GENEVA: US President Donald Trump’s new tariffs on aluminium and steel have triggered outrage and fears of a trade war — something the World Trade Organisation was designed to help avoid.

But Trump’s justification for the tariffs on national security grounds poses an unprecedented challenge to the WTO’s dispute settlement system, which has already been weakened by separate actions in Washington.

What is a WTO challenge? When a country says they will fight a trade measure at the Geneva-based WTO, they mean they plan to pursue a case with the organisation’s the Dispute Settlement Body (DSB).

DSB cases can take three years to resolve, but if judges ultimately rule that a country’s trade measures violate WTO rules, they can authorise retaliatory actions — for example reciprocal tariffs.

There is nothing stopping countries from imposing tit-for-tat trade restrictions while the long DSB process plays out. Article 21 and the national security defence: Trump has justified his tariffs through a little-used article of US trade law called Section 232, which allows the president to adjust import guidelines for national security reasons.

The WTO has its own version of that rule.

Article 21, which dates to the pre-WTO General Agreement on Tariffs and Trade, says no country shall be blocked from “taking any action which it considers necessary for the protection of its essential security interests.” The problem is the DSB has never ruled on a case where Article 21 was cited, so there is no precedent defining the scope of the exemption.

Canada WTO’s ambassador Stephen de Boer this week referred to the national security defence as a “Pandora’s Box”.

The fear, echoed by many leading economies, is that if Trump’s broad definition of a national security trade measure is permitted, it would effectively trigger a free-for-all, where nations can impose any tariffs they want in flagrant defiance of other WTO rules.

DSB in crisis: Separate from the tariff issue, the Trump administration has blocked the appointment of any new judges to the DSB’s appellate body.

The appeals process needs three judges to function. It currently has four of seven spots filled. Three of the remaining judges are expected to end their terms by September 2019.

If no new judges are approved by then, the DSB will be unable to function. So, Trump’s trade team – already hostile to the WTO – is technically in a position to paralyse the dispute settlement process, possibly blocking any ruling on his tariffs. WTO chief director-general Roberto Azevedo has identified the judges’ issue as a main threat facing the WTO.

Published in Dawn, March 10th, 2018