(e) Like product

4.164 Argentina claims that Chile has infringed Article XIX:1(a) of the GATT 1994 and Articles 2.1, 4.1(c) and 4.2(a) of the Agreement on Safeguards on the grounds that the competent Chilean authorities failed to define the like product properly.

4.165 Argentina submits that, pursuant to all three above-mentioned Articles, it is the "domestic industry" thus defined that must be examined under Article 4.2(a) to determine whether the increase in imports has caused serious injury or threat thereof. In Argentina's view, the Commission failed to identify the like product and did not conduct an analysis of the like product or products. Argentina therefore concludes that the entire analysis of the increase in imports and the determination of threat of serious injury is based on a mistaken premise which is devoid of legal validity.³⁷⁴  Argentina indicates that the Appellate Body has ruled that the wording of Article 4.1(c) is "clear and express" in stating that the term "domestic industry extends solely to the producers � of the like or directly competitive products."³⁷⁵ It further indicates that the Appellate Body also observed that "[t]he conditions in Article 2.1, therefore, relate in several important respects to the specific products. In particular, Argentina argues, according to Article 2.1, the legal basis for imposing a safeguard measure exists only when imports of a specific product have prejudicial effects on domestic producers of products that are 'like or directly competitive' with that imported product."³⁷⁶ Argentina submits that the Chilean Commission did not conduct that analysis. In Argentina's view, it is clear that, in this case, there were important elements to be identified concerning the issue of the like product. Argentina quotes the Appellate Body which maintained that "input products can only be included in defining the 'domestic industry' if they are 'like or directly competitive' with the end products".³⁷⁷ Once again, Argentina claims, this analysis did not take place. Argentina also refers to the Appellate Body statement³⁷⁸ whereby "the data before the competent authorities must be sufficiently representative to give a true picture of the 'domestic industry'". Argentina claims that, in this case, there is no way that the Panel could even consider the matter, since no like product was defined, nor were the producers of the like product identified. Thus, the decision does not meet the most elementary requirements of Articles 2.1, 4.1(c) and 4.2(a) of the Agreement on Safeguards.³⁷⁹ Argentina claims that the Commission did not provide a legal analysis of how it arrived at these categories and how it determined that they constituted the "domestic industry that produces like or directly competitive products" in accordance with Article 2.1 of the Agreement on Safeguards.

4.166 Argentina submits that, as regards edible vegetable oils, the Chilean Commission provides no reasonable explanation of why it appears to have grouped together colza (rape) seeds and various types of edible oils to form a single "product" for its investigation. According to Argentina, Chile is applying its price band to 25 different tariff items of the Harmonized System for edible vegetable oils - "products" which range from olive oil to palm oil, at various stages of processing (crude and refined). Argentina claims that, of these 25 items, Chile only records imports 21 different types of oil. Moreover, Argentina explains, Chile only produces colza (rape) and sunflower seeds and colza (rape) oil with seed produced locally, and a bit of soya bean oil with imported beans. In Argentina's view, it is not very clear on what basis the Commission determined the like product and the industry, and which domestic products are "like" or "directly competitive". Argentina claims that, when the Commission makes an estimate of threat of injury to the domestic industry, it refers indiscriminately to producers of rape, to the extracting industry and to the refining industry, without making it clear which is the domestic industry that is allegedly threatened with injury by imports of edible vegetable oils.³⁸⁰

4.167 Argentina submits that, as regards wheat flour, the Commission does not in fact provide any analysis of the wheat flour category to determine which products are "like" products or "directly competitive" with the imports. Argentina argues that the Commission merely states that "� for these purposes, flour represents an alternative way of importing wheat if direct imports prove to be more costly or are subject to higher tariffs, so it is necessary to apply a treatment similar to that applied to wheat". Similarly, Argentina submits, Chile states in its notification to the WTO of threat of serious injury that "[i]f the mechanism applied to wheat is not also applied to imports of wheat flour, a large increase in imports of wheat flour could cause injury similar to that caused to wheat production by imports of wheat."^{381 382}

4.168 As far as wheat is concerned, Argentina submits that the Commission failed to carry out a legal analysis concerning the definition of the like product. In Argentina's view, it is not clear whether durum wheat has been subsumed under pasta and wheat under flour in its definition of "product", or whether other forms of wheat have also been included.³⁸³

4.169 Chile claims not to understand Argentina's reasons for limiting its understanding of the legal requirements for the imposition of a safeguard measure solely to determination of a like product. Chile contends that Article XIX:1(a) of the GATT 1994 in fact refers to "like or directly competitive products". Article 2.1 of the Agreement on Safeguards provides that "domestic industry that produces like or directly competitive products", and Article 4.1(c) then refers to the "domestic industry", defining it as the producers as a whole of "the like or directly competitive products �". In this connection, Argentina cites the ruling of the Appellate Body in the case "US - Lamb", indicating that "The conditions in Article 2.1, therefore, relate in several important respects to specific products. In particular, according to Article 2.1, the legal basis for imposing a safeguard measure exists only when imports of a specific product have prejudicial effects on domestic producers of products that are 'like or directly competitive' with that imported product."³⁸⁴ Chile does not understand, therefore, why Argentina considers that the Commission should only have identified the like product.³⁸⁵ Chile argues that it is a fact that the categories of products involved correspond to products in the PBS which, in turn, was established some time ago and grouped categories of products that were directly competitive. In other words, if the PBS had not taken into account each agricultural product and its respective like or directly competitive products, the application of the system would have been ineffective. Nevertheless, Chile claims, as can be seen from the records, the Commission reaffirmed the analysis in that respect. Chile has specified each and every one of the products involved in the investigation and in the subsequent application of measures through its tariff position, its SACH code, Chile's harmonized system, taking into account as well, the explanatory notes to this system.³⁸⁶

4.170 In response to the above argumentation, Argentina submits that, it never suggested that the determination of the like product was the sole legal requirement for the imposition of safeguard measures. According to Argentina, one of the basic requirements laid down in the Agreement on Safeguards is the identification of a like or directly competitive product so that the authorities can then make their determinations with respect to increased imports, serious injury and causality. Argentina affirms that it is hard to understand why Chile repeats³⁸⁷ the quotation made by Argentina in its first written submission from paragraph 86 of the Appellate Body report in United States - Lamb, which states, precisely, that the legal basis for imposing a safeguard measure exists only when imports of a specific product have prejudicial effects on domestic producers of products that are "like or directly competitive" with that imported product. In fact, Argentina adds, although there were important elements relating to the issue of the like product and the producers of the like product that needed to be identified in this case, the Commission did not carry out any analysis, and it was therefore impossible to identify the industries affected. In the case of oils, Argentina explains, the Commission refers indiscriminately to producers of rape, to the extracting industry and to the refining industry. Argentina further argues that Chile states that the Commission Minutes contain an analysis of the "directly competitive products" because the Commission repeated the analysis conducted when the price band system was introduced.³⁸⁸ However, Argentina argues, that analysis could not have been included in any of the records. Argentina repeats that the Minutes that served as a basis for the investigation and conclusions of the Commission contained no more than citations of numbers and figures relating to imports and financial and economic indices of the "industries", with information taken directly from the Ministry of Agriculture's application for the initiation of an investigation and no analysis or conclusions as to its accuracy.³⁸⁹

4.171 Chile contends that the Commission acted consistently with Article XIX of the GATT 1994 and Articles 2.1, 4.1(c) and 4.2(a) of the Agreement on Safeguards by confirming not once but twice that both subject product categories were comprised of like or directly competitive products. Chile explains that the Commission confirmed that the categories of products chosen for the safeguard measure corresponded exactly to the categories used for the price band system, thereby assuring that the categories were comprised of only directly competitive products. Moreover, Chile argues, the Commission did an independent analysis of both wheat and wheat flour as well as the category comprising edible vegetable oils.³⁹⁰

4.172 As regards wheat and wheat flour, Chile explains that, in view of the inherent nature of the products under investigation, domestic wheat was considered to be a like product to imported wheat since the imports correspond to the same product at the agricultural production level. It indicates that the same conclusion was reached for flour, which would be a like product to imported flour. In this connection, Chile explains, the Commission also took account of the fact that flour constitutes an alternative way of importing wheat if the import of wheat as such proves to be more costly or subject to a higher tariff: imported flour is directly competitive with domestic wheat in view of the fact that the latter is used almost exclusively for producing flour.³⁹¹ Thus, Chile argues, the Commission found that wheat flour has a high rate of substitutability with wheat and thus the two products are directly competitive.³⁹² Chile contests Argentina's statement that the Commission does not provide any analysis to determine which products are like and directly competitive with imports of wheat flour.³⁹³ Chile argues, establishing a safeguard for wheat and failing to do so for flour would be perfectly useless because imports would then tend to be in the form of flour. This was why a price band directly related to that for wheat was then established for flour. In addition, Argentina states that it is not clear whether the Commission subsumed durum wheat for pasta and wheat for flour in its definition of product.³⁹⁴ Chile notes in this connection that imports of wheat subject to safeguards correspond to those under tariff heading 1001.9000, which only includes imports of wheat for making bread and pastry products, as determined in Minutes of Session No. 193. Imports of wheat for pasta are classified under another tariff heading (1001.1000) therefore, identification of the tariff headings makes it clear which products are covered by the investigation.³⁹⁵

4.173 As regards edible vegetable oils, Chile contests Argentina's statement that "it is not very clear on what basis the Commission determined the like product and the industry".³⁹⁶ In this connection, Chile notes that rape-seed oil produced domestically is a like product to the other oils to which the measure applied because (i) they are physically and chemically very similar; (ii) they are consumed without distinction; (iii) they have the same final use; (iv) they utilize the same channels of distribution. Chile submits that one indicator of this is the wording on the labelling of edible vegetable oils for consumption, where the reference is usually only to vegetable oils or a mixture thereof, without specifying which oils. Chile claims that, from the point of view of the consumers, which is the relevant factor when determining if the products are directly competitive, it cannot be said that they are different products.³⁹⁷

