India has won a major trade dispute against the US on Thursday, with a panel at the World Trade Organization ruling that subsidies and mandatory local content requirement instituted by eight American States were against the core global trade.
The two countries have been contesting each other’s domestic content requirement for the solar energy sector. India’s move to oppose subsidies for local units in the US was seen as retaliation to a similar move by the US against India’s plan to deploy solar power generation projects with mandatory local sourcing requirements.
The panel largely upheld India’s claims that subsidies and local content requirement in 11 renewable energy programmes in eight US States violated core global trade rules. It also asked the US to ensure that these States are in conformity with trade rules. America had launched a similar trade dispute against India’s Jawaharlal Nehru Solar Energy Mission in 2014 on the grounds that it included incentives for domestically-produced solar cells and modules. WTO’s Appellate Body had upheld the US complaint against India in that case.
In January 2017, India had moved the WTO against some of the American States programme alleging that these barriers were instituted by the States of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota, in the energy sector.
India claimed that the measures appear to be inconsistent with Articles of the General Agreement on Tariffs and Trade (GATT) 1994, Trade-Related Investment Measures (TRIMs) Agreement; and the Subsidies and Countervailing Measures (SCM) Agreement. In January 2017, India requested establishment of a panel to examine these allegations.
In March 2017, the WTO Dispute Settlement Body established a panel in which Brazil, China, the European Union, Indonesia, Japan, Korea, Norway, the Russian Federation, Saudi Arabia, Singapore, Chinese Taipei and Turkey reserved their third-party rights. The panel report was circulated to members earlier this week.
The panel exercised judicial economy (decided not to rule on the other allegations since inconsistency has been established in one) on India's claims under Articles 2.1 and 2.2 of the TRIMS Agreement and Articles 3.1(b) and 3.2 of the SCM Agreement.
“The panel found that all of the measures at issue are inconsistent with Article III:4 of the GATT 1994 because they provide an advantage for the use of domestic products, which amounts to less favourable treatment for like imported products,” the WTO said.