Geneva: India raised a major trade dispute against the US at the World Trade Organization (WTO) on 9 September, challenging the domestic content requirements and subsidies of eight American states—Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota—for renewable energy on the ground that they are inconsistent with core provisions of global trade rules.
In a tit-for-tat move ahead of the likely ruling by the WTO’s Appellate Body against India’s domestic content requirements for the solar energy programme under the Jawaharlal Nehru Solar Mission, New Delhi finally invoked dispute settlement proceedings against the US after delaying the case for more than three years.
As a first step, India asked the US to enter into what are called Article 4 consultations for discussing the allegedly illegal domestic content requirements and subsidies provided by the US’ states for the renewable sector.
The US has to provide concrete responses to India’s questions within 30 days. New Delhi can ask for the establishment of a dispute settlement panel to adjudicate the issues raised in its complaint if the two sides fail to reach an amicable agreement.
In the latest dispute with the US, India alleged that several incentive programmes to promote and develop the renewable energy sector at the federal, state, regional and local level, particularly in the eight states, are contingent upon the use of domestic or state-specific products. India argued the US’s domestic content programmes are inconsistent with global trade rules under Article 2 of the Trade-related Investment Measures Agreement and Article III:4 of GATT 1994. GATT is the acronym for the General Agreement on Tariffs and Trade.
India challenged the US’s subsidy programme for the renewable energy sector on the ground that it violates provisions relating Article 3.2 read with Article 3.1(b) of the Agreement on Subsidies and Countervailing Measures.
India’s inordinate delay in raising the present trade dispute against the US’s renewable energy programmes has denied it strategic leverage, said an international legal analyst, who asked not to be quoted.
The government knew that the US’s renewable energy programmes are inconsistent with WTO rules. However, New Delhi chose to delay raising the dispute against the US until the eleventh hour, the analyst added.
Early this year, Indian appealed to the WTO’s highest court—the Appellate Body—to dismiss a lower panel ruling that effectively struck down the government’s local content requirements for solar cells and modules for promoting renewable energy following a dispute raised by the US.
New Delhi appealed against several issues of the panel’s interpretation of Article III:8(a) dealing with government procurement and Article XX(d) and XX(j) of general exceptions, under which domestic content requirements are justified.
The US trade representative had cautioned India that a fresh trade dispute by New Delhi against the alleged local content requirements and subsidies provided by several US states and supported by the US federal administration will not be helpful, according to PV Tech, an American publication.
“Tit-for-tat WTO filings will not support our (US-India) shared efforts to deepen our bilateral economic ties, nor are they a responsible use of WTO resources,” a US spokesperson told PV Tech on 19 April.
Before the WTO panel, India had justified the domestic content requirements by pointing to its international obligations. India invoked the United Nations Framework Convention on Climate Change (UNFCC) as part of its defence to continue with the domestic content requirements.
India had argued that it had an “obligation to take steps to achieve energy security, mitigate climate change, and achieve sustainable development, and that this includes steps to ensure the adequate supply of clean electricity, generated from solar power, at reasonable prices.”
New Delhi maintained that by relying heavily on solar energy, the dependence on oil and coal will be reduced. It added that it was “necessary to ensure that there is an adequate reserve of domestic manufacturing capacity for solar cells and modules in case there is a disruption in supply of foreign cells and modules.”