WTO Logo
A World Trade Organization (WTO) logo is pictured on their headquarters in Geneva, Switzerland, REUTERS/Denis Balibouse

In a major development for India in trade dispute against the US, the World Trade Organization (WTO) has ruled that subsidies and mandatory local content requirements provided by eight American states are not aligned with global trade rules. The three-member panel upheld India's argument that the subsidies offered by the US to its local manufacturers in 11 energy programmes violated core rules of global trade. The panel also directed the US to ensure that these states operate under the set of global trade rules.

Notably, the US had made a similar complaint against India in WTO in 2014, claiming that India's Jawaharlal Nehru Solar Energy Mission provided incentives for domestically produced solar cells and modules. The Appellate body considered the US compliant and ruled against India.

Knocking WTO's door, India argued that the "domestic content requirements and subsidies instituted by the governments of the states of Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota in the energy sector" broke multiple rules pertaining to the Trade-Related Investment Measures (TRIMs) Agreement and Subsidies and Countervailing Measures Agreement.

"In the light of Article 3.8 of the DSU [dispute settlement understanding], the panel concludes that, to the extent that the measures at issue are inconsistent with Article III: 4 of the GATT (General Agreement on Tariffs and Trade) 1994, they have nullified or impaired benefits accruing to India under that agreement," the panel said.

File photo of the World Trade Organization logo seen at the entrance of the headquarters in Geneva April 9, 2013.
File photo of the World Trade Organization logo seen at the entrance of the headquarters in Geneva April 9, 2013. [Representational Image]Reuters

Apart from its complaints against ¬≠US giving subsidies to its local industry, New Delhi also highlighted the "renewable energy cost recovery incentive payment programme" implemented by the state of Washington, California's self-generation incentive programme, Montana's tax incentive for ethanol production, Michigan's renewable energy credits programme, Delaware's solar renewable energy credits and the Made in Minnesota renewable incentive programme to the global trade body.

Interestingly, the US has the option of challenging the panel's decision before the Appellate Body (AB) but it is ironical that US itself has been blocking the appointments to the body, forcing it to dysfunctional since 11 December. It is to be noted that the panel was set up in 2018 to investigate whether renewable energy programmes in the US states operated in contradiction to the rules set up the World Trade Organization.