World Trade

Organization

Argentina - Safeguard Measures on Imports of Footwear 

4.25 The European Communities maintains that this claim falls within the terms of reference[41], since the original measure (i.e. the definitive safeguard measure imposed under Resolution 987/97) is specifically mentioned by the European Communities in its Request for the Establishment of a Panel.[42] The European Communities states that it is clear that this measure is still in existence, be it in a somewhat different format than previously notified by Argentina. Therefore, the European Communities' claim is in conformity with Article 6:2 DSU, since the measure at issue was properly identified by the European Communities as 'the definitive safeguard measure' imposed by Argentina under 'Resolution 987/97'. The present case differs in that respect from 'Guatemala - Cement'[43], where Mexico had not identified the final anti-dumping duty as the measure at issue.

4.26 Thus, the European Communities requests the Panel to recommend the removal of the original safeguard measure set out in Resolution 987/97, so as to automatically render null and void the subsequent application of that Resolution as well as modifications to this measure.

4.27 The European Communities asserts that the late November 1998 modification of the safeguard measures was drastic.[44] The European Communities contends that the original safeguard measures were based on an investigation initiated on 25 February 1997, which, in the European Communities' view, was flawed for more than one reason. The subsequent changes to these measures are modifications of the original safeguard measure and are claimed by Argentina to be based on the same investigation and findings.

4.28 The European Communities recalls that it has requested that the Panel rule that Argentina's safeguard measures on imported footwear, however they may be adapted or adjusted in the meantime, should be removed. The European Communities observes that Argentina has objected to this request, claiming that it goes beyond the Panel's terms of reference. The European Communities notes that it is not seeking an extension of the terms of reference. It is merely noting, and asking the Panel to note, that once the original measures mentioned in the request for the establishment of the Panel are removed, the amendments which have been made to them will also disappear.

4.29 The European Communities underlines that Argentina has argued that the Resolutions 512/98 and 1506/98 are a simple application of Article 9 of the original safeguard measures and thus an integral part of that measure.[45] According to the European Communities, Argentina must therefore accept that these Resolutions suffer the same fate as the principal measure. The European Communities states, in addition that, first, Resolutions 512/98 and 1506/98 concern the very same safeguard measure which was introduced by Resolution 987/97 (i.e. Argentina’s safeguard measures on footwear adopted following the submission of a complaint by Argentina’s CIC in October 1996). The former Resolutions are mere modifications of the same safeguard measure, and should be repealed together with Resolution 987/97, since all are affected by the same fundamental shortcomings, which the European Communities has brought forward. h That is, these Resolutions are a modification and an 'application' of the original Resolution, and therefore if the basic Resolution becomes null and void, then -- automatically -- the subsequent modifications in application of it fall as well.

4.30 Second, Resolutions 512/98 and 1506/98 modify the original Resolution to render Argentina's safeguard measures on footwear more stringent. The European Communities submits that no provision in the Agreement on Safeguards permits that type of modification. Accordingly, such modifications per se are illegal. The European Communities argues that it is clear from the wording of Article 7.4 of the Agreement on Safeguards ("shall progressively liberalise") that safeguard measures must be "progressively" liberalised at regular intervals during the period of application. A safeguard measure cannot, during its period of application, be made more restrictive than the measure which was originally notified. For the European Communities, the safeguard measure can only be relied upon in exceptional circumstances and its provisions therefore should be interpreted strictly.

4.31 The European Communities submits that if it were possible for a WTO Member to maintain a safeguard regime which had been condemned by a Panel, by introducing a series of increasingly stricter Resolutions, this would amount to a justification of an abus de droit.Indeed, if such practice were allowed to stand, then the security and predictability of the multilateral trading system, which was agreed upon by all Members in 1994, would be seriously jeopardised and the European Communities and other Members would be required to shoot at a moving target.

4.32 Regarding Argentina’s arguments concerning Article 7:4 Agreement on Safeguards, the European Communities notes that Argentina has sought in effect unilaterally to modify the content of the Agreement on Safeguards by introducing a new requirement which should be fulfilled before Article 7:4 would apply. Argentina reads in the Agreement on Safeguards a condition that only if the ‘objective of the safeguard measure is achieved’, this provision becomes applicable, and speaks of a ‘hypothesis’ and a ‘presupposition’ on which Article 7:4 would be based.

