Caribbean Trade Law and Development

Category: WTO

  • WTO Panel rules in US’ Favour in Solar Dispute against India

    Alicia Nicholls

    A World Trade Organisation (WTO) Dispute Settlement Body panel has issued its report in the dispute  India — Certain Measures Relating to Solar Cells and Solar Modules in which the United States challenged the domestic content requirements imposed by India relating to solar cells and solar modules under the latter’s Jawaharlal Nehru National Solar Mission. The Panel found in favour of the US’ view, holding that India’s domestic content requirements were discriminatory and inconsistent with India’s obligations under Article III:4 of the General Agreement on Tariffs and Trade (GATT) 1994 and Article 2:1 of the Agreement on Trade Related Investment Measures (TRIMs).

    The dispute is  one in a growing body of WTO disputes in which one member’s government support programmes for the renewable energy sector (whether local or national) have been challenged by another member as being inconsistent with the former’s obligations under WTO rules. It is therefore not surprising that a long list of countries notified their interests as third parties to this dispute, namely: Brazil, Canada, China, Ecuador, the European Union, Japan, the Republic of Korea, Malaysia,Norway, Russia, Saudi Arabia, Chinese Taipei and Turkey.

    Background

    The Indian Government launched the National Solar Mission (NSM) in January 11, 2010 as one of the eight national missions under India’s National Action Plan on Climate Change (NAPCC). The NSM has the aim to promote the use of solar energy in India, foster energy security and make India a global leader in solar energy. According to the Indian Ministry of New and Renewable Energy’s website, the NSM’s ambition is “to deploy 20,000 MW of grid connected solar power by 2022” and to reduce the cost of solar power generation in India through four key aspects, including domestic production of critical raw materials, components and products.

    At the heart of the dispute, the Indian Government required solar developers (or their successors to the contract) to purchase or use solar cells or solar modules of domestic origin in order to be eligible to enter into and maintain certain power purchase agreements under the NSM.

    The US argued that these domestic content requirements mandated by the Indian Government under Phases I and II of the NSM were discriminatory and inconsistent with India’s WTO obligations. Specifically, the US challenged the measures’ consistency with Article III:4 of the GATT 1994 (National Treatment), arguing that they accord less favorable treatment to imported products than to like domestically produced goods.Additionally, the US argued that these domestic content requirements were trade-related investment measures which fell within paragraph 1(a) of the Illustrative List of the TRIMs Agreement’s annex and were therefore inconsistent with Article 2.1 of the TRIMs Agreement.

    In its defense, India argued that its domestic content requirements at issue were not inconsistent with Article III:4 of the GATT 1994 or Article 2.1 of the TRIMS Agreement. India also sought to rely on the exceptions in  Article III:8(a), Articles XX(j) and/or XX(d) of GATT 1994 (General Exceptions).

    The US requested consultations with India initially in February 2013 and then in relation to Phase II of the NSM in February 2014. A panel was established in May 2014 and the parties agreed to the panel’s composition in September of that same year.

    Ruling

    In its report circulated today, the Panel found in favour of the US’ view. It held that:

    • India’s domestic content requirements in question were trade-related investment measures for the purposes of the Illustrative List in the TRIMs Agreement’s Annex and were therefore inconsistent with Article 2.1 of the TRIMs Agreement.
    • The Panel also found that the domestic content requirements in question do accord “less favourable treatment” within the meaning of Article III:4 of the GATT 1994

    In regards to India’s argument about the government procurement derogation under Article III:8(a) of the GATT 1994, the Panel referred to the Appellate Body’s interpretation of that article in the Canada — Renewable Energy / Feed-In Tariff Program dispute in which the EU had successfully challenged domestic content requirements imposed by the Ontario provincial government in relation to its Feed-In Tariff (FIT) programme. Relying on its interpretation in that dispute, the Panel held that discrimination relating to solar cells and modules under the domestic content measures is not covered by Article III:8(a) of the GATT 1994.

    The Panel also argued that India failed to show that the domestic content requirements were justified under the general exceptions, Article XX(j) or Article XX(d) of the GATT 1994.

    The big picture

    What this dispute and others like it concerning domestic support for renewable energy programmes show is the increasing intersection and conflict between  trade and environmental policy, in particular, trade and climate change policy.It is an issue which is more than moot for small island developing States  like Barbados  (a Caribbean leader in solar energy which aims to become a “green economy”) in regards to how much policy space is available to policy makers to provide support for the advancement of the renewable energy sector in the country without running afoul of the country’s WTO obligations.

    The relationship between trade and climate policy is one of the issues which was discussed at length in the E15 Initiative Report entitled “Analysis and Options for Strengthening the Global Trade and Investment System for Sustainable Development”, particularly in this think piece  considering “the costs and benefits  for adjusting WTO rules to provide additional policy space to mitigate climate change and promote renewable energy”.

    As countries take more aggressive measures in order to meet their national emissions reduction targets in the spirit of the Paris Agreement’s goal to limit the global temperature increase to no more than 2 percent above pre-industrial levels (with the best endeavour goal of 1.5 percent), there is likely to be more conflict between WTO rules and climate change policies in years to come. WTO members will be forced to address ways in which the WTO rules can be flexed to more adequately accommodate members’ climate change mitigation policies, while at the same time ensuring that they are not used as a guise for protectionism.

