International Economic Law and Policy Blog

The Curious Case of US Self-Judging, Part 2

Last Friday, the United States appealed the US-Origin Marking Requirement (DS597) and the US-Steel and Aluminium Products (DS544,552, 556, 564) reports. With the appeal came news that the US would lead an effort to draft an authoritative interpretation of GATT Article XXI. This U.S. administration will want to solidify its position that Article XXI is self-judging (briefly, that it is for the invoking member to decide what action it considers “necessary” for the protection of its essential security interests and which circumstances are present) and that the only redress for Members affected by security measures would be a non-violation nullification or impairment claim.

Further consideration of how the United States lost its security defence in these cases may be overshadowed by this announcement. Towards the conclusion of the dispute settlement proceedings in US-Steel and Aluminium Products, a curious thing happened. The United States maintained the self-judging nature of GATT Article XXI(b). Still, the United States used its closing statements to argue that its security actions occurred ‘in time of war or other emergency in international relations.’ The complainants’ objections to the ‘manner and timeliness’ of the U.S. defence were noted (DS544, para 7.130). Did the panel second-guess what the U.S. government finds to be a national security issue, or did the United States argue its defence poorly? This post examines how the United States presented its arguments in the US-Steel and Aluminium Products dispute. Knowing the next steps may be to compose a new process for disputes arising from security actions, we need to interrogate this proceeding to ask better questions in the future.

Burden of Proof

Following the standard approach for exceptions, when invoking GATT Article XXI(b), the invoking member bears the burden of proof. No panel has yet clarified if the allocation of the burden of proof should shift based on the respondent’s invocation of specific security exceptions under Article XXI(b). Moreover, the DSU does not regulate circumstances where a respondent invokes Article XXI, especially subparagraph (a) which confirms that all Members may withhold any information it considers contrary to its essential security interests. To date, there is no common understanding of how Article XXI(a) impacts a Member’s burden of proof.

The burden of proof was a crucial issue in the Russia-Traffic in Transit dispute. Ukraine maintained throughout the proceedings that Russia could not invoke Article XXI(a) to refuse to disclose any factual evidence and evade its burden of proof (DS512, para. 7.32, 7.129). Russia did not disclose information about the ‘emergency in international relations.’ Instead, as is well known now, Russia formulated ‘hypothetical circumstances’ and cited Ukraine’s Trade Policy Review Report to identify the ‘emergency in international relations’ (DS512, 7.114, 7.118). The panel did not set an onerous evidentiary burden on Russia and accepted that the ‘situation’ giving rise to the measures was ‘publicly known.’  The panel did not squarely discuss Russia’s invocation of Article XXI(a) as independent of or related to its invocation of Article XXI(b). Without parameters set in this report, it remains unclear what a member could do in these proceedings to ‘lose its protection provided by article XXI’ (Hahn 1991, 616). 

In the Saudi Arabia – IP Rights (DS567) dispute, Saudi Arabia refused to engage with ‘the facts or arguments presented by Qatar’ (DS567, para 7.40). As a result, the panel clarified that it must ‘satisfy itself’ that the complainant made a prima facie case in relation to each claim. The panel explained that it would first conclude whether the claims were ‘well-founded in fact and in law through various means, including written and oral questions and undertaking a careful review of the evidentiary basis underlying Qatar's various factual assertions.’ (DS567, para 7.39). When evaluating the existence of an ‘emergency in international relations,’ the panel agreed with Saudi Arabia that severance of all diplomatic and consular relations is the ‘ultimate state expression of the existence of an emergency in international relations.’ (7.259). The panel refused to opine on the burden of persuasion or proof required to determine the existence of an ‘emergency in international relations.’ (7.268).

When the United States switched strategies

The US-Steel and Aluminium Products dispute proceeded through two substantive meetings. First, with the parties at the end of October 2019 and a second substantive meeting with the parties on 11, and 25 January 2021 (para 1.10). Parties received the interim report on 29 June 2022. A session with the third parties occurred on 18 November 2019.

Based on its first submission in US – Steel and Aluminium Products, the U.S. maintained that the GATT security exceptions were self-judging, and its invocation of security was non-justiciable in WTO dispute settlement proceedings. In particular, the U.S. asserted that the phrase ‘which it considers’ applied to the entire provision, such that Article XXI(b)(iii) ‘might have been written’ as ‘Nothing in this Agreement shall be construed to prevent any contracting party from taking, in time of war or other emergency in international relations, any action which it considers necessary for the protection of its essential security interests.’ (para 33). Thus, the U.S. had sole authority to define ‘emergency in international relations’ of subparagraph (b) of GATT Article XXI. As the Trump administration made clear at the time, U.S. concerns were with ‘economic security.’ Responding to the first set of panel questions, in February 2020, the United States explained that ‘essential security’ encompassed ‘commercial or trade relations’. Responding to the second set of panel questions, in September 2020, the United States defined ‘emergency in international relations’ as ‘a situation of danger or conflict, concerning political or economic contact occurring between nations, which arises unexpectedly and requires urgent attention’ (para 48). Moreover, an ‘emergency’ in the sense of GATT Article XXI is ‘likewise broad’ and includes commercial or trade relations that arise ‘unexpectedly and requires urgent attention.’ (para 232).

The US-Steel and Aluminium Products panel report explains that the U.S. maintained its self-judging argument and ‘submitted an extensive record of material relating to the measures at issue.’ (7.131). However, the panel report highlights only one piece of evidence: the Steel and Aluminium Reports of the USDOC and Presidential Proclamations setting out the legal basis under Section 232, both in the public record. For the first substantive meeting in October 2019, the United States’ opening and closing statements do not mention the circumstances giving rise to U.S. actions.

When did the United States begin to articulate the situation as meeting the requirements of GATT Article XXI(b)(iii)? Based on the panel report, the answer is the U.S. second written submission. While asserting that the United States did not have to provide any information explaining its invocation of the security exceptions, it argued that ‘publicly available information’ concerning its measures ‘could be understood to relate most naturally to the circumstances described in Article XXI(b)(iii).’ (para 7.132, citing the submission, paras. 23, 24). The only evidence of this is found in the panel report itself. The U.S. posted its pleadings for the US-Steel and Aluminium Products but not this second written submission.

The dates of this submission are fuzzy. Based on the panel’s explanation, the submission came before the responses the US made on September 22, 2020 to the panel’s additional questions. There, the U.S. confirms that while the panel may not ‘make its own assessment’ of the U.S. invocation of GATT Article XXI, ‘the extensive findings in the steel and aluminium reports are consistent with the United States considering the measures at issue to be taken “in time of war or other emergency in international relations”’ (p. 35, para. 42).

