Semiconductor Subsidy Mischief

Clark PackardIn the coming weeks, Congress could pass a bill showering massive subsidies on the semiconductor industry. The supposed purpose of the plan is to induce firms to produce more semiconductors domestically with an eye toward outcompeting China. My Cato colleague Scott Lincicomenoted that politics, not economics, is the driving factor behind the push for this corporate welfare scheme. Meanwhile, Bryan Riley of the National Taxpayers Unionhighlighted the enormous costs associated with the bill. The American Action Forumhas noted that the private sector is already working to address the global chip shortage – announcing more than $830 billion worth of private investment over the next decade. Largely missing from the current debate is the strong potential for future trade frictions as countries try to protect their domestic semiconductor industries from subsidized import competition.The subsidies under consideration —grants and tax credits for domestic production—are classic examples of specific subsidies under globally accepted definitions: “financial contribution[s]” by a “government” or a “public body” conferring “benefit[s]” on the recipients. Indeed, the World Trade Organization’s Agr eement on Subsidies and Countervailing Measures (SCM)explicitly mentions grants in Article 1.1 (a)(1)(i) and tax credits in Article 1.1 (a)(1)(ii) as prohibited trade ‐​distorting subsidies.Likewise, the U.S. is already a major exporter of semicon...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs