An in-depth analysis of the US case against India in the World Trade Organization on the matter of solar cells and modules.

1. US Complaint: India – Certain Measures Relating To Solar Cells And Solar Modules
Submitted in partial fulfillment of the requirements for Trade Laws & Institutions IPSG 8525
Middlebury Institute of International Studies
Jeremy Borgia May 14, 2015

2. Table of Contents
Introduction 1............................................................................................................................
Historical Context: Ongoing Indo/US Trade Disputes 2..........................................................
Policy Context: DCRs in India’s JNSM Policies 3...................................................................
Indian Sovereignty 5.................................................................................................................
The Role of the WTO Dispute Settlement System 6................................................................
WTO Accession 7.....................................................................................................................
Like Product Analysis 7............................................................................................................
Nondiscrimination: The National Treatment Clause 9.............................................................
Trade-Related Investment Measures: Article XI and TRIMs 12................................................
Article XX: The General Exceptions 15.....................................................................................
Technical Regulations and Product Standards: The SPS and TBT Agreements 18...................
Subsidies and Countervailing Duties 22....................................................................................
Conclusion/Recommendations 26..............................................................................................
Bibliography 28..........................................................................................................................
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3. Abstract
In this paper, I analyze the current WTO dispute, brought by the United States, that
alleges that certain policies regarding India’s Jawaharlal Nehru Solar Mission (JNSM) violate its
obligations under the General Agreement on Tariffs and Trade (GATT) 1994, Agreement on
Trade-Related Investment Measures (TRIMs), and the Agreement on Subsidies and
Countervailing Measures (SCM). For each alleged violation, I use the format Act of State →
Violation → Unless to determine if India is in fact in violation of its WTO obligations. In
addition, I frame the dispute in the background of the US/Indian trade relationship, providing the
political context that this dispute is taking place in.
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4. Introduction
In February 2013, the United States Trade Representative initiated a formal WTO
complaint against India by requesting consultations regarding policies relevant to India’s
ambitious Jawaharlal Nehru Solar Mission (JNSM). The project, named for India’s first prime1
minister, and a part of the broader National Action Plan on Climate Change by the Indian
government, aims to establish India as a global leader in solar energy. The reason for the US2
complaint was the American claim that “certain measures of India relating to domestic content
requirements” violated Article III:4 of the General Agreement on Tariffs and Trade (GATT)
1994, Article 2.1 of the Agreement on Trade-Related Investment Measures (TRIMs), Articles3 4
3.1(b), 3.2, 5(c), 6.3(a) and (c), and 25 of the Agreement on Subsidies and Countervailing
Measures (SCM), in addition to a broader claim that “the measures appear to nullify or impair5
the benefits accruing to the United States directly or indirectly under the cited agreements.”6
Sixty-eight days after the request for consultations, the US requested the establishment of a
dispute settlement panel. That panel is expected to deliver its final judgement in August of this
year.
In this paper, I will evaluate the disputed policies against the specific language of the
aforementioned agreements in order to determine whether India is in fact violating its
commitment under GATT. I will do so using the following model: Act of State → Violation →
Unless; I will objectively present both the Indian policies in question and India’s obligations
under GATT, followed by an analysis of the allowed exceptions, in order to determine the level
of Indian responsibility in each case. I will present both the American and Indian perspectives,
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5. including a micro conclusion, for each section, followed by a general conclusion at the end of the
article.
Historical Context: Ongoing Indo/US Trade Disputes
The United States is one of India’s largest trading partners. As an illustration, in 2011 US
exports to India totaled $21.5 billion, and its imports from India totaled $36.15 billion. In7
addition, the US is India’s largest source of foreign direct investment (FDI), with FDI totaling $9
billion (which accounts for 9% of total FDI to India). In 2005, US President George W. Bush8
and Indian Prime Minister Manmohan Singh created the Trade Policy Forum. Run by a
representative from each nation, the goal of the program is to increase bilateral trade and
investment. In the four years succeeding this agreement, “US goods exports to India…more9
than doubled, and the bilateral trade deficit [was] reduced by half.” However, despite these10
improvements, barriers to increased US/Indo trade remain.
According to a report from the Brookings Institute last year, “Indian barriers to trade and
investment, including lack of intellectual property protection and enforcement, continue to
undermine the potential of the economic relationship.” Last year the US International Trade11
Commission (USITC), “an independent, quasijudicial Federal agency with broad investigative
responsibilities on matters of trade” that advises both the executive and legislative branches on12
trade issues, launched an investigation into Indian trade, investment, and industrial policies.
Solar domestic content requirements (DCRs) were one of the many impetuses for this
investigation. In addition to the solar industry, the USITC is investigating unfair Indian trade13
practices that are allegedly doing harm to the pharmaceutical, agricultural, and aviation
industries. In just the past three years, the US and India have brought each other to the WTO
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6. dispute settlement process two other times: in March 2012 the US initiated a complaint against
India to challenge an Indian ban on US poultry, and in April of that same year India lodged a
complaint challenging American steel duties. Trade statistics reveal the likely motivation for14
these cases, and the case which we are discussing in this paper; in 2013 the US trade deficit with
India reached almost $20 billion, an increase of 1.7% from the previous year.15
Ultimately, then, the US/India solar dispute at the WTO is part of the larger framework of
strained bilateral trade relations. By addressing perceived barriers to trade through the WTO
dispute settlement system, the US likely believes that it can liberalize its trade relations with
India, reduce its trade deficit with India, and open up the Indian market to more American
exports. However, my conclusion—which I will expound upon at the end of this article—is that,
while piece mailing trade improvements through aggressive litigation through the WTO may
provide band-aid like, short-term relief, the US must ultimately seek a bilateral free trade
agreement with India (or an inclusion of India in the TPP) to achieve both long-term and
consistent trade improvement.
