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In the World Trade Organization
Panel Proceedings
United States — Certain Measures on Steel and
Aluminium Products
(DS548)
Second Written Submission
by the European Union
Geneva, 17 April 2020
Ref. Ares(2020)2109164 - 17/04/2020
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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TABLE OF CONTENTS
1. INTRODUCTION ........................................................................................ 1
2. THE EVOLUTION OF THE MEASURES AT ISSUE ................................................... 4
3. ORDER OF ANALYSIS AND BURDEN OF PROOF ................................................... 6
4. THE MEASURES AT ISSUE ARE SUBJECT TO THE DISCIPLINES OF THE AGREEMENT ON
SAFEGUARDS ........................................................................................... 8
4.1. The US arguments on “invocation” are misguided ............................ 11
4.2. The Appellate Body’s objective definition of a safeguard measure is
carefully set, and is not overinclusive............................................. 15
4.3. Regardless of whether they are safeguards, the steel and aluminium
measures are subject to and inconsistent with Article 11.1(b) of the
Agreement on Safeguards ............................................................ 20
5. THE EU HAS MADE A PRIMA FACIE CASE THAT THE MEASURES AT ISSUE ARE
INCONSISTENT WITH THE AGREEMENT ON SAFEGUARDS, WHICH THE US HAS NOT
REBUTTED ............................................................................................. 20
6. THE EU HAS MADE A PRIMA FACIE CASE THAT THE MEASURES AT ISSUE ARE
INCONSISTENT WITH THE GATT 1994, WHICH THE US HAS NOT REBUTTED ......... 22
7. THE MEASURES AT ISSUE ARE NEITHER EXEMPT FROM SCRUTINY NOR JUSTIFIED BY
ARTICLE XXI OF THE GATT 1994 ............................................................. 23
7.1. Introduction ............................................................................... 23
7.2. The self-judging reading is incorrect .............................................. 25
7.3. None of the elements in Article 31 of the VCLT support the US reading
of Article XXI(b) .......................................................................... 30
7.3.1. Ordinary meaning ............................................................. 30
7.3.2. Context ............................................................................ 31
7.3.3. Object and purpose ........................................................... 32
7.3.4. Preparatory works and other materials linked to various treaty negotiations...................................................................... 32
7.3.5. The 1949 GATT Council decision .......................................... 36
7.4. The views expressed by GATT Contracting parties and WTO Members
do not support the US position ...................................................... 37
7.5. The US “self-judging” reading of Article XXI(b) is unparalleled in other
provisions of the covered agreements ............................................ 39
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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8. THE US HAS FAILED TO REBUT ANY OF THE EU’S CLAIMS AGAINST SECTION 232 AS
INTERPRETED ......................................................................................... 41
9. THE PANEL SHOULD COOPERATE WITH THE ADDITIONAL DUTIES PANELS ............. 42
10. CONCLUSIONS ........................................................................................ 43
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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TABLE OF CASES CITED
Short Title Full Case Title and Citation
Argentina – Footwear (EC)
Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, p. 515
Australia – Apples Panel Report, Australia – Measures Affecting the Importation of Apples from New Zealand, WT/DS367/R, adopted 17 December 2010, as modified by Appellate Body Report WT/DS367/AB/R, DSR 2010:VI, p. 2371
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, p. 3327
China – Rare Earths Appellate Body Reports, China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R, adopted 29 August 2014, DSR 2014:III, p. 805
Dominican Republic – Safeguard Measures
Panel Report, Dominican Republic – Safeguard Measures on Imports of Polypropylene Bags and Tubular Fabric, WT/DS415/R, WT/DS416/R, WT/DS417/R, WT/DS418/R, and Add.1, adopted 22 February 2012, DSR 2012:XIII, p. 6775
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, p. 591
EC – Hormones Appellate Body Report, European Communities – Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, p. 135
EC and certain member States – Large Civil Aircraft (Article 22.6 – EU)
Decision by the Arbitrator, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft – Recourse to Article 22.6 of the DSU by the European Union, WT/DS316/ARB and Add.1, 2 October 2019
Indonesia – Iron or Steel Products
Appellate Body Report, Indonesia – Safeguard on Certain Iron or Steel Products, WT/DS490/AB/R, WT/DS496/AB/R, and Add.1, adopted 27 August 2018
Korea – Radionuclides Appellate Body Report, Korea – Import Bans, and Testing and Certification Requirements for Radionuclides, WT/DS495/AB/R and Add.1, adopted 26 April 2019
Peru – Agricultural Products
Appellate Body Report, Peru – Additional Duty on Imports of Certain Agricultural Products, WT/DS457/AB/R and Add.1, adopted 31 July 2015, DSR 2015:VI, p. 3403
Russia – Traffic in Transit Panel Report, Russia — Measures Concerning Traffic in Transit, WT/DS512/R, adopted 26 April 2019
Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines)
Panel Report, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines – Recourse to Article 21.5 of the DSU by the Philippines, WT/DS371/RW and Add.1, circulated to WTO Members 12 November 2018 [appealed by Thailand 9 January 2019 – the Division suspended its work on 10 December 2019]
US – Fur Felt Hats GATT Working Party Report
US – Offset Act (Byrd Amendment)
Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003, DSR 2003:I, p. 375
US – Washing Machines (Article 22.6 – US)
Decision by the Arbitrator, United States – Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea –
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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Recourse to Article 22.6 of the DSU by the United States, WT/DS464/ARB and Add.1, 8 February 2019
US – Upland Cotton (Article 22.6 – US I)
Decision by the Arbitrator, United States – Subsidies on Upland Cotton – Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS267/ARB/1, 31 August 2009, DSR 2009:IX, p. 3871
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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TABLE OF ABBREVIATIONS
AB Appellate Body
ALOP Appropriate Level of Protection
CP Contracting Parties Decision
DOD Department of Defense
DS Dispute Settlement
DSB Dispute Settlement Body
DSR Dispute Settlement Report
DSU Dispute Settlement Understanding
EU European Union
GATT 1994 General Agreement on Tariffs and Trade 1994
GATT General Agreement on Tariffs and Trade
ICJ International Court of Justice
ITO International Trade Organization
OIG Office of Inspector General
para Praragraph
SPS Sanitary and Phytosanitary Measures
SWS Second Written Submission
US United States
USDOC United States Department of Commerce
VCLT Vienna Convention on the Law of Treaties
WT World Trade
WTO World Trade Organization
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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1. INTRODUCTION
1. The EU is surprised to find itself at the stage of the second written submission
without having truly debated the detailed facts, evidence, and arguments it
has brought forward. Instead, we continue to be largely discussing an
untenable US position that was already roundly rejected by the Russia –
Traffic in Transit panel. The EU did expected the US to at least try to rebut the
details of the EU’s case. It is, nevertheless, a choice the US has made. It has
put all of its cards on a single argument, and if that argument fails, so must its
case.
2. That argument is essentially this: the US gets to tell the Panel what the
applicable WTO law is, and all that the Panel is permitted to do is to take note
of what it has been told.
3. This is, really, what the US is telling the Panel with respect to both of the key
issues in these proceedings: whether the US steel and aluminium measures
are safeguards, and whether they are justified by Article XXI of the GATT
1994.
4. On the first issue, the US thinks its measures are not safeguards because the
US does not “invoke” Article XIX and the Agreement on Safeguards. For the
purposes of this dispute, this would seem to mean that the measures are not
safeguards because the US chose not to notify them to the WTO as
safeguards.
5. There can be no doubt about the right response to this. Yes, the absence of a
WTO notification, as well as the use of certain domestic procedures, are facts
that the Panel is entitled to consider in its analysis. Yet, these facts cannot be
determinative, for the simple reason that they are under the sole control of
the US, which has a clear interest to avoid the finding that the measure is a
safeguard. That interest is not just to prevail in this dispute, and thus to be
able to impose blatantly protectionist duties and quotas on other Members
(although this would be bad enough). Worse, the interest is also to preclude
the EU and other Members from exercising their rebalancing rights under
Article XIX of the GATT 1994 and the Agreement on Safeguards. If the US
“invocation” theory is right, then any Member can unilaterally decide that its
safeguard measure is not a safeguard measure, and that, because of that
purely unilateral decision, other Members cannot rebalance.
6. In order to prevent that outcome, all that this Panel must do is to conduct an
objective assessment of all the facts, including especially the two defining
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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constituent features of a safeguard measure, following the guidance of the
Appellate Body in Indonesia – Iron or Steel Products. In doing so, the Panel
should pay particularly close attention to the fact that the US chose not to
rebut any of the facts and evidence the EU has placed before the Panel.
7. Regarding the second key issue in this dispute, the US similarly asserts that its
measures are justified by Article XXI simply because it says so, or in its words,
because it "invokes" Article XXI. That argument must fail for the same reasons
as the previous one: it is self-serving, divorced from the facts, and divorced
from the text, context, object and purpose of Article XXI. As we will explain in
further detail below, every single element of the US’ interpretation is either
unconvincing, contradictory, or works in favour of the contrary argument.
8. Thus, for example, the negotiating history raised by the US overwhelmingly
disproves the view that Article XXI is “self-judging”. The same is true of the
1949 GATT Council decision, even if it was a subsequent agreement within the
meaning of the VCLT (which it is not). Various statements by GATT contracting
parties made over the years are not relevant interpretative elements under
the VCLT, and in any event do not show a coherent or even a majority view.
9. The US also adopts contradictory and incoherent positions. For example, it is
simply contradictory to describe Article XXI as an affirmative defence while
arguing that the party raising it is not required to provide a shred of
explanation or evidence.
10. Similarly, it is incoherent to state that the “circumstances” listed in the three
subparagraphs are exhaustive1, and that an invocation of Article XXI(b) must
involve an invocation of at least one of the three subparagraphs, but to argue
at the same time that an “invocation” of Article XXI(b) is entirely self-judging,
such that the question of where and how the measure fits in the
subparagraphs cannot even be opened. There is no sense in which the
subparagraphs could be "exhaustive" if Article XXI(b) was self-judging in the
way the US argues.
11. Under the US logic, a measure would be protected by Article XXI(b) even if it
did not fall within the scope of Article XXI(b) at all. A Member could, for
example, assert that its measure is not covered by any of the subparagraphs,
but that it nevertheless invokes Article XXI(b). For the US, that would be
1 US’ opening statement at the first substantive meeting, paras. 20-21.
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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sufficient. But of course, if that were true, the three subparagraphs would no
longer be exhaustive.
12. Given the nature of the US position, this case can be decided purely on the
basis of these two legal issues. On the first issue, the EU has clearly shown
that the measures are safeguards. The fact that they are not genuine national
security measures contributes to that conclusion. In any event, the US has not
even tried to rebut the EU’s arguments, other than by saying that the
measures are not safeguards because the US did not “invoke” the safeguard
provisions. To reject this simple argument means that the US’ case must fail,
and that the EU’s case stands unrebutted.
13. On the second issue, the US has not even raised an actual Article XXI defence,
beyond stating that it “invokes” Article XXI(b). If the correct legal position is,
as the EU believes it must be, that “invocation” does not suffice, then there is
nothing left to discuss. The US has not even tried to show that its measures
are actually justified by Article XXI. Nor could it, because those measures are
plainly not genuine national security measures.
