Huawei’s 5G network and the national security exception. Is the exception of national security under the article XXI GATT applicable to the possible threat of cyber espionage?

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Master thesis

Universiteit of Amsterdam

Faculty of Law

Huawei’s 5G network and the national security exception.

Is the exception of national security under the article XXI GATT applicable to the possible threat of cyber espionage?

07-06-2019

Myron Warta

10588930

myronwarta@gmail.com

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Cyberspace has become essential in our daily lives and currently not fast enough. The Chinese company can change this by providing for a 5G network that will dramatically change the speed and purpose of our Internet. However, many Western governments fear a scenario where Huawei will provide this network because of their national security. This thesis will research if this ban is in conflict with the General Agreement on Trade and Tariffs (GATT) and if these governments do have the rightful reason to protect their national security and can apply article XXI GATT. This topic has relevance since the role of cyberspace in our lives is increasing it will be important to look at its position in the trade-world because protectionism can lurk around the corner.

Huawei is a Chinese technology and provider of telecommunication networks. Last year the company sold more smartphones than Apple and has established itself as the leading telecommunication companies of the world. However, Huawei has sparked concern among the western governments over the company’s close ties to the Chinese government, as well as its willingness to export its technology to countries that are under sanctions. Over the past years, there have been several cases were tensions rose between the US and Huawei. In December 2018 Canada arrested Meng Wanzhou (Chief Financial Officer at Huawei) because she is accused of breaking US sanctions on Iran. 1 Over the past couple of years, Huawei has reportedly circumvented sanctions imposed on North Korea and Iran, providing these countries with telecom equipment that can be used for extensive spying on populations, so-called dual-use technologies.

But the vast majority of criticism has surrounded Huawei's growing influence on global communications for the coming years. The Chinese company will provide technology for 5G wireless internet across the world. Since March 2019 tensions rose around Huawei’s 5G networks and the possibility of this being used by the Chinese authorities to spy on western governments. Huawei plays a leading role in the development of 5G networks around the world and is ready to roll it out if countries

1 “Huawei Finance Chief Meng Wanzhou Arrested in Canada” (BBC News December 6, 2018) https://www.bbc.com/news/business-46462858 accessed February 10, 2019.

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choose the company to do this. The so-called ‘Five Eyes’ consisting of the United States, Australia, New Zealand, Canada, and the United Kingdom have banned the 5G networks from Huawei. The US goes even further by barring Huawei products for government employees. The Five Eyes are afraid that China would have access to sensitive user information, such as location data, and that Chinese technologies could pose a possible threat to critical infrastructures.2

Therefore, it is important to ask if the national security exception of article XXI GATT is a legitimate excuse to ban Huawei from providing a 5G network? This main research question will be answered through several subquestions. Through these questions, it will be argued that it will be hard for the United States and its allies to legitimately invoke article XXI GATT to support their ban on Huawei. In support of this argument, there will be given background information to the Huawei case and the relation between China and mainly the US. A historical and socio-political contextualization will be provided and it will explain what the concerns of governments are that have banned the company from providing a 5G network and how China responds to these allegations.

Besides this, it is important to briefly look at the Articles III and XI GATT that will be violated by this ban. The criteria ‘a treatment less favourable’ and ‘like products’ will be discussed. Subsequently, the violation of article XI GATT will be discussed and will explain the scope and purpose of the article. Then, it will explain if the ban on Huawei entails prohibitions or restrictions other than duties, taxes or other charges and lastly if these are made effective through other measures.

For the purpose of answering the main research question the scope and purpose of Article XXI GATT and what the national security exception will be discussed. Moreover, I will explore the textual meaning of Article XXI (b) (iii) GATT and will argue that there is an ‘emergency in international relations’ because of the relationship between China and the US. Next, I will argue that there is, in fact, an ‘essential security interest’ with Huawei providing for a 5G network and that cyber espionage falls under this criterion. Lastly, I will argue that even though the previous two criteria are present that the ban is not ‘necessary’.3

2_{Al Jazeera, “Why Are Countries Banning Huawei?” (News | Al JazeeraDecember 7, 2018)}

https://www.aljazeera.com/news/2018/12/countries-banning-huawei-181206130850129.html accessed February 10, 2019.

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Chapter 1. The ban on Huawei

1.1 The background to this ban

China has made huge economic growth in the last decades. With a population of 1.3 billion, China is the world’s second largest economy and the largest if measured in purchasing price parity terms. China has been the largest single contributor to world

growth since the global financial crisis of 2008.4 Many Chinese companies are

benefitting from this economic growth; one of these companies is Huawei. This company has established itself as one of the biggest telecommunications companies and leading smartphone manufacturers in the world. This establishment of Huawei has not gone without international scandals. As mentioned in the introduction, Huawei has violated international sanctions against Iran by selling communication equipment. Besides this, Huawei has been accused of economic espionage at

T-Mobile.5 Moreover, Huawei has been seen as a threat to the national security of the

United States since 2012.6

Chinese technology companies, like Huawei, have become significant players in the global market because of their embrace of innovation and the notably improved quality and affordable prices of their products. However, the legal and political influence of the Chinese state over its technology industry and ties between the government and Huawei leaves the Western countries uneasy. Huawei’s founder is an ex-military telecommunication specialist in the Chinese army. Therefore, Western governments believe that his company holds close ties to the government.7 The Chinese National Intelligence Law that was implemented in 2016 adds to this concern of Western countries. It requires all Chinese companies ‘to support, provide assistance, and cooperate in national intelligence work, and guard the secrecy of any national intelligence work that they are aware of. The state shall protect individuals and organizations that support, cooperate with, and collaborate in national

4_{Overview, World Bank, https://www.worldbank.org/en/country/china/overview (last visited May 4, 2019).} 5_{Jon Swaine, Huawei indictments: sanctions busting, industrial espionage and a stolen robot, The Guardian (2019),}

https://www.theguardian.com/technology/2019/jan/29/huawei-criminal-indictments-us-china (last visited May 4, 2019).

6_{Michael S. Schmidt, Keith Bradsher & Christine Hauser, U.S. Panel Cites Risks in Chinese Equipment, The New York Times}

(2012), https://www.nytimes.com/2012/10/09/us/us-panel-calls-huawei-and-zte-national-security-threat.html (last visited May 4, 2019).

7_{F.J. Cillufo, What's wrong with Huawei, and why are countries banning the Chinese telecommunications firm? Washington}

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intelligence.8_{This combined with the recent violations of international sanctions on} Iran and accusations of trade espionage have Western countries worried about choosing Huawei to provide a 5G network.