Policy Context: DCRs in India’s JNSM Policies
The root of the American complaint against India in this particular case is a set of
domestic content requirements (DCRs) that are included in an Indian project to develop
additional solar electricity. These DCRs apply to solar power developers seeking government
funds or favorable low-interest financing. These policies refer specifically to phase II of the
JNSM project, which seeks to build 10,000 MW of solar power between 2013-2017. According
to the US complaint, “India requires solar power developers…to purchase and use solar cells and
solar modules of domestic origin in order to enter into and maintain certain power purchase
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7. agreements.” Indian policy stipulates that fifty percent of bids for contracts to build solar power16
plants will be subject to DCRs. These are government bids, and as such use government funds.17
Additionally, power developers or their successors receive benefits and advantages contingent on
the purchase and use of Indian produced solar cells and modules, such as long-term electricity
tariffs and favorable low-interest financing. The JNSM policy document obtained from the
Indian government corroborates these claims, stating, “The solar mission, while leveraging other
government policies, looks to provide favorable regulatory and policy conditions to develop
domestic manufacturing of low-cost solar technologies.” It is with these specific policies in18
mind that I will analyze the following components of India’s WTO obligations.
The first phase of the JNSM, which ended in 2013, also contained DCRs which drew the
ire of the United States, though the formal US complaint was not lodged until phase 1 drew to an
end. The policy in phase 1 required “crystalline silicon (cSi) solar photovoltaic (PV) projects to
use Indian-manufactured modules and concentrating solar power (CSP) projects to use at least 30
percent Indian-manufactured equipment,” but exempted thin film solar PV panels, due to the19
lack of thin film manufacturing in India. In the second phase, however, India expanded the DCR
to include thin film panels, of which the United States is a major manufacturer. First Solar, a US
firm, is the world’s largest manufacturer; First Solar’s thin film panels made up 20% of India’s
PV market under phase 1, which accounted for 8% of First Solar’s total PV production. The20
expansion of DCRs in the second phase, then, stands to deal significant damage to the US thin
solar panel market, First Solar in particular, by cutting 8% of First Solar’s thin film panel market.
Still, Shakuntala Makhijani, the Climate & Energy Research Associate and India Project
Manager at the Worldwatch Institute, said that “Without the DCR, it would be extremely difficult
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8. for India’s nascent solar manufacturing sector to establish itself and grow while faced with
competition from countries with mature solar industries like China and the United States.”21
Speaking of such regulatory protectionism, Alan O. Sykes stated that, in most cases, it “causes
additional deadweight losses that make it considerable more inefficient than other instruments of
protection such as tariffs, quotas, and subsidies.” Ultimately, however, the question is not22
whether the DCRs will benefit the Indian solar manufacturing industry; rather, it is whether these
protectionist measures constitute a violation of Indian obligations under its various free trade
agreements.
Indian Sovereignty
In this section, I will discuss the balance between Indian sovereignty and Indian
obligations under international law. Sovereign authority is exclusively the right of the local
government in a political independent territory, such as India. “The sovereignty and equality of
states represent the basic constitutional doctrine of the law of nations, which governs a
community consisting primarily of states having a uniform legal personality.” This sovereignty23
includes the corollaries: jurisdiction (prima facie exclusive), which constitutes sovereignty over a
territory and its permanent population; a duty of non-intervention from other states within this
area; and the dependence of obligations arising from both customary law and treaties. Within its
borders, the powers of the Indian government are absolute, only limited by its own constitution.
By definition, sovereignty is also exclusive; thus, the Indian government’s power cannot be
contradicted or overridden by another power. The question, then, is why the US can bring a
complaint against India for laws that are its sovereign right to issue. The answer, briefly, is that
the sovereign Indian government willingly entered into the WTO agreements, signing in 1948,
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9. binding it to not undermine the spirit or intent of the agreement, and ratifying it in 1948, binding
India to its terms. This principle is enumerated in Article 26 of the Vienna Convention on the
Law of Treaties , or Pact Sunt Servanda, which states that “Every treaty in force is binding upon24
the parties to it and must be performed by them in good faith.” India remains free as the25
sovereign power of its territory to levy any trade barriers within it deems appropriate; however, it
is subject to the consequences of those barriers, determined by the WTO dispute system that it
agreed to.
The Role of the WTO Dispute Settlement System
In this section I will briefly introduce the WTO dispute settlement system as it is relevant
to this case. The principal goal of the system is to stop violations and encourage multilateral
compliance with GATT rules. Through the use of the system, nations’ GATT obligations26
become better defined and more clear. There are four major phases of the dispute settlement
process. First, the involved parties must attempt to resolve the issue through consultations;
second, if consultations fail, the complainant may demand the establishment of a panel of experts
sixty days after having requested consultations; third, other parties can appeal to the dispute
through the Appellate Body; finally, if the complainant succeeds, the system monitors either the
implementation of its recommendations or sanctioning of appropriate retaliation.27
The US initiated the dispute process in February 2013 by requesting consultations with
India regarding the DCRs in their solar policy. The hope for the consultations is that the parties
will be able to resolve the dispute without formal WTO proceedings. Consultations must last for
sixty days; sixty-eight days after requesting consultations, the US requested that a panel be
established, moving the dispute to the next step of the dispute settlement process. The Dispute
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10. Settlement Body (DSB) “is required to establish a panel unless there is a consensus in the DSB
not to establish a panel. Since the complaining party may prevent the formation of this ‘reverse’
consensus, there is effectively a right to have a panel established.” The panel for this case was28
composed on 24 September 2014, and is expected to have a ruling by August 2015. It should29 30
be noted, referring again to the issue of Indian sovereignty, that a ruling in favor of the US would
not force India to change its own laws. Rather, it would offer recommendations, likely
amounting to the removal of DCRs and other trade barriers. “If the recommendations are not
implemented, the prevailing party is entitled to seek compensation from the non-complying
member or request DSB authority to suspend concessions previously made to that member.”31
Put simply, if the US prevails, India would have the option to maintain its trade barriers, though
the US would be entitled to retaliatory trade barriers.
WTO Accession
India is an original member of the World Trade Organization (WTO), and was a member
of GATT from 1948. Consequently, there is not a particular Indian accession with WTO+ or32
WTO- provisions. Thus, when examining India’s obligations under the various agreements33
listed above, there will not be a need to refer to outside agreements that clarify India’s
responsibilities.