14. The reading of the covered agreements put forward by the US in this case and
in the accompanying Additional Duties disputes is extreme and utterly
incompatible with a rules-based trading system. On the safeguards issue, the
US claims that the only “objective” assessment that the Panel may undertake
is whether the US itself “invokes” Article XIX and the Agreement on
Safeguards. Similarly, with respect to Article XXI, the US argues that the Panel
may only make an “objective assessment” of whether or not the US has
“invoked” that provision. Taken as a whole, these arguments form a perfect
circle of impunity for the US. Their measures are not safeguard measures, and
thus not subject to the disciplines of Article XIX and the Agreement on
Safeguards, because the US says so. They cannot be rebalanced under Article
XIX:3(a) and Article 8.2 of the Agreement on Safeguards, because the US
says so. They cannot be challenged under the GATT because they are national
security measures, for the mere reason that the US says so. We ask the Panel
not to condone this type of reasoning, for all the reasons we have already
given and those we will give in this submission.
15. One can debate the amount of “discretion” accorded by Article XXI. This is, of
course, a matter of great sensitivity, and the Panel would be right to be
cautious. But the parties are not exploring the fine points of Article XXI in
these proceedings. Instead, what the US puts forward is an extreme reading of
that provision. As soon as the Panel concludes that there are any objective
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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elements in Article XXI at all, the US case collapses. Under any reading, for
instance, cows cannot be fissionable materials just because one Member
considers them so. In other words, to resolve this dispute, the Panel does not
need to go further than to reject the extreme “self-judging” reading.
16. This would not mean that the Panel is imposing its judgment on national
security matters on the US. Just like all other exceptions in the WTO
agreements, Article XXI provides for Members to set their own policy
objectives, and their own levels of protecting those objectives. What the WTO
adjudicator decides is much more limited: whether the measure meets the
objective standards set out in Article XXI, or whether the Member is rather
engaging in unjustified discrimination or protectionism under the guise of an
exception. This is obviously what took place in this case. Be that as it may, it
is perfectly sufficient for the Panel to reject the extreme US position as a
matter of legal interpretation.
17. Such a finding will send the message that a provision as critically important as
Article XXI cannot be abused. The US’ abusive reliance on Article XXI must be
rejected not in spite of, but because of the central importance of Article XXI in
the package of rights and obligations agreed by the Membership.
2. THE EVOLUTION OF THE MEASURES AT ISSUE
18. In response to Panel Question 1, the EU has summarised again which
measures it is challenging, and which legal instruments it has referred to in
connection to these two measures (corresponding to them, evidencing them,
or otherwise related to them). To recall, at issue are three measures: the steel
measure (the steel import adjustments), the aluminium measure (the
aluminium import adjustments), and Section 232 as interpreted.
19. The EU also recalls, as explained in the response to Question 1, certain factual
and legal developments of the measures at issue that occurred after the EU’s
first written submission. These can be described either as further evidence of
those measures, and/or “amendments, supplements, replacements,
extensions, implementing measures or other related measures” within the
meaning of the seventh paragraph of the EU’s Panel Request. Either way, the
Panel is required to consider those developments as part of its assessment.
20. Specifically, the following developments are further evidence of the existence
and content of all three measures at issue:
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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• Proclamation 9980 of January 24, 2020, Adjusting Imports of
Derivative Aluminum Articles and Derivative Steel Articles Into the
United States, Federal Register vol. 85, no. 19, January 29, 2020
(“Proclamation 9980”) (Exhibit EU-70). This Proclamation introduces
further additional duties of 10 percent on certain derivative aluminium
products, and 25 percent on certain derivative steel products.
• A new official statement by President Trump, 2 December 2019: “Brazil
and Argentina have been presiding over a massive devaluation of their
currencies, which is not good for our farmers. Therefore, effective
immediately, I will restore the Tariffs on all Steel & Aluminum that is
shipped into the U.S. from those countries.” (Exhibit EU-71)
• United States Department of Commerce, Office of Inspector General,
Information Memorandum for Secretary Ross: “Management Alert:
Certain Communications by Department Officials Suggest Improper
Influence in the Section 232 Exclusion Request Review Process”, Final
Memorandum No. OIG-20-003-M, 28 October 2019 (Exhibit EU-72).
This document further shows that the product exclusion process is not
uniform, impartial and reasonable, in support of the EU’s claims under
Article X of the GATT 1994.
• The "agreements, arrangements and understandings" reached by the
United States with Canada and Mexico.2
21. The following development is further evidence of the existence and content of
the steel measure:
• Proclamation 9772 of August 10, 2018, Adjusting Imports of Steel Into
the United States, Federal Register vol. 158, no. 83, August 15, 2018
(“Proclamation 9772”) (Exhibit EU-73). This Proclamation increased the
rate of duty for steel imports from Turkey.
22. Finally, the EU refers to the following development as an amendment,
supplement, replacement, extension, implementing measure or other relate
measures, with respect to the steel and aluminium measures respectively,
with the consequence that Panel findings of WTO-inconsistency should
explicitly extend to it as well:
2 Joint Statement by the United States and Canada on Section 232 Duties on Steel and Aluminum
(Exhibit EU-75); Joint Statement by the United States and Mexico on Section 232 Duties on Steel and Aluminum (Exhibit EU-76); Proclamation on Adjusting Imports of Steel into the United States, 19 May 2019 (Exhibit EU-77); Proclamation on Adjusting Imports of Aluminum into the United States, 19 May 2019 (Exhibit EU-78). See also EU’s opening statement at the first substantive meeting, para. 63, as well as the EU’s responses to Panel Questions 2(g) and 17.
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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• Proclamation 9980 of January 24, 2020, Adjusting Imports of
Derivative Aluminum Articles and Derivative Steel Articles Into the
United States, Federal Register vol. 85, no. 19, January 29, 2020
(“Proclamation 9980”) (Exhibit EU-70). This Proclamation introduces
further additional duties of 10 percent on certain derivative aluminium
products, and 25 percent on certain derivative steel products.
3. ORDER OF ANALYSIS AND BURDEN OF PROOF
23. With respect to the order of analysis, the US maintains that the Panel should
begin by addressing the US’ “invocation” of Article XXI(b) of the GATT 1994.3
However, at the same time the US agrees that in the context of dispute
settlement, Article XXI is an affirmative defence because it is “a provision that
a Member invokes in response to a claimed breach of its obligations under a
covered agreement—such as imposing duties above its bound rates”.4
24. However, this acknowledgment does not prevent the US to put the cart before
the horse and ask that an affirmative defence is dealt with before any
substantive analysis of possible violations.
25. There are many contradictions in the US position, and the only way to sensibly
deal with them is to apply the very legal texts at issue. It is not at all clearhow
the US links the order of analysis, the standard of review, the nature of Article
XXI as an affirmative defence and the burden of proof.
26. The US does not miss any opportunity to reiterate its blank cheque theory,
according to which:
because the United States has invoked Article XXI(b) as to the measures challenged, the appropriate findings under the DSU would be to note in the Panel’s report a recognition that the United States has invoked its essential security interests. No additional findings concerning the claims raised by the complaining Member in its submissions would be consistent with the DSU, in light of Article XXI(b).5
3 US’ responses to the Panel questions, para. 80. 4 US’ responses to the Panel questions, para. 116. 5 US’ responses to the Panel questions, para. 86.
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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27. This case is different from Russia - Traffic in Transit, where Russia seemed to
argue that the respective panel had no jurisdiction.6 In fact, the US agrees
that the Panel has jurisdiction in the present case, as just recalled by the
above quote. However, the US’ proposed “blank cheque” standard of review
must undoubtedly fail, because there is no such thing as a blank cheque in the
WTO legal architecture.
28. The US takes its theory so far that the language it uses becomes hyperbolic:
The text of Article XXI(b) does not include any language requiring the invoking Member to provide an explanation or produce evidence. The text does not indicate the Member must notify the circumstances underlying the invocation, explain the action, or provide advance notice – as exists in other parts of the WTO Agreement.7
29. The EU would like to recall that the Decision of 30 November 1982 provides in
its first paragraph that:
Subject to the exception in Article XXI:a, [Members] should be informed to the fullest extent possible of trade measures taken under Article XXI.
30. Indeed, Members taking measures which they think may fall under Article XXI
should notify them to the WTO. While such notifications do no need to provide
top-secret information, they should provide information of the kind that allows
an understanding of the measure at issue, and certainly information that is
already in the public domain.
31. While that is a requirement at the time the measures are taken, once the
Article XXI(b) exceptions are raised in dispute settlement proceedings, the
burden of proof rests on the party invoking an affirmative defence.
Significantly, the US agrees that Article XXI is in the nature of an affirmative
defence.
32. The EU has already explained in its previous submissions why Article XXI(a)
cannot shelter the US from meeting its burden of proof. As the US has not met
its burden of proof with regard to its “invocation” of Article XXI in the present
proceedings, the work of the Panel is significantly alleviated and the US
defence can be easily dismissed, not requiring any discussion on substance.
33. At the end of the day, maybe this is the strategic litigation choice that the US
has consciously made. Not meeting its burden of proof may be preferable to a
6 Panel Report, Russia - Traffic in Transit, paras. 7.22 – 7.24. In addition, that was the first case
when the security exceptions were invoked and a panel report was issued. 7 US’ responses to the Panel questions, para. 86.
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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finding that its invocation of the security exceptions is manifestly
inappropriate, and done for purely economic reasons.
34. The EU reiterates its position on the appropriate order of analysis to be
followed in this case. While panels enjoy a certain margin with regard to the
order of analysis, that should not lead to unreasonable results.
35. To recall, with respect to the import tariffs and import quotas imposed by the
steel and aluminium measures the EU brings claims both under the Agreement
on Safeguards and under the GATT, while with respect to country-wide tariff
exemptions and product exclusions the EU puts forward only GATT claims.
36. The EU considers that for the import tariffs and import quotas the Panel should
begin its analysis under the Agreement on Safeguards. This is the only path
that offers the prospect of judicial economy. On the one hand, if the measures
at issue are safeguard measures and comply with the relevant provisions of
the Agreement on Safeguards, then they cannot be inconsistent with Articles
II and XI of the GATT 1994. On the other hand, if the measures do not comply
with the relevant provisions of the Agreement on Safeguards (which is the
case), then the Panel does not need to go any further, as Article XXI is not
available to violations of the Agreement on Safeguards.
37. To the contrary, if the Panel starts its assessment with the GATT claims, even
were the Panel to find that the measures at issue are justified under Article
XXI (which is not the case), it will still need to make an assessment under the
Agreement on Safeguards (for the obligations for which Article XXI is not
available).
4. THE MEASURES AT ISSUE ARE SUBJECT TO THE DISCIPLINES OF THE AGREEMENT ON
SAFEGUARDS
38. The measures at issue are subject to the disciplines of the Agreement on
Safeguards. The EU has already explained that the appropriate legal standard
is the one set by the Appellate Body in Indonesia — Iron or Steel Products.8
39. In that case, the Appellate Body has correctly found that, in the context of
Article 1 of the Agreement on Safeguards, in order to be a safeguard measure,
a measure must have two constituent features. First, it must suspend, in
8 EU’s first written submission, Section 3.
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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whole or in part, a GATT obligation or withdraw or modify a GATT concession.
