TWN Info Service on WTO and Trade Issues (Jul18/19)
26 July 2018
Third World Network
 
Infructuous dispute consultations on US steel, aluminum duties
Published in SUNS #8728 dated 24 July 2018

Geneva, 23 Jul (D. Ravi Kanth) - The United States has failed to address various systemic issues raised by six countries against the unilateral measures imposed by President Donald Trump on imports of steel and aluminum during dispute settlement consultations at the World Trade Organization last week, according to several participants.

China, the European Union, Norway, India, Canada, and Mexico had sought consultations with the US on the duties, and they were held on 19 and 20 July.

During the meetings, according to several participants who asked not to be identified, the US reportedly adopted a defiant position, failed to give satisfactory explanations, and insisted that its measures were "sovereign determinations " falling under Article XXI security exceptions of the GATT 1994.

The six countries had invoked dispute settlement proceedings against the US Section 232 measures on steel and aluminum that initially came into force on 23 March.

The US arbitrarily decided to impose an additional duty of 25% on steel and 10% on aluminum against all countries except Canada, Mexico, Australia, Argentina, South Korea, Brazil and the European Union, which took effect from 23 March 2018.

Subsequently, last month the US had removed the European Union, Canada, and Mexico from the list of exempted countries after which the three countries dragged the US into trade disputes on the additional duties on steel and aluminum.

The six countries largely focused their complaints against the US on four areas. The complainants said the US measures violated many provisions in the WTO's Safeguards Agreement, Article II commitments concerning the integrity of scheduled tariffs, Article I of most-favored-nation treatment since the US measures exempted several countries, and Article X because the US failed to administer its laws and regulations in a uniform, impartial, and reasonable manner.

China, which raised the dispute first among the six countries, said the measures at issue, operating separately or together, appear to be inconsistent with the United States' obligations under:

i. Articles XIX:1(a), XIX:2 of the GATT 1994 and Articles 2.1, 2.2, 4.1, 4. 2, 5.1, 7, 11.1(a), 12.1, 12.2 and 12.3 of the Agreement on Safeguards, because with regard to the measures at issue which constitute safeguard measures in substance, the United States has failed to make proper determination and to provide reasoned and adequate explanation of "unforeseen developments", imports "in such increased quantities" and "under such conditions", and "cause or threaten to cause serious injury to domestic producers", and the United States has also failed to follow proper procedural requirements including, for example , notification and consultation procedures, and has failed to apply the measures in a proper manner, for example, application irrespective of source of supply and only for necessary period of time.

ii. Article II:1(a) and (b) of the GATT 1994, because the United States has imposed import duties on certain steel and aluminum products in excess of the duties set forth and provided in the United States' Schedule of Concessions and Commitments annexed to the GATT 1994, and has failed to exempt products of China subject to the measures at issue from ordinary customs duties in excess of those set forth and provided in the United States' Schedule of concessions and Commitments annexed to the GATT 1994 and from all other duties or charges in excess of those imposed on the date of the GATT 1994 or those directly and mandatorily required to be imposed thereafter by legislation in force in the United States on that date.

iii. Article I:1 of the GATT 1994, because the selective application by the United States of the additional import duties on certain steel and aluminum products originating in different Members, including providing exemption or applying alternative means, has failed to extend immediately and unconditionally to China any "advantage, favor, privilege or immunity" granted by the United States "[w]ith respect to customs duties and charges of any kind imposed on or in connection with" the importation of products originating in the territory of other Members, as well as with respect to "the method of levying such duties and charges" and the "rules and formalities in connection with importation".

iv. Article X:3(a) of the GATT 1994, because the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.

In response to the dispute settlement requests from six countries - China, India, the EU, Canada, Mexico, and Norway - under Article 4 of the Dispute Settlement Understanding, the US held meetings with China, the EU, and Norway on 19 July, and Canada, India, and Mexico on 20 July at the World Trade Organization.

During the meetings on Thursday and Friday, the US adopted a defiant position, saying repeatedly that it doesn't have to provide any reasons for Section 2 32 measures on steel and aluminum since they were "sovereign determinations" falling under Article XXI security exceptions of the GATT 1994, said several participants, who asked not to be identified.

