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UNITED STATES - SAFEGUARD MEASURES ON
AB-2001-1
(Continued)
VII. Causation 162. In assessing the claims made by Australia and New Zealand relating to causation, the Panel began with a "[g]eneral interpretative analysis" of the relevant provisions of the Agreement on Safeguards , before turning to the application of that interpretation to the facts of this dispute.115 The Panel took note of the terms of Articles 4.2(a) and 4.2(b) of that Agreement116 and, after examining the ordinary meaning of the word "cause"117, stated:
163. The Panel added that:
164. The United States appeals the Panel's finding that the USITC's causation analysis was inconsistent with the Agreement on Safeguards . According to the United States, there is no basis in Article 4.2(b) of that Agreement to support the Panel's interpretation that increased imports must be a "necessary and sufficient cause" of, or must, "considered alone", cause, serious injury or a threat thereof. The United States asserts that the Panel's approach is indistinguishable from the approach of the panel in United States - Wheat Gluten Safeguard Safeguard, which we reversed on appeal. The United States concludes that, for the reasons we gave in that appeal, we must also reverse the Panel's findings on causation in this dispute. 165. We agree with the United States that the Panel's interpretation of the causation requirements in Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards is very similar to the interpretation of the same provisions by the panel in United States - Wheat Gluten Safeguard Safeguard. Both panels reasoned that increased imports, considered on their own, must be capable of causing, or threatening to cause, injury which is "serious".121 Both panels stated that increased imports must be "sufficient" to cause serious injury.122 Moreover, both panels accepted that the situation of the domestic industry may be aggravated by other factors which are also contributing to the injury and, therefore, that increased imports need not be the sole cause of injury, but may be one of several causes.123 Furthermore, we note that, in this case, the Panel relied on the interpretation of the causation requirements given by the panel in United States - Wheat Gluten Safeguard and stated that its interpretation of causation "is consistent as well with the findings of the Panel in US - Wheat Gluten (currently on appeal)".124 (emphasis added) As the United States points out, we did indeed reverse those findings on appeal in our own Report in United States - Wheat Gluten Safeguard. 166. In that appeal, in examining the causation requirements in the Agreement on Safeguards, we observed that the first sentence of Article 4.2(b) of the Agreement on Safeguards provides that a determination "shall not be made unless [the] investigation demonstrates � the existence of the causal link between increased imports � and serious injury or threat thereof." (emphasis added) In interpreting this phrase, we said:
167. We also noted in that appeal the crucial significance of the second sentence of Article 4.2(b), which states that competent authorities "shall not � attribute" to increased imports injury caused by other factors, and we found that:
168. We emphasized there that the non-attribution language in the second sentence of Article 4.2(b) means that the effects of increased imports, as separated and distinguished from the effects of other factors, must be examined to determine whether the effects of those imports establish a "genuine and substantial relationship of cause and effect" between the increased imports and serious injury.127 169. We also addressed, in that appeal, the language in Articles 2.1 and 4.2(a) of the Agreement on Safeguards , which we found to support our reading of the non-attribution language in the second sentence of Article 4.2(b). By way of conclusion, we:
170. In view of the close similarity between the respective interpretations of the causation requirements in the Agreement on Safeguards given by this Panel and by the panel in United States - Wheat Gluten Safeguard , we are of the view that, for the reasons we gave in United States - Wheat Gluten Safeguard , the Panel in this dispute erred in its interpretation of the causation requirements in the Agreement on Safeguards . As we held in United States - Wheat Gluten Safeguard, the Agreement on Safeguards does not require that increased imports be "sufficient" to cause, or threaten to cause, serious injury. Nor does that Agreement require that increased imports "alone" be capable of causing, or threatening to cause, serious injury. 171. Accordingly, we reverse the Panel's interpretation of the causation requirements in the Agreement on Safeguards , as set forth in paragraphs 7.238, 7.241 and 7.247 of the Panel Report. 172. Having reversed the Panel's "[g]eneral interpretative analysis"129 of "causation", we go on to consider whether the Panel was correct nonetheless in concluding that the United States acted inconsistently with the causation requirements in Article 4.2 of the Agreement on Safeguards . Our own examination of this issue is based exclusively on the facts presented in the USITC Report, which form part of the Panel record and are uncontested. Furthermore, notwithstanding the findings we have made previously in this appeal130, we must assume in our examination: first, that the definition of the domestic industry given by the USITC is correct, and, second, that the USITC correctly found that the domestic industry is threatened with serious injury. On this basis, we must examine whether the USITC properly established, in accordance with the Agreement on Safeguards, the existence of the required "causal link" between increased imports and threatened serious injury. 