THE NON-DISCRIMINATION PRINCIPLE AND THE NATIONAL SECURITY EXCEPTION UNDER GATT ARTICLE XXI...

     
Abstract: Non-discrimination is a fundamental principle of the World Trade Organization (WTO), which promotes global trade with the goal of eradicating hunger, reducing poverty, and ensuring global prosperity. According to the WTO rules, members are required to give other members most-favoured-nation and national treatment. Due to the military conflict between the Russian Federation and Ukraine, the United States, European Union, and several other member countries suspended most-favoured-nation treatment for Russian goods in mid-March 2022. This study examines the principle of non-discrimination under the WTO provisions, identifies relevant exceptions, analyses the Russia-Traffic in Transit case, and evaluates the appropriateness of the above actions by the US and others. Finally, this paper concludes that the US and its allies failed to present concrete evidence demonstrating a direct and causal relationship between the military situation in Ukraine and their own essential interests under Article XXI of GATT 1994
Keywords: Non-Discrimination, Most-Favoured Nation Treatment, International Trade, United States, Russia, WTO
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1. Introduction: The Non-discrimination Principle in International Trade
International free trade is based on Adam Smith’s theory of competitive advantage and the natural division of labour, as well as David Ricardo’s theory of comparative advantage.[1] Both Smith and Ricardo later emphasised the numerous benefits of trade liberalisation, greatly influencing the global trend of bilateral and multilateral trade treaties.[2] After WWII, while the International Monetary Fund and the World Bank played critical roles in monetary management and financial support in the new international framework, the International Trade Organization was unable to achieve its goal of monitoring the development of a new multilateral trade order. Instead, the General Agreement on Tariffs and Trade (GATT 1947) was signed and ratified in 1947 to establish the basic principles for promoting international trade, such as national treatment (NT) and most-favoured-nation (MFN) treatment, with the goal of reducing and eventually eliminating tariff barriers to promote international trade activities.[3] Following the Uruguay Round of trade negotiations, the World Trade Organization (WTO) succeeded the GATT 1947 as the global watchdog for global trade liberalisation in 1995. While GATT 1947 focused primarily on goods, the WTO has gone much further, incorporating policies on services, intellectual property, and investment.[4] The GATT 1947’s principle of non-discrimination has been upheld by the WTO and more clearly defined through specific agreements.
Against this historical background, this research sought to examine whether the US and its allies’ unilateral renouncement of MFN treatment for Russian goods is consistent with the WTO’s rules. This paper is divided into four parts. Following the introduction, part two discusses the non-discrimination principle under the WTO and its exceptions. Part three applies the national security exception to the contemporary Russian case. This part checks whether Russia can sue the US, the EU, and other countries for unilaterally depriving it of the right to MFN treatment at the WTO. More specifically, this part tries to answer the following questions: (1) Are the actions of the US and other relevant countries in accordance with WTO regulations? (2) Can the Russian Federation sue the US and other WTO countries and win? To answer these questions, it is necessary to examine Article XXI of GATT 1994. Finally, part four concludes the paper.