U.S. vs. China: Battle over Electric Vehicle Subsidy Policies at the WTO

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

The United States has been hit with a complaint by China over what it perceives as discriminatory requirements for electric vehicle subsidies. The complaint stems from a new U.S. rule that went into effect on January 1, which states 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.

The Chinese Commerce Ministry did not specify what prompted the complaint but expressed concerns that the U.S. has implemented discriminatory subsidy policies for new energy vehicles 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 the trade practices of other members and seek relief through a dispute settlement process.

If the United States were to lose and appeal the ruling, China’s case would likely not progress due to the WTO’s Appellate Body not functioning since late 2019. However, this does not mean that China will abandon its efforts to challenge these policies entirely. The European Union has also expressed concerns about Chinese subsidies for electric vehicles under similar rules in Europe. Under the new U.S. 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 the credits.

The real-world impact of this case is uncertain as it depends on how it is resolved through negotiations or legal proceedings between China and the United States or through WTO’s dispute settlement process if it resumes operations.

China’s dominance in battery market for electric vehicles gives it an advantage in challenging established carmakers globally who may struggle to keep up with its rapidly expanding auto industry and low costs.

In conclusion, this case highlights how trade practices can have significant implications on industries such as automotive and technology sectors worldwide and underscores how important it is for nations to engage in constructive dialogue when disputes arise in international trade relations

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