WTO: Ontario’s Domestic-Content Requirements Breach International Trade Law

Mark Del Franco
Written by Mark Del Franco
on December 20, 2012 No Comments
Categories : New & Noteworthy

The World Trade Organization (WTO) has ruled that Ontario's domestic-content requirements – a key mechanism under the province's feed-in-tariff (FIT) program and one that ensures the viability of its wind energy supply chain – violate sections of the General Agreement on Tariffs and Trade 1994.

The WTO upheld claims made by Japan and the European Union (EU) that Ontario's FIT program unfairly pressures producers of renewable energy to buy goods and services from Ontario-based supply-chain providers.

Ontario requires that wind energy developers – and, by extension, their supply-chain partners – that participate in its FIT program to source at least 50% of wind project content within the province.

Among numerous claims, the EU and Japan alleged that domestic-content requirements equate to a subsidy because ‘a financial contribution or a form of income or price support’ is derived, and therefore, a benefit is gained. However, the WTO dismissed the subsidy claims.

Canada's Department of Foreign Affairs and International Trade, in conjunction with the federal government, plans to appeal the WTO ruling.

‘The WTO panel ruled that Ontario's FIT program is a violation of the national treatment obligation under the general agreement on tariffs and trade and the agreement on trade-related investment measures,’ says Caitlin Workman, a spokesperson for the Canadian government. ‘As this is the first time Canada has received a WTO panel ruling arising solely from provincial policy or legislation, the government of Canada will be appealing the decision as requested by the government of Ontario.’

Wind energy advocates say Ontario's domestic-content requirements act as magnet to manufacturers, which continue to look at and consider opportunities to invest in Ontario. Recently, REpower Systems, a subsidiary of Suzlon Group said it would build a rotor blade manufacturing facility in Ontario.

‘Companies will only make such investments if they are confident in the sustainability of the market and the opportunity to export beyond that market – the investment must make business sense,’ says Chris Forrest, vice president of communications and public affairs at the Canadian Wind Energy Association.

‘The wind energy industry works to meet all requirements as set out in Ontario," he adds. "Those requirements have not changed, pending an appeal of the WTO decision.’

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