1.2 The importance of a 5G network

5G is the next generation of wireless mobile technology and will provide greater data speeds, better responsiveness, and the possibility to simultaneously connect to more devices.9 The nature and the potential of 5G are far more reaching than our current 4G networks. 5G is more than simply a new cool technology that offers improved quality and innovative possibilities, they have the potential of becoming the digital nervous system of contemporary societies. However, it must be remembered that no technology can be assured to be fully secure. There will always be a certain amount of risk and unexpected vulnerabilities that can be exploited by a malicious actor.10 5G will change the entire operation of digital societies, as we know it today.

However, there are security implications because a higher use of virtualization in 5G will create a broader, manufactured attack surface. Intercommunicating devices will be linked through 5G and the potential of both targets, as a means for espionage will rise. Besides this, it will enable massive collecting and parsing of telemetry data and this could become a security risk.11_{In October of 2019, there will be made a} general European policy on the security for 5G networks in Europe based on national analyses.12 Then from 2020 on providers will build these networks. Providers who already use Huawei products warn for a total ban on Huawei and the money and time it will cost to build a stable 5G network in Europe. A ban could mean that the 5G-infrastructure will be delayed and that Europe will miss out on the innovation in her economy.13

8_{Samantha Hoffman and Elsa Kania, ‘Huawei and the ambiguity of China’s intelligence and counter-espionage laws’. The}

Strategist, Australian Strategic Policy Institute, 13 September 2018.

9_{David Goldman, What is 5G? CNN (2019), https://www.cnn.com/2019/02/25/tech/what-is-5g/index.html (last visited May 4,}

2019).

10_{Kadri Kaska, Henrik Beckvard & Tomáš Minárik, Huawei, 5G and China as a Security Threat https://ccdcoe.org/ (2019).} 11_{Heather Woods, ‘Do I want an always-on digital assistant listening in all the time?’ The conversation, 16 July 2018.} 12_{Marc Hijink, Huawei is nog 'te vaag' voor een veilig 5G-netwerk NRC (2019),}

https://www.nrc.nl/nieuws/2019/04/05/huawei-is-nog-te-vaag-voor-een-veilig-5g-netwerk-a3955866 (last visited May 4, 2019).

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1.2.1 Why are there concerns about Huawei providing a 5G network?

As mentioned before in the previous paragraph, there are security implications. The US and its allies of the Five Eyes believe that Huawei has strong ties to the Chinese government. With Huawei rolling out a 5G network it can create security breaches in government systems. Moreover, 5G is more than just a fast internet connection it will be a revolutionary upgrade for many things in our daily lives. 5G networks will be used for our infrastructures such as traffic control or autonomous vehicles and the communications between cyber systems to name a few possibilities.14 It has the potential to be the digital nervous system of our societies.

In a worst-case scenario, where a 5G network does have backdoors that give access to malicious entities, an entire state can be brought to a shutdown. Besides this doom scenario, there is another concern in the form of cyber espionage that can be facilitated through the alleged backdoors in the equipment used to provide 5G. If these backdoors are present the Chinese government can spy on other countries through the communication equipment that will be used to support 5G and through that obtain sensitive information. Because of these concerns, states like the United States and Australia have banned Huawei from providing a 5G network in their states to safeguard their national security.

1.3 The Five Eyes

Is it possible to ban a company out of fear of cyber espionage, but without a single piece of hard evidence? That is a question that many governments are researching or already have taken a decision in. At least five countries have banned Huawei from providing them with a 5G network. The so-called Five Eyes; consisting of the United States, Canada, Australia, New Zealand, and the United Kingdom. The United States has urged its other allies to ban Huawei as well. Many European Union member states need to decide before June whether or not they will impose a ban on Huawei for rolling out the 5G networks.15

However, Italy and Germany both declared that they would not want to ban Huawei immediately.16 The question is whether there is a legitimate fear for a

14_{Matthew Wall, What is 5G and what will it mean for you? BBC News (2018), https://www.bbc.com/news/business-44871448}

(last visited May 18, 2019).

15_{Marc Hijink, Huawei is nog 'te vaag' voor een veilig 5G-netwerk NRC (2019),}

https://www.nrc.nl/nieuws/2019/04/05/huawei-is-nog-te-vaag-voor-een-veilig-5g-netwerk-a3955866 (last visited May 4, 2019).

16_{Christopher Scott, Italy, Germany resist ban on Huawei's 5G gear | Article Asia Times (2019),}

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national security risk or that banning Huawei is a form or protectionism.17_Several Western countries have already taken measures against Huawei. For example, the United States has urged AT&T to reconsider potential deals with the Chinese company.18 Moreover, the US Congress has passed a bill prohibiting US government agencies from purchasing or using telecommunications and surveillance products from Chinese companies like Huawei, which is also named in the document.19 Australia and New Zealand both banned Huawei from providing a 5G network, but they did not specifically name the company in their statement. However, Great Britain and Canada are evaluating the risk at this moment, although they are urged by the other members of Five Eyes to ban Huawei as well.20 Not only Great Britain and Canada are evaluating the risk, but also Germany is using Huawei products for its infrastructure and has not yet taken concrete steps of banning the company for providing the 5G network. Italy, on the other hand, has opted not to ban Huawei to provide for a 5G network.21

1.4 How does China respond to the allegations?

The Chinese government accused the United States of killing Chinese businesses and engaging in industrial sabotage by using state security as a pretext for suppressing foreign businesses.22_{Chinese Foreign Ministry spokesman stated: “China is strongly} urging the US to stop its unreasonable crackdown on Chinese companies like Huawei, and treat these objectively and fairly.”23_{Huawei has denied all the accusations made} by the United States and its allies in a separate statement. The civil case concerning the trade secrets theft allegations were already settled by the parties. Moreover, Huawei executives insist that it is a private company, owned by the employees and

17_{N. Feldman, Huawei and 5G: A Case Study in the Future of Free Trade Bloomberg.com (2019),}

https://www.bloomberg.com/opinion/articles/2019-02-13/huawei-and-5g-a-case-study-in-the-future-of-free-trade (last visited May 4, 2019).

18_{Al Jazeera, Why are countries banning Huawei? News | Al Jazeera (2018),}

https://www.aljazeera.com/news/2018/12/countries-banning-huawei-181206130850129.html (last visited May 4, 2019).

