ARGENTINA - DEFINITIVE SAFEGUARD MEASURE ON
IMPORTS OF PRESERVED PEACHES

Report of the Panel

(Continued)

2. Increase in imports

7.37 Chile claims that Argentina 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 competent authorities did not demonstrate during the period of investigation (1996-2000) that preserved peaches were being imported in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.⁵⁰¹ It argues that the increases in imports in both absolute and relative terms correspond to a foreseen and expected recovery by those imports of their historical levels that were severely disrupted in 1997 and 1998 by an isolated and unexpected climatic situation which affected the production and export capacity of Greece, the leading world producer and exporter of preserved peaches.⁵⁰² Argentina denies the claim and submits that the increase was both absolute and relative.⁵⁰³ It further argues that what the Argentine industry was facing was not a hypothetical recovery of imports to their historical levels but "unforeseen developments".⁵⁰⁴

(a) Periods of analysis

7.38 The competent authorities' report does not identify an "investigation period" as such.⁵⁰⁵ When asked by the Panel to confirm the dates of the investigation period, Argentina replied that "The gathering of import data covers the period 1996-2000."⁵⁰⁶ The Panel asked Argentina to explain which were the criteria that the competent authorities used in order to select the period of time for their analysis of increased imports in absolute and relative terms. Argentina did not respond to this part of that question.⁵⁰⁷

7.39 The technical report and joint opinion show that data was collected and considered on volume of imports in absolute terms for five years from 1996 to 2000, and in some respects six years, from 1995. Data was collected and considered on volume of imports relative to domestic production for four years from 1997 to 2000. Argentina explained that, under its legislation, one of the requirements for applications to initiate investigations into safeguard measures is the submission of import data "for the last five full years to substantiate the significant increase in absolute or relative terms of the product being imported".⁵⁰⁸ Argentina emphasizes that this obligation binds applicants but not the competent authority.⁵⁰⁹

7.40 The technical report and joint opinion show that data was collected and considered for the domestic industry for four years from 1997 to 2000, although there is also mention of certain features of the industry during prior years.

7.41 We note that Argentina has used the term "period of analysis" in its rebuttal submission. For the purposes of our examination, we will use that term as well and simply note that the period for which the competent authorities analysed data was the five year period 1996-2000 in absolute terms, and 1997-2000 in relative terms.

(b) Competent authorities' determination

7.42 The relevant section of the joint opinion reads as follows:

"Evolution of imports

�

In the period 1996/2000, Argentine imports of preserved peaches evolved in a way that needs to be analysed against a background of various factors, including climatic conditions, countervailing measures in force in Argentina, and the structural patterns of world production.⁵¹⁰ Thus, a comparison of the beginning and end of the period in question, without prejudice to the analysis of the years in between, shows that imports in tons in 2000 represented 85 per cent of the volume imported in 1996, but measured in dollars f.o.b. they only came to 64 per cent of the value for that year.

The year 1996 shows the greatest volume of imports with a figure of over 14,000 tons, equivalent to 10 million dollars f.o.b, which gives us a general average price for all origins of 0.699 dollars per kilogram. Greece was the leading exporter to Argentina during this period, representing 42 per cent of the total volume and approximately 36 per cent of the value, with an average price of 0.596 dollars f.o.b. per kilogram, within a range of 0.70 to 0.46 US$/kg.

In 1997 and 1998 total Argentine imports⁵¹¹ 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. An examination of average f.o.b. prices shows that they increased in 1997, as did the price of the main exporter, Greece. In 1998 these prices continued to rise on average, though to a lesser extent. In the case of Greece, however, they fell by some 15 per cent to a level of 0.594US$/kg.

An analysis of the most recent period shows that in 1999, total imports grew sharply (by more than 100 per cent), a situation which recurred in 2000 with a growth of 68 per cent. Imports for 2000 exceeded 12,000 tons for an f.o.b. dollar value of approximately 6,400,000. In this last year imports from Greece, the leading exporter, came to 60 per cent of the total imports.

In 1999 the average price fell to 0.625 US$/kg. and in 2000 to US$0.525/kg. f.o.b. The determining factor of this fall was the prices of the main exporters, that is to say, the European Union and, more specifically, Greece, whose average f.o.b. price in 2000 was 0.412 US$/kg.

The prices of the imports in the domestic market have generally remained below the domestic price, despite the existence of tariffs equivalent to Argentina's bound ceiling of 35 per cent and of countervailing duties for Greece.

According to the figures supplied by CAFIM for the ratio of imports to domestic production for the most recent period, imports represented 11 per cent in 1999 and 19 per cent in 2000.

