India-US solar dispute at WTO to have China, EU as third party observers

The India-US dispute over domestic content requirement in the country’s solar energy programme at the World Trade Organisation is being keenly watched by other countries with some wanting to participate as observers in the panel hearings.

The EU, Brazil, China, Norway, Canada, Malaysia, Russia, Turkey, Korea and Japan have requested the WTO, India and the US to allow them to be members ‘reserving their third party rights’ in the dispute as their interests are also linked with the panel’s verdict, a Commerce Ministry official told Business Line.

This means that these members can submit information and receive documentation but not participate in the proceedings.

“A large number of countries including Argentina, Brazil, Canada and ironically, also the US, have local content requirements in various programmes and in different forms. It is therefore not surprising that countries want to watch the proceedings of the panel hearings,” the official said.

A dispute settlement panel was set up at the WTO last month on the request of the US which complained that certain provisions mandating use of local inputs in India’s solar power generation programme were not compatible with multilateral trade rules.

“We are in consultations with the Ministry of New and Renewable Energy to firm up our arguments defending the local sourcing rules for the first hearing of the panel,” the official said.

While the EU and Japan recently won a case against Canada at the WTO against local sourcing clause in clean energy programmes run in Ontario, China has direct interest in the Indian market as it is one of the largest exporters of solar panels and cells to the country.

If the US wins its case against India and the country is forced to do away with the local sourcing clause for future projects, China could be a big gainer.

The US argument against the local buying clause in the solar projects under the Jawaharlal Nehru National Solar Mission launched in 2010 is that it discriminates against foreign manufacturers of components and thus violates WTO norms.

India has argued that since the purchase of power produced under the mission is by a Government agency, it falls under the category of Government Procurement which is out of the purview of WTO rules.

Interestingly, even if India’s arguments are rejected by the WTO, its local industry may continue to get protection as the Commerce Ministry has recommended steep anti-dumping duties on imports of solar panels and cells from the US, China and Malaysia.

If the Finance Ministry approves the recommendations, as is likely in most cases, imported solar panels and modules will become uncompetitive.