WTO takes on 'national security'

The World Trade Organization opened Pandora’s Box last week, issuing its first-ever ruling on “national security.” The decision addressed the increasingly central questions of whether and how states can claim national security to justify the imposition of trade restrictions. The result was a Solomonic declaration that affirmed the right of governments to use that justification while asserting that the WTO has the authority to determine the validity of that claim. While gratifying for advocates of liberal trade, it anticipates a more pitched battle over the same issues. The challenge is to address problems at the WTO that have motivated governments to use this exemption.

All treaties and international institutions include “escape clauses” that allow member governments to invoke national security to retain national sovereignty and authority in certain cases. There is an expectation, however, that such rationalizations will be used only in exceptional cases; if this power is abused, then those commitments are meaningless.

Article 21 of the General Agreement on Tariffs and Trade (GATT), the rules that are the foundation of the WTO, allows a government to ignore its free trade obligations “for the protection of its essential security interests … in time of war or other emergency in international relations.” In the 72 years since the GATT was promulgated, international trade arbitrators have not had to determine the scope of that exemption.

That changed in 2016, when Ukraine challenged Russia’s claim that Moscow could restrict the transit of Ukrainian goods through Russian territory to Kazakhstan and Kyrgyzstan, cutting it off from vital Central Asian markets. Russia insisted that the two countries were in a conflict that justified trade restrictions; the national security dimension was obvious.

The WTO panel acknowledged that every member could define its national security interests, that the current state of Russia-Ukraine relations “constitutes an emergency in international relations” and that “Russia has met the requirements for invoking” the national security clause of WTO rules. Significantly, however, the panel concluded that the WTO has the right to review whether national government claims are justified — “justiciable” in legal parlance — and that such justifications face a high barrier. The panel reasoned that “an emergency in international relations” would “refer generally to 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 claim of WTO authority to question member assertions is deeply unsettling for many governments. Russia argued that its claim was above review. Even WTO Director-General Roberto Azevedo is nervous about the precedent, arguing that “Issues that are sensitive enough to bring up national security concerns should be treated politically and not technically at the dispute settlement mechanism of the WTO.” He conceded, however, that members are bringing the cases — two more are currently before the body — “and we don’t have an option.”

The ruling is likely to infuriate U.S. President Donald Trump. He has used the national security justification to impose sanctions against a wide range of U.S. trade partners, asserting, for example, “If you don’t have steel, you don’t have a country.” The administration is reportedly considering the same logic to impose a 25 percent tariff on all auto imports into the country. In response, Turkey has gone to the WTO to challenge the assertion and other governments are likely to do so as well.

Last week’s ruling doesn’t validate Trump’s assertion. His claim of national security is too distant and attenuated from the security crisis that the WTO panel used to justify Russia’s response. In fact, the panel contrasted international crises with “protectionism under the guise of security.” The panel also devoted several pages to U.S. submissions to the original GATT negotiations, concluding that it was prepared to compromise on sovereignty, an analysis that would seem to anticipate U.S. objections.

U.S. trade partners, Japan among them, look at this decision with mixed emotions. They are happy that it undercuts the specious use of the national security exemption and reinforces long-held logic that the national security exemption should only be a very last resort, but its defiance of U.S. policy will compound the Trump administration’s hostility toward the WTO and may encourage Washington to intensify efforts to undermine the institution.

Japan, as chair of the Group of 20 this year, has an opportunity and a duty to put WTO reform at the top of the group’s agenda. Tokyo should build on the emerging consensus on the need for genuine action at the trade body to preserve the liberal rules-based order. The very real problems at the WTO must be fixed if that institution is to survive. Last week’s common sense ruling makes that task more urgent than ever.