Domestic content requirements are prohibited in most cases under WTO agreements.
Of course, the details of this dispute relevant to the solar panel industry are important. But this dispute takes place in a much wider trade dispute context in which India has been purposely ignoring and violating the rights of intellectual property rights holders as part of their domestic industrial policy. Particularly in the area of prescription drug patents.
As Sally Pipes writes in Forbes:
Over the last two years, the Indian government has attacked pharmaceutical patents with increasing aggression. In March 2012, it issued its first “compulsory license” for a kidney-cancer drug made by Bayer AG. A compulsory license allows firms to make generic copies of drugs supposedly still protected by patents in exchange for a licensing fee set by the government. The patent holder has no say in the matter.
Later that year, the Indian government revoked Pfizer’s patent on Sutent, which treats gastrointestinal tumors and advanced kidney cancer. No other country has taken such an action.
And in early 2013, India’s Supreme Court denied patent protection for Glivec, which is used to treat leukemia, despite the fact that it continues to be protected by patents in almost every other country.
To date, India has issued compulsory licenses or revoked patents for eight advanced pharmaceuticals.
It's in every developing country's interests to achieve as much technology transfer as possible. Respecting intellectual property rights, partnering with and licensing IP goods is the way trading partners should accomplish tech transfer.
But it's clear that India's industrial policy strategy involves purposely violating their obligations under WTO treaties and using domestic court decisions to slap a veneer of legality onto their purposeful disregard of U.S. creative and innovative goods. It's good and right for the U.S. to take action to highlight and counter India's strategy, both at the WTO and in other venues.
Along those lines, the International Trade Commission (ITC) is holding a hearing this coming Wednesday and Thursday on India's discriminatory trade practices.