Congrats to Canada on winning this unofficial competition for fairest trading partner! Canada also scored the highest on the question "Please describe the United States’ relationship with the following countries," with 72% saying it was a "friend and ally." Thus, despite what's going on at the highest political levels, most Americans still appreciate Canada.

(For comparison purposes on the fair trade question, I would be curious to hear the responses in a poll of Americans to the question "Would you say the United States is a fair or unfair trading partner?" Maybe the folks at CFR can add that one in next time.)

Another interesting question was "What do you think the next president should do about Trump's tariffs on the following trade partners?" Here are the results:

This is a complex issue, and I'm not sure how to phrase it to get a good sense of public opinion on where to go with U.S. trade policy under a new administration. Asking only about removal of the tariffs leaves some uncertainty about what else would go along with that. Rather than a country-specific question focusing on tariff removal, I might try something along the lines of the following instead: "Should the next U.S. president remove all of Trump's tariffs and then develop a new overall tariff and trade policy?"

But it's tough to capture everything that is going on with U.S. trade policy at the moment in a poll question. Among other things, you have the tariffs themselves, the various trade deals negotiated by the Trump administration, the choice of countries being targeted, the choice of sectors being protected of affected, and the specific accusations and concerns about unfair trade practices. All of it could be reconsidered by a future administration. I'm not sure polling can get at every aspect, though, and I think that to a great extent a future administration is going to have use their instincts as to the details of what Americans want to see here.

Announcing a program on Friday Oct 9, the annual Fall Trade Update program hosted and organized by Case Western Reserve University School of Law (with partners CITBA, American Society of International Law and Greater Cleveland International Lawyers Group): "Eleventh Trade Law Fall Update: 'Trade and Customs Law & Enforcement in the Remarkable Year 2026'" (virtual program only), Free - Registration link for Zoom here; all times ET
https://case.edu/law/about/events-lectures/eleventh-trade-law-fall-update-trade-and-customs-law-enforcement-remarkable-year-2026-virtual-program-only

8:20-8:30: Introduction: Juscelino Colares, Johan Verheij Memorial Professor of Law and Professor of Political Science, CWRU School of Law

8:30-9:30: Current Compliance Challenges for Global Supply Chains: forced labor tariffs; customs enforcement developments; origin rulings & non-MFN tariffs; and the often-surprising concepts of scope and circumvention in trade law - with Lawrence Friedman, John Foote, Cynthia Galvez, Luke Mathers

9:40–10:40: What's Happening on Tariff Litigation and Where Are My Refunds? State of play on IEEPA tariff refunds & challenges to tariffs under Sec. 122, 301 - with Amy Magnus, Michael Roll, Valerie Sorensen-Clark, Amy Porges

10:50-11:35: Breaking news + hot topics: with Zack Walker, Elizabeth Drake, Katherine Dobscha

11:40-12:15: Keynote roundtable on USMCA & N American auto jobs, production & growth - with Kristin Dziczek and Leila Aridi Afas

12:15-12:20: Closing remarks, The Hon. Leo Gordon, Judge, US Court of International Trade

Now Australia seems to be joining the cause, putting forward the following argument in its own WTO reform communication:

2.5. State-owned enterprises (SOEs) have come to play an increasingly prominent role in global markets compared to when the Uruguay Round was concluded. This has increased the importance of ensuring competitive neutrality between SOEs and other enterprises.

2.6. GATT Article XVII on state trading enterprises only disciplines activities related to their purchases and sales involving either imports and exports. Similarly, the SCM Agreement has limited application, including due to the Appellate Body's legal interpretation of the term "public body", and only disciplines the provision of subsidies. Existing disciplines do not adequately capture the ways governments can use ownership, control and direction to undermine competitive neutrality principles, tipping the playing field in their favour.

2.7. Actions which Members could consider include:

a. developing a definition of an SOE under WTO rules, including a definition of ownership and control that addresses indirect control;

b. strengthening SOE transparency requirements through agreed notification processes, including information on ownership, activities, control, governance, state support and noncommercial assistance;

c. ensuring the disciplines of the SCM Agreement extend to SOEs, including where government ownership, control or direction enables trade-distorting support;

d. ensuring administrative tribunals, regulators and other public authorities do not favour SOEs over private enterprises, and that SOEs do not perform regulatory functions in sectors in which they compete with the private sector;

e. strengthening cooperation and sharing of best practices on SOEs;

f. requiring SOEs to engage in activities in accordance with commercial considerations, except where delivering a clearly defined public service objective;

g. committing to competitive neutrality between SOEs and private enterprises, to ensure SOEs compete with private enterprises on merit without receiving unfair advantages from the governments that own or control them; and

h. ensuring procurement rules and practices do not favour SOEs or state-linked suppliers over other suppliers, including through discriminatory access or abnormally low tenders.

Everything Australia says here seems sensible to me. As I said in the earlier post, I've always thought it was odd that there are general GATT obligations that apply to state-trading enterprises, but nothing similar for state-owned or state-invested enterprises. In my view, this gap in the rules should be closed. (It's worth noting that the EU mentioned both state-owned and state-invested enterprises, while Australia referred only to state-owned. I'm not sure if Australia's narrower terminology was intended to limit the scope of the exercise, or if Australia would include both under the broader category of state-owned.)

Australia and the EU are on board, but I have questions about the reaction this will generate from other WTO Members. Will China, which is already subject to similar disciplines through its accession commitments, join the cause because it would like others to be covered as well? In China's own WTO reform paper, it did not explicitly address the issue of state-owned/state-invested enterprises, but it did say: "WTO accession commitments are highly Member-specific and should not be mechanically extrapolated to the wider Membership." To me, that came across as pushing back against the suggestion in the EU reform paper to extend the accession commitments on state-owned/state-invested enterprises to the broader membership, but perhaps I'm reading too much into it.

Also, how about India and Brazil, or Canada and the UK, or the least developed countries? What do others think about these issues?

And, of course, there is the U.S. What will the Trump administration think of all this now that the federal government is actively taking equity stakes in a wide range of private companies? I can imagine that under para. 2.7(a) above, the Trump administration would push for a definition that excludes its equity stakes from coverage. And then what will a post-Trump U.S. trade policy look like, and how will those folks approach the WTO in general and SOE discussions in particular? For some on the left, Trump's use of equity stakes is an opening to do more of this in support of their favored policies, whereas others may be more skeptical.

With all of the various viewpoints out there, it's likely to be difficult to make much progress on this issue at the WTO, as it is with most things these days. At the least, though, the exercise will be useful in order to map out where everyone stands, and that will give us a sense of what is possible here.

Domestic regulation should come first

For governments to be in a position to negotiate an AI treaty, domestic policy and regulation needs to be sorted out first, and I don't think we are close to that at the moment in the U.S.

As most of this blog's readers probably know by now, I worry about regulation being ineffective or counterproductive, although my views vary depending on the specific issue. With social media, for example, I am a skeptic of regulation. Many of the proposed regulations I've come across seem either pointless or harmful, and the problems can be more effectively addressed through private sector development of alternative social media apps/websites. Regulation isn't going to make the existing walled garden platforms much better, and in my view the best approach is for everyone to shift away from those to the emerging alternatives.

On AI, though, I think extensive regulation is needed, as there are a wide range of potential harms from AI products. As much fun as it can be to assign a somewhat arbitrary % figure to the chances of humanity being destroyed by AI, I'm less worried about that than I am about more basic things such as hacking or the psychological impact of AI chatbots. There are also many uncertain legal issues related to AI that would be nice to get some clarity on, and regulation could provide that.

Unfortunately, it seems to me that we are unlikely to get significant federal regulation on these issues while Trump is in office. My sense from the things Trump has said is that he does not want regulation in this area, and from what I can tell most people in the Trump administration seem to agree, or at least will go along with his view. As a result, any actions they take are likely to remain limited in scope and non-transparent, which is where things stand now. I doubt they can be swayed on this, and barring some major AI-related catastrophe that forces a response, I don't see anything happening here. Even the biggest blue wave I can imagine in the midterm elections won't give the Democrats a veto-proof majority in Congress, and thus I will be surprised if there is any federal AI regulation other than ad hoc White House guidance for the foreseeable future.

In the meantime, people can and should prepare for future legislative and regulatory action. Members of Congress can discuss the issues and make proposals, and various states will do some regulating. In this way, the next couple years can be used to map out what kind of regulation would be useful, so as to have something ready when the political situation allows it to be enacted at the federal level.

AI treaty talk

In the midst of all this non-action on federal regulation, and with President Trump meeting with President Xi last week, some people were calling for the negotiation of an AI treaty. Here are a few examples:

• Senator Bernie Sanders said: "With the future of humanity at stake, Trump must negotiate a comprehensive treaty with President Xi of China to establish a pause on advanced AI development and a ban on super intelligence."
• Dario Amodei of Anthropic said: "we should also aim for a worldwide pacing of the frontier ... Global pacing will require cooperation with China, the autocratic country with by far the most advanced AI capabilities."
• A group of Democratic Senators wrote a letter to Trump calling on him "to negotiate a formal agreement between the U.S. and China on guardrails and global standards for the development, testing, and use of frontier Artificial Intelligence (AI) models with Chinese President Xi Jinping."

During the U.S.-China talks, AI was, in fact, one of the issues on the agenda. Not surprisingly, though, very little was achieved. A White House fact sheet – which uses Trump's term for AI – says:

The two countries established the U.S.-China Super Intelligence (SI) Dialogue to exchange views on risks and benefits related to SI. The next exchange will occur by November 2026. The United States and China also agreed to establish a bilateral communication channel for SI incidents.

My sense is that a U.S.-China Dialogue, along with a channel for notifying AI-related incidents, will have a very limited impact on the regulatory issues here, and I am skeptical that any of this will lead to a significantly broader AI agreement in the near future.

This is unfortunate, because an AI treaty would be a good idea. Every government will be dealing with various problems related to AI, and coordinating these efforts would be useful.

But in the absence of a robust federal regulatory framework in the U.S., I can't see progress on an AI treaty happening anytime soon. In a situation where there is limited federal regulation, and the Trump administration doesn't want to pursue anything other than its own limited oversight of these issues, I don't know what a treaty would say other than "governments can do pretty much whatever they want." That's not particularly helpful when governments are trying to figure out what needs to be done and how to do it in a cooperative way. As far as I can tell, then, while an AI treaty with the U.S. and China as the key actors could be useful, it's going to have to wait for a new administration.

To be clear, even with a federal regulatory framework in place, such a treaty will be a challenge to negotiate, as the specific concerns of China and the U.S. – and of other countries as well – vary quite a bit. Nonetheless, once the U.S. has worked out its own views on AI regulation in a post-Trump world, I think it's worth sitting down with other governments and trying to reach common ground on international rules that could help guide everyone's domestic regulation.

• H.R.10175, Banning Antiquated Duties and Delivering Equitable American Levies (BAD DEAL) Act, press release (Senate version: S.5397, press release); and
• S.5390, The End Trump's Tariff Tax Act, press release

These bills are not likely to go anywhere in the near term though. In the meantime, there is an opportunity to talk about ways to mitigate potential problems through the Commission's implementation of Section 338. In response to the request for comments, I submitted the following:

Re: Docket Number MISC-053: Request for Comments Regarding Implementation of 19 U.S.C. 1338(g)

Dear Ms. Barton,

In the Request for Comments Regarding Implementation of 19 U.S.C. 1338(g), the Commission raises the following topic:

Section 338 (19 U.S.C. 1338) addresses "unreasonable" and "discriminatory" conduct by foreign governments. What makes conduct "unreasonable" or "discriminatory" in the context of international commerce? How should the Commission understand those terms for the purposes of Section 338?

This comment focuses on the appropriate understanding of the term "discriminatory" for the purposes of Section 338.

In thinking about the meaning of "discriminatory," helpful guidance can be found in the views of the Office of the U.S. Trade Representative (USTR) on similar issues in the context of dispute settlement at the World Trade Organization. As part of its criticism of the Appellate Body, one of USTR's complaints relates to how the Appellate Body had interpreted the WTO's non-discrimination obligations. As USTR put it in its 2020 Report on the Appellate Body of the World Trade Organization,[1] while a key principle of the WTO agreements is "the requirement that Members not discriminate against trade from other Members," this "fundamental principle, reflected in the national treatment and most-favored nation obligations, was not intended to prevent Members from pursuing their legitimate policy objectives." According to USTR, however, the Appellate Body "has found a measure to be discriminatory (and therefore not consistent with WTO rules) based solely on evidence that the measure may impact imports from one Member more than those of another, even though converting a nondiscrimination inquiry into a detrimental impact test renders almost any origin-neutral measure vulnerable to challenge in WTO dispute settlement." The result of this approach, USTR said, is that "[i]t is much more difficult to pursue legitimate public policy measures under the legal standard the Appellate Body has invented than under the standards to which Members actually agreed," and "the Appellate Body’s approach would have WTO adjudicators second-guess Members’ legislatures and serve as the ultimate arbiters of a range of important legislative questions, which is not a role that WTO Members assigned to them under the WTO agreements."

These concerns expressed by USTR are directed at WTO adjudicators, but the same logic applies when it is the U.S. government that is deciding whether a law or regulation is discriminatory. If disparate impact is sufficient to find that discrimination exists pursuant to a Section 338 investigation, with tariffs imposed in response, the pursuit of legitimate public policy objectives by governments could be undermined. An interpretation of Section 338 that leads to this outcome should be avoided, as the U.S. government should not interfere with the legitimate public policies of other countries. Doing so could harm relations with U.S. trading partners, lead to worse policies in those countries, and trigger similar complaints about U.S. laws and regulations.

It is true that governments should not use laws and regulations as a means of disguised protectionism, and both domestic and international trade law have long recognized this principle. However, for the reasons noted above, the legal standard for "discriminatory" should not target laws and regulations that merely have a disparate impact on foreign goods and services. Instead, an investigation by the Commission under Section 338 as to whether measures are "discriminatory" should consider whether these measures are designed to protect domestic industries.

The same logic applies to the Section 338 reference to an "unreasonable charge, exaction, regulation, or limitation which is not equally enforced upon the like articles of every foreign country," which is a specific articulation of the non-discrimination principle.

Former U.S. Trade Representative Katherine Tai has talked about these issues in the context of tech regulation on multiple occasions. In October 2023, she offered this brief comment: "I think that as [the trade conversation about discrimination] then crosses over into regulatory efforts that impact these big technology companies, we have to really be cognizant that measures that may look like they have a discriminatory effect may or may not be advanced with a discriminatory intent."[2] Then in January 2025, she went into more detail on these issues:

One of the challenges that we have had in recent years is the growth of some U.S.-based companies to become so powerful and so dominant, not just here in the United States, but in the global marketplace, that efforts to regulate those companies or those sectors start to run into this dynamic where if they are foreign [countries] attempting to regulate, that they could appear to be discriminatory because these companies are almost all exclusively U.S. ­based.

And so, that’s been actually quite a large part of the conversation here over the course of the last couple of years, especially in light of, for example, the tech sector, where European attempts to regulate, they might have discriminatory overtones, or they might not. But attempts to regulate at all, because the affected companies tend to be only U.S. companies, we here at USTR have had to build in additional levels of examination, analysis from a governmental perspective to try to engage with our trading partners and to really try to suss out, are the governmental measures that our companies are complaining about, are they actually discriminatory and therefore something we need to really push back on from a trade discipline perspective? Or are they instead legitimate attempts to regulate that we need to make room to have conversations about and we can’t just assume are discriminatory because the affected companies happen to all be U.S.-based?

So, this has been one of the most interesting aspects of the way we’ve been evolving the perspective here at USTR, which has really put us in conversation with our competition authorities to create that space to say that not every foreign government regulatory measure is necessarily discriminatory when you look at the dynamic in the domestic and the international marketplace, where you have a set of dominant players that happen to be U.S.­ based.[3]

Applying Tai's thinking here, an important issue in Section 338 investigations that seek to identify "discriminations against the commerce of the United States" is how the Commission should analyze whether the foreign regulations are "actually discriminatory" or whether, instead, they are "legitimate attempts to regulate." USTR has weighed in on these issues in the context of WTO obligations, and it would be useful for the Commission to consider USTR's views as it thinks about how the principle of non-discrimination should be interpreted and applied in the context of Section 338.

As a final point, let me note that in the real world example of Section 338 tariffs on Canadian imports that we are currently dealing with, the considerations I focused on in my comments to the Commission do not arise, and I wasn't trying to address the Canadian situation. Rather, I was trying to head off a particular set of issues that seem likely to come up in a world where Section 338 is used regularly: Is disparate impact sufficient to find that discrimination exists, or must there be an examination of intent, purpose, etc. as well? However, the problems related to identifying discrimination are much broader than this, and I hope the Commission gets submissions addressing other aspects of the issue as well.

In the week prior, WTO Chief Economist Bob Staiger asked all of us speaking to prepare a quick answer in the final minutes of the session: if we had the keys to the house, what is one procedural and one substantive change we would make? I will save the substantive for another day and focus on my answer for procedure: I propose that a “blocking minority” be required, rather than the current approach, which allows individual Members to prevent a majority from moving forward.

Article X:9 of the WTO Agreement requires consensus of the Ministerial Conference to add a plurilateral agreement to Annex 4. Rather than rehashing the debate about the function and relevance of consensus, Members should consider how to better manage situations of non-consensus and the risk of a single point of failure or a monopoly on opposition. 

The WTO rules do, as I explain below, allow for voting, as does the Vienna Convention on the Law of Treaties, for adopting text and amendments (see articles 9(2) or 40). Yet the WTO has become locked into a position in which Members cannot even contemplate voting. Though 131 Members may support the investment facilitation agreement, India maintains a very strong opposition. Expert scrutiny continues to debate whether there has been a recent softening of that position. Regardless, recent events expose a problem in multilateral governance, as Members appear to be in an infinite loop without an exit condition.

