(e) Like product
4.164
Argentina claims that Chile has infringed Article
XIX:1(a) of the GATT 1994 and Articles 2.1, 4.1(c) and 4.2(a) of the Agreement
on Safeguards on the grounds that the competent Chilean authorities failed to
define the like product properly.
4.165
Argentina submits that, pursuant to all three
above-mentioned Articles, it is the "domestic industry" thus defined that must
be examined under Article 4.2(a) to determine whether the increase in imports
has caused serious injury or threat thereof. In Argentina's view, the Commission
failed to identify the like product and did not conduct an analysis of the like
product or products. Argentina therefore concludes that the entire analysis of
the increase in imports and the determination of threat of serious injury is
based on a mistaken premise which is devoid of legal validity.374 Argentina
indicates that the Appellate Body has ruled that the wording of Article 4.1(c)
is "clear and express" in stating that the term "domestic industry extends
solely to the producers � of the like or directly competitive products."375
It further indicates that the Appellate Body also observed that "[t]he
conditions in Article 2.1, therefore, relate in several important respects to
the specific products. In particular, Argentina argues, according to
Article 2.1, the legal basis for imposing a safeguard measure exists only
when imports of a specific product have prejudicial effects on domestic
producers of products that are 'like or directly competitive' with that imported
product."376 Argentina submits that the Chilean Commission did not conduct that
analysis. In Argentina's view, it is clear that, in this case, there were
important elements to be identified concerning the issue of the like product.
Argentina quotes the Appellate Body which maintained that "input products can
only be included in defining the 'domestic industry' if they are 'like or
directly competitive' with the end products".377 Once again, Argentina claims, this
analysis did not take place. Argentina also refers to the Appellate Body
statement378 whereby "the data before the competent authorities must be
sufficiently representative to give a true picture of the 'domestic industry'".
Argentina claims that, in this case, there is no way that the Panel could even
consider the matter, since no like product was defined, nor were the producers
of the like product identified. Thus, the decision does not meet the most
elementary requirements of Articles 2.1, 4.1(c) and 4.2(a) of the Agreement on
Safeguards.379 Argentina claims that the Commission did not provide a legal
analysis of how it arrived at these categories and how it determined that they
constituted the "domestic industry that produces like or directly competitive
products" in accordance with Article 2.1 of the Agreement on Safeguards.
4.166
Argentina submits that, as regards edible vegetable
oils, the Chilean Commission provides no reasonable explanation of why it
appears to have grouped together colza (rape) seeds and various
types of edible oils to form a single "product" for its investigation. According
to Argentina, Chile is applying its price band to 25 different tariff items of
the Harmonized System for edible vegetable oils - "products" which range from
olive oil to palm oil, at various stages of processing (crude and refined).
Argentina claims that, of these 25 items, Chile only records imports 21
different types of oil. Moreover, Argentina explains, Chile only produces colza
(rape) and sunflower seeds and colza (rape) oil with seed produced locally, and
a bit of soya bean oil with imported beans. In Argentina's view, it is not very
clear on what basis the Commission determined the like product and the industry,
and which domestic products are "like" or "directly competitive". Argentina
claims that, when the Commission makes an estimate of threat of injury to the
domestic industry, it refers indiscriminately to producers of rape, to the
extracting industry and to the refining industry, without making it clear which
is the domestic industry that is allegedly threatened with injury by imports of
edible vegetable oils.380
4.167
Argentina submits that, as regards wheat flour, the
Commission does not in fact provide any analysis of the wheat flour category to
determine which products are "like" products or "directly competitive" with the
imports. Argentina argues that the Commission merely states that "� for these
purposes, flour represents an alternative way of importing wheat if direct
imports prove to be more costly or are subject to higher tariffs, so it is
necessary to apply a treatment similar to that applied to wheat". Similarly,
Argentina submits, Chile states in its notification to the WTO of threat of
serious injury that "[i]f the mechanism applied to wheat is not also applied to
imports of wheat flour, a large increase in imports of wheat flour could cause
injury similar to that caused to wheat production by imports of wheat."381
382
4.168 As far as wheat is concerned, Argentina submits
that the Commission failed to carry out a legal analysis concerning the
definition of the like product. In Argentina's view, it is not clear whether
durum wheat has been subsumed under pasta and wheat under flour in its
definition of "product", or whether other forms of wheat have also been
included.383
4.169 Chile claims not to understand Argentina's reasons
for limiting its understanding of the legal requirements for the imposition of a
safeguard measure solely to determination of a like product. Chile contends that
Article XIX:1(a) of the GATT 1994 in fact refers to "like or directly
competitive products". Article 2.1 of the Agreement on Safeguards provides that
"domestic industry that produces like or directly competitive products", and
Article 4.1(c) then refers to the "domestic industry", defining it as the
producers as a whole of "the like or directly competitive products �". In this
connection, Argentina cites the ruling of the Appellate Body in the case "US
- Lamb", indicating that "The conditions in Article 2.1, therefore, relate
in several important respects to specific products. In particular,
according to Article 2.1, the legal basis for imposing a safeguard measure
exists only when imports of a specific product have prejudicial effects
on domestic producers of products that are 'like or directly competitive' with
that imported product."384 Chile does not understand, therefore, why Argentina
considers that the Commission should only have identified the like product.385
Chile argues that it is a fact that the categories of products involved
correspond to products in the PBS which, in turn, was established some time ago
and grouped categories of products that were directly competitive. In other
words, if the PBS had not taken into account each agricultural product and its
respective like or directly competitive products, the application of the system
would have been ineffective. Nevertheless, Chile claims, as can be seen from the
records, the Commission reaffirmed the analysis in that respect. Chile has
specified each and every one of the products involved in the investigation and
in the subsequent application of measures through its tariff position, its SACH
code, Chile's harmonized system, taking into account as well, the explanatory
notes to this system.386
4.170 In response to the above argumentation, Argentina
submits that, it never suggested that the determination of the like product
was the sole legal requirement for the imposition of safeguard measures.
According to Argentina, one of the basic requirements laid down in the Agreement
on Safeguards is the identification of a like or directly competitive product so
that the authorities can then make their determinations with respect to
increased imports, serious injury and causality. Argentina affirms that it is
hard to understand why Chile repeats387 the quotation made by Argentina in its
first written submission from paragraph 86 of the Appellate Body report in
United States - Lamb, which states, precisely, that the legal basis for
imposing a safeguard measure exists only when imports of a specific
product have prejudicial effects on domestic producers of products that are
"like or directly competitive" with that imported product. In fact, Argentina
adds, although there were important elements relating to the issue of the like
product and the producers of the like product that needed to be identified in
this case, the Commission did not carry out any analysis, and it was therefore
impossible to identify the industries affected. In the case of oils, Argentina
explains, the Commission refers indiscriminately to producers of rape, to the
extracting industry and to the refining industry. Argentina further argues that
Chile states that the Commission Minutes contain an analysis of the "directly
competitive products" because the Commission repeated the analysis conducted
when the price band system was introduced.388 However, Argentina argues, that
analysis could not have been included in any of the records. Argentina repeats
that the Minutes that served as a basis for the investigation and conclusions of
the Commission contained no more than citations of numbers and figures relating
to imports and financial and economic indices of the "industries", with
information taken directly from the Ministry of Agriculture's application for
the initiation of an investigation and no analysis or conclusions as to its
accuracy.389
4.171
Chile contends that the Commission acted
consistently with Article XIX of the GATT 1994 and Articles 2.1, 4.1(c) and
4.2(a) of the Agreement on Safeguards by confirming not once but twice that both
subject product categories were comprised of like or directly competitive
products. Chile explains that the Commission confirmed that the categories of
products chosen for the safeguard measure corresponded exactly to the categories
used for the price band system, thereby assuring that the categories were
comprised of only directly competitive products. Moreover, Chile argues, the
Commission did an independent analysis of both wheat and wheat flour as well as
the category comprising edible vegetable oils.390
4.172 As regards wheat and wheat flour, Chile explains
that, in view of the inherent nature of the products under investigation,
domestic wheat was considered to be a like product to imported wheat since the
imports correspond to the same product at the agricultural production level. It
indicates that the same conclusion was reached for flour, which would be a like
product to imported flour. In this connection, Chile explains, the Commission
also took account of the fact that flour constitutes an alternative way of
importing wheat if the import of wheat as such proves to be more costly or
subject to a higher tariff: imported flour is directly competitive with domestic
wheat in view of the fact that the latter is used almost exclusively for
producing flour.391 Thus, Chile argues, the Commission found that wheat flour has a
high rate of substitutability with wheat and thus the two products are directly
competitive.392 Chile contests Argentina's statement that the Commission does not
provide any analysis to determine which products are like and directly
competitive with imports of wheat flour.393 Chile argues, establishing a safeguard
for wheat and failing to do so for flour would be perfectly useless because
imports would then tend to be in the form of flour. This was why a price band
directly related to that for wheat was then established for flour. In addition,
Argentina states that it is not clear whether the Commission subsumed durum
wheat for pasta and wheat for flour in its definition of product.394 Chile notes in
this connection that imports of wheat subject to safeguards correspond to those
under tariff heading 1001.9000, which only includes imports of wheat for making
bread and pastry products, as determined in Minutes of Session No. 193. Imports
of wheat for pasta are classified under another tariff heading (1001.1000)
therefore, identification of the tariff headings makes it clear which products
are covered by the investigation.395
4.173 As regards edible vegetable oils, Chile contests
Argentina's statement that "it is not very clear on what basis the Commission
determined the like product and the industry".396 In this connection, Chile notes
that rape-seed oil produced domestically is a like product to the other oils to
which the measure applied because (i) they are physically and chemically very
similar; (ii) they are consumed without distinction; (iii) they have the same
final use; (iv) they utilize the same channels of distribution. Chile submits
that one indicator of this is the wording on the labelling of edible vegetable
oils for consumption, where the reference is usually only to vegetable oils or a
mixture thereof, without specifying which oils. Chile claims that, from the
point of view of the consumers, which is the relevant factor when determining if
the products are directly competitive, it cannot be said that they are different
products.397
4.174
Argentina considers the above as ex post facto
explanations by Chile.398 Argentina considers that Chile cannot simply claim that
the Commission took the above parameters into account without indicating in what
part of the report the said analysis and its conclusions can be found. Argentina
argues that Chile itself recognizes that the implementing authority merely
identified the products under investigation by their tariff heading. Argentina
submits that this does not constitute a sufficient analysis of the like product
for the purposes of applying a safeguard measure - on the contrary, it confirms
that the parties are speaking of the same products that are subject to the price
band system.399
(f) Increase of imports
4.175
Argentina claims that the competent Chilean
authorities failed to demonstrate an increase in imports under Article XIX.1(a)
of the GATT 1994 and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.
Argentina contends that the increased imports is a fundamental requirement for
the imposition of a safeguard measure provided for in the Articles concerned.400
4.176
Argentina claims that an analysis of the content of
the Minutes and notifications reveals that Chile did not demonstrate that there
were increased imports, and hence failed to comply with its obligations under
Article XIX:1(a) and Articles 2.1 and 4.2(a) of the Agreement on Safeguards.
