How ISDS Killed A Domestic Solar Power Project In India

Wendy Cockcroft's picture

We've been assured over and over and over again that the ISDS provisions we fear in free trade agreements such as TPP, TTIP, and CETA are only to protect foreign investors from having assets unfairly seized and that this is a completely normal aspect of trade relations and there's nothing to worry our pretty little heads about. Heck, the EU Trade Commissioner even came up with a so-called compromise to allay our fears. One of the things we are stone cold terrified of is having "buy local" schemes overridden and closed down as "protectionist." In India, this just happened to a massive solar power project.

ISDS V Buy Local

Just recently, a WTO panel has ruled that the domestic content requirement (DCR) imposed under India’s National Solar Mission (NSM), is inconsistent with its archaic treaty obligations under the global trading regime. The requirement in question mandates a percentage of components to be sourced locally, to boost homegrown production of solar cells and solar modules.

Though India argued that NSM helps the country meet its climate commitments under the United Nations Framework Convention on Climate Change (UNFCCC), the WTO rejected the argument. They stated that domestic policies seen as violating WTO rules, cannot be justified on the basis that they fulfill UNFCCC or other international climate commitments.

Reuters reported that the US Trade Representative’s office called the ruling “a significant victory that would hasten the spread of solar energy across the world and support clean-energy jobs in the United States.” Preview of the TPP? America Just Blocked a Massive Solar Project in India, by Vandita for Boing Boing.

Well yes, fair enough, it supports clean-energy jobs in America, but what about the Indian people? Well, per an article in The Hindu, the panel ruling is not final and  India will probably appeal to the appellate body. Apparently, they're also planning a "sauce for the goose" response as American states including Michigan, Texas and California have apparently been resorting mandatory local content requirements in the renewable energies sector to boost the domestic economy. That said, the author of the article is too wedded to his ideological principles to consider the national welfare:

Domestic content measures, despite their immediate political gains, have a tendency to skew competition. Manufacturers must remain free to select inputs based solely on quality and price, irrespective of the origin. The Modi government must continue working towards building a business and regulatory environment which is conducive to manufacturing. This would require systemic changes in the form of simpler, transparent and consistent laws and effective dispute resolution mechanisms. - Why the WTO is right in the solar panel dispute, by Jay Manoj Sanklecha for The Hindu.

Well if that's true, the same applies to the Obama government. Keep an eye on this: we're about to see whether there really is any such thing as free trade under these agreements.

The real cost of ISDS in FTAs

As it is, the president of the Solar Energy Society of India warned that the domestic solar power industry could be hit for as much as $100 billion by the ruling. If "international law" can stop governments from subsidizing or buying from local manufacturers, their own economies will suffer. Imported panels, etc., may be cheaper but the cost of the items is not the overall cost; managing unemployment and the unrest that can often go with it is a heavy price to pay for cheaper solar panels. Surely this should be factored into procurement decision-making. In any case they're subordinating democracy itself to the will of foreign corporations. That's not right, whatever the law says.

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