From a historical perspective, the ITO/GATT anticipated decision-making would require voting. The initial plan for an International Trade Organisation (ITO) would have included a co-legislator of sorts, with an executive board comprised of the larger economies. Article 75 of the Havana Conference draft ITO Charter empowered Members to vote and provided an opportunity to take a second vote in the event the first vote was less than half the membership, which would become ‘final whether or not the total of the vote cast comprises more than half the number of the Members.’ For amendments that did not alter Member obligations, the Conference would just vote, requiring a two-thirds majority (see article 100).

That said, the commitment to one-country, one-vote presumed ‘common consent,’ though not in all circumstances. As Clair Wilcox, head of the U.S. delegation negotiating the ITO Charter, would later explain, ‘There is no single sharp division of interest that will appear in every case. The line-up of votes will be constantly shifting, from issue to issue and from time to time.’ An ITO Member would make decisions based on its priorities and lobby partners to succeed in a vote. To paraphrase Wilcox, every country would win some and lose some. The United States had significant power in this story and, of course, had a kill-switch — withdrawal from ITO membership was the ultimate decision when any Member lost faith in the decision-making process.

Without the ITO, the GATT lacked extensive decision-making institutions. However, Mary Footer observed that the commitment to joint action in GATT Article XXV supported an approach that prioritised collective decisions and created an exception for voting. Understood together, voting could help build toward consensus, in the same way an interim agreement could lead to a comprehensive trade agreement.

Although the practice evolved to consensus-based decision-making, the GATT rules concerning voting were retained within the WTO framework. Currently, Article IX:1 confirms that the WTO “shall continue the practice of decision-making by consensus followed under GATT 1947.” Article IX further explains that, absent other guidance, the failure to reach consensus creates the opportunity for voting on a one-country, one-vote basis. Article IX:2 states that the Ministerial Conference may adopt interpretations by a three-fourths majority vote. Likewise, in “exceptional circumstances,” the Ministerial Conference may waive obligations if approved by three-fourths of the Members. By this account, a three-fourths majority can change the multilateral trading system. Yet, as many academics have studied and opined, Members have been unwilling to crack that egg, knowing that it would be impossible to put consensus back together again.

Without seeking to rehash the extensive literature on consensus and voting in the WTO, what I propose is that Members consider a qualified minority rule. In addition to requiring a qualified majority to move forward, with three-fourths of the Members making a decision, a qualified minority demands that a Member wishing to veto form a minority consensus to block a decision.  

The decision-making rule would mean a requirement that three-fourths must be for YES and also that NO must be X amount (could be less than one quarter). A blocking minority places more accountability on the vetoing Members to convince a sufficient number of partners to join their opposition. It reflects the fact that the procedure must respect both poles of decision-making, those in agreement and those opposed. Incorporating this blocking minority accountability could facilitate more consensus-building, although only time would prove that hypothesis.

Old: Consensus and, failing that, 75% YES and silence on NO means the item can move forward.

New: Consensus and, failing that, 75% YES and [less than X percentage] NO means the item can move forward.

Within the European Council rules, a blocking minority is a close analogue. Article 16(4) of the TEU confirms qualified majority voting, of at least 55% of the Council members, comprising at least fifteen Member States or 65% of the Union population and a ‘blocking minority must include at least four Council members, failing which the qualified majority shall be deemed attained.’ Further research could explore the rationale and design for the Union to understand why this system introduced the counterbalance of the minority blocking, and how a similar process could benefit the WTO.

The minority block cannot be too small a number, as it would be too easy to game. One quarter of the membership would be about 40 Members. Even one-eighth of Members opposed may be sufficient to form a blocking minority. But somewhere between 20 and 40 Members could enable both the majority and minority to wrangle votes from allied partners, though there would be hope for more give and take and for blocks to form around issues. Members may acknowledge that the decisions taken need not guarantee their positions in bilateral or regional forums, but could reflect their position, though still subject to change, in the multilateral framework.

A blocking minority resolves the single point of failure but does not address other challenges with majority voting. As Ehlermann and Ehring point out, consensus decision-making may be ‘the least bad’ option compared with majority voting, as Members can passively abstain without formally objecting. Yet the value of consensus decision-making as a process may lose its salience if the trade-offs normally expected from finding a compromise solution among peers do not occur, especially when the matter at issue does not require Members to relinquish rights or to diminish their obligations.

Of course, implementing this new procedure would require Members’ consensus. Otherwise, Members are again looking at plurilateral options. In the plenary discussion, I spoke about plurilateralism and urged governments to recognise how the multilateral trading system respects the plurality of its membership, accommodating their varied approaches, while also committing to justified, transparent approaches and due regard when regulating trade. A veneer of legal universalism fails to show the dynamic, flexible system underpinned by diplomacy and context. Modernisation is not a single recipe, right? 

More than ever, in the height of geopolitical rivalry and technology-driven growth, governments must find points of compromise and cooperation. Disagreements should rest on context, objectivity, and as much data as possible, rather than on preconceived positions. Members could use a blocking minority procedure as part of the guardrails for a future world of federated decisions, in which coalitions are formed, and cooperation and standards may develop in more varied contexts. A successful blocking minority could become the foundation for a minority plurilateral agreement, with a process for transition between the two put in place (or not, depending on the topic). Further, any agreement on this new decision-making process could (for now) focus on qualifying rights without diminishing existing WTO obligations. In other words, Members may agree that open plurilaterals benefit from this process, while reserving consensus for closed plurilaterals. 

This brings me back to another point I made in the plenary. Any claims concerning the outdatedness of the multilateral trading system must be reconciled with a messy, complex history. Contrary to more conventional narratives, the system does not emerge from a context of post-war peace, any more than the ITO/GATT attempted to anchor that peace with rules committing all members to surrender discriminatory trade practices.  The origin story begins in wartime, with the United States taking a formal lead during World War II. Better appreciation of that context illuminates the emphasis on experimentation and transition between wartime and peacetime economics. The ITO/GATT project was part utopian and part pragmatic. I have never come across a demand that it be a strict code of conduct. If anything, the system often felt the opposite: uniquely pliable as governments recognised extraordinary challenges with building a globalised economy in the wake of shifting rivalries and economic reconstruction. It helps explain why historians from Irwin to Zeiler to Heilleiner have remarked on the self-restraint of the United States, and as I have tried to show in my own work, how alliance-building factored significantly in the final network of rules and exceptions.

Finally, in the plenary, I made a physics joke about perfectly spherical cows – to make the point that Members do not benefit from solutions based on unrealistic assumptions. The world must find a solution for real life, where cows are not perfectly spherical. There will never be a perfect time to reform the system. 

Though I did find a (nearly) perfectly spherical cow in the Geneva airport on my travels home.

1.       Executive Summary

Romania’s Law No. 163/2021, the constitutionality of which is currently being challenged in the Constitutional Court of Romania, offers an instructive case study of a broader and increasingly important question: how far may a State restrict access to its 5G and communications infrastructure in the name of national security while remaining within the boundaries of international trade rules? The Law No.163/2021 is particularly suitable for such an analysis because it bans certain technologies, equipment and software by reference primarily to the identity, ownership structure and corporate background of their manufacturer. Drawing on my experience in WTO adjudication and academic work in international economic law, this paper examines whether that form of manufacturer-based prohibition is consistent with Romania’s WTO obligations.

On that basis, this paper identifies several major distinct inconsistencies of Law No. 163/2021 with applicable WTO rules. The Law No.163/2021 treats like products differently depending on whether their manufacturers obtain authorization, thereby failing to provide imported products from unauthorized manufactures with equal competitive opportunities, as compared to like products from authorized manufacturers sourced domestically or from third countries. The Law is therefore inconsistent with the most-favoured-nation and national treatment obligations under the relevant WTO covered agreements, which are fundamental non-discrimination principles in the international trade order.  

Moreover, the blanket exclusion of all relevant products supplied by an unauthorized manufacturer under the Law No.163/2021 creates an unnecessary barrier to trade in violation of the WTO rules because more targeted and less restrictive measures are reasonably available. These could include product-specific security requirements, testing, certification, auditing and continuing monitoring, as well as differentiated treatment of core networks and network components of lower criticality.

The Law No.163/2021 also fails to use relevant international technical standards as the basis for its regulatory approach, as required by the WTO TBT Agreement to which Romania is a party.  Rather than assessing the security characteristics of particular technologies or products against objective technical benchmarks, it relies predominantly on broadly formulated criteria concerning their manufacturers. In addition, Romania did not notify the proposed measure through the applicable WTO transparency procedure or give other WTO Members an opportunity to comment before its adoption, which constitutes a violation of the applicable WTO transparency obligations.

Finally, the authorization system’s undefined criteria, the absence of reasons in the resulting decisions and the lack of transparency surrounding their factual basis also create a serious risk that the measure is not administered in the uniform, impartial and reasonable manner required by WTO law.

National security is unquestionably a legitimate and important objective. It does not, however, exempt a measure from WTO scrutiny merely because it is invoked as its purpose. The general exceptions under the GATT 1994 do not cover the security justification advanced for Law No. 163/2021. As for the GATT 1994 security exceptions, note that these exceptions do not confer unlimited discretion: their invocation remains subject to objective review and good-faith requirements. Law No. 163/2021 does not concern trade in arms or military supplies and was not adopted in time of an emergency in international relations. Also, the invocation of the national security exceptions to justify the Law is inconsistent with Romania’s obligation under international law to interpret and apply these exceptions in good faith.

The paper therefore concludes that the Law’s discriminatory, unnecessarily trade-restrictive, non-transparent and potentially arbitrary features amount to violations of Romania’s obligations under the relevant WTO covered agreements and cannot be justified under either the general or the security exceptions of the GATT 1994.

2.       Introduction

In July 2026, I made some preliminary observations on the WTO consistency of the European Commission proposal on the Cybersecurity Act 2.0 (CSA 2.0), which were posted on the IELP Blog and published as WTI Working Paper 4/2026.[2] While doing research on the draft CSA 2.0, I came across Law No. 163/2021[3], the 5G Security Law of Romania, which is currently being challenged before the Constitutional Court of Romania by a Chinese company.[4] I note that under Romanian constitutional law, international agreements, once ratified, are part of the domestic legal order and national courts directly apply these agreements.[5]  Therefore, one of the issues that could be addressed by the Court is the consistency of this Law with Romania’s obligations under the WTO Agreement,[6] because Romania is a party to this 1994 Agreement and, since 1995, a founding Member of the World Trade Organization.[7] In this article, I will first examine the relevant features of Law No. 163/2021, and subsequently assess the WTO consistency of this Law.

3.       Law No. 163/2021 on the Adoption of Measures Relating to Information and Communications Infrastructures of National Interest and Conditions for the Implementation of 5G Networks

The origins of Law No. 163/2021 must be traced back to a 2019 memorandum of understanding between Romania and the United States, and a 2020 European Union (EU) policy paper.  The Memorandum of Understanding signed in Washington, D.C., on 20 August 2019 by Romanian President Klaus Iohannis and US President Donald Trump laid down criteria for evaluating 5G vendors to ensure the security of 5G networks. [8] The criteria set out in the Memorandum were: first, whether the vendor is subject, without independent judicial review, to control by a foreign government; second, whether the vendor has a transparent ownership structure; and, third, whether the vendor has a history of ethical corporate behaviour and is subject to a legal regime that enforces transparent corporate practices. In the same vein, the EU policy paper of January 2020 on Cybersecurity of 5G networks: EU Toolbox of Risk Mitigating Measures recommended that: (a) EU Member States assess their national risk profiles of 5G network suppliers in light of the likelihood of interference by non-EU governments and the degree of control over their own supply chains; and (b) restrict or exclude ‘high-risk suppliers’ from participating in critical and sensitive assets, including core network functions, network management and orchestration functions, and access network functions. [9]

Romania’s 5G Security Law, Law No. 163/2021 on the Adoption of Measures Relating to Information and Communications Infrastructures of National Interest and Conditions for the Implementation of 5G Networks, was adopted by the Romanian Parliament on 7 June 2021 and published in the Official Gazette on 11 June 2021.[10] The Law entered into force on 14 June 2021.[11] Pursuant to Article 1, the Law aims ‘to prevent, counter and eliminate risks, threats and vulnerabilities to national security and defence of the country’. To this end, the Law adopts ‘measures concerning the authorization of manufacturers of technologies, equipment and software used in information and communications infrastructures of national interest, as well as in electronic communication networks through which 5G electronic communication services are provided, 5G networks’. The risks, threats and vulnerabilities referred to in Article 1 are defined in Article 2. Generally speaking, these risks, threats and vulnerabilities concern any action, fact, plan, event, situation, condition or deficiencies, which may impair Romania’s national security and defence.[12] The latter are understood to include national character, sovereignty, independence, unity and territorial integrity, functioning of state institutions, organization and communities of people, as well as life and bodily integrity of citizens.[13] The key feature of Law No. 163/2021 is that it allows only technologies, equipment and software of ‘authorized manufacturers’ to be used within: (i) information and communications infrastructures of national interest (hereinafter ‘communications infrastructures’); and (ii) 5G networks.[14] Manufacturers may be authorized by the Prime Minister of Romania when the Romanian Supreme Council for National Defence (‘CSAT’) gives its assent to such authorization.[15] However, if the CSAT identifies any risk, threat or vulnerability to Romania’s national security or defence, it will issue an adverse opinion and the application for authorization will be rejected by the Prime Minister.[16] In assessing whether there exists a risk, threat or vulnerability to Romania’s national security or defence, the Law sets out four criteria, namely: (1) whether the manufacturer is under the control of a foreign government, in the absence of an independent legal system; (2) whether the manufacturer has a transparent shareholding structure; (3) whether the manufacturer has a record of unethical corporate conduct; and (4) whether the manufacturer is subject to a legal system not requiring transparent corporate practices.[17] Note that the decision of the Prime Minister to grant or reject authorization, which is published in the Official Gazette, does not set out any reasons for the decision.[18] The opinion of the CSAT, on which the decision of the Prime Minister is based, is not made public and is not even shared with the manufacturer applying for authorization.[19] In addition to banning the use of technology, equipment or software of unauthorized manufacturers in the relevant infrastructures and networks, the Law requires that technology, equipment or software of these manufacturers which are already used in communications infrastructures and 5G networks are only to be used for 7 years (or in the case of core networks, 5 years).[20] Moreover, unauthorized manufacturers are excluded from any public procurement procedure for the supply of technologies, equipment or software for information and communications infrastructures of national interest.[21] Providers of electronic communications networks and services in Romania, which use (or, if they already use, continue to use longer than allowed) technologies, equipment or software of an unauthorized manufacturer, may be fined up to 1%-5% of their annual turnover.[22] While the Law does not explicitly single out the manufacturers of any particular country as ‘unauthorized’, Romania’s Minister stated in an interview with Free Europe at the time of the adoption of the Law that it is ‘very clear’ that technologies, equipment or software of Chinese manufacturers, and in particular of Huawei, are excluded from use in 5G networks in Romania.[23]

4.       WTO Consistency of Law No. 163/2021

According to public information, the consistency of Law No. 163/2021 with Romania’s Constitution, and in particular Article 11 thereof,[24] has been challenged before the Constitutional Court of Romania.[25] Relevant to this challenge could be claims that Law No. 163/2021 is in breach of Romania’s obligations under the WTO Agreement. The WTO Agreement is a short, 16-article agreement, with in the annex no less than 18 multilateral trade agreements, which are an integral part of the WTO Agreement and contain the specific substantive obligations imposed on all WTO Members, including Romania. Pursuant to Article XVI:4 of the WTO Agreement, a WTO Member must ‘ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the Annexed Agreements’.

In examining the WTO consistency of Law No. 163/2021, the most relevant obligations under WTO law are those contained in the GATT 1994 and the more specific TBT Agreement. Of particular interest are Articles I:1 and III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement, which prohibit discrimination; Article 2.2 of the TBT Agreement, which prohibits the creation of unnecessary barriers to trade; Article 2.4 of the TBT Agreement, which imposes an obligation to use international standards as a basis for technical regulations; Article X:3 of the GATT 1994, which requires the uniform, impartial and reasonable administration of trade measures; and Article 2.9 of the TBT Agreement, which imposes specific transparency obligations regarding technical regulations. As regards the inconsistency with any of the aforementioned GATT provisions, the question that could also be addressed is whether such inconsistency can be justified under Articles XX (General Exceptions) or XXI (National Security Exceptions) of the GATT 1994. Note that all the provisions of the GATT 1994 and the TBT Agreement referred to above have been the subject of interpretation and clarification by WTO dispute settlement panels, i.e., first instance, ad hoc arbitral tribunals, and by the WTO Appellate Body, i.e., the standing court of appeals of the WTO. Their interpretation and clarifications of WTO provisions should be given great weight.

As the panel in EC – Asbestos (2001) held that when a complainant challenges the WTO consistency of a measure under both the TBT Agreement, i.e., the WTO agreement specifically dealing with technical regulations, and the GATT 1994, i.e., the general agreement dealing with measures affecting trade in goods, an adjudicator must first examine whether the measure at issue is consistent with the TBT Agreement, since this agreement deals ‘specifically, and in detail’ with technical regulation.[26] However, should the adjudicator find a measure to be consistent with the TBT Agreement, it must still examine whether the measure is also consistent with the GATT 1994. There is no presumption of GATT-consistency when a technical regulation is found to be consistent with the TBT Agreement. In US – Tuna II (Mexico) (2012), the Appellate Body reversed the panel’s decision to exercise judicial economy regarding the complainant’s claim of inconsistency with Article III:4 of the GATT 1994 after it had found that the measure at issue was not inconsistent with Article 2.1 of the TBT Agreement.[27] Below, I therefore first address the consistency of Law No. 163/2021 with the TBT Agreement, before examining its consistency with the GATT 1994.

