SICE - WTO Dispute Settlement WTO Report WT/DS126/R

World Trade

Organization

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

Argentina - Safeguard Measures on Imports of Footwear

(Continued)

8.44 Indeed, for these modifications to be new safeguard measures, they would have to be based on a new investigation, and the conditions for the re-application of a safeguard measure, including the waiting period foreseen in Article 7.5, would have to be observed. In this respect, we note that Argentina itself considers the subsequent resolutions in substantive terms to be based on the same safeguard investigation as the definitive safeguard measure as originally applied, (Resolution 987/97), while arguing at the same time that these subsequent modifications are in procedural terms outside our terms of reference.[458] We further note that Argentina does not argue that these modifications are extensions of the safeguard measure within the meaning of paragraphs 2 and 4 of Article 7.

8.45 We do not here wish to imply that an expansion of the terms of reference of a panel in the complainant's first submission or even later could be permissible under Article 6.2 of the DSU. Clearly, due process and adequate notice would not be served if a complaining party were free to add new measures or new claims to its original complaint as reflected in its panel request at a later stage of a panel proceeding. But this is not the situation in the present dispute because, in our view (and also in the view of both parties), the subsequent resolutions do not constitute entirely new safeguard measures in the sense that they were based on a different safeguard investigation, but are instead modifications of the legal form of the original definitive measure, which remains in force in substance and which is the subject of the complaint.

8.46 In the light of these considerations, we find that our terms of reference include Argentina's provisional and definitive safeguard measures on footwear in their original legal form (Resolutions 226/97 and 987/97) as well as in their subsequently modified forms of application (Resolutions 512/98, 1506/98 and 837/98).

B. The claim under article xix of gatt 1994 and "unforeseen developments"

8.47 The European Communities raises a separate claim under Article XIX:1(a) of GATT with respect to the failure by Argentina to examine whether the import trends of the products under investigation are the result of "unforeseen developments" and the "effect of the obligations incurred by a Member under [the GATT], including tariff concessions". Since tariff concessions and other obligations are an additional element to "unforeseen developments", it necessarily follows for the European Communities that trade liberalisation per se cannot constitute such unforeseen developments. The European Communities submits that Argentina's trade liberalisation within MERCOSUR and the WTO framework was a conscious commercial policy and that the large increase in imports occurred "immediately after the opening up of the economy which began in 1989/90".[459] Therefore, the European Communities concludes that increased imports of footwear cannot be considered "unforeseen developments" within the meaning of Article XIX:1(a) of GATT because increases in imports have to be the result of other unforeseen developments.

8.48 Argentina opposes the EC's theory that the criterion of "unforeseen developments" applies to safeguard action taken under the WTO agreements. First, Argentina considers that there is a conflict with respect to the criterion of "unforeseen developments" between Article XIX and the WTO Safeguards Agreement and that, pursuant to the General Interpretative Note to Annex 1A to the Agreement Establishing the WTO, the latter prevails. In the alternative, Argentina argues that it could not have foreseen the extent of the surge of footwear imports resulting from the liberalisation programmes mentioned by the European Communities.

8.49 Article XIX:1( a) of GATT on "Emergency Safeguard Measures" reads:

"If, as a result of unforeseen developments and of the effect of the obligations incurred by a Member 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." (emphasis added).

Article 2.1 of the WTO Agreement in turn provides:

"A Member 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." (footnote omitted).

8.50 While it is true that the Safeguards Agreement by and large incorporates and further develops in greater detail the conditions for the imposition of safeguard measures provided for in Article XIX of GATT, there is at least one difference. The condition in Article XIX that safeguard measures may not be imposed unless the increased imports alleged to cause or threaten serious injury are a result of unforeseen developments and of the effect of the obligations incurred by a Member does not appear in the Safeguards Agreement.

8.51 We note that the parties and third parties have addressed in some detail the questions (i) whether the provisions of the Safeguards Agreement prevail over the "unforeseen developments" criterion of Article XIX of GATT because they are in conflict with one another, (ii) whether all the requirements of Article XIX (including the criterion of "unforeseen developments") are subsumed by the provisions of the Safeguards Agreement,[460] and (iii) whether the requirements of Article XIX of GATT and the Safeguards Agreement have to be complied with on a cumulative basis. The parties seem to agree that, since the entry into force of the WTO agreements, safeguard measures can no longer be imposed through the exclusive application of Article XIX of GATT in and of itself.

