What Trump Should Have Learned From Truman About National Security and Steel

November 16, 2020 by Digital Editor

Steel Worker (Credit: Bill Jacobus, https://www.flickr.com/photos/67513462@N00/132069382)

By: Philip Crowe

It’s been over two years since the initial imposition of steel and aluminium tariffs by the Trump administration, leading to the president describing himself as ‘Tariff Man’. This reflected a new priority for United States industrial policy – that economic security is national security. In the intervening two years the tariffs have been curtailed, enhanced and have been subject to the initiation of a dispute at the World Trade Organisation. This panel for this dispute first heard arguments in late 2019 before the COVID-19 pandemic disrupted the schedule. The panel have indicated a preference to hold a second physical hearing in Geneva before the end of 2020. Whilst imposing tariffs on your closest allies under the guise of national security might not be part of the Biden administration trade playbook, the outcome of this dispute and the interpretation of GATT Article XXI will still be vital to US trade interests into the future.

The administration’s authority for this tariff schedule is grounded in domestic law: Section 232 of the Trade Expansion Act 1962 gives the president the authority to restrict imports on grounds of national security. The measures can be implemented after an investigation by the Department of Commerce. The requirement to consider the “economic welfare of the Nation” during such an investigation indicates that the drafters of this legislation anticipated the importance of economic factors to national security issues. In March 2018 following an investigation, the administration announced that the current steel and aluminium import situation meant that the US was ‘’unable to satisfy existing national security needs or respond to a national security emergency’’, and imposed a 10% tariff on aluminium and a 25% tariff on steel. These steel and aluminium tariffs were the first and second times that S.232 restrictions had been imposed on a product other than oil or petroleum.

The states targeted by the tariffs imposed retaliatory duties before the European Union decided to request consultations at the WTO in June 2018. The responding communication from the US noted that national security is a political matter and is a competence reserved to individual states, as reflected in Article XXI of the GATT 1994, laying the foundation for a novel defence.

President Trump is not the first president to tackle the intersection between steel, national security and the law; President Truman did also. But unlike President Truman, President Trump was not in the midst of a war when he decided to invoke national security measures.  In 1952, the US steel industry was shaken by a labour dispute whilst the US army fought in the Korean War and there was a risk that a labour strike would disrupt the steel supply, crucial for defence capacity. President Truman had passed the Defense Production Act in 1950 to allow the government to stabilise prices and wages in the industry. However this legislation proved inadequate to prevent a strike, so Truman decided to issue Executive Order 10340 directing the Secretary of Commerce to seize control of the steel mills, stating that  “our national security and our chances for peace depend on our defense production’’. The order was immediately challenged by the steel mills and went to the Supreme Court as Youngstown Sheet & Tube Co. v. Sawyer. The Supreme Court held 6-3 in favour of the steel companies that Truman had exceeded his power, opining that the “Constitution does not subject this lawmaking power of Congress to presidential or military supervision or control”. A national security crisis could not justify seizure of private property by the executive – was the message of the judiciary.

A judicial body will likely once again curtail executive overreach under the guise of national security when the WTO panel publishes its findings in the EU-US dispute (US – Steel and Aluminium Products [EU]). The year 2019 saw the first ever GATT Article XXI case litigated and decided at the WTO, a dispute between Russia and Ukraine. In this dispute, the WTO held:

  • that the national security exception is justiciable and the WTO dispute settlement body will have jurisdiction to adjudicate on disputes relating to the article,
  • that the “essential security interests” of each state are self-judging and will be determined by the state in question based on their individual circumstances. However, such a consideration must be made in good faith, i.e. Article XXI must not be used as a means to circumvent other trading obligations under the GATT,
  • that the invocation of the article must be based on a genuine emergency in international relations, which is capable of objective determination. In the Russian dispute, the panel did this by reference to United Nations General Assembly resolutions in relation to the conflict between Russia and Ukraine. This differs from the good faith requirement in that the good faith requirement refers to the self-judging of essential security interests. The ability to objectively determine the existence of an emergency in international relations is reserved by the WTO.

The US will have difficulty succeeding under the Russia test. There was arguably no emergency in international relations affecting the US that would justify the steel measures and there was certainly nothing comparable to the 2014 Russia-Ukraine conflict which was used to successfully justify the Russian measures. In submissions to the dispute so far, the US Trade Representative (USTR) has avoided detailing any particular geopolitical situation that would qualify as an emergency in international relations, and instead focused on the argument that Article XXI is entirely self-judging.

There is evidence to suggest that national security is not the sole reason for these measures and that the administration sought to renegotiate trade deals using the tariffs as leverage. Take the tariffs on Canada and Mexico as an example: in May 2019 Treasury Secretary Steven Mnuchin told a Senate committee that the administration was nearing agreement with Mexico and Canada to reduce these steel and aluminium tariffs just as the new US Mexico Canada Agreement was coming close to an understanding.  In June 2019, USTR Robert Lighthizer gave evidence to a Senate committee declaring that “without question, the USMCA is the strongest and most advanced trade agreement ever negotiated”, further noting that the US renegotiations had successfully “included a requirement for North American steel and aluminum in autos… well above NAFTA levels”.  Other sections of government doubted the necessity of the tariffs, with the Pentagon assessing the Commerce Department steel report and stating that: “The US military requirements for steel and aluminum each represent only about 3% of U.S. production. Therefore, DoD does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel or aluminum necessary to meet national defense requirements”.  Furthermore, Australia were also granted a derogation from the tariffs in return for a security agreement with the US.

Evaluating the above evidence, there is no apparent genuine necessity for these tariffs to protect the security of the US and its citizens, and these measures have not been applied in good faith.  Instead the measures have been applied as a means to circumvent the global trading system and as a pretext for a better trade deal. Ironically, this is the exact type of situation that the US negotiators feared would threaten the multilateral trading system when multilateral trade negotiations were ongoing in 1947, though they likely would not have foreseen the threat emanating from their own country.

The trade law community awaits with anticipation the panel report of this case, but the most likely outcome is predictable. Although there is a chasm between the political importance of decisions made by the US Supreme Court and the WTO, Trump looks set to follow Truman as the second president who fell afoul of the intersection between steel, national security and the law.

Philip Crowe is a trainee lawyer in Dublin, Ireland. He holds a Bachelor of Civil Law with Economics from University College Dublin and a LLM in Public International Law from the London School of Economics. Prior to entering private practice, he worked as a civil servant for the Department for International Trade of the United Kingdom.