After over two years of filing a case against the United States for incentivizing domestic content in solar projects in eight states, India has now won the case at the World Trade Organization (WTO). This is a victory but with negligible financial implications.

India had raised the issue at the WTO after the trade organization had found faults with India’s domestic content requirement (DCR) category solar tenders at the behest of the United States. India had requested consultations regarding certain measures of the United States relating to the domestic content requirements and subsidies in the energy sector instituted by the states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware, and Minnesota.

Upon examining the concerned policy prevalent in the United States, the panel formed by the dispute settlement body of the WTO found India’s claims to be correct. The panel found that all the measures at issue are inconsistent with the provisions of the General Agreement on Tariffs and Trade (GATT) because they provide an advantage for the use of domestic products, which amounts to less favorable treatment for similar imported products.

The panel exercised judicial economy on India’s claims under the provisions of the Trade-Related Investment Maters (TRIMS) Agreement and Articles 3.1(b) and 3.2 of the Subsidies and Countervailing Measures (SCM) agreement.

Timeline

On January 17, 2017, India had requested the establishment of a panel.

At its meeting on February 20, 2017, the dispute settlement body deferred the establishment of a panel. At its meeting on March 21, 2017, the dispute settlement body established a panel.

Brazil, China, the European Union, Indonesia, Japan, Korea, Norway, the Russian Federation, Saudi Arabia, Singapore, Chinese Taipei, and Turkey reserved their third-party rights.

On April 11, 2018, India requested the Director-General to form the panel.

On April 24, 2018, the Director-General formed the panel.

On October 11, 2018, the Chair of the panel informed the dispute settlement body that due to the complexity of the dispute, the panel expected to issue its final report to the parties in the second quarter of 2019.

Implications

There will be negligible financial implications of the final verdict in the case. In its order, the WTO has cited a United States report that states, “First, India appears to have no significant trading interest in the measures at issue in this dispute. Second, most of the measures at issue are no longer in legal effect or are due to expire within the next two years, as India is aware. Third, records confirm that nearly half of the measures at issue have fallen into general disuse and are essentially moribund. Fourth, at any rate, India has failed to establish that any of the measures at issue breach United States’ obligations under a covered agreement.”

The panel established by the dispute settlement body was of the view that India provided minimal evidence on the extent to which these measures have been applied or are currently being applied, and provided no evidence that the measures have ever affected a single export of Indian renewable energy good.

A Geneva-based trade official informed Mercom, “The U.S. and India will have 60 days to decide whether to appeal any of the panel’s findings. If neither side appeals, or if the WTO’s Appellate Body upholds yesterday’s findings, the ruling will be formally adopted by WTO members and the U.S. will normally be given a reasonable period of time to implement in order to bring its measures in line with WTO requirements.”

“From the U.S .point of view, there is no impact on India. India argued that there is no need to prove the measures are having a current impact and noted the potential for discouraging trade just by having these unfair incentives on the books,” added the trade official.

Meanwhile, the Indian solar exports to the United States have been gradually increasing over the past three years. Recently, the United States ended India’s designation as a beneficiary developing country, thereby ending duty-free status of about 2,000 products amounting to approximately $6 billion, including solar cells and modules.

 

Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.