AMITY SCHOOL OF LAW, AMITY UNIVERSITY CHHATTISGARH

PROJECT ON : INTERNATIONAL TRADE LAW

TOPIC: TRADE REMEDIES

SUBMITTED TO: SUBMITTED BY:

MR SHAUNAK SHARMA SIR POORVA GUPTA
ALS, AUC BBA-LLB(H), SEM VIII
A80621519020

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 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Mr

Shaunak Sharma Sir, for his exemplary guidance, monitoring and constant encouragement

throughout the course of this Project. The blessing, help and guidance given by him time to

time shall carry me a long way in the journey of life on which I am about to embark. A special

thank of mine goes to my friends who helped me out in completing the project, where they all

exchanged their own interesting ideas, thoughts and made this possible to complete my project

with all accurate information. I wish to thank my parents for their personal support or attention

who inspired me to go my own way. This project has helped me a lot to evolve my personality,

sharpen my various skills and enhance my knowledge in the area of International Trade Law.

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 TABLE OF CONTENTS:

1. Acknowledgement…………………………………………………….……02

2. Introduction (meaning & kinds of Trade Remedies)…………………….…04

3. Anti-dumping…………………………………………………………….…05

3.1. Rationale behind Dumping…………………………………………….06

3.2. Meaning of Anti-Dumping…………………………………………….06

3.3. Justification for Anti-Dumping Duty………………………………….07

3.4. Anti-Dumping Duties..……………………………….………………..07

3.5. Anti-Dumping Law with specific reference to WTO & GATT…….....09

4. Subsidies & Countervailing measures……………………………………...13

4.1. Definition of Subsidies………………………………………………...14

4.2. Categories of Subsidies covered under the Subsidies & Countervailing

Measures (SCM) Agreement…………………………………………..18

5. Safeguard Measures………………………………………………………..20

5.1. Relationship between Article XIX of the GATT, 1994 & the Agreement

on Safeguards…………………………………………………………..21

5.2. Procedure for the application of Safeguard Measures………………...21

5.2.1.1. Substantive Requirements………………………………...23

5.2.1.2. Procedural Requirements…………………………………26

6. Conclusion…………………………………………………………………30

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 INTRODUCTION:

Trade remedies are actions taken in response to subsidies (countervailing duties), sales at less

than fair value (antidumping) and import surges (safeguards). The WTO permits members to

impose trade remedies or trade defence measures against imports to protect their domestic

industries from unfair practices such as dumping and subsidies, or to cope with a sudden surge

of foreign goods. However, it sets out comprehensive rules that members must follow in the

launching, investigation and imposition of anti-dumping, countervailing duties and safeguard

measures. Binding tariffs, and applying them equally to all trading partners (Most-favoured-

nation treatment, or MFN) are key to the smooth flow of trade in goods. The WTO agreements

uphold the principles, but they also allow exceptions — in some circumstances.

Three of these issues are:

1. Actions taken against dumping (selling at an unfairly low price).

2. Subsidies and special “countervailing” duties to offset the subsidies.

3. Emergency measures to limit imports temporarily, designed to “safeguard” domestic

industries.

The three separate WTO (World Trade Organisation) agreements that deal with these topics

are:

7. The Agreement on Subsidies and Countervailing Measures (The Subsidies Agreement);

8. The Agreement on Implementation of Article VI (The Antidumping Agreement); and

9. The Agreement on Safeguards (The Safeguards Agreement).

In this paper we would dive into various Trade remedies and the agreements that deal with the

issues governing the remedies.

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 ANTI-DUMPING:

Dumping, is a pricing practice where a firm charges a lower price for exporting goods than it

does for the same goods sold domestically. It is said to be the most common form of price

discrimination in international trade. Dumping can only occur at places where imperfect

competition exist and where the markets are segmented in a way such that domestic residents

cannot easily purchase goods intended for export. Antidumping duties were initiated with the

intention of nullifying the effect of the market distortions created due to such unfair trade

practices adopted by aggressive exports. They are meant to be remedial and not punitive in

nature. As a method of protection to the domestic industries, Anti-dumping duties are thus

levied on the exporting country which has been accused of dumping goods in another country.

As the Anti-dumping duty is only meant to provide protection to the domestic firms in the

initial stages, as per the international laws, the antidumping legislations may last for a

maximum period of five years.

