“Mark” Min Kim*
[This essay is available in PDF at this link]
Abstract
Justified as a national security law, the CHIPS and Science Act (“CHIPS Act”) channels an unprecedented $53 billion federal investment to reshore semiconductor production and reduce dependence on chips manufactured in China. This article documents the unique supply chain risks and institutional history that have led the United States to recognize the semiconductor supply chain as a matter of national security. Despite its success in incentivizing $450 billion in private investment at home, the CHIPS Act inspired retaliation from China and a $380 billion global chip subsidy war in which Members of the World Trade Organization (“WTO”) compete for technological superiority.
By utilizing the CHIPS Act as a case study, this article surveys the legal issues that would be contested if industrial subsidies that advance economic security objectives were challenged in the WTO’s judicial arm. Such subsidies would breach
fundamental nondiscrimination obligations under Articles I and III of the General Agreement on Tariffs and Trade (“GATT”) and are unlikely to satisfy the narrow test for general exceptions under Article XX. For these reasons, the controversial “national security exception” under Article XXI would be the last resort for such measures to be deemed consistent with WTO law. Despite the strength and frequency of national security justifications, the CHIPS Act would not satisfy the WTO Panels’ interpretation of Article XXI that confines the use of the national security exception to respond to a war or complete severance of diplomatic, trade, and political relations. The article then both explores the policy implications of a potential Dispute Settlement Body (“DSB”) finding that the CHIPS Act or like measures contravene WTO rules, and previews China’s current WTO complaints challenging U.S. semiconductors export controls and the Inflation Reduction Act (“IRA”), a parallel industrial subsidy for electric vehicles. The CHIPS Act debate exemplifies the growing divergence between international and domestic law as the line between trade and security is blurred and countries increasingly sideline the WTO to redefine the meaning of national security on their own terms.
*J.D. 2024, New York University School of Law; B.A., 2020, University of Pennsylvania. I am extremely grateful to Professors Robert Howse, Timothy Reif, Lauren Mandell, Kelly Ann Shaw, Bob Bauer, and Sally Katzen for insightful comments and suggestions. Many thanks to the excellent editors of the Harvard National Security Journal. Finally, a heartfelt and special thank you to Ahin Lee, Jack Hilles, Berke Gursoy, Eun Sol Kim, Hyo Joon Ahn, TaeJoon Kim, Jung In Heo, and my family. All views and errors are my own.