India’s Trade Policies Receive Increasing Scrutiny
February 25, 2014

The last month has seen a flurry of developments concerning India’s trade policies.  This includes a U.S. request for World Trade Organization (WTO) consultations regarding India’s solar power local content requirements, U.S. International Trade Commission (ITC) hearings on the effects of India’s trade, investment, and industrial policies on the U.S. economy, and debate over India’s qualification for immunity from WTO challenges against its agricultural subsidies.

WTO Consultations Requested Over Indian Solar Power Local Content Requirements

Last week, the United States sought consultations at the WTO on India’s local content requirements for solar cells and modules as part of the Indian government’s Jawaharlal Nehru National Solar Mission (JNNSM) project to expand solar power capacity.  India’s JNNSM has significantly increased the Indian market for solar products, which is already the second-largest market for U.S. solar exports (behind Japan).  

Under the JNNSM, half of the power generated under the project must be generated by local content solar cells and panels.  The United States claims that this local content requirement violates India’s WTO obligations to treat imports no less favorably than domestic products (so called “national treatment”) and to not impose investment measures that violate national treatment.  An earlier U.S. request for WTO consultations regarding India’s local content requirements under JNNSM claimed that India provided subsidies to companies participating in JNNSM contingent on them using local content because solar power developers receive certain benefits and advantages, such as long-term set electricity rates, if they purchase and use solar cells or panels of Indian origin.  If India fails to agree to address the United States’ concerns during consultations, the United States may request a formal WTO dispute settlement panel.

Hearings on Economic Effects of India’s Trade, Investment and Industrial Policies

On February 12 and 14, the ITC held public hearings on the effects of India’s trade, investment and industrial policies on the U.S. economy as part of its investigation thereof initiated upon the request of the Senate Committee on Finance and the House Committee on Ways and Means.  Witnesses included representatives of American and Indian industry, academics, and civil society groups.  Testimony focused on intellectual property issues (copyrights, patents, and trade secrets), particularly compulsory licenses for pharmaceutical patents, as well as local content requirements, regulatory data exclusivity/protection, and subsidies in the agricultural, chemical and technology sectors. 

The ITC will issue its final report, which will provide a quantifiable analysis of the economic effects of India’s restrictive measures on the United States, in November.  The ITC is still accepting written submissions for the record until April 11, 2014.

India’s Agricultural Stockholding Programs

Two weeks ago, India was also questioned at the WTO about its public stockholding programs for agricultural commodities.  Under the WTO’s recent Bali Agreement on trade facilitation, agriculture and development, in order for WTO members to qualify for a “peace clause” shielding them from subsidy challenges, members must prove that their public stockholding programs do not distort trade.  India must also reveal the level of domestic trade subsidies it has provided since 2003, the last time India submitted an annual subsidy notification to the WTO.  The United States and Canada were particularly concerned about reports that Indian state-trading enterprises will export 2 million tons of surplus wheat below acquisition costs.  This issue will continue to be addressed at the next WTO Agriculture Committee meeting in March.