1. Introduction
In the context of the rising international fragmentation and geopolitical tensions, concerns about dependence on strategic rivals are driving import-dependent countries to adopt trade-restrictive industrial policies.Footnote 1 The securitization of international trade and investment is challenging the international economic order.Footnote 2 In the new geopolitical reality, states are departing from the mutually beneficial trade paradigm governing the international trade regime,Footnote 3 and are invoking perceived risks of economic coercion and weaponization of strategic supplies to justify new trade restrictions.Footnote 4 For instance, the European Union’s 2026 proposal of an Industrial Accelerator Act indicates that ‘the frequent and targeted use of economic tools to advance strategic objectives’, and in particular the risk of ‘weaponization of dependencies’ in strategic sectors, threatens the EU’s resilience, economic security, and strategic autonomy.Footnote 5 The Act reinforces the clean industrialization measures adopted under the 2024 Net-Zero Industry Act to ‘avoid excessive dependency on countries with a high concentration of supply within the Union’.Footnote 6
As illustrated by repeated energy crises, and most recently the blockade of the Strait of Hormuz, energy is at the center of concerns on supply insecurity and the weaponization of dependencies.Footnote 7 The energy statecraft literature explains how foreign energy investment and trade can be used as a tool of foreign policy and an instrument of power or coercion.Footnote 8 More recently, attention has shifted to the geopolitics of the energy transition and the supply security risks posed by clean technology and mineral dependencies, extending energy statecraft theory from its traditional focus on fossil fuels to the clean energy sector.Footnote 9 Energy and economic analysts have meanwhile warned about the negative impact that trade-restrictive localization and diversification measures, adopted in response to dependency concerns, may have on the speed of the energy transition.Footnote 10
This debate is of direct relevance for the international trade law discipline. Scholars have argued that WTO law threatens states’ ability to adopt ambitious decarbonization measures and requires reform to facilitate energy transition and energy security policies.Footnote 11 At the same time, the literature has pointed to the positive role that international trade law can play in facilitating trade in clean technologies and preserving the cooperation needed to accelerate the energy transition.Footnote 12 The International Energy Agency (IEA) reinforces this view, emphasizing that despite the broader crisis of the WTO dispute settlement system ‘the WTO remains an important forum to address possible disadvantages to WTO-compliant trading partners caused by unilateral measures that affect trade in clean energy technologies’.Footnote 13
As ruled by the WTO Panel and Appellate Body in a growing number of disputes on clean industrial policy, localization requirements are difficult to reconcile with the national treatment obligation of the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Investment Measures (TRIMs).Footnote 14 Import-dependent countries have struggled to justify these trade-restrictive measures under the ‘short supply’ exception of the GATT.Footnote 15 These decisions have led to an important scholarship on the limited scope for green industrialization and supply security policies under international trade law.Footnote 16 One aspect of clean energy trade law that remains understudied is the extent to which arguments of energy statecraft, and concerns about the weaponization of dependencies, could successfully justify trade-restrictive localization and diversification measures.
This article aims to contribute to the literature on international trade law and the energy transition by examining the existing WTO decisions in clean technology disputes through the lens of energy statecraft theory. Energy statecraft theory, including its insights into weaponization risks and their inherent structural limitations in the clean energy sector, provides a novel framework to assess arguments of supply insecurity and coercion under the GATT general exceptions. Alongside decisions on short supply, the present analysis centres on the recent Panel Report in US–Certain Tax Credits under the Inflation Reduction Act where the US unsuccessfully invoked the need to protect its ‘public morals’ (GATT Article XX(a)) from the threat of China’s ‘weaponization of global dominance’ in the renewable energy sector.Footnote 17 The US presented the localization of clean energy manufacturing as a moral necessity in the face of the unfair competition and coercion allegedly characterizing China’s leadership in the sector.Footnote 18 Clean energy statecraft was thus at the very centre of the US–IRA (China) dispute.Footnote 19
The main argument of this article is that, while local content requirements have so far failed WTO scrutiny, the short supply exception may in principle accommodate policies addressing weaponization risks provided importers can prove the unreliability of the transnational supply chains on which they depend. Absent such proof, the public morals exception offers little relief for generalized weaponization claims, particularly where a measure’s design indicates objectives of industrial competitiveness rather than the asserted public morals of protection against unfair competition and economic coercion. By contrast to local content requirements, a diversification measure directed towards trusted partners may be easier to relate to a public morals objective where those partners share commitments relevant to the targeted conduct and maintain safeguards against it, but would still have to pass the necessity test and satisfy the Article XX chapeau. The constraints that WTO law imposes on weaponization defences in the clean energy sector are a necessary discipline to prevent protectionist clean technology measures from slowing down decarbonization amid the global race for technology leadership and the high economic stakes in the energy transition.
This article’s findings are limited to the potential justification of clean industrial measures adopted in the context of increasing geopolitical rivalry and anxiety about strategic dependencies. It therefore concerns measures adopted below the high threshold of ‘war or other emergency in international relations’ in Article XXI(b)(iii) GATT. WTO jurisprudence associates that threshold with situations of armed conflict or a ‘breakdown or near-breakdown in the relations between states’, extending beyond ordinary political or economic differences.Footnote 20 This article instead examines how the ordinary general exceptions may address energy statecraft claims arising below that threshold. The focus is on discriminatory measures affecting trade in clean technology products, rather than restrictions on services or foreign investment. The article therefore does not undertake a full analysis of the public order exception under Article XIV(a) of the General Agreement on Trade in Services (GATS). Its interpretation in EU–Energy Package nonetheless offers an instructive contrast,Footnote 21 to which the analysis briefly returns below, illustrating that WTO law can accommodate energy statecraft concerns where foreign governmental influence over essential infrastructure creates a concrete threat to supply security. Because clean technology dependencies are characterized by different risks and supply security responses from critical minerals,Footnote 22 the analysis focuses on the former.
The argument proceeds as follows. Section 2 introduces energy statecraft theory and explains the limits of transposing fossil fuel dependency concepts to clean technologies. Section 3 then applies this analytical framework to the supply security defence under Article XX(j). Section 4 examines clean energy statecraft claims under the Article XX(a) public morals defence in US–IRA (China). Section 5 compares the implications of Articles XX(j) and XX(a) for clean energy statecraft defences, examining the distinction between substantiated weaponization risks and broader claims of strategic dependence and industrial rivalry. Section 6 concludes.
