A World Trade Organization Panel today issued a report finding that Indian domestic content requirements covering solar cells and modules used by solar power generators violate Article III:4 of the General Agreement on Tariffs and Trade (GATT) and Article 2.1 of the Agreement on Trade-Related Investment Measures. This is a notable victory for the United States, which challenged India’s requirements as blatant WTO violations.
“Today, the WTO panel agreed with the United States that India’s ‘localization’ measures discriminate against U.S. manufacturers and are against WTO rules,” said U.S. Trade Representative Michael 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.”
Ambassador Froman made clear that clean energy policies must still abide by fair trade practices. “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.”
India attempted unsuccessfully to justify its domestic content requirements under the following provisions:
- GATT Art. III:8(a), as governmental procurement of “products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale.” The Panel found this provision inapplicable because the electricity purchased by the government was distinct from and not in a competitive relationship with the solar cells and modules used to generate the electricity.
- GATT Art. XX(j), as “essential to the acquisition or distribution of products in general or local short supply.” The Panel interpreted this provision as applying to situations in which the quantity of available supply of a product from all sources is insufficient to satisfy demand in a region or market. India failed to make such a showing or to demonstrate an imminent risk of such a shortage.
- GATT Art. XX(d), as “necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement.” India cited international agreements requiring it to take steps to promote sustainable development. The Panel found that international agreements could qualify as “laws or regulations,” but only if they have direct effect or are otherwise enforceable under the WTO Member’s domestic law. The Panel found that the international agreements that India cited did not satisfy this requirement and that Article XX(d) was thus not applicable.
A summary of the Panel’s findings and a copy of the full Panel Report can be found here.