ARGENTINA - DEFINITIVE SAFEGUARD MEASURE ON
IMPORTS OF PRESERVED PEACHES

Report of the Panel

(Continued)

2. Determination of an increase in imports. Article XIX.1(a) of GATT 1994 and Articles 2.1, 3.1 and 4.2(a) of the Agreement on Safeguards

4.40 Chile claims that an examination of the file of the investigation reveals that Argentina did not demonstrate that during the period of investigation (1996/2000), preserved peaches were being "imported in such increased quantities⁹⁵, absolute or relative to domestic production, and under such conditions" as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.⁹⁶ Chile also alleges that the CNCE failed to provide a reasoned and adequate explanation of its determination in the file of the investigation.⁹⁷

4.41 Argentina, on the contrary, submits that the increase in imports was both absolute and relative.⁹⁸ It contends that imports increased in both absolute and in relative terms inasmuch as they rose from 3,568 tons in 1998 to 7,271 tons in 1999 and then to 12,181 tons in 2000. According to Argentina, these volumes represented relative annual increases of 103.7 per cent and 68 per cent respectively⁹⁹ (Exhibits ARG-VII and ARG-VIII).¹⁰⁰  With regard to import volumes and as a percentage of domestic production, Argentina notes that a sharp increase of 10 per cent is observed between 1999 and 2000. Moreover, Argentina states that the growth rate of that indicator (imports as a percentage of production) was 90 per cent for 2000 compared with the previous year.¹⁰¹

(a) Whether there was an increase in imports in absolute or relative terms

4.42 As regards a determination of an increase in imports in absolute terms, Chile contends that the growth of imports during the two last years of the import period investigated by the Argentine authorities (1996/2000) reflects a foreseen and expected recovery of historical levels, which had been disrupted by severe climatic conditions that affected the production and exports of the product under investigation, particularly in Greece. Moreover, Chile states that if total imports over the entire investigation period are considered, imports for the year 2000 reached approximately 12,120 tons, while in 1996, they reached approximately 14,401 tons. In other words, the volume imported in 2000 was 16 per cent lower than the volume imported in 1996.¹⁰² According to Chile, the facts recorded in the technical report and its annex do not support the CNCE's determination. Chile further alleges that neither Record No. 781 nor the technical report contain a substantiated, reasoned and adequate analysis explaining how, on the basis of what facts, and why Argentina arrived at this determination in the way that it did.¹⁰³

4.43 As regards a determination of an increase in imports in relative terms, Chile indicates that, as in the case of the lack of an absolute increase in imports, when one considers the most recent part of the investigation period from beginning to end in the context of the data and trends for the entire period, and analyses the structure of apparent consumption of preserved peaches during 1996, one arrives at the same conclusion: i.e. the growth in apparent consumption of imported preserved peaches recorded in 1999 and 2000 is merely a recovery by consumption of its historical levels, and cannot objectively be qualified as a relative increase, as the CNCE has done.¹⁰⁴ Chile observes that in its technical report, the investigating authority states that "during the first three years of the investigation period, sales of the domestic product accounted for approximately 90 per cent of apparent consumption, a share which fell to 85 per cent in 2000. Although in absolute terms, sales of the domestic product decreased in 1998, their share of 93 per cent of apparent consumption was the maximum recorded during the investigation period. During that year, imports from Chile fell, while imports from Greece remained at historically low levels." Chile argues that this behaviour of imports from the main origins was due to adverse climatic conditions mentioned above.¹⁰⁵

4.44 Chile alleges that the CNCE directors' analysis of increased imports in relative terms is based exclusively on data corresponding to what it deems to be the most recent past (1997/2000) and fails to evaluate this data in the context of the whole investigation period (1996/2000). It considers the evolution of imports during the investigation period (1996/2000) only with respect to the analysis of increased imports in absolute terms, but not with respect to the analysis of the increase in relative terms. The year 1996, which is omitted from the analysis, reflects a trend of crucial importance to the adequate and objective analysis of this indicator. Also, according to Chile, the file of the investigation contains no substantiated, reasoned and adequate analysis explaining why and on the basis of what facts the CNCE arrived at its determination of an increase in imports in relative terms in the way that it did.¹⁰⁶

4.45 Argentina contends that Chile's above statements reflect a misinterpretation of certain matters. Argentina considers that Chile proceeds from the false premise that the implementing authority acted improperly in considering an investigation period (1996/2000)¹⁰⁷ and finding that there was an increase in imports in a period that did not coincide exactly with that investigation period, but fell within that period. Argentina is of the view that this interpretation by Chile is not substantiated by any rules or regulations, either domestic or under the WTO, or by WTO precedent. In particular, the Agreement on Safeguards does not stipulate a period which must obligatorily be taken to determine whether there are increased imports, nor does Argentine legislation differ from the Agreement on Safeguards in this respect. Regarding Argentine legislation, Decree No. 1059/96 requires that applicants for the initiation of an investigation should supply data on imports relating to the five most recent complete years substantiating a significant increase, in absolute or relative terms, in the product at issue. However, Argentina argues, this obligation concerns the applicant for the initiation of an investigation only, and not the implementing authority. In order to support its views, Argentina refers to the Appellate Body Reports on Argentina - Footwear (EC)¹⁰⁸ and US - Lamb.^{109 110} Argentina maintains in addition that the investigating authority acted in accordance with WTO precedents, inasmuch as those precedents establish that it is the most recent period that must be taken into account for purposes of the application of a safeguard measure.¹¹¹

4.46 Chile points out that although the competent authorities should attach importance to data from the most recent period, they should not consider such data in isolation from the data pertaining to the entire period of investigation. Otherwise, Chile argues, it is impossible to understand objectively the real significance of short-term trends in the most recent data.^{112 113} Chile explains that , in the case of the CNCE's determination, the directors who voted in favour of imposing the measure made their finding of alleged increased imports in absolute or relative terms on the basis of data from the end of the period (1999/2000) and taking 1998 as a base year.¹¹⁴ According to Chile, there can be no question that if 1998 is taken as a base year, any determination of increased imports is bound to be lacking in objectivity and in fact highly questionable, since 1998 is not a year which is representative of the normal behaviour of the imports in question.¹¹⁵ The file of the investigation shows that imports of preserved peaches in Argentina are cyclical owing to their association with market fluctuations affecting the leading producer and exporter of the product under investigation, Greece. In 1997 and 1998, following unforeseen climatic circumstances, Greece suffered a substantial loss in its capacity to produce and export preserved peaches. This isolated situation involved a disruption of the historical share of Greek imports in the Argentine market, both in absolute and in relative terms (apparent consumption), as represented by the first year of the investigation period, 1996.¹¹⁶ According to Chile, this comes out clearly when the CNCE directors make their finding of an alleged increase in imports in absolute and relative terms during 1999 and 2000. It is obvious to Chile that a comparison of imports during those years with the situation in 1998 will inevitably show strong increases towards the end of the period, when the process of recovery by imports of their historical levels began. If, on the other hand, the CNCE directors had examined the data from 1999 and 2000 without isolating it from the data of 1996, its conclusion, objectively, would have had to be the same as that reached by the investigating authority in the technical report, i.e. that the increase in imports during 1999 and 2000 reflected a recovery, in both absolute and relative terms, of their normal and historical levels that had been disrupted starting in 1997.^{117 118}

4.47 According to Chile, for the determination of increased imports to qualify as objective, unbiased and well founded rather than subjective, biased and unfounded, it is not enough for the authority concerned merely to announce that its investigation will cover a period of five years and then, upon making its determination, to consider the data from the most recent past (1999/2000) only, to compare it with data for a year that is not representative of the normal behaviour of those imports (1998) and to isolate it from data for a year that does represent normal behaviour (1996).¹¹⁹ Chile argues that Argentina did not manage to explain satisfactorily why its competent authorities excluded 1996 from the analysis and why 1998 would in fact be objectively representative of subsequent trends. What is more, Argentina never explained why the CNCE excluded, in the ITDF and its Annex, all information on apparent consumption for 1996.¹²⁰

4.48 Argentina contests Chile's interpretation that what was occurring was simply a recovery by Greek peach imports of their historical levels which were represented by 1996 and insists that what the industry was facing was not a hypothesis of recovery by imports of their historical levels, but "unforeseen developments".¹²¹ As regards 1996, Argentina contends that countervailing duties were applied to peaches from the EU since the month of January. Hence, the flow of imports from that origin must be considered to have been affected. As can be seen in page 10 of the Annex to Record No. 781 and contrary to what Chile claims, the investigating authority did take account of the impact of the countervailing duties.¹²² In response to question No. 33 of the Panel¹²³, Argentina clarified that Resolution MEyOSP No. 06/96 of 3 January 1996 introduced countervailing duties on imports of peaches from the European Union. This resolution entered into force on 9 January 1996 upon publication in the Official Bulletin. The countervailing duties continued to be applied during the investigation period relevant to file CNCE No. 94/00. The flow of imports was affected through the neutralization of the subsidy component of the imports from the European Union.

