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)

8.85 We do not, therefore, share Argentina's view that the relationship between Article 2.2 and the footnote to Article 2.1 is one of a general provision and an exception. Consequently, we conclude that the footnote does not derogate from the MFN principle embodied in Article 2.2. In this regard, we note that where the Safeguards Agreement provides for an exception it does so in clear and explicit terms. For example, Article 9 exempts, subject to certain thresholds and limitations, imports from developing country Members from the imposition of safeguard measures where the injury and causation fully reflect the effects of those imports from developing countries.[479]

8.86 If a customs union imposes safeguard measures based on a customs-union-wide investigation as a single unit against third countries (the situation captured by the footnote's second sentence), the measure would necessarily be imposed only on third country suppliers, as all other suppliers would be part of the domestic industry. By contrast, in the situation captured by the footnote's third sentence, where the investigation was limited to one member State, and where it was determined that serious injury or threat thereof was caused by imports from intra-regional as well as extra-regional sources, we see nothing that would prevent a customs union from imposing a safeguard measure on imports from all of those sources in accordance with Article 2.2, i.e., not only imports from third countries, but also intra-regional imports from the other member States of the customs union.

8.87 This result supports the interpretation that the two options offered by the footnote to Article 2.1 read in conjunction with Article 2.2 imply a parallelism between the scope of a safeguard investigation and the scope of the application of safeguard measures. Thus, in the light of the context of the footnote to Article 2.1, a member-state-specific investigation in which serious injury or threat thereof is found based on imports from all sources could only lead to the imposition of safeguard measures on a MFN-basis against all sources of intra-regional as well as extra-regional supply of a customs union. By the same token, a customs-union-wide investigation could only lead to the application of safeguard measures to all sources of extra-regional supply and could not justify the application of safeguard measures against some or all sources of intra-regional supply, as these would be part of the domestic industry in that context.

8.88 Finally, we consider these provisions in the light of the object and purpose of the Safeguards Agreement. We recall that the preamble to the Agreement[480] recognises, inter alia, as the object of the Safeguards Agreement the need to clarify and reinforce the disciplines of GATT (including those of Article XIX). It also underscores that it is the purpose of that agreement to re-establish multilateral control over safeguards and to eliminate measures that escape such control. In our view, in order to give this object and purpose meaning, a strict interpretation and implementation of the disciplines provided for in the Safeguard Agreement is needed. Otherwise, the reinforcement of disciplines, re-establishment of multilateral control and elimination of so-called "grey-area" measures could not be achieved. The preamble[481] further recognises that a "comprehensive agreement, applicable to all Members and based on the basic principles of GATT, is called for". We believe that these "basic principles" also include the most-favoured nation principle which, pursuant to Article 2.2, governs the imposition of safeguard measures on products from all sources of supply.

8.89 If we were to follow Argentina's position regarding the interpretation of Article 2 and the footnote to Article 2.1, in our view, the objectives of reinforcing disciplines concerning safeguard measures, re-establishing multilateral control and eliminating measures that escape such control may not be met for the following reasons. If, on the one hand, on the basis of an investigation taking into account third-country imports that cause (or threaten) serious injury to the domestic industry in the customs union in its entirety, a customs union decided to impose safeguard measures as a single unit, in accordance with the footnote's second sentence, such an investigation would lead to the imposition of safeguard measures against third-country imports only. If, on the other hand, a national safeguard authority were to conduct a member-State-specific investigation, taking into account serious injury caused or threatened by imports from other member States of a customs union as well as third-country imports, but the Members of the customs union had agreed not to apply safeguard measures amongst themselves, under Argentina's methodology such an investigation again would lead to the imposition of essentially identical safeguard measures against third-country imports only. We are not persuaded that, given the Safeguards Agreement's detailed rules on, e.g., increased imports, serious injury, causation and level of permissible safeguard measures, two substantially different safeguard investigations, i.e., one customs-union-wide and the other member-State-specific, could properly yield essentially the same outcome, i.e., the imposition of safeguard measures exclusively against third-country imports.

8.90 We believe that our reading of Articles 2.1 and the footnote thereto in conjunction with Article 2.2 and the object and purpose of the Safeguards Agreement gives meaning to all the parts of these provisions and does not reduce any of them to redundancy or inutility.

