War and Peace (Through Trade): Is There a Role for the WTO in Bringing Peace to Ukraine? Commentary
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War and Peace (Through Trade): Is There a Role for the WTO in Bringing Peace to Ukraine?
Edited by: Zvenyslava Opeida

Russia’s aggression against Ukraine has called into question the responsiveness and effectiveness of many international organizations, particularly those dealing with economic matters. When the war broke out, the West made it clear they were unwilling to commit military forces to Ukraine. Instead, in addition to providing weapons, the decision was made to respond through economic means by imposing sanctions intended to derogate Russia’s capacity to continue the war.

This begs the question: what role, if any, can the World Trade Organization (WTO) play here?

The international order created after World War II rested on the assumption that economic interdependence promotes peace and reduces reliance on warfare to advance geopolitical aims. The WTO, therefore, was envisaged to maintain peace but was mainly built on the “market knows best” approach: open markets mean more efficiency and higher incomes, which brings peace.

Should, however, the goal of the WTO to maintain peace through “free trade” also include restoring peace once the war is underway? In other words, if one WTO member invades another should the WTO take any actions aimed at making the war unsustainable and restoring peace? Or should its actions be limited to mitigating the negative trade effects of the war? The WTO’s reaction to Russia’s aggression against Ukraine so far suggests they see their role in the latter terms.

When it comes to the response to the war itself, we have only seen unilateral, albeit well-coordinated, actions taken by some WTO members. On March 15, 2022, only 40 of 164 WTO members issued a joint statement condemning the invasion. Importantly, the statement specifically characterized Russia’s action as “an egregious violation of international law, the UN Charter, and fundamental principles of international peace and security.” Following this statement, about 40 countries revoked Russia’s most-favored-nation status.

Yet, there has been no firm collective position regarding the invasion from the WTO as a whole. The language of the WTO documentation demonstrates clear reluctance to characterize Russia’s action under international law.

On March 2, 2022, the WTO Director-General issued a statement on “the situation in Ukraine” which fails to even mention Russia. The WTO Secretariat note, titled “The crisis in Ukraine,” identifies possible implications of the war for global trade, such as a food crisis. Nevertheless, the note does not consider creating economic incentives for Russia to stop the war as a way of addressing this issue. On the contrary, it warns against “decoupling” in the global economy because of sanctions against Russia. Likewise, in her interviews, the WTO Director-General Ngozi Okonjo-Iweala argued (here and here) that engaging Russia (not isolating it) and interdependence (rather than decoupling) is essential for achieving peace.

At the same time, the WTO evidently sees its role in “mitigating the negative effects of the crisis,” as the above-mentioned Secretariat note puts it. It is unclear, however, what can be done in practical terms to achieve this. The Ministerial Declaration on the Emergency Response to Food Security fell short of committing WTO members to limit export restrictions on food. Similarly, although the WTO Director-General called for humanitarian corridors to allow grain to leave Ukraine, it was the United Nations that secured a deal to unblock grain exports from Black Sea ports.

Trade v. Security

The WTO’s unwillingness to directly address the war in Ukraine, focusing instead on the trade issues the war has raised, is hardly surprising.

Traditionally, trade has been separated from security concerns. Originally, the draft of the Havana Charter for an International Trade Organization contained a provision under which the ITO and the UN were supposed to cooperate on “the restoration of international peace and security” (Art. 72(1)(f)). Yet, the Marrakesh Agreement establishing the WTO lacks a similar provision.

For a long time, the GATT/WTO has been viewed as an organization only dealing with trade-related issues. Binding and non-discriminatory terms of market access comprise the cornerstone of the WTO system. Making market access contingent upon new rules addressing non-trade concerns (such as the environment or human rights) may compromise this core agreement and has proven unacceptable to many WTO members. As such, peace and security have been considered to fall beyond the purview of the WTO.

More recently, however, the focus has shifted to non-trade issues. There is a developing body of jurisprudence on protecting non-trade values through the exceptions in the WTO agreements. The Agreement on fishery subsidies, adopted on 17 June 2022, became the first WTO agreement to address environmental issues.

There is a growing need to reconsider the relationship between globalization and war. The GATT/WTO rules reflect accommodations between trade and security based on the realities of the postwar world. Current levels of deep economic interdependence create more opportunities for states to coerce other governments into enabling their military ambitions.