On the basis of the survey, the Commission concludes that imports satisfy the provisions of Article 2 of the Agreement on Safeguards , insofar as there was an increase in imports in the most recent period, both in absolute terms and in relation to domestic production, at prices which justify proceeding with the analysis provided for in Article 4 of the Agreement on Safeguards ."⁵¹²

(c) Evaluation of the determination

7.43 The Panel will consider this passage in the context of the rest of the joint opinion and the technical report, in its assessment of Chile's claims. We recall the standard of review of the factual aspects of a determination of an increase in imports as formulated by the Panel in US - Line Pipe , following the Panel in US - Wheat Gluten , which we will also apply:

"[W]hether the published report on the investigation contains an adequate, reasoned and reasonable explanation of how the facts in the record before the ITC support the determination made with respect to increased imports."⁵¹³

(i) Increase in imports in absolute terms

7.44 Chile claims that Argentina acted inconsistently with its obligations in respect of the finding of an increase in imports both in absolute terms and in relative terms. The Panel will first consider the finding regarding absolute quantities, and consider separately the finding regarding relative quantities. The data on imports in absolute terms referred to in the above passage is presented in the following graph.⁵¹⁴

7.46 Accordingly, the issue for the Panel to decide is whether the competent authorities determined that there was an increase in imports in absolute terms as required by Article XIX:1(a) of GATT 1994 and Articles 2 and 4.2(a) of the Agreement on Safeguards based on the period 1998 2000.

7.47 Article XIX:1(a) GATT 1994 provides, relevantly, as follows:

"If � any product is being imported into the territory of that Member 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 �"

7.48 Article 2.1 of the Agreement on Safeguards provides:

"A Member may apply a safeguard measure to a product only if that Member has determined, pursuant to the provisions set out below, that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products."

7.49 These two provisions contain the three basic conditions making up the legal basis for a safeguard measure. The first of these is an increase in imports. Article 2.1 provides that it may be in either absolute or relative terms. Article 4.2(a) of the Agreement on Safeguards explains how the investigation should be conducted to determine whether the conditions in Article 2.1 and the second clause of Article XIX:1(a) are satisfied. It provides, relevantly:

"� 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, �"

7.50 We begin by agreeing with Argentina that none of these provisions establish a minimum period for the investigation, nor any so-called "base period" within the investigation period on which to base a determination of an increase in imports.⁵¹⁶

7.51 We recall that an increase in imports, in the sense required by Article 2.1 and Article XIX:1(a), was interpreted by the Appellate Body in Argentina - Footwear (EC) as follows:

"(�) In our view, the determination of whether the requirement of imports 'in such increased quantities' is met is not a merely mathematical or technical determination. In other words, it is not enough for an investigation to show simply that imports of the product this year were more than last year - or five years ago. Again, and it bears repeating, not just any increased quantities of imports will suffice. There must be 'such increased quantities' as to cause or threaten to cause serious injury to the domestic industry in order to fulfil this requirement for applying a safeguard measure. And this 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'".⁵¹⁷

7.52 The Panel agrees with Argentina that it is not required to show that imports have increased over five years and we have seen no evidence of such a requirement under Argentine law either. However, the point is that there is no fixed period of five years or any other length of time over which figures can simply be subtracted to yield an increase in imports in the sense of Article 2.1 and Article XIX:1(a). Accordingly, neither the mathematical increase in imports of preserved peaches in the last two years, nor the mathematical decrease over the whole five year period of analysis, is determinative.

7.53 Argentina refers to the passage quoted above from Argentina - Footwear (EC) and argues that the increase in imports identified by the directors was recent.⁵¹⁸ The directors noted that they based their analysis on "the most recent period", i.e. the last two years of the period for which data was collected and considered. We agree that the last two years of the period of analysis was the most recent period. However, we concur with the Panel in US - Line Pipe that the word "recent" does not imply that the analysis must focus exclusively on conditions at the very end of the period of analysis.⁵¹⁹ The directors also qualified the increase in imports in the last two years of the period of analysis as "sharp".⁵²⁰ We do not disagree. We see no evidence that they considered whether the increase was sudden or significant.

7.54 We believe that a recent and sharp increase in imports is a necessary, but not a sufficient, condition to satisfy Article 2.1 and Article XIX:1(a). The increase is not merely the product of a quantitative analysis, it must also be qualitative. This was the approach of the Appellate Body in the passage quoted above from Argentina - Footwear (EC), where it found that an increase in imports as required by Article 2.1 and Article XIX:1(a) must be recent, sudden, sharp and significant enough, both quantitatively and qualitatively. It is therefore not sufficient to find that an increase in imports is only recent, sudden, sharp and significant mathematically.