Like Product Analysis
Many of the succeeding sections involve a like product analysis. Thus, towards the end of
brevity and efficiency, I will now conduct a like product analysis, to be referred back to when
necessary.
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11. First, regarding physical characteristics, Indian- and US-made solar panels are the same
in size, color, and composition. Moreover, they are built for the same end-use; in fact, they are
totally interchangeable. According to the USTR, “Both CSPV and thin film modules are used34
in all three major grid-connected market segments – residential, commercial, and utility – and in
the off-grid market segment.”35
In terms of distribution channels, there is a difference between CSPV and thin film
modules—two types of solar cells that are produced both in the US and India—but there is not a
difference in distribution stemming from country of origin. Furthermore, though there exist
differences in the manufacturing and production processes between the two types of cells, there
does not exist a difference based on country of origin.36
The main differences appear in the areas of consumer perception and price. Indian solar
power developers have expressed a desire “to source modules by accessing highly competitive
global market to attain flexible pricing, better quality, predictable delivery and use of latest
technologies.” This suggests that prices from solar cell manufacturers outside India are37
perceived to be of better quality and lower price. The end-consumer perception, however, is
exactly alike; indeed, electricity generated by Indian-made cells will be exactly the same as
electricity generated by any other cell.
To conclude, solar cells manufactured in India should be considered a like product of
cells manufactured elsewhere and imported into India. They are completely interchangeable in
terms of their end use. The main difference—consumer perception (consumers being solar power
developers)—is in fact an argument for liberalizing solar cell trade into India.
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12. Nondiscrimination: The National Treatment Clause
Article III of the GATT, otherwise known as the National Treatment principle, stipulates
that a WTO member state cannot apply regulations “so as to afford protection to domestic
production.” Sections 4 and 5 provide clarification, stating, respectively, that38
4: The products of the territory of any contracting party imported into the
territory of any other contracting party shall be accorded treatment no less
favourable than that accorded to like products of national origin in respect of all
laws, regulations and requirements affecting their internal sale, offering for sale,
purchase, transportation, distribution or use.
5: No contracting party shall establish or maintain any internal quantitative
regulation relating to the mixture, processing or use of products in specified
amounts or proportions which requires, directly or indirectly, that any specified
amount or proportion of any product which is the subject of the regulation must
be supplied from domestic sources.39
Ultimately, member states cannot apply regulations to domestic manufacturers any differently
than they do to foreign manufacturers. Section 4 specifies further that imported products must be
equally available, while section 5 specifically states that regulations requiring any amount of
domestic sourcing constitutes a violation. The Appellate Body, in a case involving a US
complaint regarding Korean treatment of imported beef, stated that, “Whether or not imported
products are treated ‘less favourably’ than like domestic products should be assessed instead by
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13. examining whether a measure modifies the conditions of competition in the relevant market to
the detriment of imported products.” Using this litmus test, Indian policy supporting the JNSM40
—particularly the DCRs that are included—violate Article III, by modifying the conditions of
competition in the Indian solar market. The regulations treat foreign-made solar parts differently
than those produced domestically; these policies favor Indian domestic solar module producers
by artificially inflating domestic demand through a suppression of the demand for imported like
products.
However, section III:8 excepts government procurement from national treatment
provisions under certain conditions, stating that, “The provisions of this Article shall not apply to
laws, regulations or requirements governing the procurement by government agencies of
products purchased for governmental purposes and not with a view to commercial resale or with
a view to use in the production of goods for commercial sale.” So, the Indian government is in
violation of GATT III, unless the project is deemed to be “government procurement,” in which
case III:8 allows the exception and India would not be in violation of its obligations.
India has argued that the DCRs in the JNSM policy are indeed permissible under the
provided exceptions for government procurement. According to official sources in the Indian41
Ministry of Commerce, the “National Solar Mission is a government programme under the
Jawahar Lal Nehru National Solar Mission (JNNSM) of Ministry of New and renewable energy.
Thus the programme does not attract any norms which are applicable for commercial sale and
resale, said officials.”42
The important factor, then, is whether the Jawaharlal Nehru project should be considered
a “government procurement” project. Although the project has been spearheaded by Indian
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14. government authorities, the funding, research, development, and construction will be performed
by private developers. Low-interest loans will be made available from the Indian government.
India’s Ministry of New and Renewable Energy (MNRE) stated in its announcement, “The
policy announcement will create the necessary environment to attract industry and project
developers to invest in research, domestic manufacturing and development of solar power
generation and thus create the critical mass for a domestic solar industry.” Essentially, the43
JNSM is meant to serve as a catalyst for solar power generation, providing the synergistic
environment to promote private development, supplemented by government aid. Furthermore,
the electricity that will be generated will be sold through commercial vendors, in contrast to the
wording in III:8 stating that the exception applies “not with a view to commercial resale or with
a view to use in the production of goods for commercial sale.” It is with this in mind that I have
concluded that the project is not a case of “government procurement,” and is thus in violation of
GATT III:4 and III:5.
As a supplement to my conclusion, there is a notable example from a similar WTO
dispute between Canada and Japan. In the Canada-Certain Measures Affecting the Renewable44
Energy Generation Sector (Canada-RE) dispute, Japan initiated a complaint against Canada
relating to DCRs. “The Panel found that Canada had not established that it was entitled to rely
upon Article III:8 of the GATT as the procurement of electricity under the FIT Programme was
undertaken ‘with a view to commercial resale.” To extrapolate this case upon our current one,45
India’s government procurement defense becomes problematic because of the commercial resale
of the electricity generated.
