Context:
Recently, China requested consultations with India at the World Trade Organization (WTO) under the Dispute Settlement Understanding (DSU). The complaint challenges India’s tariffs on information and communications technology (ICT) products and subsidies in the solar sector, alleging violations of core WTO rules, including the national treatment principle and the prohibition on import-substitution subsidies. This marks China’s second WTO dispute against India in 2025, following an earlier case concerning electric vehicle (EV) and battery subsidies, indicating rising bilateral trade frictions.
Key Issues at Stake:
China’s complaint centres on two major policy instruments employed by India:
1. ICT Tariffs
India has maintained relatively high tariffs on imported ICT products as part of its strategy to promote domestic manufacturing and value addition under initiatives such as Make in India and various production-linked incentive (PLI) schemes.
China argues that these tariffs:
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- Exceed India’s WTO-bound tariff commitments, and
- Violate the national treatment principle, which requires imported goods to be treated no less favourably than like domestic products after entry into the market.
- Exceed India’s WTO-bound tariff commitments, and
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2. Solar Sector Subsidies
India has extended subsidies and incentives for photovoltaic (solar) manufacturing and deployment to build a resilient domestic solar ecosystem and reduce import dependence.
China contends that certain incentives amount to import-substitution subsidies, which WTO rules restrict because they:
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- Condition benefits on the use of domestic over imported goods, and
- Confer an unfair competitive advantage on domestic producers at the expense of foreign suppliers.
- Condition benefits on the use of domestic over imported goods, and
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WTO and Its Dispute Settlement Mechanism:
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- The WTO, established in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), is the principal global institution governing international trade rules. It facilitates trade negotiations, administers trade agreements, monitors national trade policies, and provides technical assistance to developing countries. Its overarching objective is to ensure that trade flows smoothly, predictably, and on a non-discriminatory basis.
- A cornerstone of the WTO is its binding dispute settlement system, administered by the Dispute Settlement Body (DSB). The process typically involves:
- The WTO, established in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), is the principal global institution governing international trade rules. It facilitates trade negotiations, administers trade agreements, monitors national trade policies, and provides technical assistance to developing countries. Its overarching objective is to ensure that trade flows smoothly, predictably, and on a non-discriminatory basis.
1. Consultations (up to 60 days) to seek a mutually agreed solution
2. Panel proceedings, where independent experts examine the dispute
3. Appellate review on points of law
4. Implementation and compliance monitoring
5. Retaliatory measures, if rulings are not implemented
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- However, since 2019, the WTO’s Appellate Body has been effectively paralysed due to the United States blocking judicial appointments, weakening the enforceability of dispute rulings. In response, some members—including China and the European Union—have adopted the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary alternative.
- However, since 2019, the WTO’s Appellate Body has been effectively paralysed due to the United States blocking judicial appointments, weakening the enforceability of dispute rulings. In response, some members—including China and the European Union—have adopted the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary alternative.
Conclusion:
China’s request for WTO consultations with India over ICT tariffs and solar subsidies reflects escalating trade frictions amid a challenging global economic environment. For India, the dispute highlights the delicate balance between pursuing strategic industrial policy and self-reliance objectives and adhering to multilateral trade commitments. The outcome of the consultations will not only influence India–China economic engagement but also contribute to broader debates on how WTO disciplines interact with evolving development priorities, particularly for emerging economies seeking to build domestic manufacturing capacity in strategic sectors.
