TWN Info Service on UN Sustainable Development (Feb16/02)
26 February 2016
Third World Network

India's domestic content measures on solar cells held WTO-illegal
Published in SUNS #8189 dated 26 February 2016

Geneva, 25 Feb (Kanaga Raja) - A dispute panel at the World Trade Organisation (WTO) on Wednesday ruled that domestic-content requirements (DCR) imposed by India on solar power developers who sell electricity to government agencies under the National Solar Mission are inconsistent with its obligations under the WTO.

The panel concluded that the DCR measures are inconsistent with Article 2.1 of the TRIMs Agreement and Article III:4 of the GATT 1994, and are not covered by the derogation in Article III:8(a) of the GATT 1994; and the DCR measures are not justified under the general exceptions in Article XX(j) or Article XX(d) of the GATT 1994.

The panel also said that to the extent that the measures at issue are inconsistent with Article 2.1 of the TRIMs Agreement and Article III:4 of the GATT 1994, they have nullified or impaired benefits accruing to the United States (the complainant) under those agreements.

It recommended that India bring its measures into conformity with its obligations under the TRIMs Agreement and the GATT 1994.

The measures at issue in the dispute with the United States (the DCR measures) are the domestic content requirements imposed by India under Phase I (Batch 1), Phase I (Batch 2), and Phase II (Batch 1) of the National Solar Mission, which are incorporated or otherwise reflected in various documents within each Batch, including the Guidelines and Request for Selection documents, the model power purchase agreement, and the individually executed power purchase agreements between Indian government agencies and solar power developers.

The United States had requested the establishment of a panel on 14 April 2014, and the claims brought by the United States concern certain domestic content requirements imposed under the Jawaharlal Nehru National Solar Mission (National Solar Mission).

These domestic content requirements concern solar cells and solar modules, and they are imposed on certain entities selling electricity to government agencies under the National Solar Mission.

(A full report on the ruling will appear in a forthcoming issue of SUNS.)

[Meanwhile, in a comment posted on The Huffington Post, Ben Beachley and Ilana Solomon of the US environment group, Sierra Club, have said that coming on the heels of the recent global summit in Paris to tackle climate disruption, the WTO has ruled against an important piece of the climate solution puzzle: India's ambitious program to create homegrown solar energy.

[The ruling, Beachley and Solomon said, shows that decades-old, over-reaching trade rules are out of sync with the global challenge to transition to 100 percent clean energy. In just five years, thanks to India's National Solar Mission, India has gone from having virtually no solar capacity to boasting one of the world's fastest-growing solar industries. India has named the solar program as a core component of its contribution to the Paris agreement to tackle climate change. But by ruling against India's National Solar Mission, the WTO has rejected India's argument that it was in fulfilment of its commitments under the United Nations Framework Convention on Climate Change (UNFCCC), and "indeed, the ruling boldly states that domestic policies seen as violating WTO rules cannot be justified on the basis that they fulfill UNFCCC or other international climate commitments. In effect, the WTO has officially asserted that antiquated trade rules trump climate imperatives."

[The post by the two Sierra Club members note that in January 2015, President Obama seemed to indicate support for that goal, and after a visit with Indian Prime Minister Modi, the two leaders released a statement "emphasizing the critical importance of expanding clean energy research, development, manufacturing and deployment, which increases energy access and reduces greenhouse gas emissions." Their statement even declared, "the US intends to support India's [solar power] goal by enhancing cooperation on clean energy and climate change."

[However, the US, in its WTO case against India's ambitious solar program, has complained about the "buy- local" rules of the first phases of the program. Bringing this case is a perverse move for the United States, since "nearly half of US states have renewable energy programs that, like India's solar program, include โ€˜buy-local' rules that create local, green jobs and bring new solar entrepreneurs to the economy." The US government should drop this case to avoid "undermining jobs and climate protections not just in India, but also at home."

[The Sierra Club cited the WTO ruling as one more argument for Congress to reject the Trans-Pacific Partnership (TPP) trade pact, due to come before Congress this year, and which replicates the very rules that the WTO used against India's solar program today. If the TPP were to pass the Congress, the environment group said, there would be more cases against the US, and its clean energy initiatives. SUNS]