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World Trade

Organization

WT/DS126/R
25 June 1999
(99-2217)
Original: English

 

Argentina - Safeguard Measures on Imports of Footwear 

(Continued)

6.32 In response to questioning from the Panel concerning the significance of the placement of footnote 1 to Article 2.1 immediately after the word "Member", and whether this could imply that the footnote refers only to those customs unions that are themselves Members of the WTO, the United States maintained that the placement of the footnote did not reflect the intention that the footnote refer only to customs unions that are WTO Members. The United States submitted, therefore, that the Panel and the parties should refrain from reading a purpose into the text that was never intended. Reviewing the drafting history of the provision, the United States submitted that the placement of the footnote after "contracting party" in paragraph 2 of the text up through 1991 was necessary because the text only applied to contracting parties and the European Communities was never a contracting party to the GATT. In 1992, when the Legal Drafting Group substituted the word "Member" for the phrase "contracting party", the group could not alter the placement of footnote 1 because such a change would have been viewed as a substantive change going beyond the explicitly limited mandate of the Legal Drafting Group[396].

(b) Argentina’s Safeguard Measure Violates Article 5 of the Agreement on Safeguards

6.33 The United States notes that in conducting its investigation, Argentina included imports from MERCOSUR countries for purposes of determining whether imports were increasing during the period of investigation. In constructing its safeguard measure, however, Argentina excluded MERCOSUR countries from the application of the safeguard measure. The United States does not contest, per se, either the practice of investigating all relevant imports or excluding partners in a customs union from the application of a safeguard measure.[397] In this instance, however, the United States submits that Argentina’s safeguard action is inconsistent with the terms of Article 5.1 of the Agreement on Safeguards.

6.34 The United States asserts that Article 5.1 permits safeguard measures “only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment.” Thus, the purpose of a safeguard measure is to provide the affected domestic industry with a temporary buffer from increasing imports that are causing or threatening serious injury to the industry. This “time out” permits the beleaguered domestic industry to adjust to import competition either through technological or economic advances, or through a transition to other productive uses. In order for a safeguard measure to be effective, and to comport with Article 5.1, it must affect the imports that are causing the injury. Thus, Argentina contends that “[t]he objective of the safeguard measure is to allow the domestic industry to reach the capacity to compete with a determined level of imports sourced both from MERCOSUR and other countries.” However, by failing to construct a safeguard measure that addresses the imports that are causing the injury, Argentina ensures the failure of its stated objective.

6.35 In short, the United States argues, Argentina appears to concede that the source of its injurious footwear imports is MERCOSUR. In its final determination of serious injury, notified to the Committee on Safeguards on August 21, 1997 (G/SG/N/8/ARG/1), the CNCE acknowledged that the MERCOSUR countries, Brazil in particular, were the principal suppliers of subject footwear products, and that MERCOSUR imports had, in large part, supplanted global footwear imports. Specifically, the CNCE concluded that:

The MERCOSUR countries and in particular Brazil, not being affected by the DIEM, were the sources to benefit from an increase in Argentine purchases by diversion of trade. Brazil’s share of total imports rose from 7.7 per cent in c.i.f. value terms in 1993 ($9.9 million) to 31 per cent ($36.1 million) in 1996, which made it the principal foreign footwear supplier.

The CNCE also concluded that:

Between 1994 and 1996 the value of imports from the rest of the world fell by more than $45 million, whereas the increase in imports of MERCOSUR origin was $22 million, so that total imports declined significantly after 1994.

6.36 The United States maintains that despite identifying MERCOSUR as the source of the injurious imports, however, Argentina proceeded to implement a safeguard measure that was not designed to affect the imports that caused the injury, and thus could not remedy the serious injury suffered by the domestic industry nor facilitate its adjustment to import competition.

6.37 Again, the United States does not question the propriety of investigating imports from all sources or excluding customs union partners from the application of a safeguard measure. What the United States finds troubling, however, is Argentina’s use of MERCOSUR imports for its increased-imports analysis when there was no possibility that those imports could be included in any safeguard action, even where those imports are demonstrably the cause of the injury suffered by the domestic industry. (As the Panel is aware, under Article 98 of the MERCOSUR regulations, MERCOSUR members exclude each other from the application of their safeguard measures).

6.38 In response to this dilemma, the United States submits, Argentina merely posits that “it is reasonable to consider them [MERCOSUR and third country imports] on equal terms for injury analysis purposes since in the absence of DIEM or protective measures there would be at least an equal flow of imports from the rest of the world into the Argentine Republic.” According to the United States, this response is purely speculative and does not address the problem presented. In short, the effect of Argentina’s action is to penalise producers from third countries for the injurious imports emanating from MERCOSUR. In the US view, Argentina’s safeguard measure therefore violates Article 5:1 of the Agreement on Safeguards because it does not address the injurious imports; thus, the measure can neither remedy the serious injury nor facilitate the domestic industry’s adjustment to import competition.

