WTO to Hear EU and Japan Together over Ontario Feed-in Tariff

23 January 2012

The WTO Dispute Settlement Body said Friday it would establish a dispute panel to hear the  European Union's complaint over the Canadian province of Ontario's feed-in tariff (FIT) programme for renewable energy. As a dispute panel has already been established to hear Japan's complaint over the same matter, the two proceedings will be merged.

Japan and the EU claim that Ontario's support programme for renewable energy unfairly discriminates against foreign companies as it mandates the use of domestic over foreign products. The controversial "domestic content" provision requires up to 60 percent of all input to be produced and sourced in Ontario (see Bridges Trade BioRes Review, April 2011).

As Japan had initiated formal proceedings more than a year before the EU, a first panel hearing over Japan's claims was scheduled to take place already next week (see Bridges Trade BioRes 25 July 2011). These proceedings now need to be suspended in order to harmonise timetables for the two disputes, trade sources confirmed to BioRes. A meeting between the two complainants to organise this process could take place as early as this week.

Formal panel proceedings, however, are not expected to start before the end of March.

Though the EU had requested consultations on the matter already in summer 2011, the panel request followed only last week. Sources close to the case suggest this considerable gap between the failure of consultations and the EU's panel request might partially be explained by it hoping that the case could be resolved otherwise. A heated election process in Ontario in autumn 2011 where the FIT programme itself took centre stage, had fuelled hopes for such a scenario. With the former Liberal governmental party staying in office, however, the FIT programme has been endorsed.

Though renewable energy subsidisation in and of itself is not being challenged in the dispute, experts suggest most WTO members would prefer the WTO not to rule on a dispute so close to the larger climate change mitigation and trade debate. Also, many EU members maintain similar FIT programmes, thus shying away from litigation.

Canadian policy experts further continue to warn that even a victory for Japan and the EU could result in eventual disappointment as in this case Canadian provinces cannot be forced by the federal government - which is accountable to the WTO - to bring their measures into compliance.

Japan and the EU contend that Ontario's law violates most-favoured nation treatment rules in the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Investment Measures (TRIMS) since the FIT regime requires dedicated amounts of Ontario-originated green energy goods and services. Moreover, they content that the measure constitutes a prohibited subsidy under the WTO's Subsidy and Countervailing Duty Agreement (SCMA). Facing stark opposition against the Ontario Renewable Energy Act, the government had introduced the measure, arguably, to boost domestic support.

With 2011 in the books and the continuity of the FIT ensured for now, this dispute will moving forward.

More information

For an in-depth analysis of the FIT case, see Bridges Trade BioRes Review, April 2011.

ICTSD Reporting.

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