Second, the suspension, withdrawal, or modification in question must be
designed to prevent or remedy serious injury to the Member's domestic
industry caused or threatened by increased imports of the relevant products.9
40. The test to be performed when deciding whether the Agreement on
Safeguards applies to a measure is not a “centre of gravity” test. According to
the Appellate Body’s findings in Indonesia – Iron or Steel Products,10 what
matters for the measure’s characterisation as a safeguard is whether it has “a
specific objective” of preventing or remedying serious injury to the
Member’s domestic industry (this can be referred to as a “safeguard
objective”). If so, even if the measure had some other “aspects” that suggest
that it also has another objective, this would not detract from the conclusion
that the measure is a safeguard. In such circumstances, whatever other
provisions of another agreement that might be applicable, this would not
exempt the measure from complying fully with the conditions set out in the
Agreement on Safeguards.11
41. In deciding whether “a specific objective” of the measure is a safeguard
objective, the measure must be examined as a whole. In particular, the Panel
must assess its “design, structure and expected operation”.12 That assessment
may, of course, reveal a number of different “aspects” or characteristics of the
measure. When addressing the question of whether “a specific objective” of
the measure is a safeguard objective, not all of those characteristics will
necessarily point in the same direction. It may therefore be relevant that
certain characteristics are more “central” than others, i.e. that they feature
more prominently in the measure or are more important to the measure.
While no facts are a priori excluded from such an analysis, what matters most
is the content of the measures themselves, i.e. their design, structure and
expected operation.
42. In this instance, as the EU has explained, such an analysis of the US’
measures shows that, regardless of the US’ own legal characterisation of its
safeguard measures, and regardless of whether or not those measures have
another objective apart from the safeguard objective, it is “a specific
9 Appellate Body Report, Indonesia – Iron or Steel Products, para. 5.60. 10 Appellate Body Report, Indonesia – Iron or Steel Products, para. 5.56. 11 EU’s first written submission, para. 148. 12 Appellate Body Report, Indonesia – Iron or Steel Products, para. 5.60.
United States — Certain Measures on Steel and Aluminium Products European Union (DS548) Second Written Submission _________________________________________________________________________
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objective”, as well as one of the “most central aspects” of the US measures,
that they explicitly seek to prevent or remedy serious injury to the US
domestic steel and aluminium industries caused or threatened by increased
imports.13 This conclusion is supported by an analysis of the measures’ design,
structure and expected operation, as explained in the EU’s first written
submission.14 For example, while the steel and aluminium reports pay lip
service to defence-related production and so-called “critical infrastructure”,
they are overwhelmingly devoted to the question of “whether imports have
harmed or threaten to harm US producers writ large”, i.e. to a safeguard
objective.15 In the EU’s view, it is clear from any straightforward and objective
reading that this is “the most central aspect”, or in any event at least “a
specific objective” of the US measures.
43. Indeed, not just “a specific objective”, but the most central objective of the
measures is to protect the domestic steel and aluminium industry writ large,
as an end in itself. In addition, other objectives seem to be to collect
government revenue, to achieve leverage against its international partners in
various negotiations, and to reduce the US trade deficit. The US Department of
Defense has itself stated, in effect, that the measures are not national security
measures, when it explained that it “does not believe that the findings in the
reports impact the ability of DoD programs to acquire the steel or aluminium
necessary to meet national defence requirements.”
44. This is clear from the measures themselves. Their analysis of “national
defence” and “critical infrastructure” needs boils down to a consideration of
“domestic production and the economic welfare of the United States.”16
Moreover, they go beyond even these extremely broad interpretations of
“national defence” and “critical infrastructure”: their primary “focus” is the
“larger enquiry” of “whether imports have harmed or threaten to harm U.S.
producers writ large.”17 Their ultimate purpose is simply to improve the
13 EU’s first written submission, paras. 161 - 163. 14 EU’s first written submission, paras. 164-166. 15 EU’s first written submission, para. 166., referring to Steel Report (Exhibit EU-15), fn 22. 16 Steel Report (Exhibit EU-15), p. 24. 17 Steel Report (Exhibit EU-15), fn 22.
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domestic industry’s “commercial and industrial customer sales,”18
“manufacturing capability and commercial product portfolio.19
45. Thus, it is not necessary to find that the steel and aluminium measures have
no link whatsoever to security needs in order to characterise them as
safeguards. It suffices that the safeguard objective is “a specific objective” of
those measures. In this case, that requirement is more than fulfilled, since the
safeguard objective is, in fact, the most central objective of the US measures.
46. The US does not attempt to disprove these arguments on substance. For the
US, there can be no discussion of what the actual objectives of the measures
are, because the only live issue is what the US “considers” to be the case, and
even on that point, the Panel can do no more than take the US’ word for it.
The US considers that it is not required to “furnish reasons for or explanations
of an action for which Article XXI is invoked”.20 This means that the US has not
rebutted the EU’s showing concerning the objectives of the measures.
4.1. THE US ARGUMENTS ON “INVOCATION” ARE MISGUIDED
47. Curiously, the US seems to agree with each of the two constituent features of
a safeguard measure as set out by the Appellate Body in Indonesia – Iron or
Steel Products. It merely adds a third one: invocation, which is supposedly
done by providing notice in writing and affording affected Members an
opportunity to consult.21 The US acknowledges that the Appellate Body did not
refer to this as a constituent feature, but believes that it flows from the text of
Article XIX, even though there is no reference in the text to “invocation”.22 The
US also seems to consider that there are no other constituent features, other
than the three it proposes.
48. It must follow, logically, if the US is wrong about “invocation” (through
notification) being a constituent feature of a safeguard, that the correct test to
apply is the one set out by the Appellate Body, referring to the two constituent
features of a safeguard measure, as has been the EU’s position from the
outset.
18 Steel Report (Exhibit EU-15), p. 25. 19 Aluminium Report (Exhibit EU-31), p. 40. 20 US’ responses to Panel Questions, paras. 321-322. 21 US’ responses to Panel Questions, para. 13. 22 US’ responses to Panel Questions, para. 13.
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49. In this section, the EU recalls again why the US “invocation” argument is
wrong.
50. For the purposes of this dispute, it seems that “invocation” means “providing
notice in writing and affording affected Members an opportunity to consult”.23
This is, first, at odds with some of the positions the US has taken in the
accompanying Additional Duties disputes (although, even in the context of that
dispute, it is not entirely clear what the US position on “invocation” is).
Second, and more importantly, that view is untenable.
51. First, the US position is internally contradictory. In the Additional Duties
disputes, the US initially seemed to argue that, for the safeguard provisions to
apply, “a Member must invoke the protections of Article XIX” “with the
required notice”.24 Later on, however, the US seemed to backtrack. It stated
that “once the importing Member invokes Article XIX as the basis for a
proposed measure, the WTO’s safeguards disciplines for notifications attach to
that proposed action.”25 It also claimed that it did not notify its steel and
aluminium measures “because [it] did not invoke Article XIX”.26 These
statements suggest that “invocation” is something that occurs separately
from, and prior to the notification of a safeguard. The US also stated that, in
its view, invocation and notification are not synonymous; rather, “a Member
informs others of its decision to invoke… with the notification”, such that the
notification is “a procedural mechanism to inform other WTO Members” of that
“invocation”.27 In this version of the argument, “invocation” appears to be an
event independent from notification. Indeed, even in this dispute, the US
occasionally argues along these lines, stating for example that “a safeguard
measure is one taken by a Member exercising a right pursuant to Article
XIX”.28
23 US’ responses to Panel Questions, e.g. paras. 6 and 13. 24 US’ first written submission in DS559, available at
https://ustr.gov/sites/default/files/enforcement/DS/US.Sub1.(DS559).(public).pdf, paras. 60 and 63.
25 US responses to Panel Questions, available at https://ustr.gov/sites/default/files/enforcement/DS/US.As.Pnl.Qs1.(DS559).fin.pdf, at Question 20, para. 49.
26 US responses to Panel Questions, available at https://ustr.gov/sites/default/files/enforcement/DS/US.As.Pnl.Qs1.(DS559).fin.pdf, at Question 20, para. 43.
27 US responses to Panel Questions, available at https://ustr.gov/sites/default/files/enforcement/DS/US.As.Pnl.Qs1.(DS559).fin.pdf, at Question 43, para. 96.
28 US’ responses to Panel Questions, para. 5.
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52. The lack of coherence in the two positions speaks volumes. In any event, both
versions of the US argument are wrong.
53. The version of the US position in which “invocation” occurs through notification
is simply impossible to reconcile with the fact that Article XIX of the GATT
1994 and the Agreement on Safeguards impose an obligation to notify, as
confirmed in the jurisprudence. Notification is a prerequisite of consistency
with the Agreement on Safeguards, and not a prerequisite for its applicability.
If WTO-consistent notification is what made a measure into a safeguard, it
would be logically impossible for a safeguard to be inconsistent with the
notification obligations. In other words, the obligation to notify would be
redundant. In addition, the notification provisions themselves show that a
measure can be a safeguard measure even before it is notified. Another
reason why the US “invocation” argument is clearly wrong is that it would
mean that rebalancing under Article XIX:3(a) of the GATT 1994 and Article 8.2
of the Agreement on Safeguards would be impossible or WTO-inconsistent for
the mere reason that the safeguard-imposing Member chose not to label the
measure as a safeguard. The EU refers to its response to Panel Question 9 for
a more detailed explanation in this respect.
54. Furthermore, the version of the US argument in which “invocation” is distinct
from notification is also untenable, because it makes the notion of “invocation”
utterly empty. We no longer know when, how, and in what form this allegedly
crucial step of “invocation” is supposed to take place. Instead, this version of
“invocation” would appear to be little more than ex post rationalisation for
litigation purposes. It would seem to mean the qualification of a measure as a
safeguard by the adopting Member at the moment of its choosing, possibly
even in the context of WTO litigation. The US is not saying that any particular
past event connected to the US steel and aluminium measure could have
constituted or demonstrated that “invocation” took place. Rather, the US is
saying that, because it has so far not itself “invoked” Article XIX and the
Agreement on Safeguards, those measures are not safeguards.
55. There is no authority whatsoever for the US “invocation” argument, in either of
the two versions. Thus, for example, in Indonesia - Iron or Steel Products, the
Appellate Body explained that a Member is free to exercise its right to impose
a safeguard measure (which means it may, but need not do so) “if the
conditions set out in the first part of Article XIX:1(a) are met”.29 This is,
29 Appellate Body Report, Indonesia - Iron or Steel Products, para. 5.55.
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however, not a reference to “invocation” as a constituent feature of a
safeguard. Rather, it is simply a reference to the requirements for the WTO-
consistent imposition of a safeguard listed in Article XIX:1(a), i.e. to the WTO
obligations listed in that provision, such as those on unforeseen developments,
increased quantities, injury or threat of injury, etc.
56. It does not follow from the position that Article XIX can be said to create
“rights” that Members can avail themselves of,30 that it is up to the safeguard-
imposing Member to decide whether Article XIX and the Agreement on
Safeguards apply. Notification is a “prerequisite” or “precondition” for taking a
safeguard because it is a legal obligation that must be complied with before a
safeguard measure may be applied in conformity with the Agreement on
Safeguards. As the GATT Working Party Report in US - Fur Felt Hats cited by
the United States confirms explicitly, “the contracting party taking action
under Article XIX must give notice in writing to the Contracting Parties before
taking action.”31 Thus, the meaning of notification being a “condition that
qualifies the exercise of the right”32 is simply that it is an obligation that must
be complied with.