8.52 We start our analysis by examining whether any provision of the new Safeguards Agreement addressed the relationship between the Safeguards Agreement and Article XIX of GATT. In this respect we note that Article 1 of the Safeguards Agreement provides:

"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".

Article 11.1(a) of the Safeguards Agreement on the "Prohibition and Elimination of Certain Measures" in turn requires that:

"[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."

8.53 In the light of these provisions, we need to interpret the phrases "provisions of … Article [XIX] applied in accordance with this [Safeguards] Agreement", "application of safeguard measures", i.e., "those provided for in Article XIX of GATT". In accordance with the "customary rules of interpretation of public international law" referred to in Article 3.2 of the DSU, i.e., Articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT), we deem it appropriate to approach these questions in the light of the ordinary meaning, the context and the object and purpose of the Safeguards Agreement, Article XIX of GATT and, to the extent relevant, the General Interpretative Note to Annex 1A of the WTO Agreement.

8.54 The ordinary meaning of the term application can be described as "bringing of a general or figurative statement, a theory, principle, etc., to bear upon a matter"; "[the] applicability in a particular case", "relevance", "the bringing of something to bear practically in a matter", "put into practical operation".[461] These descriptions of the ordinary meaning of application imply that bringing the theory or principle, i.e., safeguard measures in the meaning of Article XIX, into practical operation, requires compliance with and implementation of the detailed rules and procedures of the Safeguard Agreement when introducing or maintaining safeguard measures.

8.55 We note in this respect that Article 1 of the Safeguards Agreement does not refer to the application of Article XIX as such. Rather, it refers to the application of safeguard measures, which are then defined as those measures provided for in Article XIX. However, Article 11 makes clear that "such [emergency] action" has to conform with Article XIX "applied in accordance with this [Safeguards] Agreement". In our view, this indicates that the application of safeguard measures in the meaning of Article XIX requires - since the entry into force of the Safeguards Agreement - conformity with the requirements and conditions of the latter agreement. Although all the provisions of Article XIX of GATT continue to legally co-exist with the Safeguards Agreement in the framework of the single undertaking of the Uruguay Round agreements, any implementation of safeguard measures in the meaning of Article XIX presupposes the application of and thus compliance with the provisions of the Safeguards Agreement.

8.56 To put it differently, we believe that the choice of the word application appears to imply that rules for the imposition of safeguard measures provided for in Article XIX of GATT and the rules for the imposition of safeguard measures deriving from the Safeguards Agreement have to be read in conjunction and have become intrinsically linked, if not inseparable from one another since the entry into force of the WTO Agreement. While the Safeguards Agreement does not supersede or replace Article XIX, which continues to remain in force as part of the GATT, the original conditions contained in Article XIX have to be read in the light of the subsequently negotiated and much more specific provisions of the Safeguards Agreement. Those provisions of the Safeguards Agreement place the original rule of Article XIX within the entire package of the new WTO legal system and make it operational in practice.

8.57 In this regard, we recall that the Brazil - Desiccated Coconut case focused on the relationship between Article VI of GATT and the Agreement on Subsidies and Countervailing Measures (SCM Agreement) as bases for the imposition of countervailing duties. In other words, that case concerned a situation which is analogous to the present dispute. In Brazil - Desiccated Coconut,[462] the Appellate Body noted that

"the relationship between the GATT of 1994 and the other goods agreements in Annex 1A is complex and must be examined on a case-by-case basis. Although the provisions of the GATT of 1947 were incorporated into, and became part of the GATT 1994, they are not the sum total of the rights and obligations of WTO Members concerning a particular matter. For example with respect to subsidies on agricultural products, Articles III, VI, XVI of the GATT 1994 alone do not represent the total rights and obligations of WTO Members. The Agreement on Agriculture and the SCM Agreement reflect the latest statement of WTO Members as to their rights and obligations concerning agricultural subsidies.[463]" (emphasis added).

