China's WTO Complaint Against India
China has lodged a formal complaint with the World Trade Organization (WTO) against India, alleging that India's Production-Linked Incentive (PLI) scheme violates WTO laws. The complaint focuses on subsidies related to advanced chemistry cell (ACC) batteries, the auto sector, and Electric Vehicles (EVs).
Background of India's PLI Scheme
- Launched in 2020 to boost manufacturing in India, the PLI scheme offers financial incentives based on incremental sales.
- Aims to strengthen India's role in global value chains and integrate small and medium industries through backward linkages.
Specific PLI Schemes Challenged by China
- ACC Batteries: Incentivizes large-scale manufacturing capabilities.
- Auto Industry: Supports manufacturing of Advanced Automotive Technology (AAT) products.
- EV Manufacturing: Attracts global EV manufacturers to India.
China's Allegations
- The PLI schemes provide subsidies contingent on Domestic Value Addition (DVA), potentially discriminating against imported goods, including those from China.
- Examples include a 50% DVA requirement for the auto sector and 25% for ACC batteries.
WTO Law and Subsidies
The WTO's Subsidies and Countervailing Measures (SCM) agreement defines and regulates subsidies:
- Prohibited Subsidies: Includes export and Import Substitution (IS) subsidies, which require domestic goods' use over imports.
- National Treatment Obligation: Mandates equal treatment for imported and domestic products (GATT Article III.4).
- TRIMs Agreement: Prohibits trade-related investment measures favoring local content.
Dispute Resolution Process
- The first step involves consultations between India and China to resolve the issue amicably.
- If unresolved, a three-member ad hoc WTO panel adjudicates the dispute, with potential appeals postponed due to the Appellate Body's incapacity since December 2019.
Prabhash Ranjan, Professor and Vice Dean (Research) at Jindal Global Law School, provides personal views on the matter.