India questions U.S. green energy incentives at WTO

GENEVA Thu Apr 18, 2013 3:06am IST

The World Trade Organization WTO logo is seen at the entrance of the WTO headquarters in Geneva April 9, 2013. REUTERS/Ruben Sprich

The World Trade Organization WTO logo is seen at the entrance of the WTO headquarters in Geneva April 9, 2013.

Credit: Reuters/Ruben Sprich

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GENEVA (Reuters) - India hit back at U.S. accusations of trade restrictions in its solar industry on Wednesday, suggesting Washington was guilty of the banned practices, in a move that may deepen divides between giants of the developing and developed world.

India asked Washington to justify incentives offered to U.S. companies to use local labour and products in renewable energy and water projects, in filings to the World Trade Organization published on Wednesday.

It cited a list of projects in U.S. states and regions. "As the U.S. is aware, compliance with requirements of WTO agreements extends to all levels of government within a WTO member," India said in one of the filings.

Its requests for information - sometimes used as a precursor to a formal trade dispute - came two months after the United States launched a trade dispute about incentives offered to local suppliers in India's solar industry.

Both sets of allegations focus on the use of "local content requirements" that encourage companies to use local inputs in their projects, which can amount to discrimination against foreign firms and a breach of international trade law.

Local content requirements have been a growing area of trade friction since Japan and the European Union challenged Canada over a renewable energy scheme in the province of Ontario.

Canada lost the case at the WTO and, although it is still due for a final appeal ruling by May 6, its defeat has triggered a hunt for other discriminatory clauses worldwide, led by the United States, the European Union and Japan.

Their scrutiny has fallen upon capital-intensive industries in big developing markets, where they could potentially force open markets worth billions of dollars to their own companies.

Aside from the U.S. complaint about India's solar sector, the three rich trading powers have questioned the validity of local content rules in Indonesia's telecoms, mining, oil and gas sectors and Nigeria's energy industry.

They are also suspicious of Brazil's tax rules, such as a 30 percentage points hike in sales tax on cars that do not meet a 65 percent local content threshold, they said in a statement circulated by the WTO on Wednesday.

They had similar concerns about Brazil's treatment of telecoms and semiconductors.

Other sectors facing scrutiny for their local content rules include agricultural machinery in Russia and the electricity sector in Ukraine.

In one of its WTO filings, India said the existence of the U.S. requirements for renewable energy "raises concerns about their compatibility" with global trade rules.

India asked the United States to provide full details of state, regional and local renewable energy programmes that had local content requirements and listed four schemes about which it had specific questions.

It cited Michigan's renewable energy legislation, Los Angeles' solar incentive programme, California's self generation programme and incentives for commercial and residential solar power offered by Austin Energy in Texas.

It said water utilities in South Carolina, Pennsylvania, West Virginia and some New England states had mandatory domestic content requirements for ductile iron pipes and fittings for water projects.

It also cited tenders in Alabama, South Carolina and Florida which it said specified that only U.S.-made pipes were allowed to be used.

(Reporting by Tom Miles; Editing by Andrew Heavens)

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