6.39 In response to questioning from the Panel concerning whether the introduction of any safeguard measure would be WTO-inconsistent in a situation where imports showed a decreasing trend at the end of an investigation period even where imports at the end were still higher than at the beginning of the investigation period, the United States asserted that the fact that imports showed a decreasing trend towards the end of the investigative period does not preclude a Member from applying a safeguard measure. The question is whether the evidence demonstrates, as required by Article 2.1 of the Agreement on Safeguards, that the product under investigation "is being imported … in such increased quantities … as to cause or threaten to cause serious injury to the domestic industry". Imports may show a decreasing trend towards the end of the investigative period for a number of reasons, including the timing of shipments, the seasonality of the product, or importer concern about the investigation. In deciding whether the requirements of Article 2.1 are satisfied, a Member should carefully consider whether it is temporary or of longer duration. A trend of several months may simply reflect irregular shipments. A trend of several years would normally imply a more permanent change in direction of imports of a given product, and suggest that the product is not being imported in increased quantities. In the US view, in this instance, the CNCE's own data show that Argentina footwear imports have trended downward in recent years. The CNCE has failed to demonstrate how it concluded, in the face of such data, that footwear "is being imported" into Argentina "in such increased quantities" as to cause or threaten to cause serious injury to the Argentina footwear industry. According to the United States, assuming a Member has made an adequate injury determination, the fact that imports show a decreasing trend towards the end of the investigative period has no direct bearing on the standard that a Member must apply in fashioning a safeguard measure. The Agreement on Safeguards contains only one standard for applying a safeguard measure, the standard set out in Article 5.1. Article 5.1 states that a Member "shall apply a safeguard measure only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment." Thus, the measure applied will depend upon the facts of the case, including the nature and extent of injury found to exist or threatened, and circumstances relating thereto, and the adjustment to be facilitated.

(c) Argentina’s Purported Modification of its Safeguard Measure Violates Article 7.4 of the Agreement on Safeguards

6.40 The United States wishes to bring to the Panel’s attention a recent and troubling development in Argentina’s safeguard measure on certain footwear imports. Argentina recently issued Resolution1506, which purports to modify its current footwear safeguard by establishing a “quantitative restriction” in addition to the safeguard duty. The Resolution is somewhat unclear, but it appears to impose either a quota or a tariff-rate quota (TRQ) of 3.9 million pairs on imports of footwear falling within certain Universal Nomenclature of MERCOSUR (NCM) numbers. The established quota amount represents less than 50per cent of footwear imports from third countries over the last 3 years. Under the terms of the Resolution, Argentina’s safeguard measure appears to function as follows: Footwear imports that are below the quota limit are subject to a safeguard duty, as detailed in the Resolution. Once the quota limit is filled for each NCM number, imports above the limit will be assessed a duty rate that is 100per cent of the current safeguard duty. In addition, the Resolution postpones any liberalisation of the safeguard until November 30, 1999, whereupon the quota will be increased by 10per cent. Although not clear from the terms of the Resolution, the United States can only assume that MERCOSUR imports will not be counted towards the 3.9 million quota limit.

6.41 The United States asserts that this alleged modification of Argentina’s safeguard measure presents issues of grave concern to the United States. In the US view, Argentina seems to have crafted a safeguard-upon-safeguard barrier that is unnecessary and may, at the very least, violate Article 7.4 of the Agreement on Safeguards. Article 7.4 specifically requires that certain safeguard measures be progressively liberalised at regular intervals during the period of application. Argentina’s modification fails on both counts. The United States asserts that, first, rather than liberalising, Argentina has clearly made its safeguard measure more stringent. Potential exporters of footwear to Argentina must now contend with a quota or TRQ in addition to a safeguard duty. Second, Argentina has not liberalised the measure at regular intervals. As previously notified to the Committee on Safeguards on September 15, 1997 (G/SG/N/10/ARG/1 and G/SG/N/11/ARG/1), Argentina was to have liberalised the safeguard on 1 May 1998, 16 December 1998 and 1August1999. Argentina has already postponed one scheduled liberalisation period, and Resolution1506 would again delay liberalisation until 1999. According to the United States, such actions violate both the letter and the spirit of the Agreement on Safeguards.

