The six trade disputes that could imperil American exports for years to come

The good news is that the United States is negotiating with several trade partners to end the national security tariffs on steel and aluminum. The bad news is that there are six countries on the outside of these negotiations looking in, all of which will soon win favorable rulings against the U.S. at the World Trade Organization (WTO). It’s time to settle these cases 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 relief. This is a big problem, because these countries have cases pending at the WTO, and rulings are due in the second quarter of 2022. The U.S. will lose them all. Worse, the way in which the U.S. will lose is going to create chaos throughout the global economy and imperil American exports for years to come. 

President Biden needs to avert this chaos by settling these cases. Europe and others have agreed to talks on excess global capacity in steel and aluminum, and the potential to backfill with standard trade remedies should offer political cover to get the job done.   

The backstory is that, in 2017, the Trump administration pulled the trigger on 25 percent tariffs on steel, and 10 percent tariffs on aluminum. This was done under Section 232, a provision in the Trade Expansion Act of 1962 that had never been used. The move caused outsized tensions, not because of the magnitude of the tariffs, but because President Trump justified them as being about national security, despite targeting countries like Canada, Norway and Switzerland.

Almost immediately, the U.S. started laying the groundwork for a legal defense at the WTO that was built on exception for national security. In a line rehearsed in U.S. third-party submissions in cases pitting Ukraine against Russia, and Qatar against Saudi Arabia, the Trump administration demanded that this exception was “non-justiciable,” meaning the WTO can’t review it. Both Russia and Saudi Arabia peddled this same logic, but the WTO found 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 pulled its diplomats from Qatar, which (unfortunately) also persuaded the WTO, but there was a catch. In the Russia case, the WTO said that the further removed a case is from armed conflict or public disorder, the tighter the connection needed between the trade measure(s) used and the country’s national security. This tripped up Saudi Arabia, which had refused to give legal representation to Qataris protecting their intellectual property in a Saudi court. The WTO ruled that this measure didn’t contribute to Saudi Arabia’s “essential security interests.” The U.S. is even wider of the mark.

In February 2020, the WTO asked the U.S. nearly 50 questions about its use of the national security exception. Unlike in the Russia and Saudi cases, the questions were confident and often cutting. Many of these questions were also posed to third parties, nearly all of which have been strongly against the U.S. position. Norway, for example, which has also filed against the U.S., chimed in as a third party in China’s case with a biting critique of the U.S. argument about non-justiciability. 

Speaking of China, the Biden administration has sufficient “leverage” with its Section 301 tariffs to walk back (and backfill with trade remedies) its Section 232 tariffs. The aluminum tariffs on Russia pose a real commercial challenge, but they can be put on hold until hostilities ease with Ukraine.  

Big picture, what would the six U.S. losses mean? After all, couldn’t the U.S. just appeal the rulings, leaving them in the legal void it created by blocking reappointments to the WTO’s Appellate Body”? Yes, but this would be short-sighted. It would lead allies to shy away from working with the U.S. to build secure supply chains in critical technologies, fearing a repeat performance. And it would wreck U.S. investments in a rules-based global economy, not just in Geneva, but also in the Indo-Pacific and elsewhere. That would be the greatest threat to America’s national security interests. 

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service at Georgetown University. Follow him on Twitter @marclbusch.

Tags Donald Trump International relations International trade law Joe Biden Presidency of Donald Trump Presidency of Joe Biden tariffs Trade Expansion Act Trump tariffs World Trade Organization

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