173. At the outset, we note that this appeal does not involve any claim relating to the causation standard set forth in the United States statute.131 The Panel issued a preliminary ruling that the United States statute as such does not fall within the Panel's terms of reference132, and this ruling has not been appealed.133 Therefore, like the Panel, our task on this issue is confined to examining the application of the United States' statutory causation standard by the USITC in its determination in the lamb meat investigation for its consistency with the Agreement on Safeguards . 174. The claims by Australia and New Zealand relating to causation focus principally on the requirement, in Article 4.2(b) of the Agreement on Safeguards, that injury caused by factors other than increased imports should not be "attributed" to those imports. In the view of Australia and New Zealand, it is uncontested that the USITC acknowledged that other factors were having injurious effects on the domestic industry. However, Australia and New Zealand argue that the USITC failed to explain what the injurious effects of the other factors were, and, therefore, that the United States failed to demonstrate compliance with the "non-attribution" requirement in the second sentence of Article 4.2(b) of the Agreement on Safeguards.134 175. Accordingly, we must consider whether the USITC properly ensured that injury caused, or threatened, by factors other than increased imports was not attributed to increased imports, as required by Article 4.2(b). In so considering, we recall that, as we have already elaborated at some length in this Report, when examining a claim under Article 4.2 of the Agreement on Safeguards, panels must review whether the competent authorities have acted consistently with the obligations in Article 4.2 by examining whether those authorities have given a reasoned and adequate explanation as to how the facts support their determination.135 176. Article 4.2(b) of the Agreement on Safeguards provides:
177. In our Report in United States - Wheat Gluten Safeguard Safeguard, we said:
178. We emphasize that these three steps simply describe a logical process for complying with the obligations relating to causation set forth in Article 4.2(b). These steps are not legal "tests" mandated by the text of the Agreement on Safeguards, nor is it imperative that each step be the subject of a separate finding or a reasoned conclusion by the competent authorities. Indeed, these steps leave unanswered many methodological questions relating to the non-attribution requirement found in the second sentence of Article 4.2(b). 179. The primary objective of the process we described in United States - Wheat Gluten Safeguard is, of course, to determine whether there is "a genuine and substantial relationship of cause and effect" between increased imports and serious injury or threat thereof. As part of that determination, Article 4.2(b) states expressly that injury caused to the domestic industry by factors other than increased imports "shall not be attributed to increased imports." In a situation where several factors are causing injury "at the same time", a final determination about the injurious effects caused by increased imports can only be made if the injurious effects caused by all the different causal factors are distinguished and separated. Otherwise, any conclusion based exclusively on an assessment of only one of the causal factors � increased imports - rests on an uncertain foundation, because it assumes that the other causal factors are not causing the injury which has been ascribed to increased imports. The non-attribution language in Article 4.2(b) precludes such an assumption and, instead, requires that the competent authorities assess appropriately the injurious effects of the other factors, so that those effects may be disentangled from the injurious effects of the increased imports. In this way, the final determination rests, properly, on the genuine and substantial relationship of cause and effect between increased imports and serious injury. 180. As we said in our Report in United States - Wheat Gluten Safeguard Safeguard, the non-attribution language in Article 4.2(b) indicates that, logically, the final identification of the injurious effects caused by increased imports must follow a prior separation of the injurious effects of the different causal factors. If the effects of the different factors are not separated and distinguished from the effects of increased imports, there can be no proper assessment of the injury caused by that single and decisive factor. As we also indicated, the final determination about the existence of "the causal link" between increased imports and serious injury can only be made after the effects of increased imports have been properly assessed, and this assessment, in turn, follows the separation of the effects caused by all the different causal factors. 181. We emphasize that the method and approach WTO Members choose to carry out the process of separating the effects of increased imports and the effects of the other causal factors is not specified by the Agreement on Safeguards . What the Agreement requires is simply that the obligations in Article 4.2 must be respected when a safeguard measure is applied. 182. In this case, the USITC Report states that the "worsen[ing]" financial situation of the domestic industry, as defined by the USITC, had occurred as "a result of the increase in imports."137 The USITC identified six factors other than increased imports which were alleged to be contributing to the situation of the domestic industry at the same time.138 Applying the statutory standard established in United States law, the USITC considered whether, individually, each of these six factors was a "more important cause" of the threat of serious injury than the increased imports. The USITC concluded that each of these factors was not a more important cause than the increased imports.139 The USITC then concluded, echoing the United States statutory standard, that "the increased imports are an important cause, and a cause no less important than any other cause, of the threat of serious injury".140
