(Continued)

VII. Claims under Articles 2 and 4 of the Agreement on Safeguards

115. Although Argentina acknowledges that the Panel correctly articulated the proper standard of review based on Article 11 of the DSU, Argentina alleges that the Panel erred in applying that standard of review, by conducting a "de facto de novo review"¹⁰³ of the findings and conclusions of the Argentine authorities. As a consequence, Argentina maintains that the Panel read certain methodologies into the Agreement on Safeguards where that Agreement itself is silent, and thereby added to the rights and obligations of Members under that Agreement in violation of Article 3.2 of the DSU.¹⁰⁴ The Agreement on Safeguards, in Argentina's view, allows Members discretion in the way it is implemented; however, the Panel, in its reasoning, created new requirements that are not contained in the Agreement on Safeguards. Argentina also claims that the Panel made several legal errors in its analysis of the requirements of Articles 2 and 4 of the Agreement on Safeguards, in particular, relating to the conditions of increased imports, serious injury and causation that must be satisfied before a safeguard measure may be applied.¹⁰⁵ Finally, Argentina submits that the Panel Report was not adequately reasoned because the Panel failed to reach reasonable conclusions based on the totality of the evidence before the Argentine authorities, and that the Panel has therefore not fulfilled the requirement of Article 12.7 of the DSU that it provide a "basic rationale" for its ruling.¹⁰⁶

A. Standard of Review

116. The Panel stated its approach to the standard of review as follows:

In our view, we have no mandate to conduct a de novo review of the safeguard investigation conducted by the national authority. Rather, we must determine whether Argentina has abided by its multilateral obligations under the Agreement on Safeguards � in reaching its affirmative finding of injury and causation in the footwear investigation.¹⁰⁷

�

� our review will be limited to an objective assessment, pursuant to Article 11 of the DSU, of whether the domestic authority has considered all relevant facts, including an examination of each factor listed in Article 4.2(a), of whether the published report on the investigation contains adequate explanation of how the facts support the determination made, and consequently of whether the determination made is consistent with Argentina's obligations under the Safeguards Agreement. We note that this was the standard of review applied by the Panel in United States - Underwear, with which we agree.¹⁰⁸

117. Although the Panel ultimately stated the standard of review correctly, we are surprised that the Panel based its approach on several reports by previous panels reviewing domestic investigations in the context of two Tokyo Round Agreements: the Agreement on Implementation of Article VI of GATT and the Agreement on Interpretation and Application of Article VI, XVI and XXIII of GATT¹⁰⁹ as well as two previous WTO panels in United States - Underwear and United States - Shirts and Blouses.¹¹⁰

118. We have stated, on more than one occasion, that, for all but one of the covered agreements, Article 11 of the DSU sets forth the appropriate standard of review for panels.¹¹¹ The only exception is the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, in which a specific provision, Article 17.6, sets out a special standard of review for disputes arising under that Agreement.

119. In our report in European Communities - Hormones, we stated that:

Article 11 of the DSU bears directly on this matter and, in effect, articulates with great succinctness but with sufficient clarity the appropriate standard of review for panels in respect of both the ascertainment of facts and the legal characterization of such facts under the relevant agreements. �¹¹²

�

So far as fact-finding by panels is concerned, their activities are always constrained by the mandate of Article 11 of the DSU: the applicable standard is neither de novo review as such, nor "total deference", but rather the "objective assessment of the facts".¹¹³

120. Although that case dealt with the panel's assessment of the facts, and this case deals with the Panel's assessment of the matter, more generally, the same reasoning applies here. The Agreement on Safeguards, like the Agreement on the Application of Sanitary and Phytosanitary Measures, is silent as to the appropriate standard of review. Therefore, Article 11 of the DSU, and, in particular, its requirement that "� a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements", sets forth the appropriate standard of review for examining the consistency of a safeguard measure with the provisions of the Agreement on Safeguards.