2. Energy Statecraft Theory and the Energy Transition
Economic statecraft refers to the use of economic instruments by policy makers ‘in their attempts to exercise power, i.e., to get others to do what they would not otherwise do’.Footnote 23 Analyses of economic statecraft explain how governments use investment and trade, in particular in critical resources and infrastructures, as instruments of strategic influence and foreign policy. Economic statecraft can be offensive or defensive, the latter referring to governments’ responses to the interference by foreign powers with their domestic policies.Footnote 24
Energy statecraft relates to the use of energy trade and investment ‘to produce beneficial geopolitical results’.Footnote 25 Although traditionally most attention has been paid to the role of fossil fuels in the exercise of geopolitical power, there is now increasing interest for the new dependencies created as part of the energy transition.Footnote 26 This section briefly introduces the traditional energy statecraft theory, before critically looking at its application to the energy transition and summarizing the energy statecraft analytical framework that will guide the WTO law analysis in the following sections.
2.1 Energy Statecraft Theory and Law
Energy statecraft theory provides an analytical framework to aid understanding of the great power competition over access to strategic energy resources and the ‘weaponization’ of energy dependencies.Footnote 27 In contrast to the liberal approach to energy market regulation, where interdependence is seen as the driver of multilateral cooperation,Footnote 28 the energy statecraft literature points to the risks posed by the creation of energy dependencies, in particular the threat of their disruption. The textbook example of the use of energy restrictions for strategic purposes, or weaponization of energy, is the 1973 Arab oil embargo.Footnote 29 During the 1973 Yom Kippur War between Israel and a coalition of Arab states, the Arab oil exporting countries embargoed the supply of oil to the US and its European allies in an attempt to pressure them into withdrawing their support for Israel.Footnote 30
Dependence on Russian energy has also been a central focus of energy statecraft analysis. Henderson, for instance, argues that, by accepting the creation of dependencies on Russian gas, importers threatened by energy disruptions have arguably ‘armed the energy weapon’, as there often are sufficient opportunities to avoid these dependencies.Footnote 31 Summarizing the literature, Grigas argues that ‘there is a fine line between “pressure” and “weapon”, but “weapon” appears to be the preferred term for those critical of Russia’s use of gas as an instrument of its foreign policy’.Footnote 32
Using similar language, the disruption of Russian gas supplies to Europe in 2022 in the context of the war in Ukraine led to accusations of the ‘weaponization of energy resources to blackmail Europe’.Footnote 33 As explained by the International Energy Agency, Russia sought ‘to gain political leverage by withholding gas supplies and exposing consumers to higher energy bills and supply shortages over the winter heating season’.Footnote 34 Russian gas exports to Europe, which accounted for around 40% of the EU’s total gas consumption in 2021, fell sharply in 2022, putting Europe’s security of gas supply at risk and triggering an exceptional surge in energy costs that caused considerable social and economic hardship.Footnote 35 The 2022 crisis thus illustrated that energy exporters can seek to exercise strategic advantage over import-dependent countries, where importers lack the capacity to absorb disruption and mitigate the energy price increases triggered by supply shocks.Footnote 36 Furthermore, the disruption of the Russian-controlled gas infrastructure in Europe in 2022 highlighted that energy statecraft concerns extend beyond dependence on supplies themselves to the potential vulnerability created by foreign control of critical energy infrastructure.Footnote 37
2.2 Clean Energy Statecraft and Limits to the Weaponization of Clean Technologies
The energy transition is creating new dependencies that are the subject of increasing concerns in the current geopolitical context.Footnote 38 Importers are worried that their dependence on imported clean technologies and critical minerals, mainly from China, could expose them to the risk of supply disruptions.Footnote 39 Similarly to the weaponization of fossil fuels, in the ‘emerging green energy game’, the perceived risk is that exporters may seek to ‘leverage green trade relations to increase influence over regions/countries or manipulate low-carbon technologies trade to punish a target country’.Footnote 40 The EU, for instance, is worried about ‘the risk of replacing reliance on Russian fossil fuels with other strategic dependencies’ in the clean energy industry.Footnote 41 In its 2026 proposal for an Industrial Accelerator Act, the European Commission points to the risk of even greater dependence on imported clean technologies, ‘precisely at the moment when global partners are accelerating their industrial strategies and weaponizing their industrial strengths’.Footnote 42 For the EU, and the US as will be seen below (sections 4.2-4.3), weaponization risks, e.g. as theorized in the energy statecraft literature and experienced in 2022, justify the adoption of measures to address technology dependencies. The economic statecraft theory developed in relation to fossil fuels is thus transferred without adaptation to the clean energy sector.
However, clean technology dependencies are materially distinct from the fossil fuel dependencies traditionally associated with energy weaponization. As the International Energy Agency and the International Renewable Energy Agency explain, the high geographic concentration of clean energy supply chains creates vulnerabilities, but an interruption in the supply of clean technologies has a far less immediate and severe effect on energy security and affordability than a fossil fuel shock.Footnote 43 While the combustion of oil and gas means that a ‘new supply is essential to the continuous operation’ of oil- and gas-using assets,Footnote 44 clean energy facilities, once installed, no longer rely on external sources of supply (with the exception of spare parts for maintenance).Footnote 45 Thus, by contrast to the disruption of fossil fuel supplies that can force energy and transportation systems to shut down or function at significantly higher prices, disruptions to finished clean technology products (e.g. solar modules) do not impact on existing energy facilities (e.g. solar farms) and their operational costs.Footnote 46
As explained by Prontera, in a global economy dominated by renewables, the ‘very distinction between consumer and producer states makes less sense’, which should lessen much of the tension that has affected the fossil fuel economy.Footnote 47 Compared to fossil fuels, renewables are inexhaustible resources. For Prontera, ‘this implies that traditional confrontational issues – such as resource scarcity, security of external supplies, energy dependency, and weaponization and cartelization of energy resources – hardly apply to a low-carbon world’.Footnote 48 Although clean technologies can in principle be used as instruments of green foreign energy policies, the risk of disruption of clean energy supplies is ‘not sufficient to reproduce the kind of geopolitical confrontational scenarios seen in the fossil fuel world’.Footnote 49 Geographic concentration and import dependence therefore do not, on their own, establish a significant supply vulnerability or a credible risk of weaponization. That assessment depends on the likely consequences of a disruption for the importing country and its capacity to absorb or mitigate those consequences.
