On October 3, 2022, the United States provided its latest notification list for all quantitative restrictions (the previous notification was in 2020). The notice does not include the recent export restrictions on AI and semiconductors to China, as part of a broader strategy for U.S. technology competition, formally announced days later. Actions were swift, but the Biden Administration strove to keep its actions transparent so that U.S. firms can understand (as much as practical) the ramifications of the changes. We do not know if the United States may notify the WTO membership, or whether China will raise concerns about potential violations of the WTO rules.
How could China respond to the United States’ restrictions, described as ‘semiconductor policy chokeholds’?
In a committee on market access meeting on May 28, 2019, China raised ‘other business’ at the conclusion of the meeting. Its focus was the United States’ Executive Order on Securing the Information and Communications Technology and Services Supply Chain. China asserted that the EO ‘barred’ US companies from buying or using telecommunications equipment and services provided by enterprises deemed ‘national security’ threats. On May 16, 2019, the Commerce Department added Huawei and 68 affiliates to the ‘Entity List’ on security concerns.
China asked the United States representatives whether it would ‘notify subsequent administrative rules to the WTO without delay’ and to ‘respect’ WTO rules when ‘formulating’ regulations. (19.1) Moreover, China asserted that these ‘unilateral sanctioning measures’ violated Articles I and XI of the GATT and failed to comply with Article XXI of the GATT, the security exceptions.
China used its time to challenge the United States’ assessment of Article XXI. The Chinese representatives stated that the United States engaged in ‘repeated over-generalization’ of the concept of essential security and often ‘abuse[d]’ the exceptions, which ‘already caused great concern to the Membership.’ (19.2) In this case, the United States’ repeat emphasis on ‘strengthening the economy’ and ‘preserving innovation and technology was vital to its national defence.’ China’s evidence to dispute the United States' concerns with the health of the US economy was the 2019 US President’s Trade Policy Agenda, along with data that showed a ‘boom in jobs.’ Moreover, China pointed out the Agenda’s revealing logic that tariffs were ‘forms of leverage to persuade other countries to take our concerns seriously’ further challenged the idea that US trade restrictions were meant to protect national security. Speaking to the broader membership, China reminded the committee of other Article XXI invocations, namely the invocation of s. 232 to impose tariffs on steel and aluminium. Invocation of Article XXI, China argued, without objective evidence, constituted abuse and threatened the multilateral trading system. Just for good measure, China stressed that the origins of the exceptions stemmed from U.S. remarks in 1947 regarding the ‘danger’ of too broad an exception. The United States representative failed to address China’s concerns, only observing that China should put the concern on the agenda.
Any WTO member is free to assert its own assessment of security. Post-pandemic and in a warming world, governments seem hyper-attuned to the resiliency of supply chains. While we do not yet know essential details about this new restriction ecosystem, we do know from the recent Biden National Security Strategy 2022 that the United States is taking a much broader understanding of national security than that imagined by a traditional military sense of security, as contemplated by the architects of the exceptions. This new understanding of security takes in global climate and food security concerns. Positive outcomes may be possible, even from unilateral actions.
Yet, what does it mean when one member cites its ‘economic heft’ to drive the membership’s understanding? What are the legal consequences of a blending of ‘national’ focused security and global concerns? For example, if a measure aims to deliver jobs and take action to diversify supply chains for the ‘security of the American people and [their] allies and partners’ while explicitly seeking to ‘impose costs’ on another WTO member? Earlier this summer, USTR Tai observed that U.S. tariffs on Chinese goods maintain ‘leverage’ too. Due to its relative market strength, can the United States forge a new status quo for all WTO members, requiring the latter to conform?
A key unanswered question is whether both China and the United States can continue to ‘talk’ and negotiate with each other and the broader membership on essential multilateral and plurilateral initiatives. Even if the United States takes a broader assessment of security, this does not (yet) equate to a commitment to disengage from the multilateral trading system.