In the closing statement at the second substantive meeting, the United States reiterated its assessment that GATT Article XXI is self-judging. Still, in the alternative, ‘[t]he record before the panel demonstrates that the United States considers the measures at issue to be necessary for the protection of its essential security interests and taken “in time of war or other emergency in international relations”. (DS544, para 7.134). In the second set of responses to panel questions (September 22, 2020), the United States relied on the publicly available USDOC reports to justify its invocation of GATT Article XXI(b)(iii) (paras 43-49). This short explanation concerns the ‘weakening of the domestic economy’ and risks to U.S. ‘national security’ due to the ‘displacement of domestic steel by imports’ (para 43). Asserting the ‘global nature of steel excess capacity’, the USDOC reports state that inter-governmental efforts (such as at the OECD) failed to resolve the United States’ concerns with Chinese steel producers receiving subsidies and other forms of government support (para 45).

The U.S. closing statement introduced another argument too – that the ‘United States was at a crucial point [and] that without immediate action, the steel industry could suffer damages that may be difficult to reverse and reach a point where it cannot maintain or increase production to address national emergencies’ (para 7.134). The United States also used its closing to present the new argument that ‘fundamental changes’ to the steel and aluminium industries brought on by the ‘production revolution’ can lead to ‘unexpected developments,’ particularly ‘when that industry is facing an “acute” situation of global excess capacity that is the highest in the industry’s history’ (para 7.134). To make this argument, the panel report highlights that the United States referred to other inter-governmental documents, including the G20 Global Steel Forum Report of 2017, G7 Summit Communiqué, and OECD Ministerial Council meeting statements in 2018 (para 7.135).

Assessment of the U.S. invocation of GATT Article XXI

The panel relied on dictionaries to clarify that the phrase ‘emergency in international relations’ refers to ‘at least comparable in its gravity or severity to a “war”’ (para 7.138-139). Moreover, it does not cover ‘purely domestic or national affairs.’ The panel concluded that the USDOC Steel and Aluminium reports identify three factors explaining how the United States considered a ‘weakening of [the United States] internal economy may impair the national security.’ 

1. Displacement of domestic steel/aluminium by excessive imports;
2. Consequent adverse impact on the economic welfare of the domestic steel/aluminium industry; and
3. Global excess capacity in steel and aluminium.

The panel found that the first two factors speak to the domestic concerns of the United States. As the Section 232 investigations concerned determinations regarding U.S. national security, the panel found the record fails to meet the evidence required when invoking GATT Article XXI(b)(iii). One way to look at this is that the panel did not ‘second-guess’ U.S. security. Rather, the panel concluded that GATT Article XXI(b)(iii) only justifies security actions taken during a (narrow interpretation of) ‘emergency in international relations.’ The USDOC reports show what the United States deemed security interests ‘necessary’ for protection. However, this evidence was insufficient for a ruling that the security actions were taken during an ‘emergency in international relations’ (para 7.143). Had the United States made a clearer argument about the emergency in international relations earlier, it’s possible the panel could have found the United States justified its security actions.

Regarding ‘global excess capacity in steel and aluminium’, the panel acknowledged ‘evidence of international engagement’ but did not find ‘situations of a certain gravity or severity and international tensions that are of a critical or serious nature in terms of their impact on the conduct of international relations’ (para 7.147-148). The panel treated evidence of diplomatic ‘solutions’ and international cooperation as evidence that the U.S. did not act in time of an ‘emergency in international relations.’ (para 7.148).

Echoing my concerns in Part 1, the panel report narrows the use of security by interpreting GATT Article XXI(b)(iii) as a ‘we had no other choice’ type of circumstance. Effectively, the United States would have to show a breakdown of international (economic) relations between the United States and China. It fails to account for the possibility of security actions alongside international coordination. For those unsure about the future of non-violation complaints, a legitimate question is whether a dispute settlement panel will ever review any U.S. action involving China again. Still, a benefit of the effort to create a new rebalancing process is that WTO members can figure out how to address the broad spectrum of circumstances that raise security practices, including those not in times of severe breakdown of international relations.

Nevertheless, why didn’t the United States provide more evidence to argue that the challenges of excess capacity remain unresolved, despite international initiatives? Why did the panel effectively ignore the complainant’s concerns that the United States failed to discharge its burden of proof for the duration of these proceedings? I wonder what the report would have looked like if the panel had pushed harder on due process and not simply let the United States present new evidence in the closing statement of the second meeting. The panel observed (in a footnote) that after the meeting, the complainants would have the opportunity to submit written comments on arguments made by the United States during its closing statements (footnote 481). The only reference to the added submissions is where the panel highlights the United States’ arguments that OECD Members have ‘serious concerns’ with ‘severe excess capacity in key sectors such as steel and aluminium.’ (para 7.135).

Wrapping up

As part of the authoritative interpretation process, Members may choose to confirm that the circumstances by which a Member brings a security action are subjective questions. Any new process involving security actions must develop a clear plan for due process, clarifying how arguments and evidence can shift from party to party. If proceeding to focus on rebalancing, then questions regarding the burden of proof and the role of arbitrators will continue. As the arbitrator in EC-Hormones (US) (Article 22.6) explained, ‘WTO Members, as sovereign entities, can be presumed to act in conformity with their WTO obligations […] The duty rests on all parties to produce evidence and to collaborate in presenting evidence to the arbitrators – an issue to be distinguished from the question of who bears the burden of proof.’ (paras 9, 11).

National Security Disputes, Non-Violation Nullification or Impairment, and Authoritative Interpretations

At today's DSB meeting, in the context of the consideration of the U.S. - Steel/Aluminum and U.S. Origin Marking panel reports, the U.S. offered the following explanation of why it was appealing the reports into the void, as well as some broader steps it might take here:

The United States is making this intervention with regard to the several agenda items involving national security.

The United States regrets that this item has been placed on the agenda and that China and certain other Members seek to drag issues of national security into the WTO.

...

For over 70 years, the United States has held the clear and unequivocal position that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO Member to respond to a wide range of threats to its security.

...

Adjudicating questions of national security in the WTO is not only incompatible with the purpose of the WTO. a trade organization. but will not advance WTO Members shared interests in the WTO as a forum for discussion and negotiation.

From the beginning of the trading system, it has been the U.S. view that the appropriate remedy where a Member is impacted by another Member's essential security measures is to seek a non-violation / nullification or impairment claim. The reality is we designed a WTO where rebalancing could take place without interfering with a Member's sovereign responsibilities in the area of national security.

...

The United States for long has been clear that it was a mistake to begin adjudicating national security at the WTO. We warned at the time that this would open the door to future disputes that would further undermine the foundations of the WTO.

Allowing these erroneous reports to be adopted would only help erode the foundations of the multilateral trading system. The United States therefore has notified the DSB of its decision to appeal these damaging and erroneous reports.

...

The U.S. decision to appeal should not be misinterpreted as asking the WTO to reevaluate our national security decisions.

The responsibility is on us - the Members - to tackle this issue head on.