4.1.              Is Law No. 163/2021 in violation of the non-discrimination obligations under Article 2.1 of the TBT Agreement?

Article 2.1 of the TBT Agreement provides that:

Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.

Pursuant to Article 2.1, technical regulations are thus subject to a national treatment obligation and a most-favoured-nation (MFN) treatment obligation. The Appellate Body first interpreted the national treatment obligation of Article 2.1 in US – Clove Cigarettes (2012) and further clarified this obligation in US – Tuna II (Mexico) (2012) and US – COOL (2012). In US – Tuna II (Mexico) (2012), the Appellate Body also addressed the MFN treatment obligation of Article 2.1. [28]

In US – Clove Cigarettes (2012), the Appellate Body ruled that Article 2.1 of the TBT Agreement sets out a three-tier test of consistency with the national treatment obligation. This test requires the examination of: (1) whether the measure at issue is a ‘technical regulation’ within the meaning of Annex 1.1; (2) whether the imported and domestic products at issue are ‘like products’; and (3) whether the imported products are accorded ‘treatment no less favourable’ than like domestic products.[29] As the Appellate Body found in US – Tuna II (Mexico) (2012), Article 2.1 sets out a largely similar test of consistency with the MFN treatment obligation. Under the third element of the test, however, instead of examining whether the imported products are accorded ‘treatment no less favourable’ than like domestic products, the adjudicator must examine whether products imported from one WTO Member are accorded ‘treatment no less favourable’ than like products originating in any other country.[30] Below, each element of the three-tier test of consistency with the national treatment and the MFN treatment obligations under Article 2.1 will be discussed in turn.

4.1.1.     Is Law No. 163/2021 a ‘technical regulation’?

In examining the consistency of Law No. 163/2021 with Article 2.1, the first question to be addressed is whether the Law is a ‘technical regulation’ within the meaning of Annex 1.1 of the TBT Agreement.

Annex 1.1 of the TBT Agreement defines a ‘technical regulation’ as a:

Document which lays down product characteristics or their related processes and production methods, including applicable administrative provisions, with which compliance is mandatory. This may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.

In EC – Sardines, the Appellate Body set out three criteria that a document must meet to constitute a ‘technical regulation’: (1) the document must apply to an identifiable product or group of products; (2) the document must lay down one or more characteristics of the product or their related processes and production methods (PPMs); and (3) compliance with the product characteristics (or PPMs) must be mandatory.[31] 

There is no doubt that Law No. 163/2021 is a ‘document’ that applies to ‘an identifiable product or group of products’. The identifiable group of products to which Law No. 163/2021 applies is technologies, equipment and software used in information and communications infrastructures of national interest and 5G networks.

Law No. 163/2021 also lays down one or more characteristics of the products to which the Law applies. It is clear from Annex 1.1, quoted above, that the concept of ‘characteristics’ of a product is a broad concept, which refers to more than the physical characteristics (i.e., form, weight, size, colour, composition, …) of the product, but also includes, inter alia, terminology, symbols, packaging, marking or labelling requirements. The Appellate Body defined the term ‘characteristics’ in EC – Asbestos (2001) as ‘any objectively definable “features”, “qualities”, “attributes”, or other “distinguishing mark” of a product’. [32] Such ‘characteristics’ include not only features and qualities that are intrinsic to the product itself, but also related characteristics.[33] According to the Oxford English Dictionary, a ‘characteristic’ is ‘a typical feature, quality, or distinguishing attribute that someone or something has’. The identity of the manufacturer of a product may be such a distinguishing attribute. For example, the fact that a handbag is manufactured by Louis Vuitton definitely distinguishes this product from handbags produced by Fila.[34] I do not argue that the identity of the manufacturer of a product is always a distinguishing attribute, i.e., a ‘product characteristic’. Whether it is, depends on the extent to which the manufacturer’s identity is relevant to the product and its other characteristics. I note that in EC – Seal Products (2014), the Appellate Body rejected the proposition that the identity of the hunter could be viewed as a product characteristic.[35] However, this finding is inapposite here. The identity of the hunter of the seals in that case was clearly less relevant to the seal products concerned than the identity of the manufacturer of the technologies, equipment and software concerned in the present case. Law No. 163/2021 explicitly distinguishes between the products concerned on the basis of the manufacturer of these products. The identity of the manufacturer is a distinguishing attribute of these products and therefore a ‘product characteristic’ within the meaning of Annex 1.1. Excluding the identity of the manufacturer from the concept of ‘product characteristic’ would open the door to easy and frequent circumvention of the obligations under the TBT Agreement.

In EC – Asbestos (2001), the Appellate Body further noted that product characteristics may be prescribed or imposed in either a positive or a negative form. For example, the regulation may provide, positively, that products must possess certain characteristics, or the regulation may require, negatively, that products must not possess ‘certain characteristics’.[36] Law No. 163/2021 provides that the products concerned may not possess a certain characteristic, namely, they may not be produced by an unauthorized manufacturer.

As noted above, a technical regulation also includes documents laying down the processes and production methods (‘PPMs’) of the products concerned, i.e., the product-related processes and production methods. Law No. 163/2021 distinguishes between authorized and unauthorized manufacturers based on factors such as the ownership of, government control over, and corporate conduct of the manufacturers. It could be argued that each of these factors is a product-related PPM, as they determine, or at least affect, the manner in which, or the conditions under which, the products concerned are manufactured. In EC – Seal Products (2014), the Appellate Body stated that the concept of ‘related PPMs’ ‘is yet to be clarified in WTO law’, but it did indicate that there would need to be ‘a sufficient nexus to the characteristics of a product in order to be considered related to those characteristics’.[37] In the present case, the factors referred to above, i.e., ownership, government control and corporate conduct of the manufacturers, constitute ‘a sufficient nexus’ with the technologies, equipment and software concerned and are thus product-related PPMs.

Law No. 163/2021 also meets the third criterion that a document must meet to constitute a ‘technical regulation’, namely that compliance with it is ‘mandatory’. As the Appellate Body stated in EC – Asbestos (2001), ‘mandatory’ indicates that a technical regulation regulates the subject matter ‘in a binding or compulsory fashion’.[38] The Law requires the use in the communications infrastructures and 5G networks in Romania of technologies, equipment and software of authorized manufacturers, and prohibits, or requires phasing out, the use of technologies, equipment and software of unauthorized manufacturers. The requirements on the use of these technologies, equipment and software are mandatory for the providers and operators of the communications infrastructures and 5G networks concerned. The mandatory compliance with these requirements is enforced through hefty fines.

As it meets the criteria for a ‘technical regulation’ laid down by the Appellate Body in EC – Sardines (2002), it follows that Law No. 163/2021 constitutes a technical regulation within the meaning of the TBT Agreement, although it does not set out typical technical specifications related to communications infrastructures and networks. Note that similar measures, i.e., measures aiming to exclude telecommunications products of ‘high-risk vendors’ from domestic markets, have been notified by WTO Members to other Members and the WTO Secretariat as technical regulations under Article 2.9.2 of the TBT Agreement. For example, on 28 September 2022, Belgium submitted a TBT notification (G/TBT/N/BEL/47) concerning a draft royal decree seeking to implement an authorization system on electronic communications and to establish restrictions on the use of active 5G network elements manufactured by high-risk manufacturers. [39]

4.1.2.     Are the products concerned ‘like products’?

The second element of the three-tier test of consistency with Article 2.1 of the TBT relates to the question of whether the imported and domestic products concerned (for the national treatment obligation) or the imported products originating in different countries (for the MFN treatment obligation) are ‘like products’. The non-discrimination obligations of Article 2.1 only apply to ‘like products’.

In US – Clove Cigarettes (2012), the Appellate Body considered that the determination of ‘likeness’ under Article 2.1 of the TBT Agreement is, as under the non-discrimination obligations of the GATT 1994:

[A] determination about the nature and extent of a competitive relationship between and among the products at issue. [40]

It is well established in WTO case law on the determination of ‘likeness’ (both in the context of the GATT 1994 and the TBT Agreement) that in assessing the nature and the extent of the competitive relationship, an adjudicator must examine on a case-by-case basis all relevant factors, including: (1) the products’ properties, nature, and quality (i.e., their physical characteristics); (2) the products’ end uses (i.e., the extent to which products are capable of performing the same, or similar, functions); (3) consumers’ tastes and habits, also referred to as consumers’ perceptions and behaviour, in respect of the products (i.e., the extent to which consumers are willing to use the products to perform these functions or the extent to which consumers perceive products to be substitutable); and (4) the products’ tariff classification.[41]

Determining whether products are ‘like’ is often a complicated and controversial exercise. Note, however, that in the case law on ‘likeness’ under the non-discrimination obligations under the GATT 1994, it was determined that one may ‘presume’ that the products concerned are ‘like’ when the measure at issue distinguishes between products solely on the basis of their origin.[42] To date, this origin-based presumption of ‘likeness’ has not been made yet in cases relating to Article 2.1 of the TBT Agreement, but there is no reason why such presumption cannot be made regarding a technical regulation which distinguishes between products based on their origin.

As discussed above, the products concerned in Law No. 163/2021 are technologies, equipment and software used in communications infrastructures and 5G networks. The questions which arise are thus:

·       regarding the MFN treatment obligation under Article 2.1 of the TBT Agreement, whether the technologies, equipment and software imported from some WTO Members are ‘like’ the technologies, equipment and software from other WTO Members

·       regarding  the national treatment obligation under Article 2.1 of the TBT Agreement, whether the technologies, equipment and software imported from other WTO Members are ‘like’ the domestic, i.e., Romanian technologies, equipment and software.

Law No. 163/2021 distinguishes between products from authorized and products from unauthorized manufacturers. Pursuant to the Law, authorization is granted to manufacturers mainly based on whether they are controlled by a foreign government and the legal system of the country in which they operate in, as well as their ownership structure and corporate behaviour. Hence, the predominant, if perhaps not the sole, criterion for distinguishing between the products concerned is, directly or indirectly, their origin. Their likeness may thus be presumed. However, if one would consider that the products concerned cannot be ‘presumed’ to be ‘like’, the application of the four-factor ‘likeness’ test, discussed above, swiftly leads to the conclusion that the products are ‘like’. There is no difference at all in the physical characteristics, end uses and tariff classification of the products concerned from authorized manufacturers and those from unauthorized manufacturers. As to the consumers’ tastes, preferences and perceptions, note that the consumers of the products concerned are not private citizens, but providers of electronic communications services. While the tastes, preferences and perceptions of private citizens may be influenced, if not determined, by their positive or negative political perception of the country of origin of the products, the tastes, preferences and perceptions of providers of electronic communications services are typically determined by the performance and quality of the products concerned. Their perception of the products concerned would therefore not differ, at least not on the basis of whether the products are products of authorized or unauthorized manufacturers. On the basis of the above-mentioned factors, it is clear that the products concerned are in a strong competitive relationship and therefore ‘like products’ within the meaning of Article 2.1 of the TBT Agreement.

4.1.3.     Does Law No. 163/2021 accord ‘treatment no less favourable’?

The third element of the three-tier test of consistency with Article 2.1 of the TBT relates to the question of whether Law No. 163/2021 accords ‘treatment no less favourable':

·       to the products concerned imported from some WTO Members than to products from other Members, in which case Law No. 163/2021 would be inconsistent with the MFN treatment obligation; and/or

·       to the products concerned imported from WTO Members than to Romanian products, in which case Law No. 163/2021 would be inconsistent with the national treatment obligation.

In US – Clove Cigarettes (2012), the Appellate Body ruled that, in line with the well-established case law on the concept of ‘treatment no less favourable’ of Article III:4 of the GATT 1994, that:

[A] panel examining a claim of violation under Article 2.1 should seek to ascertain whether the technical regulation at issue modifies the conditions of competition in the market of the regulating Member to the detriment of the group of imported products vis-à-vis the group of like domestic products.[43]

However, while a detrimental impact on the competitive conditions in the relevant market may be sufficient to establish a violation of the national treatment obligation under Article III:4 of the GATT 1994, in US – Clove Cigarettes (2012), the Appellate Body considered that the existence of such detrimental impact is, in case of de facto discrimination, not sufficient to establish a violation of Article 2.1 of the TBT Agreement. The Appellate Body ruled that:

where the technical regulation at issue does not de jure discriminate against imports, the existence of a detrimental impact on competitive opportunities for the group of imported vis-à-vis the group of domestic like products is not dispositive of less favourable treatment under Article 2.1.[44]

According to the Appellate Body, a panel must in such cases of de facto discrimination:

further analyze whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction rather than reflecting discrimination against the group of imported products.[45]

To determine whether the detrimental impact stems exclusively from a legitimate regulatory distinction rather than reflecting discrimination, a panel must, according to the Appellate Body in US – Clove Cigarettes (2012):

[C]arefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue, and, in particular, whether that technical regulation is even-handed, in order to determine whether it discriminates against the group of imported products.[46]

The Appellate Body reached this understanding on the basis of the context of Article 2.1 and the object and purpose of the TBT Agreement. The Appellate Body emphasised, in particular, that, while the TBT Agreement does not contain a ‘general exceptions’ clause similar to Article XX of the GATT 1994,[47] the WTO Members recognise in the sixth recital of the Preamble to the TBT Agreement that ‘no country should be prevented from taking measures necessary’ to pursue policy objectives such as the protection of public health, the protection of the environment and the protection of the consumer. As the sixth recital of the Preamble states, countries should not be prevented from taking such measures ‘subject to the requirement that [these measures] are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade and are otherwise in accordance with the provisions of this Agreement’. Thus, the Appellate Body interpreted the ‘treatment no less favourable’ requirement of Article 2.1 as:

[P]rohibiting both de jure and de facto discrimination against imported products, while at the same time permitting detrimental impact on competitive opportunities for imports that stems exclusively from legitimate regulatory distinctions.[48]

The Appellate Body further refined and elaborated in later case law this ‘legitimate regulatory distinction’ test to determine whether a technical regulation accords ‘treatment no less favourable’.[49] In this regard, note that the Appellate Body in US – Tuna II (Mexico) (2012) introduced the ‘calibration’ analysis to assess whether the detrimental impact of a technical regulation stems exclusively from a legitimate regulatory distinction.[50]  This analysis examines whether there is a rational relationship between the regulatory distinction(s) and the objective of the measure to see if such distinction(s) is (are) ‘calibrated’ to the objective.

As discussed above, Law No. 163/2021 excludes the use in communications infrastructures and 5G networks in Romania of products of unauthorized manufacturers. The Law thus, quite obviously, modifies the conditions of competition of imported products of unauthorized manufacturers from certain WTO Members vis-à-vis products of authorized domestic manufacturers and authorized foreign manufacturers from other WTO Members. Law No. 163/2021 has a detrimental impact on the conditions of competition of some imported products. However, as Law No. 163/2021 does not explicitly identify the WTO Members of which the products may not be used in communications infrastructures and 5G networks and therefore does not constitute de jure discrimination, the Law can only be found to accord ‘treatment no less favourable’ when the detrimental impact on the conditions of competition of the products of unauthorized manufacturers exclusively stems from a legitimate regulatory distinction.

In assessing whether or not Law No. 163/2021 meets the ‘legitimate regulatory distinction’ test, an adjudicator should, in accordance with the case law discussed above, examine whether the Law is designed and implemented in a manner that constitutes arbitrary or unjustifiable discrimination and fails either the even-handedness requirement or the ‘calibration’ test. In this regard, note that the criteria for granting authorization are vague, subjective, and political, rather than technical, in nature. However, most importantly, the authorization is granted or denied without conducting any evidence-based and product-specific risk assessment and therefore is not ‘calibrated’ to the stated objective of protecting national security and defence.

This leads me to the conclusion that Law No. 163/2021 does not accord ‘treatment no less favourable’ and is inconsistent with both the MFN treatment obligation and the national treatment obligation of Article 2.1 of the TBT Agreement.

4.2.              Is Law No. 163/2021 an unnecessary obstacle to international trade in violation of Article 2.2 of the TBT Agreement?

Article 2.2, first sentence of the TBT Agreement, provides that:

Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.

This sentence is followed by a sentence which qualifies the terms of the first sentence and elaborates on the scope and the meaning of the obligation contained therein. The second sentence of Article 2.2 states:

For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.

The third sentence of Article 2.2 lists several of the ‘legitimate objectives’ to which the second sentence refers: national security; the prevention of deceptive practices; the protection of human health and safety, animal or plant life or health; and the protection of the environment. Note, however, that this list is not exhaustive as it is introduced by the word ‘inter alia’. The last sentence of Article 2.2 refers back to the final clause of the second sentence, namely, ‘taking account of the risks non-fulfilment would create’ and states that in assessing such risks, it is relevant to consider, inter alia: available scientific information; related processing technology; or intended end uses of products.

Article 2.2 sets out a four-tier test of consistency. This test requires the examination of: (1) whether the measure at issue is a ‘technical regulation’ within the meaning of Annex 1.1; (2) whether the measure at issue is ‘trade-restrictive’; (3) whether the measure at issue fulfils a legitimate objective; and (4) whether the measure at issue is ‘not more trade-restrictive than necessary’ to fulfil that legitimate objective. The first element of this four-tier test has already been addressed above. Law No. 163/2021 is a technical regulation within the meaning of Annex 1.1. The second, third and fourth elements of the test will be discussed in turn below.

4.2.1.     Is Law No. 163/2021 ‘trade restrictive’?

The second element of the test of consistency with Article 2.2 relates to the question of whether the measure at issue is ‘trade-restrictive’. In US – Tuna II (Mexico) (2012), the Appellate Body defined ‘trade-restrictive’ to mean ‘having a limiting effect on trade’.[51] The Appellate Body elaborated on the notion of trade restrictiveness in Australia – Plain Packaging (2020) as follows:

Where a measure modifies the conditions of competition in the market, a panel must be satisfied that such modification will have a limiting effect on trade in order to conclude that the measure is trade-restrictive.[52]

Law No. 163/2021 clearly has a limiting effect on trade and is therefore ‘trade-restrictive’ within the meaning of Article 2.2. The Law prohibits technologies, equipment and software from unauthorized manufacturers from being  used in communications infrastructures and 5G networks in Romania. As a result, imports of such products are less than they would have been in the absence of Law No. 163/2021.

