Global Courant
Today, the increasing use of economic sanctions by numerous countries has increased the importance of WTO security exceptions, allowing members to maintain otherwise WTO-inconsistent measures — such as discriminatory tariffs or import quotas or bans — for reasons of national security.
Since 2019, WTO panels have ruled on the invocation of security exceptions by WTO members in four cases. These cases ended nearly 25 years of silence about the meaning of the security exceptions in the WTO dispute settlement system.
Even before the WTO, the security exception was hardly mentioned in the predecessor of the WTO, the General Agreement on Tariffs and Trade 1947.
The approach taken by these panels was to grant some respect to WTO members in interpreting and applying security exceptions while preserving jurisdiction and requiring an objective analysis of whether the responding members are justified in invoking them. Simply pointing out general concerns about human rights or overcapacity has been insufficient.
This approach can prevent the security exceptions from turning into an unchecked justification that is susceptible to abuse. A more deferential and less demanding interpretation could seriously undermine the benefits of gradual trade liberalization, including significant tariff reductions, achieved since 1947.
However, panel verdicts are likely to increase US Intransigence to the WTO dispute resolution system and the organization itself. The WTO Appellate Body, which consists of seven individual members, is already non-functional because the United States continues to block the nomination of new members – with the term of the most recent member having expired in 2020.
In Russia – Traffic in transitpassed without appeal in 2019, the WTO panel accepted Russia’s invoke the security exception in Section XXI(b)(iii) of the General Agreement on Tariffs and Trade 1994 (GATT).
In Saudi Arabia – intellectual property rightsSaudi Arabia partially succeeded in invoking the corresponding security exception in Article 73(b)(iii) of the Agreement on Trade Related Aspects of Intellectual Property Rights. Since Qatar and Saudi Arabia have agreed to end their dispute without adopting the report, it has no formal legal standing, but may nevertheless be informative.
In late 2022, WTO panels rejected the United States’ appeal to Article XXI(b)(iii) of the GATT in US-Steel and Aluminum Products — in litigation brought by China, Norway, SwitzerlandAnd Turkey – And Marking of US origin. The United States appealed these reports”into the voidearly 2023.
The US has targeted imported aluminum coils from a number of countries. Photo: AFP/STR
In the absence of any indication from the appellate body about the interpretation or application of security exceptions, what do we know, and with only one approved WTO panel report? WTO panels refuse to accept the argument — advanced by Russia and the United States – that WTO security exceptions are “self-judgmental” or “unjustifiable”.
Article XXI(b) of the GATT provides that “(n)nothing in this Agreement shall be construed to prevent a Member from taking any action it deems necessary for the protection of its essential security interests.”
According to the panel reports, the words “as it deems necessary” are nuanced in two important respects. First, they are followed by paragraphs that limit the type of actions. For example, under Article XXI(b)(iii), action “taken in time of war or other emergency in international relations.” A panel objectively assesses whether the contested actions fall within the relevant description.
Second, panels will not show absolute respect for a member’s claim that their actions are necessary for the protection of their essential security interests. A WTO panel assesses the plausibility of the member’s statement of its essential security interests, as well as the relationship between the contested measures and those interests.
The cases also indicate what circumstances may lead to an “emergency in international relations” and what measures may be necessary to protect “essential security interests”.
In Russia – Traffic in Transit, the panel found that “the situation between Ukraine and Russia since 2014” constituted an emergency in international relations, defined 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.”
The panel found plausible Russia’s claim that it has taken steps to restrict the transit of goods from Ukraine through Russia to protect its “essential security interests”.
In Saudi Arabia IPRs, the panel found that an emergency in international relations between Saudi Arabia and Qatar began when Saudi Arabia severed all “diplomatic, consular and economic relations” with Qatar.
The panel accepted Saudi Arabia’s argument that it had taken “anti-sympathy” measures – preventing a Qatari group of companies from obtaining counsel to enforce its intellectual property rights in Saudi Arabia – to protect its vital security interests.
In the case of US-Origin Marking, the panel ruled that a US requirement that goods imported from Hong Kong be marked “China” instead of “Hong Kong”, outside of the exception in GATT Article XXI( b)(iii) fell because concerns about the “human human rights situation in Hong Kong” had not “escalated to a threshold of the seriousness required to constitute an emergency in international relations”.
Similarly, in US steel and aluminum products, the panel found that additional import duties imposed by the United States on derivative steel and aluminum products were not justified under Article XXI(b)(iii) of the GATT because “concerns about the global overcapacity in steel and aluminum” does not “incur the severity or intensity of tensions on the international scene” necessary to constitute an emergency in international relations.
These rulings demonstrate that the security exceptions give WTO members some leeway to define their own essential security interests, as well as the measures necessary to protect those interests.
Still, panels have not been afraid to “objective assessmentof the existence of an international relations emergency and the validity of purported links between contested measures and security interests in the context of such an emergency.
Panels have sought an appropriate balance to avoid the abuse of exceptions that would otherwise allow members to evade their WTO obligations.
The refusal of the panels to American position that “(i) issues of national security are political matters” beyond the scope of WTO litigation is likely to increase US resistance to negotiating Appellate Body appointments.
A sign in front of the World Trade Organization headquarters in Geneva on April 12, 2018. Photo: AFP/Fabrice Cofrini
The United States has suggested it will strive for an authoritative interpretation of GATT security exceptions. Such interpretations can be adopted with agree with three quarters of the 164 members of the WTO. The likelihood of such an agreement being reached is slim.
In the absence of a WTO Appellate Body, pressure on the Arbitration arrangement between several parties in interlocutory proceedings (MPIA). The 53 WTO members that are party to the MPIA are Australia, Brazil, Canada, China, the European Union, Japan, New Zealand and Singapore. Two cases have been completed and eight are continuing in that forum.
Despite the non-participation of the US, the MPIA can still contribute to the interpretation and application of the WTO security exceptions. MPIA rulings are binding on relevant parties and can also be persuasive in the WTO dispute settlement system.
Tania Voon is a professor at Melbourne Law School, University of Melbourne, and a former legal officer in the Appellate Body Secretariat of the World Trade Organization.
This article was originally published by East Asia Forum and has been republished under a Creative Commons license.
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