The United States believes that Members need to deepen their collective understanding of this issue that is so critical to all of us. We intend to raise this fundamental issue as part of our discussions on reform of the WTO dispute settlement system. Ultimately, we believe Members need to clarify and adopt a shared understanding of the essential security exception, and we therefore intend to seek an authoritative interpretation of Article XXI of the GATT 1994, pursuant to Article XI of the WTO Agreement.

I have a couple reactions here.

First, based on the generally accepted legal standard that exists now, I'm not sure how easy it would be to win a non-violation nullification or impairment (NVNI) claim against the U.S. measures at issue here, or against any other measures for that matter. There's a high burden of proof, and also a requirement that the measures could not have been reasonably anticipated. In past practice, this has been a difficult standard to meet, and I expect that it will remain so unless the standard is formally changed.

Second, while there is disagreement on this point, the existing DSU text might provide a remedy for NVNI complaints that is not as strong as the remedy for violation complaints.

If the U.S. seeks an authoritative interpretation of Article XXI, as it indicated above, it would be great if it would address both of these points related to NVNI as well. If NVNI is going to be the remedy for security disputes, it needs to be effective.

There is also the problem that you have to litigate NVNI claims, and these days WTO panel litigation tends to take a while, which means that responding governments get a free pass for a couple years while the litigation is going on.

All of this is why I proposed the alternative of immediate rebalancing after national security is invoked. I'd love to hear what the U.S. thinks of that idea. 

This issue came up in the latest excellent Trade Talks podcast, in an exchange between Chad Bown and Jennifer Hillman:

Chad Bown:

I asked Jennifer to explain what a non-violation complaint is in theory and how it might be put to work here in response to an Article XXI, national security type of dispute.

Jennifer Hillman:

So the concept here, and the way that this would work would be that there would be an understanding that when a member invokes this national security exception, Article XXI, the WTO system, in essence, does what the United States has basically been arguing for, which is to stop having any more litigation and instead, you would immediately assume a non-violation has occurred. And you would immediately begin the process of rebalancing without actually asking a panel to rule one way or another on whether the national security defense was effectively invoked. You would not have any rulings to that effect. You would just have an automatic understanding that whenever Article XXI is invoked, the next step is to simply rebalance the concessions.

Chad Bown:

Again, suppose this non-violation claim had been used in the US national security tariffs, WTO dispute. The idea is that even if there were no explicit WTO rules being broken, the United States did take away some legitimate economic benefits that other countries, like Norway or Switzerland, were expecting under the agreement. Even if there was no wrongdoing, those countries deserve rebalancing as compensation.

Let’s run through some of the pros and cons of such a non-violation complaint approach, starting with the benefits.

Jennifer Hillman:

So first and foremost, the benefit for the WTO as a system is it doesn't have to make these very difficult rulings on national security, which always will put it between a rock and a hard place. Because if it rules as it did in this instance, in favor of those complaining about the US's national security tariffs, the United States responds the way it did, “I'm not going to comply. You can't judge my national security.” And if on the other hand, it rules in favor of the national security defense, it invites many other trading partners to consistently impose measures and claim that they are in the name of national security.

The second thing it really does is that it can be done very quickly. It won't take the two or three or four years of litigation before a WTO panel, that it would take to go through a full defense. It does mean that you will not just in Katherine Tai's words, “willy-nilly,” start invoking national security all the time because you know that you will have to pay for it in the form of this rebalancing. And so invoking the national security defense is not free. It's available. You don't have to go through litigation, but it's not free. And therefore, in theory, that is a deterrent on using it unless and until you really need to.

Upon reading this, I asked Chad to clarify whether they were talking about the NVNI remedy as it exists now, or a theoretical nullification or impairment rebalancing procedure along the lines of what I've proposed, and he indicated it was the latter. As I noted above, under the existing NVNI standard, complaints are difficult to win and take a while to litigate. But a quick procedure to go straight to rebalancing after a Member invokes national security would be a good approach.

Expanding US Free Trade Agreements in Pursuit of Clean Energy and Trade Justice

Expanding US Free Trade Agreements in Pursuit of Clean Energy and Trade Justice

Steve Charnovitz

26 January 2023

In 2022, the United States (US) Congress passed yet another statute (US Public Law 117–169) violating the law of the World Trade Organization (WTO). One provision of that statute has received considerable foreign objections because it conditions new US automobile subsidies on domestic production with an exception provided for countries with which the US enjoys a "free trade agreement."  This non-market localization practice is itself a violation of WTO subsidy rules. Moreover, governments without a US free trade agreement, such as Japan and the EU, have rightly complained about the injustice of the US discrimination against them.  As I have written, every time the US violates international law, the US implicitly encourages other scofflaw countries to violate international law.

Because the new US subsidies are premised to some extent on a purpose of combatting climate change, the subsidies also contradict one of the core principles of the United Nations Framework Convention on Climate Change (UNFCCC) which declares that "Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade" (Art. 3.5).  This UNFCCC rule was justified because domestic protectionism and its related inefficiencies is a suboptimal way to control global warming. 

Ideally, the US would have free trade agreements with its closest allies including the European Union (EU), the United Kingdom, Japan, Ukraine, Uruguay, New Zealand, and Taiwan.  US disinterest in negotiating free trade agreements continues to dampen the US economy and to hamper opportunities for more effective US foreign policy.  The Democrat-led US House of Representatives is partly to blame because it stood by idly as the US fast-track trade negotiating authority process expired  in July 2021.  But most of the blame should go to the successive Obama, Trump, and Biden Administrations which have all failed to launch or complete free trade agreements with new partners. 

In response to continuing complaints from the EU and Japan about the discriminatory US electric vehicle (EV) subsidies, US Secretary of the Treasury Janet Yellen has recently pointed to an option of new US trade agreements with Japan and Europe (see Andrew Duehren, "Janet Yellen Expects EV Subsidy Rules to Prompt New Trade Deals," Wall Street Journal, 24 January 2023). Given the high net benefits of free trade and globalization for US companies, workers, and communities, I strongly support the idea of new US trade deals as a solution to the problems caused by the US violation of WTO and UNFCCC law.  

Although any WTO-inconsistent provisions in US law should be repealed, in US Public Law 117–169, the conditional subsidy for countries with a "free trade agreement in effect" does provide policy space for the US to negotiate new free trade agreements with nations that produce EVs and their components.  Any such free trade agreement, of course, should fulfill the rules in Art. XXIV of the WTO General Agreement on Tariffs and Trade (GATT) which requires that a "free-trade area" meet the condition that certain "duties and other restrictions on commerce" be "eliminated on substantially all of the trade" between the constituent territories. 

A comprehensive free trade agreement that truly provides free trade in all goods would meet this requirement.  Yet in this era of trade-related economic fear and insecurity, one doubts that any of the parties – the US, EU, or Japan – would be ready to achieve that much mutually-beneficial economic integration.  In other words, there is a conundrum that while new WTO-consistent free trade agreements would fulfil the arcane and protectionist provision in US law and address the complaints of the EU and Japan, none of the three countries would seem politically ready to use that solution.

