WTO Dispute Settlement Panel’s Decision to Rule on National Security Exception May Have a Major Impact on Trump Administration’s Section 232 Tariffs

A World Trade Organization (WTO) dispute settlement panel rulingRussia – Measures Concerning Traffic in Transit, issued last week on a member’s use of the WTO’s so-called “national security exception” under Article XXI of the General Agreement on Tariffs and Trade (GATT) may have a significant impact on the Trump administration’s application of that exception under U.S. law, Section 232 of the Trade Expansion Act of 1962, to impose tariffs on imports worldwide.

Currently, the Trump administration’s Section 232 tariffs on steel and aluminum imports are the subject of nine WTO members’ complaints. This decision is the first time that a WTO dispute settlement panel has opted to examine and adjudicate the WTO’s national security exception. Article XXI of the General Agreement on Tariffs and Trade (GATT) allows a member to take “any action which it considers necessary for the protection of its essential security interests.” This ruling can still be appealed to the WTO’s Appellate Body (AB).

In the report, the panel determined that Russia acted within the scope of Article XXI when it blocked road and rail transport from Ukraine during the countries’ border conflict, finding that Russia acted in “good faith” in its response to an “emergency” situation that was within the parameters of Article XXI and that allowed for the imposition of trade restrictions. The panel rejected Russia’s argument that a WTO member can unilaterally determine what constitutes “national security.”

In its third-party submissions for this proceeding, the U.S. government argued that the national security exception is entirely “self-judging” and that the WTO lacks jurisdiction to conduct that analysis. The panel found, however, that the WTO has jurisdiction to determine whether a WTO member’s use of the national security exception satisfies the requirements of Article XXI of the GATT and to analyze the parameters of the exception. The panel found that an action is within the scope of the exception if it satisfies any of the requirements in the enumerated subparagraphs of Article XXI(b).

In its analysis, the panel provided, “It would be entirely contrary to the security and predictability of the multilateral trading system established by the GATT 1994 and the WTO Agreements, including the concessions that allow for departures from obligations in specific circumstances, to interpret Article XXI as an outright potestative condition, subjecting the existence of a member’s GATT and WTO obligations to a mere expression of the unilateral will of that member,” and “for {an} action to fall within the scope of Article XXI(b), it must objectively be found to meet the requirements in one of the enumerated subparagraphs of that provision.”

The panel’s interpretation of the national security exception may have a major impact on the ongoing WTO challenges to the Trump administration’s Section 232 tariffs on steel and aluminum imports. Although the panel ultimately found that the Russia-Ukraine conflict satisfied certain Article XXI criteria, it remains to be seen how a new panel will view the Trump administration’s decision to consider steel and aluminum imports a national security threat.