From UPSC perspective, the following things are important :
Prelims level : Domestic Content Requirement
Mains level : Solar dispute at WTO
A WTO panel in June accepted India’s claim in a dispute concerning U.S. regulations on the domestic content requirement in the production of renewable energy.
The dispute and the verdict:
- The dispute revolved around certain States in the U.S. that give incentives to local producers in the form of tax rebates, refunds, and credits when they produce renewable energy using locally manufactured products.
- Article III of the WTO’s General Agreement on Tariffs and Trade (GATT) requires that countries do not provide less favorable treatment to ‘like products’ originating from other nations.
- A solar PVC manufactured in the U.S. should be liable to the same amount of tax as one made anywhere else in the world.
- WTO’s determine whether an item is a ‘like product’ based on a product’s end-use, composition, substitutability, consumer preferences, and tariff classifications.
- In this case, the U.S. conceded that the import from India was a ‘like product’.
- But the U.S. argued that the figures quoted by India showing growth in the number of solar photovoltaic (PV) systems installed in Washington State between 2005 and 2015 do not support the argument that additional incentives have induced wide-scale adoption of locally made renewable energy products.
- WTO panel rejected this argument, stating that Washington State’s additional incentive accords an advantage on the use of local products not available for ‘like imported products’.
- India was not required to prove that the rise in the production of PV systems was caused by a rise in the production of upstream local products at the cost of ‘like-imported products’.
- India had earlier lost a similar dispute over its own domestic content requirements.
- The U.S. imported 44% of the Indian solar module exports in the 2018-2019 period.
- This dispute could have been easily avoided had the two countries settled their differences beforehand.
There are various other disputes pending between the countries at the WTO involving the export promotion scheme brought in by India and the imposition of excess customs duty on steel and aluminum by the U.S.