A World Trade Organization (WTO) dispute settlement panel has found in favor of the U.S. in the country’s challenge to India’s “localization” rules regarding imported solar cells and modules under India’s National Solar Mission.
According to U.S. Trade Rep. Michael Froman, the panel agreed with the U.S. that India’s domestic-content requirements (DCRs) discriminate against U.S. solar cells and modules by requiring solar power developers to use Indian-manufactured cells and modules rather than U.S. or other imported solar technology and that the requirements are in breach of international trade rules. Froman says the DCRs have effectively blocked U.S. companies from competing for an important share of India’s solar power equipment market. Since India enacted these requirements in 2011, U.S. solar exports to India have fallen by over 90%, he notes.
“The United States and India are strong supporters of the multilateral, rules-based trading system and take our WTO obligations seriously,” states Froman. “This is an important outcome, not just as it applies to this case, but for the message it sends to other countries considering discriminatory ‘localization’ policies.”
The U.S. initiated this dispute in February 2013, and Froman says the country has consistently made the case that India can achieve its clean energy goals faster and more cost effectively by allowing solar technologies to be imported from the U.S. and other solar producers.
According to Froman, the WTO panel rejected India’s defensive arguments that the DCRs were justified, finding the Indian government had failed to establish that solar cells and modules were “in short supply” in India and had failed to demonstrate that the DCRs are, in fact, “measures to secure compliance with laws or regulations which are not inconsistent with the provisions of [the General Agreement on Tariffs and Trade 1994].”
“The United States strongly supports the rapid deployment of solar energy around the world – including in India. But discriminatory policies in the clean energy space in fact undermine our efforts to promote clean energy by requiring the use of more expensive and less efficient equipment, raising the cost of generating clean energy and making it more difficult for clean energy sources to be competitive,” explains Froman.
He adds that under President Barack Obama’s direction, the U.S. has mounted the most ambitious upgrade of trade enforcement in the history of modern U.S. trade policy. This solar energy case was one of 20 enforcement actions taken by the Obama administration at the WTO, and the U.S. has prevailed in every single one of those disputes that has been decided by the WTO so far.
Dan Whitten, vice president of communications for the Solar Energy Industries Association (SEIA), calls the WTO’s ruling a “step in the right direction” that will hopefully “remove any obstacles to a constructive U.S. presence in India’s solar market.”
“The WTO dispute settlement panel’s decision will clear the way for significant and rapid deployment of solar energy in India and can create jobs at home,” says Whitten in a statement. “This decision helps us bring clean energy to the people of India as that nation’s demand for electricity rapidly grows. We look forward to working with our solar industry colleagues in India to help grow the solar supply in both our markets and around the world.
“While we support today’s decision, we continue to believe that a mutually satisfactory resolution of this dispute, consistent with WTO rules, is the preferred solution,” he adds.