(b) Other tools of interpretation

7.75 Chile has argued that the Panel, in its interpretation of Article 4.2, should draw on the following elements:

(a) "state practice", including: the alleged existence in other Members of measures similar to the Chilean PBS; the fact that these Members never converted their measures to ordinary customs duties; and the absence of any challenge of such measures on the basis of Article 4.2;

(b) Article 24 of Economic Complementarity Agreement No. 35 ("ECA 35") between Chile and MERCOSUR;

(c) negotiating history of Article 4.2 of the Agreement on Agriculture, including communications by or with individual members of the GATT Secretariat.

7.76 We will first examine to what extent Articles 31 and 32 of the Vienna Convention instruct or allow us to consider these elements in our interpretation of Article 4.2, in particular the question as to whether Article 4.2 was meant to prohibit measures such as the Chilean PBS. Only if we find that we should consider some or all of these elements for the purpose of interpreting Article 4.2, we will subsequently address them.

7.77 According to Article 31 of the Vienna Convention, we should draw, as context, on any agreement relating to "the treaty", i.e. the WTO Agreement⁶⁴⁹, which was made between all the parties in connection with the conclusion of the WTO Agreement, as well as any instrument which was made by one or more parties in connection with the conclusion of the WTO Agreement and accepted by the other parties as an instrument related to the WTO Agreement. We should also take into account any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; and any relevant rules of international law applicable in the relations between the parties. Finally, according to Article 32 of the Vienna Convention, we may draw on preparatory work and circumstances of the Treaty's conclusion to confirm the ordinary meaning or to resolve ambiguity.

(i) "state practice"

7.78 Presumably, by referring to these elements under the banner of "state practice", Chile is suggesting that we consider these elements either as "any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation" under Article 31, or as a supplementary means of interpretation under Article 32 of the Vienna Convention. First, we do not consider that the alleged "state practice" can be qualified as subsequent practice within the meaning of Article 31 of the Vienna Convention. As stated by the Appellate Body in its report on Japan - Alcoholic Beverages II⁶⁵⁰:

"(�) in international law, the essence of subsequent practice in interpreting a treaty has been recognized as a 'concordant, common and consistent' sequence of acts or pronouncements which is sufficient to establish a discernable pattern implying the agreement of the parties regarding its interpretation.⁶⁵¹ An isolated act is generally not sufficient to establish subsequent practice⁶⁵²; it is a sequence of acts establishing the agreement of the parties that is relevant."⁶⁵³

7.79 Thus, first, the mere fact that Argentina or other Members did not challenge the Chilean PBS through the WTO dispute settlement system until recently does not constitute a "sequence of acts or pronouncements".⁶⁵⁴ Second, the fact that a few Members of the WTO would have in place measures similar to the Chilean PBS is not a "sufficiently concordant, common and consistent sequence of acts" establishing the agreement of the WTO Members regarding the interpretation of Article 4.2 of the Agreement on Agriculture.⁶⁵⁵ We will address the question of state practice as a supplementary means of interpretation below.

(ii) Article 24 of Economic Complementarity Agreement No. 35 ("ECA 35") between Chile and MERCOSUR

7.80 ECA 35 between Chile and MERCOSUR was signed on 25 June 1996 and entered into force on 1 October of that year. Article 24, which is listed under the heading "Customs Valuation", reads:

"When using the Price Band System provided for in its domestic legislation concerning the importation of goods, the Republic of Chile commits, within the framework of this Agreement, neither to include new products nor to modify the mechanisms or apply them in such a way which would result in a deterioration of the market access conditions for MERCOSUR."⁶⁵⁶

7.81 According to Chile, by signing ECA 35⁶⁵⁷, Argentina has expressed the understanding that Article 4.2 does not prohibit the Chilean PBS, because it would not have negotiated Article 24 of ECA 35 if the Chilean PBS was prohibited outright under Article 4.2 of the Agreement on Agriculture.

7.82 Article 31 of the Vienna Convention instructs us to consider other international agreements for the purpose of interpreting Article 4.2 of the Agreement on Agriculture, provided they meet certain conditions. In our view, however, it is clear that ECA 35 does not meet the conditions of the agreements referred to in Article 31 of the Vienna Convention. First, ECA 35 is clearly not an "agreement relating to the Treaty which was made between all the parties in connection with the conclusion of the Treaty", nor an "instrument which was made by one or more parties in connection with the conclusion of the Treaty and accepted by the other parties as an instrument related to the Treaty".

7.83 Second, ECA 35 is in our view not a "subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions". Leaving aside the question of whether such an agreement should be concluded between all parties to the WTO Agreement - which we need not address -, it suffices to note that the Preamble to ECA 35 reads:

"(�) the Marrakesh Agreement establishing the World Trade Organization constitutes a framework of rights and obligations to which the commercial policies and compromises of the present Agreement shall adjust."⁶⁵⁸

7.84 If the policies and compromises embodied in ECA35 have to "adjust to" the WTO Agreement, we find it difficult to see how ECA35 could be an agreement "regarding the interpretation" or "the application" of the WTO Agreement.

7.85 Finally, Article 24 of ECA 35 does not constitute in our view a "relevant rule of international law applicable in the relations between the parties". Again, leaving aside the question of whether such a rule of international law should be applicable between all parties to the WTO Agreement, the language of ECA 35 itself makes clear that Article 24 cannot be "relevant" to the interpretation of Article 4.2 of the Agreement on Agriculture. First, the Preamble states that the commercial policies and compromises of ECA 35 shall "adjust to" the WTO framework of rights and obligations. A fortiori, Article 24 of ECA 35 cannot influence the interpretation of the WTO Agreement. Second, Chile's commitment regarding its PBS in Article 24 of ECA 35 has been explicitly made "within the framework of" ECA 35. Such language suggests that the parties to ECA 35 did not intend to exclude the possibility that different commitments regarding the Chilean PBS may have been or will be made in the context of other international agreements.

7.86 In any event, even if we were somehow to take into account Article 24 of ECA 35 for the purpose of interpreting Article 4.2 of the Agreement on Agriculture, quod non, we would fail to see how a simple stand-still commitment by Chile vis-�-vis MERCOSUR and its members regarding its PBS would detract from the position that the Chilean PBS is a measure "of the kind which ha[s] been required to be converted into ordinary customs duties" within the meaning of Article 4.2 of the Agreement on Agriculture.

(iii) Negotiating history of Article 4.2

7.87 Chile is of the view that the text and context of Article 4.2 leave no ambiguity that its PBS is not a prohibited measure. However, according to Chile, should the Panel consider that there is any ambiguity, the negotiating history of the Article 4.2 will demonstrate that the negotiators did not intend to prohibit the maintenance of the PBS.

7.88 We note that Chile links its arguments regarding the negotiating history with elements of subsequent practice and maintains that under the general rubric of "state practice" it becomes clear that Members did not consider the PBS inconsistent with Article 4.2. We have already dealt with the issue of subsequent practice above; here we will turn to the issue of the negotiating history.

7.89 Article 32 of the Vienna Convention provides that:

"Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of Article 31, or to determine the meaning when the interpretation according to Article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leads to a result which is manifestly absurd or unreasonable."

7.90 Chile has argued that the PBS was in place before the start of the Uruguay Round and, therefore, all Uruguay Round negotiators were fully aware of its existence when preparing the text of Article 4.2. According to Chile, none of the negotiators required that it be converted.

7.91 We cannot agree with Chile's position that it results from the negotiating history of Article 4.2 that the Chilean PBS is not a measure of the kind which has been required to be converted. As we have discussed extensively above, the text and context of Article 4.2 make it clear that Article 4.2 and footnote 1 both are provisions of general application. Article 4.2 refers to measures of the kind that were to be converted. Footnote 1 provides an illustrative list of such measures, but generalizes to include other similar border measures. Thus, neither the text of the Article nor the footnote contemplate the need for negotiators to conclusively agree on what measures should be converted. Quite the contrary; there was a textual requirement that measures of this kind were not to be maintained. Thus, the lack of an explicit agreement that the PBS was required to be converted does not help Chile's argument.⁶⁵⁹

7.92 We can find no evidence in the negotiating history that it was intended by the negotiators to exclude the Chilean PBS from coverage of Article 4.2. We note, for example, that the Draft Final Act version of Article 4.2 provided that:

"Participants undertake not to resort to, or revert to, any measures which have been converted into ordinary customs duties pursuant to concessions under this agreement."⁶⁶⁰

7.93 As can be seen, this text used different language. It referred to a requirement that any measures which actually had been converted, would not be resorted to or reverted to. In contrast, Article 4.2 requires that Members not "maintain, resort to or revert to any measure of the kind which have been required to be converted." (emphasis added) So, the word "maintain" was added implying that not every measure had been explicitly addressed because there is no reason to have a prohibition on maintaining a measure which had been explicitly negotiated out of existence. The prohibition on reverting to or resorting to would have been sufficient otherwise. This is made conclusively clear by the addition of the phrase "of the kind" which broadened the language of Article 4.2 beyond those which had actually been subject to negotiations.

