Introduction:
Worldwide, sovereign countries are bound by trade obligations laid down by the World Trade Organization (“WTO”) and bilateral agreements signed between them. International trade is important in developing friendly relations among the countries, helping developing countries to thrive on the resources imported and/or exported to and from developed countries and maintaining global ecology.
India Bans 59 Chinese Apps Amidst the Galwan Valley Faceoff Against China
The recent stand between the Indian Army and the Galwan Valley People’s Liberation Army has sparked outrage internally in the country, with many calling for a complete boycott of Chinese imports into India as a mark of solidarity and as a respect for the sovereignty of India. Such a spark burst against China for the second time, with China refusing to use its veto power in the United Nations Security Council to name Mashood Azhar as a global terrorist, for the first time.
With tensions on the economic, diplomatic and political front running high as both nations meet eyeball to eyeball at the border and all the high-level talks between commanders, it is patriotic to call for a nationwide Chinese Products, given that India has both domestic alternatives as well as international alternatives.
But the question that arises is whether two foreign sovereign nations bound by WTO obligations, of which one of the pillars is “non-discrimination,” could possibly ban both?
On 29 June 2020, the Ministry of Information and Technology, Government of India banned 59 Chinese Applications by invoking its power under Section 69A of the Information Technology Act, 2000 (‘IT Act’) reading the relevant Rules of Procedure and Safeguards for Blocking Public Access to Information, 2009 citing that the banned application was detrimental to sovereignty and integrity
Section 69A of IT Act, 2000 reads as:
Power to issue directions for blocking public access any information by computer resource;
(1) Where, for the sake of India ‘s sovereignty and integrity, the central government or any of its officers specially authorized by it in that name are satisfied that it is necessary or expedient to do so, for the sake of India ‘s sovereignty and integrity, for the sake of the security of the State, for friendly relations with foreign States or for the sake of public order, or for the sake of preventing incitement to commit any known offence in the foregoing or hosted in any computer resource.
(2) The procedure and the safeguards under which such blocking of public access may be affected shall be as prescribed.
(3) An intermediary who fails to comply with the instructions issued pursuant to subsection ( 1) shall be punished with imprisonment for a term of up to seven years and shall be liable for fines.
While the Indian government also cited “privacy” and “data infringement” as two of the main concerns while banning applications, the same goes beyond the scope of Section 69A of the IT Act. Critics further argue that a straightjacket ban on multiple apps without objective and verifiable data on how much data infringement of Indian users actually occurred via these Chinese apps clearly contravenes the purpose of the law. Regardless of anything, India’s government has exercised its power under domestic law, and the chances of that being challenged and declared nullified seem highly unlikely given the two nations’ situation.
Would a Full Ban on Chinese goods Lead to a Violation of the WTO Regime’s Principle of Non-Discrimination?
The situation becomes much more complex and interesting as regards the legal standstill under International Law. India and China are both parties to the World Trade Organization, the former having been a member since 1995 and the latter joining in 2001 six years later. The WTO is based on core principles such as the “Most Favoured Nation (MFN)” which states that countries are unable to discriminate against trading partners of each other. The MFN is also a mandatory requirement pursuant to Article 2 of the General Tariff Agreement (“GATT”) and Article 4 of the Trade-Related Aspects of Intellectual Property Rights Agreement (“TRIPS Agreement”), although a few exceptions are permitted under strict terms. Furthermore, the principle of national treatment which provides for equal treatment of local and foreign goods (at least after they have entered the market) is also a compulsory requirement under the WTO regime.
The Indian Railways’ Dedicated Freight Corridor Corporation of India Limited approached the World Bank to terminate an INR 500 crores contract awarded to the Beijing National Railway Group for signing and telecommunications work in the Uttar Pradesh stretch of Kanpur-Deen Dayal Upadhyay. The contract was cancelled in the last four years because of non-performance citing completion of 20 per cent. Similarly, on the request of the Department of Telecommunications (DoT), Government of India, BSNL and MTNL, a 4 G upgrade tender was cancelled after it had instructed the telecommunications networks not to use Chinese equipment for the same purpose and thus advocated the boosting of India’s manufacturing sector.
