This sensationalist headline is making the internet rounds, and if you only have a quick minute, you will be misinformed of the truth about the WTO’s recent decision. With no disrespect to The Huffington Post, Mr. Beachy or Ms. Soloman, Fresh Air and Free would like to add omitted facts to provide a more balanced view.
From the article (below):
Title: The WTO Just Ruled Against India’s Booming Solar Program
No. Blatant emotional manipulation or perhaps just a case of misunderstanding?
From the article:
“On the heels of the recent global summit in Paris to tackle climate disruption, the World Trade Organization (WTO) has ruled against an important piece of the climate solution puzzle: India’s ambitious program to create homegrown solar energy. The ruling shows that decades-old, over-reaching trade rules are out of sync with the global challenge to transition to 100 percent clean energy.”
“[…] this outdated model of trade [GATT] that constrains climate progress…”
Apples to oranges. The ruling in no way compromises or deters any government program in any country from pursuing green energy in any manner which suits them.
From the article:
“But today, [February 24, 2016] the WTO released its ruling against India’s National Solar Mission, deciding that India’s efforts to boost local production of solar cells violated WTO rules.”
No. The WTO decision concerns only India’s system of awarding of contracts to sub-contractors who build solar powered plants. Specifically, as part of India’s program to develop solar-powered electric plants, the government wrote contract regulations which specified that contracts were to be awarded to those companies which committed to use only Indian manufactured solar panels.
This does not restrict Indian companies from manufacturing solar cells, only that the government of India may not exclude foreign sources of solar panels of equivalent design (“like”) in the building of the solar powered electric plants.
From the article:
“In 2014, however, the United States launched a WTO case against India’s ambitious solar program.”
Again, not against the whole solar program, but to the practice of awarding contracts to companies who commit to utilizing only solar panels made in India. In no manner does it contradict the statement: “the US intends to support India’s [solar power] goal by enhancing cooperation on clean energy and climate change.”
From the article:
“To understand the importance of this case, you must first understand the progress the Indian government has made in deploying solar energy.”
India is to be applauded for her strides in developing the use of solar energy. However, the WTO decision has no impact on the implementation of India’s clean energy programs.
From the article:
“Every country should have the right to set its own clean energy future.”
The WTO decision has no impact on the agenda of India’s domestic clean energy programs.
From the article:
“India also plans to use the solar program to establish “a leadership role in low-cost, high quality solar manufacturing”.”
Again, the WTO decision has no bearing on the direction of India’s domestic solar panel manufacturing sector. GATT is designed to support healthy global economic development. The WTO explains the idea that,
“In other words, liberal trade policies — policies that allow the unrestricted flow of goods and services — sharpen competition, motivate innovation and breed success. They multiply the rewards that result from producing the best products, with the best design, at the best price.”
So in fact, this is definitely the best solution for India to follow, which is precisely what the WTO endorses as optimal policy: comparative advantage. From the WTO website:
“Simply put, the principle of “comparative advantage” says that countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best, and then by trading these products for products that other countries produce best.”
Finally, from the article:
“Bringing this case is a perverse move for the United States. Nearly half of U.S. have renewable energy programs that, like India’s solar program, include “buy-local” rules… The U.S. government should drop this case…”
Not only has the case been decided, but the WTO is responsible for the implementation of a fair and liberal international trade agreement, and again, has no jurisdiction over the domestic growth policies of any country. The WTO has seen this argument before. From the WTO website:
“… the temptation to ward off the challenge of competitive imports is always present. And richer governments are more likely to yield to the siren call of protectionism, for short term political gain — through subsidies, complicated red tape, and hiding behind legitimate policy objectives such as environmental preservation or consumer protection as an excuse to protect producers.”
“Protection ultimately leads to bloated, inefficient producers supplying consumers with outdated, unattractive products. In the end, factories close and jobs are lost despite the protection and subsidies.”
So despite the misleading title, the WTO decision will not stifle development of India’s solar powered energy grid; India has much room for growth under GATT. And India may also choose to invest in R&D to produce a next-generation solar panel. We will all benefit from advances made in sustainable green energy. This WTO decision continues to support a global trade system which supports our efforts toward a healthy planet.
Further reading on the WTO decision:
https://www.wto.org/english/tratop_e/dispu_e/456r_a_e.pdf This is the report of the WTO panel. The grievance is outlined pp 10 – 15.
The following general information excerpt is from the website of the Ministry of Economy, Trade and Industry (Japan):
“There is a tendency for importing countries to try to use discriminatory application of domestic taxes and regulations to protect national production, often as the result of protectionist pressures from domestic producers. This distorts the conditions of competition between domestic and imported goods and leads to a reduction in economic welfare.
The national treatment rule does not in principle permit these sorts of policies designed to protect domestic products. GATT Article II does permit the use of tariffs as a means of protecting domestic industry, but this is because tariffs have high degrees of transparency and predictability since they are published and committed to in tariff schedules. On the other hand, domestic taxes and regulations are “hidden barriers to trade” that lack both transparency and predictability. Thus, they can have a large trade-distortive impact. The existence of GATT Article III generally impedes the adoption of policies and measures aimed at domestic protection, and thus promotes trade liberalization.”
