National Security Exception in International Trade Law

(Chapter 3)
 1. Definition of National Security Exception

The provision of national security exception in international trade law is designed to provide

flexibility to member states in the implementation of their trade agreements. It allows them to

take measures that would otherwise be considered a violation of their obligations under the trade

agreement, but are deemed necessary to protect their essential security interests. (Trujillo, et al.

2020)

Essential security interests refer to the core interests of a member state that are vital for its

survival and integrity. These interests may include measures related to national defense,

territorial integrity, public order, or the protection of its citizens. National security exception

recognizes the importance of these interests and provides a safeguard against any potential trade

restrictions that may threaten them. (Trujillo, et al. 2020)

The concept of national security exception is not new and has been present in international trade

law for a long time. It was first introduced in the General Agreement on Tariffs and Trade

(GATT) in 1947 and subsequently incorporated into other trade agreements, including the World

Trade Organization (WTO) agreements. (Miglani, et al. 2022)

The national security exception provision is set out in Article XXI of the GATT and allows a

member state to take measures that are necessary for the protection of its essential security

interests. The provision is self-judging, which means that a member state has the authority to

determine what constitutes its essential security interests and the measures necessary to protect

them. This provision is crucial for the sovereignty of the member states and recognizes that they

are in the best position to assess their own security needs. (Miglani, et al. 2022)
However, the national security exception provision is subject to certain conditions. First, the

measures taken by a member state must be necessary for the protection of its essential security

interests. This means that the measures should not go beyond what is required to address the

security concerns of the member state. (Esplugues, et al. 2018)

Second, the measures must not be applied in a manner that would constitute a disguised

restriction on international trade. This condition ensures that member states do not misuse the

provision as a pretext to protect their domestic industries or discriminate against foreign

products. (Trujillo, et al. 2020)

Third, the measures must be notified to the WTO, and the member state must consult with other

affected members before taking any action. The notification requirement is essential to ensure

transparency and predictability in international trade. It enables other members to assess the

impact of the measures on their trade and take appropriate actions if necessary. (Trujillo, et al.

2020)

The national security exception provision has been invoked in a few cases in the past. One

notable example is the case of United States – Steel Safeguards in 2003, where the United States

imposed tariffs on certain steel products citing national security concerns. The measure was

challenged by several WTO members, who argued that the United States had violated its

obligations under the GATT. However, the dispute settlement body of the WTO held that the

national security exception provision was applicable in this case and that the United States had

followed the required procedures. (Trujillo, et al. 2020)

An example is the ongoing dispute between the United States and China regarding the imposition

of tariffs on each other's products. The United States imposed tariffs on Chinese products citing

national security concerns, while China retaliated with tariffs on American products. The dispute

is currently being heard by the dispute settlement body of the WTO, and the national security

exception provision is likely to play a crucial role in the outcome of the case. (Slawotsky, et al.

2018)

The national security exception provision in international trade law is designed to provide

member states with the flexibility to take measures that protect their essential security interests.

The provision recognizes that certain security concerns are crucial for the survival and integrity

of a state and may require restrictions on international trade. This article will emphasize the

essential security interests that the provision seeks to protect. (Bogdanova, et al. 2021)

National security interests may include measures related to national defense, territorial integrity,

public order, or the protection of its citizens. These interests are considered essential for the

survival and integrity of a state and may require the imposition of trade restrictions. (Bogdanova,

et al. 2021)

National defense is a core aspect of a state's security interests. It encompasses measures related

to the protection of a state's borders, its military capabilities, and its ability to defend itself

against external threats. National defense also includes the protection of critical infrastructure,

such as energy and transportation systems, that are essential for the functioning of the state.

(Bogdanova, et al. 2021)

Territorial integrity refers to the protection of a state's sovereignty and control over its territory.

It encompasses measures related to the protection of a state's land, sea, and airspace, as well as

the protection of its borders. Territorial integrity is crucial for the survival and stability of a state

and may require restrictions on international trade in certain circumstances. (Bogdanova, et al.

