India and the US clashed in their festering trade dispute over solar cells and solar modules after New Delhi rejected a “vague” request from Washington seeking World Trade Organization’s (WTO’s) permission to impose trade retaliatory measures against India.
In a strong communication circulated by the WTO on Monday, India maintained there is “no legal basis” in the US request for authorization from the WTO’s dispute settlement body (DSB) to suspend concessions under Article 22.2 of the dispute settlement understanding because India has “ceased to impose any measures found inconsistent with the DSB’s rulings and recommendations” in the solar dispute.
On 19 December, the US filed a request at the WTO seeking authorization from the DSB to “suspend concessions or other obligations with respect to India at an annual level based on a formula commensurate with the trade effects caused to the interests of the United States by the failure of India to comply with recommendations and rulings of the DSB.”
The US said “it considers that India has failed to comply” with the DSB’s recommendations for removing the so-called mandatory requirements for manufacturing solar cells and modules by 14 December 2017, as agreed mutually by the two sides.
India lost the solar dispute in September 2016, after the WTO’s highest court—the Appellate Body—upheld a ruling that India violated several core provisions on national treatment and trade-related investment measures. Under national treatment, governments are required to treat imported products on par with the domestically manufactured products.
The Appellate Body concurred with the WTO panel that India’s domestic content requirements for solar cells and modules under the Jawaharlal Nehru Solar Mission amounted to trade-related investment measures as they favour domestic products over imported products.
Subsequently, the US and India agreed that New Delhi will implement the DSB recommendations by 14 December 2017. India said it filed a report before with the DSB informing that it has fully implemented the recommendations.
In its two-page rebuttal, India said the US failed to follow the “critical” steps as prescribed in the dispute settlement understanding before initiating the request for authorization to suspend trade concessions. The rules for compensation in the event of non-implementation of DSB recommendations require “the parties to enter into negotiations to agree on mutually acceptable compensation”, India has maintained.
Therefore, the US request “is an invalid one, and needs to be withdrawn by the US,” India said. Further, the US has failed to demonstrate any specific reasons or grounds that would conclusively prove India’s failure to comply with the DSB recommendations, India argued. “The US’s request under Article 22.2 of the DSU is not a valid one, and ignores the basic substantive and procedural requirements necessary for triggering the provision (and) if the United States has any disagreement as to whether there has been compliance, the fact of non-compliance must first be established in accordance with the procedures of Article 21.5 of the DSU,” India said.
New Delhi said the right course to establish whether it has implemented the DSB recommendations or not is by taking recourse to a compliance panel under Article 21.5 of the DSU. India said it is confident that a compliance panel under Article 21.5 will “lay to rest any doubts as regards India’s compliance” with the DSB rulings and recommendations and “will thereby negate the need for any proceedings under Article 22.2 of the DSU in the first place.”
Over the last few years, the US had resorted to arbitrary and unsustainable methods by seeking authorization for retaliatory measures in trade disputes without establishing whether a party to the dispute has implemented the rulings or not, said a legal analyst who asked not to be identified.
Earlier, the US sought authorization to impose trade retaliatory measures to the tune of around $450 million on India in the avian influenza trade dispute without establishing whether New Delhi has removed restrictions on American chicken and chicken products as per the dispute settlement body recommendations. This issue is now being addressed by the compliance panel as per India’s request.
The US has also failed to implement DSB recommendations in a trade dispute concerning American countervailing duties on Indian hot-rolled carbon steel products. Last year, India launched the compliance panel proceedings against the US under Article 21.5 to determine whether Washington has fully implemented the ruling on hot-rolled carbon steel products.
India has also launched a major trade dispute against the US at the WTO on the billions of dollars of subsidies as well as domestic content requirements provided by eight American states to the renewable energy sector, particularly for solar items.
India said the domestic content requirements and subsidies of eight American states — Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota — for renewable energy violated core provisions core provisions of global trade rules. The panel to adjudicate India’s claims is yet to be established.