100 Protecting Protectionism in the WTO: A Reinterpretation of the General Exceptions to Protect the IRA's Local Content Requirements Abigail Pelton1 The Inflation Reduction Act of 2022 (IRA), as part of the largest in- vestment the United States has made to mitigate climate change to date, amended the United States Internal Revenue Code to reduce the cost of shifting toward renewable energy. Specifically, the IRA expands tax credits available to taxpayers who invest in or produce clean energy and provides a new consumer tax credit for electric vehicles. However, the IRA has come under fire from U.S. trading partners because some of these tax credits contain local content requirements (LCRs)— that is, the Act requires beneficiaries to source products or materials domesti- cally in order to receive the full benefit. Several foreign governments have claimed that the IRA’s use of LCRs violates World Trade Organiza- tion (WTO) agreements to which the U.S. is a party. If another member of the WTO lodges a formal complaint with the WTO and the U.S. re- ceives an adverse ruling, the U.S. could be ordered to repeal the IRA or face sanctions, which would severely hamper U.S. and global efforts to meet emissions goals. Moreover, LCRs could be a very useful tool for countries other than the U.S. to use to facilitate the growth of prosper- ous new renewable energy industries, something essential to sustaina- bly avoiding climate catastrophe. This Note reviews the WTO rules which the IRA may violate and finds that the IRA would not pass muster under prevailing interpretations of WTO agreements. However, evi- dence in the relevant WTO agreements support an alternative that would allow the IRA to survive. This Note proposes such an interpreta- tion and argues that it would be prudent for the WTO to adopt it in light of the current climate crisis. 1. J.D., Columbia Law School, 2024; B.S., Emerson College, 2020. I would like to thank Pro- fessor Michael Gerrard for his invaluable insight and the Columbia Journal of Environmental Law student editors for their outstanding feedback and meticulous editing. 2024] Protecting Protectionism in the WTO 101 I. Introduction .................................................................................................. 102 II. The WTO, LCRs in the RE Industry, and the IRA ............................ 104 A. WTO Framework ..................................................................................... 104 1. Goals & History of the WTO ............................................................ 104 2. Dispute Resolution.............................................................................. 106 B. Local Content Requirements in Renewable Energy Policy .... 111 1. The need for RE policy ...................................................................... 111 2. Why governments find LCRs attractive in RE policy ............ 113 C. The Inflation Reduction Act ................................................................. 114 1. History and Goals of the IRA ........................................................... 114 2. LCRs in the IRA ..................................................................................... 117 III. Violations Based on Prior Interpretations of WTO Rules ........... 119 A. GATT ............................................................................................................. 119 1. “Likeness” ............................................................................................... 120 2. “Law, regulation or requirement affecting the internal sale, offering for sale, purchase, transportation, distribution or use” ............................................................................................................ 121 3. Less favorable treatment ................................................................. 122 B. TRIMS ........................................................................................................... 123 C. SCM ................................................................................................................ 124 1. “Financial Contribution” ................................................................... 124 2. “A Benefit is Conferred” .................................................................... 125 3. “Specific” ................................................................................................. 125 D. General Exceptions ................................................................................. 126 1. Applicability of the General Exceptions Outside of GATT .. 128 2. Article XX(a)-(j) Subject Matter Requirements ...................... 130 3. Article XX Chapeau ............................................................................. 133 IV. Reinterpreting the General Exceptions .............................................. 134 A. Proposed Interpretation of the General Exceptions ................. 135 1. Simplifying the “Necessary” or “Essential” Qualifier ............ 135 2. Viewing Policy Considerations as Central to the Chapeau of GATT Article XX .................................................................................... 137 3. Extending GATT Article XX to SCM .............................................. 139 B. Arguments Against This Construction ............................................ 140 1. Increased Barriers to Trade ............................................................ 140 2. The Importance of Predictability .................................................. 142 V. Conclusion ...................................................................................................... 143 102 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 I. INTRODUCTION On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA or “the Act”) into law.2 The IRA contributes an esti- mated $369 billion toward climate change mitigation and energy se- curity,3 representing the largest investment the U.S. has made in ad- dressing the climate crisis to date, and bringing the U.S. closer to meeting its greenhouse gas reductions targets.4 These investments are far-reaching and include direct investments in energy research, critical mineral processing, and parts manufacturing; loans for elec- tric vehicle manufacturers; grants for improving energy efficiency and transitioning to clean energy across sectors; and tax credits for clean energy production, clean energy investments, and electric vehicle purchases.5 Several of the tax credits contained in the IRA have been the subject of criticism from foreign governments because the credits include Local Content Requirements (LCRs); that is, in order to re- ceive all or part of the credit, products or materials must be sourced locally.6 Some of the U.S.’s trading partners have argued that the Act’s use of LCRs violates World Trade Organization (WTO) agreements.7 LCRs are a useful tool in renewable energy policy because they al- low players in emerging industries to grow before being exposed to the full competition of a global market8 and they allow nations to 2. THE WHITEHOUSE, BUILDING A CLEANER ECONOMY 5 (Sept. 2023), https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guide- book.pdf [https://perma.cc/5QYY-H85D]. 3. SENATE DEMOCRATS, SUMMARY: THE INFLATION REDUCTION ACT OF 2022, https://www.demo- crats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf [https://perma.cc/FS56-PPAJ] (last visited Oct. 20, 2023). 4. John Larsen et al., A Turning Point for U.S. Climate Progress: Assessing the Climate and Clean Energy Provisions in the Inflation Reduction Act, RHODIUM GROUP (Aug. 12, 2022), https://rhg.com /research/climate-clean-energy-inflation-reduction-act/ [https://perma.cc/YTF4-A49B]. 5. The Practical Guidance Finance Team, Energy Security and Climate Change Initiatives in the Inflation Reduction Act, LEXISNEXIS (Jan. 24, 2023), https://www.lexisnexis.com/community/in- sights/legal/practical-guidance-journal/b/pa/posts/energy-security-and-climate-change-ini- tiatives-in-the-inflation-reduction-act#:~:text=BIDEN%20SIGNED%20THE%20IRA%20INTO, investments%20in%20clean%20energy%20manufacturing [https://perma.cc/T29C-7LK3]. This is not an exhaustive list of the ways in which the IRA invests in climate change mitigation. 6. Local Content Requirements Impact the Global Economy, ORG. FOR ECON. COOP. AND DEV., https://www.oecd.org/trade/topics/local-content-requirements/ [on file with the Journal] (last visited Oct. 15, 2023). 7. Louise Wendt Jensen, E.U. Accuses U.S. of Violating WTO Rules with Inflation Reduction Act, ENERGYWATCH (Aug. 11, 2022) https://energywatch.com/EnergyNews/Policy___Trading/arti- cle14567471.ece [https://perma.cc/96JC-J6JJ]. 8. JAN-CHRISTOPH KUNTZE & TOM MOERENHOUT, LOCAL CONTENT REQUIREMENTS AND THE RENEWABLE ENERGY INDUSTRY—A GOOD MATCH? 4 (May 2013), 2024] Protecting Protectionism in the WTO 103 internalize the benefits of promulgating emissions-reducing policy more directly.9 As a result, LCRs can also broaden appeal for partisan policies.10 Nonetheless, LCRs are frequently challenged under the WTO because they create barriers to trade, and it is possible that one or more of the U.S.’s trading partners will formally complain to the WTO Dispute Settlement Body (DSB) about the IRA.11 A survey of prior cases that have been heard by the DSB reveals that, under previous interpretations of WTO agreements, the IRA likely vi- olates at least three agreements due to its use of LCRs. This note pro- poses an alternative interpretation of certain WTO agreements that would allow the IRA to pass muster. This note further argues that it would be prudent for the Appellate Body (AB) to adopt this new in- terpretation if the IRA is formally challenged. Part II of this Note describes the history and goals of the WTO as well as its mechanisms for dispute resolution; explains the appeal of LCRs in renewable energy (RE) policy; and outlines relevant portions of the IRA, with special attention to the LCRs therein. Part III de- scribes the WTO agreements implicated by a challenge against the IRA and the jurisprudence that has evolved surrounding these agree- ments. Part III also demonstrates that, absent reinterpretation, the IRA and similar RE policy would be found to violate WTO agreements. Part IV proposes an alternative interpretation of the General Excep- tions to the General Agreement in Trades and Tariffs that would allow the IRA to survive a challenge; describes potential counterarguments to this interpretation; and ultimately concludes that the WTO should use the IRA as an opportunity to reinterpret the General Exceptions as described in this note, considering the state of the climate crisis. https://www.greenpolicyplatform.org/sites/default/files/downloads/resource//local-con- tent-requirements-renewable-energy-industry-ICTSD.pdf [https://perma.cc/5YFV-HFZR]. 9. See Timothy Meyer, How Local Discrimination Can Promote Global Public Goods, 95 B.U. L. REV. 1937, 1939 (2015). 10. See infra notes 93–95 and accompanying text for a discussion of the political climate in the U.S. that led to inclusion of LCRs in the IRA. 11. Louise Wendt Jensen, supra note 7. After the U.S. passed the IRA, the European Union and South Korea immediately expressed concern over the Act’s potential WTO violations. The European Union eventually responded to the IRA by implementing the Green Deal Industrial Plan, which contains LCRs that are similar to those included in the IRA. As of August 2023, South Korea is still considering launching a complaint with the WTO. Kim Da-sol, Korea to Review WTO Complaint on Biden’s IRA, THE KOREA HERALD (Aug. 22, 2022), https://www.koreaher- ald.com/view.php?ud=20220822000789 [https://perma.cc/HZM4-N5RY]. 104 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 II. THE WTO, LCRS IN THE RE INDUSTRY, AND THE IRA Before assessing whether the IRA violates the WTO, it is important to understand what is at stake and why the U.S. employed LCRs in the Act. Part II(A) describes the history and goals of the WTO, outlines the process for resolving disputes in the WTO, and explains the con- sequences of violating the WTO. Part II(B) defines LCRs and demon- strates why they are frequently employed in RE policy. Part II(C) de- scribes the IRA with an eye to the political climate in which the Act was passed and identifies the LCRs in the Act that have drawn oppo- sition from international trading partners. A. WTO Framework This section first discusses the goals and history of the WTO, then explains the dispute resolution process for when one WTO member nation believes another to be in violation of one or more agreements. 1. Goals & History of the WTO The WTO is an intergovernmental organization which exists “to open trade for the benefit of all.”12 The predecessor to the WTO was the General Agreement on Tariffs and Trade of 1947 (GATT 1947), a multilateral trade agreement aimed at eliminating trade discrimina- tion between members, reducing tariffs, and encouraging open mar- kets following World War II.13 However, GATT 1947 only covered trade in goods, leading many member nations to enter bilateral agree- ments covering trade topics such as services and intellectual property, which undermined GATT 1947.14 During the Uruguay Round (1986– 1994), contracting nations undertook to completely reform their agreements and create the World Trade Organization.15 A total of 123 nations took part in the Marrakesh Agreement Establishing the World Trade Organization (Marrakesh Agreement) at the Uruguay Round.16 This umbrella agreement was passed along with three annexes 12. What is the WTO?, WORLD TRADE ORG., https://www.wto.org/english/thewto_e/whatis_e /whatis_e.htm [https://perma.cc/72A7-62GB] (last visited Oct. 15, 2023). 13. GATT 1947 and the Grueling Task of Signing, WORLD TRADE ORG., https://www.wto.org /english/tratop_e/gatt_e/task_of_signing_e.htm [https://perma.cc/WS3L-5JF3] (last visited Oct. 15, 2023). 14. Id. 15. The Uruguay Round, WORLD TRADE ORG., https://www.wto.org/english/thewto_e /whatis_e/tif_e/fact5_e.htm [https://perma.cc/N43H-X8LZ] (last visited Oct. 15, 2023). 16. Id. See Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, 33 I.L.M. 1144 (1994) [hereinafter Marrakesh Agreement]. 2024] Protecting Protectionism in the WTO 105 containing multilateral trade agreements and one annex containing plurilateral trade agreements.17 The WTO’s stated principles are: improving people’s lives, negotiat- ing trade rules, overseeing WTO agreements, maintaining open trade, and settling disputes.18 At the heart of the WTO are its agreements, which, like nearly all WTO decisions, are approved by a consensus of member nations (Members).19 The IRA’s usage of LCRs implicates three of the WTO’s existing agreements: the General Agreement on Tariffs and Trade 1994 (GATT),20 the Agreement on Subsidies and Countervailing Measures (SCM),21 and the Agreement on Trade-Re- lated Investment Measures (TRIMs).22 These agreements are dis- cussed in-depth in Part III, infra, but they largely function to prevent Members from enacting measures that create barriers to trade. Throughout the WTO agreements, there is evidence that sustaina- ble development and environmental protection are important goals to the organization. For example, in the preamble to the Marrakesh Agreement, Members committed to “allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so[.]”23 Other WTO findings also report that climate change has the potential to disrupt supply chains and raise trade costs across the globe, making climate change 17. See Marrakesh Agreement, supra note 16. 18. Who We Are, WORLD TRADE ORG., https://www.wto.org/english/thewto_e/whatis_e /who_we_are_e.htm [https://perma.cc/W6PT-F4G5] (last visited Oct. 15, 2023). 19. Whose WTO is it Anyway?, WORLD TRADE ORG., https://www.wto.org/english/thewto_e /whatis_e/tif_e/org1_e.htm [https://perma.cc/Y2UH-T4AV] (last visited Oct. 15, 2023). 20. General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Es- tablishing the World Trade Organization, Annex 1A, 1867 U.N.T.S. 187, 33 I.L.M. 1153 (1994) [hereinafter GATT 1994]. 21. Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agree- ment Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14 [hereinafter SCM Agreement] [Not reproduced in I.L.M.]. 22. Agreement on Trade-Related Investment Measures, Apr. 15, 1994, Marrakesh Agree- ment Establishing the World Trade Organization, Annex 1A, 1868 U.N.T.S. 186 [hereinafter TRIMs Agreement] [Not reproduced in I.L.M.]. Other agreements, such as the General Agree- ment on Trade in Services (GATS), could also be implicated by LCRs, though complaints against the IRA are more likely to arise under the three aforementioned agreements. This note will therefore focus only on GATT, SCM, and TRIMs. Furthermore, analysis of the IRA under GATS and other WTO agreements would be largely repetitive, as the same principles are found throughout most WTO agreements. See The General Agreement on Trade in Services, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 1869 U.N.T.S. 183, 33 I.L.M. 1167 (1994). 23. Marrakesh Agreement, supra note 16. 106 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 mitigation in service of the WTO goal to reduce barriers to trade.24 In spite of repeated mentions of environmental goals, the WTO is clear that measures passed by Member nations to protect the environment still must comply with all requirements of the WTO agreements “to avoid the misuse of such measures for protectionist ends[.]”25 2. Dispute Resolution If a Member nation believes that another Member is in violation of an agreement, the complaining Member must follow dispute settle- ment procedures outlined in the Dispute Settlement Understanding (DSU),26 as modified by the particular agreement(s) alleged to be vio- lated.27 Per the DSU, Members must engage in consultation to attempt to settle their dispute before any other remedy is made available.28 If, after 60 days, the Members have failed to settle their dispute, the com- plaining Member may request a panel be convened.29 Panels are com- posed of three or five panelists, drawn from a pool of “well-qualified” individuals.30 The role of the panel is to “make an objective 24. Trade and Climate Change, WORLD TRADE ORG., https://www.wto.org/eng- lish/tratop_e/envir_e/climate_intro_e.htm [https://perma.cc/K8QK-HFC7] (last visited Oct. 15, 2023). 25. Trade and Environment, WORLD TRADE ORG., https://www.wto.org/english/tratop_e/en- vir_e/envir_e.htm [https://perma.cc/JG2A-LCQT] (last visited Oct. 15, 2023). 26. Understanding on Rules and Procedures Governing the Settlement of Disputes art. 1, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994) [hereinafter DSU] (“The rules and procedures of this Understanding shall apply subject to such special or additional rules and procedures on dispute settlement contained in the covered agreements as are identified in Appendix 2 to this Understanding”). 27. GATT 1994 and TRIMs largely rely on the default dispute resolution terms of the DSU. SCM “contains extensive special or additional dispute settlement rules and procedures provid- ing, inter alia, for expedited procedures, particularly in the case of prohibited subsidy allega- tions.” Agreement on Subsidies and Countervailing Measures, WORLD TRADE ORG., https://www.wto.org/english/tratop_e/scm_e/subs_e.htm [https://perma.cc/3TSE-PFLB] (last visited Oct. 15, 2023). A Member may request consultations with any other Member which it believes has granted a subsidy prohibited by SCM. SCM Agreement, supra note 21, art. 4.1. The Members then must engage in consultation to “clarify the facts of the situation and to arrive at a mutually agreed solution.” Id. art. 4.3. If the Members fail to agree on a solution within 30 days of the consultation request, “any Member party to such consultations may refer the matter to the [DSB] for the immediate establishment of a panel, unless the DSB decides by consensus not to establish a panel.” Id. art. 4.4. 28. DSU, supra note 26. The complaining party first requests consultation, which the party alleged to be in violation must respond to within 10 days. Id. art. 4.3. The Members must then begin good faith consultations within 30 days of the receipt of the request for consultation. Id. 29. Id. art. 4.7. The 60-day period for consultations begins on the date of receipt of the re- quest for consultation. Id. If both parties agree that consultations have failed before the 60-day consultation period ends, the complaining party may request the panel be established sooner. Id. 30. Id. art. 8. 2024] Protecting Protectionism in the WTO 107 assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements.”31 Panel examination resembles an adversarial trial. Prior to the first substantive meeting of the panel, the parties submit their arguments in writing.32 The parties then present their cases orally at the first substantive meeting, beginning with the complaining Member.33 A second substantive meeting is later held, where parties present their rebuttal arguments.34 The panel may also ask parties questions at any time35 or “seek information and technical advice from any individual or body which it deems appropriate.”36 After examination, the panel’s interim report is sent to the parties for comment.37 The panel reviews and responds to any comments from parties, and the report is finalized and circulated to the parties.38 The entire panel examination process takes up to six months from the date of the panel’s establishment until its findings are circulated to the parties.39 Throughout this process, the panel “should consult regu- larly with the parties to the dispute and give them adequate oppor- tunity to develop a mutually satisfactory solution.”40 If parties are un- able to do so, the panel submits its findings to the DSB, which is composed of a representative from each Member.41 The findings in- clude the panel’s determination of whether the challenged measures are consistent with WTO rules and—if the panel finds that measures are inconsistent—a recommendation that the Member bring the measures into conformity.42 A report also generally includes specific recommendations as to how the Member should achieve conform- ity.43 31. Id. art. 11. 32. Id. app 3.4. 33. Id. app. 3.5. 34. Arguments are again submitted in writing ahead of time. Rebuttals begin with the party complained against. Id. app. 3.7. 35. Id. app. 3.8 36. Id. art. 13.1. 37. Id. art. 15.2. 38. Id. art. 12.9, app. 3.12(k). 39. Id. art. 12.8. 40. Id. art. 11. 41. Id. art. 12.7–12.8. 42. Id. art. 19. 43. Id. art. 19. Remedies under SCM deviate slightly: if a panel finds that SCM is violated, it must recommend immediate withdrawal of the subsidy in question. SCM Agreement, supra note 21, art. 4.7. This is in contrast to the generally-preferred course of recommending means of bringing the measure into compliance without withdrawing it. DSU, supra note 26 art. 19.1. 108 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 If no party objects to a panel’s findings of inconsistency with WTO agreements, the DSB will adopt the panel’s recommendation (which is generally either to bring the measure into compliance or withdraw the measure altogether within sixty days).44 A party which disagrees with the panel’s report has two options: submit objections to the DSB or appeal the report to the AB.45 If a party appeals the report, the DSB will not consider or adopt the panel report until the appeals process is resolved.46 The AB draws up its own procedures and its proceed- ings are confidential, but the AB must address each of the issues the Members raise.47 The AB “may uphold, modify or reverse the legal findings and conclusions of the panel,” and then will send a Report to the DSB.48 The DSB must adopt the AB Report, unless they decide by consensus not to.49 The DSB then makes recommendations that would bring the challenged measure into compliance with WTO rules (generally repealing all or part of the measure).50 Following panel or AB proceedings, any Member found to be in vio- lation of WTO agreements must follow the recommendations from the panel report or Appeals report, as adopted by the DSB. If a Member refuses to do so within a reasonable period of time, the Member in violation must provide compensation to the challenging Member.51 If the parties fail to agree on compensation, the DSB will permit the com- plaining party or parties to employ temporary retaliatory measures.52 It is important to note that there is no rule of stare decisis in WTO dispute resolution, meaning that panels and the AB have no obligation to follow prior interpretations of the rules currently before them.53 44. Id. art. 16. 45. DSU, supra note 26 art. 16.2, 16.4. An appeal is the preferred route for Members who disagree with the panel Report because the DSB can only depart from the Report by consensus vote. Id. 46. Id. art. 16.4. 47. Id. art. 17. 48. Id. 49. Id. art. 17.14. 50. A Unique Contribution, WORLD TRADE ORG., https://www.wto.org/english/thewto_e /whatis_e/tif_e/disp1_e.htm [https://perma.cc/FT3K-FHYJ] (last visited Oct. 15, 2023). 51. Id. The compensation is agreed upon by the parties to the dispute (e.g., a reduction in tariffs for the complaining party/parties). 52. Id. Retaliatory measures may include blocking imports or raising import duties. Gener- ally, the retaliatory measure will be similar to the offending measure, or at least affecting the same sector or WTO agreement. These retaliatory measures are designed to pressure the Mem- ber in violation to come into compliance. 53. Legal Effect of Panel and Appellate Body Reports and DSB Recommendations and Rulings, WORLD TRADE ORG, https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/ c7s2p1_e.htm [https://perma.cc/4DH5-SZ29] (last visited Oct. 15, 2023). While prior 2024] Protecting Protectionism in the WTO 109 That said, panels and the AB do tend to take prior findings into ac- count because they “create legitimate expectations among WTO Mem- bers.”54 The AB has varied in the emphasis it places on prior rulings, sometimes using them only insofar as the reasoning contained within is persuasive,55 and other times deferring broadly to prior rulings in the interest of predictability.56 The United States is currently dissatisfied with the WTO dispute resolution mechanisms, due in large part to the adjudicatory bodies’ increased reliance on their own precedent.57 The U.S. has expressed this dissatisfaction by refusing to appoint new AB members, trigger- ing an Appellate Body “Crisis” and undermining the authority of the WTO.58 Under WTO rules, appeals must be heard by a panel of three judges, drawn from a standing Appellate Body that is composed of seven members appointed by the DSB by consensus.59 Standing AB members serve four-year terms. Under President Trump, the U.S. re- fused to appoint any new members of the AB, in protest of the WTO’s “overreach.”60 Since AB members are appointed by consensus, the U.S.’s refusal prevents appointment of new AB members, which interpretations of WTO agreements are not binding in future disputes, AB interpretations are binding on future panels in the same dispute between the same parties. Appellate Body Report, Japan—Taxes on Alcoholic Beverages, WTO Doc. WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11 /AB/R 14 (adopted Nov. 1, 1996) [hereinafter Japan—Taxes on Alcoholic Beverages]. 54. Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products—Recourse to Art. 21.5 of the DSU by Malaysia, ¶ 108, WTO Doc. WT/DS58/AB/RW (adopted Nov. 21, 2001). 55. Japan—Taxes on Alcoholic Beverages, supra note 53. 56. Appellate Body Report, United States—Final Anti-Dumping Measures on Stainless Steel from Mexico, ¶ 160, WTO Doc. WT/DS344/AB/R (adopted May 20, 2008). In this report, the AB stated that, absent “cogent reasons” to do so, WTO adjudicatory bodies should not depart from prior judicial interpretations, in order to ensure “security and predictability.” Id. The “absent cogent reasons” language was viewed by many nations—including the U.S.—as judicial over- reach. For further reading on precedent in WTO adjudications, see James Bacchus & Simon Lester, The Rule of Precedent and the Role of the Appellate Body, 54 J. WORLD TRADE 183 (2020). 57. Giorgio Sacerdoti, The Authority of “Precedent” in International Adjudication: the Conten- tious Case of the WTO Appellate Body’s Practice, 19 L. AND PRAC. OF INT’L CTS. AND TRIBUNALS 497, 498 (2020). The U.S. asserts that the over-reliance on AB precedent effectively binds parties to rules that they did not agree to. Moreover, this over-reliance prevents remedy of what the U.S. views as mistaken interpretations of WTO agreements. Id. According to U.S. representatives, WTO panels and ABs should rely on the text of the agreements in question and the arguments of the parties, rather than the non-ratified interpretations promulgated by earlier panels and ABs. ROBERT MCDOUGALL, CRISIS IN THE WTO: RESTORING THE WTO DISPUTE SETTLEMENT FUNCTION 8 (Oct. 2018), https://www.cigionline.org/sites/default/files/documents/Paper%20no.194.pdf [https://perma.cc/J53B-YDRC]. 58. McDougall, supra note 57. 59. DSU, supra note 26, art. 17. The DSB is composed of representatives from each Member, so DSB consensus entails consensus of Member nations. 60. McDougall, supra note 57. 110 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 caused the standing AB to dwindle as AB members’ terms ended.61 In 2019, two of the last three AB members’ terms ended, meaning there were no longer enough members to hear appeals.62 President Biden has continued to block new AB members’ appointment.63 Since ap- pealing a panel finding prevents the DSB from adopting the report or ordering a remedy, any Member that receives an adverse panel deci- sion can essentially appeal the adverse finding into a void, and ag- grieved Members may not obtain relief for WTO violations. Even in light of the Appellate Body Crisis, the question of whether a measure violates the WTO is important for a number of reasons. First, losing Members do not always appeal panel findings, so panel reports can still be adopted by the DSB;64 second, there is the possibility that the WTO will resolve the Appellate Body Crisis in the near future through cooperation with the U.S. or by implementing procedural workarounds so that the U.S.’s consent is not necessary;65 and third, many WTO Members have formed the Multi-Party Interim Appeal Ar- bitration Arrangement, where appeals between participating mem- bers can be heard, so WTO agreements still have their full effect for those nations.66 Furthermore, the interpretation of the General Ex- ceptions that this note suggests in Part IV could help address “judicial overreach” concerns expressed by the U.S. 61. Id. at 5. 62. Id. at 1. 63. A. M. Menshikov, Position of Joe Biden’s Administration on the World Trade Organization, 92(6) HERALD OF THE RUSSIAN ACAD. OF SCI. 529, 531 (2022). 64. See, e.g., Status Report, European Union—Safeguard Measures on Certain Steel Products, WTO Doc. WT/DS595/14 (Jan. 17, 2023). 65. Tetyana Payosova et.al., The Dispute Settlement Crisis in the World Trade Organization: Causes and Cures, 18–5 PETERSON INST. FOR INT’L ECON. POL. BRIEFS 9-10 (Mar. 2018), https://www.piie.com/sites/default/files/documents/pb18-5.pdf [https://perma.cc/666C- J3CF]. The Appellate Crisis would also be resolved if the WTO conceded to the U.S.’s demands or if the U.S. consented to appointment of AB members (though this seems unlikely given that the U.S. has refused to appoint AB members for the past five years). 