4.33 The European Communities states that it has grave difficulties with this approach by Argentina. The text of Article 7:4 Agreement on Safeguards is crystal clear and does in no way leave room for such unwarranted interpretation. It reads in the first sentence: ‘the Member applying the measure shall progressively liberalise it’. Nowhere in the text of the Agreement on Safeguards can a provision be found which makes this obligation dependent on whether or not the ‘objective is being achieved’ of the safeguard measure and Argentina does not put forward any evidence which would support its position.

4.34 The European Communities also argues that in case the duration of the measure would be extended to over three years, the second sentence of Article 7:4 requires the conduct of a mid-term review and requires the Member as a result of this review either to ‘withdraw [the measure] or increase the pace of liberalisation.’ The drafters left out the possibility that the measure would be made stricter, and Argentina should therefore not be allowed to somehow read this option in the text.

4.35 The European Communities states that Argentina confirms that the new Resolutions should not be seen as ‘new measures’, and argues that should Argentina desire to apply new safeguard measures, it would be required to comply with all the conditions contained in the Agreement on Safeguards, including the carrying out of a new and separate investigation (Article 3).Moreover, Argentina would be obliged (Article 7:5) to await the expiration of a two-year period of non-application of safeguard measures.Argentina did not follow this option, since it merely modified (through Resolutions 512/98 and 1506/98) the same safeguard measures (Resolution 987/97) which were imposed as the result of the October 1996 complaint by the domestic industry.

4.36 The European Communities also takes issue with Argentina’s statement that Resolution 1506/98 ‘currently regulates the safeguards situation’. The European Communities notes that Argentina forgets to mention Resolution 837/98 (published in the Argentine Official Journal on the 7^th of December 1998[46] which is the latest ‘regulation’ of the safeguard measure on footwear. The European Communities questions why in its second submission Argentina decided not to include information on the latest modification in the safeguard regime on the 19^th of January 1998 (the date of transmission of the rebuttals), whereas such change had been made public six weeks before.

B. Submission of Evidence: Exhibit Arg-21

4.37 At the end of the first meeting of the Panel, Argentina sought to submit to the Panel one copy of the entire record of its safeguard investigation on footwear. Argentina added that the copy could be left with the WTO Secretariat for the parties to the dispute to consult. The Panel, upon being informed that no copy would at the same time be provided to the European Communities, indicated to the parties that it could not accept the documents, as in the Panel’s view, this would constitute an ex parte submission, which is not permitted by the DSU (Article 18.1). In presenting its second written submission, Argentina again sought to submit, in a single copy to the Panel only, the same documentation, as an annex identified as Exhibit ARG-21.The Panel again declined to accept the documentation, for the reasons given previously, which it indicated in a letter to the parties. In the same letter, the Panel sought the views of the parties as to the best way to proceed. The European Communities responded that the submission of the evidence in question at such a late stage in the proceeding should not be permitted. Argentina indicated that it was at that time preparing a copy of the documentation for the European Communities, and would submit the documentation to the Panel and the European Communities once the copy was ready. The Panel informed the parties that it would accept the documentation so long as it was submitted no later than the date of the second meeting of the Panel, with a copy at the same time to the European Communities, and that this same deadline would apply to any other new evidence to be submitted by either party. The Panel also informed the parties that each party would be given an opportunity to comment on any new evidence submitted by the other party.

4.38 Argentina submitted the documentation identified as ARG-21, and provided a copy to the European Communities, on the day before the second meeting of the Panel. At the second meeting, Argentina objected to the fact that the documentation had not been accepted at the time it was presented as an annex to Argentina’s second written submission; in the view of Argentina, this constituted a unilateral decision by the Secretariat, that only the Panel was able to take. The Panel recalled that its original decision regarding this evidence, taken at the end of the first substantive meeting, had not changed and explained that the Secretariat had operated on that basis. The European Communities stated that it considered the rejection of ARG-21 at the time the second submission was presented to have been perfectly correct in the light of Article 18.1 of the DSU.

