Testing the limits of WTO security exceptions
Published 08 August 2023
Invocation of security exceptions at the WTO in recent years ended almost three decades of silence on the interpretation of the article in the forum's dispute settlement system. WTO panels' objective approach in ruling on these cases has prevented the exceptions from devolving into an unmonitored justification that could gravely undermine the benefits of progressive trade liberalisation.
Growing use of economic sanctions by numerous countries today has increased the significance of WTO security exceptions, which allow members to retain otherwise WTO-inconsistent measures — such as discriminatory tariffs or import quotas or bans — on grounds of national security.
In four cases since 2019, WTO panels have ruled on WTO members’ invocation of security exceptions. These cases ended almost 25 years of silence on the meaning of the security exceptions in the WTO dispute settlement system. Even before the WTO, the security exception was hardly mentioned in the WTO’s predecessor, the General Agreement on Tariffs and Trade 1947.
The approach of these panels has been to grant some deference to WTO members in interpreting and applying security exceptions, while maintaining jurisdiction and requiring an objective analysis of whether respondent members are justified in invoking them. Simply pointing to generalised concerns about human rights or excess capacity has been insufficient.
This approach may prevent the security exceptions from devolving into an unmonitored justification that is open to abuse. A more deferential and less exacting interpretation could seriously undermine the benefits of progressive trade liberalisation, including significant tariff reductions, achieved since 1947.
The panels’ rulings are nevertheless likely to increase US intransigence towards the WTO dispute settlement system and the organisation itself. The WTO Appellate Body, which comprises seven individual members, is already non-functional because the United States continues to block the appointment of new members — with the term of the most recent member having expired in 2020.
In Russia–Traffic in Transit, adopted without appeal in 2019, the WTO panel accepted Russia’s invocation of the security exception in Article XXI(b)(iii) of the General Agreement on Tariffs and Trade 1994 (GATT).
In Saudi Arabia–IPRs, Saudi Arabia was partially successful in invoking the corresponding security exception in Article 73(b)(iii) of the Agreement on Trade-Related Aspects of Intellectual Property Rights. As Qatar and Saudi Arabia agreed to terminate their dispute without adoption of the report, it lacks formal legal status but may nevertheless be informative.
In late 2022, WTO panels rejected the United States’ invocation of GATT Article XXI(b)(iii) in US–Steel and Aluminium Products — in disputes brought by China, Norway, Switzerland, and Turkey — and US–Origin Marking. The United States appealed these reports ‘into the void’ in early 2023.
In the absence of any indication from the Appellate Body on the interpretation or application of security exceptions, and with only one adopted WTO panel report, what do we know? WTO panels refuse to accept the argument — put forward by Russia and the United States — that WTO security exceptions are ‘self-judging’ or ‘non-justiciable’.
GATT Article XXI(b) provides that ‘[n]othing in this Agreement shall be construed to prevent any Member from taking any action which it considers necessary for the protection of its essential security interests’.
According to the panel reports, the words ‘which it considers necessary’ are qualified in two main respects. First, they are followed by subparagraphs limiting the kind of actions covered. For example, under Article XXI(b)(iii), action ‘taken in time of war or other emergency in international relations’. A panel will determine objectively whether the challenged actions fall within the relevant description.
Second, panels will not give absolute deference to a member’s assertion that their actions are necessary for the protection of their essential security interests. A WTO panel will assess the plausibility of the member’s articulation of its essential security interests as well as the connection of the challenged measures to those interests. The cases also indicate the kinds of circumstances that may amount to an ‘emergency in international relations’ and the kinds of measures that may be necessary to protect ‘essential security interests’.
In Russia–Traffic in Transit, the panel found that ‘the situation between Ukraine and Russia since 2014’ constituted an emergency in international relations, defined as ‘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 panel found plausible Russia’s contention that it implemented measures restricting transit of goods from Ukraine across Russia to protect its ‘essential security interests’.
In Saudi Arabia–IPRs, the panel found that an emergency in international relations began between Saudi Arabia and Qatar when Saudi Arabia severed all ‘diplomatic, consular and economic relations’ with Qatar. The panel accepted Saudi Arabia’s argument that it implemented ‘anti-sympathy’ measures — preventing a Qatari corporate group from obtaining counsel to enforce its intellectual property rights in Saudi Arabia — to protect its essential security interests.
In US–Origin Marking, the panel found that a US requirement that goods imported from Hong Kong be marked ‘China’ rather than ‘Hong Kong’ fell outside the exception in GATT Article XXI(b)(iii) because concerns about the ‘human rights situation in Hong Kong’ had not ‘escalated to a threshold of requisite gravity to constitute an emergency in international relations’.
Similarly, in US–Steel and Aluminium Products, the panel found that additional import duties imposed by the United States on derivative steel and aluminium products were not justified under GATT Article XXI(b)(iii) because ‘concerns regarding global excess capacity in steel and aluminium’ did not ‘ris[e] to the gravity or severity of tensions on the international plane’ necessary to constitute an emergency in international relations.
These rulings demonstrate that the security exceptions provide some scope for WTO members to define their own essential security interests, as well as the measures necessary to protect those interests. Yet panels have been unafraid to undertake an ‘objective assessment’ of the existence of an emergency in international relations and the validity of claimed connections between challenged measures and security interests in the context of such an emergency. Panels have sought an appropriate balance to prevent abuse of exceptions, which could otherwise allow members to circumvent their WTO obligations.
The panels’ refusal to accept the US position that ‘[i]ssues of national security are political matters’ beyond the reach of WTO disputes is likely to increase US resistance to negotiations on Appellate Body appointments.
The United States has suggested it will seek an authoritative interpretation of GATT security exceptions. Such interpretations may be adopted with agreement by three-quarters of the WTO’s 164 members. The likelihood of reaching such an agreement is low.
Absent a WTO Appellate Body, pressure may increase on the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). The 53 WTO members party to the MPIA include Australia, Brazil, Canada, China the European Union, Japan, New Zealand and Singapore. Two cases have been finalised and eight are continuing in that forum.
Notwithstanding US non-participation, the MPIA could still contribute to the interpretation and application of the WTO security exceptions. MPIA rulings are binding on relevant parties and could also be persuasive in the WTO dispute settlement system.
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