183. According to Australia and New Zealand, the USITC's determination on this issue is inconsistent with Article 4.2(b) of the Agreement on Safeguards because the methodology used by the USITC did not ensure that injury caused by the six other factors was not attributed to increased imports.141 Our examination, therefore, focuses on the issue of non-attribution. As we have just stated, in a situation such as this, where there are several causal factors, the process of ensuring that injury caused by other causal factors is not attributed to increased imports must include a separation of the effects of the different causal factors. 184. By examining the relative causal importance of the different causal factors, the USITC clearly engaged in some kind of process to separate out, and identify, the effects of the different factors, including increased imports. Although an examination of the relative causal importance of the different causal factors may satisfy the requirements of United States law, such an examination does not, for that reason, satisfy the requirements of the Agreement on Safeguards. On the record before us in this case, a review of whether the United States complied with the non-attribution language in the second sentence of Article 4.2(b) can only be made in the light of the explanation given by the USITC for its conclusions on the relative causal importance of the increased imports, as distinguished from the injurious effects of the other causal factors. 185. In that respect, we see nothing in the USITC Report to indicate how the USITC complied with the obligation found in the second sentence of Article 4.2(b) and, therefore, we see no basis for either the Panel or us to assess the adequacy of the USITC process with respect to the "non-attribution" requirement of Article 4.2(b) of the Agreement on Safeguards . The USITC Report, on its face, does not explain the process by which the USITC separated the injurious effects of the different causal factors, nor does the USITC Report explain how the USITC ensured that the injurious effects of the other causal factors were not included in the assessment of the injury ascribed to increased imports. The USITC concluded only that each of four of the six "other factors" was, relatively, a less important cause of injury than increased imports.142 As Australia and New Zealand argue, and as the Panel expressly found143, in doing so, the USITC acknowledged implicitly that these factors were actually causing injury to the domestic industry at the same time. But, to be certain that the injury caused by these other factors, whatever its magnitude, was not attributed to increased imports, the USITC should also have assessed, to some extent, the injurious effects of these other factors. It did not do so. The USITC did not explain, in any way, what injurious effects these other factors had on the domestic industry. For instance, of the six "other factors" examined, the USITC focused most on the cessation of the payments under the National Wool Act of 1954 (the "Wool Act") subsidy. The USITC recognized that the Wool Act subsidies represented an important contribution to the profits of the growers and feeders of live lambs.144 Yet the USITC's analysis of the injurious effects of this "factor" is confined largely to the statement that "the loss of Wool Act payments hurt lamb growers and feeders and caused some to withdraw from the industry."145 (emphasis added) This explanation provides no insight into the nature and extent of the "hurt" caused to the domestic industry by this factor.146 The USITC stated also that "the effects of termination of the Wool Act payments can be expected to recede further with each passing month." The USITC, thereby, acknowledged that the Wool Act will have on-going effects, but it did not elaborate on what these effects are likely to be nor how quickly they will disappear. In varying degree, the same is true as well for the remaining "other factors" examined. Thus, although the USITC acknowledged that these other factors were having some injurious effects, it did not explain what these effects were, nor how those injurious effects were separated from the threat of serious injury caused by increased imports. 186. In the absence of any meaningful explanation of the nature and extent of the injurious effects of these six "other" factors, it is impossible to determine whether the USITC properly separated the injurious effects of these other factors from the injurious effects of the increased imports. It is, therefore, also impossible to determine whether injury caused by these other factors has been attributed to increased imports. In short, without knowing anything about the nature and extent of the injury caused by the six other factors, we cannot satisfy ourselves that the injury deemed by the USITC to have been caused by increased imports does not include injury which, in reality, was caused by these factors. 187. In this respect, we also recall that, on this issue, the Panel concluded:
188. For the foregoing reasons, we find that the USITC, in its Report, did not adequately explain how it ensured that injury caused to the domestic industry by factors other than increased imports was not attributed to increased imports. In the absence of such an explanation, we uphold, albeit for different reasons, the Panel's conclusions that the United States acted inconsistently with Article 4.2(b) of the Agreement on Safeguards, and, hence, with Article 2.1 of that Agreement.148
VIII. Judicial Economy 189. The Panel made a single finding on the claims of Australia and New Zealand under Articles I and II of the GATT 1994 and under Articles 2.2, 3.1, 5.1, 8, 11 and 12 of the Agreement on Safeguards :
