WTO Panel Says US Section 232 Duties Cut Against Global Trade Rules in 4 Dispute Rulings

The World Trade Organization issued a series of four rulings Dec. 9 finding that the U.S. Section 232 steel and aluminum tariffs set by President Donald Trump violated global trade rules. In the landmark rulings, a three-person panel found that the duties violated Articles I, II, XI and XXI of the General Agreement on Tariffs and Trade. The dispute panel said the tariffs, which the Trump administration said were needed to maintain U.S. national security, were not "taken in time of war or other emergency in international relations," as mandated by Article XXI(b)(iii) of national security protections, so the duties violate the GATT.

The U.S. was quick to condemn the ruling, with Assistant U.S. Trade Representative Adam Hodge releasing a statement taking issue with the panel's conclusions and calling for institutional reform of the global trade body. Hodge said the U.S. "strongly rejects the flawed interpretation and conclusions" in the panel reports given that the WTO's dispute settlement mechanism cannot review issues of national security. He said the trade body "has no authority to second-guess the ability of a WTO Member to respond to a wide-range" of threats.

"The WTO has proven ineffective at stopping severe and persistent non-market excess capacity from [China] and others that is an existential threat to market-oriented steel and aluminum sectors and a threat to U.S. national security. The WTO now suggests that the United States too must stand idly by. The United States will not cede decision-making over its essential security to WTO panels."

In response, China, one of the countries that brought a case against the tariffs, said it hopes the U.S. will respect the rulings and "correct the violations as soon as possible," according to an unofficial translation of a statement from the Ministry of Commerce.

The American Iron and Steel Institute accused a WTO dispute panel of again going "beyond its mandate" and declared that the WTO "has no authority to second guess the U.S. government on matters of our national security." The institute echoed calls for changes and touted the effects of the Section 232 duties on the steel industry.

The Alliance for American Manufacturing issued its own remarks over the WTO's "bad decision," saying that a strong U.S. steel industry is needed for national security. "Yet again, the WTO has been blinded by philosophy and overstepped its authority," said Scott Paul, alliance president. "This panel decision shouldn’t change our steel tariff policy in any way."

The four cases were brought by China, Norway, Switzerland and Turkey to contest Trump's Section 232 action in 2018. Two cases remain against the steel and aluminum tariffs, from Russia and India, though the EU suspended its case after the U.S. dropped the tariffs on European imports. In all four rulings, the dispute panel said the duties violated Article XXI(b) of the GATT, titled "Security Exceptions," which says nothing in the GATT prevents any signatory from taking any action it considers "necessary for the protection of its essential security interests" relating to fissionable materials, traffic in arms, ammunition and implements of war, or "taken in time of war or other emergency in international relations."

The U.S. identified three factors as the basis for its finding that steel and aluminum weakened its internal economy so as to threaten national security: the displacement of domestic steel and aluminum, the adverse impact on the economic welfare of the domestic steel and aluminum industry and global excess capacity in steel and aluminum. The panel found these factors do not rise to the level of a security threat as defined in the GATT.

"Having carefully reviewed the relevant evidence and arguments submitted in this dispute, and particularly those submitted by the United States in relation to global excess capacity, the Panel is not persuaded that the situation to which the United States refers rises to the gravity or severity of tensions on the international plane so as to constitute an 'emergency in international relations' during which a Member may act under Article XXI(b)(iii)," the reports said. "... In conclusion, the Panel does not find, based on the evidence and arguments submitted in this dispute, that the measures at issue were 'taken in time of war or other emergency in international relations' within the meaning of Article XXI(b)(iii) of the GATT 1994."