EU Can Retaliate Immediately Against Trump's Metal Tariffs
Steve Charnovitz
9 March 2018
In a recent post about the Trump Administration's proposed Section 232 actions against steel and aluminum, Simon Lester comments that "I'm not convinced by the argument that because the national security argument is a sham, the measures can be treated as a safeguard measure, and therefore the retaliation is permitted." See "How Should Countries Retaliate Against the Steel/Aluminum Tariffs?, 6 March 2018.
That skepticism had long reflected my view too. Two wrongs do not make a right. But I reconsidered the matter yesterday after watching a TV appearance by EU Ambassador David O'Sullivan. O'Sullivan argued that the EU has a "right" to retaliate. He is correct. Whether or not the national security argument is a sham (and of course it is), the EU has a right to act now.
The question of how to characterize the Section 232 action is a knotty one. Often in WTO dispute settlement, there is a disagreement by the complaining and responding WTO member country as to which WTO provision applies to a measure that is the subject of a complaint. Are the Section 232 actions just mere tariffs governed by GATT Article II, or are they antidumping duties, safeguard actions, countervailing duties, national security measures or some combination of the above? Normally, when the issue is the legality of the action, questions as to the validity of causes of action are resolved in dispute settlement. But a different issue exists when the dispute is not only about legality. Here the issue is when and how countries can respond to Section 232 actions.
In my view, the governing law appears in GATT Article XIX which addresses "Emergency Action on Imports of Particular Products." The WTO case law on this article has focused on the "unforeseen developments" precondition and certainly by that standard, the Trump metal tariffs would not qualify as a legal Article XIX safeguard. But the US emergency action on metal imports does not have to be GATT-legal for the European Union to invoke its so-called "rights" under Article XIX to engage in counterbalancing trade retorsion.
The subject of GATT Article XIX is trade action to suspend obligations in whole or in part or to withdraw or modify trade concessions. Unilateral trade actions to suspend GATT obligations are presumptively illegal, but can be legal under GATT Article XIX in prescribed circumstances. But the legal status of the obligation suspension (i.e., the Section 232 action) has nothing to do with the right of the European Union to respond to the US action that suspends obligations or modifies trade concessions. In other words, the United States does not have to invoke Article XIX for the EU to be able to avail itself of the remedies under GATT Article XIX. Thus, the recent empirical work of Chad Bown and others to quantify the trade remedies that would be available to the EU are entirely on point.
The remedies available to the EU are laid out in GATT Article XIX:3. Although these remedies have been limited by Article 8.3 of the Safeguards Agreement, since the procedural (if not substantive) prerequisites of a Safeguards-legal measure do not exist, the limitations of Article 8.3 do not apply. Under those Article XIX provisions (see 3a), the United States is supposed to notify the WTO of the Section 232 action, and then after 30 days the "affected contracting parties" are free to respond to the WTO member taking the emergency action by suspending "substantially equivalent concessions or other obligations" the suspension of which is not disapproved by the WTO. Obviously, there would be no consensus WTO disapproval of EU countermeasures and so the EU may lawfully retaliate 30 days after the US notice to the WTO.
Moreover, under the rules in GATT Article XIX:3(b), if the US Section 232 action is taken "without prior consultation," and if the US action threatens serious injury, and if such damage would be "difficult to repair," then the right to retaliate by other WTO Members such as the EU, Brazil or South Korea would begin upon the taking of the Section 232 action by the United States.
One of the lessons of the economic sanctions over the years has been that an immediate response by the EU and others is likely to be more effective in changing the misbehavior of the target country (here the United States) than a 30-day delay would be. Therefore, the EU should use its rights to retaliate on day 1 of the Section 232 actions.
One final point: Given the continued action by the Trump Administration to eviscerate WTO dispute settlement by blocking the replenishment of the Appellate Body judges, there is estoppel against any US government argument that the proper response by the EU under DSU Article 23 would be to first bring a WTO case against the Section 232 action on steel and aluminum.