6.42 Moreover, the United States submits, Argentina’s safeguard modification highlights the original safeguard measure’s inconsistency with Article 5.1 of the Agreement on Safeguards. In failing to address the source of the injurious imports, Argentina’s safeguard measure has not prevented or remedied the domestic industry’s alleged serious injury nor has it facilitated adjustment. Adding more restrictive elements to the safeguard measure merely aggravates the problem and compounds the inconsistency of the measure with Argentina’s obligations under the Agreement on Safeguards.

6.43 Finally, the United States questions whether Argentina has notified Resolution 1506 to the Committee on Safeguards, as is required by Article 12 of the Agreement on Safeguards.[398]

(d) The Requirements of Article XIX of GATT 1994 are Subsumed by the Agreement on Safeguards

6.44 The United States disagrees with the European Communities’ assertion that a Member may only impose a safeguard measure if, inter alia, the increase in imports results “from both ‘unforeseen developments’ and ‘compliance with GATT obligations,’ including tariff liberalisation according to a party’s schedules of concessions.” Article XIX:1(a) of the GATT must now be read in accordance with the rights and obligations set out in the Agreement on Safeguards, as required by Article 11:1(a) of that Agreement. The Agreement on Safeguards has defined, clarified, and in some cases modified, the package of rights and obligations of a potential user of safeguard measures, and Article 2 of the Agreement on Safeguards makes clear that a demonstration of “unforeseen developments” and a causal nexus to GATT obligations are no longer prerequisites to the application of a safeguard measure.

6.45 According to the United States, the Agreement on Safeguards clarifies and expands on the provisions of Article XIX, and establishes procedures for the application of safeguard measures. Thus, the preamble to the Agreement on Safeguards “recognis[es] the need to clarify and reinforce the disciplines of GATT, and specifically those of its Article XIX”, while Article 1 “establishes rules for the application of safeguard measures . . . provided for in Article XIX of GATT.” The United States submits that the two agreements must be read in tandem and, together, they create a new package of rights and obligations which are distinct from the rights and obligations contained in the original GATT provision. The United States recalls that the Appellate Body arrived at a similar determination in Brazil - Measures Affecting Desiccated Coconut, wherein the Appellate Body, quoting the panel, asserted:

Article VI of GATT 1994 and the SCM Agreement represent a new and different package of rights and obligations, as among WTO Members, regarding the use of countervailing duties. . . . The SCM Agreements do not merely impose additional substantive and procedural obligations on a potential user of countervailing measures. Rather, the SCM Agreements and Article VI together define, clarify and in some cases modify the whole package of rights and obligations of a potential user of countervailing measures.[399]

6.46 In addition, the United States points out, the negotiators of the Agreement on Safeguards were specific in their intent to subsume Article XIX under the new regime established by the Agreement on Safeguards. Thus, Article 11:1(a) of the Agreement on Safeguards establishes the relationship between GATT Article XIX and the Agreement as follows:

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.

(Emphasis added). In the US view, the phrase “applied in accordance with this Agreement” is significant in that it demonstrates the intent of the negotiators to subsume Article XIX under the new rights and obligations created by the Agreement on Safeguards. This intention is made even more apparent when the language in Article 11:1(a) is contrasted, for example, with language in the Agreement on Subsidies and Countervailing Measures (SCM) where there is not a similar intent to subsume Article VI of GATT under the SCM. Thus, Article 10 of the SCM provides:

Members shall take all necessary steps to ensure that the imposition of a countervailing duty on any product of the territory of any Member imported into the territory of another Member is in accordance with the provisions of Article VI of GATT 1994 and the terms of this Agreement. (emphasis added)

6.47 The United States argues that in Article 10 of the SCM Agreement, the term “in accordance with” modifies both Article VI of the GATT and the SCM Agreement, while in Article 11:1(a) of the Agreement on Safeguards, “in accordance with” modifies solely “this Agreement,” meaning the Agreement on Safeguards. Therefore, the proper reading of Article 11:1(a) must be that a safeguard action has to conform with Article XIX, which in turn must be applied in accordance with the Agreement on Safeguards. In other words, Article XIX has been subsumed by the Agreement on Safeguards, and the provisions of Article XIX that continue to have force and effect are those that are in accordance with the Agreement on Safeguards. According to the United States, this interpretation is further borne out by the fact that the Agreement on Safeguards negotiators conspicuously reiterated in Article 2 every sentence of Article XIX:1(a) except the language concerning “unforeseen developments” and GATT obligations. Since the Agreement on Safeguards is the definitive interpretation of Article XIX, a safeguard measure that satisfies the Agreement on Safeguards necessarily satisfies the requirements of Article XIX.

4. Conclusion

6.48 In conclusion, the United States respectfully requests the Panel to find that the safeguard measure implemented by Argentina on certain imports of footwear products is inconsistent with Articles 2 and 5 of the Agreement on Safeguards. Moreover, Argentina’s purported modification of its safeguard measure, at the very least, violates Article 7 of the Agreement on Safeguards.