8.91 Thus, in applying Article 31 of the Vienna Convention we have interpreted Article 2 (and footnote to Article 2.1) in the light of their ordinary meaning, their context, and the object and purpose of the Safeguards Agreement, with a view to determining the scope and the nature of the obligations pertaining to the use of safeguard measures in the case of a customs union. On the basis of this analysis, we conclude that a member-state-specific investigation that finds serious injury or threat thereof caused by imports from all sources cannot serve as a basis for imposing a safeguard measure on imports only from third-country sources of supply.

8.92 We arrive at this conclusion regarding Article 2 and the footnote to Article 2.1 without having considered yet the possible implications of Article XXIV of GATT. We will turn to these issues next.

(b) Article XXIV of GATT

8.93 Argentina emphasises that the last sentence of the footnote to Article 2.1 explicitly states that an agreed understanding on the relationship between Articles XIX and XXIV of GATT does not exist. Argentina claims that it could not impose safeguard measures against imports from other MERCOSUR countries because Article XXIV of GATT as well as secondary MERCOSUR legislation prohibit it from doing so. With respect to Article XXIV of GATT, Argentina emphasises that Article XIX of GATT is not listed in Article XXIV:8(a)(i) or (b) of GATT among the exceptions from the requirement to abolish all duties and other restrictive regulations of commerce on substantially all trade between the constituent territories of a customs union or a free-trade area. Therefore, it is, in Argentina's view, incompatible with the purpose of Article XXIV:8 of GATT to impose safeguard measures within the MERCOSUR customs union.

8.94 The European Communities contends that Article XXIV:8 of GATT does not prohibit the maintenance of the possibility to impose safeguard measures within customs unions or free-trade areas, either during the transitional period leading to their formation, or after their completion. The European Communities argues that safeguard measures are an exceptional emergency instrument of a temporary nature and are limited to a specific product, and that safeguard measures do not as such affect the establishment and the nature of a customs union or a free-trade area. Article XXIV of GATT permits the members of a customs union or free-trade area to decide whether, when applying a safeguard measure pursuant to Article XIX of GATT 1994 and the Agreement on Safeguards, to exempt other members of the customs union or free-trade area from the measure.

8.95 We recall in this regard that the last sentence of the footnote to Article 2.1 provides that:

"Nothing in the [Safeguards] Agreement prejudges the interpretation of the relationship between Article XIX and paragraph 8 of the Article XXIV of GATT 1994."

8.96 In addressing this issue we note that Article XXIV:8 [482] of GATT on "Customs Unions and Free-Trade Areas” defines that, for purposes of GATT, a customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories. Articles XXIV:8(a)(i)(ii) and (b) provide that - within the group of customs territories forming a customs union or a free-trade area - duties and other restrictive regulations of commerce are to be eliminated (except for those permitted under Articles XI, XII, XIV, XV and XX) with respect to substantially all trade between the constituent territories. These exceptions from the prohibition of "other restrictive regulations of commerce" do not include Article XIX. Practice of the Contracting Parties to the GATT of 1947 and of WTO Members is inconclusive on the issue of the imposition or maintenance of safeguard measures between the constituent territories of a customs union of a free-trade area. It is a matter of fact that many agreements establishing free-trade areas or customs unions allow for the possibility to impose safeguard measures on intra-regional trade, while few regional integration agreements explicitly prohibit the imposition of intra-regional safeguard measures once the formation of such an integration area is completed.

8.97 Although the list of exceptions in Article XXIV:8 of GATT clearly does not include Article XIX, in our view, that paragraph itself does not necessarily prohibit the imposition of safeguard measures between the constituent territories of a customs union or free-trade area during their formation or after their completion. A frequently advanced justification for the maintenance or introduction of safeguards clauses within regional integration areas is the argument that the obligation of Article XXIV:8 to eliminate all duties and other restrictions of commerce applies only to "substantially all" but not necessarily to "all" trade between the constituent territories. It could be argued that for all practical purposes the application of safeguard measures to particular categories of like or directly competitive products is unlikely to affect a trade volume that could put the liberalisation of "substantially all trade" between the constituent territories of a customs union into question. But the persuasiveness of this argument depends mainly on the extent to which safeguard measures are actually imposed. Thus we do not exclude the possibility that extensive use of safeguard measures within regional integration areas for prolonged periods could run counter to the requirement to liberalise "substantially all trade" within a regional integration area. In our view, the express omission of Article XIX of GATT from the lists of exceptions in Article XXIV:8 of GATT read in combination with the requirement to eliminate all duties or other restrictions of commerce on "substantially all trade" within a customs union, leaves both options open, i.e., abolition of the possibility to impose safeguard measure between the member States of a customs union as well as the maintenance thereof.

