Asian powerhouses · Indian Masala · Ongoing disputes at the WTO · Trade and Environment · Western World

Part II: Alternative Defences for India in the Solar Cells dispute.

In recent news, the Panel for the India-Solar Cells dispute has been established. The unrelenting attack from the US-led West must be countered strongly by India. New Prime Minister, Mr. Narender Modi has given this job primarily to the Mrs.Nirmala Sitharaman in the Ministry of Commerce and Industry. She stands to be one of the key players who will be instrumental in drafting India’s future trade policy.

A brief perusal of the questions involved in the matter is given here.
I found some interesting arguments on the question of India’s WTO commitments and whether they are offended by the Jawaharlal Nehru National Solar Mission.

1) It can be argued that essentially the program is procurement of solar power by government through a state-owned entity and thus this particular activity comes within the purview of the Agreement on Government Procurement. Because India is not a signatory to the Agreement, it retains the right to regulate the industry as it wishes i.e. without any interference from the WTO. Here, it must be remembered that the two main agreements, that the complaints argue are being violated, are the General Agreement on Trade and Tariff (Article III:4) and The TRIMS Agreement (Article 2.1 etc).

2) Another interesting way of looking at the matter is to consider that retail trading is classified as a service and thus needs to be covered under the GATS. The essential difference is that all the GATT obligations apply directly to the members i.e. all the members agree to all the obligations in the treaty (subject, of course to exceptions in Article XX and XXI). It is true that a member is allowed to decide how much it wants to liberalize a particular sector, it cannot decide which sector it wants to (a certain minimum is required).
However, in the GATS, the obligations apply only to the extent of the obligations undertaken in the member’s Schedule of Commitments. As India has not undertaken any commitments to liberalize trade in the retail sector, it can be argued that India is free to regulate the service according to what it deems fit.

These arguments are new, inventive and should definitely be taken into consideration by Indiá’s Commerce ministry, along with the recent case of Canada-FIT. 

Finally, it should be noted that there really has been no discrimination, as has been alleged by the US. A glance at the phase II contracts shows that most of them have gone to American companies. This is prima facie proof of non-discrimination since the “conditions of competition” do not seem to have been affected or altered to the disadvantage of the US. [ I’ll follow up on the legal analysis, including the question of Article III and Article 2.1, in the next post]

Commerce Secretary Rajeev Kher summarizes India’s position by highlighting that the intent was only to promote the infant domestic industry, propagate the idea of clean power and to generate jobs.

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3 thoughts on “Part II: Alternative Defences for India in the Solar Cells dispute.

  1. Art.III:8 (a) won’t apply, Akhil. NVVN sells the electricity further to discoms (for further commercial distribution to consumers at large) which fails to qualify as government procurement because it is “with a view to commercial resale”.

    More importantly, wonder why US did not challenge SCM violations under their second / addendum consultation request for Phase II. Views?

    1. Hey.
      I totally agree with you. I was reading through some of the discourse relating to Article III:8 (specifically Canada-FIT). I’m still trying to see if there’s a different way to argue the point out. I suppose we have to leave some room to factor in the intention of the Government. According to me, the words “with a view to” are a clear indication, in itself, that a lot of emphasis rests on what the government intended to do, as opposed to what it actually did. I’m not saying that there was no commercial resale, as that’s a settled fact. But I’m of the opinion that the Indian government’s primary concern is renewable energy generation, or so it would seem. What say?

      Also, I checked up on the SCM point and the WTO website says that the US claimed violations of Articles 3.1(b), 3.2, 5(c), 6.3(a) and (c), and 25.
      Here’s the link: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds456_e.htm

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