7.55 The qualitative analysis required was illustrated by the Appellate Body in Argentina - Footwear (EC) when it interpreted the requirement in Article 4.2(a) that the competent authorities evaluate the "rate and amount" of the increase in imports. They found that it meant that the competent authorities in that case should have considered the trends in imports over the period of investigation, rather than just comparing the end points, and to consider the sensitivity of their analysis to the particular end points of the investigation period used.⁵²¹

7.56 In the competent authorities' report in the present dispute, the CNCE directors who voted in favour of the measure considered the rate of the increase in imports in the last two years of the period of analysis. They cited increases of 100 per cent and 68 per cent in 1999 and 2000 respectively over the previous years. They also considered the amount of the increase in imports, in both volume and value.⁵²² They noted the trends in imports over the period of analysis, and also compared the end points. The data available in the technical report, which they did not quote, shows that the end points of the period of analysis 1996-2000 revealed a decrease in imports in absolute terms by volume of 2,217 tons or 15 per cent and a decrease by f.o.b. value of US$3,661,306 or 36 per cent.

7.57 The directors recognized the sensitivity of 1998 as their choice of base year for their determination of an increase in imports. They expressly acknowledged that an unusual factor - the bad harvest in the major exporting country - affected that year, which was 1998. They acknowledged that over the whole period for which they considered data there was a decrease in imports, so that they were aware that their choice of the base year decisively affected their determination as to whether there was an increase in imports at all.

7.58 However, the Panel finds no record in the joint opinion that the directors related these considerations to their determination of an increase in imports. Indeed, the report indicates that once they had acknowledged the decrease from 1996 to 2000, the trend from 1996 to 1997 and the sensitivity of the figures for 1998, they disregarded these considerations in reaching their conclusion. By contrast, the investigating authority qualified the increase in imports as a "recovery", which shows how it took account of the trends. This explanation of the qualitative significance of the increase from 1998 to 2000 does not appear in the joint opinion, and hence is lacking from the reasoning of the competent authorities that led to the imposition of the preserved peaches measure.⁵²³

7.59 The Panel asked Argentina whether it believed that the statistics for 1997 and 1998 were representative of imports or were influenced by any unusual factors and, if the latter, how the competent authorities took account of this in their determination. Argentina replied by providing statistics for 1997 and 1998 that appear in the joint opinion reproduced above.⁵²⁴ The Panel posed a follow up question to Argentina to ask how the competent authorities took account of these statistics in their determination of an increase in imports. Argentina replied that they did so in the sense that appears in Part V of the Annex to Record No. 781, which contains the respective opinions of the directors (reproduced in relevant part above).⁵²⁵

7.60 The Panel finds it highly significant that the volume of imports in absolute terms declined over the period of analysis - by a seventh in terms of volume and over a third in terms of price. It is highly significant that the volume of imports in absolute terms declined over the period 1996 to 1998 by more than the increase which the competent authorities identified from 1998 to 2000, and that this was due to an unusual factor which is acknowledged on the record. This decrease and the reason for it affected the significance of the later increase, so that it was qualitatively different from an increase of the same quantity under other circumstances. Its significance may have been that of a recovery and not an increase that was significant enough for the purposes of Article 2.1 and Article XIX:1(a).

7.61 We find that the competent authorities did at least acknowledge all the facts. Having done so, they then took no further account of any of them for the purposes of their determination other than those in the last two years of the period of analysis. They did not consider how this affected qualitatively the increase in the last two years of the period of analysis. Therefore, the Panel considers that their explanation was not adequately reasoned.

7.62 Argentina referred to a statement in the Appellate Body report in US - Lamb that:

"[D]ata 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."⁵²⁶

7.63 We agree with Argentina that these considerations regarding the period relevant to a threat of serious injury determination also apply to an increased imports determination, for the same reasons expressed by the Panel in US - Line Pipe:

"In a safeguard investigation, the period of investigation for examination of the increased imports tends to be the same as that for the examination of the serious injury to the domestic industry. This contrasts with the situation in an anti-dumping or countervailing duty investigation where the period for evaluating the existence of dumping or subsidization is usually shorter than the period of investigation for a finding of material injury. We are of the view that one of the reasons behind this difference is that, as found by the Appellate Body in Argentina - Footwear Safeguard, "the determination of whether the requirement of imports 'in such increased quantities' is met is not a merely mathematical or technical determination." The Appellate Body noted that when it comes to a determination of increased imports 'the competent authorities are required to consider the trends [emphasis in original] in imports over the period of investigation'. The evaluation of trends in imports, as with the evaluation of trends in the factors relevant for determination of serious injury to the domestic industry, can only be carried out over a period of time. Therefore, we conclude that the considerations that the Appellate Body has expressed with respect to the period relevant to an injury determination also apply to an increased imports determination." [original footnotes omitted]⁵²⁷