Anti-dumping measures are of two kinds:

• Anti-dumping duty: This is imposed at the time of imports, in addition to other customs

duties. The purpose of anti-dumping duty is to raise the price of the commodity when

introduced in the market of the importing country.

• Price undertaking: If the exporter himself undertakes to raise the price of the product

then the importing country can consider it and accept it instead of imposing anti-

dumping duty.

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Rationale behind Dumping:

Dumping occurs when firms start using price discrimination as a strategy for profit

maximisation. The condition mandatory for dumping to take place is the presence of an

imperfect market where price discrimination between markets is possible. Only if the above

condition is satisfied is it profitable for the exporting firm to engage in dumping. For any firm,

price discrimination in favour of exports is more common because the share of exports is

usually lesser than the domestic demand. In the export market, individual firms have lesser

monopoly power and hence choose to keep prices lower in foreign markets while charging

higher prices for domestic markets. This can also be explained through the price elasticity of

demand for goods. In areas where the demand is price inelastic, producers tend to charge a

higher price. This is said to be the case in domestic markets. In foreign markets, price elasticity

of demand is elastic and hence prices are low. Thus, if there is high elasticity on export sales

than on domestic sales, firms will dump. Often, dumping is mistaken and simplified to mean

cheap or low priced imports. However, it is a misunderstanding of the term. Dumping implies

low priced imports only in the relative sense (relative to the normal value), and not in absolute

sense. Import of cheap products through illegal trade channels like smuggling does not fall

within the purview of antidumping measure.

Meaning of Anti-Dumping:

Anti-dumping can be seen as a protective device available to the states against problems

associated with the free trade. In the recent years a large number countries have become

frequent users of anti-dumping. Many of the heaviest anti-dumping users are countries who did

not even have an anti- dumping statute a decade ago. Anti- dumping measures are not only

legal but they are also flexible in usage. Further, antidumping duties can be presented not as

protection but as encounter against “unfair” competition.

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Justifications for Anti-dumping duty:

Anti-Dumping duties were introduced by the developed countries to protect their industries

against the low priced imports. Developing countries supported the inclusion of the provision

relating to anti-dumping duties under GATT because they wanted to levy of anti-dumping

duties to be under international regulation. In free trade, firms are allowed to charge different

rates in different markets. The result would be that firms would charge lower prices in foreign

leading to material injury to the domestic producers in the foreign market. Had price

discrimination taken place by a monopoly firm within one economy, the government would

have intervened to stop consumer exploitation by enforcing an Act similar to the MRTP Act,

in India. Hence, in the international context, it is the antidumping duty that protects the

domestic producers initially and consumers in the long run. Usually, the intentions of charging

such low prices to foreign consumers is to be able to wipe out the domestic industries and

eventually acquire monopoly power in the foreign market (i.e. using predatory pricing). Thus

it is on the ground of protecting the domestic industries that the anti dumping duties have been

justified.

Anti-Dumping Duties:

The relief to the domestic industry against dumping of goods from a particular country is in the

form of anti-dumping duty imposed against that country, which could go up to the dumping

margin. Under the WTO arrangement, the national authorities can impose duties up to the

margin of dumping i.e. the difference between the normal value and the export price. The

Indian law also provides that the anti-dumping duty to be recommended / levied shall not

exceed the dumping margin. An anti-dumping duty imposed under the Act unless revoked

earlier remains in force for 5 years from the date of imposition. The Designated Authority by

the process of mid review is empowered to review the need for the continued imposition of the

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anti-dumping duty from time to time. Such a review can be done suo-moto or on the basis of

request received from an interested party in view of the changed circumstances.17 The WTO

Agreement as well as the Indian law provides that the injured domestic industry is permitted to

file for relief under both anti-dumping and countervailing duties. However, no article will be

subjected to both countervailing and anti-dumping duties to compensate for the same situation

of dumping.

• ALTERNATIVE REMEDIES: The remedy against dumping is not always in the form

of anti-dumping duty. The investigation may be terminated or suspended after the

preliminary findings if the exporter concerned furnishes an undertaking to revise his

price to remove the dumping or the injurious effect of dumping as the case may be. No

anti-dumping duty is recommended on such exporters from whom price undertaking an

interim relief in the form of a provisional anti-dumping duty, has been accepted.