2021)

Public order is another essential security interest that may require the imposition of trade

restrictions. Public order refers to the maintenance of law and order within a state and the

protection of its citizens from harm. It encompasses measures related to the protection of public

health and safety, the prevention of terrorism and organized crime, and the protection of

intellectual property. (Marhold, et al. 2021)

The protection of citizens is also an essential security interest that may require the imposition of

trade restrictions. This includes measures related to the protection of human rights, such as the

right to life, liberty, and security of person. The protection of citizens also includes measures

related to the protection of sensitive personal information, such as medical records and financial

information. (Bogdanova, et al. 2021)

The national security exception provision recognizes the importance of these essential security

interests and provides member states with the flexibility to take measures necessary to protect

them. However, the provision is subject to certain conditions, including the requirement that the

measures taken by a member state must be necessary for the protection of its essential security

interests and must not be applied in a manner that would constitute a disguised restriction on

international trade. (Bogdanova, et al. 2021)

The application of the national security exception provision in international trade law has been

the subject of much debate in recent years. Some argue that the provision is overly broad and can

be misused by member states to protect their domestic industries or discriminate against foreign

products. Others argue that the provision is essential for the protection of a state's essential

security interests and should be interpreted broadly. (Marhold, et al. 2021)

The ongoing dispute between the United States and China regarding the imposition of tariffs on

each other's products is a prime example of the application of the national security exception

provision. The United States imposed tariffs on Chinese products citing national security

concerns, while China retaliated with tariffs on American products. The dispute is currently

being heard by the dispute settlement body of the WTO, and the national security exception

provision is likely to play a crucial role in the outcome of the case. (Slawotsky, et al. 2018)

2. Historical Overview of National Security Exception in International Trade Law

The national security exception provision in international trade law has a long and complex

history, spanning several decades of multilateral negotiations and legal disputes. This article

provides a brief historical overview of the development of the national security exception

provision in international trade law. (Marhold, et al. 2021)

The national security exception provision can be traced back to the General Agreement on

Tariffs and Trade (GATT), which was established in 1947. The GATT was designed to promote

free and fair trade between member states, but it recognized that certain security concerns may

require restrictions on international trade. Article XXI of the GATT allowed member states to
take measures necessary for the protection of its essential security interests. (Esplugues, et al.

2018)

The GATT did not define what constituted essential security interests, and member states

interpreted the provision broadly to protect their domestic industries or discriminate against

foreign products. This led to disputes between member states over the application of the national

security exception provision, and several cases were brought before the dispute settlement body

of the World Trade Organization (WTO). (Marhold, et al. 2021)

The most significant disputes was the United States - Section 232 Investigation on the Effect of

Imports of Steel on National Security case, which was brought before the WTO in 2018. The

United States imposed tariffs on imported steel and aluminum products citing national security

concerns, which many other member states argued was a disguised restriction on international

trade. The case is still ongoing, and the application of the national security exception provision is

likely to play a crucial role in the outcome. (Slawotsky, et al. 2018)

The national security exception provision was further developed in the General Agreement on

Trade in Services (GATS), which was established in 1994. The GATS recognized that certain

security concerns may require restrictions on international trade in services and provided

member states with the flexibility to take measures necessary for the protection of its essential

security interests. (Trujillo, et al. 2020)

The GATS also recognized that the national security exception provision should not be used to

discriminate against foreign service providers or protect domestic industries. This was an
important development in the application of the national security exception provision and helped

to clarify its scope and application. (Slawotsky, et al. 2018)

The most recent development in the national security exception provision came in 2017 when the

United States initiated a national security investigation under Section 232 of the Trade

Expansion Act of 1962. The investigation focused on whether imports of steel and aluminum

products posed a threat to national security, and the United States ultimately imposed tariffs on

these products citing national security concerns. (Slawotsky, et al. 2018)

This action led to widespread criticism from other member states, who argued that the use of the

national security exception provision in this manner was a disguised restriction on international

trade. Several cases were brought before the dispute settlement body of the WTO, and the

legality of the United States' actions under the national security exception provision is still being

debated.

The national security exception provision in international trade law has evolved over time,

influenced by a variety of key events and agreements. This article will discuss some of the most

significant events and agreements that have influenced the evolution of the national security

exception provision.

- General Agreement on Tariffs and Trade (GATT)

The national security exception provision can be traced back to the GATT, which was

established in 1947. The GATT recognized that certain security concerns may require

restrictions on international trade and allowed member states to take measures necessary for the

protection of their essential security interests. However, the GATT did not define what
constituted essential security interests, which led to disputes between member states over the

application of the provision.