4.49 In response to question No. 15 of the Panel regarding the representativeness of the statistics for 1997 and 1998¹²⁴, Argentina indicates that in 1997 and 1998 total Argentine imports fell by 55 per cent and 45 per cent respectively, owing to severe climatic conditions that affected world production and, consequently, trade in the product in question. Argentina explains that an analysis of average f.o.b. prices shows that they increased in 1997, as did the prices of the main exporter: Greece. In 1998, Argentina adds, such prices continued to rise, though to a lesser extent on average, but in the case of the aforementioned country they fell by some 15 per cent to a level of US$0.594/kg. Also in response to question No. 35 of the Panel¹²⁵, Argentina explained that the investigating authorities took all these data into account as indicated in Section V of the Annex to Record No. 781.

(b) Whether the 1994/1996 sectoral study was of relevance

4.50 Chile submitted two tables showing the apparent consumption of preserved peaches in Argentina from 1994 to 1996 in tons and percentages, which it had calculated on the basis of a "Sectoral Study on Canned Peaches" of October 1998.¹²⁶ With reference to these two tables, Chile notes that the average historical level of sales of Argentine preserved peaches in the domestic market is approximately 73.3 per cent for the period 1994/1996; in other words, the average apparent consumption of imported preserved peaches for that period is 26.7 per cent. Further, Chile points out the contrasts with the apparent consumption of imported preserved peaches of 11 per cent for 1999, and 17 per cent for 2000, less than the average figure for 1994/1996, not to mention the figure for 1996 alone.¹²⁷

4.51 Argentina submits that the above data¹²⁸ are based on a CNCE sectoral study of apparent consumption measured in cans of peaches weighing less than 1 kilogram which do not correspond to the product under investigation in the present case, whereas the relevant paragraphs in the technical report use tons as a unit of measurement.¹²⁹ Thus, Argentina argues, the citation of that sectoral study is inaccurate. Argentina adds that this study has been available on the CNCE web page and therefore available to the general public since before the initiation of the investigation. In response to question No. 11 of the Panel¹³⁰, Argentina clarified that the technical report does not take account of the data from the sectoral study because the product in the study does not correspond to the product at issue in the safeguard investigation, the quantities in the study are expressed in different units of measurement (cans, as opposed to tons), and refer to different periods of analysis, etc.

4.52 Chile replies¹³¹ that, regardless of whether the apparent consumption of preserved peaches is measured in units of 0.820 kg (cans of peaches) or in tons, the figures and results obtained in the comparison process remain every bit as representative and real. According to Chile, what counts is that the structure of apparent consumption of preserved peaches recorded in the sectoral study for 1994/1996, measured in percentages, is fully representative, genuine and objective. Moreover, Chile says, although the unit of measurement behind the information recorded in the technical report is sometimes expressed in tons, those tons are calculated on the basis of a unit of canned peaches of 0.820 kg.¹³² Chile also indicates that the argument that the sectoral study did not refer to the same product that was investigated in connection with the imposition of a safeguard measure is not true. Chile claims that the Study comes from the file of the CNCE Investigation No. 28/95 and concerns the imposition of countervailing duties on imports of canned peaches from the European Union and therefore it refers to exactly the same product. In fact, Chile adds, the annex to the technical report itself includes that file in its statistical charts.^{133 134}

4.53 Argentina insists that the sectoral study took as a reference the investigation conducted under File CNCE No. 28/95 in which the product investigated was "peaches in syrup", while in the safeguards investigation the product under analysis was "peaches preserved in water containing added sweetening matter, including syrup, preserved in any other form or in water".¹³⁵ Hence, for Argentina, the product analysed in the safeguard investigation clearly covered a broader universe than the product considered in File No. 28/95.¹³⁶

4.54 Also concerning apparent consumption, Argentina considers that the upward trend is beyond question and that the relative importance of imports follows a pattern similar to that of the imports/production ratio. According to Argentina, after imports had recovered in 1999 to the relative share that they had enjoyed prior to the year of the world production crisis, there was a significant growth in 2000 which went well beyond the recorded historical levels¹³⁷. Argentina claims that this was the result of the unforeseen developments.¹³⁸ Argentina contends that the presence of low-price imports (due either to unfair competition during the period 1994/96 or to world market surpluses during the most recent years) has logically led to a greater share of imports in apparent consumption, which is significant.¹³⁹

4.55 Moreover, Argentina argues that the comparison of periods - such as 1994/96 with 1999/2000 - is clearly questionable, since they involve market and marketing structures that were completely different and a change in supply that was heavily influenced by the launching of the restructuring programme in the domestic production sector.¹⁴⁰ In response to question No. 21 of the Panel¹⁴¹, Argentina clarifies that the transformations in the market include changes in distribution channels with a concentration of demand and purchasing power, in the composition of importers and in consumer habits and related prices. As regards the restructuring process, Argentina submits that there were significant differences in the state of the industry following major technological improvements, an increase in the level of integration of the production process involving considerable investment, restructuring of manufacturing plants, and increased industrial concentration.

3. Determination of threat of serious injury. Article XIX:1(a) of GATT 1994 and Articles 2.1, 3.1, 4.1(b) and 4.2(a) of the Agreement on Safeguards

4.56 Chile submits that it has shown that there was no increase in imports, either in absolute or relative terms, and that there were no unforeseen developments either, so that it was impossible for the Argentine preserved peaches industry to have been in a situation where serious injury was clearly imminent. Indeed, Chile adds, if the increased imports (either in absolute or relative terms) must be the result of unforeseen developments, and if the threat of serious injury must have as its genuine and substantial cause an absolute or relative increase in imports, it is impossible, in fact and in law, for the Argentine industry to have faced a threat of serious injury under Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. According to Chile, the inconsistencies described above show per se that Argentina's determination of threat of serious injury violates the covered WTO Agreements.¹⁴²

4.57 Chile notes that Articles 4.1(a) and (b) and Article 4.2(a) of the Agreement on Safeguards impose procedural and substantive obligations. On the one hand, Chile argues, the Member wishing to apply a safeguard measure must evaluate all relevant factors of an objective and quantifiable nature pertaining to the most recent past, but without isolating them from the data relating to trends spanning the entire investigation period; and on the other hand, the Member must demonstrate that there has been a threat of serious injury, providing a reasoned and adequate explanation of how the factors analysed support such a finding.¹⁴³  As regards this second substantive obligation, Chile specifies that it requires the Member to conduct a substantive evaluation of the "bearing" - or of the "influence", "effect" or "impact" - of these relevant factors on the "situation of [the domestic] industry", i.e., to provide a reasoned and adequate explanation of the way in which the relevant factors corroborate or support their determination.^{144 145}

4.58 Argentina contests the above claims by Chile and submits that, what Chile fails to mention is that Argentina, acting in conformity with Article 4 of Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, established the threat of injury and the corresponding increased imports by conducting an evaluation which went beyond the mere recording of certain indicators, for example, isolated comparisons with respect to the impact of imports during two different periods of time. Argentina argues that, if criteria of this nature were sufficient to reach a conclusion, in a particular case, as to whether or not there was a threat of injury, the very definition of the concept would be deprived of any substance, since contextual evaluation in the broadest sense of the term would be devoid of any useful content.¹⁴⁶ Argentina favours a broader interpretation which it understands to be consistent with multilateral legislation and practice. Argentina is of the view that the criteria for determining threat of injury have much more to do with the patterns of variables within a context than with the mere establishment of their values. In other words, threat of injury must be seen more in terms of probable flows than of comparative statistics, as in the case of Chile's analysis.¹⁴⁷

(a) Whether the CNCE evaluated all of the relevant factors listed in Article 4.2(a) of the Agreement on Safeguards having a bearing on the situation of the domestic industry