8.98 In the alternative, even if one were to presume that the maintenance of intra-regional safeguards clauses between the member States of customs unions or free-trade areas is difficult to reconcile with the wording of Article XXIV:8 of GATT (i.e., the omission of Article XIX from the exemption list), we recall that Article XXIV of GATT does not require the immediate completion of a customs union or free-trade area with full integration of intra-regional trade and immediate compliance with all the requirements foreseen in Article XXIV of GATT. For a "reasonable period" of normally not more than ten years,[483] interim agreements leading to the gradual formation of a customs union or a free-trade area are permissible under Article XXIV. In the case of the MERCOSUR treaty, the temporary lack of full integration of "substantially all trade" due to the maintenance of intra-regional safeguards clauses would still be justifiable with this transitional status of the customs union. Accordingly, pending the completion of integration within MERCOSUR, the requirements of Article XXIV would not force Argentina to apply safeguard measures exclusively against third countries.

8.99 There is also no doubt in our minds that the letter and spirit of Article XXIV:8 of GATT permit member States of a customs union to agree on the elimination of the possibility to impose safeguard measures between the constituent territories. The Safeguards Agreement as well leaves each Member free to agree with other Members in the framework of a customs union to renounce the possibility to impose safeguard measures between the constituent territories with a view to completing the substitution of a single customs territory for two or more customs territories as envisaged by Article XXIV:8 of GATT. However, even if we accept the common understanding of the parties that the imposition of safeguard measures between member States of MERCOSUR is prohibited,[484] Argentina and MERCOSUR are not left without recourse. Indeed, where a customs union such as MERCOSUR has elected as a matter of policy not to use safeguard measures internally, that customs union retains the option of imposing safeguard measures by the customs union as a single unit. Therefore, our interpretation of Article XXIV, read in conjunction with Article 2 and the footnote to Article 2.1 would by no means deprive a customs union of its right to impose safeguard measures as a single unit.

8.100 Argentina further submits that it is US practice under the escape clause of Section 202 of the US Trade Act of 1974 to make injury determinations on the basis of global imports, while it is possible, according to Article 802 of NAFTA, to exclude, subject to certain conditions, imports from other NAFTA-countries from the application of safeguard measures.[485] We note that it is not within our terms of reference to make any determinations concerning the consistency or inconsistency with WTO law of the safeguard provisions of NAFTA, or of individual safeguard determinations based thereon. We recall, however, that MERCOSUR is a customs union, whereas NAFTA is a free-trade agreement, and that the footnote to Article 2.1 of the Safeguards Agreement concerns only regional integration in the form of a customs union. In these circumstances, we consider that arguments concerning Chapter 8 of the NAFTA Treaty in general and the Wheat Gluten case in particular have no bearing on the present dispute.

8.101 In the light of these considerations, we do not agree with the argument that in the case before us Argentina is prevented by Article XXIV:8 of GATT from applying safeguard measures to all sources of supply, i.e., third countries as well as other member States of MERCOSUR.

8.102 Therefore, in the light of Article 2 of the Safeguards Agreement and Article XXIV of GATT, we conclude that in the case of a customs union the imposition of a safeguard measure only on third-country sources of supply cannot be justified on the basis of a member-state-specific investigation that finds serious injury or threat thereof caused by imports from all sources of supply from within and outside a customs union.

8.103 We continue our analysis of the EC's claims because, without fully considering Argentina's investigation, it would not be possible to ascertain whether it provides the legal basis for the imposition of a safeguard measure. In the following sections we thus examine whether the safeguard investigation has established the essential conditions under the Safeguards Agreement for imposing a safeguard measure, i.e., (i) imports in such increased quantities, (ii) serious injury or threat thereof and (iii) the existence of a causal link between these two criteria, even if imports from all sources of supply are taken into account.

2. Background to the investigation

(a)The domestic industry

8.104 Argentina's report on its investigation indicates that the Argentine footwear industry is composed of a large number of large, medium and small manufacturers.[486] According to Argentina, three principal manufacturers account for 35 per cent of domestic production while the other 65 per cent is spread over some 1,500 footwear makers. Widespread use of subcontracting in certain stages of production is typical of Argentina's footwear industry. There are also licensing or supply agreements or contracts with foreign firms to produce footwear with international marks for the domestic market.