4.174 Argentina considers the above as ex post facto explanations by Chile.³⁹⁸ Argentina considers that Chile cannot simply claim that the Commission took the above parameters into account without indicating in what part of the report the said analysis and its conclusions can be found. Argentina argues that Chile itself recognizes that the implementing authority merely identified the products under investigation by their tariff heading. Argentina submits that this does not constitute a sufficient analysis of the like product for the purposes of applying a safeguard measure - on the contrary, it confirms that the parties are speaking of the same products that are subject to the price band system.³⁹⁹

(f) Increase of imports

4.175 Argentina claims that the competent Chilean authorities failed to demonstrate an increase in imports under Article XIX.1(a) of the GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards. Argentina contends that the increased imports is a fundamental requirement for the imposition of a safeguard measure provided for in the Articles concerned.⁴⁰⁰

4.176 Argentina claims that an analysis of the content of the Minutes and notifications reveals that Chile did not demonstrate that there were increased imports, and hence failed to comply with its obligations under Article XIX:1(a) and Articles 2.1 and 4.2(a) of the Agreement on Safeguards. Argentina refers to Argentina - Footwear (EC) where the Panel stated that "[t]he Agreement on Safeguards requires an increase in imports as a basic prerequisite for the application of a safeguard measure. The relevant provisions are in Articles 2.1 and 4.2(a)"⁴⁰¹ and "[t]hus, to determine whether imports have increased in 'such quantities' for purposes of applying a safeguard measure, these two provisions require an analysis of the rate and amount of the increase in imports, in absolute terms and as a percentage of domestic production."⁴⁰² Argentina argues that the increase in imports has to have already occurred when the decision is made. In this regard, it refers to the Panel report in Argentina - Footwear (EC) which maintained that " � if only a threat of increased imports is present, rather than actual increased imports, this is not sufficient determination of the existence of a threat of serious injury due to a threat of increased imports would amount to a determination based on allegation of conjecture rather than one supported by facts as required by Article 4.1(b)"⁴⁰³ According to Argentina, the report of the Panel in US - Wheat Gluten confirmed this general notion, noting that Article XIX:1(a) and Article 2.1 of the Agreement on Safeguards contains "the initial threshold requirement that there be an increase in imports."⁴⁰⁴

4.177 Argentina also refers to Argentina -Footwear (EC), where the Appellate Body established that the examination of the increase in imports must include an analysis of the trends over the period of investigation, and that recent imports must also be examined.⁴⁰⁵ Argentina reminds that the Appellate Body maintained that "not just any increased quantities of imports will suffice." � "[T]he increase in imports must have been recent enough, sudden enough, sharp enough and significant enough, both quantitatively and qualitatively to cause or threaten to cause 'serious injury'."⁴⁰⁶ Argentina claims that Chile has not demonstrated a real increase in imports. Argentina submits that, in fact, the Commission does not bother with the question of whether imports increased. On the contrary, Argentina argues, it simply reaches an unfounded conclusion: "There were noticeable differences between recent import prices resulting from full application of the band and prices resulting from imposition of a tariff ceiling of 31.5 per cent. This substantiates the forecast of a greatly accelerated increase in imports that would occur (or has already occurred) unless the full duties specified in the bands are applied. �"⁴⁰⁷ Argentina further argues that, even if this analysis had any validity, quod non, the Commission did not provide objective evidence of its effect, nor did it specify to what degree imports would have increased. Argentina submits that an analysis of this type does not provide a sufficient basis for concluding that imports were in "increased" quantities, as required by Articles 2.1 and 4.2(b) of the Agreement on Safeguards.⁴⁰⁸ Argentina concludes that what counts in deciding on the application of safeguard measures being a demonstration of the actual increase in imports and affirms that Chile provided no such demonstration either for wheat, or for wheat flour, or for edible vegetable oils.⁴⁰⁹

4.178 Argentina considers that the decision of the Commission to recommend the extension of the measures (Minutes of Session No. 224) contains some data in addition to that contained in the related documents. However, Argentina argues, the new data on which the extension is based suffers from the same shortcomings as the original investigation. Argentina submits that the Chilean Commission failed to demonstrate that imports were in such increased quantities as to justify the imposition of a safeguard measure. For all of these reasons Argentina concludes that the Chilean Commission failed to demonstrate that edible vegetable oils, wheat or wheat flour were being imported in increased quantities, absolute or relative.⁴¹⁰

4.179 Chile submits that Chile considers that the requirement regarding an increase in imports and the impact of the PBS in this case are factors that cannot be examined separately. It refers to Minutes of Session No. 224⁴¹¹ which states the following: "(i) In examining imports, the Commission took into consideration the fact that, for each of the products investigated, the normal functioning of the PBS had been decisive in containing an increase in imports and, consequently, the trend in imports cannot be examined without taking this factor into account. The analysis by the Commission takes into account the period from the adoption of each safeguard measure in effect for each product. Nevertheless, for the purposes of comparison and evaluation, information for previous periods is also taken into account."⁴¹²

4.180 Chile submits that it does not follow either from the letter of Article XIX.1 of the GATT 1994 and Article 7 of the Agreement on Safeguards, or from their object and purpose, that an extension measure requires that the competent authority find for a second time that there is an increase in imports to justify an extension. Chile argues that, taken literally, Article 7.2, refers to Articles 2, 3, 4 and 5, however as indicated earlier it refers only to procedural aspects regulated by those Articles and not to substantive aspects. Chile further argues that, if Argentina were right, there would be an essential contradiction between the requirements laid down in the last part of paragraph 2 and the requirement of a further increase in imports established in Article 2. Chile contends that, if one assumes that prior to the adoption of an extension, there must be a definitive measure whose object, inter alia, is to counteract the threat of injury presented by an increase in imports, there would be no reason for requiring evidence of the fact that the domestic industry is adjusting. Chile wonders how would it be possible for there to be any adjustment to a further increase in imports if the definitive measure were still in force.⁴¹³

4.181 In response to the above argumentation, Argentina submits that Minute 193 - which provides the outcome of the Commission's investigation for the definitive safeguard measures - is not WTO-consistent since, by not following the procedural requirements established in the Agreement on Safeguards, it does not meet any of the substantive conditions, compliance of which is necessary for any safeguard measure in order for it to be lawful. Therefore, it affords no legal basis for the application of the definitive safeguard measures. As a result, Minute 224, which is legally premised on Minute 193, can not possibly justify the extension of such WTO-inconsistent safeguard measures. Thus, the measures, whether as originally applied or as extended, are WTO-inconsistent. In addition, Argentina also maintains that Minute 224 itself violates various provisions of the Agreement on Safeguards as previously elaborated in various submissions by Argentina.⁴¹⁴

(i) Edible vegetable oils

Initiation of the investigation

4.182 Argentina submits that, with respect to oils, Minutes of Session No. 181 of the Commission states that: "Imports of oils pursued a growth trend, increasing from 82,000 tons in 1990 to 171,000 tons in 1998, reflecting a growth of 110 per cent for the period." Argentina considers that it is easy to understand the irrelevance of the data evaluated. In this regard, Argentina quotes the Appellate Body in Argentina - Footwear (EC):⁴¹⁵ "... the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points)". Argentina submits that in this case, when Chile decided to initiate the safeguards investigation, it did so on the basis of an "end point to end point" analysis only, considering the increase in imports between 1990 and 1998, without analysing the rate and amount of the increase in imports, in absolute terms and as a percentage of domestic production. Consequently, Argentina claims, the analysis carried out by the Chilean authorities is inconsistent with the obligations contained in Article 4.2 (a). Argentina explains that this was the Panel's interpretation in Argentina - Footwear (EC), and it was confirmed by the Appellate Body, which stated with respect to the increase in imports in absolute terms that it is not enough to carry out an analysis from end point to end point, rather it is necessary to consider the intervening trends (up or down and the importance of mixing them to determine an increase in the amount) (rate and amount).⁴¹⁶ According to the interpretation of the requirements made by the Appellate Body in the same case, Argentina submits that "the increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause 'serious injury'".⁴¹⁷ Argentina further submits that it is incomprehensible that Chile should have presented different data in Minutes of Session No. 181 from the data it provided in Minutes of Session No. 224 for imports of oils between 1990 and 1998 or, at least, there is no explanation of this difference in figures.⁴¹⁸

4.183 Chile contests Argentina's statement whereby Chile decided to initiate the safeguards investigation into edible vegetable oils only on the basis of an "end point to end point" analysis (for the years 1990 and 1998).⁴¹⁹ Chile notes that, when determining the measures, the Commission's analysis did not only consider the most recent trend but also developments and other factors that had affected the situation of such imports, as can be seen from Minutes of Session No. 193. Chile also contests Argentina's claim regarding "incomprehensible" differences in the data (paragraph 125), which in any event are deemed to be marginal, can be explained as a result of the revision and verification of the information provided by Chile.⁴²⁰

Provisional safeguards

4.184 Argentina submits that, regarding imports, Minutes of Session No. 185 of the Commission merely states that "... the Commission took into account the increase that would have occurred during the agricultural season 1999/2000 on the hypothesis of the bound import tariff of 31.5 per cent instead of the duties applicable under the price band. On the basis of this information provided in the application, the Commission estimated that the increase in imports would correspond, at least, to the volume needed to cover the production deficit resulting from the decrease in production under the related headings". In Argentina's view, the Minutes did not present any information with respect to an increase in imports in absolute terms or relative to domestic production and on whether the imports were under such conditions as to cause or threaten to cause serious injury, so that Chile once again failed to comply with its obligations under Articles 2.1 and 4.2 (a).⁴²¹

