In One Sentence

• USTR Katherine Tai spoke at the Munich Security Conference and reaffirmed her statement that the WTO is on “thin ice” following what the U.S. sees as several spurious decisions by the body’s dispute resolution mechanism that deny the U.S.’ right to create trade barriers citing national security reasons.
• Despite Washington’s misgivings with perceived ‘exploitation’ of the WTO’s dispute settlement process, the U.S. says it remains committed to the WTO and is pushing to reform the dispute settlement function in a new round of informal talks that began at the end of February. 
• Several WTO members—including the European Union, China, and Japan—are pushing for more formal talks and text-based negotiations to finalize dispute settlement reform in time for the body’s 13th Ministerial Conference next February.

Mark the Essentials

• As the U.S. prepares to host the Asia-Pacific Economic Cooperation (APEC) leaders’ summit in San Francisco this November, a first round of preliminary meetings between trade officials has just concluded. In the talks, U.S. officials pushed resilient supply chains and increased transpacific trade volumes as priorities.  
• Next week, the second negotiating round of the Indo-Pacific Economic Forum (IPEF) is set to take place in Bali, Indonesia. A ‘special round’ of negotiations on the three pillars of supply chains; clean energy, decarbonization and infrastructure; and tax and anti-corruption was held in New Delhi last month, while the Bali talks are slated to focus on the first pillar: trade. U.S. negotiators are expected to table a digital trade text at the upcoming Bali round. 
• A scheduled meeting between EU Trade Commissioner Valdis Dombrovskis and USTR Tai was canceled due to the EU commissioner testing positive for COVID. Calls from civil society and prominent officials, meantime, for a transatlantic ‘truce’ on the subsidy race and a limited trade facilitation agreements for critical minerals are gaining traction however, as both sides aim to lay the groundwork for their TTC meeting in Sweden later this May.
• The U.S. trade agenda is finding a willing audience among its existing treaty and FTA partners in the Indo-Pacific (such as Japan, South Korea, Singapore, and Australia), as well as with many Pacific island nations. IPEF’s ‘buffet style’ structure means that there is relatively less solidarity though among its participating member states. India, for example, has been consistently urging Washington to push for an “early harvest of deliverables” while some Southeast Asian member states (Indonesia, Malaysia, and Vietnam) are willing to move more slowly and engage selectively with U.S. trade and investment initiatives insofar as they improve their economies and enable hedging against Chinese economic influence. U.S.-EU trade relations have also been complicated by the spell of diverging tactics which came in the wake of the Inflation Reduction Act’s passage last August, but the EU’s announcement of an industrial policy overhaul last month and continued engagement in the TTC suggests that transatlantic trade agendas are moving forward in tandem.

Keeping an Eye On…

• So, after having lost three successive cases over its interpretation and use of the GATT Article XXI national security exception at the WTO dispute settlement system’s panel stage, USTR Tai claims that it is the WTO, and not Washington, who is on “thin ice”. Earlier in January, the U.S. Ambassador to the WTO Maria Pagan sought an “authoritative interpretation” of the security exception. The United States’ wish should be granted. As per Article IX:2 of the Marrakesh Agreement establishing the WTO, the organization’s Ministerial Conference and General Council (its supreme decision-making body) is vested with the authority to adopt an ‘authoritative interpretation’ of any contested GATT provision, including the national security exception, by a three-fourths majority of the membership. Future WTO panels would be jurisprudentially bound by that interpretation. The cold hard reality of the U.S.’ request for an “authoritative interpretation” is that Washington will not be able to muster even a smidgeon of the WTO’s membership behind its cause—let alone muster a three-fourth majority. As per Washington’s view of GATT Article XXI, the security exception is entirely ‘self-judging’. Issues of national security, being political matters, are not susceptible to third-party review and, as such, WTO panels lack the authority to review the invocation of Article XXI by a member (in this case the United States). Others—or rather everybody else—would beg to disagree. In its written submission, the European Union observed that a dispute settlement panel was entirely within its right to “review whether the interests at stake can ‘reasonably’ or ‘plausibly’ be considered essential security interests.” For its part, Japan submitted that the term essential security interest is “not unbounded” and is perfectly justiciable, albeit with appropriate caution. In varying forms, Australia, Canada and other close U.S. allies, too, have hewed to this overwhelmingly wide interpretative consensus while at the same time enjoining WTO panels to accord a “high level of deference” to the invoking member’s use of the exception. Truth be told, the U.S. delegate at the time of the drafting of the security exception too had noted that while “some latitude [should be afforded] for security measures,” it cannot be the case that the exception is interpreted “so broad[ly] that, under the guise of security, countries will put on measures which really have a commercial [and protectionist] purpose.” China’s position concurs with the said U.S. delegate—while WTO panels should “exercise extreme caution…in not prejudicing a Member’s right to protect its essential security interests,” it must also “prevent [bad faith] abuse of Article XXI and evasion of WTO obligations” by the invoking Member. So, perhaps it is indeed time to bring on a WTO General Council session to adopt an “authoritative interpretation” of GATT Article XXI. Far from mustering a three-fourth majority, the United States will find fewer supporters in its corner than even Russia managed at the UN General Assembly on the Ukraine invasion condemnation vote.

Expanded Reading

• APEC First Senior Officials’ Meeting Strengthens Multilateral Cooperation, U.S. Department of State, March 3, 2023
• USTR Releases President Biden’s 2023 Trade Policy Agenda and 2022 Annual Report, Office of the U.S. Trade Representative (USTR), March 1, 2023
• Readout of the First Senior Officials Meeting of the United States-Pacific Islands Trade and Investment Dialogue, Office of the U.S. Trade Representative (USTR), March 1, 2023
• A fireside conversation with US Ambassador to Vietnam Marc E. Knapper, Brookings, March 1, 2023
• EU Statement at the WTO Formal Trade Negotiating Committee, Permanent Mission of the European Union to the World Trade Organization (WTO), February 28, 2023
• APEC Officials Strengthen Sustainable and Inclusive Growth for All, Asia-Pacific Economic Cooperation (APEC), February 28, 2023
• A green plea for climate trade peace, Politico, February 27, 2023
• Letter: U.S. and EU Groups Call for Climate Peace Clause, Public Citizen, February 27, 2023
• Yellen says EV battery mineral trade pacts can likely bypass Congress, Reuters, February 24, 2023 [Paywall]
• USTR Releases Annual Report on China’s WTO Compliance, Office of the U.S. Trade Representative (USTR), February 24, 2023
• United States to Participate in Second Indo-Pacific Economic Framework Negotiating Round in Indonesia, Office of the U.S. Trade Representative (USTR), February 24, 2023
• EU calls for WTO to address current policy challenges through focused deliberation, European Commission, February 21, 2023
• Washington grapples for a post-globalization vision, Politico, February 21, 2023
• Readout of Ambassador Katherine Tai’s Meeting with European Union Executive Vice President Valdis Dombrovskis, Office of the U.S. Trade Representative (USTR), February 17, 2023
• MSC 2023: Protectonic Shifts – Global Trade Under Pressure, BR24, February 17, 2023
• E-commerce negotiations enter final lap, World Trade Organization (WTO), February 16, 2023
• WTO director general: dispute settlement reform a ‘priority’, Reuters, February 13, 2023 [Paywall]
• IPEF Negotiators Eye Partial Accord by Late May, Jiji Press, February 12, 2023