8.105 The Argentine domestic industry, represented by the Chamber of the Footwear Industry (Cámara de la Industria del Calzado or "CIC"), lodged a request for a safeguard investigation on 26 October 1996 pursuant to the provisions of the Decree 1059/96 which implements the WTO Safeguards Agreement in the Argentine legal system. The Chamber for the Production of and International Trade in Footwear and Related Products (Cámara de Producción y Comercio Internacional de Calzado y Afines or "CAPCICA") which represents the producer-importers and importers opposed the request for the application of safeguard measures.[487]

8.106 We recall that Argentina submits that the CIC represents more than 71 per cent of the domestic footwear industry.[488] We also note that the European Communities has not contested these figures and that it has not questioned that the petitioners in Argentina's safeguard investigation represent a major proportion of the domestic footwear industry[489] in the meaning of Article 4.1(c) of the Safeguards Agreement.[490]

8.107 For purposes of information collection through questionnaires, the National Foreign Trade Commission (Comisión Nacional del Comercio Exterior or "CNCE") divided the domestic industry into three categories according to the number of workers employed, i.e., (a) large companies (more than 100 workers), (b) medium-sized companies (between 41 and 100 workers) and (c) small companies (fewer than 41 workers). Importers were classified into categories according to the value of their imports,[491] i.e., (a) large importers (more than US$1,000,000), and (b) medium-sized and small (between US$100,000 and US$1,000,000). Sixty questionnaires were returned by national producers[492] and 69 by importers.[493] Argentina indicates that the results were verified by the CNCE.

(b) The footwear products

8.108 Argentina's safeguard investigation, as well as the provisional and definitive safeguard measures covered footwear products categorised in the following tariff headings of the MERCOSUR Common Tariff Nomenclature: 6401.10.00, 6401.91.00, 6401.92.00, 6401.99.00, 6402.12.00, 6402.19.00, 6402.20.00, 6402.30.00, 6402.91.00, 6402.99.00, 6403.12.00, 6403.19.00, 6403.20.00, 6403.30.00, 6403.40.00, 6403.51.00, 6403.59.00, 6403.91.00, 6403.99.00, 6404.11.00, 6404.19.00, 6404.20.00, 6405.10.10, 6405.10.20, 6405.10.90, 6405.20.00, 6405.90.00. For the description of these tariff lines, see Annex [I], infra.

8.109 The weighted average tariff level[494] for these product categories in 1995 was 28 per cent for footwear from non-MERCOSUR third countries,[495] and 12 per cent for footwear from within MERCOSUR countries.[496]

8.110 In the investigation, the Chamber of the Footwear Industry (CIC) argued "that there is only one product, namely footwear" because of a high degree of substitutability, in terms of both supply and demand, which would tend to confirm the need to analyse the sector as a whole.[497] On the supply side, the producers argued that any producer could, if necessary, vary the type of footwear it manufactured and that the Argentine industry, taken as a whole, produced almost every kind of footwear.

8.111 The importers, however, argued that brand name and product image are the most important characteristics, at least for "high-tech" performance sport footwear. Thus, the importers argued, there were no domestically manufactured products at all which could be deemed "like or directly competitive" to imported brand-name performance footwear, e.g., Nike or Reebok footwear (except for the production of local subsidiaries). In the alternative, the importers suggested that the CNCE break down footwear products on the basis of the customs nomenclature into very narrow product categories.

8.112 The CNCE, in its data collection, took account of the fact that in the highly heterogeneous footwear market certain series of types of footwear "were more or less homogeneous from the standpoint of competitive conditions, this is to say, for which within each group there was greater substitutability of both supply and demand than between products from different groups", noting as well that there was evidence of a certain degree of specialisation in different types of footwear by the enterprises that made up the industry. Thus the CNCE recognised the usefulness to break down the market for the purposes of the investigation: "Even within a unitary investigation it was necessary to establish the extent to which different segments of the industry may be affected by imports". The five categories with respect to which the CNCE collected data were:

(i) performance sportswear;

(ii) non-performance sportswear;

(iii) exclusively women's footwear;

(iv) town and/or casual footwear;

(v) other.[498]

8.113 Eventually, however, the CNCE concluded that there was a single category of like or directly competitive products – all footwear (excluding ski boots) – due to a sufficient degree of substitutability among products on the supply[499] and the demand[500] side.

8.114 The European Communities does not challenge this determination of "like or directly competitive products" as such. The European Communities argues, rather, that, having adopted an approach of product segmentation for purposes of data collection, Argentina was obliged to follow it consistently through its injury analysis and to prove serious injury in all segments in which safeguards were to be imposed.

