As much fun as it is to think about what GATT Article XXI means, and to analyze WTO panel reports that interpret and apply it, I'm skeptical that WTO litigation about measures for which the responding party has invoked the national security exception will help resolve many trade conflicts. The ongoing case of the U.S. Section 232 measures will be particularly challenging.
As discussed previously on this blog, I don't think the Section 232 measures can be characterized as safeguard measures, and therefore the rebalancing process provided there is not available. But I do think rebalancing is a good idea for this kind of case. Here is the abstract of a paper I wrote with a Cato colleague proposing a special rebalancing process to deal with national security trade restrictions:
A Proposal for 'Rebalancing' To Deal With 'National Security' Trade Restrictions
Over its first two years, the Trump administration has aggressively reshaped U.S. trade policy. One of its most controversial initiatives is the expansive use of “national security” to justify imposing tariffs and quotas. Section 232 of the Trade Act of 1962 gives the president authority to restrict imports on this basis after an investigation by the Commerce Department, and the administration has already done so for steel and aluminum and is now threatening similar actions on automobiles. The World Trade Organization (WTO) has a special exception for such measures, so there is at least an argument that they are permitted under international law. However, the administration has taken what was previously considered a narrow and exceptional remedy and broadened it to serve as a more general tool to protect domestic industries.
This paper argues that WTO dispute settlement cannot easily resolve disputes of this kind, and suggests an alternative mechanism to handle these issues. Instead of litigation, a “rebalancing” process like the one used in the context of “safeguard” tariffs and quotas should be utilized for national security measures. Safeguards are a political safety valve that allow the trading system to pursue broad-based liberalization by providing the flexibility to protect domestic industries under certain conditions (ideally, by offering compensatory liberalization elsewhere). By adopting a similar political arrangement for national security trade restrictions, the overall balance in the system can be preserved, permanent damage to the WTO dispute system avoided, and a potentially destructive loophole kept closed.
The proposal does not work out all the details of the rebalancing process, and if anyone likes the idea there is plenty of fleshing out to do, so I encourage others to write more about this.
Two other points: We wrote this before the Russia - Traffic in Transit panel report was circulated; and we do not imagine the Trump administration will support this idea (but who knows!), so our suggestion is that other governments could incorporate such a provision in their FTAs in order to test it out.
