China turns to WTO to remove US control of chip exports

China filed the complaint with the WTO on Monday, according to a statement from its Ministry of Commerce. Trade rules threaten its position in this $580 billion sector, and the country argues that the United States is unfairly using vague security-related justifications to rein in its rival.

The chip industry has become a major focus of trade tension between the two economic superpowers. Although China is the biggest maker of phones and computers, US companies still control most of the underlying chip technology.

The Biden Administration has argued that it needs to limit the access of China to the most advanced equipment to safeguard national security.

In the statement issued Monday, China He said the United States is practicing economic protectionism that undermines trade rules. The behavior also threatens the global supply chain, according to the complaint. But even if the country is successful with its case, the WTO lacks the power to force the United States to reverse its actions.

Washington has called on allies to support the restrictions, which would increase pressure on China. For US companies, meanwhile, the rules have done some harm. China it’s the biggest market for semiconductors, and chipmakers selling to the country expect to lose billions in revenue.

The measure of China marks the first stage of the long dispute resolution process of the WTO. The United States now has 60 days to start consultations. If that doesn’t solve the problem, Beijing can request the creation of a WTO panel.

It could be several years before the case makes its way through the clogged WTO dispute settlement system. And even if China wins the case, the United States could veto the outcome by appealing the decision to the slow-moving WTO appellate body.