Argentina-safeguard

measures on imports of
footwear

Panel Report (25 June 1999

and AB Report (14 December
1999)
FACTS:
National Foreign Trade Commission (CNCE) initiated
a safeguard investigation and imposed provisional
and definitive safeguard measures in the form of
minimum specific duties on imports of footwear and
later on, introduced a tariff quota system.

CLAIMS BY THE EUROPEAN COMMUNITIES

• Violation of Art. XIX GATT 1994 (“unforseen
developments”)
• Violation of Art. 2 (conditions),4 (all factors and causal
link), 5 (application for prevention or remedy), 6
(provisional measures), 12 (notification) of the
Safeguards Agreement
ART. XIX GATT 1994: “unforeseen developments”
(a) If, as a result of unforeseen developments and of the effect of the obligations
incurred by a contracting party under this Agreement, including tariff concessions,
any product is being imported into the territory of that contracting party in such
increased quantities and under such conditions as to cause or threaten serious
injury to domestic producers in that territory of like or directly competitive products,
the contracting party shall be free, in respect of such product, and to the extent and
for such time as may be necessary to prevent or remedy such injury, to suspend the
obligation in whole or in part or to withdraw or modify the concession.
Art. 1 SAFEGUARDS AGREEMENT:
This Agreement establishes rules for the application of safeguard measures which shall
be understood to mean those measures provided for in Article XIX of GATT 1994.
RULING:
 Both instruments inseparable package of rights and disciplines
 The SA defines, clarifies, and in some cases modifies the whole package
 The express omission of the “unforeseen developments” criterion in the SA has a
meaning (effective interpretation)
 The original conditions in XIX GATT have to be read in light of SA
 In case of conflict, SA prevails (General Interpretative Note to Annex 1 A to the
WTO Agreement)
 Safeguard measures in the case of customs union
ART. 2 S.A.
1. A Member(1) may apply a safeguard measure to a product only if that Member has
determined, pursuant to the provisions set out below, that such product is being imported into
its territory in such increased quantities, absolute or relative to domestic production, and
under such conditions as to cause or threaten to cause serious injury to the domestic
industry that produces like or directly competitive products.
2. Safeguard measures shall be applied to a product being imported irrespective of its source.
FOOTNOTE:
A customs union may apply a safeguard measure as a single unit or on behalf of a member state
[…]When a safeguard measure is applied on behalf of a member State, all the requirements for
the determination of serious injury or threat thereof shall be based on the conditions existing in
that member State and the measure shall be limited to that member State…

RULING:
 2.1 (“a Member”) and footnote (“limited to that member”) address only “by whom” and not “to
whom” the measures are to be addressed (ordinary meaning).
 2.2 (“irrespective of its source”) no distinction between imports intra or extra MERCOSUR on the
basis of the MFN+preamble of SA that incorporates basic principles of GATT
 2.1 + 2.2 imply a parallelism between scope of the investigation and the scope of the application of
the measures: if determined serious injury caused by imports from all sources=measures shall be
addressed against all sources
Art. XXIV.8 GATT Customs Unions and Free-trade Areas
(b) A free-trade area shall be understood to mean a group of two or more
customs territories in which the duties and other restrictive regulations of
commerce (except, where necessary, those permitted under Articles XI, XII,
XIII, XIV, XV and XX) are eliminated on substantially all the trade between the
constituent territories in products originating in such territories.

RULING
 Art. XXIV.8 provides for the elimination of restrictive regulations for
commerce.
 However, there is no reference to Art. XIX
 Therefore, Argentina is not prevented to apply SM against MERCOSUR because
Art. XXIV GATT does not necessarily prohibit the imposition of safeguard
measures b/ the constituent territories
SCOPE OF THE INVESTIGATION:
Art. 4.2 SA:
a) “All relevant factors”: the list
2. (a) In the investigation to determine whether increased imports have caused or are
threatening to cause serious injury to a domestic industry under the terms of this
Agreement, the competent authorities shall evaluate all relevant factors of an objective
and quantifiable nature having a bearing on the situation of that industry, in particular,
the rate and amount of the increase in imports of the product concerned in absolute
and relative terms, the share of the domestic market taken by increased imports,
changes in the level of sales, production, productivity, capacity utilization, profits and
losses, and employment.

b) “other factors” and causal link

(b) The determination referred to in subparagraph (a) shall not be made unless this
investigation demonstrates, on the basis of objective evidence, the existence of the
causal link between increased imports of the product concerned and serious injury or
threat thereof. When factors other than increased imports are causing injury to the
domestic industry at the same time, such injury shall not be attributed to increased
imports.
Conditions of Art. 2.1 and 4.2 a)b) SA
RULING:

