WTO Dispute DS452: European Union & Certain Member States - Certain Measures

Affecting the Renewable Energy Generation Sector.

Complainant: China

Respondents: European Union, Italy and Greece

Agreements cited:

1) GATT 1994

 Article I (General Most Favored Nation Treatment)

 Article III (National Treatment)

2) Agreement on Subsidies and Countervailing Measures

 Article 1 (Definition of a subsidy)

 Article 3 (Prohibition)

3) Trade-Related Investment Measures Agreement

 Article 2 (National Treatment and Quantitative Restrictions)

Issue raised by this paper: Did the European Union, Italy and Greece violate their

obligations under WTO rules through certain measures applied in the renewable energy

generation sector?
This is case DS452: European Union & Certain Member States - Certain Measures Affecting

the Renewable Energy Generation Sector.

My colleague and I are here today to represent the People’s Republic of China and we

would like to thank the Panel members for coming here today to help us settle the issues

we have with certain measures available in the European Union, Italy and Greece affecting

the renewable energy generation sector.

We consider the domestic content requirements of the feed-in tariff programs in both Italy

and Greece to be inconsistent with the members’ WTO obligations, under the Agreement

on Subsidies and Countervailing Measures, the GATT 1994, as well as the TRIMs. This is

especially as they appear to nullify or impair the benefits accruing to China for being party

to these Agreements.

China:

Agreement on Subsidies and Countervailing Measures

 Article 1 (Definition of a subsidy)

China considers the FIT programs with DCR to be inconsistent with “Articles 3.1 (b) and 3.2

of the SCM Agreement, because the measures include subsidies within the meaning of

Article 1.1 of the SCM Agreement that are prohibited as they are provided contingent upon

the use of domestic over imported goods.” Article 1.1 of the SCM Agreement is concerned

with the definition of a subsidy. Article 1.1(a)(1) holds that a subsidy is deemed to exist if “

there is a financial contribution by a government or any public body within the territory of a

Member” i.e. a government purchase of goods. Article 1.1(b) provides another condition,

namely that it must confer a benefit.

  Article 3 (Prohibition)

Trade-Related Investment Measures Agreement

CN argues that the measures constitute a TRIMd

- Definition of a TRIMs (article 1) “investment measures related to trade in goods

only.”

- It fits this definition because it encourages investment in the production of solar

PV generation components and favors components sourced from the EU or EEA.

As evidence of this we point out to the surge of investment in the solar PV

installations in Greece throughout during the 1st quarter of 2013. During the month

of January, Greece reported solar installations equal to one-third of what the

country was able to achieve for all of 2012. According to LAGIE, Greece’s power grid

operator, the country added 300 MW of Solar PV during the first month of the

year, amounting to about 30 percent of the 890 MW installed over the last calendar

year. Bringing the country’s PV capacity to 1.72 GW, the January number was also

double what LAGIE projected for the month, putting it on track to reach a projected

2.58 GW by the end of 2013 and 2.82 by the end of 2014. Slowing a bit in February,

Greece reported 121 MW for the month.

- Proof for Italy: At least some manufacturers in Italy have renewed their focus on

the production of renewable energy technologies and some have built generator

either in Italy or other EU member states, to take advantage of the price increase

available. The Italian-Japanese equal share joint venture for the development of

photovoltaic power between Enel Green Power and Sharp – ESSE – ends the first
 quarter of 2012 with the entry into service of 14.4 MW of new photovoltaic

capacity in Italy, in line with the partnerships business plan.

https://www.enelgreenpower.com/en/media/press/d201204-enel-green-power-

and-sharp-increase-solar-capacity-in-italy.html

Italy and Greece:

According to the International Energy Agency 2015 Report:

The installation of solar photovoltaic energy plants has consistently been declining.i In 2011,

Italy installed 9,3 GW of solar photovoltaic systems. The subsequent year (2012), that figure

was down by more than half, at only 3,6 GW. In 2013 the figure was down to 1,6GW and in

2015, the smallest installation was made with only 300 MW capacity. This can be explained

by the phase-out of the feed-in tariffs that are not granted anymore for new PV installations

International Energy Agency 2015 Report: http://www.iea-

pvps.org/fileadmin/dam/public/report/statistics/IEA-PVPS_-__A_Snapshot_of_Global_PV_-

_1992-2015_-_Final.pdf

The fact here is that since the surge in 2012, the Government of Greece has failed to secure

funding for its FIT Program. Therefore, it is no longer functioning and does therefore not

qualify as a TRIM.

