A senior U.S. official said recently that the U.S. intends to raise the World Trade Organization’s authority to rule on trade measures imposed on national security grounds in the context of ongoing talks on reforming the WTO’s dispute settlement function. U.S. officials continue to warn that failure to resolve this issue threatens the viability of the WTO as a whole.
WTO rules allow members to impose trade restrictions for national security reasons, but in 2019 a WTO panel ruled that the scope of such restrictions is limited and that the WTO has the authority to review related actions. In December 2022 the WTO issued several decisions finding that the Section 232 tariffs the U.S. imposed on imports of steel and aluminum products did not qualify for the national security exception because they were not imposed in time of war or other emergency in international relations. Similarly, the WTO ruled in January 2023 that a U.S. requirement for goods produced in Hong Kong to be marked to indicate China as their country of origin, which the U.S. said was imposed in response to China’s “highly concerning actions” to erode Hong Kong’s “autonomy and the human rights of its people,” also did not qualify for the national security exception because the situation cited by the U.S. “has not escalated to a threshold of requisite gravity to constitute an emergency in international relations.”
U.S. ambassador to the WTO Maria Pagan said in a Jan. 27 meeting of the WTO’s dispute settlement body that the U.S. is appealing these decisions. The U.S. has already said clearly that it has no intention to comply with them, but an appeal means the complainants will have no chance to seek authorization to retaliate because the WTO’s Appellate Body does not currently have enough members to hear cases. As a result, the challenged U.S. measures will remain in place, as will (in the case of the Section 232 tariffs) the tariffs major trading partners have maintained against U.S. goods in response.
Pagan said these rulings are “particularly troubling because they suggest a [WTO] member may not take action to protect its essential security interests until after irreparable damage is done … as if deterrence or preparedness were not critical to national security.” With respect to the ruling in the Hong Kong case, where the panel cited the U.S.’ continuing cooperation with Hong Kong and China as evidence that there was no emergency that would justify the national security exception, Pagan asserted that the WTO “does not have the competence or the authority to assess the foreign affairs relationships” of its members or “to pass judgment on the value that the United States – and some other members – place on freedom and human rights and the actions they take in seeking to secure those values.”
Pagan also gave a spirited reiteration of the U.S.’ opposition to the fact that the rulings were issued at all and said the appeal should not be misinterpreted as asking the WTO to reevaluate the U.S.’ national security decisions. “The U.S. will not cede decision-making over its essential security to WTO panels,” she said. “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 response to a wide range of threats to its security. This position has been shared by many members who expressed similar views throughout previous decades.”
Changing that position now, Pagan said, jeopardizes the WTO itself by “undermining our common vision for the WTO as a trade organization” and as “a forum for discussion and negotiation.” Only when WTO members “can trust that the system we built will respect the rules we agreed,” she said, will that system be able to “contribute to upholding rules-based trade.”
As a result, Pagan said, the U.S. intends to seek an authoritative interpretation that will help WTO members “to clarify and adopt a shared understanding” of the national security exception.
The U.S. also wants this exception to be included in ongoing discussions on reform of the WTO dispute settlement system. Pagan noted that those talks have been “deeply substantive and informative” in recent months, as opposed to the “stale conversations of past years.” According to a Reuters article, Pagan said that in light of this progress the U.S. hopes the system can be fully functional again by the end of 2024.
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