Consequences for security of European states?

For the past year, Ukraine has been resisting Moscow’s unprecedented excesses of violence. It is supported by NATO member countries, the European Union, and some 20 other states, such as Japan and South Korea. With regard to military aid deliveries to Ukraine, Kiev’s supporter states are repeatedly faced with the same trade-off: How many and what weapons systems does Ukraine need to repel Russian aggression as well as defend its state sovereignty – and what are the risks of further drastic Russian escalation? What are the consequences of Russia’s war against Ukraine for the security of European states – and beyond? These are the main topics that will be discussed at the Security Conference. As always in Munich, on an open stage and in front of the whole world.

Featured Speakers:

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, European Commission

Katherine Tai, Trade Representative, United States of America

Oliver Zipse, Chairman of the Board of Management, BMW AG

Moderator: Zanny Minton Beddoes, Editor-in-Chief, The Economist

To watch the full conference videos, please click here.

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I. INTRODUCTION

Foreign trade as an instrument of ‘national power’—a power to coerce other states—has long influenced trade relationships. The post–World War II multilateral trading system, however, requires governments to treat trade and security policies analytically separate, though such a separation has always been more theoretical than real. An implicit agreement among the trading community was not to make the post-war General Agreement on Tariffs and Trade (GATT) about the securitization of trade. Economic interdependence and restoration of the global economy required states to liberalize trade (as a rule) and act to protect their essential security interests (as an exception). To champion trade liberalization as (at least part of) insulation from future war, states carefully presented security concerns as trade interests. Security persisted but was not the language by which trade negotiators and delegations spoke. Still, security and trade interests remained interconnected despite the legal framework that set them up as antinomies.

Today, security and trade pull against one another, each demanding its own ‘exclusivity’. That pull challenges the multilateral trading system, now organized under the World Trade Organization (WTO). International trade policies are increasingly reflecting a national security mentality. Unpredictable dynamics in the global economy, such as the Russian invasion of Ukraine, foster insecurity. Technological innovations, warming temperatures, and pandemics have altered the prevailing wisdom that international rules foster economic growth. Leading economies are re-evaluating the gains of trade. China and the USA take a ‘combative approach’, aiming to secure their economic and geopolitical interests and weaken competitors in strategically essential sectors. Leaders increasingly caution about the ‘erosion of the multilateral trading system’ and fear that interdependence exposes them to networked coercion. Moreover, the scope for open, non-discriminatory trade will shrink if the larger economy members reorient their engagement around security interests—even more so if they invoke security exceptions without limitations. What is the role of the WTO in facing these persistent crises? Do members possess the institutional support needed to discuss security measures without clearly defined limits or those that do not directly correlate to an identifiable security threat?

The worst outcome will be if members stop using the WTO altogether, bypassing it through unilateral measures. For example, the USA is choosing to ameliorate trade insecurities with select ‘like-minded allies’ through WTO-external diplomatic talks. These initiatives may be productive. Nevertheless, these unilateral activities cut starkly against the WTO’s multilateral nature. Moreover, such detours do nothing to resolve ‘principal antagonisms’ within the global economy or growing tensions between the heterogenous WTO membership. Ultimately, the WTO is at the service of its members who drive its mandate and functions. Members choose how the WTO assists in the development of trade policies for economic resilience in response to the growing reconceptualization and operation of national security priorities.

Without WTO-wide discussions about the growing invocation of security in trade actions, a select group of powerful, advanced economy members will reframe the relationship between trade and security. Due to their relative market strength, these elite members will forge a new status quo for all WTO members, requiring the latter to conform to rules designed by the powerful. However, crucially, this will not occur through established legislative processes to change the existing trade-offs between security and efficiency within the WTO rules architecture. Left unchecked, the WTO will institutionally drift. Without consensus, drift captures an unspoken reorientation of trade towards the terms of the few. Other members invested in an open, global economy are either side-lined, left to pick sides, or forced to prioritize self-sufficiency.

WTO members need space to discuss—and disagree with—the intersection of security and trade policies. Open, frank discussion of trade security is crucial for maintaining multilateral coordination and enabling governments, businesses, and individuals to navigate global economic networks. WTO members talk about security at the WTO with greater frequency. Still, as security becomes less exceptional, members must adapt trade deliberation to the present (and future) reality of trade politics and practices based on security concerns. Discussing the interconnections between trade and security makes it possible for ‘keeping the game going’, as Friedrich Kratochwil put it, ‘by providing the participants [of an institution] with the necessary information’ to allow for “debates” about behaviour and practices. In particular, members need clear strategies to manage the opacity of security interests within an institution designed to facilitate transparent, deliberative processes. Talking and information sharing may seem insufficient, but they remain a critical first step to rethinking how the WTO can remain relevant.

