The Trump administration's initiative to burden with additional duties imports of various products from China was recently censored by the WTO's Dispute Resolution Body, with a decision that did not surprise insiders.
China had turned to the international institution contesting the measures adopted by the American administration, which - based on the results of an investigation by the United States Representative for International Trade (USTR) on China's policies and practices in the context of intellectual property rights – had unilaterally introduced the contested tariff measures, by applying the procedure set out in Section 301 of the Foreign Trade Act of 1974 (a US regulation - prior to the Marrakesh Agreement which established the WTO - aimed at sanctioning foreign commercial practices which, in the opinion of the USTR, would be in violation of commercial agreements or would unlawfully penalize the United States).
In response, the American administration motivated its initiative with the need to protect its "public morality", thus relying on one of the general exceptions provided for in art. XX of the GATT. More specifically, in the US opinion, "China's actions, policies and practices examined in the USTR Report they amount to theft and misappropriation of technology, intellectual property and trade secrets of the United States, conduct that violates prevailing public morals in the United States.” (paragraph 7.100 of the judgment); the measures in question would therefore have been adopted with the aim of "obtaining the cessation of a behaviour" which violated this morality (7.113).
Recourse to the exceptions in Article XX of the GATT allows member countries, under certain conditions, to take measures to restrict trade otherwise prohibited by the treaty. In the jurisprudence of the WTO there have been several cases in which the protection of public morality objectives has been recognized, such as the protection of minors and gambling addicts (US case-Games, WT/DS285/AB/R), or the protection of animal welfare (EC case-Seal products, WT/DS400/R) , just to name a few examples.
In the present case (WT/DS543/R) the judges, while not excluding - at least on a conceptual level - that the protection of intellectual property rights could be considered included in the concept of "public morality" expressed by the North American nation (paragraph 7.140), however, they considered that the United States had failed to explain the relationship between the specific products subject to the additional duties, and the public morality objectives they invoked. The motivation reads: “The scope of the restrictive measures justifiable pursuant to article XX, lett. a) is determined both by the public morality objective invoked and by the requirement that the measures adopted are necessary to achieve this objective. In other words, there must be a relationship between the measure taken and the interest served by the political objective in question." (7.236) On these assumptions the dispute was resolved in favor of the Asian country.
The procedure under which the US administration introduced the contested tariff measures (Section 301 of the Foreign Trade Act of 1974) was not included in the scope of the dispute decided last September 15, but in the past it had already been submitted to the scrutiny of the WTO Appellate Body following an appeal presented in 1998 by the EU (at the time EC) against the United States (WT/DS152/R). Recalling the content of the art. 23 of the WTO Dispute Resolution Agreement (DSU) – the purpose of which is precisely to prevent its members from resolving unilateral acts of retaliation the disputes that arise between them – the EC highlighted how the provisions of the Foreign Trade Act conflicted with the commitments undertaken by the United States with its accession to the WTO, and how they should therefore be modified in accordance with the treaties.
In a long and detailed argument, the judges held that, although Section 301 violated formally the provisions of the Gatt and DSU treaties – where it allowed the US to unilaterally introduce retaliatory tariffs before (and regardless of) the exhaustion of a procedure conducted under the WTO Dispute Settlement Agreement – this did not mean that, in practice:, the United States was committing a violation: since US law provided for the faculty (to act in violation of the DSU) e not the obligation, there would have been no violation as long as the country had not actually adopted retaliatory measures against a member of the WTO (not noting any measures taken towards countries immense members).
Decisive in the judges' decision was the circumstance that, in the administrative measure ratifying the WTO treaties, the American Administration had formally undertaken to base the decisions taken pursuant to section 301 not on its own unilateral determination, but exclusively on the results of a procedure previously conducted before the WTO Dispute Settlement Body; in his conclusions he clearly specified that: "In the light (...) of the commitments undertaken by the United States (...) in implementation of the Uruguay Round Agreements - commitments confirmed and reinforced in the statements made by the United States to this Body - we believe that the contents of sections 301-310 of the United States Trade Act submitted for our consideration in the present dispute do not conflict with the obligations of the United States in the WTO. It should be emphasized that this conclusion is based (…) on the commitments of the US administration referred to above. It follows therefore that, should these commitments be contradicted or violated in any way by the United States Administration (...) this compliance judgment would no longer find justification". (point 8.1).
The United States has always lived up to its commitment, regardless of the political orientation of the administration in office. Until the advent of the Trump administration.