4.59 Chile claims that, under Article 4.2(a) of the Agreement on Safeguards, the CNCE had to evaluate and investigate all of the relevant factors having a bearing on the situation of the Argentine preserved peaches industry, and at a minimum those explicitly mentioned in the said provision.¹⁴⁸ However, Chile argues, there is no evidence of any investigation or evaluation of productivity, capacity utilization or level of employment.¹⁴⁹ The only clues are a few statistical tables annexed to the technical report in which much of the content is concealed, and a mere mention of the employment factor in the Annex to the Record. In any case, Chile adds, the information relating to these factors, partially recorded in the technical report, shows that the situation of the domestic industry by no means reflected a threat of injury.¹⁵⁰

4.60 Argentina denies Chile's claim that the investigating authority failed to evaluate, among the injury factors, the "degree of utilization of production capacity" and "employment". Argentina submits that Chile has failed to provide a single argument capable of substantiating such a claim. In fact, Argentina argues, the investigating authority did analyse the degree of utilization of production capacity, and its analysis supports the determination of threat of serious injury.¹⁵¹

4.61 In response to question No. 50 from the Panel¹⁵², Chile acknowledges that the technical report contains tables for capacity utilization and employment but indicates that none of them expressly refers to the "productivity" factor. In Chile's view, Argentina describes this factor as "producto medio f�sico del empleo", the meaning of which is unclear to Chile.¹⁵³ It further argues that, unlike the other statistical tables, there is no explanation whatsoever, in annex I to the technical report, of the data in Table No. 7 or of the data recorded as "producto medio f�sico del empleo". In any event, Chile adds, recording data in statistical tables - as the competent authorities have done - is one thing, but a proper and reasoned evaluation of the data or factors, in order to explain and demonstrate how such information supports a determination, is a different matter altogether.

(i) Productivity¹⁵⁴

4.62 Argentina submits that productivity is analysed in the Record and the technical report on the basis of an approximation determined by average physical output per employee. In this connection, it claims, an examination of the coefficient obtained by measuring own-production against the number of employees in the production sector (Table 7(e) of the technical report) reveals that in 2000, as an unquestionable result of the fall in production, the indicator fell to 32 points following an increase that reflected improved performance of the sector, ending up more than 10 per cent lower than in 1999. Argentina is of the view that this decrease in the mentioned ratio has an impact on the unit cost of the product, increasing the relative incidence of productive labour in the majority of the companies.¹⁵⁵

4.63 Chile points out that in the event that Argentina explains ex post facto that the expression "producto medio f�sico del empleo" refers to the "productivity" factor, the fall in productivity is not obvious for the following reasons: (a) Not all the partial data are recorded because of their confidential nature; (b) there is no record of the totals for the survey list for 1996; (c) the total for the survey list for 1999, including imports from the main origin and competitor, i.e. Greece (already clearly on its way to recovery), exceeds the total for 1998, when such imports had practically stopped because of unexpected adverse climatic factors; (d) the totals for 2000 and 1999, including the recovering Greek imports, exceed the totals for 1998 and 1997 when the imports had practically ceased; and (e) the statistical table also includes production subcontracted to plants belonging to third parties, but their total figures do not distinguish the incidence of such production from that of the plants' own production.¹⁵⁶

(ii) Capacity utilization

4.64 Argentina observes that production capacity, as stated in Record No. 781, was "determined on the basis of values affecting the product in question exclusively �". Argentina explains that, although at the national level, there was information pointing to constant production capacity during the period under analysis, at the level of the companies that supplied information in response to the CNCE questionnaires, and that were verified, production capacity grew owing to the closure or absorption of firms (technical report, page 42), with values corresponding to the methodology set forth in the questionnaires for producers.¹⁵⁷ It further explains that, for the companies as a whole (Table 6 of the technical report), utilization of installed capacity grew until 1999 from 71 per cent to 88 per cent, and then declined in 2000 to 73 per cent, partly as a result of the increase in installed capacity and partly, indeed above all, owing to the fall in production.¹⁵⁸ Argentina submits that, if there had been no increase in installed capacity in 2000, considering the actual output level, the utilization of 51,000 tons of 1999 capacity would have corresponded, in 2000, to a utilization of 76 per cent. This implies that only 3 per cent of the 15 per cent drop in utilization of installed capacity in 2000 is attributable to the increase in installed capacity, and the rest is the result of a fall in production due to the impact of imports, since there were no primary factors that could have contributed to that fall.¹⁵⁹

4.65 Chile replies that Argentina fails to provide any explanation of why or how it came to the conclusion that this factor supported the determination of threat of serious injury. Chile claims that Argentina merely states that the degree of utilization of production capacity is analysed in the Record and the technical report and, unlike the CNCE directors, it goes on to provide explanations of the figures partially recorded in the annex to the technical report.¹⁶⁰ However, Chile argues, nowhere does it emerge that this factor was examined.¹⁶¹ Furthermore, Chile submits, the information recorded in the technical report does not support the CNCE's determination of "threat of serious injury". According to that information, Chile argues, the degree of utilization of preserved peaches production capacity for the entire domestic industry experienced an increase as from 1997, reaching 83 per cent in 1999 and remaining at that level in 2000.¹⁶²

(iii) Employment

4.66 Argentina submits that, as indicated in section 2 of the Annex to Record No. 781 (Situation of the Domestic Industry), the level of employment fell, particularly towards the end of the period. Indeed, Argentina argues, as shown in Table 7a of the technical report, the number of employees employed in production for the companies taken as a whole decreased by 4 per cent in 2000.¹⁶³ In Argentina's view, the same pattern can be observed in the total production wage bill (Table 8 of the technical report), while the average salary per employee in the production sector declined continuously, at a varying rate, during each of the years.¹⁶⁴ According to Argentina, the correlative effort to ensure adequate cost and productivity levels helps to explain why the correlation between these factors is not more explicit. However, the analysis that was conducted of the variations relating to the other products produced by the companies shows different patterns, indicating that the decrease in the production of peaches had a real impact on this factor.¹⁶⁵

4.67 Chile stresses that the only instance in the file of the investigation in which this factor was examined is a very minor one. In Chile's view, the CNCE directors that voted in favour of imposing the measure merely pointed out that the "analysis of the other parameters shows a fall in the level of employment and labour productivity � The trends in these factors directly reflect the changes in sales and production."¹⁶⁶ Chile further argues that the technical report¹⁶⁷ does not in fact provide employment figures for each company, but merely provides overall data for this factor. As can be seen, Chile adds, the CNCE, rather than evaluating and verifying this information, merely repeats what is stated in the technical report. Chile further indicates that, similarly, the technical report indicates that the level of employment in the preserved peaches production sector hardly declined at all in 2000, and that the level in other production sectors decreased by no more than 7 per cent on average during that year.^{168 169}

(b) Whether the CNCE provided a reasoned and adequate explanation of how the evidence gathered on the evaluated relevant listed injury factors justifies a finding of "threat of serious injury"

4.68 Chile claims that the injury factors that the CNCE did consider: (i) do not indicate the existence of a threat of serious injury; (ii) were not evaluated in a reasoned and adequate manner by the directors because there is no explanation of the way in which these factors support their determination; (iii) were not examined in the context of data spanning the entire investigation period; and (iv) for the most part, are supported by incomplete information treated as confidential which the CNCE received from the companies on the survey list, information for which there is no record of verification and which it was in fact impossible for Chile to verify.¹⁷⁰

4.69 Argentina denies Chile's claims that the investigating authority acted incorrectly. In Argentina's view, the investigating authority, far from acting in any way that would justify Chile's claim, carried out a proper analysis of the information.¹⁷¹