The Appellate Body in Brazil - Desiccated Coconut also endorsed the panel's statement that:

"the SCM Agreements[464] 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."[465] (emphasis added).

8.58 Given the reasoning developed by the panel and the Appellate Body in the Brazil - Desiccated Coconut case, it is our view that Article XIX of GATT and the Safeguards Agreement must a fortiori be read as representing an inseparable package of rights and disciplines which have to be considered in conjunction. Therefore, we conclude that Article XIX of GATT cannot be understood to represent the total rights and obligations of WTO Members, but that rather the Safeguards Agreement as applying the disciplines of Article XIX of GATT, reflects the latest statement of WTO Members concerning their rights and obligations concerning safeguards. Thus the Safeguards Agreement should be understood as defining, clarifying, and in some cases modifying the whole package of rights and obligations of Members with respect to safeguard measures as they currently exist. By the same token, and in the light of the principle of effective treaty interpretation, the express omission of the criterion of unforeseen developments in the new agreement (which otherwise transposes, reflects and refines in great detail the essential conditions for the imposition of safeguard measures provided for in Article XIX of GATT) must, in our view, have meaning.

8.59 We find support for this interpretation of Articles 1 and 11 of the Safeguards Agreement also in the immediate context of these provisions. Article 10 defines the temporal delimitation of the applicability of Article XIX of GATT 1947 and the new Safeguards Agreement, providing that:

"Members shall terminate all safeguard measures taken pursuant to Article XIX of GATT 1947 that were in existence on the date of entry into force of the WTO Agreement not later than eight years after the date on which they were first applied or five years after the date of entry into force of the WTO Agreement, whichever comes later."

8.60 This provision read in conjunction with Articles 1 and 11 of the Safeguards Agreement reinforces, in our view, the interpretation that safeguard measures under Article XIX of GATT - which is identical in wording with Article XIX of GATT 1947 - cannot be applied, i.e., made operational or put into practice, unless they are in conformity, i.e., in compliance with the requirements and conditions of the Safeguards Agreement.

8.61 Concerning the object and purpose of the Safeguards Agreement, we note that its preamble recognises as the object of the Safeguards Agreement "the need to clarify and reinforce the disciplines of GATT, and specifically those of its Article XIX (Emergency Action on Imports of Particular Products)," as well as the purpose: "to re-establish multilateral control over safeguards and eliminate measures that escape such control,"[466] and that, therefore, "a comprehensive agreement, applicable to all Members and based on the basic principles of GATT, is called for".[467]

8.62 Accordingly, the object of the Safeguards Agreement is to "clarify and reinforce" the disciplines of Article XIX.[468] It is the very point of a new agreement clarifying existing disciplines that it implies some degree of refinement or modification, such as in this case, in respect of the express omission of the unforeseen developments criterion.

8.63 The preamble further reflects as one of the primary purposes of the Safeguards Agreement the need to "re-establish multilateral control over safeguards and eliminate measures that escape such control". This recital highlights the wide-ranging lack of discipline on safeguard measures in the pre-Uruguay Round international trade relations. Such a re-establishment of multilateral control implies a new balance of rights and obligations that in some cases modifies the whole package of rights and obligations resulting from the Uruguay Round negotiations. On the one hand, new, clearer and more stringent conditions for the imposition of safeguard measures apply and explicit prohibitions of grey-area measures are provided for in order to contain acts of circumvention. On the other hand, there are provisions that allow for more flexible conditions, such as Article 8.3 of the Safeguards Agreement, which provides for an explicit derogation postponing the right of affected Members to suspend equivalent concessions after the imposition of a safeguard measure. The express omission of the unforeseen development criterion in the new Safeguards Agreement would arguably fit in the latter category.

8.64 One could argue that such an interpretation of the purpose of the Safeguards Agreement, particularly with respect to the omission of the criterion of unforeseen developments, simply reflects the state-of-the-art in dispute settlement practice concerning safeguard measures with respect to this criterion since the Hatters Fur case of 1951.[469] The members of the Working Party (except for the United States) in that case agreed from a general perspective:

"that the term 'unforeseen developments' should be interpreted to mean developments occurring after the negotiation of the relevant tariff concession which it would not be reasonable to expect that the negotiators of the country making the concession could and should have foreseen at the time when the concession was negotiated."