4.39 At the second meeting, the Panel indicated that, in keeping with its earlier ruling that each party would be given an opportunity to comment on any new evidence submitted by the other party, the European Communities would have a period in which to submit written comments regarding ARG-21, which was the only new evidence submitted. At the request of the European Communities, Argentina provided a list of those pages of ARG-21, pertaining to the various factors addressed in the investigation, that had not already been submitted as annexes to submissions by Argentina and that Argentina considered to be relevant to the resolution of this dispute. The European Communities commented that none of the listed pages contained any assessment or discussion of the relevance of the factors or issues regarding causality or any of the other determinations made in this investigation, but rather contained only raw data and accounting information. Thus, for the European Communities, these pages did not support any change in the European Communities’ previous conclusions regarding the present dispute.

A. Article XIX:1(a) of GATT 1994 – "unforeseen developments" 

1. Argument of the European Communities

5.1 The European Communities argues that it clearly results from the wording of Article XIX:1(a) GATT that in order to allow the imposition of a safeguard measure, not any increase in imports is relevant, but only those which result from both "unforeseen developments" and "compliance with GATT obligations", including tariff liberalisation according to a party's Schedule of Concessions. Since tariff concessions and other obligations are an additional element to "unforeseen developments", it necessarily follows that liberalisation cannot constitute by itself such unforeseen developments. The European Communities submits that Argentina's trade liberalisation, in particular within the MERCOSUR and WTO framework, was a conscious commercial policy. The development in trade since 1991 – particularly since the signing of the Treaty of Asuncion – is the natural result of the commercial policy followed by the Argentine government and that this and the illegality of the trade protection measures which preceded the safeguard measures the subject of these proceedings, were in no way unforeseen[48]. Argentina therefore violated Article XIX:1(a) GATT.

5.2 The European Communities submits that Article XIX of GATT, and in particular the requirement in Article XIX:1(a) of GATT, that safeguard measures only be taken in the event of "unforeseen developments", has never been repealed or modified. Accordingly, there is no doubt that this requirement remains fully applicable, even if not repeated in the Agreement on Safeguards.

5.3 The European Communities asserts that increased imports as a consequence of tariff concessions agreed for footwear cannot be considered "unforeseen" within the meaning of ArticleXIX:1(a) GATT[49]. If it were otherwise, a WTO Member would be allowed to withdraw the very benefits which it had agreed to when entering into tariff commitments. This would neither be consistent with a good faith interpretation of that provision nor with the liberalisation aims pursued by the GATT and the WTO Agreement overall.[50] For the European Communities, the sequence of events is clear: first, an unforeseen development is to take place; second, as a result of this unforeseen development an increase in imports occurs.An increase in imports can (by definition) not be the result of an increase in imports. Argentina's argument is thus circular.

5.4 In addition, the European Communities emphasises, safeguard measures are by definition "emergency" measures. The very nature of a safeguard measure is to tackle an urgent situation which was not expected. The safeguard mechanism is not an instrument of medium to long-term trade policy, as Argentina has applied it. Once more, this fact is demonstrated by the long investigation period from 1991-1995.It is revealing that even Argentina, in its own report, noted[51] that the big increase in imports occurred "immediately after the opening up of the economy which began in 1989/90."

5.5 Nor, according to the European Communities, can the necessity of removing the Article II GATT-illegal measures be considered an "unforeseen development". This is in fact nothing more than the implementation of agreed trade liberalisation, which, as has just been explained, is a separate condition of Article XIX:1(a) GATT, and cannot itself constitute an "unforeseen development". The European Communities submits therefore that, by imposing safeguard measures in the absence of an increase in imports of footwear resulting from "unforeseen developments", Argentina violated the obligations which it assumed under Article XIX:1(a) GATT.

5.6 The Panel asked the European Communities to comment on the meaning that the European Communities would give to the language of Article 2 of the Agreement on Safeguards in the light of the language of Article 1 and 11.1 of the Agreement and the second and fourth recitals of the preamble. The European Communities responded that Article XIX GATT and the Agreement on Safeguards set out the requirements which must be fulfilled before a safeguard measure can be taken. There is substantial overlap between the conditions set out in Article XIX GATT and the conditions set out in the Agreement on Safeguards, including in its Article 2. However, none of the provisions of the Agreement on Safeguards, including Article 1, Article 11:1, nor the second and fourth recital, allow for any of the additional conditions set out in Article XIX to be ignored.

