The Long-Term Risks of “National Security” Tariffs Have Appeared
By Ben Conner, USW Vice President of Policy
In June 2017, U.S. Wheat Associates (USW) suggested that pursuing a strategy of import protection under the guise of national security would set a dangerous precedent. Then USW President Alan Tracy said “… if the United States undermines WTO national security exemptions, it would be handing a gift-wrapped roadmap of protectionism to food self-sufficiency advocates all over the world.”
The United States did impose these tariffs and threatens more. The risk of imitation by other countries is a long-term threat to U.S. agriculture, but most affected countries to date have responded by retaliating against U.S. agriculture exports, rather than imitating the U.S. policy. In addition, these countries have brought several cases against the United States at the World Trade Organization (WTO). The United States claims these tariffs are allowed under the WTO’s national security exception, which is self-determined. Other countries claim such measures are allowed only if they fit under one of the criteria established in the WTO rules.
The WTO earlier this month gave a preview of how it might rule on the cases against the United States with its panel decision in a case that Ukraine brought against Russia. The report was adopted last week by the WTO Dispute Settlement Body (DSB). Ukraine argued that Russia’s restrictions on its transshipment rights violated WTO rules, which would be clearly true in normal circumstances. Russia claimed these restrictions were imposed for national security reasons due to the armed conflict with Ukraine. Russia further argued that the panel had no jurisdiction, because Russia had invoked the WTO’s GATT Article XXI, the rule that allows exceptions to normal WTO rules for national security reasons. Russia argued that determining national security is up to each country and therefore not subject to the panel judgment. The United States made the same argument in a third-party brief.
Russia won the case, because armed conflict is a valid national security issue, but lost the argument that the panel had no jurisdiction. At the risk of oversimplifying, the panel found that if the national security rule was meant to be self-judging, the authors of the agreement would not have included specific criteria. It quoted a U.S. delegate who said in 1947 that they supported the specific criteria due to the recognition “that there was a great danger of having too wide an exception…because that would permit anything under the sun.”
Permitting tariffs on “anything under the sun” could lead to devastating consequences for the competitive U.S. agriculture sector as more protectionist nations around the world follow the U.S. example. However, the United States, consistent with the position it has taken to date in this case, opposed this decision and claimed there should be no parameters on any trade restriction if the country imposing the restriction cites the national security exception.
USW takes no position on the respective arguments in the case but remains extremely concerned with the indiscriminate use of 232 tariffs that will likely put this question in front of the WTO DSB soon. This is a major challenge facing the WTO that did not need to happen and threatens to undermine the global trade rules that are so important to U.S. agriculture and its overseas customers.
The Trump Administration’s trade agenda includes fixing an extensive list of long-standing concerns with how some of our trading partners and international institutions have applied trade rules. USW shares many of these concerns. Unfortunately, we believe that the use of Section 232 undermines the long-term interests of the U.S. economy and U.S. agriculture in particular; and any gains made because of these tariffs are likely to be short term while the damage to the rules-based trading system could be permanent.