Leibowitz on Trade: Are Trade Restrictions for National Security Reasons Subject to WTO Dispute Settlement?

The first issue came down to whether the WTO could evaluate “objectively” whether a country correctly invoked national security concerns when it took trade-restrictive actions. The U.S. argued that national security measures are “self-judging” and “non-justiciable.” In other words, in invoking national security, WTO member states are free to determine for themselves whether national security is genuinely involved (“self-judging”); moreover, the U.S. has argued that the WTO is powerless to evaluate the basis for invoking national security (“non-justiciable”).

On April 5, a three-member Panel organized under the WTO’s Dispute Settlement Understanding was the first to address the national security exemption to WTO obligations in the 24-year history of the organization, which is contained in Article XXI(b)(iii) of the GATT, the organic law of the WTO. The Panel decided that it had jurisdiction under the WTO Dispute Settlement Understanding to evaluate “objectively” the reasons for invoking national security and not leave that decision to the complete discretion of each WTO member. Thus, the Panel agreed with Ukraine and disagreed with Russia on the first issue.

The Panel went on to evaluate the basis for Russia’s declaration of “national security” under Article XXI(b)(iii). It concluded that, in the context of the situation between Russia and Ukraine in 2014, in the aftermath of the annexation of the Crimea, Russia had an adequate basis to conclude that an “emergency in international relations” existed.

The Panel evaluated the “war or national emergency” language to require something more than political or economic differences between WTO members. It stated “political or economic differences between Members are not sufficient, of themselves, to constitute an emergency in international relations…. An emergency in international relations would, therefore, appear to refer generally to a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.” The Panel evaluated the evidence regarding the deteriorating relations between Russia and Ukraine after 2014 and noted that they were a subject of “concern to the international community;” the Panel also cited “objective” evidence of this concern, including action by the United Nations, and concluded that an “emergency” existed in that situation. (Note that the Panel did not comment on which WTO member or members were responsible for the “emergency,” only that one existed.)

This decision of the Panel, which is subject to appeal within the WTO system, refuted the position of the United States taken in reference to the Section 232 national security actions on steel and aluminum. Having decided that the WTO agreements empower the dispute settlement Panel to evaluate “objectively” Russia’s reliance on national security concerns in taking action that would otherwise violate WTO rules, the United States’ reliance on a declaration of national security will be similarly reviewed.

Could the United States successfully argue that the steel and aluminum situations constituted a “war or emergency in international relations” sufficient to justify the steel and aluminum tariffs? We will have to wait and see; it appears, however, that the burden on the United States will be heavy. The Russia-Ukraine Panel stated that the “war or national emergency” language of Article XXI requires something more than political or economic differences between WTO members. The Panel further said that “objectively” evaluating the import restrictions taken in consequence of the “emergency” found would require an “objective relationship between the ends and the means.” On both counts, the United States has a different set of facts and conditions. There is no “latent armed conflict” between steel-producing countries, and no “general instability” surrounding any state that is relevant to the steel trade restrictions. Nor can it be readily seen that any “emergency” identified by the United States was “reasonably related” to the means employed to address it (the tariffs and quotas).

The case brought by Ukraine against Russia is subject to appeal; as I’ve previously mentioned, the United States has also taken the lead in rendering the Appellate Body unable to function. A permanent body of the WTO with seven members, it always acts in Panels of three to review appeals from dispute settlement Panels. Only three of the seven seats are occupied and the United States has declined to allow the vacancies to be filled. By late this year, the Appellate Body will fall below three members and will be unable to perform its work. There is no consensus on resolving this impasse, which has persisted since 2017. 

Most reports have noted that the U.S. position was undermined by the Russia-Ukraine Panel report issued on April 5. It seems that way to me, too.

Lewis Leibowitz

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