4.185 Chile disagrees with Argentina's claim and refers to the import statistics before the Commission, updated in the Annex to Minutes of Session No. 224. Chile explains that, under the tariff heading corresponding to mixtures of oils (1517.9000), increasing quantities of edible vegetable oils started to be imported. This situation led to an increase of 45 per cent in imports of this product in 1999 and an increase of 431 per cent in 2000. Consequently, in 2000, 70 per cent of the imports of edible vegetable oils into Chile were classified as "mixtures" of oils. In Chile's view, this is relevant because, for example, between 1990 and 1996, this share did not exceed 0.4 per cent. The dramatic increase in imports of mixtures of oils is reflected in an increase in total imports of vegetable oils (pure oils and mixtures of oils) of 16 per cent in 2000 compared with the volume imported the previous year. As a result of this situation, Chile argues, the Commission received a request to investigate the situation affecting mixtures of oils and initiated a safeguards investigation into this product. As shown in Minutes of Session No. 229, during this investigation the relationship between oils and mixtures of oils and the substantial increase in imports of the latter became evident. This situation led to the adoption of a provisional safeguard measure for mixtures of oils.⁴²²

4.186 In response to the above argumentation, Argentina submits that the Chilean reference to the increase in imports of mixtures of oils has no relevance in determining the safeguard measures and that Chile recognizes that imports of edible vegetable oils declined.⁴²³

Definitive safeguards

4.187 Argentina submits that Minutes of Session No. 193 of the Commission determines, with respect to imports of the two main edible vegetable oils only, that they increased by 23 per cent in 1998 as compared to the previous year. However, Argentina argues, it then goes on to point out that "... these imports dropped by 24 per cent ..." during the most recent period, which, according to the Appellate Body, is ultimately the relevant period for the application of the measure. Argentina further submits that the same Minutes also state that "... from 1993 to 1997, the level of imports is similar", i.e. there was no increase in imports either, even if we consider a series of more than ten years, as recorded in the notifications that we shall examine in detail further on, placing the recent behaviour of imports in the broader context of their trend which, at best, was stable. Argentina indicates that Chile's notification to the WTO of 7 February 2000 on finding a serious injury or threat thereof, in the section on increased imports, repeats what was mentioned in Minutes of Session No. 193, that imports of the two main vegetable oils fell by 24 per cent during the most recent period.⁴²⁴

4.188 Chile argues that an increase in imports is a basic requirement for the imposition of safeguard measures and submits that Minutes of Session No. 193 shows that "[i]mports of the two major products in the edible vegetable oils sector increased by 23 per cent in 1998 compared with the previous year. Over the first ten months of 1999, imports fell by 24 per cent. Regarding this decrease, the Commission notes that in 1999 there was an abnormal situation due to the behaviour of importers as a result of the tariff disputes concerning the headings under which oils should be imported. From 1993 to 1997, the level of imports recorded is similar."⁴²⁵

Extension of the measures

4.189 Argentina submits that Minutes of Session No. 224 of the Commission also states that "� Imports of edible vegetable oils fell by 37 per cent in the period January to September 2000 compared with the same period in the previous year. In 1999, these imports fell by 22 per cent. The level of imports from 1993 to 1997 is similar." Argentina argues that, although an end point to end point analysis does not help in determining the application of a measure, it does help to show the trend in imports, as sanctioned by the Appellate Body in Argentina - Footwear (EC), and, in this case, the trend is, to say the least, erratic and moreover was clearly downward during the period 1998-1999 (the most recent), both as regards the headings subject to safeguards and the others.⁴²⁶

4.190 Argentina submits that, in Chile's notification to the WTO dated 22 December 2000 - extending the measure in effect - the wording in the section on vegetable oils repeats that contained in Minutes of Session No. 224 to the effect that "� Imports of edible vegetable oils fell by 37 per cent in the period January to September 2000 compared with the same period in the previous year. In 1999, these imports fell by 22 per cent. From 1993 to 1997 the level of imports is similar." Argentina contends that, when it decided to extend the safeguard measures by means of Minutes of Session No. 224, Chile recognized that there had been a significant fall in imports, which in all respects is totally inconsistent with its WTO obligations. Argentina also refers to data provided by other sources⁴²⁷ which would show a net fall in imports in 1999 and 2000 both for soya bean and sunflower oils, which account for over 90 per cent of all Chile's imports of oil under the tariff headings subject to the safeguard. In Argentina's view, these data prove that there has been no increase in imports of edible vegetable oils in absolute terms nor do any of the Minutes or notifications provide any information concerning increased imports relative to domestic production or under such conditions as to cause or threaten to cause serious injury. Argentina therefore submits that Chile fails to comply with the obligations under Article XIX.1(a) and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.⁴²⁸

4.191 In this regard, Chile quotes the following excerpt of Minutes of Session No. 224:⁴²⁹

"(i) In examining imports, the Commission took into consideration the fact that, for each of the products investigated, the normal functioning of the price band system had been decisive in containing an increase in imports and, consequently, the trend in imports cannot be examined without taking this factor into account. The analysis by the Commission takes into account the period from the adoption of each safeguard measure in effect for each product. Nevertheless, for the purposes of comparison and evaluation, information for previous periods is also taken into account."

(ii) Wheat flour

Initiation of the investigation

4.192 Argentina submits that, when considering imports, Minutes of Session No. 181 simply states that "...for flour, there was an increase of over 80 per cent during the past year and the first six months of the last three years show increases of 321 per cent, 23 per cent and 15 per cent." Argentina alleges that this conclusion is not based on concrete statistical data, as can been seen from the information provided by the actual petitioner and from the data of the Commission itself in Minutes of Session No. 224, which show a marked downward trend as of 1996.⁴³⁰

4.193 Chile contests Argentina's statement⁴³¹ that Minutes of Session No. 181 on the initiation of the investigation determined that, for wheat flour, over the past year there was an increase of over 80 per cent and that the first six months of the last three years show increases of 321 per cent, 23 per cent and 15 per cent, which, according to Argentina, "are not based on concrete statistical data", because Minutes of Session No. 224 showed a marked downward trend as of 1996. Chile points out that this apparent contradiction is simply due to the fact that a different period was taken as a basis for comparison because, for the initiation of the investigation, the Commission took the half-yearly trend for the previous three years, whereas Minutes of Session No. 224 refers to a longer period and an annual not half-yearly trend. Chile claims that this is shown by the Minutes, which states "[i]mports of wheat flour fluctuate as far as increases and decreases are concerned, but this can be explained by their low volume. Nevertheless, the Commission notes that for these purposes wheat flour represents an alternative way of importing wheat if direct imports prove to be more costly or are subject to a higher tariff, so it is necessary to apply a treatment similar to that applicable to wheat. The Commission considers that if the total duties determined by the band were not applied and the duty was limited to a maximum tariff of 31.5 per cent, the result would be a very rapid increase in imports of the product." Noting both the levels and the rates of increase, the Commission concluded that the trend had been erratic during the period 1990 - January-September 2000. Chile submits that the mere fact that Minutes of Session No. 181 refers to a particular period does not mean that the Commission considered other data or did not take into account other periods in its analysis. In any event, Chile adds, the most important element when analysing the trend in imports of wheat flour is that they are an alternative product to imports of wheat and the Commission gave priority to this argument over and above the trend in imports itself.⁴³²

Provisional safeguards

4.194 Argentina contends that, as in the case of oils, Minutes of Session No. 185 do not provide any information (data, statistics, etc.) concerning an increase in imports in absolute terms or relative to domestic production under such conditions as to cause or threaten to cause serious injury, thereby failing to comply with the obligations under Article 2.1.⁴³³

Definitive safeguards

4.195 Argentina submits that Minutes of Session No. 193 indicate that: "... Imports of wheat flour fluctuate, but this can be explained by their low volume. Nevertheless, the Commission notes that for these purposes wheat flour represents an alternative way of importing wheat if direct imports prove to be more costly or are subject to a higher tariff, so it is necessary to apply a treatment similar to that applicable to wheat." Argentina considers that the conclusion drawn by the Commission nullifies any subsequent inference by Chile from the figures because it acknowledges that these fluctuate and concern low volumes. Argentina submits that, in fact, there is a downward trend.⁴³⁴ Argentina submits that it can also be seen that the Minutes do not provide any data or statistics on imports of wheat flour, and therefore, the resolution on the application of definitive safeguard measures to wheat flour is extremely imprecise and partial. Argentina claims that, in the notification to the WTO dated 7 February 2000, concerning the existence of serious injury or threat of serious injury, the section concerning increased imports repeats the wording in Minutes of Session No. 193 regarding fluctuations in the volume of imports of wheat flour without specifying the period taken into account. In any event, Argentina concludes, the trend is downward rather than fluctuating, as can be seen from the information given by Chile in Minutes of Session No. 224.⁴³⁵

Extension of the measures

4.196 Argentina submits that, like Minutes of Session No. 193, Minutes of Session No. 224 also state that "...imports of wheat flour fluctuate as far as increases and decreases are concerned...". Argentina claims that the tables accompanying the Minutes contradict the statement in the text since they clearly show a downward trend in imports of wheat flour:⁴³⁶ Argentina indicates that the Minutes later state that "[t]he Commission considered that if the total duties determined by the band were not applied, and the duty was limited to a maximum tariff of 31.5 per cent, the result would be a very rapid increase in imports of the product." In Argentina's view, it would appear that the Chilean authorities consider that an alleged increase in imports, which in fact did not occur when the measure was applied, could provide grounds for applying the measure. In this connection, Argentina submits that it must be borne in mind that a decision to apply a measure must be based on concrete facts and not on estimates or conjecture.⁴³⁷ Argentina indicates that Chile's notification to the WTO dated 22 December 2000 concerning the extension of the existing measure states once again that imports of wheat flour show an erratic pattern of increases and decreases, and reads "if the total duties determined by the band were not applied, and the duty was limited to a maximum tariff of 31.5 per cent, the result would be a very rapid increase in imports of the product". Argentina claims that Table 3 of Minutes of Session No. 224 is attached to the notification and shows a clear downward trend in imports of wheat flour. Argentina submits that, based on the figures in the Decree extending the measure and its notification: imports of wheat flour showed a marked downward trend in 1998 and 1999 after peaking in 1996; the volume of imports of wheat flour fell by 21 per cent in 1998 compared with 1997; imports fell by a further 11 per cent during the first nine months of 2000 compared with the same period in 1999.⁴³⁸