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15. Trade-Related Investment Measures: Article XI and TRIMs
Among the claimed violations in the US complaint is Article 2.1 of the Trade-Related
Investment Measures (TRIMs) Agreement, which states: “Without prejudice to other rights46 47
and obligations under GATT [General Agreement on Tariffs and Trade] 1994, no Member shall48
apply any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT
1994.” By these terms, TRIMs 2.1 “requires two elements to be shown to establish a violation49
thereof: first, the existence of a TRIM; second, that TRIM is inconsistent with Article III or
Article XI of GATT.” GATT Article XI, titled “General Elimination of Quantitative50
Restrictions,” states that
No prohibitions or restrictions other than duties, taxes or other charges, whether
made effective through quotas, import or export licences or other measures, shall
be instituted or maintained by any contracting party on the importation of any
product of the territory of any other contracting party or on the exportation or
sale for export of any product destined for the territory of any other contracting
party.51
An illustrative list of TRIMs that are inconsistent with the obligation of national treatment
provided for in paragraph 4 of Article III of GATT 1994 and the obligation of general elimination
of quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994 is contained
in the Annex to TRIMs, and includes an illustrative list of TRIMs that are inconsistent with
GATT XI, stating: “TRIMs that are inconsistent with the obligation of national treatment…
include those which are mandatory or enforceable under domestic law or under administrative
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16. rulings, or compliance with which is necessary to obtain an advantage.” Later, it elaborates,
specifying that violations include laws requiring “the purchase or use by an enterprise of
products of domestic origin or from any domestic source, whether specified in terms of particular
products, in terms of volume or value of products, or in terms of a proportion of volume or value
of its local production.”52
Based on above text from both GATT XI and TRIMs 2.1, the JNSM is in violation of
both. The domestic sourcing requirement is an “other measure”—as explicitly listed in GATT XI
—that restricts the importation of solar modules and other input materials into India by
artificially boosting the demand for domestic solar inputs at the cost of imported demand. Put
simply, the DCRs alter what the market would demand in the absence of trade barriers. In a panel
report by the Appellate Body in 1998 regarding a dispute between India and Indonesia regarding
automobiles, the report states, “internal tax advantages or subsidies are only one of many types
of advantages which may be tied to a local content requirement which is a principal focus of the
TRIMs Agreement.” Moreover, by applying trade restrictions inconsistent with GATT XI,53
India’s JNSM is also in violation of TRIMs 2.1. Requiring local sourcing necessarily limits the
number of items that can be imported. A developer may want to import 100% of its material from
another source, but it is restricted.
Both GATT XI:2 and TRIMs Article 3 enumerate several exceptions. GATT XI states that
its provisions don’t extend to measures “applied to prevent or relieve critical shortages of
foodstuffs or other products essential to the exporting contracting party,” measures “necessary to
the application of standards or regulations for the classification, grading or marketing of
commodities in international trade,” or certain measures on any agricultural or fisheries
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17. products. Article 3 of TRIMs states that “All exceptions under GATT 1994 shall apply, as54
appropriate, to the provisions of this Agreement.” This should be kept in mind in the next55
section, as we discuss the general exceptions enumerated in Article XX of GATT; the Article XX
exceptions apply to TRIMs.
India—though the third largest producer of electricity, accounting for 4.8% of the global
share in electricity generation —still has 300 million of its population (amounting to just under56
a quarter of its total population) without access to electricity. Furthermore, India is facing
increased pressure from the international community to curb or cap its greenhouse gas
emissions. So, India may be able to argue that it is facing a critical shortage of electricity, from57
renewable sources in particular, and that such electricity constitutes an essential product.
However, this exception applies to the exporting party—in this case, the U.S.—rather
than the importing party—India. In addition, India cannot argue that the measures will help to
build solar electricity plants faster, because goods from the U.S. may well be cheaper and more
efficient. The exception is provided in order to “prevent or relieve” such shortages, and limiting
the amount of a good that can be imported does not accomplish this; rather, it exacerbates it by
limiting potential suppliers.
Secondly, this is not a case where India could argue that the measures are “necessary to
the application of standards or regulations for the classification, grading or marketing of
commodities in international trade.” The domestic sourcing requirement does not affect the
ultimate product: electricity; the power will be produced either way, the difference will be what
manufacturers will have benefited from the endeavor.
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18. Thirdly, these measures clearly have no relevance to the exception for “agricultural or
fisheries products.”
Because the domestic sourcing requirements in India’s JNSM do not qualify for any of
these exceptions enumerated in GATT XI:2 and TRIMs 3, they remain in violation of GATT XI
and TRIMs 2.1.
Article XX: The General Exceptions
Article XX of GATT enumerates a number of specific instances in which WTO members
may be exempt from GATT rules. The structure consists of two parts: the introductory clause—
often referred to as the chapeau requirement—and a list of specific measures that fall within the
scope of Article XX. The chapeau requirement “states that a measure adopted for a legitimate
objective must not be applied in a manner that constitutes arbitrary or unjustifiable
discrimination between countries where the same conditions prevail or a disguised restriction on
international trade.” Put simply, in order to utilize an Article XX exception, states must58
demonstrate that they are not preventing trade from one country when allowing similar trade
from another. In a 1998 report from the Appellate Body, it stated,
We consider that [the chapeau] embodies the recognition on the part of WTO
members of the need to maintain a balance of rights and obligations between the
right of a Member to invoke one or another of the exception of Article XX…and
the substantive rights of the other Members under the GATT 1994, on the other
hand. Exercise by one Member of its right to invoke an exception…if abused or
misused, will, to that extent, erode or render naught the substantive treaty
rights…of other Members.59
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19. In this case, because India’s DCRs apply to all foreign manufacturers—not one country’s in
particular—the chapeau requirement is met.
India is pursuing a defense based on section (j) of GATT Article XX. The WTO Appellate
Body has made clear that a party asserting a defense under Article XX bears the burden of
establishing the elements of that defense. Section (j) allows measures
essential to the acquisition or distribution of products in general or local short
supply; Provided that any such measures shall be consistent with the principle
that all contracting parties are entitled to an equitable share of the international
supply of such products, and that any such measures, which are inconsistent with
the other provisions of the Agreement shall be discontinued as soon as the
conditions giving rise to them have ceased to exist.60
The United States has posited in its written submission that “India Has Not Demonstrated
That It Meets the Prerequisites for Invoking Article XX(j) of the GATT 1994.” More61
specifically, the US is asserting that India has failed to demonstrate that solar cells and modules
are in “general or local short supply” or that India’s WTO-inconsistent trade barriers are essential
to the acquisition or distribution of those products. Indeed, India acknowledged in its written
submission that there is an “adequate availability” of solar cells and modules on the international
market, but failed to explain why Indian DCRs were nonetheless requisite in order to compensate
for an alleged “general or local short supply.” In other words, India has failed to prove that, if62
there were a shortage, the disputed trade barriers are a solution to a shortage. Moreover, even if
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20. India was experiencing a short supply of solar materials, it has not demonstrated that the
domestic content requirements (DCR) are essential to their acquisition. In fact, by placing the
DCRs, it has limited the amount of solar modules and cells that are available for import, thereby
lowering the supply. If India was, in fact, experiencing a short supply, these DCRs would
exacerbate the issue, rather than help it.
