Can India trigger Article XXI of GATT To limit or do away with the trade relations with China ?



Sarthak Chaturvedi

The Sino-India relations deteriorated after a Ladhakh Region border clash killed 20 Indian soldiers on June 15. Since then, the nationwide campaign to boycott Chinese goods has only become louder and louder. Banning 59 Chinese apps and most evidently the recent ban on one of the most popular Chinese games ''Pub G'' is also India's step towards taking this trade war into cyberspace. All of these Important and strict actions by the Government Of India call for several discussions and trigger some really important head-scratching questions! One of them is, can India actually limit or do away with the trade relations with China? If yes, can Article XXI of GATT ( General Agreement on Tariffs and Trade) be triggered to alter trade relations with China? 

Before Moving on or further concluding anything we need to understand what ''GATT'' is? and how is it related to sino-India trade relations?

What is GATT (The General Agreement on Tariffs and Trade (1947))

GATT is a set of multilateral trade agreements aimed at Non-discriminatory international trade between contracting nations.

One of the most important principles of GATT’s is ''Trade without discrimination'', in which each member nation needs to open its markets equally to every other. 

Sub principles of GATT:

1- (MFN) The most-favored-nation treatment obligation: 

If one of the members grants some kind of favorable treatment to a certain country, then it needs to grant that same favorable treatment to all other WTO members. 

2- (NT) The national treatment obligation- A WTO member cannot treat foreign products, services, and service suppliers less than the domestic ones. 

How these two principles are related to ''Indo-Sino'' trade relations?

Owing to the fact that India and China are parties to the World Trade Organization (WTO) agreements, any kind of alteration in trade relations with China can be seen as the violation of the non-discrimination principle in the GATT-WTO regime.

Is there any exception under ''GATT'' that can be used to cut trade ties with China?

Yes, there is! There is a security exception called Article XXI of GATT. According to Article XXI of GATT, several inevitable measures can be taken by the state for the “protection of its essential security interest”. There are several provisions that can be used for the protection of national interests.

How India can trigger Article XXI of GATT? 

Article XXI (b) (ii) and (iii) can be triggered by India in order to cut trade ties with China!

For you to understand it properly, I am Giving here Article XXI (b) (ii) and (iii) verbatim.

“Nothing in this Agreement shall be construed

(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

(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 another emergency in international relations;”

Conclusion:

Now the real question is does the current situation with China falls under the ambit of ''threat to India’s security''? 

Although the current situation is not ''war'' but still it does fall under the ambit of ''other emergencies in international relations'' and thus Article XXI (b) (ii) and (iii) of GATT can be triggered by India to cut trade ties with China.


Sarthak Chaturvedi

The author is a Lawyer at Supreme Court of India and a Partner at a leading law firm. The views expressed here are personal.

Comments

  1. sumit parasharSeptember 10, 2020 at 9:50 PM

    Very informative and eye opening article. Awesome work 😊😊

    ReplyDelete

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