8.115 Argentina responds that the CNCE used in the product segmentation approach for purposes of collecting pertinent information and then conducted the injury analysis for the footwear industry in its entirety. Consequently, there was no need for a disaggregated consideration of all the different injury factors with respect to the five product categories.

8.116 We address the issue of whether Argentina should have conducted its injury and causation analysis on an aggregated or on an disaggregated basis, infra, in section E.4.(a). Given the absence of a challenge by the European Communities to Argentina’s determination of the like or directly competitive product, we do not need to address whether this determination met the requirement of Article 2.1 in the sense that there was a sufficient degree of competition between the product groups across the range of footwear products at issue in this dispute.[501]

3. Standard of review

(a) No de novo review

8.117 Before considering the specifics of the claims concerning Argentina's injury and causation findings, we must consider the standard of review that we will apply. In our view, we have no mandate to conduct a de novo review of the safeguard investigation conducted by the national authority. Rather, we must determine whether Argentina has abided by its multilateral obligations under the Agreement on Safeguards, as we discuss in paras. , in reaching its affirmative finding of injury and causation in the footwear investigation.

8.118 This approach is consistent with the reports of panels reviewing national investigations in the context of the Tokyo Round Agreement on Implementation of Article VI of GATT ("Anti-dumping Agreement") and the Tokyo Round Agreement on Interpretation and Application of Articles VI, XVI and XXIII of GATT ("Subsidies Agreement") and the WTO Agreement on Textiles and Clothing ("ATC"). The panel on New Zealand - Imports of Electrical Transformers from Finland[502] panel took the view that, while the responsibility to make an anti-dumping determination rested in the first place with the authorities of the importing country, such determinations were subject to scrutiny by a panel if they were challenged by another country.[503] The panel on United States - Anti-dumping Duties on Import of Salmon from Norway concluded that it should not engage in a de novo review of the evidence examined by the national investigating authority.[504]

8.119 The panel on United States - Underwear[505] followed this approach by noting, however, that it 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.[506] 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 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. …"[507] (emphasis added).

Accordingly, the panel on United States - Underwear decided,

"in accordance with Article 11 of the DSU, to make an objective assessment of the Statement issued by the US authorities … which, as the parties to the dispute agreed, constitutes the scope of the matter properly before the Panel without, however, engaging in a de novo review. … an objective assessment would entail an examination of whether the CITA had examined all relevant facts before it (including facts which might detract from an affirmative determination in accordance with the second sentence of Article 6.2 of the ATC), whether adequate explanation had been provided of how the facts as a whole supported the determination made, and, consequently, whether the determination made was consistent with the international obligations of the United States."[508]

8.120 The panel on United States - Shirts and Blouses also stated 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."[509]

8.121 These past GATT and WTO panel reports make it clear that panels examining national investigations in the context of the application of anti-dumping and countervailing duties, as well as safeguards under the ATC, have refrained from engaging in a de novo review of the evidence examined by the national authority.

(b) Consideration of "all relevant factors"

8.122 Argentina argues that the requirement of Article 4.2(a) to evaluate "all relevant factors of an objective and quantifiable nature having a bearing on the industry" implies an obligation to evaluate factors only to the extent that they are relevant, but not an obligation to examine each and every factor. In this respect, Argentina contests the reliance on past precedents in cases involving the review of a determination made by a national authority (e.g., United States - Underwear, United States - Shirts and Blouses, New Zealand - Transformers, United States - Antidumping Duties on Salmon from Norway) under the Tokyo Round Agreements on Anti-dumping as well as Subsidies and the WTO Agreement on Textiles and Clothing (ATC) on the grounds that these cases did not concern the review of safeguard investigations under the Safeguards Agreement. The European Communities contends that Article 4.2(a) implies a requirement for the national authority to investigate at the least all factors listed in that article.

8.123 We note, first, that the text of Article 4.2(a) of the Safeguards Agreement explicitly requires the evaluation of "all relevant factors", in particular those listed in that article. Second, Article 6.4 of the ATC[510] contains no such express requirement and recognises that "none of these factors … can necessarily give decisive guidance. Nonetheless, 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 has to be considered by the national authority. With regard to the obligation to evaluate "all relevant factors" we consider these past panel reports relevant. Consequently, in accordance with the text of the Safeguards Agreement and past practice, we consider that an evaluation of all factors listed in Article 4.2(a) is required.