66. There are currently 52 nations participating in the Multi-Party Interim Appeal Arbitra- tion Arrangement (MPIA) including major U.S. trade partners such as the European Union, Can- ada, China, and Mexico. The MPIA largely follows DSU rules for appellate review and will remain in effect as long as the Appellate Body Crisis continues. Multi-Party Interim Appeal Arbitration Arrangement (MPIA), WORLD TRADE ORG., https://wtoplurilaterals.info/plural_initiative/the- mpia/ [https://perma.cc/JZF2-B397] (last visited Oct. 15, 2023); see DSU, supra note 26. Since the U.S. is not a participant in the MPIA, the IRA will not be challenged in that forum, but the European Union’s Green Deal Industrial Plan contains similar LCRs to the IRA and may be chal- lenged in the MPIA. 2024] Protecting Protectionism in the WTO 111 B. Local Content Requirements in Renewable Energy Policy Having set the stage with the WTO framework under which the IRA will be analyzed, this section explains what LCRs are and why they are frequently employed in RE policy. This section will begin by describ- ing the need for RE and why a national policy is necessary to stimulate its development, then explain the appeal of LCRs as a tool in RE policy. 1. The need for RE policy The effects of climate change are already being felt globally.67 To curb the worst impacts of climate change, virtually all nations—the U.S. included—entered the Paris Agreement in 2015.68 The Paris Agreement is a treaty with the goal of limiting global average temper- ature rise to “well below” 2℃ above pre-industrial levels by 2100 and “pursuing efforts to limit the temperature to 1.5℃.”69 In order to reach the 1.5℃ figure, global greenhouse gas emissions must be re- duced by 43% by the year 2030.70 Countries participating in the Paris Agreement are expected to submit Nationally Determined Contribu- tions (NDCs), which describe the country’s plan for reducing green- house gasses.71 Under President Biden, the U.S.’s NDC set an “econ- omy-wide target of reducing its net greenhouse gas emissions by 50- 52 percent below 2005 levels in 2030.”72 As the world’s second-larg- est producer and consumer of energy,73 the U.S.’s pledge is essential to achieving the goals of the Paris Agreement. To meet this goal, the U.S. vowed to “decarbonize the energy sector, including by cutting 67. The Effects of Climate Change, NASA.GOV, https://climate.nasa.gov/effects/ [https://perma.cc/KL2N-4Y93] (last visited Oct. 15, 2023). 68. The Paris Agreement, U.N. FRAMEWORK CONV. ON CLIMATE CHANGE, https://unfccc.int/pro- cess-and-meetings/the-paris-agreement [https://perma.cc/3MNK-W2HW] (last visited Oct. 15, 2023). The U.S. briefly withdrew from the Paris Agreement under President Trump, but rejoined in 2021 soon after President Biden took office. Press Statement, Antony J. Blinken, Secretary of State, The United States Officially Rejoins the Paris Agreement (Feb. 19, 2021), https://www.state.gov/the-united-states-officially-rejoins-the-paris-agreement/#:~:text=On %20January%2020%2C%20on%20his,becomes%20a%20Party%20again%20today [https://perma.cc/U8BC-R5JY]. 69. Id. Even global warming of 1.5 degrees poses risks for humans, particularly those in de- veloping nations and island nations. MYLES ALLEN, ET. AL., IPCC, 2018: SUMMARY FOR POLICYMAKERS (Masson-Delmotte, V., et al. eds., 2018) 7, https://www.ipcc.ch/sr15/chapter/spm/ [https://perma.cc/J7FW-UU5E]. 70. U.N. FRAMEWORK CONV. ON CLIMATE CHANGE, supra note 68. 71. Id. 72. UNITED STATES OF AMERICA, NATIONALLY DETERMINED CONTRIBUTION 1, https://un- fccc.int/sites/default/files/NDC/2022-06/United%20States%20NDC%20April%2021%20202 1%20Final.pdf [https://perma.cc/WLF3-E95Y] (last visited Oct. 15, 2023). 73. Id. at 12. 112 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 energy waste; shifting to carbon pollution-free electricity; electrifying and driving efficiency in vehicles, buildings, and party of industry; and scaling up to energy sources and carriers[.]”74 Currently, approxi- mately 78% of global greenhouse gas emissions come from fossil fuels.75 Emissions in the U.S. can be broken down by sector as follows: the transportation sector contributes 28% of emissions, the electric power sector contributes 25%, the industry sector contributes 23%, commercial and residential sectors contribute 13%, and agriculture contributes 10%.76 The transportation sector’s high contribution is largely attributable to the fact that 90% of transportation energy us- age is met by petroleum.77 A comparative case study between wind energy development in Eu- rope and the U.S. demonstrates that, predictably, a consistent and long-term RE policy leads to steadier development.78 Various U.S. states have enacted RE policies to encourage RE development, but federal-level RE policies have been insufficient to meaningfully de- crease U.S. greenhouse gas emissions.79 There are two notable road- blocks to RE policy in the U.S. which LCRs may mitigate. First, the cost of RE policy can outweigh the benefits to the jurisdiction enacting the policy, particularly in the short-term.80 Second, partisan politics, 74. Id. at 3. 75. Global Greenhouse Gas Emissions Data, EPA.GOV, https://www.epa.gov/ghgemis- sions/global-greenhouse-gas-emissions-data#:~:text=Since%201970%2C%20CO2%20 emissions,been%20the%20second%2Dlargest%20contributors [https://perma.cc/9FU6-BRTF] (last visited Oct. 15, 2023). 76. Sources of Greenhouse Gas Emissions, EPA.GOV, https://www.epa.gov/ghgemissions /sources-greenhouse-gas-emissions [https://perma.cc/9ERD-VFTU] (last visited Oct. 15, 2023) (describing emissions from the year 2021). 77. Light-duty vehicles (e.g., SUVs, pickup trucks, and cars) produce the largest share of emis- sions. UNITED STATES OF AMERICA, supra note 72 at 4. 78. Randall Swisher & Kevin Porter, Renewable Policy Lessons from the USA: The Need for Consistent and Stable Policies, in RENEWABLE ENERGY POLICY AND POLITICS 185, 196–197 (Karl Mal- lon ed., 2006). 79. U.S. Emissions, CENTER FOR CLIMATE AND ENERGY SOLUTIONS, https://www.c2es.org/con- tent/u-s-emissions/#:~:text=Trends%20in%20U.S.%20Greenhouse%20Gas%20Emissions%2 C%201990–2020&text=Total%20emissions%20decreased%20by%207.3,least%206%20per- cent%20in%202021 [https://perma.cc/75VL-D4EG] (last visited Oct. 15, 2023). 80. Since climate change is a collective action problem, the jurisdiction enacting measures to reduce emissions will not gain any special benefit from its emission reductions. Meyer, supra note 9. 2024] Protecting Protectionism in the WTO 113 fragmentation of authority,81 and politicization of climate change slow progress.82 2. Why governments find LCRs attractive in RE policy An LCR is a policy tool in which a government requires businesses to source products or materials from a particular geographic area to receive a benefit.83 One of the primary reasons for LCRs in RE policy is to spur innovation. Currently, many potential players in the RE in- dustry are dissuaded from investing in the field because they may not be able to compete with their well-established, non-RE counterparts in the international free market.84 Incentives that include LCRs for manufacturers and generators in the RE industry provide some pro- tection against international competition with more-developed peers while domestic industry participants scale up their operations.85 Since incentives with LCRs will allow more industry participants to survive infancy and eventually enter the global market, it is theorized that worldwide competition in this area will be increased, which will spur innovation that would eventually lower the global cost of renew- able energy technology.86 LCRs also allow nations to internalize the benefits of their emis- sions-reducing policies. Climate change presents a classic collective- action problem: each country will benefit greatly if they all work to- gether to reduce greenhouse gas emissions, but a jurisdiction that en- acts RE policy will receive no special benefit from its own policies.87 Governments are understandably hesitant to take on a particularized and immediate cost (i.e., the domestic cost of enacting the policy) in exchange for a non-immediate benefit that is dispersed globally.88 LCRs as a RE tool create an immediate benefit for the jurisdictions 81. See Sean Farhand & Miranda Yaver, Divided Government and the Fragmentation of Amer- ican Law, 60 AM. J. OF POL. SCI. 401 (Apr. 2016). Authority is divided between state and federal decision-makers, as well as splintered between three equal branches of federal government. Compared to more hierarchical government structures common in Europe, the U.S. system leads to policymakers wielding comparatively weaker power. Id. at 402. 82. Aaron M. McCright & Riley E. Dunlap, The Politicization of Climate Change and Polariza- tion in the American Public’s Views of Global Warming, 2001-2010, 52 SOCIO. Q 155 (2011). 83. Local Content Requirements, ORG. FOR ECON. COOP. AND DEV., https://www.oecd.org/trade /topics/local-content-requirements/ [on file with the Journal] (last visited Mar. 18, 2023). 84. KUNTZE & MOERENHOUT, supra note 8, at 4. 85. Id. at 4–5. 86. Id. at 5. This would require, of course, that LCRs are eventually phased out to allow for international competition. 87. Meyer, supra note 9. 88. Id. 114 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 enacting the policy, allowing them to more directly internalize the benefits of their emissions-reducing measures. A related benefit of LCRs is that they preserve domestic jobs.89 One of the greatest costs of RE policy is job loss in areas with a large num- ber of jobs tied to the fossil fuel industry. LCRs aid in creating jobs in regions that would otherwise face significant job loss as a result of the decreased reliance on fossil fuels. Without LCRs, nations that have been faster to develop their EV manufacturing infrastructure will gain an advantage in EV manufacturing, while nations that have delayed doing so will have a much harder time recovering those lost jobs. A 2021 study projected that, without any policy to keep EV jobs in America, approximately 75,000 American auto assembly and auto parts jobs would be lost if the EV share of the auto market increased to 50% by 2030.90 By contrast, if the U.S.-produced share of EV powertrain components concurrently rose to match the share of U.S.- produced share of internal combustion engine vehicle powertrain components, only around 35,000 American auto jobs would be lost.91 If the share of domestically produced vehicles sold in the U.S. also in- creased by 10%, the U.S. would see a net increase of 152,000 jobs.92 If switching to RE means loss of domestic jobs, nations will be much more resistant to transitioning. C. The Inflation Reduction Act 1. History and Goals of the IRA Partisanship in Washington, D.C. has prevented Congress from passing meaningful legislation on climate change for decades, with Republicans repeatedly blocking attempts to combat the climate 89. It may be argued that creation of domestic jobs should not be an acceptable policy reason for discriminating against products imported from other WTO Members, but RE policy is a spe- cial case given the import of mitigating the climate crisis. If increased RE will mean loss of do- mestic jobs, it will be very difficult to garner support for the transition to RE. 90. Jim Barret & Josh Bivens, The Stakes for Workers in How Policymakers Manage the Coming Shift to All-Electric Vehicles, ECONOMIC POLICY INSTITUTE (Sept. 22, 2021), https://www.epi.org /publication/ev-policy-workers/ [https://perma.cc/CRE6-RXU4] (discussing light-duty vehi- cles). This figure assumes that the remaining 50% of cars are ICE vehicles (i.e., no share of the market is attributed to hybrid vehicles). Id. It also assumes the total number of cars made stays the same. Id. 91. Id. 92. Id. 2024] Protecting Protectionism in the WTO 115 crisis.93 In 2022, Democrats had a slim majority in both the House of Representatives and the Senate,94 but as the midterms approached, their chance to act on climate change was drawing to an end, as a “red wave” was predicted to flip both houses.95 The Democrats’ majority was not wide enough to pass normal legislation without Republican support, so the only option for major climate action was through budget reconciliation.96 However, Congress can only pass measures 93. See, e.g., Daniel J. Weiss, Anatomy of a Senate Climate Bill Death, CENTER FOR AM. PROGRESS (Oct. 12, 2010), https://www.americanprogress.org/article/anatomy-of-a-senate-climate-bill- death/ [https://perma.cc/LH8L-SD4G] (discussing the failure of the Waxman-Markey American Clean Energy and Security Act, where Republicans and Centrist Democrats in the Senate blocked a greenhouse gas cap-and-trade program that had passed in the House of Representatives). See generally Patrick J. Egan & Megan Mullin, US Partisan Polarization on Climate Change: Can Stale- mate Give Way to Opportunity?, POL. SCI. & POL. 1 (Sept. 7, 2023), https://www.cam- bridge.org/core/journals/ps-political-science-and-politics/article/us-partisan-polarization-on -climate-change-can-stalemate-give-way-to-opportunity/2666C4C08C3A5456B3001240B882 C48D [https://perma.cc/AWQ5-SPC9]. In recent attempts to pass climate change policy imme- diately preceding the IRA, Senator Joe Manchin III (D. W.Va.), whose vote was necessary to se- cure a majority vote in the Senate, joined Republicans in blocking legislation. Alan Fram, Manchin, key Dem, says Build Back Better bill is “dead,” ASSOC. PRESS (Feb 1, 2022), https://ap- news.com/article/joe-biden-business-environment-and-nature-environment-joe-manchin-c2e 743dbb3978a9e780779fa4fec09b7 [https://perma.cc/2Q8A-EV8L] (discussing the Build Back Better Bill, an unsuccessful predecessor to the IRA). Though Senator Manchin is a Democrat, his opposition to action on climate change is closely connected to his large Republican constituency in West Virginia. See Greg Giroux & Chris Strohm, Joe Manchin (D-WV), BLOOMBERG GOV’T (2015) 1-2, https://www.asn-online.org/policy/webdocs/WV-Joe Manchin.pdf [https://perma.cc/FLB7-4FFB]. 94. 117th United States Congress, https://ballotpedia.org/117th_United_States_Con- gress#cite_note-ind-1 [https://perma.cc/N34C-TJ86] (last visited Oct. 20, 2023). Democrats held a 220-to-212-person majority in the House and a 50-person majority in the Senate (includ- ing independent Senators who caucus with Democrats), with Vice President Kamala Harris providing the tie-breaking vote. Id. 95. Climate Policy in 2023 and Beyond: U.S. Midterm Election Results, What They Mean, and Where We Go From Here, CLEAN AIR TASK FORCE (Jan. 23, 2023), https://www.catf.us/2023/01 /climate-policy-2023-beyond-us-midterm-election-results [https://perma.cc/WR3U-JEA8 ]. This was the last of several attempts by Democrats to pass climate policy through budget recon- ciliation, as Senator Manchin refused to vote for earlier bills that included climate provisions. Ximena Bustillo & Laura Benshoff, Biden Urges Democrats to Pass Slim Health Care Bill After Manchin Nixes Climate Action (updated Jul. 15, 2022), https://www.npr.org/2022/07/15 /1111675233/manchin-rejects-climate-and-tax-provisions-in-democrats-spending-package [https://perma.cc/RM43-8TGG]. With only a 50-person majority, Manchin was effectively blocking these earlier attempts. Id. 96. Budget reconciliation is a legislative process that allows Congress to make changes to spending, revenue, and the federal budget. Under normal legislative processes, senators may use the filibuster to delay a vote on a bill and the filibuster may only be ended by a 60-vote majority. By contrast, in budget reconciliation, debate can be closed by a simple majority vote, so approval is only needed from 51 senators to pass controversial measures through reconcili- ation. HOUSE COMM’N ON THE BUDGET, BUDGET RECONCILIATION: THE BASICS, (Aug. 11, 2021)., https://democrats-budget.house.gov/resources/fact-sheets/budget-reconciliation-basics [https://perma.cc/V4J9-PNLD]. 