However, that same Working Party concluded with respect to the particular case before it that:

"the fact that hat styles had changed did not constitute an 'unforeseen development' within the meaning of Article XIX, but that the effects of the special circumstances of this case, and particularly the degree to which the change in fashion affected the competitive situation, could not have reasonably be expected to have been foreseen by the US authorities in 1947 and that the condition of Article XIX that the increase in imports must be due to unforeseen developments and to the effect of the tariff concessions can therefore be considered to have been fulfilled."

8.65 It is probably fair to say that the interpretation of 'unforeseen developments' in that case made it easier for user governments of safeguard measures to meet this condition. Therefore, it has been argued that the Hatters Fur case essentially read the unforeseen developments condition out of the text of Article XIX:1(a) of GATT 1947.[470] While this statement has some explanatory value, it is of course not entirely accurate from a legal perspective since dispute settlement practice cannot add to or diminish the rights and obligations of the signatories of an international treaty. It would be wrong to proceed from the assumption that a single working party report from the early years of GATT 1947 could have a legal impact upon the wording of Article XIX of GATT. This principle was true under GATT 1947 and has been explicitly embodied in the framework of the WTO agreements, e.g., in Article 19.2 of the DSU. Therefore, one cannot assume that the prevailing practice of non-enforcement of the unforeseen developments condition in safeguard investigations in the decades since the adoption of the Hatters Fur Working Party report could have had the effect of modifying the rights and obligations of Contracting Parties to the GATT 1947 or changing the text of GATT as it forms part of the WTO agreements.

8.66 It would be unrealistic to assume that the practice of non-enforcement of the unforeseen developments condition was unknown when the new Safeguards Agreement was negotiated during the Uruguay Round. If it had been the object and purpose of the Safeguards Agreement to clarify and reinforce the disciplines of Article XIX and to re-establish multilateral control over safeguard measures also with respect to the unforeseen developments condition, the need for clear rules, detailed definitions and refined procedures regarding this condition would have been of particular importance. To put it differently, if the reinforcement of the unforeseen developments condition had been one of the objectives of the new Safeguards Agreement, one would expect to find detailed provisions concerning it in the new agreement, rather than an express omission of that criterion. In this regard, we recall that the fourth recital of the preamble to the Safeguards Agreement recognises the purpose to create:

"a comprehensive agreement, applicable to all Members and based on the basic principles of GATT 1994 …".

8.67 It appears that the negotiators intended the new Safeguard Agreement to comprehensively cover the field of the application of safeguard measures and deliberately chose not to include the unforeseen developments criterion in that new comprehensive agreement. As a result, since we must give meaning to the fact that the new Safeguards Agreement does not in so many words make a single reference to the unforeseen developments condition, conformity with the explicit requirements and conditions embodied in the Safeguards Agreement must be sufficient for the application of safeguard measures within the meaning of Article XIX of GATT.

8.68 In arriving at this conclusion, we wish to emphasise that the issue before this Panel is not really whether the criterion of unforeseen developments of Article XIX is in outright conflict[471] - in the sense of being mutually exclusive or mutually inconsistent, quod non, with Article 2.1 or any other provision of the Safeguards Agreement. In this respect, we recall the statement of the Indonesia - Automobiles panel that in international law there is a presumption against conflict.[472] Nevertheless, if we were to assume that a conflict exists, the General Interpretative Note to Annex 1A to the Agreement Establishing the WTO would resolve the issue in the sense that the provisions of the Safeguards Agreement would prevail over Article XIX of GATT to the extent of that conflict.[473]

8.69 In the light of these considerations, it is our conclusion that safeguard investigations conducted and safeguard measures imposed after the entry into force of the WTO agreements which meet the requirements of the new Safeguards Agreement satisfy the requirements of Article XIX of GATT. Therefore, we see no basis to address the EC's claims under Article XIX of GATT separately and in isolation from those under the Safeguards Agreement.