121. Based on our review of the Panel's reasoning, we find that the Panel correctly stated the appropriate standard of review, as set forth in Article 11 of the DSU. And, with respect to its application of the standard of review, we do not believe that the Panel conducted a de novo review of the evidence, or that it substituted its analysis and judgement for that of the Argentine authorities. Rather, the Panel examined whether, as required by Article 4 of the Agreement on Safeguards, the Argentine authorities had considered all the relevant facts and had adequately explained how the facts supported the determinations that were made. Indeed, far from departing from its responsibility, in our view, the Panel was simply fulfilling its responsibility under Article 11 of the DSU in taking the approach it did. To determine whether the safeguard investigation and the resulting safeguard measure applied by Argentina were consistent with Article 4 of the Agreement on Safeguards, the Panel was obliged, by the very terms of Article 4, to assess whether the Argentine authorities had examined all the relevant facts and had provided a reasoned explanation of how the facts supported their determination.

122. In addition to "an objective assessment of the facts ", we note, too, that part of the "objective assessment of the matter" required of a panel by Article 11 of the DSU is an assessment of "the applicability of and conformity with the relevant covered agreements". Consequently, we must also examine whether the Panel correctly interpreted and applied the substantive provisions of Articles 2 and 4 of the Agreement on Safeguards, in particular, those relating to the requirements of imports "in such increased quantities", "serious injury" to the domestic industry, and causation.

B. Interpretation and Application of Articles 2 and 4 of the Agreement on Safeguards

123. Articles 2.1 and 4.2 of the Agreement on Safeguards provide as follows:

Article 2

Conditions

1. 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. (footnote omitted)

Article 4

Determination of Serious Injury or Threat Thereof

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

(b) The determination referred to in subparagraph (a) shall not be made unless this investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.

(c) The competent authorities shall publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined.

124. We recall the Panel's ultimate conclusions on Articles 2.1 and 4.2:

For the foregoing reasons, we conclude that Argentina's investigation did not demonstrate that there were increased imports within the meaning of Articles 2.1 and 4.2(a); that the investigation did not evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of the domestic industry within the meaning of Article 4.2(a); that the investigation did not demonstrate on the basis of objective evidence the existence of a causal link between increased imports and serious injury within the meaning of Article 2.1 and 4.2(b); that the investigation did not adequately take into account factors other than increased imports within the meaning of Article 4.2(b); and that the published report concerning the investigation did not set forth a complete analysis of the case under investigation as well as a demonstration of the relevance of the factors examined within the meaning of Article 4.2(c).

Therefore, we find that Argentina's investigation and determinations of increased imports, serious injury and causation are inconsistent with Articles 2 and 4 of the Safeguards Agreement. As such, we find that Argentina's investigation provides no legal basis for the application of the definitive safeguard measure at issue, or any safeguard measure.¹¹⁴

1. Increased Imports

125. With respect to the requirement relating to "increased imports", the Panel stated as follows:

The Agreement on Safeguards requires an increase in imports as a basic prerequisite for the application of a safeguard measure. The relevant provisions are in Articles 2.1 and 4.2(a).¹¹⁵

^...

Thus, to determine whether imports have increased in "such quantities" for purposes of applying a safeguard measure, these two provisions require an analysis of the rate and amount of the increase in imports, in absolute terms and as a percentage of domestic production.¹¹⁶

126. In its evaluation of whether the investigation by the Argentine authorities demonstrated the required increase in imports under Articles 2.1 and 4.2(a), the Panel stated the following:

� the Agreement requires not just an increase (i.e., any increase) in imports, but an increase in "such�quantities" as to cause or threaten to cause serious injury. The Agreement provides no numerical guidance as to how this is to be judged, nor in our view could it do so. But this does not mean that this requirement is meaningless. To the contrary, we believe that it means that the increase in imports must be judged in its full context, in particular with regard to its "rate and amount" as required by Article 4.2(a). Thus, considering the changes in import levels over the entire period of investigation, as discussed above, seems unavoidable when making a determination of whether there has been an increase in imports "in such quantities" in the sense of Article 2.1.¹¹⁷ (emphasis added)

127. The Panel concluded that Argentina did not adequately consider the "intervening trends in imports, in particular the steady and significant declines in imports beginning in 1994, as well as the sensitivity of the analysis to the particular end points of the investigation period used."¹¹⁸ For these reasons, the Panel concluded that "Argentina's investigation did not demonstrate that there were increased imports within the meaning of Articles 2.1 and 4.2(a)".¹¹⁹ The Panel, though, rejected an argument made by the European Communities "that only a 'sharply increasing' trend in imports at the end of the investigation period can satisfy this requirement."¹²⁰

