WTO Ruling and India’s Solar Mission

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post

Sukalyan Talukdar, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur

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In the recent WTO ruling against India which declared that support provided by the Jawaharlal Nehru National Solar Mission to domestic manufacturers was inconsistent with the Trade Related Investment Measures agreement signed by India, again raised several questions related to US’s good will towards United Nations Climate Change Conference 2015, Paris and role of WTO (Does WTO only work for developed nations?)

According to 2015 United Nations Climate Change Conference 2015, Paris India’s INDC (Intended Nationally Determined Contribution) includes reduction in the emissions intensity of its GDP by 33 to 35 per cent by 2030 from 2005 level and also to create an additional carbon sink of 2.5 to 3 billion tonnes of COequivalent through additional forest and tree cover by 2030.  India has decided to establish a global solar alliance, INSPA (International Agency for Solar Policy & Application), of all countries located in between Tropic of Cancer and Tropic of Capricorn.

India has relied hugely upon its National Solar Mission to fulfil its INDC. India’s Solar Mission has a target to install 100 gigawatts (GW) of solar power by 2022. It also offers a subsidy of up to Rs 1 crore per MW to solar developers sourcing components from local manufacturers. It also stipulates that 10% of the solar capacity target of 100 GW by 2022 should be built with domestically manufactured solar modules, which has led to a small part of the solar auctions being reserved for developers employing only domestic content.
So far so good but the US which is especially keen on taking a slice of this huge solar market, has requested to setup a dispute settlement panel under WTO. Though India has blocked the first request, the US made a second request to the WTO. The WTO then set up a dispute settlement panel to examine the complaint by the US against India’s domestic content requirements under the country’s solar power programme.

The US charged India with violating provisions in what are called the trade-related investment measures (TRIMS) by imposing local content requirements that discriminate against foreign products. The US claimed that the Indian government’s measures to impose national content provisions and deny “national” treatment have impaired benefits accruing to American companies.

The panel apparently upheld Washington’s core complaints against the Indian measures on the ground that they are inconsistent with provisions in WTO’s rulebook which again proved that WTO works only for the developed nations. The American solar industry says that WTO ruling against India will actually have huge environmental benefits. According to them The WTO is ensuring that India’s solar ambitions are achieved in the most efficient way possible because the Indian businesses that want to generate solar power get to buy the cheapest solar panels.

After this ruling the first thing that will come to our mind is that how US is interested only about its own trade benefits and it has no concern towards the climate changes. Also this ruling goes against the spirit of an agreement signed early 2015 between US and India. In the agreement, the two sides agreed to promote clean energy and expand solar energy initiatives.

India has argued that developing an indigenous solar industry will in time boost international competition and therefore reduces the price of solar panels for everyone.

One can be amused by the hypocrisy in US trade policy. While the US argues for unfettered free markets in international forums like the WTO, it doesn’t practice what it preaches at home. Half of all US states have subsidies for renewable. India spoke repeatedly against the US at WTO’s committee on subsidies and countervailing measures, stating that American subsidy schemes relating to local or domestic content requirements for its solar companies are inconsistent with its global trade obligations. New Delhi has also provided a five-page questionnaire listing US programmes such as solar energy credits that are contingent upon compliance with domestic content requirements.

India has released statements that it will once again appeal against the World Trade Organization ruling.  Organisations like Greenpeace have already extended its support towards India.

References:

http://www.bbc.com/news/world-asia-india-35668342

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