7.94 Chile has also reported that during the early 90s, during a seminar held in a Central-American country, "a letter was presented from an authority of the GATT Secretariat arguing that it was not necessary to tariffy price bands since they were unrelated to the domestic price - provided the price bands were maintained within the bound levels."⁶⁶¹ Chile was unable to produce the said letter. However, even if we had been able to verify the exact contents of said letter, we consider that such a letter could not have changed our interpretation of Article 4.2 of the Agreement on Agriculture. The mere fact that an individual in the GATT Secretariat might have made a statement - orally or in writing - along the lines described by Chile is not determinative. The WTO Agreement gives the Ministerial Conference and the General Council the exclusive right to adopt interpretations of the WTO Agreement.⁶⁶² While the Secretariat has in the past, and will in the future be requested to provide advice to Members of the WTO, we believe the general rule of reserving the legal right to adopt interpretations to the Members to be the appropriate standard in this context, while, of course, recognizing that the WTO rules were not in force at the time in question.⁶⁶³

7.95 The Secretariat's advice might prove a part of a more comprehensive compilation of preparatory work if there were evidence that negotiators specifically adopted an approach recommended by the Secretariat, but that is not the case here. Even at face value, the advice referenced by Chile would appear to have been isolated advice offered at a regional seminar held in Central America. There is a complete lack of comprehensive evidence in this case that would correspond with any such advice. Indeed, Chile's argument seems to turn more on the silence of the negotiators regarding its PBS rather than positive evidence that it was intended to be excluded from the application of Article 4.2.⁶⁶⁴

7.96 Chile's general argument regarding "state practice" is in many ways like a non-violation argument.⁶⁶⁵ In effect, Chile argues that it had a reasonable expectation that it was not required to convert. The nature of Chile's argument can be seen in light of Chile's affirmation that it is not arguing that Argentina is legally estopped from pursuing the claim against the PBS system. Rather, Chile argues all of this constitutes the broader interpretative context. In other words, Chile should not now be required to convert a system that it had a reasonable basis for concluding was not prohibited by article 4.2. Of course, non-violation is not at all applicable here given the fact that Chile as a respondent could not raise a non-violation claim.

7.97 Chile's "negotiating history" argument might have served as a valid defence by Chile had Argentina argued that it had a non-violation claim under Article 26 of the DSU. In such a case, the existence of the PBS since 1983 would be an issue, inter alia, which Argentina would have to explain if it were to establish all the elements of a non-violation claim.

7.98 There is another aspect of the contrast between violation and non-violation claims which is useful to note here. As the Appellate Body pointed out in EC - Computer Equipment, non-violation rests on reasonable expectations in a primarily bilateral context whereas violation claims rest ultimately in a multilateral context. In order to serve as a useful tool in a violation context, there must be positive evidence in the negotiating history of a common understanding of the various parties to the negotiation.⁶⁶⁶ Hence the need for some comprehensive evidence of negotiators' intentions to sustain a defence⁶⁶⁷ based on preparatory work.⁶⁶⁸

7.99 Thus, just as with subsequent practice, we cannot agree that silence by negotiators regarding such a measure as the Chilean PBS provides meaningful evidence that the negotiators intended to exclude the Chilean PBS from the requirements of Article 4.2.

7.100 We should also note here that we do not see the evidence regarding the negotiating history as helpful in establishing a defence based on "state action" which includes subsequent practice. We remain uncertain about the legal basis of Chile's defence of "state practice". We raise this point here because we have now examined the second aspect of the defence, i.e., the negotiating history. The first aspect, "subsequent practice", was dealt with above.⁶⁶⁹ Viewed in light of the facts of this case, this argument of "state practice" might rest more firmly on a legal basis of estoppel or a defence against a claim of non-violation nullification or impairment. What Chile really seems to put forward in this case, however, is an argument of "state inaction". That is, because Members allegedly were silent about the Chilean PBS before and after the conclusion of the Uruguay Round negotiations, any claim by such Members against the PBS should fail. We have noted above that "subsequent practice" requires overt acts, not mere toleration. Whereas there may be circumstances in which the silence of negotiators might indicate acquiescence and, therefore, may be probative evidence regarding the negotiating history, in this case, such silence could perhaps have been more significant if, for instance, Chile had included the PBS in its Schedule. In such a case, Chile's assertion of silence during the verification period in early 1994 might arguably have had significance. However, as the PBS is not in its Schedule, there was nothing to verify.

7.101 We therefore conclude that, in asserting the defence of "state action" (to the extent it is based on the negotiating history), Chile has not produced sufficient evidence to call into question our interpretation of Article 4.2 as requiring conversion of the Chilean PBS into ordinary customs duties.

(c) Conclusion regarding Article 4.2 of the Agreement on Agriculture

7.102 Having regard to our analysis above⁶⁷⁰, we find that the Chilean PBS is "a similar border measure other than ordinary customs duties" which is not maintained "under balance-of-payment provisions or under other general, non-agriculture specific provisions of GATT 1994 or of the other Multilateral Trade Agreements in Annex 1A to the WTO Agreement", within the meaning of footnote 1 to the Agreement on Agriculture. We therefore conclude that the Chilean PBS is a measure "of the kind which ha[s] been required to be converted into ordinary customs duties", within the meaning of Article 4.2 of the Agreement on Agriculture. By maintaining a measure which should have been converted, Chile has acted inconsistently with Article 4.2 of the Agreement on Agriculture.

5. The Chilean PBS and Article II:1(b) of GATT 1994

7.103 According to Argentina, the Chilean PBS duties are ordinary customs duties within the meaning of the first sentence of Article II:1(b). Argentina has argued, and Chile has acknowledged, that the Chilean PBS duties can potentially exceed⁶⁷¹ and, at several instances in the past, have effectively exceeded⁶⁷², Chile's binding of 31.5 per cent in the bound rate column of its Schedule. Argentina therefore concludes that the Chilean PBS is inconsistent with Article II:1(b).⁶⁷³

7.104 We have found above that the Chilean PBS is a border measure "other than an ordinary customs duty", which is prohibited under Article 4.2 of the Agreement on Agriculture. We have also found that "ordinary customs duties" must have the same meaning in Article 4.2 of the Agreement on Agriculture and Article II:1(b) of GATT 1994. Consequently, the Chilean PBS duties not constituting ordinary customs duties, their consistency with Article II:1(b) cannot be assessed under the first sentence of that provision, which only applies to ordinary customs duties.

7.105 The next question is whether the Chilean PBS duties could be considered as "other duties or charges of any kind" imposed on or in connection with importation, under the second sentence of Article II:1(b). We have already indicated that all "other duties or charges of any kind" should in our view be assessed under the second sentence of Article II:1(b). Pursuant to the Uruguay Round Understanding on the Interpretation of Article II:1(b), such other duties or charges had to be recorded in a newly created column "other duties and charges" in the Members' Schedules. Paragraph 1 of the Uruguay Round Understanding on the Interpretation of Article II:1(b) of the GATT 1994 ("the Understanding") reads:

"(�) [i]n order to ensure transparency of the legal rights and obligations deriving from paragraph 1(b) of Article II, the nature and level of any 'other duties or charges' levied on bound tariff items, as referred in that provision, shall be recorded in the Schedules and concessions annexed to GATT 1994 against the tariff item to which they apply. It is understood that such recording does not change the legal character of 'other duties or charges'."

7.106 According to the second paragraph of the Understanding:

"(�) [t]he date as of which "other duties or charges" are bound, for the purposes of Article II, shall be 15 April 1994. 'Other duties or charges' shall therefore be recorded in the Schedules at the levels applying on this date."

7.107 Other duties or charges must not exceed the binding in this "other duties and charges" column of the Schedule. If other duties or charges were not recorded but are nevertheless levied, they are inconsistent with the second sentence of Article II:1(b), in light of the Understanding on the Interpretation of Article II:1(b). We note that Chile did not record its PBS in the "other duties and charges" column of its Schedule.

7.108 We therefore find that the Chilean PBS duties are inconsistent with Article II:1(b) of GATT 1994.⁶⁷⁴

2. The Chilean Safeguard Measures on Wheat, Wheat Flour and Edible Vegetable Oils

7.109 At issue in this dispute are safeguard measures on imports of wheat, wheat flour and edible vegetable oils, adopted by the Chilean government in accordance with the recommendations by the competent investigating authorities, the Chilean Distortions Commission ("CDC"). The safeguard measures consist of an additional duty on wheat, wheat flour and edible vegetable oils which "shall be determined by the difference between the general tariff added to the ad valorem equivalent of the specific duty determined by the mechanism set out in Article 12 of Law 18.525 - and its relevant annual implementing decrees - and the level bound in the WTO for these products".⁶⁷⁵ Thus, whenever the Chilean PBS duty exceeds, in conjunction with the 8 per cent applied tariff, the 31.5 per cent bound rate, the portion of the duty in excess of that bound rate shall be considered to constitute a safeguard measure. Put another way, the duty applied pursuant to the safeguard measure is the Chilean PBS duty to the extent it exceeds the 31.5 per cent bound rate.

2. Preliminary issues

7.110 Chile argues that none of the safeguard measures challenged by Argentina are within the Panel's jurisdiction. According to Chile, the provisional and definitive safeguard measures were no longer in effect on the date of Argentina's request for establishment of the Panel. Chile therefore requests the Panel to rule that it cannot recommend that Chile bring these measures into conformity with its WTO obligations. To support its thesis, Chile refers to the text of the respective decrees imposing the provisional and definitive safeguard measures, Articles 3.4 and 3.7 of the DSU, and the Appellate Body report on United States - Import Measures on Certain Products from the European Communities.⁶⁷⁶ According to Chile, the definitive safeguard measure is distinct from the measure extending its application, and has therefore expired, notwithstanding the extension measure.