• INTERIM REMEDIES: pending the finalization of investigation proceedings, can

also be provided to the affected domestic industry. The provisional duty can be imposed

only after the expiry of 60 days from the date of initiation of investigation and will

remain in force only for a period not exceeding 6 months, extendable to 9 months under

certain circumstances.19 If the final duty levied is less than the provisional duty which

has already been levied and collected, the differential amount already collected as

provisional duty shall be refunded. If the final duty imposed is more than the provisional

duty already imposed and collected, the difference shall not be collected.

• RETROSPECTIVE ANTI-DUMPING DUTIES: Anti-dumping duty can also be

levied on a retrospective basis in cases where injury is caused due to massive dumping

of an article imported in a relatively short time, which in the light of the timing and the

volume of imported article dumped and other circumstances, is likely to seriously

undermine the remedial effect of the antidumping duty liable to be levied. However,

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 the anti-dumping duty cannot be levied retrospectively beyond 90 days from the date

of issue of notification imposing duty.

Anti-Dumping Law with specific reference to: WTO & GATT

The Agreement on Implementation of Article VI of the General Agreement on Tariffs and

Trade, 1994 (hereinafter referred to as “the Agreement”) governs the application of

antidumping measures by Members of the WTO. The provisions of the Agreement were first

negotiated during the Kennedy Round (1967) and later substantially revised during the Tokyo

Round (1979) of GATT negotiations. WTO rules allow the member countries to opt for

antidumping measures with specific stipulations. If a country today has anti-dumping

legislations, it must be consistent with the agreement. Anti-dumping measures are unilateral

remedies which may be applied by a Member after an investigation and determination by that

Member, in accordance with the provisions of the Agreement, if it is felt that an imported

product is dumped and that the dumped import is causing material injury to a domestic industry

which produces a similar product. The Agreement applies to trade in goods only. Trade in

services is not covered by this agreement.

The agreement contains provisions with respect to the following:

A) The Agreement sets out rules for the conduct of anti-dumping investigations,

including initiation of cases, calculation of dumping margins, the application of

remedial measures, injury determinations, enforcement, reviews, duration of the

measure and dispute settlement.

B) The Agreement provides for the right of contracting parties to apply anti-dumping

measures, i.e. measures against imports of a product at an export price below its

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 “normal value” (usually the price of the product in the domestic market of the

exporting country) if such dumped imports cause injury to a domestic industry in

the territory of the importing contracting party.

C) The Agreement provides for greater clarity and more detailed rules in relation to the

method of determining whether a product is dumped, the criteria to be taken into

account in determining whether dumped imports cause injury to a domestic

industry, and also the procedures to be followed in initiating and conducting anti-

dumping investigations. This investigation can initiate only on receiving an

application, containing the nature and extent of harm to the domestic industry being

caused and the complete description of the dumped products, from the domestic

producers of the similar product. If authorities decide to proceed to initiate an

investigation, the authorities shall notify the government of the exporting Member

concerned.

D) A new provision requires the immediate termination of an anti-dumping

investigation in cases where the authorities determine that the margin of dumping

is de-minimis (which is defined as less than 2 per cent, expressed as a percentage

of the export price of the product) or that the volume of dumped imports is

negligible (generally when the volume of dumped imports from an individual

country accounts for less than 3 per cent of the imports of the product in question

into the importing country).

E) It contains provisions relating to implementation and duration of anti-dumping

measures. An anti-dumping duty shall remain in force only as long as and to the

extent necessary to counteract dumping which is causing injury. The Agreement

lays the “Sunset Provision” under which all anti-dumping measures shall expire five

years after the date of imposition (or the most recent review), unless a determination

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 is made by the authorities that, in the event of termination of the measures, dumping

and injury would be likely to continue or recur. The agreement also provides for a

judicial, arbitral or administrative review for the duration such imposition.

F) From many perspectives, the most significant feature of the WTO anti-dumping

framework is its dispute settlement procedure, which greatly strengthens the ability

of affected nations to challenge anti-dumping actions by other member nations. The

Agreement clarifies the role of dispute settlement panels in disputes relating to

antidumping actions taken by domestic authorities. Under the WTO's DSB (Dispute

Settlement Body), a case generally has to first proceed through a panel stage, then

The Dispute Settlement Body has to accept or reject the Appellate Body report

within 30 days — and rejection is only possible by consensus.

