, protecting the integrity and strategic advantage of U.S. research must be balanced against reasonable expectations of academic freedom. In recognition of the concerns that have been raised in this area, Attorney General Garland recently emphasized how the Justice Department must work to combat the economic threat from China without undermining civil rights.

Efforts to enhance vetting of U.S. government-backed research would be further bolstered by the Innovation and Competition Act’s creation of a Federal Research Security Council within the Office of Management and Budget. The council would be tasked with creating a uniform grant application process that would require, among many things, principal investigators to disclose any affiliations with foreign military, foreign government-related organizations, foreign-funded institutions, and all support from foreign institutions, governments, or laboratories. Indeed, the Innovation and Competition Act broadly targets those who might be even loosely associated with foreign entities deemed a national security risk. As such, whether the bill inhibits academic research will largely be determined by the interpretation of these potential risks. Incorrect interpretations of an individual’s threat level could ultimately limit U.S. access to students and scholars who advance—not harm—U.S. national security.

The bill would also make federal grant application fraud a specific crime under U.S. law. Although the Department of Justice routinely charges individuals with grant fraud—particularly when the individual is alleged to have concealed a connection to a hostile foreign government—the specific statutory language would likely provide law enforcement with a clearer, more specific basis upon which to pursue criminal charges. The statute would specifically penalize grant applicants who fail to disclose outside compensation—including foreign compensation—or otherwise submit false or misleading grant applications. As referenced above, however, law enforcement’s reliance on these new authorities must be threat agnostic and based on a mature understanding of the global nature of academia.

The bill directs the Office of Science and Technology Policy director to establish a Research Security and Integrity Information Sharing Analysis Organization (RSI-ISAO). The RSI-ISAO would provide members of the U.S. research community access to information to understand and identify efforts by foreign entities to obtain research, know-how, materials, and intellectual property. The organization would also be tasked with developing a set of standard risk-assessment frameworks and best practices; providing timely reports on research security risks; sharing information on security threats; providing training and support; enabling standardized information gathering and data compilation, storage, and analysis for compiled incident reports; and supporting analysis of patterns of risk and identification of bad actors.

However, the bill pins the responsibility of funding the RSI-ISAO on the NSF, with the goal of transitioning to a fee-based model in the near future. Such a model ultimately jeopardizes the overall effectiveness of the potential organization, which would rely on active information sharing among participants. Indeed, this problem reflects a greater trend that permeates throughout the counterintelligence and research security efforts found in the Innovation and Competition Act: a lack of funding. Despite the bill’s best intentions, efforts such as the Federal Research Security Council and RSI-ISAO, while great in theory, will be capable of very little without the proper resources.

Congress also highlighted in the Innovation and Competition Act that cybersecurity is an essential element of research security and integrity. The bill enlists the National Institute of Standards and Technology (NIST) to develop standards and share best practices with research institutions. However, there are already numerous existing efforts to engage with academia on cyber threats, including NIST’s own existing cybersecurity framework, which is already used in academia. Rather than developing additional—or even redundant—risk management standards, a meaningful effort to improve cybersecurity at the United States’ increasingly financially strained colleges and universities requires funding to improve cyber defenses across higher education.

The lack of funding unfortunately reflects one of the evergreen challenges in the counterintelligence and security space: money failing to meet rhetoric. Without dedicated funding allocated specifically for these initiatives, it is likely that their impact will be negated due to insufficient resources. The Innovation and Competition Act’s emphasis on enhancing awareness of the range of threats to U.S. research and innovation is commendable, but this has been a priority for multiple components of the U.S. government—including the NSF—for years. Implementation of new efforts to conduct proactive, meaningful engagement with academia on the threats that researchers face from hostile foreign actors will require fresh thinking, personnel, and a robust budget. Academia is no stranger to government concerns for security issues, and the various components of the U.S. intelligence, law enforcement, and defense communities risk inducing warning fatigue and resistance on university campuses, particularly if legacy, transactional approaches to academic engagement are not revised. The threats to research security are real, and they require sustained partnership, mutual understanding, and a resourced path forward between the public and private sector.

The Innovation and Competition Act is an important measure moving in tandem with other steps to protect U.S. research, innovation, and trade secrets. For example, the White House continues efforts left over from the previous administration to more carefully consider—and in some cases cut off—the integrated supply chains of the United States and its competitors. President Biden’s February Executive Order on America’s Supply Chains opened systematic investigations into supply chain resilience with major implications for U.S. technology and China policies. Likewise, the administration joined its Quad allies in March to announce, among many things, the creation of a critical- and emerging-technology working group. Indeed, the United States must continue its efforts to maintain a lead across key technologies by securing its supply chains, coordinating with like-minded international partners, and more carefully safeguarding the development of strategic technologies.

Admittedly, it can be hard to imagine the stakes of the mission to protect U.S. research. As previously highlighted, Google’s origin story reflects the U.S. system of collaborative disruption in action. But the scale and diversity of threats to U.S. innovation in 2021 are not what they were in 1994. In an era of increasing geopolitical competition, today’s innovators must navigate a landscape full of tripwires like state-sponsored cyber operations, state-funded venture capital, and state-backed recruitment of science and technology talent. Just as the threat has changed and becomes more complex, U.S. efforts to protect its innovation and strategic advantage must grow to meet that challenge. The Innovation and Competition Act sets the right tone, but there is far more work to be done.

Jake Harrington is an intelligence fellow in the International Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Riley McCabe is a research assistant with the CSIS International Security Program.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2021 by the Center for Strategic and International Studies. All rights reserved.

Jake Harrington

Jake Harrington

Former Intelligence Fellow, International Security Program
Riley McCabe
Program Manager and Research Associate, Transnational Threats Project