Heated Skirmishes in the Solar Sector: Do Solar-Pv Feed-In Tariffs Constitute Trade-Related Investment Measures and Subsidies Prohibited under the WTO Regime?

I. INTRODUCTIONOn November 5, 2012, the Chinese Ministry of Commerce ("China") submitted a request for consultations ("complaint") to the World Trade Organization ("WTO") alleging that Italy's feed-in- tariff program ("FIT Program" or "FIT") is inconsistent with Italy's obligations under three WTO Agreements.1 First, China has alleged that the Italian FIT Program violates certain provisions of both the 1994 General Agreement on Tariffs and Trade ("GATT 1994")2 and the Agreement on Trade-Related Investment Measures ("TRIMs Agreement") by providing solar-photovoltaic ("solar-PV") generators and components made in the European Union with an advantage that is unavailable to solar-PV generators and components made outside of the European Union.3 To substantiate this allegation, China has pointed to the Fourth and Fifth Italian Energy Bills, in which the Italian legislature agrees to grant ten percent subsidies on electricity produced by solar-PV generators so long as the generators consist of certain components made in the European Union.4 Second, China has alleged that the Italian FIT Program violates certain provisions of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement") by providing a prohibited subsidy conditioned upon the use of domestic solar-PV components over imported components.5 As evidence of this allegation, China has submitted that the Italian Government sets a price, guaranteed for twenty years, at which it purchases the electricity produced by Italian solar-PV generators.6 China has claimed that Italy's guaranteed purchase of solar-based electricity confers a "benefit" upon those solar-PV generators because the guaranteed purchase provides more 4 5 6 than adequate remuneration for the electricity that the generators produce, which is prohibited under the SCM Agreement.7 Italy had sixty days from the date of submission of China's complaint to respond to China's allegations; because the parties have failed to reach an agreement, China may now request that the WTO Dispute Settlement Body establish a panel to review its grievances.8China's complaint to the WTO has important implications for the development of WTO jurisprudence. From a legal standpoint, the complaint raises the question of whether WTO Member States may use policy tools to pursue national human health and environmental initiatives if those initiatives conflict with the free-trade principles of the WTO.9 A majority of EU Member States have already adopted FIT Programs in pursuit of similar national initiatives;10 yet, despite the widespread use of FITs, to date, only one WTO case has addressed the consistency of the FIT with the WTO Agreements.11 As other WTO Member States adopt their own FIT Programs,12 more complaints are likely to follow, and the demand for clear, instructive WTO jurisprudence will only grow.13 For this reason, legal scholarship evaluating the legality of the FIT Program would provide much-needed direction to WTO Member States as they tailor their FITs to comply with the WTO covered agreements.14Given the unclear legal status of the FIT Program, this comment evaluates and predicts the outcome of the current dispute before the WTO. It explores the manner in which the Italian FIT Program likely violates Article 2.1 of the TRIMs Agreement and Article III:4 of the GATT 1994 by mandating that solar-PV generators use a certain percentage of EU-made solar-PV components to be eligible for an increase in the sale price of the electricity that they produce. The same FIT Program, however, is unlikely to violate Articles 3.1(b) and 3.2 of the SCM Agreement because it may fail to confer a "benefit" upon solar-PV generators as required by Article 1.1(b), and therefore, it will not constitute a subsidy.Part II of this comment begins by providing an overview of the tariff supplied within the Italian FIT Program through the Renewables Decree and the Fourth and Fifth Italian Energy Bills. This part also reviews Canada - Measures, the only case in which a WTO panel has assessed the consistency of a FIT with the WTO covered agreements. …