From an energy supply and decarbonization perspective, the main risk posed by external clean technology dependencies is that supply disruptions would delay the energy transition by undermining importers’ access to clean technology products.Footnote 50 Paradoxically, there is a risk that the localization and diversification measures adopted to neutralize this risk would achieve just this. By increasing the cost of the energy transition and limiting investors’ choice of clean technologies, trade-restrictive policies could make it harder to transition to renewable energy sources.Footnote 51 At the same time, there is a risk that weaponization threats are invoked to justify measures aimed at shielding the domestic clean technology industry from competition. As pointed out by Steinbach, strategic autonomy is ‘often pressed into service in connection with a broad range of disparate strategic goals, including … greater economic competitiveness’.Footnote 52 In the new industrial and geopolitical context, states could seek to justify economic competitiveness measures under the cover of alleged concerns about offensive clean energy statecraft.Footnote 53
2.3 Energy Statecraft Theory as a Framework for WTO Analysis
The above discussion identifies two insights from energy statecraft theory that are relevant to the analysis under WTO law of measures adopted in response to alleged risks of weaponization in the clean energy sector. First, political concern about import dependence should not be equated with a demonstrated risk of weaponization. Although dependence may create exposure to supply disruption, it does not by itself establish that an exporter can, or is likely to seek to, convert that exposure into geopolitical leverage. Such leverage is more plausible where a supply interruption could impose economic or social hardship, such as significantly higher energy prices that the importing country cannot readily absorb or mitigate. Second, the nature of the relevant energy product or technology matters. Unlike fossil fuels, the disruption of supplies of finished clean technologies will primarily affect future deployment, rather than the operation and cost of already installed energy assets.
These insights provide the analytical lens for the following assessment of weaponization claims under the GATT general exceptions. Under Article XX(j), they help distinguish generalized concerns about import dependence from evidence that transnational supply chains, on which an importer relies, are sufficiently unstable or unreliable for a product to be regarded as being in short supply. Under Article XX(a), they help distinguish an asserted risk of coercive weaponization from broader concerns about foreign industrial dominance and economic competitiveness.
3. Localization and Diversification: The Short Supply Defense
To limit their technology dependencies, states are moving away from an open trade approach to clean energy supply security,Footnote 54 and are instead opting for localization and diversification measures. Governments increasingly rely on energy statecraft arguments, and in particular the risk of economic coercion and weaponization of dependencies, to justify the need for these trade restrictive measures. However, local content requirements have consistently been found in breach of the GATT.
The following analysis applies the energy statecraft framework set out above to these measures under the Article XX(j) short supply defence. It first introduces the local content requirements, diversification policies, and friend-shoring measures adopted in response to weaponization concerns, and assesses their compatibility with the GATT’s non-discrimination obligations. Localization and diversification requirements are structurally distinct responses to import dependence. While the former aim to incentivize domestic production by conditioning renewable energy subsidies on the use of local products, and therefore pursue clean energy supply security through domestic manufacturing capacity, the latter seek to reduce dependence on a single exporter by sourcing imports from alternative suppliers. Friend-shoring does so by prioritizing politically aligned partners.
Having introduced these distinct instruments and their implications under the national treatment and most-favored nation standards of the GATT, the analysis examines whether, and under what conditions, WTO jurisprudence on short supply accommodates energy statecraft arguments in the application of that defence.
3.1 Local Content Requirements
In 2022, the US responded to clean technology dependencies by adopting the Inflation Reduction Act (IRA), entitling investors in clean energy production to additional fiscal benefits for projects using US-manufactured clean technology equipment, iron, and steel.Footnote 55 The domestic content bonuses provided under the IRA increased the value of Investment Tax Credits and Production Tax Credits available to qualifying facilities producing electricity from renewable energy sources. In particular, investors benefited from a ‘bonus increase’ in these credits if their renewable energy facilities (e.g. solar farms) use 100% domestic steel and iron (the Steel and Iron Requirement) and at least 40% of equipment (e.g. solar cells) manufactured in the US (the Manufactured Products Requirement).Footnote 56
In 2026, the European Commission proposed ‘Union-origin’ (or ‘Made-in Europe’) requirements in its Industrial Accelerator Act, with the objective of addressing Europe’s high dependencies on single sources of supply for clean technology products, e.g. batteries and solar PV equipment, and to protect its economy against the perceived risk of weaponization of these dependencies.Footnote 57 For instance, public procurement procedures for the purchase of solar PV technologies will require that the PV inverter and the PV cells originate in the Union.Footnote 58 Similarly, auctions organized to accelerate the deployment of solar energy must include pre-qualification or award criteria mandating the use of EU-manufactured PV inverters and cells.Footnote 59
Because they incentivize investments in the local manufacturing of clean technologies and affect trade by favouring domestic products over imported clean technologies, local content requirements in Canada–Renewable Energy, India–Solar Cells, and most recently in US–IRA (China) were found to constitute trade-related investment measures within the meaning of the TRIMs Agreement.Footnote 60 As they require the purchase of domestic products as a necessary condition to benefit from clean energy subsidies (e.g. feed-in tariffs, auctions or tax credits), these measures were found to be in breach of national treatment.Footnote 61
Under Article III:8(a) GATT, a derogation from the national treatment requirement is possible for the public procurement of clean technology products. However, this exception does not apply to local content requirements under clean energy subsidies. As ruled by the Appellate Body in Canada–Renewable Energy, and confirmed in India–Solar Cells, under the public procurement exception, the product of foreign origin facing discrimination must be in a competitive relationship with the product purchased by public entities.Footnote 62 Given that clean energy subsidies support the purchase of electricity from clean energy sources and thus not directly the procurement of clean technology equipment, importers cannot justify local-content requirements in such schemes on the basis of Article III:8(a) GATT.
3.2 Diversification and Friend-Shoring Requirements
Besides efforts to scale up the domestic manufacturing basis, states can also opt for diversification measures. By ensuring more diverse sources of supply, countries hedge against the risk of disruption affecting one or more sources of supply. Friend-shoring measures are a form of diversification that prioritizes imports from ‘like-minded’, or politically aligned, partners.Footnote 63
For instance, the Net-Zero Industry Act aims to diversify supplies to avoid ‘excessive dependency’ on ‘single sources of supply’ of clean technology equipment, de facto targeting Chinese products.Footnote 64 The Act aims to achieve diversification through resilience requirements in public procurement tenders and auctions, penalizing the procurement of products from countries which the EU depends on for more than 50 % of its supplies. It also aims to diversify clean technology supplies from dominant suppliers through ‘Net Zero Industrial Partnerships’, concluded to ‘step up efforts to join forces with partners committed to the Paris Agreement’.Footnote 65
By treating dominant suppliers of clean technology products differently to domestic manufacturers and other foreign producers, diversification requirements are difficult to reconcile with the national treatment and most-favored nation standards of the GATT.Footnote 66 In EU–Energy Package, the Panel found that support for infrastructure projects aiming to end member states’ ‘dependency on a single supplier’ was in reality directed at Russian gas.Footnote 67 By developing infrastructure links to sources of gas supply other than Russia, the EU policy increased the availability of pipeline capacity to transport gas of non-Russian origin. More favourable conditions for the transportation of gas from any origin other than Russia reduced the competitive opportunities for Russian gas vis-à-vis other sources, including domestic gas, in violation of the national treatment obligation of the GATT.Footnote 68
3.3 Energy Statecraft under the Short Supply Exception
In both EU–Energy Package and India–Solar Cells, the Panel and Appellate Body did not accept that import dependence and generalized supply disruption risks, in and of themselves, established the legal conditions for an Article XX(j) defence.Footnote 69 The decisions instead pointed to the relevance of a concrete assessment of the reliability of the relevant supply relationships and, in EU–Energy Package, of the connection between the challenged measures and the acquisition or distribution of the product.
