At the Atlantic Council's Transatlantic Forum on GeoEconomics event today, economics correspondent Stephanie Flanders asked U.S. Trade Rep. Katherine Tai about possible unilateral U.S. tariffs on dirty steel:
I think the issue has been for the EU, and I think Vice President Dombrovskis has made it clear, is that what you were looking for seems to go against WTO rules because you have been discriminating against a certain number of countries and you don't have a similar mechanism that the EU has for how it applies to its own companies. So I think this gets us to one of the discussions that we've had all through the day, there's a sort of disquiet in Europe with a US policy which seems to undermine the concept of a global rule based order. There's even a feeling that you can't do all the things that you're talking about within the WTO or even within the spirit of the WTO. Is that fair?
Tai responded as follows:
I appreciate the opportunity to explain the US point of view because I know that Brussels has been very effective in transmitting its side of the story. ... What I want to really emphasize is, I really bristle at this narrative that the United States would put forward a proposal that is WTO-inconsistent, because that calls into question ... our good faith as a WTO member. Let me put it this way, because I think that ... many people talk about the WTO, [but] not a lot of people have been to the WTO or participated at the WTO or represented their governments at the WTO.
The fact of the matter is that there is no WTO rabbi who sits and pronounces whether or not a measure that's being advanced by a WTO member is kosher or not. I think that when we put forward measures, we all try to ensure that we are working within the rules based order. In fact, I know that the Europeans are very, very proud of their carbon border adjustment mechanism and that it is a culmination of a lot of European based work and compromise in negotiations. But I also want to acknowledge and recognize that Europe's confidence that the CBAM is WTO consistent is indicative of the work that Europe has put in to design the system and Europe's confidence in terms of how it will defend the CBAM if challenged at the WTO, and we all know that there are members of the WTO right now who are looking at preparing to challenge the CBAM and the WTO. So whether or not you feel confident about the work you've done to design your system, [that] doesn't mean that it's not going to be challenged or you wouldn't have to defend it.
And so, I give you that background because I want to emphasize and make clear that the proposals that we have on the table and shared with Brussels are ones that we also we have designed to withstand WTO scrutiny, that we have our reasons for believing that we have abided by the WTO rules.
At the end of the day, in our negotiations, it became very clear that our levels of tolerance or our comfort level with different types of defenses are different on a Washington and Brussels basis. And that's very natural. We have adapted in the negotiations, as you must in negotiations, to try to come towards Europe in terms of its WTO argumentation and defense comfort.
On the EU CBAM, my take has always been that if you implement a CBAM in conjunction with equivalent domestic measures, it can be done consistently with WTO rules (or justified under an exception), although whether it actually will be consistent with the rules depends on the specifics of the implementation. In practice, the way this may play out is that the EU will adopt a measure, it will then be challenged successfully in a WTO complaint, and then the EU will modify it in a way that makes it consistent.
With regard to U.S. tariffs on dirty steel, while it is good to hear that the U.S. is trying to do this consistently with WTO rules, I'm not sure I see how it could be done consistently (or how it could be justified under an exception), and I'd want to hear more from Tai or someone at USTR on the specifics. Of course, it's easy to think of possible arguments that could be made, such as a defense under GATT Article XX(g). It's just hard, based on what we currently know about the potential measures, to imagine those arguments succeeding, although it would be great if we could hear more details about the current shape of the measures that are being discussed in the negotiations. I feel like Tai's explanations above perhaps suggests a "tolerance" for arguments that many people would reject, but maybe I'm reading too much into that.