E. Claims under the Safeguards Agreement

8.70 In the following sections we discuss the claims under Articles 2, 4, 5, 6 and 12 of the Safeguards Agreement. In examining the claims under Articles 2 and 4, we will discuss, inter alia: (i) whether Article 2 (and the footnote to Article 2.1) permit including MERCOSUR imports in the investigation, while imposing the safeguard measure exclusively against non-MERCOSUR imports, (ii) the scope of the domestic industry and the products covered by the investigation, (iii) the appropriate standard of review by this Panel, (iv) whether there were imports in increased quantities in absolute or relative terms, (v) the review of Argentina's injury analysis, and (vi) the review of Argentina's causation analysis.

8.71 We will then address (i) the claim concerning the application of the safeguard measures within the meaning of Article 5, (ii) the imposition of provisional safeguard measures within the meaning of Article 6 and (iii) the claims concerning the notification requirements foreseen in Article 12.

1.The imposition of safeguard measures in the case of a customs union

8.72 One of the EC's core allegations against Argentina's safeguard investigation is that the Argentine authorities conducted an analysis of imports, injury and causation on the basis of statistics for all imports, i.e., from MERCOSUR countries as well as from third countries, and then applied the safeguard measure only against imports from non-MERCOSUR third countries. The European Communities does not in principle challenge the exclusion of MERCOSUR imports from the application of the safeguard measure, provided, however, that MERCOSUR imports also are excluded from the "increased imports", "serious injury" and "causality" analyses. The European Communities contends that Argentina cannot, consistently with the Safeguards Agreement, include MERCOSUR imports in the injury and causation analyses and then exclude these imports from application of the resulting safeguard measures.[474]

8.73 Argentina responds that the European Communities suggests a methodology for the injury and causation analyses in the case of a customs union which reads obligations into the Safeguards Agreement that it does not explicitly contain. In Argentina's view, public international law allows a sovereign country to adopt one of several possible interpretations within the latitude that the wording of a treaty provision permits. Argentina relies in its argumentation concerning the interpretation of treaty law on the Appellate Body Reports in the European Communities - Computer Equipment[475] case and the India - Patents case.[476]

8.74 In particular, Argentina takes the position that Articles 2 and 4 of the Safeguards Agreement only refer to the concept of " imports" without any further limitation or clarification and that the footnote to Article 2 emphasises the lack of a common understanding concerning the application of safeguard measures in the case of a customs union. Argentina reads the third sentence of the footnote[477] to mean that only the "conditions" existing within that member State of the customs union should matter for the safeguard investigation. For Argentina this implies that all imports from intra- and extra-regional sources may be taken into consideration when assessing the "conditions in that member State" because the footnote does not explicitly prohibit the inclusion of imports from within the customs union in the injury or causation analyses.

8.75 In considering issues relating to the imposition of safeguard measures in the case of a customs union, in the dispute before us the essential question is whether Argentina was permitted under the Safeguards Agreement to take MERCOSUR imports into account in the analysis of injury factors and of a causal link between increased imports and the alleged (threat of) serious injury, and was at the same time permitted to exclude MERCOSUR countries from the application of the safeguard measure imposed.

(a) Article 2 and the footnote to Article 2.1

8.76 We note that Article 2 of the Safeguards Agreement sets out the basic requirements for the application of safeguard measures:

"Article 2

Conditions

1. 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.

2. Safeguard measures shall be applied to a product being imported irrespective of its source."

Footnote 1 to Article 2.1 of the Safeguards Agreement provides that:

"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. Nothing in this Agreement prejudges the interpretation of the relationship between ArticleXIX and paragraph8 of ArticleXXIV of GATT 1994.(emphasis added)."

8.77 We address first Argentina’s argument concerning the footnote to Article 2.1, specifically that the footnote emphasises the lack of understanding among Members regarding the application of safeguard measures in the case of a customs union, and that the footnote’s reference to “conditions in that member State and the measure shall be limited to that member State” does not explicitly prohibit the inclusion in the injury or causation analyses of imports from within a customs union. We consider this argument in accordance with the ordinary meaning of Article 2 and its footnote, as well as their context and in the light of their object and purpose.

8.78 According to the ordinary meaning of the text of the footnote to Article 2.1, in the case of measures imposed by a customs union there are two options for imposing safeguard measures, i.e., (i) as a single unit or (ii) on behalf of a member State. In the latter case, when a safeguard measure is imposed on behalf of a member State, the footnote's third sentence sets out two conditions, i.e., (i) "all requirements for the determination of serious injury or threat thereof shall be based on the conditions existing in that member State" and (ii) "the measure shall be limited to that member State".

