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China Accuses US of Discrimination in EV Subsidies; WTO Unable to Provide Relief as Appellate Body Blocked

China set to oppose Biden administration’s electric vehicle strategies at the World Trade Organization

China Accuses US of Discrimination in EV Subsidies; WTO Unable to Provide Relief as Appellate Body Blocked

China has accused the United States of discrimination against electric vehicle subsidies in a complaint filed with the World Trade Organization. Under a new US rule that took effect on January 1st, electric car buyers are no longer eligible for tax credits of $3,750 to $7,500 if critical minerals or battery components were made by Chinese, Russian, North Korean, or Iranian companies. These tax credits are part of President Biden’s climate legislation known as the 2022 Inflation Reduction Act.

The Chinese Commerce Ministry did not specify what led to the complaint but criticized the US for enacting discriminatory subsidy policies for new energy vehicles under the act. The statement mentioned that these policies unfairly excluded Chinese products and distorted fair competition in the global supply chain for electric vehicles. Members of the WTO can file complaints about trade practices of other members and seek relief through a dispute settlement process.

The impact of the case is uncertain due to the WTO’s Appellate Body being blocked since late 2019 by the US. China, which has a rapidly expanding auto industry with strengths in electric vehicles and battery technology, has been a dominant player in batteries for electric vehicles. The European Union has also launched its own investigation into Chinese subsidies for electric vehicles, concerned about potential threats to its auto industry.

With the new US rule, only 13 out of over 50 electric vehicles on sale in the US are eligible for tax credits, down from around two dozen models in 2023. Automakers are working to source parts that would make their models eligible for these credits.

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