116 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 through reconciliation that deal with budget, spending, and the fed- eral debt limit;97 thus, subsidies were the primary tool available. Democrats passed the IRA on August 16, 2022 without any Repub- lican support in the House or Senate,98 investing $369 billion in en- ergy security and climate change.99 Prior to the passage of the IRA, a business-as-usual estimate would project the U.S. to reduce GHG emissions by 30% of 2005 levels by 2030.100 The clean energy invest- ments in the IRA put the U.S. on track to reduce emissions to 40% of 2005 levels by 2030.101 This anticipated emission reduction is accomplished through a va- riety of tax credits, most notably an expanded Investment Tax Credit for certain investments in renewable energy,102 an expanded Produc- tion Tax Credit for renewable energy generation,103 an Advanced En- ergy Project Credit for investments in renewable energy manufactur- ing,104 several credits for homes and buildings that are energy efficient105 or generate solar energy,106 and a consumer tax credit for certain EVs.107 Although the IRA alone will not bring the U.S. to its target of a 50–52% reduction by 2030, it is the most aggressive action Congress has taken thus far to respond to the climate crisis.108 97. CONG. RSCH. SERV., THE BUDGET RECONCILIATION PROCESS: THE SENATE’S “BYRD RULE” (updated Sept. 28, 2022), https://sgp.fas.org/crs/misc/RL30862.pdf [https://perma.cc/666X-NXHQ]. 98. Kelsey Tamborrino & Josh Siegel, Big Winners from Biden’s Climate Law: Republicans Who Voted Against It (Jan. 23, 2023), https://www.politico.com/news/2023/01/23/red-states-are- winning-big-from-dems-climate-law-00078420 [https://perma.cc/3YSN-CZQQ]. 99. SENATE DEMOCRATS, supra note 3. The IRA also serves a number of additional goals, in- cluding lowering the federal deficit, lowering the costs of prescription drugs and healthcare, cre- ating jobs, and lowering the cost of energy. Press Release, White House Briefing Room, Fact Sheet: The Inflation Reduction Act Supports Workers and Families (Aug. 19, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/19/fact-sheet- the-inflation-reduction-act-supports-workers-and-families/ [https://perma.cc/9CRQ-S8NW]. 100. Larsen et al., supra note 4. 101. Id. 102. Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818 § 13102 (2022) (codified at 26 U.S.C. § 48). 103. Id. § 13101 (codified at 26 U.S.C. § 45). 104. Id. § 13501 (codified at 26 U.S.C. § 48C). 105. See id. §§ 13301 (codified at 26 U.S.C. § 45) & 13303 (codified at 26 U.S.C. § 179D); see also Dirk Wallace & Peter Lawrence, The Inflation Reduction Act: An Overview of Clean Energy Provisions and Their Impact on Affordable Housing, NOVOGRADAC (Jan. 13, 2023), https://www.novoco.com/notes-from-novogradac/inflation-reduction-act-overview-clean-en- ergy-provisions-and-their-impact-affordable-housing [https://perma.cc/ES6W-A7KN]. 106. See, e.g., Inflation Reduction Act § 13302 (Residential Clean Energy Credit) (codified at 26 U.S.C. § 25D). 107. Id. § 13401 (codified at 26 U.S.C. § 30D). 108. Larsen et al., supra note 4. 2024] Protecting Protectionism in the WTO 117 2. LCRs in the IRA A number of the IRA’s new tax credits include LCRs. For example, enhancements are offered on the Production Tax Credit (PTC) and In- vestment Tax Credit (ITC) if minimum amounts of raw materials are produced in the United States,109 and the Clean Vehicle Credit is only for Electric Vehicles (EVs) that meet domestic assembly110 and bat- tery sourcing requirements.111 The PTC and ITC were already part of the Internal Revenue Code, but the IRA expanded them to provide more support for RE facilities. In its new form, the PTC offers up to 2.6 cents per kilowatt hour of renewable energy produced by qualify- ing facilities.112 If a RE facility uses only steel or iron that was pro- duced in the U.S. and at least 40% of the remaining material was also produced in the U.S., the PTC and ITC credits will be increased by 10% (increasing the ITC from 30% to 40% of the cost of eligible RE pro- jects).113 The Clean Vehicle Tax Credit offers up to $7,500 in rebates for the purchase of qualifying electric vehicles.114 As a threshold to qualify for any of the credit, the EV’s final assembly must take place in North America.115 Then, to be eligible for one-half of the credit ($3,750), the battery components of the vehicle must be manufactured or assem- bled in North America.116 To be eligible for the other half ($3,750), critical minerals used in the vehicle must be extracted, processed, or recycled in North America or a country with which the U.S. has a free trade agreement.117 109. Thomas Gray et al., New IRA Tax Incentives for US Manufacturing in Renewable Energy Sector, TROUTMAN PEPPER (Oct. 25, 2022) https://www.troutman.com/insights/new-ira-tax-incen- tives-for-us-manufacturing-in-renewable-energy-sector.html [https://perma.cc/TP98-NYXU]. 110. Id. 111. Id. 112. Inflation Reduction Act Tax Changes, Part 2—Energy Credits and Incentives, BALLARD SPAHR (Sept. 27, 2022), https://www.ballardspahr.com/insights/alerts-and-articles/2022/09/inflation- reduction-act-tax-changes-part-2-energy-credits-and-incentives [https://perma.cc/758F-PB3T]. 113. Id. 114. Sean Bray et. al., How the Inflation Reduction Act Affects the Future of U.S.-EU Tax and Trade Cooperation, TAX FOUND. (Nov. 9, 2022), https://taxfoundation.org/inflation-reduction- act-eu-tax-trade/ [https://perma.cc/J3TN-DGLB]. However, there are disagreements over whether this tax credit will actually reduce the cost of EVs. Tori Smith, Proposed Tax Credits Would Make Electric Vehicles More Expensive, AM. ACTION F. (Aug. 4, 2022), https://www.ameri- canactionforum.org/insight/proposed-tax-credits-would-make-electric-vehicles-more-expen- sive/ [https://perma.cc/8B6Q-MY78]. 115. Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818 § 13401(b). 116. Id. § 13401(e)(2)(B). 117. Id. § 13401(e)(2)(A). 118 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 Of all these LCRs, the Clean Vehicle Credit has received the most at- tention for potentially violating WTO agreements. The European Un- ion, Japan, and South Korea have publicly voiced concerns about the Clean Vehicle Tax Credit.118 The European Union passed the Green Deal Industrial Plan in direct retaliation against the IRA,119 and South Korea may still be considering launching a complaint with the WTO.120 This is likely due to the fact that the Clean Energy Tax Credit is more likely than other LCRs in the IRA to distort trade because the tax credit is worth a significant percentage of the value of an EV, and its LCR is very stringent, with 100% of the credit contingent upon final assem- bly in North America.121 The PTC and ITC are less likely to distort trade, since the LCR enhancement is a small percentage of each credit, which themselves are only a portion of the cost of the renewable en- ergy projects.122 118. Louise Wendt Jensen, supra note 7. 119. Press Release, Eur. Parliament, Green Deal Industrial Plan: Securing the EU’s Clean Tech Leadership (Feb. 16, 2023), https://www.europarl.europa.eu/news/en/press-room/20230210 IPR74806/green-deal-industrial-plan-securing-the-eu-s-clean-tech-leadership [https://perma.cc/TR6M-U4RY]. The Green Deal Industrial Plan is a package of several acts that seek to speed the development of net-zero technology in the European Union. Many of the measures included in the Green Deal Industrial Plan include LCRs. It is clear that the IRA has incited a greater disregard for WTO compatibility by comparing the Green Deal Industrial Plan with the EU’s Carbon Border Adjustment Mechanism (CBAM). Carbon Border Adjustment Mech- anism, EUROPE COMM’N, https://taxation-customs.ec.europa.eu/carbon-border-adjustment- mechanism_en [https://perma.cc/4RLH-H3CF] (last visited Sept. 22, 2023). CBAM is a measure set to go into effect in October 2023 and will essentially adjust the price of certain goods to re- flect their carbon-intensity. Id. When this measure was first proposed in 2021, the EU carefully designed CBAM not to discriminate between WTO members. Id. In fact, the EU requested com- ments on CBAM’s compatibility from WTO Deputy Director General Jean-Marie Paugam in 2021. Statement, Jean-Marie Paugam, Deputy Director-General of the WTO, WTO Rules No Barrier to Ambitious Environmental Policies (Sept. 16, 2021), https://www.wto.org/english/news_e/news 21_e/ddgjp_16sep21_e.htm [https://perma.cc/LX5C-N499]. By comparison, the Green Deal In- dustrial Plan is a “Europe First” plan that would be treated similarly to the IRA under WTO rules. 120. Heekyong Yang et al., South Korea to Review Filing WTO Complain Over U.S. Inflation Re- duction Act, REUTERS (Aug. 22, 2022), https://www.reuters.com/markets/skorea-review-filing- wto-complaint-over-us-inflation-reduction-act-industry-2022-08-22/ [on file with the Journal]. However, South Korea seems pacified for the time being because the U.S.’s implementing regu- lations have so far prevented the Act negatively impacting South Korea’s EV economy. Chad P. Brown, How the United States Solved South Korea’s Problems with Electric Vehicle Subsidies Under the Inflation Reduction Act 1 (Peterson Inst. for Int’l Econ. Working Paper No. 23-6, July 2023) For example, the Treasury left open a loophole so that leased vehicles assembled outside of North America qualify for the exemption. Id. at 13. The Treasury also announced pathways for other countries to “become ‘free trade agreement’ partners for the sake of gaining access to Sec- tion 30D tax credits.” Id. Nevertheless, nations such as South Korea could still file a WTO com- plaint if these concessions ever prove insufficient to keep up U.S. demand for imported EVs. 121. Trevor Houser et al., Relay Race, Not Arms Race: Clean Energy Manufacturing Implica- tions of the IRA for the US and EU, RHODIUM GROUP (Feb. 28, 2023), https://rhg.com/re- search/clean-energy-manufacturing-ira-us-eu/ [https://perma.cc/4J3K-4ZNS]. 122. Id. 2024] Protecting Protectionism in the WTO 119 In the sections that follow, this Note will (1) demonstrate that the IRA’s LCRs probably do violate WTO rules as they have been inter- preted historically, and (2) argue that the IRA presents an opportunity for the WTO to reinterpret its rules—especially the General Excep- tions—in the context of RE policy to allow for limited protectionism. III. VIOLATIONS BASED ON PRIOR INTERPRETATIONS OF WTO RULES Objections to the IRA under the WTO are most likely to arise under GATT, SCM, and TRIMs. A survey of prior cases demonstrates that the IRA likely violates these agreements under the jurisprudence that has formed over the past 29 years of WTO dispute resolution. This section describes the relevant provisions of GATT, SCM, and TRIMs in turn; discusses relevant disputes that WTO adjudicatory bodies have heard dealing with those agreements; and applies prior interpretations of the agreements to the IRA. This section demonstrates that, absent a reinterpretation like that one proposed in Part IV, the IRA would likely violate the WTO. A. GATT The GATT is the primary WTO agreement dealing with trade in goods.123 Article III of GATT establishes the National Treatment Rule, which is a central principal of WTO agreements.124 In essence, the Na- tional Treatment Rule says that Members may not use tariffs or other measures to treat imported products less favorably than “like” domes- tic products.125 One recent renewable energy case provides a survey of AB deci- sions regarding the elements necessary to prove a violation of the 123. GATT and the Goods Council, WORLD TRADE ORG., https://www.wto.org/eng- lish/tratop_e/gatt_e/gatt_e.htm [https://perma.cc/2RXL-6RYN] (last visited Oct. 20, 2023). 124. GATT 1994, supra note 20 art. III. There is also a potential violation of the Most-Fa- voured Nation Principle, which says that no member may treat any member nation less favora- bly than the nation it treats most favorably. Id. art. I. The fact that the IRA includes products produced by its free-trade partners as fulfilling the IRA’s LCRs may implicate the Most-Favoured Nation Principle. However, the Most-Favoured Nation Principle will not be discussed at length in this Note because the National Treatment Principle is more clearly applicable, and at any rate the same general rules and exceptions apply to both the National Treatment Principle and the Most-Favoured Nation Principle. See generally id. 125. Id. art. III. Section 4 states, “The products of the territory of any contracting party im- ported into the territory of any other contracting party shall be accorded treatment no less fa- vourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distri- bution or use.” 120 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 National Treatment Principle.126 U.S.—Renewable Energy arose when India challenged measures enacted by various U.S. states that in- cluded incentives to encourage renewable energy generation under GATT Article III.127 The challenged programs each required in-state manufacturing or assembly in order to qualify for all or part of the in- centives.128 India argued that the incentives’ contingency upon use of domestic parts or local labor violated the National Treatment Princi- ple.129 The U.S. did not raise any exemptions in defense of its states’ policies, arguing only that India “has failed to meet its burden to show that the measures at issue are inconsistent with [the National Treat- ment Principle].”130 The panel’s report stated that there are three el- ements necessary to establish a violation: first, “that the imported and domestic products at issue are like products”; second, “that the meas- ure at issue is a law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution, or use”; and third, “that the imported products are accorded treatment less fa- vorable than that accorded to like domestic products.”131 These three elements are discussed in turn below. 1. “Likeness” The panel in U.S.—Renewable Energy noted that there has been in- consistency in how the AB defines the first element of the National Treatment test (“likeness”). There is a line of AB cases that views “likeness” as “a determination about the nature and extent of a com- petitive relationship among products” and require a holistic analysis of the nature of the products, consumer behavior toward them, etc.132 Other cases have allowed complainants to establish “likeness” “by 126. Panel Report, United States—Certain Measures Relating to the Renewable Energy Sector, WTO Doc. WT/DS510/R (adopted June 27, 2019) [hereinafter U.S.—Renewable Energy]. 127. Id. ¶ 7.84. 128. The challenged measures were promulgated by the states of Washington, California, Montana, Connecticut, Michigan, Delaware, and Minnesota. Id. ¶ 2.5. The Washington, Califor- nia, Connecticut, Delaware, and Michigan programs offered financial incentives for renewable energy projects, with additional benefits available for use of equipment manufactured or assem- bled in-state. Id. The Montana programs offered tax incentives for biofuels produced within Montana, using agricultural products originating in Montana. Id. ¶ 2.20. The Minnesota pro- grams provided incentives and rebates for photovoltaic modules that are certified as “Made in Minnesota.” Id. ¶ 2.55. 129. Id. ¶ 2.2. India additionally argued that these measures violate TRIMs and SCM. Id. 130. Id. ¶ 3.2. 131. Id. ¶ 7.85 (internal quotations omitted). 132. Id. ¶ 7.89. See also Appellate Body Report, European Communities—Measures Affecting Asbestos and Asbestos-Containing Products, ¶ 102, WTO Doc. WT/DS135/AB/R (adopted Apr. 5, 2011) [hereinafter EC—Asbestos]. 2024] Protecting Protectionism in the WTO 121 demonstrating that the measure at issue makes a distinction based exclusively on the origin of the product.”133 A complaining party would be able to show that the IRA’s EV tax credit would fulfills both of these “likeness” tests because the IRA distinguishes exclusively on the origin of the battery components and the location of assembly,134 and there is a competitive relationship between domestic and foreign EVs. 2. “Law, regulation, or requirement affecting the internal sale, offering for sale, purchase, transportation, distribution or use” The panel in U.S.