This paper presents World Trade Organization’s (WTO) functioning to ensure international trade businesses in the framework of the case given. The paper also reveals the legislative nature the WTO practices to avoid mutual countries-participants’ claims regarding trade norms and volumes. Moreover, the research underlines the politic shade thrown upon the international business which should function in clearly set regulative rules. The examples shown below prove the researcher’s suggestion of WTO’s still ongoing development to perfect the whole mechanism of it. Thus, WTO, by far, faces the national market values of each country as a main barrier, which, in most of the cases, surpluses the political interests as well.
The Case and Key Issues
The United States asked the WTO to impose a formal complaint against India. According to Reuters, the conflict between the two countries began in the solar energy market being overheated by numerous political backgrounds. They range starting from Indian nuclear activity as a large one and arrest of an Indian diplomat as a small but notable. However, thereafter, the requirement of the Indian authorities addressed to producers to use solar panels and modules manufactured exclusively in India came out as the reason for the complaint. The United States considered it discrimination against the US products supposed to be a part of international trading not without reason. The complaint underlined that such forced localization actually closes the Indian market for the US solar panels and modules. The US government has repeatedly raised this issue in meetings with colleagues from India. However, any action, despite the promises, was not adopted. American side, in turn, intends to protect the rights of their workers and manufacturers such as First Solar and Abound Solar. Moreover, in recent years, India's solar energy market is one of the most profitable being rapidly developed, the main advantage of which is the environmental cleanliness. In Delhi, they believe that solar energy can help to a great extent the electricity capacities to meet the growing energy needs of the country.
Governmental and Stakeholders’ Issues and Goals
It should be pointed out that the conflict rose to an international level between two sovereign countries. However, there are definite market players who suffer or gain profit being a part of a conflict mentioned. Governments are stressed also while this US complaint against India in the WTO was not the first in the trade disputes between Washington and New Delhi. Earlier, for example, the United States complained about India because Indians have imposed a ban on imports of the US poultry. In 2007, Delhi also prohibited to import products of American farmers, including chicken, fearing the spread of bird flu. India, in turn, also complained to the WTO about the United States, for instance, because of the customs duties imposed on steel products from India. However, this background information was given to understand the nature of the international business functioning.
Going back to both sides of a trade dispute, India blamed the United States for creating barriers to the development of the domestic production of the solar cells through the use of the Fast Start Finance Fund GCF UN program. The volume of the program is $30 billion as it was designed to support resourcing in developing countries and provide concessional loan financing. Deputy General Director of CSE (Indian Centre for Science and Environment) said that the whole project aims at providing the support to the development of alternative energy systems in the developing world. It has resulted in a game in which the US companies-manufacturers of photo-electrochemical cell elements get financing, while Indian manufacturers do not have such support. According to studies conducted by CSE as India Times noted, about 80% of Indian companies are in a “state of forced closure and debt restructuring” concerning the production of solar cells. The reason for such problem is that the solar modules for the Indian solar stations are being ordered by the projects’ developers in the United States.
Jawaharlal Nehru National Solar Mission proposed to apply the requirements to use photo-electrochemical cell elements of domestic production in the construction of new plants in India. However, it is obvious that the conditions of competition between Indian and American manufacturers are not equal. (According to the program of financing of the GCF fund, there are the low interest rates on loans, for comparison, about 3% in the period of 18 months, which are offered to the Indian project developers in case they intend to buy American products. On the contrary, Indian banks offer credit funds with an interest rate of 14% that are far higher.
Moreover, the US products are mainly presented by thin film modules, although it is believed that the efficiency of their use is lower than that of crystalline modules. The large volume of imports of these products creates the so-called bias in the structure of the elements of solar energy in India. Thus, the set of solar panels in India is about 60% relative to the panels of the thin film type. At the same time, their share in the rest of the world is about 14%. It is important to note that the Fast Start Finance program financing has allocated about $248.3 million through Ex-Im Bank and OPIC. The financing contributed to the work on the creation of a network of stations running on solar energy between 2010 -2011 years. In this case, according to the Indian side, the main beneficiaries were American manufacturers of solar energy system components, such as First Solar and Abound Solar.
Representatives of the Ex-Im Bank confirmed this view upon the issue. The bank management’s statement confirmed that Ex-Im Bank provided about $500 million to finance projects in the field of solar energy in India. It is believed that these actions contribute to the promotion of US goods and services. In July 2012, the Bank has allocated two loans totaling $57.3 million to First Solar to build three plants in India.
These business activities are over proved since the capacity of the Indian solar industry continues growing rapidly, which the data published by the Ministry of New and Renewable Energy indicates. These figures show the total capacity of solar projects put into operation at the end of March 2014. The figures, which exclude private solar projects or individual settings, were released on April 1, 2014. According to these data, the total capacity of projects administered under the National Solar Mission reached nearly 2,632 MW by the end of the first quarter. This figure reflects an increase of 177.8% as compared to 947.5 MW the previous year. Slightly more than a third of the entire input of solar power in the country is currently in the state of Gujarat.
Solutions and WTO Disputes
The WTO provides a mechanism for resolving trade disputes to ensure that the member-countries follow their obligations under the WTO. Trade disputes occur at the level of WTO member countries’ governments, where one or more countries suggest that another country violates the agreement or its commitments under the WTO. Resolution of trade disputes is one of the most important aspects of the WTO, without which rule-based system will not be effective since these rules will not be followed.
The mechanism for resolving WTO trade disputes consists of three successive key points (WTO, n.d.):
1. Bilateral consultations. The party that suggests that the measure adopted by another party is inconsistent with any WTO agreement and affects its rights requests consultations to find a solution. According to the case given, The US arranged this step. However, as written above, the US and India sides had many opportunities to deal. Therefore, the research moves further.
2. Creation of a panel at the request of any disputant. The party, which initiated the dispute, may request the establishment of a panel in case the dispute has not been solved in the consultation stage. The panel consists of three to five experts from different nationalities, appointed by the General Director of the WTO, who are highly qualified in matters of opinion. This option seems to be actual for the case given since the group examines and evaluates the subject of the dispute and clarifies the applicability of the WTO. The parties offer to the panel the actual facts of the case and arguments in writing.
3. The completion of the dispute at any stage with the help of mediation and conciliation procedures with a mutually acceptable solution. The priority objective of the dispute settlement mechanism of the WTO is to settle differences by consultation, mediation, and conciliation procedures, as well as using the last peaceful means of resolving disputes – implementation of the recommendations. This option seems quite acceptable as well since both the US and India are interested in further solar market development.
The solar market issue between the US and India has no new tendency in WTO practice. However, both sides may lack the experience to well dispute being blind by a possible profit this market can give. Moreover, this case was politically heated earlier. The paper suggested three possible solutions, mainly bilateral consultations, creation of the panel, and the completion of the dispute. However, one of them, the first, as seen has not provided any positive tendency.
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