India files dispute against US at WTO challenging domestic content requirements, subsidies

India has filed a new dispute against the US at the World Trade Organisation (WTO) challenging the domestic content requirements and subsidies allegedly provided by eight American states.

India initiated a case against the US on 9 September by submitting a request for consultation under WTO's dispute settlement system regarding alleged Domestic Content Requirements (DCR) and subsidies provided by eight US states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota in the renewable energy sector.

Representational image. Reuters.

Representational image. Reuters.

India has complained to the WTO that the measures taken by the American government around the DCR are inconsistent with the WTO's Trade-Related Investment Measures (TRIMs) agreement and the agreement on Subsidies and Countervailing Measures (SCM agreement) because they discriminate against imported products as compared to domestic products, and because the subsidies are contingent on the use of domestic over imported goods.

The consultations give the party 60 days to resolve the dispute without proceeding to litigation, failing which the complainant may request a Dispute Settlement Body (DSB) panel to adjudicate in the matter.

The US had initiated a similar case against Indian “localisation” rules in February 2013 — a case that India lost under a DSB ruling. The US and India had failed to resolve their differences with consultations after which the matter was referred to a DSB panel in April 2014. The WTO panel on 24 February this year ruled that the DCR for solar power developers selling electricity to the government to use India-manufactured cells and modules rather than imported solar technology under the Jawaharlal Nehru National Solar Mission (NSM) is inconsistent with the TRIMs agreement and the General Agreement on Tariffs and Trade (GATT). Specific articles under these agreements require that a product, whether domestic or international, should not be discriminated against in terms of the rules that apply and its market access.

India had appealed against the decision in April this year and expects the Appellate Body's ruling in the coming days.

“This is an important outcome, not just as it applied to this case, but for the message it sends to other countries considering discriminatory 'localisation policies',” the US Trade Representative Michael Froman had announced soon after the DSB ruling against India.

India and the US have been clashing quite a bit at the WTO. A major dispute between the two countries concerning certain American agricultural products, including poultry, is ongoing where the US has claimed retaliation of $450 million annually from India for trade losses. The US has stated that it will update this figure annually. In a meeting held on 5 September, the countries disagreed on the procedures on how to resolve this dispute and whether India has complied with the panel ruling. India has lost this case both in the DSB ruling and in its appeal against the DSB findings. The case has turned messy and remains at a logjam.

This is the ninth dispute registered with the WTO this year.

Since the creation of international trade body in 1995, the US has initiated six dispute cases against India while India has initiated nine cases (excluding the present one) against the US. However, there are only two active US-initiated cases against India, including the DCR-solar panel case. Similarly, only two cases of India against the US is active under the dispute settlement system — one, over US non-immigrant temporary working visas and second, a dispute of US' imposition of countervailing duties on import of certain Indian hot-rolled steel flat products.

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Updated Date: Sep 13, 2016 11:39:19 IST

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