4.2.2.     Does Law No. 163/2021 fulfil a legitimate objective?

The third element of the test of consistency with Article 2.2 relates to the question of whether the measure at issue fulfils a legitimate objective. As noted above, the third sentence of Article 2.2 lists specific examples of legitimate objectives, including ‘national security’. With regard to the term ‘fulfil’, the Appellate Body considered in US – Tuna II (Mexico) (2012) that, in the context of Article 2.2, ‘fulfil’ an objective does not mean the complete achievement of something, but is to be understood as referring to ‘the degree of contribution that the technical regulation makes toward the achievement of the legitimate objective’.[53] In US – Tuna II (Mexico) (2012), the Appellate Body also stated that in the context of Article 2.2, an adjudicator must ‘assess the contribution to the legitimate objective actually achieved by the measure at issue, not the contribution that is intended to be achieved’.[54]

Article 1 of Law No. 163/2021 states that the Law aims ‘to prevent, counter and eliminate risks, threats and vulnerabilities to national security and defence of the country’. While an adjudicator is not bound by a country’s characterisation of the objective(s) it pursues through the measure at issue and must make an independent and objective assessment of the objective(s) pursued, it may take a country’s characterization of the objective(s) as a starting point.[55] As for Law No. 163/2021, it is clear that the objective pursued by the Law is ‘national security’ and that ‘national security’ is a legitimate objective within the meaning of Article 2.2. However, does Law No. 163/2021 ‘fulfil’, i.e., make a contribution to the achievement of, that legitimate objective? As noted above, what is important is the contribution ‘actually achieved’, not the contribution intended to be achieved. To assess the actual contribution of Law No. 163/2021 to the achievement of ‘national security’, an adjudicator must, as the Panel in Australia – Tobacco Plain Packaging (2020) did, review a plethora of evidence, including scientific studies, expert accounts and empirical evidence. It is important to note that it is for the complainant to show that Law No. 163/2021 does not contribute to the achievement of ‘national security’. While it might be challenging for a complainant to show that the Law does not make any contribution to the stated objective, I note, as will be addressed below, that the complainant may be successful in raising doubts as to the degree of contribution Law No. 163/2021 makes to the achievement of ‘national security’.

4.2.3.     Is Law No. 163/2021 more trade restrictive than necessary to protect national security?

The fourth and last element of the test of consistency with Article 2.2 relates to the question of whether the measure at issue is ‘more trade-restrictive than necessary’ to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. In US – Tuna II (Mexico) (2012), the Appellate Body found that in the assessment of whether a technical regulation is ‘more trade-restrictive than necessary’ within the meaning of Article 2.2 of the TBT Agreement an adjudicator should start by considering three factors, namely: (1) the degree of contribution made by the measure to the legitimate objective at issue; (2) the trade-restrictiveness of the measure; and (3) the nature of the risks at issue and the gravity of consequences that would arise from non-fulfilment of the objective(s) pursued by the Member through the measure.[56] The Appellate Body has referred to the consideration of these factors as the ‘relational analysis’. According to the Appellate Body, this relational analysis will, however, in most cases not allow to determine whether the trade-restrictiveness of the measure at issue is more than necessary. In most cases, a comparison of the challenged measure and possible alternative measures should be undertaken.[57] If there is an alternative measure that is: (1) less trade-restrictive; (2) makes an equivalent contribution to the relevant legitimate objective, taking account of the risks non-fulfilment would create; and (3) that is reasonably available, the trade restrictiveness of the measure at issue is more than necessary.[58] The Appellate Body referred to the comparison of the measure at issue and possible alternative measures as the ‘comparative analysis’. Note that with regard to the requirement that a proposed alternative measure is ‘reasonably available’, the Appellate Body stated, in US – COOL (Article 21.5 – Canada and Mexico) (2015), that, since the alternative measures is of a hypothetical nature (because it does not yet exist in the Member in question), a complainant cannot be expected to provide ‘complete and exhaustive’ description of the alternative measure it proposes.[59] The Appellate Body stated:

It would appear incongruous to expect a complainant, under Article 2.2 of the TBT Agreement, to provide detailed information on how a proposed alternative would be implemented by the respondent in practice, and precise and comprehensive estimates of the cost that such implementation would entail.[60]

Starting with the relational analysis of the necessity of the trade restrictiveness of Law No. 163/2021, it must be noted, regarding the first factor to be considered in this analysis, that the degree of contribution to the achievement of national security is rather low, if not zero. The Law prohibits the use in communications infrastructures and 5G networks of technologies, equipment and software from unauthorized manufacturers, i.e., manufacturers which: are under the control of a foreign government; do not have a transparent shareholding structure; have a record of unethical corporate conduct; and/or are subject to a legal system not requiring transparent corporate practices. However, in the absence of evidence that the technologies, equipment or software of these unauthorized manufacturers constitute a national security risk, it is difficult to sustain that Law No. 163/2021 makes a significant contribution to the achievement of national security. In this respect, focus placed on the identity and shareholding of a product manufacturer rather than the product itself bears little relevance to the security risks that the specific product may pose. Therefore, the contribution of Law No. 163/2021 is, if any, small and uncertain.

As to the trade restrictiveness of Law No. 163/2021, the second factor to be considered in the relational analysis, namely trade-restrictiveness of the measure, I note that there will be no trade in technologies, equipment and software of unauthorized manufacturers used in communications infrastructures or 5G networks. As Law No. 163/2021 bans these products, the Law is highly trade restrictive.

As to the nature of the risks at issue and the gravity of consequences that would arise from non-fulfilment of the objective of Law No. 163/2021, i.e., the third factor to be considered in the relational analysis, the possible risks to national security related to communications infrastructures and 5G networks are, in theory, significant and consequences arising from the non-fulfilment of the objective of national security are grave. However, in light of the first and second factors considered above, it is not possible to decide on the basis of the relational analysis whether Law No. 163/2021 is more trade restrictive than necessary.

Hence, I proceed to the comparative analysis. Is there a less trade-restrictive measure that is reasonably available and that makes an equivalent contribution to national security? I argue that there is. Rather than imposing a blanket ban on all technologies, equipment and software of unauthorized manufacturers to be used in communications infrastructures and networks, Romania could clearly distinguish between core networks and other networks of less criticality (for example, radio access network (RAN) and internetwork exchanges).[61] Moreover, Romania could demand that these technologies, equipment and software meet product-specific technical requirements which address possible national security risks that may arise with respect to these products. Together with imposing these technical requirements, it could introduce product-specific testing, auditing and monitoring to ensure compliance. For technologies, equipment and software used in 5G networks, for example, Romania can, in defining the relevant technical requirements, be inspired by the work of the International Telecommunication Union (ITU), which sets inter alia performance and design requirements for 5G networks. I discuss the relevant work of the ITU in more detail below in the context of Article 2.4 of the TBT Agreement. In defining alternative technical requirements to address possible national security risks, Romania could also fall back on EU research under the 5G Public Private Partnership (5G-PPP).[62] Under the 5G-PPP, a dedicated working group on security was set up. An alternative measure setting out product-specific technical requirements addressing national security risks is less trade restrictive (as it is not a blanket ban on all relevant products of unauthorized manufacturers, but is more selective), is reasonably available (as the implementation of this alternative measure would not give rise to excessive costs or major technical difficulties), and makes at least an equivalent contribution to national security. In fact, while Law No. 163/2021 may arguably make no or a small contribution to national security, this alternative measure would specifically focus on products posing actual national security risks and thus make a much more substantial contribution to national security.

This leads me to the conclusion that Law No. 163/2021 is more trade-restrictive than necessary to achieve Romania’s policy objective of national security and is therefore inconsistent with Article 2.2 of the TBT Agreement.

4.3.              Is Law No. 163/2021 in violation of the obligation to base technical regulations on international standards under Article 2.4 of the TBT Agreement?

Article 2.4, first sentence of the TBT Agreement provides:

Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations.

However, Article 2.4, second sentence of the TBT Agreement further states that Members do not have to use international standards as a basis when:

such international standards or relevant parts would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued, for instance because of fundamental climatic or geographical factors or fundamental technological problems.

There are three main questions, which must be answered to determine whether or not a technical regulation is consistent with Article 2.4, namely: (1) whether there exists a relevant international standard; (2) whether the relevant international standard is ‘used as a basis’ for the technical regulation at issue; and (3) whether the relevant international standard is an effective and appropriate means for the fulfilment of the legitimate objectives pursued. Below, each element of this three-tier test of consistency is discussed in turn.

4.3.1.     Does a relevant international standard exist?

The first element of the test of consistency with Article 2.4 relates to the question of whether a ‘relevant international standard’ exists or its completion is imminent. A standard is an ‘international standard’ within the meaning of Article 2.4 if it is approved by an international standardising body[63], and an ‘international standardizing body’ is a body which has ‘recognized activities in standardization’[64] and of which the membership is ‘open to relevant bodies of at least all WTO Members’.[65] An international standard is ‘relevant’ when it concerns the same product as the technical regulation and addresses the same issue(s).[66]

The International Telecommunication Union (ITU), a recognized international standardizing body, approved on 2 September 2022, IMT-2020, the international standard for 5G networks. IMT-2020 explicitly addresses cybersecurity through dedicated international standards and security frameworks. The ITU established detailed recommendations – such as Recommendation ITU-T X.1814 – to define security requirements, threat identification, and guidelines for IMT-2020 (5G) communication systems.[67] Just as Law No. 163/2021, IMT-2020 concerns 5G networks and addresses the issue of cybersecurity. It is therefore a ‘relevant international standard’ within the meaning of Article 2.4. According to public record, before Law No. 163/2021 was adopted on 7 June 2021, the 5G security guidelines had been negotiated since 2019 and had gone through a number of draft versions. These circumstances demonstrate that completion of the standard was ‘imminent’.[68] Note that Romania has an active presence in the ITU,[69] and is therefore familiar with the ITU standardization work. Therefore, IMT-2020 is the ‘relevant international standard’ for Law No. 163/2021, the existence of which was imminent at the time of adoption of the Law.

4.3.2.     Is IMT-2020 used as a basis for Law No. 163/2021?

The second element of the test of consistency with Article 2.4 relates to the question of whether the relevant international standard is ‘used as a basis’ for the technical regulation at issue. The panel in EC – Sardines (2002) stated that the requirement to use, as a ‘basis’ imposes the obligation to ‘employ or apply’ the international standard as ‘the principal constituent or fundamental principle for the purpose of enacting the technical regulation’.[70]

IMT-2020 has clearly not been used as a basis for Law No. 163/2021. The Law takes a very different approach to regulating the use of technologies, equipment and software in 5G networks and, in particular, to addressing security issues such products may raise.

4.3.3.     Is IMT-2020 an effective and appropriate means for the fulfilment of the legitimate objective pursued by Law No. 163/2021?

The third, and last, element of the test of consistency with Article 2.4 relates to the question of whether the relevant international standard is an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued by the technical regulation at issue. The Appellate Body in EC – Sardines (2002) stated that an international standard is ‘effective’ if it has the capacity to accomplish the objective(s) pursued, and it is ‘appropriate’ if it is suitable for the fulfilment thereof.[71]

As discussed above, the policy objective pursued by Law No. 163/2021 is national security. This is obviously a legitimate objective and an objective which all countries pursue.  IMT-2020, the international standard for 5G networks, addresses security issues. As noted above, Recommendation ITU-T X.1814 defines security requirements, threat identification, and guidelines for IMT-2020 (5G) communication systems. IMT-2020 is effective since it has the capacity to address adequately national security issues, and it is appropriate since it is suitable for the fulfilment of national security. The fact that IMT-2020 is of a recent date and thus reflects all recent developments regarding cybersecurity strongly supports the conclusion that IMT-2020 is both effective and suitable for the fulfilment of national security.

On the basis of the above, I conclude that Law No. 163/2021 is in violation of Article 2.4 of the TBT Agreement.

4.4.              Is Law No. 163/2021 in violation of the transparency obligations under Article 2.9 of the TBT Agreement?

Article 2.9 of the TBT Agreement imposes on WTO Members detailed transparency and notification requirements. These requirements apply to proposed technical regulations whenever a relevant international standard does not exist, or the proposed regulation is not in accordance with the relevant international standard, and the proposed regulation may have a significant impact on the trade of other Members.  Under Article 2.9.2, Members are required to notify other Members, through the WTO Secretariat, of the proposed technical regulation.[72] Such notification must be done at an early appropriate stage of the process, when comments made by other Members can still be taken into account and amendments to the proposed technical regulation made.[73] In the same vein, Article 2.9.4 requires Members to allow reasonable time for other Members to make comments in writing, discuss these comments upon request, and take these written comments and the results of these discussions into account.

As discussed above, Law No. 163/2021 is not in accordance with the relevant international standard and has a significant impact on trade of other Members. The transparency obligations under Article 2.9 therefore apply to Law No. 163/2021. Romania was under an obligation to notify the draft of Law No. 163/2021 to other Members at an early stage of the legislative process that led to the adoption of the Law. It failed to do so in violation of its obligation under Article 2.9.2.[74] Moreover, in violation of its obligation under Article 2.9.4, it also failed to allow reasonable time for other Members to make comments in writing, discuss these comments upon request, and take these written comments and the results of these discussions into account.

4.5.              Is Law No. 163/2021 in violation of the most-favoured treatment obligation under Article I:1 of the GATT 1994?

Article I:1 states in relevant part:

With respect to … all matters referred to in paragraph […] 4 of Article III, any advantage, favour, privilege or immunity granted by any [Member] to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other [Members].

 As stated by the Appellate Body in EC – Seals Products (2014), there are four questions which must be answered to determine whether or not a measure affecting trade in goods is consistent with the MFN treatment obligation of Article I:1, namely: (1) whether the measure at issue is a measure covered by Article I:1; (2) whether that measure grants an ‘advantage’; (3) whether the products concerned are ‘like products’; and (4) whether the advantage at issue is accorded ‘immediately and unconditionally’ to all like products concerned, irrespective of their origin or destination.[75] Below, I will discuss each element of this four-tier test of consistency in turn.

4.5.1.     Is Law No. 163/2021 a measure covered by Article I:1?

The first element of the test of consistency with the MFN treatment obligation of Article I:1 relates to the question of whether the measure is a measure covered by this provision. Article I:1 covers a very broad range of measures, including measures regarding all matters referred to in Article III:4 of the GATT 1994. The latter measures are ‘laws, regulations and requirements affecting [the] internal sale, … and use’ of products.

Law No. 163/2021 is unmistakably a law affecting the sale and use of products and, in particular, technologies, equipment and software. The Law is thus a measure covered by Article I:1.

4.5.2.     Does Law No. 163/2021 grant an advantage?

The second element of the test of consistency with the MFN treatment obligation of Article I:1 relates to the question of whether the measure at issue grants an ‘advantage’. The text of Article I:1 of the GATT 1994 refers to ‘any advantage, favour, privilege or immunity granted by any [Member]’. In light of the use of the word ‘any’, it is not surprising that the term ‘advantage’ has been given a broad meaning in the case law. The panel in EC – Bananas III (1997) considered that a measure granting an ‘advantage’ within the meaning of Article I:1 is a measure that creates ‘more favourable competitive opportunities’ or affects the commercial relationship between products of different origins.[76] In Canada – Autos (2000), the Appellate Body further clarified the meaning of the term ‘advantage’, and thus the scope of the MFN treatment obligation, by ruling:

The words of Article I:1 refer not to some advantages granted ‘with respect to’ the subjects that fall within the defined scope of the Article, but to ‘any advantage’; not to some products, but to ‘any product’; and not to like products from some other Members, but to like products originating in or destined for ‘all other’ Members.[77]

As discussed above, Law No. 163/2021 prohibits the use in communications infrastructures and 5G networks of technologies, equipment and software of unauthorized manufacturers, while allowing the use of the products of authorized manufacturers. The Law therefore grants an advantage to the products of authorized manufacturers.

4.5.3.     Are the products at issue ‘like products’?

The third element of the test of consistency with the MFN treatment obligation of Article I:1 relates to the question of whether the products at issue are ‘like products’. In Section 4.1.2 above, I already addressed the question whether the products at issue in Law No. 163/2021, i.e., technologies, equipment and software of unauthorized manufacturers and technologies, equipment and software of authorized manufacturers, are ‘like products’ within the meaning of Article 2.1 of the TBT Agreement. As I noted in Section 4.1.2, in the case law on ‘likeness’ under the non-discrimination obligations of the GATT 1994, including Article I:1 thereof, it was determined that one may ‘presume’ that the products concerned are ‘like’ when the measure at issue distinguishes between products solely on the basis of their origin.[78] On examining Law No. 163/2021, I established in Section 4.1.2 that Law No. 163/2021 distinguished between products on the basis of their origin. I therefore come to the conclusion that it may be presumed that the products concerned are ‘like’ within the meaning of Article I:1 of the GATT 1994.

In the alternative and pursuant to well-established case law, I argue that the determination of ‘likeness’ under Article I:1 of the GATT 1994 is (as under Article 2.1 of the TBT Agreement) a determination of the nature and the extent of the competitive relationship between and among the products at issue. In assessing this relationship, an adjudicator must examine the same factors (physical characteristics, end use, consumer tastes, preferences and perceptions, and customs classification) as when establishing ‘likeness’ under Article 2.1 of the TBT Agreement. In Section 4.1.2 above, I concluded that the products at issue in Law No. 163/2021 are ‘like products’ within the meaning of Article 2.1 of the TBT Agreement. Since the same test of determining ‘likeness’ applies under Article I:1 of the GATT, I conclude – for the same reasons as spelt out in Section 4.1.2 – that the products at issue in Law No. 163/2021 are also ‘like products’ within the meaning of Article I:1 of the GATT 1994.

