China files WTO complaint over US export controls on semiconductors

China’s government filed a dispute at the World Trade Organization (WTO) against the U.S. over export controls that restrict the ability of Chinese firms to make advanced semiconductors, build and maintain supercomputers, and obtain high-end computer chips that could have military applications.

China claims that the U.S. policies violate the WTO’s General Agreement on Tariffs and Trade (GATT) in addition to agreements on trade-related investment, intellectual property rights and trade in services. The Chinese government said the U.S. export controls “threatened the stability of the global industrial supply chains.”

The U.S. implemented the new export controls in early October for semiconductors, supercomputers and related computing items through a pair of rules put forward by the Commerce Department’s Bureau of Industry and Security (BIS). The export restrictions apply to items used by China to improve military technologies ranging from autonomous drones to weapons of mass destruction; to increase its speed and accuracy of logistics and planning systems; to commit human rights abuses. 

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Semiconductor chips are seen on a circuit board of a computer. (Reuters/Florence Lo / Reuters Photos)

Export licenses requested by entities linked to the Chinese government face a “presumption of denial” under the restrictions, while those filed by multinational firms are determined on a case-by-case basis. 

The BIS rules from October also updated the list of Chinese firms that are barred from receiving sensitive exports because of their links to the Chinese military or because they haven’t allowed verification checks on the end use of products to go forward. 

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A researcher plants a semiconductor on an interface board. (Reuters/Kim Kyung-Hoon/File / Reuters Photos)

In announcing the export restrictions this fall, Under Secretary of Commerce for Industry and Security Alan Estevez said that BIS is “appropriately doing everything in our power to protect our national security and prevent sensitive technologies with military applications from being acquired by the People’s Republic of China’s military, intelligence, and security services.”

The Office of the U.S. Trade Representative did not respond to a request for comment on China lodging the dispute against the U.S. over these export controls at the WTO. In a separate announcement Thursday, the BIS added 36 entities to its export restriction lists, most of which are located in China.

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Chinese President Xi Jinping, right and President Biden appear on a screen as they hold a meeting via video link in Beijing, Nov. 16, 2021. (Yue Yuewei/Xinhua News Agency via AP / AP Newsroom)

The WTO dispute process begins with a request for consultations between the parties to the dispute, which will formally begin following the circulation of the request on Thursday. China had signaled on Monday that it planned to raise the dispute at the WTO. 

During the consultation phase, the parties can discuss the dispute and attempt to find a solution without proceeding to litigation. If those consultations fail to resolve the dispute after 60 days, China could request that a WTO panel step in to resolve the issue.

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Should the WTO panel rule against the export controls, the U.S. could request a further review by the WTO’s Appellate Body – which hasn’t functioned properly for three years because the U.S. blocked the appointment of new judges and has effectively been rendered toothless.

WTO rules also tend to allow a broad exception for export controls and other trade barriers that are grounded in national security concerns. The U.S. made such an argument in a recent case regarding Trump-era tariffs on aluminum and steel that the Biden administration has defended. While that ruling went against the U.S. in that case, it may yet be appealed to the WTO’s Appellate Body.

Reuters contributed to this report.