CSIS Analysts Say WTO Panels Consistent but Toothless on Section 232 Issue

Researchers at the Center for Strategic and International Studies expect the U.S. will get "a taste of its own medicine” when China appeals its loss over Section 232 retaliatory tariffs at the World Trade Organization, adding that China likely won't have to drop the tariffs since there is no appellate body to take that appeal.

Research intern Emilie Kerstens and Bill Reinsch, Scholl chair in international business, wrote: "Perhaps it will inspire U.S. trade officials to work harder on reforming the system so that WTO law can be enforced. However, given the iron grip the United States has held on refusing adjudication of the security exception, it is more likely that nothing will change, and the system will remain hobbled and dysfunctional."

Their blog post about the WTO decision (see 2308160055), published Aug. 25, noted that "it may seem contradictory that this panel is calling the U.S. steel and aluminum tariffs security measures when previous panels have consistently rejected the justification of these measures under the security exception."

But, they explained, the panelists stuck to the text of the General Agreement on Tariffs and Trade, the WTO's predecessor, in both cases. When countries facing Section 232 tariffs challenged the tariffs as protectionism masquerading as national security measures, the panelists noted that hiking tariffs or imposing other import restrictions under the national security provision of the GATT can only be done when there is an "emergency in international relations," and the U.S. didn't have such an emergency with trading partners around the globe.

In this case, the language about countries' ability to retaliate in response to safeguards says the country that imposed the safeguards had to be intending a safeguard (Section 201 in U.S. law), and retaliation doesn't apply to "measures sought, taken or maintained by a Member pursuant to provisions of GATT 1994" other than the safeguard article.

The panelists weren't required to decide whether the Section 232 tariffs conformed to WTO national security tariff rules, they just had to discern if the U.S.'s investigation justifying the tariffs focused on national security issues, not just economic harm from imports.

"By adopting a narrow interpretation of Article XIX on safeguard measures just as it has done for Article XXI on the security exception, the panel is maintaining consistency and staying within its mandate by not adding to or diminishing the rights in the WTO agreements," the CSIS researchers wrote. "By applying the same rigorous and narrow interpretation of the rules to China’s measures as it has to the United States, the panel is holding both countries to the same standard."