The six trade disputes that could jeopardize US exports for years to come
The good news is that the United States is negotiating with several trading partners to end national security tariffs on steel and aluminum. The bad news is that there are six countries outside of these negotiations, all of which will soon get favorable rulings against the United States at the World Trade Organization (WTO). It’s time to settle those things too.
The Biden administration has sought to ease tensions with Europe, Japan and the United Kingdom (UK). But China, India, Norway, Russia, Switzerland and Turkey are still waiting for help. This is a big deal because these countries have pending cases at the WTO and the rulings are due in the second quarter of 2022. The US will lose them all. Worse still, the way the United States will lose will create chaos throughout the global economy and jeopardize US exports for years to come.
President BidenJoe BidenJan. 6 defendant asks to subpoena Trump as witness in On The Money trial – Breaking the January jobs boom Pics of the Week: Joe Biden, Punxsutawney Phil and Sarah Palin MORE must avoid this chaos by settling these matters. Europe and others have agreed to talks on excess global steel and aluminum capacity, and the ability to fill with standard trade remedies should provide political cover to get the job done.
The backstory is that in 2017 the Trump administration pulled the trigger on 25% steel and 10% aluminum tariffs. This was done under section 232, a provision of the Trade Expansion Act 1962 which had never been used. This decision has caused inordinate tension, not because of the magnitude of the tariffs, but because President TrumpDonald TrumpCanada’s Prime Minister Calls Truckers Protesting COVID-19 Vaccine Mandate an ‘Occupation’ justified them as being related to national security, despite targeting countries like Canada, Norway and Switzerland.
Almost immediately, the United States began laying the groundwork for a legal defense at the WTO based on the national security exception. In a line repeated in U.S. third-party submissions in cases pitting Ukraine against Russia and Qatar against Saudi Arabia, the Trump administration has demanded that this exception be “non-justiciable,” meaning the WTO cannot review it. Both Russia and Saudi Arabia have peddled this same logic, but the WTO has concluded otherwise, insisting that national security is “an objective fact, subject to objective determination.”
Russia and Ukraine were shooting at each other, so the WTO let Russia off the hook. Saudi Arabia had withdrawn its diplomats from Qatar, which (unfortunately) also convinced the WTO, but there was a catch. In the case of Russia, the WTO has stated that the further a case is from an armed conflict or public disorder, the closer the necessary link between the trade measure(s) used and the national security of the country. This tripped up Saudi Arabia, which had refused to give legal representation to the Qataris protecting their intellectual property in a Saudi court. The WTO ruled that the measure did not contribute to Saudi Arabia’s “essential security interests”. The United States is even further from the mark.
In February 2020, the WTO asked the United States nearly 50 questions about its use of the national security exception. Unlike the cases of Russia and Saudi Arabia, the questions were confident and often cutting. Many of these questions were also posed to third parties, almost all of whom strongly opposed the US position. Norway, for example, which also sued the United States, intervened as a third party in China’s case with a scathing critique of the US non-justiciability argument.
Speaking of China, the Biden administration has enough “leverage” with its Section 301 tariffs to roll back (and bridge with trade remedies) its Section 232 tariffs. Aluminum tariffs imposed on Russia pose a real trade challenge, but they can be suspended until hostilities with Ukraine subside.
Overall, what would the six American losses mean? After all, couldn’t the US simply appeal the rulings, leaving it in the legal limbo it created by blocking reappointments to the WTO Appellate Body? Yes, but that would be shortsighted. This would lead allies to be reluctant to work with the United States to build secure supply chains in critical technologies, fearing repeat performance. And it would ruin American investments in a rules-based global economy, not just in Geneva, but also in the Indo-Pacific and elsewhere. This would be the greatest threat to America’s national security interests.
Marc L. Busch is the Karl F. Landegger Professor of International Commercial Diplomacy at Georgetown University’s Walsh School of Foreign Service. Follow him on Twitter @marclbusch.