4.70 Argentina contends that the CNCE did provide a reasoned and adequate explanation of how the evidence gathered on the evaluated relevant listed injury factors justified a finding of threat of serious injury. Argentina explains that the evolution of the relevant import-related variables is closely linked to the evolution of the international market. Argentina argues that, in the 1998/1999 and 1999/2000 seasons, world production grew by 16 per cent¹⁷², a highly significant growth rate if it is borne in mind that practically throughout the 1990s, world production of preserved peaches remained fairly stable in the vicinity of 1 million tons per year.¹⁷³ Argentina argues that what is significant in the analysis of international market trends is the availability of exportable surpluses, and this analysis reveals Greece's structural exporter status, which is clearly reflected in the relationship between production, exports and availability of stocks over the past decade.^{174 175} Exports represented 97.2 per cent of production for the period 1990/2000 with a value exceeding 100 per cent for certain years, proving that there were plenty of readily available stocks that could easily be poured on to the international market.¹⁷⁶ In the case of Greece, these values can be explained by natural conditions for the production of peaches.¹⁷⁷ Greek peaches also share enormous price flexibility which is reflected in the great diversity of f.o.b. price quotations for Greek exports, depending on their destination.^{178 179} In Argentina's view, the logical corollary to this can be found in the behaviour of the domestic market for peaches during the 1999/2000 season when the fall in the volume of production was coupled with a significant decrease in the unit value of the product and, more importantly, in the per unit mark-up, since although costs decreased during the reference period, prices were subjected to an even greater downward pressure. This can be seen from the fact that the unit price/cost ratio fell sharply for all of the companies surveyed in the 1999/2000 season¹⁸⁰, confirming the imminence of a threat of serious injury within the meaning of Article 4.1(b) of the Agreement on Safeguards.¹⁸¹ In response to question No. 16 of the Panel¹⁸², Argentina confirmed that the above information can be found in the technical report (pages 54/59, 73/74, 81/82 and annex I - Methodological Notes and Statistical Tables). The competent authority considered that this information showed that there was a threat of serious injury.¹⁸³

4.71 Argentina further argues that the implementing authority did not analyse the relevant indicators out of context, but rather in the light of the changes that were taking place on the international market and the greater or lesser degree to which the Argentine economy was exposed to such developments.¹⁸⁴ For example, Argentina adds, the CNCE did not disregard the fact that 1998 was an atypical year in terms of production in the Northern Hemisphere owing to drought, and that, as a result, production levels in the following year were bound to be higher. Nor was the CNCE unaware of the fact that imports, measured in absolute or relative terms, and analysed in the context of the entire decade of the 90s, reached their highest volumes in 1993.¹⁸⁵

4.72 Chile does not agree with the above comments made by Argentina. In Chile's view, the non-confidential information recorded in the technical report does not justify these comments: they are based on information that is not recorded in the file of the investigation and they are based on data from the most recent past that was not analysed in the context of trends spanning the entire investigation period. Moreover, Chile draws the attention of the Panel to the fact that Argentina has offered a number of arguments and lines of reasoning which cannot be found in the comments and determinations of the CNCE directors that voted in favour of imposing the challenged measure, hence representing ex post facto clarifications.¹⁸⁶

4.73 In Chile's view, any attempt by a Member to cure investigative or procedural deficiencies on the part of the competent authorities ex post facto by presenting possible explanations and reasons for their determinations that were not provided by the authorities themselves is contrary to the Agreement on Safeguards. The time and place for providing explanations and reasons for a determination are prior to the imposition of the measure, in the file of the investigation, and this must be done by the competent authorities. In the specific case of Argentina, Chile adds, the task of providing a reasoned and adequate evaluation falls to the CNCE directors.¹⁸⁷

(i) Rate and amount of the increase in imports of the product at issue in absolute and relative terms. Share of domestic market taken by increased imports.

4.74 As regards the analysis of the imports in absolute terms, Chile is of the view that the CNCE directors that voted in favour of the measure, minimize the importance of the fact that the growth in imports during 1999 and 2000, seen in the context of the entire investigation period (1996/2000), reflects a recovery of historical levels that were severely disrupted in 1997 and 1998 rather than an increase in imports.¹⁸⁸ Chile claims that Argentina does not provide any argument to justify the CNCE's decision to consider data from the most recent past only, without analysing that data in the context of trends spanning the entire investigation period.¹⁸⁹ According to Chile, these facts were set forth in the technical report and its annex. Chile maintains that, if total imports for 1999 and 2000 had been analysed in relation to the entire investigation period, the conclusion would have been that imports actually decreased by approximately 75 per cent in 1998, 51 per cent in 1999 and 16 per cent in 2000 with respect to the average for 1996. Thus, in Chile's view, not even in the most recent past (1999 and 2000) did imports reach the historical averages that were interrupted in 1997. Chile concludes that it is impossible to maintain that there was threat of serious injury when imports in 1999 and 2000 were considerably lower than the historical average represented by 1996, and when the growth recorded towards the end of the period was a predictable trend which allowed the domestic industry to adjust beforehand to what was the normal behaviour of imports.¹⁹⁰

4.75 As regards the analysis of the imports in relative terms, Chile submits that when the CNCE analyses the rate and amount of the alleged relative increase in imports (as with the absolute increase), it minimizes the importance of the fact that the growth in apparent consumption of imports in 1999 and 2000, seen in the context of the entire investigation period (1996/2000), reflects a recovery and not an increase.¹⁹¹ According to Chile, the disruption in imports also explains why the share of sales of the domestic product in apparent consumption reached a maximum of 93 per cent during the period of investigation. Consequently, Chile argues, it is not possible to maintain that there was threat of serious injury when apparent consumption of imports in 1999 and 2000 was significantly lower than the historical average represented by 1996. Chile is of the view that an industry which should historically share at least 25 per cent of apparent consumption cannot claim threat of serious injury when subsequently, during a period of recovery of imports, it shares only 17 per cent of apparent consumption.¹⁹²

4.76 Argentina considers that it has sufficiently dealt with Chile's claims regarding the rate and amount of imports when dealing with the increased imports.¹⁹³ In this regard, it insists that it has already pointed out that the most relevant data for the purposes of a determination is the data from the most recent past and that this is precisely what the investigating authority did in the case at issue.¹⁹⁴ It further argues that the leading world producer and exporter of peaches, Greece, recorded an increase in its exports to Argentina of 207 per cent in 1998, 309 per cent in 1999 and 110 per cent in 2000. Argentina indicates that this rate and amount of increase in imports was within the context described in Section IV.B.2 of overproduction and accumulation of stocks that could be poured onto the international market. To take this last factor alone, Argentina points out that in 1999 and 2000, available stocks in Greece were 152.1 per cent and 173.1 per cent higher, respectively, than the average recorded for the entire 1990s. Measured as a percentage of Argentine production, these stocks represented 183 per cent in 1999 and 225 per cent in 2000.¹⁹⁵ Argentina maintains that the increase in imports was less in terms of value and that this is due to the sharp fall in world prices, in particular in Greece, where in 2000, an increase in the volume of imports of 110 per cent corresponded to an increase in the value of imports of 76 per cent.¹⁹⁶

4.77 Argentina submits that the Argentine domestic market has developed over the last years thanks to various factors, such as a general growth in demand and changes in consumption patterns for a series of products. In this connection, Argentina explains, the massive presence in the domestic Argentine market of relatively low-priced products has caused part of the market to be taken by those products.¹⁹⁷ As far as preserved peaches are concerned, Argentina argues, apparent consumption followed an upward trend, disturbed only in 1998 by adverse climatic conditions in the Northern Hemisphere and a domestic supply which, although the adjustment process was under way, proved insufficient.¹⁹⁸ Argentina contends that the prices of imported peaches on the market (even after the Greek price had been corrected by the countervailing duty) declined for the most part, particularly from the main countries of origin, recording levels up to 20 per cent below the domestic price.¹⁹⁹ In this context, Argentina submits, the share of imports in the domestic market measured through apparent consumption (see Exhibit ARG-VI) grew significantly in 2000 to the detriment of sales of the domestic product, affecting prices, production and utilization of installed capacity.²⁰⁰

(ii) Changes in the level of sales, in volume and value

4.78 Chile notes that, based on the information supplied by the portion of the domestic industry analysed by the CNCE, the volume of sales of preserved peaches totalled 24,386 tons in 1997, 26,422 tons in 1998, 37,264 tons in 1999 and 37,113 tons in 2000. Chile further notes that this represents a variation, according to the CNCE, of 8 per cent, 41 per cent, and -minus 0.4 per cent respectively. In terms of price (Argentine pesos), the CNCE's estimated variation is 5 per cent, 28 per cent and minus 14 per cent respectively.²⁰¹ Chile points out that in the file of the investigation, with the exception of the company ARCOR, the monthly sales data for that portion of the industry, in volume and in pesos, is not recorded for each company individually. Chile explains that the CNCE treats it as confidential information and that the sales data in pesos does not even include the totals for the survey list. Consequently, Chile submits that it has no way of verifying the estimated total annual sales in tons, and still less, the estimated sales in pesos.²⁰²

