Context
- China has filed a trade dispute against India at the World Trade Organization WTO.
- It alleges that India’s electric vehicle EV and battery subsidy schemes violate WTO rules.
- This comes at a time when both nations are cautiously trying to stabilise relations post the Ladakh border standoff.
Key Highlights
- China has filed a complaint with the WTO Dispute Settlement Body.
- Claims that India’s EV subsidies discriminate against Chinese imports.
- Says India has violated national treatment obligations and used import substitution subsidies.
- China wants access to the growing Indian EV market.
Detailed Insights
- India provides Production Linked Incentive PLI schemes to promote domestic EV and battery manufacturing.
- China says localisation requirements unfairly favour Indian firms over foreign companies.
- WTO’s national treatment principle mandates equal treatment for imported goods.
- Import substitution subsidies are prohibited under WTO rules as they encourage replacing imports with domestic goods.
- Chinese EV firms like BYD and MG Motor SAIC face regulatory restrictions in India.
- India remains cautious due to security concerns and trade imbalances with China.
WTO Provisions Involved
- Agreement on Subsidies and Countervailing Measures SCM
- National Treatment – Article 3
- Prohibition of import substitution subsidies – Article 3.1b
- WTO Dispute Settlement Understanding DSU
India’s Possible Defence
- Subsidies aim to promote clean energy and reduce emissions.
- Measures are part of environmental commitments and public interest policy.
- Subsidy schemes are non-discriminatory and open to foreign firms that invest in India.
- Policy ensures technology transfer, industrial growth and reduced import dependency.
Impact of the Dispute
- May escalate India–China trade tensions.
- Could delay Chinese EV investment in India.
- Might affect global EV supply chains.
- Shows trade policy being used as a strategic tool.