SAFEGUARDS Jakarta, 20-22 March 2017 Alexandre Larouche-Maltais Senior Trade and Investment Expert Conference Board of Canada Partner: Project Executed by:
Table of contents Introduction • GATT Origins • Objective and structure of the Agreement on Safeguards • Rationale Conditions for application of safeguard actions • Unforeseen developments • Increased imports or conditions of competition • Serious injury or threat • Causation • Application on an MFN basis Application of measures • MFN • Provisional measures • Definitive measures • Compensation • S&DT
INTRODUCTION TO SAFEGUARDS Historical development under the GATT/WTO Rationale for the use of safeguard measures against “fair trade”
In a nutshell... Emergency measures to limit imports temporarily, designed to Safeguards "safeguard" domestic industries. A WTO member may apply a temporary "safeguard" measure (e.g., an extra duty, or a quota, or other measure, on imports of a product) where an increase in imports of the product is causing, or is threatening to cause, serious injury to the industry. Source: WTO, “Technical information on Safeguards”
5 Historical development of safeguards under the GATT/WTO Pre-Uruguay round WTO era GATT Art. XIX SG Agreement New rules and Emergency Action “Grey area” procedures for the Clarification by on Imports of measures use of safeguard DSB Particular Products measures 1947-1994 1995-… 1947 1995 Source: WTO, “eLearning on Trade Remedies”
6 Historical development of safeguards under the GATT Pre-Uruguay round WTO era GATT Art. XIX SG Agreement New rules and Emergency Action Safeguard measures “Grey area” procedures for the Clarification by on Imports of permitted since 1947 but measures use of safeguard DSB Particular Products unfrequently used. measures 1947-1994 1995-… 1947 1995 Source: WTO, “eLearning on Trade Remedies”
7 Historical development of safeguards under the GATT Pre-Uruguay round WTO era GATT Art. XIX SG Agreement Governments preferred to use “grey New rules and Emergency Action area” measures as there were no rules “Grey area” procedures for the Clarification by on Imports of on those measures… and no need to measures use of safeguard DSB Particular Products compensate measures 1947-1994 1995-… 1947 1995 i.e. "voluntary" export restraint arrangements, minimum pricing arrangements, etc. Frequently employed on products subject to chronic trade frictions, such as cars, steel and semiconductors Source: WTO, “eLearning on Trade Remedies”
8 Historical development of safeguards under the GATT Pre-Uruguay round WTO era GATT Art. XIX SG Agreement To use a safeguard, a member must: Publish domestic legislation New rules and • Emergency Action “Grey area” procedures for the Clarification by Conduct investigation • on Imports of measures use of safeguard DSB Present evidence & arguments • Particular Products measures Apply transparency in all steps • Limit its duration • 1947-1994 1995-… 1947 1995 Source: WTO, “eLearning on Trade Remedies”
9 Historical development of safeguards under the GATT Pre-Uruguay round WTO era GATT Art. XIX SG Agreement New rules and Emergency Action “Grey area” procedures for the Clarification by on Imports of measures use of safeguard DSB Particular Products measures 1947-1994 1995-… 1947 1995 Source: WTO, “eLearning on Trade Remedies”
OBJECTIVE AND STRUCTURE OF THE AGREEMENT ON SAFEGUARDS
Objectives of the SG Agreement GATT • Clarify and reinforce the disciplines of GATT 1994, and specifically those of its clarification Article XIX Control • Re-establish multilateral control over safeguards and eliminate measures that safeguards escape such control Structural • Encourage structural adjustment and enhance rather than limit competition in adjustment international markets Source: Preamble of the Agreement on Safeguards
Objectives of the SG Agreement GATT • Clarify and reinforce the disciplines of GATT 1994, and specifically those of its clarification Article XIX In line with the “object and purpose of the Agreement on Safeguards the injury standard for the application of a safeguard measure should be higher than the injury standard for antidumping or Control • Re-establish multilateral control over countervailing measures ” safeguards and eliminate measures that safeguards escape such control Structural • Encourage structural adjustment and enhance rather than limit competition in adjustment international markets Source: Preamble of the Agreement on Safeguards
