United States Challenges India's Domestic Content Requirements

    View Author 11 February 2014

    NSM limitations pose danger to U.S. SOLAR PRODUCT EXPORTS

    Today, U.S. Trade Representative Michael Froman announced the United States has requested World Trade Organization (WTO) dispute settlement consultations with India concerning domestic content requirements in Phase II of India’s National Solar Mission (“NSM”). The United States specifically cites India’s domestic content requirements that compel solar power developers participating in Phase II to use Indian-manufactured solar cells and modules instead of those manufactured by the United States or other imported equipment as discriminating against U.S. companies. Moreover, the United States notes that India has now extended the domestic content requirements to more solar energy products – such as thin film – than covered under Phase I of the NSM. Thin film currently comprises the majority of U.S. solar product exports to India.

    In 2010, India launched the first of three phases of the NSM – a national program to promote the development of solar power generation facilities. In February 2013, the United States requested WTO consultations with India over the domestic content requirements noted during Phase I. The formal consultations failed to resolve U.S. concerns.

    The Office of the U.S. Trade Representative specifically says: “The domestic content requirements under Phase II appear to be inconsistent with India’s obligations to provide treatment to imported products no less favorable than that accorded to domestic products under Article 3 of the General Agreement on Tariffs and Trade and Article 2 of the Agreement on Trade-Related Investment Measures.” A request for consultations is the first step in the WTO dispute settlement process. Under WTO rules, if the matter is not resolved through consultations within 60-days of the request, the United States may then ask the WTO to establish a dispute settlement panel. The United States could seek a WTO ruling against India’s NSM program and impose punitive trade measures like tariffs in retaliation. The solar program is just one of the trade barriers the United States has cited in its annual 2013 National Trade Estimate Report on Foreign Trade Barriers.

    This week, the U.S. International Trade Commission (USITC) will hold a public hearing “concerning a wide range of Indian policies that discriminate against U.S. trade and investment in that country.” The Commission’s hearing is in connection with its investigation Trade, Investment, and Industrial Policies in India: Effects on the U.S. Economy. The USITC investigation is at the request of the Senate Finance and House Ways and Means Committee leadership. Congress seeks clarification of those Indian industrial policies that discriminate against U.S. imports and investment in favor of supporting Indian domestic industries and the effect these barriers have on the U.S. economy and U.S. jobs. The Commission is expected to deliver its report to Congress by November 30, 2014. The USITC will likely note in its final report to Congress concerns the United States has over the domestic content requirements found in India’s NSM.