Why Is The World Trade Organization On The Sidelines During The Ukrainian Crisis?

 
on March 18 2014 3:01 PM
  • Ukraine women protesters
    Ukraine women protesters Reuters
  • Ukraine
    Pro-Russian demonstration at Simferopol’s Lenin Square. Avedis Hadjian
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Ukraine, Russia, the United States, and each of the member states of the European Union are all Members of the World Trade Organization (WTO).  They are bound by mutual trade obligations under the WTO treaty as a matter of international law. Yet they are imposing trade embargoes, considering trade sanctions and contemplating other restrictive trade measures as economic leverage in the heat of the current crisis. Why doesn’t the WTO step in to stop them?

First of all, the WTO has no legal authority to intervene in this crisis. In reality, the WTO is only 160 countries working together as something they choose to call the WTO. The few hundred people who work at the place called the WTO in Geneva can act in this instance only if a WTO member files a formal legal complaint in a dispute settlement.

So far, no one has done so. Geopolitics has, to date, trumped the mundane dealings of mere trade. To trigger WTO action, could the United States, as some have suggested, file a WTO lawsuit challenging the tightening vice of Russian trade restrictions on Ukraine? No. Those restrictions have been imposed on the trade of Ukraine.

Under WTO rules, Ukraine alone can challenge their impact on Ukraine in the WTO.  If it chose to pursue such a challenge, Ukraine would, as one example, have a strong WTO case against Russian limits on imports of Ukrainian pork products.  Ukraine could have other have other solid legal claims against Russia as well in WTO dispute settlement -- if Ukraine decided to make them.

Further, and foremost in sidelining the WTO at this time, is the existence of a capacious national security exception to the general obligation of all WTO members not to discriminate in their international trade in goods and services with other members.  International law can only work if it includes exceptions.  There are always difficulties in defining them.  This is manifestly so of the security exception in the WTO treaty.

It is clear from the WTO treaty that a restrictive trade action taken to maintain international peace and security under the United Nations Charter would be entitled to this security exception. Of course, no collective security action is likely to happen in this crisis under the United Nations Charter. The Russians would veto it from their perch on the U.N. Security Council.

Here, however, the clarity ends. Much more likely as a professed excuse for what would otherwise be illegal trade action in these circumstances is the permission slip in the WTO treaty allowing any WTO member to take “any action which it considers necessary for the protection of its essential security interests … taken in time of war or other emergency in international relations.”

This is broad language indeed. What does it mean? No one knows. No one really wants to know. In the nearly seven decades since this security exception was written into the General Agreement on Tariffs and Trade -- the GATT -- few have even bothered to ask what it means.

An exception of such sweeping breadth invites abuse. In 1975, Sweden defended its limits on footwear imports by arguing that maintaining sufficient domestic shoe production was integral to Sweden’s national security.  And yet, which country is willing to allow another country -- or collection of countries -- to define its national security interest? No country will. Nor should it.

The closest the trading system has come to having to define the security exception was in a GATT dispute in 1986. Strongly opposed to the rule of the communist Sandinistas, the United States imposed a trade embargo on Nicaragua. The Nicaraguans challenged the embargo in the GATT. The GATT panel could not reach a binding result.

Significantly, the United States argued then that its actions had been taken for national security reasons, and that the security exception left it to each country to judge for itself what action it considered necessary for the protection of its essential security interests. Although this U.S. view has not been adopted as an authoritative interpretation of international trade law, it is shared by many WTO members.

In 1996, the European Union challenged the extraterritorial application by the United States of the Helms-Burton Act restricting trade with Cuba. The U.S. informed the WTO that it would not participate in the WTO proceedings, saying the dispute “was not fundamentally a trade matter” and therefore not a WTO matter.

The WTO proceedings were suspended at the request of the Europeans, and, eventually, that dispute lapsed into a long legal limbo. Still, the intractability of that dispute raised a central and enduring question: Are disputes over trade measures taken in the name of national security ultimately “justiciable”? That is, are they the kinds of international disputes that are truly capable of being judged fairly and effectively by an international tribunal?

In defense of what they alone see as their national security interests, sovereign countries are going to impose controls on exports of technologies with military uses, protect their strategic domestic production, and, in times of “emergency in international relations,” apply restrictive trade measures that, in other times, would be clearly inconsistent with their treaty obligations. Some of them, in so doing, can rightly contend that such trade actions are to be preferred to the alternative of military action.

Are WTO judges capable of determining when countries should, and should not, take such trade actions?  Fortunately, I was able to complete my years of service as a WTO judge without having to answer that question.

Jim Bacchus is the former chairman of the Appellate Body of the World Trade Organization and a former member of the Congress of the United States, from Florida. He currently chairs the global practice of the Greenberg Traurig law firm.

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