Local Discrimination and Global Public Goods Timothy Meyer

Local Discrimination and Global Public Goods Timothy Meyer Vanderbilt Law School tim. meyer@vanderbilt. edu

India & U. S. Renewable Energy Disputes � India-Solar Cells ◦ Local content rules in the Jawaharlal Nehru National Solar Mission found inconsistent with WTO’s nondiscrimination rules � United States-Renewable Energy ◦ India challenged a series of state and local measures in the United States that provide support to renewable energy industries conditioned on use of local content � Two of approximately 18 renewable energy trade disputes initiated since 2009 ◦

Where does Green Discrimination occur? � Recent studies have found around 20 renewable energy LCRs at the national level globally (Stephenson 2013; Lewis 2014) � 43 renewable LCRs in 23 U. S. states � Does not include truly local programs, e. g. , city programs in Austin, TX, or Los Angeles �A subsample of 10 programs provide roughly $277 million/year �Extrapolating $1 billion annually � Programs in states from California and Minnesota to Mississippi and Louisiana

WTO’s Nondiscrimination Rules � Non-Discrimination Rules—National Treatment and Most-Favored Nation—cause nations to internalize the costs of economic discrimination � Discrimination should only occur when the gains to discriminating country exceed losses to foreign producers � Logic breaks down where, as a matter of political economy, discrimination promotes the provision of global public goods

Nondiscrimination’s Logic � Economic Logic: Discriminating among products based on national origin arbitrarily denies foreign producers and domestic consumers the ability to capture gains from trade � Political Logic: Domestic producers represent the interests of foreign producers in the political process

Problems Created by Renewable Energy Disputes � Selective Enforcement ◦ Political economy dynamics mean rules are enforced against some products but not others (renewables but not fossil fuels) ◦ Disputes are brought by countries, usually acting at the behest of domestic industry � Nondiscrimination rules do not require full internalization of the costs and benefits of discrimination ◦ Most obvious in the public goods context, when the development of, e. g. , environmental products through discrimination creates additional benefits

Discrimination and Logrolling � Discriminatory provisions provide a cheap way to build legislative coalitions � They confer benefits on local constituencies while shifting costs to unrepresented foreigners � Discrimination reduces the political costs of lawmaking; ND rules raise the cost of lawmaking

When is Discrimination likely to be beneficial? � Jurisdictions with Smaller Budgets � Smaller budgets = reduced bargaining space legislators � Discrimination through LCRs increases the bargaining space by allowing legislators to spend money twice to help multiple constituencies � Suggests discrimination likely to be more beneficial at local levels and in emerging markets

Conclusion: Implications for WTO Doctrine � When should trade law permit discrimination? � Current doctrine generally hostile to political economy arguments about the necessity of discrimination � Market-based arguments more likely to succeed in theory ◦ In practice, they haven’t gotten much traction ◦ See India’s GATT art. XX(j) defense in India-Solar Cells