TWN Info Service on WTO and Trade Issues (Nov18/04)
5 November 2018
Third World Network
       
US threatens to hold "WTO reforms" hostage over panel requests
Published in SUNS #8785 dated 31 October 2018

Geneva, 30 Oct (D. Ravi Kanth) - The United States threatened at the World Trade Organization on Monday that it would hold the proposed "WTO reforms" a hostage to the invocation of dispute settlement panel proceedings by seven members against Washington's steel and aluminum tariffs imposed under the US Section 232 security provisions.

Warning the seven complainants - China, the European Union, Canada, Mexico, Norway, Turkey and Russia - who made their first-time panel requests, the US issued bellicose threats: "if the WTO were to undertake to review an invocation of Article XXI [by the US], this would undermine the legitimacy of the WTO dispute settlement system and even the viability of the WTO as a whole."

"Infringing on a sovereign right to determine, for itself, what is in its own essential security interests would run exactly contrary to the WTO reforms that are necessary in order for this organization to maintain any relevancy," the US told the seven members.

At a Dispute Settlement Body (DSB) meeting on Monday, the US came down heavily on China, the European Union, Canada, Mexico, Norway, Turkey and Russia for requesting a panel to rule against the additional import duties of 25% on steel and 10% on aluminum imposed by the Trump administration under its Section 232 security provisions.

In separate responses to the first-time requests from the seven complainants, the US issued dire threats of serious consequences to the WTO if parties "under take to review an invocation of Article XXI" dealing with security exceptions.

Effectively, the US told the so-called "reformers" of the WTO such as the EU, Canada, Norway, and Mexico among others, who are the complainants against the Section 232 tariffs on steel and aluminum, not to proceed with their second-time requests at the DSB next month.

For all practical purposes, the US has held the WTO reforms a hostage to how members undertake to review "an invocation of Article XXI of the GATT [General Agreement on Tariffs and Trade] 1994" under which the US President Donald Trump "has determined that these [Section 232] measures are necessary to address the threatened impairment that imports of steel and aluminum articles pose to the US national security."

The US accused Norway of "undermining the trading system by asking the WTO to do what it was never intended to do."

"It is simply not the WTO's role, nor its competence, to review a sovereign nation's judgment of its essential security interests," the US argued.

Further, "issues of national security are political matters not susceptible to review or capable of resolution by WTO dispute settlement," the US maintained.

The US said that it has all along been its position for over 70 years that "issues of national security are not matters appropriate for adjudication in the WTO dispute settlement system."

Citing the European actions before the GATT Council in 1982, the US said the European Economic Community (EEC) and its member States had stated that Article XXI was a reflection of a Member's "inherent rights".

The EEC, according to the US, had maintained that "the exercise of these rights constituted a general exception, and required neither notification, justification, nor approval, a procedure confirmed by thirty-five years of implementation of the General Agreement... [since] every contracting party was - in the last resort - the judge of its exercise of these rights."

The US told Norway that it had supported the EEC and its member States, Canada, and Australia in their invocation of Article XXI by stating that "in taking the measures .... [they] did not act in contravention of the General Agreement."

The sharp exchanges between the US on the one side and the seven members on the other offered a glimpse of how the US is going to proceed in the coming days and months on a range of issues at the WTO.

It is clear as daylight that the US intends to decimate the dispute settlement system which operates under the Appellate Body while forcing plurilateral negotiations in areas of its interest as well as imposing burdensome and intrusive requirements for notifications, said several trade envoys, who asked not to be quoted.

The proposed reforms by the EU and Canada along with 11 countries last week at their Ottawa meet are meaningless because the US will not enable any progress on the DSB reform, said a South American trade envoy, who asked not to be quoted.

The seven members said that the US steel and aluminum duties violated several core provisions such as the most-favoured-nation treatment, the integrity of scheduled commitments, and various provisions in the Safeguards Agreement.

They called for a single panel, saying that their "requests reflect a shared conviction among the co-complainants that the US steel and aluminum tariffs are inconsistent with the United States' WTO obligations."

Though the US "does not characterize the steel and aluminum tariffs as "safeguard measures" as a matter of US municipal law," the question is not one of municipal law, Norway said.

The complainants asserted that the US steel and aluminum tariffs constitute "safeguard measures" under the Agreement on Safeguards.

In a sharp response, the US raised two sets of criticisms against the complainants.

The US singled out China by saying that it is not the only member which expressed concern that China's non-market economic system is at the source of the international steel and aluminum glut.

A joint proposal from the EU, Japan, Mexico, and the US had warned that "overcapacity is a major cause of distortions to international trade."

"China's non-market economic system and the policies it generates in the steel and aluminum sectors are recognized as a global problem," the US maintained.

"China's choice to pursue dispute settlement against members defending their legitimate interests would make WTO rules an instrument for China to protect its non-market behaviour," rather than promoting "fair, market- based competition that improves the welfare of all our citizens," the US maintained.

The US levelled the second set of criticisms against the EU, Norway, and four other members, saying that "issues of national security are political matters not susceptible to review or capable of resolution by WTO dispute settlement."

More ominously, the US warned that "infringing on a sovereign's right to determine, for itself, what is in its own essential security interests would run exactly contrary to the WTO reforms that are necessary in order for this organization to maintain any relevancy."

The US, however, will not be able to prevent the establishment of a panel if the seven countries make a second request at the next DSB meeting next month.

But it remains to be seen how the EU, Canada, Mexico, and Norway - who are the signatories to the Ottawa communique for reforming the WTO last week - will proceed next month at the DSB. If they fail to bring their second requests for establishing the panel at next month's DSB meeting, then they will lose their credibility for pursuing reforms, trade envoys said.