5.7 For the European Communities, one way of understanding the requirement of "unforeseen developments" is to consider that the continuum starting with trade liberalisation, running into unforeseen developments which result in increased imports which occur under conditions which are such that serious injury results.[52] This starts with loss of sales, continues with loss of sales and production, falling capacity utilisation, losses and finally unemployment. In fact one might say that unforeseen developments is a defining feature of safeguard measures since it defines the circumstances in which they may become justified.

5.8 The European Communities notes that Article 1 of the Agreement on Safeguards establishes "rules" for the application of safeguard measures. However, it does not establish "the rules" or "the only rules" for the application of safeguard measures. Therefore, the Agreement on Safeguards is not intended to be the exclusive source of safeguard rules. The Agreement on Safeguards elaborates on a number of the conditions mentioned in Article XIX which should be fulfilled before a measure can be taken. However, the Agreement on Safeguards does not elaborate on all of the conditions set out in Article XIX GATT. Some of those conditions, such as "as a result of unforeseen developments" or "the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions", are not repeated, but this can by no means have as a consequence that they are made invalid.

5.9 For the European Communities, the non-repeating of these two conditions can be explained by the intention of the Agreement on Safeguards to provide more detailed explanation of some of the conditions mentioned in Article XIX, which were not further defined at the time. Conditions such as "serious injury" or "threat of serious injury" or "causation" are elaborated upon further in the Agreement on Safeguards and defined in much greater detail than before.

5.10 The European Communities asserts that Article 1 Safeguard Agreement does not define what a safeguard measure is but expressly refers to Article XIX GATT. If Article XIX tells what a safeguard measure is (an "emergency" measure, to be taken in case of "unforeseen developments") and the Safeguard Agreement tells how to apply it, the consequence must be that the Safeguard Agreement is not exhaustive.

5.11 In the view of the European Communities, Article 11:1 Agreement on Safeguards requires that safeguard action conforms to both Article XIX GATT and to the Agreement on Safeguards. Paragraph (a) sets out that Members considering taking a safeguard measure should apply the conditions of Article XIX in accordance with the Agreement on Safeguards. Therefore, this paragraph requires that, for example, if "serious injury" is to be demonstrated, this should be done in accordance with the more elaborated provisions set out in this respect in Article 4:1(a) and 4:2(a) Agreement on Safeguards. This paragraph does not state that the conditions mentioned in Article XIX GATT -- but not repeated in the Agreement on Safeguards -- should be ignored. Indeed, paragraph (c) of Article 11:1 confirms that Article XIX is still fully applicable beside the Agreement on Safeguards.

5.12 According to the European Communities, the second recital strengthens this argument. It explains that the aim of the Agreement on Safeguards is not to replace Article XIX, but instead that it has the objective of clarifying and reinforcing this provision. For example, a term such as "serious injury" is clarified by Article 4.1(a) and 4.2(a) Agreement on Safeguards. These more detailed elaborations have the effect of reinforcing the safeguard mechanism: with the text of the Agreement on Safeguards in place, it is now much clearer which steps should be undertaken by a Member before "serious injury" is proved to exist. Given this clarity, Panels are now in a much better position to verify whether all of the relevant factors were evaluated.

5.13 Finally, regarding the fourth recital, it is the view of the European Communities that this provision reaffirms that the comprehensive Agreement on Safeguards is applicable to all Members and is based on the basic principles of GATT. Therefore, all WTO Members -- not just a sub-set -- are required to comply with the Agreement on Safeguards, which incorporates some of the more fundamental concepts contained in the GATT. This recital cannot be interpreted in such a way as to have the Agreement on Safeguards replace Article XIX GATT, nor can it be read in such a way as to allow for some of its conditions to be ignored."

