China has commenced dispute settlement proceedings against the United States at the World Trade Organization to protect its interests in the electric vehicle industry, as confirmed by the Chinese mission on Tuesday and subsequently by the WTO.
China contends that it is challenging “discriminatory subsidies” as per the U.S. Inflation Reduction Act (IRA), which it asserts has led to the exclusion of goods from China and other WTO member countries.
The comprehensive legislation offers substantial tax credits to support consumer purchases of electric vehicles and facilitate companies’ renewable energy production, aligning with President Joe Biden’s objective of decarbonizing the robust U.S. power sector.
“Under the guise of responding to climate change, reducing carbon emissions, and protecting the environment, (these subsidies) are, in fact, contingent upon the purchase and utilization of goods from the United States or imported from certain particular regions,” stated the Chinese mission.
They emphasized that the initiation of proceedings aimed “to safeguard the legitimate interests of the Chinese electric vehicle industry and to maintain a fair level playing field of competition for the global market.”
U.S. Trade Representative Katherine Tai responded, stating that Washington was evaluating China’s request for WTO consultations “regarding parts of the Inflation Reduction Act of 2022 and its implementing measures.”
In her statement, Tai highlighted that the IRA was contributing to a “clean energy future that we are collectively seeking with our allies and partners.” She accused China of leveraging what she described as “unfair, non-market policies” to benefit Chinese manufacturers.
A WTO official confirmed receipt of China’s request for dispute consultations on the matter, withholding further details.
In Beijing, a spokesperson for China’s Ministry of Commerce urged Washington to “promptly correct discriminatory industrial policies, and maintain the stability of the global industrial and supply chains for new energy vehicles.”
Typically, WTO rulings on trade disputes are expected within six months after an adjudication panel is established, though they frequently extend beyond this timeline.
Should the WTO rule in favor of China, Washington could potentially appeal the decision into a legal vacuum existing since December 2019, when the WTO’s top appeals bench ceased functioning due to U.S. opposition to judge appointments.
The United States advocates for reforms to the Appellate Body, alleging overreach. Negotiations are ongoing but face numerous hurdles.
