Examining the WTO Compliance of Subsidy Measures in the US and EU Chip Acts and China’s Strategic Responses

Abstract

In recent years, the United States and the European Union have introduced a series of chip-related legislative measures characterized by large-scale subsidies and restrictive provisions, significantly affecting the structure of the global semiconductor industry and raising concerns regarding their consistency with WTO rules. Using normative analysis and comparative research methods, this paper evaluates the legality of these measures under the “three-step” framework of the Agreement on Subsidies and Countervailing Measures (SCM Agreement). The analysis shows that the subsidies adopted by the US and the EU satisfy the criteria for subsidies under the SCM Agreement, exhibit both de jure and de facto specificity, and have caused “serious prejudice” to China’s semiconductor industry. In addition, the “guardrail clauses,” which impose differentiated treatment based on investment destination, are inconsistent with the GATT principles of most-favored-nation treatment and national treatment. The paper further argues that the defenses based on GATT Articles XXI and XXIV invoked by the US and the EU are unlikely to be persuasive under the current WTO framework. Comparative analysis indicates that US legislation reflects a strategy of broad-based containment, whereas the EU adopts a more selective and preventive approach, with clear differences in policy objectives, subsidy structures, and restrictive measures. On this basis, the paper proposes differentiated response strategies, including litigation-oriented countermeasures toward the US and rule-based coordination with the EU. It also outlines a broader framework for safeguarding China’s legitimate interests through four dimensions: more targeted litigation strategies, improvements in domestic legal countermeasures, compliance-oriented industrial subsidy policies, and participation in the restructuring of global trade rules.