TWN Info Service on WTO and Trade Issues (Jul18/03)
2 July 2018
Third World Network

US panicky over escalating retaliations against its S.232 tariffs?
Published in SUNS #8710 dated 28 June 2018

Geneva, 27 Jun (D. Ravi Kanth) - The United States on Tuesday seemed to be in a state of panic over the escalating retaliatory trade measures launched against Washington's additional duties of 25% on steel and 10% on aluminium under its national security provisions.

The US Trade Representative Ambassador Robert Lighthizer complained that the "new tariffs" by "certain World Trade Organization (WTO) Members, including the European Union" undermined the global trading system.

In a detailed statement released on Tuesday (26 June), the USTR lashed out at the EU and China for imposing retaliatory duties on American products.

On Tuesday, President Trump defended his decision to impose additional duties on steel and aluminium after his national brand Harley-Davidson signalled its move to shift some production facilities to the EU following the retaliator y duties imposed by Brussels on Harley-Davidson motorcycles and other items.

"We are going to intensify our fight against the US actions and if we don't stand firm then the US will simply walk over other countries," a trade envoy of a dominant trading nation told SUNS on Tuesday.

The USTR said Washington is justified to "take actions on trade in steel an d aluminum to protect our national security interests" under its Section 232 provisions, which are "wholly legitimate and fully justified, both as a matter of US law and WTO rules."

"By contrast," according to the USTR, "the European Union has concocted a groundless legal theory to justify immediate tariffs on US exports."

"Other WTO members, including China, have adopted a similar approach," Ambassador Lighthizer said.

"These retaliatory tariffs underscore the complete hypocrisy that govern so much of the global trading system," the USTR maintained.

"For months, the EU, China, and others have criticized the trade policy of the United States, while claiming to champion the WTO," Ambassador Lighthizer said, arguing that "their recent tariffs prove that they simply ignore WTO rules whenever doing so is convenient."

The USTR went on to assert that "Article XXI [security exceptions] of the General Agreement on Tariffs and Trade gives broad authority to WTO Members to take action necessary to protect essential security interests."

"For decades, the United States has consistently held the position that act ions taken pursuant to Article XXI are not justiciable by any panel of the WTO," Ambassador Lighthizer said.

"In other words," he argued, "each sovereign country must have the power to decide, for itself, what actions are essential to its security."

"Any other reading of the Article would represent an unacceptable constrain t on the freedom and independence of all WTO Members," Ambassador Lighthizer said, setting a new precedent that unilateral crowbar trade measures under national security provisions are justified and they cannot be challenged under the multilateral dispute settlement system.

"President Trump's actions regarding steel and aluminum plainly fall within the legitimate scope of Article XXI," said Ambassador Lighthizer.

"Faced with massive excess capacity that puts the very future of our steel and aluminum industries at risk, President Trump took certain measures that he deemed essential to the national security of the United States," he said, arguing that "these measures were implemented only after long and careful analysis, and after all trading partners had the chance to address our concerns."

"While the United States has acted responsibly here, the European Union and its followers have not," the USTR said.

"Rather than work with the United States, they have retaliated with tariffs designed to punish US companies and workers," Ambassador Lighthizer said.

Further, "in an effort to give cover to this blatant disregard for WTO rule s, they claim to be acting in reliance on a narrow exception that applies only in response to a safeguard measure," Ambassador Lighthizer said.

"That exception [under a safeguard action] does not apply here, however, because the United States has not taken a safeguard measure," he asserted.

Because "the President's actions here were taken under a US national security statute - not under the separate US statute for safeguard measures," there "is no credible basis for the EU's legal theory," Ambassador Lighthizer carped.

Also, "when the EU and others falsely assert the US steel and aluminum duties are safeguard measures, and impose retaliatory duties under this pretense, they do great damage to the multilateral trading system," the USTR claimed.

"Indeed, they show that they are willing to distort WTO rules to mean whatever they want, whenever they want," Ambassador Lighthizer griped.

Therefore, "faced with these unjustified tariffs, the United States will take all necessary actions under both US law and international rules to protect its interests," he said.

