“The United States has held the clear and unequivocal position, for over 70 years, that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO member to respond to a wide-range of threats to its security,” he added.
The ruling from a group of panels reviewing the case suggests the United States “must stand idly by” while China and other countries flood its market with steel and aluminum that has been produced with generous amounts of government support, Hodge said. “The United States will not cede decision-making over its essential security to WTO panels,” he added.
Four WTO dispute settlement panels, each comprised of the same individuals, issued a ruling in cases brought by China, Norway, Switzerland and Turkey. Two other challenges brought by Russia and India are still pending.
“I think this ruling sends a shockwave into the system” since there long has been a custom of members to deferring to each other on what constitutes a national security threat, said Wendy Cutler, a former senior U.S. trade official now at the Asia Society Policy Institute.
The United Steelworkers union and the American Iron and Steel Institute, an industry group, also blasted the decision.
“The United States can’t trade away our national security. We must maintain these relief measures and refuse to bow to the misguided efforts of the WTO lawyers,” Steelworkers President Tom Conway said in a statement.
The defiant American stance comes at a time when massive new subsidies for green technologies provided by the Inflation Reduction Act are raising new concerns about the U.S. commitment to the rules-based global trading system.
Trump triggered the dispute when he dusted off a rarely-used trade provision — Section 232 of the 1962 Trade Expansion Act — to restrict steel and aluminum imports from around the world on the grounds that they threatened two industries vital to U.S. national security.
Trading partners saw the move as a thinly-disguised protectionist measure and quickly lined up to challenge the action at the WTO. Many members, such as the European Union and China, also imposed retaliation on American goods.
Article 21 of the WTO’s foundational document, the General Agreement on Tariffs and Trade, allows members to take actions that violate WTO commitments to treat trading partners fairly if it’s for purposes of protecting national security.
However, it also places limitations on when it can be used. Two instances it specifically mentions are for cases involving material to build nuclear weapons or arms trafficking for the purpose of supplying a military establishment.
A third more general exception allows countries to invoke Article 21 “in time of war or other emergency in international relations.” That was the Trump administration’s defense.
However, the WTO panels charged with reviewing the matter determined Trump’s tariffs were not imposed in time of war or other emergency in international relations, and therefore it could not invoke the national security exception to break its trade commitments.
That deals a major blow to the longstanding U.S. position — and the view shared by many other members — that such actions are “self judging,” meaning if a member decides a trade action is in its national security interest, then others should agree and not challenge it.
However, many believed Trump’s steel and aluminum actions so stretched the definition of what constitutes a national security threat that they could not go unchallenged.
Those included the EU, Canada and Mexico, as well as China, Norway, Switzerland, Turkey, Russia and India. Canada and Mexico reached a settlement with the United States in 2020 as part of the Trump administration’s efforts to win congressional approval of the U.S.-Mexico-Canada Agreement to succeed NAFTA.
The Biden administration also negotiated a deal with the EU in 2021 to resolve the dispute and subsequent arrangements with the U.K. and Japan followed.
The “self judging” approach worked well when countries were using the national security exception in narrow ways, but the world has changed since then, Cutler said. She blamed China for starting the trend by walling off the internet and other economic sectors on national security grounds.
The four years it took the WTO to rule on the issue reflects both the sensitivity of the concern and stresses on the organization’s dispute settlement system.
In addition, the Trump administration has completely shut down the WTO Appellate Body by blocking the appointment of new judges because it believes many of its decisions were wrong. That now enables it to appeal Friday’s lower panel rulings “into the void” to prevent them from being formally adopted.
There are also more decisions stemming from Trump’s steel and aluminum action to come.
The Trump administration filed counter complaints challenging the retaliation imposed by a long list of nations. The arrangements with Canada, Mexico and the EU resolved those cases, while others involving China, Russia, India and Turkey are still pending.
The issue in those cases is whether the countries were legally entitled to unilaterally retaliate against Trump’s measures, or whether they should have taken the much longer route of formally challenging the tariffs through the WTO’s dispute settlement system.