Abstract
AbstractUS–Renewable Energyis the last in a series of WTO disputes involving subsidies schemes with local content requirements. Local content requirements (LCRs) are highly discriminatory and trade distortive instruments and therefore all cases concerning green energy have been found to violate WTO law. However, recent jurisprudence has developed a different definition of prohibited LCRs under the GATT and the SCM agreement, the latter allowing for some leeway to define origin of products under a government subsidy scheme. Depending how the subsidy scheme is framed, it will be able to be excused from the GATT's more stringent prohibition of LCRs, this raises question of consistency in the application of the LCRs prohibition. Moreover, we review a simple and robust approach that modern welfare economics suggests for framing discussions of subsidy policy. We apply this approach to the case of renewable energy subsidies and discuss some complexities with respect to local content requirements. In conclusion, this allows us to critically assess and review proposals to increase coherence between WTO subsidy policy and green energy promotion policies and submit proposals to achieve better suited WTO subsidy rules.
Highlights
US-Renewable Energy is the last in a series of WTO disputes involving subsidies schemes with local content requirements
Renewable energy support schemes were mostly attacked as subsidies contravening the General Agreement on Tariffs and Trade (GATT), the Trade-Related Investment Measures (TRIMs) and the Agreement on Subsidies and Countervailing Measures (SCM)
Other scholars instead highlighted that the major issue in these subsidies cases was not the subsidy granted for promoting renewable energy but the local content measures attached to those schemes, which favored the sourcing of domestic equipment or inputs for the production of green energy (Hartmut 2014; Marín Durán 2018; Celli 2019)
Summary
The WTO framework does not favor trade in green goods as opposed to other goods and its rules apply in to renewable energy and to fossil fuel energy. Other scholars instead highlighted that the major issue in these subsidies cases was not the subsidy granted for promoting renewable energy but the local content measures attached to those schemes, which favored the sourcing of domestic equipment or inputs for the production of green energy (Hartmut 2014; Marín Durán 2018; Celli 2019). These local content measures made the support schemes trade distorting and prohibited under Article III: GATT as well as under the TRIMs and the SCM agreement. We review the economic policy and political economy rationale for subsidies and industrial policy (section III) and look at how to achieve a better balance between the WTO necessity to ensure lesser trade distortions and the legitimate economic and noneconomic rational of governments to intervene in their economies (section IV)
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