VII. Interim Review

7.1 The Panel issued its interim report on 21 April 1999 and informed the parties that requests for the review of precise aspects of the interim reports had to be filed by 5 May 1999. On 30 April 1999, Argentina requested an extension of one week of the time-period for submitting comments on the interim report. On 3 May 1999, the Panel granted an extension until 10 May 1999.

7.2 On 10 May 1999, Argentina and the European Communities requested the Panel to review, in accordance with Article 15.2 of the DSU, precise aspects of the interim report. Argentina requested a further meeting with the Panel, whereas the European Communities did not consider such a meeting necessary. The interim review meeting with the parties was held on 20 May 1999.

7.3 The European Communities submitted a number of specific comments. The comments on the section entitled "the imposition of safeguard measures in the case of a customs union" addressed in particular the Panel's description of the European Communities’ position on this issue and the specific phrasing of the legal reasoning interpreting the relationship between Articles XIX and XXIV of the GATT. Further to that, the European Communities made minor editing suggestions concerning the sections on "standard of review", "increased imports" and "the application of safeguard measures". Moreover, it suggested modifying the Panel's characterisation of the reason why the European Communities raised a claim under Article 5. The European Communities also criticised the Panel’s reasoning on why it refrained from ruling on the EC's claim against the provisional safeguard measure. In response to these comments, we modified paras. 8.78, 8.79, 8.94, 8.287, and 8.292.

7.4 Argentina submitted a number of specific comments on the interim report which it grouped into three major categories: (i) comments concerning the descriptive part; (ii) comments related to the section entitled "factual background" introducing the Panel's findings and conclusions; and (iii) comments on the section of the findings addressing the EC's claims under Articles 2 and 4 of the Safeguards Agreement.

7.5 (i) As to the descriptive part, Argentina suggested changes to the account of events concerning its submission to the Panel of the entire record of the national investigation (Exhibit ARG-21). We carefully considered these suggestions but continue to believe that the description of the sequence of events in paras. 4.37-4.39 is accurate. We did introduce a sentence into para. 4.37 at the suggestion of Argentina, and made a few editing changes to this paragraph. Argentina further requested some editing changes in sections describing its arguments, including those concerning "the imposition of safeguard measures in the case of a customs union", some of which the Panel accepted in paras. 5.90, 5.97, 5.141, 5.269, 5.303, and 5.352. However, the Panel did not accept Argentina's proposals to shorten the description of certain responses by the European Communities to arguments made by Argentina.

7.6 (ii) With respect to the section dealing with the "factual background" to this case, the Panel did not accept Argentina's request to delete portions of this introductory section to the findings because they are an accurate summary of events discussed by both parties concerning the context of this dispute.

7.7 (iii) Argentina's fundamental criticism of the findings addressing the EC's claims under Articles 2 and 4 of the Safeguards Agreement was that it believed that the Panel had carried out a de novo review of the national authority's determinations of increased imports, serious injury and causation. Argentina argued that the Panel's review should have been restricted to considering whether the Comisión Nacional de Comercio Exterior (CNCE) had evaluated the proper factors in its report and whether it had a reasonable basis for its conclusion that negative effects on those factors were a result of increased imports. Argentina alleged that the Panel instead substituted its judgement and proceeded to identify those trends and evidence it considered the most relevant. In Argentina's view, the Panel asked the national authority to explain why it found certain evidence to be compelling, rather than properly asking whether the evidence as a whole supported the CNCE's judgement, especially when asking Argentina to provide a complete analysis of any purportedly "adverse" data to the conclusion it reached. Argentina claimed that in not doing so, the Panel exceeded its authority because it was not the Panel's task to reweigh the evidence. Argentina submitted that it was for the national authority, as the trier of fact, to weigh all of the evidence and reach a conclusion. For Argentina it was the role of the Panel to determine whether the judgement of the national authority was one possible legitimate interpretation of the evidence, and not whether it was the correct interpretation because the standard based on international law principles is basically "what is not prohibited, is permitted".

7.8 While we do recognise the general interpretative principle "in dubio mitius"[400] raised by Argentina, we do not share Argentina's apparent opinion that under the Safeguards Agreement it is for the national authority to choose one of several possible factual or legal interpretations. Rather, regarding legal interpretations, a treaty must be interpreted, pursuant to Article 31 of the Vienna Convention, in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. Under the Safeguards Agreement, it is incumbent upon a national authority to adequately explain its factual conclusions on the basis of the evidence contained in the record of this case, and it is these explanations in the light of that evidence that we have reviewed in accordance with our standard of review, as explained in section VIII.E.3 of the findings. In this regard, the Safeguard Agreement is clear that the existence of increased imports, serious injury or threat, and causal link between the two, must be made on the basis of objective and quantifiable evidence on all relevant factors having a bearing on the situation of the industry, including factors other than increased imports that at the same time are causing injury. The Agreement also is clear that the detailed report on the case must set forth the findings and reasoned conclusions, and must demonstrate the relevance of the factors considered.

