China Challenges India's Production-Linked Incentive (PLI) Schemes at the World Trade Organization
China has filed a complaint at the WTO alleging that India’s Production-Linked Incentive (PLI) schemes for ACC batteries, the auto sector, and solar PV modules violate international trade rules. China argues that the 'Domestic Value Addition' (DVA) requirements act as prohibited import substitution subsidies. Under the WTO's Subsidies and Countervailing Measures (SCM) Agreement, subsidies contingent on the use of domestic over imported goods are forbidden. India maintains these schemes are sovereign rights to boost domestic industry, but the dispute highlights the legal complexities of industrial policy and the current paralysis of the WTO's Appellate Body.
Key Points
- China specifically targets PLI schemes for Advanced Chemistry Cell (ACC) batteries and the automotive sector.
- The core of the dispute is the 'Domestic Value Addition' (DVA) requirement, which China claims discriminates against imports.
- The WTO SCM Agreement prohibits subsidies that are contingent upon 'import substitution' or 'export performance.'
- The WTO's dispute settlement process is currently hampered by the vacancy in its Appellate Body, delaying final resolutions.
Exam Facts
- The SCM Agreement stands for the Agreement on Subsidies and Countervailing Measures.
- TRIMS refers to the Agreement on Trade-Related Investment Measures.
- The WTO Appellate Body has been non-functional since December 2019.
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