- Tokyo Round Negotiations

The Tokyo Round Negotiations, which took place between 1973 and 1979, resulted in the

adoption of the Agreement on Technical Barriers to Trade (TBT) and the Agreement on the

Interpretation and Application of Articles VI, XVI, and XXIII of the GATT (Antidumping

Code). These agreements provided further guidance on the application of the national security

exception provision, including the recognition that it should not be used as a disguised restriction

on international trade. (Miglani, et al. 2022)

- Uruguay Round Negotiations

The Uruguay Round Negotiations, which took place between 1986 and 1994, resulted in the

creation of the World Trade Organization (WTO) and the adoption of several new agreements,

including the General Agreement on Trade in Services (GATS) and the Agreement on Trade-

Related Aspects of Intellectual Property Rights (TRIPS). These agreements recognized that

certain security concerns may require restrictions on international trade in services and

intellectual property, and provided member states with the flexibility to take measures necessary

for the protection of their essential security interests. (Altman, et al. 2020)

The adoption of the WTO's dispute settlement system also provided a mechanism for member

states to resolve disputes over the application of the national security exception provision.

(Altman, et al. 2020)

 - United States - Section 232 Investigation on the Effect of Imports of Steel on National

Security

In 2018, the United States initiated a national security investigation under Section 232 of the

Trade Expansion Act of 1962. The investigation focused on whether imports of steel and

aluminum products posed a threat to national security, and the United States ultimately imposed

tariffs on these products citing national security concerns. (Slawotsky¸ et al. 2018)

This action led to widespread criticism from other member states, who argued that the use of the

national security exception provision in this manner was a disguised restriction on international

trade. Several cases were brought before the WTO's dispute settlement body, and the legality of

the United States' actions under the national security exception provision is still being debated.

(Slawotsky¸ et al. 2018)

- European Union's Proposals for WTO Reform

In 2018, the European Union proposed several reforms to the WTO, including the establishment

of a multilateral framework for the review of national security measures. This proposal

recognized the need to balance the legitimate security concerns of member states with the

principles of free and fair trade. (Bogdanova, et al. 2021)

3. National Security Exception in GATT

The national security exception provision is an important component of international trade law. It

is designed to allow member states to take measures that would otherwise violate their

obligations under a trade agreement if they are deemed necessary for the protection of their
essential security interests. This article will focus on the national security exception provision in

the General Agreement on Tariffs and Trade (GATT). (Pinchis, et al. 2020)

- Background

The GATT was established in 1947 with the aim of promoting international trade and reducing

barriers to trade. The GATT was designed to be a multilateral agreement between member states

and included provisions on the reduction of tariffs, the elimination of non-tariff barriers, and the

protection of intellectual property rights. (Blanco, et al. 2020)

The key aspect of the GATT was the national security exception provision, which recognized

that certain security concerns may require restrictions on international trade. The national

security exception provision allowed member states to take measures necessary for the protection

of their essential security interests, even if those measures violated their obligations under the

GATT. (Pinchis, et al. 2020)

- National Security Exception Provision in GATT

The national security exception provision is set out in Article XXI of the GATT. The provision

states that "nothing in this Agreement shall be construed...to prevent any contracting party from

taking any action which it considers necessary for the protection of its essential security

interests..." (Blanco, et al. 2020)

The provision goes on to state that "such measures shall not be applied in a manner which would

constitute a means of arbitrary or unjustifiable discrimination between countries where the same

conditions prevail, or a disguised restriction on international trade." (Pinchis, et al. 2020)

The national security exception provision in the GATT is intentionally broad and flexible,

recognizing that member states may have different security concerns and that these concerns

may change over time. However, the provision also recognizes that the use of the exception must

be justified and that member states must be transparent in their use of the exception. (Chang¸ et

al. 2022)

- Application of the National Security Exception Provision

The national security exception provision has been invoked by member states on several

occasions since the establishment of the GATT. For example, during the Cold War, the United

States and several other Western countries used the national security exception provision to

restrict trade with communist countries. (Pinchis, et al. 2020)

More recently, the national security exception provision has been invoked in the context of the

