On April 5, 2019, a World Trade Organization (WTO) dispute settlement panel issued a landmark ruling in a dispute between Russia and Ukraine in which Russia claimed it had taken trade-restrictive measures for the purpose of protecting its national security. Central to the dispute was the so-called “national security exception,” which allows WTO members to breach their WTO obligations for purposes of national security. In the Russia-Ukraine dispute, Russia invoked the exception to justify measures that blocked trade between Ukraine, Kazakhstan, and the Kyrgyz Republic that transited through Russia. Russia claimed it had adopted those measures in response to escalating events in Ukraine after political turmoil there in 2014.
Q1: Why does this dispute matter for the United States and the WTO overall?
A1: The United States has invoked the WTO national security exception, laid out in Article XXI of the General Agreement on Tariffs and Trade (GATT), to justify its tariffs on steel and aluminum. The European Union, Turkey, Switzerland, Russia, Norway, Mexico, Canada, India, and China have filed disputes against the United States at the WTO and claim that there is no legitimate or plausible national security rationale for the tariffs. The Trump administration, however, has an ironclad view that measures taken by members for the purposes of national security cannot be reviewed by a WTO dispute settlement panel. In fact, the Trump administration sided with Russia in the complaint brought by Ukraine for the same reason, despite backing Ukraine in the conflict there. The outcome of the Russia-Ukraine dispute offers a glimpse into how future WTO panels could handle other disputes involving the Article XXI national security exception, including the U.S. steel and aluminum tariffs. Observers of the WTO have long seen a dispute over Article XXI as a lose-lose proposition. There is concern that a ruling upholding the U.S. view of the national security exception could inspire other countries to impose protectionist measures in the name of national security, while a ruling that limits a country’s ability to use the exception could be seen an unacceptable breach of national sovereignty, which would discredit the WTO and perhaps lead members such as the United States to withdraw from the body.
Q2: What does Article XXI of the GATT state?
A2: Below is the plain text of the Article XXI of the GATT, but its meaning and how members can operationalize the exception was the central question of the Russia-Ukraine case and will likely be the main question in disputes involving U.S. steel and aluminum tariffs.
Article XXI Security Exceptions
Nothing in this Agreement shall be construed
(a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
(i) relating to fissionable materials or the materials from which they are derived;
(ii) relating to the traffic in arms, ammunition, and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii) taken in time of war or other emergency in international relations; or
(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.
Section (b) and (b)(iii) in particular are most relevant to the arguments made over the national security exception. Russia and the United States claim that the wording of section (b) makes the national security exception non-justiciable by the WTO dispute settlement system. That claim stems from the phrase that the WTO agreements should not prevent any member “from taking actions which it considers necessary for the protection of its essential security interests.” 1According to the United States and Russia, section (b) makes clear that only the member invoking the national security exception can determine whether the measure taken is in its own national security interests. The United States also argues that judgment by another body of what is in the U.S. national security interest or whether a measure is necessary to protect U.S. national security would be an inappropriate breach of national sovereignty. Therefore, the United States and Russia argue that once a member has invoked the national security exception, the measure justified by it cannot be subject to review by a WTO panel.
Q3: What did the WTO panel rule?
A3: The WTO panel rejected the Russian (and U.S.) argument that the article is non-justiciable but ultimately found Russian actions consistent with the national security exception, making several important decisions along the way. First, the panel determined that actions taken under Article XXI(b) are reviewable. The panel report also found that the three subparagraphs of section (b) which lay out the circumstances in which a member can invoke national security exception can be objectively observed. 2Further, the panel found that measures justified by the national security exception can be reviewed to determine if they are necessary to protect national security and have a plausible connection to the national security interest cited by the respondent in a dispute. 2To sum up those conclusions, the panel found that it can review a measure a WTO member claims “it considers necessary” to protect its own security interest because it can objectively determine whether one of the three circumstances laid out in the subparagraphs of section (b) occurred at the time of the measure’s imposition and because it can objectively determine whether the measure has a plausible connection to the circumstance identified.
In the context of the Russia-Ukraine case, the panel decided that the state of affairs between Russia and Ukraine rose to the level of “war or other emergency in international relations,” therefore meeting section (b)(iii). 3In making that determination, the panel, importantly, defined an “emergency in international relations” to be “a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.” 4By extension, the panel claimed that an emergency in international relations is an objective state that a panel can review and determine whether an action was taken “at the time of” such an emergency. The panel also found that there was a plausible relationship between the conflict between Russia and Ukraine and trade-restrictive measure Russia had taken.5
Q4: What does the decision mean for the United States?
A4: The panel’s findings may spell trouble for the U.S. defense of its steel and aluminum tariffs at the WTO. The U.S. claim that the national security exception is non-justiciable was clearly undercut by the panel report. In fact, the panel explicitly pushed back against that U.S. position. The panel wrote that its “interpretation of Article XXI(b)(iii) also means that it rejects the United States' argument that Russia's invocation of Article XXI(b)(iii) is ‘nonjusticiable,’ to the extent that this argument also relies on the alleged totally ‘self-judging’ nature of the provision.”6
The United States may also be hard pressed to meet the Russia-Ukraine panel’s definition of “emergency in international relations.” The panel report adds that “political or economic differences between Members are not sufficient, of themselves, to constitute an emergency in international relations for purposes of subparagraph (iii).” 7Many U.S. trading partners have argued that the steel and aluminum tariffs are a tool of leverage for the United States in trade negotiations. The United States has also faced push back against its argument that the tariffs are necessary to rebuild the steel and aluminum industries in the United States, both of which are necessary to maintain its defense base and national security. Questions about the purpose of the tariffs may dovetail with a question of “good faith” raised by the WTO panel in the Russia-Ukraine dispute. The panel determined that the so-called “obligation of good faith,” “requires that Members not use the exceptions in Article XXI as a means to circumvent their obligations under the GATT 1994. A glaring example of this would be where a Member sought to release itself from the structure of ‘reciprocal and mutually advantageous arrangements’ that constitutes the multilateral trading simply by re-labelling trade interests that it had agreed to protect and promote within the system, as ‘essential security interests’, falling outside the reach of that system.”8
It is important to note, however, that both Russia and Ukraine have the option to appeal findings made by the panel as neither of their original positions were upheld. The fate of that appeal is uncertain. For one, the Appellate Body may take a vastly different approach to the national security issue than the panel. Another possibility is that the Russia-Ukraine appeal languishes along with the Appellate Body if the United States continues to block appointments to it. In that case, it is possible that an appeal is never concluded or at least significantly delayed, which would prevent WTO members from adopting the panel report.
Additionally, the circumstances of the United States case are different from the Russia-Ukraine case. A different dispute settlement panel may approach the national security issue in a different manner that may or may not be more favorable to the United States. That may be the case in a pending dispute between Qatar and the United Arab Emirateswhich also revolves around the national security exception. Perhaps what is most clear is that the WTO is not done deliberating on the national security question. In fact, it’s likely just getting started.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jack Caporal is an associate fellow with the CSIS Scholl Chair in International Business.
Critical Questions are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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