8.124 In the light of the fact that the parties agree that de novo review is not appropriate, and appear also to generally share our view of the appropriate standard of review,[511] we, too, will not engage in a de novo review of the evidence examined by the national authorities of Argentina. Therefore, our review will be limited to an objective assessment, pursuant to Article 11 of the DSU, of whether the domestic authority has considered all relevant facts, including an examination of each factor listed in Article 4.2(a), of whether the published report on the investigation contains adequate explanation of how the facts support the determination made, and consequently of whether the determination made is consistent with Argentina’s obligations under the Safeguards Agreement. We note that this was the standard of review applied by the Panel in United States – Underwear, with which we agree.

(c) Argentina's report on the “detailed analysis of the case” setting forth its “findings and reasoned conclusions"

8.125 During the course of these proceedings, Argentina submitted to the Panel an exhibit containing the entire 10,000-plus page record of its investigation. Argentina indicated that it considered this documentation of fundamental importance to the Panel’s reaching a decision regarding the consistency of the determination with the WTO rules. Argentina states that without the complete record of the investigation, the Panel would not have at its disposal all of the pertinent elements on which to decide the dispute. Argentina also submitted a list indicating those portions of the entire record which it considers to be of particular relevance for this dispute.

8.126 In our view, under the above standard of review as applied to the facts of this particular dispute, it is the published “detailed analysis of the case under investigation” and the published “report setting forth [the] findings and reasoned conclusions”, provided for respectively in Article 4.2(c) and Article 3.1, rather than the full record of the investigation[512], that must be the focus of our review. This is because the European Communities does not challenge the data generated and relied upon in the investigation as such, but rather Argentina’s analysis and interpretation of those data. If the European Communities had claimed that Argentina’s compilation of the data for one or another injury factor were incorrect, it might have been necessary for us to consider the raw information (e.g., questionnaire responses) from which those data were compiled. However, because the European Communities accepts the aggregated data as presented by Argentina in its various documents concerning the results of the investigation, but challenges rather the reasoning based thereon, consideration of the underlying raw information is of secondary importance. If we were to conduct our own assessment of the underlying evidence as contained in the entire record of Argentina's investigation, we believe that we would effectively be engaging in a de novo review, which we and both parties agree would be inappropriate. Nonetheless, we have reviewed and taken note of those portions of the entire record of the investigation which Argentina has identified in the above-mentioned list as being the most relevant for, inter alia, the injury and causation analyses.

8.127 In considering which document or documents constitute the published report(s) referred to in Article 3.1 and Article 4.2(c), we recall that annexed to its first submission, Argentina submitted among other documents both Act 338 and the “Technical Report Prior to the Final Determination” (“Technical Report”) of the investigation prepared by the CNCE. We further recall that we sought clarification from Argentina, in a written question, concerning which of the documents submitted to the Panel constituted the published report referred to in Article 3.1 of the Agreement. Argentina replied that Act 338 is the published report of the CNCE’s findings regarding serious injury, and that it incorporates by reference the Technical Report. According to Argentina, the Technical Report provides a detailed summary of all of the factual data gathered during the investigation.[513] Argentina further stated that all interested parties had access to the complete record of the investigation except the information therein designated as confidential, and were provided with additional information in connection with the hearings held during the investigation. Argentina also stated in response to a question from the Panel that Act 338 addresses the relevance of each factor considered (as required under Article 4.2(c)), on the basis of the detailed information contained in the Technical Report.

5.128 We conclude from the foregoing that Act 338 constitutes both the published report “setting forth [the] findings and reasoned conclusions reached on all pertinent issues of fact and law” referred to in Article 3.1 of the Safeguards Agreement, and the published document containing the “detailed analysis of the case under investigation” and the “demonstration of the relevance of the factors examined” referred to in Article 4.2(c). Thus, we will base our review in the first instance on Act 338. We note, however, that Act 338 is based on and summarises information that is set forth in more detail in the Technical Report. Thus, while Act 338 is the most relevant document, the Technical Report also forms an integral part of the record of the investigation and is closely related to Act 338.

4. Claims under Articles 2 and 4 of the Agreement on Safeguards regarding Argentina’s investigation, and findings of serious injury, threat of serious injury and causation

8.129 The European Communities raises a number of claims under Articles 2 and 4 concerning Argentina’s investigation and findings of serious injury, threat of serious injury and causation. In particular, the European Communities argues that the investigation was flawed in a number of ways that violate these articles, and that the findings of serious injury, threat and causation also violated these articles.