57. The US is not just misreading the jurisprudence, but also attempting to
confuse the obligations applicable to safeguard measures and the constituent
features of safeguard measures, something that the Appellate Body expressly
warned against in Indonesia-Iron or Steel Products.
58. To put it simply, the jurisprudence clearly shows that there is no “right” to
take a safeguard measure independently from the legal requirements that
apply to safeguard measures.
59. Thus, it is correct that notification is a “precondition”, not for the existence of
a safeguard, but for the WTO-consistency of a safeguard. Nothing in the text
of Article XIX suggests anything different. Nor is there any context in other
provisions of the GATT 1994 that would suggest otherwise. Neither Article XIX,
nor any other provision of the GATT 1994, speak of “invocation”.
60. For example, the various requirements listed in Articles XVIII,33 XXVIII and
XIX:3(a) of the GATT 1994 are obligations on the Member imposing the
30 US’ responses to Panel Questions, para. 6. 31 GATT Working Party Report, US – Fur Felt Hats, GATT/CP/106, paras. 3-4. 32 GATT Working Party Report, US – Fur Felt Hats, GATT/CP/106, para. 3. 33 US’ responses to Panel Questions, paras. 35 – 38.
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measure. If those requirements or “conditions” are not met, the conclusion is
not that those provisions do not apply, but that the Member acted
inconsistently with them. With respect to Article XVIII in particular, at least
one key difference between Articles XIX and XVIII of the GATT 1994 disproves
the US’ position. While a WTO-consistent safeguard measure produces legal
effects in WTO law (notably because it modifies or withdraws a concession),
and while it must follow certain WTO procedures (such as notification), it is
nevertheless a domestic measure. A modification of schedules under Article
XVIII:7(a) is a WTO measure, the essence of which is that it modifies the
content of a Member’s Schedule of Concessions. In practice, the Member
modifying its schedule would typically increase a duty to a level reflecting that
modification, but this is not an indispensable element of action taken under
Article XVIII. Thus, an “Article XVIII measure” is taken at the level of the
WTO, and may only be taken at the level of the WTO, whereas an “Article XIX
measure” (a safeguard) is necessarily taken within a Member’s legal order.
61. Furthermore, even if it was necessary to resort to supplementary means of
interpretation or other materials (quod non), they would provide no support
for the “invocation” argument. For example, a 1987 Background Note by the
GATT Secretariat uses the term “invoke”, but not in the meaning suggested by
the US. It discusses a dataset of notified safeguard measures. Then it refers to
those notifications, interchangeably, as instances of Contracting Parties
invoking or notifying34 “Article XIX actions”. The difference between “invoking
Article XIX” and invoking or notifying “Article XIX actions” is significant. The
second term suggests that, first, there is an Article XIX action, which a
Member then notifies or invokes. This makes sense, because whether or not a
Member took an “Article XIX action” is an objective question, and not a
question that depends on “invocation”, whether in the form of notification or
otherwise.
4.2. THE APPELLATE BODY’S OBJECTIVE DEFINITION OF A SAFEGUARD MEASURE IS
CAREFULLY SET, AND IS NOT OVER-INCLUSIVE
62. Under the approach set out by the Appellate Body in Indonesia – Iron or Steel
Products, it would not follow that any raised duty is a safeguard. If this was
the test, it would have been a simple matter for the EU to explain that,
34 Drafting History of Article XIX and its Place in GATT: Background Note by the Secretariat,
MTN.CNG/NG9/W/7 (September 16, 1987), para 12.
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because the US duties on steel and aluminium products are over the bound
rate, which by definition benefits domestic producers, the measure is a
safeguard.
63. Instead, the constituent features of a safeguard measure described in
Indonesia – Iron or Steel Products, which the US seems to consider irrelevant
in this dispute35, are a great deal more detailed. First, in order to be a
safeguard, it is not enough for a measure to constitute a tariff barrier – it must
suspend GATT obligations, or withdraw or modify GATT concessions. Second, it
is precisely that suspension, withdrawal or modification (and not some other
aspect of the measure) that must have a nexus with the safeguard objective.
Third, that suspension, withdrawal or modification must be designed to
achieve the safeguard objective. In other words, the “design, structure, and
expected operation” of that suspension, withdrawal or modification must be
tailored towards achieving a precise safeguard objective; it is not enough to
simply raise trade barriers. Fourth, the safeguard objective is much more
specific than simply “protecting” a domestic industry. The objective of the
measure must be to address an alleged serious injury to an existing domestic
industry by the alleged occurrence of increased imports which allegedly caused
or threatened to cause that serious injury.
64. Furthermore, the EU has pointed to a number of reasons why the US
measures are safeguards. Most importantly, they are safeguards because they
possess the two constituent features of a safeguard set out by the Appellate
Body in Indonesia – Iron or Steel Products. First, they suspend at least one
GATT obligation, in whole or in part, or withdraw or modify a GATT concession.
Second, they are demonstrably linked to the objective of preventing or
remedying injury to the US domestic industries.
65. Regarding the first constituent feature, it should be noted that, first, the duties
are not just raised but are set above bound rates. Second, the obligation not
to exceed the bound rates is only one obligation that the US measures have
suspended, withdrawn or modified; in its first written submission, the EU has
focused on it without prejudice to others, such as the obligations in Articles I
and XI of the GATT 1994.36 Third, while it is true that suspending an
obligation, withdrawing or modifying a concession is not necessarily the same
as exceeding a bound rate of duty, the Appellate Body has previously based its
35 US’ responses to Panel Questions, para. 21. 36 EU’s first written submission, para. 154.
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enquiry of whether a measure suspends obligations, or withdraws or modifies
concessions on whether or not bound rates have been exceeded.37 Fourth, the
steel and aluminium measures at issue use as a legal basis a US statute the
purpose of which is to impose import restrictions through duties.38 Fifth, the
measures explicitly state that their purpose is to reduce the level imports to a
certain level through the use of increased duties and quotas.39 Thus, with
respect to the constituent feature of “suspending at least one GATT obligation,
in whole or in part, or withdrawing or modifying a GATT concession”, the US
measures do everything that a safeguard measure does. The only difference
from a typical safeguard measure is that the adopting Member characterises it
as something other than a safeguard.
66. With respect to the objective of preventing or remedying injury, the EU has
provided a wealth of evidence showing that a benefit to domestic producers
does not simply follow from an increased duty.40 Instead, the US authorities
based the steel and aluminium measure on a detailed analysis of alleged
existing and threatened injury to a well-defined domestic industry allegedly
caused by increased imports. They also tailored the measures in order to
achieve a particular capacity utilisation of domestic producers, as well as other
specific protective effects. The measures are overwhelmingly and expressly
concerned with improving the “economic welfare” of the domestic steel and
aluminium industries, and take specific steps to advance that objective. They
also purport to assess a number of injury factors that are typically associated
with a serious injury finding under Article 4.2(a) of the Agreement on
Safeguards (the rate and amount of the increase in imports, the share of the
domestic market taken by increased imports (import penetration), changes in
37 Appellate Body Report, Indonesia - Iron or Steel Products, para. 5.56 (“However, the imposition of
the specific duty does not suspend any of Indonesia's GATT obligations, nor does it withdraw or modify any of Indonesia's GATT concessions. This is because, as the Panel rightly found and no participant has contested, Indonesia "has no binding tariff obligation with respect to galvalume in its WTO Schedule of Concessions" and is, therefore, "free to impose any amount of duty it deems appropriate" on that product.”) See also Panel Report, Dominican Republic – Safeguard Measures, paras. 7.75 (“The complainants affirm that the impugned measures also suspend the application of Article II:1(b), second sentence, of the GATT 1994 in that they impose a tariff surcharge other than ordinary customs duties that is not recorded in the Dominican Republic's schedule of concessions...”) and 7.88 (“since the impugned measures are not "ordinary customs duties" nor any of the measures provided for in Article II:2 of the GATT 1994, by definition they must be other "duties or charges … not recorded in the Dominican Republic's schedule of concessions Consequently, since they result in the levying of such duties or charges, the impugned measures have suspended the obligations of the Dominican Republic under Article II:1(b), second sentence, of the GATT 1994 with respect to the import duties imposed on the imported products concerned.”)
38 EU’s first written submission, para. 152. 39 EU’s first written submission, para. 155. 40 EU’s first written submission, sections 2.5.3, 2.6.3 and 3.1.3.
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the level of domestic sales, production and productivity, capacity utilization,
profits and losses, and employment). On this score, the US steel and
aluminium measures shout “safeguard” from every page.
67. And there is more. The EU has provided at least five additional reasons why
the US steel and aluminium measures are safeguards:
• they purport to be based on a consideration typical to a safeguard
measure: whether there are increased imports of the product at
issue;41
• they repeatedly discuss whether imports take place "in such quantities
and under such circumstances" as to cause or threaten serious injury
and impair national security, i.e. in language corresponding to the
references to imports in certain “quantities” and under certain
“conditions” in Article XIX.1(a) of the GATT 1994 and Article 2.1 of the
Agreement on Safeguards;42
• they refer to a number of precedents (earlier trade remedy measures
against steel or aluminium products), which include safeguard
measures;43
• they affirm that unforeseen developments (e.g. in the form of
“dramatic changes in the steel industry since 2001”) occurred;44 and
• the agreements with Canada and Mexico implicitly recognize that the
US measures are in the nature of safeguards, and that they can be
rebalanced by the affected exporting party.45 Those agreements are
closely linked to the underlying safeguard measures, because they
were negotiated precisely in order to exempt Canada and Mexico from
the additional duties while ensuring that the US steel and aluminium
industries will be similarly protected. Moreover, they make provision
for the same level of additional duties on the same products. They are
also closely comparable to the several country exemptions previously
negotiated by the United States,46 because they are designed to
41 EU’s first written submission, sections 2.5.4 and 2.6.4, paras. 169-170. 42 EU’s first written submission, sections 2.5.4 and 2.6.4, paras. 171-173. 43 EU’s first written submission, sections 2.5.5 and 2.6.5, para. 174. 44 EU’s first written submission, section 2.5.6, paras. 175-176. 45 EU’s first written submission, paras. 214-215. 46 See EU’s responses to Panel Questions 2(g) and 17.
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achieve the same underlying safeguard objective: protecting the US
steel and aluminium industry, writ large, from alleged injury caused or
threatened by alleged increased imports. The agreements with Canada
and Mexico illustrate that particularly well because they explicitly
mimic the rules applicable to safeguards, and in particular Article 8.1
of the Agreement on Safeguards. Thus, the agreements show that
there is a Member proposing to apply a safeguard in response to a
surge of imports; a suspension of concessions; an action to “address”
the surge of imports in order to remedy injury; an attempt to maintain
equivalence; an agreement to that effect; and the prospect of specific
rebalancing.
68. It should be pointed out that the EU’s approach is not novel. It merely follows
the approach of the Appellate Body in Indonesia – Iron or Steel Products. On
top of that, it provides a number of reasons, grounded in the facts and
evidence, confirming the conclusion that the measures are safeguards.
