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UNITED STATES - SAFEGUARD MEASURES ON
7.139 SG Article 4.2(a) requires that 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 factors listed in that provision. The language in this provision is mandatory ("shall�"). Also, this list is preceded by the term "in particular�". On the basis of the wording of the provision, we therefore concur with the shared view of the parties that all of the factors listed in SG Article 4.2(a) must be evaluated,178 and, moreover, we consider that factors not enumerated in SG Article 4.2(a) that are "relevant" must be examined. An examination of any one of those factors in a given case may lead the investigating authority to conclude, however, that a particular factor is not of an objective or quantifiable nature or probative in the circumstances of a particular industry (or segment) in a particular case. 7.140 In examining the USITC's threat of serious injury determination we examine, first, whether the USITC evaluated "all relevant factors of an objective and quantifiable nature having a bearing on the situation of [the] industry", in particular, the factors listed in SG Article 4.2(a), as well as any other relevant factors. Second, we examine whether the approach followed by the USITC consisted of a fact-based, future-oriented consideration of increased imports and of the condition of the US domestic industry.179 7.141 An initial issue before
us is whether, accepting arguendo the USITC's industry definition, all factors need to be investigated in detail for all identified industry segments (i.e., growers, feeders,
packers and breakers) or whether an investigation of certain injury factors with respect to particular segments only would be sufficient to meet the requirements of SG Article 4.2(a). In the
light of the general standard of review, as it applies to contingent trade remedy cases, we consider the latter as sufficient if there is an adequate explanation in the report published by the USITC,
of (i) why conclusive inferences from the data concerning one industry segment can be drawn for another industry segment,180 or (ii) why the factual constellation in particular industry
segment in the given case does not permit data collection (i.e., not a "factor of a objective and quantifiable nature"), or (iii) renders a certain injury factor not
probative in the circumstances of a particular industry segment (i.e., not a factor "having a bearing on the situation of that industry" within the meaning of SG Article 4.2(a).
(b) Summary of the injury data collected by the USITC 7.142 A review of the data, factor by factor, and industry segment by segment shows the following for
the period from the end of 1996 to September 1998 (the part of the investigation period which the USITC stated formed the basis of is threat finding): (i) Production and
shipments 7.143 For growers, production and shipment volume of lambs increased between 1996 and interim 1998 annualised.181 Total shipment value and average unit value declined. 7.144 For feeders, production, shipment volume and value, and average unit value declined between 1996 and 1998 interim annualised.182 7.145 For packers, production, shipment volume, value and average unit value all declined between 1996 and interim 1998 annualised.183 Shipment volume declined between 1996 and 1997, then increased slightly in interim 1998. Shipment value declined steadily throughout the period.184 7.146 For breakers, production and shipment volume and value increased between 1996 and interim 1998 annualised, and average unit
value declined.185 (ii) Capacity and capacity utilisation 7.147 As regards growers, the USITC did not collect data on capacity and utilisation because it was considered impractical given the variability in land conditions from ranch to ranch. 7.148 For feeders, data on capacity and capacity utilisation was also not collected because it was considered impractical given the difficulty of measuring a number of variables including length of time that lambs are kept by feeders, which may vary with market conditions. 7.149 For packers, capacity increased and production and capacity utilisation decreased between 1996 and interim 1998.186 7.150 For breakers, capacity increased by 30 per cent between
1996 and interim 1998. Capacity utilisation declined by 17 per cent.187 The USITC states that the decline in capacity utilisation resulted from the increase in capacity which was outpaced by the
increased production reported to the USITC by breakers. (iii) Employment 7.151 In respect of growers, the USITC notes that US Department of Agriculture ("USDA") data show a 20 percent decline in the number of growing establishments and that the sharp declines in slaughter suggest that employment indicators (such as the number of workers and the number of hours worked) declined during the period of investigation. 7.152 In respect of growers/feeders, the report also notes, however, that the questionnaire data show increases in the number of workers and the number of hours worked of both growers and feeders. The data also show small to moderate increases in these indicators between 1996 and interim 1998.188 7.153 In respect of packers/breakers, no employment data were provided. The USITC report states only that data were requested from growers and feeders, and does not mention packers
and breakers in this context. It is not clear whether the USITC even requested data from packers/breakers. (iv) Market share 7.154 For growers/feeders, no market share data were collected or calculated as they hold 100 per cent off market for live lambs. 7.155 For packers/breakers, the US producers' share of the US lamb meat market
declined from 83.4 per cent in 1996 to 80.3 per cent in 1997 and to 76.9 per cent in interim-1998. In 1993, it had been at 88.8 per cent. Thus, imports' market share increased from 16.6 per cent in
1996 to 19.7 per cent in 1997 and to 23.3 per cent in interim 1998.189 (v) Productivity 7.156 In terms of growers and feeders, productivity remained "relatively constant" during the period of investigation.190 7.157 In terms of packers and breakers, the USITC characterised productivity as "relatively constant" during the period of
investigation, on the basis of information on direct labour costs.191 (vi) Inventories 7.158 For growers and feeders, according to the USITC report, inventory data were not collected or discussed, but this factors is also not listed in SG Article 4.2(a). In any case, growers and feeders of live lamb are unlikely to have inventories of lamb meat. 7.159 Inventories of packers decreased during the 1993-1995, then increased between 1995 and 1997, before decreasing in interim 1998. Inventories were apparently at a low level
(i.e., "remained under" an undisclosed percentage) throughout that period of investigation. The USITC also found that inventories were a not particularly probative injury factor in this case due to
the perishability of fresh lamb meat.192 (vii) Financial performance (profit and loss) 7.160 Regarding growers, net sales value increased between 1996 and 1997, then decreased in interim 1998 compared to interim 1997. Net income increased between 1996 and 1997, although it remained well below the levels of 1993-1995193. Net income decreased between interim periods. As a percent of sales, net income increased from 0.7 percent in 1996 to 2.8 percent in 1997, and (for the smaller group of companies that reported data for the interim periods) declined from 22.2 percent to 13.5 percent between interim 1997 and 1998.194 7.161 Regarding feeders, net sales value increased between 1996 and 1997, then declined between interim periods. Net income went from positive to negative between 1996 and 1997, with the loss increasing several-fold in interim 1998. As a percent of net sales, net income declined from a profit of 3 percent to a loss of 0.7 percent between 1996 and 1997, and to a loss of 8.4 percent in interim 1998.195 7.162 Regarding grower/feeders, no data were reported for the interim periods. Net sales value increased between 1996 and 1997, and total expenses also increased, more rapidly than did net sales. No indexed data were provided by the USITC for profits and losses. The unit value of sales for slaughter lambs declined, while it increased for feeder lambs and cull ewes.196 7.163 Regarding packers, total net sales declined between 1996 and 1997, and continued to decline in interim 1998. The unit value of sales decreased between 1996 and 1997 and continued to decrease in interim 1998. Operating income dropped from positive to negative between 1996 and 1997, and the losses deepened in interim 1998.197 7.164 Regarding breakers, there was only one reporting company. For purposes of protecting business confidential information, the panel did not request, and the United States did not submit this information, also not in indexed form.198 7.165 Regarding packer/breakers, net sales value decreased steadily between 1996 and
interim 1998. Operating income in 1997 and interim 1998 declined sharply from the 1996 level. The unit value of sales also declined during this period.199
(viii) Difficulty of
generating capital 7.166 For growers/feeders, the USITC report indicates that a number of them reported difficulties in generating adequate capital to finance the modernisation of their plant and equipment (i.e., cancellation/rejection of expansion plans, reductions in the size of capital investments, bank rejection of loans, reduced credit ratings, and difficulty in repaying loans).200 7.167 For packers/breakers, the USITC indicates that a number of them reported difficulties in recouping new investments and in repaying loans.201
(ix) Prices and price trends 7.168 The USITC collected data on a number of specific products202 and also examined USDA wholesale price data on various products.203 The data collected by the USITC data generally show US producers' prices at a lower level at the end of the interim-1998 than during 1997, although these prices generally turned upward during interim 1998. A similar finding is made with respect to the import prices. 7.169 The USITC states that some packers and breakers reported having to reduce prices to compete with low-priced imports. 7.170 USDA data on prices for live lambs purchased for slaughter also were lower in interim 1998 than in 1997, although they increased somewhat over the course of the interim 1998 period. The USDA data also show some upturns in the interim period for certain cuts of lamb meat, although here again the prices at the end of the interim period remained below the 1997 level. 7.171 The USITC data on prices included as well prices of imported lamb meat, as well as margins of under/overselling by the imported product over the domestic product.204 The
report on the investigation notes that the imported lamb consistently undersold the domestic lamb for all products except one, and that the average margins of underselling by the Australian product
ranged from 29.0 to 42.0 percent. Underselling by the New Zealand product ranged from 19.7 to 36.5 percent. The USITC determination does not refer to these price differentials, but rather notes the
