The U.S. and India are allies, but that doesn’t mean we don’t have to tiptoe around each other from time to time. But with recent diplomatic disputes, and energy clashes, is our relationship with India starting to sour?
The U.S. on Monday filed a complaint with the World Trade Organization (WTO) against India over a solar power dispute that puts limits on U.S. access to the Indian market.
As if things weren’t already shaky, this latest case reignites a year-old complaint of the same order that was filed one year ago, almost to the very day.
In February 2013 at the Geneva-based WTO, the U.S. said India violated global trade rules by requiring solar energy components like solar cells and modules to be made domestically, negating U.S. solar exports.
It goes beyond solar, too. Many believe India has put a burden on different U.S. trade industries – from shrimp to steel pipes – affecting our jobs and cash flow.
It doesn’t help matters that recently a female Indian diplomat was arrested and strip searched in New York over what authorities said were visa fraud charges. This prompted India to retaliate against U.S. diplomats in India, sending the two allies into a tailspin of fury, and relations have sunk to their lowest point since India and its “nuclear device” back in 1998.
India’s solar program of interest, the Jawaharlal Nehru National Solar Mission, aims to double the country’s renewable energy capacity by 2017. The U.S. Wants to get in on the action.
After last year’s WTO dispute over the program, India actually expanded its rules to also cover thin film technology. That means the majority of relevant materials the U.S. is currently exporting to India would not be allowed in the solar program.
India claims that its policies are legal under the WTO procurement rules that permit countries to exempt products from non-discrimination obligations, asking the U.S. to, in turn, justify incentives made to U.S.-based companies that use local labor and products in renewable energy projects.
The Indian embassy in Washington was not available for comment following Monday’s trade action.
It really is like déjà vu, only this year India has made sure to compound the situation and distance itself further from the U.S.
The WTO has the power to enforce sanctions that would allow the U.S. to continue supplying India and its enormous solar program in its quest to become more solar dependent.
Currently, India – the third-largest economy in Asia – faces a debacle of energy woes, a problem that increasingly becomes evident as the nation’s economy grows.
And the U.S. has been a major part of that. While building its own solar-manufacturing industry through a series of loans, it exported $119 million worth of solar-industry products to India in 2011 alone, according to Bloomberg, but since, exports to our ally have tapered off. In 2012, India remained the second-largest export market for U.S. solar producers after Japan. It was right about that time that India made plans to expand its own solar manufacturing industry to more than 20 times its current size.
Ever since, trade has gone down and the U.S. is seemingly being shut out.
So, for the past three years, the U.S. government has been in talks with India to try to encourage them to move away from local content requirements, and let the U.S. help in their energy endeavor, but to no avail. Going to the WTO is the next logical action.
Environmental groups argue that the U.S. should back off and let India build its own solar power industry that would cut greenhouse gas emissions.
But this issue goes beyond solar energy. As India becomes more powerful, its blatant disregard for those who helped build it up is like a slap in the face. And as the saying goes, you give ‘em an inch and they’ll take a mile.
Not including Monday, there have been 14 past or current WTO cases between the U.S. and India, according to Reuters, whose bilateral trade in goods measured $63.7 billion last year.
Monday’s action in no way undermines the value that the U.S. places on its relationship with India; quite the contrary, but India’s actions clearly have discriminated against American suppliers. At the end of the day, India’s reluctance to work with U.S. solar companies will only hurt the spread of solar power, and actually will impede India’s own progress as costs will inevitably go up.
The U.S. cannot and will not turn a blind eye. We tried to negotiate and that didn’t work. We’ve been more than patient, but like with any unresolved dispute, it’s time for mediation.
For now, manufacturers like First Solar Inc. (NASDAQ: FSLR) out of Tempe, Arizona, have found a loophole that allows them to continue exporting their “thin film” solar modules by using crystalline silicon. Without further action, India would certainly find a way to shut that down.
The U.S. International Trade Commission is scheduled to hear complaints of trade barriers enacted by India today and tomorrow. India has been notified that the U.S. has requested consultation by the WTO, and that if the matter can’t be resolved in 60 days, the U.S. can request a special panel at the WTO to hear the case.
In good faith, a resolution should be found.