7.111 As regards the extension, Chile submits that the Panel cannot examine the measure extending the application of the definitive safeguard measure, as it was not included in Argentina's request for consultations. Chile states that, although it has had some consultations with Argentina, "this does not mean that [�] Argentina had called for valid consultations in the WTO on the extension measures because it did not request such consultations in writing and made no notification to the WTO to this effect."⁶⁷⁷ Chile does not deny that "the content of the final measure (extension) is identical to that in the previous measure", but argues that the new measure is the result of a new request, new hearings and new evidence, and only exists because of a formal decision by the Chilean authorities.⁶⁷⁸ Finally, Chile posits that the Panel should not make findings with respect to the extended safeguard measures which it has recently "withdrawn".

(a) The provisional safeguard measures

7.112 We note that the Appellate Body in US - Certain EC Products stated that "the panel erred in recommending that the DSB request the US to bring into conformity a measure which the panel has found no longer exists."⁶⁷⁹ In this regard, we recall that Article 19.1 DSU provides that "[w]hen a panel [�] concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement". Put another way, a panel is required to make the recommendation to bring a measure which it has found inconsistent into conformity if that measure is still in force. Conversely, when a panel concludes that a measure was inconsistent with a covered agreement, the said recommendation cannot and should not be made. However, in our view, Article 19.1 DSU would not prevent us from making findings regarding the consistency of an expired provisional safeguard measure, if we were to consider that the making of such findings is necessary "to secure a positive solution" to the dispute. We would not, however, formulate recommendations with regard to those measures.

7.113 In our view, this approach is fully consistent with the Appellate Body's findings in US - Certain EC Products and the findings in other WTO disputes. While the Appellate Body in US - Certain EC Products found that the Panel should not have made a recommendation regarding a measure that no longer existed, it nowhere suggested that the Panel erred in making findings regarding that measure.⁶⁸⁰ To the contrary, the Appellate Body stated that the Panel "should have limited its reasoning to issues that were relevant and pertinent" to the expired measure. And, while we note that the Panel in Argentina - Textiles and Apparel⁶⁸¹ decided not to address a measure which had been terminated before commencement of the Panel proceedings, we do not understand that Panel to have found that it lacked jurisdiction to make findings on an expired measure. To the contrary, the Panel considered US arguments that it should rule on the expired measure because of the threat of recurrence, but found no evidence to that effect.⁶⁸² This suggests that the Panel merely exercised its discretion not to rule on the expired measures in that case.

7.114 Further, to argue, as Chile does, that the provisional measures lie necessarily outside the scope of the Panel's jurisdiction, because those measures have elapsed, is not tenable, because this would imply that the Panel could examine all aspects of the investigation, except those relating to the provisional measures. We are concerned that if the conformity of such measures cannot, as a matter of principle, be addressed by panels solely because they are no longer in effect at the time of the request for establishment, then provisional safeguard measures generally will escape panel scrutiny, since they are generally terminated before the matter reaches the panel stage.⁶⁸³ Members could then adopt provisional safeguard measures, the WTO-consistency of which, could never be examined by panels. In our view, the drafters of the DSU cannot have meant to exclude, in such a manner, provisional safeguard measures from its scope.

7.115 Although we do not consider that the termination of a measure before the commencement of panel proceedings deprives a panel of the authority to make findings in respect of that measure, we would only make findings regarding the provisional safeguard measures in this case if we were to consider this necessary in order to "secure a positive solution" to the dispute. As explained below⁶⁸⁴, this is not the case.

(b) The definitive safeguard measures and the extension of their period of application

7.116 Chile raises two different objections regarding the Panel's jurisdiction with respect to the definitive safeguard measures and the extension of their duration: first, the definitive safeguard measures had "expired" before the request for establishment was made; second, the "extension measures" were not formally included in the request for consultations. We cannot accept either of those objections, for one and the same reason. Both of Chile's objections are based on the proposition that the extension of the period of application results in a measure distinct from the definitive safeguard measure. We disagree with this proposition. In our view, Article 7 of the Agreement on Safeguards makes it clear that what is at issue is not an extension "of the safeguard measure", but, rather, an extension "of the period of application of the safeguard measure" or of "the duration of the safeguard measure". Article 7 is entitled "Duration and Review of Safeguard Measures". Article 7.1 provides:

"A Member shall apply safeguard measures only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. The period shall not exceed four years, unless it is extended under paragraph 2." (emphasis added)

7.117 Article 7.2 reads:

"The period mentioned in paragraph 1 may be extended provided that the competent authorities [�] have determined [�] that the safeguard measure continues to be necessary to prevent or remedy serious injury and that there is evidence that the industry is adjusting [�]." (emphasis added)

7.118 Article 7.3 reads:

"The total period of application of a safeguard measure including the period of application of any provisional measure, the period of initial application and any extension thereof, shall not exceed eight years." (emphasis added)

7.119 This language is sufficiently clear for us as to conclude that the "extensions" are not distinct measures, but merely continuations in time of the definitive safeguard measures. As a result, we consider that the definitive safeguard measures were not terminated before the request for establishment, but, rather, that their duration was simply extended at that time. Thus, we need not further consider Chile's argument that we lack the authority to make findings in respect of the definitive measures on the grounds that they have expired.⁶⁸⁵ For the same reason, we also consider the fact that the extension was not mentioned in the request for consultations irrelevant for the determination of our jurisdiction: pursuant to Article 4.4 of the DSU, Argentina had to, and did, identify the definitive safeguard measures in its request for consultations. The fact that the duration of the identified measures was extended by Chile after the request for consultations cannot affect Argentina's compliance with Article 4.4 of the DSU.⁶⁸⁶

7.120 We note, moreover, that the "extension" did not in any way amend the content of the safeguard measures and that there were, in fact, exchanges between Argentina and Chile during the period of consultations regarding the "extension". Chile must therefore have been fully informed about Argentina's intention to challenge the safeguard measures, as extended in time. Thus, even if the "extension" were to be considered a separate measure, quod non, Chile's due process rights would not have been impinged upon.⁶⁸⁷

(c) Withdrawal of safeguard measures while the panel proceedings were ongoing

7.121 On 14 August 2001, the Panel received a communication from Chile stating that the safeguard measures on wheat and wheat flour had been terminated as of 27 July 2001. At the second meeting with the parties, the Panel was informed by Chile that the safeguard measure on vegetable oils would be terminated as of 26 November 2001.

7.122 Argentina has nevertheless explicitly requested the Panel to make findings regarding those measures. Argentina posits that the safeguard measures, even though they may have been repealed following their extension, require a specific ruling by the Panel because they form part of its Terms of Reference. Argentina contends that the fact that the definitive measures were repealed is irrelevant for the purpose of a ruling, since Chile explicitly recognized that it resorted to safeguards "to obtain the required legal backing" for its PBS.⁶⁸⁸ In Argentina's view, if there is no ruling by the DSB establishing the inconsistency of the safeguard measures, the situation could recur, since the attempt at ex-post facto justification will have escaped the scrutiny of the DSB.

7.123 We first recall in this respect that the safeguard measures are defined by reference to the difference between the PBS duty plus the 8 per cent applied tariff and the 31.5 per cent bound rate. Consequently, it appears to us that the duty covered by the safeguard measure could de facto continue to be applied as long as the PBS duties plus the 8 per cent applied tariff exceed the 31.5 per cent bound rate. Formally, however, the portion of the PBS duty exceeding the 31.5 per cent bound rate would then presumably no longer be motivated by the objective of safeguard protection.

7.124 We also recall that, in our view, Article 19.1 DSU does not prevent us from making findings regarding the consistency of an expired provisional safeguard measure, if we were to consider that the making of such findings is necessary "to secure a positive solution" to the dispute. We would not, however, formulate recommendations with regard to those measures.

7.125 In determining then whether or not to make findings regarding the "withdrawn" safeguard measures, we note that the challenged measures are indeed within our Terms of Reference. Argentina has in effect argued that it has suffered nullification or impairment as a result of the withdrawn measures and that it is entitled to a ruling on the matter which has been referred to us by the DSB. Considering our findings and conclusions regarding the Chilean PBS, on the one hand, and the particular nature of the safeguard measures by which a portion of the PBS duties were justified, on the other, we believe that it would be in the interest of a prompt settlement of the overall dispute to make findings regarding the safeguard measures at issue, even though they have been withdrawn in the course of the proceedings. By making findings on the "withdrawn" safeguard measures, we thus wish to make it clear that the partial identity between the Chilean PBS and the safeguard measures is bound to affect the question of consistency of such safeguard measures with the substantive requirements of Article XIX of GATT 1994 and the Agreement on Safeguards.

7.126 In accordance with past practice of GATT and WTO panels⁶⁸⁹, we will therefore examine the "withdrawn" safeguard measures challenged by Argentina in these proceedings, and make findings accordingly.

3. Published report (Article 3.1 of the Agreement on Safeguards)

7.127 Article 3.1 of the Agreement on Safeguards provides in fine that "[t]he competent authorities shall publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law". Chile has confirmed that the Minutes of Sessions Nos. 181, 185, 193 and 224 of the CDC constitute the "published report" within the meaning of Article 3.1 of the Agreement on Safeguards.⁶⁹⁰ Argentina argues that Chile has acted inconsistently with its obligation to "publish" the report of the investigating authorities.

