According to India, eleven measures adopted at the state level in the US to promote renewable energy violate WTO rules.
India has submitted its first request for establishment of a dispute panel against the US at the World Trade Organisation (WTO)—a request that was blocked by Washington on February 20 stating that this dispute was launched for purely political reasons.
According to India, eleven measures adopted at the state level in the US to promote renewable energy violate WTO rules. The measures adopted by the states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware, Minnesota and the city of Los Angeles to promote the use of solar energy, biofuels and other renewable energies violate international trade rules on subsidies, agreement on Trade-Related Investment Measures (TRIMs) and the General Agreement on Tariffs and Trade (GATT) by favouring the use of domestic components over imported products.
Specifically, according to India, some of the trade clauses that the US violates are: products from an exporting territory should not be discriminated against like products of national origin; if a contracting party maintains a subsidy that seriously reduces imports from another member country then the contracting party upon request should discuss limiting the subsidization; subsidies contingent upon use of domestic over imported products are prohibited (except as provided in the agreement on agriculture); no member should cause, through the use of subsidy, “injury” or “serious prejudice” (to displace or impede the imports of a like product of a country into the market of the subsidizing country) to the domestic industry of another member; and other national treatment obligations.
Washington shot back saying that India appears to have launched this dispute purely for political reasons—in response to a similar US-initiated case against India on solar cells that India lost at the WTO.
India had lost a case in November 2015 at a WTO dispute board for making it mandatory for its solar power developers selling electricity to the government under the Jawaharlal Nehru National Solar Mission (JNNSM) to use certain types of solar cells and modules that were made in India. This was discriminatory towards American products, the US complained, and invoked some of the same provisions as India has in the current case.
India appealed against the judgment but lost at the appellate board (AB) as well in September last year. Among its arguments to the AB, India in a rare instance in the WTO dispute settlement process had invoked article XX(d) of GATT -- 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 form solar power, at reasonable prices”.
India has signed the Paris climate agreement that requires it to develop its renewable energy sector to meet its commitments.
New Delhi registered the current case against the US on DCR and subsidies provided by the American government in the renewable energy sector and requested for consultations on September 9 last year. India said consultations, held in November last year, between the disputing parties, had failed prompting India to request WTO for establishing a dispute settlement panel.
Every member should have policy space in order to build in-house renewables capacity within their territory, India said, but members must also be mindful of their WTO obligations.
The US, blocking the request at a meeting of the dispute settlement body (DSB) on 20 February, said that at a time when the WTO's dispute settlement resources are already overstretched, the US said it regretted India would seek to use WTO resources on such a matter. The US does not import significant amounts of renewable energy equipment from India and the measures identified by India appear to have virtually no effect on commerce, an American trade diplomat argued, and so the US would reject India’s request for a panel.
However, according to WTO rules, India can renew its request at a future DSB meeting and such a second request for a panel cannot be rejected by the US.