TWN Info Service on WTO and Trade Issues (Feb12/04)
18 February 2012
Third World Network

Panel set to examine Canadian measures on feed-in tariffs
Published in SUNS #7293 dated 24 January 2012

Geneva, 23 Jan (Kanaga Raja) -- The WTO Dispute Settlement Body (DSB), at its meeting on 20 January, agreed to establish a panel, at the request of the European Union, to examine measures imposed by Canada relating to its feed-in tariff programme.

This was a first-time panel request by the EU, but Canada did not block the panel request as it was entitled to, and thus a panel was established at this first instance.

The third parties to the dispute are Japan, China, Australia, India, the US, Chinese Taipei and Saudi Arabia.

The dispute is with regards to Canada's measures relating to domestic content requirements in the feed-in tariff programme (the FIT Program).

According to its communication to the DSB, the EU said that the measures that are the subject of its request are those relating to the FIT Program established by the Canadian province of Ontario in 2009 providing for guaranteed, above-market, long-term pricing for the output of renewable energy generation facilities (in particular, facilities utilizing wind power with a contract capacity greater than 10 kW, and facilities utilizing solar) that contain a minimum percentage of domestic content.

The EU said that these measures are inconsistent with Canada's obligations under the Subsidies and Countervailing Measures (SCM) Agreement, the GATT 1994, and the Trade-Related Investment Measures (TRIMs) Agreement because they constitute a prohibited subsidy, and also discriminate against imports of equipment and components for renewable energy generation facilities.

In its statement at the DSB, the EU said that it is seriously concerned about the measures at stake in this dispute, considering the significant commercial interest of the EU in the area of renewable energy technologies, including on the Canadian market, and the negative effects that this kind of measures have on the world-wide deployment of low-carbon technologies for the generation of electricity.

It added that feed-in-tariff programmes are important instruments to incentivise the development of sustainable sources of energy, as an alternative to fossil fuels, but they should be designed and implemented in a way that does not discriminate against foreign goods.

In its statement, Canada said that the Ontario FIT program was established to increase the supply of renewable energy in that province and it supports Ontario's committed transition away from coal-fired electricity generation, an ambitious energy plan taken in concert with industry and the public.

It said that it is confident that the FIT program is consistent with Canada's obligations under the WTO Agreement.

Canada noted that at Japan's request, the DSB had recently established a panel (DS412, panel composed on 6 October 2011) to consider the same measures now challenged by the EU.

Over the last week, Canada said that it had held consultations with the EU, Japan and the existing panel in that other dispute to determine whether harmonization of the timetables would be feasible.

As a result of those consultations, in order to allow the proceedings in the two disputes to be promptly harmonized, Canada said that it can agree to the establishment of a panel (DS426) today (on 20 January). "We will move quickly with the European Union to compose the same Panel, and will work with both complainants to harmonize the timetables. We hope that this will reduce the burden on the Panel, the Secretariat and the parties," it said.

In an intervention, Japan said that Canada's measures at issue in this dispute (DS426) are the same as what Japan is challenging in its own dispute with Canada (DS412) and the panel proceedings in its dispute are well underway and is at a fairly advanced stage.

Japan said that the sheer number of third parties, thirteen, in its dispute DS412, and the EU's decision in the present dispute to proceed to request panel establishment should signify growing concerns amongst the WTO membership about the WTO-inconsistency of this type of domestic content requirement measures adopted by the Canadian province of Ontario.

Citing Canada's referral to complete harmonization of the panel proceedings in DS412 and DS426 under Article 9.3 of the Dispute Settlement Understanding (DSU) as a precondition for Canada's acceptance of the establishment of a panel in this dispute at the present meeting, Japan said that as much as it is supportive of the principle of harmonization in the event of multiple complaints on the same matter, Article 9.3 provides that harmonization shall be made "to the greatest extent possible".

But nothing in Article 9.3 requires that there be harmonization "in all cases", "at any cost" or "notwithstanding the principle of 'prompt settlement' of dispute articulated in DSU Article 3.3," it added.

Japan stressed that given that the panel proceedings in DS412 have been already at the advanced stage, it wonders how it would be possible or even practical to completely harmonize, or synchronize, the panel proceedings in these two disputes without causing substantial delays in DS412 or otherwise adopting an extremely expedited timetable in DS426.

Any harmonization of proceedings in DS412 and DS426, assuming such harmonization would be possible, should not be solely at the expense of Japan's interests in its dispute DS412 and must be explored in a way that would not cause any substantial delay and would preserve the rights and interests of the parties in these proceedings, said Japan.

However, noted Japan, this morning (on 20 January), the panel in DS412 communicated to the parties its decision to suspend the timetable and to harmonize the timetables in both cases by postponing the first substantive meeting by almost two months.

Japan expressed regret and said that it is extremely disappointed with this panel's decision. Two months of delay in the already prolonged proceedings can be in no way considered as minimum or insignificant and the rationale behind this decision briefly set out in the panel's communication is hardly compelling, Japan added.

Japan said that it could object to the establishment of a panel today to preserve its rights under the DSU, but decided not to do so in a spirit of cooperation and on the understanding that the timetable subsequent to the first substantive meeting will be expedited so as to compensate the initial substantive delay in DS412 that the panel has just decided.+