19_{Frank J. Cilluffo & Sharon L. Cardash, What's wrong with Huawei, and why are countries banning the Chinese}

telecommunications firm?The Conversation(2019), https://theconversation.com/whats-wrong-with-huawei-and-why-are-countries-banning-the-chinese-telecommunications-firm-109036 (last visited May 4, 2019).

20_{Al Jazeera, Why are countries banning Huawei? News | Al Jazeera (2018),}

https://www.aljazeera.com/news/2018/12/countries-banning-huawei-181206130850129.html(last visited May 4, 2019).

21_{Reuters, Italy opts not to ban Huawei and ZTE from 5G networks, despite earlier report Venture Beat (2019),}

https://venturebeat.com/2019/02/07/italy-opts-not-to-ban-huawei-and-zte-from-5g-networks-despite-earlier-report/ (last visited May 4, 2019).

22_{BBC, Huawei: China threatens to retaliate over US sanctions}_{(2019), https://www.bbc.com/news/world-us-canada-48299522}

(last visited June 21, 2019).

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not the state.24_{On top of that Huawei’s CEO, Ren Zhengfei stated that he would} decline any request from Beijing for sensitive information on clients and stressed the potential for cooperation with the U.S. and other countries on 5G and other matters. He said: “Huawei firmly stands on the side of customers when it comes to cybersecurity and privacy.”25

The possibility of drawing the line between protectionism and national security is built into international trade treaties, which typically prohibit protectionist tariffs while allowing exceptions for legitimate national security interests. Article XXI of the World Trade Organization treaty carves out certain actions that a signing country “considers necessary for the protection of its essential security interests.”26_{For this to} be happening there needs to be made a violation of articles in the GATT. Therefore, the next two chapters will briefly discuss the possible violations of articles III and XI of GATT.

24_{P. Waldman, S Prasso & T Shields, Another Reason U.S. Fears Huawei: Its Gear Works and It's Cheap, Bloomberg.com}

(2019), https://www.bloomberg.com/news/articles/2019-01-24/huawei-stokes-u-s-fear-with-low-cost-networking-gear-that-works (last visited May 4, 2019).

25_Id.

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Chapter 2 Article III (4) GATT

In the previous chapter, the ban on Huawei has been discussed by given background information and the reasons for Western governments to impose it on the Chinese company. This chapter will focus on a possible violation of the General Agreement for Tariffs and Trade, namely article III (4).

2.1 Scope and purpose

This article is known as ‘national treatment’. Under this rule, Members must not accord discriminatory treatment between imports and “like” domestic products (with the exception of the imposition of tariffs, which is a border measure). Article III GATT prevents countries from taking discriminatory measures on imports and from offsetting the effects of tariffs through non-tariff measures. The purpose of this article is simple: governments should not employ internal measures to give protection to the domestic industry. This internal measure must not give less favourable treatment to ‘like’ foreign products. It is clear that the drafters wanted to have the same treatment for imported goods as the like domestic goods once they had been cleared through customs.

2.2 What are the criteria for a violation of Article III (4) GATT?

The text of the Article states that: ‘the products of the territory of any contracting party imported into the territory of any other contracting party 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. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.’27 From this paragraph, the two important components are treatment no less favourable and like products.

2.2.1 Is there treatment no less favourable in the Huawei case?

Under Article III:4 less favorable treatment must affect the group of imported products, as compared to the group of domestic products. If imported products from

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the complaining party, on the whole, are treated less favorably than domestic like products, only then the national treatment obligation is breached. From the case Clove cigarettes it became clear that the ‘treatment no less favorable’ standard does not prohibit regulatory distinctions between products found to be like, provided that the group of like products imported from the complaining Member is treated no less favorably than the group of domestic like products.28

When looking at the facts of the case, it can be said that Huawei provides products and a 5G network for prices that are beneath those of, for example, American manufacturers. However, this does not mean that the products from Huawei are of lower quality.29 Three criteria that need to be fulfilled: First, if there is a genuine relationship between the measure at issue and its adverse impact on competitive opportunities for imported goods vis-à-vis domestic products. In the current case, there is a genuine relationship between the ban on Huawei products and their competitive opportunities in regards to domestic products. Because the US Congress has passed the section 516 Act, Huawei cannot sell telecommunication products to several bodies of the governments. These bodies are banned from purchasing and using Huawei’s products.30_{Moreover, Huawei is also banned from} competing for the 5G network rollout in Australia and the United States.31_Therefore the ban has an adverse impact on Huawei’s opportunities to compete with other telecommunication companies.

Secondly, the role of the design, structure and expected operations of the measure has to be examined. Huawei is at this moment the leading company when it comes to rolling out the 5G network.32 From Japan – Alcoholic Beverages II it became clear that it is important to look at how the measure is being applied. Many countries in Europe fear that banning Huawei for providing them with a 5G network will put them on an economic disadvantage in comparison to countries that did use Huawei. However, states have taken the measure to ensure that the Chinese government cannot spy on them by using Huawei products. Yet, there has not been shown concrete evidence that this has happened.

28_{United States – Measures Affecting the Production and Sale of Clove Cigarettes, para. 193-194 (2012).} 29_{Huawei arrest: This is what the start of a tech Cold War looks like, CNN(2018),}

https://m.cnn.com/en/article/h_9345b23ca7053f08332030a63d7e3329 (last visited May 8, 2019).

30_{The US House of Representatives, ‘An Act Making Appropriate for the Department of Defense, the Department of Veterans}

Affairs, and Other Departments, and Agencies for the Fiscal Year Ending’,

http://docs.house.gov/billsthisweek/20130318/BILLS-113hr933eas.pdf (last visited 18 June 2019).

31_{Christopher Joye, ‘Global Digital Wars Take Australia Hostage, Australian Financial Review, 2 November 2013.}

32_{Du, Ming, 'Treatment No Less Favourable' and the Future of National Treatment Obligation in Article III:4 of the GATT 1994} after EC-Seal Products (April 16, 2015). 15 (1) World Trade Review (2016), p.159.

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Lastly, it is of importance to look at the relationship between the products on the competitive market from a consumer perspective.33_{Consumers are primarily} guided by the price and quality of the products in their choice between products.34 Huawei products are of good quality and are offered for a cheaper price than similar products of other manufacturers. This lower price range and the quality ratio will make consumers choose for Huawei faster than for other manufacturers. Therefore, it can be stated that Huawei is treated less favourable than other non-Chinese telecommunications companies.