The EU, in EU–Energy Package, relied on energy statecraft arguments in defence of its gas diversification program under Article XX(j). It argued that natural gas was ‘in short supply’ in the EU because of the serious risks of supply disruptions, e.g. as a result of political actions, and the EU’s dependency on few sources of supply.Footnote 70 Although the Panel accepted that gas may become in short supply due to disruption risks, it rejected the EU defence by ruling that the EU had failed to demonstrate that gas at the time was in short supply based on a ‘holistic consideration of trends in supply and demand as they evolve over time’.Footnote 71 Even if a shortage of gas supply had been proven, not all measures adopted to mitigate supply disruptions and achieve supply security would necessarily contribute to the ‘acquisition or distribution’ of gas, within the meaning of Article XX(j).Footnote 72 A demonstration that the diversification of import routes contributes to supply security is by itself not sufficient to establish that diversification also contributes to the acquisition or distribution of gas.
The same dispute offers an instructive contrast under the public order exception in Article XIV(a) GATS. The Panel more expressly engaged with energy statecraft considerations in assessing the EU’s third-country certification measure for foreign-controlled transmission-system operators. In line with energy statecraft theory (section 2.1), it found that security of energy supply is a fundamental interest of society, to which foreign control of transmission systems can pose a genuine and sufficiently serious threat.Footnote 73 As pointed out by Bao, ‘the panel’s focus on the threat posed by foreign government control to the EU’s energy security interests … clearly demonstrate a perception of energy security with geopolitical and defensive connotations’.Footnote 74 The Panel also agreed that the certification mechanism was necessary to maintain public order.Footnote 75 However, it ruled that by targeting foreign operators only, the mechanism constituted an arbitrary and unjustifiable discrimination, as it failed to address the possible security risks associated with domestic operators that have commercial and personal interests abroad. The decision illustrates the potential relevance of the public order exception to weaponization claims, while confirming that recognition of energy statecraft concerns does not, in itself, justify a discriminatory measure.
In India–Solar Cells, India unsuccessfully argued that local content requirements were essential to the acquisition of solar PV products as limited domestic manufacturing capacity created a situation of local short supply. India advanced an energy statecraft-type argument, pointing to the vulnerabilities resulting from its sole dependence on imported solar cells and modules.Footnote 76 However, the Appellate Body refused to treat domestic manufacturing capacity as the sole relevant source of available supply.Footnote 77 It accepted that supply disruption risks may inform whether a product is in short supply,Footnote 78 but rejected the proposition that import dependence in and of itself entails an intolerable vulnerability to supply disruptions in the absence of a sufficient level of domestic production.Footnote 79 In assessing the availability of the products at issue, the Appellate Body recognized the relevance of the extent to which international supply was stable, including the reliability of the transnational supply chains on which India relied.Footnote 80
This approach is consistent with the distinction drawn by energy statecraft theory between energy dependence and the potential weaponization of clean technology supplies (section 2.2). Dependence is not problematic on its own, but it may become so where the relevant supply relationship presents substantiated risks of disruptive impacts. India did not demonstrate that the international sources of supply on which it relied were insufficiently stable or reliable to meet demand. Its argument therefore rested on the proposition that import dependence as such justified localization, instead of on evidence of a concrete vulnerability in the relevant transnational supply relationship. The decision in India–Solar Cells thus shows that energy statecraft concerns may be relevant to the assessment of short supply under Article XX(j), where they are substantiated by evidence of the specific disruption risks and supply unreliability facing the importing country.Footnote 81
3.4 Implications for Clean Energy Statecraft
Although import dependent states have so far failed to justify local content requirements and diversification measures under Article XX(j) GATT, energy statecraft analysis may assist the assessment of short supply where it identifies a concrete vulnerability in the relevant transnational supply relationship. The relevant evidence does not concern foreign concentration alone, but whether the relevant supply relationship presents concrete risks of disruption that make international supply too unstable or unreliable to meet demand. The assessment of those disruption risks is necessarily product and supply chain specific, and may therefore take into account the different supply security characteristics that distinguish fossil fuel and clean technology dependence, as conceptualized in energy statecraft theory (sections 2.1 and 2.2).
Assessing supply unreliability and disruption risks in determining whether products are in short supply under Article XX(j) contributes to limiting abuses of this defence. As argued by Bao, ‘without appropriate guardrails, dubious claims disguised as security interests could transgress the demarcation line between legitimate and illegitimate use of legal exceptions’.Footnote 82 In the context of the global race for technological leadership and growing protectionism, broad concerns of offensive clean energy statecraft cannot provide a blanket justification for trade-restrictive localization measures. The following section examines whether the public morals exception under GATT Article XX(a), as interpreted and applied by the Panel in US–IRA (China), offers a broader and less demanding justification for clean industrialization measures based on energy statecraft considerations.
4. Public Morals and the Weaponization of Clean Energy
In US–IRA (China), the US sought to justify the IRA local content regime by presenting it as ‘necessary to protect public morals’ under Article XX(a) GATT, instead of invoking short supply and seeking to demonstrate the unreliability of its clean energy supply chains. By reducing reliance on China and encouraging US consumers not to reward China’s practices, the IRA tax benefits were presented as a moral necessity in the face of the unfair competition and coercion allegedly characterizing China’s ‘attainment and weaponization of global dominance in the … renewable energy sector’.Footnote 83 The Panel rejected this defence, ruling that the IRA local content regime was not designed to protect public morals, but instead was aimed to achieve economic objectives.Footnote 84
This section first introduces the Panel’s approach to the assessment of whether a measure was taken to protect public morals, before examining the Panel’s finding on unfair competition and economic coercion, its analysis of the economic nature of the IRA, and its evaluation of the design, structure, and expected operation of the IRA localization measures in the light of energy statecraft theory.
