Focus on local demand to win WTO solar dispute, says Timothy Meyer

India may succeed in its solar dispute with the U.S. at the World Trade Organisation if it takes steps to develop its manufacturing capacity to serve domestic demand which is not addressed by global companies, according to Vanderbilt University Law School Professor, Timothy Meyer.

Last month, WTO Dispute Settlement Panel ruled India’s requirement for companies that sell solar power to the government use only locally-made parts and components in its national solar power program discriminated U.S. manufacturers.

A December 2015 paper by Mr. Meyer showed that local content requirements for renewable energy were quite common at states and local-level in the U.S. There were 44 such programs in 23 states in the U.S., according to the paper.

“The Indian government has already raised the question of whether a few such programs are consistent with trade rules before a WTO committee, but they have not yet initiated a formal dispute with the United States,” Mr. Meyer told The Hindu in an interview.

“Given the breadth of local content requirements within the United States, I would not be surprised if India (or China, which has raised similar concerns) eventually brings a claim against the United States based on these programs.”

Mr. Meyer said that prevalence of local content requirements in renewable energy indicates that government officials in both India and the U.S. face political pressure to link economic development with environmental objectives.

India argued that solar manufacturing capacity is in short supply relative to the demand for solar panels in India and hence it is claims exception under the General Agreement on Tariffs and Trade (GATT) for measures “essential to the acquisition or distribution of products in general or local short supply.”

“India’s defence before the WTO panel was quite creative in this regard. The panel ruled correctly I think that this argument is too broad,” said Mr. Meyer.

“If the mere fact that a country does not produce a product was enough to justify discriminatory measures like local content requirements, the exception could be used to broadly reverse the trade concessions WTO members have made to each other.”

The WTO panel had ruled that the exception only applies when supply, both domestic and international, exceeds demand.

“By focusing its arguments (or future measures) on the goal of developing a manufacturing capacity that serves a domestic demand not adequately served by international markets, India might have greater success,” Mr. Meyer added.

Last week, Piyush Goyal Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy said the government is examining options to file a case against the U.S. in the World Trade Organisation based on programs run by American state governments which give protection to domestic manufacturers.

“Such a claim might be useful in negotiating a settlement of this case with the United States,” said Mr. Meyer.

However, he said the fact that the U.S. has similar programs will not help India in an appeal in this case.

“This case is only about the consistency of the local content requirements in the Nehru Solar Mission program, rather than the legality of U.S. conduct. I suspect that on appeal the WTO’s Appellate Body will confirm the panel’s basic findings.” The dispute comes at a time when India is betting big on renewable energy. The government has an ambitious plan of achieving 100 gigawatt of solar capacity by 2022.