Yet there may another, less scary, solution.  GATT Article XXIV:5 also countenances an "interim agreement necessary for the formation of" a free-trade area provided that such agreement "include a plan and schedule" for the formation of a free-trade area "within a reasonable length of time."  Given how slowly international trade progress now moves (e.g., the WTO Doha Development Round commenced in 2001 with only a small portion of it achieved by 2022), a "reasonable length of time" might now be many decades long.  Thus, the US, the EU, and Japan could commit to a plan that launches negotiations for a free trade agreement with a soft target date of 2050.  The net zero carbon emission goals for 2050 could be symmetrically matched with a 2050 goal of zero tariff pollution. 

 

 

 

The Risks and Economic Consequences of Inefficiency

Here is something U.S. Trade Rep. Katherine Tai said at a World Economic Forum event last week:

So I think that whether it's in the world of goods trade, or services trade, or digital trade, part of what we are struggling with right now at this inflection point is trust. Whether or not you trust your partners, whether or not you trust your actors in terms of what they're going to do with the data, whether you trust each other, whether you trust that we are making the kinds of gains with respect to the climate crisis that will allow for a sustainable future for all of us.

In that context, we are struggling against this paradigm of efficiency. And I think this gets to your point on fragmentation also. From the business side, I can completely understand an anxiety around -- we're looking at a less efficient world. And the world that we have been through has been really about maximizing efficiency.

But I think that is part of the point, which is this. You know what's really inefficient is health insurance. I've got to pay $50 every two weeks, even though I'm healthy. But the logic is that when I do have that crisis, when I inevitably need more, and run into a health issue, I have paid into a system that will take care of me. Right? And so I think that the way we need to think about it is, a less efficient world economic system will necessarily mean that we can't just be pursuing the lowest cost, the maximum cost efficiency, but that premium that is going to come with that extra work that we have to do is really an insurance policy to make sure that when we run into problems, whether it's an earthquake, whether it's a tornado, whether it's another epidemic that turns into a pandemic, whether it is non-economically based decision making that erupts in military incursion, that we're not all there to suffer for it, but that we've thought ahead and then we have systems that can help us bounce back.

Here are several points in reaction.

First, there is no doubt that efficiency has played an important role in many production decisions over the past few decades, as companies in industrialized countries looked to produce for global markets in a way that lowered costs, and governments negotiated international economic agreements to facilitate that. But empirically speaking, I wonder how much efficiency has been achieved in practice over that time, especially in relation to government policies. Obviously, efficiency is what free market economists are pushing for, but how well has that translated into the trade policies of the U.S. or other countries? Governments often talk a good game, but actual policy, even long before Trump came on the scene, has been full of inefficiency-generating policies such as the Jones Act, anti-dumping abuse, a wide range of subsidies, and excessive intellectual property protection, as well as bilateral and regional trade agreements that may distort trade more than they create it. With all that in mind, how far has policy moved along the continuum of efficiency from, say, 1993 to 2023? It may not be as far as people think, but it's a difficult thing to measure, so it's hard to say for sure.

Second, Tai makes reference to insurance here, but is efficiency or inefficiency a better hedge against risk? The recent baby formula shortage in the U.S. is a good example of how an inefficient set of policies designed in part to favor domestic producers and exclude imports led to product shortages, so inefficiency in the form of greater self-sufficiency is not necessarily the best way to avoid risks. At the same time, I do agree that there are some instances where an overemphasis on efficiency can lead to risks, and trust is a real concern. However, the real world examples of this may be more limited than some commentators have been suggesting recently. It sometimes seems that there are people in the U.S. who don't trust any trading partner, even close allies, and want to shift towards a very high degree of self-sufficiency. In my view, that approach will mostly increase risks for Americans, as efficiency and relying on others a bit can actually be pretty good insurance against disasters, whereas inefficiency can be risky here. If there's an earthquake or a tornado in your country, you want to have quick access to alternative sources of supply, and if your goal has been self-sufficiency, getting access to supplies in these situations could be difficult. As with everything, the choice between efficiency and inefficiency is about achieving a sensible balance. At this point, I'm more worried about inefficiency than efficiency.

Finally, in addition to the issue of risk, there are overall economic consequences to think about when deciding how much efficiency we should aim for, as well as distributional consequences. With regard to the general economic impact, when we shift away from efficiency and towards a more inefficient approach that emphasizes self-sufficiency, we tend to lower overall economic welfare. Among other things, competition decreases, production costs increase, and prices go up. And as to the distributional consequences, policies that protect domestic markets from foreign competition help certain (well-connected) companies, including both their owners and employees, but everyone else pays a price. For the most part, that's going to help those who are better off economically and hurt those who are worse off.

Call for Abstracts: European Yearbook of International Economic Law (EYIEL)

This is from the editors of the European Yearbook of International Economic Law:

The editors of the European Yearbook of International Economic Law (EYIEL) welcome abstracts from scholars and practitioners at all stages of their career for the EYIEL 2023. This year’s focus section will be on European and International (Public) Procurement and Competition Law. Next to this, in Part II the EYIEL will consider Current Challenges, Developments and Events in European and International Economic Law.

For the Focus Section, abstracts may cover any topic relating to (public) procurement and competition law in the field of European and international economic law, though preference is given to topics focusing on the international perspective. We particularly welcome contributions addressing the following aspects:

− the WTO (Internal) Procurement Regime,

− the UN Procurement Regime,

− the EU Procurement Regime,

− General International (Public) Procurement,

− the EU Competition Law Regime,

− the International Competition Law Regime.

For the General Section, abstracts shall address topics which are currently of relevance in the context of European and International Economic Law. Similarly, reviews of case-law or practices and developments in the context of international organisations are encouraged.

Abstracts should not exceed 500 words. They should be concise and clearly outline the significance of the proposed contribution. Abstracts together with a short bionote may be submitted until 28 February 2023 via e-mail to [email protected]

For full details, see the Call for Abstracts here. 

SIEL Call for Papers, Posters and Panels: Deadline Extended: 1 February 2023

This is from the SIEL:

Please note that we have extended the deadline for the submission of paper, panel and poster proposals for SIEL 2023 until 1 February 2023.

You can find the revised Call for Papers, Panels and Posters here. 

USMCA Panel Report Circulated in Auto ROO Dispute

The panel report in the USMCA Chapter 31 auto rules of origin dispute was circulated today (our WorldTradeLaw.net Chapter 31 panel reports page is here). Based on a quick skim, the panel's findings seemed reasonable to me, but I may come back to this after having looked more carefully at the legal provisions in question.

