The World Trade Organization (WTO) has agreed to form a dispute panel to examine the compatibility of certain tax credits under the US Inflation Reduction Act (IRA) with WTO rules. This decision follows a second request from China after consultations held in May failed to resolve the dispute.
The tax credits in question include the Clean Vehicle Credit and several Renewable Energy Tax Credits, such as the Investment Tax Credit for Energy Property and the Production Tax Credit for Electricity from Renewables. China claims these credits favor US-made goods and discriminate against imports, violating WTO trade rules.
The US initially opposed China's first request in July, arguing that its actions were essential in addressing climate change and criticizing China for its clean energy practices.
The US called China's complaint a move to entrench non-market excess capacity and undermine global climate goals. China, however, maintained that WTO rules should be applied fairly and non-discriminatorily to combat climate change.
Despite US objections, the WTO's Dispute Settlement Body has now confirmed the establishment of the panel. Seventeen countries, including the European Union, have reserved their third-party rights to participate in the panel proceedings.
China has raised concerns about the trade-distorting effects of the IRA, which it claims may involve subsidies surpassing $1 trillion, making it one of the largest ever enacted.
