China Challenges U.S. at WTO Over Inflation Reduction Act

China “not environmental protection, but ‘discriminatory law'”

China has filed a lawsuit at the World Trade Organization (WTO) against the United States’ Inflation Reduction Act (IRA).

According to reports from Yonhap News and the WTO on the 27th, the dispute resolution process began at the WTO following China’s request to rectify the discriminatory subsidy execution resulting from the IRA.

The Chinese delegation claimed, “The IRA is being implemented under the superficial reason of responding to climate change and protecting the environment, but in essence, it has a discriminatory nature by providing subsidies only if products produced in the United States are purchased and used, or imported from specific regions.”

The U.S.’s IRA aims to combat climate change by investing $375 billion in relevant businesses such as electric vehicles and renewable energy. It also intends to transfer the industry supply chain for clean energy, which relies on China, to the U.S.

To achieve this goal, subsidies are only provided to electric vehicles that do not procure key minerals and parts for their batteries from “concerned companies” abroad, including China.

There has also been controversy over discrimination as it requires that electric vehicles be assembled in North America. The European Union (EU) also makes the electric vehicle subsidies based on the IRA a significant trade issue with the U.S.

However, the U.S. appears unwilling to accept China’s claims. U.S. Trade Representative Katherine Tai confirmed in a statement that the U.S. had received China’s request for consultations related to the IRA, stating, “We are carefully reviewing the request for consultations.”

WTO member countries can sue another member at WTO if they believe the member’s policy discriminates against their government or violates WTO agreements.

The first step in a lawsuit is to request bilateral consultations for dispute resolution with the opposing country. The country receiving the request is obliged to consult with the suing country within 30 days.

However, if Tai’s position holds, it seems unlikely that the U.S. and China will reach a satisfactory agreement through consultations.

Representative Tai argued, “The IRA is a revolutionary tool for the U.S. to seriously respond to the global climate crisis and invest in U.S. economic competitiveness,” and “The IRA is the U.S.’s contribution to the future of clean energy we aim to achieve with our allies and partners.”