(iii) Wheat

Initiation of the investigation

4.197 Argentina contends that, as far as wheat is concerned, it can be seen that Chile decided to initiate the safeguards investigation by means of Minutes of Session No. 181 on the basis of partial data that do not give an overall view of the trend, particularly since the imports peaked in 1996 and this did not occur subsequently.⁴³⁹

Provisional safeguards

4.198 Argentina submits that, with regard to wheat imports, Minutes of Session No. 185 do not provide any information either to justify the application of provisional safeguard measures to imports of wheat.⁴⁴⁰

Definitive safeguards

4.199 Argentina submits that, as regards imports of wheat, Minutes of Session No. 193 indicate that, although there was an increase in imports from 1993 to 1996, these fell in 1997 and only rose by 6 per cent in 1998 compared with the previous year. They also indicate that, over the first ten months of 1999, imports increased by 281 per cent in comparison with the same period the previous year. Argentina further submits that, in the publication by ODEPA entitled El Pulso de la Agricultura of February 1999, No. 27 there are specific references to the seriousness of the drought in 1998/1999. According to this publication, 55 per cent of the agricultural communities were in a state of alert. Argentina claims that, in its report on the first half of 1999, the Chilean Ministry of Agriculture stated that the drought during the 1998/1999 season had led to a decrease in the area under cultivation and a fall in wheat yields and production throughout Chile. Consequently, Argentina submits, it is clear that this factor, which was not taken into account in the relevant Record, had a decisive effect on domestic production of wheat and possibly on other products subject to the safeguard, and, as a result, on imports. Argentina indicates that the section on increased imports in the notification to the WTO dated 7 February 2000 on finding a serious injury or threat thereof repeats the wording in Minutes of Session No. 193.⁴⁴¹

4.200 Chile submits that an increase in imports is a basic requirement for the imposition of safeguard measures and quotes Minutes of Session No. 193⁴⁴² which reads: "Imports of wheat (in tonnes) increased by 6 per cent in 1998 compared with the previous year. Over the first 10 months of 1999, imports increased by 281 per cent in comparison with the same period the previous year. From 1993 up to 1996, there was an increase in imports, which then fell in 1997. Import of wheat flour fluctuated, but this can be explained by their low volume."⁴⁴³

4.201 In response to the above argument, Argentina claims that that increase is irrelevant in order to decide the application of a safeguard measure considering that the 511,187 tons imported in 1999 represented almost 30 per cent less of the total imported in 1996 (638,946 tons) as shown by data provided by Chile in Minutes of Session No. 224.⁴⁴⁴

Extension of the measures

4.202 Argentina refers to Minutes of Session No. 224 which state that "[d]espite the fact that imports of wheat (in tons) fell by 18 per cent in the period January to September 2000 compared with the corresponding period for 1999, the Commission took into account that, in annual terms, imports remained above the annual average for the period 1990-1999." In Argentina's view, it is clear that the figures given do not suffice for the purpose of deciding whether or not to extend the safeguard measure and, in light of the interpretation given by the panel in Argentina - Footwear (EC) concerning the increase in imports in absolute terms to the effect that an end point to end point comparison does not suffice and that intervening trends (up or down and the importance of mixing them in order to determine an increase in the amount), the rate and amount, within a fixed period of investigation, must be analysed, which is not the case in this instance, serious doubts are cast on the consistency and coherence of the figures. Argentina therefore claims that it does not suffice to consider different figures for incomplete periods in some cases or figures that are not viewed as a whole, because this deprives the period of any relevance. Argentina further argues that, bearing in mind that in the same Argentina - Footwear (EC) case the Appellate Body considered that the increase in imports must have been recent enough, sudden enough, sharp enough and significant enough, both quantitatively and qualitatively, to cause or threaten to cause "serious injury", the decrease of 18 per cent in imports of wheat during the most recent period is decisive for invalidating the application of the measure.⁴⁴⁵

4.203 Argentina explains that, regarding wheat imports, the Minutes include a Table 1 with figures which, on the one hand, do not show a growing trend in imports of wheat and, on the other, indicate that the trend is to say the least erratic. Consequently, Argentina submits as particularly serious, the fact that Minutes of Session No. 224, which extend the safeguard measures for one year, not only fail to record an increase in imports of wheat but acknowledge a fall of 18 per cent in the most recent period,. According to Argentina, Minutes of Session No. 224 and the notification of the extension also contain figures on imports of "other wheat", which reached a peak in 1996 and then declined. Argentina argues that, although imports increased in 1999, this increase has been estimated on the basis of historically low levels such as those in 1997 and 1998. Imports fell again in the year 2000. Argentina claims that the section on wheat imports in the notification to the WTO dated 22 December 2000 concerning the extension of the existing measure repeats the wording in Minutes of Session No. 224 of the Commission: "[d]espite the fact that wheat imports (in tons) fell by 18 per cent in the period January to September compared with the corresponding period for 1999, the Commission took into account that, in annual terms, imports remained above the annual average for the period 1990-1999." Argentina questions the relevance this statement has in support of the decision to apply a safeguard measure. Argentina indicates that it has also obtained figures concerning Chilean imports of wheat (tariff heading 1001.9000 - Wheat, other) from other sources⁴⁴⁶ for the last three full years. According to Argentina, these figures clearly show the fall in wheat imports in the year 2000. In any event, Argentina states, as far as this product is concerned, the impact of the drought in 1998/1999 must be taken into account and yet was not considered by the Chilean authorities under "other factors".⁴⁴⁷

(g) Evaluation of all relevant factors

4.204 Argentina contends that the competent Chilean authorities did not evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of the industry, as required by Article 4.2(a) of the Agreement on Safeguards. In particular, Argentina considers that the determination of threat of serious injury made by the Chilean authority applying the measure is not supported by the evidence obtained during the investigation. Argentina maintains that the determination of threat of serious injury by the Commission is inconsistent because of two instances of non-compliance: (i) contrary to their obligations under Article 4.2 of the Agreement on Safeguards, the Chilean authorities did not evaluate all the factors related to the situation of the industry; (ii) the findings and conclusions of the Commission regarding the factors investigated were not substantiated by evidence.⁴⁴⁸

4.205 Argentina notes that neither the Minutes of the Commission nor the notifications to the WTO contain any analysis of each of the factors specified in Article 4.2(a) during the investigation period, but only isolated data referring to some of the factors related to the appraisal of an alleged threat of injury. Argentina explains that, for example, neither the Minutes nor the notifications contain any evaluation of the rate and amount of the increase in imports, the share of the domestic market taken by imports, nor any figures regarding sales, productivity, capacity utilization, profits and losses, employment or any other relevant factor concerning the situation of the domestic industry. In Argentina's view, this does not mean that the competent authority must confine itself to examining the factors listed in the Agreement on Safeguards, but it does mean that, at the very least, it should examine these factors, because Article 4.2(a) uses the words "in particular" when referring to them. For example, Argentina adds, in addition to the aforementioned profitability (profits and losses), the competent authority should have examined cash flows in the major firms in this sector. Argentina submits that the investigation carried out by the Commission did not comply with the provisions of the Agreement on Safeguards because it did not evaluate all relevant factors and did not undertake a substantive analysis of each factor. Argentina suggests that the Commission may have simply accepted the information on the industry's indicators submitted by the petitioner, in this particular case the Ministry of Agriculture. Argentina considers that the Final Determination does not really contain data but only some partial statistics for the three products mentioned therein. It further explains that it is only possible to extract some isolated data that are not very clear because there is no sequential information of the type needed to undertake comparisons. In Argentina's opinion, it is not possible either to identify the source of the statistics on which the investigation was based nor the process by which the statistics were verified and re-evaluated in terms of their reliability. Furthermore, Argentina affirms, the data themselves appear to be based on some type of "forecast" because the text is written in the conditional tense. Argentina contends that, it has not proved possible to identify any analytical basis to substantiate the forecast. Argentina also contends that the comparison between the periods examined is not very clear and the data given have not been evaluated in relation to previous years. According to Argentina, in essence, the data do not prove anything concerning the existence of a serious threat of injury to the industry. Argentina submits that the gravity of the measure adopted by the Commission is not justified by the mere statement that "limiting import duties to 31.5 per cent at a time when international prices for these products have fallen obviously constitutes a threat of serious injury ..."^{449 450}

4.206 Chile submits that Article 4.2(a) requires Members to "evaluate all relevant factors of an objective and quantifiable nature" when investigating whether the increased imports have caused or are threatening to cause serious injury. Although Article 4.2 does contain certain factors to be evaluated, the Article does not contain a definitive list, thereby leaving Members latitude and even a duty to determine what are the relevant factors in particular cases.⁴⁵¹

4.207 Argentina disagrees with the above interpretation of Article 4.2 by Chile⁴⁵² and considers that this interpretation is definitely contrary to the actual text of the Article, according to which Chile had a minimum obligation to analyse the factors mentioned therein - given that the Article refers to them "in particular" - aside from other relevant factors.⁴⁵³ Argentina argues that this interpretation is consistent with different Appellate Body precedents as in "Argentina - Footwear (EC)"⁴⁵⁴, and "US - Lamb"⁴⁵⁵. ⁴⁵⁶

4.208 Chile submits that the Chilean authority complied with the requirement to evaluate all relevant factors laid down in Article 4.2(a) of the Agreement on Safeguards. As indicated in that paragraph, "all relevant factors" must be analysed. Chile submits that relevance is fundamental when considering factors affecting injury or threat of injury and it must be considered on a case-by-case, product-by-product basis. Chile maintains that the Commission therefore considered it highly relevant to include the impact of the PBS on trade flows in the products investigated that were subject to price bands. It further argues that failing to take this impact into account would have been inconsistent with Article 4.2(a). Chile explains that during the investigation period, the band functioned with positive specific tariffs. It would be simply inadmissible not to take into account the existence of this tariff and its effect on the flow of imports and "consequently, the trend in imports cannot be analysed without taking into account this factor".⁴⁵⁷ Chile indicates that this is why the authority considered it necessary to evaluate the injury that would have been caused to domestic industry in the absence of the band during the period prior to application of the safeguards. In this connection, Chile submits that Minutes of Session Nos. 181, 185, 193 and 224 again refer to the impact that would have been caused by failure to apply safeguards. The effects of the increase in imports take into account both the income level of producers and the value of production, the decrease in net profits, including losses, as well as the physical downturn in the domestic industry which would be absorbed by imports and, lastly, the effect on employment. Chile claims that this analysis was undertaken for each and every one of the products covered by the investigation, namely, wheat, wheat flour and oils.⁴⁵⁸

