TWN Info Service on WTO and Trade Issues (Jul17/04)
11 July 2017
Third World Network

Goods Council debates national security exceptions to WTO rules
Published in SUNS #8496 dated 6 July 2017

Geneva, 5 Jul (Kanaga Raja) -- A meeting of the WTO Goods Council on 30 June debated the issue of national security exceptions to the WTO rules, with a number of members voicing concerns over the "systemic risks" posed by the investigations initiated by the United States earlier this year into steel and aluminium imports under Section 232 of the Trade Expansion Act of 1962.

Apart from the discussions that took place over the Section 232 investigations on the implications to US national security of imports of steel and aluminium, the Goods Council also heard Qatar expressing deep concern over trade restrictions imposed on it earlier this month by several Gulf States, which claimed these measures were in accordance with Article XXI of the GATT  (relating to security exceptions).

According to trade officials, the Russian Federation initiated the discussion on the US Section 232 investigations on steel and aluminium imports, arguing that for the sake of the stability of world markets, the US should refrain from applying trade-restrictive measures.

[According to a fact sheet issued by the US Department of Commerce, under Section 232 of the Trade Expansion Act of 1962, the Secretary of Commerce is authorised to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the United States.

[The fact sheet cited the Section 232 investigations as including the consideration of the following: domestic production needed for projected national defence requirements; domestic industry's capacity to meet those requirements; related human and material resources; the importation of goods in terms of their quantities and use; the close relation of national economic welfare to US national security; loss of skills or investment, substantial unemployment and decrease in government revenue; and the impact of foreign competition on specific domestic industries and the impact of displacement of any domestic products by excessive imports.]

At the Goods Council meeting, the Russian Federation highlighted its strong interest in this matter, pointing out that it is the fifth largest supplier of iron and steel to the US market, and the third largest in respect of aluminium.

The Russian Federation queried why the US found it necessary to apply more trade measures on top of the trade defence measures already allowed under WTO rules.

According to the Russian Federation, concerted action was instead needed within the G20 against excess steel capacity.

According to trade officials, the European Union underlined that the scope of security exceptions in the General Agreement on Tariffs and Trade (GATT) did not apply to the US situation.

Article XXI of the GATT describes specific circumstances for when WTO members can use security interests to justify deviations from WTO commitments.

Article XXI on Security Exceptions states:

"Nothing in this Agreement shall be construed

(a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or

(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i) relating to fissionable materials or the materials from which they are derived;

(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii) taken in time of war or other emergency in international relations; or

(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security."

At the Goods Council meeting, the European Union pointed out that no exception in the GATT is capable of justifying an import restriction taken outside of the framework of trade remedies for the purpose of protecting a domestic industry against foreign competition.

The European Union may end up bearing the brunt of import restrictions since Chinese exports are already largely subject to US trade defence measures, while Canada and Mexico will likely be excluded from the measures, it said.

It further emphasised that a proliferation of actions from the Section 232 investigations and outcomes would pose "unacceptable" systemic risks.

The European Union made clear that it will "be firm in taking all necessary actions" if import restrictions are applied to EU exports.

According to trade officials, Brazil, Australia and Chinese Taipei echoed the concerns voiced by the European Union over the "systemic risks" posed by the US Section 232 investigations.

Brazil expressed concern about the implications on the global trading system if members do not follow time- tested practices.

It said that the possibility of restrictive measures "could lead to results that would not be in the interest of any."

Australia pointed out that "international trade rules should be upheld" in addressing this global challenge.

It warned that "any unjustifiable measures could further exacerbate global market distortions and result in retaliation and tit-for-tat measures."

Chinese Taipei said that it too had a "systemic concern" and was closely monitoring the issue. Japan said that it had an interest in the issue and was "closely following the US government's actions to address it."

According to trade officials, China said that the Section 232 investigations were inconsistent with GATT Article XXI. It added that imports of steel and aluminium were not a threat to national security.

The US should avoid creating trade barriers in the name of national security, China said.

China also voiced concern with what it viewed to be a rushed investigation, saying that it was concerned about the due process and accuracy of the process.

According to trade officials, the United States provided an explanation of what factors were under consideration in the investigation, the public hearing process, as well as its rationale.

"The Secretary of Commerce has initiated these investigations in light of the critical role steel and aluminium serve in the US national security industrial base and the continued increase in steel and aluminium imports," the US maintained.

The US said that if the Commerce Secretary finds that steel or aluminium is being imported into the US "in such quantities or in such circumstances as to threaten to impair national security," the Commerce Secretary shall recommend actions to be taken to "adjust the imports of steel and aluminium."

Separately, under other agenda items that were taken up at the meeting, the United States reiterated its concern over the Chinese government's intervention and support to "key industrial sectors, such as steel and aluminium."

The United States further expressed concern about the timeliness and completeness of China's notifications of its subsidies.

According to trade officials, the European Union, Japan and Canada likewise expressed their concerns over the issue of global overcapacity in steel and aluminium.

In turn, China complained about the "abusive" use of trade defence measures by the United States.

China said that it had already phased out some of its production capacities and eliminated 65 million tons of steel capacity.

It was wondering what fellow WTO members have done to contribute to addressing this global problem.

The G20 forum on addressing global overcapacity was the appropriate forum for this discussion, stated China.

Meanwhile, Qatar expressed its "deep concern" over (trade-restrictive) actions taken earlier this month by Saudi Arabia, the United Arab Emirates (UAE) and Bahrain.

According to trade officials, Qatar said it regrets that measures imposed at that time continue to be applied and that these were in violation of cornerstone WTO regulations and commitments.

(Qatar had earlier raised this matter at a meeting of the Council for Trade in Services held on 13-16 June 2017.)

Bahrain, speaking also for Saudi Arabia and the UAE, maintained that these measures were in accordance with Article XXI of the GATT.

Bahrain said that this provision allows, in cases of an emergency in international relations, for a WTO member to limit actions that would affect national security interests.

The UAE said the situation in the Gulf is very serious and it involves at the core the issue of national security.

The UAE maintained that the matter does not fall under the competence of the Goods Council nor of the WTO.

Egypt said that the trade restrictions fall under the "exceptional circumstances", and thus were consistent with WTO rules.

According to trade officials, the US urged all the parties to remain open to negotiations. It said that this was the best way to resolve this matter.

The US further said it would not get ahead of current diplomatic discussions, particularly not in this Council.

The US added that it will continue to stay in close contact with all parties and will continue to support the mediation efforts of the Emir of Kuwait.

The US said it believed its allies and partners are stronger when they are working together towards countering security threats.

The US pointed out that each country involved had something to contribute to that effort.

Turkey expressed its hope that this matter will come to a quick resolution. It underlined the "hundreds of years of fraternal and strong ties" among the parties involved.

OTHER MATTERS

According to trade officials, China reiterated its call for WTO members to "honour" their commitments as provided for under China's Protocol of Accession of 2001, as it relates to the use of third party prices or costs in calculating anti-dumping margins as of 11 December 2016.

China said this was a legal issue that should not be politicized and it is an international issue that should not be circumvented by domestic laws.

Meanwhile, after inviting delegations to take the floor and express their views on the ongoing discussions on e-commerce, the Chair of the Goods Council, Ambassador Choi Kyonglim of Korea, summarised: "There continues to be a very strong interest in e-commerce and very strong exchange of experiences, practices and views... However, there remains differences in views. I did not see a convergence in a particular direction."

The Chair encouraged members to continue to reflect on the issue, and said that his door was open for further consultations. +