TWN Info Service on WTO and Trade Issues (Aug11/01)
3 August 2011
Third World Network  

Panel set to examine Canadian green energy sector
Published in SUNS #7197 dated 25 July 2011

Geneva, 22 Jul (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organization (WTO) this week agreed to establish a panel to examine certain measures imposed by Canada affecting the renewable energy generation sector.

This was a second-time request and panel establishment was automatic. A first-time request was made by Japan on 17 June.

China, the European Union, Korea, Chinese Taipei, Honduras, the US, Norway and Australia reserved their third-party rights to the dispute.

The dispute is with respect to measures relating to domestic content requirements in Canada's feed-in tariff programme (the FIT Programme).

In a communication to the DSB, Japan said that the measures that are the subject of its request are those taken by the Government of Canada or its provinces relating to the FIT Programme established by the Canadian province of Ontario in 2009 providing for guaranteed, long-term pricing for the output of renewable energy generation facilities that contain a defined percentage of domestic content.

According to Japan, these measures are inconsistent with Canada's obligations under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), the GATT 1994, and the Trade-Related Investment Measures (TRIMs) Agreement because they constitute a prohibited subsidy, and also discriminate against equipment for renewable energy generation facilities produced outside Ontario.

In particular, Japan considered that these measures are inconsistent with the following provisions:

1. Articles 3.1(b) and 3.2 of the SCM Agreement, because the measures are subsidies within the meaning of Article 1.1 of the SCM Agreement that are provided contingent upon the use of domestic over imported goods, namely, contingent upon the use of equipment for renewable energy generation facilities produced in Ontario over such equipment imported from other WTO Members such as Japan;

2. Article III: 4 of the GATT 1994, because the measures accord less favourable treatment to imported equipment for renewable energy generation facilities than accorded to like products originating in Ontario; and

3. Article 2.1 of the TRIMs Agreement, in conjunction with paragraph 1(a) of the Agreement's Illustrative List, because the measures are trade-related investment measures inconsistent with Article III: 4 of the GATT 1994 which require the purchase or use by enterprises of equipment for renewable energy generation facilities of Ontario origin.

Further, Japan considered that Canada's measures nullify or impair benefits accruing to Japan directly or indirectly under the cited Agreements in a manner described in Article XXIII: 1 of the GATT 1994.

In its statement to the DSB on 20 July, Japan said that this is a clear case of WTO-inconsistent domestic content requirements. The feed-in tariff programme of the Canadian province of Ontario provides for guaranteed, long-term pricing for the output of renewable energy generation facilities that contains a defined percentage of domestic content, added Japan.

Japan considered that the measures at issue are inconsistent with Canada's obligations under Article 3.1 (b) and 3.2 of the SCM Agreement, Article III: 4 of the GATT 1994, and Article 2.1 of the TRIMs Agreement.

In its statement, Canada said that it remains confident that the Ontario Green Energy and Green Economy Act and the feed-in tariff programme are consistent with Canada's obligations under the WTO.

Canada further said that feed-in tariffs have been used by several WTO Members to encourage the use and development of renewable sources of energy.
Ontario's feed-in tariff is no different, said Canada, adding that it supports Ontario's committed transition away from coal-fired electricity generation, an ambitious energy plan by any measure, but one taken in concert with both industry and the public.

In other actions, the DSB agreed to establish a panel, at the request of Moldova, concerning taxes imposed by Ukraine on distilled spirits.

This was a second-time request and panel establishment was automatic. A first-time request was made by Moldova to the DSB on 17 June.
Colombia, the European Union, China and the US reserved their third-party rights to the dispute.

In a communication to the DSB, Moldova said that the dispute is with respect to discriminatory taxation applied on imported alcoholic beverages by Ukraine.

Moldova claimed that Ukraine had acted inconsistently with Article III: 2, first sentence, of the GATT 1994 by applying a lower tax rate on the domestic distilled spirits, namely "Cognac", than on certain other imported like distilled spirits, thereby nullifying or impairing the benefits accrued to Moldova under the GATT 1994.

In the event that the beverages falling within the category of "spirits" were found by the panel not to be "like products" to domestic "Cognac" within the meaning of the first sentence of Article III: 2, Moldova further claimed that Ukraine has acted inconsistently with Article III: 2, second sentence, of the GATT 1994 by applying a lower tax rate on domestic distilled spirits, namely "Cognac", than on certain other imported directly competitive or substitutable distilled spirits, so as to afford protection to the domestic production, thereby nullifying or impairing the benefits accrued to Moldova under the GATT 1994.

According to Moldova, by applying a higher tax on distilled spirits (to the extent that they are not "like products" to "Cognac", but still "directly competitive or substitutable" products) than on the "Cognac", Ukraine affords protection to its domestic production of so-called "Cognac", thereby violating Article III: 2, second sentence, of the GATT 1994. +