4.209 Chile contests Argentina's claims that it did not evaluate "all the relevant factors", as required by Article 4.2(a) of the Agreement on Safeguards. Chile submits that the Agreement on Safeguards does not determine nor specify what is the proper method for deciding on the relevance of the factors, so Argentina's statement in its claim regarding the need to consider "for example, (�) cash flows in the major firms in this sector"⁴⁵⁹ should not be taken into account because the relevance of factors is the result of the criteria used by the investigating body and may vary from case to case. Chile further submits that, if the Agreement on Safeguards itself lists certain aspects that should be given particular attention and does not include the factors cited by Argentina, Chile does not consider that it violated this Article by not including a separate analysis of cash flows in the major firms. Moreover, Chile argues, for this type of product, the most important factor is price. Chile refers to US - Lamb, and submits that the Appellate Body clearly indicated "that the competent authorities are not required 'to show that each listed injury factor is declining' but, rather, they must reach a determination in light of the evidence as a whole".^{460 461} Chile submits that failure to include a factor that in Argentina's opinion, was decisive or critical, even if it really was, which remains subject to discussion - does not suffice to affirm non-compliance with the Agreement on Safeguards. Furthermore, Argentina indicates that "[i]t appears that the Commission simply accepted the information on the industry's indicators �", but does not reject the factors taken into account. Consequently, Chile argues, these factors cannot be nullified simply because another additional factor was not taken into account in the investigation. Chile submits that this would only apply to the extent that the information included did not, as a whole, lead to an appropriate conclusion.⁴⁶²

4.210 In response to a question from the Panel, Chile explains that all of the factors on which the Commission had information were considered. It adds that the factors that were not considered were those for which information was unavailable from public sources and could not be found by consulting other sources either.⁴⁶³

4.211 In response to Argentina's claim that the gravity of the measure adopted by the Commission is not justified by the mere statement that "limiting import duties to 31.5 per cent at a time when international prices for these products have fallen obviously constitutes a threat of serious injury" ⁴⁶⁴, Chile submits that Minutes of Session No. 193 contain detailed information concerning the serious injury to the domestic industry concerned if the recommended measures are not applied. In addition, Chile claims, Argentina fails to draw attention to other Minutes that formed an integral part of the investigation, namely, Minutes of Session No. 181 of 9 September 1999 and Minutes of Session No. 185 of 22 October 1999, where the injury to the domestic industry that would occur if the recommended measures were not adopted is confirmed and explained in detail.⁴⁶⁵

Edible vegetable oils

4.212 Argentina contends that it is not clear what type of product or industry is being examined under the heading "vegetable oils", and therefore, it is impossible to determine the relevance of the information obtained in the investigation or whether such data are representative of the industry. It further states that it is impossible to determine what periods are being examined because no dates are given. Argentina affirms that, although the Commission highlights decreases in production and employment levels, reading the documents it is not clear whether the slowdown in the production of edible vegetable oils did in fact occur or would occur. In addition, Argentina points out that the Commission does not deal either with the other factors listed in Article 4.2(a), namely, the share of the domestic market taken by imports, changes in the level of sales, productivity, capacity utilization, profits and losses, inter alia.⁴⁶⁶ In Argentina's view, although the extension of the safeguard measure, reported in Minutes of Session No. 224 and in the notification of extension, includes some additional data, the following points should be made: Firstly, the data are not analysed in the aforementioned Record; secondly, the figures contained in the tables attached to the Minutes imposing the measure in fact invalidate any possible determination of threat of injury. For example, Argentina explains, prices appear to have risen significantly between 1996 and 1999 in terms of pesos and then stabilized during the period examined for the year 2000.⁴⁶⁷

4.213 Argentina indicates that Table 16 of Minutes of Session No. 224 recommending the extension contains figures relating to colza (rape) and sunflower, in terms of area sown, harvest and yield. In Argentina's opinion, it is not clear why these seeds should be representative of the edible oils industry because no explanation of their relevance is given. Argentina submits that, in any event, it can easily be seen that the total number of hectares sown and harvested increased sharply in the period beginning in 1998, and sowing increased threefold between 1997 and 1999, returning to the 1998 level in the year 2000, although the figure was still higher than that for the previous years, and that harvests reached their maximum level in 1999 following an increase in 1998. In terms of employment, Argentina adds, the figures presented relate solely to the seed sector and there is no information at all on the milling and refining sector, which raises doubts as to their relevance. Nevertheless, Argentina argues, the number of people employed increased in 1998 and 1999.⁴⁶⁸

4.214 Chile contests the above statement from Argentina that the data provided "in fact invalidate any possible determination of threat of injury.⁴⁶⁹ In Chile's view, Argentina's assertion regarding rising prices is based on only one of the three columns in Table 12, attached to Minutes of Session No. 224 (for the purpose of determining the price in question), and is precisely the column that does not contain any adjustment for national currency. Chile argues that Argentina does not refer to the other prices shown. In column two of this table, Chile submits, it is clearly indicated that the prices in United States dollar terms decreased over the same period.⁴⁷⁰

4.215 In response to a question by the Panel, Chile explains that, in the case of the oil industry, the relevant factors analysed by the Commission were the rate and amount of the increase in imports, the share of the domestic market taken by increased imports, production (in the case of oils, only production information was available, which in any case is similar to the level of sales), capacity utilization, and profits and losses. Domestic prices were also evaluated. Chile also indicates that no information was available concerning productivity and employment in the oils industry.⁴⁷¹

4.216 With respect to Chile's reply to question 21 of the Panel regarding the factors that it investigated, Argentina argues that, apart from the fact that it is impossible to find any reference in any of the Records to the share of the market taken by imports or changes in the level of sales, for example, it must be stressed that the findings and conclusions of the Commission were not supported by evidence.⁴⁷²

4.217 In reference to the above argument on lack of information on productivity and employment, Argentina claims that Chile is contradicting itself since the Commission, having stated that it did not have data on productivity and employment in the oils industry, then claims that the information provided by the sector via the questionnaires was sufficient.⁴⁷³

Wheat flour

4.218 Argentina submits that, as far as wheat flour is concerned, in its final determination the Commission did not provide any evidence of the factors of injury specified in Article 4.2(a) of the Agreement on Safeguards.⁴⁷⁴ Argentina explains that the notification of threat of serious injury simply indicates that: "[i]f the mechanism applied to wheat is not also applied to imports of wheat flour, a large increase in imports of wheat flour could cause injury similar to that caused to wheat production by imports of wheat." On the basis of the information in the final determination and the notification of extension, Argentina considers to be obvious that the most important change in the price of wheat flour - at least at the global level and in terms of pesos - occurred during the period 1996/1997, when prices fell by almost 20 per cent. Argentina claims that this trend was reversed in 1998, however, and again in 1999, and, after having reached a peak in 1999, prices stabilized in 2000.⁴⁷⁵ Accordingly, Argentina submits that, in the case of wheat flour, no factor was evaluated in the final determination and this cannot be compensated by a vague reference to the situation in the wheat production industry.⁴⁷⁶

Wheat

4.219 Argentina contends that, in its final determination, the Commission refers to some indicators, but it does not provide any analysis of the figures or their relevance. It is thus impossible to see, according to Argentina, whether the factors of injury were examined on the basis of the same period of time because there is no reference whatsoever in this regard. Regarding the figures given, Argentina explains, the wide range in some of the figures such as the reduction in the net profit margin, which ranges from 20 to 90 per cent, is striking, an aspect for which the Chilean authorities offer no explanation. Although Argentina could consider that one of the reasons for this might be the grouping of different products in the same section, or the scale of production or any other factor, this is not explained. Argentina further states that the final determination does not analyse the factors listed in Article 4.2(a) of the Agreement on Safeguards concerning market share, changes in the level of sales or productivity. In this regard, Argentina claims that the document determining the extension and the notification of the extension for the first time provides certain data on the industry, but the time scales given are not evaluated by the Commission on Distortions in the determination itself. Argentina concludes that there are no substantiated conclusions in respect of the few data furnished and that, moreover, even the information itself does not prove the existence of a threat of serious injury.⁴⁷⁷

4.220 Argentina explains that Table 9 on domestic prices expressed in pesos ("Domestic prices, wheat") shows the largest drop between the years 1996 and 1997. Prices then increased in 1997/1998 and 1998/1999, falling by only 1.5 per cent in 1999/2000. Concerning the area sown, 1998 was essentially the same as 1997, but harvests increased by 14 per cent and yield by 16 per cent. Argentina submits that, contrary to what is alleged by Chile, this shows that the sector not only increased production but also productivity. Argentina further submits that, although the aforementioned reduction occurred in 1999, in 2000 the sown area, harvests and yield all increased. Although in historic terms annual variations are quite normal and decreases in one year are followed by increases, Argentina argues, the years 1997 and 1998 appear to have been years of strong growth both as far as sowing and harvesting are concerned. Argentina thus conclude that there is no evaluation of all the factors, as required by the Agreement on Safeguards, because there are no references to the share of the domestic market taken by imports, changes in the level of sales, productivity, capacity utilization, profits and losses, etc.⁴⁷⁸

4.221 In response to a question by the Panel, Chile explains that, in the case of wheat, the relevant factors analysed by the Commission were the rate and amount of the increase in imports (in absolute and relative terms), the share of the domestic market taken by increased imports, production (no information available on sales), productivity, profits and losses, and employment. Surface area and domestic prices were also considered. Chile indicates that the capacity utilization was not evaluated because it was not relevant to this agricultural crop, as stated in Minutes of Session No. 193.⁴⁷⁹

