Geneva: India on Thursday won a major trade dispute against the US at the World Trade Organization, with a dispute settlement panel pronouncing that subsidies and mandatory local content requirements instituted by eight American states breached global trade rules.
In a significant 100-page report, the three-member panel largely upheld India’s claims that subsidies and local content requirement in 11 renewable energy programmes in eight US states violated core global trade rules. The panel also asked the US to ensure that these states are in conformity with trade rules.
India had claimed that the “domestic content requirements and subsidies instituted by the governments of the states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota in the energy sector" violated several provisions of the Trade-Related Investment Measures (TRIMs) Agreement and Subsidies and Countervailing Measures Agreement.
The panel urged the US to bring the eight states in conformity with US obligations under Article III:4 of “national treatment". Under the national treatment provision, foreign producers must be treated on a par with domestic producers.
Among others, New Delhi had challenged the “renewable energy cost recovery incentive payment programme" implemented by the state of Washington, California’s self-generation incentive programme, Montana’s tax incentive for ethanol production, Michigan’s renewable energy credits programme, Delaware’s solar renewable energy credits and the Made in Minnesota renewable incentive programme.
Citing ‘judicial economy’ (limited resources of the panel to go into all the issues raised by India), the panel said, “In the light of Article 3.8 of the DSU [dispute settlement understanding], the panel concludes that, to the extent that the measures at issue are inconsistent with Article III:4 of the GATT (General Agreement on Tariffs and Trade) 1994, they have nullified or impaired benefits accruing to India under that agreement."
The US can still challenge the panel’s ruling before the Appellate Body (AB); however, the AB itself is feared to have become dysfunctional after 11 December because the US has been blocking appointments to it.
The WTO panel was set up last year to examine whether renewable energy programmes in the US states constituted prohibited subsidies and violated national treatment provisions. India also argued that some of the renewable energy programmes administered by the American states violated core provisions in the TRIMs agreement by insisting on mandatory domestic content requirements.
The ruling contains several “systemic implications" and exposed the illegal measures adopted by the US and its states, said a Geneva-based legal analyst, who asked not to be named. Firstly, it would show the US and its federal states maintain WTO-inconsistent programmes in the renewable energy sector. Secondly, it is a lesson to the US that it should not undermine renewable energy programmes in other countries such as India on grounds that they violate global trade rules when Washington and its federal states adopt much bigger programmes worth billions of dollars that violate global trade rules, the analyst said.
In 2014, the US had launched a similar trade dispute against India’s Jawaharlal Nehru Solar Energy Mission, on the grounds that it included incentives for domestically produced solar cells and modules. WTO’s Appellate Body had upheld the US complaint against India in that case.
Thursday’s ruling could provide India the much-needed strategic leverage normally open to WTO members in tit-for-tat trade disputes. At a time when the US is pursuing several trade disputes against India, particularly against the nation’s export-related schemes, a victory in the renewable energy sector could help India in settling other disputes with Washington, the analyst said.