Continue on to: 4. Claims under Articles 2 and 4 of the Agreement on Safeguards regarding Argentina’s investigation, and findings of serious injury, threat of serious injury and causation 8.130

[479] The exception of Article 9 is a qualified one. It only applies to developing country Members whose share in the importing Member's market does not exceed 3 per cent, provided that such developing country Members collectively account for not more than 9 per cent of the total imports of the product concerned.

[480] Recital 2.

[481] Recital 4.

[482] "For the purposes of this Agreement:

(a) A customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories, so that

(i) duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with respect to substantially all the trade between the constituent territories of the union or at least with respect to substantially all the trade in products originating in such territories, and,

(ii) subject to the provisions of paragraph 9, substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union;

(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 ArticlesXI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories."

[483] Understanding on Article XXIV of GATT 1994, para. 3.

[484] EC answer to question 1 by the Panel, see descriptive part, para. .

[485] Argentina mentions specifically the Wheat Gluten case, see descriptive part, para. 5.97 .

[486] G/SG/N/8/ARG/1, p.12 et seq.

[487] G/SG/N/8/ARG/1, p.3; Nike Argentina S.A. and RBK Argentina S.A. also came forward in their capacity as importers.

[488] The CIC noted that, together with its equivalents in the provinces of Córdoba and Santa Fé, it makes up the Argentine Federation of the Footwear and Related Products Industry (Federación Argentina de la Industria del Calzado y Afines, FAICA), thus representing 85 per cent of the domestic industry.

[489] The other association at issue, i.e., CAPCICA, represents importers or producer-importers.

[490] Article 4.1(c): "… a 'domestic industry' shall be understood to mean the producers as a whole of the like or directly competitive products operating within a Member's territory, or whose collective output of these products constitutes a major proportion of the total domestic production of those products." (emphasis added).

[491] During the period from January to November 1996, the period for which at that point importers had information available. (See, G/SG/N/8/ARG/1, p. 6).

[492] 24 by large and medium-sized companies and 36 by small companies in simplified multiple-choice format.

[493] Acta No. 338 de la CNCE, Determinación Final de la Existencia de Daño de la CNCE, Exhibit ARG-2, p.5.

[494] G/SG/N/8/ARG/1, p.9.

[495] At a tariff headings level, five headings corresponded to 20 per cent, 3 to 28 per cent and the other 17 to 29 per cent.

[496] The duty rates were 0 per cent for 13 headings, which in 1995, represented 39 per cent of the total imports from Brazil, Paraguay and Uruguay, the other 61 per cent paid duty at 20 per cent.

[497] G/SG/N/8/ARG/1, p.10.

[498] i.e., all other footwear not included in the previous categories such as espadrilles, work boots, gum boots, slippers, sea boots, riding boots, fishing boots, and men's and unisex sandals.

[499] "On the demand side, the Commission concluded that there is a broad range of footwear types, prices, qualities, uses and marks which although not in strong competition at the various extremes, do create competition between adjacent groups; therefore, although the definition of footwear as a 'protective foot covering' is a simplification, it acquires great significance when the substitutability between different kinds of footwear is taken into account". (G/SG/N/8/ARG/1, page 11).

[500] "On the supply side, the Commission concluded that the concept of a 'footwear industry' is also significant, since although it is well known that manufacturers specialize in different segments of the market, they share various critical factors that make possible the reallocation of resources, re-specialization and significant competitive shifts. Thus, it is easy to reallocate labour between different product lines, and this also applies to much of the equipment and many of the raw materials." (G/SG/N/8/ARG/1, page 11).

[501] We note that the question whether foreign products are "like or directly competitive" for purposes of WTO law has to be made on a case-specific and provision-specific basis. In this regard we consider as relevant the demand-side and supply-side criteria relied on by Argentina, e.g., physical or technical descriptions, consumer use, perception of consumers and manufacturers, production process, production plants and workforce, commercial marks, quality, commercial channels, substitutability between different kinds of footwear, possibility of reallocation of resources, re-specialization and significant competitive shifts.

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

[503] Panel Report on New Zealand - Transformers.

[504] Panel Report on United States - Imposition of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, ADP/87, dated 30 November 1992, para. 494, p. 186f.

[505]Panel Report on United States - Restrictions on Imports of Cotton and Man-Made Fibre Underwear, adopted on 25 February 1997 (WT/DS24/R).

[506] See, inter alia, 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.

[507]United States - Underwear, op.cit., para. 7.12.

[508]United States - Underwear, op.cit., para. 7.13.

