WTO Establishes Panel To Ascertain Tax Credits Rule Under IRA   

WTO Establishes Panel To Ascertain Tax Credits Rule Under IRA   

The World Trade Organization’s (WTO) Dispute Settlement Body (DSB) at a recent meeting agreed to a request from China to establish a dispute panel. This panel will rule on the WTO compatibility of certain tax credits under the US Inflation Reduction Act (IRA). The move was expected after China made it clear that it opposed US tariffs as well as steps it took to encourage local manufacturing under the IRA. Over 50 GW of module manufacturing capacity and related industries are expected to come up in the US by 2028 , thanks to IRA credits.

WTO took this in response to China’s repeated requests to establish a panel to clarify tax credits under the United States Inflation Reduction Act (IRA) and determine if they are in line with WTO rules. The tax credits under the rule included other tax credits such as the Clean Vehicle Credit and the Renewable Energy Tax Credits, which further include other tax credits such as the Investment Tax Credit for Energy Property; the Clean Electricity Investment Tax Credit; the Production Tax Credit for Electricity from Renewables; and the Clean Electricity Production Tax Credit.

In the WTO’s last ruling, the United States stated it was not in a position to agree to China’s first request in July, justifying its actions as necessary to combat climate change. At the earlier meeting, China argued that the IRA’s subsidies favor US goods over imports, violating WTO rules prohibiting such discrimination.

At the meeting, the United States expressed disappointment over China’s decision to pursue a panel request. It reiterated that the IRA is its most significant step toward clean energy, aimed at ensuring secure and sustainable supply chains for a global clean energy future.

The DSB agreed to the establishment of the panel. Argentina, Australia, Brazil, Canada, Colombia, the European Union, Indonesia, Israel, Japan, Korea, Norway, the Russian Federation, Singapore, Switzerland, Thailand, Türkiye, the United Kingdom, and Venezuela reserved their third-party rights to participate in the panel proceedings.

Question On The Place of Origin

For the 12th time, the United States raised the matter of the panel ruling in DS597 at a DSB meeting. The US said it was raising the matter again due to recent developments in Hong Kong, China, regarding free speech and human rights. The US referred back to its previous statements regarding its position on essential security and its reasons for placing this item on the DSB agenda.

Hong Kong, and China, criticized the US for once again raising this matter at the DSB. It referred to previous WTO panels that dismissed US claims that invoking national security in defense of a trade-restrictive measure is entirely self-judging. Any objections should be heard by the WTO’s Appellate Body, which remains blocked due to the US refusal to allow the appointment of new Appellate Body members, said Hong Kong, China.

China reiterated its firm belief that a restored appeal mechanism is the proper place to address claims of panel error made by the US and rejected in the strongest terms what it described as US interference in the internal affairs of another WTO member. The committee’s next regular DSB meeting will take place on 28 October.