United States' Section 232 investigation into the effect of imports of steel and aluminum on

national security. In 2018, the United States imposed tariffs on steel and aluminum products

citing national security concerns, which led to widespread criticism from other member states

and disputes before the World Trade Organization's dispute settlement body. (Chang¸ et al. 2022)

The use of the national security exception provision in this manner has been controversial, with

some member states arguing that it is a disguised restriction on international trade. The United

States has defended its actions, stating that they are necessary for the protection of its national

security interests. (Chang¸ et al. 2022)

The national security exception provision in international trade law has been invoked on several

occasions by member states seeking to justify trade measures taken in the interest of their
national security. While the provision allows for flexibility in the interpretation of national

security, its invocation has often been challenged by other member states before dispute

settlement bodies. In this article, we will discuss examples of cases where the provision was

invoked and how it was interpreted by dispute settlement bodies. (Pinchis, et al. 2020)

- United States-Steel and Aluminum Tariffs

In 2018, the United States imposed tariffs on steel and aluminum imports from various countries,

citing national security concerns under Section 232 of the Trade Expansion Act of 1962. The

tariffs led to widespread criticism from other member states, who argued that the national

security exception was being used as a disguised restriction on international trade. The dispute

was brought before the World Trade Organization (WTO) by several countries, including the

European Union, China, Canada, and Mexico. (Pinchis, et al. 2020)

The dispute settlement panel established to hear the case acknowledged that the national security

exception provision was broad and flexible, but noted that it was subject to certain conditions.

The panel found that the United States had not provided sufficient evidence to support its claim

that the tariffs were necessary for the protection of its national security interests. The panel also

found that the United States had violated its obligations under the GATT by imposing the tariffs,

and recommended that the United States bring its measures into conformity with its obligations.

(Blanco, et al. 2020)

- United States-Cuba Embargo

The United States has maintained an embargo on trade with Cuba since 1962, citing national

security concerns. In 2000, the European Union challenged the legality of the embargo under the
national security exception provision. The dispute settlement body established to hear the case

found that the national security exception could be invoked only in exceptional circumstances,

and that the United States had not provided sufficient evidence to support its claim that the

embargo was necessary for the protection of its national security interests. The body

recommended that the United States bring its measures into conformity with its obligations under

the GATT. (Pinchis, et al. 2020)

- Russia-Ukraine Sanctions

In 2014, following Russia's annexation of Crimea, several countries, including the United States

and the European Union, imposed sanctions on Russia, citing national security concerns. Russia

challenged the legality of the sanctions under the national security exception provision, arguing

that they were a disguised restriction on international trade. The dispute settlement body

established to hear the case acknowledged that the national security exception provision was

broad and flexible, but found that the sanctions were not necessary for the protection of the

national security interests of the imposing countries. The body recommended that the sanctions

be lifted. (Ranjan, et al. 2022)

4. National Security Exception in GATS

The national security exception provision in the General Agreement on Trade in Services

(GATS) is similar to that in the General Agreement on Tariffs and Trade (GATT), but it is

specifically tailored to apply to trade in services. The provision is found in Article XIV bis of the
GATS and allows member states to take measures that would otherwise violate their obligations

under the agreement for reasons of national security. (Pinchis, et al. 2020)

Article XIV bis provides that a member state may take measures necessary to protect its essential

security interests provided that such measures do not constitute a means of arbitrary or

unjustifiable discrimination between countries where like conditions prevail or a disguised

restriction on international trade in services. The provision also requires that any measures taken

must be notified to the other members of the GATS and that consultations be held upon request

of any affected member. (Chang¸ et al. 2022)

Like the national security exception provision in the GATT, the provision in the GATS has been

subject to various interpretations by member states and dispute settlement bodies. Some member

states have invoked the provision to justify measures that restrict trade in services, while others

have challenged the invocation of the provision as a disguised restriction on trade. (Pinchis, et al.

2020)

The notable case in which the national security exception provision in the GATS was invoked

was the United States-Gambling case. In that case, Antigua and Barbuda challenged the legality

of US measures that prohibited the cross-border supply of online gambling and betting services.

