China Moves WTO Challenging India's 'Discriminatory' Tariff Treatment

China has moved to the World Trade Organisation (WTO), seeking dispute consultations with India over certain measures applied to solar cells, solar modules, and information technology goods. The WTO stated on Tuesday that the request was circulated to its members on December 23.

China Challenges India’s Trade Measures

In its communication, China claimed that India’s tariff treatment and specific measures discriminate against Chinese imports and are contingent upon the use of domestic inputs. 

Beijing maintains that these actions breach various provisions under the WTO’s General Agreement on Tariffs and Trade (GATT) 1994, the Agreement on Subsidies and Countervailing Measures (SCM), and the Agreement on Trade-Related Investment Measures (TRIMS).

The request, submitted on December 19, seeks consultations “at a mutually convenient date” to discuss the contested measures and explore a possible resolution without escalating the dispute.

India-China Friction

The latest development builds upon China’s long-standing complaints alleging India’s discrimination against foreign products. 

In October this year, China filed a complaint against India at WTO, alleging that New Delhi’s electric vehicle (EV) and battery manufacturing subsidies give domestic companies an unfair advantage over global competitors.

Solar equipment-related WTO  complaint is just another segment for the standing friction between India and China regarding trade.

Dispute Centres on PLI and Duty Policies

At the core of China’s complaint lies India’s Production Linked Incentive (PLI) Scheme for photovoltaic (PV) solar cells and modules, along with import duties on a range of information technology goods. According to China, India’s PLI structure effectively favours manufacturers using domestic inputs over imported components, violating WTO rules by offering less favourable treatment to foreign goods.

Under the PLI scheme, incentives are linked to Local Value Addition (LVA) - the higher the local content, the greater the incentive. China argues that such a framework is inconsistent with GATT principles and the TRIMS agreement, which prohibit trade-related investment measures that distort competition by favouring domestic producers.

Additionally, duties and the Agriculture Infrastructure and Development Cess (AIDC) imposed on items such as smartphones, semiconductor manufacturing machinery, and flat panel displays have also been contested.

India’s Trade Actions Against China

This latest move comes just days after India announced anti-dumping duties on cold-rolled steel imports from China for five years, aimed at protecting its domestic steel industry. The new consultation request at the WTO appears to extend the ongoing trade friction between the two Asian economies into the renewables and electronics sectors.

What WTO Consultations Involve

A request for consultations marks the formal beginning of a trade dispute at the WTO. It allows the parties to hold discussions and seek a negotiated settlement within 60 days. If the consultations fail, the complainant - in this case, China - may request the establishment of a panel to adjudicate the case.

WTO’s Dispute Settlement in Limbo

However, even as countries continue to raise disputes, the WTO’s dispute resolution system remains partly paralysed. Since 2019, the Appellate Body, which serves as the final court of appeal in trade disputes, has been non-functional due to the United States blocking the appointment of new judges. As a result, while panels can still issue rulings, unresolved appeals often leave disputes in procedural limbo.