128. Argentina maintains that, in its interpretation and application of the requirement of "increased imports" in Articles 2.1 and 4.2 of the Agreement on Safeguards, the Panel "impose[d] a variety of methodological hurdles which must be overcome before a finding of 'increased imports' can be justified."¹²¹ In particular, Argentina argues that the Panel misinterpreted the word "rate" in Article 4.2(a) to include "direction", and found that there could only be "increased imports" if: (i) a change in the base year from 1991 to 1992 would still result in an increase; (ii) the analysis of end points and interim periods is mutually reinforcing; and (iii) it is found that the decrease in imports in 1994 and 1995 was temporary.¹²² Argentina also asserts that the Panel "collapsed" the "increased imports" requirement "with the other qualitative requirements of Article 2" and wrongly treated it as
a "qualitative, rather than a separate quantitative requirement.¹²³" The ordinary meaning of "increased imports", in Argentina's view, is that imports have become greater, and Argentina argues that there is no factual or contextual support for any additional requirements in the Agreement on Safeguards.¹²⁴

129. We agree with the Panel that Articles 2.1 and 4.2(a) of the Agreement on Safeguards require a demonstration not merely of any increase in imports, but, instead, of imports "in such increased quantities � and under such conditions as to cause or threaten to cause serious injury."¹²⁵ In addition, we agree with the Panel that the specific provisions of Article 4.2(a) require that "the rate and amount of the increase in imports � in absolute and relative terms" (emphasis added) must be evaluated.¹²⁶ Thus, we do not dispute the Panel's view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a).¹²⁷ As a result, we agree with the Panel's conclusion that "Argentina did not adequately consider the intervening trends in imports, in particular the steady and significant declines in imports beginning in 1994, as well as the sensitivity of the analysis to the particular end points of the investigation period used."¹²⁸

130. All the same, while we do not find that the Panel erred in its application of the requirement in Article 2.1 of the Agreement in Safeguards that the "product is being imported � in such increased quantities", we do find the Panel's interpretation of that requirement somewhat lacking. We note that the Panel characterized this condition in Article 2.1 on several occasions in the Panel Report simply as "increased imports". However, the actual requirement, and we emphasize that this requirement is found in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, is that "such product is being imported � in such increased quantities"¹²⁹, "and under such conditions as to cause or threaten to cause serious injury to the domestic industry". (emphasis added) Although we agree with the Panel that the "increased quantities" of imports cannot be just any increase, we do not agree with the Panel that it is reasonable to examine the trend in imports over a five-year historical period. In our view, the use of the present tense of the verb phrase "is being imported" in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 indicates that it is necessary for the competent authorities to examine recent imports, and not simply trends in imports during the past five years - or, for that matter, during any other period of several years.¹³⁰ In our view, the phrase "is being imported" implies that the increase in imports must have been sudden and recent.

131. We recall here our reasoning and conclusions above on the meaning of the phrase "as a result of unforeseen developments" in Article XIX:1(a) of the GATT 1994. We concluded there that the increased quantities of imports should have been "unforeseen" or "unexpected".¹³¹ We also believe that the phrase "in such increased quantities" in Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 is meaningful to this determination. 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".

2. Serious Injury

132. With respect to the requirement relating to "serious injury", Article 4.2(a) of the Agreement on Safeguards provides, in relevant part:

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

133. The Panel stated that the requirements of Article 4.2(a) obliged it to:

� consider, first, whether all injury factors listed in the Agreement were considered by Argentina, as the text of Article 4.2(a) of the Agreement ("all relevant factors � including � changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment") is unambiguous that at a minimum each of the factors listed, in addition to all other factors that are "relevant", must be considered.¹³²

The Panel also concluded that, pursuant to the provisions of Article 4.2(c) and, by reference, Article 3 of the Agreement on Safeguards, it was required to examine whether Argentina's findings and conclusions on "serious injury" were supported by the evidence before the Argentine authorities.

