China files WTO dispute complaint against India’s PLI scheme

China filed a WTO dispute complaint against India’s Production-Linked Incentive (PLI) schemes on grounds of trade distortion and violation of WTO subsidy rules.

Key Highlights

• Schemes challenged:
  1. PLI for Advanced Chemistry Cell (ACC) batteries – promotes giga-scale manufacturing of ACC batteries with 25% Domestic Value Addition (DVA).
  2. PLI for Auto sector – targets Advanced Automotive Technology (AAT) products, requiring 50% DVA.
  3. PLI for EV manufacturing – aims to attract global EV players to make EVs in India.
• China’s argument:
  • These PLIs condition financial benefits on the use of domestic goods, thereby discriminating against imported goods (including Chinese components).
  • Hence, they violate WTO’s Subsidies and Countervailing Measures (SCM) Agreement.
• India’s defence (expected):
  • The PLI schemes are non-discriminatory, performance-linked, and WTO-consistent.
  • They aim to build global manufacturing competitiveness, not to restrict imports.

WTO Legal Framework

1. Agreement on Subsidies and Countervailing Measures (SCM Agreement)

• Governs the use of industrial subsidies by member nations.
• Defines a subsidy as:
  a) Financial contribution by a government or public body,
  b) Conferring a benefit to a specific industry or enterprise.
• Prohibited subsidies:
  • Export-contingent subsidies, and
  • Import-substitution subsidies — i.e., subsidies contingent on using domestic goods over imported ones.
    ➤ China alleges that PLI violates this second type.

2. WTO Dispute Settlement Process

• Step 1: Consultations (mandatory first stage).
• Step 2: Panel establishment (if consultations fail).
• Step 3: Appellate Body (though currently dysfunctional).
• Step 4: Implementation or retaliation.

Source: TH