Is it environmental one-upsmanship or old-fashioned protection of an infant industry? India’s Jawaharlal Nehru National Solar Mission (NSM) was created to boost domestic production of solar cells and solar modules – clearly a good idea for the environment, right? The rub is that this is done by requiring that Indian solar projects buy their solar modules, cells or thin film technologies only from Indian factories – effectively banning foreign competition for solar power gear from Indian soil. It is a tad subtler than an outright ban. An Indian solar project can use foreign kit, but they won’t get the sweet power purchase deal from the national power monopoly. Washington started asking questions in the WTO a few months back, saying that Indian policy is a local content requirement that violates multiple international agreements. I posted about it because it is a traditional trade spat, but in new bright green environmental clothing.New Delhi struck back a couple of weeks ago. Not by defending itself, but by arguing that the United States also has illegal local content requirements (who knew?). The Indian argument seems to be “you do things wrong, so you can’t complain when we do things wrong“. That’s often a good political, but is not a recognized defense in international law. Quite the contrary. Canada is in the process of losing a WTO case brought by the European Union and Japan against local content requirements used for renewable energy projects in Ontario.
There is substance to India’s case, which relies on the concept that defeated the Canadians: national governments are responsible for what their state, provincial or local governments do that violates international obligations. India has now raised questions about water utilities, for instance, in New England, Pennsylvania, West Virginia and South Carolina that impose local content rules on iron pipes and fittings used in water projects. New Delhi sees discriminatory local content rules being used in solar and renewable energy projects in Michigan, California and Texas. And pipe procurements in Alabama, South Carolina and Florida that are restricted to local products. This kind of puts Washington between a rock and a hard place, because there is long precedent for asserting the legal primacy of international treaties over local or state law, going back at least to a case brought by Japan against “Buy America” procurement legislation in Mississippi in the 1970s.
This is all part of a larger picture. As customs duties have come down across much of the world, local content requirements have become a favored tool for restricting foreign competition. U.S., European and Japanese companies often find themselves the victims of local content rules, so their trade agencies are waging an aggressive campaign against such rules wherever they are found. There have been complaints against similar practices in Indonesia, Brazil, Russia and the Ukraine – and we are likely to hear about more.
For better or worse, India is telling us that perhaps Washington should make sure its own house is in order. Not a bad idea. But just try selling that to local and state politicians egged on by local producers. In any country.