In a pivotal escalation of the green technology trade war between the world’s two most populous nations, the World Trade Organization (WTO) Dispute Settlement Body (DSB) formally established an expert panel on June 23, 2026, to adjudicate case DS644. The dispute, initiated by China against India, targets a complex web of import duties and domestic manufacturing incentives across the solar energy and information technology (IT) sectors. The move comes at a moment of significant geoeconomic irony: China has recently overtaken the United States to become India’s largest trading partner, even as Beijing moves to dismantle the very “Make in India” policies designed to rectify a staggering $112 billion bilateral trade deficit.
Dispute Timeline and Procedural Background
The formation of the panel marks the exhaustion of bilateral diplomatic channels and follows a strictly defined WTO legal trajectory:
- December 19, 2025: China formally requests consultations with India, alleging that India’s protectionist measures in the solar and IT sectors breach multilateral trade rules.
- May 22, 2026: India exercises its right under WTO rules to block China’s first request for a dispute panel, a standard procedural move to delay litigation.
- June 23, 2026: The DSB approves China’s second request for the panel.
Under WTO procedural norms, while a respondent may defer the process once, a second request for a panel is automatically approved unless there is a unanimous “reverse consensus” against it—a rarity in modern trade law.
Core Allegations and Legal Pillars
China’s complaint centers on three distinct pillars of India’s industrial strategy, alleging violations of the General Agreement on Tariffs and Trade (GATT 1994), the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the Agreement on Trade-Related Investment Measures (TRIMs Agreement).
1. Discriminatory Tariff Treatment China alleges that India applies customs duties—including the First Schedule to the Customs Tariff Act and the Agriculture Infrastructure and Development Cess (AIDC)—that far exceed its “bound rates” (the maximum ceiling India committed to at the WTO). Beijing cites violations of GATT Article II:1(a) and (b), arguing that Indian applied rates on items like smartphones (15%) and semiconductor manufacturing machines (7.5%) contravene India’s 0% bound commitments.
2. Local Content Requirements (LCRs) in PLI Schemes The complaint targets the “Make in India” framework, specifically the Production Linked Incentive (PLI) Scheme. China argues that making cash grants contingent on Local Value Addition (LVA) constitutes a prohibited subsidy under SCM Article 3.1(b) and GATT Article III:4, as it mandates the use of domestic inputs over imports.
3. The ALMM Non-Tariff Barrier A significant “Specific Trade Concern” raised by China is the Approved List of Models and Manufacturers (ALMM). Beijing contends that this mandate, which restricts the deployment of solar modules to those on an India-approved list, serves as a de facto import ban on Chinese modules, further tightening the domestic content requirement.
Technical Mechanics: The Solar PV Module PLI Scheme
A central focus of the panel review is the “National Programme on High Efficiency Solar PV Modules” (Tranche I and II). This scheme provides giga-watt scale manufacturing grants but uses a “moving target” incentive structure where requirements tighten annually.
Local Value Addition (LVA) Framework
To qualify for grants, manufacturers must meet LVA thresholds that scale with their level of integration. Crucially, Tranche II prioritizes “fully integrated” Level 1 units, and all beneficiaries must navigate a minimum LVA requirement that increases every year throughout the five-year granting period.
| Level of Integration | Scope of Integration | LVA Requirement Range |
| Level 1 | Polysilicon → Ingots-Wafers → Cells → Modules | 50% to 90% |
| Level 2 | Ingots-Wafers → Cells → Modules | 50% to 90% |
| Level 3 | Cells → Modules | 50% to 90% |
The LVA Calculation Formula: Per the WTO filing, the achieved LVA is calculated as: [(Sale Value of Module - Value of Imported Materials) / Sale Value of Module] × 100
Technical Annex: Applied vs. Bound Duty Discrepancies
The dispute highlights several high-tech products in “Annex A” where India’s applied duties allegedly create “less favorable treatment” for Chinese exports:
- Smartphones: Applied Duty of 15% vs. Bound Rate of 0%.
- Semiconductor Manufacturing Machines: Applied Duty of 7.5% vs. Bound Rate of 0%.
- Assembled Photovoltaic Cells/Modules: Applied Duty of 20% vs. Bound Rate of 20% (contested via additional charges like AIDC).
- Unassembled Photovoltaic Cells: Applied Duty of 7.5% vs. Bound Rate of 0% (Photosensitive semiconductor devices).
India’s Formal Defense
India has maintained a defiant posture, asserting that its measures are essential for climate goals and strategic energy security. Key points of India’s defense include:
- Consistency: India argues all measures are fully compliant with WTO obligations and were thoroughly explained during consultations.
- Policy Objective: The measures are vital for fostering a “vertically integrated” domestic ecosystem to reduce reliance on volatile global supply chains.
- Systemic Regret: India expressed regret that WTO resources are being utilized for this dispute, suggesting the DSB should focus on genuine trade concerns rather than industrial policy aimed at clean energy transition.
International Stakes and Bilateral Context
Reflecting the global race for renewable energy dominance, 12 major economies have reserved Third-Party Rights to join the proceedings: Australia, Brazil, Canada, the European Union, Japan, the Republic of Korea, the Philippines, the Russian Federation, Singapore, Türkiye, the United Kingdom, and the United States.
The geopolitical weight of the case is underscored by the current trade imbalance. For the 2025-26 period, bilateral trade reached 151.1 billion, but India’s trade deficit with China widened to a record 112.16 billion. This deficit remains the primary driver behind India’s aggressive “Make in India” push.
The panel will also operate against the backdrop of a concurrent dispute initiated by China regarding India’s measures in the automotive and renewable energy sectors, signaling a broader, multi-front legal confrontation over the future of the global green economy.
Leave a Comment