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U.S. Lashes Trading Partners for Challenging Steel and Aluminum Tariffs

Thursday, November 01, 2018
Sandler, Travis & Rosenberg Trade Report

The U.S. rejected this week efforts by several trading partners to pursue litigation at the World Trade Organization against the additional tariffs it imposed earlier this year on imported steel and aluminum. The U.S. asserted that those tariffs followed a decision that such imports threaten national security and therefore cannot be challenged at the WTO.

In a submission to an Oct. 29 meeting of the WTO’s Dispute Settlement Body, the U.S. said its Section 232 tariffs are aimed at China, whose “non-market policies and practices have been widely recognized by WTO members as leading to massive excess capacity and distortions of world markets.” They have also “led to global conditions in which core U.S. industries, which are vital to our national security, are not able to survive and invest for the future on market-based terms.” The tariffs were thus imposed under a domestic law designed to “address the threatened impairment that these imports … pose to U.S. national security.”

The U.S. asserted that the WTO would be outside its limits to review these tariffs or the underlying national security determination. Article XXI of the GATT 1994 allows each WTO member to decide for itself what actions are essential to its security, the U.S. said, and such decisions are therefore “not matters appropriate for adjudication in the WTO dispute settlement system.” Proceeding with a review of such a decision “would undermine the legitimacy of the WTO’s dispute settlement system and even the viability of the WTO as a whole,” the U.S. claimed, and infringing a sovereign country’s Article XXI rights “would run exactly contrary to the WTO reforms that are necessary in order for this organization to maintain any relevancy.”

The U.S. dismissed the arguments of other WTO members that the Section 232 tariffs are undermining the international trading system, asserting instead that it is the actions of others that are having that effect. These include China’s attempts to use the WTO dispute settlement system to preserve its “unfair, trade-distorting policies” and the European Union’s request that the WTO “do what it was never intended to do;” i.e., review a sovereign nation’s judgment of its essential security interests. The U.S. also accused the EU, Canada, Norway, and Russia of reversing their previous support for the position that the invocation of Article XXI is not reviewable in dispute settlement when their interests changed.

The U.S. added that while its tariffs were only implemented “after long and careful analysis, and after all trading partners had the chance to address our concerns,” the tariffs those countries imposed in retaliation are “unjustified and WTO-inconsistent” because they are “designed to punish U.S. companies and workers.” These countries “pretend” that the U.S. measures “are so-called ‘safeguards’” and that their “unilateral, retaliatory duties constitute suspension of substantially equivalent concessions under the WTO Safeguards Agreement,” the U.S. said, but many of them “do not seriously believe” those assertions, as evidenced by their failure to comply with that agreement’s procedures for taking retaliatory measures. It is “hypocritical,” the U.S. asserted, for these countries to accuse the U.S. of not following WTO rules and then not follow those rules themselves.

The U.S. requested that the WTO convene dispute settlement panels to review the retaliatory measures. Both those requests and those directed against the U.S. tariffs were blocked, but in both cases the panels will be automatically created if a second request is submitted.

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