China’s WTO Dispute over US Chip Sanctions

December 15, 2022

China has recently raised a dispute with the World Trade Organisation (WTO) over the US chip sanctions.

About the US Chip Sanctions

On October, the United States issued new export controls preventing the sales and services by the US businesses to Chinese chip manufacturers. The purpose of these restrictions is to prevent China from buying and manufacturing high-end chips with military applications, preventing the growth of China’s semiconductor industry and the development of military systems. This move also covers export restrictions on some chips used in supercomputers and stricter requirements on the sale of semiconductor equipment.

What are the implications of these restrictions?

While these restrictions will slow down China’s progress in chip technology, they can never completely halt the development of the Chinese chip industry.
Rather, this move provides the US manufacturers the time to stay ahead of China in the technical aspects and cutting-edge capabilities.
The ban on the export of US chips adversely affects China’s objective to achieve self-reliance in chip manufacturing. Currently, Chinese manufacturers are unable to etch precise patterns on silicon wafers, making the country heavily reliant on imported equipment.
It will also cause long-term geopolitical implications in the area of artificial intelligence and electric vehicle manufacturing. According to estimates, the number of petrol-powered vehicles is expected to decline by 50 percent by 2030. The US is looking to take up a lion’s share of this opportunity.

About the WTO Dispute Against US Chip Sanctions

China has filed a dispute with the WTO over the export-related measures that were put in place by the US government as per the CHIPS Act of 2022 that specifically targeted China’s semiconductor industry.
It has invoked proceedings against the US under Article 4 of the Dispute Settlement Understandings (DSU), criticising the US for over-generalizing the concept of “national security” and over-stretching its export control measures.
China held that the US’ trade ban is hindering the normal international trade of semiconductor chips and threatening the stability of the global supply chains.
It also alleged that the US restrictions have undermined the international trade order and violated the international trade rules.

How will the dispute be settled?

The Article 4 of the DSU requires the US to reply within 10 days after the date of receiving China’s request for consultations and enter into consultations in good faith within the period of not more than 30 days after receiving the request.

If the two countries fail to arrive at an amicable settlement or solution, then China can request the establishment of a dispute settlement panel to adjudge the US’ export-related measures.

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