For much of the postwar period, international trade law treated national security as a necessary anomaly. The rules-based trading system, established through the 1947 General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO), was built around predictability. It was a reflection of the convulsion of the interwar period, during which the relatively free trade of the prewar period was supplanted by rampant protectionism and economic fragmentation. The GATT framework sought to discipline trade unilateralism by embedding commitments to non-discrimination and tariff binding within a rules-based system. Tariff commitments (Article II), non-discrimination rules (Article I and III), and dispute settlement procedures (Article XXIII) were designed to discipline unilateral action. National security sat uneasily within that framework and was accommodated through an exception. Article XXI of the GATT permits states to take measures they consider necessary to protect their essential security interests and was widely understood to be used sparingly, in exceptional circumstances.
That understanding no longer holds. Over the past decade, and especially since 2022, NATO members increasingly rely on trade restrictions, subsidies, sanctions, and export controls to pursue economic security objectives that are neither temporary nor peripheral. Measures framed as responses to crises, including sanctions following Russia’s invasion of Ukraine and controls on sensitive technologies, have become part of longer-term strategies to manage dependency and shape the strategic environment. Economic security has increasingly moved toward the centre of trade governance, and the national security exception has followed with it, reflecting a broader shift in how states use trade instruments to pursue strategic objectives. This places pressure on the balance between predictability and discretion within trade law. Trade rules are meant to constrain discretion, while security policy depends on flexibility. That tension is now being worked out within the international legal system.
From political safety valve to legal structure
The WTO provides the basic framework for enforcing trade obligations. Member states agree to core rules and may challenge one another’s measures through a formal dispute process.
Within that system, Article XXI allows departures from trade obligations where necessary to protect essential security interests, including in situations of war or serious international tension. For much of the GATT period, this provision functioned less as a legal rule than as a shared understanding. States rarely invoked it, and legal review was generally avoided. That posture has eroded. In Russia – Measures Concerning Traffic in Transit, a WTO panel rejected the argument that Article XXI is entirely self-judging. While recognizing broad state discretion, it held that the provision has legal structure and panels may examine whether a situation qualifies as an “emergency in international relations” and whether a measure is plausibly connected to it. Subsequent disputes, including challenges to United States tariffs on steel and aluminum, followed a similar approach. National security is no longer treated as a legal void. A state invoking security must explain how its measure relates to a qualifying situation. That requirement does not eliminate discretion but restrains how it is exercised.
Under the earlier understanding, a state could adopt a trade restriction and, if challenged, invoke national security as a justification at a later stage. Because the exception was treated as largely beyond review, the connection between the measure and the asserted security interest did not need to be clearly articulated in advance. The legal risk lay primarily in whether the exception would be invoked, not in how the measure was structured. This pattern is reflected in earlier disputes, including the Czechoslovakia case and the United States’ embargo against Nicaragua, where Article XXI was invoked without a clear articulation of the connection between the measure and a specific security situation.
As WTO panels have signaled that Article XXI has limits, the approach of not articulating a clear connection between the measure and the asserted security interest has become less reliable. A government can no longer assume that invoking national security will end the analysis. The introduction of effective, even if limited, legal scrutiny of national security claims requires that the structure, scope, and stated purpose of pertinent trade measures be aligned with a recognizable security rationale, such as an emergency in international relations or the defence of an essential security interest, from the outset. A measure designed with a clear security logic is likelier to withstand scrutiny within the framework established by WTO case law on Article XXI than a principally economic measure backed by an opportunistic security-related defence.
Governments have responded accordingly. Export controls on advanced technologies are now framed as part of ongoing efforts to limit military or strategic risk, rather than as temporary trade interventions. Sanctions are designed not only to respond to specific events, but to constrain capabilities over time. Industrial policies aimed at supply chain diversification are justified in terms of reducing exposure to disruption or coercion. The key point is not that states are invoking security more often, but that they are doing so more systematically. The national security exception no longer operates only when a dispute arises. It influences how measures are defined, explained, and implemented in the first place. Beyond merely accommodating security concerns at the margins, trade jurisprudence now contributes to structuring how those concerns are translated into policy. As this pattern becomes more common, a secondary issue arises: if multiple states design policies around security rationales, the interaction between those policies becomes as important as their individual justification.
