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André Sapir, a senior fellow at the economics think tank Bruegel, concurs. “The panel has made a very important and welcome contribution by rejecting Russia’s argument that the [it] has no jurisdiction to review Russia’s invocation of Art XXI”. But the panellists were also “wise” to decide they had no jurisdiction to review Russia’s specific measures.
WTO system at stake
The case could send shockwaves through the WTO system over time.
Washington’s steel tariffs introduced last year are based on Section 232 of the 1962 Trade Expansion Act, which empowers the US president to impose unilateral trade restrictions for national security reasons. The measures affected close US allies, including NATO and EU members as well as Japan. The US exempted some countries from the tariffs, imposing only duty-free quotas in return for trade concessions. US friends such as Korea, Argentina and Brazil played along. The others refused and saw tariffs slapped on their metals exports.
The US administration is currently considering applying tariffs on imports of autos on similar national security grounds.
The EU, Canada, Turkey, Mexico and others are suing the US in the WTO over the steel duties, arguing that the US is using the national security argument as a disguised protectionist measure and trying to exempt itself from WTO rules altogether.
To several analysts, the ruling is bad news for Washington. US president Donald Trump has on occasion expressed the desire to leave the WTO. The US Trade Representative, Robert Lighthizer, a long-standing WTO critic, sees the Geneva’ trade dispute settlement mechanism as impinging too much on national sovereignty.
The US is currently blocking the appointment of members of the WTO’s Appellate Body whose terms have expired. By end 2019, the appellate function in Geneva could simply wane. This would weaken a system of impartial and peaceful settlement of trade disputes valued by a large group of countries, who fear crude power politics could enter the game in international trade relations and signal a return to a less benign international order. In short: Washington has thrown the WTO into an existential crisis.
The panellists clearly had the US cases in mind. The 137-page panel report delves into the history of the security exception when it was under negotiation in the 1940s and led to Article XXI of the GATT. The report shows that the US administration at the time was split over the clauses’ merits. The defence community in the US wanted the security exception to be absolute and the GATT dispute settlement mechanism not to be allowed to adjudicate any cases related to security. The US diplomatic community for its part argued that such a carve-out would mean the whole multilateral system would not be able to function. The latter won the argument at the time....
It’s not clear yet how the current disputes on the US steel measures will pan out. If the panellists choose to refer to the Russia-Ukraine case – nothing requires them to do so - “the panels will likely require the US to show, objectively, the existence of an “emergency in international relations”, explains Robert McDougall, the director of Cadence Global, an international trade consultancy.
“If this panel report is followed, then the US will have a hard time to show instability - war is out of the question. If they manage to do that then it will be an easy ride for the US”, reckons Petros Mavroidis, a law professor at Columbia University.
10 UKRAINE Country Report May 2019 www.intellinews.com