As we have talked about on this blog, the Safeguards Agreement provides for compensation/suspension where safeguards measures are used. Here is Article 8.1:
A Member proposing to apply a safeguard measure or seeking an extension of a safeguard measure shall endeavour to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure, in accordance with the provisions of paragraph 3 of Article 12. To achieve this objective, the Members concerned may agree on any adequate means of trade compensation for the adverse effects of the measure on their trade.
Under Article 8.2, "[i]f no agreement is reached within 30 days in the consultations under paragraph 3 of Article 12, then the affected exporting Members shall be free, not later than 90 days after the measure is applied, to suspend, upon the expiration of 30 days from the day on which written notice of such suspension is received by the Council for Trade in Goods, the application of substantially equivalent concessions or other obligations under GATT 1994, to the trade of the Member applying the safeguard measure, the suspension of which the Council for Trade in Goods does not disapprove."
So Members can impose safeguards measures, but when doing so, they must offer compensation or accept suspension. In this way, the level of concessions can remain in balance.
Maybe this approach could also work for national security measures. The interpretation of GATT Article XXI is difficult and controversial. Whatever level of review a WTO panel or the Appellate Body decides on is going to make someone involved in the case very unhappy. And it seems likely that if a defense under Article XXI is not accepted by the panel/Appellate Body, the responding party will not comply with the ruling. Perhaps it's best, then, to recognize that the WTO dispute settlement system cannot do the impossible. Maybe these disputes simply cannot be resolved through litigation.
Instead, what if everyone agreed on a rebalancing system such as the one in Safeguards Agreement Article 8. Governments can impose national security tariffs/quotas/other measures, but after doing so, they have to try to agree on compensation. So, for example, the United States could impose tariffs on steel and aluminum, but would then have to look for other products on which to lower tariffs as compensation. If no compensation can be agreed, then we move on to rebalancing through the suspension of concessions.
Obviously, this would take an amendment to the rules, and would be politically challenging, so I have no great hope it will happen. But I worry that the current rules are not sufficient to deal with the situation, and perhaps we need to explore alternatives. It may turn out that in practice, national security measures are often met with retaliation, and therefore formalizing this process would simply recognize an existing reality.
(And yes, I do recognize that some people think that rebalancing is already possible in the case of the U.S. Section 232 tariffs, but for the reasons discussed in the comments here and here I disagree. Anyway, even if they are right, that argument would not apply to all national security measures.)
Let me also mention Article 8.3, which says:
The right of suspension referred to in paragraph 2 shall not be exercised for the first three years that a safeguard measure is in effect, provided that the safeguard measure has been taken as a result of an absolute increase in imports and that such a measure conforms to the provisions of this Agreement.
I haven't worked out all the details of what I had in mind for national security rebalancing, but I was not thinking of simply carrying over Article 8.3 as is. Maybe there could be some variation of this idea, though. For example, the right of suspension would not be exercised for one year if the government invoking national security notified the WTO in a timely manner and provided a detailed justification for the measure.