Trade Dispute Escalates as China and US Clash Over Clean Energy Subsidies
The ongoing trade dispute between China and the United States has reached a new level as the World Trade Organisation (WTO) has established a panel to address China’s concerns regarding the US clean energy subsidies under the Inflation Reduction Act (IRA). The dispute revolves around whether the tax credits provided under the IRA comply with the WTO regulations.
China’s Request Granted by WTO
Agreeing to China’s second request, the WTO’s Dispute Resolution Body (DSB) will examine the specific tax credits included in the IRA to assess their compliance with multilateral trading system regulations. Eighteen nations, including the European Union, Russia, the United Kingdom, Japan, and Australia, have reserved their rights to participate as third parties in the proceedings.
China Alleges Discrimination by US
China contends that the clean energy subsidies provided by the IRA favor US goods while discriminating against imports, in violation of WTO regulations. The subsidies, which are estimated to be worth around $393 billion, could potentially exceed $1 trillion, according to various assessments. The provisions in question include the Clean Vehicle Credit and Renewable Energy Tax Credits.
China’s Stance on Non-Discrimination
China has acknowledged that certain aspects of the IRA’s subsidies pose problems but focuses its challenge on the provisions that contravene WTO rules. It emphasizes the importance of clean energy transition benefits for all members but insists that these benefits should not come at the expense of the fundamental principle of non-discrimination, vital to the multilateral trading system.
US Disappointed by China’s Move
Initially, the US opposed the establishment of a dispute resolution panel, noting that its actions under the IRA were necessary for combating climate change. However, the US has expressed disappointment over China’s decision to seek a panel for a second time. Despite making efforts to resolve the conflict through consultations, China maintained that it had not been successfully resolved.
A Contest over Clean Energy Supremacy
The ongoing trade battle between the US and China extends beyond this specific dispute over clean energy subsidies. Earlier this month, the US announced significant tariff increases on imports of solar cells, electric vehicles (EVs), batteries, and critical minerals sourced from China. These new tariffs, taking effect in September 2024, will impose restrictions on products such as EVs, solar cells, EV batteries, critical minerals, aluminum, and steel.
Progress Undermined
The US claims that China’s request to the DSB undermines global efforts to tackle the climate crisis and develop a resilient clean energy supply chain. It characterizes China’s complaint as a regrettable attempt to hinder progress on critical issues, as it reinforces reliance on China’s excess non-market capacity while harming the overall WTO members’ broader interests.
In summary, the US-China trade dispute has escalated with the establishment of a panel by the WTO to address China’s concerns over the US clean energy subsidies. The two nations continue to clash over clean energy supremacy, raising tariffs on various products. The outcome of the panel’s examination of the IRA’s provisions will have significant implications for the clean energy sector and international trade relations.