4.222 In reference to the above on the lack of relevance of the capacity utilization factor, Argentina recalls that according to panel and Appellate Body precedents, the investigating authority cannot refrain from analysing factors listed in Article 4.2(a) of the Agreement on Safeguards, let alone provide an ex post facto justification during the dispute settlement proceeding of why it did not analyse a factor. Argentina questions how the Commission managed to determine, in Minutes of Session No. 185, that "[t]he number of registered farms would decrease by 25,000 from a total of 89,700. The sown area would decrease from the current 370,000 hectares to 243,000. 390,000 tonnes, i.e. 28 per cent of the current total, would no longer be produced", without analysing capacity utilization, which is absolutely necessary in order to determine threat of injury. Consequently, contrary to the requirements laid down in Article 4.1(b) of the Agreement on Safeguards, this conclusion was based on conjectures and remote possibilities.⁴⁸⁰ In connection with the same answer given by Chile to question 21, Argentina highlights its inconsistency with the answer given by Chile to question 35, since, according to Argentina, in the first one Chile states that the CCommission on Distortions analysed the rate and amount of the increase in imports in absolute and relative terms, while in the second one Chile points out that the Commission focused its analysis of imports on their evolution in absolute terms, without mentioning where that analysis could be found in the Minutes of the Commission.⁴⁸¹

(h) Threat of injury

4.223 Argentina claims that the Chilean authorities did not prove the existence of a threat of serious injury in the terms laid down in Article XIX:1(a) of the GATT 1994 and Article 4.1(a), 4.1(b) and 4.2(a) of the Agreement on Safeguards.

4.224 Argentina elaborates on the existing case law of the Appellate Body. In this regard, it indicates that the Appellate Body stated that, in making a determination of threat of injury, the concept of "serious injury" was essential and panels must be mindful of the very high standard of injury implied by these terms⁴⁸² and that "� there must be a high degree of likelihood that the anticipated serious injury will materialize in the very near future".⁴⁸³ In Argentina's view, the information submitted by the Commission does not, however, define the extraordinary circumstances that would justify imposition of a safeguard measure. Argentina indicates that, as regards the period of review for the evaluation of the relevant factors when determining threat of injury, the Appellate Body has ruled that it must be determined "� whether there is an appropriate temporal focus for the competent authorities' 'evaluation' of the data in determining that there is a 'threat' of serious injury in the imminent future".⁴⁸⁴ Argentina also indicates that the Appellate Body also stated that "� data relating to the most recent past will provide competent authorities with an essential, and, usually, the most reliable, basis for a determination of a threat of serious injury".^{485 486}

4.225 Argentina submits that, in its determinations, the Commission repeatedly relies on forecasts, hypotheses and conjecture in order to establish the threat of serious injury which its domestic industries are allegedly experiencing, in violation of Article 4.1(b) and the principles laid down by the Appellate Body. It argues that the Commission's determinations employ the conditional tense and lack any basis or proof. Argentina provides some specific examples below: (i) Minutes of Session No. 181 of the Commission containing the decision to initiate the investigation states with regard to the three products that: "The quantification of the injury was based on forecasts that were made on the basis of the hypothesis of application of the bound tariff of 31.5 per cent and the effect this would have on a series of variables for each of the products in question". (ii) In the case of wheat, the Commission states that: " the application of the price band mechanism has ensured that the injury is not significant. If application of the price band were limited to a total duty of 31.5 per cent, domestic prices would fall and affect the producers' income levels". (iii) Minutes of Session No. 185 recommending application of the provisional safeguard measure states that: "With regard to injury, the Commission had before it the information contained in the application, which quantifies the injury on the basis of forecasts elaborated according to a hypothesis of application of the bound tariff of 31.5 per cent and the effect this would have on a series of variables for each of the products in question." (iv) In the case of oils, the same Minutes simply conclude that " � the ceiling of 31.5 per cent would lower the price and value of production � "⁴⁸⁷

4.226 Chile contends that a "threat of serious injury" means serious injury that is "clearly imminent", according to Article 4.1(b) of the Agreement on Safeguards. It further submits that Article 2.1 of the Agreement on Safeguards, when referring to an increase in imports (in absolute or relative terms), also indicates that such imports must be "under such conditions as to cause or threaten to cause serious injury to the domestic industry �". Chile argues that the Chilean authorities followed an analytical forward-looking approach based on the facts when determining the threat of serious injury. In this regard, Chile refers to the analysis of the "threat of injury" done by the Appellate Body in the United States - Lamb Meat where it said that "this term is concerned with 'serious injury' which has not yet occurred, but remains a future event whose actual materialization cannot, in fact, be assured with certainty"⁴⁸⁸ and emphasized that "in order to constitute a 'threat', the serious injury must be 'clearly imminent'. The word 'imminent' relates to the moment in time when the 'threat' is likely to materialize".⁴⁸⁹ Chile further submits that the Appellate Body later states that "as facts, by their very nature, pertain to the present and the past, the occurrence of future events can never be definitively proven by facts. There is, therefore, a tension between a future-oriented 'threat' analysis, which, ultimately, calls for a degree of 'conjecture' about the likelihood of a future event, and the need for a fact-based determination � Thus, a fact-based evaluation, under Article 4.2(a) of the Agreement on Safeguards must provide the basis for a projection that there is a high degree of likelihood of serious injury to the domestic industry in the very near future."⁴⁹⁰ Chile considers that, in accordance with this statement, a threat of serious injury must always be based on a projection, which must be consistent with the data on which it is based.⁴⁹¹

4.227 Chile submits that, in the case of the goods investigated, according to the Commission, it is irrefutable that the local and the imported product are easily interchangeable. Clearly, this was also taken into account when analysing the threat of injury. Chile argues that the close relationship between agricultural commodities and products that require a certain degree of processing that allow them to be considered directly competitive has been described above. Chile explains that the Commission based its threat determination on the price of the products corresponding to each sector of the production industry involved, which is a key element when determining injury for such products.⁴⁹² Chile considers that this way of assessing threat of injury meets the requirements of Article 4.1(c) of the Agreement on Safeguards. Chile further submits that when it was noted that the price band for oils could not operate to the full, it was verified that, in the absence of a safeguard, its incomplete functioning would in the short term lead to a serious impairment for agricultural producers, given the agreed conditions under which the product was marketed. Chile explains that competition from imported oil at very low prices would lead to a very low domestic price for the agricultural producer, which would absorb the whole of the reduction, with significant losses that are estimated in the submission. In the medium term, Chile states, the producers might cease to sow and the industrial plants would lose profits because they had no product to process. Chile contends that, once again, in the case of a band that is only partly functioning and in the absence of any safeguard measure, the price the industry would have to pay would fall to such a level that agricultural producers would lose the volume estimated as threat of injury; not because of inefficient management but because of a change in the rules of the game fixed prior to the sowing season. In addition, Chile declares, if the industry met its commitment to pay a predetermined price, it would suffer losses. Chile argues that, in either of the two cases, in the following season, there would be a sharp fall in prices and, as a result, in the area sown, with the result that there would be an internal deficit, an increase in imports and greater injury.⁴⁹³ Chile adds that the Commission took notice of the fact that if the price band system was limited to a 31.5 percent ad valorem ceiling, prices would drop even further raising the likelihood of serious injury even more. Accordingly, Chile submits, the Commission based its threat determination on a consistent basis in the record⁴⁹⁴ and took account of the fact that the normal functioning of the price band had been decisive in containing an increase in imports and the resulting injury.⁴⁹⁵

4.228 Argentina, in reference to the above argumentation by Chile⁴⁹⁶, submits that, in none of the Minutes did the Commission analyse or even define the affected industry and that the correlation of prices is not, in itself, sufficient for the purposes of determining the existence of a threat of injury. Argentina repeats that Chile did not demonstrate that increased imports threatened to cause serious injury to the domestic industry, but rather, used hypothetical and unsubstantiated circumstances for the sole purpose of not complying with its obligation to apply its WTO tariff binding of 31.5 per cent applying safeguard measures to justify the inconsistency of its price band system. In addition, Argentina, in reference to Chile's statement⁴⁹⁷ that the Commission took account of the fact that the normal functioning of the price band had been decisive in containing an increase in imports and the resulting injury, wonders how, without an increase in imports - since the price band was functioning at full regime - and without threat of injury, given the existence of the price band, could the Commission find that there was a threat of injury. Argentina concludes that Chile is trying to argue before the Panel, as a justification of its violation of Article II:1(b) of the GATT 1994, the application of safeguard measures, while on the other hand, it is trying to justify the non existence of imports in such quantities and the absence of evidence of threat of injury by pointing to the existence of the price band system which it maintained in violation of Article 4.2 of the Agreement on Agriculture.⁴⁹⁸

(i) Causal link

4.229 Argentina maintains that Chile did not comply with its obligations under Articles 4.2(b) and 2.1 of the Agreement on Safeguards inasmuch as it did not establish any causal link between the alleged increase in imports and the alleged threat of injury to the domestic industry. Argentina also considers that Chile failed to comply with its obligations under Article XIX.1(a) of the GATT 1994 and Articles 2.1 and 4.2(b) of the Agreement on Safeguards inasmuch as it did not establish any causal link between the existence of factors other than the increase in imports which at the same time were causing injury to the domestic industry.⁴⁹⁹

4.230 Argentina contends that, in this case, contrary to what is required in the above-mentioned Articles, there was no evidence of an increase in imports or threat of serious injury. Argentina indicates that the Appellate Body Report in Argentina - Footwear (EC) stated that a causal link cannot exist if there is no increase in imports or serious injury.⁵⁰⁰ However, in order to conclude its examination of the inconsistencies in the findings of the Commission, Argentina also considers that there is no evidence of the existence of a causal link.⁵⁰¹