7.9 We consider Argentina's allegation that our findings amount to a de novo review of the case as unfounded. We believe that in addressing the EC claims we have kept with our decision not to engage in a de novo review. In accordance with Article 11 of the DSU,[401] a panel is required to make an objective assessment of the matter before it, including an objective assessment of the facts. In interpreting that article, the United States - Underwear panel found, a policy of total deference to the findings of the national authorities could not ensure an "objective assessment" as foreseen by this article.[402] The panel on New Zealand - Transformers was also confronted with the argument of New Zealand that the determination of "material injury" by the competent authority of New Zealand could not be scrutinised by the panel.[403] The Transformers panel responded that

"the responsibility to make a determination of material injury caused by dumped imports rested in the first place with the authorities of the importing contracting party concerned. However, the Panel could not share the view that such a determination could not be scrutinised if it were challenged by another contracting party. On the contrary, the Panel believed that if a contracting party affected by the determination could make a case that the importation could not in itself have the effect of causing material injury to the industry in question, that contracting party was entitled, under the relevant GATT provisions and in particular Article XXIII, that its representations be given sympathetic consideration and that eventually, if no satisfactory adjustment was effected, it might refer the matter to the CONTRACTING PARTIES, as had been done by Finland in the present case. To conclude otherwise would give governments complete freedom and unrestricted discretion in deciding anti-dumping cases without any possibility to review the action taken in the GATT. This would lead to an unacceptable situation under the aspect of law and order in international trade relations as governed by the GATT."[404]

7.10 As noted in para. 8.119, the United States - Underwear panel[405] followed an approach similar to that developed by the New Zealand - Transformers panel. We agreed with this statement of the New Zealand - Transformers and the United States - Underwear panels in paras. 8.118-8.119 of our findings. Accordingly, we consider that, while it is in the first place the responsibility of the national authority of the importing country to carry out a safeguard investigation and make a determination, we must address in our findings the objections raised by the European Communities to the determinations made by the CNCE. In our view, Article 11 of the DSU requires us to conduct an assessment of the claims and the facts of the case before us as safeguard determinations made by a national authority are subject to scrutiny by a panel if they are challenged by another Member (para. 8.118).

7.11 In our review, we followed the test developed by the United States - Underwear and the United States - Shirts and Blouses panels (para. 8.119 -8.120 ) which held that "an objective assessment would entail an examination of whether (i) the [national authority] had examined all relevant facts before it (including facts which might detract from an affirmative determination …), (ii) whether adequate explanation had been provided of how the facts as a whole supported the determination made, and, consequently, (iii) whether the determination made was consistent with the international obligations of the [Member concerned]."[406]

7.12 According to this test, one essential element of a Panel's review of a national investigation is to evaluate whether "adequate explanation had been provided of how the facts as a whole supported the determination made". This standard of review is different from a de novo review by a panel of a national investigation and the determination made. As set forth in paras. 8.205 -8.207 , in our view, an assessment of whether an explanation was as a whole adequate concerns the logical relationship between two given benchmarks, i.e., the facts of a case as collected by a national authority, on the one hand, and the safeguard determination made by it, on the other. Our assessment of this case has not involved questioning the facts as determined by the national authority; indeed, the European Communities did not challenge the facts gathered and compiled by the CNCE, but rather alleged that the determinations made could not be logically drawn from the facts as reflected in the CNCE's record of the investigation. As a result of these EC allegations it was necessary for the objective assessment which we are required to conduct to evaluate whether the explanation given by the national authority in evaluating the facts before it adequately supported the conclusions drawn with respect to the crucial conditions (i.e., (i) increases in imports, (ii) serious injury or threat thereof, and (iii) the existence of a causal link) and the safeguard determination made. The discussion of the adequacy of an explanation cannot merely consist in taking the explanation presented by a national authority at face value; it requires a process of evaluation of the reasoning by the national authority in its determination, in the light of arguments advanced by the complaining Member, and of responses by the respondent Member. Moreover, for an explanation to be adequate as a whole it must provide adequate reasoning on how the conclusions drawn flow from the facts of the case, including those facts that would appear to detract from such conclusions.