4.5.4.     Does Law No. 163/2021 accord immediately and unconditionally the advantage at issue to all like products?

The fourth and final element of the test of consistency with the MFN treatment obligation of Article I:1 relates to the question of whether the advantage granted by the measure at issue is accorded ‘immediately and unconditionally’ to all like products irrespective of their origin or destination. Article I:1 of the GATT 1994 requires that any advantage granted by a WTO Member to imports from, or exports to, any country must be granted ‘immediately and unconditionally’ to imports from, or exports to, all other WTO Members. There is no debate on what ‘immediately’ means. ‘Immediately’ means ‘without delay, at once, instantly’. More problematic has been the meaning of the requirement to accord an advantage ‘unconditionally’. ‘Unconditionally’ does not mean that no conditions can be attached to the granting of an advantage. It means that these conditions may not have a detrimental impact on the competitive opportunities of the like products imported from or exported to any Member.[79] As discussed above, the ‘advantage’ granted by Law No. 163/2021 is the permissible use of technologies, equipment and software in communication infrastructures and 5G networks in Romania. This ‘advantage’ is only granted to the products of authorized manufacturers. It is therefore not granted ‘immediately’ and ‘unconditionally’ to all like products imported from any Member.

On the basis of the above, I conclude that Law No. 163/2021 is in violation of the MFN treatment obligation under Article I:1 of the GATT 1994.

4.6.              Is Law No. 163/2021 in violation of the national treatment obligation under III:4 of the GATT 1994?

Article III:4 of the GATT 1994 states in relevant part:

The products of the territory of any [Member] imported into the territory of any other [Member] shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

As stated by the Appellate Body in Korea – Various Measures on Beef (2001), there are three questions which must be answered to determine whether or not a measure affecting trade in goods is consistent with the national treatment obligation of Article III:4, namely: (1) whether the measure at issue is a ‘law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution, or use’ of the products concerned; (2) whether the imported and domestic products at issue are ‘like products’; and (3) whether the imported products are accorded ‘less favourable’ treatment than that accorded to like domestic products.

The Law meets the above three elements. First, as already discussed above in the context of Article I:1 of the GATT 1994, Law No. 163/2021 is a law affecting the international sale and use of technologies, equipment and software and is therefore covered by Article III:4. Second, as the ‘likeness’ of products under Article III:4 is, pursuant to well-established case law, assessed in the same way as likeness under Article I:1 of the GATT 1994 and Article 2.1 of the TBT Agreement, the products at issue in Law No. 163/2021 are also ‘like products’ within the meaning of Article III:4 of the GATT 1994. Third, by excluding the use in communications infrastructures and 5G networks in Romania of products of unauthorized manufacturers, the Law quite obviously modifies the conditions of competition to the detriment of imported products of unauthorized manufacturers.[80] Law No. 163/2021 therefore accords ‘treatment less favourable’ to imported products within the meaning of Article III:4.

On the basis of the above, I conclude that Law No. 163/2021 is in violation of the national treatment obligation under Article III:4 of the GATT 1994.

4.7.              Is Law No. 163/2021 in violation of the obligation under Article X:3(a) of the GATT 1994 to administer trade measures in a uniform, impartial and reasonable manner?

Article X:3(a) of the GATT 1994 states:

Each [Member] shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings of the kind described in paragraph 1 of this Article.

The panel in Thailand – Cigarettes (Philippines) (2011) ruled that to establish a violation of Article X:3(a), a complainant must show that: (1) the measure at issue is a legal instrument of the kind referred to in Article X:1 of the GATT 1994; and (2) this measure is administered in a manner that is non-uniform, partial and/or unreasonable.[81] Below, I will discuss each element of this two-tier test of consistency in turn.

4.7.1.     Is Law No. 163/2021 a legal instrument referred to in Article X:1 of the GATT 1994?

The first element of the test of consistency with the obligation of Article X:3(a) relates to the question of whether the measure at issue is a legal instrument of the kind referred to in Article X:1 of the GATT 1994. Article X:1 refers to, and applies to, ‘laws, regulations, judicial decisions and administrative rulings of general application’ affecting, inter alia, the sale or use’ of products. As already noted above in Sections 4.5.1 and 4.6.1, Law No. 163/2021 is unmistakenly a ‘law’ affecting the sale and use of products.

4.7.2.     Is Law No. 163/2021 administered in a manner that is non-uniform, partial and/or unreasonable?

The second element of the test of consistency with the obligation of Article X:3(a) relates to the question of whether the measure at issue is administered in a manner that is non-uniform, partial and/or unreasonable.  Note that the administration of a measure in any of these three manners constitutes a violation of Article X:3(a).[82] Also, as Article X:3(a) clearly indicates, the requirements of ‘uniformity, impartiality and reasonableness’ do not apply to the laws, regulations, decisions, and rulings themselves, but rather to the administration of those legal instruments.[83] However, as the Appellate Body clarified in EC – Selected Customs Matters (2006), it is possible to challenge under Article X:3(a) the content of a legal instrument to the extent that it regulates the application or implementation of that instrument.[84] As the Appellate Body stated in US – Shrimp (1998), underlying Article X:3 is the due process requirement. Article X:3 sets out ‘certain minimum standards for transparency and procedural fairness’ in the administration of trade measures.[85] The requirements of ‘uniformity’, ‘impartiality’ and ‘reasonableness’ have been clarified in WTO case law as follows.  ‘Uniformity’ requires that a trade measure be applied consistently and predictably and accords uniform treatment to persons similarly situated[86]; ‘impartiality’ requires that a trade measure is applied or implemented in a fair, unbiased and unprejudiced manner[87]; and ‘reasonableness’ requires that the administration of a trade measure is equitable, appropriate for the circumstances and based on rationality. The assessment of ‘reasonableness’ entails ‘a consideration of the factual circumstances specific to each case, for which purpose it is necessary to examine the features of the administrative act at issue, in the light of its objective, cause or the rationale behind it’.[88]  Notably, in China – Raw Materials (2012), the panel found that the lack of definition, guidelines or standards may pose a very real risk of criteria being applied non-uniformly and unreasonably.[89]

The administration of Law No. 163/2021 raises multiple concerns. First, the decision-making process on the granting or denial of authorization lacks transparency. Applicants for authorisation are merely informed of the final decision of the Prime Minister, but not of the reasons for that decision. Second, the standards for assessing whether to grant authorization are characterised by – to use the words of the panel in China – Raw Materials (2012) – a ‘lack of definition, guidelines or standards’. The criteria applied pursuant to Law No. 163/2021 to decide on granting or denying authorization, namely ‘control by a foreign government’, or ‘an independent legal system’, are not defined. Also, and more generally, it is unclear what constitutes a risk, threat or vulnerability in relation to national security and defence within the meaning of Law No. 163/2021. As decisions to deny authorisation do not give any reasons, the lack of clarity of Law No. 163/2021 on these issues will not be remedied through subsequent application of the Law. Law No. 163/2021 is, and will continue to be applied, in a non-uniform, partial and/or unreasonable manner. This constitutes a blatant violation of the principle of due process which underlies Article X:3(a).

On the basis of the above, I conclude that Law No. 163/2021 is in violation of Article X:3(a) of the GATT 1994.

4.8.              Can the otherwise GATT-inconsistent Law No. 163/2021 be justified under the general exceptions of Article XX of the GATT 1994?

Above, I have argued and concluded that Law No. 163/2021 is inconsistent with Articles I:1, III:4 and X:3(a) of the GATT 1994. The question which now arises is whether Romania can justify these GATT inconsistencies under the general exceptions of Article XX of the GATT 1994, and/or under Article XXI thereof. In this Section, I will address whether justification under Article XX is possible.

Article XX of the GATT 1994, entitled ‘General Exceptions’, states:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a)         necessary to protect public morals;

(b)         necessary to protect human, animal or plant life or health;

(c)         relating to the importations or exportations of gold or silver;

(d)         necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;

(e)         relating to the products of prison labour;

(f)          imposed for the protection of national treasures of artistic, historic or archaeological value;

(g)         relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

(h)         undertaken in pursuance of obligations under any intergovernmental commodity agreement …;

(i)           involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry …;

(j)           essential to the acquisition or distribution of products in general or local short supply …

In its very first case, US – Gasoline (1996), the Appellate Body stated:

In order that the justifying protection of Article XX may be extended to it, the measure at issue must not only come under one or another of the particular exceptions – paragraphs (a) to (j) – listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX.[90]

Article XX thus sets out a two-tier test for determining whether a measure, which is otherwise inconsistent with GATT obligations, can be justified.  As regards the first element of this test, namely whether the measure at issue comes under one of the specific exceptions exhaustively listed in paragraphs (a)–(j). These exceptions relate to the protection of societal values and interests such as public morals, human, animal, or plant life or health, exhaustible natural resources, and national treasures of artistic, historic, or archaeological value. In EC – Seal Products (2014), the Appellate Body explained that provisional justification under one of the paragraphs of Article XX requires that a challenged measure ‘address the particular interest specified in that paragraph’, and that ‘there be a sufficient nexus between the measure and the interest protected’.[91] The nexus required between the measure and the interest protected differs between paragraphs, but a common nexus requirement is that the measure is ‘necessary’ to protect the interest concerned.[92] When a measure is found to be provisionally justified under one of the paragraphs of Article XX, an adjudicator must, subsequently, assess whether the application of that measure meets the requirements of the opening clauses, commonly referred to as the chapeau, of Article XX. The chapeau requires that a provisionally justified measure is:

not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade.

As discussed above, Law No. 163/2021 explicitly states that it aims ‘to prevent, counter and eliminate risks, threats and vulnerabilities to national security and defence of the country’. The policy objective pursued by Law No. 163/2021 is thus, as also already discussed above, national security. The exceptions exhaustively listed in Article XX do not include ‘national security’, and none of the exceptions that are included can, even if interpreted broadly, be understood to cover ‘national security’. This is not surprising since ‘national security’, as a possible exception, is specifically dealt with in Article XXI of the GATT 1994, discussed below.  As noted above, the provisional justification under one of the paragraphs of Article XX requires that the measure at issue addresses the particular interest, i.e., policy objective, specified in that paragraph. Law No. 163/2021 does not address an interest specified in any of the paragraphs of Article XX and can therefore not be justified under Article XX. Any further exploration of the conditions for the invocation of Article XX to justify Law No. 163/2021 is therefore pointless.

4.9.              Can the otherwise GATT-inconsistent Law No. 163/2021 be justified under the national security exceptions of Article XXI(b) of the GATT 1994?

Apart from Article XX of the GATT 1994, WTO Members can, and increasingly do, invoke Article XXI thereof to justify otherwise GATT-inconsistent measures. As with Article XX, Article XXI may be invoked to justify an inconsistency with any obligation under the GATT 1994, but it is not available to justify inconsistencies with obligations under the TBT Agreement. Article XXI, entitled ‘Security Exceptions’, states:

               Nothing in this Agreement shall be construed

               (a)         to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests;  or

               (b)         to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(i)           relating to fissionable materials or the materials from which they are derived;

(ii)          relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

(iii)     taken in time of war or other emergency in international relations;  or

                 (c)         to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

4.9.1.     Justiciability and legal standard of Article XXI(b) of the GATT 1994

Of possible relevance in the present case is Article XXI(b), and in particular subparagraphs (ii) and (iii) thereof.  A WTO Member may invoke Article XXI(b) (ii) to justify otherwise GATT-inconsistent measures relating to trade in arms or in other materials, directly or indirectly, for military use; and Article XXI(b)(iii) to justify measures taken in time of war or other emergency in international relations. In recent years, the invocation of, most notably, Article XXI(b)(iii) has escalated, and with it disputes relating to such invocation. Some WTO Members, and in particular, the United States, continue to argue that the question whether a Member correctly invokes Article XXI(b) is ‘non-justiciable’, i.e., cannot be decided by a WTO panel.[93] However, it is now well established in WTO case law that a WTO panel can examine, and decide on, whether a Member correctly invokes Article XXI(b) to justify an otherwise GATT-inconsistent measure.[94] The phrase in the chapeau of Article XXI(b), ‘which it considers necessary for the protection of its essential security interests’ (the ‘it’ referring to the Member invoking Article XXI(b)), does not give a Member unlimited discretion. As the panel in Russia – Traffic in Transit (2019) ruled, the words ‘which it considers’ referred to the ‘essential security interests’ and the necessity of the measure at issue to protect these interests. [95] The words ‘which it considers’ do not refer to the objective facts listed in the subparagraphs of Article XXI(b).[96] Whether the otherwise GATT-inconsistent measure is a measure ‘relating to the traffic in arms, …’; or a measure ‘taken in time of war or other emergency in international relations’, can, and must, be objectively established by a panel.

In old GATT and current WTO case law, there is very little guidance on which measures may be considered to be measures ‘relating to traffic in arms, …’ within the meaning of Article XXI(b)(ii).  While it is clear what traffic in ‘arms, ammunition and implements of war’ is, what is traffic in ‘other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment’? This is, potentially, traffic in a very broad category of goods and materials, but, as Article XXI(b)(ii) explicitly states, it is traffic to supply the military. Therefore, measures relating to traffic for supplying non-military entities are not measures ‘relating to traffic in arms …’ within the meaning of Article XXI(b)(ii).

In contrast to Article XXI(b)(ii), there is plenty of recent WTO case law on Article XXI(b)(iii) and the question what measures may be measures ‘taken in time of war or other emergency in international relations’. While the concept of ‘taken in time of war’ needs no explanation, the concept of ‘other emergency in international regulation’ has been more problematic. The panel in Russia – Traffic in Transit (2019) found that an ‘emergency in international relations’ refers to:

a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.[97]

The panel also noted in this regard that ‘political or economic differences between Members are not sufficient, of themselves, to constitute an emergency in international relations’, unless they affect defence and military interests, or the maintenance of law and public order interests.[98] Note that the panel in Saudi Arabia – IPRs found that ‘Saudi Arabia's severance of all diplomatic, consular and economic ties with Qatar … falls into the category of cases in which such action can be characterized in terms of an exceptional and serious crisis in the relations between two or more States’, i.e., an emergency in international relations.^[99] Most recently, the panel in US – Steel and Aluminium (China) held that :

an “emergency in international relations” … must be, if not equally grave or severe, at least comparable in its gravity or severity to a "war" in terms of its impact on international relations.[100]

If a WTO Member invoking Article XXI(b) can successfully argue that an otherwise GATT-inconsistent measure is a measure ‘relating to traffic in arms, …’ or a measure ‘taken in time of war or other emergency in international relations’, that Member can justify this measure provided that ‘it considers’ the measure ‘necessary for the protection of its essential security interests’. It is now well-established caselaw that, while the words ‘it considers’ leave a Member wide discretion, this discretion – as already noted above – is not unlimited. The panel in Russia – Traffic in Transit (2019) noted, that ‘essential security interests’ may be understood to refer to:

those interests relating to the quintessential functions of the state, namely, the protection of its territory and its population from external threats, and the maintenance of law and public order internally.[101]

According to the panel, what specific interests are relevant to the protection of a state from external or internal threats ‘will depend on the particular situation and perceptions of the state in question and can be expected to vary with changing circumstances’.[102] The panel therefore concluded that:

[I]t is left, in general, to every Member to define what it considers to be its essential security interests.[103]

However, this does not mean that a Member may consider any concern to be an ‘essential security interest’. As the panel in Russia – Traffic in Transit (2019) stated:

[T]he discretion of a Member to designate particular concerns as ‘essential security interests’ is limited by its obligation to interpret and apply Article XXI(b)(iii) of the GATT 1994 in good faith.[104]

The panel noted that ‘the obligation of good faith is a general principle of law and a principle of general international law, which underlies all international treaties and binds all parties to such treaties. This obligation of good faith is codified in Article 31(1) of the Vienna Convention on the Law of Treaties regarding the interpretation of treaties, and in Article 26 thereof regarding the application of treaties. As the panel in Russia – Traffic in Transit (2019) observed, a ‘glaring example’ of a violation of the obligation to interpret and apply Article XXI(b) in ‘good faith’ is the relabelling of trade interests as ‘essential security interests’.[105] To avoid such and other violations of the obligation to interpret and apply Article XXI(b) in good faith, the panel in Russia – Traffic in Transit (2019) ruled that a Member must:

articulate the essential security interests said to arise from the emergency in international relations sufficiently enough to demonstrate their veracity.[106]

The obligation to interpret and apply Article XXI(b) in good faith applies not only to the designation of ‘essential security interests’, but also, and most importantly to the ‘connection’ between these interests and the measure at issue.[107] As noted above, the Member invoking Article XXI(b) must ‘consider’ this measure ‘necessary for the protection of its national security interests’. The panel in Russia – Traffic in Transit (2019) ruled that measures can only be regarded as ‘considered necessary’ by the Member invoking Article XXI(b) if these measures:

meet a minimum requirement of plausibility in relation to the proffered essential security interests, i.e. that they are not implausible as measures protective of these interests.[108]

A measure that would, for example, be very remote from, or unrelated to the essential security interests invoked, would not meet this minimum requirement of plausibility. If a Member would with regard to a measure that does not meet the minimum requirement of plausibility argue that it considers this measure necessary, this Member would not interpret and apply Article XXI(b) in good faith, and an adjudicator must reject the invocation of this provision.