The alliance coordination problem
Among allied states, that interaction takes place without a shared trade-law framework. NATO emphasizes resilience and economic security but it does not function as a trade-policy institution and has no formal mechanism for determining the appropriateness of security-based trade measures enacted by member states. Trade policy remains largely national, while the principal shared legal frameworks governing trade obligations are provided by the WTO and overlapping bilateral and regional trade arrangements. Coordination of security-based economic measures occurs primarily through informal alignment among allied states (although certain sanctions regimes may also involve United Nations Security Council mechanisms). The sanctions response to Russia’s invasion of Ukraine illustrates this dynamic, as allied states adopted broadly similar sanctions, export controls, and financial restrictions through parallel domestic action rather than through a unified legal framework.
This alignment is not necessarily driven by identical strategic assessments or formal coordination. As security-based trade measures become more central to responses toward common adversaries, closely integrated economies face increasing pressure to avoid regulatory divergence. Differences in export controls, sanctions regimes, or technology restrictions can create opportunities for circumvention and inconsistencies across supply chains. The ability to shape these emerging frameworks, however, is uneven, with larger economies often able to set regulatory and strategic expectations that smaller states face significant pressure to follow. States may therefore adopt similar measures not because they share identical threat perceptions, but because the costs of remaining outside emerging regulatory or strategic frameworks become increasingly difficult to accept.
Recent export controls on advanced semiconductor technology illustrate this dynamic. Restrictions introduced by the United States were subsequently reflected in measures adopted by allied states with control over critical supply-chain components, including the Netherlands and Japan. Alignment emerged not through a formal alliance mechanism or shared legal obligation, but through parallel policy decisions shaped by economic interdependence and strategic pressure. These pressures toward convergence do not eliminate the possibility of disagreement, however, particularly where allies diverge on the underlying strategic rationale or preferred scope of economic measures. The reimposition of United States sanctions on Iran following withdrawal from the JCPOA illustrates how uncoordinated security-based economic measures can generate intra-alliance friction, with European allies responding through legal and regulatory measures designed to limit the extraterritorial effects of U.S. sanctions.
As security considerations become a more permanent feature of trade and economic policy, the management of alignment and disagreement among allied states becomes a structural challenge. In the absence of a unified legal or institutional framework, coordination depends on overlapping strategic interests, informal alignment, and continuing efforts to manage the economic and legal consequences of divergence. The broader framework of allied economic coordination remains workable largely because states have, thus far, exercised restraint in how far they extend security-based measures. These dynamics are particularly significant for middle powers, which often lack the ability to shape emerging security-based trade frameworks independently and must instead navigate them through alignment and coordination with allies.
Canada illustrates how middle powers navigate the growing intersection of trade law and economic security. Rather than relying on a single statute or a unified policy structure governing economic-security policy, Canada implements security-based trade measures through a collection of existing statutes and regulatory authorities, while working closely with key allies. This means that in practice, sanctions, export controls, and related measures are often developed in parallel with those adopted by the United States and European partners, particularly in response to shared strategic concerns such as Russia’s invasion of Ukraine. Alignment reduces risks associated with divergence, including regulatory gaps and opportunities for circumvention, while also situating Canadian measures within broader and more recognizable collective security rationales.
This alignment serves both strategic and legal functions. As WTO jurisprudence increasingly requires states to articulate plausible connections between security-based trade measures and qualifying security concerns, coordination with allies helps reinforce the credibility and coherence of those justifications. Canada’s approach therefore reflects a broader pattern among allied states, where economic-security policy is managed less through overarching legal frameworks formally agreed upon between countries, than through coordinated practice, incremental implementation, and alignment across interconnected jurisdictions.
Conclusion
National security no longer operates at the margins of trade law. As governments increasingly rely on sanctions, export controls, and industrial policy to pursue strategic objectives, security considerations have become embedded in the design and justification of trade measures. Given the absence of an overarching unified trade framework, allied states increasingly manage economic-security policy through parallel domestic action. As security considerations become more embedded in trade governance, this coordination will become both more necessary and consequential.
Photo: Scrabble tiles spelling trading rules on a wooden table (2024) by Markus Winkler via Upspalsh.
Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.