Structure of the SG Agreement Art. 3 Investigation Art. 4 Determination of Serious Injury or Threat Thereof Art. 5 Application of Safeguard Application of Art. 1 General General Measures new SG Provision Provisions Art. 6 Provisional Safeguard Measures Art. 2 Measures Art. 7 Duration and Review of Conditions Safeguard Measures Art. 8 Level of Concessions and Other Obligations Art. 9 Developing Country Members Art. 10 Pre- existing Article Art. 12 Notification XIX Measures and Consultation Pre-Existing Art. 11 Multilateralism Art. 13 Surveillance Prohibition and Measures Art. 14 Dispute Elimination of Settlement Certain Measures Source: Preamble of the Agreement on Safeguards
• Restoring competitiveness : viable industries besieged by foreign competition, and seek a respite to restore their “competitiveness” with additional capital investments Rationale • Adjustment costs : to slow the pace of industry contraction How can a WTO may, under certain conditions, member justify the reduce these costs use of safeguard • Political benefits of actions, without the protection : combination of presence of severe decline in an import illegitimate practices, competing industry and against “fair trade”? growth and prosperity for foreign competitors. Source: Sykes, “The Safeguards Mess: A Critique of WTO Jurisprudence” 2003
CONDITIONS FOR APPLICATION OF A SAFEGUARD ACTION Unforeseen developments Increased imports or conditions of competition Serious injury or threat Causation Procedural requirements
“Situations when, as a result of obligations incurred under the GATT 1994, a Member Unforeseen finds itself confronted with developments developments it had not ‘foreseen’ or ‘expected’ when GATT Art. XIX it incurred that obligation.” "If, as a result of unforeseen developments and of the effect of the Evidence of this claim must obligations incurred by a be demonstrated by the Member under this Investigating authority of the Agreement, including tariff importing country concessions …" Source: Appellate Body in Argentina — Footwear (EC) 1999
Increased “the increase in imports must imports or have been recent enough, conditions of sudden enough, sharp enough, and significant competition enough, both quantitatively and qualitatively” GATT Art. XIX and SG Agreement Art. 2.1 "… if[…] [a] product is There is no “minimum” being imported […] in such quantity required, and no increased quantities, “absolute formula” on absolute or relative to suddenness. Assessment domestic production, and must be done on a case by under such conditions …" case basis. Source: Appellate Body in Argentina — Footwear (EC) 1999
The SG Agreement defines serious injury as a “significant overall impairment” in the position of a domestic industry; Serious injury “Often, there is a continuous progression of injurious GATT Art. XIX and SG Agreement Art. 2.1 effects eventually rising and culminating in what can be apply a safeguard measure determined to be ‘serious to a product only if … that injury’. Serious injury does such product is being imported … to cause or not generally occur threaten to cause serious suddenly.” injury… Source: Appellate Body in US — Line Pipe (2001)
The SG Agreement defines “threat of serious injury” as a “serious injury that is clearly imminent” threat of Mean “either one or the serious injury other, or both in combination” GATT Art. XIX and SG Agreement Art. 2.1 apply a safeguard measure “Threat of serious injury” sets to a product only if … that a lower threshold for the such product is being right to apply a safeguard imported … to cause or measure than a “serious threaten to cause serious injury” injury… Source: Appellate Body in US — Line Pipe (2001)
The SG Agreement defines “domestic industry” as “producers as a whole of 1. the like or directly competitive products”; or Domestic those whose collective 2. industry output of the like or directly competitive products GATT Art. XIX and SG constitutes a major Agreement Art. 2.1 proportion of the total apply a safeguard measure domestic production of to a product only if … that those products. such product is being imported … to cause or threaten to cause serious This definition allows a broader injury to the domestic industry that produces like consideration of effects than in or directly competitive anti-dumping or countervail products. cases. Source: WTO, “Technical Information on Safeguard Measures”
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