For developing countries, GATT allows for protected domestic growth under certain circumstances:
Members in the early stages of development can raise their standard of living by promoting the establishment of infant industries, but this may require government support, and the goal may not be realistically attainable with measures that conform to the GATT. In such cases, countries can use the provisions of GATT Article XVIII:C to notify WTO Members and to initiate consultations. After consultations are completed and under certain restrictions, these countries are then allowed to take measures that are inconsistent with GATT provisions, excluding Articles I, II and XIII. Unlike the trade restrictions for balance of payment reasons in GATT Article XVIII:B, the Article III:C procedure allows both broader measures and violations of the national treatment obligations in order to promote domestic infant industries.”
© 2016 Fresh Air and Free. All rights reserved.
The WTO Just Ruled Against India’s Booming Solar Program
02/24/2016 01:28 pm ET | Updated 16 hours ago
Ben Beachy Senior Policy Advisor, Responsible Trade Program, Sierra Club
On the heels of the recent global summit in Paris to tackle climate disruption, the World Trade Organization (WTO) has ruled against an important piece of the climate solution puzzle: India’s ambitious program to create homegrown solar energy. The ruling shows that decades-old, over-reaching trade rules are out of sync with the global challenge to transition to 100 percent clean energy.
In just five years, thanks to India’s National Solar Mission, India has gone from having virtually no solar capacity to boasting one of the world’s fastest-growing solar industries. In just the last year, a parade of leading solar companies has announced plans to establish new factories in India to produce solar cells, the parts of solar panels that use sunlight to produce electricity. India has named the solar program as a core component of its contribution to the Paris agreement to tackle climate change.
But today, the WTO released its ruling against India’s National Solar Mission, deciding that India’s efforts to boost local production of solar cells violated WTO rules. Though India argued that the program helps the country to meet its climate commitments under the United Nations Framework Convention on Climate Change (UNFCCC), the WTO rejected that argument. Indeed, the ruling boldly states that domestic policies seen as violating WTO rules cannot be justified on the basis that they fulfill UNFCCC or other international climate commitments. In effect, the WTO has officially asserted that antiquated trade rules trump climate imperatives.
To understand the importance of this case, you must first understand the progress the Indian government has made in deploying solar energy. In the five years since India announced its national solar program, the country has grown its solar capacity from nearly nothing to commissioning nearly 5,000 megawatts, as a result of government subsidies and long-term contracts. As we’ve noted before, this solar expansion has been timely, as the troubled Indian coal industry has been unable to expand to meet power demand. The program aims to reduce the cost of solar energy and achieve 100,000 megawatts of solar power capacity by 2022 – more than the current solar capacity of the world’s top five solar-producing countries combined.
India also plans to use the solar program to establish “a leadership role in low-cost, high quality solar manufacturing.” In January 2015, President Obama seemed to indicate support for that goal. After a visit with Indian Prime Minister Modi, the two leaders released a statement “emphasizing the critical importance of expanding clean energy research, development, manufacturing and deployment, which increases energy access and reduces greenhouse gas emissions.” Their statement even declared, “the US intends to support India’s [solar power] goal by enhancing cooperation on clean energy and climate change.”
In 2014, however, the United States launched a WTO case against India’s ambitious solar program. The United States claimed that the “buy-local” rules of the first phases of the program, which say that power companies must use solar components made in India in order to benefit from the government-subsidized program, discriminate against U.S. solar exports. In its ruling, the WTO agreed that India’s buy-local rules “accord less favorable treatment” to imported solar components, even while acknowledging that “imported cells and modules currently have a dominant share of the market for solar cells and modules in India.” India has indicated that it may alter its solar program to try to persuade the U.S. to drop the case. It is unclear whether the U.S. will accept the proposed changes, and what impact they may have on India’s solar expansion plans.
Bringing this case is a perverse move for the United States. Nearly half of U.S. states have renewable energy programs that, like India’s solar program, include “buy-local” rules that create local, green jobs and bring new solar entrepreneurs to the economy. The U.S. government should drop this case to avoid undermining jobs and climate protections not just in India, but also at home.
Every country should have the right to set its own clean energy future. “Buy local” rules — a standard policy tool to foster, nurture, and grow new industries — can help push us toward the goal of 100 percent clean energy that our planet needs by cultivating domestic renewable energy firms that promote strong climate policies. “Buy local” policies can also benefit workers and bring in new constituencies to advocate for increased clean energy production. And by bringing more renewable energy goods producers like India to the global market, “buy-local” policies can encourage greater competition and innovation, reducing the cost of renewable energy over time.
The WTO ruling against India’s homegrown solar program echoes another WTO ruling in 2013 against “buy-local” provisions in a groundbreaking clean energy program in Ontario, which had successfully reduced climate-disrupting emissions while creating thousands of green jobs. Three weeks after the WTO’s ruling, Ontario eliminated its “buy-local” provisions and ended incentives for large-scale clean energy projects.
Rather than reform this outdated model of trade that constrains climate progress, the Trans-Pacific Partnership (TPP), a trade pact between the U.S. and 11 other Pacific Rim nations that could come before Congress this year, would expand the model. Indeed, the text of the controversial deal replicates the very rules that the WTO used against India’s solar program today. While many in Congress oppose the TPP, if the deal were to pass, we could see even more trade cases against clean energy initiatives.
Congress should view this ruling as further confirmation that a vote against the TPP is a vote for green jobs and climate action. You can take action now to protect job-creating clean energy programs by asking your member of Congress to vote no on the toxic TPP.