2.2.2 Are there like products?

Not only a treatment less favourable should be present, but this treatment should be less favourable towards products that are like to domestic products that are sold on the market. Like products describe the relationship between two goods that are produced by two different trading nations. There are four criteria for determining if products are like.

Firstly, the physical properties of the products. The products from Huawei are not different from those manufactured by other companies. Secondly, the extent to which the products are capable of serving the same or similar uses. This criterion is fulfilled because products by Huawei used for the 5G network will be serving a similar or the same use as domestic products. Thirdly by the extent to which consumers perceive and treat the products an alternative means of performing particular functions in order to satisfy a particular want or demand. Huawei has sold more products than any other manufacturer in 2018. Huawei is now the leading manufacturer in smartphones. This shows that consumers are attracted to the lower prices while the functions of Huawei products are similar to domestic products. Lastly, the international tariff classification of the products is a criterion.35 According to the Appellate Body in the EC-Asbestos case, the analysis of likeness between two products should be carried out on a case-by-case basis. This is present in the Huawei case. Apart from the ban on Huawei only the United States has put a tariff of 25% on Chinese products, including those from Huawei, in the rest of the countries these tariffs are not different from domestic products.

33_{Erich Vranes, Trade and the Environment: Fundamental Issues in International Law, WTO Law}

and Legal Theory (Oxford: Oxford University Press 2009), pp.200–215.

34_{Du, Ming, 'Treatment No Less Favourable' and the Future of National Treatment Obligation in Article III:4 of the GATT 1994} after EC-Seal Products (April 16, 2015). 15 (1) World Trade Review (2016), pp.161-62.

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Therefore it can be stated that Huawei products are like products and with the two criteria being fulfilled there is a violation of Article III:4 GATT. However, this violation can be excused by the national security exception of Article XXI GATT, which will be discussed in chapter 4. In the next chapter another violation will be covered, namely that of quantitative restrictions of Article XI GATT.

Chapter 3 article XI GATT

Besides article III GATT being violated by the ban on Huawei products, there is another possible violation that will be examined in this thesis, namely that of article XI paragraph 1 GATT. Paragraph 1 states that: no prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.36 For a violation, it is necessary to have a prohibition or restriction other than duties, taxes or other charges, which in this case are made effective through other measures.

Article XI GATT generally prohibits quantitative restrictions on importation or exportation of any product. The reason for this is that quantitative restrictions are considered to have a greater protective effect than tariff measures, and are more likely to distort the free flow of trade. When quantitative restrictions are used, it is impossible to export in excess of the quota no matter how price competitive foreign products may be.37

3.1 Does the ban on Huawei fall under ‘a prohibition or restriction other than duties, taxes or other charges’?

In the case of Huawei, the US has prohibited its governmental bodies from buying Huawei telecommunications products. Moreover, it advises other countries to do the same. It is true that the US has raised its taxes on Chinese products including those of Huawei. However, this prohibition is different because it implicitly introduces

36_{Article XI of the General Agreement on Tariffs and Trade} 37_{Part II Chapter 3 Quantitative restrictions, p. 235}

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restrictions in the form of quotas because it will reduce the import of Huawei’s telecommunications products from the trade levels as existed prior to this prohibition taken by the US. It applies to all measures instituted by a Member prohibiting or restricting the importation, exportation or sale for export of products other than measures that take the form of duties, taxes or other charges.38

In the case of China – Raw Materials, the Appellate Body observed that the term 'prohibition' is defined as a 'legal ban on the trade or importation of a specified commodity'. By using the word 'quantitative' in the title of Article XI of the GATT 1994 it informs the interpretation of the words 'restriction' and 'prohibition' in Article XI:1. Thereby, suggesting that prohibitions and restrictions that limit the quantity or amount of a product being imported or exported are covered by article XI GATT.39 When the US and other countries are banning their governing bodies and companies from using Huawei telecommunication products it will limit the quantity of these products being exported to these countries. This is the causal link between the measure and the reduction of export from China.

3.2 Is the ban on Huawei made effective through ‘other measures’?

In the US the ban on using Huawei telecommunication products by governmental bodies and personnel can be seen as a restriction. These products from Huawei are allowed into the market without an express formal quantitative restriction but are only allowed under certain conditions.40 Article XI does cover these situations. It has to be examined whether the restriction makes an impact on the competitive opportunities of Huawei products in the foreign markets.

The ban on Huawei is made effective through other measures than tariffs and duties in the form of an executive order by president Trump that ban American telecommunication companies from installing foreign equipment that could be threatening the national security.41 A decisive test is whether or not a measure is a restriction on importation within Article XI:1 GATT depends on the question if the measure has a limiting effect on importation by negatively affecting the competitive

38_{Appellate Body Report, Japan – Semi-Conductors, para. 104.} 39_{WTO Analytical index GATT 1994 – Jurisprudence, p. 6}

https://www.wto.org/english/res_e/publications_e/ai17_e/gatt1994_art11_jur.pdf

40_{Colombia – Ports of Entry, para. 7.234.}

41_{Cecilia Kang & David E. Sanger, Huawei Is a Target as Trump Moves to Ban Foreign Telecom Gear, The New York Times}

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opportunities of a certain product. When applied to the case of Huawei in this thesis, we can presume that the ban on Huawei equipment and products that are used for unrolling a 5G network will have a limiting effect on importation. If American companies have to ask the government for permission to buy these products, Huawei will be importing less to the US.

Therefore it can be assumed that there might be a violation of Article XI:1 GATT at this moment because of the competitive opportunity of Huawei products it taken away by this ban. For now, Huawei will not be a strong competitor in the American market when it comes to selling telecommunication products and will, therefore, export less to the US.

Chapter 4 Scope and purpose of Article XXI:2 (b) (iii) GATT

Australia and the US have put a ban on Huawei products because they fear that it will form a problem for national security. The US Commerce Department has announced that it placed Huawei and its dozens of affiliates on a list of firms considered a risk for national security.42 Because of this listing, the company will be unable to buy American parts, which used for their products, without the permission of the US government. Because the US is using the national security exception, this chapter will discuss the scope and purpose of article XXI GATT. Moreover, it will give an image of a developed practice in international trade law in regard to the national security exception.

4.1 What is the national security exception?

Article XXI GATT states that 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

42_{Cecilia Kang & David E. Sanger, Huawei Is a Target as Trump Moves to Ban Foreign Telecom Gear, The New York Times}

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(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.