69. The approach used by the Appellate Body and by the EU is not open to
criticism because it would allegedly catch DSB-authorised countermeasures.47
First, while DSB-authorised countermeasures do suspend concessions, they
are the result of an explicit DSB-authorisation, unlike a safeguard measure
which is a domestic measure par excellence. Already for that reason, the two
types of measures can be distinguished. Moreover, while countermeasures
may in practice be used by the imposing Member to protect a domestic
industry, their objective is not to protect domestic industries, but to induce
compliance.48 A countermeasure would still be a countermeasure even if it is
completely divorced from the protection of a domestic industry. Moreover, as
the EU explained above, the concept of “protection” is much broader than the
second constituent feature of a safeguard measure. For example, one could
imagine a measure that is designed to “protect” even though there is no
allegation that the domestic industry suffered any injury or is under threat of
injury.
47 US’ response to Panel Question 5. 48 Decisions by the Arbitration Panels, EC and certain member States — Large Civil Aircraft (Article
22.6), para. 5.2; US – Washing Machines (Article 22.6 – US), para. 1.17; and US – Upland Cotton (Article 22.6 – US II), para. 4.58.
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4.3. REGARDLESS OF WHETHER THEY ARE SAFEGUARDS, THE STEEL AND ALUMINIUM
MEASURES ARE SUBJECT TO AND INCONSISTENT WITH ARTICLE 11.1(B) OF THE
AGREEMENT ON SAFEGUARDS
70. In its first written submission, the EU has provided another, independent
reason why the steel and aluminium measures are subject to the disciplines of
the Agreement on Safeguards, irrespective of whether they are also
safeguards. The EU argues that the steel and aluminium measures (defined as
the tariff and non-tariff treatment of the relevant steel and aluminium
products respectively, i.e. including quota treatment) are, and give effect to
voluntary export restraints and/or "measures" "which afford protection" similar
to the measures referred to in Article 11.1(b) and footnote 4 of the Agreement
on Safeguards.49
71. As complex measures with multiple aspects, the steel and aluminium
measures each exhibit the characteristics both of a safeguard and of an Article
11.1(b) measure. The EU notes, indeed, the US agreement that “[t]here could
be some overlap in the scope of measures covered by Article XIX of the GATT
1994, Article 11.1(b) of the Agreement on Safeguards, and other
provisions.”50
72. The sole response of the US to the EU’s claims under Article 11.1(b) is to
assert, once again, that its measures were taken “pursuant to” Article XXI of
the GATT 1994, and that therefore Article 11.1(c) takes them out of the scope
of application of the Agreement on Safeguards. Both points are incorrect, as
the EU explains elsewhere. Beyond that, the US has failed to even address the
merits of the EU’s claims under Article 11.1(b). Therefore, the EU’s prima facie
case remains unrebutted.
5. THE EU HAS MADE A PRIMA FACIE CASE THAT THE MEASURES AT ISSUE ARE
INCONSISTENT WITH THE AGREEMENT ON SAFEGUARDS, WHICH THE US HAS NOT
REBUTTED
73. The EU notes that the US has not attempted to rebut the EU’s prima facie case
that the steel and aluminium measures are inconsistent with the Agreement
49 EU’s first written submission, sections 3.1.5 and 3.2.9; EU’s responses to Panel Questions 2(g)
and 17-19. 50 US’ responses to Panel Questions, para. 62.
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on Safeguards. In that sense, the EU refers to section 3.2 of its first written
submission.
74. The US submits that the lack of any explicit reference to Article XXI of the
GATT 1994 in the Agreement on Safeguards is not determinative. It thinks
that the fact that references to the GATT 1994 are made 14 times in the
Agreement on Safeguards should legally suffice.51 Then, the US seems to
focus on Article 1 of the Agreement on Safeguards, which provides that the
Agreement “establishes rules for the application of safeguard measures” under
Article XIX of GATT 1994.52
75. What the US puts forward basically amounts to an application of the GATT
general and security exceptions to all Annex 1 A agreements covering trade in
goods. Indeed, all those agreements are elaborating upon certain GATT
provisions and all contain several references in their texts to the GATT 1994.
76. To give but one example, the Customs Valuation Agreement, actually called
Agreement on Implementation of Article VII of the General Agreement on
Tariffs and Trade 1994, refers in its preamble to:
Desiring to further the objectives of GATT 1994 and to secure additional benefits for the international trade of developing countries;
Recognizing the importance of the provisions of Article VII of GATT 1994 and desiring to elaborate rules for their application in order to provide greater uniformity and certainty in their implementation;
77. Yet, the Article 21.5 panel in Thailand — Cigarettes (Philippines) found that
the general exceptions in Article XX of GATT 1994 are not applicable to the
obligations in the Customs Valuation Agreement.53 The US explains nowhere
why and how the language in the Agreement on Safeguards is different from
the relevant language in the Customs Valuation Agreement, and in particular
what makes it more specific within the meaning of the existing case-law.
78. The EU disagrees with the US’ approach. It is supported neither by the text of
the respective agreements nor by any of the existing panel and Appellate Body
reports. What is required is not just a general textual link between two given
agreements, but specific language clearly showing that the exceptions apply
also to the other agreement. Thus, what the US was required was to show the
51 US’ responses to the Panel’s questions, para. 358. 52 US’ responses to the Panel’s questions, para. 359. 53 Panel Report, Thailand — Cigarettes (Philippines) (Article 21.5 – Philippines), para. 7.757.
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specific language that supports it proposition, as opposed to general language.
Perhaps, the US might also try to show that the “balance” under the
Agreement on Safeguards is differently struck than under the TBT Agreement
or the GATS, for instance.54 The US did not do that. The EU also refers to its
previous explanations in its first written submission.55
79. Finally, contrary to what the US asserts,56 the EU has explained that Article
11.1(c) does not make Article XXI applicable in the context of safeguards.
Article 11.1(c) of the Agreement on Safeguards is mirrored in the case law of
the Appellate Body concerning safeguard measures. While that case law
identifies the defining features of a safeguard measure,57 Article 11.1(c) tells
us which measures are not safeguard measures. They are two sides of the
same coin.
80. Indeed, the measures at issue are not measures sought, taken or maintained
by a Member pursuant to provisions of GATT 1994 other than Article XIX.
81. The words “pursuant to” in Article 11.1(c) mean that a measure is “within the
scope” of one of the relevant provisions, which is an objective question. The
characterization of the measures at issue under the US domestic legislation is
not dispositive of their legal characterization under WTO law. Otherwise, by
simply invoking a certain provision in the GATT 1994 (e.g. the security
exceptions) a Member may unilaterally take measures out of the scope of the
Agreement on Safeguards .
82. The EU recalls that it is clear from the terms “other than” that it would only
be measures that are exclusively taken on the basis of other provisions of the
GATT that would fall outside the scope of the Agreement on Safeguards.
Measures taken pursuant to both Article XIX and some other provision are
clearly caught, because they are not taken pursuant to provisions “other
than” Article XIX.58
6. THE EU HAS MADE A PRIMA FACIE CASE THAT THE MEASURES AT ISSUE ARE
INCONSISTENT WITH THE GATT 1994, WHICH THE US HAS NOT REBUTTED
54 Panel Report, Thailand — Cigarettes (Philippines) (Article 21.5 – Philippines), paras. 7.755-7.756. 55 EU’s first written submission, paras. 464 -472. 56 US’ responses to the Panel’s questions, paras. 68 and 360. 57 Appellate Body Report, Indonesia - Iron or Steel Products, para. 5.60. 58 See also the EU’s response to Panel question no. 20.
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83. The EU notes that the US has not attempted to rebut the EU’s prima facie case
that the steel and aluminium measures are inconsistent with several provisions
of the GATT 1994. In that sense, the EU refers to Section 4.1 of its first
written submission.
84. The EU would like to draw the Panel’s attention on the further developments
relevant to certain claims under the GATT 1994.
85. First, Proclamation 9980 introduces further additional duties of 10 percent on
certain derivative aluminium products, and 25 percent on certain derivative
steel products, contrary to Articles II:1(a) and (b) of the GATT 1994.59
86. Second, the USDOC’s Memorandum “Management Alert: Certain
Communications by Department Officials Suggest Improper Influence in the
Section 232 Exclusion Request Review Process” confirms that the product
exclusion process is not uniform, impartial and reasonable, giving rise to an
inconsistency with Article X of the GATT 1994.60
87. Third, the US has made “deals” ("agreements or arrangements” within the
meaning of the Agreement on Safeguards) with Canada and Mexico,
inconsistently with Article I:1, because the advantage that products from
those countries enjoy is not extended immediately and unconditionally to like
steel and aluminium products from all WTO Members, including to the EU, and
with Article XI:1 of the GATT 1994, because those measures are prohibitions
or restrictions on imports or exports which have limiting effects.61
7. THE MEASURES AT ISSUE ARE NEITHER EXEMPT FROM SCRUTINY NOR JUSTIFIED BY
ARTICLE XXI OF THE GATT 1994
7.1. INTRODUCTION
88. The US’ case continues to be, in essence, that Article XXI is entirely self-
judging. For the US, the subparagraphs of Article XXI(b) are supposedly
exhaustive, but that does not matter a great deal, because the adopting
Member is still free to deem anything under the Sun to constitute an “essential
59 See Exhibit EU-70. 60 United States Department of Commerce, Office of Inspector General, Information Memorandum
for Secretary Ross: “Management Alert: Certain Communications by Department Officials Suggest Improper Influence in the Section 232 Exclusion Request Review Process”, Final Memorandum No. OIG-20-003-M, 28 October 2019 (Exhibit EU-72).
61 See Exhibit EU-75, Exhibit EU-76, Exhibit EU-77 and Exhibit EU-78.
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security interest”, and to declare any measure it sees fit as necessary for the
protection of such an interest.
89. The EU will address several specific arguments made by the US in the
following sections. By way of introduction, however, the EU would invite the
Panel to imagine four different versions of a national security exception.
90. The first version is the current Article XXI(b) of the GATT 1994.
91. The US argues that, when it “invokes” that provision, the Panel cannot engage
in any further objective assessment. It cannot find any WTO-inconsistency.
Instead, it can only state that Article XXI(b) was invoked and that ends the
matter.
92. The US thinks it can achieve that outcome without even telling the Panel which
“action” supposedly falls within Article XXI(b), whether or why it “considers
that necessary”, what it is “for”, which “security interest” is at issue, whether
and why it is “essential”, and which of the three subparagraphs (if any) is at
issue or why.
93. The second version we invite you to imagine is the same as the current Article
XXI(b) of the GATT 1994, but with no subparagraphs. That provision would
read, simply: “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.”
94. Under the US approach, this provision would be interpreted in exactly the
same way. If the US invokes it, it is an end of the matter: no further objective
assessment, and no finding of WTO-inconsistency is possible.
95. This means that, for the US, the three subparagraphs may as well not be there
at all. The US seems to see no contradiction between that and its claim that
the three subparagraphs are, in fact, the exhaustive circumstances in which
Article XXI(b) can be invoked. To the EU, it is clear that this view is self-
contradictory, and that it impermissibly reads the three subparagraphs out of
the Agreement.
96. A third version of a national security exception would be as follows: “If the
respondent states, during panel proceedings, that it invokes national security
with respect to a measure, the panel shall not examine the matter any further,
and shall make no findings or recommendations other than to state that
national security has been invoked.”
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97. Again, under the US approach, this provision would be interpreted in exactly
the same way. If the US invokes it, it is an end of the matter: no further
objective assessment, and no finding of WTO-inconsistency is possible.