For instance, Europe’s dependence on Russian energy has become an economic weapon and weakened the EU response to Russia’s invasion. Since the invasion, Russia’s revenue from exporting gas and oil to Europe has doubled over the average from previous years and is being used to finance the war in Ukraine.

It is worth remembering that Russia’s first invasion of Ukraine in 2014 was triggered by a trade issue – Ukraine’s decision to enter into a Free Trade Area with the EU instead of the Russia-led Eurasian Economic Union. Such a precedent raises serious concerns over the future of the global trade system where a country is not free to choose between joining a trade block that promotes the maintenance of competition, versus counterparts led by countries with patronal systems of wealth creation.

It is unrealistic to continue separating trade and security. There is a debate to be had about how economic interconnectedness helps and how it hinders global economic development. And the WTO is precisely the forum to foster such discussions.

National Security Exception

Article XXI(b)(iii) of the GATT allows a WTO Member to adopt measures otherwise inconsistent with GATT obligations, which that Member “considers necessary for the protection of its essential security interests … taken in the time of war or other emergency in international relations.”

Throughout most of GATT/WTO history, the security exception has been regarded as a Pandora’s box better kept closed. Ironically, it was the dispute brought by Ukraine against Russia (Russia – Traffic in Transit) that became the first to interpret Article XXI.

In 2016 – after the first Russian invasion – Ukraine challenged restrictions on the transit of goods from Ukraine, through Russia, to Kazakhstan and Kyrgyzstan. Russia invoked Article XXI claiming that such restrictions were necessary for the protection of its security interests and the panel agreed.

Although the panel found that Article XXI is not entirely self-judging, the proposed threshold for meeting the requirements for invoking the provision were set rather low:

– Whereas the panel determined that the situation between Ukraine and Russia constituted “an emergency in international relations,” it concluded that it is not relevant for the dispute whether Russia bears any international responsibility for the existence of such a situation.

– The panel granted the invoking Member sole discretion to decide which measure is “necessary” to protect its security interests. Hence, there was no assessment as to whether the restrictive measures on transit (while maintaining trade with Ukraine) of particular goods (but not others) are genuinely related to the protection of Russia’s security interests.

– The precise security interests of Russia here were not articulated as it was left to the invoking Member to define its “essential security interests.” As the panel explained, the more an emergency is close to armed conflict, the lower the required level of articulation of such security interests.

Under such an interpretation, Article XXI can easily be misused to undermine global peace and security. It makes it possible for a WTO member to initiate a war in violation of international treaties and then invoke the existence of such war to justify the departure from its WTO obligations and impose measures that, in fact, are aimed at weakening its adversary’s economy.

On the other hand, the panel has narrowed the application of Article XXI by defining the “essential security interests” of the invoking Member as those relating to the protection of “its territory and its population from external threats and the maintenance of law and public order internally.”

Thus, while creating room for abuse of this provision, the panel, at the same time, has created uncertainties regarding the ability of WTO members to rely on Article XXI to address legitimate security concerns. When, for example, the United States – a country that is geographically remote and thus in many ways unaffected by the war – invokes Article XXI in response to Russia’s invasion, can it be regarded in the context of the protection of the United States’ territory, population, and internal order and, thus, be WTO-consistent?

WTO members obviously need more clear guidance on how to properly exercise Article XXI so that such exercise leads to promoting rather than undermining global peace.

To conclude, in order to deliver its potential economic benefits, the WTO needs to function in a more pragmatic way, which would require a reconsideration of its laissez-faire stance on peace and security issues. As Nobel-winning economist Paul Krugman pointed out: “We’re often told that trade promotes peace, which may or may not be true. One thing that’s for sure, however, is that peace promotes trade.”

Zvenyslava Opeida is an Associate Professor Of Law at the National University of Kyiv-Mohyla Academy in Kyiv, Ukraine. The views expressed here are the author’s and do not necessarily reflect the positions of her university or any other organization with which she is affiliated.

Suggested citation: Zvenyslava Opeida, War and Peace (Through Trade): Is There a Role for the WTO in Bringing Peace to Ukraine?, JURIST – Professional Commentary, August 16, 2022, https://www.jurist.org/commentary/2022/08/war-and-peace-through-trade-is-there-a-role-for-the-wto-in-bringing-peace-to-ukraine/.

This article was prepared for publication by Ingrid Burke-Friedman, Features Editor. Please direct any questions or comments to [her] at commentary@jurist.org

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