Government Support for Semiconductors & International Trade Disciplines - Proposed Chips Act for Europe within the Frame of WTO Commitments

Abstract: The global semiconductor industry has benefited from a period of intense geographic specialization, yet faces the growing prospect of a new era of turbulence in international trade relations. Severely disrupted by exogenous shocks in global supply chains, the ability of the industry to cater to ceaseless demand growth is jeopardized by an increasing number of initiatives proposed for most industrialized economies to subsidize domestic development and production of semiconductors. The purpose of the study is to identify the array of measures currently being considered to stimulate the European semiconductor industry, along with their corresponding risk of being involved in international trade disputes based on earlier invocations of the WTO SCM Agreement. The study draws lessons from previous disputes citing the SCM Agreement to mitigate the risk of a complainant’s success in disputing the proposed EU measures. At the same time, the study considers whether the proposed legislation is coherent in addressing what is likely one of the most complex industries and sophisticated supply chains in the world.