98. This means that, for the US, not just the three subparagraphs of Article
XXI(b), but also the terms “action”, “necessary”, “for the protection of”,
“essential”, and “security interests”, may as well not be there at all.
99. To the EU, it is again clear that this interpretation makes a large portion of
Article XXI(b) useless and ineffective, not to speak of the fact that it
contradicts several provisions of the DSU, such as Articles 3.2, 3.3, 7.1 and
11.
100. Finally, the fourth version of the national security exception is as follows:
“Invoke me to prevent adverse panel findings.” There is no content at all.
Nevertheless, under the US approach, this provision would be interpreted in
exactly the same way as the previous three.
7.2. THE SELF-JUDGING READING IS INCORRECT
101. The US starts from the wrong premise that panels have a “dual” function
which would support its theory on the difference between jurisdiction and
“justiciability”:
[…] the function of a panel is to make “an objective assessment of the matter before it” and “such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.” Therefore, although the Panel has jurisdiction over this dispute – because the DSB has established the Panel to examine the matter set out in the panel request – the dispute presents an issue that is not justiciable, meaning that, beyond noting the U.S. invocation, the Panel cannot make findings of WTO-inconsistency that would assist the DSB in making a recommendation on the matter.62
102. The US reading is manifestly incorrect. The panel in Russia- Traffic in Transit
has already rightly rejected the “justiciability” argument, similarly presented
by the US as a third party in that case:63
The Panel's interpretation of Article XXI(b)(iii) also means that it rejects the United States' argument that Russia's
62 US’ responses to the Panel’s questions, para. 104. 63 Panel Report, Russia- Traffic in Transit, para. 7.52.
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invocation of Article XXI(b)(iii) is "nonjusticiable", to the extent that this argument also relies on the alleged totally "self-judging" nature of the provision.64
103. The EU notes again one important aspect: the US agrees that the Panel has
jurisdiction in the present proceedings. At the same time, what the US catches
under its “justiciability” theory is the standard of review, which, according to
the US, is “self-judging”.
104. Let us have a closer look at the US reasoning. The US argument boils down to
the text of Article XXI(b): “the self-judging nature of the provision is reflected
in the text of Article XXI(b) itself”.65 Thus, it suffices for the EU to show that
there are at least certain objective elements in Article XXI(b), not self-judging,
and the whole US “blank cheque” theory falls apart. Let us recall an example
which has become a classic in this line of cases: cows are not fissionable
materials within the meaning of Article XXI(b)(i), even if the invoking Member
“considers” that to be the case.
105. The EU refers to its previous detailed submissions on this point, as well as to
the relevant findings of the panel in Russia-Traffic in Transit. In light of these,
there can be only one conclusion: the text of Article XXI itself does not support
the self-judging theory.
106. Importantly, the US agrees that “the main text and subparagraphs of Article
XXI(b) establish three circumstances in which the Member may act”,66 which
are exhaustive,67 as opposed to an open-ended provision.
107. However, the EU disagrees that the phrase “any action which it considers
necessary for the protection of its essential security interests” is a single
integral clause.68 The EU has already explained that “it considers” qualifies
only the necessity test, and that “for” also refers to the nexus between the
measure at issue and the value protected (essential security interests).
Moreover, whether the interests at issue are of a security nature and whether
they are essential are also elements which are not qualified by “it considers”.69
64 Panel Report, Russia- Traffic in Transit, para. 7.103. 65 US’ responses to the Panel’s questions, para. 261. 66 US’ responses to the Panel’s questions, para. 119. 67 US’ responses to the Panel’s questions, para. 155. 68 US’ responses to the Panel’s questions, para. 126. 69 EU’s opening oral statement at the first substantive meeting, Section 6.6.1.
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108. Contrary to what the US seems to suggest, acknowledging that there are
objective elements in the chapeau of Article XXI(b) does not amount to
substituting a panel’s views for those of the Member invoking the security
exceptions. Instead, all that a panel can and should do is an objective
assessment of the matter before it. The very text of the chapeau of Article
XXI(b) is drafted in such a way that does not support the extreme US
interpretation.
109. Similarly, the text of Article XXI(b) does not support the US’ extension of “it
considers” even beyond the chapeau, to sub-paragraphs (ii) to (iii). Such an
interpretation leads to manifestly absurd results, such as assimilating cows to
fissionable materials. Equally, such an interpretation reduces to inutility sub-
paragraphs (ii) to (iii). Why refer to certain goods (fissionable materials, arms
and ammunitions) or circumstances (war or other emergency in international
relations) if, at the end of the day, the invoking Member is the only judge of
what words mean? A provision has to be interpreted in a way that gives
meaning to its different elements, and not one rendering words devoid of
content.
110. Thus, the US extreme interpretation leads to manifestly absurd results and
does not give meaning to treaty terms. It is contra legem. In contrast, the
interpretation advanced by the EU and by most of the third parties leads to
rational and reasonable results, acknowledging a wide margin of appreciation
for the invoking Member, and at the same time recognizing that such
discretion is not unfettered.
111. The EU also refers to its detailed analysis of the text of Article XXI(b), which
leads to only one possible conclusion, namely that the drafters did not intend
to make of this article a self-judging provision.70
112. The US provides an interpretation of the phrase “other emergency in
international relations” which encompasses commercial or trade relations.71 In
other words, for the US economic security seems to be part of national
security. The US attaches great weight to the absence of the word “similar”
from Article XXI(b)(iii), while other enumerations in other provisions of the
GATT 1994 and other covered agreements refer to “similar” items.
70 See also infra, Section 7.3.1. on the ordinary meaning. 71 US’ responses to the Panel’s questions, para. 235.
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113. The EU does not think that the absence of the word “similar” is of any
particular significance.
114.
115. The US’ approach is dangerous, as it seeks to open Article XXI to virtually
anything under the sun. It is precisely because treaty drafters wanted to keep
economic emergency situations and national security situations apart, that
there are two distinct sedes materiae, dealing with two separate matters:
Article XIX, for emergency actions on imports of particular products and Article
XXI(b)(iii), which deals with a different type of emergency (war or other
emergency in international relations).
116. Furthermore, the US’argument that the principle of good faith is not relevant
for the interpretation of Article XXI is manifestly unacceptable.72
117. Of course this principle is relevant, as every treaty provision should be
interpreted in good faith. A reading of Articles 3.2 and 11 of the DSU, and 31
of the VCLT strongly confirms this understanding. Panels may “determine, in
an appropriate case, whether a Member had acted in good faith”.73
118. The fact that the EU stops short of stating that the US acted in bad faith does
not show agreement that the US acted in good faith. The EU is not making
such a statement because, while it may very well do so, the Panel does not
need to find that the US acted in bad faith in order to dismiss its defence
under Article XXI. Instead, the Panel should simply take note that the US has
not met its burden of making a prima facie case. In fact, it seems that the US
has made the strategic choice not to even attempt to make a prima facie case.
However, should the Panel consider that the US has somehow met its burden
of proof, then the Panel may easily dismiss the US alleged justification on the
basis of an objective assessment of the matter.
119. The corollary of good faith is the abuse of rights. Tellingly, the US is not
capable to provide an adequate response to the Panel’s question on how to
address possible abuses. In particular, the US explains that:
other WTO Members can take reciprocal actions themselves under a similar understanding of their inherent right to take action they consider necessary for the protection of their essential security interests. Indeed, Members frequently respond in this way to the
72 US’ responses to the Panel’s question no 32. 73 Appellate Body Report, US – Offset Act, paras. 297-298.
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imposition of economic sanctions they perceive to be unwarranted.74
120. While this may be true in practice, a very foundation of the multilateral trading
system is the prohibition of self-help and the duty of an objective assessment
by panels. An escalation of self-help is not the rule of law anymore, but the
law of the jungle. And the EU and other complainants would like to keep the
WTO away from becoming such a jungle.
121. To give the final touches to its self-judging theory, the US wrongly asserts that:
Imposing a requirement for a Member invoking Article XXI(b) to explain its action it considers necessary for the protection of its essential security interests would be inconsistent with its right under Article XXI(a) […].75
Article XXI(a) anticipates that there may not be facts on the record before a panel to permit any review of a Member’s invocation of Article XXI.76
122. The EU has already explained that Article XXI(a) cannot be read as so far-
reaching as to absolve a Member invoking Article XXI(b) from meeting its
burden of proof.77 The absence of facts makes a panel’s objective assessment
even more important.
123. To recall, Article XXI(a) does not provide that information regarding essential
security measures or the Member’s security interests does not have to be
provided at all. The invocation of Article XXI(a) should be objectively reviewed
in a similar manner that Article XXI(b) can be reviewed.
124. In addition, the EU considers that a Member cannot invoke Article XXI(a) in
order to escape its burden of proof obligations. Like Article XXI(b), Article
XXI(a) is also a provision whose invocation can be reviewed by a panel. The
discretion accorded under this provision is not unlimited.
125. Certain information may of course be of a highly sensitive nature. However,
the respondent is expected at a minimum to explain in sufficient detail why
such information cannot be shared with the panel. There is nothing that would
prevent a panel, if necessary, from adopting appropriate procedures to deal
with certain sensitive information in cases involving the invocation of Article
XXI. In this dispute, the US did not request such procedures, and even
74 US’ responses to the Panel’s questions, para. 120. 75 US’ responses to the Panel’s questions, para. 147. 76 US’ responses to the Panel’s questions, para. 247. 77 EU’s response to Panel question no 53.
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requested public hearings. Thus, the US reference to Article XXI(a) is not just
wrong, but also wholly irrelevant to these proceedings.
126. At any rate, even if a Member is justified in not providing certain information
pursuant to Article XXI(a), that would not discharge it from its burden of proof
in relation to Article XXI(b).
127. Thus, the US should have explained the “action” that it considers necessary to
protect its essential security interests, the “essential security interests” that it
claims to be at issue, the nature of the alleged “emergency in international
relations”, as well as any plausible connection between the “action” and the
“essential security interests”. The US did none of this.
7.3. NONE OF THE ELEMENTS IN ARTICLE 31 OF THE VCLT SUPPORT THE US READING OF
ARTICLE XXI(B)
128. As the EU has explained in its previous submissions, the US interpretative
arguments about Article XXI(b) fall flat. Neither the ordinary meaning, nor the
context, object and purpose, nor any other elements listed in Article 31 of the
VCLT support the US view.
7.3.1. Ordinary meaning
129. The ordinary meaning of the treaty terms does not support the US’ self-
judging theory.
130. The US asserts that “the most natural reading” of Article XXI(b) is that
subparagraph endings (i) and (ii) modify the phrase “essential security
interests”.78 However, it seems to agree that for subparagraph (iii) it is
“actions”—not “interests” — that are “taken”.79 All this should provide support,
in the US’ view, to its overarching theory of “a single relative clause”.
131. The EU has already explained that each of the subparagraphs (i) to (iii) relates
only to the word “action” in the chapeau and that the different linguistic
versions support the EU’s argument. Indeed, this clearly follows from the use
78 US’ responses to the Panel’s questions, para. 152. 79 US’ responses to the Panel’s questions, para. 154.
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of the feminine plural. Thus, “relativas” and “appliquées” can refer only to
“medidas” and “mesures”.
132. The EU also recalls that the panel in Russia – Traffic in Transit explained that
the ordinary meaning of Article XXI(b) is that the adjectival clause “which it
considers” in the chapeau of Article XXI(b) does not qualify the determination
of the circumstances in the subparagraphs.80
133. For detailed explanations on the ordinary meaning, the EU refers to its
responses to Panel questions no. 40 to 43.
