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WTO Upholds Ruling Against Domestic Content Requirements in India’s Solar Power Program

Monday, September 19, 2016
Sandler, Travis & Rosenberg Trade Report

The World Trade Organization’s Appellate Body has upheld a dispute settlement panel ruling that the domestic content requirements in India’s National Solar Mission, which require solar power developers to use Indian-manufactured cells and modules to participate in certain projects that sell electricity to the government, violate WTO rules by discriminating against imports. A press release from the Office of the U.S. Trade Representative notes that since India enacted these requirements in 2011 U.S. solar exports to India have fallen by more than 90 percent.

According to USTR, the Appellate Body’s “decisive finding rejected all of India’s defensive arguments.” In particular, USTR said, the Appellate Body upheld the panel’s findings that India’s domestic content requirements are not justified under:

- the government procurement exception to Article III:8(a) of the GATT 1994 because the Indian government does not itself procure solar cells or modules under the NSM;

- Article XX(j) of the GATT 1994 because the Indian government failed to establish that solar cells and modules were in short supply in India (noting that a short supply analysis must take into account the quantity available from all domestic and international sources); or

- Article XX(d) of the GATT 1994 because India failed to demonstrate that the measures are necessary to secure compliance with laws or regulations requiring it to take steps to promote sustainable development.

USTR hailed the ruling as “a clear victory for American solar manufacturers and workers” but a Sierra Club official said it had “undermined a successful solar initiative slated to bring us one step closer to tackling the climate crisis while creating local clean energy jobs” and demonstrates “the very real dangers harmful trade cases pose for our environment, our air, our water, and our climate.”

Once the Appellate Body report is formally adopted India will have a short period of time to indicate whether it intends to brings its rules into compliance. If it does not, the U.S. may seek authorization to impose retaliatory sanctions, which could take the form of higher tariffs on imported goods from India.

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