—Renewable Energy separated the second element into (1) an inquiry into whether the measure is a law, regulation, or requirement, and (2) an inquiry into whether the measure affects the “internal sale, offering for sale, purchase, transportation, distribution, or use" of the products.135 The panel noted that ABs have interpreted “laws, regulations, and requirements” broadly to include not only mandatory orders, but also “conditions that an enterprise accepts in order to obtain an advantage.”136 The U.S. argued that India failed to demonstrate that the second part of this element (“affecting the inter- nal sale, offering for sale, purchase, transportation, distribution, or use”) was met.137 However, the AB relied on Canada—Autos to reject the U.S.’s argument.138 The AB had held in that case that any measure that “confers an advantage upon the use of domestic products while denying that advantage if imported products are used” alters the com- petitive relationship between the products and thus does “affect the internal sale, offering for sale, purchase, transportation, distribution, or use,” even if such effect is minimal.139 The panel therefore con- cluded that this inquiry “need not examine whether or the extent to which the measure has, under current circumstances, influenced pur- chasing decisions on the market.”140 Under this interpretation, the 133. U.S.—Renewable Energy, supra note 126, ¶ 7.89. See also Appellate Body Report, Argen- tina—Measures Relating to Trade in Goods and Services, ¶ 6.36, WTO Doc. WT/DS453/AB/R (adopted May 9, 2016). 134. Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818 § 13401. 135. U.S.—Renewable Energy, supra note 126, ¶ 7.147 (citing Appellate Body Report, Can- ada—Certain Measures Affecting the Automotive Industry, WTO Doc. WT/DS139/AB/R (adopted June 19, 2000)). 136. Id. ¶ 7.151. 137. Id. ¶ 7.156. 138. Id. ¶ 7.158. 139. Id. ¶ 7.160. 140. Id. ¶ 7.161. 122 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 IRA is also vulnerable at the second element of the National Treatment Rule violation because it conditions a benefit (receipt of tax credits) on making an EV purchase that complies with certain requirements. 3. Less favorable treatment Finally, the panel addressed the third element: less favorable treat- ment. Prior AB rulings have determined that “treatment no less fa- vorable requires effective equality of opportunities for imported products to compete with like domestic products,” so the question at this stage is “whether a measure modifies the conditions of competi- tion in the relevant market to the detriment of imported product.”141 In U.S.—Renewable Energy, India argued that the fact that the measures incentivize the use of domestic inputs necessarily makes its treatment of imported products less favorable.142 The U.S. argued— and the panel agreed—that “it is difficult to see how a measure could accord less favorable treatment to imported than to domestic prod- ucts without it affecting the sale, purchase, transport, distribution or use of such products,”143 which makes the second element144 some- what redundant. Nevertheless, the panel concluded that these two el- ements are different because the third element introduces the “to the detriment of imported products” piece.145 A final note that the panel made on the “less favorable treatment” element is that the AB does not generally require that the claimant demonstrate that there are ac- tual detrimental trade impacts; rather, they only must show that the competitive trade relationship is affected.146 This element would therefore also be found to be satisfied by the IRA’s final assembly re- quirement: incentivizing the purchase of domestically-manufactured 141. Id. ¶ 7.243 (citing Appellate Body Report, Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, ¶ 137, WTO Doc. WT/DS161/AB/R, WT/DS169/AB/R (adopted Jan. 10, 2001) (emphasis in original)). See also Appellate Body Report, Thailand—Fiscal Measures on Cigarettes from the Philippines, ¶ 73, WTO Doc. WT/DS371/AB/R (adopted Mar. 21, 2017) (“[I]t seems to be sufficient for a panel to determine on the basis of the available elements of fact that the measure will probably negatively affect the conditions of competition.”). 142. U.S.—Renewable Energy, supra note 126, ¶ 7.241. 143. Id. ¶ 7.242. 144. The second element is “[l]aw, regulation or requirement affecting the internal sale, of- fering for sale, purchase, transportation, distribution or use,” discussed earlier. See supra Part III(A)(2). 145. U.S.—Renewable Energy, supra note 126, ¶ 7.242. 146. Id. ¶ 7.245 (citing Panel Report, United States—Tax Treatment for “Foreign Sales Corpo- rations”—Recourse to Article 21.5 of the DSU by the European Communities, ¶ 215, WTO Doc. WT/DS353/RW (adopted Jan. 29, 2002); Appellate Body Report, Japan—Measures Affecting the Automobile Industry, ¶¶ 16–17, WTO Doc. WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/W (adopted Nov. 1, 1996)). 2024] Protecting Protectionism in the WTO 123 EVs over foreign-manufactured EVs affects the competitive relation- ship between foreign and domestic producers to the detriment of for- eign producers. B. TRIMS The TRIMs Agreement mandates in relevant part that no Member may apply a trade-related investment measure that is inconsistent with the National Treatment obligation in GATT Article III.147 TRIMs does not define a trade-related investment measure, but it does pro- vide an illustrative list of measures which would violate the agree- ment.148 This illustrative list states, inter alia, that measures that re- quire “the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in terms of par- ticular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production” in order to “obtain an advantage” would be inconsistent with the national treat- ment obligation and therefore violate TRIMs.149 As demonstrated in the AB report for Canada—Renewable Energy, the inquiry into whether a measure violates TRIMs is a straightfor- ward question of whether the measure is one of the types described in the illustrative list.150 In Canada—Renewable Energy, the AB ad- dressed two consolidated cases, both pertaining to a feed-in tariff (FiT) program established by Ontario for electricity generators using renewable resources.151 Eligibility for contracts under the FiT pro- gram required meeting a minimum domestic content level.152 Com- plaints against this program were made by the EU and Japan under TRIMs Article 2.1.153 The AB affirmed the panel’s finding that the FiT program did require “the ‘purchase or use’ of products from a domes- tic source, within the meaning of Paragraph 1(a) of the Illustrative List,” and compliance with this requirement was necessary in order to “obtain an advantage.”154 Since the measure fit within one of the 147. TRIMs Agreement, supra note 22, art. 2.1. 148. Id. Annex. 149. Id. Annex 1(a). 150. Appellate Body Report, Canada—Certain Measures Affecting the Renewable Energy Sec- tor and Measures Relating to the Feed-in Tariff Program, WTO Doc. WT/DS412/AB/R, WT/DS426/AB/R (adopted May 24, 2013) [hereinafter Canada—Renewable Energy]. 151. Id. 152. Id. ¶ 1.4. 153. Id. ¶ 1.6. 154. Id. ¶ 1.12. See TRIMs Agreement, supra note 21, art. 2.2 (stating that measures de- scribed in the Illustrative List are inconsistent with GATT 1994, supra note 20, art. III:4). 124 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 examples in the Illustrative List, the panel and AB found that it vio- lated the National Treatment Obligation and therefore also violated TRIMs Art. 2.1.155 The IRA likewise requires that entities purchase products of domestic origin in order to obtain an advantage in the form of a tax rebate, and would therefore be found by a panel to be in violation.156 C. SCM SCM “provides rules for the use of government subsidies and for the application of remedies to address subsidized trade that has harmful commercial effects.”157 The first step in analyzing whether a chal- lenged measure violates SCM is to determine whether the measure is a subsidy in the first place. The SCM states that “a subsidy shall be deemed to exist if: there is a financial contribution by a government or any public body within the territory of a Member . . . or there is any form of income or price support in the sense of Article XVI of GATT 1994; and a benefit is thereby conferred.”158 This can be broken into two pieces: 1) whether there is a “financial contribution” and 2) whether “a benefit is conferred.” Once it is established that a measure is a subsidy, the next question is whether the subsidy is “specific.” If so, the measure violates the WTO.159 1. “Financial Contribution” The SCM’s sections dealing with subsidies do not expound upon what types of measures would qualify as a “financial contribution,”160 but Part V of SCM, which deals with countervailing measures, pro- vides a list of types measures that would leave a recipient “better off.”161 The AB has routinely turned to this list in order to interpret “financial contributions.”162 Included on the list is “government reve- nue that is otherwise due is foregone or not collected (e.g. fiscal 155. Canada—Renewable Energy, supra note 150, ¶ 1.15. 156. Gray, supra note 109. 157. Trade Guide: WTO Subsidies Agreement, INT’L TRADE ADMIN., https://www.trade.gov /trade-guide-wto-subsidies [https://perma.cc/L4MV-VX5V] (last visited Sept. 22, 2023). 158. SCM Agreement, supra note 21, art. 1.1. 159. Some specific subsidies are “prohibited,” meaning a Member will be ordered to repeal or amend the offending measure. Other specific subsidies are “actionable,” meaning a Member will not be ordered to repeal the measure, but they will be subject to countervailing measures. Subsidies that include LCRs fall into the “prohibited” category. Id. art. 3.1(b). 160. Id. 161. Id. art. 14. 162. Canada—Renewable Energy, supra note 150, ¶ 5.163. 2024] Protecting Protectionism in the WTO 125 incentives such as tax credits).”163 Following the AB’s approach of us- ing SCM Part V list to interpret “financial contribution,” the IRA’s EV tax credits would clearly count as “government revenue that is other- wise due” that is being “foregone or not collected.” These credits therefore fall within SCM’s definition of “financial contribution.” 2. “A Benefit is Conferred” The next question is whether a measure confers a benefit. Accord- ing to the AB in Canada—Renewable Energy, a measure confers a ben- efit if it puts the recipient in a better position than it had been in the marketplace.164 If no data is available to show a marketplace “base- line,” the panel or AB may create a model baseline to compare with the outcome of the financial contribution.165 Whether the IRA actually confers a benefit will not be clear for several months or longer, when there is data available regarding the actual cost of EVs to consumers after the rebates are given. Whether there is a benefit conferred for the purposes of SCM will also depend on how narrow of a “baseline” marketplace is used. However, the ABs seem to err on the side of find- ing that a measure confers a benefit,166 so it is safest to proceed as- suming that a benefit would be found. 3. “Specific” If it is established that a measure is a subsidy, then it is necessary to explore whether it is prohibited by the agreement. A subsidy is pro- hibited under SCM if it is “specific.” A subsidy is automatically consid- ered specific if it is “contingent . . . upon export performance” or “con- tingent . . . upon the use of domestic over imported goods."167 LCRs have historically been found to fall within the latter category.168 If a subsidy doesn’t fall within either of these categories, it is considered specific if access is limited to certain enterprises.169 A measure is not specific if the authority granting the subsidy “establishes objective cri- teria or conditions governing the eligibility for, and the amount of, a 163. SCM Agreement, supra note 21, art 1.1(a)(1)(ii). 164. Canada—Renewable Energy, supra note 150, ¶ 5.163. 165. See id. 166. See, e.g., Canada—Renewable Energy, supra note 150. 167. SCM Agreement, supra note 21, art. 3. 168. Id. art. 2.2. 169. Id. art. 2.1(a)–(b). There are additional factors that can also be considered where there are reasons to believe that a subsidy is specific despite the measure not having the characteris- tics described in Article 2.1(a)–(b) of SCM. See id. art. 2.1(c), 2.2. 126 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 subsidy.”170 In the case of the IRA, the benefit is contingent upon the use of domestic over imported goods, so it would likely be found to be specific and therefore prohibited. D. General Exceptions Having established that the IRA preliminarily violates GATT, TRIMs, and SCM, this section discusses the General Exceptions to GATT, which is the most promising defense available to the U.S. for a RE pol- icy that contains LCRs.171 The General Exceptions authorize certain measures that would otherwise violate the WTO, recognizing that there are domestic policy considerations that must sometimes super- sede open trade objectives. There are ten General Exceptions, though only three are likely to apply to renewable energy-promoting 170. Id. art. 2.1(b). 171. There are also two exemptions found in Article III of GATT that Member nations have attempted to use to defend RE measures containing LCRs. First is the “government procure- ment” exemption, which applies to goods “purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale.” GATT 1994, supra note 20, art. III:8(a). This exemption arises in the context of RE policy because some of the most prevalent RE-promoting measures involve renewable generation re- quirements (such as feed-in tariffs, renewable portfolio standards, and tradeable green certifi- cates) for electricity. See Xianyu Yu et. al, Whether Feed-In Tariff Can Be Effectively Replaced or Not? An Integrated Analysis of Renewable Portfolio Standards and Green Certificate Trading, 245 ENERGY 1, 1–2, (2022). The “government procurement” exemption is arguably applicable to measures regulating electricity procurement because electricity is usually purchased by a gov- ernment or quasi-governmental entity before being distributed. The IRA does not primarily regulate electricity procurement or other government or quasi-government purchases (public utilities in the U.S.), so the “government procurement” exemption does not apply to the LCRs contained therein. See Energy Procurement: Everything You Need to Know, WATCHWIRE (Feb. 8, 2021), https://watchwire.ai/energy-procurment/#:~:text=Energy%20procurement%20is%2 0the%20strategic,indexed%2C%20and%20block%20and%20index [https://perma.cc/F68T- VU32]. The second Article III exemption is the “domestic subsidies” exemption for “subsidies [applied] exclusively to domestic producers.” GATT 1994, supra note 20, art. III:8(b). The do- mestic subsidies exemption states that “[t]he provisions of this Article shall not prevent the pay- ment of subsidies exclusively to domestic producers . . . applied consistently with the provisions of this Article and subsidies effected through governmental purchases of domestic products.” Id. The domestic subsidies exemption therefore applies to subsidies for domestic producers, so long as such subsidies are permitted under SCM. The exemption provides no definition of a sub- sidy, so the AB has deferred to the definition of subsidy provided in SCM. Id. See Panel Report, Indonesia—Certain Measures Affecting the Automobile Industry, WTO Doc. WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R (adopted July 2, 1998). Therefore, if a measure is found to be a subsidy under SCM and does not violate SCM, it will not violate GATT. If the measure is not found to be a subsidy under SCM, then the “domestic subsidies” exemption is not applicable. For the purposes of this Note, an analysis of the “domestic subsidies” exemption would be en- tirely redundant of SCM analysis in Part III(C), so it will not be discussed at length again here. 2024] Protecting Protectionism in the WTO 127 policy.172 The applicable exceptions are: Article XX(b), measures “necessary to protect human, animal or plant life or health”; Article XX(g), measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with re- strictions on domestic production or consumption”; and Article XX(j), measures “essential to the acquisition or distribution of products in general or local short supply.”173 The chapeau (introductory text) to Article XX specifies that measures are only eligible for the General Ex- ceptions if they “are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between coun- tries where the same conditions prevail, or a disguised restriction on international trade.”174 A successful Article XX defense must satisfy both the subject matter of the relevant exception (including the “es- sential to,” “necessary to,” or “relating to” qualifier threshold) and the chapeau. Under existing WTO interpretations, it is very difficult to mount a successful Art. XX exception defense. Within the 48 WTO dis- putes in which General Exceptions were invoked, the challenged pol- icy was found not to violate WTO terms only twice.175 As demon- strated below, previous interpretations of the General Exceptions by WTO adjudicatory bodies thus far would not absolve the U.S. of its Na- tional Treatment Obligation with regards to the IRA. However, the text of the General Exemptions and other WTO documents support an alternative interpretation of the General Exceptions that would allow the IRA to survive a challenge under SCM, TRIMs, and GATT. 172. The other seven exceptions are unlikely to apply because they are not relevant to envi- ronmental issues or energy. See, e.g., GATT 1994, supra note 20, art XX(e) (measures “relating to the products of prison labour”). 