Argentina refers to Argentina - Footwear (EC) where the Panel
stated that "[t]he Agreement on Safeguards requires an increase in imports as a
basic prerequisite for the application of a safeguard measure. The relevant
provisions are in Articles 2.1 and 4.2(a)"401 and "[t]hus, to determine whether
imports have increased in 'such quantities' for purposes of applying a safeguard
measure, these two provisions require an analysis of the rate and amount of the
increase in imports, in absolute terms and as a percentage of domestic
production."402 Argentina argues that the increase in imports has to have already
occurred when the decision is made. In this regard, it refers to the Panel
report in Argentina - Footwear (EC) which maintained that " � if only a
threat of increased imports is present, rather than actual increased imports,
this is not sufficient determination of the existence of a threat of serious
injury due to a threat of increased imports would amount to a
determination based on allegation of conjecture rather than one supported by
facts as required by Article 4.1(b)"403 According to Argentina, the report of the
Panel in US - Wheat Gluten confirmed this general notion, noting that
Article XIX:1(a) and Article 2.1 of the Agreement on Safeguards contains "the
initial threshold requirement that there be an increase in imports."404
4.177
Argentina also refers to Argentina -Footwear
(EC), where the Appellate Body established that the examination of the
increase in imports must include an analysis of the trends over the period of
investigation, and that recent imports must also be examined.405 Argentina reminds
that the Appellate Body maintained that "not just any increased
quantities of imports will suffice." � "[T]he increase in imports must have been
recent enough, sudden enough, sharp enough and significant enough, both
quantitatively and qualitatively to cause or threaten to cause 'serious
injury'."406 Argentina claims that Chile has not demonstrated a real increase in
imports. Argentina submits that, in fact, the Commission does not bother with
the question of whether imports increased. On the contrary, Argentina argues, it
simply reaches an unfounded conclusion: "There were noticeable differences
between recent import prices resulting from full application of the band and
prices resulting from imposition of a tariff ceiling of 31.5 per cent. This
substantiates the forecast of a greatly accelerated increase in imports that
would occur (or has already occurred) unless the full duties specified in the
bands are applied. �"407 Argentina further argues that, even if this analysis had
any validity, quod non, the Commission did not provide objective evidence
of its effect, nor did it specify to what degree imports would have increased.
Argentina submits that an analysis of this type does not provide a sufficient
basis for concluding that imports were in "increased" quantities, as required by
Articles 2.1 and 4.2(b) of the Agreement on Safeguards.408 Argentina concludes that
what counts in deciding on the application of safeguard measures being a
demonstration of the actual increase in imports and affirms that Chile provided
no such demonstration either for wheat, or for wheat flour, or for edible
vegetable oils.409
4.178
Argentina considers that the decision of the
Commission to recommend the extension of the measures (Minutes of Session No.
224) contains some data in addition to that contained in the related documents.
However, Argentina argues, the new data on which the extension is based suffers
from the same shortcomings as the original investigation. Argentina submits that
the Chilean Commission failed to demonstrate that imports were in such increased
quantities as to justify the imposition of a safeguard measure. For all of these
reasons Argentina concludes that the Chilean Commission failed to demonstrate
that edible vegetable oils, wheat or wheat flour were being imported in
increased quantities, absolute or relative.410
4.179
Chile submits that Chile considers that the
requirement regarding an increase in imports and the impact of the PBS in this
case are factors that cannot be examined separately. It refers to Minutes of
Session No. 224411 which states the following: "(i) In examining imports, the
Commission took into consideration the fact that, for each of the products
investigated, the normal functioning of the PBS had been decisive in containing
an increase in imports and, consequently, the trend in imports cannot be
examined without taking this factor into account. The analysis by the Commission
takes into account the period from the adoption of each safeguard measure in
effect for each product. Nevertheless, for the purposes of comparison and
evaluation, information for previous periods is also taken into account."412
4.180
Chile submits that it does not follow either from
the letter of Article XIX.1 of the GATT 1994 and Article 7 of the Agreement on
Safeguards, or from their object and purpose, that an extension measure requires
that the competent authority find for a second time that there is an increase in
imports to justify an extension. Chile argues that, taken literally, Article
7.2, refers to Articles 2, 3, 4 and 5, however as indicated earlier it refers
only to procedural aspects regulated by those Articles and not to substantive
aspects. Chile further argues that, if Argentina were right, there would be an
essential contradiction between the requirements laid down in the last part of
paragraph 2 and the requirement of a further increase in imports established in
Article 2. Chile contends that, if one assumes that prior to the adoption of an
extension, there must be a definitive measure whose object, inter alia,
is to counteract the threat of injury presented by an increase in imports, there
would be no reason for requiring evidence of the fact that the domestic industry
is adjusting. Chile wonders how would it be possible for there to be any
adjustment to a further increase in imports if the definitive measure were still
in force.413
4.181 In response to the above argumentation, Argentina
submits that Minute 193 - which provides the outcome of the Commission's
investigation for the definitive safeguard measures - is not WTO-consistent
since, by not following the procedural requirements established in the Agreement
on Safeguards, it does not meet any of the substantive conditions, compliance of
which is necessary for any safeguard measure in order for it to be lawful.
Therefore, it affords no legal basis for the application of the definitive
safeguard measures. As a result, Minute 224, which is legally premised on Minute
193, can not possibly justify the extension of such WTO-inconsistent safeguard
measures. Thus, the measures, whether as originally applied or as extended, are
WTO-inconsistent. In addition, Argentina also maintains that Minute 224 itself
violates various provisions of the Agreement on Safeguards as previously
elaborated in various submissions by Argentina.414
(i) Edible vegetable oils
Initiation of the investigation
4.182
Argentina submits that, with respect to oils,
Minutes of Session No. 181 of the Commission states that: "Imports of
oils pursued a growth trend, increasing from 82,000 tons in 1990 to 171,000 tons
in 1998, reflecting a growth of 110 per cent for the period." Argentina
considers that it is easy to understand the irrelevance of the data evaluated.
In this regard, Argentina quotes the Appellate Body in Argentina - Footwear
(EC):415 "... the competent authorities are required to consider the trends
in imports over the period of investigation (rather than just comparing the end
points)". Argentina submits that in this case, when Chile decided to initiate
the safeguards investigation, it did so on the basis of an "end point to end
point" analysis only, considering the increase in imports between 1990 and 1998,
without analysing the rate and amount of the increase in imports, in absolute
terms and as a percentage of domestic production. Consequently, Argentina
claims, the analysis carried out by the Chilean authorities is inconsistent with
the obligations contained in Article 4.2 (a). Argentina explains that this was
the Panel's interpretation in Argentina - Footwear (EC), and it was
confirmed by the Appellate Body, which stated with respect to the increase in
imports in absolute terms that it is not enough to carry out an analysis from
end point to end point, rather it is necessary to consider the intervening
trends (up or down and the importance of mixing them to determine an increase in
the amount) (rate and amount).416 According to the interpretation of the
requirements made by the Appellate Body in the same case, Argentina submits that
"the increase in imports must have been recent enough, sudden enough, sharp
enough, and significant enough, both quantitatively and qualitatively, to cause
or threaten to cause 'serious injury'".417 Argentina further submits that it is
incomprehensible that Chile should have presented different data in Minutes of
Session No. 181 from the data it provided in Minutes of Session No. 224 for
imports of oils between 1990 and 1998 or, at least, there is no explanation of
this difference in figures.418
4.183
Chile contests Argentina's statement whereby Chile
decided to initiate the safeguards investigation into edible vegetable oils only
on the basis of an "end point to end point" analysis (for the years 1990 and
1998).419 Chile notes that, when determining the measures, the Commission's
analysis did not only consider the most recent trend but also developments and
other factors that had affected the situation of such imports, as can be seen
from Minutes of Session No. 193. Chile also contests Argentina's claim regarding
"incomprehensible" differences in the data (paragraph 125), which in any event
are deemed to be marginal, can be explained as a result of the revision and
verification of the information provided by Chile.420
Provisional safeguards
4.184
Argentina submits that, regarding imports, Minutes
of Session No. 185 of the Commission merely states that "... the Commission took
into account the increase that would have occurred during the agricultural
season 1999/2000 on the hypothesis of the bound import tariff of 31.5 per cent
instead of the duties applicable under the price band. On the basis of this
information provided in the application, the Commission estimated that the
increase in imports would correspond, at least, to the volume needed to cover
the production deficit resulting from the decrease in production under the
related headings". In Argentina's view, the Minutes did not present any
information with respect to an increase in imports in absolute terms or relative
to domestic production and on whether the imports were under such conditions as
to cause or threaten to cause serious injury, so that Chile once again failed to
comply with its obligations under Articles 2.1 and 4.2 (a).421
4.185
Chile disagrees with Argentina's claim and refers
to the import statistics before the Commission, updated in the Annex to Minutes
of Session No. 224. Chile explains that, under the tariff heading corresponding
to mixtures of oils (1517.9000), increasing quantities of edible vegetable oils
started to be imported. This situation led to an increase of 45 per cent in
imports of this product in 1999 and an increase of 431 per cent in 2000.
Consequently, in 2000, 70 per cent of the imports of edible vegetable oils into
Chile were classified as "mixtures" of oils. In Chile's view, this is relevant
because, for example, between 1990 and 1996, this share did not exceed 0.4 per
cent. The dramatic increase in imports of mixtures of oils is reflected in an
increase in total imports of vegetable oils (pure oils and mixtures of oils) of
16 per cent in 2000 compared with the volume imported the previous year. As a
result of this situation, Chile argues, the Commission received a request to
investigate the situation affecting mixtures of oils and initiated a safeguards
investigation into this product. As shown in Minutes of Session No. 229, during
this investigation the relationship between oils and mixtures of oils and the
substantial increase in imports of the latter became evident. This situation led
to the adoption of a provisional safeguard measure for mixtures of oils.422
4.186 In response to the above argumentation, Argentina
submits that the Chilean reference to the increase in imports of mixtures of
oils has no relevance in determining the safeguard measures and that Chile
recognizes that imports of edible vegetable oils declined.423
Definitive safeguards
4.187
Argentina submits that Minutes of Session No. 193
of the Commission determines, with respect to imports of the two main edible
vegetable oils only, that they increased by 23 per cent in 1998 as compared to
the previous year. However, Argentina argues, it then goes on to point out that
"... these imports dropped by 24 per cent ..." during the most recent period,
which, according to the Appellate Body, is ultimately the relevant period for
the application of the measure. Argentina further submits that the same Minutes
also state that "... from 1993 to 1997, the level of imports is similar",
i.e. there was no increase in imports either, even if we consider a series of
more than ten years, as recorded in the notifications that we shall examine in
detail further on, placing the recent behaviour of imports in the broader
context of their trend which, at best, was stable. Argentina indicates that
Chile's notification to the WTO of 7 February 2000 on finding a serious injury
or threat thereof, in the section on increased imports, repeats what was
mentioned in Minutes of Session No. 193, that imports of the two main vegetable
oils fell by 24 per cent during the most recent period.424
4.188
Chile argues that an increase in imports is a basic
requirement for the imposition of safeguard measures and submits that Minutes of
Session No. 193 shows that "[i]mports of the two major products in the edible
vegetable oils sector increased by 23 per cent in 1998 compared with the
previous year. Over the first ten months of 1999, imports fell by 24 per cent.