The US repeatedly maintained that every member retains the authority to determine for itself those matters that it considers necessary to the protection of essential security interests under Article XXI of the GATT 1994, the participants said.

The US said it was wrong on the part of the complainants to raise the dispute under safeguard provisions because the measures implemented by the US administration fell under security provisions.

The six countries, however, sharply disagreed with the US and raised several systemic and other issues, said participants who asked not to be identified.

To start with, the complainants maintained that the additional duties on steel and aluminum constituted a "disguised safeguard," as the US Department of Defence had maintained that there was no threat from the imports of steel and aluminium to the country's national security.

In response, the US said it is not in a position to share the reasons for the determination made under the US Section 232 provisions.

The complainants asked the US whether Washington complied with the requisite "transparency" provisions before determining the additional duties on steel and aluminum.

They sought to know whether the US held prior consultations with the domestic steel and aluminum companies before imposing the duties. The US team said it is not in a position to provide any reasons, said participants who asked not to be quoted.

The complainants asked the US to explain the reasons as to how it determined that the exempted countries, such as Australia, Brazil, and Argentina, from the additional duties did not pose any national security threat for the American steel and aluminium industries.

The US team of lawyers said they are not fully apprised of the consultation s within the administration.

The six countries asked the US whether the exemptions violated the most-favored-nation treatment principle since Australia, Argentina, and Brazil were left off the hook.

The US stonewalled the issue by saying it is a sovereign determination, the participants said.

The complainants said while the US Department of Commerce had suggested duties of 21% on steel and 7% on aluminium, the Presidential proclamation had increased the duties to 25% on steel and 10% on aluminum. They asked the US to explain the discrepancies between the decision made by the Department of Commerce and President Donald Trump on the additional duties.

In response, the US team said it has no knowledge of how the decision on final duties was arrived at, according to the participants in the consultations.

When asked whether the additional duties violated Article II of the GATT 1994, the US team said it was a sovereign determination under Article XXI of the GATT 1994.

Given the US' failure to provide credible reasons, the six countries are considering requesting for a dispute settlement panel to rule against the US measures.

Russia and Switzerland, who had also raised the dispute against the US measures, will hold their consultations later.

The US told Switzerland on 19 July (Thursday) that "the tariffs imposed pursuant to Section 232 are issues of national security not susceptible to review or capable of resolution by WTO dispute settlement, and the consultation provision in the Agreement on Safeguards is not applicable."

In short, the US chose to adopt stonewalling tactics by refusing to provide credible replies during the consultations, said participants who asked not to be quoted.

[While the WTO and its Appellate Body has not so far dealt with a dispute where GATT Art. XXI (national security exception) has been invoked, the Hague-based International Court of Justice has dealt with the scope of such "self-judging clauses", and how they are to be interpreted. The ICJ has held that such clauses in a treaty "do not grant a pure discretionary power to the state invoking these." In Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v. France), interpreting Article 2(c) of the 1986 Convention on Mutual Assistance in Criminal Matters (which provides that a State may refuse a request for mutual assistance "if it considers that execution of the request is likely to prejudice [the] sovereignty, ..... security, ... ordre public or other ... essential interests" of the State), the ICJ stated: "... while it is correct ... that the terms of Article 2 provide a State to which a request for assistance has been made with a very considerable discretion, this exercise of discretion is still subject to the obligation of good faith codified in Article 26 of the 1969 Vienna Convention on the Law of Treaties ..." (http://worldtradelaw.typepad.com/ielpblog/2018/03/litigating-gatt-article- xxi-the-us-view-of-the-scope-of-the-exception.html#comments).

[The AB has consistently ruled, and the rulings have been adopted by the WTO's Dispute Settlement Body, in a long line of disputes, that the "good faith" requirements of the VCLT are applicable at the WTO at all stages - from negotiations, to accords, and to their implementation. However, by the time this dispute is ruled upon by a panel, the legal issues raised will be automatically eligible for interpretation by the Appellate Body. Unless between now and that situation, the vacancies on the AB get filled and it is able to function and once notice of appeal is given, the ruling cannot be adopted. There may thus well be a deadlock. SUNS.]