4.79 Chile notes that in evaluating this factor, the CNCE states that domestic market sales of the companies analysed taken as a whole decreased, in value, by 14 per cent in 2000 as compared to the previous year, and that domestic sales calculated for the purposes of the estimate of apparent consumption declined in 2000. It adds that this loss took place in a context of growth in apparent consumption starting in 1999. In Chile's view, this evaluation is clearly insufficient.²⁰³ Chile submits that the CNCE gives no reason why its estimated decline in the value of sales towards the end of the investigation period (14 per cent) should reflect a clearly imminent threat of serious injury in the near future. Moreover, Chile claims that Argentina fails to explain why it does not give any consideration to its estimate of sales in volume, which shows practically no decrease in 2000.²⁰⁴ Nor does it explain how this relationship between its estimate of the value of sales for 2000 and its estimate of apparent consumption for 1999 and 2000 justifies its determination of threat of serious injury.²⁰⁵

4.80 Chile notes that apparent consumption shows that domestic industry sales declined by only 1 per cent in 2000 as compared to 1999, and that their share in the market with respect to imports merely decreased from 89.41 per cent to 83.44 per cent in 2000. Thus, according to Chile, it is difficult to speak of "a fall in the share of sales" in 2000, when this "fall" represents a variation of minus 5 per cent and when sales decreased by 1 per cent.²⁰⁶ Moreover, Chile argues, the CNCE confines itself to the trends for the most recent period without analysing the share of sales in apparent consumption for the entire investigation period. In Chile's view, the CNCE should not have excluded the trends for 1996, since they are important to the behaviour of imports and apparent consumption. The greatest increase in sales in value and pesos and the greatest share of the domestic industry in apparent consumption were recorded in 1998, with the situation beginning to recover in 1999.²⁰⁷

4.81 Argentina argues that domestic market sales by Argentine companies which, after consecutive increases in 1998 and 1999 had decreased by only 0.4 per cent in tons, had in fact decreased by 14 per cent in terms of value. Moreover, Argentina adds, this decrease is reflected in the statistics of each one of the companies (Record No. 781, Annex, section 2, page 7 - Situation of the domestic industry - and Table 2.2 of the technical report).²⁰⁸ In Argentina's view, this decrease - more than proportional in value - reflects the fall in the price of the domestic product, provoked by the presence in the market of a considerable and growing volume of imports at decreasing prices. Argentina submits that the fall in price of the domestic product, adversely affected by imports, limited the losses in volume of sales to a minimum, but at the cost of lost profitability and a general negative impact on the industry.²⁰⁹

4.82 In reference to the above, Chile argues that Argentina failed to provide any justification, under the Agreement on Safeguards for: (i) the fact that Chile had no way of verifying the estimated total annual and monthly sales, in volume and value, of the companies on the survey list, because for reasons of confidentiality, practically none of the supporting information was included in the CNCE Report²¹⁰; (ii) the fact that the CNCE determined that there was a threat of serious injury in circumstances in which sales from the domestic industry declined by only 1 per cent in 2000, and their share in apparent consumption decreased by less than 6 per cent during the same year²¹¹; and (iii) the fact that the CNCE, without any explanation, disregarded the figures provided by CAFIM for sales in tons by the Argentine industry in 2000. Chile argues that pursuant to CAFIM's figures, these sales increased by 13 per cent in 2000 as compared to 1999.^{212 213}

4.83 Argentina replies that the classification of some of the information as confidential did not mean that the investigating authority could not draw proper conclusions from that information. In Argentina's view, the issue of the decline in sales has been duly explained. It argues that it reflects the fact that the fall in the price of the domestic product, adversely affected by imports, limited the losses in volume of sales to a minimum, at the cost of lost profitability and a general negative impact on the industry. Argentina further argues that the investigating authority did not act arbitrarily in analysing the sales figures, but examined all of the information at its disposal.²¹⁴

(iii) Production

4.84 In its first written submission, Chile argues that the technical report contains no analysis of this factor and that it merely provides, in an annex, a statistical table showing data on domestic production.²¹⁵ Chile explains that, for the CNCE, the information supplied by CAFIM shows a decrease of some 4.5 per cent in 1998, followed by stability in 1999 and 2000 at about 65,000 tons. However, the CNCE adds that the companies on the survey list, while they experienced growth in 1998 and 1999, in 2000 their production as a whole fell by 14 per cent.²¹⁶ Chile contends that the CNCE carried out another analysis, disregarding the data provided by CAFIM because it did not reflect trends that fitted in with its determination of threat of serious injury. According to Chile, without any kind of explanation to justify or support its new finding, the CNCE concluded that there was a decline in domestic production in 2000 which was consistent with the decline recorded in the companies analysed. It estimated the decrease at 12 per cent compared to 1999, with domestic production totalling 57,847 tons.²¹⁷ Chile submits that the CNCE does not consider 1996 and it confines itself to making estimates and using information from the technical report without providing a reasoned and adequate explanation of how that information supports its conclusions.²¹⁸ In any case, Chile argues, the estimate made by CAFIM, which is representative of the domestic industry, does not justify the finding of "threat of serious injury", nor indeed does the 12 per cent decrease estimated by the CNCE, since it takes place in the context of the recovery of imports. Furthermore, Chile contends, these CNCE estimates do not indicate any relationship between this recovery and the lower productivity. According to Chile, domestic production in 1998, when imports to Argentina reached their low point, was 4 per cent lower than in 1997 and 6.5 per cent lower than in 2000.²¹⁹

4.85 Argentina contests the above statement by Chile and submits that the indicators analysed and verified for the mentioned subgroup of companies show that production grew in 1998 and 1999 (20 per cent and 39 per cent respectively) and declined in 2000 (14 per cent). According to Argentina, it should be borne in mind that the adjustment process launched by the sector led to an increase in production which was reversed by massive imports in such conditions as to negatively influence that variable.^{220 221}

4.86 Chile claims that Argentina's above explanation fails to provide any justification under the Agreement on Safeguards for the fact that the CNCE, without providing any explanation of its determination, decided to disregard the domestic production figures provided by CAFIM, which show no decrease for 1999 and 2000; that on the contrary, it chose to adjust its estimate on the basis of the companies in the survey list, which did suffer a decline in 2000.^{222 223}

(iv) Profits and losses

4.87 Chile submits that it is impossible to verify each and every one of the items of information provided by the Argentine producers. In Chile's view, the CNCE merely repeats what was stated by the producers on the basis of their general accounting statements and their specific sales accounts for the product under investigation. Chile claims that there is no knowledge of the methodologies used by producers in arriving at such conclusions, and the file of the investigation does not state that the CNCE investigated the data, let alone verified it to see whether it corresponded to the reality.²²⁴ According to Chile, what the file does reveal is that the Argentine industry made heavy investments in connection with a reconversion of the primary and secondary sectors, that the total average cost of peaches as a raw material decreased throughout the investigation period, and that it is common for part of that industry to entrust its production of preserved peaches to processing plants belonging to third parties. Chile submits that the CNCE fails to evaluate any of these circumstances which influence production costs and profits.²²⁵

4.88 Chile observes that the CNCE itself acknowledges that the accounting statements of the companies are limited from the analytical point of view in that these are multi-product companies. This is why, in Chile's view, it decided to obtain from the companies in question the accounts specifically relating to preserved peaches. However, Chile adds, it remains silent as to the impact of the profitability of sales of that product for each multi-product enterprise in terms of billing.²²⁶ Chile argues that, according to the actual information provided by the companies on the survey list, sales of preserved peaches represented between 1 per cent and 40 per cent; but it is impossible to verify the impact of these billings on their total sales, since the CNCE reveals this information for ARCOR only.²²⁷ Moreover, Chile submits, all of the companies on the survey list indicate a high debt ratio which has persisted since 1997. Chile claims that the CNCE has failed to investigate how this historical indebtedness might have been affecting the domestic industry's profitability.²²⁸

4.89 Argentina submits that, in analysing the evolution of the profitability and net worth of the enterprises in relation to the impact of imports on the domestic industry, it should be borne in mind that since these are multi-product enterprises, for an analysis to be more specific and directly relevant, as well as objective, it must be conducted on the basis of the accounts containing the results for the product in question.²²⁹ In Argentina's view, the fact that the CNCE was dealing with a multi-product industry and Chile's claim that there are no disaggregated profitability indicators for each product do not preclude the possibility of the CNCE having reached consistent conclusions on threat of injury to the preserved peaches industry.²³⁰ Argentina notes that there are disaggregated accounts for the production of peaches in terms of cost, price, employment and corresponding wages, as well as the evolution of sales (in volume and value) and the per unit mark up for the product measured as the unit price/cost ratio.²³¹ Argentina is of the view that circumstances dictated that the analysis of specific accounts for a major portion (more than 60 per cent) of the domestic industry was the most appropriate and relevant approach.²³²

