A case for accepting the WTO ruling

The World Trade Organisation’s (WTO) Appellate Body has declared certain domestic content requirements (DCRs) in India’s Jawaharlal Nehru National Solar Mission (JNNSM) illegal. Under JNNSM, whose goal is to make India “a global leader in solar energy”, the government enters into long-term electricity purchase contracts with eligible solar power developers (SPDs), assuring them guaranteed prices for 25 years. This government-procured electricity is then sold to distribution companies who, in turn, sell it to consumers. However, only those SPDs who source certain types of solar cells and modules domestically are eligible. The objective evidently is to favour domestic solar cells and modules over imported ones. It was this DCR measure that the U.S. challenged in the WTO. There are three dimensions in this case that need a closer look: the legal issues, environmental impact, and India-U.S. trade relations.

Legal issues

Subject to limited exceptions, the WTO treaty prohibits countries from discriminating against goods based on origin or destination. This core non-discrimination commitment is given effect through several legal provisions, including the one that outlaws domestic laws that make it necessary for an enterprise to purchase or use products of domestic origin to obtain an advantage. According to the Appellate Body, India’s DCR measure in JNNSM violates this rule and the general prohibition against discrimination between imported and domestic products.

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