Regarding this decrease, the Commission notes that in 1999 there was an abnormal
situation due to the behaviour of importers as a result of the tariff disputes
concerning the headings under which oils should be imported. From 1993 to 1997,
the level of imports recorded is similar."425
Extension of the measures
4.189
Argentina submits that Minutes of Session No. 224
of the Commission also states that "� Imports of edible vegetable oils fell by
37 per cent in the period January to September 2000 compared with the same
period in the previous year. In 1999, these imports fell by 22 per cent. The
level of imports from 1993 to 1997 is similar." Argentina argues that, although
an end point to end point analysis does not help in determining the application
of a measure, it does help to show the trend in imports, as sanctioned by the
Appellate Body in Argentina - Footwear (EC), and, in this case, the trend
is, to say the least, erratic and moreover was clearly downward during the
period 1998-1999 (the most recent), both as regards the headings subject to
safeguards and the others.426
4.190
Argentina submits that, in Chile's notification to
the WTO dated 22 December 2000 - extending the measure in effect - the wording
in the section on vegetable oils repeats that contained in Minutes of Session
No. 224 to the effect that "� Imports of edible vegetable oils fell by 37 per
cent in the period January to September 2000 compared with the same period in
the previous year. In 1999, these imports fell by 22 per cent. From 1993 to 1997
the level of imports is similar." Argentina contends that, when it decided to
extend the safeguard measures by means of Minutes of Session No. 224, Chile
recognized that there had been a significant fall in imports, which in all
respects is totally inconsistent with its WTO obligations. Argentina also refers
to data provided by other sources427 which would show a net fall in imports in 1999
and 2000 both for soya bean and sunflower oils, which account for over 90 per
cent of all Chile's imports of oil under the tariff headings subject to the
safeguard. In Argentina's view, these data prove that there has been no increase
in imports of edible vegetable oils in absolute terms nor do any of the Minutes
or notifications provide any information concerning increased imports relative
to domestic production or under such conditions as to cause or threaten to cause
serious injury. Argentina therefore submits that Chile fails to comply with the
obligations under Article XIX.1(a) and Articles 2.1 and 4.2(a) of the Agreement
on Safeguards.428
4.191 In this regard, Chile quotes the following
excerpt of Minutes of Session No. 224:429
"(i) In examining imports, the Commission took into
consideration the fact that, for each of the products investigated, the
normal functioning of the price band system had been decisive in containing
an increase in imports and, consequently, the trend in imports cannot be
examined without taking this factor into account. The analysis by the
Commission takes into account the period from the adoption of each safeguard
measure in effect for each product. Nevertheless, for the purposes of
comparison and evaluation, information for previous periods is also taken
into account."
(ii) Wheat flour
Initiation of the investigation
4.192
Argentina submits that, when considering imports,
Minutes of Session No. 181 simply states that "...for flour, there was an
increase of over 80 per cent during the past year and the first six months of
the last three years show increases of 321 per cent, 23 per cent and 15 per
cent." Argentina alleges that this conclusion is not based on concrete
statistical data, as can been seen from the information provided by the actual
petitioner and from the data of the Commission itself in Minutes of Session No.
224, which show a marked downward trend as of 1996.430
4.193
Chile contests Argentina's statement431 that Minutes
of Session No. 181 on the initiation of the investigation determined that, for
wheat flour, over the past year there was an increase of over 80 per cent and
that the first six months of the last three years show increases of 321 per
cent, 23 per cent and 15 per cent, which, according to Argentina, "are not based
on concrete statistical data", because Minutes of Session No. 224 showed a
marked downward trend as of 1996. Chile points out that this apparent
contradiction is simply due to the fact that a different period was taken as a
basis for comparison because, for the initiation of the investigation, the
Commission took the half-yearly trend for the previous three years, whereas
Minutes of Session No. 224 refers to a longer period and an annual not
half-yearly trend. Chile claims that this is shown by the Minutes, which states
"[i]mports of wheat flour fluctuate as far as increases and decreases are
concerned, but this can be explained by their low volume. Nevertheless, the
Commission notes that for these purposes wheat flour represents an alternative
way of importing wheat if direct imports prove to be more costly or are subject
to a higher tariff, so it is necessary to apply a treatment similar to that
applicable to wheat. The Commission considers that if the total duties
determined by the band were not applied and the duty was limited to a maximum
tariff of 31.5 per cent, the result would be a very rapid increase in imports of
the product." Noting both the levels and the rates of increase, the Commission
concluded that the trend had been erratic during the period 1990 -
January-September 2000. Chile submits that the mere fact that Minutes of Session
No. 181 refers to a particular period does not mean that the Commission
considered other data or did not take into account other periods in its
analysis. In any event, Chile adds, the most important element when analysing
the trend in imports of wheat flour is that they are an alternative product to
imports of wheat and the Commission gave priority to this argument over and
above the trend in imports itself.432
Provisional safeguards
4.194
Argentina contends that, as in the case of oils,
Minutes of Session No. 185 do not provide any information (data, statistics,
etc.) concerning an increase in imports in absolute terms or relative to
domestic production under such conditions as to cause or threaten to cause
serious injury, thereby failing to comply with the obligations under Article
2.1.433
Definitive safeguards
4.195
Argentina submits that Minutes of Session
No. 193 indicate that: "... Imports of wheat flour fluctuate, but this can be
explained by their low volume. Nevertheless, the Commission notes that for these
purposes wheat flour represents an alternative way of importing wheat if direct
imports prove to be more costly or are subject to a higher tariff, so it is
necessary to apply a treatment similar to that applicable to wheat." Argentina
considers that the conclusion drawn by the Commission nullifies any subsequent
inference by Chile from the figures because it acknowledges that these fluctuate
and concern low volumes. Argentina submits that, in fact, there is a downward
trend.434 Argentina submits that it can also be seen that the Minutes do not
provide any data or statistics on imports of wheat flour, and therefore, the
resolution on the application of definitive safeguard measures to wheat flour is
extremely imprecise and partial. Argentina claims that, in the notification to
the WTO dated 7 February 2000, concerning the existence of serious injury or
threat of serious injury, the section concerning increased imports repeats the
wording in Minutes of Session No. 193 regarding fluctuations in the volume of
imports of wheat flour without specifying the period taken into account. In any
event, Argentina concludes, the trend is downward rather than fluctuating, as
can be seen from the information given by Chile in Minutes of Session No. 224.435
Extension of the measures
4.196
Argentina submits that, like Minutes of Session No.
193, Minutes of Session No. 224 also state that "...imports of wheat flour
fluctuate as far as increases and decreases are concerned...". Argentina claims
that the tables accompanying the Minutes contradict the statement in the text
since they clearly show a downward trend in imports of wheat flour:436 Argentina
indicates that the Minutes later state that "[t]he Commission considered that if
the total duties determined by the band were not applied, and the duty was
limited to a maximum tariff of 31.5 per cent, the result would be a very rapid
increase in imports of the product." In Argentina's view, it would appear that
the Chilean authorities consider that an alleged increase in imports, which in
fact did not occur when the measure was applied, could provide grounds for
applying the measure. In this connection, Argentina submits that it must be
borne in mind that a decision to apply a measure must be based on concrete facts
and not on estimates or conjecture.437 Argentina indicates that Chile's
notification to the WTO dated 22 December 2000 concerning the extension of the
existing measure states once again that imports of wheat flour show an erratic
pattern of increases and decreases, and reads "if the total duties determined by
the band were not applied, and the duty was limited to a maximum tariff of 31.5
per cent, the result would be a very rapid increase in imports of the product".
Argentina claims that Table 3 of Minutes of Session No. 224 is attached to the
notification and shows a clear downward trend in imports of wheat flour.
Argentina submits that, based on the figures in the Decree extending the measure
and its notification: imports of wheat flour showed a marked downward trend in
1998 and 1999 after peaking in 1996; the volume of imports of wheat flour fell
by 21 per cent in 1998 compared with 1997; imports fell by a further 11 per cent
during the first nine months of 2000 compared with the same period in 1999.438
(iii) Wheat
Initiation of the investigation
4.197
Argentina contends that, as far as wheat is
concerned, it can be seen that Chile decided to initiate the safeguards
investigation by means of Minutes of Session No. 181 on the basis of partial
data that do not give an overall view of the trend, particularly since the
imports peaked in 1996 and this did not occur subsequently.439
Provisional safeguards
4.198
Argentina submits that, with regard to wheat
imports, Minutes of Session No. 185 do not provide any information either to
justify the application of provisional safeguard measures to imports of wheat.440
Definitive safeguards
4.199
Argentina submits that, as regards imports of
wheat, Minutes of Session No. 193 indicate that, although there was an increase
in imports from 1993 to 1996, these fell in 1997 and only rose by 6 per cent in
1998 compared with the previous year. They also indicate that, over the first
ten months of 1999, imports increased by 281 per cent in comparison with the
same period the previous year. Argentina further submits that, in the
publication by ODEPA entitled El Pulso de la Agricultura of February
1999, No. 27 there are specific references to the seriousness of the drought in
1998/1999. According to this publication, 55 per cent of the agricultural
communities were in a state of alert. Argentina claims that, in its report on
the first half of 1999, the Chilean Ministry of Agriculture stated that the
drought during the 1998/1999 season had led to a decrease in the area under
cultivation and a fall in wheat yields and production throughout Chile.
Consequently, Argentina submits, it is clear that this factor, which was not
taken into account in the relevant Record, had a decisive effect on domestic
production of wheat and possibly on other products subject to the safeguard,
and, as a result, on imports. Argentina indicates that the section on increased
imports in the notification to the WTO dated 7 February 2000 on finding a
serious injury or threat thereof repeats the wording in Minutes of Session No.