4.90 Looking at the analysis of productivity of the product based on specific accounts, Argentina submits, the 11 per cent fall in the marginal contribution on sales after covering the variable costs, and a sales/breakeven point ratio²³³, which fell from 1.25 in 1999 to 0.67 in 2000, i.e. 33 per cent below the 1/1 limit, reveals a negative profitability at the end of the period, corresponding to the sharp growth in imports at decreasing prices and the consequent impact on domestic prices.²³⁴ At the same time, the price/cost ratio at the end of the period was close to or less than one, depending on the company, with considerable decreases recorded in 2000. Argentina argues that these results which, in accordance with the methodology used, corresponded exclusively to the product under analysis, must be seen in the context of multi-product enterprises in which the sale of preserved peaches does not exceed 40 per cent of total billing and whose balance pages, as indicated in the technical report, are affected by company transfers and influenced by the operating results for other products as well as non-operating and non-recurring results.²³⁵

4.91 Argentina contends that, during the most recent period, when imports grew to unforeseen levels, most of the companies on the survey list representing the sector were experiencing decline: a 14 per cent fall in production, a 14 per cent decrease in the value of sales, and a 10 per cent fall in average physical output per employee (as an approximation of productivity), owing mainly to the 14 per cent decrease in production, which was higher than the decrease in employment. Thus, Argentina argues, the production capacity increased (following the restructuring mentioned earlier on) while capacity utilization decreased in 2000. In Argentina's view, this negative evolution of the degree of utilization of capacity was not attributable to the growth in capacity, but to the fall in production.²³⁶

4.92 Argentina further argues that, in addition to its above arguments regarding the special cost-benefit accounts for peaches, the analysis of employment indicators (average wage and total wage bill) reconfirms the relativity of the consolidated balance pages, given the multi-product industry status. According to Argentina, this can be seen in the negative ratio of the above-mentioned indicators and the evolution of wage indicators for the rest of the production of the companies on the survey list. These indicators are positive for 1999 and 2000, a fact that, in Argentina's view, could only reflect a difference in profitability vis-�-vis the production of peaches.²³⁷ Argentina concludes that it is obvious that the positive values (alleged by Chile) in the consolidated balance pages can only be explained by the results for the other products, and not by the billing for peaches, whose prices were seriously affected by the downwards pressure exerted by imports.²³⁸

4.93 Chile submits that Argentina fails to provide any argument to justify, in the light of the Agreement on Safeguards: (i) the fact that the CNCE does not explain or demonstrate the true incidence of billing for sales of preserved peaches by companies of the survey list on total sales or the profitability indices of these multi-product companies; and (ii) the fact that the CNCE provides no explanation of the methodologies used by the companies in presenting this information and of how it is possible to verify this information when the bulk of it is treated as confidential.^{239 240} Chile further responds to Argentina²⁴¹ that the whole point of a reasoned and adequate explanation supported by sufficient evidence is to avoid this kind of assumption or conjecture. Objectively, it says, the CNCE's determinations should be evident and well-founded for all Members, and not only for Argentina.²⁴²

(v) Other considerations

4.94 Argentina contends that Chile undervalues certain variables which, in Argentina's view, are essential when it comes to evaluating threat of injury, namely:

(a) Chile does not attach enough importance to the fact that the growth rate in imports was positive from 1998 onwards, and that imports grew at a faster rate than in 1996²⁴³;

(b) Nor does Chile attach enough importance to the fact that 1998/2000 was a period of recession in Argentina which, until 1997, had experienced sustained growth, so that low-priced imports, in the context of substitution of consumption to which Argentina has already referred, had considerably more potential for injury due to the downward pressure they exerted;

(c) Chile does not attach enough importance to the incontrovertible fact that the volume of stocks available in Greece to be poured on to the international market during the 1999/2000 period represented 1.83 and 2.25 times Argentina's production for those years respectively. In 2000, Argentine production fell by 12 per cent²⁴⁴;

(d) Chile does not give due consideration to the fact that that stock could easily have been poured on to the Argentine market for macroeconomic reasons (1 to 1 parity as a result of the currency board) and the fact that it is a counter-seasonal market with growing apparent consumption. Argentina comments that the seasonality component was highlighted by the investigating authority on page 9 of the Annex to Record No. 781, and is also reflected in Table 15.2 of the technical report²⁴⁵;

(e) Chile does not correctly analyse the historical volumes in Greece which, with its enormous production capacity and its high export coefficient, is unquestionably the country with the greatest potential to pour excedent production on to the world market, and focuses exclusively on the unfair competition component, which was duly remedied by applying countervailing duties. The investigating authority specifically refers to this circumstance on page 10 of the Annex to Record No. 781;

(f) Chile underestimates the high potential for the said production volumes to be poured on to a market like the Argentine market. In addition to Greece, the European market has other major suppliers (Spain, Italy and France), and the other large consumer market in the Northern Hemisphere, the United States, has historically been almost entirely self-sufficient;

(g) Chile overlooks the fact that during the preceding years, the Argentine industry had been pursuing a significant investment and productive expansion plan, so that the downward pressure exerted by imports on prices, on top of the considerations set forth in subparagraph (b) above, aggravated the injury to the domestic industry that much more.

4.95 Argentina maintains that, taking the period 1995/1996, one could quite clearly see that the annual growth rate of imports decreased up until 1998. On the other hand, Argentina submits, during the period 1998/2000, the annual growth rate of imports rose steadily, reaching figures which, if we look at the entire decade, were only exceeded in 1993. Similarly, there was an upward trend in both apparent consumption and growth in international stocks in 1998/2000. Argentina stresses that the figure (in thousands of tons) for average annual stocks in Greece, the leading world exporter and producer was 47.6, while for 1995/1996, it was 43.25. Argentina explains that taking the mentioned average for the 1990s (47.6), available stocks in Greece for 1999 exceeded that figure by 152 per cent, and in 2000 by 173 per cent.^{246 247}

(c) Whether the CNCE considered all relevant injury factors not listed in Article 4.2(a) of the Agreement on Safeguards. Industry readjustment

4.96 According to Chile, the producers that took part in the investigation showed that domestic production had expanded considerably over the past decade following heavy investments and business strategies involving the plantation of new, highly efficient varieties of peaches for preserves with good market prospects, vertical integration of production between the primary and secondary sectors, international scientific and technical counselling, protection against climatic risks and industrial concentration in plants offering economies of scale. This extensive readjustment led to a significant increase, inter alia, in productivity, production, sales and degree of utilization of production capacity. Chile indicates that all of this took place in the framework of trade liberalization, an indication of the confidence of the domestic industry in its ability to compete on export markets in the long term. Chile is of the view that, under these conditions, it is impossible that the CNCE should have found that this industry was facing a threat of serious injury.²⁴⁸

4.97 Argentina responds that the CNCE sent questionnaires to 100 per cent of the companies registered as producers in CAFIM, and received replies from a large percentage of the domestic industry: six companies, of which five, duly verified, represented 68 per cent of production in 1999. These companies as a whole were referred to throughout the Record and the technical report as the "survey list" or the "companies surveyed", without distinction.²⁴⁹ Argentina maintains that the information supplied, together with the verifications, revealed that the sector was being restructured on the basis of new primary "productive units" which had led to a growth of 21 per cent in the production of preserved peaches up to 1999. This trend was reversed in 2000 under the pressure of imports in conditions which produced a significant decline in domestic production, making the industry more sensitive and marking out a clear and foreseeable path towards imminent injury.²⁵⁰

4.98 In response to question No. 17 of the Panel²⁵¹, Chile indicates that the legal basis of its claim regarding industry readjustment is the obligation imposed by Article 4.2(a) of the Agreement on Safeguards according to which the competent authorities must not only evaluate, at a minimum, the factors indicated therein, but must also evaluate any other factor that is relevant or pertinent to the situation of the domestic industry concerned, with a view to determining whether that industry is facing serious injury or a threat thereof. In response to question No. 42 of the Panel²⁵², Chile clarified that, in its view, an industry readjustment process can perfectly be measured and quantified on the basis of objective data on indicators of such a process, considered as an additional factor; these include production, investment, technological innovation, exportable surpluses, and so forth.