7.13 Argentina further alleged that the Panel created a new concept by requiring that for each single factor of injury analysis it is necessary to elaborate a reasonable explanation linking the data to the conclusion for each factor in isolation. In Argentina's view, it is sufficient to comply with the standard set by the Safeguards Agreement for a national authority to examine the totality of the data.

7.14 In para. 8.123, we noted that the text of Article 4.2(a) of the Safeguards Agreement explicitly requires the evaluation of "all relevant factors of an objective and quantifiable nature having a bearing on the industry", in particular those listed therein. We also noted that despite the absence of an express requirement of a similar nature in the Agreement on Textiles and Clothing (ATC), the panels on United States - Underwear and United States - Shirts and Blouses ruled that each and every injury factor mentioned in Article 6.4 of the ATC had to be considered by the national authority. In our view, for an evaluation of how the facts as a whole supported the determination made it is necessary for the national authority to link through an adequate explanation each of the relevant factors within the meaning of Article 4.2(a) to the overall determination, including where such factors seem to detract from that determination. We believe that in our discussion of the EC's claims under Articles 2 and 4 we have done nothing more than evaluate whether each of the identified factors was analysed and whether adequate explanations are contained in the record of the investigation as carried out by the national authority regarding how each of the relevant injury factors supported or was reconciled with the overall determination made.

7.15 Argentina further submits that under the Safeguards Agreement national authorities have a broad discretion how to conduct a safeguard investigation. Therefore, there is no specific requirement as to the methodology to be used to measure increases in imports or as to how thoroughly any factor must be considered, as long as the approach is reasonable and not in conflict with the specific requirements provided for in the Agreement. In Argentina's opinion, in several instances the Panel has imposed standards and requirements which have no basis in the Agreement.

7.16 In this context, we recall that we endorsed in para. 8.120 the statement by the panel on United States - Shirts and Blouses which reasoned that

"this is not to say that the Panel interprets the ATC as imposing on the importing Member any specific method either for collecting data or for considering and weighing all the relevant economic factors upon which the importing Member will decide whether there is need for a safeguard restraint. The relative importance of particular factors including those listed in Article 6.3 of the ATC is for each Member to assess in the light of the circumstances of each case."[407]

7.17 We agree in principle with Argentina that the Safeguards Agreement leaves a margin of discretion to the national authority to choose its methodology for carrying out its investigation, in particular with respect to data collection and the weighing of the relative importance of all relevant economic factors provided that an adequate explanation is given of how the facts as a whole supported the determination made. However, a juxtaposition of data and conclusions without adequate reasoning linking them is not sufficient under the terms of the Safeguards Agreement.

7.18 We did not find fault with the duration of the investigation period chosen by Argentina for measuring whether increases in imports occurred, nor with the beginning and end years of that period (1991 to 1995) as selected by the CNCE. Nor did we consider an end-point-to-end-point analysis of a given investigation period to be problematic per se under the Safeguards Agreement. However, in the light of Article 4.2(a)'s requirement that "the rate and amount of the increase in imports" be evaluated, we considered that only end-point-to-end-point data are not enough but also that analysis of import trends during the entirety of an investigation period is required (para. 8.159). In a factual situation where the variation by one year of the beginning and the end points of an investigation period yielded substantially different results and where intervening trends of declines in imports were of a more than temporary nature, we considered a mere end-point-to-end-point analysis to be insufficient for demonstrating an increase in import quantities as required by Article 2 of the Safeguards Agreement. We further note Argentina's statement that certain portions of the record, in some cases even not explicitly cited by the authorities, were nevertheless within their knowledge and should be assumed to have been considered by the administering authority. In this regard, we recall our conclusion, consistent with the previous panel reports mentioned above, that the national authority of the importing Member has the obligation to examine, at the time of its determination, at least all of the factors listed in Article 4.2(a) and to publish a report setting forth, in accordance with Article 3.1, its findings and reasoned conclusions reached on all pertinent issues of law and of fact. We cannot endorse a theory that certain portions of a record of 10,000 plus pages should be assumed, absent adequate reasoning in the published report on the investigation, to have been considered by the national authority when making its determination.

7.19 With respect to the publication of a report setting forth findings and reasoned conclusions, Argentina also emphasised that the Technical Report is an integral part of Act 338, and that these documents cannot be separated from each other. Accordingly, it is Argentina's position that both of these documents constitute Argentina's published report setting forth the competent authority's findings and reasoned conclusions reached on all pertinent issues of fact and law. We note that Argentina largely relied on Act 338 in its argumentation. We also recall our statements in paras. 8.126-8.128 that we deemed Act 338 to be the most important document, but that we also took the Technical Report into consideration where that report contained more specific and additional information. However, we noted that consideration of the raw data of the investigation in the 10,000-plus page investigation record appeared to be of lesser importance given that the contents were organised and summarised by the CNCE in Act 338 and the Technical Report. Nonetheless, pursuant to Argentina’s comments, we modified the end of para. 8.128.


