TWN Info Service on WTO and Trade Issues (Feb13/06)
26 February 2013
Third World Network

Canada to appeal renewable energy ruling
Published in SUNS #7521 dated 8 February 2013

Geneva, 7 Feb (Kanaga Raja) -- Canada has notified the WTO Dispute Settlement Body (DSB) of its intention to appeal a panel ruling that had found that certain Canadian measures relating to the feed-in-tariff (FIT) programme established by the province of Ontario that affects the country's renewable energy generation sector were inconsistent with its WTO obligations.

In a ruling issued on 19 December 2012, the Panel - in its overall conclusions and recommendations, issued separately for Japan and the European Union (the complainants) - had concluded that both Japan and the EU have established that the "Minimum Required Domestic Content Level" prescribed under the FIT Programme, and implemented through the individual FIT and microFIT Contracts executed since the FIT Programme's inception, places Canada in breach of its obligations under Article 2.1 of the TRIMs (Trade-Related Investment Measures) Agreement and Article III: 4 of the GATT 1994.

On the other hand, the Panel had concluded that both Japan and the EU had failed to establish that the FIT Programme, and the individual solar PV (photovoltaic) and wind-power FIT and microFIT Contracts executed since the FIT Programme's inception, constitute subsidies, or envisage the granting of subsidies, within the meaning of Article 1.1 of the SCM (Subsidies and Countervailing Measures) Agreement, and thereby that Canada has acted inconsistently with Articles 3.1(b) and 3.2 of the SCM Agreement.

The three-member Panel ruling on the "benefit" question in relation to the "subsidy" complaint under the SCM agreement was by a majority. The majority had held that the complaint had not been established on the issue of subsidy, while the dissenting member had held that the programme provided a benefit, and thus constituted a subsidy in terms of the SCM agreement.

The Panel had concluded that to the extent Canada had acted inconsistently with Article 2.1 of the TRIMs Agreement and Article III: 4 of the GATT 1994, Canada had nullified or impaired benefits accruing to Japan and the EU. It had recommended that Canada bring its measures into conformity with its obligations under the TRIMs Agreement and the GATT 1994 (see SUNS #7507 dated 24 December 2012).

In its notification to the DSB and Appellate Body, dated 5 February, Canada is appealing certain issues of law and legal interpretations developed in the panel reports.

According to Canada, it is seeking review by the Appellate Body of the Panel's findings and conclusions that the Government of Ontario's FIT Program, as implemented through the FIT and MicroFIT Contracts, is not covered by the terms of Article III: 8(a) of GATT 1994.

"This conclusion is in error and is based on erroneous findings on issues of law and legal interpretation including the Panel's finding that the Government of Ontario purchases renewable electricity ‘with a view to commercial resale'."

Canada is also requesting the Appellate Body to find that "the Panel acted inconsistently with Article 11 of the DSU [Dispute Settlement Understanding] by failing to make an objective assessment of the facts related to this issue, specifically with respect to the Panel's finding that the resale of electricity purchased under the FIT Program is ‘commercial' in nature, and by using this faulty factual finding to support its conclusion about the applicability of Article III: 8(a) of GATT 1994 to the FIT Program."

Canada further requests the Appellate Body to find that the Panel failed to find that the Government of Ontario does not purchase renewable electricity "with a view to use in the production of goods for commercial sale".

Meanwhile, according to trade officials, the United States on 6 February separately notified the WTO Secretariat of its request for consultations with India on certain measures imposed by India relating to domestic content requirements under the Jawaharlal Nehru National Solar Mission (NSM) for solar cells and solar modules.

Trade officials said that in its request for consultations, the first step in the dispute settlement process, the US alleges that India requires solar power developers, or their successors in contract, to purchase and use solar cells and solar modules of domestic origin in order to participate in the NSM and to enter into and maintain power purchase agreements under the NSM or with National Thermal Power Company Vidyut Vyapar Nigam Limited.

The US claims that as a result, solar power developers, or their successors in contract, receive certain benefits and advantages, including subsidies through guaranteed, long-term tariffs for electricity, contingent on their purchase and use of solar cells and solar modules of domestic origin.

According to trade officials, the US complaint said that India's measures appear to be inconsistent with several WTO Agreements.

A press release by the Office of the US Trade Representative dated 6 February announcing the US request for consultations with India relating to domestic content requirements in India's national solar programme, said that "India's program appears to discriminate against US 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 US imports," the USTR press release added.

It quoted outgoing USTR Ron Kirk as saying: "The Obama Administration is committed to strengthening the American clean energy sector and preserving the millions of jobs it supports."

"Trade enforcement is critical for ensuring that our clean energy goods and services can compete on an equal footing around the world. As today's action demonstrates, we will not hesitate to enforce our rights under our trade agreements on behalf of American workers and manufacturers."

USTR Kirk added: "Let me be clear: the United States strongly supports the rapid deployment of solar energy around the world, including with India. 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."

A news report in the Wall Street Journal has quoted the joint secretary at India's Ministry of New & Renewable Energy as saying that India's program has not stopped imports of equipment, and that it continues to comply with WTO rules. +