The national security exception allows governments to take measures when necessary in cases where essential security interests are at risk. WTO members are not prevented from taking measures when they consider it necessary.43 The United States claims that this system is largely self-judging.44 Therefore, Article XXI GATT depends on the good faith of states to prevent the exception of being abused for protectionism. The security exception entails five categories: 1) national security information, 2) fissionable materials, 3) military goods and services, 4) war or international emergencies and 5) UN obligations. Whether it is necessary to protect an essential security interest is judged by the state itself. Some scholars see this alleged self-judging clause that is read in Article XXI (b) (iii) allowing a Member to the WTO while retaining its power to unilaterally escape from certain obligations in particular circumstances.45 However, this contemporary view of the US on the national security exception is contradictory to what the US delegation to forming the GATT in 1947 wanted.46 It was never intended to form an easy opt-out mechanism for members that would like to free themselves of imposed obligations by the WTO. In contrast, other GATT provisions that contain exceptions suggest an objective standard under which WTO judicial bodies may define as “necessary” and examine measures against this definition.47 Moreover, these WTO judicial bodies have rejected the view of this national security clause removes their jurisdiction and has taken the position that

43_{Peter Van Den Bossche, The Law and Policy of the World Trade Organization, 2nd ed. (New York:}

Cambridge University Press, 2008) 664–70.

44_{Mona Pinchis-Paulsen, Trade Multilateralism and National Security: Antinomies in the History of the International Trade}

Organization SSRN (2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3353426 (last visited Jun 22, 2019).

45_{Andrew Emmerson, ‘Conceptualizing Security Exceptions: Legal Doctrine or Political Excuse?’, 11}

Journal of International Economic Law 135, pp. 139–40 (2008).

Organization SSRN (2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3353426 p. 33 (last visited Jun 22, 2019).

47_{Peter Lindsay, The Ambiguity of GATT Article XXI: Subtle Success or Rampant Failure, 52 Duke Law Journal 1277-1313}

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these types of self-judging clauses merely affect the applicable standard of review.48 Nevertheless, the United States claims that the self-judging nature of Article XXI logically flows from the wording “which it considers”.49_{The plain text of Article} XXI seems to suggest that a Panel or Appellate Body would not possess the necessary mandate to decide on this. Yet, this expressly framed clause is typical wording and establishes a subjective test of whether the exception is valid in any given circumstances.50 In this thesis, the focus will be on paragraph b number iii because the ban involves the unrolling of a 5G network by Huawei that allegedly poses a risk to the national security.51 It is not relating to the cases that are given in the numbers i and ii. However, in the case of Huawei, it could fall under an ‘other emergency’, which makes it necessary to protect essential security interests. Article XXI GATT has only been invoked scarcely and WTO members only have relied on it in exceptional cases. There are several reasons for the scarce use of article XXI GATT. Firstly, many trade restrictions during the Cold War were related to non-members of the WTO and therefore there was no great need for just under the GATT.52 Secondly, there is a great risk of abuse of this article, which is also a factor that is being argued in this thesis. The US delegation at the GATT meetings for forming Article XXI, among others, was prioritizing trade-multilateralism and that national security was not monolithic even though security was a core objective at that time.53_{In the past, major} trading partners have been reluctant to resort to the national security exemption, because excessive reliance on it could accelerate retaliation recourse and lead to undesirable trade wars. Since 1947 when the GATT has adopted a state practice that safeguarded mutual deterrence, reputation costs and the interest in seeing all trading states to comply with the GATT obligations have prevailed. Thirdly, article XXI GATT has been subject to jurisdiction over dispute settlement.

Recently, there has been the case between Ukraine and the Russian Federation, which is the first ever dispute settlement report on the national security

48_{S. Schill/R. Briese, Self-Judging Clauses in International Dispute Setttlement, Max Planck Yearbook of United Nations Law,}

Volume 13 (2009) p. 119.

49_{Iryna Bogdanova, The WTO Panel Ruling on the National Security Exception: Has the Panel 'Cut' the Baby in Half? EJIL Talk}

(2019), https://www.ejiltalk.org/the-wto-panel-ruling-on-the-national-security-exception-has-the-panel-cut-the-baby-in-half/ (last visited May 25, 2019) p. 2.

50_{S. Schill & R. Briese, Self-Judging Clauses in International Dispute Setttlement, Max Planck Yearbook of United Nations}

Law, Volume 13 (2009) p. 70.

51_{China is not a GPA member at present; The following analysis will focus on Article XXI(b)(iii) of the GATT, Shin-yi Peng,}

Cybersecurity Threats and the WTO National Security Exceptions, Journal of International Economic Law, (2015), 18, p. 458.

52_{A. Lowenfeld, Trade Controls for Political Ends, Vol III, 2nd ed. , (1984)}

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exception. These cases give an insight into how broad the discretion is of the national security exemption. The exemption is not devoid of normative guidance and the subjection to jurisdiction imposes limitations on recourse to national security. In the next paragraph, some cases on national security exemption will be discussed.

4.2 Cases on article XXI GATT

As stated in the previous paragraph, over the years states have scarcely used article XXI GATT. However, there have been several cases where the national security exemption was used as part of the reasoning to impose restrictions on trading partners. Article XXI was first invocated in 1961 when Ghana justified its boycott against Portuguese goods, because of protests against Portugal’s colonial oppression against African states. However, there was no GATT panel formed and the issue was resolved through diplomacy when colonialism ceased. There was no litigation or interpretation of article XXI used.54 In a subsequent case between the European Economic Communities (EEC) and Argentina, the former imposed sanctions on the latter during the dispute over the Falkland Islands. The EEC claimed that the sanctions were justified under article XXI, underlining that the United Nations Security Council had condemned the occupation of the Falkland Islands by Argentina. Accordingly, the EEC argued that the sanctions were justified under Article XXI (b) (iii) GATT because it was an “emergency in international relations.” This could also be argued by the United States in the Huawei case because of the trade war with China. However, the GATT council released a decision in regard to article XXI, which acknowledged that “trade measures taken for security reasons could constitute, in certain circumstances, an element of disruption and uncertainty for international trade.”55

In one instance a GATT dispute settlement authority almost approached adjudicating on article XXI. In a dispute between Nicaragua and the US, where the latter imposed sanctions and shielded itself, by citing that the former established a threat to its national security. Furthermore, the US claimed that the dispute was outside the purview of the GATT.56 Though many developing countries were skeptical towards this claim and feared that larger developed countries could abuse

54_{Roger Alford, The Self-Judging WTO Security Exception, 3 Utah L. Rev. 722 (2011).}

55_{Report of the Panel, Decision Concerning Article XXI of the General Agreement, L/5426, GATT B.I.S.D. (29th Supp.)}

(December 2, 1982) ('Decision concerning Article XXI').