 An evaluation of all factors listed in Art. 4.2.a) is required in the

investigation, however a disaggregated consideration (5 categories of
footwear) is not necessary .
 Given mixed trends in data, end-point-to-end-point comparison is not useful.
It is necessary to examine it together with intervening trends over the period.
 It is necessary to evaluate whether any downturn in the imports is temporary
or a longer term change (1991-1993 increased; 1993-1996 decreased) on the
basis of “increase…in such quantities” (2.1) judged in the context of its “rate
and amount” (4.2)
 Safeguard measure’s purpose: address urgent situation=irreconciliable with a
reversal of the increasing trend several years before the investigation began
 Not necessary a sharply increasing: there might be downturns but they must
be temporary (in this case, they are a trend at the time of SM.
RULING CON’T:

 Relevant period: “is being imported in such increased quantities”/han aumentado”

(2.1) is silent regarding the period of investigation-5years period is useful.

 “serious injury” 2.1+4.2.b): CNCE analised sales, production, profits and losses and
employment. No analysis of capacity utilisation and productivity,therefore no
complete analysis of “all factors”.

 “causal link”4.2.b) Need for a link between data and conclusions: in spite of the
declining trend of imports, there is no explanation on how they caused injury if they
were declining.

 “under such conditions” 2.1 does not constitute a specific legal requirement for a
price analysis, however it is important for the statements regarding lower-priced
imports. It indicates the need to analyse the conditions of competition in order to
determine serious injury. It refers to the substance of the causation. Without
conditions of competition=incomplete causal link of serious injury.

 “other factors” 4.2.b): Tequila effect, industrial specialisation regime, imports from
other MERCOSUR countries

 “Threat of serious injury” 2.1 requires according to the definition of 4.1.b) an

actual increase (and not the mere possibility of increase) in imports as a basic
prerequisite for a finding of either threat of serious injury or serious injury.
 CONCLUSION ON CLAIMS REGARDING ART.
2, 4, 5, 6, 12 SAFEGUARDS AGREEMENT
 Argentina’s investigation and determinations of increased imports,
serious injury and causation are inconsistent with Art. 2 and 4 of SA

 No need to examine claims under Art. 5 (if there is no serious injury

there is no need to examine if measures were applied to prevent or
remedy it) and 6 (no increase in imports, so no need to examine
provisional measures)

 Art. 12 does not require to notify the full detail of the investigations
and findings. It creates opportunities for further information to be
provided upon request.
 APPELLATE BODY
 (EC) ART. XIX GATT 94 “unforeseen developments” must be interpreted in light of:
Art. 1 This Agreement establishes rules for the application of safeguard measures
which shall be understood to mean those measures provided for in Article XIX of
GATT 1994.
Art. 11.1. (a) SA A Member shall not take or seek any emergency action on
imports of particular products as set forth in Article XIX of GATT 1994 unless such
action conforms with the provisions of that Article applied in accordance with this
Agreement.
 The provisions of Art. XIX GATT 1994 and SA are all privisions of one treaty, the
WTO Agreement.
 Provisions of Art. XIX continue in full force and effect
 Safeguard measures mus comply with the provisions of both the SA and the GATT
1994 in a cumulative fashion
 “unforeseen developments”=unexepected. Art. XIX is clearly an extraordinary
remedy
 The panel failed to give meaning and legal effect to all relevant provisions of the
WTO Agreement, contrary to the principle of effectiveness
CUSTOMS UNION ISSUE:
 Footnote to Art. 2.1 does not apply to the present case since the safeguard measures were applied by Argentina and not by
MERCOSUR on behalf of a Member State (reversed Panel’s findings).

 Argentina did not allege that Art. XXIV provided a defense: analysis of Art. XXIV was therefore not relevant

 The answer “to whom” is given by Art. 2.2: “safeguard measures shall be applied to a product being imported irrespective of its
source”.

 Argentina’s investigation which evaluated serious injury or threat was caused by imports from all sources could only lead to the
imposition of safeguard measures on imports of all sources=parallelism b/investigation and measures

DE NOVO INVESTIGATION:

 no de novo investigation: the panel was obliged to assess whether the Argentine authorities examined all relevant facts and
provided a reasoned explanation

VIOLATION OF ART. 2 AND 4 SA:

 -Agreed with the Panel’s conclusions on the violation of Art. 2 and 4 SA

 -Does not agree that it is reasonable to examine the trend in imports over a five-year historical period: “is being imported”
implies that increase in imports must have been sudden and recent.

 -the panel did not use the definition of “serious injury” of Art. 4.1 a): “serious injury” shall be understood to mean a significant
overall impairment in the position of a domestic industry;

 Argentina did not evaluate all factors. However, an evaluation of each listed factor (Art. 4.2 a) will not necessarily have to show
that each such factor is “declining”

 -if there is no serious injury, why the panel analised causal link?

 -upheld panel’s finding that Argentina’s investigation did not provide legal basis for the application of safeguard measures.
THANKS!