The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on China’s request has agreed to establish a panel to adjudicate a dispute against India’s incentive schemes that seek to build advanced manufacturing capacity in electric vehicles, batteries and other automobiles locally.
The panel was set up in the second attempt by China at the DSB’s meeting on Tuesday. The first attempt was made by China on setting up the panel on January 27 but that was successfully blocked by India.
Tracing the history of the dispute
The dispute was first brought by China in October last year against the Production Linked Incentive scheme for Advanced Chemistry Cell (ACC) Battery Storage, PLI for Automobile and Auto Component Industry and the Scheme to Promote Manufacturing of Electric Passenger Cars in India (EV Passenger Cars Scheme).
China had sought consultations with India on the schemes, claiming that India’s incentive schemes that require companies to prioritize domestic production unfairly discriminate against foreign businesses and restrict trade, thereby violating WTO rules, including the principles of national treatment and the prohibition of import substitution subsidies.
What did India say at Tuesday’s meeting of DSB
India on its part said at Tuesday’s meeting of DSB that it did enter into consultations with China and provided detailed explanations to show that its measures comply with WTO obligations and had no impact on China’s trade interests.
At Tuesday’s meeting India got the backing of the US, which said that the dispute was an attempt to distract from China’s own non-market policies and excess capacity, which harm global supply chains and undermine industrial development in developing countries.
At the meeting of the DSB, countries like Canada, European Union, Japan, Korea, UK, US Russia and Singapore reserved their third-party rights to participate in the proceedings of the DSB.
The Request for Consultation is the first and most crucial stage for dispute resolution at the WTO. If consultations fail, the complaining country can request the establishment of a panel to probe the complaint. After hearing all the sides the panel issues its recommendations that are put before the Dispute Settlement Body (DSB). If the findings of the panel are adopted then countries in the dispute have to abide by the ruling, They also have an option to go before the Appellate body.
The Appellate Body – the final court of appeal is non-functional since 2019. This is because the US has blocked appointment of new judges to this body. So even after the disputes are decided by the DSB, the appeals cannot be taken up. This results in all disputes ending in a void.