4.231 As far as the determination of a causal link is concerned, Argentina notes first and foremost that the alleged threat of serious injury to the domestic industry evaluated by Chile is not based on a threat caused by increased imports but is related to Chile's obligation in the WTO to apply the bound tariff of 31.5 per cent. Argentina indicates that this is specifically stated in Minutes of Session No. 181 of the Commission, which reads: "[t]he quantification of injury was based on forecasts that were made on the basis of the hypothesis of application of the bound tariff of 31.5 per cent and the effect this would have on a series of variables for each of the products in question". Likewise, Argentina contends, Minutes of Session No. 185 state that: "[r]egarding imports, the Commission took into account the increase that would have occurred during the 1999/2000 agricultural season on the hypothesis of application of the bound import tariff of 31.5 per cent instead of the duties applicable under the price band." Argentina also refers to Minutes of Session No. 224 in order to claim that this reconfirms that "[i]n examining imports, the Commission took into account the fact that, for each of the products investigated, the normal operation of the price bands had been decisive in curbing an increase in imports and, consequently, the trend in imports cannot be analysed without taking this factor into account �". In Argentina's view, this clearly shows that it was not increased imports that led to the application and extension of the safeguard measures but the hypothesis of application of the bound tariff.⁵⁰²

4.232 Argentina fails to understand how a simple statement such as "given the recent and future situation of international prices �"⁵⁰³, without any analytical support, can constitute the basis for determining the existence of a causal link. Argentina affirms that Chile failed to comply with its obligations under Articles 4.2(b) and 2.1 of the Agreement on Safeguards by not establishing a causal link between the alleged increase in imports and the alleged injury to the domestic industry. In Argentina's opinion, as the Appellate Body stated in the US - Wheat Gluten case: "We begin our reasoning with the first sentence of Article 4.2(b). That sentence provides that a determination 'shall not be made unless [the] investigation demonstrates � the existence of the causal link between increased imports � and serious injury or threat thereof.' (emphasis added). Thus, the requirement for a determination under Article 4.2(a), is that 'the causal link' exists. The word 'causal' means 'relating to a cause or causes', while the word 'cause', in turn, denotes a relationship between at least two elements, whereby the first element has, in some way, 'brought about' 'produced' or 'induced' the existence of the second element. The word 'link' indicates simply that increased imports have played a part in, or contributed to, bringing about serious injury so that there is a causal 'connection' or 'nexus' between these two elements. Taking these words together, the term 'the causal link' denotes, in our view, a relationship of cause and effect such that increased imports contribute to 'bringing about', 'producing' or 'inducing' the serious injury."⁵⁰⁴ Argentina refers now to Argentina - Footwear (EC), where the Panel determined a three-stage sequence to justify the causal link (the Appellate Body supported this method and approach).⁵⁰⁵ Argentina adds that, regarding the last stage of the causal link in US - Wheat Gluten and US - Lamb, the Appellate Body supported a "logical process" for the competent authorities' determination of "whether 'the causal link' exists between increased imports and serious injury, and whether this causal link involves a genuine and substantial relationship of cause and effect between these two elements", in accordance with the obligations under Article 4.2(b).⁵⁰⁶ This process means separating the injurious effect of increased imports from the injury caused by other factors. Argentina claims that the Appellate Body considers that Article 4.2(b) presupposes that the injurious effects caused to the domestic industry by the increased imports must be distinguished from the injurious effects caused by other factors.⁵⁰⁷ In this regard, Argentina mentions that the Appellate Body noted that "[w]hat is important in this process is separating or distinguishing the effects caused by the different factors in bringing about the 'injury'."^{508 509}

4.233 Argentina examines the application of the three-stages methodology designed by the Appellate Body to this case: (i) Simultaneity of the trends: Argentina indicates that the determinations do not contain sufficient bases to conclude that the trends are simultaneous. Indeed, Argentina states, the import trends have not been analysed in relation to the changes in the industry's economic and financial indicators. In fact, this could not have been done because the Minutes do not contain any analysis nor sufficient data for this purpose. What is even worse is that the period examined for the indicators of threat of injury are not even known, so the authorities could not have analysed the relative fluctuations in trends. (ii) Conditions of competition (under such conditions): Argentina explains that the few references to prices which appear in the Minutes clearly do not allow any analysis of the conditions of competition between the imported product and the like product. Consequently, Chile could hardly try to establish the existence of a causal link under specified conditions of competition. (iii) Other factors caused injury to Chile's domestic industry producing wheat, wheat flour and edible vegetable oils, but not increased imports: Argentina indicates that the third element of a causation analysis is the consideration of whether factors other than increased imports are causing or threatening to cause serious injury to the domestic industry. If so, Article 4.2(b) requires that such injury not be attributed to increased imports.⁵¹⁰

4.234 Argentina claims that the Commission did not undertake an analysis to evaluate the injury or threat of injury to the domestic wheat, wheat flour and edible vegetable oils industry caused by "other factors". As an example, Argentina indicates that, although the Commission showed that international prices were falling, this was not properly evaluated and, bearing in mind that these are agricultural and agro-industrial products, climatic conditions within Chile - which are extremely relevant to the local supply situation - were not evaluated.⁵¹¹ Argentina asserts that the request for extension of the measure by the Chilean Ministry of Agriculture⁵¹², clearly shows that the low level of international prices was one of the Chilean Ministry of Agriculture's main concerns. Argentina argues that the Commission did not evaluate this additional factor - namely, international prices - in terms of their impact on the domestic industry, distinguishing this effect from the effect of imports.⁵¹³ Argentina further states that the ODEPA Publication "El Pulso de la Agricultura" of February 1999, No. 27, contains specific references to the seriousness of the drought in 1998/1999. According to this publication, Argentina claims, 55 per cent of agricultural communities were in a state of alert. In its report on the first half of 1999, the Chilean Ministry of Agriculture stated that the drought during the 1998/1999 season had led to a decrease in the area under cultivation and a fall in the yield and production of wheat throughout Chile.⁵¹⁴ Argentina submits that the Commission did not analyse this factor, even though it had a decisive effect on domestic wheat production of wheat and possibly on other products subject to the safeguard.⁵¹⁵

4.235 As regards Argentina's statement that the Chilean authorities did not make any determination of a causal link in any Minutes or notification⁵¹⁶, Chile points out that, as shown in Minutes of Session No. 193, the Commission took into account the fact that average c.i.f. prices of Chilean imports were closely related to world prices (trend in commodities). In fact, Chile argues, the correlation coefficient calculated between the average c.i.f. price and the international price over two periods, for wheat and oil, was 91 per cent and 92 per cent respectively. Chile explains that these variables are therefore closely related, so it can be stated that the trend in domestic prices is strongly affected by the trend in import costs.⁵¹⁷

4.236 As regards the above argumentation, Argentina considers that Chile's claim whereby the relationship between prices of Chilean imports and world prices proved that there was a causal link is worthless since the causal link must be between the increase in imports and the threat of injury. Argentina further argues that the correlation of prices is not, in itself, sufficient for the purposes of determining the existence of a threat of injury.⁵¹⁸ Argentina further argues that if one delves deeper into Chile's analysis, and checks this statement in Minutes of Session No. 193 against the graph showing the evolution of the international price of soya bean oil (US$/ton),⁵¹⁹ one would find that there are inconsistencies in this reasoning. Argentina points out that this graph shows a sharp fall in international prices between November 1998 and September 2000, whereas according to Minutes of Session No.193, "imports [of oils] fell by 24 per cent�" during the first ten months of 1999. In Argentina's view, the alleged inverse correlation between international prices - their fall - and the evolution of imports - their increase - is not valid. To illustrate this, Argentina has provided, as Annex ARG-35, two graphs that show a direct correlation between the fall in international prices and the decrease in imports, based on the graph which Chile itself provided in its submission and on import data for soya bean oil provided in Table 7 of Minutes of Session No. 224. Argentina claims that there could hardly have been a threat of injury when the trends presented by Chile itself point to the contrary.⁵²⁰

4.237 Chile stresses that it had already stated that the Commission, in explaining the threat of injury situation, took account of the following information: the evolution of imports - bearing in mind that the operation of the price band had been decisive in containing their increase; the correlation between international prices, import prices and domestic prices; and the low level of international prices. This was the basis for the prediction that a rapidly accelerating increase in imports would occur if the total duties under the price band were not applied, and led the Commission to the conviction that there was an imminent threat of injury. In Chile's view, this is particularly true for commodity type products, such as those at issue. Regarding Argentina's claim that the inverse correlation between the fall in international prices and the increase in imports was not valid in the case of oils, Chile submits that two factors must be borne in mind: (i) that the operation of the price bands was decisive in containing imports; and (ii) that since 1999 there has been an abnormal situation in the pattern of imports - explaining their decrease - owing to the disputes concerning the tariff headings under which oils should be imported. Chile further submits that, with respect to the impact of these disputes, Minutes of Session No. 224 point out that a close look at these headings reveals an increase in imports of vegetable oils, and not a decrease.⁵²¹

4.238 Specifically with respect to oils, Argentina submits that the Commission failed to take into account in its causation analysis a number of other factors which had been raised by the Oil Industry Association of the Argentine Republic (CIARA) in the proceedings. In particular, Argentina submits that the Commission failed to analyse the shift of the industry to more profitable sectors; the increase in local demand for seed; the elasticity of oil-seed supply in relation to the real tariff on oils; whether the threat of injury to the industry would be eliminated by the transfer of the input price increase resulting from the increased tariff to consumers, or whether on the contrary, the threat of injury to the industry was attributable to the tariff increase that caused the increase in the sales price of oils generating a fall in demand; imports as a commercial strategy of the Chilean oils industry deriving from the shortage of local sources of supply; the sustained growth of the economy, the increase in domestic demand, the increase or variations in private consumption and the increase in GDP in relation to imports of oils over the past decade; the population growth and increase in per capita consumption; the fact that international prices causing the variation in tariffs under the price band do not affect oil-seed production; the structural problems of oil-seed production; the shift of the industry to more profitable sectors; the analysis of other factors affecting agricultural production must take account of meteorological circumstances that could have affected productivity and profitability of the crop.⁵²²

(j) Whether Chile's safeguard measure was not limited to the extent necessary to remedy injury and to facilitate adjustment

4.239 Argentina submits that Chile's safeguard measure violates Articles XIX.1(a) of the GATT 1994 and Articles 3.1 and 5.1 of the Agreement on Safeguards because it was not limited to the extent necessary to remedy injury and to facilitate adjustment.