173. GATT 1994, supra note 20, art. XX. 174. Id. 175. DANIEL RANGEL, WTO GENERAL EXCEPTIONS: TRADE LAW’S FAULTY IVORY TOWER 4 (Feb. 2022), https://www.citizen.org/wp-content/uploads/WTO-General-Exceptions-Paper_-1.pdf [https://perma.cc/AU2U-Z8LP]. This statistic includes disputes in which GATT General Excep- tions were invoked and disputes in which the GATS General Exceptions were invoked. Eleven of these cases failed at the subject matter/scope threshold, seventeen failed at the “neces- sary”/“related to” qualifier threshold, and twelve failed at the chapeau threshold. Id. at 6. In eleven cases, the panel did not address the exception on judicial economy grounds; in five cases the subject matter requirement was not satisfied; in eighteen cases, the relevant essential, nec- essary, etc. requirement was not met; and in nine cases the chapeau threshold was violated. Id. In one of the two cases where the challenged policy was ruled not to violate WTO terms, the AB found that the challenged measure was non-violative without reaching the General Exceptions defense, because they determined that the “likeness” test was failed. Id. at 14. 128 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 1. Applicability of the General Exceptions Outside of GATT There was uncertainty for many years as to whether the General Exceptions were applicable to agreements other than GATT.176 The AB first addressed this question in China—Audiovisuals, in which the U.S. alleged that measures enacted by China violated of Paragraph 5.1 of China’s Accession Protocol, inter alia.177 China defended its meas- ure under the General Exceptions. The AB turned to the text of the Accession Protocol to resolve the matter and found that since Para- graph 5.1 referenced GATT (“without prejudice to China’s right to reg- ulate trade in a manner consistent with the WTO Agreement”), the ex- ceptions to GATT would apply to the Accession Protocol.178 A few years later, in China—Raw Materials,179 the AB was asked to consider whether the General Exceptions applied to a different section of China’s Accession Protocol. The AB worked under the presumption, based on China—Audiovisuals, that the General Exceptions would not apply outside of GATT unless there was evidence in the text that the exceptions were intended to apply.180 The AB concluded that China could not rely on the General Exceptions as a defense under Para- graph 11.3 of China’s Accession Protocol because they did not explic- itly mention GATT Article XX.181 One important distinction between the WTO agreements such as China’s Accession Protocol and agreements such as SCM and TRIMs is that the latter were drafted alongside GATT and are annexed together to the Marrakesh Agreement. 182 The agreements annexed to the Mar- rakesh Agreement were drafted together at the Uruguay Round to be 176. See generally Danielle Spiegel Feld & Stephanie Switzer, Whither Article XX? Regulatory Autonomy Under Non-GATT Agreements After China—Raw Materials, 38 YALE J. INT’L L. ONLINE (2012) (analyzing China—Raw Materials, infra note 179, and the WTO jurisprudence leading to it). 177. Appellate Body Report, China—Measures Affecting Trading Rights and Distribution Ser- vices for Certain Publications and Audiovisual Entertainment Products, WTO Doc. WT /DS363/AB/R (adopted Dec. 21, 2009). An Accession Protocol is a document required of new entrants to the WTO, stating that the new entrant accedes to the WTO agreement and outlining the terms of entry. 178. Id. ¶ 220–21. 179. Appellate Body Report, China—Measures Related to the Exportation of Various Raw Ma- terials, WTO Doc. WT/DS394/AB/R (adopted Jan. 30, 2012) [hereinafter China—Raw Materials]. 180. Id. ¶ 303. 181. Id. ¶ 304. 182. Marrakesh Agreement, supra note 16. The Marrakesh Agreement is annexed with the agreements on goods, services, and intellectual property, dispute settlements, and more. These agreements were all drawn at the Uruguay Round. Id. 2024] Protecting Protectionism in the WTO 129 read as a cohesive whole.183 Members’ Protocols of accession, on the other hand, were drafted years or even decades after the Uruguay Round. Moreover, protocols of accession are very different types of documents: While protocols of accession are created by a subset of Member nations (a “working party”) to set out the obligations and commitments of specific nations as terms of joining the WTO,184 the agreements annexed in the Marrakesh Agreement are the primary guiding documents of the WTO, agreed upon by consensus and bind- ing on all Members. Therefore, a panel may apply a less exacting standard in determining whether the General Exceptions apply to TRIMs and SCM. A further point is that the National Treatment Obli- gation in TRIMs is derived directly from GATT.185 Therefore, even un- der a standard as strict as the one set out by the AB in China—Audio- visuals, a panel would still probably find that the General Exceptions apply to TRIMs. However, since SCM does not refer to GATT, a panel that applies the test iterated in China—Audiovisuals may determine that the General Exception cannot be used to defend against an SCM challenge. Some scholars suggest that the uncertainty around the question of whether the General Exceptions apply to non-GATT Uru- guay Round agreements may have a chilling effect when nations con- sider measures that would require invoking the General Exceptions for a non-GATT agreement.186 Looking at non-GATT agreements relevant to the IRA, a panel fol- lowing the AB’s precedent from the disputes involving China’s Acces- sion Protocol would probably find that General Exceptions are appli- cable to TRIMs’ National Treatment obligation because that obligation originates in GATT, but a panel may determine that it does not apply 183. See Appellate Body Report, Korea—Definitive Safeguard Measure on Imports of Certain Dairy Products, ¶ 81, WTO Doc. WT/DS98/AB/R (adopted Jan. 12, 2000) (“Article II:2 of the WTO Agreement expressly manifests the intention of the Uruguay Round negotiators that the provisions of the WTO Agreement and the Multilateral Trade Agreements included in its An- nexes 1, 2 and 3 must be read as a whole”). 184. WTO Membership and Accession, GEO. L. LIBRARY, https://guides.ll.georgetown.edu/c.ph p?g=363556&p=4108236#:~:text=The%20protocol%20of%20accession%20is,bound%20by %20its%20multilateral%20agreements [https://perma.cc/K845-Z6EU] (last visited Oct. 20, 2023). 185. The language that establishes TRIMs National Treatment Obligation states, “Without prejudice to other rights and obligations under GATT 1994, no Member shall apply any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT 1994.” TRIMs Agree- ment, supra note 22, art. 2.1. 186. Luca Rubini, The Subsidization of Renewable Energy in the WTO: Issues and Perspectives 35, NCCR Trade Reg. Working Paper No. 2011/321 (June 2011). However, the chilling effect is less likely to occur while the Appellate Body Crisis is ongoing, as the WTO’s enforcement powers are undermined. https://perma.cc/K845-Z6EU 130 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 to SCM because the relevant SCM sections make no reference to GATT generally or to Article XX. 2. Article XX(a)-(j) Subject Matter Requirements When the AB analyzes a measure under Article XX, it will separate the relevant (a)–(j) paragraph into two or more elements. To satisfy Article XX(b), the measure must be (1) “necessary” to (2) “protect hu- man, animal or plant life or health.”187 To satisfy Article XX(g), the measure must be (1) “relating” to (2) “the conservation of exhaustible natural resources” (3) “if such measures are made effective in con- junction with restrictions on domestic production or consump- tion.”188 To satisfy Article XX(j), the measure must be (1) “essential” to (2) “the acquisition or distribution of products in general or local short supply.”189 The AB has found that “necessary” and “essential” require more or less the same inquiry (though “essential to” is vaguely more strin- gent).190 The AB purports that this inquiry involves a balancing test between the effectiveness of the measure to address the policy con- cern against the trade-restrictiveness of the measure,191 taking into account “the relative importance of the societal interest” that the measure seeks to protect.192 If that analysis “yields a preliminary con- clusion that the measure is necessary,” the AB will compare the meas- ure against reasonable alternatives to confirm that the measure is necessary.193 However, in practice the entire “necessary” or “essen- tial” analysis inevitably boils down to the question of whether the measure enacted is the least trade-restrictive of the reasonably 187. Appellate Body Report, Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WTO Doc. WT/DS161/AB/R, WT/DS169/AB/R (adopted Jan. 10, 2001) [hereinafter Ko- rea—Beef]. 188. Appellate Body Report, United States—Standards for Reformulated and Conventional Gasoline, ¶ 19, WTO Doc. WT/DS2/AB/R (adopted Apr. 29, 1996). 189. Appellate Body Report, India—Certain Measures Relating to Solar Cells and Solar Mod- ules, WTO Doc. WT/DS456/AB/R (adopted Oct. 14, 2016) [hereinafter India—Solar]. 190. Id. 191. See, e.g., Korea—Beef, supra note 187, ¶ 164. See also Appellate Body Report, Brazil— Measures Affecting Imports of Retreaded Tyres, ¶ 182, WTO Doc. WT/DS332/AB/R (adopted Dec. 17, 2007) [hereinafter Brazil—Tyres] (analyzing “necessary to”). 192. India—Solar, supra note 189, ¶ 5.59 (quoting Appellate Body Report, Colombia— Measures Relating to the Importation of Textiles, Apparel and Footwear, ¶ 5.126, WTO Doc. WT/DS 461/AB/R (adopted May 18, 2005) [hereinafter Colombia—Textiles]) (internal quota- tions omitted); Brazil—Tyres, supra note 191, ¶ 182 (“necessary” analysis). 193. Brazil—Tyres, supra note 191, ¶ 178. 2024] Protecting Protectionism in the WTO 131 available alternatives.194 When considering an alternative, the AB al- lows the defending Member to show that it is not “reasonably availa- ble” by demonstrating that the suggested alternative would involve “prohibited costs or substantial technical difficulties,”195 but domestic political barriers such as partisanship and fragmentation of authority (i.e., federalism) are not taken into account. Also not considered is the cost of “returning to the drawing board,” for example, the loss of mo- mentum if a measure is struck down, or the delaying action will cause the problem seeking to be remedied to get worse. The “relating to” threshold has been found to be much lower than the “necessary” or “essential” threshold; it merely requires a substantial relationship with the relevant policy goal.196 Panels and the AB read the second part of the subject matter re- quirement with varying levels of broadness. In India—Solar, the AB found that India’s power-purchase agreement failed to satisfy the sub- ject matter requirements with respect to Art. XX(j), which mandates that such agreements be “essential to the acquisition or distribution of products in general or local short supply.”197 The AB interpreted “general or local short supply” strictly to mean that there must be a disruption in supply of the product in question, considering both im- ports and domestic production.198 However, the subject matter ele- ment has often been interpreted more broadly than in India—Solar. One case where a Member came close to mounting a successful Article XX defense is United States—Shrimp.199 There, Article XX(g) (“relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic 194. Korea—Beef, supra note 187, ¶ 166 (“In our view, the weighing and balancing process we have outlined is comprehended in the determination of whether a WTO-consistent alterna- tive measure which the Member concerned could ‘reasonably be expected to employ’ is availa- ble, or whether a less WTO-inconsistent measure is ‘reasonably available.’”); see also India— Solar, supra note 189, ¶ 5.59. 195. Appellate Body Report, U.S.—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, ¶ 308, WTO Doc. WT/DS285/AB/R (adopted Apr. 20, 2005). 196. Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products, ¶¶ 135-137, WTO Doc. WT/DS58/AB/R (adopted Nov. 21, 2001) [hereinafter U.S.— Shrimp]. 197. India—Solar, supra note 189, ¶ 5.45. The PPA was a 25-year agreement with solar power developers that set minimum domestic content requirements for solar cell modules. Id. ¶ 1.3. 198. Id. ¶ 5.75. 199. U.S.—Shrimp, supra note 196. The challenged measure prohibited importation of shrimp except where (a) the shrimp trawler used Turtle Excluder Devices (TEDs), (b) the har- vesting country’s government has a program similar to the TEDs program that has been certified by the U.S., or (c) the U.S. certifies that the shrimp were not fished from an environment where the fishing poses a risk of sea turtle capture. Id. ¶ 3–5. 132 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 production or consumption”)200 was invoked by the United States in defense of a measure promulgated to protect an endangered species of sea turtle.201 Noting that the understanding of terms such as “nat- ural resource” can evolve over time and may have different meanings for different Member nations, the AB stated that the subject matter of the General Exceptions should be interpreted in accordance with the understanding of the Member which promulgated the measure, as un- derstood at the time.202 The AB thus concluded that, within our mod- ern scientific understanding of sea turtle populations and ecosystems generally, sea turtles could be considered “exhaustible natural re- sources.”203 Looking at the subject matter requirement as a whole, a WTO adju- dicatory body closely following AB precedent would be unlikely to find that the IRA is “necessary to protect human, animal or plant life or health.” The IRA, as a statute that encourages renewable energy development and reduces the U.S.’s greenhouse gas emissions, would almost certainly be found to protect “human, animal, or plant life or health.” However, the Act on its own will not have a significant impact on mitigating climate change,204 so its trade restrictions may not sur- vive a balancing test against the policy considerations, which would be required to meet the “necessary to” element of Article XX(b). More- over, complaining nations would certainly be able to identify less trade-restrictive means of reducing greenhouse gas emissions, 200. GATT 1994, supra note 18 art. XX(g). 