TRADE POLICY IN A VIOLENT WORLD: THE NATIONAL SECURITY EXEMPTION

Export controls based on national security considerations are exempted from GATT rules by Article XXI. The United States has been quite vigorous in using the national security argument to extend limitations on foreign direct investment beyond defense industries alone. In the new circumstances of a war on terrorism of indefinite duration, recourse to the national security exemption could become more commonplace in other areas of trade policy development.

In an October 4 address to the Commerce Department's Update 2001 annual conference on export controls, Under Secretary of Commerce Kenneth Juster indicated that the Bush Administration is pressing other countries to make multilateral export-control regimes more effective. Mr. Juster's conclusion is reproduced here for your information:

In sum, as a result of globalization, economic interaction and national security are more intertwined than ever. Indeed, the entire concept of "national security" takes on new meaning in the current global economy and in light of the recent terrorist attacks. No longer is national security narrowly limited to national defense and military preparedness. Our conception of national security must also be concerned with securing the international conditions necessary for preserving and enhancing free trade and U.S. economic prosperity.

As the events of September 11 made crystal clear, with globalization we all now find ourselves on the front lines of both international trade and U.S. national security. Complying with export controls, securing computer networks, and protecting critical infrastructure assets are issues that are relevant not only to individual anti corporate responsibility, but also to the maintenance of our national security. Our challenge is to manage these risks in a way that allows the United States to reap the maximum economic benefits of globalization while still protecting U.S. national security. I look forward to working closely with all of you in the business community in addressing this important new challenge.

We believe that there is a better than 50/50 chance that the United States will be pressing trading partners to give effect to a range of trade distorting measures on the strength of the Article XXI national security exemption. Great care will be needed to ensure that the exercise does not deteriorate into a protectionist binge. No indication has yet emerged as to whether specific criteria are envisioned that will be applied as a check against the worst excesses of barrier building.

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