4.9.2.     Can Law 163/2021 be justified under Article XXI(b) of the GATT 1994?

As repeatedly noted above, Law No. 163/2021 aims ‘to prevent, counter and eliminate risks, threats and vulnerabilities to national security and defence of the country’. However, Romania cannot successfully invoke Article XXI(b) to justify the otherwise GATT-inconsistent Law No. 163/2021.

Regarding Article XXI(b)(ii), I note that Law No. 163/2021 does not relate to the kind of trade covered by this subparagraph. The Law does not relate to ‘traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment’. The technologies, equipment and software used in communications infrastructures and 5G networks are not ‘arms’, ‘ammunition’ or ‘implements of war’. Also, the technologies, equipment and software are traded for use in communication infrastructures and 5G networks. They are not ‘other goods and materials’ traded ‘for the purpose of supplying a military establishment’. The possibility that the products concerned may occasionally be supplied to a military establishment does not alter the nature of Law No. 163/2021 as a measure relating to trade in the products concerned for use in communications infrastructures and 5G networks.

Regarding Article XXI(b)(iii), I note that Law No. 163/2021 is not a measure ‘taken in time of war or other emergency in international relations’. Romania is happily not at war with any country in which the products of unauthorized manufacturers originate. Law No. 163/2021 is therefore not a measure taken in time of war. The Law is also not a measure taken in time of emergency in international relations with any of the countries in which the products of unauthorized manufacturers originate. While Romania may have political and economic differences with these countries, such differences are not an emergency in international relations, defined by the panel in Russia – Traffic in Transit (2019) as ‘a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state’[109], or defined by the panel in US – Steel and Aluminium (China) as a situation which ‘must be, if not equally grave or severe, at least comparable in its gravity or severity to a "war" in terms of its impact on international relations’.[110] I also note that Romania has clearly not severed its diplomatic, consular and economic ties with the countries in which the products of unauthorized manufacturers originate.

I conclude that Law No. 163/2021 is not a measure that covered by either subparagraph (ii) or subparagraph (iii) of Article XXI(b), and can therefore not be justified under Article XXI(b). However, if Law No. 163/2021 would be covered by either of the subparagraphs (quod non), Romania could not successfully invoke Article XXI(b) to justify the otherwise GATT-inconsistent Law, because such invocation would constitute a violation of Romania’s obligation under international law to interpret and apply Article XXI(b) in good faith. This is so because Law No. 163/2021 only refers in the most general terms to the protection of ‘national security and defence of the country’ and fails thus to articulate (sufficiently to demonstrate their veracity) the ‘essential security interests’ at issue. Also, and even more importantly, Law No. 163/2021 is not a measure that Romania can – in good faith – consider to be ‘necessary’ because the Law fails to meet the minimum requirement of plausibility. The publicly available material does not establish that the technologies, equipment and software of unauthorized manufacturers constitute a risk to Romania’s ‘essential security interests’. In the absence of any evidence of a risk to Romania’s ‘essential security interests’, Law No. 163/2021 is so remote from, or unrelated to, the essential security interests invoked that Romania cannot – in good faith – consider the Law to be ‘necessary’.

On the basis of all the above, I conclude that the inconsistency of Law No. 163/2021 with Articles I:1, III:4 and X:3(a) of the GATT 1994 cannot be justified under the national security exceptions of Article XXI(b) thereof.

5.       Conclusion

Pursuant to Article 11 of Romania’s Constitution, international agreements concluded and duly ratified by Romania, such as the WTO Agreement, are part of its domestic legal order and can be directly applied by its domestic courts. On the basis of the factual information that is publicly available and the legal analysis undertaken above, I conclude that Law No. 163/2021 is inconsistent with:

·       the MFN treatment and national treatment obligations of Article 2.1 of the TBT Agreement;

·       the prohibition of creating unnecessary barriers to trade of Article 2.2 of the TBT Agreement;

·        the obligation to use international standards as a basis for technical regulations of Article 2.4 of the TBT Agreement;

·       the transparency obligations regarding technical regulations of Article 2.9 of the TBT Agreement;

·       the MFN treatment obligation of Article I:1 of the GATT 1994;

·       the national treatment obligation of Article III:4 of the GATT 1994; and

·       the obligation to administer trade measures in a uniform, impartial and reasonable manner of Article X:3(a) of the GATT 1994.

I also conclude that the inconsistency of Law No. 163/2021 with Articles I:1, III:4 and X:3(a) of the GATT 1994 cannot be justified under the ‘general exceptions’ of Article XX of the GATT 1994, or the ‘security exceptions’ of Article XXI(b) thereof.

Romania’s Law No. 163/2021 offers a case study of the broader questions arising at the intersection of 5G security regulation and WTO obligations. Drawing on my experience as a former Member and Chair of the WTO Appellate Body and my academic work in international economic law, I seek in this article to contribute to a balanced analysis of those questions, recognizing both the importance of national security objectives and the legal disciplines established by international trade agreements.

[1] Former Member and Chair of the WTO Appellate Body; Professor Emeritus of International Economic Law, World Trade Institute, University of Bern; and external legal advisor, King & Wood.

[2] See https://www.wti.org/research/publications/1499/preliminary-thoughts-on-the-european-commission-proposal-for-the-cybersecurity-act-20/.

[3] See https://legislatie.just.ro/public/DetaliiDocument/243213

[4] See e.g.  https://informat.ro/en/current-affairs/huawei-contests-the-exclusion-from-5g-networks-in-romania-at-the-constitutional-court-116111

[5] Constitution of Romania 1991 (rev. 2003), Article 11(2), see https://www.constituteproject.org/constitution/Romania_2003. 

[6] Marrakesh Agreement on the Establishment of the World Trade Organization (‘WTO Agreement’) signed on 15 April 1994 and entered into force on 1 January 1995, at https://www.wto.org/english/docs_e/legal_e/marag_e.htm.

[7] See https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm. When Romania joined the European Union in 2007, it remained a full-fledged Member of the WTO with all the rights and obligations which Members have under the WTO Agreement. Note that the European Union as well as its 27 Member States are all WTO Members, albeit that within the WTO the European Commission will act on behalf of the European Union and its Member States.

[8] On file with the author.

[9] NIS Cooperation Group, CG Publication 01/2020, see https://digital-strategy.ec.europa.eu/en/library/cybersecurity-5g-networks-eu-toolbox-risk-mitigating-measures.

[10] Published in the Official Gazette, Part I, No 590 of 11 June 2021.  See: https://legislatie.just.ro/public/DetaliiDocument/243213

[11] Note that Article 9 and Articles 12 to 16 entered into force 30 days after the publication in the Official Gazette.

[12] See Article 2, paras. a, g, and i of Law 163/2021.

[13] Ibid.

[14] Note Article 2, para. d of Law 163/2021, which defines ‘information and communications infrastructures of national interest’ broadly.

[15] See Articles 3, 4 and 5 of Law 163/2021.

[16] See Article 6 of Law 163/2021. Note that a manufacturer can challenge such rejection within 30 days of its publication in the Official Gazette. See Article 8 of Law 163/2021.

[17] Article 4(3) and Article 5(2) of Law 163/2021. These criteria are virtually identical to the criteria set out in the 2019 Memorandum of Understanding between Romania and the United States referred to above.

[18] See: https://legislatie.just.ro/public/DetaliiDocument/279515

[19] Ibid.

[20] Article 10 of Law 163/2021. The same applies to products of manufacturers of which the authorization was withdrawn. See Article 7 of Law 163/2021.

[21] Article 11(2) of Law 163/2021.

[22] Article 14 of Law 163/2021. If the provider is newly established, a fine ranging from RON 10,000,000 to RON 50,000,000 may be imposed. See ibid. 

[23] See: https://romania.europalibera.org/a/interviu-100-de-minute-cu-premierul-alegeri-pensii-fmi-5g-fara-china/30923127.html

[24] See: https://www.profit.ro/povesti-cu-profit/it-c/ultima-ora-gigantul-huawei-reclama-in-romania-la-ccr-legea-in-baza-careia-i-a-fost-interzis-accesul-la-5g-ul-romanesc-precedent-recent-in-justitia-uniunii-europene-22410424

[25] See: https://dosare.ccr.ro/#/CautareDosare

[26] Panel Report, EC – Asbestos (2001), para. 8.16.

[27] Appellate Body Report, US – Tuna II (Mexico) (2012), para. 405.

[28] Most recently, the panels in EU and Certain Member States – Palm Oil (Malaysia) (2024) and EU – Palm Oil (Indonesia) (2025) interpreted and applied the non-discrimination obligations of Article 2.1.

[29] Appellate Body Report, US – Clove Cigarettes (2012), para. 87.

[30] Appellate Body Report, US – Tuna II (Mexico) (2012), para. 202.

[31] Appellate Body Report, EC – Sardines (2002), para. 176.

[32] Appellate Body Report, EC – Asbestos, para. 67.

[33] Ibid.

[34] For Louis Vuitton handbags, see https://de.louisvuitton.com/deu-de/homepage. For Fila handbags, see, https://www.fila.de/en/Women/Accessories/Backpacks-Waist-Bags/.

[35] Appellate Body Report, EC – Seal Products (2014), paras. 5.45 and 5.69.

[36] Appellate Body Report, EC - Asbestos, para. 69.

[37] Appellate Body Report, EC – Seal Products (2014), para. 5.12.

[38] Appellate Body Report, EC – Asbestos, para. 68.

[39] See https://www.epingalert.org/en/Search/Index?countryIds=C056&distributionDateFrom=2022-08-01&distributionDateTo=2022-09-30&viewData=G%2FTBT%2FN%2FBEL%2F47

[40] Appellate Body Report, US – Clove Cigarettes (2012), para. 120. See also, ibid, para. 156.

[41] For ‘likeness’ under the non-discrimination obligations of the GATT 1994, see Appellate Body Report, EC – Asbestos (2001), para. 101. The Appellate Body in US – Clove Cigarettes (2012) explicitly referred to its approach to ‘likeness’ its Report in EC – Asbestos (2001) and to determine ‘likeness’ under Article 2.1 of the TBT Agreement assessed the same factors. See Appellate Body Report, US – Clove Cigarettes (2012), para. 119. See also ibid., paras. 120 and 156.

[42] See e.g. Panel Report, Colombia – Port of Entry (2009), paras. 7.182 and 7.357.

[43] Appellate Body Report, US – Clove Cigarettes (2012), para. 180.

[44] Ibid., para. 182.

[45] Appellate Body Report, US – Clove Cigarettes (2012), para. 182.

[46] Ibid.

[47] Ibid., para. 101.

[48] Ibid., para. 175.

[49] See e.g., US – Tuna II (Mexico) and US – COOL.

^[50] Appellate Body Report, US – Tuna II (Mexico) (2012), para 297.

[51] Appellate Body Report, US – Tuna (Mexico) (2012), para. 319.

[52] Appellate Body Report, Australia – Plain Packaging (2020), para. 6.406.

[53] Appellate Body Report, US – Tuna II (Mexico) (2012), para. 315.

[54] Ibid., para. 317.

[55] Ibid., para. 314.

[56] Appellate Body Report, US – Tuna II (Mexico) (2012), para. 322.

[57] Ibid.

[58] Ibid.

[59] Appellate Body Report, US – COOL (Article 21.5 – Canada and Mexico) (2015), para. 5.334.

[60] Appellate Body Report, US – COOL (Article 21.5 – Canada and Mexico) (2015), para. 5.338. According to the Appellate Body, it would be more appropriate, for the respondent, once the complainant made a prima facie case, to establish that a proposed alternative measure is not reasonably available. See ibid., para. 5.339.

[61] Note that according to the EU 5G Toolbox, core networks functions are generally considered as critical, while radio access networks, transport and transmission functions, and internetwork exchanges are rated with lower criticality. See: https://digital-strategy.ec.europa.eu/en/library/cybersecurity-5g-networks-eu-toolbox-risk-mitigating-measures (pp. 39-40).

[62] Available at: https://digital-strategy.ec.europa.eu/en/policies/5g-research-standards.

[63] Appellate Body Report, US – Tuna II (Mexico) (2012), para. 356.

[64] Ibid., para. 363.

[65] See TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations with Relation to Articles 2, 5, and Annex 3 to the Agreement, in WTO document G/TBT/1/ Rev.10, dated 9 June 2011, pp. 46–8, para. 6.

[66] Panel Report, EC – Sardines (2002), paras. 7.69 – 7.70, as upheld by the Appellate Body in Appellate Body Report, EC – Sardines (2002), para. 233.

[67] See https://www.itu.int/ITU-T/recommendations/rec.aspx?rec=14992&lang=en

[68] See https://www.itu.int/ITU-T/workprog/wp_item.aspx?isn=15006

[69] See https://www.ancom.ro/en/about-us/media-en/press-releases/romania-chairs-the-council-of-the-international-telecommunication-union/#:~:text=Romania%20became%20a%20member%20of%20the%20organization%20in%201866,%20just%20one%20year%20after%20the%20establishment%20of%20the%20Union

[70] Panel Report, EC – Sardines (2002), para. 7.110.

[71] Appellate Body Report, EC – Sardines (2002), para. 288.

[72] Article 2.9 of the TBT Agreement. The WTO Secretariat maintains the Technical Barriers to Trade Information Management System (TBT IMS), a publicly available database of all information provided by WTO Members in relation to technical regulations and other measures covered by the TBT Agreement standards. See https://eping.wto.org. Members submit over 3,000 to 4,000 new TBT notifications every year.

[73] Ibid.

[74] There is no entry in the TBT IMS relating Romania’s proposed Law 163/2021.

[75] Appellate Body Reports, EC – Seal Products (2014), para. 5.86.

[76] Panel Report, EC – Bananas III (Guatemala and Honduras) (1997), para. 7.239. See also Panel Report, Colombia – Ports of Entry (2009), para. 7.341; and Panel Report, US – Poultry (China) (2010), para. 7.415.

[77] Appellate Body Report, Canada – Autos (2000), para. 79. See also Appellate Body Reports, EC – Seal Products (2014), para. 5.86.

[78] Panel Report, Colombia – Port of Entry (2009), paras. 7.182 and 7.357; and Panel Report, US – Poultry (China) (2010), paras. 7.431–7.432.

[79] Appellate Body Reports, EC – Seal Products (2014), para. 5.88.

[80] Appellate Body Report, Korea – Various Measures on Beef (2001), para. 137. ‘Treatment no less favourable’ is assessed by examining whether a measure modifies the conditions of competition in the relevant market to the detriment of imported products.

[81] Panel Report, Thailand – Cigarettes (Philippines) (2011), para. 7.866.

[82] Ibid., para. 7.867.

[83] Appellate Body Report, EC – Bananas III (1997), para. 200.

[84] Appellate Body Report, EC – Selected Customs Matters (2006), para. 200.

[85] Appellate Body Report, US – Shrimp (1998), paras. 182-183; see also, Panel Report, US – COOL (2012), para. 7.861.

[86] Panel Reports, US – COOL (2012), para. 7.876.

[87] Panel Report, Colombia – Textiles (Article 21.5 – Colombia) / Colombia – Textiles (Article 21.5 – Panama) (2016), para. 7.361 (referring to Panel Report, Thailand – Cigarettes (Philippines) (2011), para. 7.899).

[88] Panel Reports, Colombia – Textiles (Article 21.5 – Colombia) / Colombia – Textiles (Article 21.5 – Panama) (2016), para. 7.362 (referring to Panel Reports, China – Raw Materials (2012), para. 7.696; Panel Report, US – COOL (2012), para. 7.851).

[89] Panel Report, China – Raw Materials (2012), paras. 7.751-7.752; 7.745-7.746.

[90] Appellate Body Report, US – Gasoline (1996), p. 22.

[91] Appellate Body Reports, EC – Seal Products (2014), para. 5.169

[92] This is the nexus required under paragraphs (a), (b) and (d) of Article XX of the GATT 1994.

[93] Panel Report, US – Steel and Aluminium Products (China), para. 7.128.

[94] Ibid. In this report, circulated in 2022 but subsequently appealed into the void by the United States, the panel sets out in detail the interpretative analysis leading to its conclusion that Article XXI(b) is not ‘self-judging’ or ‘non-justiciable’. See ibid, paras. 7.104 – 7.128.

[95] Panel Report, Russia – Traffic in Transit (2019), para. 7.82.

[96] Ibid.

[97] Ibid., paras. 7.76 and 7.111.

[98] Ibid., para. 7.75.

[99] Panel Report, Saudi Arabia – IPRs, para. 7.262.

[100] Panel Report, US – Steel and Aluminium Products (China), para. 7.139.

[101] Panel Report, Russia – Traffic in Transit (2019), para. 7.130.

[102] Ibid., para. 7.131.

[103] Ibid., paras. 7.119 and 7.131.

[104] Ibid., para. 7.132.

[105] Panel Report, Russia – Traffic in Transit (2019), para. 7.133.

[106] Ibid., para. 7.134.

[107] Ibid., para. 7.138.

[108] Ibid.

[109] Panel Report, Russia – Traffic in Transit (2019), paras. 7.76 and 7.111. Also, the political and economic differences, which may well be present, do presently not affect directly the defence and military interests of Romania, or the maintenance of law and public order in Romania.

[110] Panel Report, US – Steel and Aluminium Products (China), para. 7.139.

At the Ministerial Conference held in March this year, 67 WTO Members participating in the negotiations for the Agreement on Electronic Commerce (ECA) issued a “Declaration on Interim Arrangements for the Agreement on Electronic Commerce”.[2] In a nutshell, those Members announced their intention to have the ECA provisionally enter into force outside of the WTO legal framework, while continuing to push for a consensus-based decision for the incorporation of the ECA into Annex IV to the WTO Agreement as a “plurilateral agreement”.[3] 

The key elements of the interim arrangements are as follows: (i) the Interim Arrangements Annex becomes an integral part of the ECA and prevails over the latter in the event of conflicts; (ii) the Interim Arrangements Annex will automatically lapse if and when the ECA is incorporated into Annex IV to the WTO Agreement; (iii) the provisions of the DSU are incorporated by reference into the Interim Arrangements Annex, mutatis mutandis, and appeal arbitration is established as the default mechanism for appeals. 

