WTO National Security Ruling May Have Ramifications for Section 232

The text of Article XXI lists as security exceptions the following:

Nothing in this Agreement shall be construed

(a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or

(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i) relating to fissionable materials or the materials from which they are derived;

(ii) relating to the traffic in arms, ammunition, and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii) taken in time of war or other emergency in international relations; or

(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

Russia claimed that the border conflict with the Ukraine justified restricting trade across its borders. In this instance, the WTO agreed that Russia’s concerns met the criteria above.

The U.S. Section 232 measures on steel and aluminum are related to economic security, not a military or international conflict, and therefore may not meet the criteria as stated by Article XXI and interpreted by the WTO.

In its analysis the WTO dispute panel wrote: “It would be entirely contrary to the security and predictability of the multilateral trading system established by the GATT 1994 and the WTO Agreements, including the concessions that allow for departures from obligations in specific circumstances, to interpret Article XXI as an outright potestative condition, subjecting the existence of a member’s GATT and WTO obligations to a mere expression of the unilateral will of that member,” and “for {an} action to fall within the scope of Article XXI(b), it must objectively be found to meet the requirements in one of the enumerated subparagraphs of that provision.”

Said the Sandler, Travis & Rosenberg Trade Report: “Under this standard it could be difficult for the U.S. to justify its Section 232 tariff increases in the WTO cases that China, the European Union, Canada, Mexico, and others have brought against the steel and aluminum tariffs or in similar cases that could be filed if the U.S. levies Section 232 tariffs against automobiles and auto parts, which could occur as early as mid-May.”

When pressed to explain the panel ruling, WTO Director General Roberto Azevêdo said it should be looked at as “case-specific.”

“The panel simply said, ‘Look, these are common things that are acknowledged to pertain to emergency situations or essential security interests and we believe that our members — in that case, what Russia was putting on the table — fit with those definitions with those things,’” said Azevêdo at a conference on Thursday.

He added, “Whether other situations would put things that are not so squarely in there and would lead the panel to do a broader look at that, I don’t know. I cannot speculate over that. I assume that it may come a point when … the box doesn’t fit so easily, so the panel will have a challenge to deal with all those different views. It will depend a lot on the arguments made.… It does in fact depend a lot on the arguments made by the lawyers and what they expect to happen and it’s difficult to predict.”