WTO remedies for Trump's tariffs:

A case of barking at the wrong tree?

Delroy Beckford

Sunday, April 08, 2018

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The dust is not yet settled on the likely impact of imposed tariffs on steel and aluminium by the Donald Trump-led Administration in the US, but there are already signs that the World Trade Organization (WTO) may be faced with the issue of resolving the dispute.

China has now responded with its own counter-tariffs, and though this is but a fraction of the value of trade against China by the US tariffs, as announced by the Trump Administration, the counter-punch is seen as signs of the beginning of a trade fight even if it is but a mild hit.

But China has gone farther by enlisting the assistance of an independent arbiter, the WTO, indicating that it does not want a fully blown face-to-face fight if it can avoid it.

Recently, China notified the WTO of its request for consultations with the US — the first step before a request for the establishment of a dispute settlement panel if there is no resolution of the issue at this stage. In its notification, China has characterised the tariffs as a safeguard measure under the WTO Agreement on Safeguards noting that the requirements for such a measure have not been met and seeks compensation for the US's breach of this agreement.

This agreement permits compensation for countries affected by tariffs raised above agreed tariff ceilings.

China's classification of the tariffs as a safeguard measure is apparently to avoid having to deal with jurisdictional issues inherent in the national security exception justification. But the choice relates also to the fact that safeguard measures are the easiest to challenge successfully.

A safeguard measure allows countries to increase tariffs beyond agreed tariff ceilings if there is a surge in imports causing injury to a domestic industry. But most of these measures imposed by countries have been struck down by the WTO as not in compliance with Agreement on Safeguards.

For starters, safeguard measures must be applied on a non-discriminatory basis. The exceptions proposed for the tariffs to particular countries is a breach of the Safeguards Agreement already, and provides one clear basis on which the measure can be struck down, assuming that this measure is properly regarded as a safeguard measure.

But this approach carries with it a catch-22 situation. A safeguard measure can also be defended by exceptions in the WTO agreement which include the national security exception. So this issue will be faced head on.

Given that the US measure has been justified under the national security exception, it is doubtful that its characterisation as a safeguard measure will carry much weight. That the US has not classified the move as a safeguard measure is unsurprising since it did not result from a safeguard investigation.

If consultations do not resolve the issue, whether in terms of the classification of the measure or requested compensation, a dispute settlement panel will likely be established to resolve the dispute.

Other countries affected by the tariffs have not made any notifications to the WTO in respect of consultations over this measure, indicating either that the issue is to be resolved by diplomacy or, if a panel is to be established, to join the dispute as third parties.

True enough, if there is no violation of the agreement, consideration may be given to a non-violation complaint, whereby compensation is requested for benefits nullified or impaired by conduct which is not itself a breach of the WTO agreement.

But compensation is usually addressed after failure to comply with a ruling of a breach and for withdrawal of the offending measure within a reasonable period. This case is so far different. Self-help has crept into the game and both parties are pursuing their own unilateral remedies of retaliation.

This development is not surprising given that a WTO ruling on compensation usually takes many years after the complaint is first filed, and goes through the expected judicial process of an appeal and arbitration to determine the amount of compensation.

Added to this is the fact that compensation usually does not cover the period from when the breach occurred but is primarily limited to the period after a ruling on when the offending measure is to be withdrawn.

In the more difficult case of a non-violation complaint, the complaint would refer to a situation alleging that the measure in question nullifies and impairs benefits, even though there is no breach of any specific WTO agreement. The argument here would be that the spirit of the agreement is breached in terms of the reasonable expectations for trade liberalisation.

The problem with this approach is that successful non-violation complaints are rare in the WTO legal order, let alone providing an award for compensation arising from such claims.

This may suggest that the WTO is not the place to go. On this view we may have a crisis in the making. If this dispute is to represent the development of an acceptable precedent of how countries should behave when hit with unilateral measures, developing countries with less bargaining power may stand to lose more from this approach.

It may be that it is premature to predict this as an inevitable outcome. But we are usually cautioned that the General Agreement on Tariffs and Trade (GATT)/WTO legal framework was initially conceived of for countries primarily of the Western bloc with similar economic, social and political institutions and security concerns. Diverse membership has presented its own challenges with the increased likelihood of actions taken which are not in accord with the shared values of the initial members.

Nonetheless, developing countries affected by the measure may choose to get involved or watch by the sidelines. Both approaches have their pros and cons. The ability to shape the jurisprudence going forward on these issues is not insignificant, suggesting their joining the dispute as third parties. The likely backlash by the US on trade and non-trade issues regarding aid and so on may counsel non-involvement, let alone those developing countries benefiting from the exceptions proposed.

But it may be that getting involved is not to be discounted even with the associated disadvantages. Regional trade agreements formed by developing countries usually contain a national security exception. This is the case with the Revised Treaty of Chaguaramas governing Caricom trade, the Caricom-Costa Rica Free Trade Agreement, and also with the cases of North American Free Trade Agreement (NAFTA), to name a few.

Clarification on the scope of such exceptions and the implications for compensation would doubtless bear fruit in how such a provision is to be interpreted and applied in regional trade agreements so as to avoid abuse.

A tempered approach may suggest presenting arguments not on the merits or not of the dispute, but on the question of the compensation that is due for 'nullification or impairment of benefits'. Again, this would be on the premise that there is no breach of any particular agreement as such.

It remains to be seen whether the approach adopted by developing countries in this dispute is that of ants amidst the tussle of elephants.

Dr Delroy S Beckford is a Fulbright scholar, attorney-at-law, and adjunct lecturer in the Faculty of Law, The University of the West Indies, Mona. He is the author of Power and Judicial Activism in the WTO: The Appellate Body's Interpretation of Trade Remedy Agreements . Send comments to the Observer or

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