declining trends in the unit values and prices of imports. (c) Evaluation by the Panel 7.172 We emphasize again here that our evaluation of the USITC's consideration of the factors listed in SG Article 4.2(a) is based on our acceptance, arguendo, of the industry definition that in fact was used by the USITC in the investigation. That is, taking at face value the industry defined as encompassing growers, feeders, packers and breakers, the question that we address here is whether the USITC adequately addressed all of the SG Article 4.2(a) factors in respect of the industry so defined. Of course, this in no way alters our finding above in respect of that industry definition as such. 7.173 We recall that the USITC stated that for growers and feeders of live lamb, by definition there can be no inventories of lamb meat and that for packers and breakers, while inventories of packers rose slightly, this factor is not particularly probative for the industry's condition due to the perishability of meat. 7.174 The USITC report in this case also states that collection of capacity data from growers and feeders was impractical due to measurement variations among individual growers. For similar reasons, the USITC did not place much emphasis on the information on increasing capacity of packers and breakers. The USITC acknowledges though that declines in capacity utilisation were also due to the fact that capacity increased at a faster rate than production.205 7.175 Moreover, the treatment of employment in respect of packers and breakers is very cursory, essentially consisting of an inference drawn from these establishments� financial information as to labour productivity.206 7.176 Furthermore, we note that "total net sales" are only one of the possible indicators for an industry's financial performance. It is clear from the USITC report that this factor was indeed investigated for the different industry segments. We recall that we did not request such information regarding breakers for reasons of protecting business confidentiality, but we consider that the financial information before us was sufficient for a review of the industry's profits and losses. 7.177 We emphasise that more thorough treatment of these factors (i.e., capacity utilisation and employment) would have been better. However, we also note that the USITC has investigated all the relevant injury factors listed in SG Article 4.2(a), consistent with WTO dispute settlement practice.207 We also consider that, where the USITC did not collect data concerning a particular injury factor with respect to all industry segments, the USITC report provides an adequate explanation for that. Either the USITC report explains how inferences can be drawn from the data collected with regard to one segment for another segment for which data were not collected, or it explains why, in the circumstances of the particular industry segment at issue, the collection of data of an objective and quantifiable nature was not possible, or it explains why a specific injury factor is not probative for that segment. 7.178 However, these
preliminary considerations about the analysis of injury factors are subject to our discussions concerning the analytical approach taken by the USITC in reaching its threat determination as well as to
whether the data collected are representative of a "major proportion" of the producers in the relevant industry segments, and whether the USITC properly defined the domestic industry (see section
VII.C above). 3. The USITC's analysis of threat of serious injury in this investigation (a) Projections relevant to a threat of injury finding 7.179 The complainants claim that the USITC approach to examining whether threat of serious injury exists does not meet the standard set by SG Article 4.1(b) for a prospective analysis of the industry's condition. In particular, New Zealand208 argues that there should be an examination of the trends in supply and demand in the domestic market, of the factual evidence of the position of the domestic industry in the past and an extrapolation into the future, and of trends in domestic and imported prices of the product. Based on these past trends and any evidence of forward contract prices, there should be an analysis of how prices were likely to develop in the future. This is particularly important in the case of seasonal or agricultural products because of seasonal fluctuations, and such an analysis should be based on at least three years' worth of data. In New Zealand�s view, a price analysis based on "a single season's data" as it characterises the USITC's price analysis, does not provide the basis for an objective determination "based on facts". 7.180 Australia argues that a threat analysis supported by facts must demonstrate that the situation of the domestic industry will change markedly and that such a change is imminent. For Australia it is necessary that "facts are prospective" so as to allow an evaluation to determine that serious injury will occur imminently. The complainants do not provide further elaboration of the nature of "prospective facts", nor concerning how such facts should be obtained or evaluated for reliability. 7.181 The complainants do not define in further detail a specific methodology for how a prospective analysis of future developments in the industry's condition should, in practice, be conducted, what kind of data or trend extrapolations would be relevant and reliable as the basis for such an analysis, and how an analysis based solely on projections of industry performance would avoid being "allegation, conjecture or remote possibility" which SG Article 4.1(b) prohibits. 7.182 The United States points as proof of the USITC's prospective analysis of future developments in the industry�s condition to its causation finding, in particular to the projections obtained in the investigation that lamb meat exports from Australia and New Zealand to the United States would continue to increase in 1999. It also refers to the declining trend in import and domestic prices for lamb meat at the end of the period of investigation. 7.183 The complainants criticise the USITC approach first as inadmissible because the United States invokes elements of its causation analysis as a demonstration of the existence of a threat of injury. 7.184 We recall that the Safeguards Agreement does not set out a particular methodology to be followed by competent national authorities in determining serious injury or threat and causation. We do not consider it decisive how the USITC itself structured analytically its report on the investigation and determination, as long as the competent authority's threat and causation analysis in their totality establish the existence of threat of serious injury as well as of a causal link between increased imports and such threat consistent with the Safeguards Agreement.209 7.185 The complainants further claim that the US reference to projections of future increases in imports in defending its threat analysis amounts to equating a "threat of increased imports" with a "threat of serious injury", which the Argentina � Footwear panel found not to be permissible. 7.186 We deem the reliance on the Argentina � Footwear findings as inapposite, because in that case imports were declining at the time that the Argentine authorities made their determination, so that the threat finding was based on a projection that imports would begin to increase if a safeguard measure were not imposed. The Safeguards Agreement requires of course as a basic prerequisite for the application of a measure, that imports be increasing. In the present dispute, there is no disagreement that US lamb meat imports were increasing steadily at the time of the USITC's determination. The projected increases in 1999 thus were of further increases, not the commencement of an increase. 7.187 We agree in general with the complainants� argument that a threat of increased imports as such cannot be equated with threat of serious injury. However, in our view, this is not what the USITC has done in this case. Moreover, we also deem it possible that imports continuing on an elevated level for a longer period without further increasing at the end of the investigation period may, if unchecked, go on to cause serious injury (i.e., may threaten to cause serious injury). That is, if increased imports at a certain point in time cause less than serious injury, it is not necessarily true that a threat of serious injury can only be caused by a further increase, i.e., additional increased imports. In our view, in the particular circumstances of a case, a continuation of imports at an already recently increased level may suffice to cause such threat. 7.188 In our view, the same logic applies to the complainants' arguments that the aggravated decline in other injury factors such as prices,210 or financial performance211 in the most
recent past (i.e., 1997 and interim-1998) has to be seen in the context of the industry's "long-term secular decline"212 or does not concern some of the firms operating in the industry. Again, we do not
exclude that in the particular circumstances of a case, e.g., prices remaining at a depressed level for a longer period may be sufficient for a determination on the whole that an industry is
threatened with serious injury even if a given injury factor does not show a recent, sharp and sudden decline. Also, a threat finding does not require that, e.g., financial performance of each
individual firm operating in the industry show a decline. A competent national authority may arrive at a threat determination even if the majority of firms within the relevant industry is not facing
declining profitability, provided that an evaluation of the injury factors as a whole indicates threat of serious injury. (b) Relevant time-period for the threat analysis 7.189 While the USITC collected data for five full years (1993-1997 and interim-1998) and in addition for the first nine months of 1997 and 1998 (the "interim periods"), it based its determination of threat of threat of serious injury on declines at the end of that period (i.e., 1997 and interim 1998).213 7.190 We do not share the complainants' criticism that the time-frame used by the USITC for it is analysis is too short. More specifically, New Zealand in this connection characterises the data on which the USITC based its determination as "a single season's data", and argues that the analysis of projected import volumes and prices should have been based on a minimum of three years of past data.214 7.191 In this respect, we also note that, in offering their own interpretations and explanations of the USITC data, the complainants frequently refer to the investigation period as a whole. For example, the complainants argue that over that period, the increase in imports was considerably smaller than the decline in domestic production/shipments. The USITC's finding of "displacement" of domestic production by imports, however, is based on the end of the investigation period. 7.192 In our view, due to the future-oriented nature of a threat analysis, it would seem logical that occurrences at the beginning of an investigation period are less relevant than those at the end of that period. While the SG Agreement does not specify the appropriate duration of the time-period to be considered in an investigation, the Panel and Appellate Body in Argentina � Footwear both considered this issue to some extent. Both concluded that (for an actual serious injury finding) the most recent data were clearly the most relevant. In particular, the Appellate Body stated that "the relevant investigation period should not only end in the very recent past, the investigation period should be the recent past".215 7.193 Given that a threat of serious injury pertains to imminent significant overall impairment, i.e., an event to take place in the immediate future, the same principle should hold true a fortiori for threat determinations compared with present serious injury determinations. This supports the view that the USITC was correct to focus on the most recent data available from the end of the investigation period. We also consider that data from 1997 and interim-1998 cover an adequate and reasonable time-period if complemented by projections extrapolating existing trends into the imminent future so as to ensure the prospective analysis which a threat determination requires. 7.194 Therefore, we consider that, by basing its determination on events at the end of the investigation period (i.e., one year and nine months) rather than over the course of the entire investigation period, the USITC analysed sufficiently recent data for making a valid evaluation of whether significant overall impairment was "imminent" in the near future. By the same token, we also consider that, by basing its determination at all on data about events from the recent past, rather than relying exclusively on projections for the various industry indicators into the future, the USITC made its threat determination on the basis of objective and quantifiable facts, and "not merely on allegation, conjecture or remote possibility". 7.195 In the light of the foregoing considerations,
we see no conceptual fault with the USITC's analytical approach used in its threat of serious injury determination, in particular with respect to the prospective analysis and the time-period used.
