Wednesday, July 4, 2012

Security interests, WTO and domestic policy space

The question of the balance between domestic policy space and following multlilateral treaty obligations has often been a topic in my blog. An article titled "The Self-Judging WTO Security Exception" by Roger Paul Alford in the Utah Law Review on the use of the 'Security exception" under GATT which explores this debate in the context of Artice XXI of GATT in great detail provides a brilliant overview of the issue. To what extent does Article XXI give a country the freedom to impose restrictions that hinder free trade? Is it an unrestricted right? Is it "self-judging" or based on objective criteria? Who decides (the member country or the Dispute Settlement Body) as to the necessity and desirability of the measure? Is the exception open to abuse? What has been the practice of countries in this regard? Can the threat of a "national security" issue be misused as a protectionist tool? Can it be used to pursue an ideological agenda in international relations?

Article XXI of the GATT states:
"Security Exceptions 
          Nothing in this Agreement shall be construed
(a)      to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b)      to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
(i)       relating to fissionable materials or the materials from which they are derived;
(ii)      relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii)     taken in time of war or other emergency in international relations; or
(c)      to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security."
The provision itself provides wide latitude to a member to take measures inconsistent with WTO obligations "which it considers" necessary for the protection of its essential security interests. The article makes a detailed analysis of the use of this provision and its challenge at the DSM of the WTO. Contrary to fears of its possible abuse and extensive use, State practice indicates that it has not been invoked too often. Further it has never been a subject of a WTO dispute though many countries could have justified some of their measures under this exception. The author asks some pertinent questions regarding the lack of abuse of this provision:
"The general and consistent practice of complying with a self-judging rule raises larger issues beyond the WTO. While the self-judging nature of Article XXI remains contested, it is undeniable that it has been invoked at the sole discretion of the Member States. As such, it provides a useful prism through which to consider theories of international law compliance. Unlike almost every other aspect of the WTO, there is no obvious sanction for ignoring its textual limits. So why does a State typically invoke Article XXI(b)(ii) to restrict military and dual-use goods, but not purely civilian products? Why does a State not declare virtually every crisis—economic, political, social, or military—an “emergency in international relations” under Article XXI(b)(iii)? Why does a State not consider virtually any national policy an “essential security interest”? With billions of dollars at stake in WTO litigation,350 why not invoke the security exception in bad faith? In short, what is to prevent Article XXI from becoming the exception that swallows the rule?"
Explaining the various theories of compliance to international law and its juxtaposition to the limited use of the security exception the article tends to view that the exception to be not abused in good faith. 
" The WTO security exception carries forward Adam Smith’s great insight: defense is more important than free trade. The security exception is an anomaly, a unique provision in international trade law that grants the Member States freedom to avoid trade rules to protect national security. In the long history of GATT and the short history of the WTO, that freedom has never been challenged seriously. Member States understand the exception to be self-judging, and presume that it will be exercised with wisdom and in good faith.
Thus far, the record has been impressive. While no doubt there have been departures, the self-judging security exception has worked reasonably well. It certainly has not undermined the effective functioning of the WTO. The overwhelming majority of security measures are unregulated by international trade law, and those few that have been challenged were never reviewed. International trade law, viewed by many as the most effective and intrusive branch of international law, has preserved one enclave of complete national sovereignty. There are many possible explanations for its success. Its ambit is sufficiently broad to cover most security concerns, and it is reinforced by other WTO provisions that facilitate compliance.
A self-judging rule that Member States honor provides helpful insights into broader questions regarding nations obeying other international laws. Any number of theories, including traditional normative theories of compliance, and more controversial rational choice theories that focus on national self-interest, can explain the strong compliance record. The one theory that has little explanatory power is a pure coercion theory. Whatever may be motivating Member States to respect the limits of the security exception, it is not fear of sanction."
A recent example of a ban on exports due to a possible security exception was seen in the case of the EU ban on exports of luxury items to Syria about which I have blogged here. Is the fact that the security exception has not been misused so far by any country to advance protectionist measures is in itself a guarantee for the future? With the trend of increased protectionist measures, is there a danger that this provision will be open to "innovative" interpretation to justify countries' measures? Does "essential security interests" include "economic interests" ? Who defines what the contours of this "economic interest' is? Are there objective criteria to do so? Is the exception "self judging" or subject to DSM judicial review? To what extent can the judicial review question the rationale of a domestic policy choice? Would an over authoritative judicial body undermine compliance? Would it be reasonable to argue that it is in a countries economic interest to protect its domestic industry? Only time will tell if this exception becomes the rule?


Anonymous said...

Here's another interesting article examining security law in both investment law and WTO law:

Srikar said...

Thanks for this extremely relevant piece. I quote from it:

"This understanding of the essential security provision is grounded in the widely-shared concern
over the abuse of GATT Article XXI. The Czechoslovakian delegation to a GATT Council Meeting, for
example, warned that any state wanting to justify illegal trade measures could do so if Article XXI was
to be construed broadly.78 Perhaps due to such anxiety, states have collectively refrained from invoking
Article XXI as a defense to breaching trade agreements.79 The best evidence of this reservation is the
fact that there is still no GATT or WTO case law construing the meaning of Article XXI.80 There is not
even a consensus as to whether the invocation of Article XXI is reviewable by the WTO Dispute
Settlement Body. Such reservation is notable since states have repeatedly invoked Article XX’s general
exception clause in several important cases, including U.S.-Shrimp, Korea-Beef, and EC-Asbestos."

I wonder if the Syrian case as well as the Iranian Oil Sanctions on third parties will ever reach the WTO?

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