In a recent news article, Chris Horseman reported that the European Union might be interested in pushing for a similar solution for the other plurilateral agreement that is currently in a state of limbo due to lack of consensus at the General Council: the Agreement on Investment Facilitation for Development (IFDA).[4] 

WTO Members are actively debating the matter. At the latest General Council meeting held in July this year, Members discussed a number of issues concerning the ECA interim arrangements, including the involvement of the Director-General as the depositary of the agreement and the extent to which the Committee on Trade-Related Aspects of Electronic Commerce (“ECA Committee”) to be established pursuant to the Interim Arrangements will receive support from the Secretariat once the agreement enters into force.[5] 

This post focuses on one aspect that has not caught much attention: the role of the ECA Committee in the administration of disputes under the Interim Arrangements. 

As the ECA Interim Arrangements will not formally be a WTO Agreement, the WTO DSU will not apply to it. The drafters of the ECA Interim Arrangements opted to incorporate by reference the rules of the DSU, mutatis mutandis, thereby creating a parallel set of provisions on dispute settlement, identical in content to, but formally distinct from, those of the DSU. This approach certainly has a merit: the drafters did not have to conduct extensive negotiations over dispute settlement matters, and could instead refer to a set of rules everyone was already accustomed to. 

The WTO DSU entrusts the Dispute Settlement Body (DSB) with a number of key functions that are crucial for the operations of the dispute settlement mechanism. Since recourse to the DSB was not possible for a non-WTO agreement, the drafters of the ECA Interim Arrangements assigned those functions to the ECA Committee. 

Paragraph 3.3 of the ECA Interim Arrangements reads as follows: 

3.3 For the purposes of this Annex:

(…)

(b) references to the "Dispute Settlement Body" or to the "DSB" in the DSU shall be understood as references to the Committee (…).

In practical terms, this means that for disputes under the ECA Interim Arrangements, the ECA Committee “shall have the authority to establish panels, adopt panel (…) reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions of obligations under the covered agreements”.[6] 

The implications for the ECA Committee are not negligible. The ECA Committee, in fact, will have to perform the same functions as other committees established under the WTO covered agreements. In addition to those, it will also administer dispute settlement operations, which is a task assigned to the DSB for WTO covered agreements. This is likely to increase the workload of the ECA Committee, in a situation where certain non-participants have already raised concerns regarding the extent to which the WTO Secretariat will support the activities of the committee. 

One way to minimize the burden on the ECA Committee would be for parties in disputes under the ECA (or the IFDA, if participants will also proceed with interim arrangements) to resort to arbitration pursuant to Article 25 of the DSU, as incorporated by reference in the interim arrangements annex, also for first instance disputes. Replacing panel proceedings with arbitrations means that the ECA Committee would not have to perform certain functions normally assigned to the DSB under the WTO DSU. Arbitration proceedings, in fact, are premised on an agreement between the parties and arbitration bodies need not be established by the DSB. Furthermore, the parties to arbitration proceedings agree to abide by the arbitration awards, such that the DSB is not called to adopt arbitration awards. 

Pursuant to Article 25.2 of the DSU, in the event that the parties agree to resort to arbitration, they shall also “agree on the procedures to be followed”. This can be done on the basis of ad hoc arrangements or by means of a template set of procedures to be followed in every dispute, similar to the MPIA. The procedures need not be unnecessarily complex or different from panel proceedings under the DSU. In this respect, inspiration could be drawn from the EU-US arrangements in the Steel and Aluminium and Additional Duties disputes, where the parties agreed to replace panel proceedings with arbitration proceedings. They did so to “freeze” their dispute while they sought a negotiated solution, anticipating that negotiations could take longer than the 12-month limit envisaged in Article 12.12 of the DSU for the suspension of disputes. The parties thus terminated their panel proceedings and initiated arbitration proceedings, appointing the original panelists as arbitrators. In terms of the procedures, the parties agreed to reproduce the “rules, procedures and practices on panel proceedings that would have applied to the panel proceedings”, with the exception of the twelve-month limit set forth Article 12.12 of the DSU.[7] At the time of writing this post, both arbitration proceedings are still formally suspended. 

Replacing panel proceedings with arbitrations also for first instance disputes would thus be coherent with economical approach of the ECA Interim Arrangements. When negotiating interim arrangements for the IFDA, drafters could consider the solutions suggested in this post as a way to ensure that the committee to be established under that agreement will devote all its energies to its core business, without having to also perform the functions originally assigned to the DSB under the WTO DSU.

[1] International trade lawyer, ccantore@pm.me.

[2] WTO, Declaration on Interim Arrangements for the Agreement on Electronic Commerce, WT/MIN(26)/42 (27 April 2026).

[3] Plurilateral agreements are binding only for those WTO Members that have accepted them and do not create rights and obligations for other WTO Members (Article II:3 of the WTO Agreement). Pursuant to Article X:9 of the WTO Agreement, the Ministerial Conference (or the General Council in the intervals between meetings of the Ministerial Conference) may decide “exclusively by consensus” to add a new plurilateral agreement to Annex IV to the WTO Agreement.

[4] C. Horseman, “EU to push for interim fix on stalled WTO investment pact” (available at: https://borderlex.net/2026/09/02/eu-to-push-for-interim-fix-on-stalled-wto-investment-pact/, last accessed, 15 September 2026).

[5] P. Ungphakorn, “Text: WTO Head on the E-Commerce Plurilateral Deal and Secretariat Support” (available at: https://tradebetablog.wordpress.com/text-dg-reply-secretariat-and-e-commerce-plurilateral/, last accessed, 15 September 2026).

[6] Article 2.1 of the DSU.

[7] WTO, US – Steel and Aluminium Products (EU) – Recourse to Article 25 of the DSU, WT/DS548/19, paras. 5 and 6; EU – Additional Duties (US) – Recourse to Article 25 of the DSU, WT/DS559/7, paras. 5 and 6.

First, he describes the industrial policy threat coming from China:

[China has constructed] a vast, decentralized system of state-backed innovation finance, channeling subsidized capital into priority high-tech sectors and encouraging firms to compete ruthlessly for scale. The result is a market systematically tilted by state intervention, one in which Chinese firms can overbuild capacity and flood markets before American and allied competitors can scale up production.

Then he explains what he thinks a U.S. version of industrial policy that responds to the Chinese threat should look like:

But Washington should not aim to copy Beijing’s state-backed playbook wholesale. After all, the United States has plenty of advantages over China, including its entrepreneurs, universities, and capital markets, which are the deepest in the world. But those markets optimize for efficiency, not resilience or security. The challenge, then, is to turn capital into capability, to channel investment toward the industries that anchor modern national strength and economic vitality: advanced computing, biotechnology, robotics, critical minerals, pharmaceutical precursors, advanced manufacturing, and the electric-energy backbone. And the solution is an ambitious national strategic investment enterprise, headlined by a federal Strategic Investment Fund.

...

Throughout its history, the United States built institutions that channeled capital toward a national strategy. Resurrecting that tradition today would mean establishing a new kind of public investor: a U.S. Strategic Investment Fund (SIF), a federally chartered, market-facing public investor with its own balance sheet, designed to invest alongside private capital in strategically critical industries, both mature and emerging, where markets alone have proven insufficient.

He offers a lot of detail in support of his plan, a key element of which is to try to institutionalize industrial policy rather than have it be carried out in an ad hoc way (as has been the case).

From what I can tell, Sullivan's views on industrial policy reflect the conventional wisdom among many establishment Democrats these days. However, after the experience with these kinds of policies during the Biden administration, it may be time for a rethink. I have several specific criticisms of Sullivan's piece that could help move things in this direction (for any Democrat who is interested!): (1) he gets some of the history of U.S. economic policy wrong; (2) I'm not sure he's learning the right lessons from China's successes; (3) his proposals could lead to an international subsidy race, and that hasn't been a great outcome generally for the economy; and (4) the Biden administration tried a more limited version of his proposal and it didn't work out very well politically for the Democrats. Let's go through each one. (I'll have more to say about all this at some point, but it's going to have to wait.)

Learning the right lessons from U.S. economic history

First, Sullivan tells a story of U.S. economic history in which most of our industrial success is based on state capitalism. However, the history he presents is a bit dubious at times.

For example, he says "U.S. shipbuilding ... collapsed after the 1980s, when government subsidies were withdrawn, ... ." But as shown here, the U.S. shipbuilding situation is more complicated than that. From 1974 to 1978, the U.S. built 14 to 24 ships per year. It's true that after subsidies were cut in 1981, production declined to between 5 and 12 from 1981 to 1986, and continued to fall after that, so maybe this is what he has in mind by "collapse." To put these figures in perspective, however, in 1978 Japan delivered 471 ships. And for additional perspective, note that in 1981 the U.S. ranked 15th worldwide in shipbuilding, while last year the U.S. ranked 19th. So basically, without the subsidies, U.S. shipbuilding went from small to tiny, which doesn't feel like a "collapse." (A 1980 NY Times headline makes clear that serious problems existed in the industry even before the subsidy cuts: "U.S. Shipyards in the Doldrums; Orders Down Sharply")

Learning from history is always a good idea, but we need to make sure we have an accurate understanding of what happened. 

China's subsidies are a problem but let's not idealize them too much

Second, a key element of the policy vision Sullivan sets out is that it is a response to China: China provides massive subsidies for its industries, he says, and therefore the U.S. needs to adopt its own version of these subsidies in order to compete.

China does provide a lot of subsidies. Something missing here, though, is an evaluation of why exactly China has been successful in certain industries, and how much of a role the subsidies played in the success. In my view, it's an open question as to whether subsidies have been the driving force, as there are a wide range of factors other than subsidies and state interventions that help explain China's economic success. Having a 1.4 billion person internal free trade area as a market certainly seems like a plus!

Furthermore, evaluations of China's industrial policy are not always very glowing, and there are sectors where China gave lots of subsidies and still isn't competitive.

Having said that, by all means, the U.S. and other countries should challenge China on its subsidies. But just like with our own history, we should make sure to learn the right lessons from China's successes and failures.

(And speaking of history, keep in mind that back in the 1980s, people were talking about Japan overtaking the U.S. economically, but by the late 1990s it was clear that their predictions had missed the mark. Along the same lines, the situation with China could look very different in 10 years.)

Does anyone really win a subsidy race?

Third, it's important to think through the likely international response to a further expansion of industrial subsidies. China and the U.S. aren't the only players here. What is likely to follow from a ratcheted up U.S. industrial policy is that other countries will increase subsidies to their industries as well. At the end of all the ratcheting, the countries that can afford to participate in this subsidy race would be back on somewhat equal ground in terms of competitiveness (while less developed countries would fare badly), with taxpayers having funded the race for little if any advantage. That outcome does not seem ideal. In past decades, we saw the impact of similar developments on industries such as steel, and it's not great.

A better approach would be agreements not to subsidize, or at least to limit subsidies or to regulate the economic harm they may cause. As it happens, we have something along these lines in place at the WTO, but for some reason people haven't been enforcing it. I think I have a sense of why the Trump administration didn't enforce the WTO's subsidy rules. I'm not sure I understand why the Biden administration didn't do so though. If Sullivan is going to make the case for industrial policy, I think it's worth pushing him to explain how he thought about this issue while he was in the Biden administration. Why didn't he argue for challenging China's industrial policies? And how, in his view, are the U.S. and the world better off with China, the U.S., and many other countries competing with subsidies rather than competing in a more market-oriented system? Is the future he envisions for many industries something like the endless Airbus-Boeing subsidy battle (which was on a brief hiatus but now could be back), and is that really where we want to go with all of the industries that have been declared strategic? If so, it's going to cost taxpayers a lot of money, and it's not clear that any country will improve its position in the end. (And with the current state of the budget deficit/debt, it seems like a bad time for the U.S. to go down this road.)

Didn't we already try all this?

Speaking of things that happened during the Biden administration, my final point here is that, as I read it, Sullivan's proposal is basically to take the Biden administration's approach to economic policy and go a step or two further, turning industrial policy from an ad hoc effort to an institutionalized one. Before we go that route, however, I think we should ask whether this approach worked the first time, either in terms of policy outcomes or politics. Given the results of the 2024 election, there's a strong argument that it did not work out politically for those who pushed it.

Of course, Sullivan might argue that things didn't work out because of Biden personally, and that it would all go much better with a different Democratic president (i.e., Bidenomics would work better without Biden). Or perhaps he would say the efforts needed to have been undertaken more vigorously and comprehensively, and the institutional aspects of his "Strategic Investment Fund" proposal would make everything go more smoothly the next time around.

It's difficult to evaluate hypothetical arguments like these. However, if I were a Democrat thinking about a post-Trump economic policy, rather than just press forward with more of what they did last time, I would do a thorough post-mortem on the Biden administration's economic policies and think about the results of those earlier efforts to revive industrial policy. Figuring out what went wrong is essential for not ending up in the same place next time.

Then some Canadian wildfire smoke blew down to the U.S., and in a social media post on July 17 Trump put forward a vague tariff threat in response. But there are plenty of tariff threats these days, and it didn't necessarily seem like this one was going anywhere.

A few days later, though, on July 20, the Trump administration announced the imposition of tariffs under Section 338 based on accusations that Canada was discriminating against U.S. products in various ways. As the first ever use of Section 338 to impose tariffs, I think it's fair to say that this came as a bit of a surprise. Sure, people had mentioned Section 338 as a possible avenue for tariffs all the way back in 2016, but it hadn't been used to date, so why would it be now? Did the somewhat offhand wildfire tariff threats pave the way for a new tariff action that otherwise would not have happened? Did trade officials feel like that threat needed to have some sort of follow through? Who knows! Maybe the insider details will come out at some point.

Regardless of exactly how we got there, the Section 338 tariffs led to Canada-U.S. relations spiraling downwards. Canada announced its retaliation on August 25, and these tariffs went into effect today. In terms of possible U.S. escalation, all we have as of this writing is a threat by Trump to ban the sale of Bombardier jets. We'll see if anything else emerges in the coming days. [UPDATE: Action to remove Canadian-origin products from GSA procurement was just announced by Trump.][UPDATE II: Here comes more retaliation: Excluding Certain Canadian Products from Importation into the United States in Response to Continued Discrimination Against the Commerce of the United States with Respect to Dairy; Excluding Certain Canadian Products from Importation into the United States in Response to Continued Discrimination Against the Commerce of the United States with Respect to Motor Vehicles; Excluding Certain Canadian Alcoholic Beverages from Importation into the United States in Response to Continued Discrimination Against the Commerce of the United States with Respect to Alcoholic Beverages; there was also this: Modifying the Scope of Products of Canada Subject to the Additional Duties Imposed to Offset Canadian Discrimination Against the United States with Respect to Motor Vehicles; Modifying the Scope of Products of Canada Subject to the Additional Duties Imposed to Offset Canadian Discrimination Against the Commerce of the United States with Respect to Alcoholic Beverages]

I'm not sure what the Trump administration expected in response to the Section 338 tariffs. Administration officials often make reference to the fact that most U.S. allies eventually agreed to deals in the face of U.S. tariffs, whereas only China and Canada retaliated. It's possible these officials see trade leverage as the key here. Thus, in their view, the use of trade leverage pushed other allies into signing deals, and Canada should/would follow the same path with enough of this trade leverage in place. Section 338 would ratchet things up and get the deal done.

In my view, though, it's a mistake to see trade leverage as the key here. Arguably, it was security leverage that made the other deals happen. Everyone's situation is a little different, but, to take a couple examples, many EU nations feel dependent on the U.S. in the face of security threats from Russia, as do Japan and South Korea based on threats from China and North Korea. It was this security dependency that made these deals possible.

Importantly, Canada is in a very different position from most U.S. allies in relation to security, as it doesn't face the same security threats. I occasionally hear vague suggestions that Canada is under threat from China or Russia, but in a world where China or Russia are bombing/attacking/invading Canada, so much else has gone wrong that this is the least of anyone's worries. Canada simply does not face security threats in the way that other U.S. allies do. And the practical impact of this difference is that the U.S. doesn't have the same leverage over Canada as it does over other allies.

And then on top of that, while nobody's domestic politics are positive in relation to being publicly pushed around by the U.S., Canadian politics are particularly sensitive to this, especially in light of the rhetoric coming from President Trump and others in the administration.

So what happens now? My sense is that when they were at the negotiating table, Canada and the U.S. were not actually that far apart on the substance. A few tweaks here and there could be enough to close the gaps. However, the politics of all this could get in the way of a deal. The rhetoric has gotten heated and it can be hard to walk things back.

In the short term, this situation probably helps the Liberals in Canada politically, which makes a deal less attractive to the leadership there. In the U.S., it could hurt the Republicans slightly in the upcoming midterms, but this may not register enough for the administration to care (and Trump likes tariffs and trade wars, so he is not likely to back down in response to a small amount of political uncertainty).

Summing all this up: It's quite a mess we are in, and I'm not sure whether and how the key actors can get us out of it. While there's always a way for each side to make small concessions, declare victory, and get out, I don't know when people will feel the economic or political incentive to do so.

The ANZSIL International Economic Law Interest Group (IELIG) was established in 2011 to provide a forum for those interested in international economic law, especially international regulation of trade, investment, intellectual property, and monetary law. The work of the Interest Group covers all areas of international economic law and its implementation in domestic law, embracing both theoretical and practical aspects. The IELIG aims to maintain relevance for government, practitioners and academics alike and encourages discussion and exchange of ideas among all those involved in this field.

2026 Workshop (online)

The 2026 ANZSIL IELIG Workshop will be held via Zoom on Friday 27 November 2026. Its aim is to provide an informal setting for discussion of topical issues and works in progress.

