In a major win for India, the World Trade Organization (WTO) has declared that the United States has violated several trade agreements through subsidies and domestic content requirements implemented in its energy sector by eight of its states. The trade dispute was initiated by India in 2016, following similar accusations against India’s solar power policies by the US. Now, India’s claims have been validated by a WTO dispute settlement panel which found that these American states were in breach of global trade rules.
Dispute Background
Back in 2016, India brought this dispute to the WTO, claiming that eight American states – Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware, and Minnesota, had instituted domestic content requirements and subsidies in their energy sectors that broke several provisions of the Trade-Related Investment Measures (TRIMs) Agreement and Subsidies and Countervailing Measures Agreement. Coincidentally, the US had won a case against India at the WTO the same year over India’s solar power policies, which they alleged led to a 90% drop in U.S. solar exports to India.
Panel Findings
The panel pronounced that the subsidies and local content requirements set in place by these eight states were in violation of global trade rules, as all the measures introduced were inconsistent with GATT 1994 (Article III-national treatment). This is due to these measures favouring the use of domestic products, which effectively results in less favourable treatment for similar imported products. Under Section III of GATT 1994, foreign producers should be accorded the same treatment as domestic producers.
US Reaction
In response to the panel’s ruling, the US has the option of challenging this decision before the Appellate Body (AB) of WTO. However, the AB has been rendered dysfunctional due to the US blocking appointments to it.
| US States Involved | Violated Agreement | Advantage |
|---|---|---|
| Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware, Minnesota | Trade-Related Investment Measures (TRIMs) Agreement and Subsidies and Countervailing Measures Agreement | Favoured use of domestic products in their energy sectors |
Implications of the Ruling
The ruling indicates that both the US and its federal states maintain WTO-inconsistent programs within the renewable energy sector. What is more, the world trade body asserts that the US should not undermine renewable energy programs running in other countries like India under the guise of violating global trade rules. This stance was taken especially when Washington and its federal states have adopted larger programs worth billions of dollars that contravene these same global trade rules.
