Congressional Research Service Examines Aspects of “National Security Exception” under GATT Article XXI

The Congressional Research Service, a non-partisan arm of the U.S. Library of Congress, issued a report on 28 November that examines various aspects of the “national security exception” under Article XXI of the General Agreement on Tariffs and Trade. This analysis is especially relevant in light of the on-going legal challenge by a number of economies at the World Trade Organisation against the use by the United States of Section 232 of the Trade Expansion Act of 1962 to impose additional tariffs on steel and aluminium imports on the basis of national security considerations.

Seven economies – mainland China, the European Union, Canada, Mexico, Norway and Russia – contend in separate WTO complaints that the Section 232 tariffs on steel and aluminium contravene U.S. multi-lateral obligations because they are in their content and substance safeguard measures taken to protect the U.S. steel and aluminium industries from the economic effects of imports. The seven economies disagree with U.S. arguments that the national security exception under GATT Article XXI precludes WTO panels from examining the claims, arguing that while national security was a sensitive matter panels were fully within their right to examine whether such claims are justified under the exception.

The United States, on the other hand, argues the Section 232 tariffs are necessary for the protection of its essential security interests given the key role steel and aluminium plays in U.S. national defence. According to the United States, these measures are therefore justified under GATT Article XXI and not subject to review by a WTO panel. The United States further argues that its position on the national security exception has been consistent for 70 years and is a position the EU and others supported in the past, most notably in 1982 when certain EU actions were examined before the GATT Council.

Prepared by CRS Legislative Attorney Brandon Murrill, the CRS report – formally described as a legal sidebar and entitled The “National Security Exception” and the World Trade Organization – examines the various perspectives on GATT Article XXI. Murrill notes that GATT Article XXI “does not clearly address whether a WTO panel should either (1) completely defer to a WTO Member’s judgment that its trade measures are justified to protect the Member’s national security or (2) evaluate, at least to some degree, whether the Member’s use of the exception is valid.” Although WTO and GATT members have invoked Article XXI in trade disputes, no WTO panel has formally interpreted the Article XXI exception to define its scope.

Murrill also sets out the perspectives of both sides in this dispute. On the one hand, he states, Article XXI arguably makes each WTO member the sole judge of whether its trade-restrictive actions are justified. In other words, once a WTO member has invoked the exception to justify a measure potentially inconsistent with its GATT obligations a panel cannot independently evaluate whether that member’s use of the exception is essential to its security interests or fits within the enumerated list of national security justifications in Article XXI(b). Murrill adds that “a broad reading of Article XXI is also arguably consistent with the WTO’s stated objective to serve as the ‘common institutional framework for the conduct of trade relations among its Members.’” Additionally, he seeks to clarify that as a trade organisation the WTO lacks competence to rule on matters of national security.

On the other hand, Murrill states, it could be argued that a WTO panel should not completely defer to a WTO member’s judgment about the appropriateness of invoking Article XXI and must evaluate whether use of the exception is proper. At least one scholar and former WTO Appellate Body member has argued that the United States must at least demonstrate to the panel that the Section 232 tariffs on steel and aluminium fit within one of the three specific categories of actions that a member may take for national security reasons enumerated in Article XXI(b). Murrill adds that the Appellate Body has stated that under the Vienna Convention “a treaty should be interpreted under the assumption that its parties will make reasonable use of its exceptions and perform their obligations in good faith.” Therefore, the United States arguably must prove that it adopted the Section 232 measures in good faith for national security reasons rather than to circumvent its trade obligations and protect domestic industries.

According to Murrill, the argument for a more limited scope of the Article XXI exception may also draw support from one of the central purposes of the WTO agreements and dispute settlement system: to provide “security and predictability to the multilateral trading system” so that businesses can conduct international trade with certainty. Allowing a WTO member to take any measure it deems essential to its security interests would arguably defeat this objective by undermining the predictability and certainty of the rules-based system. Murrill posits that a reading of Article XXI that permits WTO members to retain complete discretion over use of the exception could lead countries to enact a multitude of protectionist measures under the guise of national security, potentially undermining the purpose of WTO rules.

Murrill observes that he reviewed only Article XXI issues for purposes of his paper. WTO members could conceivably also attempt to challenge the U.S. tariffs under the WTO Safeguard Agreement or seek compensation under a non-violation claim under Article XXIII. As a non-partisan entity, CRS presents arguments without taking any position as to which one will prevail in the international forum.

Meanwhile, WTO Director-General Roberto Azevêdo on 4 December expressed concern about Article XXI disputes, noting that while “normally in the past whenever somebody claimed or adopted a measure that would be justified under national security concerns there was never a challenge”, people are now “challenging others under the dispute settlement system and that’s risky.” Azevêdo said that he is telling members to “be careful with this” and is working “to see whether we can find a way of solving this.”