7.64 We do not believe that the statement to which Argentina refers in the Appellate Body report in US - Lamb is authority for the proposition that the most recent data alone is sufficient for a determination. The most recent past should not be considered separately from the overall trends during the period of analysis, as the succeeding paragraph of that report explains:

"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. For instance, although the most recent data may indicate a decline in the domestic industry, that decline may well be a part of the normal cycle of the domestic industry rather than a precursor to clearly imminent serious injury. Likewise, a recent decline in economic performance could simply indicate that the domestic industry is returning to its normal situation after an unusually favourable period, rather than that the industry is on the verge of a precipitous decline into serious injury. Thus, we believe that, in conducting their evaluation under Article 4.2(a), competent authorities cannot rely exclusively on data from the most recent past, but must assess that data in the context of the data for the entire investigative period." [original footnote omitted]⁵²⁸

7.65 The Appellate Body acknowledged that by evaluating the most recent data in isolation, the resulting picture of the domestic industry may be quite misleading. We believe that the same is true of the resulting picture of an increase in imports. In the present case, we believe that the analysis of the 1998-2000 data should not be considered in isolation. However, the record shows that the directors acknowledged the decrease from 1996 to 2000, the trend from 1996 to 1997, and the sensitivity of the figures for 1998, but did not evaluate the increase from 1998 to 2000 in light of those facts.

7.66 Argentina argues that the investigating authority did not isolate the data for the last two years from the whole period of investigation because:

"� the investigating authority took an investigation period (1996/2000) and detected the increased imports in a period within the investigation period (1999/2000). In other words, the investigating authority, when evaluating the data corresponding to the most recent past, clearly did not isolate that data from the data corresponding to the entire investigation period."⁵²⁹

7.67 In the Panel's view, the first sentence does not rebut the argument that the competent authorities isolated the data for the end of the period for which they had data from the entire period. Indeed, detecting an increase in only part of the period is synonymous with isolating the data for that part from the data corresponding to the entire period. Merely commenting on the data for the first two years without relating it to the mathematical increase in the last two does not amount to a determination of a qualitative increase either.

7.68 Argentina also mentioned that in 1996 countervailing duties were applied to peaches from the European Union which affected the flow of imports from that origin.⁵³⁰ In the Panel's view, this cannot justify the competent authorities disregarding the imports in 1996 for three reasons. First, countervailing duties could be expected to reduce the level of imports, which would not explain why the 1996 figures were so much higher than the 1997 and 1998 figures. Second, the competent authorities had an explanation as to why the 1997 and 1998 figures were lower than 1996 - namely, because there had been a bad harvest in Greece. Third, the countervailing measure was in place at the same rates for the entire period of analysis, excepting only the first nine days of 1996.⁵³¹ However, there is no reason on the record that justified the competent authorities disregarding the effects of the statistics for a whole year because of the effect of those nine days. The Panel also notes that Argentina does not argue that the countervailing measure was insufficient to offset the effect of the subsidies.⁵³²

7.69 For all of the above reasons, the Panel finds that the competent authorities' determination of an increase in imports in absolute terms is inconsistent with Article 4.2(a) of the Agreement on Safeguards , and that they failed to determine an increase in imports in absolute terms as required by Article 2.1.

(ii) Increase in imports in relative terms

7.70 Our finding at paragraph 7.69 does not of itself prove that Argentina acted inconsistently with Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards , as the first condition for the application of a safeguard measure is an increase in imports in absolute or relative terms. In order to succeed on this claim, Chile must also show that the competent authorities failed to show an increase in imports in relative terms.

7.71 The meaning of an increase in imports in relative terms is clear from Article 2.1 of the Agreement on Safeguards which refers to "increased quantities, (�) relative to domestic production." It is clear from the joint opinion that the data cited by the competent authorities refers to relative quantities in this sense, calculated by reference to volume.

7.72 The treatment of imports relative to domestic production is particularly sparse in the competent authorities' report.⁵³³ The only relevant statement in the joint opinion - apart from the conclusion that the increase satisfied Article 2 - reads as follows:

"According to the figures supplied by CAFIM for the ratio of imports to domestic production for the most recent period, imports represented 11 per cent in 1999 and 19 per cent in 2000."⁵³⁴

7.73 The technical report contains data on quantities of imports relative to domestic production, with sub-totals by hemisphere, for the years 1997 to 2000. There is no data on relative quantities for 1996. Argentina informed the Panel that the gathering of import data covers the period 1996-2000⁵³⁵, but we take it that it meant the period for which applicants had to supply data, which was five years on quantities of imports in absolute or relative terms and, in this case, import data was collected for five years in absolute terms only.⁵³⁶ There are alternative figures for 2000: 18.57 per cent according to CAFIM and 21.05 per cent according to the CNCE, due to their different figures for domestic production in that year.⁵³⁷ This explains why the directors introduced the figures with the qualification "According to the figures supplied by CAFIM".

