Article co-authored by Dr. Armin Rosencranz and Aditya Vora on "Battling it out at the WTO" - The Statesman

February 02, 2017 | Dr. Armin Rosencranz and Aditya Vora

With the whirlwind of disputes filed by India and the United States against each other, both challenging the other’s domestic content requirement in the renewable energy sector, we offer to provide some clarity on the issue. For simpler understanding we would refer to the case filed by the US challenging the domestic content requirement as the US case and the case filed by India as the India case.

India in September 2016 asked for consultation with the United States over renewable energy subsidies that are provided by various US states. This consultation request came three days after India lost the case brought by the US. India in the present case is claiming that the American states of California, Connecticut, Delaware, Massachusetts, Michigan, Minnesota, Montana and Washington are providing renewable energy subsidies very similar to those of the domestic content requirement under the Jawaharlal Nehru Solar Mission (JNSM) that the US claims is violating WTO law.
India alleged that these States were granting subsidies to local manufacturers in the renewable energy industry along with the requirement that the products be made domestically. India lost the case filed by US at WTO. Therefore, critics claim that this case has been filed by India as a reciprocation. India seems to be alleging the same issues in the same field against the US to leverage a settlement in the case that India had lost.
As mentioned above, India lost in appeal at the WTO against the US. JNSM required that 20GW of solar power was to be generated from domestically produced modules or solar cells. The WTO found that the mandatory domestic content requirement under JNSM violated the National Treatment provision of Article III:4 of the WTO Agreement. The Government of India has significantly reduced the domestic content requirement after the initiation of proceedings at WTO. At the beginning of the
Mission the domestic content requirement in the auctioned contracts was as high as 50 per cent of the total output generating capacity. This value dropped significantly through the auctions and is currently down to 5 per cent. The US is still unsatisfied with the measures undertaken by the Indian Government.
Before the final judgement was delivered by the WTO there was a lot of chatter about the case being settled by the two governments. Assurances were given by high-ranking officials from both nations that a settlement would be reached. The Indian Government also offered to restrict the domestic content requirement to government owned companies, saying that only Public Sector Undertakings would be mandated to use domestically produced modules.
Even after the WTO ruling was delivered, India asked the US not to implement it. Under WTO law, the complainant can give 15 months to the defendant to implement the ruling. If 15 months were provided, India would be able to finish the JNSM without having to painstakingly restructure the entire mission. After the 15-month period, the ruling would be applicable.
However, nothing meaningful resulted from these negotiations. The Government of India then announced that it aimed to file several cases against the US because eight of its states had domestic content requirements in the renewable energy sector. Seasoned observers never thought that India would pursue the dispute and ask the WTO to establish a panel.
The decision not to pursue the formation of a WTO dispute resolution panel came after Indian officials met the transition team of President-elect Trump and were assured that a settlement would be reached. It was decided that the cases would not be pursued further and that the Trump administration would seriously consider the settlement once in office.
This request for establishment of a panel came on 24 January 2017. The elaborate reasons stated by India include that the eight US states were giving “performance-based incentives” for generating renewable energy. These incentives were contingent on the fact that domestically produced goods were being used. These incentives were given to offset the investment cost. India claims that this violates Article III:4 because the measures provide less favourable treatment to imported products than the domestically produced goods.
Even though India has requested establishment of the Panel, we believe that there is still a probability that an amicable solution will be found. However, with the new Trump Administration and the ‘America First’ policy, there is equally a good chance that the panel is established and the case is argued before the WTO. This, we believe, would affect relations between the US and India for not being able to reach a common ground. Some critics have also berated India for bringing a frivolous complaint against the US. If we disregard that, the issue at hand in both these cases is exactly the same. It would be in the best interest of both nations to settle.
The writers are, respectively, professor of law and third-year law student at the Jindal Global Law School, Sonipat.