Is commercial and economic cyber espionage by China subject to valid counter-measures by the U.S. under the WTO — specifically under GATT Article XXI that allows trade restrictions  to protect national security? What about more limited responses under the TRIPS agreement  to protect intellectual property rights?

These are intriguing questions. They may be the next big trade questions involving cybersecurity and economic espionage for commercial gain.

The  annual report by the Office of the Counterintelligence Executive (November 2011) entitled “Foreign Spies Stealing U.S. Economic Secrets in Cyberspace” declares “Foreign economic collection and industrial espionage against the United States represent significant and growing threats to the nation’s prosperity and security.”

Article XXI of the GATT 1947 governing “security exceptions”  provides  that nothing in the WTO rules “prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.“

Does Article XXI mean that the U.S. can impose restrictions on Chinese trade and investment that it considers necessary to restrict Chinese government-sponsored cyber espionage which it deems harmful to the national security of the U.S.? Maybe so.

But when cyber espionage does not rise to the level of endangering national security a U.S. trade response may still be valid, to enforce the obligations of the TRIPS Agreement. Which agreement obviously did not envision an active government role to violate the intellectual property rights of foreign companies for the gain of domestic firms.

TRIPS requires as a general obligation under the “national treatment principle” (Article III) that a country “shall accord to the nationals of other Members treatment no less favourable than it accords to its own nationals ….” Providing government-sponsored commercial intelligence to it own firms amounts to giving its own nationals a more favorable treatment, to say the least.

The U.S. Economic Espionage Act of 1996 is a major player in this discussion. This predates Chinese and Russian commercial espionage. This probably needs to be updated somewhat.

We may be seeing a whole new era of trade relations and WTO dispute resolution emerging and just over the horizon.  One involving national security and cyber espionage. And not just involving China. Welcome to the 21st century.