7.3.2. Context
134. The US refers to the the GATT Contracting Parties’ Decision Concerning Article
XXI of the General Agreement of 30 November 1982 (1982 Decision) as
relevant context.81
135. However, the 1982 Decision is not what the US would like it to be, as it is far
from supporting a self-judging interpretation of Article XXI.
136. Indeed, the central feature of the decision is a notification requirement. On top
of that, it also mentions that Members “should take into consideration the
interests of third parties which may be affected” and, crucially, that “when
action is taken under Article XXI, all [Members] affected by such action retain
their full rights under the General Agreement.”
137. The EU has explained that “full rights under the [GATT]” includes also the right
to challenge a measure on the basis of what is now Article XXIII:1(a) of the
GATT 1994, i.e. in a “violation” complaint. Thus, contrary to the arguments of
the US, the 1982 Decision confirms the EU’s view that Article XXI does not
provide for an exception to the rules on jurisdiction laid down in the DSU or to
the special rules on consultations and dispute settlement contained in Articles
XXII and XXIII of GATT 1994, and that unilateral invocations do not prevent
panels from objectively reviewing whether the conditions in Article XXI are
met.82
80 Panel Report, Russia – Traffic in Transit, para. 7.82. 81 US’ response to Panel question no. 25. 82 EU’s responses to Panel’s questions, para. 168.
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7.3.3. Object and purpose
138. The US proposes a self-serving, incorrect version of how the object and
purpose of the GATT 1994 may inform the interpretation of Article XXI:
The object and purpose of the GATT 1994 supports an interpretation of Article XXI(b) as self-judging. The object and purpose of the GATT 1994 is set out in the agreement’s Preamble. That Preamble provides, among other things, that the GATT 1994 set forth “reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade.” Particularly with these references to arrangements that are “mutually advantageous” and tariff reductions that are “substantial” (rather than complete), the contracting parties (now Members) acknowledged that the GATT contained both obligations and exceptions, including the essential security exceptions at Article XXI.83
139. As already explained, an object and purpose of the GATT 1994 is to promote
“the security and predictability of the reciprocal and mutually advantageous
arrangements”.84 Thus, the scope of review of Article XXI(b) should take that
into account. Article XXI is not self-judging, as there is no security and
predictability of a system where a Member may unilaterally determine whether
a provision applies and what its meaning is.
140. The EU further refers to its response to Panel question no. 45, where it has
explained that when a panel objectively assesses facts and evidence
suggesting different possible outcomes, the test is always one of “plausibility”
or “more likely than not”.
7.3.4. Preparatory works and other materials linked to various
treaty negotiations
141. The EU refers to Section 6.4 of its opening statement at the first substantive
meeting, as well as its responses to Panel Questions 56-63, demonstrating
that the US reading of the negotiating history is wrong.
142. In particular, as the EU has already explained in detail:
• what arises from the ordinary meaning, object and purpose of Article
XXI(b) (notably, that the provision is not “self-judging”) is neither
83 US’ responses to Panel’s questions, para. 255. 84 EU’s response to Panel question no. 55.
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ambiguous, obscure, absurd, or unreasonable; therefore, there is no need
to resort to supplementary means of interpretation;
• in any event, supplementary means of interpretation strongly support the
EU’s position; there is nothing in those materials supporting a “self-
judging” reading of Article XXI(b) or its predecessors, and much of that
supports the opposite view;
• even if the available materials related to the negotiation of the GATT 1947
and the Havana Charter supported the US interpretation (quod non), the
US would also need to persuade the Panel that the interpretation remains
valid after the Uruguay Round, despite the numerous ways in which it
conflicts with the DSU;
• the negotiating history does not exhaustively or conclusively deal with the
standard and scope of review to be applied to an invocation of Article XXI
in dispute settlement proceedings under the DSU, but to the extent it
does, it supports the EU’s arguments;85 moreover, there are elements of
the negotiating history of the Uruguay Round agreements that further
explain that Article XXI is justiciable, and that an objective assessment of
an Article XXI is no different to an objective assessment under any other
provision of the covered agreements;
• nothing in the negotiating history suggests that disputes subject to
security exceptions could only be subject to non-violation complaints;
instead, both “violation” and “non-violation” complaints were always
meant to be available;
• all issues arising out of the Havana Charter were intended to be subject to
the dispute settlement procedures provided therein, whether involving the
ITO itself (Articles 93-95 of the Havana Charter), or the ICJ (Article 96 of
the Havana Charter); the references to “justiciability” therefore do not
support but rather disprove the US view;86
• the materials cited by the US show, at best, that the Contracting Parties
considered that non-violation complaints would be available even in cases
where the measure at issue is objectively within the scope of the security
85 See the US response to Panel Question 62 and the EU’s response to the same question. 86 See the US response to Panel Question 61, and the EU’s counterarguments in response to the
same question.
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exception, i.e. justified under it (and not simply where that exception is
unilaterally "invoked");87
• there is no reason why the Russia – Traffic in Transit panel should not
have taken into account, or why this panel should not take into account
internal documents of the US delegation at the time of the negotiations,
whether as preparatory work or otherwise; those documents support what
is already clear from the ordinary meaning, object and purpose, and other
aspects of the negotiating history: Article XXI is not self-judging.
143. The following two points can be added to rebut the US replies to Panel
Questions.
144. First, the US does not explain why the conclusions it draws from the
negotiating history of the Havana Charter and the GATT 1947 should also be
valid for the WTO agreements, especially given the existence of the DSU. The
provisions of the DSU cited by the US are not helpful. For example, the fact
that, under Article 3.2, dispute settlement should serve to preserve the rights
and obligations of Members under the covered agreements, and to clarify the
existing provisions of those agreements in accordance with customary rules of
interpretation,88 does not at all explain the extent to which Havana Charter
negotiations are relevant to the standard of review under the DSU. It merely
means that dispute settlement should be based on the rights and obligations
as existing under the covered agreements, i.e. the Uruguay round WTO
agreements. The EU recalls that, under Article II:2 of the WTO Agreement, the
agreements and associated legal instruments included in Annexes 1, 2 and 3
(the "Multilateral Trade Agreements") are integral parts of the WTO
Agreement, binding on all Members. This applies, of course, also to the DSU
and the GATT 1994, which form part of a single, inseparable package of rights
and obligations.89 Thus, any interpretative effects of the addition of the DSU
into the legal framework of the WTO cannot simply be assumed away (even if
the legal position under the GATT 1947 was the one the US advocates, quod
non).
145. Second, the reference to the statements made by Argentina and Nicaragua in
1987 and 1988 do not support the US position. A straightforward reading of
87 See the US response to Panel Question 59, paras. 274 – 279, and the EU counterarguments in its
response to Panel Question 59(a). 88 US’ response to Panel Questions, para. 269. 89 Appellate Body Reports, Argentina – Footwear (EC), para. 81; China – Rare Earths, para. 5.30.
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the materials submitted by the US shows that Argentina and Nicaragua were,
indeed, concerned about possible abuses of Article XXI, and proposed different
ways to limit the reliance on the security exception by Members. However,
nothing in their statements suggests that either Argentina or Nicaragua at the
time understood Article XXI to be “self-judging”, or anything other than
justiciable.
146. For example, if Article XXI was indeed “self-judging” for the mere reason that
it uses the words “it considers” and regardless of whether the measure
objectively falls within one of the subparagraphs of Article XXI(b) (as the US
argues), it would make no sense whatsoever to add an interpretative note on
the meaning of “emergency in international relations”90 or to “interpret certain
terms of the provisions of Article XXI(b)(iii) in such a way as to limit possible
arbitrariness.”91
147. Instead of any perceived self-judging nature of the provision, the arguments
of Argentina and Nicaragua focused on the use of Article XXI in practice. For
example, the objective expressed by Argentina to “avoid future uses of Article
XXI that could continue to undermine the functioning of the General
Agreement”92 implies that what should change is not the meaning of Article
XXI, but the practice of Members. If the meaning of Article XXI that those
Members wished to change was that it was self-judging, it would make no
sense to speak of “abuse”, or to push for reinterpretations of particular
concepts. Such arguments imply that there is an objective meaning to the
provision, which can be objectively assessed.
148. In any event, the subsequent discussion was rather inconclusive, as it
reflected a wide variety of views on the proposals. Thus, it does not show any
sort of consensus or majority view on anything resembling the current US
position. If anything, it goes in the opposite direction, because not a single
delegation in the discussion cited by the US expresses the view that the
provision is self-judging. One delegation stated that “a great deal of discretion
was necessary”.93 Other delegations seemed to approach the US position when
they stated that Article XXI was “essentially a matter for unilateral decision”,
but even they immediately acknowledged that “the right of recourse to Article
90 Exhibit US-150, para. 2. 91 Exhibit US-151, para. VI. 92 Exhibit US-151, para. VI. 93 Exhibit US-153, para. 6.
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XXIII was the appropriate safeguard against abuse” (including, therefore,
“violation” claims).94 All of this is a far cry from what the US would like the
negotiating history to mean.
7.3.5. The 1949 GATT Council decision
149. In its responses to Panel Questions 64-68, the EU has explained that:
• the 1949 Decision is not a “subsequent agreement” on the interpretation
of GATT 1947, because it does not establish a common understanding
accepted by all parties to the treaty, and because it does not bear
specifically upon the interpretation of the agreement or some of its
provisions; it is instead simply an instance of the application of Article XXI
in a dispute;
• under well-established jurisprudence, the 1949 Decision is not one of the
“other decisions of the CONTRACTING PARTIES to GATT 1947” and is
therefore not incorporated into the GATT 1994;
• the 1949 Decision was taken under Article XXIII of the GATT 1947 and is
therefore the equivalent of an adopted panel report, meaning that it
cannot have the effects the US claims it has.
150. The US has not explained on what basis it thinks the Decision reflects a
common understanding accepted by all the parties to the GATT 1947 even
though certain contracting parties were absent or abstained. It is entirely
insufficient for the US to state that, at the time, GATT Council decisions were
taken by majority vote,95 because a GATT Council decision does not in itself
entail a subsequent agreement on the interpretation of the treaty.
151. Moreover, even assuming for the sake of argument that the 1949 Decision is a
subsequent agreement on the interpretation of the GATT 1947 (quod non), the
United States would have to show why and how that agreement remains
relevant in the context of the WTO Agreement, DSU, and the GATT 1994. It
fails to do so. The entirety of the US argument in that respect is that “the text
of Article XXI of the GATT 1947 is identical to the text of Article XXI of the
GATT 1994.”96 This is unhelpful. First, the US argument implies that, just
94 Exhibit US-153, para. 6. 95 US’ responses to Panel Questions, para. 303. 96 US Responses to Panel Questions, para. 308.
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because the text of a provision does not change, agreements prior to a treaty
automatically turn into subsequent agreements. Second, the US argument
implies that all the changes to the WTO legal framework in the Uruguay Round
come to nothing.
