The Ministry of Commerce Photo: VCG

China has proposed to the World Trade Organization (WTO) the establishment of an expert panel regarding a dispute over new-energy vehicle (NEV) subsidies and other measures under the US Inflation Reduction Act (IRA), as the US has failed to reach a solution through consultations with China, a spokesperson of the Ministry of Commerce (MOFCOM) said on Monday.

Experts said that the move is a rational and law-based response to the unfair US sanctions targeting Chinese companies and products, urging the US to drop the politically motivated IRA and seek more cooperation instead of confrontation with China in fighting against climate change.

The US government, under the pretext of tackling climate challenges and pursuing low-carbon development, detailed in its IRA requirements for products eligible for its subsidies to be produced in certain regions, including domestically within the US. 

These protectionist measures violated the WTO's rules such as national treatment and most favored nation treatment, drawing opposition and concerns from China and the international community.

To protect the development interests of this industry, on March 26, China submitted a dispute to the WTO dispute settlement mechanism concerning the subsidies for NEVs under the IRA. 

However, the US failed to reach a solution through consultations with China. As a result, China requested the establishment of a panel at the WTO over the matter, according to the MOFCOM on Monday.

The IRA conditions subsidies on the use of products from the US and certain other regions, excluding products from WTO members like China. Such a move creates artificial trade barriers and increases the cost of the green energy transition, the MOFCOM spokesperson said on Monday, responding to media requests for details regarding the case.

"China's NEV industry has made significant contributions to the global green energy transition and combating climate change... No matter how the IRA is packaged or beautified, it cannot change the discriminatory, protectionist nature of the subsidies and their violation of WTO rules," the spokesperson said.

Responding to China's proposal to the WTO, Li Yong, a senior research fellow at the China Association of International Trade, told the Global Times on Monday that "we have taken law-based measures to safeguard our rights in the face of unfair measures from the US."

China's move came as the talks with the US over the IRA-related matter failed to reach an agreement, and therefore, it is reasonable to establish an expert team to better look into the case, Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Monday. It's an important effort by China to achieve a solution on the basis of WTO rules.

The MOFCOM spokesperson also said that China's firm advancement of the litigation process is a concrete action to uphold the authority and effectiveness of the multilateral trading system centered on the WTO and to support international efforts to combat climate change.

"China recognizes the implementation of industrial subsidies by WTO members in ways that comply with WTO rules, support the green energy transition, and promote economic and social development," the spokesperson said, noting "We once again urge the US to adhere to WTO rules and stop abusing industrial policies that harm international cooperation in addressing climate change."

Under enhanced cooperation in the global vehicle industry, China's automobile companies have embraced global market competition, and China-made NEVs have become an increasingly important factor in contributing to the green transformation.

Amid China's continuing development in the NEV sector, global players have been stepping up cooperation with Chinese companies despite increasingly protectionist moves against the Chinese electric vehicle (EV) sector implemented by the US-led West. 

US-based electric carmaker Tesla in June exported 71,007 vehicles made in China, according to the China Passenger Car Association.

In the long term, protectionism will only jeopardize the West's own competitiveness, while the rise of China's EVs is the result of openness, competition and cooperation, Wu Shuocheng, a veteran automobile industry analyst, said in a recent interview.