In its first written submission, India listed the need to protect solar developers from
supply disruptions as cause for the DCRs, expressing a desire for the DCRs to “ensure domestic
resilience in addressing any supply side disruptions.” Essentially, India posits that a reliance on63
imported solar cells and modules would endanger the stability and constancy of its solar power
projects, necessitating a certain amount of domestic sourcing to combat any such disruption. In
making this argument, India must demonstrate whether the risk for a supply side disruption is
founded, how such a disruption would affect the project, and how the DCRs solve the problem.
Moreover, should India satisfy these requirements, it will be necessary for India to demonstrate
that the DCRs are the least restrictive solution to the problem. In response to this statement, in its
second written submission, the US quotes an Indian written statement which precedes the
statement made regarding supply side disruptions, in which India states that it seeks to
“minimize dependence on imported cells and modules.” The US posited that this statement
reflects an (unsupported) concern that “imported solar cells and modules are particularly subject
to supply disruptions, and not as an assertion that the DCRs have a blatantly protectionist
objective.” In any event, “minimizing dependence” on imported goods is not an objective64
protected by Article XX, or a tool to achieve the acquisition or distribution of goods in short
supply.
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21. Furthermore, India must prove that there are no less restrictive, WTO-consistent
measures that could achieve the same result. In terms of “ensuring domestic resilience,” India
has other options. For example, India could import a surplus in order to supplement supply
during a shock; or, India could seek out long-term contracts with importers. Ultimately, because
India has failed to demonstrate a short supply of solar cells and modules, that the DCRs as part
of the JNSM would alleviate any short supply, and that the DCRs are the least restrictive option,
Article XX:j exception cannot apply, and India remains in violation of GATT Articles III, XI, and
TRIMs 2.1.
India may also choose to pursue exceptions in sections b of GATT Article XX general
exceptions. Section b covers measures “necessary to protect human, animal or plant life or
health.” This is intertwined with the SPS and TBT agreements, which will be discussed in the
next section. Because the majority of the reasoning for a XX:b exception shares the reasoning of
the SPS and TBT agreements, I will refer the reader to those sections, rather than become
repetitive. In summary, India may argue that a combination of the lack of electricity, as well as
the lack of renewable energy, constitutes a health risk. Ultimately, however, India would not be
able to successfully use a XX:b argument, as it would not be able to demonstrate that the DCRs
are necessary to address the health risks posed by both lack of access to electricity and lack of
renewable energy; indeed, DCRs would both slow and drive up the cost of India’s response to
these risks.
Technical Regulations and Product Standards: The SPS and TBT Agreements
India will likely pursue a defense of its DCRs through the WTO Agreement on the
Application of Sanitary and Phytosanitary Measures (SPS Agreement), which was designed to
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22. protect humans, animals, and plants from diseases, pests, or contaminants. In doing so, India
must prove that there is an issue with adverse effect on human, animal, or plant health; in this
case, India would seek to prove that both the lack of electricity in India and the effects of non-
renewable solar electricity constitute an adverse effect on human health and safety. Certainly,
there is a basis for such an argument. According to a New York Times article published in
February 2014, the Yale Environmental Performance Index ranked India 174th out of 178
countries on air pollution, and according to India’s Central Pollution Control Board, in 2010,
particulate matter in the air of 180 Indian cities was six times higher than World Health
Organization standards. “More people die of asthma in India than anywhere else in the world.
Indoor air pollution, mostly from cooking fires, and outdoor air pollution are the third and fifth
leading causes of death in India.” With this context, India could easily argue that an urgent65
pursuit of a vibrant renewable energy sector constitutes an issue relating to human health. The
issue, as I will discuss further in the following paragraphs, is whether there is a cogent argument
that the DCRs are trade barriers that will help this situation.
India may also choose to use the Agreement on Technical Barriers to Trade (TBT) in its66
defense. The TBT agreement allows for trade restrictions for certain “legitimate objectives,”
including “national security requirements; the prevention of deceptive practices; protection of
human health or safety, animal or plant life or health, or the environment.” The Indian67
domestic content requirements (DCRs) constitutes a TBT. The DCRs are a mandatory technical
regulation that govern the import of a specific product based on technical specifications (the type
of solar part) and quota (the amount allowed to be imported). They apply to solar modules and
associated solar inputs in particular.
!19

23. This area is perhaps India’s best defense at the WTO. India’s policy measures to promote
solar electricity fall under the auspices of protection of human health, protection of the
environment, and national security. In India, more than 35% of the population—predominantly
in rural areas—live without electricity. Lack of access to electricity leads to a host of conditions68
that pose significant risk to human health and safety. For instance, many Indians without access
to electricity use traditional fuels, including wood and biomass cakes, for cooking and heating.69
A report from the World Health Organization claims that between 300,000 and 400,000 people in
India die every year due to indoor air pollution and carbon monoxide poisoning because of
biomass burning. With this in mind, development of sources of electricity able to serve these70
rural areas is certainly an issue affecting human heath. As India seeks to build its capacity for
electricity, it must do so with environmental protection in mind. India is the third largest emitter71
of carbon dioxide (after China and the United States), contributing roughly 5% of the world’s
human-sourced CO2 emissions. A prompt expansion of the Indian power supply through72
renewable solar plants will allow for delivery of electricity to rural communities whose current
lack of access endangers their health and safety; furthermore, expansion through solar electricity
will do so in a way that does not expand India’s carbon footprint. This expansion should occur in
a manner that considers the national security implications of India’s power supply. Relying
wholly on foreign exporters for solar cells and modules, while perhaps initially cheaper, could
place the integrity and security of India’s power supply in foreign hands. While relying entirely
on domestic suppliers is both unrealistic and undesirable, so is relying entirely on foreign
suppliers. This rationale could potentially warrant the DCRs for a limited time as India
establishes a stronger domestic industry.
