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United States Prevails in WTO Dispute Challenging India’s Discrimination Against U.S. Solar Exports

Obama Administration trade enforcement victory is a significant win for the rapid deployment of solar energy across the world and for clean energy jobs here at home

Washington, D.C. – United States Trade Representative Michael Froman announced today that a World Trade Organization (WTO) dispute settlement panel found in favor of the United States in the U.S. challenge to India’s “localization” rules discriminating against imported solar cells and modules under India’s National Solar Mission.  The Panel agreed with the United States that India’s domestic content requirements 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 in breach of international trade rules.  In an important outcome -- not just as it applies to this case, but also as other countries consider localization policies -- the Panel rejected India’s defensive arguments and determined that India’s local content requirements are inconsistent with the national treatment obligations in Article 2.1 of the Agreement on Trade-related Investment Measures (TRIMs Agreement) and Article III:4 of the General Agreement on Tariffs and Trade 1994.

Under President Obama’s direction, the United States 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 World Trade Organization (WTO) – more than any other WTO Member. And the United States has prevailed in every single one of those disputes that has been decided by the WTO so far.

The United States initiated this dispute in February 2013 because it considered that India’s domestic content requirements are inconsistent with WTO rules that prohibit discrimination against imported products.  The United States 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 United States and other solar producers.

“Today, the WTO panel agreed with the United States that India’s ‘localization’ measures discriminate against U.S. manufacturers and are against WTO rules.  The United States and India are strong supporters of the multilateral, rules-based trading system and take our WTO obligations seriously,” 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.”

“As we made clear when we launched this dispute, the Obama Administration is committed to strengthening the clean energy sector and the millions of jobs it supports here in America and all over the world.  Trade enforcement is critical for ensuring that world-class U.S. clean energy goods and services can compete on an equal footing around the world for the benefit of American workers and manufacturers, foreign consumers and the global environment.”

“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.” 

“This win underscores not just how aggressive and successful the Obama Administration has been in terms of enforcing our current trade agreements, but also the resolve with which we will enforce the high standards negotiated in TPP, whether it’s with regard to labor, intellectual property rights or the environment.”

The United States challenged the Government of India’s imposition of domestic content requirements for solar cells and modules under India’s National Solar Mission.  Under these requirements, solar power generators are required to use Indian-manufactured solar cells and modules to participate in certain projects under the program.  This means that U.S. companies have been effectively blocked from competing for an important share of India’s solar power equipment market.  Since India enacted these domestic content requirements in 2011, U.S. solar exports to India have fallen by over 90 percent.

This most recent trade enforcement win comes on that same day that President Obama is to sign the Trade Facilitation and Trade Enforcement Act of 2015, a bipartisan legislative accomplishment that increases the Administration’s enforcement abilities so that the United States can build on our record of standing up for the trade rights of American workers, farmers, and businesses in the global economy.

The boost in enforcement authority and resources resulting from President Obama’s signing of the customs bill today means that the United States will go into the implementation of the Trans-Pacific Partnership – in which U.S. negotiators delivered the highest standards of any trade agreement in history regarding labor, the environment, intellectual property and numerous other areas – with more capacity than ever before to ensure other countries fulfill all of their obligations.

Background

Since 2009, this Administration has brought 20 enforcement actions in the WTO and won every single one decided thus far.  Recent WTO victories include:

  • In June 2014, the WTO found that China breached WTO rules by imposing unjustified extra duties on American cars and SUVs.  In 2013, an estimated $5.1 billion of U.S. auto exports were covered by those duties.
     
  • In August 2014, the WTO found that China breached WTO rules by imposing duties and quotas on exports of rare earths, tungsten, and molybdenum.  Those export restraints promote China’s own industry and discriminate against U.S. companies using those materials, which are key inputs by critical American manufacturing sectors, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum, and chemicals.
     
  • In January 2015, the WTO found that Argentina’s import licensing requirements and other import restrictions breach international trade rules.  These restrictions potentially affect billions of dollars in U.S. exports each year, including exports of energy products, electronics and machinery, aerospace equipment, pharmaceuticals, precision instruments, medical devices, motor vehicle parts, and agricultural products.
     
  • In June 2015, the WTO found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza.  The WTO agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without sufficient scientific evidence and was not based on international standards, which confirm that importing U.S. products is safe.

On February 6, 2013, the United States requested consultations with India concerning India’s domestic content requirements under “Phase I” of the Jawaharlal Nehru National Solar Mission (“NSM”) for solar cells and solar modules.  On February 10, 2014, the United States requested supplementary consultations concerning India’s domestic content requirements under “Phase II” of the NSM.  The WTO established a panel at the request of the United States on May 23, 2014, and the panel was composed on September 24, 2014.

The Panel found that India’s domestic content requirements under its National Solar Mission are inconsistent with India’s national treatment obligations under Article III:4 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Article 2.1 of the Agreement on Trade-related Investment Measures (TRIMs Agreement).  Because an Indian solar power developer may bid for and maintain certain power generation contracts only by using domestically-produced equipment, and not by using imported equipment, India’s requirements accord “less favorable” treatment to imported solar cells and modules than that accorded to like products of Indian origin. 

The Panel rejected India’s defensive arguments.  In particular, the Panel rejected India’s argument that the domestic content requirements were justified under the government procurement derogation of Article III:8(a) of the GATT 1994, because the Indian government does not itself procure the solar cells or modules.  The Panel rejected India’s argument that the DCR measures were justified under Article XX(j) of the GATT 1994, because the Indian government had failed to establish that solar cells and modules were “in short supply” in India.  And the Panel rejected India’s argument the DCR measures were justified under Article XX(d) of the GATT 1994, because India 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 GATT 1994].”

Under WTO rules, the report will be adopted if either party so requests within 60 days of the report’s circulation, or either party may appeal the report before it is adopted.  The United States will continue to work with India, as it has for the last several months, to explore opportunities to negotiate a resolution of this dispute, consistent with WTO rules.