56_{Report of the Panel, Minutes of Meeting Held in the Centre William Rappard on May 29, 1985, ¶1-17, C/M/188 (June 28,}

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the national security exception.57_{Delegates from other countries also considered it not} plausible that a small country, which has limited resources, could constitute an extraordinary threat to the national security of the US.58 On this point, there is a difference with the Huawei case because it is plausible for China to form a threat to the US due to its size and resources. However, the US agreed to the formation of a Panel because of international criticism, but it was limited in its jurisdiction and could not examine or judge the validity of, or the motivation for invocating Article XXI (b) (iii).59 The Panel stated that it was binding on “each contracting party, whenever it made use of its rights under Article XXI, to carefully weigh its security needs against the need to maintain stable trade relations.”60_{Nevertheless, the Panel acknowledged} that in the future it would be desirable to have a more formal interpretation by a Panel with the requisite authority.61

A major dispute between WTO members was the Helms-Burton Act 1996 by the US, which imposed direct sanctions on exporting certain products to Cuba, even extending these sanctions against any country who exported products to Cuba.62 Many WTO members questioned whether Cuba formed a legitimate threat to the national security of the US and many trading partners took strong objection to these sanctions, which also occurs in the Huawei case. The US maintained its claim that the invocation of the national security exception is entirely in the discretion of the state invoking it and a WTO Panel does not have the competence to decide upon it.63 Although a Panel was formed the case was cleared through diplomacy and political considerations.64

4.2.1 Russia – Traffic in Transit

On April 29th. 2019 the Panel report Russia – Traffic in Transit was published in which the Russian Federation’s invocation of article XXI GATT was assessed. The US was a third-party to this dispute and argued with the Russian Federation that the

57_{William R. Sprance, The World Trade Organization and United States' Sovereignty: The Political and Procedural Realities of}

the System, 13 Am. U. Int'lL. Rev. 1231 (1998).

58_{GATT Council, Minutes of Meeting Held May 29, 1985, GATT Doc. C/M/188 (28 June 1985), 7.}

59_{Report of the Panel, United States-Trade Measures Affecting Nicaragua, para. 5.1-5.17, L/6053, GATT (October 13, 1986).} 60_Ibidem.

61_Ibidem.

62_{Klinton W. Alexander, The Helms-Burton Act and the WTO Challenge: Making a Case for the United States under the GATT}

National Security Exception, 11 FLA. J. INT'L L. 579-581 (1997).

63_{H. Schloemann/ S. Ohlhoff, “’Constitutionalization’ and Dispute Settlement in the WTO: National Security as an Issue of}

Competence”, AJIL 93 (1999), 430.

64_{Communication from the Chairman of the Panel, United States: The Cuban Liberty and Democratic Solidarity Act,}

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national security exception is non-justiciable.65_{The US even went further by stating} in their third party opinion that there were no legal criteria by which a Member can determine whether or not its essential security interests can be judged, which makes any dispute where the security exception is invoked non-justiciable.66 Therefore, the US has an interest in the Panel’s ruling because it will create a precedent for coming cases in which the national security exception is invoked. For the Huawei case, the claim of the US that disputes over the national security exception are non-justiciable would mean that the ban could be continued and will only be dealt with through diplomacy.

Although, there is a difference between the two cases because the dispute between Ukraine and the Russian Federation is set against the backdrop of the military conflict, which is not present between China and the US. Before the conflict, the Russian Federation was the biggest export market for Ukrainian producers. After the conflict started the Russian Federation has imposed economic sanctions on Ukraine. In 2016 Ukraine had initiated the dispute to question WTO-consistency of the restrictions to the transit of goods from Ukraine to Central Asia through the Russian Federation’s territory. Ukraine contended that economic sanctions violated articles V and X of the GATT.

The Russian Federation contested that these transit sanctions were justified by the national security exception as necessary to protect its essential security interests, as the US is doing in regard to its ban on Huawei. The Russian Federation stated that the Panel lacked jurisdiction to review the matter and as a result of this, it was deprived of the right to engage in the substance of the claims of Ukraine. Furthermore, the Russian Federation stated that it did not have to provide factual evidence in support of its invocation of article XXI. The Panel rejected both claims of the Russian Federation.67 This is for the Huawei case, because the US and its allies did not have shown any concrete evidence of a possible national security risk that Huawei allegedly poses. Similar to the claims of the US, the Russian Federation emphasized the self-judging nature of article XXI GATT that flows from “which it considers”.

However, the Panel established a three-tier test that challenged the

65_{Third Party Executive Summary of the United States of America, Russia – Traffic in Transit, paras. 7–8, 18, WT/DS512 (Feb.}

27, 2018).

66_{Russia –Traffic in Transit par. 7.51-7.52 (2019).} 67_{Russia – Traffic in Transit par. 7.103 (2019).}

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judging perception of Article XXI. The following aspects have to be fulfilled to justify an invocation of the national security exception: 1) whether the condition of ‘taken in time of war or other emergency in international relations’ entails an objective or a subjective standard. 2) Whether every WTO member is entitled to define for himself what constitutes ‘essential security interests’. 3) Whether the measure that is taken, has a connection to the essential security interests it deems to protect. The Panel concluded that subparagraphs i-iii are operating as limitative qualifying clauses and thus limit the discretion granted to the WTO members.68 Therefore, the Panel confirmed that the wording “war” or “other emergency in international relations” are objective facts, which are receptive to objective determination.69 With this conclusion, the Panel prevents the national security clause from being ‘the catch-all’ provision from WTO members that support unverified unilateral determinations when the security exception applies.70

Furthermore, the Panel made an interesting point, which can be used for the Huawei case by providing a definition of what can be considered as an “essential security interest”. Its definition refers to those interests relating to the classic 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.71_However, the final determination of this was left in the hands of the WTO members.72 According to the Panel, it will depend on the particular situation and perception of the state in question whether or not the specific interests are considered directly relevant to the national security. This can be expected to vary with changing circumstances.73 Therefore, the outcome in the Huawei case can be different from the Panel’s decision in Russia – Traffic in Transit. The situation in the Huawei case differs a lot from the dispute between Ukraine and Russia because it is still based on a hypothesis and risk management assessment rather than hard evidence. The relevance of the measure to protect the national security is still disputed by many other states.

