The World Trade Organization’s Dispute Settlement Body (DSB) on Tuesday agreed to set up a dispute panel to examine India’s production-linked incentive (PLI) schemes for batteries, electric vehicles and related sectors, following a request by China. The move marks an escalation in trade tensions between the two countries over support measures in the automotive and renewable energy space.
At its meeting on February 24, the DSB established the panel in the case titled India – Measures Concerning Trade in the Automotive and Renewable Energy Technology Sectors (DS642), after China submitted a second request. India had blocked the first request at the DSB meeting on January 27, as permitted under WTO rules.
China has challenged India’s incentive schemes covering advanced chemistry cell batteries, automobiles and auto components, and electric vehicles, arguing that they discriminate against foreign firms and violate core WTO principles such as national treatment and the prohibition on import substitution subsidies. Beijing contends that the measures unfairly restrict trade and tilt the playing field in favour of domestic manufacturers.
India, however, expressed regret over China’s decision to press ahead with the panel request. New Delhi said it had engaged in consultations in good faith and provided detailed explanations demonstrating that its measures are consistent with WTO obligations. India maintained that it remains confident the schemes are fully compliant with global trade rules.
The United States, participating as a third party, voiced disappointment at China’s move and urged Beijing to address its own non-market policies and excess industrial capacity, which it said have harmed global supply chains.
Several members — including Canada, the European Union, Japan, the United Kingdom and the United States — reserved their third-party rights to join the dispute proceedings.
In a separate development, the United States formally notified its decision to appeal a panel ruling in a dispute brought by China over certain tax credits under the US Inflation Reduction Act. The case, United States – Certain Tax Credits under the Inflation Reduction Act (DS623), had been scheduled for adoption at the meeting but was removed from the agenda following the US appeal.
China criticised Washington’s decision to appeal the ruling to a currently non-functioning appellate body, stating that the panel had conducted a careful and impartial assessment of the dispute. The US countered that the report failed to address what it described as China’s non-market policies and dominance in renewable energy sectors, arguing that the findings undermined efforts to protect domestic workers and businesses.
The European Union, a third party in the case, said the dispute underscored the need for an effective appellate review mechanism.
The next regular meeting of the DSB is scheduled for April 21.