[509] Panel Report on United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India, 6 June 1997, WT/DS33/R, para. 7.52.

[510] Article 6.4 of the ATC: "… The Member or Members to whom serious damage, or actual threat thereof … is attributed, shall be determined on the basis of a sharp and substantial increase in imports, actual or imminent, from such a Member or Members individually, and on the basis of the level of imports as compared with imports from other commercial transaction; none of these factors, either alone or combined with other factors, can necessarily give decisive guidance. …".

[511] For the EC’s view, see, descriptive part, para. 5.136 - 5.140 . For Argentina’s view, see, descriptive part, para. 5.141 .- 5.143

[512] In response to a request from the EC at the second substantive meeting to identify the most relevant pages of the investigation record that had not previously been submitted to the Panel, Argentina submitted an annotated list of pages pertaining to specific issues or factors. We note that the pages of the record identified in that list contain essentially raw data, either in uncompiled or compiled form. In keeping with our standard of review, we find these pages of secondary relevance to our consideration of Argentina’s injury and causation analysis and explanation in its investigation.

Argentina identified the following pages of the entire investigation record as relevant for particular issues:

Increased imports: Act 338, p. 5329; Informe técnico previo a la determinación final, Anexo 5, Cuadros 15-21, pp. 5477-5490; información de los productores respecto a las importaciones, pp. 44-48; aranceles y preferencias correspondientes, pp. 173-177; información sobre importaciones fuente INDEC, pp. 250-251; información de las cámaras sectoriales sobre el indice de agresión de las importaciones, pp. 401-411; Acta 266 e Informe técnico previo a la apertura de la investigación, pp. 602-607; presentación de la demandante con posterioridad a la Audencia Pública, pp. 5176-5179; yes">

Employment: Technical Report , p. 5639; presentación del sector respecto al cierre de empresas, pp. 197-226 (or 193-223); idem respecto a despidos y suspensiones de personal, pp. 414-418; Acta 266 e informe técnico previo a la apertura de la investigación, pp. 569-592; Anexo estadístico del informe técnico previo a la apertura de la investigación, pp. 629-701; presentación de la unión de trabajadores posterior a la Audencia Pública, pp. 5148-5168; informe técnico previo a la determinación final, Anexo 2, Cuadro 17, p. 5583, (pp. 5564-5583); Anexo 3, Cuadros 45-47, , pp. 5638-5640, pp. 5641-5643; presentación de la Cámara de importadores con cifras de desempleo, pp. 5073-5075;

Imports relative to domestic production and consumption: Informe técnico previo a la apertura de la investigación, pp. 574-575; respuestas a los formularios de las encuestas a productores, pp. 1176-2920; sistemizada en el informe técnico previo a la determinación final, Anexo 2, pp. 5578-5584, Anexo 3, pp. 5585-5646, Anexo 4, pp. 5647-5716; respuestas de los importadores, pp. 1197-2721, pp. 4586-4651; información de la Cámara peticionante sobre el consume aparente, pp. 4803-4804; información de la CAPCICA sobre el consume aparente, pp. 5064-5067; informe técnico previo a la determinación final, pp. 5498-5507;

Sales: información de los productores, pp. 1176-2920, sistemizada en el informe técnico previo a la determinación final, Anexo 2, pp. 5578-5584; información verificada, en fojas varias de pp. 4421 à 5017; Informe técnico previo a la determinación final, Anexo 3, pp. 5585-5646, Anexo 4, pp. 5647-5716; Acta 266 e Informe técnico previo a la apertura de la investigación, , pp. 592-601, 629-701; Informe técnico previo a la determinación final, Anexo 3, pp. 5603-5611, 5321-5323, Acta 338, pp. 5344-5346;

Profits and losses: Acta 266 e informe técnico previo a la apertura de la investigación, pp. 592-601, 660-671, Cuadros 28-29, pp. 669-670, Gráfico 5, p.668; información de los productores, pp. 1176-2920; verificaciones realizadas por el CNCE a la información precedente, en fojas varias de pp. 4421 à 5017; sistemizada en el informe técnico previo a la determinación final, Anexos 2, pp. 5578-5584, Anexo 3, pp. 5585-5646, Anexo 4, pp. 5647-5716; balances de las empreseas, pp. 464, 560, 2886, 4222-4223, 5060, 5082; Acta 338, pp. 5326-5327, 5465-5474, Anexo 2, pp. 5582-5583, Anexo 3, pp. 5631-5633;

[513] See descriptive part, para. 5.251 .

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