4.1 Public Moral Objectives
Under Article XX(a) GATT, provisional justification requires states to establish both that the challenged measure is ‘designed or taken to protect public morals’ and that it is necessary to protect them.Footnote 85 If those conditions are met, the measure must additionally satisfy the Article XX chapeau by not being applied so as to constitute arbitrary or unjustifiable discrimination, or a disguised restriction on international trade. Accordingly, in US–IRA (China), the Panel started its assessment of the US defence of the IRA by examining whether the contested measure was designed to protect US public morals.Footnote 86
Earlier WTO jurisprudence has applied a relatively low threshold when assessing states’ characterization of a contested measure as protecting public morals, and engaged in a stringent assessment of necessity.Footnote 87 In Colombia–Textiles, for instance, the Appellate Body considered that ‘if the measure is not incapable of protecting public morals, this indicates the existence of a relationship between the measure and the protection of public morals’.Footnote 88 By contrast, the US–IRA (China) Panel subjected the moral objectives invoked by the US to a detailed analysis based on the measure’s text, legislative history, design, structure, and expected operation. It found that the economic purposes evidenced by the record did not establish the claimed moral rationale, addressing the issue at the threshold stage instead of under the necessity test. This approach may suggest a more demanding threshold in qualifying policy objectives as public morals under Article XX(a), and could affect the allocation of the analysis between the assessment of the public morals objectives allegedly pursued by the contested measures and the subsequent necessity assessment. However, the broader implications for Article XX(a), and potentially for other Article XX subparagraphs, lie beyond this article’s focus on energy statecraft and the legal treatment of weaponization-based claims.
Public morals refer to ‘standards of right and wrong conduct maintained by or on behalf of a community or nation’.Footnote 89 The difficulty in using arguments of energy statecraft when determining what constitutes a ‘standard of right and wrong conduct’ relates to the economic nature of energy activities. There is rarely a ‘bright line’ between economic and public morals concerns.Footnote 90 As stated in US–Tariff Measures (China), public morals ‘may frequently have inseparable economic aspects’, and ‘a measure may be found to pursue a public morals objective even if it has economic aspects’.Footnote 91 At the same time, as found in EC–Seal Products, this assessment has to take into account the fact that Article XX(a) is intended to protect ‘non-economic interests and concerns’.Footnote 92 The question is therefore not whether the practices invoked by the US, i.e. unfair competition and economic coercion, have inseparable economic aspects, but whether they were shown to violate standards of right and wrong conduct maintained in the US. The following sections examine how the Panel addressed this question and whether its treatment of those claims leaves adequate scope for energy statecraft concerns under Article XX(a).
4.2 Unfair Competition and Dominance
According to the US, ‘China’s policy of global dominance is an effort towards monopolization’ that contradicts the US public morals against unfair competition as evidenced by US law.Footnote 93 The Panel accepted that domestic laws prohibiting particular conduct might, in principle, evidence a public moral against that conduct.Footnote 94 It did not, however, treat the existence of US competition law as establishing a free-standing public moral against all forms of unfair competition or all strategies aimed at sectoral dominance. US law, in particular the Sherman Act and the Federal Trade Commission Act, promotes competition by prohibiting certain unfair business practices and the monopolization of trade.Footnote 95 While the Panel found that these laws supported the existence of a public moral against certain trade practices, including monopolization,Footnote 96 the US did not explain how all of China’s alleged strategies to dominate the global clean energy industry (e.g. non-market excess capacity, state-directed investment, and required technology transfers) fell within the specific forms of unfair competition prohibited under US law.Footnote 97
The argument that China’s pursuit of dominance over the clean energy sector violated a broader US public moral against unfair competition was also found to be unconvincing. The US and its international partners expressed concerns about Chinese non-market trade practices, but these concerns were mainly made with a focus on their implications for economic security and foreign policy,Footnote 98 and were thus not directly related to public morals.Footnote 99 Even if public morals in the US would extend beyond the monopolization practices prohibited under US law, the US did not demonstrate how China’s alleged targeting of the clean energy sector for dominance would fall under this broader concept of unfair competition.Footnote 100 On the contrary, there is evidence that the US itself has adopted similar policies, e.g. with the objective of ‘reestablish[ing] American leadership in manufacturing’,Footnote 101 ‘enhancing America’s global AI dominance’,Footnote 102 and ‘mak[ing] America energy dominant’.Footnote 103 In pursuit of technological leadership and dominance, the US has engaged in market interventions to support innovation and increase manufacturing in the US. The IRA local content requirements themselves interfered with the market to support the US clean energy manufacturing industry and limit sourcing from China, thus amounting to industrial practices similar to China’s alleged policies.Footnote 104 While the degree of US market intervention may not be equivalent to China, the fact that the US also seeks to achieve sectoral dominance contradicted its argument that China’s pursuit of clean energy leadership threatens US public morals against unfair competition.Footnote 105
To summarize, in jurisdictions where domestic law prohibits particular anti-competitive conduct, unfair competition can in principle be a public moral concern within the meaning of Article XX(a), while the use of comparable practices may weaken the credibility of a claimed moral concern. In US–IRA (China), the US had not established that the alleged Chinese clean energy practices fell within the specific forms of unfair competition prohibited by US law, or that they violated a broader US public moral against unfair competition. The US’ own pursuit of technological leadership and use of market interventions under the IRA further weakened the US public moral defence. In the context of the global race for technology leadership, this reasoning makes it difficult to invoke Article XX(a) against a rival’s state-led industrial strategy and distinguish it from its own trade-restrictive clean industrial policies.
4.3 Economic Coercion
Besides unfair competition, China’s targeting of the clean energy sector for dominance would, according to the US, contradict the US public moral against coercion.Footnote 106 The US did not provide a clear definition of coercion. For China, if coercion is to be understood as ‘economic coercion by a state in order to influence the policies or practices of another state’, there can be no public moral against such practice in the US as ‘the United States engages in that sort of ‘economic coercion’ all the time, for example through its pervasive use of economic sanctions against other countries’.Footnote 107 According to China, the US would regularly engage in coercion against foreign and domestic enterprises, e.g. in its pursuit of global dominance of the AI sector.Footnote 108
In the absence of a definition of coercion by the US, the Panel relied on the 2023 G7 Trade Ministers’ Statement condemning ‘economic coercion that interferes with legitimate choices of another government’.Footnote 109 Assuming that this was the meaning of the alleged US public moral against coercion, the Panel found that it was unclear whether China’s alleged clean energy practices would fall within that meaning of coercion.Footnote 110 In particular, the US failed to explain how targeting clean energy dominance, or promoting state-directed investment in clean energy, would constitute conduct that ‘interferes with the legitimate choices of another government’.Footnote 111 On the contrary, according to the Panel, these alleged practices concern ‘conduct undertaken by and in China’.Footnote 112 As China’s clean energy policies mainly relate to investments in China, pursuing dominance over the clean energy sector does not necessarily amount to an act of economic coercion defined as interference with the sovereign decisions of other states.
To summarize, the Panel did not per se exclude economic coercion from the scope of public morals under Article XX(a). In the absence of a clear definition advanced by the US, it assessed the claim against the G7 understanding of economic coercion as conduct that interferes with the legitimate choices of another government, and found that the US had not established that China’s alleged practices amounted to such interference. As with unfair competition, a public morals defence based on economic coercion would be strengthened by a clear legal basis identifying the specific coercive practices targeted by the trade restrictions. Energy statecraft theory may assist in identifying such practices.
