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Trade disputes between India and US (Relevant for GS Prelims and GS Mains Paper II, III)

The WTO dispute that India lost over solar power and the one that it has now filed against the U.S. are similar. India and the U.S. have been filing a number of disputes against each other, challenging the other’s domestic content requirement in the renewable energy sector.

The allegations by India
India in the present case claims that California, Connecticut, Delaware, Massachusetts, Michigan, Minnesota, Montana and Washington are providing renewable energy subsidies similar to those of the domestic content requirement under the Jawaharlal Nehru National Solar Mission (JNNSM), which, the U.S. claims, violates World Trade Organisation (WTO) law.

India alleges that these states have been granting subsidies to local manufacturers in the renewable energy industry along with the requirement that the products be made domestically.

The WTO ruling in JNNSM case
JNNSM required that 20 gigawatt (GW) of solar power should be generated from domestically produced modules or solar cells.

The WTO found that the mandatory domestic content requirement under JNNSM violated the National Treatment provisions of the WTO agreement. ‘National Treatment’ refers that international goods should be treated at par with international goods.

What India has done to satisfy US concerns?
The Indian government has significantly reduced the domestic content requirement after the initiation of proceedings at the WTO.

At the beginning of the mission, the domestic content requirement in the auctioned contracts was as much as 50% of the total output generating capacity. This value dropped significantly through the auctions and is currently down to 5%. The U.S. is still unsatisfied with the measures undertaken by the government.

Before the final judgment was delivered by the WTO, there was a lot of chatter about the case being settled by the two governments.

However, nothing meaningful came from from these negotiations. The Indian government then announced that it had decided to file many cases against the U.S.

Claims made by India
The request for the establishment of a panel came on January 24, 2017. The reasons stated by India include that the eight U.S. states were giving “performance-based incentives” for generating renewable energy. These incentives were contingent on the fact that domestically produced goods were being used and were given to offset the investment cost. India claims that this violates National Treatment provisions because these measures provide less favourable treatment to imported products than domestically produced goods.

Way forward
Even though India has requested establishment of the panel, is it still possible that an amicable solution may be found.

However, with the new Trump administration and its ‘America First’ policy, there is a good chance that the panel will be established and the case argued before the WTO. This would affect relations between the U.S. and India. Both the cases are in fact the same, so it would be in the best interest of both nations to settle it.



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