Here are a few questions/comments in lieu of actual substantive analysis of the panel's reasoning:

• I was really hoping that the panel would find no violation and then have to deal with the complainants' non-violation claims. I can imagine that the panelists were not very eager to go this route though.
• How will the U.S. react to this ruling? USTR's spokesperson tweeted: "The disappointing USMCA panel interpretation of the agreement could
  result in less North American content in automobiles, less investment across the region, and fewer American jobs. We are reviewing the report
  and considering the next steps. We will engage Mexico and Canada on a possible resolution to the dispute, including the implications of the Panel's findings for investment in the region." What steps will the U.S. take now?
• How will Canada and Mexico react to the U.S. reaction? Are we likely to see retaliation proposed here in the event of non-compliance? Could this dispute be considered together with the U.S. complaint about Canadian dairy TRQs and various recent Mexican policies as part of a larger compromise?
• I'm torn about preferential trade agreements in general. My thinking rambles along like this: These agreements are fundamentally flawed because they are discriminatory, but perhaps they are the best we can do right now, and if we are going to do them we should make the rules of origin flexible, even though that undermines the "regionalism" aspect, but really we need to find a way to get back to multilateralism.

If I were an Appellate Body. Post 1.

At the close of December, 2 WTO panel reports were circulated. First, United States – Certain Measures on Steel and Aluminium Products (DS544/552/556/564) on 9 December 2022. Second, United States-Origin Marking (DS597) on 21 December 2022. This post is in multiple parts. The first, If I were an Appellate Body, discusses the interpretation of GATT Article XXI(b) by focusing on the United States-Origin Marking (DS597) panel’s interpretive approach to the phrase ‘emergency in international relations.’

In its second part, the blog argues that the only way to view the recent reports involving the United States’ invocation of GATT Article XXI is through the lens of the US non-justiciability arguments and, more generally, the United States’ loss of faith in WTO dispute settlement. The Russia – Traffic in Transit (DS512) and Saudi Arabia - Measures concerning the Protection of Intellectual Property Rights (DS567) reports built an analytical framework around the obligation of good faith and stressed balancing considerations when connecting the measures to a party’s essential security interests. What is clear now is that the recent US reports (note also United States – Certain Measures on Steel and Aluminium Products (DS544/552/556/564) seek to severely limit the invocation of the security exceptions, making it crucial that members develop a way to address rising concerns with trade security in a new world that does not see security only in terms of extreme, exceptional situations.

What is an ‘Emergency in International Relations’?

The WTO disputes we have seen so far have respondents invoking GATT Article XXI:b(iii) in times of ‘war or other emergency in international relations.’ Beginning with DS512, the panel focuses on the phrase in ordinary terms, finding the idea of ‘war’ to form one aspect of the broader category of ‘emergency in international relations.’ Finding that ‘war’ refers to ‘armed conflict’ enabled that panel to emphasise situations of ‘danger […] that arises unexpectedly and requires urgent action.’ (DS512, para 7.72). Connecting the phrase in sub-paragraph (iii) to the other subparagraphs (i) and (ii) led the panel to find that all three sub-paragraphs share the same interests. On this basis, the panel connects the situation ‘emergency in international relations’ to ‘all defence and military interests, as well as maintenance of law and public order interests.’ (para 7.74). The panel thus defines ‘emergency in international relations’ as ‘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.’ (para 7.76)

Two crucial observations with this strategy flow into all subsequent panels’ assessments. First, the panel avoided temporal issues concerning situations of ‘war or other emergency in international relations’ in the security exceptions. Second, the DS512 panel interconnects a respondent’s articulation of essential security interests to its identification of the situation under sub-paragraph (b)(iii) and – as we later learn – the connection between the measure at issue and the articulated essential security interests.

Imminent War

The DS512 panel bases its interpretation on the US’s initial proposals for the ITO Charter. (para 7.75) In 1946, an initial US proposal was for any ITO member to invoke the exceptions ‘in time of war or imminent threat of war, relating to the protection of the essential security interests of a Member.’ (Pinchis-Paulsen 2020, p.129). The US defence departments rejected the ‘imminent threat’ language because the text would become ‘unduly restrictive’ and could generate ‘serious diplomatic repercussions.’ Ultimately, the final text became the more ambiguous, ‘international emergency’ to prevent the possibility that invoking the trade rules would appear as ‘an act of war.’ After that, the final text of ‘emergency in international relations’ came following internal US concerns that economic emergency could fall under ‘international emergency’ and deviated from the original intention. (Pinchis-Paulsen 2020, p.140-142). The drafters’ focus on how ITO members (could) act before war crystallises, not on broadening the potential situations for invoking the exceptions. That is, to account for the fact that governments must plan for war before they are ‘at war.’ Of course, in hindsight (and with the benefit of the work of excellent historians), we better appreciate the timeliness of war and the tools of economic statecraft.

Tightening the meaning of ‘emergency in international relations’ feeds into a broader effort to address pretexts for war. Legal scholars studying the pretext model observe how states use formulaic language ‘in terms of generally accepted international principles.’ State leaders persuade domestic or international audiences about their actions by speaking the language of international law, even while actively breaking it (a point Gerry Simpson makes about the 2022 Russian invasion of Ukraine). However, this critical question of pretext does not account for changes to security patterns or power relations over time – planning for war by actions that come by creep or by tsunamis. Wartime is a political argument. (Dudziak, 136) The GATT security exceptions fail to explain how the security exceptions work in a ‘forever war’ or what time looks like before ‘wartime’ or following the end of ‘wartime’. This has massive implications for the future shaping of trade policies and how governments may attend to their WTO negotiation, notification, and surveillance commitments, but I digress.

None of the four panels has directly engaged with the question of wartime. The DS512 panel found it an ‘objective fact’ that Russia’s actions were taken ‘during’ the found situation. (para. 7.70). Likewise, in DS567, in an ongoing conflict, it was clear the measures were ‘of a continuing nature’ and taken ‘during’ an ‘emergency in international relations. (para. 7.268, 7.269). The DS544 panel finds the phrase ‘in time of’ creates a ‘temporal link’ between the action taken and the situation at issue. (7.140).

The DS597 panel did not consider how time flows through a situation. Instead, its interpretation of ‘emergency in international relations’ requires evidence of a ‘breakdown’ of relations. This interpretation equates GATT Article XXI with a specific point in time. The panel does not address the durability or longevity of this breakdown. Therefore, it remains unclear whether the panel renders GATT Article XXI into a ‘non-application’ clause compared to Articles XXXIII and XIII of the WTO Agreement, which otherwise only applies at the time of accession.

Avoiding discretion and finding a breakdown

As I will elaborate more in the next post, the DS597 panel report includes a detailed assessment of the history and plain meaning of the GATT Article XXI construction to find that, contrary to the US submissions, the security exceptions are neither non-justiciable nor self-judging in interpretation. Appreciating the predominant attention to the US arguments helps set the context for the DS597 panel’s approach that bypasses the earlier DS512 panel’s attention to how certain situations ‘give rise to particular types of interests.’ (DS512 para 7.76).