8.79 Accordingly, the footnote also offers two options for conducting safeguard investigations in the case of measures to be applied by a customs union, i.e., (i) on a customs union-wide basis, or (ii) on a member State-specific basis. This dispute clearly centres around the second option. Argentina correctly points out that, as a result, the requirements for determining increased imports, serious injury and causation should be based on the "conditions existing in that member State". We agree with Argentina that this phrase would not appear to prevent the investigating authority of that member State from including imports from other member States of the customs union in question in its injury and causation analyses. Thus the second option certainly permits Argentina to take imports from all sources, including those from within MERCOSUR, into consideration in its safeguard investigation.

8.80 The EC's argument is rather that if a safeguard measure is imposed only on imports from non-MERCOSUR sources, injury and causation analyses should be limited to non-MERCOSUR imports, too. In other words, in the EC's view, there should be a parallelism between, on the one hand, the investigation leading to and, on the other hand, the application of safeguard measures.

8.81 Thus, the next question is whether the ordinary meaning of the text of the footnote provides any guidance regarding to whom[478] a safeguard measure may be applied. We note that the first part of the footnote's third sentence ties the "conditions existing in that member State" to the examination of the "requirements" for the determination of serious injury or the threat thereof. Therefore, the first part of the footnote's third sentence addresses explicitly only by whom, and on the basis of which conditions , safeguard measures may be imposed, but not to whom such measures may be applied. Thus, the first part of this sentence leaves this question open.

8.82 The last phrase of the footnote's third sentence provides that "the measure shall be limited to that member State". In our view, the requirement to limit the measure “to that member State” makes it clear that, based on a member-State-specific investigation, the customs union may impose safeguard measures only on behalf of that member State, but not as if the causation of serious injury had been established for the entire customs union. In that case, the provisions of the footnote's second sentence would apply. In other words, the last phrase of the footnote’s third sentence means that the only market that can be protected by a safeguard measure is the market that was the subject of the underlying investigation. Hence, this phrase concerns only by whom, and not to whom a safeguard measure may be imposed. Therefore, this provision as well leaves open the question of whether there is a requirement to impose such safeguard measures either (i) against all sources of supply including the other member States of a customs union, or (ii) exclusively against third-country suppliers.

8.83 Thus, based on the analysis of the ordinary meaning of the text of the footnote to Article 2.1, we conclude that that footnote does not concern to whom but rather by whom a safeguard measure may be applied. Therefore, the ordinary meaning of that footnote does not clarify the question of whether the safeguard measure must be applied to all imports or may be applied solely to imports from third countries.

8.84 We next consider whether the context of the footnote indicates that a Member would be permitted to include imports from within a customs union in its injury and causation analyses while excluding such imports from the application of the safeguard measure. The immediate context of Article 2.1 and the footnote thereto is Article 2.2 which provides that "[s]afeguard measures shall be applied to a product being imported irrespective of its source," i.e., on the basis of the most-favoured-nation treatment principle. The ordinary meaning of Article 2.2 would appear to imply that, as a result of a member-State-specific investigation, safeguard measures have to be imposed on a non-discriminatory basis against products from all sources of supply, regardless of whether they originate from within or from outside of the customs union. Argentina has submitted that footnote 1 to Article 2.1 should be interpreted also to derogate from Article 2.2 and that, accordingly, customs unions should be deemed exempted from that MFN requirement. However, we are mindful of the fact that the footnote was inserted after the word "Member" in the first paragraph of Article 2. It therefore clearly refers solely to the question of who can impose a measure, and not to the supplier countries that might be affected by it. For the footnote to have a broader meaning, the drafters would have had to place it after the title of Article 2, or in both paragraphs of that article. The fact that they did not do so must have meaning and has to be taken into account in our interpretation.

Continue on to: (a) Article 2 and the footnote to Article 2.1: 8.85

[458] Argentina's answer to question 35 by the Panel, see para. 4.11 of the descriptive part.

[459] G/SG/N/8/ARG/1, Exhibit EC-16, p.3.