!20

24. However, the US will have a strong rebuttal to these claims. The office of the USTR
asserts that India’s protectionist domestic sourcing requirements in the policy of the JNSM
constitutes a WTO-inconsistent trade barrier that is not protected by the TBT agreement. The
Indian argument can provide cogent reasoning asserting that the issue of India’s power supply—
particularly the lack of available electricity to rural communities—is an issue of human health
and security. While the US surely agrees that providing clean electricity to these areas is an
urgent need, the unequal treatment of domestic suppliers of solar parts vs. international suppliers
is ultimately unwarranted, and constitutes a wanton display of protectionism. Specifically, the
US would dispute the notion that, in the interest of Indian national security, it is requisite for the
trade barriers to be implemented. Certainly India is entitled to ensuring a reliable flow of source
materials to ensure alacrity in its development of solar power development. However, India has
failed to demonstrate that its DCRs are the least restrictive means to accomplish this goal, and so
violates 2.2 of the TBT, which states “technical regulations shall not be more trade-restrictive
than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would
create.” Furthermore, under the DCRs, domestic suppliers are treated more favorably than73
foreign suppliers, violating 2.1, which states “Members shall ensure that in respect of technical
regulations, products imported from the territory of any Member shall be accorded treatment no
less favourable than that accorded to like products of national origin and to like products
originating in any other country.” In terms of “ensuring domestic resilience,” as India has74
claimed to be pursuing in its written submission, India has other options. Specifically, India75
could import a surplus in order to supplement supply during a shock; or, India could seek out
long-term contracts with importers.
!21

25. In the end, I argue that the Indian JNSM domestic content requirements constitute a
violation of GATT Articles I, III, and XI, and that they are not permissible under the TBT
agreement due to incompatibility with articles 2.1 and 2.2 of that agreement.
Subsidies and Countervailing Duties
In its complaint, the United States has claimed that the Indian DCRs violate Articles
3.1(b), 3.2, 5(c), 6.3(a) and (c), and 25 of the Agreement on Subsidies and Countervailing
Measures (SCM). Before doing a more general analysis of whether the Indian policies in
question constitute subsidies, I will first address each of the specific articles that the USTR cited
in its complaint.
Article 3.1(b) prohibits “subsidies contingent, whether solely or as one of several other
conditions, upon the use of domestic over imported goods.” Indian policy supporting phase 2 of76
the JNSM clearly violates this article by providing subsidies—through low-interest loans and
competitive electricity tariffs—to solar power developers who adhere to the strict domestic
content requirements.
Article 3.2 is more broad, stating that governments must not grant subsidies that involve a
direct transfer of funds, tax credits, the government providing goods or services besides general
infrastructure, or the government making payments through a funding mechanism. Indian77
JNSM policy introducing DCRs as a precondition to winning government bids violates the
directive that governments not grant a direct transfer of government funds. Furthermore, the
competitive electricity tariffs for solar developers may constitute a funding mechanism, whereby
the government is facilitating further payments to these developers.
!22

26. Article 5(c) states that members should not cause through subsidies “serious prejudice to
the interests of another Member.” Articles 6.3(a) and (c) define serious prejudice, respectively, as
“the effect of the subsidy is to displace or impede the imports of a like product of another
Member into the market of the subsidizing Member;” and “the effect of the subsidy is a
significant price undercutting by the subsidized product as compared with the price of a like
product of another Member in the same market or significant price suppression, price depression
or lost sales in the same market.” As previously noted, during phase 1 of the JNSM, a US78
company called First Solar provided 20% of the solar panels. This provides a useful case study
by which to demonstrate India’s violation of 5(c). Upon imposition of DCRs in phase 2 of the
JNSM, India effectively impeded the imports of those US solar panels, displacing a large
proportion of First Solar’s market. These then caused the lost sales, which are referred to in
section (c).
Article 25 of the Agreement on Subsidies and Countervailing Measures requires that
members give proper notification to other members before introducing subsidies. Although the
data is not currently available, that the USTR included this on the complaint suggests that India
failed to meet its obligation in this regard.
In order to determine the applicability of the Agreement on Subsidies and Countervailing
Measures, we must first determine whether the Indian DCRs constitute a subsidy. According to a
recent news article,
India’s solar programme, launched in 2010, appears to discriminate against US
solar equipment by requiring solar energy producers to use Indian-manufactured
!23

27. solar cells and modules and by offering subsidies to those developers for using
domestic equipment instead of imports, the US trade office said last February.79
So, Indian developers who use domestic inputs are given preferential treatment that confers a
benefit; this qualifies as a subsidy. This claim is corroborated by a JNSM policy document from
the Government of India, whose Ministry of New and Renewable Energy enumerates the
Domestic Content Requirement (DCR) as applying to projects that receive government funds,
“375 [megawatts (MW)] with stipulation of Domestic Content Requirement (DCR) in respect of
Solar PV Cells and Modules to be used in the projects.” The documents goes on to further80
explain that 375 additional MW of projects are available “without any DCR restriction.” This
policy constitutes a financial contribution by directing a disproportionate amount of government
funds towards Indian domestic solar manufacturers by requiring that half of the developers (the
first 375) adhere to DCRs. This confers a benefit on the recipient domestic industry, as it creates
an artificially high demand for Indian produced solar parts. This is supported by statements from
Indian developers; power project developers prefer “to source modules by accessing highly
competitive global market to attain flexible pricing, better quality, predictable delivery and use of
latest technologies.” This, in turn, constitutes an advantageous position; but for these DCRs,81
power developers would base their sourcing decisions on globally available prices, which would
likely favor imports.