(c) Evaluation of data pertaining to the period from January 1997 to September 1998 7.196 Next, we examine whether the USITC's determination of threat of serious injury, the factual findings and explanations that the data show declines in various indicators (i.e., market share, production, shipments, profitability and prices) for the industry's performance, particularly during 1997 and interim 1998, and the projections concerning future import volumes and prices (as contained in the causation section of the USITC) are sufficiently fact-based and sufficiently forward-looking to meet the requirements of SG Article 4.1(a) and (b) and 4.2(a). 7.197 This review is different from the complainants' challenges against the representativeness of the data, and is separate as well from the issues raised by complainants concerning the interpretation of the data such as the time-periods that they consider most relevant, and the alternative explanations that they have put forward for the various trends in the data. 7.198 The parties are not in disagreement on the fact that the imports of lamb meat had increased significantly, especially during the latter part of the period of investigation (by 19 per cent in 1997 as well as in interim-1998), and were projected to continue to increase in 1998 and 1999. 7.199 We note that the complainants do not, as such, challenge the USITC's findings that there were declines in 1997 and interim-1998 for most of the indicators referred to by the USITC in its determination. 7.200 New Zealand appears to acknowledge explicitly that there were declines in market share, production volume and value, prices, number of growing establishments, sales by packers and breakers, and revenue of packers, breakers and feeders.216 New Zealand also implicitly acknowledges (in pointing to an increase in gross profits of packer/breakers in interim-1998) that operating profitability declined for all segments of the industry in 1997 and interim 1998.217 New Zealand, while acknowledging that prices in the interim period were lower than during 1997, also argues that prices rose from the latter part of 1998 and that the United States has now disclosed that those price increases continued in 1999.218 New Zealand also cites to testimony of a professor of agricultural economics concerning USDA projections of price increases in 1999.219 Concerning underselling, New Zealand questions the validity of the USITC's data. New Zealand argues that some of the products for which price comparisons were made by the USITC are not comparable, and thus that there was less underselling than was identified by the USITC. New Zealand nevertheless seems to acknowledge, at least as part of an argument concerning the significance of those findings, that the USITC found some underselling.220 7.201 With regard to the other factors examined by the USITC which it did not identify as forming part of the basis of its threat finding, the complainants view the increases in capacity and production by breakers including in 1997 and interim-1998, along with the increases in capacity of packers in these periods, as evidence of positive performance. They also point to a decrease in packers' inventories during interim 1998 as evidence of an improved ability to make sales. According to New Zealand, the USITC "dismissed" as "mixed evidence" the data on capacity, capacity utilisation, inventories and productivity.221 7.202 Australia submits that for growers, production and sales increased, that productivity apparently increased, that capacity utilisation was not examined, that net income without subsidies was positive in 1998 compared with 1993-1996, and that employment increased. It appears that in making these arguments Australia is looking at the entire period of investigation, rather than the end thereof. Regarding the end of the period of investigation (interim-1998), Australia draws attention to the increase in shipments of live lambs reported in questionnaire data as well as a slight increase in shipments of lamb meat as reflected in USDA data. Australia further notes that the production figures and the number of workers employed by growers increased during interim-1998. 7.203 We note that in our view SG Article 4.1(b) and 4.2(a) do not require the competent national authority to show that each listed injury factor is declining, i.e., point in the direction of serious injury or threat thereof. The competent national authority is required to make its determination in the light of the developments of injury factors on the whole in order to determine whether the relevant industry's condition is facing "significant overall impairment" in the industry's condition is imminent. We agree with the Appellate Body�s statement in Argentina � Footwear that:
7.204 Therefore, in the light of the specific evidence, explanations and prospective analysis reflected in the USITC report, we consider the USITC's reliance, among other
difficulties, on factors including the domestic industry's market share, production, shipments, profitability and prices as a sufficient basis for determining whether threat of serious injury exists.
We also consider that the USITC's analysis of the overall picture of trends reflected in and projected from the most recent data (especially from 1997 and interim-1998) along with the projections
concerning further increases in imports (assuming arguendo that the data on which these trends and projections were based were representative of a major proportion of the producers forming the
relevant industry),223 seem to confirm the USITC determination that a "significant overall impairment" in the overall position of the domestic industry was clearly imminent.
(d) The
complainants' alternative explanations for the decline in the US industry's condition 7.205 In their submissions, Australia and New Zealand offer a number of alternative explanations for the declines in the US industry's performance at various points during the period of investigation. Some of these explanations are the "other factors" considered by the USITC in its analysis of causation (e.g., cessation of the Wool Act subsidies, lack of an adequate marketing and promotion strategy by US lamb producers), while they derive other explanations from the investigation's record.224 7.206 The United States responds to these alternative explanations by stating that the complainants are asking the Panel to engage in a de novo review, by reweighing the evidence and substituting its own analysis and judgment for the determinations made by the USITC. 7.207 As confirmed in Argentina � Footwear,225 the
standard of review applicable in safeguard cases limits panels to reviewing whether the competent national authorities have examined all the relevant facts and have provided a reasoned explanation of
how the facts supported their determinations. Thus, to the extent that any of the alternative explanations put forward by Australia and New Zealand are in effect new analyses of the record evidence,
they are not relevant to our review. Rather, these factual and legal arguments would be relevant to our review only to the extent that they were raised in the investigation, in which case we would
need to consider whether the USITC gave a reasoned explanation of why the facts supported its conclusions in respect of them, and whether that explanation is persuasive. We note in this regard that
there were a number of alternative explanations for the condition of the industry that were raised by parties and considered by the USITC during the investigation. These were the cessation of
the Wool Act subsidies, alleged failure to develop and implement an effective marketing programme for lamb meat, competition from other meats, alleged increased input costs, alleged overfeeding of
lambs, and alleged concentration in the packer segment. We discuss the USITC's consideration of all of these factors under "other factors" in the section on causation below. 7.208 Australia and New Zealand claim that the data relied upon by the USITC do not represent a "major proportion" of the industry producing lamb meat as required by SG Article 4.1(c). They argue that the responses to the USITC's questionnaires provided an inadequate basis for it to render judgments about the condition of the industry (however broadly defined) as a whole. 7.209 The complainants accept that in general the coverage of responses received from packers and breakers is much more complete than for growers and feeders. However, New Zealand points out that this coverage is very inconsistent as among the different factors considered, and in particular that the United States has not provided any information as to the coverage of the questionnaire responses in respect of financial data.226 According to New Zealand, only 49 growers, three grower/feeders, and nine feeders, representing only 5 per cent of the US lamb crop in 1997, provided data on the financial condition of the live lamb industry227, while the feeders reporting financial data represented approximately one-third of the slaughtered lambs fed in feedlots in 1997.228 Moreover, no financial data were provided for interim 1998 by grower/feeders.229 7.210 New Zealand notes that data on domestic shipments and inventories were provided in response to questionnaires from five packers, which the USITC estimated to account for 76 per cent of the sheep and lambs slaughtered in the US in 1997.230 However, information on the financial condition of the packers was provided by only four packers, two of whom were also packer/breakers231, and the USITC's report does not indicate which of these firms were included in the five packing firms estimated to account for 76 per cent of the sheep and lambs slaughtered in the United States in 1997. 7.211 Concerning breakers, New Zealand argues that the USITC received usable questionnaire responses from four firms,232 yet only three firms (including two who were also packers) provided data on their financial condition,233 and only one of these was solely a breaker. New Zealand points out that no information has been provided on the proportion of total breaker output represented by the one breaker response. As a result, according to New Zealand, the USITC made findings on the financial condition of lamb meat packers and breakers on the basis of financial data provided by five firms - two packers, two packer/breakers, and only one breaker,234 and it is not possible to determine the percentage of each segment's operations that is represented by these questionnaires, and thus to know whether these firms represent a valid sample of packers. 7.212 The United States describes the number of usable questionnaire responses in very similar terms: Out of 74,710 growers (1997), the USITC received usable data from 57 firms or individuals accounting for an estimated 6 per cent of domestic live lamb production.235 But the United States emphasises that the questionnaire coverage of packers and breakers was much higher than for growers and feeders. According to the United States, the five responding packers and packer/breakers accounted for approximately 76 percent, i.e., a sizeable majority, of the lambs slaughtered.236 The United States provides no specific information on the coverage of the four breakers who provided useable data in response to the questionnaire, however. Rather, the United indicates that in total, 75 percent of lamb carcasses are processed by breakers while the remaining 25 percent are processed by packers, and that there are 16 known breakers in the United States of which four were the ones providing usable data. Neither the fact that breakers process three times as much lamb meat as packers, nor the fact that one quarter of the total number of known breakers provided useable questionnaire data, indicates however the percentage of total domestic output of breakers that was represented by the questionnaire data used by the USITC237 7.213 Thus, while in total the questionnaire responses received from packers accounted for a sizable majority of the packers segment, the coverage of the usable data received on production, capacity utilization, etc., compared with that received on financial indicators is unknown. Similarly, information on the overall representativeness of the breakers' questionnaire responses has not been provided by the United States although it was specifically requested by the Panel.238 As noted above, the questionnaire data for growers/feeders represents only a small minority of that total segment. 