7.128 In this regard, we note that the Minutes of the relevant CDC sessions have not been "published" through any official medium. Rather, they were transmitted to the interested parties and placed at the disposal of "whoever wishes to consult them at the library of the Central Bank of Chile".⁶⁹¹ In order to determine whether it is sufficient under Article 3.1 of the Agreement on Safeguards to make the investigating authorities' report "available to the public" in such a manner, we first refer to the dictionary meaning of "to publish". The term can mean "to make generally known", "to make generally accessible", or "to make generally available through [a] medium".⁶⁹² We therefore turn to the context of Article 3.1 provided by similar publication requirements in the AD and SCM Agreements. We note that both Article 22 of the SCM Agreement ("public notice and explanation of determinations") and Article 12 of the AD Agreement ("public notice and explanation of determination") distinguish between giving "public notice" and "making otherwise available through a separate report"⁶⁹³, which must be "readily available to the public".⁶⁹⁴ In addition, we also note that various "transparency" provisions in the covered agreements, such as Article III of the GATS, Article 63.1 of the TRIPS Agreement, and Article 2.11 of the TBT Agreement all distinguish between "to publish" and "to make publicly available". In the light of these considerations, we find that the verb "to publish" in Article 3.1 of the Agreement on Safeguards must be interpreted as meaning "to make generally available through an appropriate medium", rather than simply "making publicly available". As regards the minutes of the relevant CDC sessions, we therefore find that they have not been generally made available through an appropriate medium so as to constitute a "published" report within the meaning of Article 3.1 of the Agreement on Safeguards.

4. Documents examined by the Panel to assess Chile's compliance with its obligations under Article XIX of GATT 1994 and the Agreement on Safeguards

7.129 In the previous section, we have found that the Minutes of the CDC meetings that Chile considers to represent the basis for its decision to impose the definitive safeguard measures at issue in this dispute do not constitute a "published" report within the meaning of Article 3.1. Given that the CDC did however seek to explain the bases for its imposition of the definitive safeguards measures, that these bases may be found in the publicly available Minutes referred to above, and that Argentina has not disputed that Chile may seek to motivate its decision to impose a safeguard measure on the basis of unpublished but public minutes, we will proceed to examine Argentina's substantive claims on that basis.

7.130 There is however an issue regarding which of those Minutes we may refer to in our review. Chile has designated minutes of CDC sessions Nos. 181, 185, 193 and 224 as jointly constituting the "report" referred to in Article 3.1 of the Agreement on Safeguards. We note, however, that the Minutes of Session No. 224 only concern the extension, and that it contains statistical data not included in the Minutes of Sessions Nos. 181, 185 and 193. According to Chile, "the information in Record No. 224 and its annexed statistical tables" are "useful in clarifying the analyses made in the investigation for the recommendation of the definitive measures in Record No. 193", because "much of the information contained in the later of these two records (Record No. 224) is updated data from the investigation concerning the measures initially recommended".⁶⁹⁵

7.131 For the purpose of our analysis of the consistency of the definitive safeguard measure, and the investigation preceding its recommendation by the CDC, with the requirements of Article XIX of GATT 1994 and the Agreement on Safeguards, we shall only consider findings and reasoning by the CDC reflected in the Minutes of Sessions Nos. 181, 185 and 193, respectively recommending the initiation of the investigation, the adoption of provisional measures and the adoption of definitive safeguard measures. We consider that our duty under Article 11 of the DSU to make an objective assessment of the matter requires us to assess the consistency of the definitive safeguard and the preceding investigation with Article XIX of GATT 1994 and the Agreement on Safeguards on the basis of explanations provided by the CDC before or at the time of its recommendation to apply definitive safeguard measures. Consequently, whenever we refer below to information contained in the Minutes of Session No. 224, we will do so, at the most, to provide observations on our findings made on the basis of the Minutes of Sessions Nos. 181, 185 and 193.⁶⁹⁶

5. Unforeseen developments (Article XIX:1(a) of GATT 1994 and Article 3.1 of the Agreement on Safeguards)

7.132 Argentina claims that Chile has infringed Article XIX:1(a) of GATT 1994 and Article 3.1 of the Agreement on Safeguards by not identifying or making any findings with respect to unforeseen developments justifying the imposition of safeguard measures. Chile points out that the reason why the CDC recommended the application of safeguard measures on products subject to the PBS was the continued existence of unusually low prices over a period that could not be considered transitory. Chile contends that the unforeseen developments correspond to this special situation of global prices.

7.133 Article XIX:1(a) reads:

"If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession."

7.134 We recall that the Appellate Body in US - Lamb stated that "unforeseen developments" is a circumstance whose existence must be demonstrated as a matter of fact for a safeguard measure to be applied consistently with Article XIX.⁶⁹⁷ According to the Appellate Body, the demonstration of the existence of this circumstance must feature in the published report of the investigating authorities.⁶⁹⁸ If the published report does not discuss or offers any explanation as to why certain factors mentioned in it can be regarded as "unforeseen developments", that report does not demonstrate that the safeguard measure concerned has been applied as a result of "unforeseen developments".⁶⁹⁹

7.135 According to Chile, the CDC made its findings and reasoned conclusions relating to the requirement of "unforeseen developments" in the Minutes of Session No. 193, where it states that:

" (�) [t]he increase in imports, and the potential for further substantial increases, has occurred at a time when international prices of the products investigated have been subject to sizeable and rapid decreases."⁷⁰⁰

7.136 We note that the CDC did not discuss or offer any explanation in its report as to why the reported "sizeable and rapid decrease in international prices" could be regarded as an unforeseen development. In fact, nothing in the CDC's report suggests that this reference was intended to relate to the issue of unforeseen developments. Consequently, we consider that the CDC did not demonstrate that the safeguard measures at issue have been applied "as a result of unforeseen developments", as required by Article XIX:1(a) of GATT 1994.

7.137 Argentina has claimed that Chile failed to set forth reasoned findings and conclusions regarding unforeseen developments in its report, as required by Article 3.1 of the Agreement on Safeguards. We recall in this respect the statement by the Appellate Body in US - Lamb:

"(�) we observe that Article 3.1 requires competent authorities to set forth findings and reasoned conclusions on 'all pertinent issues of fact and law' in their published report. As Article XIX:1(a) of the GATT 1994 requires that 'unforeseen developments' must be demonstrated, as a matter of fact, for a safeguard measure to be applied, the existence of 'unforeseen developments' is, in our view, a 'pertinent issue[] of fact and law', under Article 3.1, for the application of a safeguard measure, and it follows that the published report of the competent authorities, under that Article, must contain a 'finding' or 'reasoned conclusion' on 'unforeseen developments'."⁷⁰¹

7.138 In light of our finding that the CDC did not discuss or offer any explanation in its report as to why the reported "sizeable and rapid decrease in international prices" could be regarded as an unforeseen development, we find that Chile has failed to set forth reasoned findings and conclusions in its report regarding unforeseen developments, as required by Article 3.1 of the Agreement on Safeguards.

7.139 According to Chile, the statement by the CDC regarding declining international prices reflects the fact that a fall in international prices to such low levels and for such a long period is unusual and unpredictable, especially with respect to products whose prices tend to undergo strong fluctuations.⁷⁰² We wish to point out that, although this ex post facto explanation provided by Chile cannot, in any event, cure the CDC's failure to make findings and reasoned conclusions in its report, this explanation would not meet the requirement to demonstrate the existence of "unforeseen developments" either. First, Chile in its explanation and the CDC in its determination seem to refer to different events. Whereas the CDC spoke of "sizeable and rapid" decreases in international prices, Chile now argues that it was the "sustained" fall in international prices which could not have been foreseen. Second, it should be recalled that the safeguard measures do not impose any duty which was not already being applied under the Chilean PBS. The duty applied pursuant to the safeguard measures is merely a different label for the portion of the Chilean PBS duties exceeding the 31.5 per cent bound rate. The Chilean PBS has the stated objective of providing additional protection to offset declining international prices. The very fact that Chile established its PBS with such an objective constitutes, in our view, evidence that declining international prices cannot have been unforeseen. If the safeguard measures are not adding any protection to what already resulted from the Chilean PBS, in force since 1983, it is difficult to see how those safeguard measures could then have been adopted as a result of developments which could not have been foreseen at the end of the Uruguay Round.⁷⁰³

7.140 In conclusion, we find that Chile failed to demonstrate the existence of unforeseen developments, as required by Article XIX:1(a) of GATT 1994, and set forth findings and reasoned conclusions in this respect in its report, as required by Article 3.1 of the Agreement on Safeguards.

6. Definition of like or directly competitive product (Articles XIX:1(a) of GATT 1994 and Articles 2.1, 4.1(a) and 4.2(c) of the Agreement on Safeguards)

7.141 Argentina claims that Chile has infringed Article XIX:1(a) of GATT 1994 and Articles 2.1, 4.1(c) and 4.2(a) of the Agreement on Safeguards on the grounds that the CDC failed to properly identify the product that was like or directly competitive to each imported product, and thereby failed to identify the affected domestic industries. Accordingly, Argentina contends, the entire analysis of increased imports and of threat of injury is based on false premises and lack legal validity. Chile argues that the categories of products subject to the safeguard measures correspond to products subject to the PBS, which groups categories of products that are directly competitive. According to Chile, 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. Chile claims that the CDC reaffirmed this analysis, as reflected in the Minutes.

