The World Trade Organization swats down India’s Booming Solar Plan in response to legality complaint from the US.
An estimated 300 million Indians don’t have access to electricity. The country’s solar plan, which is launched in 2010, aims to change that, and simultaneously combating poverty via job creation. India has indeed made strides in adding solar capacity. Through government subsidies and long-term contracts, India’s National Solar Mission hopes to achieve 100,000 megawatts of solar capacity by 2022. India has already become a leader in solar-manufacturing by offering solar power developers cost breaks for building panels with Indian-made cells and modules. This could let Indians to have sustainable development in the future. However, why did WTO side with the US to rule out India’s moving forward?
The U.S. argues that the Solar Mission’s domestic content requirements have led to a 90 percent decrease in its solar exports to India since 2011. The export losses led the U.S. to file a WTO complaint, which has been staunchly opposed by several U.S. environmental groups. In August of last year, the WTO panel released a preliminary ruling against the Indian domestic content requirements, and Wednesday’s ruling finalized that decision.
As being part of WTO means that a country cannot put such domestic content requirements India as per WTO has flouted the rule. As per WTO all countries should be open to trade every time else the country is dubbed as one that is following protectionism. This comes under Article 2.1 of the Trade-Related Investment Measures (TRIMS) and Article lll 4 of the General Agreement on Tariffs and Trade (GATT) 1994.
For Espa and an Indian energy analyst who wished to remain anonymous, the decision was not a surprise. The WTO had hinted it would deliver this verdict in an August 2015 communication.
India’s domestic manufacturers have long complained that cheap imported solar cells account for around 90% of the market, and are being “dumped” at below production cost prices. Over 70% of the 150 million imported panels came from China in 2014. The government does not impose duties on these imports despite pleas from local manufacturers. According to a September 2015 report by PV-Tech, India’s solar panel manufacturing capacity is around 250 MW. A KPMG report from January 2015 suggests the sector is uncompetitive for three reasons: small factory size, lack of government support, and an undeveloped domestic supply chain.
WTO’s decision has irritated many groups. It hinders domestic suppliers to make great profit with government subsidies. As a result, solar energy industries in India lose a great chance to develop. “Something very wrong is going on when again and again we are seeing trade rules hamper governments’ ability to [tackle] climate change,” Ilana Solomon, director of the Sierra Club’s Responsible Trade Program, tells The Christian Science Monitor in a phone interview Thursday. “India needs to be in the driver’s seat. It is not for the WTO to decide what’s in India’s best interest.”
Climate change activists also oppose such decision, claiming that Wednesday’s ruling is yet another glaring example of archaic trade rules usurping necessary climate progress. “The ink is barely dry on the UN Paris Climate agreement, but clearly trade still trumps real action on climate change,” Sam Cossar-Gilbert, an organizer at Friends of the Earth International Economic Justice, said in a statement Wednesday. “Trade policy can not continue to be a hindrance: Governments must be free to implement sound climate policy.”
This is not the first time that WTO has ruled in such a manner. In 2012 in response to a complaint filed on behalf of Japan and the EU, it had ruled against the government of Ontario’s green energy program which incentivized renewable producers to source goods and services from inside the province.