Security and climate ‘exceptions’ make their way into EU FTAs

The EU is out there to secure a dense and reliable set of international rules for trade for itself in a time of severe crisis in the multilateral trading system and transatlantic relations. Among others, it is doing so by investing into its bilateral trade agreement strategy and adding new items to these new treaties that signal a departure from a world where the United States was standard-bearer for international trade rules.

Is the EU reinterpreting shaping general WTO rules in its own way? A glance at the Mercosur, Mexico and Japan agreements and whatever we know of the coming EU-Australia agreement indicate this could well be the case.

Security exception makes appearance in EU FTAS

The EU was piqued by the United States resorting to national security justifications to introduce tariffs on its metals last year. The same Section 232 measures have also affected recent EU free trade agreement partners such as the US big neighbour, Mexico. The trauma is perceptible when one reads the legal text of the EU-Mexico agreement and the texts the EU filed to Australia as part of ongoing trade talks.

In earlier EU free trade agreements – such as the free trade agreement with Vietnam, initially concluded four years ago – the EU only made a general reference to the WTO’s General Agreements on Tariffs and Trade’s Article XX to justify any trade restrictive measure against Vietnam. Article XX covers health and safety, protection of the environment and public morals and is the fundamental global rule-book for ‘general exceptions’ to multilateral trade rules on non-discrimination. The Vietnam trade agreement, concluded initially in 2015, does not make reference to the WTO’s security exception (GATT Article XXI).

Article XXI reads as follows:

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.

Fast-forward to FTAs concluded or started recently, and here you find the security exception. The EU-Mexico FTA and the legal language EU negotiators tabled to Australia for consideration include a copy-pasted GATT Article XXI. This makes clear that security-related restrictions might be taken but only under the type of emergency or international situations outlined in the WTO rule-book.

The EU-Japan FTA concluded last year also includes a security exception. The relevant article does not refer however explicitly to the WTO’s Article XXI. The FTA’s chapter on ‘trade in goods’ stipulates that as part of the general exceptions to the principles laid down in the agreement, are measures that are “necessary to protect public security or public morals or to maintain public order”. A footnote in the text further adds: “The public security and public order exceptions may be invoked only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.

A new ‘Paris Agreement exception’

Both for domestic political reasons and in response to the United States’ withdrawal from the Paris Agreement on combating climate change the EU has now made clear that any trade restrictive measures it could take under an FTA for the purposes of implementing the 2015 UNFCC accord on climate are legitimate.

Here the EU’s latest FTA texts introduce a modification to the language included in the WTO’s GATT Article XX. For example, in the EU-Mercosur preliminary FTA text, we read: “the measures referred to in Article XX(b) of the GATT 1994 include environmental measures, such as measures taken to implement multilateral environmental agreements, which are necessary to protect human, animal or plant life or health.” The EU is trying to get this type of language into its new trade agreements, such as the one with Australia (see table below).