We are honoured to have Professor Jarrod Hepburn, University of Melbourne, as this year’s keynote speaker. He will speak on ‘The Flexible Sources of Investment Law’. Jarrod received the ANZSIL Article Prize this year for ‘The Legal Justification for the Doctrine of Legitimate Expectations in International Investment Law’ (2025) 36 European Journal of International Law 43. As part of the workshop, we celebrate this achievement with panel on Jarrod’s work.

We invite paper proposals from ANZSIL members, practitioners in the field as well as staff from MFAT, DFAT, and the Attorney-General’s Department. We encourage PhD students, early career practitioners and academics to submit a proposal. Paper proposals may be on any topic within the work of the IELIG.

All speakers are invited to submit their paper following the workshop to the Australian Year Book of International Law or the New Zealand Yearbook of International Law for possible publication. We also invite ANZSIL members and MFAT/DFAT/AGD staff to attend the workshop even if not presenting a paper.

Submission of proposals

If you wish to submit a paper proposal, please submit an abstract of 300 words by email to christian.riffel@canterbury.ac.nz by 9 November 2026. Please include the heading on your email message ‘ANZSIL IELIG Workshop Proposal: [Your Name]’.

Prof Chris Riffel, University of Canterbury | Te Whare Wānanga o Waitaha

Dr Jose-Miguel Bello Villarino, University of Sydney ANZSIL IELIG Co-Chairs

A monthslong crackdown within the Trump administration to soften its trade rules all started with a flap over pasta.

In the aftermath, Commerce Secretary Howard Lutnick and other top Commerce Department officials are leaning on agency staff not to drive up tariffs on grocery items and other goods ahead of the midterm elections.

...

Agency leaders first stepped in late last year, after a Commerce Department investigation determined in September that leading Italian pasta makers had been underpricing the products they sold in the U.S., in violation of trade rules. The proposed punishment — sky-high tariffs on the pantry staple — drew headlines at a time when the administration was trying to convince Americans its trade agenda was not driving up prices.

...

In particular, he and other top Commerce officials have discouraged staff from pursuing the most aggressive possible tariffs in the pasta case and other similar investigations into trade violations, according to four people familiar with the matter, granted anonymity to share unreported details about the internal discussions.

In some cases, senior officials instructed staff to recalculate rates that were deemed too high, two of the people said. The result has been much lower duties on violators in recent months compared to the past.

...

Lutnick signaled to staff across meetings and private correspondence in the fall of 2025 that the administration would no longer prioritize the most aggressive forms of enforcement, according to the four people. In a meeting in March, senior Commerce officials told private-sector lawyers about the new approach, stressing that the administration would no longer back the most aggressive form of enforcement, two of the people said.

...

Since the fall, Commerce officials overseeing antidumping and countervailing investigations have selected the lowest tariff option under consideration in the overwhelming majority of cases, two of the people familiar said. One of the people said that career staff initially chose the highest rate 90 percent of the time, but senior leadership would “ask to redraw the numbers” if all the options seemed too high.

I'm not totally sure how this story made its way into the press, although I can imagine that domestic industry lawyers were getting annoyed at the Commerce Department and perhaps looked for ways to make their concerns public.

Thinking about the big picture here, one possible takeaway from recent U.S. trade policy developments is that the unrestrained use of tariffs other than AD/CVDs has brought a bit of restraint to AD/CVDs. But I'd want to hear from practitioners about this before reaching any firm conclusions on the connection.

The last time I remember mainstream media reporting on the inner workings of AD/CVD calculations was a 2003 Washington Post article, which was about Commerce pushing duties in the direction people would generally expect:

... Lawyers who defend foreign companies in dumping cases complain that [Joseph] Spetrini stands out for his tendency to use his discretion in ways that hurt their clients, the result often being higher "dumping margins" set by the department on imported goods, with concomitantly higher duties.

"Bending the rules in favor of petitioners – that's what he views as his job, frankly," said one trade lawyer, speaking of the U.S. parties in dumping cases.

...

... [Spetrini] has considerable latitude in interpreting the rules and deftly skews the outcome toward high margins, according to a number of former employees who relate similar accounts of how he operates. A term several used to describe Spetrini's approach is "margin shopping," or looking at different ways to calculate an importer's costs or prices and choosing the one that helps fatten the prospective margin to a desirably high level.

First up, Colombia explains how the TRIPS Agreement uses intellectual property rights to reward, and therefore encourage, innovation, focusing on the example of patents. A key point of the submission is that there are two separate elements (which it refers to as "prerogatives") – exclusivity and remuneration – of the patent reward system:

1. Colombia notes that the TRIPS Agreement establishes two main mechanisms to reward innovation through the protection of intellectual property rights (IPRs): i) exclusivity and ii) profit potential. Indeed, in the example of patents, Article 28 of the TRIPS Agreement states:

Article 28 – Rights Conferred

1. A patent shall confer on its owner the following exclusive rights:

(a) where the subject matter of a patent is a product, to prevent third parties not having the owner's consent from the acts of: making, using, offering for sale, selling, or importing for these purposes that product;

(b) where the subject matter of a patent is a process, to prevent third parties not having the owner's consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.

2. Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.

2. According to the aforementioned article, a patent holder has two distinct prerogatives. The first is a prerogative of exclusivity, which prevents third parties from performing certain acts with respect to the patented product or process without their consent. The second is a prerogative of remuneration, under which a given use generates an entitlement to compensation. In the ordinary patent bargain, the two are bundled. However, as discussed below, the multilateral IP framework already recognizes configurations in which a right to remuneration is preserved independently of any power to prohibit use. Because the two prerogatives differ in scope and serve different functions, they do have distinct effects on innovation, access, market competition, technological diffusion, industrial learning and development.

(footnote omitted)

Colombia then notes the downsides to the exclusivity element:

4. Regarding the possibility of excluding third parties from using a technology, this prerogative can generate tensions with technology users, limit cumulative innovation, hinder interoperability, restrict competition, or increase barriers to entry, both for companies in industrialized and developing countries. Among countries, this exclusivity often serves as an industry protection, as it creates a "moat" in a specific market, with potential significant effects on other countries and its technological upscaling and development strategies.

On the other hand, Colombia sees the remuneration element as more positive and talks about the possibility of applying it independently of exclusivity:

5. By contrast, the remuneration prerogative – the possibility of receiving remuneration for a technological contribution – is in many cases sufficient on its own as a legitimate and sufficient incentive for innovation, without the negative impacts. The differentiated effects of exercising or privileging one of these two prerogatives over the other are relevant to the design of an optimal IPR reward system. In this context, the question is not whether innovators should be rewarded, but whether the reward should necessarily depend on the possibility of exclusion.

With regard to alternative approaches to remuneration that do not involve exclusivity, Colombia notes the following:

10. Other existing incentive mechanisms can inform this discussion. These include statutory licencing, related rights, pools, innovation awards, innovation inducement prices, reward funds, conditional public funding, open knowledge models, etc., under which the remuneration prerogative is kept, but the exclusivity one is not.

11. Taken together, these experiences demonstrate that the promotion of innovation could be better anchored focusing on the monetary rewards, without the potential adverse effects of granting temporary monopolies of exclusion.

(footnote omitted)

Colombia later elaborates on the point about separating out the two elements:

12. The international community could achieve significant progress on several IP discussions by independently analysing the two described prerogatives. Discussions on technology transfer, IP rights in pandemics, IP rights for environmental objectives, the role of the objectives, principles, and flexibilities of the TRIPS Agreement, VMAT for tech transfer (Voluntary and Mutually agreed terms), industrial protection and competition, etc., have proven to be almost intractable in different international fora. Exploring different models with autonomous prerogatives – for example, using different periods of protection for the two prerogatives, or providing market reward incentives by augmenting the remuneration mechanisms when a commitment to limit the right to exclude is made – could provide venues for better collective solutions. Likewise, the developmental dimension related to technology access and technology learning and technology upgrading, could be better served by treating the two prerogatives independently, and create a better scenario for trust and rule making at the WTO, even in the context of the reform of the organization.

Going forward, Colombia suggests the following discussion:

13. Consequently, Colombia, invites an exploratory thematic discussion on alternative innovation reward mechanisms currently in use, in which exclusivity has been modulated without eliminating the remuneration reward, and its effects on different types of industries and different types of countries.

In the English version of the document, the word "prizes" does not appear, but when I look at the Spanish version I think I see (using Google Translate) "innovation inducement prizes" (or maybe "awards") rather than "innovation inducement prices" (as stated in the English document), and Colombia clearly has something along these lines in mind. Prizes are arguably a better way to encourage innovation than the current patent system, so I'm glad Colombia raised this.

Colombia's communication was discussed at a meeting of the TRIPS Council on July 22-23. So far, all we have is the brief summary of the meeting put out as a WTO news item, which explains the reaction to the communication as follows:

Members also discussed a submission by Colombia entitled "Autonomous examination of TRIPS prerogatives, and existing examples" (IP/C/W/742). The submission invited members to consider thematic discussions on alternative innovation reward mechanisms, with a proposal to assess the impact of IP exclusivity as separate from a right to remuneration, and to discuss their effects across industries and regions. Some members expressed interest in continued dialogue on this topic, while others questioned the premise of the submission and emphasized the adequacy of the existing IP framework.

It's not too difficult to imagine which Members fell on each side of the debate. More details should be available soon when the minutes of the meeting are released, and I'll come back to it then if anything interesting was said.

Neguse: So going back to you, Mr. Steil, socialism [is] owning the means of production, right?

Steil: That's a piece of it, yeah.

Neguse: Okay. What would you call the Trump administration acquiring a 10% equity stake in Intel, a 15% stake in rare earth producer MP Materials, and a 10% stake in Lithium Americas and Trilogy Metals?

Steil: It's an America first policy to make sure we can outcompete China.

Neguse: Do you believe that the government should own grocery stores?

Steil: No.

Neguse: That would be socialist to you?

Steil: I think that would be a type of overreach in the federal government, absolutely.

Neguse: Would that be socialist to you?

Steil: Yeah, that'd be a form of socialism.

Neguse: Okay. And if Donald Trump announces tomorrow that he's going to take a 20% equity stake in Kroger, would that be socialism to you?

Steil: I'd want to see the details.

Neguse: Oh, you want to see the details?

Steil: No, but understand the difference. ...

...

Neguse: ... You said if government owns grocery stores, that would be socialist. But if, of course, Donald Trump were to announce an equity stake in a grocery store, well, I'd have to really see the details ...

...

Steil: I think there's a meaningful and substantive role of the federal government as it relates to foreign policy and national defense. I think that's why we look at the National Defense Production Act. ...

... [Rare earth materials, oil] have national policy and national security interests at stake, which is why we have the Defense Production Act, which gives the federal government certain roles that are non-traditional in the capitalist system. ... And then the question is, where on that dial? And so the question then becomes: Some folks on your side of the aisle would like to have government-run grocery stores. I think that's nuts.

...

Neguse: ... I asked you a very simple question. You answered it. The government owning grocery stores would be socialist in your view. I then posed the question as to whether or not the President announcing that the United States government would take a 10% or 20% equity stake in one of the largest national retailers in our country, whether that would be socialist, you said, I'd have to know the details. ... So, you then answered and took us down the road of the justifications with respect to national security and foreign mining and all the rest, so we are back to square one. As you said, you said very clearly, there are people in my party who believe the government should own grocery stores, and I'm trying to get a better sense as to whether or not you agree. And I sense that if Donald Trump were to announce that he believes it's the right thing to do, that you would agree. You have an opportunity to tell me no, that if the President announced a 10 or 20% equity stake in a national grocer, that you would not support that, you believe that's socialist.

Steil: I think there would need to be a national security rationale for the action. I don't see any ... in your hypothetical, I don't see a national security purpose.

...

Neguse: Okay. So, a test for you as to whether or not the U.S. government acquiring a stake in any American company or any American industry, as to whether or not that is socialist, is whether or not there's any kind of national security implication. And essentially, the United States government can, so long as they can put together this cogent rationale, Donald Trump can take equity stakes in whatever companies he deems necessary – the U.S. government, I should say, taking equity stakes, he's initiating – as long as that national security prerogative is established ... .

Steil: No, I think you're wildly overstating.

In reaction, let me first note that I mentioned similar issues last year, when Commerce Secretary Howard Lutnick didn't seem to deny that what the Trump administration was doing could be characterized as state capitalism, suggesting that it was justified as a response to China. In the Neguse-Steil exchange, the characterization has shifted from state capitalism to socialism, which I think is a fair way to describe some of the things that have been happening recently.

It seems to me that Steil's position as set out above is that, contrary to the title of the House Resolution, socialism should not, in fact, be condemned or denounced in all its forms, but rather should be embraced in particular circumstances. I understand that he only wants government ownership of the means of production when "national security" is at stake, but the concept of national security is very broad in theory, and in practice recently has been much broader than I ever imagined, with few if any guardrails. As a result, a limitation on government ownership of industry to circumstances involving national security does not provide much of a restriction on what I always thought was one of the main concerns people had with socialism, and instead appears to be a somewhat open-ended endorsement of such ownership.

Bringing this topic closer to the main focus of this blog, what does the current Trump administration/Republican party position on these issues mean for U.S. international economic policy? If Republicans are going to support U.S. government ownership of the means of production for national security reasons, that could, in theory, lead to some significant changes in international economic governance and relations. Perhaps the rules need to be refined and clarified so that all actors in the trading system are aware of the specific circumstances when government ownership of the means of production is permitted, so governments can have more certainty in knowing when and how they can do it?

That, of course, was a rhetorical question, and I'm pretty sure I know the answer: The Republican politicians who support U.S. government ownership of the means of production for security reasons would not apply these principles to foreign governments, and do not think international rules need to be adjusted to provide more guidance or leeway. Rather, the Trump administration and these Republican politicians are still likely to object to foreign government policies and practices of this sort when they have an impact on U.S. companies. And if foreign governments invoked national security in the same way the Trump administration has been doing, I don't think that would make a difference for the Trump administration's response. To make that point more concrete, if you think about possible foreign government interventions of this sort in the tech sector, I can imagine the Trump administration's response would be highly aggressive.

Having said all that, I'd still like to see some questions from trading partners on these issues, to clarify the scope of what the Trump administration thinks governments – both the U.S. and others – may do here. What exactly are its views on government ownership of industry based on a national security rationale? Given how common the practice has become, this seems worth fleshing out. Ideally, these conversations would happen at the WTO, so there would be a published account of the discussion, but even bilateral conversations could be useful.

And while we are on the subject of questions for the Trump administration, Congress could ask some about the nature and purpose of the equity stakes the administration has been taking, as well as how these actions would be considered under our international obligations. That might be more useful than voting on non-binding resolutions such as the one that triggered this discussion.

Finally, a big issue here is whether, or to what extent, this view on the part of some Republican politicians will outlast Trump's presidency. In 2029, will they return to the more free market views they held for several decades before Trump? I have been skeptical that there is a coherent big government version of economic policy that works in terms of politics on the right, in the absence of someone with Trump's personality dominating the scene. We'll find out in a couple years whether I'm correct about this.

In August 2023, China suspended imports of all Japanese aquatic products following the release of ALPS-treated water from the Fukushima Daiichi Nuclear Power Plant. The measure was widely discussed in Japan as an example of economic coercion. I previously examined its consistency with the WTO SPS Agreement in an EJIL: Talk! post.

More than three years have now passed, but Japanese seafood exports to China remain negligible. We can now look beyond the immediate impact of the measure and ask a different question: did this economic coercion work?

This post looks at how Japanese seafood exports changed after the restrictions, with particular attention to whether exports that could no longer go to China were redirected to other markets. 

What happened to Japanese seafood exports?

For this analysis, I identified 213 seafood product categories using Japan’s nine-digit statistical classification, based on the seafood categories in Japan’s trade statistics. I then traced their monthly export values from January 2022 through July 2026. The accompanying spreadsheet file contains the underlying product-level data.

Of these 213 products, 106 had been exported to China before the restrictions. Their average monthly export value to China fell by 99.9 per cent after the measure was introduced. In practical terms, direct exports to China almost disappeared.

At the same time, the average monthly export value of these products to all other markets — the rest of the world (ROW) — increased by about 30 per cent. At first sight, this looks like trade diversion: exports that could no longer go to China may have been redirected to third-country markets.

But there is one important problem. The other 107 products had not been exported to China before the restrictions, yet their average monthly export value to the ROW also increased by about 26 per cent. It is therefore possible that Japanese seafood exports were simply increasing more generally during this period. 

Was it trade diversion?

The next question is whether the increase in ROW exports really reflected trade diversion following the loss of the Chinese market. I focused on how dependent each product had been on China before the restrictions.

The idea was simple. If trade diversion occurred, products that had relied more heavily on China should show larger increases in exports to other markets after the restrictions. I therefore tested whether this pattern could be seen in the trade data.

The result supports this view. A 10 percentage point higher pre-restriction share of exports going to China was associated with an estimated 16.9 per cent higher monthly export value to the ROW after the restrictions. This makes it difficult to explain the increase in ROW exports only by general economic conditions or a broader increase in Japanese seafood exports. The result is consistent with trade diversion following the loss of the Chinese market. The accompanying Python replication code allows readers to reproduce this estimate. 

What does this tell us about economic coercion?

China’s restrictions almost eliminated direct exports of the affected products to the Chinese market. At the same time, however, products that had relied more heavily on China showed larger increases in exports to third-country markets. The restrictions therefore caused a major disruption in bilateral trade, but the trade data also point to reallocation toward alternative markets.

Previous research has shown that exporters targeted by economic coercion can reduce its economic impact by redirecting trade elsewhere. Ferguson, Waldron and Lim (2023), for example, identify reallocation to alternative markets as an important response to China’s trade restrictions against Australia. The Japanese seafood case shows a similar pattern.