7.142 We recall that the Appellate Body in US - Lamb stated:

"(�) 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. In our view, it would be a clear departure from the text of Article 2.1 if a safeguard measure could be imposed because of the prejudicial effects that an imported product has on domestic producers of products that are not 'like or directly competitive products' in relation to the imported product. [�] Accordingly, the first step in determining the scope of the domestic industry is the identification of the products which are 'like or directly competitive' with the imported product. Only when those products have been identified is it possible then to identify the 'producers' of those products."⁷⁰⁴

7.143 With respect to wheat, the CDC provided in its report only an implicit assertion of likeness or direct competitiveness, without offering any reasoned conclusion regarding the products which, in its view, should be considered like or directly competitive. The report of the CDC does, in the final section containing the recommendation, identify the tariff heading (1001.9000, "wheat other than durum wheat") of imported products to which the safeguard measures will apply. However, the identification of the tariff lines of the imported products to which the safeguard measures shall apply, does not say anything about whether the domestic product is like or directly competitive with the imported products.⁷⁰⁵

7.144 With respect to wheat flour, Chile has asserted that wheat and wheat flour are directly competitive products. In Chile's view, this reasoning is reflected in the CDC's report, where it reads that:

"(�) 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."⁷⁰⁶

7.145 This comment, however, relates to a possible relationship of likeness or direct competitiveness between two imported products, imported wheat and imported wheat flour, not between domestic wheat or wheat flour and the imported wheat flour.

7.146 Finally, as regards vegetable oils, Chile has confirmed that the safeguard measures on vegetable oils apply to both crude and refined oils.⁷⁰⁷ The CDC, however, does not provide any reasoned conclusions or finding as regards the likeness or direct competitiveness between domestic crude and refined oils and the imported crude and refined oils included in the 25 tariff lines subject to the safeguard measures. Chile has offered the following ex post facto explanation:

"(�) colza-oil (rape) produced domestically is a like product to all oils to which the measure applies since: (i) they are physically and chemically very similar, (ii) they are consumed without distinction, (iii) they have the same final use, and (iv) they utilize the same distribution channels."⁷⁰⁸

7.147 Even if these assertions were to be substantiated, however, they do not provide any explanation as regards the relationship of likeness or direct competitiveness between other domestic oils, such as maize and olive oil,⁷⁰⁹ and the imported oils included in the 25 tariff lines subject to the safeguard measures. In any event, we recall that even this incomplete explanation was not provided, as a reasoned conclusion, in the CDC's report, but only offered by Chile as ex post facto rationalization.

7.148 Furthermore, when asked by the Panel to identify the domestic industry as regards edible vegetable oils identified in reference to 25 tariff lines, Chile stated that "[t]he relevant domestic industry is the oils industry, which includes the rape-seed oil industry".⁷¹⁰ Nevertheless, Chile has clarified that the injury data in the minutes of CDC session No. 193 regarding production, employment and "marginalization" of producers concern the agricultural production of rape-seed, and not "the oils industry".⁷¹¹ Thus, by considering injury data relating to agricultural producers of rape-seed, the CDC would appear to have included such producers in its definition of the domestic industry. The CDC, however, provided in its report no explanation of how domestic rape-seeds can be regarded as like or directly competitive with imported vegetable oils. We note in this respect that, according to the Appellate Body in US - Lamb, the input and end-product need to be like or directly competitive for their respective producers to be included in the definition of the domestic industry.⁷¹²

7.149 We therefore find that the CDC failed to make adequate findings and reasoned conclusions with respect to the issue of likeness or direct competitiveness, and, consequently, failed to identify the domestic industry, as required by Article XIX:1(a) of GATT 1994 and Articles 2 and 4 of the Agreement on Safeguards.

7. Increase in imports (Articles XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards)

7.150 Argentina claims that an analysis of the content of the Minutes of the CDC sessions and the notifications reveals that Chile did not demonstrate that there were increased imports, and that Chile therefore failed to comply with its obligations under Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards. Chile submits that the requirement regarding an increase in imports and the impact of the PBS in this case are factors that cannot be examined separately. According to Chile, the CDC's investigation did identify increased imports in accordance with the requirements of Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards. In addition, as regards the extension of the definitive measure, Chile argues that the justification of such an extension cannot require that the competent authority find for a second time that there is an increase in imports.

7.151 The relevant section of the Minutes of Session No. 193 of the CDC, at which the CDC decided to recommend the adoption of the definitive safeguard measures, reads as follows:

"In its analysis of imports, the Commission has taken into account the fact that the normal operation of price bands has been a decisive factor in preventing a greater increase in imports, and consequently the trend in imports cannot be considered without bearing this factor in mind. Even so, there has been an increase in imports in absolute terms which threatens to cause injury to the production sectors concerned. In its analysis, the Commission has taken into account the period commencing when, for each product, the specific tariffs determined by the application of the price band, added to the general tariff, exceeded the level bound in the WTO. Without prejudice to this analysis, information prior to this period shall also be considered for comparison and assessment. In this regard, the Commission points out that:

- Imports of wheat (in tons) increased by 6 per cent in 1998 in comparison with the previous year. Over the first ten months of 1999, imports rose by 281 per cent compared with the same period in 1998. There was an increase in imports from 1993 to 1996, with a drop in 1997. Imports of wheat flour fluctuated, but this can be explained by their low volume. Nevertheless, the Commission notes that 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.

- [�]

- Imports of the two main edible vegetable oils 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. In relation to this reduction, the Commission points out that there was an abnormal situation in 1999 concerning the behaviour of importers as a result of the tariff disputes regarding the tariff headings for oil imports. From 1993 to 1997, the level of imports was similar.

The Commission notes the significant 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 forecasts of a greatly accelerated increase in imports that would occur (or has already occurred) unless the full duties specified in the bands are applied. The increase in imports, and the potential for further substantial increases, has occurred at a time when international prices of the products investigated have been subject to sizeable and rapid decreases."

7.152 We recall that the Appellate Body in its report on Argentina - Safeguard Measures on Imports of Footwear stated:

"[W]e agree with the Panel that the specific provisions of Article 4.2(a) require that 'the rate and amount of the increase in imports � in absolute and relative terms'� must be evaluated. [..] Thus, we do not dispute the Panel's view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a).

[�] Although we agree with the Panel that the 'increased quantities' of imports cannot be just any increase, we do not agree with the Panel that it is reasonable to examine the trend in imports over a five-year historical period.

[�] [T]his language in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, we believe, requires 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'."⁷¹³

7.153 In addition, we recall that the Appellate Body in its report on US - Lamb stated:

"[W]e believe that, although data from the most recent past has special importance, competent authorities should not consider such data in isolation from the data pertaining to the entire period of investigation. The real significance of the short-term trends in the most recent data, evident at the end of the period of investigation, may only emerge when those short-term trends are assessed in the light of the longer-term trends in the data for the whole period of investigation. If the most recent data is evaluated in isolation, the resulting picture of the domestic industry may be quite misleading."⁷¹⁴

7.154 We consider that the analysis by the CDC contained in the minutes of its session No. 193 does not demonstrate that the products concerned are "being imported [�] in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause or threaten to cause serious injury," as required by Article 2.1 of the Agreement on Safeguards.

7.155 First, according to the Minutes of Session No. 193, imports of "the two main" edible vegetable oils fell 24 per cent over the first ten months of 1999. Thus, in the period immediately preceding the opening of the investigation, imports of the product concerned actually fell significantly. In addition, although the Minutes of Session No. 193 do also indicate that imports increased by 23 per cent in 1998, they only state with respect to long-term trends that "[f]rom 1993 to 1997, the level of imports was similar". We consider, therefore, that the CDC failed to identify such increase in imports of edible vegetable oils as required by Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.

7.156 Second, as regards wheat flour, according to the Minutes of Session No. 193, imports "fluctuated". Such a statement does not identify a discernable upward trend in the growth of these imports. In the absence of this discernable trend, we find that the CDC did not demonstrate that there was an increase in imports of wheat flour recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause "serious injury".⁷¹⁵ We consider, therefore, that the CDC failed to identify such increase in imports of wheat flour as required by Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.

7.157 Third, with respect to wheat, the CDC identified in the Minutes of Session No. 193 a 281 per cent increase in the first ten months of 1999. Although the Minutes of Session No. 193 do also indicate that imports increased by 6 per cent in 1998, they only state with respect to long-term trends that "[t]here was an increase in imports from 1993 to 1996, with a drop in 1997". We consider that such a conclusory statement does not meet the requirement of assessing short-term trends "in the light of the longer-term trends in the data for the whole period of investigation". For example, the import volumes for 1999, even though they represented a 281 per cent increase over the preceding year, were still smaller than the import volumes for 1995 and 1996. The CDC should have provided a reasoned analysis as regards the significance of the import volumes for 1999 in the context of the import volumes for 1995 and 1996.⁷¹⁶ Accordingly, we find that the CDC did not demonstrate that there was an increase in imports of wheat recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause serious injury.⁷¹⁷ We consider, therefore, that the CDC failed to identify such increase in imports of wheat as required by Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.

7.158 Moreover⁷¹⁸, we note that table 3 annexed to the Minutes of Session No. 224 of the CDC (containing the recommendation to extend the period of application) actually shows a decrease in imports of wheat flour of 14 per cent in 1999, of 21 per cent in 1998, and of 28 per cent in 1997. In addition, table 7 annexed to the Minutes of Session No. 224 of the CDC shows a decrease of 4 per cent in total imports of vegetable oils during 1997, and increases of 4 per cent and 21 per cent in 1996 and 1998, respectively. As for wheat, the tables show a decrease of 60 per cent in 1997 and increases of 5, 11, and 4 per cent in 1995, 1996 and 1998, respectively.