201. U.S.—Shrimp, supra note 196, ¶ 8. 202. In U.S.—Shrimp, the AB noted that the term “natural resource” has evolved over the fifty years since GATT was written, and that the exception should be read “in the light of contempo- rary concerns of the community of nations about the protection and conservation of the envi- ronment.” Id. ¶ 129. Likewise, in European Communities—Seal Products, the AB’s inquiry into whether a measure was “necessary to protect public morals” focused on the public morals of the Member promulgating the measure, without regard to the public morals of other nations. Euro- pean Communities—Measures Prohibiting the Importation and Marketing of Seal Products, WTO Doc. WT/DS400/AB/R, WT/DS401/AB/R (adopted June 18, 2013) (referring throughout to the moral concerns of the EU public). 203. U.S.—Shrimp, supra note 196, ¶ 131. 204. Since the United States is one of the biggest greenhouse gas emitters, the IRA is a much- needed step toward reducing global emissions, and early projections regarding its impacts are promising. John Bistline et al., Emissions and Energy Impacts of the Inflation Reduction Act, 380 SCIENCE 1324, 1325 (June 29, 2023) (showing that without the IRA, economy-wide emissions were projected, on average, to decrease by only 28% by 2030 compared with 2005, but with the IRA, the average projected decrease in emissions is 37%). However, collective action is needed from nations around the world; on the scale of action needed to combat the climate crisis, indi- vidual measures such as the IRA are drops in the bucket. For a comparative look at individual nations’ potential contributions to climate change mitigation, see Steven R. Brechin, Climate Change Mitigation and the Collective Action Problem: Exploring Country Differences in Greenhouse Gas Contributions, 31 SOCIO. F. 846 (2016). 2024] Protecting Protectionism in the WTO 133 particularly if the adjudicatory body does not consider political barri- ers when assessing “reasonable alternatives.” When it comes to whether the measure is “essential to the acquisi- tion or distribution of products in general or local short supply,” the U.S. could invoke global battery supply chain shortages.205 The U.S. could argue that these shortages necessitate expanding U.S. infra- structure for battery assemblage, mining, and mineral processing in order to ensure that the U.S. maintains an adequate supply of batter- ies. Applying the balancing test, a WTO panel would probably find that effect of the IRA on access to these resources justifies the trade restrictiveness of the Act. Again, however, survival of the IRA against WTO challenges would depend on whether other nations are able to propose less trade-restrictive means of serving the same ends. Regarding Article XX(g) (“relating to the conservation of exhausti- ble natural resources if such measures are made effective in conjunc- tion with restrictions on domestic production or consumption”), fossil fuels are certainly an exhaustible natural resource,206 and the IRA seeks in part to reduce reliance on fossil fuels. However, the U.S. has not otherwise restricted domestic production or consumption of fos- sil fuels, opting instead to prioritize alternatives, so the IRA would once again fail. 3. Article XX Chapeau Even if a panel found that the IRA fell within one of the paragraphs of Article XX, it would likely fail the chapeau under existing AB inter- pretation. The chapeau states that the General Exceptions do not pro- tect measures that are “applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on inter- national trade.”207 In U.S.—Shrimp, the AB rejected the notion that discrimination is justifiable on the grounds that “differing treatment between countries relates to the policy goal of the applicable Article 205. Phil LeBeau, EV Battery Costs Could Spike 22% by 2026 as Raw Material Shortages Drag On, CNBC (May 18, 2022), https://www.cnbc.com/2022/05/18/ev-battery-costs-set-to-spike- as-raw-material-shortages-drags-on.html [https://perma.cc/D63Q-U3EF]. 206. Moshood Sadiq, What Differentiates Exhaustible from Inexhaustible Resources? Energy Clime, https://energyclime.com/10-differences-between-exhaustible-and-inexhaustible-re- sources [https://perma.cc/6DXX-QPUT] (last visited Nov. 23, 2023). The ability of the atmos- phere to absorb greenhouse gases without increasing global temperature could also be viewed as a natural resource. 207. GATT 1994, supra note 20 art. XX. 134 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 XX exception.”208 Rather, the AB opined that policy considerations cease after determining that the measure falls within the scope of a General Exception’s subject matter.209 The AB also noted that the cha- peau “addresses, not so much the questioned measure or its specific contents as such, but rather the manner in which that measure is ap- plied.”210 At the chapeau level, an adjudicatory body addresses whether the measure—regardless of any Article XX policy considerations—is ap- plied “as a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail” or “a disguised re- striction on international trade.”211 The AB has not sufficiently elabo- rated on when discrimination is or is not “arbitrary or unjustifiable.” In U.S—Shrimp, the AB found that the measure failed at the chapeau because the measure was applied such that other WTO Members were forced to adopt a regulatory program that is “essentially the same” as the U.S. program for an import to receive equal treatment.212 Given that the IRA discriminates against imported EVs and battery compo- nents, and that the Article XX(a)–(j) policy considerations are not ac- cepted as justification for discrimination under the chapeau, a panel following prior AB interpretations would likely find that the IRA fails at the chapeau. IV. REINTERPRETING THE GENERAL EXCEPTIONS The AB’s prior interpretations of the WTO rules create a predica- ment. Rapid decarbonization is vital for the wellbeing of all nations, measures to support decarbonization would uphold the values of the WTO, and LCRs such as the IRA are a popular and arguably necessary tool for achieving that end. However, the prior WTO determinations discussed in Part III of this Note show that a WTO adjudicatory body would likely consider the IRA violative of the relevant agreements. This section proposes an interpretation of GATT that would allow for easier survival of measures such as the IRA that forward important policy goals but contain restrictions on international trade. This sec- tion then explains potential drawbacks to the new interpretation and 208. U.S.—Shrimp, supra note 196, ¶ 149. 209. Id. 210. Id. ¶ 115 (quoting Appellate Body Report, United States—Standards for Reformulated and Conventional Gasoline, ¶ 22, WTO Doc. WT/DS2/AB/R (adopted May 20, 1996)). The AB determined that the panel below had erred because it focused on the design of the measure ra- ther than its application. Id. 211. GATT 1994, supra note 20, art. XX. 212. U.S.—Shrimp, supra note 196, ¶ 164. 2024] Protecting Protectionism in the WTO 135 finally explains why the WTO adjudicatory bodies should nonetheless use the IRA as an opportunity to establish a more expansive interpre- tation of the General Exceptions. A. Proposed Interpretation of the General Exceptions There are two major flaws in the AB’s interpretation of the General Exceptions that have resulted in it being virtually impossible for a Member to use these exceptions to justify a restriction on trade. First, the existing interpretation places too much emphasis on the trade restrictiveness of the challenged measure and not enough em- phasis on the policy concerns being addressed. Under existing inter- pretation, when an exception uses the “necessary” or “essential” standard, the adjudicatory body considers the trade restrictiveness of a measure three times in its analyses. First, during the initial balanc- ing test, the AB weighs the measure’s effectiveness against its trade restrictiveness. Then, if the measure passes the initial balancing test, the AB considers trade restrictiveness again because it will only per- mit a measure that is the least trade restrictive of reasonable alterna- tives. Finally, the AB considers trade restrictiveness a third time when it applies the chapeau. The policy concern that the Member seeks to address is only considered in the initial balancing test. Second, the WTO is too restrictive in its application of the General Exceptions to agreements other than GATT. The AB looks for specific indicia that drafters of WTO agreements outside of GATT intended for the General Exceptions to apply. This narrow application of the Gen- eral Exceptions means that even where there is an important policy interest involved that would absolve a Member of obligations under GATT, the measure could still be struck down under other agreements that were intended to be read as a cohesive whole along with GATT. To remedy these flaws, this Note proposes that the WTO panels and the Appellate Body re-ground the “necessary” or “essential” test, re- form the chapeau interpretation, and expand the General Exceptions to more agreements. Such changes in the WTO interpretation would redress many of the U.S.’s concerns that triggered the Appellate Body Crisis as well as encourage more nations to promulgate aggressive RE policy. Each of these solutions are described below. 1. Simplifying the “Necessary” or “Essential” Qualifier Part III(D)(2) of this Note explained that when determining whether a measure is “necessary” or “essential” to the policy 136 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 consideration, the AB balances the effect of the challenged measure on the problem seeking to be remedied against its trade restrictive- ness and requires that there is no reasonable alternative to achieving the policy goals that is less trade restrictive than the promulgated measure. During the initial balancing test, the AB also takes into ac- count the seriousness of the issue being remedied, but it is not clear from prior rulings exactly how that is done. This Note proposes that the “necessary” or “essential” inquiry should be a single balancing test between the effectiveness of the measure to remedy the problem be- ing addressed, the trade-restrictiveness of the measure, and the grav- ity of the problem seeking to be solved. That is, where the situation being addressed is very dire, less effective (i.e., more incremental) and/or more trade-restrictive measures may pass muster, so as not to hinder government efforts to respond to the most serious threats. This test is not so different from what the AB purports to do in the first part of its “necessary”/“essential” analysis.213 Making it an ex- plicit three-part balancing test removes some of the vagueness around how to “take into account” the seriousness of the problem be- ing addressed. The biggest difference between this interpretation and the prevailing interpretation is that, under the interpretation for- warded by this Note, the results of the balancing test will not be un- dermined by the existence of a less restrictive alternative. The text of Article XX does not require that the measure is the least restrictive of alternatives, and implementing this requirement bizarrely gives na- tions the power to block measures by fellow Members if they can come up with new, less restrictive solutions to the problem being ad- dressed. One obvious problem is that the alternatives proposed by other na- tions may not be practicable for political reasons. As noted earlier, that type of practicability has historically not been accounted for by the AB. Another issue is that the prevailing interpretation essentially requires Members to think of every conceivable course of action to address the problem in order to implement the least trade-restrictive, which is a large burden when Members are trying to address serious problems quickly. Applying the new interpretation to disputes involving RE policy in light of the climate emergency, panels and the AB should generously 213. See supra Part III(D)(2) (“The AB purports that this inquiry involves a balancing test between the effectiveness of the measure to address the policy concern against the trade-re- strictiveness of the measure, taking into account the relative importance of the societal interest that the measure seeks to protect” (internal quotations omitted)). 2024] Protecting Protectionism in the WTO 137 view measures which serve a goal of decarbonization or otherwise mitigating climate change as “necessary to protect human, animal or plant life or health.”214 Without expedient, radical action, climate change will result in significant loss of human, animal, and plant life and serious detriment to health. Since climate change is a cumulative- impact issue, nations around the globe must use all tools in their arse- nal to combat its negative effects. Mandating withdrawal of measures where there is a less trade-restrictive alternative is counterproduc- tive. This reasoning should carry over to other Article XX (a)–(j) par- agraphs as well. For example, the more pressing a product shortage is, the more likely a measure should be found to be “essential to the acquisition or distribution of products in general or local short sup- ply.”215 Under this interpretation, given that climate change is an existential threat to human, animal, and plant life,216 the IRA would be very likely to be considered “necessary” to protect those groups. Although the final assembly requirement for the EV credit is quite trade-restrictive and the IRA on its own will not end climate change, those considera- tions pale in comparison to the severity of the climate crisis. This in- terpretation would also make it easier for the IRA to clear the thresh- old of “essential to the acquisition or distribution of products in general or local short supply” because there would no longer be a re- quirement that the IRA be the least restrictive of available alterna- tives. 2. Viewing Policy Considerations as Central to the Chapeau of GATT Article XX An alternative interpretation of the chapeau could also make it eas- ier for RE measures such as the IRA to successfully mount a General Exceptions defense. Rather than viewing the Article XX(a)–(j) policy considerations as irrelevant to the chapeau, the WTO panels should instead view these policy considerations as central to the chapeau. This interpretation of the Article XX chapeau would require that a panel analyze any discrimination resulting from the manner in which a measure is applied within the context of the policy consideration. The Article XX chapeau states that the General Exceptions will not save measures that are “applied in a manner which would constitute 214. GATT 1994, supra note 20, art. XX(b). 215. GATT 1994, supra note 20, art. XX(j). 