134. The Panel read Article 4.2(a) literally to mean that all the listed factors: "changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment" - must be evaluated in every investigation. In addition, the Panel stated that all other relevant factors having a bearing on the situation of the industry must also be evaluated. As the Panel found that Argentina had not evaluated two of the listed factors, capacity utilization and productivity, the Panel concluded that Argentina's investigation was not consistent with the requirements of Article 4.2(a).¹³³

135. Argentina submits that the Panel erred in its analysis of Argentina's determination of "serious injury". According to Argentina, Article 4.2(c) of the Agreement on Safeguards requires only a demonstration of the relevance of the factors examined, rather than an examination of all the listed factors as relevant.¹³⁴ In response to the Panel's finding that Argentina had not properly evaluated the factors of capacity utilization and productivity, Argentina replies by maintaining that the factor of productivity is explicitly mentioned in Act 338 and that data sufficient to calculate capacity utilization was available to the Argentine authorities.¹³⁵ Furthermore, Argentina argues that neither capacity utilization nor productivity was a principal or a significant issue in the investigation.¹³⁶ Argentina also takes issue with the Panel's view that the available data for 1996 should have been examined by Argentina in its investigation of "serious injury". Here, Argentina responds that the record clearly shows that the data for 1996 was incomplete, and Argentina submits that it was appropriate and reasonable to use a single review period for which all the data was available as a basis for its determination of "serious injury". In addition, Argentina argues that the Panel erred in several aspects of its examination of the evidence considered by the Argentine authorities.

136. We agree with the Panel's interpretation that Article 4.2(a) of the Agreement on Safeguards requires a demonstration that the competent authorities evaluated, at a minimum, each of the factors listed in Article 4.2(a) as well as all other factors that are relevant to the situation of the industry concerned. Furthermore, we do not dispute the Panel's finding that Argentina did not evaluate all of the listed factors, in particular, capacity utilization and productivity. We consider the other points that Argentina has raised in this appeal, relating to the availability of data for 1996 and to the Panel's evaluation of the evidence considered by the Argentine authorities, to relate to matters of fact which are not within our mandate, under Article 17.6 of the DSU, to examine on appeal.

137. For these reasons, we uphold the Panel's conclusion that Argentina did not evaluate "all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry" as required by Article 4.2(a) of the Agreement on Safeguards.

138. However, although it was not necessary for the Panel to go beyond where it did in this case, as the Panel found that Argentina had not evaluated all of the required listed factors, we do not believe that an evaluation of the listed factors in Article 4.2(a) is all that is required to justify a determination of "serious injury" under the Agreement on Safeguards. We note, in this respect, that there is a definition of "serious injury" in Article 4.1(a) of the Agreement on Safeguards, which reads as follows:

"serious injury" shall be understood to mean a significant overall impairment in the position of a domestic industry. (emphasis added)

And we note that, in its legal analysis of "serious injury" under Article 4.2(a), the Panel made no use whatsoever of this definition.

139. In our view, it is only when the overall position of the domestic industry is evaluated, in light of all the relevant factors having a bearing on a situation of that industry, that it can be determined whether there is "a significant overall impairment" in the position of that industry. Although Article 4.2(a) technically requires that certain listed factors must be evaluated, and that all other relevant factors must be evaluated, that provision does not specify what such an evaluation must demonstrate. Obviously, any such evaluation will be different for different industries in different cases, depending on the facts of the particular case and the situation of the industry concerned. An evaluation of each listed factor will not necessarily have to show that each such factor is "declining". In one case, for example, there may be significant declines in sales, employment and productivity that will show "significant overall impairment" in the position of the industry, and therefore will justify a finding of serious injury. In another case, a certain factor may not be declining, but the overall picture may nevertheless demonstrate "significant overall impairment" of the industry. Thus, in addition to a technical examination of whether the competent authorities in a particular case have evaluated all the listed factors and any other relevant factors, we believe that it is essential for a panel to take the definition of "serious injury" in Article 4.1(a) of the Agreement on Safeguards into account in its review of any determination of "serious injury".

3. Causation

140. With respect to the requirement of causation, Article 4.2(b) of the Agreement on Safeguards provides that a determination of serious injury:

� shall not be made unless this investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.