193.441
4.200
Chile submits that an increase in imports is a
basic requirement for the imposition of safeguard measures and quotes Minutes of
Session No. 193442 which reads: "Imports of wheat (in tonnes) increased by 6 per
cent in 1998 compared with the previous year. Over the first 10 months of 1999,
imports increased by 281 per cent in comparison with the same period the
previous year. From 1993 up to 1996, there was an increase in imports, which
then fell in 1997. Import of wheat flour fluctuated, but this can be explained
by their low volume."443
4.201 In response to the above argument, Argentina
claims that that increase is irrelevant in order to decide the application of a
safeguard measure considering that the 511,187 tons imported in 1999 represented
almost 30 per cent less of the total imported in 1996 (638,946 tons) as shown by
data provided by Chile in Minutes of Session No. 224.444
Extension of the measures
4.202
Argentina refers to Minutes of Session No. 224
which state that "[d]espite the fact that imports of wheat (in tons) fell by 18
per cent in the period January to September 2000 compared with the corresponding
period for 1999, the Commission took into account that, in annual terms, imports
remained above the annual average for the period 1990-1999." In Argentina's
view, it is clear that the figures given do not suffice for the purpose of
deciding whether or not to extend the safeguard measure and, in light of the
interpretation given by the panel in Argentina - Footwear (EC)
concerning the increase in imports in absolute terms to the effect that an end
point to end point comparison does not suffice and that intervening trends (up
or down and the importance of mixing them in order to determine an increase in
the amount), the rate and amount, within a fixed period of investigation, must
be analysed, which is not the case in this instance, serious doubts are cast on
the consistency and coherence of the figures. Argentina therefore claims that it
does not suffice to consider different figures for incomplete periods in some
cases or figures that are not viewed as a whole, because this deprives the
period of any relevance. Argentina further argues that, bearing in mind that in
the same Argentina - Footwear (EC) case the Appellate Body considered
that the increase in imports must have been recent enough, sudden enough, sharp
enough and significant enough, both quantitatively and qualitatively, to cause
or threaten to cause "serious injury", the decrease of 18 per cent in imports of
wheat during the most recent period is decisive for invalidating the application
of the measure.445
4.203
Argentina explains that, regarding wheat imports,
the Minutes include a Table 1 with figures which, on the one hand, do not show a
growing trend in imports of wheat and, on the other, indicate that the trend is
to say the least erratic. Consequently, Argentina submits as particularly
serious, the fact that Minutes of Session No. 224, which extend the safeguard
measures for one year, not only fail to record an increase in imports of wheat
but acknowledge a fall of 18 per cent in the most recent period,. According to
Argentina, Minutes of Session No. 224 and the notification of the extension also
contain figures on imports of "other wheat", which reached a peak in 1996 and
then declined. Argentina argues that, although imports increased in 1999, this
increase has been estimated on the basis of historically low levels such as
those in 1997 and 1998. Imports fell again in the year 2000. Argentina claims
that the section on wheat imports in the notification to the WTO dated 22
December 2000 concerning the extension of the existing measure repeats the
wording in Minutes of Session No. 224 of the Commission: "[d]espite the fact
that wheat imports (in tons) fell by 18 per cent in the period January to
September compared with the corresponding period for 1999, the Commission took
into account that, in annual terms, imports remained above the annual average
for the period 1990-1999." Argentina questions the relevance this statement has
in support of the decision to apply a safeguard measure. Argentina indicates
that it has also obtained figures concerning Chilean imports of wheat (tariff
heading 1001.9000 - Wheat, other) from other sources446 for the last three full
years. According to Argentina, these figures clearly show the fall in wheat
imports in the year 2000. In any event, Argentina states, as far as this product
is concerned, the impact of the drought in 1998/1999 must be taken into account
and yet was not considered by the Chilean authorities under "other factors".447
(g) Evaluation of all relevant factors
4.204
Argentina contends that the competent Chilean
authorities did not evaluate all relevant factors of an objective and
quantifiable nature having a bearing on the situation of the industry, as
required by Article 4.2(a) of the Agreement on Safeguards. In particular,
Argentina considers that the determination of threat of serious injury made by
the Chilean authority applying the measure is not supported by the evidence
obtained during the investigation. Argentina maintains that the determination of
threat of serious injury by the Commission is inconsistent because of two
instances of non-compliance: (i) contrary to their obligations under Article 4.2
of the Agreement on Safeguards, the Chilean authorities did not evaluate all the
factors related to the situation of the industry; (ii) the findings and
conclusions of the Commission regarding the factors investigated were not
substantiated by evidence.448
4.205
Argentina notes that neither the Minutes of the
Commission nor the notifications to the WTO contain any analysis of each of the
factors specified in Article 4.2(a) during the investigation period, but only
isolated data referring to some of the factors related to the appraisal of an
alleged threat of injury. Argentina explains that, for example, neither the
Minutes nor the notifications contain any evaluation of the rate and amount of
the increase in imports, the share of the domestic market taken by imports, nor
any figures regarding sales, productivity, capacity utilization, profits and
losses, employment or any other relevant factor concerning the situation of the
domestic industry. In Argentina's view, this does not mean that the competent
authority must confine itself to examining the factors listed in the Agreement
on Safeguards, but it does mean that, at the very least, it should examine these
factors, because Article 4.2(a) uses the words "in particular" when referring to
them. For example, Argentina adds, in addition to the aforementioned
profitability (profits and losses), the competent authority should have examined
cash flows in the major firms in this sector. Argentina submits that the
investigation carried out by the Commission did not comply with the provisions
of the Agreement on Safeguards because it did not evaluate all relevant factors
and did not undertake a substantive analysis of each factor. Argentina suggests
that the Commission may have simply accepted the information on the industry's
indicators submitted by the petitioner, in this particular case the Ministry of
Agriculture. Argentina considers that the Final Determination does not really
contain data but only some partial statistics for the three products mentioned
therein. It further explains that it is only possible to extract some isolated
data that are not very clear because there is no sequential information of the
type needed to undertake comparisons. In Argentina's opinion, it is not possible
either to identify the source of the statistics on which the investigation was
based nor the process by which the statistics were verified and re-evaluated in
terms of their reliability. Furthermore, Argentina affirms, the data themselves
appear to be based on some type of "forecast" because the text is written in the
conditional tense. Argentina contends that, it has not proved possible to
identify any analytical basis to substantiate the forecast. Argentina also
contends that the comparison between the periods examined is not very clear and
the data given have not been evaluated in relation to previous years. According
to Argentina, in essence, the data do not prove anything concerning the
existence of a serious threat of injury to the industry. Argentina submits that
the gravity of the measure adopted by the Commission is not justified by the
mere statement that "limiting import duties to 31.5 per cent at a time when
international prices for these products have fallen obviously constitutes a
threat of serious injury ..."449
450
4.206
Chile submits that Article 4.2(a) requires Members
to "evaluate all relevant factors of an objective and quantifiable nature" when
investigating whether the increased imports have caused or are threatening to
cause serious injury. Although Article 4.2 does contain certain factors to be
evaluated, the Article does not contain a definitive list, thereby leaving
Members latitude and even a duty to determine what are the relevant factors in
particular cases.451
4.207
Argentina disagrees with the above interpretation
of Article 4.2 by Chile452 and considers that this interpretation is definitely
contrary to the actual text of the Article, according to which Chile had a
minimum obligation to analyse the factors mentioned therein - given that the
Article refers to them "in particular" - aside from other relevant factors.453
Argentina argues that this interpretation is consistent with different Appellate
Body precedents as in "Argentina - Footwear (EC)"454, and "US - Lamb"455.
456
4.208
Chile submits that the Chilean authority complied
with the requirement to evaluate all relevant factors laid down in Article
4.2(a) of the Agreement on Safeguards. As indicated in that paragraph, "all
relevant factors" must be analysed. Chile submits that relevance is fundamental
when considering factors affecting injury or threat of injury and it must be
considered on a case-by-case, product-by-product basis. Chile maintains that the
Commission therefore considered it highly relevant to include the impact of the
PBS on trade flows in the products investigated that were subject to price
bands. It further argues that failing to take this impact into account would
have been inconsistent with Article 4.2(a). Chile explains that during the
investigation period, the band functioned with positive specific tariffs. It
would be simply inadmissible not to take into account the existence of this
tariff and its effect on the flow of imports and "consequently, the trend in
imports cannot be analysed without taking into account this factor".457 Chile
indicates that this is why the authority considered it necessary to evaluate the
injury that would have been caused to domestic industry in the absence of the
band during the period prior to application of the safeguards. In this
connection, Chile submits that Minutes of Session Nos. 181, 185, 193 and 224
again refer to the impact that would have been caused by failure to apply
safeguards. The effects of the increase in imports take into account both the
income level of producers and the value of production, the decrease in net
profits, including losses, as well as the physical downturn in the domestic
industry which would be absorbed by imports and, lastly, the effect on
employment. Chile claims that this analysis was undertaken for each and every
one of the products covered by the investigation, namely, wheat, wheat flour and
oils.458
4.209
Chile contests Argentina's claims that it did not
evaluate "all the relevant factors", as required by Article 4.2(a) of the
Agreement on Safeguards. Chile submits that the Agreement on Safeguards does not
determine nor specify what is the proper method for deciding on the relevance of
the factors, so Argentina's statement in its claim regarding the need to
consider "for example, (�) cash flows in the major firms in this sector"459 should
not be taken into account because the relevance of factors is the result of the
criteria used by the investigating body and may vary from case to case. Chile
further submits that, if the Agreement on Safeguards itself lists certain
aspects that should be given particular attention and does not include the
factors cited by Argentina, Chile does not consider that it violated this
Article by not including a separate analysis of cash flows in the major firms.
Moreover, Chile argues, for this type of product, the most important factor is
price. Chile refers to US - Lamb, and submits that the Appellate Body
clearly indicated "that the competent authorities are not required 'to show that
each listed injury factor is declining' but, rather, they must reach a
determination in light of the evidence as a whole".460
461 Chile submits that failure
to include a factor that in Argentina's opinion, was decisive or critical, even
if it really was, which remains subject to discussion - does not suffice to
affirm non-compliance with the Agreement on Safeguards. Furthermore, Argentina
indicates that "[i]t appears that the Commission simply accepted the information
on the industry's indicators �", but does not reject the factors taken into
account. Consequently, Chile argues, these factors cannot be nullified simply
because another additional factor was not taken into account in the
investigation. Chile submits that this would only apply to the extent that the
information included did not, as a whole, lead to an appropriate conclusion.462
4.210 In response to a question from the Panel, Chile
explains that all of the factors on which the Commission had information were
considered. It adds that the factors that were not considered were those for
which information was unavailable from public sources and could not be found by
consulting other sources either.463
4.211 In response to Argentina's claim that the gravity of
the measure adopted by the Commission is not justified by the mere statement
that "limiting import duties to 31.5 per cent at a time when international
prices for these products have fallen obviously constitutes a threat of serious
injury" 464, Chile submits that Minutes of Session No. 193 contain detailed
information concerning the serious injury to the domestic industry concerned if
the recommended measures are not applied. In addition, Chile claims, Argentina
fails to draw attention to other Minutes that formed an integral part of the
investigation, namely, Minutes of Session No. 181 of 9 September 1999 and
Minutes of Session No. 185 of 22 October 1999, where the injury to the domestic
industry that would occur if the recommended measures were not adopted is
confirmed and explained in detail.465
Edible vegetable oils
4.212
Argentina contends that it is not clear what type
of product or industry is being examined under the heading "vegetable oils", and
therefore, it is impossible to determine the relevance of the information
obtained in the investigation or whether such data are representative of the
industry. It further states that it is impossible to determine what periods are
being examined because no dates are given. Argentina affirms that, although the
Commission highlights decreases in production and employment levels, reading the
documents it is not clear whether the slowdown in the production of edible
vegetable oils did in fact occur or would occur. In addition, Argentina points
out that the Commission does not deal either with the other factors listed in
Article 4.2(a), namely, the share of the domestic market taken by imports,
changes in the level of sales, productivity, capacity utilization, profits and
losses, inter alia.466 In Argentina's view, although the extension of the
safeguard measure, reported in Minutes of Session No. 224 and in the
notification of extension, includes some additional data, the following points
should be made: Firstly, the data are not analysed in the aforementioned Record;
secondly, the figures contained in the tables attached to the Minutes imposing
the measure in fact invalidate any possible determination of threat of injury.
For example, Argentina explains, prices appear to have risen significantly
between 1996 and 1999 in terms of pesos and then stabilized during the period
examined for the year 2000.467
4.213
Argentina indicates that Table 16 of Minutes of
Session No. 224 recommending the extension contains figures relating to colza
(rape) and sunflower, in terms of area sown, harvest and yield. In Argentina's
opinion, it is not clear why these seeds should be representative of the edible
oils industry because no explanation of their relevance is given. Argentina
submits that, in any event, it can easily be seen that the total number of
hectares sown and harvested increased sharply in the period beginning in 1998,
and sowing increased threefold between 1997 and 1999, returning to the 1998
level in the year 2000, although the figure was still higher than that for the
previous years, and that harvests reached their maximum level in 1999 following
an increase in 1998. In terms of employment, Argentina adds, the figures
presented relate solely to the seed sector and there is no information at all on
the milling and refining sector, which raises doubts as to their relevance.
Nevertheless, Argentina argues, the number of people employed increased in 1998
and 1999.468
4.214
Chile contests the above statement from Argentina
that the data provided "in fact invalidate any possible determination of threat
of injury.469 In Chile's view, Argentina's assertion regarding rising prices is
based on only one of the three columns in Table 12, attached to Minutes of
Session No. 224 (for the purpose of determining the price in question), and is
precisely the column that does not contain any adjustment for national currency.