Continue on to: VII. Interim Review: 7.20

[396] To understand the drafting and placement of this footnote, it is helpful to review the drafting history of the Agreement on Safeguards and to inspect this footnote as it stood at representative points in time. The Punta del Este Ministerial Declaration on the Uruguay Round provided that safeguards would be a subject for negotiation, and stated that "a comprehensive agreement on safeguards is of particular importance to the strengthening of the GATT system and to progress in the Multilateral Trade Negotiations". (BISD 33S/24, emphasis added) In pursuance of that mandate, Negotiating Group 9 on Safeguards produced a text labelled as “Agreement on Safeguards” which took the legal form of a decision of the CONTRACTING PARTIES to the GATT 1947. The text was arranged in consecutively numbered paragraphs and it provided for obligations which would be binding on all contracting parties to the GATT. Indeed, because of the nature of safeguards action, any agreement in this area would not be effective unless it applied to every contracting party; a Tokyo Round‑style Code approach would not work. The negotiators therefore settled on a text that would interpret and apply the GATT, such that if a safeguards action satisfied the requirements of that text, it would satisfy the requirements of GATT ArticleXIX.

The Chairman of the Negotiating Group tabled a safeguards text on 31 October 1990 with the statement that “This text represents the level of agreement that could be reached at this stage.” The Negotiating Group accepted the text as “a working paper for the very final phase of the negotiations” (MTN.GNG/NG9/W/25/Rev.3, 31 October 1990). The Negotiating Group then decided to send the text forward (MTN.GNG/NG9/21, 31 October 1990). The text was included in the Draft Final Act of the Uruguay Round circulated for the Brussels Ministerial Meeting (MTN.TNC/W/35/Rev.1, dated 3 December 1990). The relevant pieces from this text were as follows:

2. A contracting party may apply a safeguard measure to a product only if the importing contracting party 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.

1 A customs union may apply a safeguard measure as a single unit or on behalf of a member State. When a customs union applies a safeguard measure as a single unit, all the requirements for the determination of serious injury or threat thereof under this agreement shall be based on the conditions existing in the customs union as a whole. 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. It is understood that when a safeguard measure is applied by a customs union on behalf of a member State, [any injury attributable to competition from producers established in other member States in the customs union shall not be attributed to increased imports, in conformity with the provisions of sub-paragraph7(b)] [such a measure shall be applied to imports from other member States of the customs union].

The commentary preceding the safeguards text listed among the outstanding issues: “What should be the obligations of a customs union in relation to safeguard actions? (Footnote 1 to paragraph 2).”

The same passages in the safeguards text in the Dunkel Draft Final Act (MTN.TNC/W/FA, 20December 1991) read as follows:

2. A contracting party1 may apply a safeguard measure to a product only if the importing contracting party 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.

1A customs union may apply a safeguard measure as a single unit or on behalf of a member State. When a customs union applies a safeguard measure as a single unit, all the requirements for the determination of serious injury or threat thereof under this agreement shall be based on the conditions existing in the customs union as a whole. 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. Nothing in this agreement prejudges the interpretation of the relationship between Article XIX and Article XXIV:8 of the General Agreement.

The Dunkel Draft also included an early draft of the Multilateral Trade Organization Agreement. It was at that point that the decision was made that the final Uruguay Round results would include the creation of an MTO with Members. In January 1993, the Trade Negotiations Committee established a Legal Drafting Committee whose mandate was limited to considering the institutional and dispute settlement provisions in the Dunkel text, and making necessary legal rectifications in the other provisions in that text.

The Legal Drafting Group met during the spring of 1992 and worked on successive drafts of the MTO Agreement, and also made systematic changes in the texts in the Dunkel Draft to integrate them into the legal framework of the MTO . As part of its work, the Group mechanically substituted the word “Member” for the phrase “contracting party.”

As of the 12 December 1993 close of negotiations in the Uruguay Round, the same passages read as follows:

2. A Member1 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.

1A customs union may apply a safeguard measure as a single unit or on behalf of a member State. When a customs union applies a safeguard measure as a single unit, all the requirements for the determination of serious injury or threat thereof under this Agreement shall be based on the conditions existing in the customs union as a whole. 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. Nothing in this Agreement prejudges the interpretation of the relationship between ArticleXIX and ArticleXXIV:8 of GATT 1994.

The capitalization of “member State” in the footnote occurred during the final legal drafting process in February-March 1994. The present arrangement of the text in articles and paragraphs also dates from the final legal drafting process (see MTN/FA/Corr.3 dated 21 February 1994, p. 173ff).

