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TWN
Info Service on WTO and Trade Issues (Jan23/04) Geneva, 30 Jan (D. Ravi Kanth) — After making the World Trade Organization’s Appellate Body dysfunctional, the United States has somewhat ironically appealed a panel ruling in favour of China, Switzerland, Norway, and Turkiye against the US Section 232 tariffs on steel and aluminum products to the defunct Appellate Body. Several countries, especially China and Turkiye, described the US move to appeal the panel ruling as an appeal “into the void.” At a WTO Dispute Settlement Body (DSB) meeting on 27 January, the continued US defense in sustaining its unilateral measures against WTO members prompted China to call the US as “a unilateral bully, a rule breaker, and a supply chain disruptor”. Significantly, the US appeal against the panel’s ruling before the Appellate Body came after it blocked for the 62nd time a proposal from 127 WTO members on 27 January to start the selection process for filling vacancies on the Appellate Body. A day before the DSB meeting, the US appealed the panel’s ruling before the Appellate Body. Despite Washington’s appeal, the US complained that a discussion on the panel’s ruling was included in the agenda of the DSB meeting. The US alleged that China and certain other WTO members sought to drag issues of national security into the WTO. In its statement, the US reiterated that it will not cede decision-making over its essential security to WTO panels, arguing that for over 70 years, the US has held the clear and unequivocal position that issues of national security cannot be reviewed in WTO dispute settlement. The US said the WTO has no authority to second-guess the ability of a WTO member to respond to a wide range of threats to its security, a view shared by many members who expressed similar views throughout previous decades at the GATT and WTO. Washington went on to say that “adjudicating questions of national security in the WTO is not only incompatible with the purpose of the WTO, a trade organization, but will not advance WTO members’ shared interests in the WTO as a forum for discussion and negotiation.” The US said that WTO members have an appropriate remedy where a member is impacted by another member’s essential security measures, namely, to seek a non-violation/nullification or impairment claim. It claimed that the panel’s reports were particularly troubling because they suggest a WTO member may not take action to protect its essential security interests until after irreparable damage is done – for example, after “armed struggles or outbreak of hostilities” – as if deterrence or preparedness were not critical to national security. Such rulings, the US maintained, “disregard the reality of sovereign nations, who must anticipate – not react to – issues of national security.” CHINA EXPOSES US DOUBLE STANDARDS China, which won the trade dispute against the US Section 232 tariffs along with Switzerland, Norway, and Turkiye, issued a strong statement at the meeting, stating the central points of the panel’s ruling. According to China, the panel found (1) the security exception under Article XXI (b) (of the GATT 1994) is not self-judging; (2) the US Section 232 measures violated two core provisions of the WTO, namely, the most- favored-nation treatment and the sanctity of the scheduled tariff binding commitments; and (3) the US measures were not taken in the time of emergency in international relations, hence, failed to meet the threshold of the security exception. China said it hoped that “the US would show due self-restraint not only to appeal every unfavorable panel report into the void, which the US itself has created through the constant blockage of the Appellate Body Members’ selection.” The US has so far launched 11 appeals after it paralyzed the Appellate Body in December 2019, accounting for 37% of all appeals raised since then, China pointed out. China expressed alarm over the manner in which the US rejected the panel ruling by drawing reference to a US press release issued on 9 December 2022 wherein the US Trade Representative declared that it has no intention to implement the relevant panel’s decisions, and threatened fundamental reforms to the dispute settlement mechanism. “The US seems to indicate that it will refuse to comply with the result of any proceedings, in which it has invoked a security exception,” China said, suggesting that Washington’s stance directly contradicts the principle of “pact sunt servanda.” In short, the US, according to China, “has declared itself to be above the law, which is in sharp contradiction with the principle of rule of law embedded in this rules-based organization, as well as the binding, enforceable nature of the dispute settlement system.” China, quoting a phrase from the motion picture Spider Man, reminded the US that it should “behave in a manner that could match its power with its responsibility.” China explained how the US has become a “unilateral bully” by providing an account of how Washington went on to impose additional duties on imports of certain steel and aluminum products “in the disguise of national security.” According to China, “from the outset, the United States deployed these additional duties as an instrument of economic coercion, using them to force other Members to enter into quota arrangements, or make concessions to the US in trade negotiations.” Though the US measures have been challenged by several members and found WTO-inconsistent by all panels, China said “the findings of panels in this dispute demonstrated once again that security exception is not the “safe harbor” for unilateralism or protectionism.” Further, “given the blatant nature of the US additional duties, there has never been any dispute that these measures are inconsistent with the United States’ most basic and tariff binding obligations under Articles I and II of the GATT 