5.14 In response to a question from the panel regarding whether Article XIX of GATT and the Agreement on Safeguards provide for conflicting, cumulative or alternative conditions, the European Communities responded that there is no conflict between Article XIX GATT and the Agreement on Safeguards, and that the conditions are cumulative. The Appellate Body in The Appellate Body in 'Guatemala – Cement' defined the notion of "conflict" as follows:

"… In our view, it is only where the provisions of the DSU and the special or additional rules and procedures of a covered agreement cannot be read as complementing each other that the special or additional provisions are to prevail. A special or additional provision should only be found to prevail over a provision of the DSU in a situation where adherence to the one provision will lead to a violation of the other provision, that is, in the case of a conflict between them. … "[53]

5.15 Therefore, in line with the argumentation by the Appellate Body, the European Communities submits that, as long as adherence to the Agreement on Safeguards does not lead to a violation of Article XIX GATT (or vice versa), they both apply, complementing each other. Therefore, the requirement that imports must have increased "as a result of unforeseen developments" applies in addition to the other conditions set out in Article 2:1 Agreement on Safeguards. In other words, this is a separate condition and should have been demonstrated by Argentina. Since it has failed to do so, the European Communities submits that Argentina did not comply with Article XIX GATT.

5.16  The European Communities submits that in the same terms the interpretative note to Annex IA to the WTO Agreement provides that:

"In the event of a conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex IA […], the provision of the other Agreement shall prevail to the extent of the conflict."

5.17  The European Communities fails to see how Article XIX GATT, to the extent that it requires that the increase in imports must result from "unforeseen developments", could be said to be in conflict with the provisions of the Agreement on Safeguards."

5.18 In response to a Panel request for comments on the relevance, if any, of previous panel and Appellate Body reports addressing the relationships between various agreements and provisions, e.g., Brazil Desiccated Coconut, Guatemala-Cement (dealing with DSU Article 1.2 as opposed to the General Interpretative Note to Annex I A), Indonesia-Cars, EC‑Bananas III or EC‑Hormones, the European Communities stated regarding 'Brazil - Measures Affecting Desiccated Coconut' that the Report of the Panel, upheld by the Appellate Body, supports the European Communities’ view that the GATT and the Agreement on Safeguards "represent an inseparable package of rights and disciplines that must be considered in conjunction".[54] (emphasis added)

5.19 The European Communities notes the quotation by the United States in its third party submission of the following passage from that panel report:

"Article VI of GATT 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."[55]

5.20 The European Communities notes and agrees with the US statement in this respect that the "new package" made up by the Agreement on Safeguards and Article XIX GATT is different from Article XIX GATT 1947. The European Communities disagrees with the United States’ interpreting the "new package" as consisting of the Agreement on Safeguards only.This, in fact, is the exact opposite of what the Appellate Body meant when it stated (see quote above) that the GATT provision and the specific agreement together "define, clarify and in some cases modify the whole package of rights and obligations".

5.21 The European Communities in this respect notes the following further comments from the Coconut Panel Report. On the applicability of the GATT within the WTO system, the Panel considered the following passage[56]:

"It is evident that both Article VI of GATT 1994 and the SCM Agreement have force, effect and purpose within the WTO Agreement. That GATT 1994 has not been superseded by other Multilateral Agreements on Trade in Goods (“MTN Agreements”) is demonstrated by a general interpretative note to Annex 1A of the WTO Agreement[57]. The fact that certain important provisions of Article VI of GATT 1994 are neither replicated nor elaborated in the SCM Agreement further demonstrates this point.[58]"

5.22 In this regard, the European Communities recalls that in that case the Panel did not have to decide on the precise content of the "new package", that is, on whether and to what extent the GATT provision at issue (Article VI) had been modified as a result of the relevant Agreement in Annex 1 A (the Agreement on Subsidies and Countervailing Measures). In fact, the Panel concluded for the inapplicability of the whole relevant "package" to the case before it.[59]

5.23 Regarding 'Guatemala - Anti-Dumping Investigation regarding Portland Cement from Mexico', the European Communities notes its comments above. The European Communities sees no 'conflict' between Article XIX GATT and the Agreement on Safeguards, for the same reasons as the Appellate Body did not see a 'conflict' between a provision in the DSU and a provision in the Anti-Dumping Agreement: if Argentina would comply with the "unforeseen developments" condition, it would not violate any provision of the Agreement on Safeguards.