To evaluate the US invocation of the security exceptions, the DS597 panel (and Hong Kong, China) work hard to get the US to identify a particular ‘situation’ – that is, to do more than invoke GATT Article XXI and instead identify one specific sub-paragraph. Based upon some reluctant responses from the US in the proceedings, the panel proceeds to interpret sub-paragraph (iii) of Article XXI(b) and the phrase ‘emergency in international relations.’ (paras. 7.257, 7.258)

Citing dictionary meanings, the DS597 panel finds that the terms ‘emergency’ refers to ‘danger or conflict’ beyond ‘the ordinary’ and suggests a ‘degree or magnitude of seriousness, as reflected by the need for urgent or immediate action.’ The panel does not unpack the degree idea, for it would require considering a member’s assessment of its security concerns. Identifying a spectrum implies that a government must determine what is serious and when. The DS597 panel produces a ‘definition’ as a situation of ‘utmost gravity’ and ‘representing a breakdown or near-breakdown in those relations.’ (para 7.289, 7.290, 7.310, 7.315). Although the panel observes a ‘thermometer’ for gauging international relations, it rejects the role of the invoking Member’s appreciation of the situation. (7.309).

The panel treats the exceptions like a light switch. When toggled on, members will no longer comply with international commitments, including WTO commitments. (7.298, 7.311). According to the panel, evidence of international cooperation is evidence that a member cannot invoke GATT Article XXI! The exact panel text (without sourcing) may be helpful here:

As we know from daily media reports, we live in a world driven by a range of political, economic, social, and environmental tensions and divergences. At the same time, in the midst of these tensions and divergences Members will in most cases continue to manage their relationships within a range of international legal frameworks aimed at ensuring predictability and stability within the international system. Article XXI(b)(iii) stands for the principle that situations of war or other emergency in international relations represent an exception to this. If the existence of tensions or policy divergences of any magnitude, however, were to constitute an emergency in international relations, the character of Article XXI as an exception to apply in the gravest of circumstances would fundamentally change.

Such an assessment significantly departs from the complexity and ambiguity of wartime. The panel did not seek to opine on war or security, but its interpretation of the provision creates significant implications for the future deliberation of trade security. Recent lessons from the 2022 Russian invasion of Ukraine and the battle over semiconductor controls exemplify the complexity of economic interdependence in the modern globalised economy. The panel’s assessment makes sense if trying to thicken the exceptions’ boundaries to catch pretext or opaque self-judging arguments. But it also eradicates the safety valve function of GATT Article XXI. It washes the good away with the bad. 

What is the emergency at issue in DS597?

Adding to the complexity of this dispute is that there are competing emergencies at play. At issue was the United States’ relations with China and Hong Kong, China and the relations of Hong Kong, China and China. According to the US, the situation in Hong Kong, China, resulting from China’s actions (including the adoption of the National Security Law) and actions of Hong Kong, China's authorities, creates a threat to the US’s essential security interests. The panel then adds the additional situation of ‘an erosion of freedoms and rights of the people in Hong Kong, China, as well as the institutional degradation of democracy in Hong Kong, China.’ (para 7.323).

The two identified situations became muddled as the panel evaluates the evidence presented by the United States. Such evidence fell into one of four categories: US domestic instruments; reports and statements by United States officials on the situation in Hong Kong, China; other Members’ views; and press reports. Executive Order 13936 of 14 July 2020 confirmed the US President’s conclusion that the situation in Hong Kong ‘constitutes an unusual and extraordinary threat […] to the national security, foreign policy, and economy of the United States’ and on this basis, the President declared ‘a national emergency with respect to that threat.’ (DS 597 para 7.331). Subsequently, the US enacted the 2020 Hong Kong Autonomy Act ‘to impose sanctions with respect to foreign persons involved in the erosion of certain obligations of China with respect to Hong Kong.’ The panel notes that the sanctions on the importation of goods from Hong Kong, China are ‘expressly excluded from the authority of the Act.’ (7.334).

Additional evidence from the State Department’s report of the situation in Hong Kong, China aids the DS597 panel’s analysis of whether an ‘emergency in international relations’ existed. First, there is an examination of the extent Hong Kong, China’s ‘autonomy’ for implementing commercial agreements. This autonomy examination extends to other structural policies that address state control over its national economy from China, including (but not limited to) the continuation of Hong Kong China’s legal system (despite questions of judicial independence), the practice of protecting property rights, the maintenance of Hong Kong, China’s currency pegged to the US dollar, and Hong Kong, China’s participation ‘separately from China’ in 24 international organisations, including the WTO (para 7.336). Second, the panel observes that the US and Hong Kong, China maintain some bilateral agreements.

Several countries raise significant concerns about the events in Hong Kong, China. The panel notes a ‘concern in public opinion’ regarding undermining human rights and democracy in Hong Kong, China. However, the panel does not find that this evidence meets its defined ‘breakdown’ of relations. While other US government reports evidence US consideration of ‘the human rights situation in Hong Kong, China’, the panel finds there is no ‘meaningful information on the specific issue of how the human rights situation in Hong Kong, China has affected international relations between the United States, Hong Kong, China and China.’ (emphasis added, para 7.340). Does this statement help the panel identify the situation? Its focus is on how a situation impacts the respondent in the dispute but not the situation itself. To this end, the panel sets a new threshold of a ‘requisite level of gravity’ defined as the ‘point of breakdown.’ (7.353). The panel points to but does not mention the elephant in the room. The United States spoke to measures ‘vis-à-vis Hong Kong, China’ but does not provide any evidence on measures taken ‘vis-à-vis China.’  It is difficult to square this panel conclusion with an earlier observation that an ‘emergency does not necessarily have to originate in the invoking Member's own territory and bilateral relations.’ (para. 7.297)

Additionally, the DS597 panel points to the factual circumstances of DS512 and DS567 to highlight the differences between them and the US concerns with the ‘human rights situation in Hong Kong, China.’ Recall, however, that the assessments of those situations were thin. The DS512 panel relies on evidence that the dispute is ongoing, ‘publicly known’, involves the disputing parties, and that other Members imposed sanctions on Russia. (DS512, para.7.119-7.120) The DS597 panel dwells on different aspects, noting that the General Assembly resolution considered the situation of ‘armed conflict’ and sanctions imposed on Russia following the annexation of Crimea. For the DS597 panel, it is significant that goods were marked ‘China’ but not subject to different tariff treatment. (7.356). In contrast, the DS567 panel observes that it was a matter of fact that Saudi Arabia ‘severed diplomatic and consular relations with [Qatar].’ (DS567 para 7.258) The DS597 panel adds that there was a complete collapse of ‘economic relations’ between Saudi Arabia and Qatar. In sum, a future invocation of GATT Article XXI(b)(iii) would require demonstrating a ‘breakdown’ by showing international recognition of the situation, trade restrictions and evidence of the severance of diplomatic, consular, or economic relations between the parties.  