7.74 We recall that there is no statement as to what was the investigation period. For our purposes, we need only find that the period of analysis of import quantities in relative terms was the four-year period from 1997 to 2000.

7.75 The Panel asked Argentina over what periods of time the competent authorities found an increase in imports in absolute and relative terms. Argentina replied that the period is 1999-2000.⁵³⁸ In response to a follow-up question, Argentina indicated that the base year for the determination of an increase in imports was 1998.⁵³⁹ Chile has proceeded on the premise that the base year was 1998.⁵⁴⁰ It appears that these approaches focus on absolute quantities. Given that there is no reference in the joint opinion to figures for relative quantities for 1998, and no reference to figures for relative quantity for one year over another, the notion of "base year" refers, at best, to 1999, the figure for which can be subtracted from that for 2000.

7.76 There is no reasoning in the competent authorities' report as to why they determined that respective volumes of imports in relative terms of 11 per cent in 1999 and 19 per cent in 2000 constituted an increase in imports in relative terms in the sense of Article 2.1 and Article XIX:1(a). In fact, there is not an express determination of an increase in relative terms at all, although it can be deduced from the quantities for two years which are given (7.49 per cent, based on the figures supplied by CAFIM).⁵⁴¹ The only facts which the competent authorities appear to have considered are the statistics in table 20 of the technical report on imports relative to domestic production for four years, which show annual increases.

7.77 The only evidence on the record that shows how the facts supported the determination of an increase in imports in relative terms is the statement in the conclusion on evolution of imports that the increase, in both absolute and relative terms, was "in the most recent period". We refer to our findings above at paragraphs 7.53 and 7.54 that this alone does not necessarily constitute an increase in the sense of Article 2.1 and Article XIX:1(a), nor can it on the facts of this case without some additional explanation. We see no evidence that the directors considered this sudden, sharp or significant. There is no qualitative analysis and almost no quantitative analysis.

7.78 In addition, our findings above in paragraphs 7.63 to 7.68 are applicable to the determination of an increase in imports in relative terms. The data for the most recent period, 1999 and 2000, was isolated from the rest of the data, and the resulting picture of the increase in imports was quite misleading.

7.79 For these reasons, the Panel finds that the competent authorities failed to determine an increase in imports in relative terms as required by Article 2.1 of the Agreement on Safeguards .

7.80 Chile urged the Panel to consider data on apparent consumption of preserved peaches for the period 1994-1996 drawn from a "Sectoral Study of Canned Peaches" prepared by the CNCE in 1998 for an earlier investigation into peaches in syrup from the European Union (the "subsidies investigation").⁵⁴² Chile alleges that the safeguard investigators referred to the file of the subsidies investigation because it is mentioned in some statistical charts in the safeguards technical report.⁵⁴³ Argentina does not deny that the file of the subsidies investigation may be quoted as a source in the file of the safeguard investigation and says that it was publicly available on the website of the CNCE before the safeguards investigation began. However, it denies that the safeguard investigation technical report takes account of the data from the sectoral study.⁵⁴⁴

7.81 We do not find that sectoral study relevant to our examination. It contains figures on apparent consumption and shows import quantities relative to domestic sales, not relative to domestic production. There are no figures for exports in 1996 which would allow a calculation of the quantity of imports relative to domestic production for that year. Argentina has argued that the product under consideration in the sectoral study is peaches in syrup which is not the same as preserved peaches⁵⁴⁵, despite the cross-reference in two statistical charts. It also argues that its statistics cannot be compared with the preserved peaches data because they are measured in units of cans, not tons, and that differences in apparent consumption and market and marketing structures between the period 1994-1996 and 1999-2000 make the study unreliable. Chile has not dispelled the doubts raised by these arguments.

7.82 In view of our findings at paragraphs 7.69 and 7.79, we find that Argentina acted inconsistently with its obligations under Article XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards , because the competent authorities failed to make a determination of an increase in imports, in absolute or relative terms, as required.

3. Threat of serious injury

7.83 Chile claims that Argentina acted inconsistently with Article XIX:1(a) of GATT 1994 and Articles 2, 4.1(b) and 4.2(a) of the Agreement on Safeguards because, in making their determination of a threat of serious injury:

(a) the competent authorities did not properly evaluate all of the factors having a bearing on the situation of the domestic industry;

(b) the competent authorities evaluated factors in terms of the most recent past without considering them in the context of the entire period investigated. As part of this claim, Chile alleges other deficiencies in the competent authorities' methodology; and

(c) the competent authorities' findings and conclusions with respect to the factors that they investigated neither proved nor justified the claim that serious injury was clearly imminent and they based their finding of "threat of serious injury" merely on conjecture or remote possibility.⁵⁴⁶

7.84 Argentina denies this claim and submits that the competent authorities conducted an analysis that was consistent with the provisions of Article XIX:1(a) and Article 4.2(a), (b) and (c) of the Agreement on Safeguards .⁵⁴⁷ The Panel notes that there is no claim made under Article 4.2(c).

