India can achieve greater success in its solar dispute with the US at the World Trade Organisation, according to Vanderbilt University Law School Professor Timothy Meyer. India needs to focus on its arguments or future measures on developing a manufacturing capacity that serves a domestic demand not adequately served by international markets, he said.Last month, the WTO dispute settlement panel ruled that India’s requirement that companies selling solar power to the government should only use domestically-made components discriminated against American manufacturers.
Interestingly, a December 2015 paper by Mr Meyer showed that local content requirements for renewable energy are quite common at the state and local level in the US. There are 44 such programmes in 23 states in the US, according to the paper.“The Indian government has already raised the question of whether a few such programmes are consistent with trade rules before a WTO committee, but they have not yet initiated a formal dispute with the United States,” Mr Meyer told The Hindu in an interview.“Given the breadth of local content requirements within the United States, I would not be surprised if India (or China, which has raised similar concerns) eventually brings a claim against the United States based on these programmes,” he said.
Last week, Piyush Goyal, Minister of State (independent charge) for Power, Coal and New & Renewable Energy, said the government is examining options to file a case against the US in the World Trade Organisation based on programmes run by American state governments, which give protection to domestic manufacturers.“Such a claim might be useful in negotiating a settlement of this case with the United States,” said Mr Meyer.
However, he said the fact that the US has similar programmes will not help India in an appeal in this case. “This case is only about the consistency of the local content requirements in the Nehru Solar Mission programme, rather than the legality of the US conduct. I suspect that on appeal the WTO’s Appellate Body will confirm the panel’s basic findings.”The dispute comes at a time when India is betting big on renewable energy. The government has an ambitious plan of achieving 100 gigawatt of solar capacity by 2022.
Mr Meyer said that prevalence of local content requirements in renewable energy indicates that government officials in both India and the US face political pressure to link economic development objectives with environmental objectives.India has argued that solar manufacturing capacity is in short supply relative to the demand for solar panels in India, and hence it is claiming exception under the General Agreement on Tariffs and Trade for measures “essential to the acquisition or distribution of products in general or local short supply”.
“India’s defence before the WTO panel was quite creative in this regard. The panel ruled correctly, I think, that this argument is too broad,” said Mr Meyer. “If the mere fact that a country does not produce a product was enough to justify discriminatory measures like local content requirements, the exception could be used to broadly reverse the trade concessions WTO members have made to each other.”The WTO panel had ruled that the exception only applies when supply, both domestic and international, exceeds demand.
“By focusing its arguments (or future measures) on the goal of developing a manufacturing capacity that serves a domestic demand not adequately served by international markets, India might have greater success,” Mr Meyer added.