Geneva (D. Ravi Kanth) – India has taken the plunge finally, and raised a dispute against the United States at the World Trade Organization on 9 September over domestic content requirements and subsidies provided by eight American states — Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota — for renewable energy companies in violation of national treatment and other provisions, according to a complaint filed by India.After dithering for over three years despite conclusive evidence against several incentive programs offered by several states in the US, to promote and develop the renewable energy sector in violation of core WTO rules, India launched dispute settlement proceedings against the US on 9 September, and has asked the US to enter into Article 4 consultations under the Dispute Settlement Understanding.
As a first step, the US must provide concrete responses to the issues raised in the Indian complaint within 30 days. India can call for the establishment of a dispute settlement panel to adjudicate over the allegedly inconsistent practices adopted by the eight states if the two sides fail to amicably resolve the issues raised in the Indian complaint.
Although India’s full compliant against the incentive programs provided by the eight states is not public yet, New Delhi had already raised concern over the incentives contingent upon the use of domestic or state specific products that are incompatible with the obligations of the US under Article 2 of the TRIMs Agreement read with Article III:4 of GATT 1994.
Article 2 of the TRIMs Agreement provides that “no member shall apply any TRIM that is inconsistent with the provisions of Article III of GATT 1994,” while GATT Article III:4 calls for treatment to imported products “no less favourable” than that accorded to “like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.”
India had raised concerns about “Michigan: Renewable Energy Credits under the Clean, Renewable, and Efficient Energy Act (Public Act 295)”; “California: Los Angeles Department of Water and Power (LADWP) – Solar Photovoltaic Incentive Program”; “California: Self Generation Incentive Program (SGIP)”; “Delaware: Solar Energy Credits”; “Minnesota: Xcel Energy – Solar Rewards Program and MN Made PV Rebate Program”; “Massachusetts: Commonwealth Solar II Photovoltaic Rebate Program”; and “Connecticut: S.109 of The Public Act No. 11-80 Read With The Residential Solar Investment Program” among others.
In these programs the US states offer renewable energy credits for each megawatt hour of electricity generated from a renewable energy system constructed using equipment made in the states listed in India’s complaint. Further, they require using workforce composed of residents from the states mentioned by India.
In the California solar incentive program, for example, it was prescribed that photovoltaic modules and solar power equipment must be manufactured within the limits of the City of Los Angles.
India also raised several subsidy programs offered by these states to promote renewable energy. India had argued that “some of these subsidy programs have provisions relating to local or domestic content requirements” which are inconsistent with Article 3.2 read with Article 3.1(b) of the Agreement on Subsidies and Countervailing Measures. India challenged Delaware’s solar renewable energy credits on grounds that it offers multiple credits for specific energy source.
Significantly, the US resorted to an identical trade dispute against India’s national solar mission and the local content requirements. India had imposed certain local content requirements under the Jawaharlal Nehru Solar Mission (JNNSM) which was established by the Indian government in 2010.
The National Solar Mission intended to “establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible.”
In addition, the JNNSM was also a “major contribution by India to the global effort to meet the challenges of climate change.”
For promoting solar power, the Indian government entered into long-term power purchase agreements with solar power developers, providing a guaranteed rate for a 25-year term. The power developers had to implement domestic content requirements which required using certain Indian-manufactured cells and modules.
India also justified its solar local content requirements by recourse to the so-called “government procurement carve-out” under GATT Article III:8(a) – which states that “national treatment disciplines of GATT Article III shall not apply to laws, regulations for government purchases and not with a view to commercial resale or with a view to use in the production of goods for commercial sale.”
In effect, the domestic content and renewable energy credit programs followed by the eight states of the USA seem to be much more expansive and comprehensive than what India had followed under JNNSM, according to legal analysts familiar with the dispute.
Surprisingly, the Indian government waited for three years instead of simultaneously launching the dispute against the US after Washington resorted to dispute settlement proceedings in 2013.
India ought to have followed the European Union which launched the subsidy dispute against the US civil aircraft giant Boeing immediately after the US raised the dispute against the EU’s Airbus.
By delaying the dispute for three years, India has now lost the strategic leverage with the US in the solar dispute, according to a legal analyst who asked not be quoted.
The US trade representative had already 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 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.
The US provides subsidies worth tens of billions of dollars for promoting solar energy.
The better response from India, the USTR spokesperson told PV Tech, is not to file additional cases but drop its DCR entirely, and find alternative measures to promote its domestic solar manufacturing.
The moot issue in the USTR response to PV Tech is whether the US and its federal constituent states will do the same by dropping their domestic content requirements and subsidies for the renewable energy sector, the legal analyst asked. – Source: Third World Network