4.240 Argentina contends that the Commission did not consider whether or not the measure was "necessary" to prevent injury and facilitate readjustment and no substantive analysis was undertaken (for example, "reasoned conclusion"). Argentina argues that Chile based its safeguard measure on the difference between the bound tariff and the combination of the PBS duty and applied rate, and this is in no way related to a threat of injury from imports.⁵²³

4.241 Argentina noted that Chile's Ministry of Agriculture stated that: "The surcharge will allow the current level of tariffs on products subject to the band system to be maintained in order to meet Chile's obligations to the World Trade Organization (WTO) in 1994."⁵²⁴ Argentina claims that, in violation of Articles XIX.1(a) of the GATT 1994 and 5.1 of the Agreement on Safeguards, the Commission did not prove that its safeguard measure was necessary to remedy serious injury and facilitate the readjustment of the industry. Argentina argues that, in Korea - Dairy, the Appellate Body considered that Article 5.1 imposed an "obligation" to ensure that the safeguard measure was applied only to the extent "necessary".^{525 526}

4.242 Chile submits that, in accordance with its obligations under the Agreement on Safeguards, it instituted a measure that protected its domestic producers from serious injury, but which provided no further amount of protection. Chile explains that, having found the requisite conditions justifying a safeguard action, the action recommended by the Commission and taken by the Government involved the least possible trade disruption consistent with preventing serious injury: an increase in duties to enable the price band to apply without regard to the bound level of duties. Chile further explains that the Chilean Safeguard Law only allows imposition of duties; it does not allow a quota. It limits the safeguards to one year plus an additional year. Chile submits that, in this particular case, the Commission recommended that the surcharge be in the form of the duty in excess of the bound rate under the price band, instead of a flat surcharge. Chile argues that the flat surcharge would have to have been very high, while the price band could result in lower rates, as indeed has been the case.⁵²⁷

4.243 Chile explains that the safeguard measures applied by Chile include a special mechanism for their application, which is based on the same world price considerations as those in the PBS. According to Chile, this means in practice that the measure is one of variable applications in order to reflect in the most appropriate way the impact of imports in relation to the injury suffered by the domestic industry. Chile argues that the variable nature of the measure means that there is an immediate response to trends in the injury, so that the measure can be automatically adjusted to the necessary level to remedy the injury. In Chile's view, this flexibility can be seen in the fact that there were periods when, even though the measure had been decreed, tariff surcharges were not applied. Chile submits that the authority showed its intention not to apply a safeguard higher than that strictly necessary by calculating it on a weekly basis so as not to give the industry producing the product subject to the safeguard protection over and above the minimum required.⁵²⁸

4.244 Argentina, in reference to Chile's statement to the effect that the safeguard measures applied by Chile include a special mechanism for their application, which is based on the same world price considerations as those in the price band system⁵²⁹, submits that, if this is the case, Chile's actual mechanism for the application of safeguard measures violates the Agreement on Safeguards, which does not take world prices as a basis, but rather, imports 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.⁵³⁰

4.245 Chile submits that its statement did not refer to the increase in imports as a requirement for the application of a safeguard measure, but rather, as Argentina itself mentions, to the mode of operation of the adopted measure, which was fixed in accordance with the proportionality requirement established in Article 5 of the Agreement on Safeguards for the purpose of preventing the imminent injury that threatened the domestic industry affected and to permit its adjustment.⁵³¹

4.246 Argentina argues that the serious injury cannot be repaired and the adjustment made with identical measures, both for the definitive safeguards and their extensions. It further submits that it is also hard to understand how these measures - which, according to Chile itself, were justified by the threat of injury caused by a fall in international prices - could be maintained over time in a market in which there could necessarily always be price fluctuations. In Argentina's view, the adjustment does not depend on the Chilean industry, but on the evolution of international market conditions. Argentina contends that, following Chile's logic, if the fall in prices were to persist, the safeguards would have to be permanent. Conversely, it adds, the proposed remedy is so far from meeting the requirements of Article 5.1 of the Agreement on Safeguards that an increase in international prices would lead to the termination of the measures independently of the state of the industry or of any other economic factor that could have a bearing on the industry.⁵³²

4.247 In reference to the above argumentation of Argentina, Chile stresses that the problem was not the short-term fluctuation in prices, but the sharp and sustained fall in those prices over a long period. Contrary to Argentina's assertion, Chile adds, if the fall in prices were to persist, the measures would not be permanent, but would be applied for the time necessary to facilitate adjustment and adaptation to the new price conditions, and in any case, for not more than two years. Chile considers that, in this scenario, as in the case of an increase in prices, the measures would continue to be applied in full conformity with Article 5.1 of the Agreement on Safeguards, since the purpose of their adoption and the amount involved was limited to what was necessary to prevent serious injury and facilitate adjustment.⁵³³

4.248 Chile submits that the short period during which the measures were applied together with the safeguard formula adopted was based on considerations of proportionality which maintained domestic competition without neutralizing or equalizing domestic prices and international prices. Chile also notes that based on the facts of this case the purpose of the safeguards must be to prevent a threat of serious injury from materializing and not to repair serious injury that has already taken place. According to Chile, it is perfectly logical that the extension measures should have adopted the same formula as the definitive measures, because in spite of the recovery shown by the domestic industry, the measures, as established, continued to be necessary to prevent serious injury.⁵³⁴

(k) Provisional measures

4.249 Argentina claims that the competent Chilean authorities did not comply with Article XIX:2 of the GATT 1994 and Article 6 of the Agreement on Safeguards, which lay down the requirements for the application of provisional measures.

4.250 Argentina contends that both Article XIX.2 of the GATT 1994 and Article 6 of the Agreement on Safeguards provide that "critical circumstances" must exist before provisional measures can be adopted. In other words, Argentina claims, the authority may only adopt provisional measures in circumstances "where delay would cause damage which it would be difficult to repair". Article 6 also states that such measures may be taken "pursuant to a preliminary determination that there is clear evidence that increased imports have caused or are threatening to cause serious injury". Argentina claims that the resolution of the Commission recommending the adoption of provisional measures ("provisional determination") does not in any way analyse why a delay would cause damage which it would be difficult to repair.⁵³⁵ Consequently, Argentina considers, in the light of the text itself, the resolution of the Commission does not comply with the requirements of Article 6. Argentina indicates that, furthermore, the provisional resolution of the Commission fails to comply with Articles 2.1, 4.1 and 4.2, as well as Articles 3.1 and 4.2(c) of the Agreement on Safeguards, because there is no evaluation of "like product", and an increase in imports a threat of injury or a causal link are not proven.⁵³⁶

4.251 Argentina explains that the analysis of the Commission is divided into three categories of product but there is no examination of whether this categorization of "like product" and "domestic industry" is in conformity with Articles 2.1, 4.1(c) and 4.2(b) of the Agreement on Safeguards.⁵³⁷ In Argentina's opinion, the Commission does not undertake any analysis of increased imports but simply concludes that imports would increase if duties were limited to the bound tariff.⁵³⁸ There is no evidence, however, that imports did in fact increase. The sole reference to increased imports is on page 2 of the Resolution where the authorities indicate that they based their recommendation on "available evidence" which shows the "possibility" of an increase in imports of the products in question "if the tariff falls to 31.5 per cent" - in other words, Argentina claims, the level bound by Chile. However, not even in this case is the relevant information provided. Argentina also indicates that the analysis of the indicators of threat of injury are incomplete because not all the factors have been evaluated, as required by Article 4.2(a) of the Agreement on Safeguards.⁵³⁹ Argentina contends that, even for those factors that have been evaluated, the analysis has no meaning because there is no investigation period and no reference to any other period that might give an overall view of the relevance of the "decreases" inferred.⁵⁴⁰ According to Argentina, it appears that the figures are simply forecasts because the findings are set out in the conditional tense. Argentina argues that the basis for such forecasts and their source are not identified.⁵⁴¹ For the foregoing reasons, Argentina claims that the provisional resolution does not comply with Article 4.2(a).⁵⁴²

4.252 Argentina contends that there is no analysis of causality.⁵⁴³ In other words, Argentina explains, there is no attempt to relate the trends in imports (which are not provided) with the trends in indicators for the industry (in the few cases where these are provided the data are not specified). Consequently, Argentina claims that the resolution does not comply with Article 4.2(b) of the Agreement on Safeguards.⁵⁴⁴

4.253 Chile submits that Minutes of Session No. 185, of 22 October 1999, sets out the critical circumstances and assessments required in order to determine the need for the recommended provisional measures, as required by Article XIX:2 of the GATT 1994 and Article 6 of the Agreement on Safeguards.⁵⁴⁵

4.254 Chile explains that if Chile's bound rate of 31.5 percent was observed in the future, the Commission estimated that imports would increase dramatically causing significant injury to the wheat, sugar and oils producers. Given the price elasticity of the products, it could be calculated that there would be a significant import surge, a decline in prices and serious injury to Chilean producers. Therefore, the Commission properly found that any delay in adopting a safeguard measure would cause damage which "would be difficult to repair".⁵⁴⁶

4.255 Argentina considers this an ex post facto explanation. Argentina also questions to what "factual basis" is Chile referring when Chile itself considers the elasticity of products to be "given", without bothering to make any analysis in this respect. Argentina states that it is incorrect for Chile to suggest that "it could be calculated" that there would be a significant import surge, a decline in prices and serious injury to Chilean producers, without actually making any calculation. Argentina submits that Article 6 of the Agreement on Safeguards clearly stipulates that such a measure may only be taken "pursuant to a preliminary determination that there is clear evidence that increased imports have caused or are threatening to cause serious injury".⁵⁴⁷