4.4 The Economic Nature of Supply Security
While references to public moral objectives in national laws can be a pertinent factor in assessing whether measures were taken to protect these public morals, direct evidence of different objectives than the public morals invoked can be relevant in disqualifying this defence.Footnote 113 The IRA does not make any explicit reference to the objective of protecting the US public morals against unfair competition and coercion.Footnote 114 Instead, statements made by public officials emphasized the importance of addressing the US technology and resource dependencies on China, ensuring energy security, and incentivizing investments in US manufacturing.
For instance, the Biden administration presented the IRA as a ‘modern industrial strategy’, designed to revitalize the US manufacturing sector and avoid the risks of dependency on China in critical supply chains.Footnote 115 The ‘overconcentration’ of clean energy supply chains in China due to ‘unfair non-market practices’ would make the US vulnerable to supply disruptions of imported products that may harm the US economy.Footnote 116 According to the Panel, these statements may support the conclusion that US policymakers were concerned about their reliance ‘on a trading partner perceived as unstable or unreliable’.Footnote 117 However, these supply security concerns are distinct from concerns of unfair competition and coercion, and can thus not be assimilated with the public moral considerations invoked by the US to justify the IRA local content requirements.Footnote 118 The US aims to counter China’s alleged practices ‘not because these are in themselves morally objectionable, but because of their economic effects on domestic manufacturing and stability of supply’.Footnote 119 As seen above (Section 3.4), the short supply exception under Article XX(j) provides the legal basis to justify measures taken to protect the national economy against dependencies on unreliable transnational supply chains.
4.5 Public Morals, Localization, and Diversification
In the absence of direct reference to public morals, state measures may still be found to have been adopted in pursuit of public morals if public morals are apparent in the ‘design, content, structure and expected operation’ of the relevant measures.Footnote 120 In US–IRA (China), the Panel did not agree that the IRA local content regime related to public morals concerns about China’s clean energy practices, as the IRA covered an overly broad scope of products, allowed for the continued import of Chinese products (albeit at less favourable conditions), and discriminated against both Chinese and non-Chinese imports.
First, the Panel found that the broad scope of the IRA goes beyond the clean technology products that China is allegedly seeking to monopolize, and therefore does not support the objective of protecting US public morals against this threat. Contrary to the US defence of the IRA as applying to clean technology products that have allegedly been targeted for dominance by China, the Panel considered that the IRA bonus credits were not limited to goods in the renewable energy sector, but applied ‘to any item produced as a result of the manufacturing process that is incorporated into any article, material, or supply that is itself directly incorporated into an eligible facility’.Footnote 121 This broad scope of the IRA bonus mechanism was found to bear an insufficient relation to the US public morals allegedly threatened by China’s practices in relation to renewable energy products specifically. Energy statecraft theory supports this finding, by distinguishing the weaponization risks associated with different energy products.
Second, the Panel found the IRA incapable of protecting the alleged US public morals because it continued to allow, and even reward, the procurement of Chinese clean technology products by US renewable energy investors. Indeed, under the IRA, renewable energy projects remain eligible for the base credit, even when they procure all their products from China.Footnote 122 For the Panel, a measure that continues to reward the use of the products, which are allegedly threatening public morals, cannot be said to have been designed to protect these public morals.Footnote 123 While the bonus credit regime incentivizes the use of domestic products, the fact that Chinese products continue to be legitimate options does not signal ‘any kind of moral disapprobation’ regarding China’s alleged practices in the renewable energy sector.Footnote 124 As this mechanism does not express to developers of renewable energy projects in the US that the use of such Chinese products is inconsistent with the US standards of right and wrong conduct, it could only be motivated by reasons other than the public values invoked by the US.Footnote 125
Third, limiting the IRA bonus credits to US clean technology products, and US iron and steel, without considering imports from ‘like-minded partners’ further undermined the US defence that the IRA local content regime was designed to protect US public morals against China’s clean energy dominance. Like-minded partners supposedly share the US moral values, including its commitments against unfair competition and coercion. Taking this value alignment into account, the Panel could not see how excluding the clean technologies, and iron and steel, manufactured in like-minded partners from the IRA local bonuses would contribute to protecting the alleged public morals pursued by the IRA.Footnote 126
The US argued that Chinese non-market practices have ‘infiltrated’ the global steel market.Footnote 127 However, the US failed to substantiate how steel production in all countries, other than the US, had been affected by China’s alleged practices, and thus how the use of steel from these countries would reward China’s practices.Footnote 128 For instance, the fact that excess capacity negatively impacts on the profitability of steel factories outside of the US does not mean that China’s practices have ‘morally tarnished’ steel production abroad. Similarly, the fact that Chinese state-owned enterprises have engaged in overseas investments in steel production does not necessarily mean that these investments present moral risks, as they are subject to the rules that protect public morals in like-minded countries.
The Panel’s detailed assessment of the design of the IRA illustrates the stricter inquiry into the ‘designed to protect public morals’ criterion discussed in Section 4.1, and raises questions regarding its alignment with the established distinction between a measure’s public morals objective and the subsequent necessity analysis. In principle, considerations concerning the restrictiveness of the IRA, especially the fact that it did not entirely exclude projects using Chinese clean technologies from the base and bonus credits, would be relevant to the measure’s contribution to the objective under the necessity inquiry.
At the same time, the decisive point in the Panel’s reasoning was not that the IRA was insufficiently restrictive, but that its design features could not be said to be capable of protecting public morals. In particular, the Panel considered that, because the IRA continued to reward Chinese clean technologies, it could not signal to the industry that their use was inconsistent with US standards of right and wrong conduct. Together with the scheme’s broad product coverage and treatment of imports from like-minded partners, this design feature instead pointed to documented economic and industrial policy purposes. The reasoning can thus be understood as questioning the credibility of the public morals objectives invoked by the US, rather than the sovereign right of the US to select its level of protection of public morals.
5. Energy Statecraft Defences under Article XX GATT: Short Supply and the Limits of Public Morals
The Panel Report in US–IRA (China) disciplines the use of the public morals defence in relation to energy statecraft, and has therefore been characterized as highlighting the structural inadequacy of the WTO system in the new geopolitical reality.Footnote 129 The normative categories of the WTO were not designed for a geopolitical environment in which strategic competition between major powers has become central to industrial and climate policy, and addressing this structural inadequacy may therefore require renegotiation to accommodate the imperatives of geostrategic competition.Footnote 130
However, similarly to the risk posed by the trivialization of the GATT essential security exception,Footnote 131 a broad interpretation of the public morals exception, incorporating geopolitical arguments without sufficiently stringent assessment of their genuine moral purpose, could facilitate protectionist measures. In the context of the global race for technological leadership, this risk is particularly acute. Applied to the energy transition, it could slow down decarbonization and increase its cost. Measures taken to protect the national economy against clean energy weaponization risks are best justified under the short supply exception of Article XX(j).