141. The Panel interpreted the requirements of Article 4.2(b) as follows:

� we will consider whether Argentina's causation analysis meets these requirements on the basis of (i) whether an upward trend in imports coincides with downward trends in the injury factors, and if not, whether a reasoned explanation is provided as to why nevertheless the data show causation; (ii) whether the conditions of competition in the Argentine footwear market between imported and domestic footwear as analysed demonstrate, on the basis of objective evidence, a causal link of the imports to any injury; and (iii) whether other relevant factors have been analysed and whether it is established that injury caused by factors other than imports has not been attributed to imports.¹³⁷

142. On causation, the Panel stated:

� the trends -- in both the injury factors and the imports -- matter as much as their absolute levels. In the particular context of a causation analysis, we also believe that this provision means that it is the relationship between the movements in imports (volume and market share) and the movements in injury factors that must be central to a causation analysis and determination.

In practical terms, we believe therefore that this provision means that if causation is present, an increase in imports normally should coincide with a decline in the relevant injury factors. While such a coincidence by itself cannot prove causation (because, inter alia, Article 3 requires an explanation - i.e., "findings and reasoned conclusions"), its absence would create serious doubts as to the existence of a causal link, and would require a very compelling analysis of why causation still is present.¹³⁸

143. Argentina argues on appeal that the Panel erred in establishing and applying three "standards" in its analysis of causation. First, Argentina maintains that the Panel required that an upward trend in imports must coincide with a downward trend in the injury factors. On this point, Argentina maintains that Article 4.2(c) of the Agreement on Safeguards refers to "changes" and not to "downward trends", so that there is no requirement that there be a "downward trend" in each year of the period of investigation. Moreover, Argentina maintains that the Panel's requirement of "coincidence" in time is not implied by the term "cause". Second, Argentina asserts that the Panel used the phrase "under such conditions" to develop a requirement that the "conditions of competition" between imported and domestic footwear in the Argentine market demonstrate a causal link between the increased imports and injury. Argentina asserts that there is no basis in the Agreement on Safeguards for this requirement. Third, Argentina maintains that the Panel required the Argentine authorities to establish that other relevant factors had been analyzed, and that injury caused by factors other than imports is not evidence of serious injury caused by imports. In Argentina's opinion, this requirement goes far beyond what is actually required in Article 4.2(b) of the Agreement on Safeguards.

144. We note that Article 4.2(a) requires the competent authorities to evaluate "the rate and amount of the increase in imports", "the share of the domestic market taken by increased imports", as well as the "changes" in the level of factors such as sales, production, productivity, capacity utilization, and others. We see no reason to disagree with the Panel's interpretation that the words "rate and amount" and "changes" in Article 4.2(a) mean that "the trends -- in both the injury factors and the imports -- matter as much as their absolute levels."¹³⁹ We also agree with the Panel that, in an analysis of causation, "it is the relationship between the movements in imports (volume and market share) and the movements in injury factors that must be central to a causation analysis and determination."¹⁴⁰ (emphasis added) Furthermore, with respect to a "coincidence" between an increase in imports and a decline in the relevant injury factors, we note that the Panel simply said that this should "normally" occur if causation is present.¹⁴¹ The Panel qualified this statement, however, in the following sentence:

While such a coincidence by itself cannot prove causation (because, inter alia, Article 3 requires an explanation - i.e., "findings and reasoned conclusions"), its absence would create serious doubts as to the existence of a causal link, and would require a very compelling analysis of why causation still is present.¹⁴²

145. We are somewhat surprised that the Panel, having determined that there were no "increased imports", and having determined that there was no "serious injury", for some reason went on to make an assessment of causation. It would be difficult, indeed, to demonstrate a "causal link" between "increased imports" that did not occur and "serious injury" that did not exist. Nevertheless, we see no error in the Panel's interpretation of the causation requirements, or in its interpretation of Article 4.2(b) of the Agreement on Safeguards. Rather, we believe that Argentina has mischaracterized the Panel's interpretation and reasoning. Furthermore, we agree with the Panel's conclusions that "the conditions of competition between the imports and the domestic product were not analysed or adequately explained (in particular price); and that 'other factors' identified by the CNCE in the investigation were not sufficiently evaluated, in particular, the tequila effect."¹⁴³

146. For all these reasons, we uphold the Panel's conclusion that "Argentina's findings and conclusions regarding causation were not adequately explained and supported by the evidence."¹⁴⁴

