The reliance of the Trump administration on Section 232, the national security provision under the Trade Expansion Act of 1962, to impose trade restrictions on import of steel and aluminum, would certainly run into very serious WTO challenges.  This defense by the U.S. in the WTO most likely would lead to blowing up the WTO.

  The possibility of this has been heightened by the recent determination by the Dept. of Commerce recommending to President Trump to take a range of retaliatory trade actions based on this provision concerning steel and aluminum imports.

      In the WTO’s dispute resolution procedure the United States would have to rely upon the almost never-used defense of the “security exception” provided under Article XXI of the GATT agreement.  The U.S. did offer this defense in the older GATT case, never finalized by an adopted panel report, brought by Nicaragua in the 1980s.  Bahrain has recently stated its intention to rely upon this same defense in the new case brought by Qatar against Bahrain over its trade embargo.

   No matter what the outcome would be over the U.S. defense of national security, if either it is upheld or rejected, the outcome would not be pretty. In fact, it would be an unmitigated disaster.

     Why?

     If upheld the WTO decision would allow other countries to potentially take trade actions under Gatt Article XXI. For example, China could argue its Internet rules and various export controls of minerals are for the protection of its national security. The Russian Federation could argue that it could impose restrictions on trade with the EU because of its trade sanctions over the Ukraine and this would be a valid exercise of Russia’s rights of the national security exception.  

      If the U.S. loses this major case undoubtedly the Trump administration would never honor its obligation to comply with the decision.

     Here you would have the major architect of the WTO and its dispute resolution system rejecting the core aspects of today’s global system. That’s certainly not good. 

     By the way Article XXI has requirements that the U.S. most likely could not meet in its defense. For example, trade restrictions such as higher tariffs or trade sanctions, need to be in protection of “essential security interests …. or taken in time of war or other emergency in international relations.” There is a global glut of steel and aluminum. The U.S. is not in a time of war or other international relations emergency.

     Added to this the Trump’s administration’s public contemplation of declaring a “national emergency” under the International  Emergency Economic Powers Act of 1977, concerning China’s restrictions on intellectual property right, the situation becomes even more bizarre. There is simply no national emergency concerning intellectual property rights. U.S. firms are free to enter into joint ventures in China or not to enter into such business relationships that involves licensing of technology. This is really a matter of global corporate strategy.

     That law provides the President to regulate commerce after declaring a “national emergency” in response to any unusual and extraordinary threat to the United States which has a foreign source. While administrations have relied upon this, often in cases involving foreign military actions, no administration considered violation of intellectual property rights as a national emergency. This would most certainly also be rejected by the WTO.

     In addition, the U.S. Supreme Court in  the seminal cases of Curtis Wright (1936), Youngstown (1952), and Dames & Moore (1981)  make it clear that the President has no inherent authority as commander-in-chief to  impose embargoes or to take other actions relating to commerce. Authorizing these actions are within the exclusive authority of the Congress. The President can only act pursuant to a delegation of authority in these areas. Thus, the Presidents determination of “national security” under Section 232 or “national emergency” under the IEEPA is  reviewable by the federal courts.

     Federal courts have consistently upheld their right to review executive actions in light of the executive’s claims of foreign policy and national security. Just look at the recent wave of decisions concerning review of President Trump’s immigration decisions. Just recall the Supreme Court’s review of post-9/11 cases concerning detainees rights and the right of habeas corpus.

     This entire scenario of possible reliance on national security or a national emergency to impose U.S. trade restrictions because of concerns over steel and aluminum imports or transfer of intellectual property rights, foreshadows a potential trade disaster of the first order. One that U.S. economic history and trade diplomacy have not seen since the founding of the post-war international economic order.