NAM: WTO Decision on Solar Localization Rules Marks Victory for U.S. Manufacturers

By: Ryan Ong, Director for International Business Policy at the National Association of Manufacturers

United States Trade Representative Michael Froman announced today that a World Trade Organization (WTO) dispute settlement panel had found that localization rules under India’s national solar energy policy violated WTO international trade rules in discriminating against imported solar cells and modules. This marks an important victory for U.S. manufacturers in pushing back against Indian efforts to promote local manufacturing at the expense of market access and opportunity for U.S. manufacturers.

India launched its national solar policy, the Jawaharlal Nehru National Solar Mission (JNNSM), in 2010, requiring those selling and operating solar power generators to use locally manufactured solar cells and modules to participate in key projects.  These policies significantly limited the ability of U.S. solar companies to participate in important segments of the Indian market, and impacted billions of dollars of U.S. exports each year. U.S. solar exports to India have declined more than 90 percent since 2011.

The NAM and other industry groups strongly supported the United States in efforts to file a WTO complaint against India in consultations joined by 13 other WTO members ranging from Brazil and Russia to Japan and the European Union. In its complaint, the United States argued that these local content requirements contradicted India’s WTO obligations, particular Article III:4 of the General Agreement on Tariffs and Trade (the so-called GATT 1994) and Article 2.1 of the Agreement on Trade-related Investment Measures (TRIMs Agreement).

The Panel upheld those claims, ruling that India’s domestic content requirements discriminate against U.S. solar cells and modules by requiring solar power developers to use Indian-manufactured cells and modules rather than U.S. or other imported solar technology. The panel also rejected India’s arguments that the measures are justified under the GATT’s general exception based on its lack of domestic manufacturing capacity in solar cells and modules that could result in these products could be considered “products in general or local short supply.”

This decision comes at an important time for the U.S.-India commercial relationship. Bilateral trade discussions with India’s Modi regime have largely stalled, with initial optimism that his administration might be able make real progress on achieving a robust trading relationship flagging. It is more important now than ever before for the U.S. to find ways to move beyond dialogue with India and towards concerted efforts to remove trade barriers like these forced localization barriers.

The NAM has worked to eliminate these restrictions since they were imposed in 2010, and congratulates Ambassador Froman and USTR for their successful efforts. The NAM encourages India to quickly implement the WTO findings, and to address other trade barriers, localization requirements, and IP restrictions that impact U.S. manufacturing, such as high tariffs, local content requirements, and India-unique standards.

Complaints are nothing new at the WTO, and are an important enforcement tool for both developed and developing economies to ensure fair international trading rules. Today’s decision illustrates the importance of these tools for the continued global competitiveness of manufacturers here in the United States.