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.
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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.
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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.
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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.
