Discrimination against Chinese Electric Vehicle Subsidies: A Case at the World Trade Organization

China to oppose Biden’s electric vehicle initiatives at the WTO

Discrimination against Chinese Electric Vehicle Subsidies: A Case at the World Trade Organization

The United States has been accused of discrimination against Chinese electric vehicle subsidies by China, which has filed a complaint with the World Trade Organization. The complaint stems from a new U.S. rule that went into effect on January 1st, stating that electric car buyers are not eligible for tax credits if critical minerals or other battery components were made by Chinese, Russian, North Korean, or Iranian companies. This policy is part of President Joe Biden’s 2022 Inflation Reduction Act aimed at addressing climate change.

China’s Commerce Ministry did not provide any specific reasons for the complaint but expressed concerns over the discriminatory subsidy policies implemented under the act. The ministry believes that these policies exclude Chinese products, distort fair competition and disrupt the global supply chain for new energy vehicles. Member countries of the WTO can file complaints about trade practices of other members and seek relief through a dispute settlement process.

The impact of this case is uncertain due to the fact that if the United States loses and appeals the ruling, China’s case may not progress as the WTO’s Appellate Body has not been functioning since late 2019. China is a dominant player in the battery market for electric vehicles and has a rapidly expanding auto industry that could challenge established carmakers globally. The European Union has also expressed concerns about Chinese subsidies for electric vehicles under this new U.S. rule.

Under this new rule, only 13 out of over 50 EV models on sale in the U.S were eligible for tax credits, prompting automakers to source eligible parts to qualify for these credits.

In summary, China’s complaint against discriminatory requirements for electric vehicle subsidies highlights growing tensions between China and the United States over trade practices related to climate change efforts. While it remains unclear how this case will be resolved, it serves as a reminder of ongoing challenges faced by both countries in balancing their economic interests with their international obligations under global trade rules.

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