In April 2017, the US Secretary of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to evaluate the effect of imported steel and aluminium on national security. In 2018, the United States imposed Section 232 tariffs on foreign steel and aluminium products from several allies on the basis that a surge of increased imports adversely affected domestic production, which was essential for national security. Sharp, smart commentary characterised the actions as classic protectionism.
Several WTO Members brought claims to the WTO, arguing that the United States had raised tariffs in a way that was inconsistent with the disciplines set out in the GATT 1994 and the Agreement on Safeguards. At the time, policy analysis, including my own analysis, debated how the United States would justify these tariffs—what form and approach it would take when invoking the security exceptions of the GATT 1994.
But not just the 232 tariffs case was at the WTO’s doorstep. In an equally interesting dispute between the United States and Hong Kong (US–Origin Marking Requirement), the United States invoked security interests in August 2020 to defend a measure stating that imported goods ‘produced in Hong Kong … may no longer be marked to indicate “Hong Kong” as their origin but must be marked to indicate “China”.'
For both the US–Certain Steel and Aluminium Products and the US–Origin Marking Requirement cases, the United States adopted a position that (roughly) equated to: “We have always, since the inception of the GATT, taken the position that the security exceptions are wholly self-judging and, therefore, exclude any review of the challenged measures.”
However, separate WTO panels have found that the United States’ interpretation was incorrect.
As set out by the Russia–Traffic in Transit panel report, a WTO panel must first evaluate the circumstances under which a respondent Member took its challenged measures, as dictated by the interests protected. The crux of the panel’s objective assessment was whether the defendant, subject to an obligation of good faith, could adequately articulate its essential security interests based on the emergency at issue. After that, the panel could determine whether the measures were ‘minimally plausible’ to serve essential security interests (paras. 7.81, 7.1, 7.135-7.138).
To put a very long story short, all WTO panels have interpreted the applicable circumstances to invoke Article XXI of the GATT (or its equivalent in the TRIPS Agreement) narrowly to deter members from shielding protectionist measures. Members could not invoke the security exceptions to protect economic interests, but rather only ‘military and serious security-related conflicts.’ (Russia–Traffic in Transit panel report, para 7.81)
All WTO disputes to date have involved a respondent Member invoking a specific circumstance within the GATT security exceptions that required action taken ‘in time of war or other emergency in international relations’ within the meaning of subparagraph (b)(iii) of Article XXI of the GATT 1994. In US–Origin Marking Requirement, the United States committed to these circumstances somewhat begrudgingly, not genuinely finding itself in a position to argue anything else but not having the factual evidence to demonstrate that the ‘China’ mark of origin was necessary to protect US security interests in time of an international emergency (para 7.258). In US–Certain Steel and Aluminium Products, the United States also argued that the ‘publicly available information’ concerning its measures ‘could be understood to relate most naturally to the circumstances described in Article XXI(b)(iii).’ (para. 7.150).
As explained in more detail elsewhere, the WTO panels in US–Steel and Aluminium Products interpreted the terms ‘emergency in international relations’ in the sense of subparagraph (b)(iii) of GATT Article XXI as ‘equally grave or severe’ to ‘war’ in terms of the impact on international relations. The WTO panel report went further in the US–Origin Marking Requirement. It concluded that for an emergency to impact the US’s essential security interests, the United States must show that its relations with Hong Kong, China had reached a ‘point of breakdown’ to constitute an emergency in international relations (para 7.353).
The Origin Marking Requirement panel concluded:
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. (para 7.311)
The United States failed to provide evidence of such a breakdown. In the US–Origin Marking Requirement, the United States’ evidence did not clarify the threats to US security arising from the Government of China and Hong Kong, China authorities’ actions concerning human rights and freedoms of people in Hong Kong and the autonomy of Hong Kong (panel report, paras. 7.331, 7.340, 7.345, 7.353). For the 232 tariffs, the United States could show a domestic emergency but not one that demonstrated a total collapse of relations – quite hard to do, considering the tariffs were imposed strategically on allies to address the United States’ overcapacity concerns stemming from Chinese exports. (US–Certain Steel and Aluminium Products panel report, para 7.155) Reading the reports together, the panels accorded deference to a respondent Member’s connection of means to ends. Still, they set a strict standard for identifying the circumstances that gave rise to the challenged measures.
In 2022, I found the WTO panel reports cumulative findings on identifying the circumstances concerning. Even while carefully evaluating the treaty’s meaning in textual and historical context, the reports’ restrictions on using the WTO security exceptions could have the opposite desired effect. Members could adopt harsher policies- such as terminating economic relations or actions of ‘near-comparable gravity’ – to show that peaceful or friendly relations no longer existed. Nothing prevents a government from walking this back years later, suggesting this might be a sound, short-term strategy, leaving the longer-term consequences for the future (assuming the United States is troubled with how they frame arguments in disputes involving security measures).
Could the intention to curb abuse of the security exceptions now form a part of a strategy that justifies an escalation of US-China tensions?
Some may wave this concern away, noting, for example, a bypass found in the indeterminacy of subparagraph (b)(ii) of GATT Article XXI, whereby a respondent Member takes action relating to the traffic of goods carried on for the purpose of supplying a military establishment. Invoking this provision would require factual evidence of a direct or indirect connection to military purposes. However, demarcating “strategic goods” based on an intrinsic military quality is unhelpful as an analytical limit to trade restrictions. All trade has the potential to be strategic. Invoking this subparagraph does not enable a respondent Member to evade the circumstances giving rise to security interests. Depending on the time and place, a “strategic good” can be nickel, grain, leather shoes, or munitions, making the review of trade restrictions in the name of security a complex endeavour.
Now, with speculation as to what the second Trump Administration will do, I worry that we are in a far more dire situation than in 2018. Knowing what Trump presented when campaigning, we have clues that the Trump Administration could withdraw (again) from the Paris Agreement, pull back from collective security commitments, and terminate its MFN treatment of China.
Should China bring a dispute to the WTO if the Trump administration imposes 60% tariffs on all Chinese imports or more, or any other WTO Member brings a dispute concerning across the board tariff increases, there may be scope to argue that such actions are ‘political’ or ‘economic’ (Panel Report, Saudi Arabia – IPRs, para. 7.263). This will come down to the facts presented.
When Russia first invoked the GATT security exceptions, swiftly followed by the United States, there were concerns that the turn to security exceptions would destroy the rules-based multilateral trading system. We know that since these WTO dispute settlement reports, the United States has sought to reform the WTO dispute settlement mechanism and the scope for judicial review of its security measures. In the e-commerce joint statement initiative, the United States has pointed out that the existing security exceptions text ‘falls short’.
In a future dispute, would Members be willing to have the United States declare a total breakdown of economic and diplomatic relations with China? Panels’ underlying intention was to limit the abuse of the security exceptions, but the effect of the reports could inadvertently provide the United States with the political cover it needs to take a much more extreme position if pushed to defend Trump 2.0 tariffs. In the end, Members might avoid pushing the United States to defend country exemptions and product exclusions on the basis that a political minefield is better than a divided world. Nevertheless, it might be wise to use litigation to illuminate negotiations and to make clear that the United States’ benefits with the system come with commitments.
* Complainants were China, Norway, Switzerland, and Turkey. Note that while not consolidated, the same panellists adjudicated these disputes, leading to four nearly identical reports: US–Steel and Aluminium Products (China) DS544, (Norway) DS552, (Switzerland) DS556, (Turkey) DS564.