7.159 Finally, as regards all three product categories subject to the safeguard measures, we find fault with the CDC's analysis on two additional grounds. First, Article 4.2(a) of the Agreement on Safeguards provides that:

"(�) the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of the industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms � ." (emphasis added)⁷¹⁹

7.160 When conducting its investigation, the CDC does not appear to have made any analysis at all of import trends relative to domestic production. As a matter of fact, in the Minutes of Session No. 193, the CDC states only that "there has been an increase in imports in absolute terms".⁷²⁰ In its reply to a question by the Panel, Chile has clarified that the CDC analysed the increase in imports "both in absolute terms and in relation to production, information which was available in the Technical Report prepared by the Technical Secretariat", but that it "focused its analysis of imports on their evolution in absolute terms, which is why only that information was recorded in the records of the Commission."⁷²¹ We note Chile's statement which said that the Technical Report is "non-binding and classified information"⁷²², and was not part of the CDC's report. We therefore consider that Chile acted inconsistently with Article 4.2(a) of the Agreement on Safeguards by reason of the failure of the CDC to evaluate the increase in imports in relation to domestic production.

7.161 Second, the CDC has stated in Minutes of Session No. 193 that "[i]n its analysis of imports, [it] has taken into account the fact that the normal operation of price bands has been a decisive factor in preventing a greater increase in imports, and consequently the trend in imports cannot be considered without bearing this factor in mind". Moreover, the CDC has stated that "the significant 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 [�] substantiates the forecasts of a greatly accelerated increase in imports that would occur (or has already occurred) unless the full duties specified in the bands are applied". These statements confirm that the CDC's analysis of import trends somehow accounted for the fact that greater import increases would have occurred in the absence of Chilean PBS duties exceeding the 31.5 per cent bound rate. Accordingly, the CDC's analysis of import trends is, at least partly⁷²³, based on hypothetical import increases, i.e. increases which would have occurred but for Chilean PBS duties granting additional protection by exceeding the 31.5 per cent bound rate. We consider that this analytical approach is inconsistent with Article 2.1 of the Agreement on Safeguards, which clearly requires that actual imports have increased. A threat of increased imports is not sufficient.

7.162 In conclusion, we find that that the CDC failed to demonstrate increased imports of the products subject to the safeguard measures, as required by Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.

8. Threat of serious injury and evaluation of all relevant factors (Article XIX:1(a) of GATT 1994 and Articles 4.1(a), 4.1(b) and 4.2(a) of the Agreement on Safeguards)

7.163 Argentina claims that the CDC did not establish 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. Argentina also contends that the CDC 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. Argentina maintains that the determination of threat of serious injury by the CDC is inconsistent because of two instances of non-compliance: (i) contrary to the requirements of Article 4.2 of the Agreement on Safeguards, the CDC did not evaluate all the factors related to the situation of the industry; and (ii) the findings and conclusions of the CDC regarding the factors investigated were not substantiated by evidence.

7.164 Chile submits that the CDC 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 "threat of injury" by the Appellate Body in US - Lamb, where it was said that the occurrence of future events can never be definitively proven by facts. 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. Chile also submits that the CDC 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 provision, all "relevant" factors must be analysed. According to Chile, 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 CDC therefore considered it highly relevant to include the impact of the PBS on trade flows in the products investigated that were subject to the PBS.

7.165 Chile has explained that the CDC's relevant findings and reasoned conclusions are contained in the following section of the Minutes of Session No. 193:

"The Commission notes the significant 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 forecasts of a greatly accelerated increase in imports that would occur (or has already occurred) unless the full duties specified in the bands are applied. The increase in imports, and the potential for further substantial increases, has occurred at a time when international prices of the products investigated have been subject to sizeable and rapid decreases.

The Commission has also taken into account that the c.i.f. prices of Chilean imports are closely linked to international prices (the behaviour of commodities) and domestic prices similarly shadow trends in import prices. Predicted trends in international prices for these products are also negative; i.e., prices should remain at their present levels or fall even more.

The situation described has left the Commission convinced of the existence of an imminent threat of injury if only the tariff ceiling of 31.5 per cent is applied, which can be summarized as follows:

(i) In the case of wheat, a decrease of 34 per cent in the area under cultivation is expected (from 370 thousand hectares to 244 thousand hectares); a decrease of 28 per cent in production (less than the reduction in the area cultivated as crop yields continue to improve); 10 per cent fall in prices; a decrease of 35 per cent in direct employment; and a drop of 20 to 90 per cent in net profit margins depending on the level of production. This means that around one third of approximately 90,000 producers will cease this activity. As is the case for sugar beet and rape, the capacity of utilisation indicator has not been estimated because it is not relevant to agricultural crops;

(ii) for sugar (sugar beet), the aforementioned indicators used to assess injury are even more significant, showing a reduction of around 80 per cent in production, area under cultivation and employment, and a 28 per cent decrease in prices, meaning that 90 per cent of producers will cease this activity. Very high losses are expected in the sugar industry, with a 28 per cent reduction in the value of output and related losses amounting to US$10 million;

(iii) in the case of oils (rape), indicators show a drop of 54 per cent in production and a decrease of around 60 per cent in employment (direct and indirect), marginalizing over 63 per cent of producers. Losses in the oil industry are estimated to include an 8 per cent fall in the value of output, a US$3.2 million reduction in production. It should also be noted that a decrease in rape cultivation will have an impact on wheat yields because rape is sold in rotation with wheat (30,000 hectares of rape allow the rotation of around 100,000 hectares of wheat)."⁷²⁴

7.166 Article 4.2(a) of the Agreement on Safeguards reads:

"In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry under the terms of this Agreement, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment."

7.167 We recall that the Appellate Body in US - Lamb stated that,

"(�) an 'objective assessment' of a claim under Article 4.2(a) of the Agreement on Safeguards has, in principle, two elements. First, a panel must review whether competent authorities have evaluated all relevant factors, and, second, a panel must review whether the authorities have provided a reasoned and adequate explanation of how the facts support their determination. [�] Thus, the panel's objective assessment involves a formal aspect and a substantive aspect. The formal aspect is whether the competent authorities have evaluated 'all relevant factors'. The substantive aspect is whether the competent authorities have given a reasoned and adequate explanation for their determination."⁷²⁵

7.168 As regards the formal aspect, the Appellate Body stated in Argentina - Footwear that:

"Article 4.2(a) of the Agreement on Safeguards requires a demonstration that the competent authorities evaluated, at a minimum, each of the factors listed in Article 4.2(a) as well as all other factors that are relevant to the situation of the industry concerned."⁷²⁶

7.169 Chile has conceded that the CDC did not evaluate certain relevant factors, such as changes in the level of sales and capacity utilization with respect to wheat, and productivity and employment with respect to vegetable oils.⁷²⁷ Chile has explained that it did not evaluate all the relevant factors explicitly listed in Article 4.2(a), including productivity and employment in the oils industry, because for those factors "information was unavailable from public sources and could not be found by consulting other sources either".⁷²⁸ At the same time, however, Chile has indicated that the questionnaires which the CDC had sent to the interested parties did not include "the more specific questions that are necessary in other cases, since the data contained in the application covered a large part of the background information from the industry and the data gathered from other sources was considered sufficient".⁷²⁹ We find it difficult to accept lack of information as a justification for failure to evaluate all relevant factors, if the investigating authorities were apparently satisfied that the available information was sufficient and no further investigative steps had to be taken. Accordingly, by failing to evaluate each of the factors listed in Article 4.2(a), we consider that Chile has acted inconsistently with its obligations under Article 4.2(a).

7.170 We now proceed to examine whether Chile has complied with the substantive requirements of the injury analysis. We recall in this respect that, pursuant to Article 4.1(b), a threat of serious injury shall be understood to mean serious injury that is clearly imminent, and that a determination of the existence of a threat of serious injury shall be based on facts and not merely on allegation, conjecture or remote possibility. We also recall that the Appellate Body in US - Lamb has stated:

"[I] making a 'threat' determination, the competent authorities must find that serious injury is 'clearly imminent'. As we have already concluded, this requires a high degree of likelihood that the anticipated serious injury will materialize in the very near future. Accordingly, we agree with the Panel that a threat determination is 'future-oriented'. However, Article 4.1(b) requires that a 'threat' determination be based on 'facts' and not on 'conjecture'. 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. Unavoidably, this tension must be resolved through the use of facts from the present and the past to justify the conclusion about the future, namely that serious injury is 'clearly imminent'. 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.⁷³⁰

[�] [W]hatever methodology is chosen, we believe 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. The likely state of the domestic industry in the very near future can best be gauged from data from the most recent past. Thus, we agree with the Panel that, in principle, within the period of investigation as a whole, evidence from the most recent past will provide the strongest indication of the likely future state of the domestic industry.

However, we believe that, although data from the most recent past has special importance, competent authorities should not consider such data in isolation from the data pertaining to the entire period of investigation. The real significance of the short-term trends in the most recent data, evident at the end of the period of investigation, may only emerge when those short-term trends are assessed in the light of the longer-term trends in the data for the whole period of investigation. If the most recent data is evaluated in isolation, the resulting picture of the domestic industry may be quite misleading. [�]"⁷³¹

7.171 The CDC did not provide in the Minutes of Session No. 193 any indication regarding either the data which it had based its injury projections on, or the relevant time-period during which such data would have been examined. The data mentioned in the CDC's report refer to hypothetical growth rates taken with respect to projected values. They do not reveal what the most recent historical values were. Consequently, the CDC does not appear to have based its injury determination on data relating to the most recent past, and did not assess such data in the context of the data for the entire investigative period. We therefore find that, also in this respect, Chile has acted inconsistently with its obligations under Article 4.2(a).