190. New Zealand appeals the Panel's decision to exercise judicial economy by not examining its claim under Article 5.1 of the Agreement on Safeguards on the nature of the safeguard measure applied by the United States. New Zealand submits that the Panel's rulings relate solely to the investigation required to underpin safeguard measures, but do not address the appropriateness of the safeguard measure itself. Therefore, New Zealand concludes that, in declining to rule on the claim under Article 5.1 of the Agreement on Safeguards , the Panel has failed to enable the DSB to make sufficiently precise recommendations and rulings for the effective resolution of this dispute. 191. We recall that, on the issue of panels' exercise of judicial economy, we have previously explained that panels "need only address those claims which must be addressed in order to resolve the matter in issue in the dispute."150 At the same time, the "discretion" a panel enjoys to determine which claims it should address is not without limits151, as a panel is obliged "to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by a Member with those recommendations and rulings".152 192. We have considered appeals from panels' application of judicial economy in the context of challenges to safeguard measures on two previous occasions. In Argentina - Footwear Safeguard, the European Communities requested that we address its claim on "unforeseen developments". In United States - Wheat Gluten Safeguard Safeguard, the European Communities made a similar appeal concerning its "unforeseen developments" claim. In that case, the European Communities also asked us to overturn that panel's exercise of judicial economy and to address the European Communities' claims under Article I of the GATT 1994 and Article 5 of the Agreement on Safeguards. However, in both Argentina - Footwear Safeguard and in United States - Wheat Gluten Safeguard Safeguard, we upheld the respective panel's findings that the safeguard measure imposed was inconsistent with the requirements of Articles 2 and 4 of the Agreement on Safeguards . In both cases, we determined, therefore that the respective panel had correctly found that the safeguard measure lacked a legal basis, and, in both cases, we found that, for this reason, the panel had acted within its discretion in declining to address the issue of "unforeseen developments" under Article XIX:1(a) of the GATT 1994. In United States - Wheat Gluten Safeguard, in considering the further claims of the European Communities, we observed:
193. In this case, the Panel found that the United States had acted inconsistently with Article XIX:1(a) of the GATT 1994, with various provisions of Article 4 of the Agreement on Safeguards , and with Article 2.1 of the Agreement on Safeguards . The Panel found that the United States had failed to "demonstrate", as a matter of fact "the existence of unforeseen developments", had defined the United States' domestic lamb industry inconsistently with the provisions of Article 4.1(c) of the Agreement on Safeguards , had relied on data insufficient to support its determination of a threat of serious injury pursuant to Article 4.2(a), and had erred in its assessment of causation under Article 4.2(b). These findings concern the substantive determinations made by the USITC, and, as in Argentina - Footwear Safeguard and United States - Wheat Gluten Safeguard, the findings made by the Panel - as upheld by us on appeal - deprive the safeguard measure at issue of a legal basis. 194. In consequence, we are of the view that there is no meaningful distinction to be drawn between the Panel's exercise of judicial economy in this case with respect to New Zealand's claim under Article 5.1 of the Agreement on Safeguards , and the exercise of judicial economy with respect to the claim under that Article by the panel in United States - Wheat Gluten Safeguard . Having found that the safeguard measure applied by the United States lacked a legal basis, the Panel was entitled to decline to address further claims that the same measure is inconsistent with other provisions of the Agreement on Safeguards . We also observe that a finding on New Zealand's claim under Article 5.1 of the Agreement on Safeguards would not have enhanced the ability of the DSB to make sufficiently precise recommendations and rulings in this dispute. 195. We, therefore, conclude that the Panel did not err in its exercise of judicial economy with respect to New Zealand's claim under Article 5.1 of the Agreement on Safeguards .
196. Australia makes a conditional appeal against the Panel's exercise of judicial economy in declining to examine its claims under Articles 2.2, 3.1, 4.2, 5.1, 8.1, 11.1(a) and 12.3 of the Agreement on Safeguards . New Zealand makes a conditional appeal against the Panel's exercise of judicial economy in declining to examine its claims under Articles 2.2, 3.1 and 5.1 of the Agreement on Safeguards, and under Articles I and II of the GATT 1994. These appeals, however, are made only if we reverse the Panel's conclusions that the safeguard measure at issue was inconsistent with the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994. As the conditions on which these requests are predicated have not been fulfilled, there is no need for us to examine the conditional appeals of Australia and New Zealand. We recall, as well, that we found above that there was no need for us to examine Australia's conditional appeal relating to the Panel's findings on "unforeseen developments".154
197. For the reasons set forth in this Report, the Appellate Body:
198. The Appellate Body recommends that the DSB request that the United States bring its safeguard measure found in this Report, and in the Panel Report as modified by this Report, to be inconsistent with the GATT 1994 and the Agreement on Safeguards, into conformity with its obligations under those Agreements.