7.214 The complainants further argue that the USITC picked and chose between questionnaire data and data published by the USDA in a result-oriented way. 7.215 The United States argues that the USITC relied on the USDA data to the extent they were available because they were more complete than the USITC's questionnaire data. The USITC report itself characterizes the sample represented by the questionnaire respondents from growers and feeders as not constituting a statistically valid sample.239 Rather, the USITC report indicates that questionnaires were sent to 110 establishments "believed to be among the larger growers of lambs". According to the USITC report, the usable data collected through the growers, feeders and grower/feeders questionnaires represented approximately 6 percent of domestic lamb production.240 7.216 The USDA data used by the USITC include the data on lamb slaughter, which the USITC used to estimate US production and shipments of lamb meat (quantity and value).241 The USITC also used USDA data on the prices of live lambs sold for slaughter as well as for certain lamb meat cuts.242 In addition, the USITC relied on USDA data concerning the number of lamb growers for its finding that the number of growers declined during the period of investigation. For the remaining indicators of the industry's condition, the questionnaire responses were the USITC's only source of information. 7.217 While we share the complainants' concerns about the representativeness of the questionnaire response data, their criticism of the USITC's use of USDA data where available seems misplaced. The sense of SG Article 4.1(c)'s reference to the producers as a whole or those constituting a major proportion thereof is clearly in favour of the use of the most comprehensive data possible. Given that the USDA compiles and publishes data that according to the USITC have much better coverage than the questionnaire data, we see no impediment in the Safeguards Agreement to the USITC's having relied on them. Indeed, if the USITC had ignored the USDA data and relied exclusively on the scarce questionnaire data for growers and feeders, the complainants would have had stronger grounds for complaint. 7.218 Thus, in our view, the crucial problem with the data used by the USITC relates to the representativeness of the questionnaire data where they were used (e.g., employment, financial indicators), and not with the use of USDA data where available. In particular the low data coverage for growers and feeders (approximately six per cent), the lack of financial data for interim 1997 and 1998 for grower/feeders, and the uneven data coverage for packers and breakers (especially in the financial data as outlined above) raises serious doubts as to whether the data represent a "major proportion" of the domestic industry, in the sense of SG Article 4.1(c). 7.219 This lack of representativeness is likely compounded by the fact that the USITC defined the domestic industry broadly as including growers and feeders, as the conclusions drawn from the data pertaining to only a small proportion of US growers and feeders are central to the USITC's overall finding of threat of serious injury. 7.220 We agree with the United States that the Safeguards Agreement does not specify any particular methodology to ensure the representativeness of data collected in an investigation.243 But we also note that the USITC itself concedes that the questionnaire responses do not constitute a statistically valid sample of the producers which, in the USITC's view, form an essential part of the domestic industry.244 While, again accepting arguendo the USITC's industry definition,245 we recognize that in practical terms it would have been impossible for the USITC to collect data from all of the more than 70,000 growers, we nevertheless believe that the USITC could have obtained data from a larger percentage of the growers than it did or from a statistically valid sample, so as to ensure that the data collected were representative of growers as a whole. In any case, petitioners requesting the initiation of an investigation could not automatically be taken to represent a major proportion of the domestic industry.246 7.221 In the light of the foregoing, we conclude that on the basis of the information made available by the United States in this dispute (and absent more detailed information on
the exact coverage of the questionnaire responses), by industry segment and by injury factor, we are not persuaded that the data used as a basis for the USITC�s determination in this case was
sufficiently representative of "those producers whose collective output � constitutes a major proportion of the total domestic production of those products" within the meaning of SG
Article 4.1(c). 5. Conclusions concerning the USITC's threat of serious injury determination in this case 7.222 In the light of the foregoing considerations, we see no conceptual fault with the USITC's analytical approach used in its threat of serious injury determination, in particular with respect to the prospective analysis and the time-period used. 7.223 We further emphasise that more thorough treatment of certain injury factors (i.e., capacity utilisation and employment) would have been better. But we also note that where the USITC did not collect data concerning a particular injury factor with respect to all industry segments, it provided an adequate explanation of how inferences can be drawn from the data collected with regard to one segment for another segment for which data were not collected, or why, in the circumstances of the particular industry segment at issue, the collection of data of an objective and quantifiable nature was not possible, or why a specific injury factor is not probative for that industry segment. 7.224 We also consider the USITC�s analysis of threat of serious injury in the present investigation to be sufficiently fact-based and future-oriented, in that it relied on available factual information as to expected future developments, notably projected import increases and the likely price effects of those increases on the domestic industry. We also see no analytical flaw in the USITC�s decision to rely on the most recent data (from 1997 and interim 1998) as the basis for reaching its conclusions on threat of serious injury. 7.225 However, we are not persuaded that the data used as a basis for the USITC�s determination in this case were sufficiently representative of "those producers whose collective output � constitutes a major proportion of the total domestic production of those products" within the meaning of SG Article 4.1(c). 7.226 In the light of the foregoing considerations and conclusions, we find that the USITC's threat of serious injury determination in the lamb meat investigation is inconsistent with SG Article 4.1(c), and thus with SG Article 2.1.
7.227 SG Article 4.2(b) requires for a determination of serious injury or threat thereof that:
7.228 In safeguard investigations, the USITC traditionally applies the so-called "substantial cause" standard embodied in the US safeguard statute, Section 202(b)(1)(B). According to this standard, the USITC determines whether the subject article is being imported in such increased quantities as to be a "substantial cause" of serious injury or threat of serious injury, i.e., a cause which is "important and not less than any other cause". 7.229 New Zealand and Australia claim that the "substantial cause" and "not less than any other cause" standard of the US safeguards legislation as it was applied in the lamb safeguard determination is inconsistent with the requirements of SG Article 4.2(b). The complainants fault this standard because, they allege, it could be met even if increased imports are only one of many causes of serious injury or threat, as long as no single other cause is more important than increased imports. For Australia and New Zealand, increased imports by themselves must be causing or threatening a degree of injury that is "serious" for the causation standard of the Safeguards Agreement to be met. 7.230 The United States contends that the complainants� claims amount in fact to a challenge of the US safeguards statute per se, which is not within this Panel's terms of reference. We have issued a preliminary ruling on 25 May 2000 (see above, paragraphs 5.54-5.56 and pertinent reasoning, see paragraphs 5.57-5.58) that the application of the US causation standard by the USITC in this lamb investigation at issue is within our terms of reference, whereas the US safeguards statute per se (and the causation standard as embodied therein in general terms) is not. 7.231 On the merits of these claims, the United States defends the "substantial cause" standard as applied in this investigation with the following
arguments. The term "cause" as it is used in, e.g., SG Articles 2 and 4, in the US view does not imply that increased imports need to be the sole cause of injury as long as they are a
substantial cause in the connection between imports and injury. Nor does the SG Article 4.2(b) require competent national authorities to examine the effects of increased imports in isolation
from other factors. In support of that argument, the United States recalls the reasoning of the panel on United States � Salmon from Norway,247 which dealt with claims under the Tokyo Round
Anti-Dumping Code. That panel reasoned that there was no requirement "in addition to examining the effects of imports" that the "USITC should somehow have identified the extent of injury caused by
these other factors in order to isolate the injury caused by these factors from the injury caused by the imports from Norway."248 2. General interpretative analysis of causation and
non-attribution of "other factors" 7.232 In past disputes under concerning the WTO Safeguards Agreement,249 panels have used a three-step test in applying the causation standard of SG Article 4.2(b): the analysis focused on (i) whether upward trends in imports coincide with downward trends in the injury factors, and if not, whether an adequate explanation is provided as to why nevertheless the data show causation; (ii) whether the conditions of competition between the imported and domestic product as analysed demonstrate the existence of a causal link between the imports and any injury; (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. While the complainants do allege that the USITC did not properly examine the conditions of competition in the marketplace250, in our view the main focus of the causation issue in this dispute is in respect of the application of the third step, especially in the light of the United States' application of its "substantial cause" standard in this investigation. 7.233 Thus, we first consider whether, in conducting its investigation into whether increased imports were "a cause that is important and not less than any other cause" of any threat of serious injury to the domestic industry producing lamb meat, the USITC satisfied the requirements in SG Article 4.2(b)(i) to demonstrate the causal link between the increased imports and the threat of serious injury, and (ii) not to attribute to imports injury caused by other factors. 7.234 SG Article 4.2(b) limits the application of safeguard measures to circumstances where increased imports cause or threaten to cause serious injury. There can be, of course, no threat of serious injury attributable to imports at all if that threat is entirely attributable to other causes. However, SG Article 4.2(b) does not preclude Members from attributing threat of serious injury to increased imports where other factors have also contributed to that threat251 � as long as they ensure that increased imports are not blamed for any of the injury caused by other factors. In this situation, the question then arises whether SG Article 4.2(b) requires that increased imports in isolation or by themselves are sufficient to cause a threat of serious injury, although "other factors" may aggravate that threat. 