China Criticizes U.S. Bulk-Power System Policy Before the World Trade Organization

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

On May 1, 2020, President Donald Trump signed Executive Order (EO) 13920, “Securing the United States Bulk-Power System.” The EO declares that threats to the bulk-power system by foreign adversaries constitute a national emergency. While the EO does not name specific countries, its likely focus on the People’s Republic of China did not go unnoticed by the country before the World Trade Organization (WTO) at a virtual meeting of the WTO Goods Council on June 8, 2020.

China voiced its concern that the EO exploits national security exceptions to trade agreements under Article XXI of the General Agreement on Tariffs and Trade (GATT). China additionally alleged that the U.S. has not demonstrated that its policy will not hurt global trade.

The WTO has historically taken a cautious view regarding the adjudication of disputes over Article XXI with underlying concerns that such disputes are a lose-lose situation. Specifically, a ruling upholding a broad, U.S.-style view of the exception was thought to encourage other countries to impose protectionist measures, while a ruling limiting the exception could be seen as a breach of national sovereignty. In fact, the U.S. has long held that the national security exception is non-justiciable. However, a recent landmark ruling in 2019 on a dispute between Russia and Ukraine explicitly pushed back against this position and may have opened the door for China to formally challenge U.S. policy before the WTO.

In response to China’s concerns, the U.S. has stated its national security is not a topic open for discussion at the WTO Goods Council meeting.

At present, China has largely responded to the intensifying battle with the Trump administration over trade restrictions with retaliatory tariffs of its own. However, recent escalation from the U.S. — including the blacklisting of dozens of Chinese entities that allegedly committed human rights violations by the U.S. Department of Commerce, barring U.S. exporters from trading with them, and threats to ban China-based airlines from flying to and from the U.S. — could lead China to seek a ruling from the WTO to support its position in the ongoing trade war.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Faegre Drinker Biddle & Reath LLP

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