China’s Attack on U.S. Inflation Reduction Act Shows Need for Reform of WTO Rules to Remove Barriers to Climate Action
WASHINGTON, D.C. — Today, China filed a complaint at the World Trade Organization (WTO) against the United States, alleging the requirements to qualify for electric vehicle tax credits in the Inflation Reduction Act (IRA) are discriminatory.
Global Trade Watch Director Melinda St. Louis issued the following statement in response:
“The climate crisis is too urgent for the U.S. or any country to allow outdated trade rules — written long before governments were taking climate change seriously — to distract us from enacting bold climate policies.
“China’s WTO case against the Inflation Reduction Act is yet another example of how WTO rules enable countries to attack policies that combat climate change and support a clean energy transition.
“We’ve been warning since before the passage of the Inflation Reduction Act that antiquated WTO rules would threaten our ability to realize the green transition. Prominent labor, environmental, and consumer groups have urged the U.S. government to boldly implement the IRA as intended despite trade-pact attacks — and to make a commitment not to use such trade rules to challenge other countries’ climate policies.
“Such a ‘Climate Peace Clause’ would temporarily halt cases like this one so countries can prioritize the green transition and revise the WTO rules currently creating unnecessary hurdles.
“We must move forward with IRA implementation and work to enact even bolder policies to transform our economy for a clean energy future, and support other countries that do the same.”
Additional context:
- When the EU and other trading partners threatened to launch disputes at the WTO, civil society pushed back and urged the U.S. government to implement the IRA as intended.
- IAM, UAW, USW, Sierra Club and Public Citizen call for IRA to be implemented as intended despite EU threats of trade challenge
- 40+ EU and US civil society orgs urge EU to drop trade threats on IRA, and for both US and EU to commit to a Climate Peace Clause
- Trans Atlantic Consumer Dialogue says trade rules should not undermine domestic regulatory action
- Statement on EU’s Initial Threats to IRA in Aug 2022
- In 2019, India successfully challenged a dozen programs in eight U.S. states through the WTO that were implemented to make purchasing and installation of renewable energy systems more affordable. That was after the U.S. won its own WTO case against India’s solar program. Last year, the US and India wisely dropped their longstanding WTO complaints against one another’s clean energy policies.
- There is growing demand for a Climate Peace Clause to stop WTO attacks on policies needed to fight climate change. And to support a just transition, this peace clause must additionally facilitate climate finance and green technology transfer to developing countries.
- Threats of trade challenge have prompted the U.S. to negotiate Critical Minerals Agreements with select countries to grant them access to the EV tax credits in the IRA. These CMAs have been met with criticism for undermining Congress’ intent, failing to include congressional and public input, and paying only lipservice to labor and environmental standards in the dangerous and dirty mining industry.