India has raised objections to the United States’ $280 billion semiconductor programme at a key meeting of the World Trade Organisation (WTO), as per reports.
New Delhi raised the issue at the recent Trade Policy Review of the USA, about the 'Creating Helpful Incentives to Produce Semiconductors For America' Act or CHIPS Act.
“This puts more competitive manufacturers globally, at a distinct disadvantage. What steps are proposed to be taken to create an even playing field for global manufacturers in these areas, especially from the developing world,” India asked.
China, joining India said, “China notes that the US has continuously criticised the industrial subsidy policies of other members on various occasions over the years. Please clarify whether the consistent position of the US has changed.”
The US in its reply said that it intends to administer the Act in a manner that is consistent with the US law and its WTO commitments.
The COVID-19 pandemic and the Russia-Ukraine crisis have disrupted global supply chains of semiconductors, which created massive shortages of the important component.
Countries across the world identified the need to attain self-sufficiency in the sector and announced a host of plans to build home-grown semiconductor champions.
The US’s CHIPS Act is one of the largest incentive programmes in the world, providing $52 billion in subsidies and a total of $280 billion in incentives to restore America’s dominance in global semiconductor manufacturing.
However, the programme also restricts chips (or any product in the semiconductor supply chain made using American technology) made in the USA from being exported to China, which could effectively kneecap China’s semiconductor industry — since all semiconductor manufacturers across the world use American supplies in one way or another.
The USA had previously used the Foreign Direct Product Rule (FDPR) to ban Huawei’s exports to the USA and cut off chips supply to Russia.
China had initiated the preliminary stages of dispute resolution at WTO in December itself.
However, WTO — a body already rendered dysfunctional by USA’s refusal to appoint members to it and famous for the time taken to resolve disputes — might not leave China with many options.
The massive American programme can also affect smaller players in the supply chain like India, which have considerably smaller incentive programmes, such as India’s $10 billion Production Linked Incentive scheme.
Meanwhile, the USA has offered explicit support to India to help it build a semiconductor industry ecosystem through the recently launched Initiative on Critical and Emerging Technologies (iCET).
Nonetheless, India is well within its rights to ask questions to the USA on its programme which has protectionist undertones.
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