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WTO battles: How India wants to pay US in its own coin

Neeraj Thakur | Updated on: 10 February 2017, 1:49 IST

The World Trade Organisation (WTO) is ruled by those who have the might and craft of hiding their unfair trade practices. The most successful countries are those that manage to bypass the WTO's rules without getting any objection from other countries. The trade in the solar power equipment is testimony to this unsaid rule of the game at the WTO.

However, there are times, when such unsaid rules are challenged, and this sets the stage for an all out war between nations. In February 2016, when the WTO dispute settlement panel said that India's solar power programme violated global trade rules by imposing domestic content restrictions on the production of solar cells and modules as part of its National Solar Mission, it gave a major jolt to the Indian government.

The ruling came three years after the US launched a dispute against India at the WTO, complaining that its domestic content requirement (DCR) measures violated national treatment provisions for treating imported products at par with domestically manufactured products, core norms of trade-related investment provisions, and financial subsidy rules. But India has decided to have its revenge.

India extracting revenge

According to a story in Press Trust of India (PTI), India will file 16 cases against the US for violating WTO treaties as certain programmes of the western country in the renewable energy sector are "inconsistent" with global norms.

In the Rajya Sabha, commerce and industry minister Nirmala Sitharaman said certain renewable energy programmes of the US at the sub-federal level are inconsistent with WTO provisions, particularly with respect to the obligation under GATT (General Agreement on Tariff and Trade) 1994, Agreement on Subsidies and Countervailing Measures and/or TRIMS (Trade-Related Investment Measures) Agreement.

Does US run anti- WTO subsidy programmes to promote local industry in solar sector? According to a report from Metalminer, a US based website that tracks metal industry, "There are 44 programs in 23 states, which are incompatible with WTO law."

One such programme is California's Self Generation Incentive Program, which offers a 20% discount to in-state businesses that install California-made solar panels or other renewable energy technologies. "The governments of Connecticut, Delaware, Illinois, and other states also impose local content requirements on electrical power supply companies" according to the article.

What does it indicate?

India did not become aware of these violations of the WTO rules by the US overnight. According to Abhijit Das, Head of Centre for WTO Studies, "India could have challenged US anytime in the past. India had discussed this issue in the subsidies committee of the WTO subsidies committee without formally raising any objection".

Will winning the case benefit India?

According to the Ministry of New and Renewable Energy (MNRE) India's cell and module manufacturing capacity now stands at 1,212 MW and 5,620 MW respectively. This means that India currenlty is not in a position to export solar panels to the US. However, the WTO ruling against India's Domestic Content Requirement policy, will make it difficult for India to increase domestic capacity. Therefore the country has decided to teach US a lesson in its own game.

Where will it lead to?

According to Biswajeet Dhar, professor of economics at Jawaharlal Nehru University and an expert on foreign trade, "India wants to bring the US on the negotiation table for a amicable dispute settlement. This would be possible if the US feel threatened about the future of its own domestic industry".

The US Solar panel manufacturers face a lot of pressure from the Chinese companies as they supply cheap solar panels. If India manages to get a ruling against US for promoting its own solar companies, it would do no good to the US companies. So, it makes sense for the Indian government to pay the US back in its own coin.

Edited by Sahil Bhalla

First published: 18 May 2016, 9:52 IST
Neeraj Thakur @neerajthakur2

As a financial journalist, his interface with the two dominant 'isms'- Marxism and Capitalism- has made him realise that an ideal economic order of the world would lie somewhere between the two.

Senior Assistant Editor at Catch, Neeraj writes on everything related to business and the economy.

He has been associated with Businessworld, DNA and Business Standard in the past.

When not thinking about stories, he is busy playing with his pet dog, watching old Hindi movies or searching through the Vividh Bharti station on his Philips radio transistor.