147. And, on the basis of all of the above reasoning, we uphold the Panel's findings and conclusions in paragraph 8.279 and paragraph 8.280 of the Panel Report, including the conclusions that "Argentina's investigation and determinations of increased imports, serious injury and causation are inconsistent with Articles 2 and 4 of the Safeguards Agreement."¹⁴⁵ We also uphold the Panel's ultimate conclusion that "Argentina's investigation provides no legal basis for the application of the definitive safeguard measure at issue, or any safeguard measure."¹⁴⁶

C. Article 12.7 of the DSU

148. Argentina also contends that the Panel violated Article 12.7 of the DSU by failing to provide "a basic rationale" for its findings and conclusions. Article 12.7 of the DSU reads, in relevant part:

� the report of a panel shall set out the findings of fact, the applicability of relevant provisions and the basic rationale behind any findings and recommendations that it makes. (emphasis added)

149. In our reports in Korea - Alcoholic Beverages¹⁴⁷ and Chile - Taxes on Alcoholic Beverages¹⁴⁸, we found that the panels in those cases had provided sufficient reasons for their findings and recommendations, and that, therefore, the requirements of Article 12.7 of the DSU were fulfilled. In this case, the Panel conducted extensive factual and legal analyses of the competing claims made by the parties, set out numerous factual findings based on detailed consideration of the evidence before the Argentine authorities as well as other evidence presented to the Panel, and provided extensive explanations of how and why it reached its factual and legal conclusions. Although Argentina may not agree with the rationale provided by the Panel, and we do not ourselves agree with all of its reasoning, we have no doubt that the Panel set out, in its Report, a "basic rationale" consistent with the requirements of Article 12.7 of the DSU.

150. For these reasons, we reject Argentina's appeal under Article 12.7 of the DSU. Indeed, we cannot help but note that, in this appeal, Argentina seems to be arguing that the Panel said and did both too much and too little.

VIII. Findings and Conclusions

151. For the reasons set out in this Report, the Appellate Body:

(a) concludes that the Panel did not exceed its terms of reference by referring in its reasoning to Article 3 of the Agreement on Safeguards;

(b) reverses the Panel's conclusion in paragraph 8.69 of the Panel Report that "safeguard investigations conducted and safeguard measures imposed after the entry into force of the WTO agreements which meet the requirements of the new Safeguards Agreement satisfy the requirements of Article XIX of GATT", and also reverses the Panel's finding that the Uruguay Round negotiators "expressly omitted" the phrase "as a result of unforeseen developments" from Article 2 of the Agreement on Safeguards;

(c) declines to make a finding with respect to the European Communities' claim under Article XIX of the GATT 1994 since, in light of the findings in paragraph (f) below, there is, in any event, no legal basis for the safeguard measures imposed by Argentina;

(d) reverses the Panel's findings and conclusions relating to footnote 1 to Article 2.1 of the Agreement on Safeguards and Article XXIV of the GATT 1994, and concludes that Argentina, on the facts of this case, cannot justify the imposition of its safeguard measures only on non-MERCOSUR third country sources of supply on the basis of an investigation that found serious injury or threat thereof caused by imports from all sources, including imports from other MERCOSUR member States;

(e) concludes that the Panel correctly stated and applied the appropriate standard of review, as set forth in Article 11 of the DSU;

(f) upholds the Panel's findings and conclusions that Argentina's investigation and determinations of increased imports, serious injury and causation are inconsistent with Articles 2 and 4 of the Agreement on Safeguards, and that, accordingly, Argentina's investigation provides no legal basis for the application of the definitive safeguard measure at issue or any safeguard measure; and

(g) concludes that the Panel did not fail to set out the "basic rationale" behind its findings and recommendations as required by Article 12.7 of the DSU.

152. The Appellate Body recommends that the DSB request that Argentina bring its safeguard measures found in this Report, and in the Panel Report as modified by this Report, to be inconsistent with the Agreement on Safeguards, into conformity with its obligations under that Agreement.

Signed in the original at Geneva this 17th day of November 1999 by:

__________________________

James Bacchus
Presiding Member

__________________________

Christopher Beeby
Member

 

_________________________

Mitsuo Matsushita
Member