The wording “other emergency in international relations” appeared to be a confusing concept for the WTO members. Nevertheless, the Panel pointed out that political or economic differences between Members are not sufficient on themselves

68_{Russia – Traffic in Transit par. 7.65 (2019).} 69_{Id. paras. 7.70-7.71, (2019).}

70_{Iryna Bogdanova, The WTO Panel Ruling on the National Security Exception: Has the Panel}

‘Cut’ the Baby in Half? (2019).

71_{Russia – Traffic in Transit para. 7.130, (2019).} 72_{Id. para. 7.130, (2019).}

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to constitute an emergency in international relations as described in subparagraph iii.74_{Following this, the Panel defined it as: “a situation of armed conflict, or of latent} conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.”75_{This left the Panel to conclude that the situation between the} two states constituted an emergency in international relations since 2014.76 The Panel in Russia – Traffic in Transit made commendable efforts to shed light on the ambiguous article XXI GATT, and it showed that there is an extremely restricted discretion to review the national security clause invocation. It is noteworthy to mention that during the Panel proceedings the Russian Federation has hidden behind the argument that it is exempted from the need to engage in the discussion of the merits by invocating the national security clause. Thus, the Russian Federation was excused from meeting its burden of proof to demonstrate a nexus between the measure and the protection of its essential security interests.

The outcome of this dispute does have consequences for the US and its ban on Huawei. The US claim that Article XXI GATT is non-justiciable is undercut by the Panel report. It even named the US in the report making it ever more clear that the claimed ‘self-judging’ system is not in the nature of this provision.77_{However, the} Panel did not give importance to the burden of proof to demonstrate the nexus in this case and that is exactly what is missing in the Huawei case. This is could mean that the US and its allies can ban Huawei without having to give proof of why this ban is necessary to protect the national security.

Chapter 5 Article XXI (b) (iii) GATT applied to Huawei case

In the previous chapter, the purpose and scope of article XXI GATT were discussed and cases since 1947 have been reviewed. On the basis of these findings, this chapter will discuss if the ban on Huawei is rightfully taken or can be seen as an act of protectionism. The United States has adopted a ban against the Chinese company to compete on the American market because it fears that ‘backdoors’ will be installed in the equipment that is used to provide 5G.78 By inserting this hardware or software in their equipment, Huawei could have the capacity to remotely access the American

74 Id. para. 7.75, (2019).

75_{Russia – Traffic in Transit par. 7.76 (2019).} 76_{Id. paras. 7.122-7.123.}

77_{Id. para. 7.103.}

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networks, which allow the Chinese government to shut these down or dismantle the critical security system in a time of crisis.79

5.1 Is there an emergency in international relations?

Article XXI (b) (iii) GATT requires that there is a war or an emergency in international relations. The wording “an emergency in international relations” in Article XXI is quite vague. However, the Panel in Russia – Traffic in Transit gave a definition. The Panel defined an emergency in international relations as follows: “a situation of armed conflict, or of latent conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.”80_{Current president Trump has} been critical about China before he was the president of the United States and became even more critical when he was in the running for the presidency.81 Following this critical stance of president Trump, the United States initiated a trade war in February of 2018 by implementing “global safeguard tariffs” of 30 percent on solar panels. Many more tariffs would follow on different products and in May 2019 the levies on Chinese imports were raised from 10 to 25 percent. With China reacting to the United States by raising their levies to 25% on $60 billion worth of US goods in June 2019.82 Therefore look at the definition that the Panel in Russia – Traffic in Transit gave there is a situation of heightened tension between the United States and China. This element of Article XXI (b) (iii) is present.

5.2 Is there an essential security interest?

Another element that is important in article XXI is “an essential security interest”. In Russia – Traffic in Transit the Panel provided the definition that an essential security interest can be understood as those interests that relate to the classic functions of a state, such as the protection of its territory and its population from external threats, and the maintenance of law and public order internally.83 The word ‘essential’ indicates that general security should not suffice. As stated in paragraph 5.1 of this chapter, 5G will be fully integrated into our societies and will create security risks that will have to be secured through cybersecurity measures. Our physical and economic

79_{Id. at 13.}

80_{Russia – Traffic in Transit para. 7.76 (2019).}

81_{Adrienne Klasa, Timeline: No end in sight for US-China trade war, Financial Times (2019),}

https://www.ft.com/content/d1c41952-83ad-11e9-9935-ad75bb96c849 (last visited May 20, 2019).

82_id.

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infrastructure will be depending on 5G networks and when these are hacked, which is an external threat, it will constitute dangers to society because it can take down systems that are of essential importance for its citizens. The United States and its allies of the Five Eyes that banned Huawei only specify one threat, namely cyber espionage through backdoors installed in Huawei equipment used for providing a 5G network. Nonetheless, this is a cybersecurity risk and the question is if as such it can fall under Article XXI (b) (iii) GATT.

5.2.1 Is cyber espionage an essential security interest?

Because we are living in a hyper-connected world with ever-growing connectivity between computers it makes all our systems vulnerable to cyber attacks.84 Commonly, the term cybersecurity is used to denote designing, testing, and deploying software to ensure the software will function properly and its vulnerabilities will be reduced when an attack occurs. With the United States and its allies banning Huawei from bidding on sensitive network projects and supplying equipment for military and government personnel, it highlights that there is a growing concern among governments over the repeated cyber-attacks originating from China. Until now, these cyber-attacks have not been threating to the population and the territory of the states. Nevertheless, it can occur when societies have switched to 5G networks that will be more integrated into our daily lives. Similarly, the International Court of Justice in the case of Nicaragua v. the United States elaborated on the Merits of the case under the Freedom of Commerce and Navigation treaty. The court found that the concept of essential security interest certainly extends beyond the concept of an armed attack and has even been subject to a broader interpretation in the past.85 Therefore, it can be assumed that cyber espionage can be categorized as an essential security interest. Yet, there is no hard evidence that Huawei is installing these so-called backdoors in their telecommunications equipment and the burden of proof is therefore not strong enough.

Moreover, Huawei founder Ren Zhengfei stated that his company does not spy for the Chinese government and that it operates independently.86 Cyber espionage can

84_{Thomas Mowbray, Cybersecurity: Managing Systems, Conducting Testing, and Investigating (Indianapolis, IN: Wiley, 2013)}

pp. 3–14.

85_{Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), Jurisdiction and} Admissibility, 1984 ICJ REP. 392 June 27, 1986.