Chile argues that Argentina does not refer to the other prices shown. In column
two of this table, Chile submits, it is clearly indicated that the prices in
United States dollar terms decreased over the same period.470
4.215 In response to a question by the Panel, Chile
explains that, in the case of the oil industry, the relevant factors analysed by
the Commission were the rate and amount of the increase in imports, the share of
the domestic market taken by increased imports, production (in the case of oils,
only production information was available, which in any case is similar to the
level of sales), capacity utilization, and profits and losses. Domestic prices
were also evaluated. Chile also indicates that no information was available
concerning productivity and employment in the oils industry.471
4.216 With respect to Chile's reply to question 21 of the
Panel regarding the factors that it investigated, Argentina argues that,
apart from the fact that it is impossible to find any reference in any of the
Records to the share of the market taken by imports or changes in the level of
sales, for example, it must be stressed that the findings and conclusions of the
Commission were not supported by evidence.472
4.217 In reference to the above argument on lack of
information on productivity and employment, Argentina claims that Chile
is contradicting itself since the Commission, having stated that it did not have
data on productivity and employment in the oils industry, then claims that the
information provided by the sector via the questionnaires was sufficient.473
Wheat flour
4.218
Argentina submits that, as far as wheat flour is
concerned, in its final determination the Commission did not provide any
evidence of the factors of injury specified in Article 4.2(a) of the Agreement
on Safeguards.474 Argentina explains that the notification of threat of serious
injury simply indicates that: "[i]f the mechanism applied to wheat is not also
applied to imports of wheat flour, a large increase in imports of wheat flour
could cause injury similar to that caused to wheat production by imports of
wheat." On the basis of the information in the final determination and the
notification of extension, Argentina considers to be obvious that the most
important change in the price of wheat flour - at least at the global level and
in terms of pesos - occurred during the period 1996/1997, when prices fell by
almost 20 per cent. Argentina claims that this trend was reversed in 1998,
however, and again in 1999, and, after having reached a peak in 1999, prices
stabilized in 2000.475 Accordingly, Argentina submits that, in the case of wheat
flour, no factor was evaluated in the final determination and this cannot be
compensated by a vague reference to the situation in the wheat production
industry.476
Wheat
4.219
Argentina contends that, in its final
determination, the Commission refers to some indicators, but it does not provide
any analysis of the figures or their relevance. It is thus impossible to see,
according to Argentina, whether the factors of injury were examined on the basis
of the same period of time because there is no reference whatsoever in this
regard. Regarding the figures given, Argentina explains, the wide range in some
of the figures such as the reduction in the net profit margin, which ranges from
20 to 90 per cent, is striking, an aspect for which the Chilean authorities
offer no explanation. Although Argentina could consider that one of the reasons
for this might be the grouping of different products in the same section, or the
scale of production or any other factor, this is not explained. Argentina
further states that the final determination does not analyse the factors listed
in Article 4.2(a) of the Agreement on Safeguards concerning market share,
changes in the level of sales or productivity. In this regard, Argentina claims
that the document determining the extension and the notification of the
extension for the first time provides certain data on the industry, but the time
scales given are not evaluated by the Commission on Distortions in the
determination itself. Argentina concludes that there are no substantiated
conclusions in respect of the few data furnished and that, moreover, even the
information itself does not prove the existence of a threat of serious injury.477
4.220
Argentina explains that Table 9 on domestic prices
expressed in pesos ("Domestic prices, wheat") shows the largest drop between the
years 1996 and 1997. Prices then increased in 1997/1998 and 1998/1999, falling
by only 1.5 per cent in 1999/2000. Concerning the area sown, 1998 was
essentially the same as 1997, but harvests increased by 14 per cent and yield by
16 per cent. Argentina submits that, contrary to what is alleged by Chile, this
shows that the sector not only increased production but also productivity.
Argentina further submits that, although the aforementioned reduction occurred
in 1999, in 2000 the sown area, harvests and yield all increased. Although in
historic terms annual variations are quite normal and decreases in one year are
followed by increases, Argentina argues, the years 1997 and 1998 appear to have
been years of strong growth both as far as sowing and harvesting are concerned.
Argentina thus conclude that there is no evaluation of all the factors, as
required by the Agreement on Safeguards, because there are no references to the
share of the domestic market taken by imports, changes in the level of sales,
productivity, capacity utilization, profits and losses, etc.478
4.221 In response to a question by the Panel, Chile
explains that, in the case of wheat, the relevant factors analysed by the
Commission were the rate and amount of the increase in imports (in absolute and
relative terms), the share of the domestic market taken by increased imports,
production (no information available on sales), productivity, profits and
losses, and employment. Surface area and domestic prices were also considered.
Chile indicates that the capacity utilization was not evaluated because it was
not relevant to this agricultural crop, as stated in Minutes of Session No. 193.479
4.222 In reference to the above on the lack of relevance of
the capacity utilization factor, Argentina recalls that according to
panel and Appellate Body precedents, the investigating authority cannot refrain
from analysing factors listed in Article 4.2(a) of the Agreement on Safeguards,
let alone provide an ex post facto justification during the dispute
settlement proceeding of why it did not analyse a factor. Argentina questions
how the Commission managed to determine, in Minutes of Session No. 185, that
"[t]he number of registered farms would decrease by 25,000 from a total of
89,700. The sown area would decrease from the current 370,000 hectares to
243,000. 390,000 tonnes, i.e. 28 per cent of the current total, would no longer
be produced", without analysing capacity utilization, which is absolutely
necessary in order to determine threat of injury. Consequently, contrary to the
requirements laid down in Article 4.1(b) of the Agreement on Safeguards, this
conclusion was based on conjectures and remote possibilities.480 In connection with
the same answer given by Chile to question 21, Argentina highlights its
inconsistency with the answer given by Chile to question 35, since, according to
Argentina, in the first one Chile states that the CCommission on Distortions
analysed the rate and amount of the increase in imports in absolute and relative
terms, while in the second one Chile points out that the Commission focused its
analysis of imports on their evolution in absolute terms, without mentioning
where that analysis could be found in the Minutes of the Commission.481
(h) Threat of injury
4.223
Argentina claims that the Chilean authorities did
not prove the existence of a threat of serious injury in the terms laid down in
Article XIX:1(a) of the GATT 1994 and Article 4.1(a), 4.1(b) and 4.2(a) of the
Agreement on Safeguards.
4.224
Argentina elaborates on the existing case law of
the Appellate Body. In this regard, it indicates that the Appellate Body stated
that, in making a determination of threat of injury, the concept of "serious
injury" was essential and panels must be mindful of the very high standard of
injury implied by these terms482 and that "� there must be a high degree of
likelihood that the anticipated serious injury will materialize in the very near
future".483 In Argentina's view, the information submitted by the Commission does
not, however, define the extraordinary circumstances that would justify
imposition of a safeguard measure. Argentina indicates that, as regards the
period of review for the evaluation of the relevant factors when determining
threat of injury, the Appellate Body has ruled that it must be determined "�
whether there is an appropriate temporal focus for the competent authorities'
'evaluation' of the data in determining that there is a 'threat' of serious
injury in the imminent future".484 Argentina also indicates that the Appellate Body
also stated that "� data relating to the most recent past will provide competent
authorities with an essential, and, usually, the most reliable, basis for a
determination of a threat of serious injury".485
486
4.225
Argentina submits that, in its determinations, the
Commission repeatedly relies on forecasts, hypotheses and conjecture in order to
establish the threat of serious injury which its domestic industries are
allegedly experiencing, in violation of Article 4.1(b) and the principles laid
down by the Appellate Body. It argues that the Commission's determinations
employ the conditional tense and lack any basis or proof. Argentina provides
some specific examples below: (i) Minutes of Session No. 181 of the Commission
containing the decision to initiate the investigation states with regard to the
three products that: "The quantification of the injury was based on forecasts
that were made on the basis of the hypothesis of application of the bound tariff
of 31.5 per cent and the effect this would have on a series of variables for
each of the products in question". (ii) In the case of wheat, the Commission
states that: " the application of the price band mechanism has ensured that the
injury is not significant. If application of the price band were limited to a
total duty of 31.5 per cent, domestic prices would fall and affect the
producers' income levels". (iii) Minutes of Session No. 185 recommending
application of the provisional safeguard measure states that: "With regard to
injury, the Commission had before it the information contained in the
application, which quantifies the injury on the basis of forecasts elaborated
according to a hypothesis of application of the bound tariff of 31.5 per cent
and the effect this would have on a series of variables for each of the products
in question." (iv) In the case of oils, the same Minutes simply conclude that "
� the ceiling of 31.5 per cent would lower the price and value of production � "487
4.226
Chile contends that a "threat of serious injury"
means serious injury that is "clearly imminent", according to Article 4.1(b) of
the Agreement on Safeguards. It further submits that Article 2.1 of the
Agreement on Safeguards, when referring to an increase in imports (in absolute
or relative terms), also indicates that such imports must be "under such
conditions as to cause or threaten to cause serious injury to the domestic
industry �". Chile argues that the Chilean authorities followed an analytical
forward-looking approach based on the facts when determining the threat of
serious injury. In this regard, Chile refers to the analysis of the "threat of
injury" done by the Appellate Body in the United States - Lamb Meat where it
said that "this term is concerned with 'serious injury' which has not yet
occurred, but remains a future event whose actual materialization cannot, in
fact, be assured with certainty"488 and emphasized that "in order to constitute a
'threat', the serious injury must be 'clearly imminent'. The word 'imminent'
relates to the moment in time when the 'threat' is likely to materialize".489 Chile
further submits that the Appellate Body later states that "as facts, by their
very nature, pertain to the present and the past, the occurrence of future
events can never be definitively proven by facts. There is, therefore, a tension
between a future-oriented 'threat' analysis, which, ultimately, calls for a
degree of 'conjecture' about the likelihood of a future event, and the need for
a fact-based determination � Thus, a fact-based evaluation, under Article 4.2(a)
of the Agreement on Safeguards must provide the basis for a projection that
there is a high degree of likelihood of serious injury to the domestic industry
in the very near future."490 Chile considers that, in accordance with this
statement, a threat of serious injury must always be based on a projection,
which must be consistent with the data on which it is based.491
4.227
Chile submits that, in the case of the goods
investigated, according to the Commission, it is irrefutable that the local and
the imported product are easily interchangeable. Clearly, this was also taken
into account when analysing the threat of injury. Chile argues that the close
relationship between agricultural commodities and products that require a
certain degree of processing that allow them to be considered directly
competitive has been described above. Chile explains that the Commission based
its threat determination on the price of the products corresponding to each
sector of the production industry involved, which is a key element when
determining injury for such products.492 Chile considers that this way of assessing
threat of injury meets the requirements of Article 4.1(c) of the Agreement on
Safeguards. Chile further submits that when it was noted that the price band for
oils could not operate to the full, it was verified that, in the absence of a
safeguard, its incomplete functioning would in the short term lead to a serious
impairment for agricultural producers, given the agreed conditions under which
the product was marketed. Chile explains that competition from imported oil at
very low prices would lead to a very low domestic price for the agricultural
producer, which would absorb the whole of the reduction, with significant losses
that are estimated in the submission. In the medium term, Chile states, the
producers might cease to sow and the industrial plants would lose profits
because they had no product to process. Chile contends that, once again, in the
case of a band that is only partly functioning and in the absence of any
safeguard measure, the price the industry would have to pay would fall to such a
level that agricultural producers would lose the volume estimated as threat of
injury; not because of inefficient management but because of a change in the
rules of the game fixed prior to the sowing season. In addition, Chile declares,
if the industry met its commitment to pay a predetermined price, it would suffer
losses. Chile argues that, in either of the two cases, in the following season,
there would be a sharp fall in prices and, as a result, in the area sown, with
the result that there would be an internal deficit, an increase in imports and
greater injury.493 Chile adds that the Commission took notice of the fact that if
the price band system was limited to a 31.5 percent ad valorem ceiling, prices
would drop even further raising the likelihood of serious injury even more.
