The tariff war has reached the multilateral trade body - the World Trade Organization.
Canada and China have chosen the dispute settlement route for the moment to take on the issue of tariffs imposed by the United States. Requesting consultation is the first stage of the dispute settlement procedure.
What are Canada's main grounds in the request for consultations relating to violations of GATT (they had a Trade Facilitation Agreement violation argument too):
1. The US has imposed an ad valorem duty of 25% on non-energy goods from Canada and 10% on energy goods. These are tariffs in addition to what the US imposes according to its tariff schedule under the GATT commitments. This fails the MFN test.
2. The treatment to Canadian goods are less favourable than what the US GATT commitments are.
3. They are in excess of the bound rates that the US committed at the WTO
And here are China's main grounds for seeking consultation:
1. The 10% additional tariff on all goods from China fails the MFN test.
2. It is in excess of the bound rates of the US committed at the WTO.
3. They are protectionist and discriminatory.
Will the national security exception under Article XII GATT come to the rescue as the measures are allegedly related to the national emergency of "alleged influx of synthetic opioids into the United States"?
What is teh security exception?
Article XXI
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.
Is a "self-judging" exception going to be tested again in the panel? Will it be an appeal in the void again later? I had blogged about the self-judging nature of the exception here.