216. Id. 138 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 a means of arbitrary or unjustifiable discrimination between coun- tries where the same conditions prevail, or a disguised restriction on international trade.”217 In cases such as United States—Shrimp, the AB has held that the Article XX(a)–(j) policy considerations are not rele- vant to the chapeau, but rather that the policy considerations are only relevant insofar as is necessary to determine whether the measure falls within the subject matter scope of a General Exception.218 After that inquiry is complete, the AB determines whether the measure— regardless of the policy concerns it is addressing—is “applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination.”219 However, in doing so the AB has largely disre- garded the “arbitrary or unjustifiable” language, finding that any measure that is applied in a manner that discriminates between coun- tries fails to satisfy the chapeau. This results in it being nearly impos- sible for measures which violate the National Treatment Principle to qualify for a General Exception because any measure that discrimi- nates against imported products will almost certainly also discrimi- nate between countries as applied. However, the drafters of GATT clearly intended for GATT violations to sometimes be excused for policy reasons. This is the purpose of the General Exceptions in the first place. Only “arbitrary or unjustifiable discrimination,” or “a disguised restriction on international trade” should fail the chapeau, according to the chapeau’s own terms.220 In- cluding the modifiers “arbitrary” and “unjustifiable” suggests that the drafters of GATT foresaw some acceptable justification for discrimina- tion and sought to require such discrimination to be reasonably con- nected to said justifications. Placing the chapeau within the context of the General Exceptions, it seems that the appropriate justifications ought to be the policies outlined in Article XX(a)–(j). The better reading of the chapeau would require any discrimination that results from the manner in which the measure is applied be jus- tifiable based on the Article XX(a)–(j) policy concerns (i.e., not “unjus- tifiable”), reasonably related to the policy goals (i.e., not “arbitrary”), and not a “disguised restriction on international trade.” The first re- quirement is similar to the necessary/essential analysis discussed in Part IV(A)(1) of this Note, but the focus under the chapeau would be on the application of the measures rather than its design. The second 217. GATT 1994, supra note 20, art. XX. 218. U.S.—Shrimp, supra note 196. 219. GATT 1994, supra note 20, art. XX. 220. Id. 2024] Protecting Protectionism in the WTO 139 requirement is fairly self-explanatory, simply requiring that any in- consistency in the ways in which the measure is applied serve the pur- pose of forwarding the policy goals that the measure seeks to serve. The third requirement involves examining the legislative history of the measure and the decision-making process that the Member uses to implement the measure, so as to determine whether the Article XX(a)–(j) policy considerations are the true motivation behind the discrimination. Looking at the IRA, there are two reasons that the Act’s restrictions on trade are justifiable and reasonably related to the goal of protect- ing human, plant, and animal life. First, the restrictions on trade were necessary in order to pass any federal action on climate change in the U.S.221 Second, the restrictions will allow the production of newer green technologies to grow before being exposed to an international market, which will ultimately make them cheaper and more available globally.222 The Article XX chapeau specifically requires looking into the application of a measure rather than just the measure itself. It will be some time before it becomes clear whether the IRA is applied so as to unjustifiably or arbitrarily discriminate between Member nations, but based on the Act itself, it ought to be able to be applied in such a way as to avoid violating the chapeau. 3. Extending GATT Article XX to SCM Finally, the General Exceptions should be interpreted to apply to all multilateral trade agreements annexed in the Marrakesh Agree- ment,223 such as GATT, TRIMs, and SCM.224 This interpretation is ap- propriate because the various agreements of the WTO are intended to be read as whole, as indicated by Article II of the WTO Agreement, which states, “The agreements and associated legal instruments in- cluded in Annexes 1, 2, and 3 . . . are integral parts of this Agree- ment.”225 Yet the AB has indicated that it will only apply the General Exceptions to other agreements where the provisions in question spe- cifically refer to GATT or the General Exceptions. The AB has not yet made explicit whether the General Exceptions would apply to other 221. See supra Part II(B)(2) & Part II(C)(1). 222. Id. 223. Marrakesh Agreement, supra note 16, art. XI.1. The Marrakesh Agreement is annexed with the agreements on goods, services, and intellectual property, dispute settlements, and more. These agreements were all drawn at the Uruguay Round. 224. WTO Legal Texts, WORLD TRADE ORG., https://www.wto.org/english/docs_e/legal_e/le- gal_e.htm [https://perma.cc/9U5A-7FWV] (last visited Oct. 20, 2023). 225. Marrakesh Agreement, supra note 16, art. II:2. 140 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 agreements annexed in the Marrakesh Agreement, but answering this question explicitly and in the positive would foster predictability and reassurance for nations attempting to address the types of problems contemplated by the General Exceptions. The purpose of the General Exceptions is to allow measures to pass muster, despite restricting trade, where policy concerns are more im- portant than barrier-free trade.226 It would undermine that purpose if measures that are justified under the General Exceptions as serving important policy objectives were considered impermissible under other agreements.227 Moreover, the AB has frequently relied on WTO agreements to aid in the interpretation of other agreements. For ex- ample, the AB relies on the definition of subsidy from SCM when in- terpreting whether a measure is a subsidy for the purpose of GATT.228 Under this interpretation, if the IRA were found to violate SCM, GATT Article XX exceptions would be available to the U.S. to defend SCM violations, just like they are available to defend alleged GATT and TRIMs violations. This would be an important point for RE generally, since subsidies are effective instruments in the development of re- newable energy technology and infrastructure; Articles XX(b), XX(g), and XX(j) could justify renewable energy subsidies that would other- wise violate SCM. B. Arguments Against This Construction There are two major downsides to reinterpreting the General Ex- ceptions as this Note proposes. First, the WTO’s primary purpose is to reduce barriers to trade, and lowering the bar to qualify for the Gen- eral Exceptions would be counter to that purpose. Second, the inter- pretation suggested by this Note departs from AB precedent, so it would undermine the WTO goal of predictability for adjudicatory bod- ies to adopt this or a similar interpretation. This section will elaborate on and respond to each of these arguments in turn. 1. Increased Barriers to Trade The WTO is first and foremost a mechanism for promoting free trade between nations. Broadening the reach of the General Excep- tions would undoubtedly lead to more barriers to trade, since 226. RANGEL, supra note 175, at 9. 227. Rubini, supra note 186, at 35. 228. Panel Report, Indonesia—Certain Measures Affecting the Automobile Industry, ¶ 5.181, WTO Doc. WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R (adopted July 23, 1998). 2024] Protecting Protectionism in the WTO 141 Members would have less concern about adverse rulings in the WTO when promulgating measures to address pressing issues such as cli- mate change. Moreover, when one nation adopts RE policy with LCRs, other nations are likely to respond with similar measures. Even knowing that the WTO would likely rule against the IRA, the European Union has retaliated against the U.S. by announcing a Green Deal In- dustrial Plan, which is geared at scaling up new renewable energy projects in Europe.229 French president Emmanuel Macron has also called for a “Buy European” policy to respond to the IRA’s Clean Vehi- cle Credit more directly.230 These policies are being labeled as the be- ginning of a potential subsidy war.231 It is important to recall at this point that these policies are being promulgated in the context of the Appellate Body Crisis, where the WTO as a dispute resolution forum is in a weak position.232 If the U.S. receives an adverse ruling from a WTO panel, it could just appeal it into the “void” and continue to refuse to appoint standing AB mem- bers.233 The Appellate Body Crisis was triggered in the first place by what the U.S. viewed as judicial overreach on the part of the DSB.234 Expanding the General Exceptions as this Note proposes could go a long way toward appeasing some of the U.S.’s concerns, perhaps con- vincing the U.S. to end the Appelate Body crisis. The WTO would then be able to control the damage, so to speak, by striking measures when the trade restrictiveness does in fact outweigh the policy interest of the General Exceptions. WTO adjudicatory bodies can also assess whether the application LCRs is arbitrary, unjustified, or a disguised restriction on trade in violation of the chapeau to the General Excep- tions. Moreover, we must ask ourselves whether a tit-for-tat approach in protectionist RE policy is such a bad thing. A global increase in do- mestic growth-promoting RE policy could ultimately result in more green innovation and, eventually, lower costs of RE technologies worldwide.235 This type of rapid progress is essential in the fight 229. See supra note 119. 230. Clea Caulcutt, Emmanuel Macron Calls for ‘Buy European Act’ to Protect Regional Car- makers, POLITICO (Oct. 26, 2022), https://www.politico.eu/article/emmanuel-macron-buy-eu- ropean-act-cars-united-states-china/ [https://perma.cc/X8EZ-BT5K?type=image]. 231. Andrés Velasco, A Subsidy War Without Winners, PROJECT SYNDICATE (Jan. 27, 2023), https://www.project-syndicate.org/commentary/only-losers-in-the-us-europe-green-subsidy -war-by-andres-velasco-2023-01 [https://perma.cc/7N2K-5DZR]. 232. See WORLD TRADE ORG., supra note 50. 233. Id. 234. See supra notes 57–62 and accompanying text. 235. KUNTZE & MORENHOUT, supra note 8, at 10. 142 COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [Vol. 49:1 against the climate crisis. While there are valid reasons to proceed with caution in the face of a so-called RE subsidy war,236 WTO adjudi- catory bodies could continue to protect free trade even if the General Exceptions are more accessible.237 2. The Importance of Predictability Another concern some may raise to a new construction of the Gen- eral Exceptions comes down to the fact that it is a departure from precedent, which would undermine the WTO goal of predictability. Though WTO precedent is not binding, panels treat prior AB rulings as very persuasive, in large part so that Members can rely on prior interpretations.238 There is also the concern that if panels interpret agreements vastly differently from one dispute to another, their ap- plication of the rules could become arbitrary. Despite the lack of stare decisis in the WTO, panels have frequently treated AB precedent as though it is binding.239 However, the interpretation proposed by this Note is not vastly dif- ferent from the AB’s past interpretations. The AB purports to apply a balancing test when applying the general exceptions, yet in practice, the trade-restrictiveness of the measure is emphasized so much as to almost completely overshadow the policy concerns that the General Exceptions exist to address.240 Simplifying the “necessary” or “essen- tial qualifier” is really a matter of following the inquiry the AB has pur- ported to employ. The AB has never spoken to the question of whether the General Exceptions apply to SCM, so answering in the af- firmative doe not depart from AB precedent, per se. It is only at the 236. For example, when world powers put domestic production first, the real losers could end up being the developing nations that cannot match pace. See Rachel Thrasher, Green Subsi- dies: What About the Global South?, SOC. EUR. (Feb. 10, 2023), https://www.socialeurope.eu /green-subsidies-what-about-the-global-south [https://perma.cc/XAZ7-UTST]. Even so, the WTO has mechanisms for protecting developing nations, and those should be employed if the “subsidy war” continues to escalate. 237. For example, by making GATT Article XX(a)–(j) policy considerations central to the cha- peau, as discussed above, a panel could conduct a thorough analysis of the measure, its legisla- tive history, and its application to determine whether discrimination is truly motivated by the approved policy considerations. See Part IV(A)(2), supra. Where the panel determines that the policy considerations are being invoked as a “disguised restriction on international trade,” the panel can reject the General Exceptions defense. 238. Appellate Body Report, United States—Final Anti-Dumping Measures on Stainless Steel from Mexico, ¶ 160, WT/DS344/AB/R (adopted 20 May 2008). 239. Bacchus & Lester, supra note 56, at 189–91. 240. See Donald H. Regan, The Meaning of ‘Necessary’ in GATT Article XX and GATS Article XIV: The Myth of Cost-Benefit Balancing, 6 WORLD TRADE REV. 347, 355-56 (2007). 2024] Protecting Protectionism in the WTO 143 chapeau to Article XX that the interpretation proposed by this Note expressly diverts from the AB’s precedent. Importantly, the contracting members to the WTO chose not to make prior AB decisions controlling.241 The drafters could have es- tablished stare decisis as a rule but opted not to, likely in recognition that making prior decisions binding would place too much power in the hands of the adjudicatory bodies rather than in the text of the agreements. In fact, the habit of panels and the AB to treat prior rul- ings as binding is precisely the type of “judicial overreach” that led the U.S. to block appointment of standing AB members and set off the Ap- pellate Body Crisis.242 V. CONCLUSION This Note has demonstrated that a WTO panel would likely find that the IRA’s use of LCRs violates GATT, TRIMs, and SCM under prior AB interpretations. Yet measures such as the IRA are essential for devel- oping and scaling up RE technology quickly to combat the climate cri- sis, and LCRs are an affective policy tool for those ends. This Note pro- poses a new construction of GATT General Exceptions which would permit policies such as the IRA to pass muster. Specifically, this Note suggests that: (1) the balancing test in the “necessary” and “essential” inquiries should be simplified to create equilibrium between trade re- strictiveness and non-trade policy objectives; (2) policy considera- tions should continue to be considered when analyzing whether a measure passes the chapeau to the General Exceptions; and (3) the General Exceptions should be interpreted to apply to SCM and other agreements that are annexed to the Marrakesh Agreement. Though RE policy that includes LCRs presents a barrier to trade, the climate crisis is an emergency that justifies some trade restriction, and the time is ripe for the WTO to open the door to this type of policy. The interpretation proposed in this Note is ultimately in the interest of the WTO and the planet. 241. Bacchus & Lester, supra note 56, at 189. International tribunals’ prior rulings are not binding so that nations are not bound by the outcome of disputes that they were not involved in. Id. at 184. 242. Id. at 185. I. Introduction II. The WTO, LCRs in the RE Industry, and the IRA A. WTO Framework 1. Goals & History of the WTO 2. Dispute Resolution B. Local Content Requirements in Renewable Energy Policy 1. The need for RE policy 2. Why governments find LCRs attractive in RE policy C. The Inflation Reduction Act 1. History and Goals of the IRA 2. LCRs in the IRA III. Violations Based on Prior Interpretations of WTO Rules A. GATT 1. “Likeness” 2. “Law, regulation, or requirement affecting the internal sale, offering for sale, purchase, transportation, distribution or use” 3. Less favorable treatment B. TRIMS C. SCM 1. “Financial Contribution” 2. “A Benefit is Conferred” 3. “Specific” D. General Exceptions 1. Applicability of the General Exceptions Outside of GATT 2. Article XX(a)-(j) Subject Matter Requirements 3. Article XX Chapeau IV. Reinterpreting the General Exceptions A. Proposed Interpretation of the General Exceptions 1. Simplifying the “Necessary” or “Essential” Qualifier 2. Viewing Policy Considerations as Central to the Chapeau of GATT Article XX 3. Extending GATT Article XX to SCM B. Arguments Against This Construction 1. Increased Barriers to Trade 2. The Importance of Predictability V. Conclusion