4.99 Also in response to question No. 42 of the Panel, Argentina indicates that it considers that although the industry readjustment may have the characteristics of an objective and possibly quantifiable fact, it is not one within the meaning of Article 4.2(a) which, moreover, does not list it among the objective and quantifiable facts for the purposes of the Article 4 determination.

(d) Whether the CNCE based its finding of "threat of serious injury" merely on conjecture or remote possibility and failed to demonstrate adequately that it was clearly imminent

4.100 Chile claims that the CNCE based its finding of "threat of serious injury" merely on conjecture or remote possibility and not on facts, and that it failed to demonstrate adequately that in the year 2000 there was a high probability or imminence that such injury would occur in the near future. The CNCE maintains that the factors it considered showed the high degree of sensitivity of the domestic industry to the change taking place in the market as a result of imports and that the behaviour of those imports towards the end of 2000, in terms of price and volume, had the capacity to cause serious injury. On that basis, it determined that there was a threat of serious injury, stating that in the international market there were no indicators that suggested that the volume and price of world production and exports, both present and future, should not be equal to or even greater than in 2000.²⁵³ Chile submits that all relevant factors of an objective and quantifiable nature, properly evaluated, do not indicate that the behaviour of imports towards the end of 2000 constituted a threat of serious injury.²⁵⁴

4.101 According to Chile, the CNCE unjustifiably predicts that serious injury will occur based on the simple assertion that there were no indicators in the international markets to prove that the volume and price of world production and exports would decrease either then or in the future. The CNCE does not provide any analysis to demonstrate the truth of its assertion or explain how and why, nor does it provide empirical evidence in support of its prediction. Its assertion rests on an assumption based on the lack of indicators in the international market. In other words, on the basis of a negative fact, it assumes a positive fact, that the volume and price of world production and exports in 2000 and in subsequent years could be the same or even higher. It bases its finding of threat of serious injury on a highly vague and ambiguous assumption, stating that the said assumption justifies the conclusion that such a threat exists because international market conditions such as they are will not be changing in future years. In other words, it bases one assumption on another assumption. Chile also argues that the CNCE should have focussed more specifically on production and exports from the two main origins: Greece and Chile.²⁵⁵

4.102 Argentina emphasizes that the determination of threat of serious injury, far from having been made on the basis of mere conjecture or remote possibility, was based on facts. Argentina observes that Chile itself appears to recognize that the analysis effected by Argentina supports a determination of the existence of the threat of serious injury. Argentina argues that according to Chile, the Argentine investigating authority was guilty of inconsistency in maintaining that the volume and price of world production and exports would not decrease in the future. It is obvious to Argentina that Chile agrees that the current situation is one of threat of injury. Otherwise, why would it lay stress on the future if it could demonstrate that the information considered by the investigating authority at the time of its determination was false. Argentina also submits that the Appellate Body in US - Line Pipe found that before serious injury occurs "there is a continuous progression of injurious effects eventually rising and culminating in what can be determined to be 'serious injury', serious injury does not generally occur suddenly�". Accordingly, the Appellate Body found that the threat of serious injury requires a lower threshold than serious injury and this distinction serves to allow an importer Member to act sooner to take preventive action when increased imports posed a 'threat' of 'serious injury' to a domestic industry, but have not yet caused 'serious injury'.²⁵⁶

To continue with 4. Demonstration of the existence of a causal link. Articles 2.1, 3.1 and 4.2(b) of the Agreement on Safeguards.

Return to Index

95 In paragraph 4.29 of its first written submission, Chile indicates that, after having demonstrated that Argentina imposed a definitive safeguard measure without there having been increased imports, in absolute or relative terms, it is not necessary to address the issue of whether the CNCE also considered this alleged increase in terms of its quantity or magnitude - in such increased quantities - as the requirement must be understood in the light of the Article XIX of the GATT 1994 and the Agreement on Safeguards.

96 See Chile's first written submission, paragraph 4.15.

97 See Chile's first written submission, section heading IV.2.1, page 10.

98 See Argentina's first written submission, paragraph 61.

99 Argentina refers to the technical report, Table No. 2, sheet 1439 and Table No. 15.2, sheet 1477.

100 See Argentina's first written submission, paragraph 61.

101 See Argentina's first written submission, paragraph 62.

102 See Chile's first written submission, paragraph 4.16.

103 See Chile's first written submission, paragraph 4.17.

104 See Chile's first written submission, paragraph 4.23. It cites statistics from a sectoral study, the subject of arguments summarized in the section below.

105 See Chile's first written submission, paragraph 4.19.

106 See Chile's first written submission, paragraphs 4.22(a), (b) and (c).

107 In response to question No. 12 of the Panel ("Statistics for various years appear in Record No. 781 and its Annex and the technical report. Could Argentina clarify what was the period of investigation?") Argentina confirms that the gathering of import data covers the period 1996-2000.

108 Argentina refers to the Appellate Body Report, Argentina - Footwear (EC), paragraphs 130 to 131.

109 Argentina refers to the Appellate Body Report, US - Lamb, paragraph 137.

110 See Argentina's first written submission, paragraphs 54 to 59.

111 See Argentina's first oral statement, paragraph 11.

112 Chile refers to the Appellate Body Report, US - Lamb, paragraphs 137 and 138.

113 See Chile's rebuttal, paragraph 29.

114 In response to question No. 34 of the Panel ("Please refer to paragraph 12 of Argentina's second oral statement. Does Argentina share Chile's point of view that the base year for the determination of an increase in imports was 1998? Can Argentina confirm that increases were measured in 1999 over 1998, and 2000 over 1999?") Argentina confirmed that it used 1998 as a base year for the determination of an increase in imports.

115 See Chile's rebuttal, paragraph 30.

116 See Chile's first oral statement, paragraphs 18 to 19.

117 See technical report, pages 32, 57 and 58.

118 See Chile's rebuttal, paragraph 31.

119 See Chile's second oral statement, paragraph 16.

120 See Chile's rebuttal, paragraph 32.

121 See Argentina's rebuttal, paragraphs 18 and 19.

122 See Argentina's rebuttal, paragraph 20.

123 Namely, "Please refer to paragraph 20 of Argentina's written rebuttal. Could Argentina indicate the exact date in January 1996 on which the countervailing measure entered into force? Please confirm that the countervailing measure remained in place for the duration of the investigation period relevant to file CNCE No. 94/00. Could Argentina explain how the countervailing measure affected the flow of imports during that investigation period?".

124 Namely, "Does Argentina believe that the statistics for 1997 and 1998 were representative of imports or were they influenced by any unusual factors? If the latter, how did the competent authorities take account of this in their determination?".

125 Namely, "Argentina's answer to question 15 indicates unusual factors that influenced statistics for imports and prices in 1997 and 1998. How did the competent authorities take into account these factors in their determination of an increase in imports?".

126 See Chile's first written submission, paragraph 4.24 and Exhibit CHL-6.

127 See Chile's first written submission, paragraphs 4.25 and 4.26.

128 See paragraph 4.50 of the present report.

129 See Argentina's first written submission, paragraph 64.

130 Namely, "Was the study referred to by Chile in paragraphs 4.24-4.25 of its first written submission submitted by an interested party to the CNCE, or otherwise available to the investigation team in this case, during the safeguard proceedings?".

131 See paragraph 4.51 and footnote 130 of the present report.

132 Chile refers to page 21 and the Annex to the technical report, tables 10 and 11, as examples.

133 Chile refers to the Annex to the technical report, charts 5.1 and 5.2.

134 See Chile's rebuttal, paragraph 34.

135 Argentina refers to MCN tariff codes 2008.70.10 - Peaches preserved in water containing added sweetening matter, including syrup; and 2008.70.90 - Other.

136 See Argentina's second oral statement, paragraph 32.

137 Argentina refers to the technical report, Table 2, sheet 1439 and Table 15.2, sheet 1477.

138 See Argentina's first written submission, paragraph 63.

139 See Argentina's first written submission, paragraph 65.

140 See Argentina's first written submission, paragraph 66.

141 Namely, "� Could Argentina indicate which were the differences in the market structures and marketing conditions between these two periods?".

