The recent statement from both Russia & Ukraine that they won’t appeal a landmark trade decision in which the WTO upheld Moscow’s right to claim a key exemption to international trade rules that allows governments to take “any action which it considers necessary for the protection of its essential security interests.”
The Loop Hole
The WTO allows a country to take “any action which it considers necessary for the protection of its essential security interests.
The US argues that the WTO cannot decide whether measures are necessary to protect a country’s security interests because it would infringe on that country’s sovereign rights. On the other hand Canada, the European Union, Mexico and a half-dozen other U.S. trade partners have asked the WTO to determine if Trump’s metal tariffs are actually necessary to protect America’s national security.
The US, particularly the Trump administration has been using this loop hole as a favorite justification for using a controversial interpretation of a cold-war era U.S. national security law to impose import tariffs.
WTO Director-General Roberto Azevedo acknowledged the precarious nature of these types of rulings, saying it’s a “very dangerous development” for the Geneva-based trade body to begin mediating regional security conflicts. It’s not the place for the WTO to solve such matters, he said. “Issues that are sensitive enough to bring up national security concerns should be treated politically and not technically at the dispute settlement mechanism of the WTO,” Azevedo said in an April 4 interview in Mexico City. “But they are bringing the cases and we don’t have an option.”https://www.bloomberg.com/news/articles/2019-04-05/wto-defies-trump-with-historic-first-ruling-on-national-security
While the ruling dealt with a dispute between Russia and Ukraine, it has important ramifications for a series of separate WTO cases related to Trump’s steel and aluminum tariffs. Russia, which is challenging the U.S. tariffs on foreign steel and aluminum, welcomed the decision. “The ruling makes our arguments in the dispute with the U.S. more weighty,” Economy Minister Maxim Oreshkin said in a statement. “Our victory in the WTO thus has systemic importance for the organization and should become part of the planned reform.”https://www.bloomberg.com/news/articles/2019-04-05/wto-defies-trump-with-historic-first-ruling-on-national-security
Jennifer Hillman, a former WTO judge who teaches at Georgetown University, said while trade pacts often include dispute mechanisms the brewing U.S.-China pact would be unique if it didn’t have a role for third-party arbitrators. It also could see much of the WTO case load go away with the U.S. and China historically two of the biggest users of the dispute system. “When it is the two biggest countries that have brought the majority of cases at the WTO, it is a big blow to the system,’’ Hillman said.https://www.bloomberg.com/news/articles/2019-04-16/trump-receives-trade-setback-as-wto-rule-may-foil-u-s-strategy
Moreover, other WTO members are likely to have their own complaints with a U.S.-China deal and to use the WTO to challenge it, said Jim Bacchus, a former chief judge of the WTO’s appellate body. “The United States and China are not the only two countries in the global trading system,” he said.https://www.bloomberg.com/news/articles/2019-04-16/trump-receives-trade-setback-as-wto-rule-may-foil-u-s-strategy
With evolution in business, society, economics, trade and survival; law creates loop holes and those loop holes are exploited for gains of a relatively few at the cost of a larger population. Such cases arise irrespective of scale, be it local, regional, national, international or global. The benefactors always question the change and whether the change is legal, fair or even moral while the delay causes the exploited more pain. The question remains that why there are no bodies which monitor loop hole exploitation and such exploitation only come to light when someone finally decides to fight.