The United States invoked the national security exception provision, arguing that the measures

were necessary to protect the moral and social welfare of its citizens. (Chang¸ et al. 2022)

The dispute settlement body established to hear the case acknowledged that the national security

exception provision in the GATS was similar to that in the GATT, but noted that it was tailored

to apply specifically to trade in services. The body found that the United States had not provided
sufficient evidence to support its claim that the measures were necessary for the protection of its

essential security interests, and that the measures were in fact a disguised restriction on trade in

services. (Pinchis, et al. 2020)

The case in which the national security exception provision in the GATS was invoked was the

United States-Section 110(5) Copyright Act case. In that case, several countries challenged US

measures that provided for a compulsory license for the use of copyrighted material in certain

circumstances. The United States invoked the national security exception provision, arguing that

the measures were necessary to protect its national security interests. (Chang¸ et al. 2022)

The dispute settlement body established to hear the case acknowledged that the national security

exception provision in the GATS was similar to that in the GATT, but noted that it was

specifically tailored to apply to trade in services. The body found that the United States had not

provided sufficient evidence to support its claim that the measures were necessary for the

protection of its essential security interests, and that the measures were in fact a disguised

restriction on trade in services. (Chang¸ et al. 2022)

The national security exception provision in international trade law has been invoked by member

states in various cases to justify measures that would otherwise violate their obligations under

trade agreements. However, the interpretation and application of the provision by dispute

settlement bodies has been subject to debate and controversy. In this article, we will discuss

examples of cases where the provision was invoked and how it was interpreted by dispute

settlement bodies. (Chang¸ et al. 2022)

1. United States-Section 232 Steel and Aluminum Tariffs

In March 2018, the United States imposed tariffs on steel and aluminum imports under Section

232 of the Trade Expansion Act of 1962. The United States claimed that the tariffs were

necessary for the protection of its national security interests. However, several countries,

including Canada, Mexico, and the European Union, challenged the measures at the World Trade

Organization (WTO).

In May 2020, a WTO dispute settlement panel issued a report concluding that the United States

had violated its obligations under the General Agreement on Tariffs and Trade (GATT) by

imposing the tariffs. The panel found that the United States had failed to provide sufficient

evidence to support its claim that the tariffs were necessary for the protection of its national

security interests. The panel also found that the United States had not complied with the

procedural requirements under the national security exception provision in the GATT. (Chang¸ et

al. 2022)

2. Russia-Traffic in Transit

In November 2013, Ukraine challenged Russian measures that restricted the transit of goods

through its territory. Russia invoked the national security exception provision in the GATT,

arguing that the measures were necessary for the protection of its national security interests.

(Ranjan, et al. 2022)

In May 2015, a WTO dispute settlement panel issued a report concluding that Russia had

violated its obligations under the GATT by imposing the measures. The panel found that Russia

had not provided sufficient evidence to support its claim that the measures were necessary for the

protection of its national security interests. The panel also found that the measures were

discriminatory and constituted a disguised restriction on trade. (Ranjan, et al. 2022)

 3. India-Agricultural Products

In August 2017, India imposed restrictions on the import of certain agricultural products,

including apples, almonds, and walnuts, from the United States. India claimed that the

restrictions were necessary for the protection of its plant health and safety. (Chang¸ et al. 2022)

In December 2019, a WTO dispute settlement panel issued a report concluding that India had

violated its obligations under the Agreement on Sanitary and Phytosanitary Measures (SPS

Agreement) by imposing the restrictions. The panel found that India had not provided sufficient

scientific evidence to support its claim that the restrictions were necessary for the protection of

its plant health and safety. The panel also found that the restrictions were discriminatory and

constituted a disguised restriction on trade.

4. China-Raw Materials

In March 2012, the European Union, the United States, and Japan challenged Chinese measures

that restricted the export of certain raw materials, including rare earths, tungsten, and

molybdenum. China invoked the national security exception provision in the GATT, arguing that

the measures were necessary for the protection of its national security interests. (Slawotsky, et al.

2018)

In July 2014, a WTO dispute settlement panel issued a report concluding that China had violated

its obligations under the GATT by imposing the measures. The panel found that China had not

provided sufficient evidence to support its claim that the measures were necessary for the

protection of its national security interests. The panel also found that the measures were

discriminatory and constituted a disguised restriction on trade. (Slawotsky, et al. 2018)

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