Trade Cases

WTO Rules in Crosshairs of Section 232 Dispute

October 30, 2018

The United States has denied initial requests by World Trade Organization members to establish dispute settlement panels over Section 232 tariffs, claiming that once a national security measure is invoked under Article XXI, it cannot be litigated by a WTO panel.

The United States may block a request for a dispute panel one time, but not a second, leaving the door now open to China, the European Union, Canada, Mexico, Norway, Russia and Turkey to initiate another request.

The group maintains that use of Article XXI under WTO rules for national security was abused by the United States. Article XXI states that the agreement will not “prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.” The agreement typically applies to the areas of nuclear material, arms trafficking and actions taken in a time of war or international emergency.

The U.S. claims it was within its legal rights to invoke Article XXI to curtail imports of steel and aluminum that threaten the national security of the United States. The Section 232 tariffs are de facto safeguard measures, countered the seven countries.

“It is not the WTO’s function, nor within its authority, to second guess a sovereign’s national security determination,” said Dennis Shea, U.S. ambassador to the WTO. “WTO members did not abdicate their responsibilities to their citizens to protect their essential security interests when they formed the WTO. Because the United States has invoked Article XXI, there is no basis for a WTO panel to review the claims of breach raised by the European Union.

“The United States wishes to be clear,” Shea said. “If the WTO were to undertake to review an invocation of Article XXI, this would undermine the legitimacy of the WTO’s dispute settlement system and even the viability of the WTO as a whole.”

Canada, Mexico, the EU and China are “hypocritical” to call the U.S. measures safeguards and then to insist their retaliatory measures are “substantial equivalent concessions,” Shea added. The U.S. has requested dispute panels against all four countries for their retaliatory tariffs, all of which were blocked.

“Just as those members appear to be ready to undermine the dispute settlement system by throwing out the plain meaning of Article XXI and 70 years of practice,” Shea said, “so too are they ready to undermine the WTO by suggesting they are following WTO rules while taking measures blatantly against those rules.”