The DS597 panel report strategically chooses to incorporate the factual circumstances of DS512 and DS567 to require evidence of a ‘breakdown’ in relations to identify a ‘war or other emergency in international relations.’ The effort here appears to render the assessment value-neutral while ensuring a member cannot self-judge the circumstances by which it deviates from WTO rights and obligations. Evidence of a breakdown seems easy to quantify without requiring relativism. In reading the report, it appears that the panel sacrifices the important balancing the DS512 panel injects into the interpretation of GATT Article XXI. The genuine concern is that the US now understands what it takes to invoke the security exceptions – a clear, demonstrated breakdown of international relations. But is it the function of a WTO panel to consider the long-term implications of this finding? Suppose security guides US economic policy (for how long is unclear). What does it mean for a report to say the invocation was improper because the respondent did not do enough to fracture international relations?

I hear Emily Lydgate’s assessment of EC Seal Products in the back of my mind, as she cautions against a rationality test that tried too hard to impose ‘a consistency requirement onto a pluralistic, democratic society as it does not match the reality of how regulation emerges.’ Jo Langille and Rob Howse have a forthcoming AJIL article that deeply tackles this.

As I will explain in the next post, the panel should have attended to the DS512 panel’s original inquiry and asked whether there was an urgent and serious situation that gave rise to a member’s essential security interests. The DS597 panel, having crafted its definition, does not examine whether the situation in Hong Kong, China, could be understood to be ‘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.’ They highlight the limits of past panels’ interpretation.

The issue here comes down to how this affects the US.  This is precisely the purpose of the third and fourth steps of the DS512’s legal interpretive approach (and accepted by the DS567 panel) for analysing GATT Article XXI. Namely, whether a respondent has sufficiently articulated its essential security interests as dependent on the situation in question and then whether, while meeting an obligation of good faith, the respondent demonstrates that the measures meet a minimum requirement of plausibility in relation to the proffered essential security interests. In this case, how the different markings identifying “Hong Kong, China” versus “China” plausibly relate to the US essential security interests – but not as identifying the existence of a situation. (see 7.220, 7.221). Yet, how the situation impacts the US becomes key to identifying the situation. The panel asks for evidence that a situation in China breaks down the relations between the US, Hong Kong, China, and China. In focusing on GATT Article XXI, I put to the side more complex questions about the assessment of GATT Article IX.

What is a Free Trade Agreement, Anyway?

This is the second of two posts on trade agreements in the news over the last ten days.

During the holidays, Treasury and the IRS confirmed what many had already been discussing since President Biden signed the Inflation Reduction Act in November: that they might take an expansive definition of “free trade agreement” when determining if the “critical mineral requirement” is met for the new clean vehicle tax credit.  

In their White Paper, Treasury and the IRS track the statutory language and describe the requirement:

… the critical mineral requirement will be met if the percentage of the value of the critical minerals in the vehicle’s battery that were extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect, or recycled in North America, is equal to or greater than 40 percent for a vehicle that is placed in service in 2023 after the date on which Treasury and the IRS issue proposed guidance.

The White Paper then states:

The term “free trade agreement” is not defined in the Inflation Reduction Act (or in any other statute).  Treasury and the IRS expect to seek comment in the proposed guidance on what criteria should be used to identify free trade agreements for the purposes of the critical minerals requirement and expect to propose that these criteria include whether an agreement reduces or eliminates trade barriers on a preferential basis, commits the parties to refrain from imposing new trade barriers, establishes high-standard disciplines in key areas affecting trade (such as core labor and environmental protections), and/or reduces or eliminates restrictions on exports or commits the parties to refrain from imposing such restrictions, including for the critical minerals contained in electric vehicle batteries.  Treasury and the IRS also expect to propose that the term encompasses, at minimum, the comprehensive trade agreements of the United States with the following countries: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore.  Further, Treasury and the IRS expect to propose that the Secretary may identify additional free trade agreements for purposes of the critical minerals requirement going forward and will evaluate any newly negotiated agreements for proposed inclusion during the pendency of the rulemaking process or inclusion after finalization of the rulemaking.

Although this was unsurprising – this already came up in various conversations among scholars and among governments in November and early December – some on social media appeared dismayed by what they saw as the diminution of a statutory and household term and a questionable-to-them workaround. 

Readers of this blog will know that, in addition to not being defined in U.S. statute, “free trade agreement” is not used in the GATT.  Rather, GATT Article XXIV refers to “free-trade area”.  (Last year, I asked students in my Law of Trade Agreements class to determine whether the arrangement created by IPEF -- or what we knew of it at the time of the class exam -- was consistent with Article XXIV of the GATT.  This was of course partly a trick question.  And implicit in the question was the issue of whether it mattered….)   

Apart from these rather academic affairs, we all know what we mean when we say “free trade agreement”.  We also know that the Biden Administration is not inclined toward those “comprehensive” agreements, to use the White Paper language.  As with the Administration before it, other forms of trade-related deals are in vogue.  Treasury and IRS go so far as to suggest that “newly negotiated agreements” could be coming.  (Query here under what authority those agreements would be negotiated, but we’ve already had that conversation.)

More may not be needed, however. When it comes to the more than 1200 trade-related agreements that the United States maintains covering over 100 countries, they very often “reduce or eliminate trade barriers”, just not all of them.  Consistent with what Treasury and IRS suggest in their illustrative list, these mini-deals or trade executive agreements could still be considered free trade agreements or at least “free-ing” agreements: they almost always make the exchange of goods and services easier.  The United States has 107 such agreements with Japan and about 60 with the European Union, despite not having a comprehensive trade agreement with either partner.  These agreements cover everything from avocados to zoning.  The set of countries with which the United States has no agreement accomplishing what Treasury and IRS propose is quite small (check out the map).

That said, the matter may not be so easily resolved with members of Congress pushing back and the potential for litigation. 

This is certainly not the first time trade-relevant rules have faced multidirectional challenges on implementation.

The new fisheries import rule followed a somewhat similar path.  (The rule was intended to become effective on January 1 but recently was pushed back another year.)  According to this rule, and generalizing considerably, the only foreign fisheries permitted to export fish and fish products to the United States will be those that the United States has approved.  Approval turns on whether the fishery has sufficient protection in place, in the view of the United States, for marine mammal bycatch.  Over the last several years, trading partners raised significant concern about the details of the rule while environmental groups put pressure on the executive branch to implement the law as Congress intended in the 1972 Marine Mammal Protection Act. The result has been a very long implementation process during which Commerce and USTR have worked hard to avoid ruffling feathers – or scales? – among major fish-exporting partners.

Whether albacore or zirconium, or others that may be coming, these separation-of-trade-law-powers implementation issues are likely to continue.

Trade Agreement Transparency for the New Year

This is post one of two on trade agreements in the news over the last ten days.

Many will know that the president signed into law the National Defense Authorization Act in the days before Christmas.  Like several recent big legislative packages, this one contains some important trade-relevant provisions.  I want to highlight just one, one that was crafted by many elves over many months, and does not mention trade at all. 