As for Italy, if the FIT program were to truly attract additional investment through unfair

benefits, then the installation numbers for solar PV plants should be surging.

CN: Given that our numbers do not coincide, and that we are not likely to come to an

agreement as to whether or not your FIT programs are Trade-Related Investment Measures,

we will have to let the Panel decide upon this matter.

So let’s move on to the essential substance.

It is our understanding that your measures are to be considered TRIMs and therefore find

them to be in violation of Article 2.1. and 2.2.

Article 2.1 refers to Article III of GATT 1994 (see note 78)  national treatment supported

by

Article 2.2 refers to GATT III:4 and the illustrative list of TRIMs.

DCR to FIT is a violation of Article III.

Go through the list.

Italy & Greece: We justify these measures under article III:8 (a) – government procurement

derogation, because the government bodies are procuring the components for renewable

energy generating equipment, so as to promote the production of renewable energy as

required by law.

CN: Surely our colleagues are aware of the WTO Panel and Appellate Body rulings in the

case of Canada Renewables and India solar cells, regarding the nnecessity for competitive

market relationship between the like products being discriminated against the the products

being procured.

Here the situation is no different in any significant way.

Yes we are aware of the Appellate Body’s ruling in both cases however, you must be aware

that the WTO does not operate under stare decisis. Unfortunately, the Appellate Body’s

interpretation of the provision of Article III:8 a is too simplistic and restrictive.

We would like to suggest the Panel expand on the interpretation given by the Panel in the

Canada renewables case. Article III:8(a) provides that GATT Article III does not apply to laws,

regulations or requirements governing the procurement by governmental agencies of

products purchased for governmental purposes. In its interpretation, the Appellate Body

focused on the ‘products purchased ’, while the panel fixed its attention to whether the

Ontario LCR could be characterized as ‘laws, regulations or requirements governing

procurement. Under such a reading, the article, more than it does refer to the products

which are being purchased, the article refers to the procurement of those products. It is

then possible to make an argument for a broader reading of the article, one in which

government procurement refers to the important steps of the process of acquiring the end

product rather than directly purchasing it. Thus, as procurement of electricity is hardly

possible without first generating it, the Italian and Greek LCRs could be seen to be

encompassed within the meaning of GATT Article III:8(a), and therefore the measures would

not violate Article III:4 of GATT and 2.1 and 2.2 of the TRIMs Agreement.

China:

We would urge the Panel to follow the WTO’s desire to promote “consistency” in its rulings

and would hope that it follows the Appellate Body’s finding in the Canada renewables case

with regards to the government procurement derogation.

Do you agree that TRIMs article 2.1 is an extension of GATT Article III:4, national treatment.
TRIMs Article 2.1. says that “Without prejudice to other rights and obligations under GATT

1994m no Member shall apply any TRIM thant is inconsistent with the privisions of Article III

or Article XI of GATT 1994.”

Article 2.2. further consolidates the connection to Article III:4 of GATT: “An illustrative lit of

TRIMs that are inconsistent with the obligation of national treatment provided for in

paragraph 4 of Article III of GATT 1994 and the obligation of general elimination of

quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994 is contained

in the Annex to this Agreement”

Goes to determining whether the measures

Illustrative list  GATT III:4  TRIMs 2.1 and 2.2.

Sourcing requirements are in violation of the List of TRIMs

Showing why DCR FIT grants less favourable treatment  !!!!

From

Italy and Greece:

Article

http://www.forbes.com/sites/christophercoats/2013/03/19/whats-behind-the-sudden-
solar-surge-in-greece/#11d14d5b29ba

i2015. Snapshot of global photovoltaic markets. Online Available at: http://www.iea-

pvps.org/fileadmin/dam/public/report/statistics/IEA-PVPS_-__A_Snapshot_of_Global_PV_-
_1992-2015_-_Final.pdf Accessed December 12th 2016.