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Trade and National Security: Rising Risks for the WTO

Published online by Cambridge University Press:  14 February 2020

Tatiana Lacerda Prazeres Open the ORCID record for Tatiana Lacerda Prazeres [Opens in a new window]
Tatiana Lacerda Prazeres*
Affiliation:
Academy of China Open Economy Studies, University of International Business and Economics, Beijing
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Email: [email protected]
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Abstract

The WTO is exposed to significant political risks deriving from both the abusive employment of the national security argument, as well as the use of the WTO dispute settlement system to address this problem. This article explores the implications of the first WTO panel decision, adopted in April 2019, in which the argument of ‘essential security interests’ was employed to justify trade restrictions. Article XXI of the GATT 1994 now tends to be invoked in other ongoing disputes, notably by the United States in the dispute settlement cases involving its barriers to steel and aluminum. The article argues that pathways other than WTO litigation should be explored to deal with trade barriers adopted under the argument of national security and, despite the absence of simple solutions, it considers some possible alternatives.

Keywords

WTOnational securitysecurity exceptionArticle XXIdispute settlement
Type
Snipings
Information
World Trade Review , Volume 19 , Issue 1 , January 2020 , pp. 137 - 148
Copyright
Copyright © Tatiana Lacerda Prazeres 2020

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Footnotes

The rubric ‘Snipings’ is intended for contributions which, while rigorous, offer early analyses of issues of immediate policy relevance for the multilateral trading system. They would normally be shorter and possibly be less extensively documented than our standard articles with a view to stimulating current debates. They are subject to standard, albeit expedited, refereeing procedures. Further submissions under this heading are welcome.

References

1 Between 1947 and 1994, Article XXI was invoked on a few occasions, even in the context of dispute settlement, but no GATT panel on this subject was ever adopted. Cf. Mavroidis, Petros, The Regulation of International Trade, vol. I, Cambridge, MA: MIT Press, 2016, pp. 479–487Google Scholar.

2 Panel Report, Russia – Measures Concerning Traffic in Transit (henceforth, Russia–Traffic in Transit), WT/DS512/R.

3 These disputes were initiated by China (WT/DS544), India (WT/DS547), the European Union (EU) (WT/DS548), Norway (WT/DS552), Russia (WT/DS554), Switzerland (WT/556), and Turkey (WT/DS564) against the United States. Mexico (WT/DS551) and Canada (WT/DS550) also opened cases, but mutually agreed solutions with the United States were later announced.

4 Cf. WT/DS567 and WT/DS576. It may be difficult to ascertain whether a case will become a ‘national security case’, as the defendant's strategy (and its decision to invoke Article XXI) may be known only after it presents its first written submission. Given this, another dispute involving Russia and Ukraine (WT/DS525) may well become another national security case if it proceeds (it has remained under consultation since 2017). There is also a dispute possibly related to national security involving Bahrain and Qatar (WT/DS527), but it is unclear whether it will proceed (in consultations since 2017 as well).

5 WT/DS590.

6 On the issue, cf. Alford, Roger, ‘The Self Judging WTO Security Exception’, Utah Law Review, 3 (2011): 697–759Google Scholar.

7 Ukraine claimed that Russia's measures violated Article V (Freedom of Transit) and Article X (Publication and Administration of Trade Regulations) of GATT 1994.

8 Panel Report, Russia–Traffic in Transit, para. 7.57.

9 In response to the Panel, the United States clarified that: ‘[w]e have used the term “jurisdiction” to refer to the ability of a Panel or the Appellate Body, under the terms of reference set by the DSB [Dispute Settlement Body] pursuant to the DSU [Dispute Settlement Understanding], to organize and hear a dispute from a Member, including receiving submissions from the parties and third parties. We have used the term “justiciability” to refer to the ability of the Panel or Appellate Body to make findings and provide a recommendation to the DSB.’ Panel Report, Russia–Traffic in Transit, WT/DS512/R/ADD 1, Annex D-10, para. 29.

10 Cf. Ibid., Annex D.

11 Panel Report, Russia–Traffic in Transit, para. 7.132–133.

12 Ibid., para. 7.138.

13 Ibid., para. 7.75.

14 Ibid.

15 Ibid. para. 7.76.

16 Action by the Dispute Settlement Body, Russia – Measures Concerning Traffic in Transit, WT/DS512/7, 29 April 2019.

17 Dispute Settlement Body, Minutes of the Meeting of 26 April 2019, WT/DSB/M/428, 25 June 2019.

18 It is worth remembering that, at the time of this writing, the WTO Appellate Body is on the verge of paralysis. If there had been an appeal on this case, its conclusion would probably have had to wait a long time.

19 Supra n. 17.

20 Though it is beyond the purpose of this article to comment on these issues, the United States and other commentators also questioned the Panel's discharge of the burden of proof and its order of analysis.

