New trade war? China goes to WTO over Biden’s plan for electric cars

The Chinese Government has requested in World Trade Organization (WTO) the beginning of consultations with the United States over the subsidies that the latter allocates to the purchase of electric vehicles, the first step in what could lead to a trade dispute between both commercial powers, confirmed this Tuesday to EFE a strong the entity.

“We can confirm that a request for consultations has been received from China“, within the framework of the dispute procedure, indicated the source.

Asked about details of the Chinese process, the organization pointed out that additional information can only be provided once the official document containing China’s request has been distributed among all WTO member states.

This confirmation comes hours after the Chinese Ministry of Commerce said in a statement posted on its website that it would use the WTO’s existing dispute settlement mechanism in this case, which functions as an arbitration panel.

China is challenging a series of rules issued in the United States, according to which only vehicle owners who use supplies from specific regions, among which China does not figure, can access subsidies.

The US fiscal plan, aimed at curbing inflation, includes a credit of up to US$7,500 for electric vehicles, which is expected to boost demand in this sector.

Additionally, the credit is only available for vehicles with final assembly in North America.

Most of the other requirements are related to the extraction, processing and recycling of critical minerals, and the manufacturing and assembly of battery components.

China’s position

China filed a complaint with the World Trade Organization against the United States on Tuesday over what it considers discriminatory requirements to qualify for its electric vehicle subsidies.

Starting this year, American buyers will not be eligible for tax deductions of between $3,750 and $7,500 if key minerals or other battery components were made by companies in China, Russia, North Korea or Iran. The aid is part of President Joe Biden’s climate legislation, the so-called Inflation Reduction Act of 2022.

China’s Ministry of Commerce said in a statement posted online that the United States has formulated discriminatory aid policies for new vehicles in the name of responding to climate change. According to Beijing, the US measure excludes Chinese products, distorts competition and disrupts the global supply chain for this type of vehicle.

Countries that are part of the WTO, based in Geneva, can lodge complaints about the trade practices of other partners and seek redress through the dispute resolution process.

China is a dominant player in the electric vehicle battery sector and has a rapidly expanding automotive industry that could pose a challenge to established global manufacturers if it makes the international leap. Its strong point is electric cars and its companies have become leaders in battery technology.

The European Union, concerned about the possible threat to its auto industry, last year launched its own investigation into Beijing’s subsidies for electric cars.

According to the new US regulations, which came into force on January 1, only 13 of the more than 50 electric vehicles on sale in the country are eligible for tax credits, compared to more than 20 models last year. Manufacturers have tried to find components that make their models eligible for subsidies.