[460] Third party submission by the United States, see descriptive part, section VI.C.1.(d).

[461] The New Shorter Oxford English Dictionary on Historical Principles, Oxford (1993) p.100.

[462] Appellate Body Report on Brazil - Measures Affecting Desiccated Coconut, AB-1996-4, WT/DS22/AB/R, adopted on 20 March 1997, p. 14.

[463] Panel Report on Brazil - Measures Affecting Desiccated Coconut, WT/DS22/R, adopted on 20 March 1997, para. 227.

[464] The plural means the Tokyo Round Subsidies Agreement and the Uruguay Round SCM Agreement.

[465] Panel Report on Brazil - Desiccated Coconut, para. 246.

[466] Recital 2.

[467] Recital 4.

[468] The term clarify may be understood as meaning "make clear or plain to the understanding, remove complexity, ambiguity or obscurity, remove ignorance, misconception or error from, become transparent" The New Shorter Oxford English Dictionary on Historical Principles, Oxford (1993) p. 411.

[469] Working Party Report on Withdrawal by the United States of a Tariff Concession under Article XIX of the GATT, GATT/CP/106, adopted on 22 October 1951.

[470] Jackson, John H., World Trade and the Law of GATT, Indianapolis (1969), pp. 560 et seq.

[471] The most recent Appellate Body report to address the concept of "conflict" is the Guatemala - Cement case. However, in the Guatemala - Cement case the Appellate Body dealt with the question of the relationship between the special or additional dispute settlement provisions of the Anti-dumping Agreement as contained in Annex 1A to the WTO Agreement and the DSU as incorporated in Annex 2 to the WTO Agreement, whereas the present dispute concerns the relationship between the substantive provisions of an Annex 1A agreement and the GATT 1994.

[472] The Panel on Indonesia - Certain Measures Affecting the Automobiles Industry (WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R), adopted on 23 July 1998, para. 14.28: "… In international law for a conflict to exist between two treaties, three conditions have to be satisfied. First, the treaties concerned must have the same parties. Second, the treaties must cover the same substantive subject-matter. Were it otherwise, there would be no possibility for conflict. Third, the provisions must conflict, in the sense that the provisions must impose mutually exclusive obligations. … The presumption against conflict is especially reinforced in cases where separate agreements are concluded between the same parties, since it can be presumed that they are meant to be consistent with themselves, failing evidence to the contrary."

[473] General Interpretive Note: "In the event of conflict between a provision of the GATT 1994 and a provision of another agreement in Annex 1A to the Agreement Establishing the WTO …, the provisions of the other agreement shall prevail to the extent of the conflict."

[474] MERCOSUR imports accounted, e.g., in 1991 only for 1.90 million pairs of 8.86 million total imports (i.e., 21.4 per cent) and in 1995, for roughly one fourth of total imports, i.e., 5.83 of 19.84 million pairs. However, in 1996 MERCOSUR supplied the largest percentage (55.7 per cent) of total imports of 13.47 million pairs, i.e., 7.5 million pairs (as opposed to 5.97 million pairs from third countries).

[475] "The purpose of treaty interpretation under Article 31 of the Vienna Convention is to ascertain the common intentions of the parties. These common intentions cannot be ascertained on the basis of the subjective and unilaterally determined "expectations" of one of the parties to a treaty." Appellate Body Report on European Communities - Customs Classification of Certain Computer Equipment, (WT/DS62, 67, 68/AB/R), para. 84.

[476] The Appellate Body also affirmed "The duty of a treaty interpreter is to examine the words of the treaty to determine the intentions of the parties. This should be done in accordance with the principles of treaty interpretation set out in Article 31 of the Vienna Convention. But these principles of interpretation neither require nor condone the imputation into a treaty of words that are not there or the importation into a treaty of concepts that were not intended." Appellate Body Report on India - Patent Protection for Pharmaceuticals and Agricultural Chemical Products, (WT/DS/50/AB/R), para 45.

[477] i.e., where a safeguard "is applied on behalf of a customs union's member State, all requirements for the determination of serious injury shall be based on the conditions existing in that member State and the measure shall be limited to that state".

[478] For ease of discussion, we use the term "to whom" to mean "to imports from which sources of supply".

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