1994.” China lamented that while the panel “incorrectly held that these measures were not safeguard measures because the US adopted them under security provisions of its domestic law, we commend the panel’s overall conclusion that the US measures violated the WTO rules and were not justified under the security exception.” According to China, the US position contradicts the principle of pacta sunt servanda, as Washington “not only publicly announced that it had no intention to remove the WTO-inconsistent measures, but also continued to block the Appellate Body.” Further, the US action is a “blatant disregard of international rule of law, which directly contradicts the principle of pact sunt servanda,” China said. In its second intervention after the US sought to justify its interpretation of Article XXI concerning the invoking of the security exception, China said that “seven panels have now examined the contention that the security exceptions are completely “self-judging” and have all rejected that contention.” Turkiye, which also won the same dispute against the US, expressed sharp disappointment over the US decision to appeal the panel report “into the void”, which inflicts great harm upon the multilateral trading system. Under other business, Norway and Switzerland separately expressed regret over the US decision to appeal the panel’s ruling “into the void.” In separate interventions on the panel’s ruling against the US, the EU urged the parties to find a negotiated solution. The EU also said that contrary to what was suggested, the panels did not pronounce on US security interests but simply stated that the security sections are not entirely self-judging and that there was no war or emergency in international relation between the parties. The EU also said it recognizes the special nature of the security interest covered by the security exception and the need for a margin of discretion for the member invoking these exceptions, however, considering the circumstances in the present dispute, the finding that the measures were not justified by the security exception should not come as a surprise. Canada argued that no member benefits from a situation where disputes remain unresolved and that a member acting in good faith should find no comfort in an unfair – and short-term – advantage that has arisen because of the absence of a functioning Appellate Body. Russia welcomed the rulings and said that the destructive attempts by the US to escape its international obligations should not succeed. US ACTIONS AGAINST HONG KONG, CHINA In a separate trade dispute concerning the use of the security exception by the US concerning its origin marking requirement on goods, Hong Kong, China dismissed the US interpretation as “erroneous”. Hong Kong, China said “most specifically, the United States has violated the most favored nation treatment requirement, which is a bedrock principle of the WTO and the cornerstone of the multilateral trading system.” According to Hong Kong, China,”the panel also concluded that the United States has not demonstrated that such a measure is justified on the grounds of national security exceptions under Article XXI(b) of the GATT 1994, with the panel clearly pointing out that while the multilateral trading system allows for sufficient flexibility for members to adopt measures they considered necessary for the protection of their security interests, it also ensures that this flexibility is exercised within the limits intended by its drafters.” The US, however, defended its actions with respect to Hong Kong, China, saying they were based “on well- grounded determinations implicating US essential security interests relating to democracy and human rights.” It explained “to the panel that it considers democratic principles and human rights to be critical to its essential security interests.” The US maintained that “not all WTO members value democratic principles or human rights, or perceive them as relevant to their essential security interests, but the United States does, as is reflected in the US National Security Strategy which was the basis for the adoption of the challenged measure.” The US claimed that “it fundamentally disagrees with the panel’s approach, which suggests a state ought to defer consideration of its essential security interests until after a breakdown in relations.” At the meeting, the EU said that the panel report in favour of Hong Kong, China, “is yet another confirmation from the WTO panel that the invocation of the security exception is not entirely subjective; this panel, however, appears to have given a different interpretation to the concept of emergency in international relations to the other panels, requiring a breakdown or near breakdown in relations whereas the previous panels cited armed conflict, or heightened tension, or general instability in the member state.” Russia apparently criticized several aspects of the panel’s findings, arguing that the panel’s interpretation of national security will have a strong negative impact on security and predictability of trade. Certain conclusions by the panel are either not necessary for the resolution of the matter or come from mistaken premises, it said. China said it objected to the US allegations and unilateral judgment and interference in other members’ internal affairs, adding that the WTO dispute settlement mechanism is a forum to resolve trade disputes rather than a place to discuss political issues. Meanwhile, the DSB agreed to establish a panel, at the second request of the European Union, to rule on the alleged Chinese measures that adversely affected the protection and enforcement of intellectual property rights. The DSB also agreed with the second-time request of the European Union to establish a panel to rule on alleged Chinese restrictions on the import of goods and services from Lithuania. +
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