7.235 We recall that the relevant provisions of the Safeguards Agreement impose a dual obligation: Members are required (i) to demonstrate the existence of a causal link between increased imports and serious injury suffered by the domestic industry; and (ii) not to attribute injury being caused by other factors to increased imports. 7.236 We begin our interpretative analysis with the relevant parts in SG Article 4.2�s subparagraph (a), i.e., "in the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry" and in subparagraph (b), i.e., "[that] determination � 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". 7.237 The word "to cause" means "effect, bring about, occasion, produce, induce, make",252 or also "to serve as cause or occasion of". The word "the cause" means "that which produces an effect or consequence; an antecedent or antecedents followed by a certain phenomenon"; it "indicates a condition or circumstance or combination of conditions and circumstances that effectively and inevitably calls forth an issue, effect or result or that materially aids in that calling forth."253 7.238 We agree with the United States that the ordinary meaning of "cause" implies that increased imports need not be the sole or single cause of serious injury. But all these dictionary definitions indicate that serious injury or threat thereof must result from increased imports, regardless of whether increased imports are qualified as an "important" cause, or one that "materially aids" in generating the result. In other words, the ordinary meaning requires a showing of a link (i.e., a unifying element) between increased imports and injury or threat thereof of a "serious" degree. It is not enough that increased imports cause just some injury which may then be intensified to a "serious" level by factors other than increased imports. In our view, therefore, the ordinary meaning of these phrases describing the Safeguards Agreement�s causation standard indicates that increased imports must not only be necessary, but also sufficient to cause or threaten a degree of injury that is "serious" enough to constitute a significant overall impairment in the situation of the domestic industry. We also note that there is a difference between a sole cause, on the one hand, and a necessary and sufficient cause, on the other. Any sole cause is by definition a necessary and sufficient cause, but obviously not any necessary and sufficient cause is the sole cause, it may coincide with other causes as recognised by the second sentence of SG Article 4.2(b). 7.239 We believe that the relevant context, in particular the second sentence of SG Article 4.2(b), confirms the ordinary meaning of these phrases. On the one hand, the requirement not to attribute to increased imports injury caused by other factors does not diminish the requirement of the subparagraph�s first sentence that increased imports by themselves need to be necessary and sufficient to cause serious injury or threat thereof. On the other hand, the second sentence of SG Article 4.2(b) also makes clear, as noted by the United States, that increased imports need not be the sole or exclusive causal factor present in a situation of serious injury or threat thereof, as the requirement not to attribute injury caused by other factors by implication recognises that multiple factors may be present in a situation of serious injury or threat thereof. 7.240 Our interpretation is also in conformity with the object and purpose of the Safeguards Agreement which is to provide for temporary relief and to facilitate adjustment to import competition in emergency situations where increased imports cause serious injury or threat thereof to the domestic industry producing goods which are like or directly competitive to those imports. These objectives could not be accomplished if increased imports are not a necessary and sufficient cause for serious injury or threat thereof because applying safeguard measures against increased imports would not be a justifiable or appropriate remedy for serious injury or threat thereof which is in fact caused by other factors. 7.241 In other words, where a number of factors, one of which is increased imports, are sufficient collectively to cause a significant overall impairment of the position of the domestic industry, but increased imports alone are not causing injury that achieves the threshold of "seriousness" set up by SG Article 4.2(a) and 4.2(b), the conditions for imposing a safeguard measure are not satisfied. While we believe that a Member remains free to determine any appropriate method of assessing causation, any method that it selects would need to ensure that the injury caused by increased imports, considered alone, is "serious injury", i.e., causing a significant overall impairment in the situation of the domestic industry. Moreover, we cannot see how a causation standard that does not examine whether increased imports are both a necessary and sufficient cause for serious injury or threat thereof would ensure that injury caused by factors other than increased imports is not attributed to those imports. 7.242 We also believe that our interpretation is confirmed by past GATT/WTO dispute settlement practice, in particular by the panel report on Argentina � Footwear, and is consistent as well with the findings of the Panel in US � Wheat Gluten (currently on appeal).254 7.243 Concerning SG Article 4.2(b)�s the causation standard, the panel in Argentina � Footwear suggested that, if causes other than imports are subtracted, increased imports by themselves must still be shown to cause or threaten to cause serious injury.255 In Argentina - Footwear, the Appellate Body upheld the panel's causation analysis, which included an examination of whether relevant other factors have been analysed and whether it is established that injury caused by factors other than imports has not been attributed to imports."256 7.244 In the recent dispute on US � Wheat Gluten, the EC criticised the US "substantial cause" test, arguing that it prevents the investigating authority from verifying the only important issue, i.e., whether increased imports are per se causing (or threatening to cause) a "significant overall impairment of the position of the domestic industry". 7.245 The US � Wheat Gluten panel concluded that SG Article 4.2(b)�s causation standard requires that imports in and of themselves must be capable of causing injury. That panel also noted that "the United States is free to determine an appropriate method of assessing causation" � "or how to go about ensuring that injury attributable to other factors is not attributed to imports", but "the method it selects must ensure that the injury caused by increased imports, considered alone, is 'serious' injury."257 7.246 We are also of the view that our interpretation of the Safeguard Agreement�s causation approach is consistent with the reasoning of the reports of the panels on US � Salmon from Norway under the Tokyo Round Subsidies and Antidumping Codes,258 to the extent that these are relevant for this safeguards dispute. The United States cites these panel reports in support of its argument that there is no requirement to isolate and quantify the percentage of injury caused individually by increased imports and each of the specific other causes. We agree that this panel rejects the notion that the USITC "should somehow have identified the extent of injury caused by these other factors in order to isolate the injury caused by these factors from the injury caused by the imports from Norway." However, the panel continues in holding that "the USITC was required to conduct an examination sufficient to ensure that in its analysis of factors � it did not find that material injury was caused by imports from Norway when material injury to the domestic industry allegedly caused by imports from Norway was in fact caused by factors other than these imports".259 7.247 In our view, this reasoning confirms our interpretation that SG Article 4.2(b) requires that increased imports by themselves must be a necessary and sufficient cause of serious injury or threat thereof and injury caused by other factors must not be attributed to increased imports. The recent panel on US � Wheat Gluten shares our reading of the US � Salmon from Norway panels' reasoning when the former states: "[a] Member is not necessarily required to quantify on an individual basis, the precise extent of �injury� caused by each other possible factor. However, a Member must conduct an examination that ensures that any injury caused by such other factors is not attributed to increased imports."260 7.248 Turning to the US "substantial cause" standard, it seems that this standard focuses on a somewhat different question than SG Article 4.2(a) and (b) as interpreted by us above. Under the "substantial cause" standard, the USITC examines whether imports are an important cause of injury and no less important than any other single cause (or put in other words, whether there is a single cause more important than increased imports). 7.249 As the following hypotheticals illustrate, this standard could imply, depending on circumstances, sometimes a higher and sometimes a lesser degree of causation than suggested by SG Articles 2.1 and 4.2(b): Under the US "substantial cause" standard it would seem possible that in cases where increased imports are an important cause of serious injury, no safeguard measure would be imposed where at least one other cause is more important than increased imports. By the same token, however, it would also seem possible that in cases where imports are an important cause contributing more injury than, or at least the same amount of injury as, any other cause individually, a safeguard measure could be applied because no single other factor individually is a more important cause than increased imports. In the latter situation, a safeguard measure could be imposed even if all other factors in combination cause the predominant part of injury, and serious injury would not have been caused by increased imports, if taken alone. 7.250 Thus,
when the USITC applies its "substantial cause" test, the question of whether increased imports by themselves are necessary and sufficient to cause a degree of injury or threat that is "serious" within
the meaning of SG Article 4.2(b) is not addressed by the United States' "substantial cause" standard, and thus can only be answered on a case-by-case, fact-specific basis. Similarly, the US
"substantial cause" standard as such does not address the issue of ensuring in all cases that no injury caused by other factors is attributed to increased imports. 3. The USITC�s
investigation of causation and non-attribution of "other factors" 7.251 In the light of our interpretation of the Safeguard Agreement�s causation standard and our considerations about the US "substantial cause" standard, the question arises whether the USITC determined in the lamb investigation that increased imports were by themselves a necessary and sufficient cause for threat of serious injury and whether injury caused by factors other than increased imports, if any, was not attributed to those imports. 7.252 During the panel proceeding, the United States has argued that the USITC determined that no factor other than increased imports contributed in any significant way to the threat of serious injury faced by the domestic industry. If the facts before us confirm this argumentation, then even the application of a causation standard which does not in all cases ensure consistency with the causation standard of the Safeguards Agreement could have resulted in no substantive error as far as the USITC's determination in the lamb investigation is concerned. Thus, it is important for us to review the precise wording of the report of that determination published by the USITC and the pertinent argumentation of the parties in their submissions.
