Main Contents and Problems of the U.S. “Chip Act” and China’s Response in the Context of WTO

Abstract

With the rise of unilateral protectionism and the blockage of World Trade Organization (WTO) multilateral trading system reform, the United States (U.S.) provides huge financial support to its semiconductor industry through the “Chip Act.” Besides, the U.S. attempts to improve the competitiveness of its semiconductor industry and dominate the international semiconductor market by setting up a series of “guardrails provisions” to curb the development of “foreign countries of concern,” such as China. Through documentary analysis, the main contents of the “Chip Act” are clarified, and its justiciability and compliance are analyzed from the perspective of WTO rules. In terms of actionability, the “Chip Act” meets the general conditions of subsidies and possesses the traits of specificity but at the same time causes damage to other countries’ industries, thus constituting an actionable subsidy. In terms of compliance, the discriminatory provisions of the “Chip Act” violate the principle of non-discrimination. Accordingly, China should actively respond under the WTO framework by promoting the resolution of the Appellate Body crisis and the reform of the dispute settlement mechanism as well as participating in subsidy reform negotiations and contributing Chinese solutions; China should also take the initiative to apply countervailing rules to the “Chip Act” while improving its own trade remedy system.