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Enactment of an Act for Repealing the Discriminatory Treatment for Import Products concerning Renewable Energy Came into Force in the Province of Ontario

In accordance with the reports of the WTO Panel and the WTO Appellate Body, on July 24, 2014, the Ontario Provincial Government in Canada, revised its Electricity Act of 1998 to eliminate the subsection thereof, which was ground for discriminatory treatment for import products concerning the Feed-in Tariff (FIT) on electricity generated from renewable energy sources. This is the first WTO dispute settlement case where the WTO ruled the WTO-inconsistency of a measure that accords favorable treatment to domestically manufactured products in the renewable energy sector.

The Government of Japan will continue to closely watch the implementation of the law and related regulations and, if necessary, will encourage the Ontario Provincial Government to act consistently with the WTO Agreements.

1. Background to this case

In May 2009, the Ontario Provincial Government of Canada established a FIT program on electricity generated from renewable energy sources, such as solar and wind power. In the FIT program, the government required electricity generators participating in the program to utilize power generation equipment to which at least a certain percentage of value was added (including material procurements and assembly) in the province (local content requirements) as a condition for procurement of such electricity. Therefore, solar panels or other equipment, which were manufactured and exported from outside Ontario by companies, including Japanese companies, received less favorable treatment than manufactured products in the province.

In September 2010, the Government of Japan, jointly with the EU, decided to settle this matter under the WTO dispute settlement procedures, claiming that Canada’s local content requirements under the FIT program at issue were inconsistent with the WTO Agreements. In response, in December 2012, the WTO released the Panel’s report on this matter, in which the Panel mainly accepted Japan’s arguments that the Ontario Provincial Government’s favorable treatment for domestically manufactured goods was inconsistent with the WTO Agreements. In addition, in May 2013, the Appellate Body released a report in which the decision made by the Panel on this matter was endorsed.

Reference:
News release on May 7, 2014:
Release of WTO Appellate Body Report on certain Local Content Requirements under the Feed-in Tariff Program in Ontario, Canada:
http://www.meti.go.jp/english/press/2013/0507_01.html

In response to the decisions, the Government of Japan and the EU, a joint complainant, have strongly requested the Canadian Government and the Ontario Provincial Government to immediately implement the Appellate Body’s recommendations. In March 2014, the Ontario Provincial Government finally submitted a bill for the act for eliminating the local content requirements, but in May 2014, the bill was discarded due to the dissolution of the parliament of the provincial government. However, in June 2014, the ruling party of the provincial government won the confidence of the public in Ontario in the provincial election, and the bill was submitted to the parliament anew, resulting in it being approved on July 24, 2014. The revised act was enacted immediately on the same date.

2. Evaluation

This is the first WTO dispute settlement case where the WTO ruled the WTO-inconsistency of a measure that accords favorable treatment to domestically manufactured products in the renewable energy sector. In settling this matter under the WTO dispute settlement procedures, Japan has been aiming not only to pursue Ontario’s elimination of the measure at issue but also to prevent the global spread of protectionist measures in the renewable energy sector and to contribute to the clarification and development of international trade rules by establishing a new precedent.

In response to the reports from the WTO Panel and the WTO Appellate Body, the Ontario Provincial Government revised its Electricity Act of 1998 to eliminate the subsection thereof, which was the ground for the discriminatory treatment for import products concerning the Feed-in Tariff (FIT) on electricity generated from renewable energy sources. The Panel’s and Appellate Body’s rulings of this case will have implications for other countries which continue to implement similar measures, and thus that the rulings will be highly evaluated from a systemic viewpoint of preventing protectionism in the renewable energy sector, which is regarded as a major growth industry.

The Government of Japan will continue to closely watch the implementation of the law and related regulations and if necessary, will encourage the Ontario Provincial Government to ensure act consistently with the WTO Agreements.

Release Date

July 25, 2014

Division in Charge

  • Information on the WTO dispute settlement procedures in general:
    WTO Compliance and Dispute Settlement & International Legal Affairs Office, Multilateral Trade System Department
  • Information on the related solar panels and other equipment:
    Device Industry Strategy Office, Commerce and Information Policy Bureau

Related Information

WTO

Regional Affairs / Canada

Ministry of Economy, Trade and Industry
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