7.253 We note in respect of causation that the USITC determined that "lamb meat is being imported into the United States in such increased quantities as to be a substantial cause of the threat of serious injury to the domestic industry producing an article like or directly competitive with the imported article". Thus, the USITC determination clearly states that in the view of the USITC, a causal link existed between the threat of serious injury that it found and the increased imports of lamb meat. 7.254 Specifically, the USITC found, concerning imports and their past effects, that import volumes had increased, reaching record levels in 1996 and surpassing those levels thereafter, and that that their unit values had declined and were continuing to drop. The USITC also found that the increase in imports had caused prices to fall, given the inability of growers and feeders to reduce their production in the short run. As a result, the USITC found, the financial performance of the various industry segments worsened due to declining sales and falling prices.261 7.255 The USITC also found, concerning the likely future effects of imports, that further increases in import volume were likely to have further negative effects on the domestic industry's prices, shipment volumes and financial condition in the imminent future. Additional increases in imports were expected, as exporters from Australia and New Zealand projected further increases in exports to the United States for 1998-1999. 7.256 The complainants argue that the USITC failed to establish any causal link whatsoever between increased imports and any threat of serious injury experienced by the US industry. In making these arguments, the complainants point to a number of alternative explanations for the declining condition of the US industry, the most important being the termination of the Wool Act subsidies, and the long-term contraction in US sheep production and in US consumption of lamb meat. They argue as well that there was little direct competition between imported and domestic lamb meat. 7.257 While many of the complainants' alternative explanations may conceivably contain some element of truth, this by no means amounts to a demonstration that imports played no role whatsoever in the condition of the US industry. In our view, the complainants have brought forward no proof of a complete absence of a causal link between the increased imports and the condition of the industry. We recall in this respect that under our standard of review, we are precluded from performing a de novo review of the domestic investigation, and from substituting our own judgement for that of the USITC. 7.258 By the same token, however, we recall our conclusion that, for the requirements of SG Article 4.2(b) to be met, increased imports must by
themselves be a necessary and sufficient cause of threat of a degree of injury that could be characterized as serious. Although we find no basis to conclude that imports had no effect on
the condition of the domestic industry, this does not mean that the USITC's conclusions cited above amount to a finding that imports by themselves were necessary and sufficient to threaten to cause
serious injury. Thus, as noted above, we must also consider whether in this particular case the USITC found that there was no other factor that contributed in any appreciable way to the declining
condition of the industry. If not, we also have to examine whether the United States did ensure that none of any injury caused by such other factors was attributed to increased imports. For this, we
must turn to the USITC's determination concerning each of the "other factors" that it examined. (b) USITC determination concerning the non-attribution of "other factors" 7.259 As discussed above, SG Article 4.2(b) requires consideration of whether any "factors other" than increased imports could have caused threat of serious injury, and also requires that any injury caused by such other factors not be attributed to increased imports. The USITC identified and investigated six such potential other causes: (i) the termination of the US Wool Act payments; (ii) competition from other meat products; (iii) increased input costs; (iv) overfeeding of lambs; (v) alleged concentration in the packer segment of the industry; and (vi) the lack of an effective industry marketing programme. 7.260 In this following section, we discuss whether with respect to these six "other factors" identified in the USITC's investigation, the language of the report published by the USITC confirms the argumentation of the United States in its submissions to the Panel. In particular, we note that the United States argues in its submissions that the USITC found that none of the "other factors" made any appreciable contribution to the threat of serious injury found to exist. According to the "substantial cause" standard applied by the USITC, however, the USITC is required to determine whether each of the potential "other factors" individually is a less important cause of threat of serious injury than increased imports. 7.261 In this respect, we recall our above consideration that, even if no one factor individually is a more important cause of a threat of serious injury than are increased imports, this does not exclude the possibility that all other factors collectively could contribute to this threat to such an extent that the threat of injury caused by increased imports in and of themselves does not rise to the requisite level of "seriousness" any more. In that case (and assuming that injury caused by other factors is not attributed to increased imports), the residual threat attributable to increased imports does not constitute a necessary and sufficient cause for threat of serious injury and thus no imposition of a safeguard measure is justified. 7.262 Thus, we must carefully review the exact nature of the USITC's determinations in respect of each of the identified possible "other factors". If the USITC did not find that none of these factors made more than a negligible contribution to the threat of serious injury, and if it did not ensure the non-attribution of injury caused by such other factors to increased imports, then we would have to conclude that the United States has not fulfilled the requirements of SG Article 4.2(b). 7.263 The USITC's causation determination
concerning the "other factors" is as follows: (i) Termination of payments under the National Wool Act of 1954 7.264 The USITC report states that the phasing out of the wool subsidies forced some growers to liquidate stocks, decreased availability and increased prices (e.g., 30 per cent decrease in domestic supply and associated decreases in breeding stock created difficulty in meeting demand).262 The report indicates that the growers earned a small profit in 1997, which the petitioners cited as evidence of recovery from the termination of the Wool Act payments. Concerning the termination of the Wool Act payments, the USITC states in the causation determination:
7.265 Before the Panel, the United States argues based on the above USITC statement that the effects of termination of wool subsidies were expected to "recede further with each
passing month", that the USITC found that termination of wool subsidies ceased to be relevant as an "other factor" as of 1997. We note, however, that the determination quoted above in fact states that
it was "unrealistic to conclude that the effects of the termination of Wool Act payments had completely disappeared as of 1997",264 and that the termination was merely a "less important" cause than
increased imports of the threat of serious injury. Thus, we cannot see how the USITC's determination could indeed constitute a finding that the termination of the Wool Act payments did not contribute
to any appreciable extent to the threat of serious injury that the USITC found to exist. (ii) Competition from other meat products and demand side factors 7.266 Another causal factor discussed by the USITC is the decline in lamb meat consumption due to changing consumer tastes and preferences, price ratios between lamb meat and substitute products (e.g., beef, pork and poultry), and changes in consumer income. In this regard, the USITC made the following finding:
7.267 This finding by the USITC appears to acknowledge that competition from other meats plays some role in the condition of the domestic lamb industry. In our view, therefore, this
finding that competition from other meats was not a more important cause than increased imports cannot be understood as a finding that such competition made no appreciable contribution
to the threat of serious injury. (iii) Increased input costs 7.268 The USITC noted that expenses for growers increased at a modest rate and then fell in interim 1998, that expenses for feeders increased at a faster pace but not at a dramatic pace, and that input costs for packers and breakers rose moderately in line with production. The USITC concluded that "[t]hus, there has been no significant increase in input costs that explains the sharp decline in industry profits, and no increase is predicted in the imminent future."266 7.269 Unlike its findings on factors (i) and (ii), here the USITC's determination on its face does appear to say that the USITC in fact did find that increased input costs played
and were expected to play no appreciable role in the condition of the industry. That is, the USITC did not couch this finding in the statutory language of increased input costs not being a "more
important" cause than imports of the threat of serious injury. We view this difference in the wording of the USITC's determination on this factor, as compared with the first two, as undercutting the
US argument that the USITC had in fact determined that none of the "other factors" had had any impact, but that the USITC was constrained by the language of the US statute to use the formal
construction thereof in setting forth that determination. (iv) Alleged overfeeding of lambs 7.270 Before the USITC, respondents alleged that in 1997 some US feeders held lambs unduly long in feed lots in order to maximise revenue while prices were high, and that these lambs were heavier than usual when slaughtered, which pulled down prices generally. In this respect, the USITC found that "even if we accept respondents' arguments, these 'fat' lambs would have accounted for no more than a small share of total domestic lamb production. In any event, respondents do not allege that overfeeding is currently taking place or represents a future threat."267 7.271 As with increased input costs (factor (iii)), the nature of the USITC's
determination in respect of alleged overfeeding appears to be expressed in different terms than for the factors (i) and (ii). That is, we view the USITC as in fact determining that the contribution of
overfeeding to the industry's condition during 1997, if any, was minimal and that there was no evidence that any overfeeding was taking place at the time of the determination or would take place in
the future. Thus, again, the fact that the USITC explicitly made such a finding in respect of this factor, but not in respect of all of the "other factors" again undercuts the US argument that the use
of the statutory language is simply a required formality. If this were in fact the case, that language would have been used in respect of all of the "other factors" examined.