7.85 The Panel will consider these claims in the order set out above, as consideration of the evaluation of the serious injury factors will assist in making findings on the competent authorities' final conclusion that a threat of serious injury existed.

(a) Period of analysis

7.86 The competent authorities collected and considered data concerning the situation of the domestic industry for the four-year period 1997-2000. This was the period considered by the directors in the joint opinion. Import data was collected and considered for the five-year period 1996-2000, although the quantity of imports relative to domestic production was not calculated for 1996.

(b) Competent authorities' determination

7.87 The joint opinion contains a section headed "Situation of the domestic industry" which summarizes findings on a series of injury factors, discussed below. The conclusion of that section reads as follows:

"On the basis of the considerations set forth above, of the Technical Report and of the evidence contained in the file, Dr Lidia Elena M. de Di Vico and Dr H�ctor Arese conclude that the domestic preserved peaches industry shows indications of injury that grew worse during the last year considered (2000), but that they do not qualify as serious injury. Nevertheless, these indicators reflect a high degree of sensitivity to the change that is taking place in the market as a result of the imports."

7.88 The final phrase links the situation of the domestic industry and imports. The analysis of the evolution of imports in the joint opinion was reproduced in paragraph 7.42 above. The conclusion reached in the joint opinion on the existence of a threat of serious injury, which appears in the section headed "Causality", reads as follows:

"As concluded in the relevant section, there are signs of injury in the domestic industry which, while they do not yet qualify as serious injury within the meaning of Article 4.1(a) of the Agreement on Safeguards , show a high degree of sensitivity to the change taking place in the market as a result of imports. The behaviour of imports observed towards the end of 2000 shows that they have the capacity, in terms of price and volume, to cause serious injury.

"The lack of any indicators in the international market showing that the volume and price of world production and exports, both in the current year and in future years, would not equal or even exceed the levels for the year 2000, leads to the conclusion of threat of serious injury within the meaning of Article 4.1(b)."⁵⁴⁸

7.89 This passage shows that the directors identified imports as the threat to the domestic industry due to their price and volume, and the situation of the domestic industry. The period of time on which they based this determination was "towards the end of 2000". That description of the period of time is not sufficiently precise to know what it was, nor what were the changes in prices and quantities during that period.

7.90 The only injury factor which the directors expressly linked to imports in the section headed "Situation of the domestic industry" was the level of stocks. Otherwise, in their view, the relationship between the injury factors and imports was that the former showed signs of a high degree of sensitivity and the imports had the capacity to cause serious injury.

7.91 The other injury factors which were considered to demonstrate the high degree of sensitivity are reviewed in the joint opinion. Although the joint opinion states that its review of the situation of the domestic industry is an analysis of the situation of the industry during the period 1997-2000, most of the negative variations which it mentions consist of variations in 2000 as compared with 1999. This is the case of reported and estimated domestic production, value of overall domestic market sales, domestic market share, employment, labour productivity, wage bill, exports, selling prices and cost/price ratios. It mentions falls in sales data from the accounting statements of surveyed companies without limiting them to a particular year.

7.92 Most of the factors analysed showed deterioration. Apparent consumption was growing and the volume of sales by the domestic industry was steady. The joint opinion mentioned the former in relation to falling domestic market share but did not mention the latter. It mentioned growth in production reported by the surveyed companies in 1998 and 1999. The statistics for domestic production supplied by CAFIM, which represented 100 per cent of the domestic industry, showed that production was steady in 2000, but the competent authorities gave an explanation why they chose to make their own estimates.⁵⁴⁹

(c) Evaluation of the determination

7.93 Chile's first two claims concern the competent authorities' evaluation, under Article 4.2(a), in making a determination of a threat of serious injury under Article XIX:1(a) of GATT 1994 and Article 2.1 of the Safeguards Agreement. We will apply the standard of review to two aspects of the evaluation in accordance with the following statement of the Appellate Body in US - Lamb :

"� in examining a claim under Article 4.2 of the Agreement on Safeguards , a panel's application of the appropriate standard of review of the competent authorities' determination has two aspects. First, a panel must review whether the competent authorities have, as a formal matter, evaluated all relevant factors and, second, a panel must review whether those authorities have, as a substantive matter, provided a reasoned and adequate explanation of how the facts support their determinations."⁵⁵⁰

7.94 We understand Chile's first two claims to correspond to these two aspects of the competent authorities' determination. We will begin with our review of the formal aspect first and review whether the competent authorities evaluated, as a formal matter, all relevant factors.

