The Law Of Unintended Consequences: U.S. Challenges India’s Restrictions On Solar Exports

(Editorial Director Frank Andorka predicted something like this back in December 2011. Just sayin’)

United States Trade Representative Ron Kirk announced today that the United States has requested World Trade Organization (WTO) dispute settlement consultations with the Government of India concerning domestic content requirements in India’s national solar program.  India’s program appears to discriminate against U.S. 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 U.S. imports.  Tackling these barriers is a top priority of the Obama Administration.

“The Obama Administration is committed to strengthening the American clean energy sector and preserving the millions of jobs it supports,” said Ambassador Kirk.  “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.”

“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.”

Consultations are the first step in the WTO dispute settlement process, and parties are encouraged to agree to a solution at this stage.  Under WTO rules, if the matter is not resolved through consultations within 60 days, the United States may request the establishment of a WTO dispute settlement panel.

The Interagency Trade Enforcement Center (ITEC), created by this Administration to enhance U.S. trade enforcement capabilities, provided key support to USTR’s monitoring and enforcement unit in the development and initiation of this dispute.

On January 11, 2010, India launched its national solar policy, the Jawaharlal Nehru National Solar Mission (JNNSM).  Phase I of that national policy is composed of two parts:  Batch 1 and Batch 2.  Under Batch 1, India required developers of solar photovoltaic (“PV”) projects employing crystalline silicon technology to use solar modules manufactured in India.  Subsequently, under Batch 2, India expanded this domestic sourcing requirement to crystalline silicon solar cells as well.  In its draft policy for Phase II of the JNNSM, India has stated that it is considering expanding the scope of the domestic content requirements further to include solar thin film technologies, which currently comprise the majority of U.S. solar exports to India.  India also offers solar energy developers participating in the JNNSM a guarantee that the government will purchase a certain amount of solar power at a highly subsidized tariff rate, provided that they use domestically manufactured solar equipment instead of imports.

These elements of India’s national solar policy appear to be inconsistent with India’s obligations under the WTO agreements.  These obligations include Article III of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which generally prohibits measures that discriminate in favor of domestically produced goods versus imports; Article 2 of the WTO Agreement on Trade-Related Investment Measures, which prohibits trade-related investment measures that are inconsistent with GATT Article III; Article 3 of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), which prohibits conditioning a subsidy on the use of domestic over imported goods; and Article 5 of the SCM Agreement, which prohibits causing adverse effects on other WTO Members through subsidies that discriminate against imported goods.

The United States has engaged India on our concerns regarding the JNNSM over the last three years, including in bilateral fora such as the U.S.-India Trade Policy Forum and the U.S.-India Energy Dialogue, and at the WTO in various committees.

Rhone Resch, president and CEO of the Solar Energy Industries Association® (SEIA®), today released the following statement in support of the U.S. government’s decision to initiate World Trade Organization (WTO) dispute settlement proceedings challenging India:

We fully support today’s decision by the U.S. government to initiate WTO dispute settlement proceedings challenging the local content provision of India’s Jawaharlal Nehru National Solar Mission (National Solar Mission) for solar cells and modules.
 While we applaud India’s National Solar Mission and its focus on growing a domestic solar manufacturing base, this program must also be consistent with India’s international trade obligations. Unfortunately, the National Solar Mission’s local content requirement unfairly discriminates against U.S. solar cell and module manufacturers. India also appears to be expanding this trade distorting measure, regardless of the U.S. government’s multi-year effort to encourage India to abandon the requirement. As a last resort, the U.S. has been forced to petition the WTO.
The use of discriminatory localization barriers to bolster domestic interests is a growing trend within the global solar industry which must be reversed.  We are hopeful that today’s action by the U.S. government will encourage not only India but other countries contemplating the imposition of localization barriers to focus instead on WTO-consistent government support measures.  And we encourage all nations interested in the advancement of solar energy to join together in the development of mutually-beneficial policy mechanisms.  A good place to start is the creation of a list of government-supported alternatives to local content requirements.
As solar markets around the world continue to grow, there will be countless opportunities for U.S. exports, but only if U.S. companies are allowed to compete on an even playing field.  The U.S. government is right to challenge India’s discriminatory practices.

 

  • Dilip

    This move is likely to be very counterproductive. The idea behind this so called ‘Indian Panels’ was to thwart use of sub-standard Chinese panels (naturally cheap), and allow use of US/ German wafers in Indian repackers (some call it panel manufacturers) with appropriate quality fulfillment on power output side.

  • http://twitter.com/FairTexan Raj

    Frank – I am flabbergasted by Ron Kirk’s intervention. Harsh is right on with his comments. What is good for the goose is good for the gander. “Predatory approaches” are not appropriate and only demonstrates that the US is a wet blanket. I have to object to Rhone Resch characterization of the situation.

  • Harsh

    Because the Indian government is paying above market prices for solar energy in order to boost the solar industry in the country, it has all rights to ensure that money spent on the technology goes to Indian companies and is re-circulated in the economy.

    Does the US-Exim bank allow use of non-American suppliers in projects in India financed by it?
    Would the US govt. award funds to non-American companies for projects under the sun-shot initiative?
    Why is the US applying duty to Chinese imports??

    HYPOCRITES!!!

    • http://www.solarpowerworldonline.com/ Frank Andorka

      The word we used when we heard the news was ironic. Your points are valid, and we appreciate your response. I personally find it odd that a year after we criticized China for 12 months about doing this with US, we’re now turning around and doing it to India. We’ll be watching closely to see how this plays out.