7.172 Moreover, we note that, according to Chile, a threat of serious injury exists because imports would increase unless the full duties specified in the Chilean PBS are applied. We consider this reasoning insufficient to support the CDC's conclusion. As we have stated earlier, at the time of the adoption of the safeguard measures, the Chilean PBS was already operating without restriction, and PBS duties were being imposed in excess of the 31.5 per cent bound rate. Chile argues that there would be a threat of serious injury if the Chilean PBS were not to be applied without restriction, and that, therefore, safeguard measures equal to the portion of the PBS duties exceeding the 31.5 per cent bound rate should be adopted. Put another way, Chile based its determination of a threat of serious injury on a counterfactual analysis: if they were to restrict the operation of the Chilean PBS to the 31.5 per cent bound rate, injury may occur. Thus, in their threat of injury analysis, for "projecting" the future condition of the domestic industry, the investigative authorities did not rely on an extrapolation of existing trends, but on the results from a counterfactual exercise, simulating what that condition would be if the safeguard measure were to be removed.⁷³² Such counterfactual analysis cannot justify the imposition of definitive safeguard measures.

7.173 In reply to the Panel's questions, Chile has argued that "the determination of whether or not serious injury would occur if a safeguard measure were withdrawn is possible", because the Agreement on Safeguards "envisages that such an analysis will be made by the competent authorities in that it assumes that a safeguard measure will be maintained only for the time necessary to prevent or remedy serious injury."⁷³³ We do not disagree with Chile that this type of analysis is indeed envisaged by Article 7.2 of the Agreement on Safeguards for the extension of the period of application of the safeguard measure. Obviously, however, it cannot apply to the adoption of the safeguard measure, where a projection should be made on the basis that a new safeguard measure would not be adopted, and not on the basis that an existing safeguard measure (or its equivalent) were to be withdrawn.

7.174 In conclusion, we find that the CDC did not demonstrate the existence of a threat of serious injury, as required by 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.

9. Causal link (Articles 2.1 and 4.2(b) of the Agreement on Safeguards)

7.175 Argentina argues 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 GATT 1994 and Articles 2.1 and 4.2(b) of the Agreement on Safeguards inasmuch as it did not evaluate factors other than the increase in imports which at the same time were causing injury to the domestic industry. According to Chile, the CDC established the causal link between increased imports and threat of serious injury when it stated that "the c.i.f. prices of Chilean imports are closely linked to international prices (the behaviour of commodities) and domestic prices similarly shadow trends in import prices."⁷³⁴

7.176 We have found above that the CDC failed to appropriately establish the existence of both increased imports and threat of serious injury. No causal link can exist if the existence of either of the two substantive requirements has not been established.⁷³⁵

7.177 In any event, we recall that, pursuant to Articles 2 and 4.2 of the Agreement on Safeguards, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof must be demonstrated, and that, when factors other than increased imports are causing injury to the domestic industry, such injury shall not be attributed to increased imports. In this case, Chile's analysis of causality was strictly limited to its statement that international prices, import prices and domestic prices are linked. Further, the CDC's report at no point reflects any consideration as to the possible effects on the domestic industries concerned of factors other than increased imports. We consider that such a cursory one-sentence analysis is insufficient to demonstrate the existence of a causal link between increased imports and threat of serious injury. Moreover, injury must be caused or threatened by increased imports, not decreasing international prices.⁷³⁶ Declining international prices may be a factor in a causal analysis but mere consideration of such declining international prices cannot be substituted for such a causal analysis, which, of course, was not done here. We therefore find that the CDC failed to properly establish a causal link, as required by Articles 2.1 and 4.2 of the Agreement on Safeguards.

7.178 Finally, we recall the Appellate Body's statement in US - Wheat Gluten:

"Article 4.2(b) presupposes [�] as a first step in the competent authorities' examination of causation, that the injurious effects caused to the domestic industry by increased imports are distinguished from the injurious effects caused by other factors. The competent authorities can then, as a second step in their examination, attribute to increased imports, on the one hand, and, by implication, to other relevant factors, on the other hand, 'injury' caused by all of these different factors, including increased imports. Through this two stage process, the competent authorities comply with Article 4.2(b) by ensuring that any injury to the domestic industry that was actually caused by factors other than increased imports is not 'attributed' to increased imports and is, therefore, not treated as if it were injury caused by increased imports, when it is not. In this way, the competent authorities determine, as a final step, 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, as required by the Agreement on Safeguards."⁷³⁷

7.179 We recall that Argentina has argued that the increase in imports of wheat during 1999 was due to extreme drought in Chile, severely affecting domestic output that year. We note that this issue was raised, at least in passing, by Argentine exporters,⁷³⁸ and a Report of a Chilean government agency submitted by Argentina confirms that Chilean wheat production was adversely affected by drought in the 1998/99 season.⁷³⁹ The minutes of session No 193 - in which adoption of the definitive measure is recommended by the CDC - however, do not contain any analysis as regards injury caused by other factors, such as drought in the case of wheat.⁷⁴⁰ Thus, the CDC did not distinguish the injurious effects caused to the domestic industry by increased imports from the injurious effects caused by other factors. We therefore consider that, also in this respect, the CDC did not perform an adequate causation analysis, as required by Article 4.2(b) of the Agreement on Safeguards.

7.180 In conclusion, we find that the CDC did not demonstrate the existence of a causal link, as required by Articles 2.1 and 4.2(b) of the Agreement on Safeguards.

10. Measures necessary to remedy injury and facilitate adjustment (Article XIX:1(a) of GATT 1994 and Articles 3.1 and 5.1 of the Agreement on Safeguards)

7.181 Argentina submits that Chile's safeguard measure violates Article XIX:1(a) of GATT 1994 and Article 5.1 of the Agreement on Safeguards because it was not limited to the extent necessary to remedy injury and to facilitate adjustment. Argentina contends that the CDC did not consider whether or not the measure was "necessary" to prevent injury and facilitate readjustment and that no substantive analysis was undertaken. 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. 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 CDC and taken by the Government involved the least possible trade disruption consistent with preventing serious injury: an increase in duties to enable the PBS to apply without regard to the bound level of duties.

7.182 Pursuant to Article 5.1 of the Agreement on Safeguards, "[a] Member shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment". According to the Appellate Body in Korea - Dairy:

"(�) the wording of this provision leaves no room for doubt that it imposes an obligation on a Member applying a safeguard measure to ensure that the measure applied is commensurate with the goals of preventing or remedying serious injury and of facilitating adjustment."⁷⁴¹ (emphasis added)

7.183 Thus, according to this report, in order to comply with the requirement of Article 5.1, the Member imposing the safeguard measure must ensure that the measure is only applied to the extent necessary to prevent or remedy serious injury and to facilitate adjustment. We consider that a Member can only ensure that the safeguard measure is calibrated if there is, at a minimum, a rational connection between the measure and the objective of preventing or remedying serious injury and facilitating adjustment. In the absence of such a rational connection, a Member cannot possibly ensure that the measure is applied only to the extent necessary.

7.184 We recall that the safeguard measures at issue consist of a duty in the amount of the difference between, on the one hand, the sum of the 8 per cent applied rate and the ad valorem equivalent of the PBS duty, and, on the other hand, the 31.5 per cent bound rate. According to Chile, such a duty is "most appropriate" to remedy injury and facilitate adjustment.⁷⁴² This argument appears to be based on the premise that the lower PBS threshold (to which level import prices are raised through the safeguard measure) can be regarded as indicative of a state below which the domestic industry will experience (a threat of) serious injury. In our view, this premise is unfounded because the lower PBS threshold is calculated on the basis of the international prices observed in the recent past, and therefore does not reflect in any way the condition of the domestic industry. In our view, therefore, it is clear that the lower PBS threshold has no rational connection to a state of the domestic industry below which (a threat of) serious injury will be experienced. We find accordingly that Chile did not ensure that the safeguards measures are applied to the extent necessary to prevent or remedy serious injury and facilitate adjustment, as required by Article XIX:1(a) of GATT 1994 and Article 5.1 of the Agreement on Safeguards.

7.185 Moreover, we note the following statement by the Appellate Body regarding the obligation of Article 5.1 in its report on US - Line Pipe:⁷⁴³

"For all these reasons, we conclude that the phrase 'only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment' in Article 5.1, first sentence, must be read as requiring that safeguard measures may be applied only to the extent that they address serious injury attributed to increased imports.⁷⁴⁴

Having reached this conclusion, we must consider now whether the Panel erred in concluding that Korea did not make a prima facie case that the United States had not fulfilled this substantive obligation in Article 5.1, first sentence. On this, we conclude that, by establishing that the United States violated Article 4.2(b) of the Agreement on Safeguards, Korea has made a prima facie case that the application of the line pipe measure was not limited to the extent permissible under Article 5.1. In the absence of a rebuttal by the United States of this prima facie case by Korea, we find that the United States applied the line pipe measure beyond the "extent necessary to prevent or remedy serious injury and to facilitate adjustment".⁷⁴⁵

[�]

We note that, had the Panel found differently, the United States might have attempted to rebut the presumption raised by Korea in successfully establishing a violation of Article 4.2(b) of the Agreement on Safeguards, that the United States had also violated Article 5.1. [�] The United States did not rebut Korea's prima facie case by showing that this was so. We offer this observation only to emphasize that we are not stating that a violation of the last sentence of Article 4.2(b) implies an automatic violation of the first sentence of Article 5.1 of the Agreement on Safeguards."⁷⁴⁶

7.186 The Appellate Body report on US - Line Pipe cited above supports our finding that Chile's measures are inconsistent with Article 5.1, first sentence. Chile failed to either assess the serious injury arising from �other factors' in the context of its Article 4.2(b) causation analysis⁷⁴⁷ or otherwise establish that the Chilean measures address the serious injury arising from imports alone in the context of Article 5.1.