This article proceeds as follows. Section II provides an analytical description of how members reimagined the relationship between essential security interests and trade interests. Section III then evaluates WTO institutional procedures for addressing WTO notification and review. Section IV explains how members use existing WTO procedures to raise security concerns and justify trade actions, with an assessment of the implications of security exceptions in the covered WTO agreements. Section V turns prescriptive and assesses how WTO members can build upon existing techniques to develop a sound infrastructure for members changing trade policies and practices based on security, resilience, or efficiency. Section VI concludes.

To read the full article, please click here. 

The post Let’s Agree to Disagree: A Strategy for Trade-Security appeared first on WITA.

The US–China rivalry is further complicating the EU’s relationships with both countries. While the Biden administration has signalled it is keen to work with allies in ‘dealing’ with China, the EU has demonstrated a limited willingness to do so. 

Balancing its relationships with the US and China has proven difficult for the EU, which aims to be a relatively neutral third pillar in the world order. However, this is a risky and largely unsustainable strategy that could result in continued soft triangulation between these two superpowers and provide limited benefits. 

To read the full report from Chatham House, please click here. 

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The increased attention on semiconductor global value chains brought stark realities to light. First, semiconductor manufacturing is disproportionately concentrated in Asia, especially in Taiwan. Single-source supply chains are fragile and highly vulnerable. Second, China’s increasingly competitive relationship with the US and its allies is accelerating strategic decoupling, reshoring, and ringfencing throughout the semiconductor landscape.

As geopolitical rivalry intensifies, the US and China share one common goal: They both want to localize semiconductor manufacturing. This behavior is typical of early-stage techno-nationalism, the neo-mercantilist mindset that links a nation-state’s technology prowess with its national security, economic prosperity, and socio-political stability.

This report is Part 2 of the comprehensive Hinrich Foundation primer Semiconductors at the heart of a US-China tech war. In this Part 2 of the series, author and Research Fellow Alex Capri focuses on the actions the United States has taken to try and revitalize its semiconductor industry.

To read the full report from The Hinrich Foundation, please click here.

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To read the full article, please click here.

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Now the United States and China are the main protagonists in this technologically driven competition, but Japan remains an indispensable player. The resulting zero-sum landscape has produced protectionist policies that have not been pursued widely since the 1980s and 1990s, when U.S.-Japan economic competition was at its height. The high stakes behind this current shift promise to make this era of technonationalism longer lasting and more intense than earlier periods.

Japan and the United States have watched warily as China’s economic heft has grown and as the technological sophistication of its manufacturing base has increased. Beijing’s penchant for pursuing a state-driven economic and innovation model has not allayed their concerns. This reemergence of great-power competition is coinciding with the so-called Fourth Industrial Revolution, in which an early lead in technological mastery of certain strategic fields like AI and quantum computing could put a country (and its allies) in an unassailable leadership position. Fear of “losing” this competition is fueling an unprecedented scale of investment and a zero-sum mentality that could tempt countries to overreact in ways that would damage their national interests and broader global interests.

To view the original report, click here.

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Current WTO Disputes Involving the Security Exception

A series of WTO disputes involving the security exception has emerged in the last two years. The most advanced of these disputes is brought by Ukraine against Russian restrictions on traffic in transit from Ukraine to third countries via Russia. Ukraine alleges breaches of the “Freedom of Transit” provisions of GATT Article V. In response, Russia has invoked the security exception in Article XXI.

In 2017, Qatar requested the establishment of a panel with respect to “measures taken in the context of coercive attempts at economic isolation” allegedly imposed by the UAE against Qatar. Qatar brings claims under GATT 1994, GATS, and TRIPS, including under provisions regarding transit and nondiscrimination. The UAE contends that, pursuant to the security exceptions in these three agreements, it was “forced to take measures in response to Qatar’s funding of terrorist organizations.”

Additional disputes have arisen more recently in relation to the U.S. imposition of tariffs on steel and aluminum imports, under Section 232 (“Safeguarding national security”) of the Trade Expansion Act of 1962. Of the countries that export these products to the United States, only Argentina, Australia, Brazil, and the Republic of Korea are exempt from these tariffs, with Australia subject to monitoring in an undisclosed arrangement and the other three countries agreeing to import quotas of questionable WTO legality.

Nine countries have commenced WTO disputes against the United States in relation to these tariffs: China, India, Canada, the European Union, Mexico, Norway, Russia, Switzerland, and Turkey. In addition, the United States has commenced six disputes against retal- iatory tariffs imposed by Canada, China, the European Union, Mexico, Russia, and Turkey. WTO panels have already been requested in most of these fifteen disputes.

Read the full report here

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