152. Finally, the US argument as to why the 1949 Decision allegedly concerns a
general interpretative question, as opposed to the application of the provision
to a particular set of facts, boils down to the following:
After the vote, the representative of Czechoslovakia inquired “whether the decision could not be communicated to all members of the Interim Commission of the International Trade Organization, so that they would be informed of the interpretation given by the CONTRACTING PARTIES of the provisions of the Havana Charter”. No Contracting Party disagreed with that statement. 97
153. This is not a serious argument. First, whenever a legal provision is applied in
any kind of dispute, whether by the GATT Council, a WTO panel, the Appellate
Body, or any other adjudicator, it must necessarily be interpreted. Thus, any
report or decision on a GATT dispute will also entail an “interpretation”. This
does not make the report or decision an authoritative interpretation of the
treaty being applied, or a subsequent agreement on the interpretation of that
treaty. Second, requesting (after the vote) that the decision be circulated such
that its content is made known is a rather anodyne act of transparency that
cannot turn the decision into an authoritative interpretation or a subsequent
agreement.
7.4. THE VIEWS EXPRESSED BY GATT CONTRACTING PARTIES AND WTO MEMBERS DO
NOT SUPPORT THE US POSITION
154. The views expressed by GATT Contracting parties and WTO Members are not
relevant under Article 31 of the VCLT and cannot be attached any particular
legal value.
155. The EU has explained that an analysis of those views in inconclusive, as there
were opposite views expressed by different GATT contracting parties or WTO
Members. All that those views show is that there was never a consensus or a
97 US Responses to Panel Questions, para. 301.
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common understanding on how Article XXI should be interpreted. They speak
for both sides of the argument.
156. The EU refers to its detailed explanations in its previous submissions.98
157. The EU has already answered to the US reference to a Report by the G20
Global Forum on Steel Excess Capacity.99 The respective document has no
legal relevance. The position of the EU on such matters is as stated or not
stated by its duly authorised representatives in these proceedings. The
document expresses a political opinion about certain economic matters, which
should properly be addressed through different economic tools.
158. In its response to Panel Question no. 74, the US quotes from different
documents pertaining to the national security strategies of different countries,
ranging from certain EU Member States such as Austria, Germany and Spain
to other WTO Members, such as China, Russia and Turkey.
159. The EU notes, first, that what a domestic document of a WTO Member states
about national security is one thing, while what may be covered by the Article
XXI exceptions, as agreed by the whole WTO membership, is a different
matter.
160. If a Member states in its national security strategy that it is a matter of
national security for it to have a big apple pie factory with a monopoly in its
internal market, that does not mean that such an interest can automatically fit
under any of the subparagraphs (i) to (iii) of Article XXI(b). You can't fit a
round peg in a square hole.
161. Second, while the EU does not want to speculate on the meaning of national
security strategy documents of other WTO Members, the EU believes that such
documents may be understood as acknowledging a link, in certain limited
circumstances, between national security and a specific and substantiated
security of supply issue. In that case, such considerations may be the means,
but not the ends in themselves.
162. To the contrary, if a panel finds that a measure seeks to protect a domestic
industry as an end in itself, as the facts and evidence in this case
overwhelmingly establish, as opposed to doing so as a means to a security
98 See the EU’s response to Panel’s question no. 51(d). 99 See the EU’s response to Panel’s question no. 69.
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objective, then the panel must find that the measure is controlled by the
safeguards disciplines in any event.
163. Finally, the EU notes that all those statements the US quotes from different
national documents are not statements of those WTO Members in the context
of WTO dispute settlement proceedings, which could have taken into account
the actual language of Article XXI.
7.5. THE US “SELF-JUDGING” READING OF ARTICLE XXI(B) IS UNPARALLELED IN OTHER
PROVISIONS OF THE COVERED AGREEMENTS
164. In Question 48, the Panel asked the US whether there are other provisions of
the covered agreement that might be interpreted in the way in which the US
interprets Article XXI(b), and in particular its subparagraphs. In its responses,
the US either had to concede that the provisions mentioned by the Panel
cannot be interpreted in that way, or resorted to incorrect interpretations of
those provisions.
165. First, the US agrees that Article 22.3 of the DSU is not “self-judging” in the
way in which the US claims Article XXI(b) to be, even though that provision
also uses the term “considers”, followed by a requirement (comparable to the
subparagraphs of Article XXI(b)) to take into account certain factors.100
166. For the other three provisions mentioned by the Panel, it is not fully clear if
the US considers them all to be “self-judging”. In any event, that view would
be incorrect.
167. The provision that seems, on its terms, to provide the largest amount of
discretion to Members is Article 3.7 of the DSU, referring to Members’ own
“judgment”. And indeed, the Appellate Body has explained that Members are
expected to be “largely self-regulating” in its application.101 Nevertheless, even
that provision is not “self-judging”. Thus, in Peru – Agricultural Products, the
Appellate Body found:
[A]lthough the language of the first sentence of Article 3.7 of the DSU states that 'a Member shall exercise its judgement', the considerable deference accorded to a Member's exercise of its judgement in bringing a dispute is not entirely unbounded. For example, in order to
100 US’ responses to Panel Questions, para. 214. 101 Appellate Body Report, EC – Bananas III, para. 135.
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ascertain whether a Member has relinquished, by virtue of a mutually agreed solution in a particular dispute, its right to have recourse to WTO dispute settlement in respect of that dispute, greater scrutiny by a panel or the Appellate Body may be necessary.102
168. In that dispute, the Appellate Body went on to conduct an objective
assessment of whether the complainant “could be considered as having acted
contrary to its good faith obligations under Articles 3.7 and 3.10 of the DSU
when it initiated these proceedings.”103
169. Therefore, while that provision does entail a considerable amount of discretion,
it is certainly not “self-judging”, and it leaves intact the possibility of a panel
to conduct an objective assessment of whether a Member infringed it, and
whether it acted in line with good faith, unlike the interpretation of Article XXI
proposed by the US.
170. Annex A(5) of the SPS Agreement defines the concept of the “appropriate level
of protection” in SPS measures. It is correct that, under that provision, it is up
to each Member to set its own desired level of protection. The same would be
true under Article XX, and indeed under Article XXI of the GATT 1994: in
principle, it is for each Member to decide the legitimate policy objective it
pursues, and the extent to which it must be protected. This does not,
however, mean total discretion. To the contrary, none of those provisions
entitles Members to adopt measures that are inappropriate, unnecessary, or
incoherent with their objective. Thus, not only are those provisions not self-
judging, but they are designed to be subject to adjudication, in order to
prevent abuse and differentiate protectionism from legitimate regulation.
171. Accordingly, the following has been clearly established in the jurisprudence
concerning Annex A(5) of the SPS Agreement:
• A panel would typically be expected to accord weight to the respondent's articulation of its ALOP, particularly where that appropriate level of protection was specified in advance of the adoption of the SPS measure, where the ALOP is specified with sufficient precision, and where it has been consistently expressed by the responding Member. A panel, however, is not required to defer completely to a respondent's characterization of its own ALOP, particularly where the respondent has not expressed its ALOP with sufficient precision. Rather, a panel must ascertain the respondent's ALOP on the basis of the totality of the
102 Appellate Body Report, Peru – Agricultural Products, paras. 5.18-5.19. 103 Appellate Body Report, Peru – Agricultural Products, para. 5.28.
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arguments and evidence on the record, which may include the level of protection reflected in the SPS measure actually applied.104
• The right of a Member to define its appropriate level of protection is not […] an absolute or unqualified right.105
• Even if [a Member] has the right to establish its ALOP and to devise risk management measures if necessary to achieve such ALOP, [it] has to do so consistently with the SPS Agreement.106
172. All this makes clear that Annex A(5) is not a self-judging provision. A WTO
panel is entitled and required to objectively scrutinise and determine what the
regulating Member’s ALOP is, as well as whether the measure is consistent
with the SPS Agreement. A Member could not avoid that scrutiny by simply
asserting that it “invokes” a certain provision, as the US is doing here, and
expecting the panel’s task to be done at that point.
173. Finally, it is correct that previous panels have found that Article 5.4 of the SPS
Agreement does not impose a positive obligation, due to its “hortatory”
wording. Nevertheless, this does not suggest that this provision is in any way
“self-judging”. It does not leave any room for a unilateral determination by a
Member of what the applicable disciplines are or of which WTO provisions
apply. Thus, there is no parallel between that provision and the interpretation
proposed by the US for Article XXI(b). Indeed, the provision has had
consequences for the objective assessment of the applicable rights and
obligations by panels. For example, in Australia – Salmon, the Appellate Body
based its reasoning that “the SPS Agreement contains an implicit obligation for
a WTO Member maintaining an SPS measure to establish and articulate its
appropriate level of protection” in part on Article 5.4.107
174. Thus, the jurisprudence on various provisions of the covered agreements
containing wording which might suggest a measure of Member discretion
comparable to that suggested by the text of Article XXI(b) shows that those
provisions are not “self-judging”.
8. THE US HAS FAILED TO REBUT ANY OF THE EU’S CLAIMS AGAINST SECTION 232 AS
INTERPRETED
104 Appellate Body Report, Korea - Radionuclides (Japan), paras. 5.24 and 5.34. 105 Appellate Body Report, EC – Hormones, para. 173. 106 Panel Report, Australia – Apples, para. 7.1134. 107 Appellate Body Reports, Australia – Salmon, para. 206; Australia – Apples, fn. 509.
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175. With respect to the EU’s claims against Section 232 as interpreted, the EU
refers to its earlier submissions, which set out detailed facts, evidence and
argument on the content and nature of that measure, all the reasons why it is
WTO-inconsistent, as well as factual and legal developments relevant to that
measure post-dating the EU’s first written submission.108 The US has not even
addressed this measure, and has therefore failed to rebut the EU’s prima facie
case of WTO-inconsistency.
176. The US has so far mentioned this measure only in a very brief and vague
paragraph of its responses to questions. The US states as follows:
The United States has invoked Article XXI(b) as a basis for the challenged measures. The challenged measures are therefore justified under Article XXI(b).
177. Apart from the fact that this statement is obviously legally incorrect
(“invocation” does not amount to justification), it is incorrect as a factual
matter. Given that the US has not even mentioned this measure in its
submissions, it has in fact not even “invoked” (whatever that term actually
means) Article XXI(b) or any other provision as a defence in respect of that
measure.
178. Alternatively, if the Panel considers that the US has in fact invoked Article
XXI(b) in respect of Section 232 as interpreted, whether by this statement in
its responses to questions or otherwise, then this invocation means that the
US acknowledges the existence of the measure as challenged and described by
the EU, as otherwise the US would not be invoking Article XXI in respect of it.
9. THE PANEL SHOULD COOPERATE WITH THE ADDITIONAL DUTIES PANELS
179. The EU has explained at the first substantive meeting why it is crucial that the
Panels in the Additional Duties disputes do not work in “clinical isolation” from
the Panel in DS548 – as well as all the other panels in the Steel and
Aluminium disputes. The EU reiterates its concerns and refers to the
respective part of its opening oral statement.109
108 EU’s FIRST WRITTEN SUBMISSION, section 5; EU’s opening statement at the first substantive
meeting, para. 37; EU’s responses to Panel Questions 1 (paras. 13-16), 2 (paras. 20, 36 and 39), 3(a) and 73(c).
109 EU’s opening oral statement at the first substantive meeting, paras. 27 – 35.
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10. CONCLUSIONS
180. For the reasons set out in this submission, the European Union requests the
Panel to find that the measures at issue are inconsistent with the US'
obligations under the Agreement on Safeguards and the GATT 1994 as
detailed in the EU’s submissions.