WTO Dispute Roundup: Environment Issues Taking Centre Stage

22 June 2011

Environmental issues featured prominently in last week's meeting of the WTO Dispute Settlement Body (DSB), as members deferred Japan's first request for a panel on the Canadian province of Ontario's green energy plan, while granting Ukraine's request for a panel to adjudicate its dispute with Moldova on discriminatory "environmental charges."

Canada's renewable energy efforts again under fire

Ontario's feed-in tariff (FIT) programme for renewable energy has been an area of contention between Ottawa and Tokyo since last autumn. Under the FIT programme, Ontario supports the generation of green energy by guaranteeing electricity purchase prices, grid access, and long-term contracts to renewable energy producers thus limiting their risks and supporting needed investments. Around 75 similar programmes are currently in place worldwide.

However, it was not the FIT programme itself but a local content provision within the programme that landed Canada at the WTO. To receive FIT support, renewable energy producers must ensure that a certain percentage of the goods and services used for setting up the facility comes from Ontario. This can be as high as 60 percent. Japan alleges that the measure violates the national treatment provisions of the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Investment Measures (TRIMS).

Tokyo also claims that the local content requirement makes the FIT a "prohibited subsidy," under the terms of the WTO's Subsidies and Countervailing Measures (SCM) Agreement.

Japan's request for a dispute panel, which was issued on 1 June and deferred at the DSB meeting, comes several months after Tokyo initiated the case. Japan requested consultations with the Canadian government on 13 September 2010; soon after the EU and the US submitted requests to join those consultations, given their own interests in renewable energy generation (see Bridges Weekly, 7 October 2010).

The Japan Ministry of Economy, Trade and Industry, in a 1 June press release on the dispute, cited concern over the "possible proliferation of such protectionist measures all over the world" as their motivation for seeking the WTO's assistance on this matter. They noted that their consultations with Canada in October did not provide them with the intended result, given that Canada "raised a local content requirement from 50 percent to 60 percent on 1 January 2011."

Under WTO rules, targeted countries are allowed to refuse the first request for a dispute panel. As such, Canada blocked the creation of the panel at the 17 June meeting of the DSB. However, Japan can present the request a second time, at which point a panel of arbitrators will automatically be established.

For a detailed analysis of the potential legal implications of the Canada - Renewables dispute, please refer to the April 2011 issue of the Bridges Trade Bio Res Review.

Ukraine, Moldova row moves forward

The DSB established a panel for a dispute between Moldova and Ukraine this Friday; Ukraine had issued its initial panel request on 24 May, which Moldova blocked (see Bridges Weekly, 1 June 2011).

The Ukraine case stems from a 1998 Moldovan law that allows Moldova to apply charges to imports whose use contaminates the environment, in addition to other duties or taxes. The fee ranges from 0.5 to 5 percent of the customs value of those products.

Like the Canada - Renewables case, national treatment also plays a significant role in the Moldova - Environmental Charges dispute. Ukraine alleges that Moldova's actions are in violation of the WTO's General Agreement on Tariffs and Trade (GATT) 1994, by not charging the same fees to like domestic products.

Ukraine also claims that Moldova charges importers an environmental fee for plastic or "tetra-pack" packages containing imported goods, without applying the same charge to like domestic goods.

Argentina, China, and the European Union have already reserved their third party rights to the dispute. The EU had also joined on to the initial consultations in March of this year. However, the Ukraine submission from 13 May (WT/DS421/4) claimed that "consultations were not possible since Ukraine had neither received any written reply nor had the Moldovan experts enter[ed] the consultations within a period as provided in ... the [Dispute Settlement Understanding]."

ICTSD reporting; "Japan challenges Canada at WTO over green energy programme," AGENCE FRANCE-PRESSE, 18 June 2011; "Japan challenges Canada's energy measures at WTO," REUTERS, 17 June 2011; "Japan takes Canada to WTO on green buy-local rules," 1 June 2011; "WTO sets up dispute panel on Ukraine-Moldova row," REUTERS, 17 June 2011.

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