New DelhiChina has once again approached the World Trade Organization against India, This time the matter is not limited to electric vehicles or batteries only, but it also includes tariffs imposed on India’s ICT products and subsidies related to the solar sector, The Chinese Commerce Ministry says that these policies of India are against WTO rules and Indian companies are getting unfair benefits due to this,
In a statement issued on Friday, China said that India’s tariffs and subsidies give advantage to its domestic industry and harm the interests of Chinese companies. China has demanded India to abide by its commitments under WTO and immediately improve these policies. This controversy has come to light at a time when India is emphasizing on Make in India and self-reliant India.
What case has China filed against India in WTO?
In the new case that China has filed in WTO, two big issues have been raised. First, the tariffs imposed by India on products related to information and communication technology. Second, the subsidy being given to the Indian solar sector i.e. photovoltaic industry. China alleges that these steps are not in accordance with international trade rules and domestic companies are unfairly benefiting from this.
Earlier also complaint on EV and battery subsidy
This is not the first time that China has gone to WTO against India. Earlier, China had also filed a complaint regarding India’s electric vehicle and battery subsidy. In that case too, China had argued that India’s policies give unfair competitive edge to the domestic industry and make the market disadvantageous for Chinese companies. Even then China had said that it would take strict steps to protect the interests of its domestic industries.
Why does China object to India’s policies?
China says that India is deliberately adopting such tariff and subsidy models, which make it difficult for foreign companies to compete. Tariffs on ICT products promote goods made in India, while subsidies for solar, EV and battery sectors strengthen local manufacturing. China considers this against the rules of global trade.
What does this mean for India
India’s side will now present its position under WTO rules. India has generally been arguing that these policies are related to its needs as a developing country and the objective of building domestic industry. This fight in WTO may go on for a long time and it may also affect India-China trade relations and global supply chain.
What does WTO’s basic rule say?
The basic principle of WTO is level playing field. This means that no country can give such an advantage to its domestic companies that competition becomes unfair for foreign companies. But this does not mean that governments should not support. Support is allowed, only the methods and scope are fixed.
WTO rules on subsidies
Under WTO’s Agreement on Subsidies and Countervailing Measures, subsidies are seen in three categories.
- First, prohibited subsidy. This includes export related subsidies or such help which forces the use of domestic products instead of directly imported goods. This is considered completely wrong.
- Second, actionable subsidies. It is not completely banned, but if it is proven to cause harm to the industry of another country, then a case can be filed against it. China is putting India’s EV, battery and solar subsidies in this category.
- Third, non-actionable support. This includes help like research, skill development, infrastructure, which is generally accepted in WTO.
What is the rule on tariff
In WTO, every country has set a maximum limit of tariff, which is called bound tariff. If a country keeps the tariff within this limit then it is considered within the rules. But if the tariff exceeds this limit or targets only selected countries, then a dispute arises. China’s allegation is that India has imposed excessive or discriminatory tariffs on ICT products.
Then is India wrong?
Not necessary. Right and wrong are not decided immediately in WTO case. India can argue that its subsidies are linked to industrial development, climate goals and energy security, and not to harm any country. Many times the WTO panel also gives some flexibility to the developing country in such matters.
Why does China file a case again?
WTO cases are not only used for breaking rules but are also used as a pressure tool. This creates pressure on the negotiation table. China knows that India is progressing rapidly in manufacturing and tech, so it wants to challenge these policies in the initial stage itself.