7.187 We note that Argentina has also based its claim on Article 3.1, which requires the investigating authorities, inter alia, to set forth their findings and reasoned conclusions on all pertinent issues of fact and law, thus raising the question of whether Chile was under an obligation to justify, in its report, the application of the measures.⁷⁴⁸

7.188 As we have already found that Chile has acted inconsistently with Article 5.1 of the Agreement on Safeguards, we do not find it necessary for the settlement of this dispute to address Argentina's claim regarding the justification of the application of the measure to the extent that it has been based on Article 3.1. We accordingly decide to exercise judicial economy to that extent.

11. Appropriate investigation (Articles 3.1 and 3.2 of the Agreement on Safeguards)

7.189 Argentina claims that Chile breached its obligation under Articles 3.1 and 3.2 to conduct a "appropriate investigation" because Argentina did not have a full opportunity to participate in the investigation. Specifically, Argentina asserts that it did not have access to any public summary of the confidential information on which the Chilean authorities may have based their determination. Chile responds that Argentina participated in two hearings before the CDC and had access to the file containing submissions of other interested parties. It further contends that there were no non-confidential summaries of confidential information because there was no confidential information to discuss; the information regarding these products was completely public.

7.190 We note that, pursuant to Article 3.2 of the Agreement on Safeguards, parties submitting confidential information may be requested to furnish non-confidential summaries or, if such information cannot be summarized, the reasons why such summaries cannot be provided. Argentina has not however established in this case that the record contained any confidential information⁷⁴⁹; thus, we do not see the factual basis for a claim based on the absence of non-confidential summaries. We therefore conclude that Argentina has failed to establish that Chile has acted inconsistently with Articles 3.1 and 3.2 of the Agreement on Safeguards by reason of an alleged failure to provide Argentina with access to non-confidential summaries of confidential information.

7.191 Argentina further contends that the failure of the minutes of the relevant sessions of the CDC to take into account or analyse information provided by the Argentine exporters in respect to the evaluation of imports and the condition of the domestic industry is evidence in support of its claim that Chile failed to conduct an appropriate investigation.⁷⁵⁰ In this Report, we have already found, inter alia, that Chile acted inconsistently with Articles 2.1 and 4.2(a) of the Agreement on Safeguards in respect of its consideration of the increased imports requirement and with Article 4.2(a) of the Agreement by failing to consider all relevant factors having a bearing on the state of the industry. In these circumstances, we do not consider it necessary to examine Argentina's further claim under Article 3.1 that Chile failed take into account information provided by Argentine exporters on these issues. Accordingly, we exercise judicial economy with respect to this claim.

12. Findings and reasoned conclusions (Article 3.1 of the Agreement on Safeguards)

7.192 Argentina submits that the national investigating authorities must explain in their report how they arrived at their conclusions, based on the information, and that the findings of the competent authorities must be contained in the decision itself. According to Argentina, the CDC has not done so, and has therefore acted in a manner inconsistent with Article 3.1 of the Agreement on Safeguards.

7.193 Above, we have already found that the CDC failed to set forth findings and reasoned conclusions in its report regarding unforeseen developments and the application of the measures.⁷⁵¹ In addition, we have also found that Chile has not demonstrated that the CDC complied with the substantive requirements of Articles 2 and 4 of the Agreement on Safeguards. In the light of these findings, we do not consider it necessary to make any additional findings under Article 3.1 of the Agreement on Safeguards, and, accordingly, will exercise judicial economy in this respect.

13. Provisional measures (Article XIX:2 of GATT 1994 and Article 6 of the Agreement on Safeguards)

7.194 Argentina claims that the CDC did not comply with Article XIX:2 of GATT 1994 and Article 6 of the Agreement on Safeguards, which lay down the requirements for the application of provisional measures. Chile submits that the Minutes of Session No. 185 set 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 GATT 1994 and Article 6 of the Agreement on Safeguards.

7.195 We have stated above that the provisional safeguard measures are within our jurisdiction. Nonetheless, considering our findings above regarding the inconsistency of the CDC's investigation and the resulting safeguard measures with the requirements of Article XIX of GATT 1994 and Articles 2, 3, 4 and 5 of the Agreement on Safeguards, we do not consider it necessary to examine Argentina's claim under Article 6, and, accordingly, decide to exercise judicial economy in this respect.⁷⁵²

14. Notification and consultation (Article XIX:2 of GATT 1994 and Article 12 of the Agreement on Safeguards)

7.196 Argentina claims that Chile violated Article XIX:2 of GATT 1994 and Article 12.1(a) of the Agreement on Safeguards by failing to comply with the notification requirement laid down in Article 12.1(a) and 12.2 and by not holding prior consultations with Members having a substantial interest as exporters of the product concerned, as required by Article 12.3 and 12.4. Chile responds that it did act in conformity with the requirements of each of those provisions.

7.197 Considering our findings above regarding the inconsistency of the CDC's investigation and the resulting safeguard measures with the requirements of Article XIX of GATT 1994 and Articles 2, 3, 4 and 5 of the Agreement on Safeguards, we do not consider it necessary to examine Argentina's claim under Article 12, and, accordingly, decide to exercise judicial economy in this respect.

15. Extension of the definitive safeguard measures (Article 7 of the Agreement on Safeguards)

7.198 Argentina has requested the Panel to make findings regarding the consistency of the extension of the definitive safeguard measures with the requirements of the Agreement on Safeguards. We recall that we have found above that the CDC's investigation and the resulting definitive safeguard measures are inconsistent with the requirements of Article XIX of GATT 1994 and Articles 2, 3, 4 and 5 of the Agreement on Safeguards. If the definitive safeguard measures are inconsistent with Chile's obligations under the Agreement on Safeguards, such inconsistency cannot of course be "cured" by a decision to extend their duration. On the contrary, the decision to extend their duration must, by definition, be tainted by inconsistency as well. We recall, however, that Article 7 of the Agreement on Safeguards, which sets out the conditions for an extension, is not within our Terms of Reference. We will therefore refrain from making any finding regarding the consistency of the decision to extend the safeguard measures' duration with Article 7 of the Agreement on Safeguards.

VIII. CONCLUSIONS AND RECOMMENDATIONS

8.1 In light of the findings above, we conclude that:

(a) the Chilean PBS is inconsistent with Article 4.2 of the Agreement on Agriculture and Article II:1(b) of GATT 1994;

(b) as regards the Chilean safeguard measures on wheat, wheat flour and edible vegetable oils:

(i) Chile has acted inconsistently with Article 3.1 of the Agreement on Safeguards by not making available the relevant minutes of the sessions of the CDC through an appropriate medium so as to constitute a "published" report;

(ii) Chile has acted inconsistently with Article XIX:1(a) of GATT 1994 because the CDC failed to demonstrate the existence of unforeseen developments, and Article 3.1 of the Agreement on Safeguards because the CDC's report did not set out findings and reasoned conclusions in this respect in its report;

(iii) Chile has acted inconsistently with Article XIX:1(a) of GATT 1994 and Articles 2 and 4 of the Agreement on Safeguards because the CDC failed to demonstrate the likeness or direct competitiveness of the products produced by the domestic industry, and, consequently, failed to identify the domestic industry;

(iv) Chile has acted inconsistently with Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards because the CDC failed to demonstrate the increase in imports of the products subject to the safeguard measures required by those provisions;

(v) Chile has acted inconsistently with 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 because the CDC did not demonstrate the existence of a threat of serious injury;

(vi) Chile has acted inconsistently with Articles 2.1 and 4.2(b) of the Agreement on Safeguards because the CDC did not demonstrate a causal link;

(vii) Chile has acted inconsistently with Article XIX:1(a) of GATT 1994 and Article 5.1 of the Agreement on Safeguards because the CDC did not ensure that the measures were limited to the extent necessary to prevent or remedy injury and facilitate adjustment;

(viii) Argentina failed to establish that Chile has acted inconsistently with the requirement of Articles 3.1 and 3.2 of the Agreement on Safeguards to conduct an "appropriate investigation" because Argentina allegedly did not have a full opportunity to participate in the investigation and did not have access to any public summary of the confidential information on which the Chilean authorities may have based their determination.

8.2 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits under that agreement. Accordingly, we conclude that to the extent Chile has acted inconsistently with the provisions of the GATT 1994, the Agreement on Agriculture and the Agreement on Safeguards, it has nullified or impaired benefits accruing to Argentina under those Agreements.

8.3 We recommend that the Dispute Settlement Body request Chile to bring its PBS into conformity with its obligations under the Agreement on Agriculture and the GATT of 1994. As explained above⁷⁵³, we do not make any recommendation with respect to the safeguard measures challenged by Argentina in these proceedings.

__________

753 See our comments at paras. 7.112-7.113 and para. 7.124.