It is not clear what the USTR implies by "international rules" as there are only multilateral (trade) rules that are administered by the World Trade Organization dispute settlement system.

The USTR's statement, however, raises several questions as well as reveals the first signs of panic setting within the Trump administration following the retaliatory measures imposed by China, the EU, and other dominant trading nations in equal measure to Washington's unilateral actions.

To start with, why is the US concerned/worried with the retaliatory measure s imposed by China, the EU, Canada, Mexico, and other countries under the WTO safeguard provisions and other rules such as non-violation concerns when it feels secure and confident that their actions are legally groundless while the actions taken by Washington are under national security provisions?

Surely, the US can easily prove the "inconsistency" of the retaliatory actions by China, the EU, and other countries before a WTO panel and the Appellate Bod y.

Washington can also establish before a panel and the Appellate Body that it is justified in imposing the additional duties under Article XXI.

Further, it can ask the panel and the AB to clarify the "broad authority to WTO Members to take action necessary to protect essential security interests" under Article XXI.

The US maintains that "actions taken pursuant to Article XXI are not justiciable by any panel of the WTO."

Curiously, it has omitted the Appellate Body in its statement and only mentioned "panel" which, in turn, raises another set of questions.

[So far, the WTO has not had a dispute involving claims of national security exception under Art. XXI. Prior to the WTO, in the 1980s, the US had (under President Reagan) invoked this provision of GATT 1947 to deny the Sandinist a regime of Nicaragua a sugar quota. Under the old GATT, the dispute went before a panel, chaired by Norway's Martin Huslid, but the panel found itself unable to give a ruling, knowing that the US could block adoption.

[While the WTO, with its negative consensus for adoption of rulings, has not had to deal with such a dispute to hand down a ruling, the International Court of Justice at the Hague has given its view on the scope for self-judgement in such clauses. In a dispute between Djibouti and France under their treaty over Certain Questions of Mutual Assistance in Criminal Matters, interpreting Article 2 (c) of the 1986 Convention on Mutual Assistance in Criminal Matters (which provide s that the requested 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 gave its views on the scope of such "self-judging" provisions.

[In its ruling in that case, the ICJ said: "... that, while it is correct, as France claims, 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 (...)" (cited by Prof Regis Bismuth, Professor at Sciences, PO Law School, France), in a comment posted at the I ELP blog: (http://worldtradelaw.typepad.com/ielpblog/2018/04/the-us-china-national-securitysafeguardstariff-fight.html#comments) SUNS]

After all, the US along with other countries had created the Appellate Body to ensure that the rulings and recommendations of the Dispute Settlement Body are implemented on the basis of the negative consensus principle.

In short, why a rule-bound largest member of the global trading system feel s diffident about its actions?

Why is the US preempting other members from taking what they reckon as legally sound retaliatory measures under safeguard provisions? Why is the US dismissing those actions as "hypocritical" and legally "groundless"?

The short answer is the US is increasingly worried that it will not be able to prevent a panel or the AB ruling against its national security provisions a s wholly inconsistent with Article XXI.

The US also fears that a panel or the AB would justify the retaliatory measures imposed by China, the EU, and other members under the WTO Safeguards Agreement.

Moreover, the ongoing trade disputes against the additional duties by the US on steel and aluminum can take more than two years to be resolved.

By end-2019, the Appellate Body will disappear following the repeated unilateral action by the US to block the selection process for filling the three vacancies.

Therefore, the US could be worried that the additional duties imposed by China, the EU, and other major countries will remain in place for a long period without the issue being resolved by the dispute settlement system.

The US statement has vindicated the Thucydides' Melian Dialogue of more than 2,500 years ago after the Peloponnesian war: "Right is a question that only has meaning in relations between equals in power. In the real world, the strong will do what they will and the weak suffer what they must."

Clearly, the US is finding it difficult to face retaliatory actions by Chin a and the EU which are certainly its "equal" powers in global trade.

The US would not have to bother if the retaliatory measures are imposed by other countries but not China and the EU which are its equals in the global trading system. +