In regards to the type of subsidy offered, The Indian government’s JNSM policy of DCRs
for much of the solar goods are a prohibited subsidy, as they are a content requirement. Article 3
of the Subsidies Agreement reads:
!24

28. The following subsidies, within the meaning of Article 1, shall be prohibited: …
subsidies contingent, whether solely or as one of several other conditions, upon
the use of domestic over imported goods…If the measure in question is found to
be a prohibited subsidy, the panel shall recommend that the subsidizing Member
withdraw the subsidy without delay.82
Although specific data is not currently available to answer the question of whether the
Indian DCR subsidy causes material injury, it is not necessary for the US to prove material
injury. This is because the subsidy is a prohibited one. However, to strengthen the US argument
by proving material injury, it would need the following information to determine whether the
subsidies caused material injury: the average revenue for both Indian and US solar manufacturers
(in order to determine whether the loss of potential revenue constitutes “material injury” for US
producers); the winning bids for both the 375 MW sections (with and without DCRs) in order to
approximate how much money each industry would have received without the DCRs (to use the
MWs without DCRs as a sample, assuming that the same price/revenue would hold for the other
375 MW if not for the DCRs).
Solar modules produces in the US are totally interchangeable with modules produced in
India, as proven by the fact that half of the 750 MW are being funded without DCRs. These
goods are identical physically, in terms of end-use, and manufacturing process. The statements
referenced above from power developers suggest that there is a producer perception that
imported solar modules are better quality than Indian produced modules. Because consumers
will be purchasing the electricity, rather than the modules themselves, there is no difference in
!25

29. consumer perception (as they will be purchasing electricity either way). Moreover, those
statements suggest that imported modules are more competitively priced than Indian produced
modules.
(The US has not yet instituted any countervailing measures, and it is thus premature to
discuss amounts.)
Conclusion/Recommendations
We have now reviewed the agreements and sections that the United States Trade
Representative has listed in its complaint to the WTO against India. I have also delved into
sections that, although they were not specifically mentioned in the agreement, were pertinent to
the topic of the US/India solar dispute. In reviewing these topics, I objectively presented the
Indian act of state that precipitated the complaint, the language of the agreement or section in
question, whether or not the Indian act of state constituted a violation of that particular section,
and whether the exceptions enumerated in the text of the agreements applied to India.
Ultimately, after this exercise, it is my conclusion that India is indeed in violation of its
WTO agreements, including GATT Articles III and XI, TRIMs, and various sections of the
Agreement on Subsidies and Countervailing Measures. Moving forward, I believe that the panel
will recommend that India remove the domestic content requirements from the policy
surrounding the JNSM in order to bring itself back into full compliance. If this is indeed the case,
India will be forced to choose between compliance—in conjunction with avoidance of retaliatory
measures from the United States—and protecting its nascent domestic solar manufacturing
industry.
!26

30. It is because of this likely choice that many environmental groups in the United States
have petitioned the American government to cancel its complaint. Some have claimed that a US
victory in this matter could spark a north-south divide in terms of climate justice.
The US government is strongly defending its action before the WTO by stating
that it supports the deployment of clean energy technologies all across the world,
including India. However, if a country’s clean energy initiatives adversely affect
the US manufacturers and workers, whereby there is a rise in the cost of clean
energy, it would result in the undermining of the shared vision with regard to
promotion of use of renewable energy.83
Conversely, a ruling in favor of India, these groups argue, could “serve as a great encouragement
to emerging economies such as India which wish to reduce the dependence on fossil fuels and
increase the use of renewable energy, and at the same time create a sustainable industry.”84
This conflict gestures towards a larger and growing dissonance that is growing between
trade and environmental concerns. While in this paper I have concluded that the United States
ultimately holds the high ground when it comes to the WTO agreements, it may very well be that
it could lose the moral high ground by preventing the growth of Indian industry that could
greatly benefit its environmental needs. Certainly, this conflict between competing interests and
commitments could fill the pages of yet another article. But for now, let us remember that
international agreements must be a means towards the end of mutual prosperity, rather than being
an end in themselves.
!27

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____________________________________
World Trade Organization, India — Certain Measures Relating to Solar Cells and Solar Modules, https://1
www.wto.org/english/tratop_e/dispu_e/cases_e/ds456_e.htm
Center for Climate and Energy Solutions, National Action Plan on Climate Change, http://www.c2es.org/2
international/key-country-policies/india/climate-plan-summary
GATT 1994:General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement3
Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RESULTS OF THE
URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 17 (1999), 1867 U.N.T.S. 187, 33 I.L.M.
1153 (1994) [hereinafter GATT]
TRIMS Agreement: Agreement on Trade-Related Investment Measures, Apr. 15, 1994, Marrakesh4
Agreement Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RESULTS OF
THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 143 (1999), 1868 U.N.T.S. 186
[hereinafter TRIMS]
Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement5
Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RESULTS OF THE
URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 231 (1999), 1869 U.N.T.S. 14
[hereinafter SCM]
See #16
!32

36. http://www.census.gov/foreign-trade/balance/c5330.html#20077
http://www.state.gov/r/pa/ei/bgn/3454.htm8
https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2010/us-india-trade-policy-forum-facts9