The placement of the footnote after “contracting party” in paragraph 2 of the text up through 1991 was necessary because that text only applied to contracting parties, and the European Communities was never a contracting party to the GATT. In 1992, when the Legal Drafting Group substituted the word “Member” for the phrase “contracting party,” the group could not alter the placement of footnote 1 because such a change would have been viewed as a substantive change going beyond the explicitly limited mandate of the Legal Drafting Group.

[397] In response to questioning from the Panel, the United States clarified that it does not view ArticleXXIV:8 of GATT 1994 as prohibiting the maintenance or introduction of safeguard measures between the member States of a customs union or free-trade area, whether during its formation or after its completion.

[398] Argentina asked the United States where in Article 12 the obligation to notify the Safeguards Committee of Resolution MEYOSP 1506/98 could be found. The United States replied that assuming arguendo the modification was consistent with the Agreement on Safeguards, it would have to be notified under Article 12.1(c). The United States further maintained that acceptance of Argentina's implicit contention that it does not have to notify a new and more stringent "modification" of its safeguard measure would defeat the very purpose of the notification provisions of Article 12. Article 12 maintains the transparency of the system and ensures that Members are kept informed of the most current status of safeguard measures in all Member countries taking such measures. The logical consequence of Argentina's position that Article 12 requires Members to notify the taking of a safeguard action, but that further "modification" of the measure need not be notified, is to approve the dissemination of misleading information. In failing to notify its action to the Committee on Safeguards, Argentina erroneously maintains to the World Trade Organization that the only applicable safeguard measure on footwear imports is the safeguard duties as notified, while in reality Argentina is applying both a safeguard duty and a TRQ. Such action is counter to Article 12.1(c), which requires notification of the measure actually applied. There simply is no basis to argue that Article 12 merely requires notification of the "initial" safeguard measure, even if subsequent "modifications" render the notified measure obsolete.

[399] WT/DS22AB/R (21 February 1997), at p.16. (Emphasis in original).

[400] The Appellate Body noted: The interpretative principle of in dubio mitius, widely recognized in international law as a 'supplementary means of interpretation', has been expressed in the following terms: 'The principle of in dubio mitius applies in interpreting treaties, in deference to the sovereignty of states. If the meaning of a term is ambiguous, that meaning is to be preferred which is less onerous to the party assuming an obligation, or which interferes less with the territorial and personal supremacy of a party, or involves less general restrictions upon the parties.' …" Appellate Body Report on European Communities - Measures Concerning Meat and Meat Products (Hormones), adopted on 13 February 1998, para. 165, footnote 154.

[401] Article 11 of the DSU: "… a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements …".

[402] Panel Report on United States - Restrictions on Imports of Cotton and Man-Made Fibre Underwear (United States - Underwear), (complaint by Costa Rica), WT/DS24/R, adopted on 25 February 1997, para. 7.10.

[403] Panel Report on New Zealand - Imports of Electrical Transformers from Finland, adopted on 18 July 1985, BISD 32S/55.

[404] Ibid, para. 4.4.

[405] This panel did not see its "review as a substitute for the proceedings conducted by national investigating authorities or by the Textiles Monitoring Body (TMB). Rather … the Panel's function should be to assess objectively the review conducted by the national investigating authority, in this case the CITA. We draw particular attention to the fact that a series of panel reports in the anti-dumping and subsidies/countervailing duties context have made it clear that it is not the role of panels to engage in a de novo review. In our view, the same is true for panels operating in the context of the ATC, since they would be called upon, as in the context of cases dealing with anti-dumping and/or subsidies/countervailing duties, to review the consistency of a determination by a national investigating authority imposing a restriction under the relevant provisions of the relevant WTO legal instruments, in this case the ATC. …" United States - Underwear, op.cit., para. 7.12.

[406] The United States - Underwear panel also noted in footnote 18 to para. 7.13 to that report: "This approach is largely consistent with the approach adopted by the panel reports cited in footnote 16 (Korea - Anti-Dumping Duties on Imports of Polyacetal Resins from the United States, adopted on 27 April 1993, BISD 40S/205; United States - Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, adopted on 27 April 1994; United States - Initiation of a Countervailing Duty Investigation into Softwood Lumber Products from Canada, adopted on 3 June 1987, BISD 34S/194) although it should be pointed out that the standard of review was expressed in slightly different terms in each of the aforementioned panel reports."

[407] Panel Report on United States - Measures Affecting Imports of Woven Wool Shirts and Blouses from India (United States - Shirts and Blouses), adopted on 23 May 1997, para. 7.52.