21 Supra n. 17.

22 United States – Trade Measures Affecting Nicaragua, L/6053, 13 October 1986 (unadopted), para. 1.4.

23 Ibid.

24 Ibid., para. 5.11.

25 USA, ‘Presidential Proclamation on Adjusting Imports of Automobiles and Automobile Parts Into the United States’, 17 May 2019, www.whitehouse.gov/presidential-actions/adjusting-imports-automobiles-automobile-parts-united-states/ (accessed 19 June 2019). A key point in the justification for the Proclamation is: ‘the Secretary [of Commerce] found that American-owned automotive R&D and manufacturing are vital to national security. Yet, increases in imports of automobiles and automobile parts, combined with other circumstances, have over the past three decades given foreign-owned producers a competitive advantage over American-owned producers.’

26 The threat of tariffs was dropped after the United States and Mexico reached a deal on migration enforcement. President Trump announced on 7 June 2019 via Twitter that the tariffs, due to enter into force three days later, were ‘indefinitely suspended’.

27 Japan – Measures Related to the Exportation of Products and Technology to Korea, WT/DS590.

28 www.congress.gov/bill/115th-congress/house-bill/5040/text (accessed 19 June 2019).

29 US Department of Commerce, Department of Commerce Announces the Addition of Huawei Technologies Co. Ltd. to the Entity List, 15 May 2019, http://www.commerce.gov/news/press-releases/2019/05/department-commerce-announces-addition-huawei-technologies-co-ltd (accessed 19 June 2019).

30 See, for example, UNCTAD, World Investment Report 2019. Geneva: Unctad, 2019, chapter III.A.

31 WT/DS528 (involving services and intellectual property) and WT/DS567 (exclusively on intellectual property) are two cases brought against Saudi Arabia by Qatar.

32 www.wto.org/english/news_e/news17_e/tbt_20jun17_e.htm (accessed 19 June 2019).

33 It is important to consider the demonstration effect of having the United States, the very architect of the trading system, using trade as a tool to pursue non-trade related policy objectives. There are obvious risks of other countries following the same approach, further increasing the risks for the WTO.

34 Cf. US First Written Submission on the case United States – Certain Measures on Steel and Aluminum Products (WT/DS552), https://ustr.gov/sites/default/files/enforcement/DS/US.Sub1.%28DS552%29.fin.%28public%29.pdf (accessed 7 October 2019).

35 Cf. USA. Presidential Proclamation on Adjusting Imports of Aluminum into the United States, 8 March 2018, https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/ (visited on 20 July 2019). The Proclamation also includes the following excerpt: ‘[t]his relief will help our domestic aluminum industry to revive idled facilities, open closed smelters and mills, preserve necessary skills by hiring new aluminum workers, and maintain or increase production, which will reduce our Nation's need to rely on foreign producers for aluminum and ensure that domestic producers can continue to supply all the aluminum necessary for critical industries and national defense’.

36 Supra n. 17.

37 Panel Report, Russia–Traffic in Transit, WT/DS512/R/ADD, Annexes D-3 (Canada) and D-6 (Japan).

38 For a different view on this point, see Balan, George Dian, ‘On Fissionable Cows and the Limits to the WTO Security Exceptions (2 July 2018)’, Society of International Economic Law (SIEL), Sixth Biennial Global Conference, https://ssrn.com/abstract=3218513. The author argues that ‘litigating the security exceptions should be rather seen as a matter of normality and not as an atomic danger to the multilateral system’.

39 The minutes of the Dispute Settlement Body meeting of 29 October 2018 contain the following: ‘The United States said that it was not the WTO's function, nor was it within its authority, to second guess a sovereign's national security determination. Members had not abdicated their responsibilities to their citizens to protect their essential security interests when they had formed the WTO.’ WTO Dispute Settlement Body, Minutes of Meeting of 29 October 2018, WT/DSB/420, para. 13.3.

40 Supra n. 34.

41 WTO Analytical Index, www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art23_jur.pdf (accessed 14 October 2019).

42 Members have tried to clarify Article XXI in the past, with very limited success. Cf. GATT, Decision Concerning Article XXI of the General Agreement, L/5426, 2 December 1982.

43 Communication from China, China's Proposal on WTO Reform, WT/GC/W/773, 13 May 2019.

44 China (WT/DS558), Canada (WT/DS557), the EU (WT/DS559), Turkey (WT/DS561), Mexico (WT/DS560), Russia (WT/DS566), and India (WT/DS585). The cases against Canada and Mexico have been terminated following mutually agreed solutions.

45 https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/united-states-challenges-five-wto (accessed 19 July 2019).

46 See Lee, Yong-Shik, ‘Three Wrongs Don't Make a Right: The Conundrum of the US Steel and Aluminum Tariffs’, World Trade Review, 18(3) (2019): 481–501.

47 http://europa.eu/rapid/press-release_IP-18-4006_en.htm (accessed 21 July 2019).

48 The EU Trade Commissioner said: ‘Our response is measured, proportionate and fully in line with WTO rules. Needless to say, if the US removes its tariffs, our measures will also be removed.’ See http://trade.ec.europa.eu/doclib/press/index.cfm?id=1868 (accessed 21 July 2019).