Authors: Tania Voon and Andrew Mitchell, University of Melbourne

At a World Trade Organization (WTO) meeting of the Goods Council in Geneva on 12 April 2019, China expressed concerns about Australia’s exclusion of Huawei from the country’s rollout of 5G mobile telecommunications networks. This alleged ban was communicated as ‘security guidance to Australian carriers’ in an August 2018 media release co-authorised by Scott Morrison, who has since become Prime Minister.

In the WTO agenda item, China described the move as a ‘discriminatory market access prohibition on 5G equipment’.

In 2015, Professor Shin-yi Peng explored possible WTO breaches in various Australian and United States restrictions on Huawei. The WTO’s General Agreement on Tariffs and Trade 1994 (GATT) precludes discrimination against both imported products in comparison to local products and products imported from one WTO Member in comparison to those from any other country. GATT also prohibits import quotas and bans.

Australia’s actions could breach any of these provisions, just as a previous Australian government’s ban on Huawei from tendering for the National Broadband Network may have done.

Australia argues that it has not banned Huawei from the 5G rollout or breached WTO rules because it has not singled out any company or country. Rather, the media release states that ‘the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law’ would create risks of ‘unauthorised access or interference’ that could not be sufficiently mitigated through ‘technical security controls’.

This wording is nevertheless directed at China, whose National Intelligence Law of 2017 provides for its national intelligence institutions to request assistance from the country’s firms. The United States has pressured allies to exclude Huawei on cybersecurity grounds, and the Australian government reportedly contacted Chinese companies Huawei and ZTE directly to confirm their exclusion.

This does seem discriminatory — if China launched a formal WTO dispute, Australia would have to rely on general exceptions in GATT Article XX or the security exception in GATT Article XXI.

The general exceptions are stringent. Australia would have to show that the ban was necessary for purposes such as protecting public morals (perhaps extending to public order and privacy considerations) or securing compliance with other Australian laws (such as privacy or security laws), and that no other less trade-restrictive alternatives such as technical protocols were reasonably available.

Defences under the security exception are also subject to review. Article XXI(b) protects actions a WTO Member ‘considers necessary for the protection of its essential security interests’, but such actions must fall within a specific sub-paragraph such as those ‘taken in time of war or other emergency in international relations’.

A recent WTO Panel report assessed the security exception for the first time in a dispute brought by Ukraine against Russia. The WTO Panel rejected arguments by Russia and the United States that the security exception is self-judging or non-justiciable. As a third party, Australia argued that the Panel had to determine whether Russia considered its actions necessary to protect its security interests.

Having identified an emergency in international relations, the Panel upheld Russia’s invocation of Article XXI. It found that the Russian measures were not ‘so remote’ that ‘it is implausible that Russia implemented’ them to protect ‘its essential security interests arising out of that emergency’. The WTO Appellate Body is currently hamstrung, and Russia and Ukraine have indicated they will not appeal the Panel decision.

The Panel characterised an emergency in international relations as ‘a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state’. That description might more readily apply to the relationship between Russia and Ukraine than to Australia and China.

Australia might instead rely on the reference in Article XXI(b) to traffic in ‘goods and materials … for the purpose of supplying a military establishment’. The coming 5G networks may be important for military purposes, but so might an extremely wide range of materials, from boots to cars. An overly expansive interpretation of this provision could risk undermining the multilateral trading system.

The security exception is also at issue in a WTO dispute brought by Qatar against the United Arab Emirates and in multiple WTO disputes brought against the United States imposition of steel and aluminium tariffs. As the WTO Director-General has pointed out, WTO Panel Reports are case-specific — different Panels may take different approaches.

A successful defence by Australia could require evidence that cybersecurity risks are higher for Huawei and ZTE equipment, despite the use of Chinese components by many other telecommunications suppliers. But Australia could contend that the details of its security assessments are beyond the scope of the WTO — Article XXI(a) confirms that a WTO Member need not provide information ‘the disclosure of which it considers contrary to its essential security interests’.

Ultimately, China is unlikely to bring a WTO dispute against Australia, because Beijing itself frequently invokes concepts such as public morals and national security to justify various restrictions and censorship, including in telecommunications and technology.

Tania Voon is Professor at Melbourne Law School, the University of Melbourne and a former Legal Officer with the Appellate Body Secretariat of the World Trade Organization.

Andrew Mitchell is Professor at Melbourne Law School, the University of Melbourne and the Director of the Global Economic Law Network.