(i) All relevant factors

7.95 Chile claims that the CNCE did not evaluate and investigate all the relevant factors having a bearing on the situation of the domestic industry in particular and at a minimum those explicitly mentioned in Article 4.2(a) of the Agreement on Safeguards . It argues that the competent authorities omitted three of the factors listed in Article 4.2(a), namely productivity, capacity utilization and employment.⁵⁵¹ It made a separate claim regarding an alleged unlisted factor: relating to the domestic industry's "expansive readjustment".⁵⁵² Argentina cites parts of the competent authorities' report that purport to show these factors were investigated and evaluated.⁵⁵³

7.96 Article 4.2(a) 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.⁵⁵⁴ We will therefore assess first whether the competent authorities' determination, as a formal matter, evaluated the three listed relevant factors which Chile claims were omitted.

Capacity utilization

7.97 Table 6 of the technical report contains data for capacity utilization, which shows that among those companies surveyed this factor improved in 1999 and declined in 2000 to its 1998 level of 73 per cent. It also shows that the technical team calculated an industry-wide figure based on the figures supplied by CAFIM which showed that this factor improved in 1999 and remained steady in 2000. A statement by CAFIM to this effect is noted in the body of the technical report.⁵⁵⁵ All of this shows merely that data on capacity utilization was collected and tabulated. However, in terms of what the competent authorities evaluated, in accordance with Article 4.2(a), the joint opinion does not mention "capacity utilization" as such. It does refer to the methodology for calculation of production and installed capacity but does not mention any statistic or result for installed capacity.

7.98 Argentina argued that the competent authorities considered both the fall in production and the increase in capacity.⁵⁵⁶ However, it did not direct us to any place on the record that shows that they conducted any evaluation of capacity utilization nor, for that matter, installed capacity. The only indirect reference to capacity utilization which the Panel could see in the joint opinion is a statement that the directors reached the conclusion that the industry showed a high degree of sensitivity (which was a prelude to the determination of a threat of serious injury) based on the consideration of injury factors in the joint opinion (which did not include capacity utilization), the technical report (which did include capacity utilization) and the evidence contained in the file. A catch-all phrase of this kind does not demonstrate an evaluation of a factor.

7.99 The most that the Panel can say is that the CNCE directors who voted in favour of the measure may have read the table of statistics which showed that capacity utilization either declined to 1998 levels or remained steady but there is nothing on the record that shows that they evaluated the factor. It is not even clear which figure they might have referred to for 2000, or whether they might have referred to both. Therefore, the Panel finds that the competent authorities did not, as a formal matter, evaluate this factor as required by Article 4.2(a).

To continue with Productivity

Return to Index

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

502 See Chile's rebuttal, paragraph 23.

503 See Argentina's first written submission, paragraph 61

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

505 See, for example, the absence of a reference to this period in the information summary on page (i) of the technical report. However, on two occasions the investigating authorities refer to the "period considered" and the "period investigated" as 1997-2000 in the section on the domestic market (see page 34 of the technical report).

506 See Argentina's response to question No. 12 of the Panel.

507 See Argentina's response to question No. 14 of the Panel.

508 See Decree No. 1059/96, Annex 1, paragraph (e) reproduced in full in Exhibit CHL-5, explained by Argentina in its first written submission, paragraph 58.

509 See Argentina's first written submission, paragraph 58.

510 [Original footnote] Imports for the period 1996/2000 were also analysed in the light of Decree 1059/96.

511 [Original footnote] Not including MERCOSUR.

512 See Annex to Record No. 781, Section V.A.1 headed "Evolution of imports".

513 See Panel Report in US - Line Pipe , paragraph 7.194.

514 This data is taken from Table 15 and accompanying graphics in the technical report. The graph includes the 1999 figure for imports in absolute terms in terms of value, which was not quoted by the directors.

515 See Chile's rebuttal, paragraph 13(b) and Argentina's response to question No. 34 of the Panel.

516 See Argentina's first written submission, paragraph 57.

517 See Appellate Body Report in Argentina - Footwear (EC), paragraph 131.

518 See Argentina's first written submission, paragraphs 57 to 59.

519 See Panel Report in US - Line Pipe , paragraph 7.204.

520 See Annex to Record No. 781, Section V.A.1 headed "Evolution of imports". A dissenting director wrote that the increase was not "sharp": see Annex to Record No. 781, Section V.B.