Accordingly, Chile submits, the Commission based its threat determination on a
consistent basis in the record494 and took account of the fact that the normal
functioning of the price band had been decisive in containing an increase in
imports and the resulting injury.495
4.228
Argentina, in reference to the above argumentation
by Chile496, submits that, in none of the Minutes did the Commission analyse or
even define the affected industry and that the correlation of prices is not, in
itself, sufficient for the purposes of determining the existence of a threat of
injury. Argentina repeats that Chile did not demonstrate that increased imports
threatened to cause serious injury to the domestic industry, but rather, used
hypothetical and unsubstantiated circumstances for the sole purpose of not
complying with its obligation to apply its WTO tariff binding of 31.5 per cent
applying safeguard measures to justify the inconsistency of its price band
system. In addition, Argentina, in reference to Chile's statement497 that the
Commission took account of the fact that the normal functioning of the price
band had been decisive in containing an increase in imports and the resulting
injury, wonders how, without an increase in imports - since the price band was
functioning at full regime - and without threat of injury, given the existence
of the price band, could the Commission find that there was a threat of injury.
Argentina concludes that Chile is trying to argue before the Panel, as a
justification of its violation of Article II:1(b) of the GATT 1994, the
application of safeguard measures, while on the other hand, it is trying to
justify the non existence of imports in such quantities and the absence of
evidence of threat of injury by pointing to the existence of the price band
system which it maintained in violation of Article 4.2 of the Agreement on
Agriculture.498
(i) Causal link
4.229
Argentina maintains that Chile did not comply with
its obligations under Articles 4.2(b) and 2.1 of the Agreement on Safeguards
inasmuch as it did not establish any causal link between the alleged increase in
imports and the alleged threat of injury to the domestic industry. Argentina
also considers that Chile failed to comply with its obligations under Article
XIX.1(a) of the GATT 1994 and Articles 2.1 and 4.2(b) of the Agreement on
Safeguards inasmuch as it did not establish any causal link between the
existence of factors other than the increase in imports which at the same time
were causing injury to the domestic industry.499
4.230
Argentina contends that, in this case, contrary to
what is required in the above-mentioned Articles, there was no evidence of an
increase in imports or threat of serious injury. Argentina indicates that the
Appellate Body Report in Argentina - Footwear (EC) stated that a causal
link cannot exist if there is no increase in imports or serious injury.500 However,
in order to conclude its examination of the inconsistencies in the findings of
the Commission, Argentina also considers that there is no evidence of the
existence of a causal link.501
4.231 As far as the determination of a causal link is
concerned, Argentina notes first and foremost that the alleged threat of
serious injury to the domestic industry evaluated by Chile is not based on a
threat caused by increased imports but is related to Chile's obligation in the
WTO to apply the bound tariff of 31.5 per cent. Argentina indicates that this is
specifically stated in Minutes of Session No. 181 of the Commission, which
reads: "[t]he quantification of injury was based on forecasts that were made on
the basis of the hypothesis of application of the bound tariff of 31.5 per cent
and the effect this would have on a series of variables for each of the products
in question". Likewise, Argentina contends, Minutes of Session No. 185 state
that: "[r]egarding imports, the Commission took into account the increase that
would have occurred during the 1999/2000 agricultural season on the hypothesis
of application of the bound import tariff of 31.5 per cent instead of the duties
applicable under the price band." Argentina also refers to Minutes of Session
No. 224 in order to claim that this reconfirms that "[i]n examining imports, the
Commission took into account the fact that, for each of the products
investigated, the normal operation of the price bands had been decisive in
curbing an increase in imports and, consequently, the trend in imports cannot be
analysed without taking this factor into account �". In Argentina's view, this
clearly shows that it was not increased imports that led to the application and
extension of the safeguard measures but the hypothesis of application of the
bound tariff.502
4.232
Argentina fails to understand how a simple
statement such as "given the recent and future situation of international prices
�"503, without any analytical support, can constitute the basis for determining the
existence of a causal link. Argentina affirms that Chile failed to comply with
its obligations under Articles 4.2(b) and 2.1 of the Agreement on Safeguards by
not establishing a causal link between the alleged increase in imports and the
alleged injury to the domestic industry. In Argentina's opinion, as the
Appellate Body stated in the US - Wheat Gluten case: "We begin our
reasoning with the first sentence of Article 4.2(b). That sentence 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). Thus, the requirement for a
determination under Article 4.2(a), is that 'the causal link' exists. The word
'causal' means 'relating to a cause or causes', while the word 'cause', in turn,
denotes a relationship between at least two elements, whereby the first element
has, in some way, 'brought about' 'produced' or 'induced' the existence of the
second element. The word 'link' indicates simply that increased imports have
played a part in, or contributed to, bringing about serious injury so that there
is a causal 'connection' or 'nexus' between these two elements. Taking these
words together, the term 'the causal link' denotes, in our view, a relationship
of cause and effect such that increased imports contribute to 'bringing about',
'producing' or 'inducing' the serious injury."504 Argentina refers now to
Argentina - Footwear (EC), where the Panel determined a three-stage sequence
to justify the causal link (the Appellate Body supported this method and
approach).505 Argentina adds that, regarding the last stage of the causal link in
US - Wheat Gluten and US - Lamb, the Appellate Body supported a
"logical process" for the competent authorities' determination of "whether 'the
causal link' exists between increased imports and serious injury, and whether
this causal link involves a genuine and substantial relationship of cause and
effect between these two elements", in accordance with the obligations under
Article 4.2(b).506 This process means separating the injurious effect of increased
imports from the injury caused by other factors. Argentina claims that the
Appellate Body considers that Article 4.2(b) presupposes that the injurious
effects caused to the domestic industry by the increased imports must be
distinguished from the injurious effects caused by other factors.507 In this
regard, Argentina mentions that the Appellate Body noted that "[w]hat is
important in this process is separating or distinguishing the effects
caused by the different factors in bringing about the 'injury'."508
509
4.233
Argentina examines the application of the
three-stages methodology designed by the Appellate Body to this case: (i)
Simultaneity of the trends: Argentina indicates that the determinations do not
contain sufficient bases to conclude that the trends are simultaneous. Indeed,
Argentina states, the import trends have not been analysed in relation to the
changes in the industry's economic and financial indicators. In fact, this could
not have been done because the Minutes do not contain any analysis nor
sufficient data for this purpose. What is even worse is that the period examined
for the indicators of threat of injury are not even known, so the authorities
could not have analysed the relative fluctuations in trends. (ii) Conditions of
competition (under such conditions): Argentina explains that the few references
to prices which appear in the Minutes clearly do not allow any analysis of the
conditions of competition between the imported product and the like product.
Consequently, Chile could hardly try to establish the existence of a causal link
under specified conditions of competition. (iii) Other factors caused injury to
Chile's domestic industry producing wheat, wheat flour and edible vegetable
oils, but not increased imports: Argentina indicates that the third element of a
causation analysis is the consideration of whether factors other than increased
imports are causing or threatening to cause serious injury to the domestic
industry. If so, Article 4.2(b) requires that such injury not be attributed to
increased imports.510
4.234
Argentina claims that the Commission did not
undertake an analysis to evaluate the injury or threat of injury to the domestic
wheat, wheat flour and edible vegetable oils industry caused by "other factors".
As an example, Argentina indicates that, although the Commission showed that
international prices were falling, this was not properly evaluated and, bearing
in mind that these are agricultural and agro-industrial products, climatic
conditions within Chile - which are extremely relevant to the local supply
situation - were not evaluated.511 Argentina asserts that the request for extension
of the measure by the Chilean Ministry of Agriculture512, clearly shows that the
low level of international prices was one of the Chilean Ministry of
Agriculture's main concerns. Argentina argues that the Commission did not
evaluate this additional factor - namely, international prices - in terms of
their impact on the domestic industry, distinguishing this effect from the
effect of imports.513 Argentina further states that the ODEPA Publication "El
Pulso de la Agricultura" of February 1999, No. 27, contains specific
references to the seriousness of the drought in 1998/1999. According to this
publication, Argentina claims, 55 per cent of agricultural communities were in a
state of alert. In its report on the first half of 1999, the Chilean Ministry of
Agriculture stated that the drought during the 1998/1999 season had led to a
decrease in the area under cultivation and a fall in the yield and production of
wheat throughout Chile.514 Argentina submits that the Commission did not analyse
this factor, even though it had a decisive effect on domestic wheat production
of wheat and possibly on other products subject to the safeguard.515
4.235 As regards Argentina's statement that the Chilean
authorities did not make any determination of a causal link in any Minutes or
notification516, Chile points out that, as shown in Minutes of Session No.
193, the Commission took into account the fact that average c.i.f. prices of
Chilean imports were closely related to world prices (trend in commodities). In
fact, Chile argues, the correlation coefficient calculated between the average
c.i.f. price and the international price over two periods, for wheat and oil,
was 91 per cent and 92 per cent respectively. Chile explains that these
variables are therefore closely related, so it can be stated that the trend in
domestic prices is strongly affected by the trend in import costs.517
4.236 As regards the above argumentation, Argentina
considers that Chile's claim whereby the relationship between prices of Chilean
imports and world prices proved that there was a causal link is worthless since
the causal link must be between the increase in imports and the threat of
injury. Argentina further argues that the correlation of prices is not, in
itself, sufficient for the purposes of determining the existence of a threat of
injury.518 Argentina further argues that if one delves deeper into Chile's
analysis, and checks this statement in Minutes of Session No. 193 against the
graph showing the evolution of the international price of soya bean oil
(US$/ton),519 one would find that there are inconsistencies in this reasoning.
Argentina points out that this graph shows a sharp fall in international prices
between November 1998 and September 2000, whereas according to Minutes of
Session No.193, "imports [of oils] fell by 24 per cent�" during the first ten
months of 1999. In Argentina's view, the alleged inverse correlation between
international prices - their fall - and the evolution of imports - their
increase - is not valid. To illustrate this, Argentina has provided, as Annex
ARG-35, two graphs that show a direct correlation between the fall in
international prices and the decrease in imports, based on the graph which Chile
itself provided in its submission and on import data for soya bean oil provided
in Table 7 of Minutes of Session No. 224. Argentina claims that there could
hardly have been a threat of injury when the trends presented by Chile itself
point to the contrary.520
4.237
Chile stresses that it had already stated that the
Commission, in explaining the threat of injury situation, took account of the
following information: the evolution of imports - bearing in mind that the
operation of the price band had been decisive in containing their increase; the
correlation between international prices, import prices and domestic prices; and
the low level of international prices. This was the basis for the prediction
that a rapidly accelerating increase in imports would occur if the total duties
under the price band were not applied, and led the Commission to the conviction
that there was an imminent threat of injury. In Chile's view, this is
particularly true for commodity type products, such as those at issue. Regarding
Argentina's claim that the inverse correlation between the fall in international
prices and the increase in imports was not valid in the case of oils, Chile
submits that two factors must be borne in mind: (i) that the operation of the
price bands was decisive in containing imports; and (ii) that since 1999 there
has been an abnormal situation in the pattern of imports - explaining their
decrease - owing to the disputes concerning the tariff headings under which oils
should be imported. Chile further submits that, with respect to the impact of
these disputes, Minutes of Session No. 224 point out that a close look at these
headings reveals an increase in imports of vegetable oils, and not a decrease.521
4.238 Specifically with respect to oils, Argentina
submits that the Commission failed to take into account in its causation
analysis a number of other factors which had been raised by the Oil Industry
Association of the Argentine Republic (CIARA) in the proceedings. In particular,
Argentina submits that the Commission failed to analyse the shift of the
industry to more profitable sectors; the increase in local demand for seed; the
elasticity of oil-seed supply in relation to the real tariff on oils; whether
the threat of injury to the industry would be eliminated by the transfer of the
input price increase resulting from the increased tariff to consumers, or
whether on the contrary, the threat of injury to the industry was attributable
to the tariff increase that caused the increase in the sales price of oils
generating a fall in demand; imports as a commercial strategy of the Chilean
oils industry deriving from the shortage of local sources of supply; the
sustained growth of the economy, the increase in domestic demand, the increase
or variations in private consumption and the increase in GDP in relation to
imports of oils over the past decade; the population growth and increase in per
capita consumption; the fact that international prices causing the variation in
tariffs under the price band do not affect oil-seed production; the structural
problems of oil-seed production; the shift of the industry to more profitable
sectors; the analysis of other factors affecting agricultural production must
take account of meteorological circumstances that could have affected
productivity and profitability of the crop.522
(j) Whether Chile's safeguard measure was not limited to
the extent necessary to remedy injury and to facilitate adjustment
4.239
Argentina submits that Chile's safeguard measure
violates Articles XIX.1(a) of the GATT 1994 and Articles 3.1 and 5.1 of the
Agreement on Safeguards because it was not limited to the extent necessary to
remedy injury and to facilitate adjustment.