5.1 Public Morals and Energy Statecraft
The Panel in US–IRA (China) found that it was not bound by the moral objectives invoked by the US to justify the IRA local content regime under Article XX(a) GATT, and instead engaged in a detailed assessment of the public moral considerations allegedly underlying these restrictions. In the context of geopolitical competition where security interests can hide economic considerations, objective assessments of policy objectives are needed to limit the risk of abuse of geopolitical arguments in defence of industrial policies and to address the risk that protectionism poses to the energy transition.
As energy statecraft merges geopolitical and foreign policy objectives with economic tools,Footnote 132 qualifying responses to perceived weaponization risks as driven by the protection of public morals is a challenging task. In the energy transition, concerns about ‘excessive dependencies’ on imported clean energy products originate from the limited competitiveness of domestic producers in import-dependent countries, and are thus intrinsically connected to economic considerations.Footnote 133 Incentivizing domestic manufacturing to reduce dependence on certain producers does not on its own prove that the measure was designed to protect public morals, as this may be driven by economic competitiveness rather than moral conviction.Footnote 134
It is also difficult for importers to present unfair competition by leading clean technology exporters as a public moral concern when these importing states themselves pursue technological leadership. In US–IRA (China), the US ambition to ‘reestablish American leadership in manufacturing’ and ‘make America energy dominant’ affected the credibility of its argument on the public moral threat posed by China’s clean technology leadership.Footnote 135 Similarly, the EU aims to ‘play a dominant role in strategic parts of the global value chain’ in clean technologies.Footnote 136 Based on US–IRA (China), the explicit acknowledgment of the objective of technology dominance undermines the potential for the EU to invoke public morals concerns on China’s clean technology leadership to justify the localization measures of the Industrial Accelerator Act under Article XX(a) GATT.
This does not mean that all measures responding to external supply risks face the same difficulty in relating to a public morals objective. Unlike a local content requirement, a diversification measure does not necessarily condition a benefit on domestic production. As will be further examined below, states incentivizing sourcing from partners that share commitments relevant to the specific conduct targeted may more coherently relate the differential treatment of imports to the asserted moral objective. This does not, in itself, establish sufficient justification under Article XX(a).
5.2 Economic Coercion and the Weaponization of Clean Technologies
As US–IRA (China) shows, clean energy leadership, or dominance, does not necessarily equate with economic coercion and therefore does not necessarily threaten importers’ public morals against coercion. More specifically, the Panel’s reasoning suggests that measures taken by the exporting state to achieve leadership in the clean energy sector are unlikely to amount to economic coercion when these measures are ‘undertaken by and in’ the exporting state.Footnote 137
In the clean energy sector, the argument that dependencies could be weaponized to interfere with an importer’s legitimate policy choices, and would thus threaten that state’s moral value against coercion, further suffers from the fact that, as explained in energy statecraft theory (see Sections 2.2 and 2.3 above), clean technology supply disruptions only give exporters limited geopolitical leverage. In contrast to fossil fuel shocks, interrupting exports of solar cells, for instance, would not impact on the functioning of existing solar farms, thus considerably reducing the pressure that exporters would be able to exercise through their dominance of the sector. Similarly, interrupting battery exports would not affect the functioning of existing storage systems and electric vehicles in circulation, although this would disrupt the operation of electric vehicle factories abroad.Footnote 138 Depending on the relevant clean technology product and its specific uses, the characteristics of clean technology supply security, as conceptualized in energy statecraft theory, reinforce the conclusion that dominance in this sector does not necessarily equate with economic coercion.
The Panel in US–IRA (China) refrained from offering its own definition of economic coercion, and instead referred to the G7’s understanding of economic coercion as actions interfering with another government’s sovereign decisions. Under customary international law, a state’s coercive intervention in the affairs of other states is prohibited,Footnote 139 but below the threshold of the use of force, the contours of coercion are contested.Footnote 140 One interpretation is that a state ‘imposes costs on the victim state so as to change its decision-making calculus and cause it to change its policy choices’.Footnote 141 Dominant fossil fuel exporters may be in a position to impose sufficient economic and social hardship on importers to make them change their policy choices.Footnote 142 However, the limited geopolitical leverage available to clean technology exporters makes it considerably more difficult for import-dependent countries to establish that dominance in the clean energy sector rises to the level of coercion in this sense.
The distinction between unlawful economic coercion and economic sanctions purportedly aimed at ensuring compliance with legal obligations also warrants attention.Footnote 143 For instance, in the context of the Arab oil embargo of 1973, the Arab oil exporting states considered the interruption of oil exports as necessary to restore the rights of the Arab people in the context of the Middle East conflict, and to discourage oil importers from continuing to support what the Arab states considered to be a violation of international law by Israel. On this basis, Shihata rejected the characterization of the embargo as a ‘weapon for blackmailing the West’, and instead argued that the Arab countries were simply following the practice of a great number of states, notably the US, that banned exports of strategic commodities, in pursuit of foreign policy interests and international security.Footnote 144
In US–IRA (China), the US portrayed China’s pursuit of technology dominance as a threat of weaponization, and thus unlawful economic coercion. In turn, China accused the US of exercising pervasive economic pressure against other states. Although the Panel did not rule on this question, the legal and moral complexity of distinguishing unlawful economic coercion from economic restrictions purportedly directed at ensuring compliance with legal obligations complicates reliance on economic coercion arguments under Article XX(a) GATT.