    For further information on the US-India Solar dispute, please see the  WTO’s case summary and the full Panel Report.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • WTO holds first post-Nairobi full membership meeting; Turkmenistan considering membership

    Alicia Nicholls

    This week the World Trade Organisation (WTO) held its first full membership meeting after the 10th Ministerial Conference in Nairobi last December. For the WTO’s news item on the meeting, please visit here.

    Turkmenistan considering WTO membership

    In other news, Turkmenistan is said to be considering WTO membership. According to Azer News, the EU proposed Turkmenistan for WTO membership in 2011 and Turkmenistan’s Deputy Prime Minister and Foreign Minister reportedly held several meetings in Geneva this week, including with Roberto Azevedo, Director General of the WTO. For the full Azer News article, please see here.

    Alicia Nicholls B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. The following information is for general You can read more of her commentaries and follow her on Twitter @LicyLaw.

  • Davos 2016: Proposals for Strengthening the Global Trade and Investment System

    Alicia Nicholls

    A new report by the E15 Initiative entitled “Strengthening the Global Trade and Investment System in the 21st Century” was launched at the World Economic Forum’s Annual Meeting 2016 held January 20-23 in Davos, Switzerland. The new report proposes a set of reforms with the aim of strengthening the global trade and investment system in the 21st century. Small vulnerable economies (SVEs) like those in the Caribbean stand to benefit from many of the proposals if endorsed by the international community.

    According to details on the website of the E15 Initiative, the E15 Initiative report is a product of the E15 Initiative  jointly undertaken by the International Centre for Trade and Sustainable Development (ICTSD) and the World Economic Forum, in conjunction with 16 partnering institutions and 375 international experts over the past two years.

    The E15 Initiative report is timely as it comes at a time of slowing global trade. Global trade is now growing at less than the rate of global GDP, which is not the norm, and last year the WTO revised downward its global trade growth projections for this year. The report also comes on the heels of the failure of WTO members at the 10th WTO Ministerial Conference in Nairobi, Kenya in December to agree on the continuation of the Doha Development Agenda, as well as in the midst of an ever-growing “spaghetti bowl” of regional trade agreements, which includes the recently concluded Trans-Pacific Partnership (TPP) and several other mega-regional trade agreements currently under negotiation.

    The E15 Initiative report has 16 chapters of practical recommendations organised in thematic groups. The reforms proposed are not limited to the WTO’s architecture but include proposals on wider global trade and investment cooperation. As an example, in light of the concerns about fragmentation, one of the proposals is for the establishment of a Regional Trade Agreement Exchange. The report is accompanied by a Synthesis Report which “summarizes and interprets the significance of the proposals for progress on many of the international community’s most important shared imperatives”.

    Proposals of Interest to the Caribbean SVEs

    The report’s recommendations touch on several issues which are of particular concern to SVEs, including the availability of correspondent-banking relationships. The loss of correspondent banking due to de-risking practices by banks in metropolitan countries is an issue of significant import to Caribbean SVEs as it has implications for remittances sending/receiving and the transaction of business with the rest of the world.

    Another recommendation which benefits services-based economies of the region is the proposed development of a comprehensive WTO Framework for Trade Facilitation in Services, while the proposed establishment of an Agreement on Access to Basic Science and Technology is also noteworthy. Other proposals touch on food security, fisheries subsidies and illegal unreported and unregulated (IUU) fishing, trade solutions to climate change, proposals on ensuring trade rules are equitable and predictable and on modernising the coherence of the investment agreements framework.

    For further information on the report, please see the website of the E15 Initiative. The full E15 Initiative report may be accessed here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. The Author is in no way affiliated with the ICTSD, WEF, the E15 Initiative or the report mentioned. You can read more of her commentaries and follow her on Twitter @LicyLaw.

  • WTO Director General Visits Barbados

    Alicia Nicholls

    Director General of the World Trade Organisation, Roberto Azevedo, paid an official visit to Barbados this week. The Director General’s visit to Barbados comes as part of his official visit to the Caribbean. Earlier this week the Director General visited Jamaica where he met with Prime Minister Portia Simpson Miller and other senior government representatives, and gave a speech at the University of the West Indies’ Mona Campus.

    According to Barbados’ Government Information Service, Mr. Azevedo met with Barbados’ Prime Minister, the Rt. Hon Freundel Stuart and Minister of Foreign Affairs and Foreign Trade, the Hon Senator Maxine McClean.

    Barbados has been a strong and vocal supporter of the multilateral trade process. Barbados was a founding member of the WTO and has been a party to the GATT since 1967. The chairperson’s statement on Barbados’ trade policy review in January last year noted, inter alia, that members “praised Barbados’ strong support for the multilateral trading system and the role it has played in the DDA negotiations” and its open and liberal investment and trade regime.  Barbados has played a leading role in advocating for the interests of Small Vulnerable Economies (SVEs) and currently chairs the Africa, Caribbean & Pacific (ACP) group  in the WTO.

    According to a report by Barbados’ Nation News, Minister McClean and Director General Azevedo held a joint press conference at the headquarters of her ministry. During this press conference, Minister McClean is reported to have emphasised the challenges faced by small states like Barbados in the multilateral trading system and reiterated the need for a successful conclusion of the Doha Development Round.

    The future of the Doha Round has been left undecided at the WTO’s 10th Ministerial Conference in Nairobi, Kenya last December. In the Nairobi Declaration, WTO members unprecedentedly stated their disagreement on whether Doha should be ended or continued.

    Details on Director General Azevedo’s official visit to Barbados may be obtained from the official website of the Barbados Government Information Service here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.