4.240
Argentina contends that the Commission did not
consider whether or not the measure was "necessary" to prevent injury and
facilitate readjustment and no substantive analysis was undertaken (for example,
"reasoned conclusion"). Argentina argues that Chile based its safeguard measure
on the difference between the bound tariff and the combination of the PBS duty
and applied rate, and this is in no way related to a threat of injury from
imports.523
4.241
Argentina noted that Chile's Ministry of
Agriculture stated that: "The surcharge will allow the current level of tariffs
on products subject to the band system to be maintained in order to meet Chile's
obligations to the World Trade Organization (WTO) in 1994."524 Argentina claims
that, in violation of Articles XIX.1(a) of the GATT 1994 and 5.1 of the
Agreement on Safeguards, the Commission did not prove that its safeguard measure
was necessary to remedy serious injury and facilitate the readjustment of the
industry. Argentina argues that, in Korea - Dairy, the Appellate Body
considered that Article 5.1 imposed an "obligation" to ensure that the safeguard
measure was applied only to the extent "necessary".525
526
4.242
Chile submits that, in accordance with its
obligations under the Agreement on Safeguards, it instituted a measure that
protected its domestic producers from serious injury, but which provided no
further amount of protection. Chile explains that, having found the requisite
conditions justifying a safeguard action, the action recommended by the
Commission and taken by the Government involved the least possible trade
disruption consistent with preventing serious injury: an increase in duties to
enable the price band to apply without regard to the bound level of duties.
Chile further explains that the Chilean Safeguard Law only allows imposition of
duties; it does not allow a quota. It limits the safeguards to one year plus an
additional year. Chile submits that, in this particular case, the Commission
recommended that the surcharge be in the form of the duty in excess of the bound
rate under the price band, instead of a flat surcharge. Chile argues that the
flat surcharge would have to have been very high, while the price band could
result in lower rates, as indeed has been the case.527
4.243
Chile explains that the safeguard measures applied
by Chile include a special mechanism for their application, which is based on
the same world price considerations as those in the PBS. According to Chile,
this means in practice that the measure is one of variable applications in order
to reflect in the most appropriate way the impact of imports in relation to the
injury suffered by the domestic industry. Chile argues that the variable nature
of the measure means that there is an immediate response to trends in the
injury, so that the measure can be automatically adjusted to the necessary level
to remedy the injury. In Chile's view, this flexibility can be seen in the fact
that there were periods when, even though the measure had been decreed, tariff
surcharges were not applied. Chile submits that the authority showed its
intention not to apply a safeguard higher than that strictly necessary by
calculating it on a weekly basis so as not to give the industry producing the
product subject to the safeguard protection over and above the minimum required.528
4.244
Argentina, in reference to Chile's statement to the
effect that the safeguard measures applied by Chile include a special mechanism
for their application, which is based on the same world price considerations as
those in the price band system529, submits that, if this is the case, Chile's
actual mechanism for the application of safeguard measures violates the
Agreement on Safeguards, which does not take world prices as a basis, but
rather, imports in such increased quantities, absolute or relative to domestic
production, and under such conditions as to cause or threaten to cause serious
injury to the domestic industry that produces like or directly competitive
products.530
4.245
Chile submits that its statement did not refer to
the increase in imports as a requirement for the application of a safeguard
measure, but rather, as Argentina itself mentions, to the mode of operation of
the adopted measure, which was fixed in accordance with the proportionality
requirement established in Article 5 of the Agreement on Safeguards for the
purpose of preventing the imminent injury that threatened the domestic industry
affected and to permit its adjustment.531
4.246
Argentina argues that the serious injury cannot be
repaired and the adjustment made with identical measures, both for the
definitive safeguards and their extensions. It further submits that it is also
hard to understand how these measures - which, according to Chile itself, were
justified by the threat of injury caused by a fall in international prices -
could be maintained over time in a market in which there could necessarily
always be price fluctuations. In Argentina's view, the adjustment does not
depend on the Chilean industry, but on the evolution of international market
conditions. Argentina contends that, following Chile's logic, if the fall in
prices were to persist, the safeguards would have to be permanent. Conversely,
it adds, the proposed remedy is so far from meeting the requirements of Article
5.1 of the Agreement on Safeguards that an increase in international prices
would lead to the termination of the measures independently of the state of the
industry or of any other economic factor that could have a bearing on the
industry.532
4.247 In reference to the above argumentation of Argentina,
Chile stresses that the problem was not the short-term fluctuation in
prices, but the sharp and sustained fall in those prices over a long period.
Contrary to Argentina's assertion, Chile adds, if the fall in prices were to
persist, the measures would not be permanent, but would be applied for the time
necessary to facilitate adjustment and adaptation to the new price conditions,
and in any case, for not more than two years. Chile considers that, in this
scenario, as in the case of an increase in prices, the measures would continue
to be applied in full conformity with Article 5.1 of the Agreement on
Safeguards, since the purpose of their adoption and the amount involved was
limited to what was necessary to prevent serious injury and facilitate
adjustment.533
4.248
Chile submits that the short period during which
the measures were applied together with the safeguard formula adopted was based
on considerations of proportionality which maintained domestic competition
without neutralizing or equalizing domestic prices and international prices.
Chile also notes that based on the facts of this case the purpose of the
safeguards must be to prevent a threat of serious injury from materializing and
not to repair serious injury that has already taken place. According to Chile,
it is perfectly logical that the extension measures should have adopted the same
formula as the definitive measures, because in spite of the recovery shown by
the domestic industry, the measures, as established, continued to be necessary
to prevent serious injury.534
(k) Provisional measures
4.249
Argentina claims that the competent Chilean
authorities did not comply with Article XIX:2 of the GATT 1994 and Article 6 of
the Agreement on Safeguards, which lay down the requirements for the application
of provisional measures.
4.250
Argentina contends that both Article XIX.2 of the
GATT 1994 and Article 6 of the Agreement on Safeguards provide that "critical
circumstances" must exist before provisional measures can be adopted. In other
words, Argentina claims, the authority may only adopt provisional measures in
circumstances "where delay would cause damage which it would be difficult to
repair". Article 6 also states that such measures may be taken "pursuant to a
preliminary determination that there is clear evidence that increased imports
have caused or are threatening to cause serious injury". Argentina claims that
the resolution of the Commission recommending the adoption of provisional
measures ("provisional determination") does not in any way analyse why a delay
would cause damage which it would be difficult to repair.535 Consequently,
Argentina considers, in the light of the text itself, the resolution of the
Commission does not comply with the requirements of Article 6. Argentina
indicates that, furthermore, the provisional resolution of the Commission fails
to comply with Articles 2.1, 4.1 and 4.2, as well as Articles 3.1 and 4.2(c) of
the Agreement on Safeguards, because there is no evaluation of "like product",
and an increase in imports a threat of injury or a causal link are not proven.536
4.251
Argentina explains that the analysis of the
Commission is divided into three categories of product but there is no
examination of whether this categorization of "like product" and "domestic
industry" is in conformity with Articles 2.1, 4.1(c) and 4.2(b) of the Agreement
on Safeguards.537 In Argentina's opinion, the Commission does not undertake any
analysis of increased imports but simply concludes that imports would increase
if duties were limited to the bound tariff.538 There is no evidence, however, that
imports did in fact increase. The sole reference to increased imports is on page
2 of the Resolution where the authorities indicate that they based their
recommendation on "available evidence" which shows the "possibility" of an
increase in imports of the products in question "if the tariff falls to 31.5 per
cent" - in other words, Argentina claims, the level bound by Chile. However, not
even in this case is the relevant information provided. Argentina also indicates
that the analysis of the indicators of threat of injury are incomplete because
not all the factors have been evaluated, as required by Article 4.2(a) of the
Agreement on Safeguards.539 Argentina contends that, even for those factors that
have been evaluated, the analysis has no meaning because there is no
investigation period and no reference to any other period that might give an
overall view of the relevance of the "decreases" inferred.540 According to
Argentina, it appears that the figures are simply forecasts because the findings
are set out in the conditional tense. Argentina argues that the basis for such
forecasts and their source are not identified.541 For the foregoing reasons,
Argentina claims that the provisional resolution does not comply with Article
4.2(a).542
4.252
Argentina contends that there is no analysis of
causality.543 In other words, Argentina explains, there is no attempt to relate the
trends in imports (which are not provided) with the trends in indicators for the
industry (in the few cases where these are provided the data are not specified).
Consequently, Argentina claims that the resolution does not comply with Article
4.2(b) of the Agreement on Safeguards.544
4.253
Chile submits that Minutes of Session No. 185, of
22 October 1999, sets out the critical circumstances and assessments required in
order to determine the need for the recommended provisional measures, as
required by Article XIX:2 of the GATT 1994 and Article 6 of the Agreement on
Safeguards.545
4.254
Chile explains that if Chile's bound rate of 31.5
percent was observed in the future, the Commission estimated that imports would
increase dramatically causing significant injury to the wheat, sugar and oils
producers. Given the price elasticity of the products, it could be calculated
that there would be a significant import surge, a decline in prices and serious
injury to Chilean producers. Therefore, the Commission properly found that any
delay in adopting a safeguard measure would cause damage which "would be
difficult to repair".546
4.255
Argentina considers this an ex post facto
explanation. Argentina also questions to what "factual basis" is Chile referring
when Chile itself considers the elasticity of products to be "given", without
bothering to make any analysis in this respect. Argentina states that it is
incorrect for Chile to suggest that "it could be calculated" that there would be
a significant import surge, a decline in prices and serious injury to Chilean
producers, without actually making any calculation. Argentina submits that
Article 6 of the Agreement on Safeguards clearly stipulates that such a measure
may only be taken "pursuant to a preliminary determination that there is clear
evidence that increased imports have caused or are threatening to cause serious
injury".547
374 See Argentina's First Written Submission, paras.
95-98.
375 Argentina refers to the Appellate Body report on US - Lamb
(WT/DS177/AB/R, WT/DS178/AB/R) adopted on 16 May 2001, para. 84.
376 Ibid., para. 86.
377 Ibid., para. 90.
378 Ibid., para. 132.
379 See Argentina's First Written Submission, paras.
99-101.
380 See Argentina's First Written Submission, paras.
104-106.
381 Argentina quotes document G/SG/N/8/CHL/1, subpara. 1(iv).
382 See Argentina's First Written Submission, para. 107.
383 See Argentina's First Written Submission, para. 108.
384 Chile refers to para. 99 of Argentina's First Written
Submission.
385 Chile refers to para. 98 of Argentina's First Written
Submission.
386 See Chile's First Written Submission, paras. 151-156.
387 Argentina refers to para. 153 of Chile's First Written
Submission.
388 Argentina refers to para. 155 of Chile's First Written
Submission.
389 See Argentina's Rebuttal, paras. 115-118.
390 See Chile's First Oral Statement, para. 75.
391 See Chile's response to question 27(a) (CHL) of the
Panel.
