Quick Win No. 7
Design an economic security safeguards mechanism to reform the WTO security exception
Responding to the perception that aspects of international trade create economic security risks, some WTO members have implemented unilateral, trade-inhibiting measures that lack clear endpoints. Members may justify violations of trade rules by invoking the WTO security exceptions, provided all requirements are met. However, security exceptions are not a long-term solution for persistent, unpredictable challenges and may even preclude multilateral approaches to anticipate and mitigate economic security risks. It is time to view security as more than an exception to WTO rules and principles. Members should build a new mechanism for economic security issues using the WTO’s safeguards procedures as a model.
A new Economic Security Safeguards (ESS) mechanism could create breathing space for protecting domestic industries that are strategic to economic security objectives while setting limits on the duration and the extent of remedy. When designing such a mechanism, members should decide how to characterize economic security safeguards and deliberate on a framework for evaluating risks. Members may agree that traditional wartime interests do not characterize economic security or that the assessment of economic security should strictly control how a product could indirectly contribute to a member’s defense capabilities.
While existing WTO safeguard rules require a demonstration of injury to industries caused by increased imports, the ESS could instead target industry risks associated with economic security. ESS implementation would thus depend upon improved information sharing concerning economic security risks rather than strict causation analysis. Practically speaking, knowledge of risk may be hard-to-observe for applying the ESS, as supporting evidence establishing chains of cause and effect may be difficult to show.
To resolve this tension, members could coordinate their strategic foresight practices that examine future government planning and contingencies and weigh their implications. As part of this, members could diagnose the short-term and long-term risks for economic security. They would need to agree on an approach that assesses how imports create supply dependencies and related risks in relation to domestic manufacturing capacity and consumption. Finally, the WTO could work with the Organisation for Economic Co-Operation and Development’s (OECD) risk likelihood and impact framework to design an ESS impact assessment based on different risk levels. Domestic authorities would rely on this risk assessment to evaluate the relevant factors for the right to impose trade restrictions. For example, to reduce uncertainty or early mitigation of risks, members could prioritize source diversification and set a high standard for imposing limited trade restrictions. In contrast, for vital products at high risk of severe impacts, members could set a deferential standard for evaluating the situation of the domestic industry. On this basis, there may be scope for members to choose between ESS that apply universally to all imports or moderate risk exposure from specific sources. Members could carefully circumscribe ESS usage by conditioning the duration of ESS implementation with a corrective action plan.
WTO security exceptions for extraordinary circumstances may still be required. However, to address ongoing concerns with economic interdependence, the ESS could allow members to advance economic security goals as part of, and not exceptional to, members’ long-term commitments to work together.