(v) Alleged concentration in the packer segment of the industry 7.272 The USITC also considered whether concentration in the packer segment of the industry might be a "more important cause" of the threat of serious injury than increased imports, and cited USDA data indicating that nine packers accounted for 85 percent of the sheep and lambs slaughtered in 1997. According to the USITC, "an undue level of concentration" would have suggested that packers were sheltered from the effects of low-priced imports, and would have been able to pass through lower prices more readily to feeders and growers. The USITC noted that petitioners had claimed that concentration in the packer segment had actually decreased during the period of investigation, and the USITC further found that packers, "like other segments of the lamb meat industry", had experienced deteriorating profits in the latter part of the period of investigation, and had operated at a loss in interim 1998. The USITC concluded that "concentration in the packer segment of the industry is a less important cause of the threat of serious injury than increased imports."268 7.273 The USITC did not define what it meant by an "undue" level of concentration, and rather looked to the financial performance of the packers as the basis for its finding that
concentration in this segment was a less important cause of threat than were increased imports. Moreover, the fact that the USITC returned to the statutory language in rendering its
determination concerning this factor (i.e., that this "other factor" is a less important cause than increased imports) suggests that the nature of its conclusion was qualitatively different
than for the two preceding "other factors" (i.e., increased input costs and overfeeding). Here again, we do not believe that the USITC determination that this cause was less important than increased
imports can be understood as a finding that such concentration in the packer segment played no role in the threat of serious injury. (vi) Failure to develop and implement an
effective marketing programme for lamb meat 7.274 Finally, the USITC also identified, considered as an "other factor", and made a finding in respect of, whether the failure to develop and implement an effective marketing programme for lamb meat was a more important cause of the threat of serious injury than increased imports, "particularly in light of the repeal of the longstanding Wool Act payment programme".269 The USITC concluded that:
7.275 The USITC does not elaborate on which parts of the "foregoing discussion" lead to its conclusion concerning the lack of an effective marketing programme, or on how that
discussion demonstrates that the absence of an effective marketing programme was a less important cause than increased imports of the threat of serious injury. We note that in respect of this factor,
the USITC again returned to the statutory language in setting forth its determination. As in the case of the termination of wool subsidies, competition from other meats, and alleged concentration in
the packer segment, we do not believe that the USITC determination that the lack of an effective marketing programme was not more important than increased imports can be understood as a finding that
such competition made no appreciable contribution to the threat of serious injury. 4. Conclusions on causation and non-attribution of "other factors" 7.276 In the light of the foregoing, we conclude that the United States has, in applying the "substantial cause" test (i.e., "important cause and not less than any other cause") in the lamb investigation, not shown, pursuant to SG Article 4.2(b), that increased imports were by themselves a necessary and sufficient cause of threat of serious injury. 7.277 We also conclude, as a matter of fact, that the determinations by the USITC in respect of four of the six "other factors" examined do not constitute determinations that these factors made no appreciable contribution to the threat of serious injury. Rather, the USITC found that these four factors were "less important" causes than increased imports of the threat of serious injury, which in our view means that they were contributing in a more than insignificant way to that threat. Therefore, we conclude that the USITC's application of the "substantial cause" test in the lamb meat investigation as reflected in the USITC report did not ensure that threat of serious injury caused by other factors has not been attributed to increased imports. 7.278 Finally, we recall our preliminary ruling of 25 May 2000 and the pertinent reasoning contained in paragraphs 5.54-5.58 above that the US safeguard statute per se is not within this Panel's terms of reference, and that, consequently, our findings are limited to an examination of the US causation standard as applied in this investigation concerning imports of lamb meat. 7.279 In the light of the foregoing considerations and conclusions, we find that the USITC's determination of a causal link between increased imports and threat of serious injury as well as its determination on "other factors" in this lamb meat investigation is inconsistent with SG Article 4.2(b), and thus also with SG Article 2.1.
7.280 Bearing in mind the statements of the Appellate Body on "judicial economy" in the disputes on United States � Shirts and Blouses and Australia � Salmon,271 we believe that in the foregoing sections we have addressed all those claims and issues which we considered necessary for the resolution of the matter in order to enable to DSB to make sufficiently precise recommendations and rulings for the effective resolution of the dispute before us. Therefore, we see no need to rule on the complainants' claims under SG Articles 2.2, 3.1, 5.1 and GATT 1994 Articles I and II, or on Australia's claims under SG Articles 8, 11 and 12. VIII. CONCLUSIONS AND RECOMMENDATIONS 8.1 On the basis of the foregoing considerations, we conclude:
8.2 We therefore recommend that the Dispute Settlement Body request the United States to bring its safeguard measure on imports of lamb meat into conformity with its obligations under the WTO Agreement on Safeguards and the GATT of 1994.
178 We find support for our view in the Appellate Body Report in Argentina � Footwear, op. cit. There, the Appellate Body stated: "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) �". Appellate Body Report, Argentina-Footwear, paragraph 136; Panel Report, Argentina-Footwear, op. cit., at paragraph 8.123. See also Panel Report on Korea � Dairy, op. cit., at paragraph 7.55. Regarding disputes concerning safeguard measures under the Agreement on Textiles and Clothing, the panel and Appellate Body Reports on US � Underwear and US � Shirts and Blouses follow the same line holding that at least all the injury factors applicable under the Textiles Agreement need to be examined. 179 Here again we emphasize that for purposes of our analysis of this question we accept, arguendo, the facts in the USITC report at face value, without prejudice to our consideration of the issues before us, including industry definition and representativeness of data. 180 "In considering each of the factors listed in SG Article 4.2, and any others found to be relevant by the authority, the investigating authority has two options: for each factor, the investigating authority can consider it either for all segments, or if it decides to examine it for only one or some segment(s), it must provide an explanation of how the segment(s) chosen is (are) objectively representative of the whole industry". See Panel Report on Korea � Dairy, op. cit., at paragraph 7.58. 181 Table 1, USITC Report, Exh. US-1, at II-12. 182 Table 2, Id. at II-13. 183 Tables 8 and 9, USITC Report, Exh. US-1, at II-22 (indexed data, Annex 3-7, US Answer to Panel Question 24). 184 Table 5, USITC Report, Exh. US-1, at II-17. 185 Tables 3 and 4, USITC Report, Exh. US-1, at II-16 (indexed data, Annex 3-7, US Answer to Panel Question 24). 186 Table 8, USITC Report, Exh. US-1, at II-22 (indexed data, Annex 3-7, US Answer to Panel Question 24). 187 Table 4, USITC Report, Exh. US-1, at II- 16 (indexed data, Annex 3-7, US Answer to Panel Question 24). 188 Table 11, USITC Report, Exh. US-1, at II-23. 189 Table 32, USITC Report, Exh. US-1, at II-50. 190 Productivity was calculated from questionnaire data, referenced in the USITC Report (Exh. US-1) in footnote 97, at I-20. 191 Referenced in USITC Report, Exh. US-1, footnote 98, at I-20. 192 USITC Report, Exh. US-1, at I-20. 193 Complainants attribute this decline in income to the elimination of the Wool Act subsidies. 194 Table 12, USITC Report, Exh. US-1, at II-25. We note that only 27 of 49 producers provided interim period data, so these are not comparable to the full year data. 195 Table 15, USITC Report, Exh. US-1, at II-30-32. 196 Table 14, USITC Report, Exh. US-1, at II-29 (indexed data, Annex 3-7, US Answer to Panel Question 24). No data were provided for the interim periods. 197 Table 16, USITC Report, Exh. US-1, at II-33 (indexed data, Annex 3-7, US Answer to Panel Question 24). 198 Table 20, USITC Report, Exh. US-1, at II-34. 199 Table 18, USITC Report, Exh. US-1, at II-33 (indexed data, Annex 3-7, US Answer to Panel Question 24). 200 USITC Report, Exh. US-1, at I-21, Appendix F. 201 USITC Report, Exh. US-1, at I-21. The data show that packers made large capital investments in 1997, and packer/breakers in 1995 and 1996. 202 Tables 39-43, USITC Report, Exh. US-1, at II-75-76 (indexed data, Annex 3-7, US Answer to Panel Question 24). 203 USITC Report, Exh. US-1, figures 5-10, at II-58 to II-61. 204 USITC Report, Exh. US-1, at II-51ff. 205 USITC Report, Exh. US-1, at I-20. 206 Tables 16-20, USITC Report, Exh. US-1, at II-33-34 (indexed data, Annex 3-7, US Answer to Panel Question 24). USITC Report, Exh. US-1, at I-20. 207 See Panel and Appellate Body Reports on Argentina � Footwear, op. cit., at paragraph 8.123 and paragraph 136, and Panel Report on Korea � Dairy, op. cit., at paragraph 7.55 in respect of the Safeguards Agreement. 208 Question 7 from the Panel to Australia and New Zealand (Annexes 1-7 and 2-8). 209 From a contextual perspective, we also note that "threat" determinations under the AD and SCM Agreements, too, blend the trends and projections for imports and for the domestic industry indicators. 210 First Written Submission of New Zealand, Annex 2-1, at paragraph 7.59. 