China Files WTO Complaint Against US over Discriminatory Electric Vehicle Subsidy Policies

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

In response to discriminatory requirements for electric vehicle subsidies, China has filed a complaint against the United States with the World Trade Organization. Under a new U.S. rule that took effect in January 2023, 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 Joe Biden’s climate legislation known as the 2022 Inflation Reduction Act.

The Chinese Commerce Ministry did not specify what prompted the complaint but criticized the U.S. for formulating discriminatory subsidy policies for new energy vehicles under the act. The statement mentioned that these policies excluded Chinese products, distorted fair competition, and disrupted the global supply chain for new energy 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 as the functioning of the WTO’s Appellate Body has been blocked since late 2019 by the US and China, a dominant player in batteries for electric vehicles, has a rapidly expanding auto industry with strengths in electric vehicles and battery technology. 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 U.S rule only 13 out of over 50 electric vehicles on sale in the U.S are eligible for tax credits, a decrease from about two dozen models in 2023. Automakers are working to source parts that would make their models eligible for the credits.

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