China initiated a dispute against the U.S. at the World Trade Organization over Washington’s sweeping semiconductor export curbs that look to cut the world’s second-largest economy off from high-tech components.

In October, the U.S. introduced rules that restricted chips made using American tools from being exported to China as well as any semiconductors designed for artificial intelligence applications. The move has effectively kneecapped China’s semiconductor industry.

The Chinese Ministry of Commerce confirmed the trade dispute in a statement Monday and accused the U.S. of abusing export control measures and obstructing normal international trade in chips and other products.

It said that the WTO dispute is a way to address China’s concerns through legal means.

Washington has maintained that its export restrictions are in the interest of national security.

China’s dispute on chips comes days after the WTO ruled that tariffs imposed by former President Donald Trump on steel and aluminum imports violated global trade rules. China was among the countries that brought action against the U.S.

Trade disputes via the WTO can take years to resolve. China has taken the first step known as a request for consultations. The WTO also has provisions in its rules that allow countries to impose restrictions in the interest of national security. This could make it difficult for China to win this particular dispute.

“If this is the response to the export controls, it suggests that China has limited options,” Pranay Kotasthane, chairperson of the high tech geopolitics program at the Takshashila Institution, tweeted on Tuesday.

“Given that WTO has exceptions for national security concerns, which can be defined broadly, it’s unlikely to result in any policy changes.”

A spokesperson for the U.S. Trade Representative was not immediately available for comment when contacted by CNBC.

But spokesperson Adam Hodge told Reuters on Monday that the U.S. has received the request for consultations from China in regards to the semiconductor export restrictions.

“As we have already communicated to the PRC (People’s Republic of China), these targeted actions relate to national security, and the WTO is not the appropriate forum to discuss issues related to national security,” Hodge said.

By: DocMemory
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