China Launches WTO Dispute Over US Chip Export Controls

Capping a year of increasing tension between Washington and Beijing over advanced chips used in everything from smartphones to weapons of mass destruction, China has initiated a trade dispute at the World Trade Organization (WTO) against the United States for imposing wide-ranging semiconductor export controls on China.

The U.S. Department of Commerce’s Bureau of Industry and Security announced an extensive set of regulations on October 7, which restricted chips made using American tools from being exported to China, in addition to any semiconductors designed for artificial intelligence applications.

The wide-reaching export controls have effectively hobbled China’s semiconductor industry, prompting Beijing to announce on December 12 that it would initiate the WTO dispute.

“China’s filing of a lawsuit at the WTO is to resolve China’s concerns through legal means and is a necessary way to defend its legitimate rights and interests,” the country’s Ministry of Commerce said in a statement.

Beijing’s statement added that the U.S. restrictions “threatened the stability of the global industrial supply chain.”

In response, the United States said the WTO was “not the appropriate forum” to settle national security concerns, the BBC reported.

“U.S. national security interests require that we act decisively to deny access to advanced technologies,” U.S. Assistant Secretary of Commerce for Export Administration Thea Kendler said.

The export controls — which are among the strictest Washington has imposed — aim to slow China’s ability to produce high-end semiconductors that have uses in commercial and military technology. Advanced chips are used in artificial intelligence, supercomputers and weapons.

The U.S. began restricting sales of American technology to Chinese companies such as Semiconductor Manufacturing International Corp. in 2020. In December 2021 the United States sanctioned nine Chinese technology companies over their ties to the surveillance of ethnic minorities such as Uyghurs.

In late August of this year, the Biden administration restricted technology companies like Nvidia and Advanced Micro Devices from selling graphics processing units to China.

China’s initiation of a WTO dispute over the export controls did not surprise Martijn Rasser, director of the technology and national security program at the Washington-based Center for New American Security.

The dispute “underscores just how few options Beijing has to really counter the U.S. moves,” he told VOA Mandarin in an interview. “It’s mostly a symbolic move by Beijing. I don’t expect that Chinese leaders are really expecting anything to come out of this in their favor. But it’s one of the few courses of action that they have, so they took it.”

Reported chip developments over the summer in China may have spurred the United States to launch these extensive restrictions, according to Gerard DiPippo, a senior fellow at the Washington think tank the Center for Strategic and International Studies.

“My feeling is that they are worried about China’s progress in chips related to supercomputing and artificial intelligence,” he told VOA Mandarin.

Among the restrictions is a ban on the supply of cutting-edge graphics processing units (GPUs), or any electronics containing GPUs, to China. GPU chips play an important role in developing artificial intelligence applications.

The ban on GPUs also applies to chips made outside the U.S. because they are covered by the foreign direct product rule, so any chip made directly from U.S. technology or even partly produced from U.S.-made semiconductor production equipment is subject to U.S. jurisdiction.

Since all semiconductor fabrication facilities use at least some U.S.-manufactured equipment, Washington has jurisdiction over every GPU in the world.

The United States imposed these GPU and other restrictions due to national security concerns, U.S. national security adviser Jake Sullivan said in an October 12 speech at Georgetown University. He added that Washington was implementing a “small yard, high fence” policy.

“Chokepoints for foundational technologies have to be inside that yard,” he said. “And the fence has to be high — because our strategic competitors should not be able to exploit American and allied technologies to undermine American and allied security.”

To Washington, national security concerns outweighed any administration goals to lessen tensions with Beijing, according to Chris Miller, a Tufts University professor and author of the book “Chip War: The Fight for the World’s Most Critical Technology.”

“The judgment made by the Biden administration is that this has created a risk that the United States is unwilling to tolerate,” he said. “For the United States, it is better to try to slow down China’s progress in chip manufacturing, even if it increases the tension between the two countries.”

When countries cite national security concerns, according to Rasser, the WTO typically lets that stand. Washington’s national security concerns about chips in this case “are ironclad,” Rasser said, so it’s extremely unlikely that the WTO will rule in favor of China.

Although the short-term effects of these restrictions are significant for China, Miller expects China will eventually be able to produce this technology on its own.

“China will eventually be able to find alternative sources, but I expect that it will not be very easy,” Miller said. “It’s going to be a long process and probably a pretty expensive one.”

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