WTO AND US–CHINA CLEAN ENERGY DISPUTE

May 30, 2024

WTO AND US–CHINA CLEAN ENERGY DISPUTE

What Is the US–China Clean Energy Dispute?

• The dispute involves competition between the United States and China in the clean energy sector.

• China challenged the US Inflation Reduction Act (IRA) at the World Trade Organization (WTO).

Why Is This Important?

• Both the US and China are leading economies and major investors in clean energy.

• Their competition impacts global efforts to reduce greenhouse gas emissions.

What Is the US Inflation Reduction Act (IRA)?

• The IRA is a US law with a budget of $369 billion for clean energy and climate programs.

• It provides tax credits favoring domestic over imported goods, aiming to reduce reliance on Chinese products.

What Are China’s Claims?

• China claims the IRA violates three WTO agreements by implementing illegal trade-related investment measures and subsidies.

• These actions, China argues, breach principles of national treatment and most-favored-nation treatment.

How Has the US Responded?

• The US has agreed to hold WTO consultations with China.

• The US may argue the IRA supports public and environmental health and national security under specific WTO provisions.

What Are the Potential Outcomes?

• The WTO’s dispute settlement system is currently limited due to the US blocking the appointment of Appellate Body members.

• This creates uncertainty about the resolution of the dispute.

Why Does This Matter for Global Trade?

• The dispute highlights challenges in balancing ambitious climate policies with multilateral trading rules.

• It raises concerns about discriminatory trade measures and the effectiveness of the WTO.

What Is the Broader Impact?

• The dispute underscores the need for clear rules on green industrial policies and effective dispute resolution.

• Cooperation between the US and China remains crucial for global clean energy efforts.

SRIRAM’s