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Inside India and America's Solar Power Trade War

Striking at India for attempting to do the very same thing is incredibly short sighted, serving no one's long term interests.
Photo: American Center Mumbai

The United States and India are in the middle of a trade war over solar power. And it just escalated.

First, the US complained to the World Trade Organization that India's National Solar Mission unfairly prioritizes domestically-produced solar power products. Now, India has responded in kind, filing a request for information about how the US promotes renewable energy in Michigan, California, and Texas.

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The US complaint formally dates back to February, and it states,

"It appears India requires solar power developers, of their successors in contract, to purchase and use solar cells and solar modules of domestic origin in order to participate in the [National Solar Mission] and to enter into and maintain power purchase agreements under the NSM … As a result, solar power developers … receive certain benefits and advantages, including subsidies through guaranteed, long-term tariffs for electricity, contingent on their purchase and use of solar cells and solar modules of domestic origin."

In short, the US is crying foul that in order to qualify for participation in India's ambitious program for expanding solar power (20 GW+ by the end of the decade), projects have to have include some measure of domestic materials—something which India has enacted to help ensure what domestic solar power industry is has can continue to grow. The US argues that by requiring projects to include Indian solar products in order to win some of India's pledged funds, it's unfairly blocking foreign solar manufacturers from competing.

Not so small irony: The photo up top is from the opening of a 600 MW solar power park in the state of Gujarat last year and it was taken by the American Center in Mumbai as the US Consul General in India was in attendance, the project led by California-based Sun Edison. It's not like foreign companies are cut out of India's impressive growth in solar power, but the US apparently feels the issue is a threat enough to American solar manufacturers to take the case to the WTO.

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Should India and the US not find common ground within 60 days—a time period coming to an end—the US can request a WTO panel be establish to determine whether India has violated free trade rules. Should that happen recent precedent is against India. A WTO ruling from last November found that domestic content requirements for Ontario's successful feed-in tariff program were in violation of trade rules.

A couple points that pop to mind, related to the sheer absurdity of all this.

First, as Ilana Solomon points out in a piece for Huffington Post, historically domestic content requirements have been used (very successfully in some cases, think South Korea) to aid emerging economies, well, emerge—to use the euphemism that's only slightly better than the burdensome and misleading 'developing nation' moniker.

Solomon concludes (and I agree with this wholeheartedly), "In the case of India, allowing some degree of foreign competition may be important to stimulate its domestic companies to increase their efficiency and competitiveness. But, foreign competition must not undermine the ability of India to grow its own solar industry."

The fact of the matter is, the US action here is not based in any way out of some abstract notion of the economic superiority of free trade or fair play. The history of US actions against what it perceives as unfair subsidies China grants its solar power manufacturers—which have resulted in punitive tariffs enacted—clearly shows that the WTO action, as well as the action against China, stem primarily from US desire to protect its own domestic solar power manufacturers. At least those that make a stink about the domestic content requirements.

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It's all some melange of economic colonialism, fetishization of free trade, and good old fashion economic nationalism and mercantilism masquerading as neoliberalism. And it's bad news all around.

If we are to have any chance of even slowing down climate change, the world needs more renewable energy, full stop. A recent IEA report shows that despite impressive gains in solar power and wind power in recent years, the world's energy mix is pretty much just as dirty now as it was 20 years ago.

Clearly more work needs to be done. For anyone not directly tied to the companies involved, who feel disadvantaged by promotion programs in other nations, it matters not one iota who made the solar panels, or their parts. It matters a bit more who installed them, local jobs benefiting local economies—but if climate change continues as it has been, local economies will be battered in any case. The solution is as much renewable energy as possible, as quickly as possible, in as many nations as possible, pretty much without giving a good goddamn where the panels are made.

Looked at another way, the WTO bickering is just another example of the type of outdated, compartmentalized, nationalistic thinking which is the exact opposite of what is needed to solve this, and the many other, transnational social and environmental problems now presenting themselves to the world.

How will it end? As mentioned the WTO hasn't looked kindly on domestic content requirements when they are brought to their attention. Hopefully this defuses itself before that time. But here again, in the case of China, the US doesn't seem inclined to back down. Which is also too bad.

Both the United States and India want to protect their own solar power industry and expand them. India is only responding to US provocation. The US would be better served in stimulating demand for solar power products at home through consistent and ambitious renewable energy policy, both at the national level and state level—in the latter case enacting strong, predictable feed-in tariffs as have worked so well in the Germany. Striking at India for attempting to do the very same thing is incredibly short sighted, serving no one's long term interests.