521 See Appellate Body Report in Argentina - Footwear (EC), paragraph 129.

522 In fact, the amounts for 1999 were omitted, but they appear in the technical report, table 15.

523 After the determination of an increase in imports, the joint opinion does address some qualitative issues regarding world production, which it links to imports, in the paragraphs dealing with the alleged unforeseen developments. This only relates to the period 1998-2000 and does not add anything qualitative to the analysis of the increase of imports, which the directors had already qualified as recent and sharp. See Annex to Record No. 781, Section V.A.3 headed "Conditions of competition".

524 See Argentina's response to question No. 15 of the Panel.

525 See Argentina's response to question No. 35 of the Panel.

526 See Appellate Body Report in US - Lamb , paragraph 137. We note that the Panel in Chile - Price Band System, paragraph 7.153, fn. 714, also considered this statement relevant to the analysis of actual import trends.

527 See Panel Report in US -Line Pipe, paragraph 7.209.

528 See Appellate Body Report in US - Lamb , paragraph 138.

529 See Argentina's rebuttal, paragraph 22. The Panel observes that Argentina does not confirm that the period 1996 - 2000 was the investigation period in this case, but the Panel does not believe that this alters the situation. The period for which the competent authorities had import data in absolute terms available and which they considered was the five year period from 1996 to 2000. The competent authorities isolated the data for 1998 from the data for that entire five-year period.

530 See Argentina's rebuttal, paragraph 20.

531 See Argentina's response to question No. 33 of the Panel.

532 See Argentina's response to question No. 55 of the Panel.

533 Although the competent authorities cited relative rates of increase in imports of 100 per cent in 1999 and 68 per cent in 2000, those statistics refer to the absolute quantity for one year relative to the absolute quantity for the previous year, but not quantities relative to domestic production. Before the Panel, Argentina cited a statistic for the quantity relative to domestic production for one year relative to the quantity relative to domestic production for the previous year. That is not a quantity relative to domestic production either, nor does it appear in the competent authorities' report. We do not consider those statistics in relation to the determination of an increase in imports in relative terms for these reasons. See Argentina's first written submission, paragraph 61 and its rebuttal, paragraph 62.

534 See Annex to Record No. 781, Section V.A.1 headed "Evolution of imports".

535 See Argentina's response to question No. 12 of the Panel.

536 This appears to indicate that the applicants substantiated their application on the basis of an increase in absolute terms only.

537 See Table 20 in the technical report.

538 See Argentina's response to question No. 14 of the Panel

539 See Argentina's response to question No. 34 of the Panel.

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

541 Argentina asserted before the Panel that the increase was in the order of 10 per cent (see Argentina's second oral statement, paragraph 29). The difference in the figures quoted by the directors is 8 per cent (see Annex to Record No. 781, Section V.A.1 headed "Evolution of imports"). These figures were rounded up from those in the technical report which show a difference of 7.49 per cent (see Table 20 in the technical report). The percentage can be subtracted because, according to the figures supplied by CAFIM, domestic production volume was identical in 1999 and 2000.

542 See Chile's first written submission, paragraphs 4.24 to 4.26. The Sectoral Study is reproduced in Exhibit CHL-6.

543 See Chile's rebuttal, paragraph 34.

544 See Argentina's response to question No. 11 of the Panel.

545 See Argentina's first written submission, paragraphs 64 to 66 and its response to question No. 11 of the Panel. Contrast the references to "peaches in syrup" with "canned peaches" in the Sectoral Study in Exhibit CHL-6 with the product description in the technical report in the preserved peaches safeguard investigation, pages 11 and 12.

546 See Chile's first written submission, paragraph 4.32.

547 See Argentina's second oral statement, paragraphs 36 and 46.

548 See Annex to Record No. 781, Section V.A.4 headed "Causality".

549 The competent authorities could not explain why the domestic production figure for 2000 was identical to 1999 when the production of the companies surveyed had decreased, so the technical team made two estimations for 2000 using two alternative methods. See the methodological notes in the technical report, Annex I, pages 2 and 3.

550 See the Appellate Body Report in US - Lamb , paragraph 141.

551 See Chile's first written submission, paragraphs 4.61 and 4.64.

552 See Chile's first written submission, paragraph 4.63 and response to question No. 17 of the Panel.

553 See Argentina's first written submission, paragraphs 91 to 94 and 104 to 106.

554 See the Appellate Body Report in Argentina - Footwear (EC), paragraph 136.

555 See the technical report, page 42 for the statement by CAFIM. See page 87 for a statement by the European Commission which appears in Part VI and therefore "does not in any way constitute the opinion of the CNCE technical team" (page 73).

556 See Argentina's first written submission, paragraphs 93 and 94, its rebuttal, paragraph 27 and its response to question No. 48 of the Panel.

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