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United States Challenges India's Solar Domestic Content Requirements at WTO
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February 08, 2013

United States Challenges India's Solar Domestic Content Requirements at WTO

By Cheryl Kaften
TMCnet Contributor

Nearly two months after the World Trade Organization ruled that the domestic content requirement in Ontario’s feed-in tariff (FiT) breaches the rules of fair trade, the United States has officially approached the WTO to challenge a similar content requirement in India’s national solar policy, the Jawaharlal Nehru National Solar Mission (JNNSM).

United States Trade Representative Ron Kirk announced on February 6 that America had requested WTO dispute settlement consultations with the Government of India. He said, “India’s program appears to discriminate against U.S. solar equipment by requiring solar energy producers to use Indian-manufactured solar cells and modules; and by offering subsidies to those developers for using domestic equipment instead of imports. These forced localization requirements of India’s national solar program restrict India’s market to U.S. imports. Tackling these barriers is a top priority of the Obama Administration.”

Launched in 2010, the JNNSM (Phase I, Batch I) mandated that domestic solar projects use crystalline modules manufactured by India-based companies. For Phase I, Batch II of the photovoltaic projects selected between 2011 and 2012, the JNNSM expanded this domestic sourcing requirement to include crystalline silicon solar cells, as well.

In its draft policy for Phase II of the JNNSM, India stated that it is considering expanding the scope of the domestic content requirements to include solar thin film technologies—which currently comprise the majority of U.S. solar exports to India. India also offers solar energy developers participating in the JNNSM a guarantee that the government will purchase a certain amount of solar power at a highly subsidized tariff rate, provided that they use domestically manufactured solar equipment instead of imports.

Specifically, the United States’ complaint notes that India’s solar policy appears to be inconsistent with its obligations under the WTO agreements—among them:

  • Article III of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which generally prohibits measures that discriminate in favor of domestically produced goods versus imports
  • Article 2 of the WTO Agreement on Trade-Related Investment Measures, which prohibits trade-related investment measures that are inconsistent with GATT Article III
  • Article 3 of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), which prohibits conditioning a subsidy on the use of domestic over imported goods
  • Article 5 of the SCM Agreement, which prohibits causing adverse effects on other WTO Members through subsidies that discriminate against imported goods

“Let me be clear: The United States strongly supports the rapid deployment of solar energy around the world, including with India,” said Kirk. “Unfortunately, India’s discriminatory policies in its national solar program detract from that successful cooperation, raise the cost of clean energy, and undermine progress toward our shared objective.”

Kirk explained that, prior to lodging the complaint, the United States had unsuccessfully approached India to negotiate better terms—at the U.S.-India Trade Policy Forum, at the U.S.-India Energy Dialogue; and at the WTO, in various committees.

Members of the U.S. trade organization and the Solar Energy Industry Association (SEIA) are now coming out in approval of the request for WTO intervention.

Rhone Resch, president and CEO of the Washington, DC-based SEIA commented, “While we applaud India’s National Solar Mission and its focus on growing a domestic solar manufacturing base, this program must also be consistent with India’s international trade obligations. Unfortunately, the National Solar Mission’s local content requirement unfairly discriminates against U.S. solar cell and module manufacturers. India also appears to be expanding this trade-distorting measure, regardless of the U.S. government’s multi-year effort to encourage India to abandon the requirement. As a last resort, the United States has been forced to petition the WTO.”

If the complaint against India that the United States has brought to the WTO is not resolved through consultations within 60 days, America may request the establishment of a WTO dispute settlement panel.

Meanwhile, Canada is challenging the December WTO ruling on its domestic content requirements. Ontario Energy Minister Chris Bentley said through a spokesperson that the province’s position always has been that the FiT program is consistent with Canada’s obligations under the WTO agreements.

Ontario’s clean energy policies already created more than 28,000 jobs, he said. An appeal is likely to take many months.

Edited by Braden Becker

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