The “gift” to which I’m referring in the holiday Act is a set of amendments to the 1972 Case-Zablocki Reporting Act (Case Act) -- go to page 2590 of the NDAA to find them. 

In brief, the Case Act is the statute that requires the executive branch to report to Congress on agreements that the executive signs and to publish those agreements for the benefit of the public.  Problems have plagued the Case Act’s success since its inception.  The collection of executive agreements held by the State Department and shared with Congress is woefully incomplete – and it is especially bad when it comes to the more than 1200 trade-related executive agreements (TEAs).  Part of the problem is that, in the trade space, USTR plays what is, in other foreign relations circumstances, the State Department’s “clearinghouse role”—and this immediately creates distinctions in how those agreements are handled. Trade agreements are often left out of the State Department’s reporting and publishing repertoire for a variety of reasons, despite far-reaching mandates in the Case Act.

To be sure, Congress asks for reports about trade lawmaking activities, including what has been known as the U.S. “trade agreements program,” but this typically amounts to either reporting about traditional free trade agreements or offering a partial list of TEAs without their texts.  All this – and much more I have described elsewhere – has made the hiddenness of TEAs troublesome, more so than with other executive agreements. Their application, monitoring, and engagement needs are more acute than those for agreements with more distant or limited effects on private actors.

The NDAA amendments, which will be operational by late September, offer a good start toward improving the transparency of executive agreements.  The amendments will help make available many agreements that, before now, may never have seen more than the inside of a desk in a government agency.  For example, the amendments require agencies to make available to State (for State to then publish and send to Congress) non-binding instruments.  They require agencies to provide a detailed description of the authority under which agreements are concluded and the authority needed to implement them, among several other important obligations.  The NDAA also provides resources to the State Department to take on these additional responsibilities. 

There is a lot more to unpack in the text as it becomes operational in the fall.  The amendments have the potential to enhance the dialogue between the branches on effective implementation of agreements and to clarify how agreements become part of U.S. law.  These are moves in the right direction and include several that scholars and practitioners have sought.

But these amendments still leave questions unanswered when it comes to trade-related agreements such as many entered into by USTR, Commerce, Treasury, or USDA.  The amendments do not do enough to take into account trade’s special institutional foundations within the U.S. government.  Part of the longstanding difficulty on trade agreements has been one of differing interpretations between State and USTR of the inclusivity of the Case Act.  The NDAA amendments again speak of agreements generally without further clarity as to whether trade is in, as State argues, or out, as USTR argues, of the exercise.

Further, since USTR already makes a list of all the trade-related agreements about which it knows, this could have been an opportunity to ask USTR to digitize and make available copies of all those agreements.  That would go part of the way to providing a centralized repository of trade-related agreements, given the shortfalls at the State Department.  Generally, however, the NDAA amendments do not address existing agreements, only future ones. 

Finally, the NDAA amendments continue to centralize agreement oversight in the Senate Foreign Relations Committee and House Foreign Affairs Committee.  That makes sense for many non-trade agreements, but this structural distinction between those committees and Senate Finance and House Ways and Means only exacerbates confusion in reporting structures. 

Come September, we may have more transparency on trade-related agreements, but we may not if agencies remain entrenched on how they view TEAs, how they treat them, and whether they share them.  It may take trade-specific legislation to fill in these gaps – perhaps that will come in 2023.

Katherine Tai on National Security

At a CFR event in December, Christina Davis of Harvard asked U.S. Trade Rep. Katherine Tai the following question about the WTO panel ruling on the Section 232 steel and aluminum duties:

I'd like to ask about your response to the WTO panel ruling last week that overturned the United States' trade protection for steel and aluminum. And the US has responded that the WTO does not have the jurisdiction to judge on national security, that every Member should respond to its national security on its own decision. How will the United States deal with trade partners mimicking the United States, where an industry is protected for national security? Will you have a response when they follow the same policy we have adopted?

Here was Tai's response:

So let me get to the core of your question, and what we said last week in response to the panel report on national security. Our position has long been that, just look at the text of the agreement, that national security decisions that are made by governments are a source of incredible responsibility. They should not be made willy nilly, but for the integrity of a multilateral institution like the WTO, that it should not get into the business of second guessing the national security decisions that are made by sovereign governments. And I think that our response is very much focused on the reasoning that is in that panel report, which gets deep into creating requirements and parameters for what is or is not a legitimate national security decision. I think that the WTO is getting itself on very, very thin ice. And I think that it really challenges the integrity of the system. So that's my answer for you, which is, it is the responsibility of governments to bring integrity to their decisions on national security, but it is a very challenging place to be to have unelected, not really accountable decision makers in Geneva second guess processes that are run through a government like ours, which is democratic, and also for a country like ours, that many others look to, to defend on national security, not just for ourselves, but for others.

This exchange gets at some of the same issues I raised in a recent post, where I said:

The U.S. has made clear its view that once a government invokes national security, WTO panels should not scrutinize the measure at issue for compliance with the terms of the national security exception. But what does the U.S. expect and hope for in terms of keeping abuse of this exception in check? Rely solely on good faith on the part of Members invoking national security? Affected governments should bring non-violation nullification or impairment complaints in these circumstances? At the U.S. Trade Policy Review that just took place, Ambassador María Pagán said this: "I wish to remind Members: the negotiating history of Article XXI(b) confirms the drafters intended this provision to be self-judging, and that the available remedy for such measures is a non-violation claim." That seems pretty clear, but my question then is, how does the U.S. think implementation of successful non-violation complaints should work? Is there the same rebalancing process that you would see with violation claims, or is it just good faith efforts to reach a settlement? And finally, would the U.S. consider my suggestion of automatic and immediate rebalancing after a government invokes national security?

Tai's response raises some additional points for me.

First, there's definitely an element of her answer that seems to take the "good faith" approach to national security issues that I mentioned in my post, in particular where she says "it is the responsibility of governments to bring integrity to their decisions on national security." But what if governments are not acting in good faith? How should such situations be handled? If it is through non-violation claims, what does Tai think about the questions I asked in my earlier post?

Second, it's worth noting that you don't have to withdraw a measure in response to a WTO panel's ruling of violation, as you can just accept retaliation by the complainant instead. Assuming this kind of rebalancing is acceptable to the U.S. in the context of NVNI claims, why is a finding of violation and then having rebalancing as a result not acceptable to the U.S. as well?

Third, what do other governments think about the U.S. suggestion that NVNI claims are the proper approach to national security measures? Will we eventually see some government bring a claim and test this out?

Fourth, Christina's question was specifically about the possibility that other governments would copy the U.S. actions. What would the U.S. do if, say, India stopped protecting certain patents held by U.S. companies and invoked national security as the basis? Or if Mexico invoked national security in relation to measures keeping foreign producers out of its energy sector?

And lastly, Tai's answer makes reference to the U.S. defending other countries and being a democracy. Should those characteristics be a consideration in evaluating a national security defense?