Section XXI of GATT (the 1947 General Agreement on Tariffs and Trade) titled “Security Exceptions” makes it clear that countries have the right to abandon the rules for national security considerations. While the text is explicit that GATT “cannot prohibit measures which are needed purely for security reasons,” it also cannot allow that “under the guise of security, countries will put on measures which really have a commercial purpose,” protecting any industry. The WTO (World Trade Organization), GATT’s successor in 1990, adopted Section XXI unchanged.
Over the decades, Ghana used this section against Portugal because of the latter’s link with Angola; Australia and Canada used it against Argentina during the Falkland episode; in November 1975 Sweden introduced a global import quota for certain footwear, the government stating that the “decrease in domestic production has become a critical threat to the emergency planning of Sweden’s economic defence as an integral part of the country’s security policy... Such a capacity is indispensable in … the provision of essential products necessary to meet basic needs in case of war or other emergency in international relations.” China imposed heavy tariffs on Australian wine and barley after Australia called for an international inquiry into the origins of Covid-19. The list is long.
It is surprising that the debate about tariffs is focused almost exclusively on the price and tax angle, rather than the above Exception Clause. World population in 1947 was about 2.5 billion, in 1990, 5.2 billion, now it is almost 8 billion. Notable is that substantial parts of today’s global population live either under dictatorial regimes, which amounts to parts of the world pursuing an “export strategy” of people.
How can the U.S. induce these countries to move away from their model of society, which some believe threatens U.S. security? Whereas the U.S. can accept selective migration, failed states ensure the flow of people well beyond “selective” as individuals escape what restrains their ability to prosper.
It’s worth noting that tariffs can induce governments in the rest of the world to give more options to their own population – which necessarily implies deepening their financial markets, and thus, reluctantly, weakens their power. Tariffs, combined with greater obstacles to crossing borders, prevent the dictatorial, failing countries’ from “exporting” their discontented, and perhaps their manufactured on the cheap products and services with ease.
The U.S. can reasonably expect that by limiting the inflow of people and products, more people will stay put in their own countries. Idled where they’d rather not be, they might increase pressures on their government, weaken dictatorships and stabilize gradually failing states. Which is a case for tariffs that has not been traditionally made.
Such use of tariffs has to do with security in a world destabilized by the sudden, unanticipated drastic increase in world population, most of whom live in countries with atavistic models of society, and in a world where the 1947 rules no longer offer a stable solution. Unfortunately, tariffs have become a tool to deal with presumed allies of the U.S. - Western Europe, Canada and other countries – but which have succumbed for decades to the “ordeal of affluence” (that the Founding Fathers feared the U.S. would similarly fall into).
These countries express pride in how much gentler they are than the U.S., having spent far more on entitlements than the U.S. They seemingly forgot that they could do so because they spent minuscule amounts on their military, counting on the U.S. security umbrella. “Allies” and “friends” are empty words when the actions are not there, and tariffs now appear to be “security-related” wake up calls for them.
Briefly, WTO permits using tariffs for security reasons, which the suddenly 8 billion-peopled planet now requires in the eyes of some. Tariff use weakens dictatorial and “natural resource” based countries all built on an “export model of society,” and also forces Western Europe and others to adjust.
Rules and models of society that worked for a far less mobile 1947-2.5 billion populated world, do not work for the present 8 billion. Remember that the Bretton Woods agreement broke down when countries violated two of its clauses: Devaluing the currency when politically convenient rather than under extreme hardships, as a clause required; and penalizing countries accumulating excess reserves, as the second clause required. So is now the fate of WTO, as parties to the agreement have long been violating its spirit.