5.3 Public Morals and Geopolitical Alignment
The decision in US–IRA (China) also helps understanding of the concept of ‘like-minded country’ that so far has received limited attention in the legal literature, despite its increasing relevance in the new geopolitical reality.Footnote 145 Besides its geopolitical connotation, the concept has a moral dimension. Like-minded countries may be defined as sharing moral values, e.g., as argued by the US, commitments against unfair competition and coercion.Footnote 146 Investments by state-owned enterprises from strategic rivals in the territory of like-minded partners do not necessarily undermine the moral integrity of the products manufactured by these companies.Footnote 147 As the national laws protecting public morals in like-minded countries apply to foreign producers, there is little public moral justification for the exclusion of their products. Therefore, less favourable treatment of supplies from like-minded states is difficult to justify on moral grounds. This interpretation is relevant for the design of responses to perceived risks of clean energy statecraft. Instead of local content requirements excluding all foreign producers from the benefits of clean energy support schemes, diversification policies that reduce certain dependencies by ensuring a more diverse pool of suppliers should be preferred where partners share relevant moral commitments.Footnote 148
For Galbraith and Wu, the Panel’s rejection of the US attempt to justify the IRA local content regime as a moral response to geopolitical rivalry fails to resolve ‘the tension between a legal order premised on non-discrimination and a geopolitical environment in which discrimination – between partners and adversaries, trusted and untrusted suppliers – has become central to how states conceive their industrial and climate futures’.Footnote 149 However, the US–IRA (China) Panel’s reasoning indicates that the US had not explained why products from partners it characterized as like-minded should be treated in the same manner as products associated with the practices alleged to threaten US public morals. If like-minded partners share public morals values relevant to the specific conduct targeted by a measure, and maintain safeguards addressing that conduct, preferential treatment for their products may help demonstrate a coherent relationship between a friend-shoring measure and its asserted public morals objective. This reasoning does not establish that friend-shoring is compatible with Article XX(a), but suggests that it may avoid one incoherence identified in the IRA local content regime. The responding state would still need to establish that the measure is necessary to protect the public morals invoked and that it satisfies the chapeau.
This interpretation is not without danger from an international trade and decarbonization perspective. As argued by Heusel and Wiater, ‘the concept of ‘friend-shoring’ is in stark contrast to the global mindset that has prevailed since the end of the Cold War, promoting trade liberalization in a fully globalised world’.Footnote 150 Friend-shoring also presents challenges for the energy transition. For instance, in Shell’s 2050 ‘Archipelagos’ scenario, in which the geopolitical order resembles the 19th-century world of power alliances with clusters of states focused on security, net-zero emissions are not achieved by 2100.Footnote 151 In this scenario, the world would significantly overshoot the temperature limits set in the Paris Agreement, albeit to a lesser degree than in Shell’s ‘Islands’ scenario in which energy policy is driven by nationalism and protectionism.Footnote 152
5.4 The Short Supply Alternative
Compared to the public morals exception where the vulnerabilities associated with import dependencies on unreliable partners are of little relevance (section 4.4), energy statecraft considerations have a greater role to play under the short supply defence, provided importers can substantiate their reliability concerns. As seen above (section 3.3), under Article XX(j) GATT the unreliability of transnational supply chains can be taken into account to justify that certain goods are in short supply. Taking into account the economic interests at stake in the energy transition, to avoid justifying protectionist policies under the short supply exception of the GATT, import-dependent states cannot simply invoke vulnerabilities associated with dependencies without substantiating these risks of weaponization.
For instance, while the supply security of critical raw materials raises distinct policy considerations beyond the scope of this article, the methodology of the EU Critical Raw Materials Act offers a useful illustration of what substantiation of supply risks may look like in practice. Under the EU Critical Raw Materials Act, the European Commission is required to monitor supply risks and conduct ‘stress tests’ assessing the vulnerability to disruptions of the EU’s supply chain for specific raw materials.Footnote 153 ‘Supply risks’ are to be determined according to a detailed formula reflecting, e.g. the export restrictions imposed by the exporting country on specific products. By contrast, the 2024 Net-Zero Industry Act and 2026 Industrial Accelerator Act broadly refer to the risk posed by excessive dependencies on dominant suppliers, without substantiating these risks, and might thus, without further evidence, fail the supply security test under Article XX(j) GATT.
From an energy transition and decarbonization perspective, a rigorous assessment of short supply helps ensure that clean energy project developers maintain access to the technology suppliers of their choice, unless these suppliers present demonstrated supply security risks. As explicitly recognized in the Net-Zero Industry Act and the proposed Industrial Accelerator Act, there is a risk that resilience conditions and localization requirements could ‘slow down the deployment of energy from renewable sources’ and have a negative financial impact on households and companies.Footnote 154 Substantiating the specific disruption risks characterizing existing supply chains can help minimize the adverse effect of clean industrial initiatives on renewable energy investments.
6. Conclusion
Repeated energy crises, and the significant economic and social hardship they have caused, illustrate the risk of weaponization of energy dependencies theorized in the energy statecraft literature. In the context of the energy transition, similar concerns are now increasingly being expressed in relation to clean technology dependencies, driving states (e.g. the EU and US) to adopt localization and diversification strategies. However, the energy statecraft theory, developed in relation to fossil fuels, cannot be transferred without adaptation to the clean energy sector to help justify trade-restrictive clean industrialization measures based on weaponization concerns under the general exceptions of the GATT.
In India–Solar Cells, India pointed to the vulnerabilities associated with its dependency on imported solar products to justify its local content requirements under the short supply exception of the GATT, but failed to establish the unreliability of its transnational supply chains. In EU–Energy Package, the EU invoked the need to protect its security of energy supply from high dependence on Russia, but failed to demonstrate that gas was already in short supply. In US–IRA (China), the Panel found that the US had not established unfair competition, economic coercion, and the pursuit of dominance in the clean energy industry as public morals concerns capable of justifying the challenged local content requirements under Article XX(a).
The US–IRA (China) Panel’s rejection of the US public morals defence of local content requirements, insofar as it relied on concerns about economic coercion and the weaponization of clean energy technologies, finds support in clean energy statecraft theory. The geopolitical leverage associated with dominance over clean energy supply chains is structurally more limited than that associated with fossil fuel supplies, making it more difficult to demonstrate coercion through the weaponization of finished clean technology products.
By contrast to local content requirements, diversification measures, and in particular friend-shoring, may stand a better chance of justification under Article XX(a). A diversification measure directed towards trusted partners may be easier to relate to a public morals objective where those partners share commitments relevant to the targeted conduct and maintain safeguards against it. From a climate change perspective, this approach is problematic as higher emissions are expected in a world divided in geopolitical blocs or ‘Archipelagos’ organized based on friend-shoring, albeit less than with ‘Islands’ fully focused on domestic protectionism.Footnote 155
The interpretation of public morals in US–IRA (China) channels energy statecraft defences of localization measures toward XX(j). Importers may succeed in defending responses to weaponization risks where the unreliability of the transnational supply chains on which they depend is proven to result in short supply. In the absence of such proof, general concerns about excessive dependencies offer little relief. This reflects WTO law’s core function of guarding against protectionism in disguise. As states, including the EU in finalizing its Industrial Accelerator Act, design their clean industrial policies, these constraints must be taken seriously to avoid putting at risk the speed of the energy transition.
Data availability statement
All data used for this article is available publicly.
Acknowledgements
The author is most grateful to the reviewers for their thorough and most useful comments on an earlier version of this article.
Declaration on AI use
The article has benefited from language editing and feedback on structure and clarity of argument by Perplexity AI. The substantive analysis is entirely the author’s.
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