30 四月 2018

US steel and aluminium tariffs and the WTO’s security exception: Unsecuring multilateral trade?

by Jayant Raghu Ram


The United States has instituted measures imposing high duties on all imports of steel and aluminium into the United States. While the US has sought to justify these measures on the basis of its national security requirements, the real underlying motive would seem to be to afford protection to its domestic steel and aluminium industries given the rhetoric that preceded these measures. Though these measures are seemingly inconsistent with WTO law, the US may attempt to defend them under, inter-alia, the provisions of GATT Article XXI, which pertains to security exceptions. However, the possibility that Article XXI may provide a credible defence in this instance is tenuous, as this article attempts to argue.

On 8th March 2018, US President issued two proclamations imposing tariffs of 25% and 10% on steel and aluminium articles respectively imported from all countries (except Canada and Mexico). These proclamations were issued pursuant to recommendations made in February 2018 by the Commerce Secretary ("Secretary") under Section 232 of the Trade Expansion Act, 1962, which permits the Department of Commerce to investigate the effects of imports on national security.

The motif of the recommendations made by the Secretary is that the displacement of American-produced steel and aluminium by excessive imports and their consequent adverse impact on American domestic industries was weakening the internal economy and therefore threatened the US’ national security. The Secretary was also of the opinion that rising levels of imports of steel and aluminium threatened to impair national security by displacing the capacity and thereby disrupting the supply required to produce steel for critical infrastructure and national defense.

It is highly possible that the US would intend to defend these measures under, inter-alia, GATT Article XXI. Though Article XXI has long been understood to be a self-judging exception, it must be noted that Article XXI allows a WTO Member to derogate from its GATT obligations only in the limited circumstances defined therein. For the purposes of this article, focus is limited to those provisions of Article XXI which are directly applicable and relevant to understanding the impugned measures – paragraph (b), clause (iii). Paragraph (b) allows a WTO Member to take any action which it considers necessary for the protection of its essential security interests in only three limited circumstances, of which clause (iii) pertains to actions “taken in time of war or other emergency in international relations.

Factually, it may be argued that there exists both a "time of war" given the US’ ongoing war in Afghanistan and also an "emergency in international relations" given the situation in Syria. However, the mere existence of either of these factors may not be sufficient to justify the invocation of clause (iii). It would need to be demonstrated that the existence of either of these situations directly or indirectly necessitates the need to resort to the impugned measures. In my opinion, in addition to the above, the threat to the United States’ security interests stemming from such circumstances should be imminent or foreseeable and not based on conjecture or remote possibility.

It would also be important to note that the US has not cited either of the aforesaid factors as reasons for implementing the impugned measures. Instead, the US has cited the weakening of its internal economy on account of increased imports as one of the two major reasons. Even if its internal economy is considered to fall within the ambit of "essential security interests”, derogation from GATT obligations for protection of the same can be permitted only if there is a reasonable nexus with a state of war or an emergency in international relations which the US might be facing, which is clearly not the case. To otherwise permit such a derogation would open a Pandora’s box whereby every WTO Member would then attempt to defend protectionist measures under the guise of national security, howsoever obscure, thereby throwing the entire multilateral trading system into disarray.

This is not the first time that national security has been invoked in defence of trade measures, nor is the US the only country to have done so. A similar measure was taken way back in 1975 by Sweden when it had established an import quota for certain footwear and sought to defend the same under Article XXI. Sweden argued that the decrease in domestic production had become a critical threat to Sweden’s economic defence and therefore necessitated the maintenance of a minimum domestic production capacity in vital industries. Sweden further argued that such capacity was necessary to secure the provision of essential products necessary to meet basic needs in case of war or other emergency in international relations. Though this measure did not culminate into a dispute, many GATT members questioned the feasibility of defending these measures under Article XXI.

The US’ import tariffs are similar to Sweden’s measure. However, what makes the former hugely unpopular in the world trading community besides the absence of any reasonable nexus with protection of its essential security interests is the very scale of these measures and the protectionist rhetoric underlying them. Though a full-blown global trade war has not broken out (yet) post the implementation of the impugned measures, these actions set a very unhealthy precedent for other WTO Members to provide an excuse for defending their trade measures under the guise of protecting their security interests. 

It would be important to note that the possibility that the security exceptions would be exploited to claim protection for everything under the sun was noted way back in 1947 itself during negotiations leading to the GATT. Commenting on the possibility of abuse of this exception, the Chairman of the Preparatory Committee expressed his view that:

“I think there must be some latitude here for security measures. It is really a question of a balance. We have got to have some exceptions. We cannot make it too tight, because we cannot prohibit measures which are needed purely for security reasons. On the other hand, we cannot make it so broad

that, under the guise of security, countries will put on measures which really have a commercial purpose.”

According to the Chairman, the only guarantee against any such abuse would be the spirit of Members while designing their measures. In this regard, it should be mentioned that while the United States and even other Members have implemented measures in the past with the objective of protecting their security interests, the United States’ spirit and motivation for implementing the impugned measures is highly suspect for the reasons discussed in the foregoing paragraphs. It would be in the best interests of the United States and the world trading community that such measures are made more rational and designed in keeping with the spirit of Article XXI that GATT negotiators envisaged.

[The author is a Senior Associate, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi] 


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