WTO sides with Russia in landmark national security ruling

Editor’s note: This ruling impacts whether the US would win a WTO challenge to the administration’s Section 232 tariffs on steel and aluminum, which are based on national security.

WTO ruled on whether a country can use an exemption to invoke national security as justification for introducing trade restrictions.

[Hans von der Burchard | April 5, 2019 | POLITICO]

Russia was right to impose transport restrictions on Ukraine in the name of national security, the World Trade Organization (WTO) said Friday in a landmark ruling.

The decision is of crucial importance because, for the first time, a WTO dispute settlement panel ruled whether a country can use the Article 21 exemption to invoke national security as a justification for introducing trade restrictions that cannot be challenged by the affected state.

U.S. President Donald Trump has become the most famous advocate of that exemption as he told the EU and other countries that they could not challenge his tariffs on steel and aluminum because they were introduced in the name of national security. Trump is also threatening to slap auto tariffs on the EU and other trading partners, which would likely be justified under the same argument.

The EU has warned that misusing Article 21 will open Pandora’s box and allow every country to introduce arbitrary trade barriers.

However, the WTO panel set a potentially high barrier for using the national security justification: It noted that Russia had cited an “emergency in international relations” that “is very close to the ‘hard core’ of war or armed conflict.”

Moscow introduced its transit restrictions in early 2016 amid conflict in eastern Ukraine. Kiev had complained that the measures cut Ukrainian exporters from key markets in Central Asia and the Caucasus, which they can only reach by Russian roads. In September 2016, Ukraine launched a WTO dispute to test whether Russia was allowed to invoke Article 21.

Significantly, the WTO judges also shot down the Russian argument — backed by the United States — that Article 21 claims are “non-justiciable” — meaning WTO panels can’t rule on any dispute invoking the national security exemption. The fact that the Trump administration last year sided with Russia on that point, despite backing Ukraine in the larger territorial conflict, had caused a diplomatic stir.

The judges “found that WTO panels have jurisdiction to review aspects of a member’s invocation” of Article 21, the Geneva-based trade organization said in a summary of the ruling.

The Office of the U.S. Trade Representative had no specific comment on Friday’s ruling, but referred to an earlier statement it filed in the case, which argued the WTO’s national security exception “is self-judging and not justiciable by a dispute settlement panel.”

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