392 See Chile's First Oral Statement, para. 75.
393 Chile refers to para. 107 of Argentina's First Written
Submission.
394 Chile refers to para. 108 of Argentina's First Written
Submission.
395 See Chile's First Written Submission, paras. 157-159.
396 Chile refers to para. 105 of Argentina's First Written
Submission.
397 See Chile's First Written Submission, paras. 160-162
and Chile's First Oral Statement, para. 75.
398 Argentina refers to para. 75 of Chile's First Oral Statement.
399 See Argentina's Rebuttal, para. 119-120.
400 See Argentina's First Written Submission, para. 109.
401 Argentina refers to the Panel report on Argentina -
Safeguard Measures on Imports of Footwear ("Argentina - Footwear (EC))",
(WT/DS121/R) adopted on 12 January 2000, as modified by the Appellate Body
report, para. 8.138.
402 Ibid., para. 8.141.
403 Ibid., para. 8.284.
404 Argentina quotes the Panel report on United States -
Definitive Safeguard Measures on Imports of Wheat Gluten from the European
Communities ("US - Wheat Gluten"), (WT/DS166/R) adopted on 19 January
2001, as modified by the Appellate Body report, para. 8.31.
405 Argentina quotes the Appellate Body report on Argentina -
Footwear (EC), (WT/DS121/AB/R) adopted on 12 January 2000, para. 129.
406 Ibid., para. 131.
407 Argentina quotes the notification on threat of serious
injury, G/SG/N/8/CHL/1, item 2 in fine.
408 See Argentina's First Written Submission, paras.
110-115.
409 See Argentina's Second Oral Statement, para. 44.
410 See Argentina's First Written Submission, paras.
116-118.
411 Chile quotes the Minutes No. 224, II.(i) of 17 November 2000.
412 See Chile's First Written Submission, para. 170.
413 See Chile's Second Oral Statement, paras. 61-63.
414 See Argentina's response to question 50 of the Panel.
415 Argentina quotes the Appellate Body report on Argentina -
Footwear (EC), (WT/DS121/AB/R) adopted on 12 January 2000, para. 129.
416 Ibid., para. 129.
417 Argentina quotes the Appellate Body report on Argentina -
Footwear (EC), (WT/DS121/AB/R) adopted on 12 January 2000, para. 131.
418 See Argentina's First Written Submission, paras.
119-125.
419 Chile refers to Argentina's First Written Submission, para.
121.
420 See Chile's First Written Submission, paras. 172,-173.
421 See Argentina's First Written Submission, paras.
126-127.
422 See Chile's First Written Submission, paras. 167-169.
423 See Argentina's Rebuttal, para. 124.
424 See Argentina's First Written Submission, paras.
128-130.
425 See Chile's First Written Submission, para. 166.
426 See Argentina's First Written Submission, paras.
131-133.
427 Argentina refers to data provided by the Argentine Embassy in
Chile, based on Chilean customs figures, published by the firm "Intelecta".
428 See Argentina's First Written Submission, paras.
134-140.
429 Chile quotes the Minutes No. 224, II.(i) of 17 November 2000.
430 See Argentina's First Written Submission, paras.
141-142.
431 Chile refers to paras. 141-142 of Argentina's First Written
Submission.
432 See Chile's First Written Submission, paras. 174-179.
433 See Argentina's First Written Submission, para. 143.
434 See Argentina's First Written Submission, para. 144.
435 See Argentina's First Written Submission, paras.
145-147.
436 See Argentina's First Written Submission, paras.
148-150.
437 Argentina refers to the Panel report on Argentina -
Footwear (EC), (WT/DS121/R) adopted on 12 January 2000, as modified by the
Appellate Body report, para. 8.284.
438 See Argentina's First Written Submission, paras.
151-155.
439 See Argentina's First Written Submission, para. 156.
440 See Argentina's First Written Submission, para. 157.
441 See Argentina's First Written Submission, paras.
158-159.
442 Chile quotes the Minutes No. 193 of 7 January 2000.
443 See Chile's First Written Submission, para. 164.
444 See Argentina's Rebuttal, para. 122.
445 See Argentina's First Written Submission, paras.
160-163.
446 Argentina refers to data provided by the Argentine Embassy in
Chile, based on Chilean customs figures, published by the firm "Intelecta".
447 See Argentina's First Written Submission, paras.
164-172.
448 See Argentina's First Written Submission, paras.
173-176.
449 Argentina quotes the notification of threat of serious
injury, G/SG/N/8/CHL/1, p. 1; see also Minutes No. 193, p. 2, and Minutes No.
224, pp. 1 and 2.
450 See Argentina's First Written Submission, paras.
177-182.
451 See Chile's First Oral Statement, para. 78.
452 Argentina refers to para. 78 of Chile's First Oral Statement.
453 See Argentina's Rebuttal, para. 129.
454 WT/DS121/AB/R, adopted 12 January 2000, para. 121.
455 WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, para. 127.
456 See Argentina's Rebuttal, footnote 85.
457 Chile quotes the Minutes No. 224, Commission on Distortions,
17 November 2000.
458 See Chile's First Written Submission, paras. 180-182.
459 Chile refers to para. 179 of Argentina's First Written
Submission.
460 Chile quotes WT/DS177/AB/R, WT/DS178/AB/R, para. 144.
461 See Chile's First Written Submission, paras. 183-186.
462 See Chile's First Written Submission, para. 187.
463 See Chile's response to question 21(b) (CHL) of the
Panel.
464 Chile refers to footnote 88 of Argentina's First Written
Submission where Argentina refers inter alia to Minutes No. 193, p. 2,
and Minutes No. 224, pp. 1 and 2.
465 See Chile's First Written Submission, para. 188.
466 Argentina refers to Minutes No. 193, p. 4. See also the
notification of threat of serious injury, G/SG/N/8/CHL/1, pp. 1 and 2.
467 See Argentina's First Written Submission, paras.
183-187.
468 See Argentina's First Written Submission, para. 188.
469 Chile refers to para. 187 of Argentina's First Written
Submission.
470 See Chile's First Written Submission, para. 189.
471 See Chile's response to question 21(a) (CHL) of the
Panel.
472 See Argentina's Rebuttal, para. 130.
473 See Argentina's Rebuttal, para. 133.
474 Argentina refers to Minutes No. 193, p. 4.
475 Argentina refers to Minutes No. 224, notification of
extension, G/SG/N/14/CHL/1, p. 16, Table 10.
476 See Argentina's First Written Submission, paras.
191-193.
477 See Argentina's First Written Submission, paras.
194-197.
478 See Argentina's First Written Submission, paras.
198-200.
479 See Chile's response to question 21(a) (CHL) of the
Panel.
480 See Argentina's Rebuttal, paras. 131-132.
481 See Argentina's Rebuttal, para. 134.
482 Argentina refers to the Appellate Body report on US - Lamb,
(WT/DS177/AB/R, WT/DS178/AB/R) adopted on 16 May 2001, para. 126.
483 Ibid., para. 125.
484 Ibid., para. 127.
485 Ibid., para. 137.
486 See Argentina's First Written Submission, paras.
202-207.
487 See Argentina's First Written Submission, paras.
208-213.
488 Chile quotes the Appellate Body report on US - Lamb,
(WT/DS177/AB/R, WT/DS178/AB/R) adopted on 16 May 2001, para. 125.
489 Ibid.
490 Ibid., para. 136.
491 See Chile's First Written Submission, paras. 190-195.
492 See also Chile's First Oral Statement, para. 79.
493 See Chile's First Written Submission, paras. 196-199.
494 See Chile's First Oral Statement, para. 79.
495 See Chile's response to question 22(a) (CHL) of the
Panel.
496 Argentina refers to para. 79 of Chile's First Oral Statement.
497 Argentina refers to Chile's response to question 22(a) (CHL)
of the Panel.
498 See Argentina's Rebuttal, paras. 137-142.
499 See Argentina's First Written Submission, paras.
238-239.
500 Argentina quotes the Appellate Body report on Argentina -
Footwear (EC), (WT/DS121/AB/R) adopted on 12 January 2000, para. 145.
501 See Argentina's First Written Submission, para. 217.
502 See Argentina's First Written Submission, paras.
218-222.
503 Argentina refers to Minutes No. 224, p. 5, para. 3.
504 Argentina quotes the Appellate Body report on US - Wheat
Gluten, (WT/DS166/AB/R) adopted on 19 January 2001, para. 67.
505 Argentina quotes the Panel report on Argentina - Footwear
(EC), (WT/DS121/R) adopted on 12 January 2000, as modified by the Appellate
Body report, para. 8.229, and Appellate Body report on Argentina -
Footwear (EC), (WT/DS121/AB/R), adopted on 12 January 2000, paras. 144
and 145. See Argentina's First Written Submission, footnote 117.
506 Argentina quotes the Appellate Body report on US - Lamb,
(WT/DS177/AB/R, WT/DS178/AB/R) adopted on 16 May 2001, para. 177.
507 Argentina quotes the Appellate Body report on US - Wheat
Gluten, (WT/DS166/AB/R), adopted on 19 January 2001, para. 69.
508 Ibid., para. 68.
509 See Argentina's First Written Submission, paras.
223-226.
510 See Argentina's First Written Submission, paras.
228-231.
511 See Argentina's First Written Submission, paras.
232-234.
512 Argentina refers to the request for extension of the
safeguard measure for price-band-related products, Ministry of Agriculture,
Order No. 792, 10 October 2000. (See Annex ARG-22).
513 See Argentina's First Written Submission, paras.
235-236.
514 Argentina refers to the Temporada Agr�cola, No. 13,
first half of 1999, ISSN 0717-0386, Government of Chile, ODEPA (Ministry of
Agriculture), pp. 21 and 22, attached as Annex ARG-30.
515 See Argentina's First Written Submission, para. 237.
516 Chile refers to para. 218 of Argentina's First Written
Submission.
517 See Chile's First Written Submission, paras. 200-203.
518 See Argentina's First Oral Statement, para. 105.
519 Argentina refers to para. 201 of Chile's First Written
Submission.
520 See Argentina's First Oral Statement, paras. 101-103.
521 See Chile's Rebuttal, paras. 68-69.
522 See Argentina's response to question 24 (ARG) of the
Panel.
523 See Argentina's First Written Submission, paras.
240-242.
524 Argentina quotes "El Pulso de la Agricultura", No. 32,
ODEPA publication, Ministry of Agriculture (December 1999), attached as Annex
ARG-31.
525 Argentina quotes the Appellate Body report on Korea -
Dairy, WT/DS98/AB/R, adopted on 12 January 2000, para. 96.
526 See Argentina's First Written Submission, paras.
243-245.
527 See Chile's First Oral Statement, paras. 81-82.
528 See Chile's First Written Submission, paras. 207-209.
529 Argentina refers to para. 207 of Chile's First Written
Submission.
530 See Argentina's Rebuttal, para. 99.
531 See Chile's Second Oral Statement, paras. 46.47.
532 See Argentina's First Oral Statement, para. 107.
533 See Chile's Rebuttal, paras. 72-73.
534 See Chile's Second Oral Statement, paras. 72-73.
535 Argentina refers to Minutes No. 185.
536 See Argentina's First Written Submission, paras.
246-248.
537 Argentina refers to Minutes No. 185.
538 Ibid.
539 Ibid.
540 Ibid.
541 Ibid.
542 See Argentina's First Written Submission, paras.
249-251.
543 Argentina refers to Minutes No. 185.
544 See Argentina's First Written Submission, para. 252.
545 See Chile's First Written Submission, para. 210.
546 See Chile's First Oral Statement, para. 83.
547 See Argentina's Rebuttal, paras.150-151.