http://www.brookings.edu/research/opinions/2014/09/23-india-us-trade-investment-relationship-meltzer10
See #1011
http://www.usitc.gov/press_room/about_usitc.htm12
http://www.business-standard.com/article/economy-policy/india-us-trade-ties-hit-a-new-13
low-114030100685_1.html
http://www.globalisationanddevelopment.com/2013/02/the-latest-wto-trade-dispute-can-us.html14
See #1415
World Trade Organization, India – Certain Measures Relating To Solar Cells And Solar Modules:16
Request For Consultations By The United States, https://docs.wto.org/dol2fe/Pages/FE_Search/
FE_S_S006.aspx?Query=(%20@Symbol=%20(wt/ds456/1/*
%20%20))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#
Ministry of New and Renewable Energy, Final Guidelines for Selection of 750 MW Grid Connected17
Solar Power Projects Under Batch-I, Phase-II of JNNSM, http://mnre.gov.in/file-manager/UserFiles/final-
VGF_750MW_Guidelines_for-grid-solar-power-projects.pdf
Ministry of New and Renewable Energy, Jawaharlal Nehru National Solar Mission Phase II – Policy18
Document, http://mnre.gov.in/file-manager/UserFiles/draft-jnnsmpd-2.pdf
http://blogs.worldwatch.org/revolt/another-solar-trade-dispute-united-states-files-wto-complaint-19
against-india/
See #1920
See #1921
Jackson, pg. 70222
Jackson, pg. 20123
1155 U.N.T.S. 33124
Jackson, pg. 19725
Jackson, pg. 27226
Jackson. pg. 28627
Jackson, pg. 28728
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds456_e.htm29
http://zeenews.india.com/business/news/economy/wto-verdict-on-indias-solar-dispute-with-us-30
soon_124523.html
!33

37. Jackson, pg. 29331
World Trade Organization, India and the WTO, https://www.wto.org/english/thewto_e/countries_e/32
india_e.htm
WTO+ and WTO- refers to components of WTO accession agreements, where a member is bound by33
the GATT plus specific obligations, or is bound by the GATT except for listed obligations, usually for a
transitionary period
http://www.thehindubusinessline.com/industry-and-economy/local-sourcing-mandatory-in-phase-ii-of-34
solar-projects/article5254566.ece
http://www.usitc.gov/publications/701_731/pub4295.pdf35
See #35 pg. 836
Kevin Roebuck, Solar PPA: High-impact Strategies - What You Need to Know: Definitions, Adoptions, Impact,37
Benefits, Maturity, Vendors, pg. 87
See #3538
World Trade Organization, General Agreement on Tariffs and Trade 1994, https://www.wto.org/english/39
res_e/booksp_e/analytic_index_e/gatt1994_02_e.htm
Jackson pg. 62240
http://www.reuters.com/article/2014/02/10/us-usa-trade-india-idUSBREA161W22014021041
http://www.business-standard.com/article/economy-policy/india-us-to-thrash-out-solar-procurement-42
issue-113031300284_1.html
http://www.mnre.gov.in/file-manager/UserFiles/mission_document_JNNSM.pdf43
Precedent does not exist in the WTO system. Thus, this example is not meant to present precedence44
that can be considered in the WTO panel proceedings. Rather, the example is meant to illustrate how a
similar WTO issue was handled.
http://ovalobserver.org/switching-off-sun-india-us-solar-cells-dispute/45
1868 U.N.T.S. 18646
World Trade Organization, India: Certain Measures Relating to Solar Cells and Solar Modules, https://47
www.wto.org/english/tratop_e/dispu_e/cases_e/ds456_e.htm
1867 U.N.T.S. 18748
World Trade Organization, Agreement on Trade-Related Investment Measures, https://www.wto.org/49
english/res_e/booksp_e/analytic_index_e/trims_01_e.htm#article2
Jackson pg. 123450
World Trade Organization, General Agreement on Tariffs and Trade 1994,51
See #4952
Jackson pg. 123553
See #5054
!34

38. See #4955
British Petroleum, Statistical Review of World Energy 201456
International Business Times, US Solar Companies SunEdison Inc And First Solar Inc Give Critical57
Boost To India Solar Energy Target With 20,000 MW Pledge, http://www.ibtimes.com/us-solar-companies-
sunedison-inc-first-solar-inc-give-critical-boost-india-solar-1817552
http://www.academia.edu/7744640/The_Chapeau_of_Article_XX_GATT_UPDATED_VERSION_58
Jackson, pg. 66559
World Trade Organization, Marrakesh Agreement, https://www.wto.org/english/docs_e/legal_e/60
gatt47_02_e.htm#articleXX
U.S. Trade Representative, India — Certain measures Relating to Solar Cells and Solar Modules,61
https://ustr.gov/sites/default/files/files/Issue_Areas/Enforcement/WTO/Pending/US.Sub2.Fin.Public.pdf
India’s First Written Submission, para. 233., https://ustr.gov/sites/default/files/files/Issue_Areas/62
Enforcement/WTO/Pending/US.Sub2.Fin.Public.pdf
India’s First Written Submission, para. 209.63
See #4264
http://www.nytimes.com/2014/02/14/opinion/indias-air-pollution-emergency.html?_r=065
1868 U.N.T.S. 12066
World Trade Organization, Agreement on Technical Barriers to Trade, https://www.wto.org/english/docs_e/67
legal_e/17-tbt_e.htm
International Energy Agency, Statistics, http://www.iea.org/statistics/statisticssearch/report/?68
year=2010&country=INDIA&product=Indicators
World Academy of Science, Energy and Sustainable Development-An Indian Perspective, http://www.waset.org/69
journals/waset/v54/v54-24.pdf
World Health Organization, Indoor smoke from solid fuels, http://www.who.int/quantifying_ehimpacts/70
publications/en/Indoorsmoke.pdf?ua=1
Environmental protection is clearly tied to the issue of human health and security. Air pollution caused by coal71
and thermal power plants, which account for the majority of India’s current power supply, has been shown to cause a
litany of health problems in India’s population.
International Energy Agency, CO2 Emissions from Fuel Combustion Highlights, 2014, https://www.iea.org/72
publications/freepublications/publication/co2-emissions-from-fuel-combustion-highlights-2014.html
See #6873
See #6974
India’s First Written Submission, para. 233., https://ustr.gov/sites/default/files/files/Issue_Areas/Enforcement/75
WTO/Pending/US.Sub2.Fin.Public.pdf
https://www.wto.org/english/docs_e/legal_e/24-scm.pdf76
See #7777
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39. See #7778
Indian Express, Solar subsidies: US to turn the heat on India at WTO, http://indianexpress.com/article/business/79
business-others/us-likely-to-drag-india-to-wto-on-solar-subsidies/
Indian Ministry of New and Renewable Energy, No. 29/5(1)/2012-13/JNNSM, http://mnre.gov.in/file-manager/80
UserFiles/VGF_750MW_scheme_for-grid-solar-pv-power-projects.pdf
Kevin Roebuck, Solar PPA: High-impact Strategies - What You Need to Know: Definitions, Adoptions,81
Impact, Benefits, Maturity, Vendors, pg. 87
https://www.wto.org/english/docs_e/legal_e/24-scm.pdf82
http://ovalobserver.org/switching-off-sun-india-us-solar-cells-dispute/83
See 8384
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