142 See Chile's first written submission, paragraph 4.34.

143 See Chile's first written submission, paragraph 4.31. See also Chile's first oral statement, paragraphs 24 and 25.

144 Chile refers to the Appellate Body Reports, US - Lamb, paragraphs 103 and 104; and US - Wheat Gluten, paragraph 71.

145 See Chile's first oral statement, paragraph 37.

146 See Argentina's second oral statement, paragraphs 46 and 47.

147 See Argentina's second oral statement, paragraph 48.

148 See Chile's first written submission, paragraph 4.60.

149 See Chile's first written submission, paragraph 4.61 and rebuttal, paragraph 35(b). Note that the latter does not refer expressly to productivity.

150 See Chile's first written submission, paragraph 4.62.

151 See Argentina's rebuttal, paragraphs 24 and 25.

152 Namely, "Please refer to paragraph 4.62 of Chile's first written submission. Does Chile agree that there are statistical tables in the technical report for each of the three factors of productivity, capacity utilization and employment?".

153 In response to question No. 49 of the Panel ("Regarding productivity, please clarify the meaning of "producto medio fisico del empleo" (which we have translated as "labour productivity") Argentina indicates that "producto medio fisico del empleo" is the "own production divided by the number of employees in the preserved peaches production sector.

154 See footnote 149 to the present report.

155 See Argentina's first written submission, paragraph 91.

156 See Chile�s response to question No. 51 of the Panel ("The opinion of the directors who voted in favour of the imposition of the safeguard measure refers to falls in "el producto medio f�sico del empleo". In view of this, please clarify Chile's claim that there is no reference to productivity at all in Record No. 781 or its Annex.")

157 See Argentina's first written submission, paragraph 92.

158 See Argentina's first written submission, paragraph 93.

159 See Argentina's first written submission, paragraph 94.

160 Chile refers to paragraphs 92 to 94 in Argentina's first written submission, Annex to the technical report, Table No. 6.

161 See Chile's first oral statement, paragraph 27.

162 See Chile's first oral statement, paragraph 28.

163 See Argentina's first written submission, paragraph 104.

164 See Argentina's first written submission, paragraph 105.

165 See Argentina's first written submission, paragraph 106.

166 Chile refers to the Annex to Record No. 781, page 8.

167 Chile refers to the Annex to the technical report, Table No. 7.

168 Chile refers to the Annex to the technical report, Table No. 7.

169 See Chile's first oral statement, paragraphs 29 to 31.

170 See Chile's rebuttal, paragraph 35(d).

171 See Argentina's rebuttal, paragraph 35.

172 Argentina refers to the technical report, page 73, sheet 1407.

173 See Argentina's first written submission, paragraph 69.

174 Argentina refers to the technical report, page 59, Table No. 7, sheet 1393.

175 See Argentina's first written submission, paragraph 72.

176 See Argentina's first written submission, paragraph 73.

177 See Argentina's first written submission, paragraph 76.

178 Argentina refers to the technical report, page 82, sheet 1416.

179 See Argentina's first written submission, paragraph 77.

180 Argentina refers to the technical report, Tables 10.1, 10.2, 10.3, 10.4 and 10.5, sheets 1452/1456.

181 See Argentina's response to question No. 16.

182 Namely, "Was the information about the world market set out in Argentina's first written submission in paragraphs 68-78 considered by the competent authorities? If so, did it show that there was merely a threat of increased imports, or a threat of serious injury? Where does it appear in the report of the competent authorities?".

183 See Argentina's first written submission, paragraph 79.

184 See Argentina's second oral statement, paragraphs 41 to 43.

185 See Argentina's second oral statement, paragraphs 44 and 45.

186 See Chile's first oral statement, paragraph 33.

187 See Chile's first oral statement, paragraph 36.

188 See Chile's first written submission, paragraph 4.35.

189 See Chile's first oral statement, paragraph 34(a).

190 See Chile's first written submission, paragraph 4.36.

191 See Chile's first written submission, paragraph 4.37.

192 See Chile's first written submission, paragraph 4.38.

193 Argentina refers to paragraphs 52 to 67 of its first written submission. See Section IV.B.2 of the present report.

194 See Argentina's rebuttal, paragraphs 29 and 30.

195 See Argentina's first written submission, paragraphs 81 and 82.

196 See Argentina's first written submission, paragraph 83.

197 See Argentina's first written submission, paragraph 84.

198 See Argentina's first written submission, paragraph 85.

199 See Argentina's first written submission, paragraph 86.

200 See Argentina's first written submission, paragraph 87.

201 See Chile's first written submission, paragraph 4.39.

202 See Chile's first written submission, paragraph 4.40.

203 See Chile's first written submission, paragraph 4.41.

204 See Chile's first written submission, paragraph 4.42.

205 See Chile's first written submission, paragraph 4.43.

206 See Chile's first written submission, paragraph 4.44.

207 See Chile's first written submission, paragraph 4.47.

208 See Argentina's first written submission, paragraph 88.

209 See Argentina's first written submission, paragraph 89.

210 See Chile's first written submission, paragraph 4.40.

211 See Chile's first written submission, paragraph 4.44.

212 Chile refers to the Annex to the technical report, Tables 19.1 and 19.2.

213 See Chile's first oral statement, paragraph 34(b).

214 See Argentina's rebuttal, paragraphs 32 to 34.

215 See Chile's first written submission, paragraph 4.49.

216 See Chile's first written submission, paragraph 4.50.

217 See Chile's first written submission, paragraph 4.51.

218 See Chile's first written submission, paragraph 4.53.

219 See Chile's first written submission, paragraph 4.54.

220 Argentina refers to Annex to Record No. 781, section 2, page 7 - Situation of the domestic industry - and Table 1 of the technical report.

221 See Argentina's first written submission, paragraph 90.

222 Chile refers to Annex to Record No.781, page 7.

223 See Chile's first oral statement, paragraph 34(c).

224 See Chile's first written submission, paragraph 4.55.

225 See Chile's first written submission, paragraph 4.56.

226 See Chile's first written submission, paragraph 4.57.

227 See Chile's first written submission, paragraph 4.57.

228 See Chile's first written submission, paragraph 4.58.

229 See Argentina's first written submission, paragraph 95.

230 See Argentina's first written submission, paragraph 96.

231 See Argentina's first written submission, paragraph 97.

232 See Argentina's first written submission, paragraph 98.

233 Argentina refers to the technical report, Statistical Annex, specific accounts for preserved peaches, sheet 1475.

234 See Argentina's first written submission, paragraph 99.

235 See Argentina's first written submission, paragraph 100.

236 See Argentina's first written submission, paragraph 101.

237 See Argentina's first written submission, paragraph 102.

238 See Argentina's first written submission, paragraph 103.

239 Chile refers to the Annex to the technical report, Tables 12, 13 and 14; Annex to Record No. 781, page 8; Chile's first written submission, paragraphs 4.57 and 4.58.

240 See Chile's first oral statement, paragraph 34(d).

241 Chile refers to paragraph 103 of Argentina's first written submission where Argentina states that it is obvious that the positive values (alleged by Chile) in the consolidated balance sheets can only be explained by the results for the other products. See paragraph 4.92 of the present report.

242 See Chile's first oral statement, paragraph 35.

243 Argentina refers to Exhibit ARG-XVII.

244 Argentina refers to the technical report, page 59 and Table 1.

245 Argentina refers to Exhibit ARG-XVIII.

246 Argentina refers to Exhibits ARG-IX and ARG-XVII.

247 See Argentina's second oral statement, paragraph 49.

248 See Chile's first written submission, paragraph 4.64.

249 See Argentina's first written submission, paragraph 79.

250 See Argentina's first written submission, paragraph 80.

251 Namely, "What exactly is the legal basis of Chile's claim regarding industry readjustment in paragraphs 4.63-4.64 of its first written submission?".

252 Namely, "Chile's answer to question 17 indicates that it claims that industry readjustment was another factor relevant or pertinent to the situation of the domestic industry. Could such a process be considered "of an objective and quantifiable nature" in the sense of Article 4.2(a) of the Agreement on Safeguards? Why, or why not? ".

253 See Chile's first written submission, paragraph 4.65.

254 See Chile's first written submission, paragraph 4.66.

255 See Chile's first written submission, paragraph 4.68.

256 See Argentina's first oral statement, paragraph 53.

Agreements  |  Disciplines | Trade Policy Developments | Countries | Trade & SMEs Home | What's New | SiteMap | Resources | Search | Disclaimer