86_{Julian E. Barnes & Adam Satariano, U.S. Campaign to Ban Huawei Overseas Stumbles as Allies Resist, The New York Times}

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be seen as an essential security interest because 5G will have an increasing role in our society. Therefore, it will be easier to spy on the population of a state or its organs. However, parties have to come forward with evidence to back up their allegations when in a dispute. The burden of proof in the Huawei case is not exactly strong and forms a problematic part of invoking article XXI (b) (iii) GATT for protecting the national security. Nevertheless, it is up to the WTO-member invoking article XXI (b) GATT if it considers that there is an essential security interest. Following the Russia – Traffic in Transit case, where the Panel excused Russia who invoked the national security exception from meeting its burden of proof to demonstrate a nexus between the measure and the protection of its essential security interests.87

5.3 Is the ban necessary?

Besides having an emergency in international relations and an essential security interest it is also important that a measure to protect this is necessary. The WTO member that invokes article XXI (b) must demonstrate subjective criteria that any measure taken pursuant the article does not intentionally serve a protectionist purpose. The Panel or Appellate Body are faced with determining whether the member genuinely believes that the measure taken is necessary to protect the essential security interest at issue. In this sense, a Panel that has to judge the Huawei case can make use of the jurisprudence from the ‘necessity test’ of article XX GATT.88_{There are three} factors that need to be weighed: 1) The extent to which the measure contributes to the realization of the end pursued. 2) The importance of the interests or values protected. 3) The degree to which the measure produces trade restrictions.89

Whereas the United States and Australia claim that Huawei allegedly forms a cybersecurity risk by providing a 5G network, the truth is that all major IT competitors of Huawei outsource the manufacture of components of their products to other places as India, Russia, Israel, Taiwan, Malaysia, Thailand, and Mexico. Resulting in globally distributed cyber threats.90 In this era of global IT supply chains, the potential of installing backdoors in telecommunication equipment software is

87_{Iryna Bogdanova, The WTO Panel Ruling on the National Security Exception: Has the Panel ‘Cut’ the Baby in Half? (2019) p}

4.

88_{Shin-yi Peng, Cybersecurity Threats and the WTO National Security Exceptions, Journal of International Economic Law,}

(2015), 18, p. 473.

89_{D. Regan, The meaning of “necessary” in GATT Article XX and GATS Article XIV: the myth of cost-benefit balancing, 6}

World Trade Reviews, 3 (2007)

90_{Theodore Moran, ‘Dealing with Cybersecurity Threats Posed by Globalized Information Technology}

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ever-present. According to Huawei, 70 percent of its components that are in its products are procured from the global supply chain in which America is the biggest contributor with 32 percent.91 Simultaneously, Western IT manufacturers have large research and development centers in China and major telecommunication equipment providers have substantial bases in China.92 For example, Nokia Siemens Networks that have 5 of its 10 manufacturing facilities in China and the American IT provider Cisco Systems produces 25 percent of its products in China.93

In the light of these facts and percentages the WTO member that invokes article XXI (b) (iii) GATT shall have to believe that in a world of global IT supply chains a measure to safeguard cyber security from one or two manufacturers based on their national origin is fitting to make a material contribution to secure an essential security interest.

However, up to this date, there has not been any hard proof that there are backdoors in the products of Huawei. Besides, there are a lot of other countries that do not share the view of the United States and are still open for a 5G network from Huawei. However, there are scholars that believe that there are strong arguments in favour of countries that ban Huawei, to protect their essential security interests. Shin-Yi Peng states that a strong argument could be that equipment for router access layer made by Huawei and procured in China poses the highest risk for cybersecurity risk, such as espionage. As Huawei controls the software design it controls the network.94

5.4 Overview

In this chapter Article XXI (b) (iii) GATT was applied to the playing matter of Huawei to see if states, that ban Huawei from providing 5G in their country, can rightfully invoke the national security exception. Firstly, this chapter discussed the capabilities of a 5G network and its dangers. In the near future, it is more than likely that 5G will be the societies’ digital nervous system. For that reason, 5G will have a lot of control over systems that we use in our daily lives and form a danger when backdoors are installed in software systems that give way to malicious entities. This

91_{John Suffolk, ‘21stCentury Technology and Security– A Difficult Marriage’, Cyber Security Perspectives} 20 (2012)

92_{Id. at 9.} 93_{Id. at 10.}

94_{Shin-yi Peng, Cybersecurity Threats and the WTO National Security Exceptions, Journal of International Economic Law,} (2015), 18, p. 474.

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first paragraph laid a fundament for the application of Article XXI (b) (iii) GATT to Huawei case. Followed by the question if there is an emergency in international relations. With the definition given by the Panel in Russia – Traffic in Transit case it became clear that indeed a “situation of heightened tension or crisis”. This crisis can be traced back to the time before Trump’s presidency, where he already was critical of China. During his presidency, Trump suits the action to the word and initiated a trade war from February 2018 on. The tension between the United States and China was already present. During this trade war, Huawei became a target for the American government. For that reason, there is a situation of heightened tension, which is an emergency in international relations according to Article XXI (b) (iii).

Thirdly, this chapter discussed whether there was an essential security interest. By help of the definition given by the Panel in Russia – Traffic in Transit it was found that the protection of a state’s territory and its population from external threats, and the maintenance of law and public order internally can be threatened by 5G network when cyber espionage and/or attack occur through backdoors in the software. Moreover, it is established that cyber espionage can be an essential security interest because many important systems that will be working on 5G in the near future are of great importance for the protection of the state and its population.

Lastly, article XXI GATT states that when a state considers that a measure is “necessary”. In this chapter, the necessity of the measures against Huawei was discussed. For a measure to be necessary three factors need to be taking into account. Firstly, the extent to which the measure contributes to the realization of the end pursued. Secondly, the importance of the interests or values protected. Thirdly, the degree to which the measure produces trade restrictions. Because Huawei is a Chinese company and the parts used in its products and equipment are being made in China is a reason for the US and Australia to ban the company. The US and Australia fear that Chinese products will contain backdoors that enable espionage. However, the global supply chain ensures that many parts of products are built in foreign countries with China being a leading country.

For these reasons, the extent of the ban does not contribute to the realization of preventing cyber espionage. This can still happen through other producers’ products that are produced in China. The ban produces trade restrictions because Huawei is unable to sell its products on the American and Australian markets. Estimates are that Huawei will have a 30 billion loss by August. Therefore it is doubtful whether the