India ‘disappointed’ with WTO ruling in solar panel dispute, seeks cooperation for Paris deal

In a trade meeting held in Geneva, India said that it is “disappointed” with many of the findings of an Appellate Board (AB) of the World Trade Organisation (WTO) on a solar panel dispute case, and asked for the cooperation of all WTO members in achieving its Paris climate deal targets that it recently ratified. In a special meeting of the dispute settlement body (DSB) on 14 October, a dispute settlement panel report and an appellate board panel report were adopted by the WTO on a solar panel dispute case initiated by the US against India in 2013. India had lost the case both at the dispute panel and its appeal against the findings of the dispute panel.The AB report, issued on 16 September, concerns India’s domestic content requirements (DCR) for solar power developers selling electricity to the government as part of certain phases of its National Solar Mission.

The DSB ruling stated that India’s DCR measures are inconsistent with global trade rules and violate national treatment obligations under GATT 1994, and certain other articles of the agreement on Trade-Related Investment Measures (Trims) and agreement on Subsidies and Countervailing Measures (SCM). National treatment obligations of Article III: 4 of GATT requires that imported products cannot be discriminated against vis-à-vis like local products in matters of all laws, regulations and requirements “affecting their internal sale, offering for sale, purchase, transportation, distribution or use”. India had appealed against the verdict. But the appellate board dismissed India’s argument that since the government buys the electricity from the concerned products it could seek exemption under the ‘government procurement’ principle provided under article III: 8(a) of the GATT 1994. This provision allows countries to ignore national treatment obligations if government agencies procure products for government purposes and not commercial resale.

The appeals judges also disagreed with India’s argument that it lacks the capacity for domestic manufacturing of solar cells and modules leading to a “general and local situation” of short supply of such products and, thus, DCR measures are essential for addressing this short supply. India is “committed” to design its future solar mission schemes consistent with the board’s findings, India said on Friday, and would inform the DSB of its intentions with respect to implementing the ruling within the next 30 days as provided by WTO rules. However, it is “deeply disappointed” with many aspects of the AB ruling. In India’s view, the AB had “a narrow reasoning” of article III:8 (a) of GATT 1994—the judgment implies that in order to “potentially justify discrimination against solar cells and modules” under the ‘government procurement’ principle, a member state must purchase those cells and modules and not just the electricity from them, “even when those cells and modules are exclusively used for electricity generated for supplies to the government”.

“India is deeply disappointed that the Appellate Body chose to simply reiterate its reasoning in Canada Renewable Energy/Feed-in Tariff dispute without adequate consideration of the unique nature and role of solar cells and modules in solar power generation,” India said in a statement at the DSB meeting. Article XX (j) – relating to WTO exemptions in cases of supply shortages — evoked by India in the short-supply argument was interpreted for the first time in WTO’s jurisprudence. The AB’s interpretation of the applicability of the concerned WTO rule “effectively confines any meaningful use of this provision only for export restraints and not import restraints”. The “failure” to address the circumstances in which article XX (j) can be an “effective and legitimate” tool for import restraint will remain a “significant limitation” in any future use of the article’s rules, India warned.

That the AB ruled that the “vulnerability” of a situation of short supply has to be demonstrated through actual disruptions in the supply of cells and modules means that any policy measure under article XX (j) can be an “after-thought and not one that can prevent the rise of situations of general or local short supply”. India, meanwhile, said it is “evaluating the reports of the panel and AB carefully” and that it was “committed to frame the future design of its solar mission schemes relating to domestic content consistent with the findings.” India has demonstrated its “steadfast commitment” to promote renewable energy by ratifying the Paris Climate Change agreement and urged the cooperation of all WTO members to ensure a “sustainable” manner in which to achieve all the targets committed to in the deal.

The US said in the meeting that though it “strongly supports” India’s effort to promote the generation and use of solar power in India and “looks forward” to a partnership in the fight against climate change, “discriminatory policies” in the clean energy sector undermine efforts to promote the generation of clean energy by requiring the use of more expensive and less efficient equipment. “The US Trade Representative Michael Froman had earlier stated that ever since India brought in the DCR rules American solar exports into the country have fallen by more than 90 percent.” The US took exception to an AB judge attaching a “separate opinion” offering remarks on why in his view the panel did not need to rule on certain of the issues appealed. The US stated that it “did not see how it relates to an issue raised in this appeal”. The separate opinion appeared to be “another example of obiter dicta” (a non-essential expression said in passing) which is a problem.

The EU, however, said it was within the AB members’ rights to attach a separate opinion and it did not share the US’ concern over the substance of the opinion. India has, in turn, registered a similar complaint against the US on 9 September by requesting WTO for consultation regarding DCR and subsidies provided by the American government to the eight states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota in the renewable energy sector.