China challenging Biden’s electric vehicle plans at the WTO

China filed a World Trade Organization, WTO, complaint against the United States on Tuesday over what it says are discriminatory requirements for electric vehicle subsidies.

The Chinese Commerce Ministry didn’t say what prompted the move. But under a new US rule that took effect January 1, electric car buyers are not eligible for tax credits of US$3,750 to US$7,500 if critical minerals or other battery components were made by Chinese, Russian, North Korean or Iranian companies. The credits are part of US President Joe Biden’s signature climate legislation, named the 2022 Inflation Reduction Act.

A ministry statement didn’t mention the specific restriction. It said, though, that under the act and its implementing rules, the US had formulated discriminatory subsidy policies for new energy vehicles in the name of responding to climate change. It said the US move excluded Chinese products, distorted fair competition and disrupted the global supply chain for new energy vehicles.

Member countries of the Geneva-based WTO can file complaints about the trade practices of other members and seek relief through a dispute settlement process.

The real-world impact of the case is uncertain. If the United States loses and appeals the ruling, China’s case likely would go nowhere. That is because the WTO’s appellate body, its supreme court, hasn’t functioned since late 2019, when the US blocked the appointment of new judges to the panel.

China is the dominant player in batteries for electric vehicles and has a rapidly expanding auto industry that could challenge the world’s established carmakers as it goes global. Its strength is in electric vehicles and its companies have become leaders in battery technology.

The European Union, concerned about the potential threat to its auto industry, launched its own investigation into Chinese subsides for electric vehicles last year.

Under the new US rule, only 13 of the more than 50 EVs on sale in the US were eligible for tax credits, down from about two dozen models in 2023. Automakers have been scrambling to source parts that would make their models eligible for the credits.

– AP