Now that such restrictions and cancellations are offering a big blow to Chinese investment in India, it is important to understand whether these Government of India decisions and any such decisions will be permissible under the International Trade obligations scanner in the future.
Security Exception under GATT & a Look at the History
The MFN referred to in Article 1 and the National Treatment referred to in Article 3 of the GATT shall apply to all Member States except for a few derogations provided for in the GATT itself. Article XXI of the GATT is one of the exceptions that are relevant for instant India – China row. Article XXI of the GATT provides for ‘Security Exceptions’ and opens with the words ‘Nothing in this Agreement’ and allows the State not to provide any information for the protection of its security interests and also allows the State to take ‘any action’ to protect its fundamental security interests in relation to:
(I) fissionable materials or the materials they derive from;
(ii) trade in weapons, explosives and war equipment and other goods and services carried out directly or indirectly for the purpose of supplying a military establishment;
(iii) war time or other international relations emergency.
Furthermore, Article XXI provides that any Contracting Party may take any action to fulfil its obligations under the Charter of the United Nations for the maintenance of international peace and security.
Article XXI allows the country to “self-judge” what steps are necessary to preserve its security interests while at the same time being aware of its obligations to uphold the GATT. Nevertheless, a State has an absolute right to trigger Article XXI to safeguard the interests of security. The test of Article XXI, however, lies in the fact that Member States can not use the exceptions provided for in Article XXI as a means of shying away from the obligations laid down in the GATT, and even merely political or economic differences between the Member States are not sufficient to constitute an emergency in foreign relations under Article XXI.
In 2014, in a series of military conflicts, Russia took over a part of eastern Ukraine known as the Crimean Peninsula, and other portions. In this process, Russia banned traffic between Ukraine, Kazakhstan and the Kyrgyz Republic, Whose trade route was itself through Russia. Ukraine has called the move by Russia a violation of Article V, Article X of the GATT and the WTO accession protocol by Russia. Russia defended the ban by pleading that this move was necessary to safeguard its essential security interests under Article XXI(b)(iii) of the GATT. Five years later in 2019, the United States of America (“US”) also invoked Article XXI of the GATT in order to justify its tariffs on steel and aluminium, which led several countries, including Turkey, Switzerland, India, Mexico, China, and the European Union, to lodge a lawsuit against the United States at the WTO.
With regard to Article XXI(b)(ii) which provides, in order to prevent any Contracting Party from taking any action it considers necessary to protect its essential security interests in arms, ammunition and war equipment traffic and in other goods and materials carried out directly or indirectly for the purpose of supplying a military establishment. Therefore, in order to provide more military establishments, India can take the steps it deems “necessary” which are otherwise limited by the GATT provisions. In the Geneva Session Preparatory Committee, it was discussed that where a member exporting commodities is satisfied that the purpose of such a transaction is to supply a military establishment, the language of Article XXI(b)(ii) shall cover the same immediately or ultimately.
Article XXI(b)(iii), which provides for the prevention by any contracting party of any action it considers necessary to safeguard its essential security interests at a time of war or other emergencies in international relations, strengthens India ‘s argument against China. While war has not broken out between the two nations as of this moment, the conflict between the nations’ armed forces across the LAC is large enough to fall under “another emergency in international relations,” and thus allows India as the sole judge to take action to protect its vital security interests.
Conclusion
Thus, given the current situation between India and China in the LAC, India will certainly reduce its trade relations with China in accordance with the GATT Agreement by adhering to Article XXI(b)(ii) and Article XXI(b)(iii) by stressing that a country is the “self-judge” of its own national and security interests. The situation between the countries is not merely a diplomatic conflict as the recent standoff at the LAC between the two nations’ Armed Forces, would indicate prima facie. The economic benefits/losses of such a move remain to be seen in the future and will be subject to further discussion.
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