The House on Thursday approved a $716 billion defense policy bill that would give the military a 2.6 percent pay hike, the largest in nine years.
The compromise bill weakens a bid to clamp down on the Chinese telecom giant ZTE and allows the president to waive sanctions against countries that have bought Russian weapons but now want to buy U.S. military equipment.
Defense Secretary Jim Mattis sought the waiver, saying it would help countries such as India that are seeking to "pull away from the Russian orbit."
The waiver would not benefit Russia, Mattis said in a letter to Congress: "It will only benefit the U.S. and countries willing to pursue a security relationship with us," including Vietnam and Indonesia.
The bill does not fund President Donald Trump's request for a new "Space Force" as an independent military service branch.
The bill was negotiated by House and Senate lawmakers after competing versions were approved in each chamber. It was approved, 359-54, and now goes to the Senate.
Lawmakers from both parties have expressed outrage that the revised legislation guts a provision to reinstate penalties against ZTE and restrict the Chinese company's ability to buy U.S. component parts. ZTE was almost forced out of business after being accused of selling sensitive information to nations hostile to the U.S., namely Iran and North Korea, in violation of trade laws.
Trump warned in May that the ban was causing heavy job losses in China and said he had discussed the matter with Chinese President Xi Jinping. The Commerce Department reached a deal with ZTE to lift the ban in June, allowing business with U.S. companies to resume.
The bill retains language blocking U.S. government purchases and contracts with ZTE, which supporters noted in touting the compromise.
"ZTE will continue to be punished, and the government procurement ban on ZTE and Huawei," another Chinese company, will stay intact, said Sen. David Perdue, R-Ga. "Overall, this is win for the United States, not for ZTE."
House Armed Services Committee Chairman Mac Thornberry, R-Texas, said the defense bill will strengthen military readiness, provide troops a needed pay raise and "drive further innovation in emerging technologies to secure our military advantage."
The waiver language on Russia sanctions "provides flexibility for strategic partners and allies" such as India "to move away from the use of Russian military equipment to American equipment," Thornberry said.
But New Jersey Sen. Robert Menendez, the top Democrat on the Senate Foreign Relations Committee, said the waiver undermines U.S. efforts to crack down on Russia in the wake of its interference in the 2016 elections.
"I'm concerned it may not only create a waiver but it may also waive Congress's right to bring a vote on any arms sale to those countries," Menendez said.
The defense bill drops a Republican proposal that would have barred the Fish and Wildlife Service from using the Endangered Species Act to protect two chicken-like birds in the western half of the U.S. The House-approved language would have blocked endangered-species listing for the sage grouse and lesser-prairie chicken for 10 years.
The birds have become flashpoints in an ongoing battle over whether they warrant federal protection that hinders mining and other development from Kansas to California.
Environmentalists hailed the decision and mocked the idea that the birds pose a threat to the Pentagon.
"Congress listened to governors, sportsmen and veterans" who opposed the bird measure, said Tracy Stone-Manning of the National Wildlife Federation, adding that she's relieved lawmakers "recognized that sage grouse and other wildlife aren't national security threats."
The bill also drops an effort to loosen Cabinet control over the National Nuclear Security Administration, the agency responsible for securing the nation's nuclear weapons stockpile.
The bill is named after Arizona Sen. John McCain, chairman of the Senate Armed Services Committee, who is away from Congress battling brain cancer.
The annual measure sets policies and a budget outline for the Pentagon, to be funded by a later appropriations bill that typically follows the policy measure fairly closely.
The military got a major budget increase under the terms of a bipartisan pact passed earlier this year that the Pentagon's many allies in Washington promise will address shortfalls in military readiness such as pilot training, maintenance of equipment and procurement of new weapons systems.