The solar trade dispute between the U.S. and India hit another roadblock recently after the U.S. objected to India’s request to establish a compliance panel to resolve the deadlock.  India had asked the World Trade Organization (WTO) to evaluate the Domestic Content Requirement (DCR) program’s compliance with an earlier trade ruling through its Dispute Settlement Body (DSB), but the U.S. move has scuttled those efforts.

The U.S. made its objections known to all parties present at a meeting of the DSB on February 9, 2018.

According to a document obtained by Mercom, the DSB called the meeting on India’s behalf. At the meeting, the Indian delegation argued that India is in full compliance with its WTO obligations and, since the U.S. objects, New Delhi’s compliance needs to be evaluated by a panel established under Article 21.5 the Dispute Settlement Understanding (DSU).

The U.S. rejected India’s stance, stating that India hasn’t provided any evidence to substantiate its claim that it has not entered into any Power Purchase Agreements (PPAs) for solar projects developed under the DCR category. The country also questioned India’s compliance by saying that it does not understand how India can claim compliance while it continues applying DCR measures that are inconsistent with WTO measures.

However, there’s a catch. According to WTO norms, if India puts in another request for the creation of a compliance panel, the U.S. can do little to stop the establishment of such a panel. Any country that’s part of a dispute can block the creation of a panel once, but when the DSB meets for the second time, the appointment can no longer be blocked unless there is a consensus against appointing the panel.

The document also said that the U.S. has kept the avenue of bilateral talks open and has reserved its right to move forward under DSU Article 22.6 to obtain authorization to take countermeasures in relation to India’s DCR measures. At the meeting, the U.S. delegation made it known that it is willing to work with India to find a bilateral resolution to the dispute without further proceedings.

The compliance panel’s report can only be rejected by a consensus in the DSB and its conclusions are difficult to overturn.

According to the document viewed by Mercom, statements made by the Canadian and Japanese delegations present at the meeting also lent support to India’s request for setting up a compliance panel, considering the request appropriate. Delegations from the two countries agreed that an original respondent, in this case India, has the right to resort to compliance proceedings.

What is the dispute all about?

In 2013, the U.S. requested consultations with India through the WTO regarding India’s DCR program. The DCR program was part of the country’s National Solar Mission and mandated that only domestically manufactured solar cells and modules could be used to build solar projects auctioned under the DCR category. The case was referred to the DSB in 2014 and a final report was issued by the WTO in February 2016.

India appealed the decision in April 2016, but WTO upheld its earlier ruling in October 2016 and agreed with the U.S. that India’s DCR program discriminated against American and other imported solar products, like cells and modules, in breach of international trade rules.

In June 2017, the U.S. and India agreed that a reasonable period to implement the DSB’s recommendations would be 14 months and set December 14, 2017 as the final date to end the DCR program.

In December 2017, the U.S. claimed that India had failed to comply with the WTO’s DSB recommendations and requested that the DSB authorize the suspension of concessions or other obligations with India at an annual level based on a formula proportionate to the trade effects caused on U.S. interests by India’s failure to comply.

In January 2018, a month after the U.S. argued that India did not abide by the solar policy norms, India rejected the U.S. accusation, calling it groundless and vague.

Later that same month, India wrote to the WTO, seeking the appointment of a compliance panel to look into the claims made by the two sparring countries.

Mercom recently reported that the ongoing trade rift between India and the U.S. has been referred to arbitration, but the complexity of the case suggests that negotiations are likely to extend beyond the standard 60-day arbitration period.

Image credit: Flickr