211 Id., and First submission of Australia, Annex 1-1, at paragraphs 153-164. 212 First submission of New Zealand, Annex 2-1, at paragraph 7.62. 213 The USITC report (Exh. US-1) at I-18 states that "In mid-1997, economic indicators relating to the industry began to fall. As described below, the deterioration in these indicators that occurred after 1996 confirms that the industry is threatened with serious injury". 214 Response of New Zealand to Question 7 from the Panel (Annex 2-8). 215 Appellate Body Report on Argentina � Footwear, op. cit., at footnote 130. 216 First Written Submission of New Zealand, Annex 2-1, at paragraph 7.56. 217 Second Written Submission of New Zealand, Annex 2-9, at paragraph 4.23. 218 The basis for New Zealand's argument concerning price trends in the United States in 1999 is a 7 July 1999 press release by Australia's Deputy Prime Minister denouncing the safeguard measure, in which Mr. Fischer refers to a "recent increase in lamb prices in the United States". Thus, this is not a statement by the USITC as to the trend in prices in 1999. The United States submitted this document as an exhibit in a different context. Given that we are not engaging in a de novo review of the national investigation, we note that this argument is not relevant to our examination of the USITC investigation, because it is based on a document dated well after the investigation was finished, which thus was not part of the record of the investigation, and because it pertains to actual events following the period of investigation, as opposed to projections concerning what would happen in the months following the investigation. 219 Exh. NZ-16, and footnote 49 to the second written submission of New Zealand, Annex 2-9. 220 Second Written Submission of New Zealand, Annex 2-9, at paragraphs 2.18, 4.10 and 4.11. See, New Zealand's statements that "meaningful comparisons are possible for only 3 of 8 products surveyed and in one of those, the domestic product actually oversold the imported product" (Second Oral Statement of New Zealand, Annex 2-10, at paragraph 36), and that "the so-called 'underselling' tended to reduce over the period of investigation and in any case was present throughout that period" (Second Written Submission of New Zealand, Annex 2-9, at paragraph 4.11. Emphasis in original.) 221 First Written Submission of New Zealand, Annex 2-1, at paragraph 7.61. 222 Appellate Body Report on Argentina � Footwear, op. cit., at paragraph 139. 223 See our findings on representativeness of data below, and on industry definition above. 224 See paragraphs 7.200-7.202, above. 225 Appellate Body Report on Argentina � Footwear, op. cit., at paragraph 121. 226 First Submission of New Zealand, Annex 2-1, at paragraphs 4.6-4.11. 227 USITC Report, Exh. US-1, at II-24. 228 Id. 229 Id. at II-29. 230 Id. at II-14. 231 Id. 232 Id. at II-15. 233 Id. at II-24. 234 Id. at II-29 to II-34. 235 Id. at I-17, II-11; US Answer to Question 14 of the Panel (Annex 3-7). 236 US Answer to Question 14 of the Panel (Annex 3-7). 237 US Answer to Question 14 of the Panel (Annex 3-7). 238 US Answer to Question 14 of the Panel (Annex 3-7). 239 USITC Report, Exh. US-1, at I-17. 240 USITC Report, Exh. US-1, at I-17; and US Answer to Question 14 of the Panel (Annex 3-7). 241 Tables 5 and 7, USITC report, Exh. US-1, at II-17. 242 Figures 3 and 5-10, USITC Report, Exh. US-1, at II-55, II-58-II-61. 243 See US Answer to Question 16 of the Panel (Annex 3-7). 244 USITC Report, Exh. US-1, at I-17. 245 Of course, only once the relevant domestic industry has been defined consistently with SG Article 4.1(c) is it logically possible to select producers representing a "major proportion" of the collective output of the like or directly product in question, or to develop a valid statistical sample that would ensure that the data collected are representative of a major proportion of the domestic industry. 246 Growers: "All growers in the United States were associated with petitioners, since membership in the petitioning association was automatically based upon receipt of Wool Act payments. Thus the USITC could not send questionnaires to 'unassociated' growers. Only a few growers were named individually as petitioners, as the great majority of questionnaire recipients consisted of companies with no particular known view of the safeguard proceeding. To obtain financial or other data on grower operations, [the USITC] sent questionnaires to 110 firms and individuals believed to be among the larger growers of lamb. (USITC Report, Exh. US-1, at I-20). The USITC identified questionnaire respondents in the other industry segments based on names and addresses which petitioners supplied in the petition pursuant to USITC regulation (Exhibit US-39)" See US response to Question 15 of the Panel (Annex 3-7). Feeders: "Nine feeders were identified in the petition. The Commission sent questionnaires to 11 firms believed to be feeders and received responses from 18 feeder operations, including several growers that also maintain feeder operations." See USITC Report, Exh. US-1, at II-13. Packers: "The packing segment of the industry is somewhat concentrated, with 5 responding firms accounting for 76 per cent (based on USDA data) of the sheep and lamb slaughtered in the United States in 1997. Questionnaires were sent to 17 firms identified as packers/slaughterers of lambs." See USITC Report, Exh. US-1, at II-14. Breakers: "This segment of the industry is as concentrated as the packing segment. In addition to packers who further process lamb into cuts, there are less than 10 major firms in the United States engaged in processing lamb carcasses � Questionnaires were sent to 16 firms identified as breakers of lamb meat." See USITC Report, Exh. US-1, at II-15. 247 Panel Report on United States � Imposition of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, ADP/87, BISD 41S/229, adopted by the Committee on Anti-dumping Practices on 27 April 1994. 248 Id., at paragraph 555. 249 See Panel Report on Argentina - Footwear, op. cit., at paragraph 8.229; Appellate Body Report on Argentina � Footwear, op. cit., at paragraph 145; Panel Report on United States � Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities WT/DS166/R, dated 31 July 2000, appeal pending, at paragraph 8.91. 250 See, e.g., First Written Submission of New Zealand, Annex 2-1, at paragraphs 7.78-7.88. 251 The second sentence of SG Article 4.2(b) explicitly recognizes this possibility, as discussed below. 252 Oxford English Dictionary, at 355. 253 Webster's New International Dictionary, at 355-356. 254 See, Panel and Appellate Body Reports on Argentina � Footwear, op. cit.; Panel Report on United States � Wheat Gluten, op cit.; Panel Report on United States � Imposition of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, adopted by the Committee on Antidumping Practices on 27 April 1994, ADP/87, BISD 41S/229; and Panel Report on United States � Imposition of Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, adopted by the Committee on Subsidies and Countervailing Measures on 28 April 1994, SCM/153, BISD 41S/576. 255 Panel Report on Argentina - Footwear, op. cit., at paragraph 8.229. 256 The Appellate Body also adopted the panel's opinion 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" (paragraph 142, Appellate Body Report on Argentina � Footwear). A coincidence between increase in imports and deterioration in injury factors would normally occur if causation is present, and its absence would create serious doubts as to the existence of the causal link. Such a coincidence by itself cannot prove causation, there is also a need for an adequate explanation of how the facts support the determination. But an absence of such coincidence would cast doubt on the existence of a causal link, it would require a particularly convincing explanation in the �findings and reasoned conclusions� published pursuant to Article 3.1 of the Safeguards Agreement. (See, Panel Report on Argentina � Footwear, op. cit., at paragraph 8.238.) 257 Panel Report on United States � Wheat Gluten, op. cit., at paragraph 8.140. 258 Panel Report on United States � Imposition of Anti-dumping Duties on Imports of Fresh Chilled Atlantic Salmon from Norway, op. cit., and Panel Report on United States � Imposition of Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, op. cit. 259 Panel Report on United States � Imposition of Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, op. cit., at paragraph 321. 260 Panel Report on US - Wheat Gluten, op. cit., at paragraph 8.142. 261 USITC Report, Exh. US-1, at I-23-24. 262 Id. at II-79. 263 Id. at I-24-I-25. Footnotes omitted, emphasis added. 264 Id. at I-24. 265 Id. at I-25. Footnotes omitted, emphasis added. 266 Id. at I-25. 267 Id. at I-25. Footnotes omitted. 268 Id. at I-25-26. Footnotes omitted, emphasis added. 269 In its interim review comments, the United States argues that the failure to develop and implement an effective marketing programme for lamb meat is not a factor that falls within the scope of SG Article 4.2(b), citing its answer to one of our questions. (See, US Answer to Panel Question 11, Annex 3-7, at paragraph 85: "The USITC was not required to assume that it was appropriate to consider the absence of such a program to be a factor causing injury under Article 4.2(b) as opposed to a possible adjustment measure to address injury."). We note that the language of SG Article 4.2(b) is open-ended as to what sorts of "other factors" might potentially be causing injury in a given investigation, by implication leaving it to investigating authorities to identify such potential "other factors" in the light of the facts of each particular case. In this regard, we note that it was the USITC that decided to investigate the lack of a marketing programme as one among several possible "other factors" that might be threatening to cause injury to the domestic industry. In the light of this decision by the USITC, and given that we are precluded from engaging in a de novo review of the case, we believe that we can only assess the USITC's determination in respect of this factor on its own terms, i.e., as a finding in respect of a possible "other factor" within the meaning of SG Article 4.2(b). 270 USITC Report, Exh. US-1, at I-26. Emphasis added. 271 See paragraph 7.119 and footnotes 156-157.
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