Signed in the original at Geneva this 12th day of April 2001 by:
_________________________
116
Ibid., para. 7.236.
117
Ibid., para. 7.237.
118
Panel Report, para. 7.238.
119
Ibid., para. 7.239.
120
Ibid., para. 7.241.
121
Panel Report, para. 7.241; Panel Report, United States -
Wheat Gluten Safeguard, supra, footnote 18, paras. 8.138, 8.139 and
8.143.
122
Panel Report, paras. 7.238 and 7.241; Panel Report, United
States - Wheat Gluten Safeguard, supra, footnote 18, para. 8.138.
123
Panel Report, para. 7.238; Panel Report, United States -
Wheat Gluten Safeguard, supra, footnote 18, para. 8.138.
124
Panel Report, para. 7.242. See, also, Panel Report, paras.
7.244, 7.245 and 7.247.
125
Appellate Body Report, United States - Wheat Gluten Safeguard
Safeguard, supra, footnote 19, para. 67.
126
Ibid., para. 68.
127
Appellate Body Report, United States - Wheat Gluten Safeguard
Safeguard, supra, footnote 19, para. 69.
128
Ibid., para. 79.
129 Panel Report, heading 2, p. 74.
130
Supra, paras. 75, 96, 133, 134 and 161.
131
Under the United States Trade Act of 1974 (19 U.S.C. �� 2251
to 2254), the United States' competent authorities are directed, by Section
202(b)(1)(A) to "make an investigation to determine whether an article is being
imported into the United States in such increased quantities as to be a
substantial cause of serious injury, or the threat thereof
". (emphasis added) Section 202(b)(1)(B) explains that the
term "substantial cause" means "a cause which is important and not less than any
other cause."
132
Panel Report, paras. 5.57 and 5.58.
133
Furthermore, at the oral hearing, all the participants agreed
that the United States' statutory standard as such is not at issue in this
appeal.
134
See, generally, Australia's appellee's submission, paras. 226
- 250; New Zealand's appellee's submission, paras. 6.32 - 6-39.
135
Supra, paras. 100 - 107.
136
Appellate Body Report, supra, footnote 19, para. 69.
137
USITC Report, p. I-24.
138
These six other factors were: the cessation of subsidy
payments under the National Wool Act of 1954; competition from other meat
products, such as beef, pork and poultry; increased input costs; overfeeding of
lambs; concentration in the packing segment of the industry; and a failure to
develop and maintain an effective marketing program for lamb meat. (USITC
Report, pp. I-24 - I-26).
139
USITC Report, pp. I-24 - I-26.
140
Ibid., p. I-26.
141
Australia argues that, "after finding that other factors were
merely a 'less important cause' of the threat of serious injury than imports,
[the USITC] failed to undertake the next step in the analysis" and, therefore,
"failed to demonstrate that any threat of serious injury caused by other factors
had not been attributed to imports". (Australia's appellee's submission, paras.
225 and 231; see, generally, paras. 225 - 250) New Zealand argues that the USITC
failed "to properly distinguish the injurious effects of imports from the
injurious effects of other factors", and also failed "to ensure that threat of
serious injury caused by 'other factors' was not attributed to increased
imports". (New Zealand's appellee's submission, heading (i), p. 52 and para.
6.39; see, generally, paras. 6.16 - 6.39)
142
These four other factors were: cessation of the payments
under the National Wool Act of 1954; competition from other meat products;
concentration in the packer segment of the industry; the failure to develop and
implement an effective marketing program.
143
Panel Report, para. 7.277.
144
The USITC said that "Wool Act subsidies represent an
important contribution to profit (15 to 20 percent)." (USITC Report, p. I-30)
145
Ibid., p. I-24.
146
Ibid., p. I-25.
147
Panel Report, para. 7.277.
148
Ibid., paras. 7.279, 8.1(f) and 8.1(g).
149
Ibid., para. 7.280.
150
Appellate Body Report, United States - Measure Affecting
Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted
23 May 1997, DSR 1997:I, 323 at 340.
151
Appellate Body Report, India - Patent Protection for
Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16
January 1998, , DSR 1998:I, 9, para. 87.
152
Appellate Body Report, Australia - Salmon, supra,
footnote 25, para. 223.
153
Supra, footnote 19, paras. 183 and 184.
154
Supra, para. 75.
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