5.24 Regarding 'Indonesia - Cars', the European Communities refers to what the Panel in that case said in paragraphs14.97 - 14.100. The question before the Panel was whether Article III:2 GATT was -- or was not -- applicable to the dispute. Indonesia had argued that there was a conflict between this provision and the SCM Agreement, in that the respective obligations were mutually exclusive. However, the Panel disagreed and found that they were not mutually exclusive. The Panel ruled that:

"It is possible for Indonesia to respect its obligations under the SCM Agreement without violating Article III:2 since Article III:2 is concerned with discriminatory product taxation, rather than the provision of subsidies as such. Similarly, it is possible for Indonesia to respect the obligations of Article III:2 without violating its obligations under the SCM Agreement since the SCM Agreement does not deal with taxes on products as such but rather with subsidies to enterprises. At most, the SCM Agreement and Article III:2 are each concerned with different aspects of the same piece of legislation (footnote omitted)."

5.25 Similarly, in the European Communities’ view it is possible for a WTO Member to respect its obligations under the Agreement on Safeguards without violating Article XIX GATT, in particular with respect to the requirement of "unforeseen developments". Given that they are not mutually exclusive, Article XIX GATT is applicable to the present dispute.

5.26 Regarding Bananas III, the European Communities notes that the Appellate Body had to decide whether both Article X:3(a) GATT and Article 1:3 Agreement on Import Licensing Procedures applied with regard to the EC import licensing procedures[60]. Notwithstanding the fact that the Appellate Body found that "there are distinctions between [the] two articles" (i.e. that the two provisions read differently), and at the same time that they have "identical coverage" (i.e. that they regulate the same aspect of the same case in point), the Appellate Body did not consider that they conflicted and thus that the Interpretative Note to Annex IA applied. Consequently, the Appellate Body found that both Article X:3(a) GATT and Article 1:3 Agreement on Import Licensing Procedures were applicable.

5.27 The European Communities submits that the hypothesis considered in the above parts of Appellate Body Report is different from the one at issue in the present dispute. In fact the Agreement on Safeguards and Article XIX of GATT do not overlap, in the sense that the "unforeseen developments" requirement is additional and therefore complementary to the matter regulated in the Agreement on Safeguards. In any event, even if these provisions overlapped, the above-mentioned case law makes clear that the GATT provision is not eliminated by the system, but rather remains in force and is applicable cumulatively with the Agreement on Safeguards

5.28 The European Communities further notes that the Appellate Body in Bananas III also addressed the relationship between Article XIII GATT and the Agreement on Agriculture[61], notably to decide "whether the provisions of the Agreement on Agriculture allow market access concessions on agricultural products to deviate from Article XIII of GATT."[62] The European Communities had argued in this respect that concessions made pursuant to the Agreement on Agriculture prevailed over Article XIII of GATT, based on Articles 4:1 and 21:1 of the former Agreement[63]. The Appellate Body however upheld the Panel's conclusion that the Agreement on Agriculture "does not permit the European Communities to act inconsistently with the requirements of Article XIII of GATT."[64] The European Communities submits that, likewise, the Agreement on Safeguards does not authorise Argentina to act inconsistently with the requirements of Article XIX GATT. Indeed, the contrary is the case, since Article 11:1(a) Agreement on Safeguards requires Members to take action "which conforms with the provision of that Article".

5.29 Finally, regarding 'Hormones', the European Communities refers to paragraphs 8.31 and 8.32 of the Panel Report in this case, which state that:

"both the SPS Agreement and GATT apply to this dispute, we next examine the relationship between these two agreements. The parties to the dispute present diverging views with respect to whether we should first address GATT or the SPS Agreement. However, neither of the parties claims that the relevant provisions of the SPS Agreement and the GATT are in conflict. Therefore, we do not need, as a preliminary matter, to address the General Interpretative Note". (emphasis added).

5.30 Given this statement by the Panel, the European Communities submits that this case is not relevant for the present dispute, since none of the parties had claimed that a conflict existed between provisions in the two agreements and the Panel confirmed that both agreements applied to the dispute.

2. Argument of Argentina

5.31 Argentina observes that the European Communities submits that "the development of trade since 1991 - particularly the signing of a Treaty of Asunción - is the natural result of the commercial policy followed by the Argentine Government and that this and the illegality of the trade protection measures which preceded the safeguard measures the subject of these proceedings, were in no way unforeseen".[65] Argentina considers this statement by the European Communities to be irrelevant, from the legal point of view, to whether Argentina fulfilled, in this case, the requirements laid down by the Agreement on Safeguards for the application of a safeguard measure. In Argentina's view, a correct interpretation of the legal relationship between Article XIX of the GATT and the Agreement on Safeguards would indicate that the WTO disciplines contain no obligation relating to "unforeseen developments" as the European Communities claims.

5.32 Argentina notes that at various points in its submission, the European Communities repeats that the objective of a safeguard measure, under Article XIX of the GATT, is protection in case of emergencies and "unforeseen circumstances".[66] According to this interpretation, if a WTO Member decides to apply a safeguard it must show that the imports increased sharply during the most recent period. Argentina further notes that the European Communities maintains that Article XIX:1(a) of the GATT is applicable to the case in that the increase in imports allowing the imposition of a safeguard measure must result from "unforeseen developments" and Argentina violates that provision by failing to demonstrate that the imports were the result of unforeseen developments.

5.33 Argentina maintains that the Article XIX requirement whereby imports must be the result of unforeseen developments has not been valid since the entry into force of the WTO Agreement on Safeguards. Indeed, the Agreement on Safeguards, which interprets Article XIX of the GATT, makes no reference in Article 2 (conditions for the application of a safeguard measure), or in any other article, to the need for the increase in imports to be the result of "unforeseen developments". Argentina maintains that the Safeguards Agreement has precedence over Article XIX, and that consequently it should not be obliged to fulfil a requirement of this article that has not been established in the Safeguards Agreement.

5.34 Argentina argues that the fact that this requirement was not included in the Agreement on Safeguards, a multilateral agreement designed to "clarify and reinforce the disciplines of GATT, and specifically those of its Article XIX" in order to produce a "structural adjustment" (as stated in the preamble to the Agreement) cannot be considered as unintended or as an oversight. The omission must be interpreted as a result of the "structural adjustment", a deliberate intention not to include the requirement in the Agreement on Safeguards in order to ensure that this tool could be used in cases in which imports of a product fulfilled the conditions laid down in Article 2, even when the increase in imports was not the result of unforeseen developments, but in general "of such conditions as to cause or threaten to cause serious injury".

5.35 Argentina contends that this discrepancy between the Agreement on Safeguards and Article XIX of the GATT with respect to the requirements for the application of a safeguard must be resolved in accordance with the General Interpretative Note to Annex 1A which stipulates that: "In the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A to the Agreement Establishing the World Trade Organization (referred to in the agreements in Annex1A as the "WTO Agreement"), the provision of the other agreement shall prevail to the extent of the conflict." According to Argentina, in the case at issue, there is a clear and specific conflict between Article XIX of the GATT and the Agreement on Safeguards (as per Annex 1A of the WTO Agreement) since the former contains a condition which is not contained in the AS, an agreement intended to clarify and reinforce the Article XIX.

5.36 Argentina submits that in public international law, for there to be a conflict between two treaties, the three following conditions must be met: firstly, the parties to the treaty in question must be the same; secondly, the treaties must have the same substantive purpose; and thirdly, the provisions must be contradictory in the sense that they impose obligations that are mutually exclusive.Argentina maintains that in the case at issue, the three conditions are met: (1) Argentina and the European Communities, as Members of the WTO, are both parties to the Agreement on Safeguards and the GATT; (2) the Agreement on Safeguards and Article XIX of the GATT have the same substantive purpose, clearly set forth in the preamble to the Agreement on Safeguards, to "clarify and reinforce the disciplines of the GATT, and specifically those of its Article XIX"; (3) the provisions of Article XIX and Article 2 of the Agreement on Safeguards are contradictory in that Article XIX establishes a condition (that imports should be the result of "unforeseen developments") which Article 2 of the Agreement on Safeguards does not establish. The inconsistency lies in the fact that one of the provisions contains a condition which was not taken up by the provision that "clarifies" and interprets it.