G) The Agreement strengthens the requirement for the importing country to establish

a clear causal relationship between dumped imports and injury to the “domestic

industry” by evaluating all relevant economic factors related to the industry

concerned.

H) Provisions on the application of provisional measures12 are given. These measures

are applied when an investigation as per article 5 has been initiated or a preliminary

affirmative determination has been made of dumping and consequent injury to a

domestic industry

I) Provisions in respect of the use of price undertakings13 in anti-dumping cases have

been strengthened. Here proceedings may be suspended or terminated without the

imposition of provisional measures or anti-dumping duties upon receipt of

satisfactory voluntary undertakings from any exporter to revise its prices or to cease

exports to the area in question at dumped prices so that the authorities are satisfied

that the injurious effect of the dumping is eliminated.

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 J) The agreement provides that the provisional measures and anti-dumping duties shall

only be applied to products which enter for consumption after the time when the

decision for imposition of these measures enters into force. However, where a final

determination of injury is such that the effect of the dumped imports would, in the

absence of the provisional measures, have led to an injury to domestic producers,

antidumping duties may be levied retroactively for the period for which provisional

measures have been applied.

The WTO Anti-dumping Agreement, or more formally the Agreement on the Implementation

of Article VI of the GATT, allows governments to act against dumping where there is genuine

(“material”) injury to the competing domestic industry. In order to do that, the government has

to be able to show that dumping is taking place, calculate the extent of dumping (how much

lower the export price is compared with the exporter’s home market price), and show that the

dumping is causing injury or threatening to do so.

Anti-dumping measures can be applied if the dumping is hurting the industry in the importing

country. Therefore, a detailed investigation has to be conducted according to specified rules

first. The investigation must evaluate all relevant economic factors that have a bearing on the

state of the industry in question. If the investigation shows dumping is taking place and

domestic industry is being hurt, the exporting company can undertake to raise its price to an

agreed level in order to avoid anti-dumping import duty

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 SUBSIDIES & COUNTERVAILING MEASURES (SCM) :

The WTO Agreement on Subsidies and Countervailing Measures does two things:

• It disciplines the use of subsidies, and

• It regulates the “countervailing” actions countries can take to counter the effects of

subsidies.

The main object and purpose of the SCM Agreement is to increase and improve GATT

disciplines relating to the use of both subsidies and countervailing measures (US - Carbon

Steel, Appellate Body Report, para. 73). Therefore, the SCM Agreement can be seen as "two

agreements in one".

A) Multilateral Disciplines on Subsidies: The SCM Agreement provides

multilateral disciplines governing whether, and what kind of, a subsidy may be

provided by a Member. Certain subsidies are prohibited and all other specific

subsidies may be challenged if they cause adverse effects to the interests of other

Members. These rules are enforced through the WTO dispute settlement

mechanism, in accordance with the Dispute Settlement Understanding (DSU) – see

Module 10. This is also called the "multilateral track". In this regard, the SCM

Agreement contains special or additional rules and procedures that supplement or

replace the rules of the dispute settlement mechanism provided in the DSU. The

invocation of the multilateral track may end with the withdrawal of the subsidy or

the removal of its adverse effects, depending on the case.

B) Countervailing Measures: The SCM Agreement also allows Members to

apply countervailing measures after conducting a domestic investigation according

to the criteria set forth in the SCM Agreement (also called "unilateral" or "domestic"

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 track). As we will see below, countervailing duties can only be applied when

subsidized imports are causing injury or threatening to cause injury to the domestic

industry producing the like product. The SCM Agreement also provides procedural

requirements that regulate the conduct of countervailing investigations. As in the

case of anti-dumping, a failure to comply with any of the requirements for the

imposition of countervailing measures can be challenged by the exporting Member

through the WTO dispute settlement mechanism.

[I] Definition of Subsidies:

The definition of "subsidy" contains three elements which must be satisfied for a subsidy to be

covered by the SCM Agreement (Article 1). There must be:

• A financial contribution;

• By a government or any public body within the territory of a Member; à

• Which confers a benefit.

All three elements must be satisfied in order for a subsidy to exist.

Specificity Requirement: The disciplines in the SCM Agreement only apply to "specific"

subsidies (Article 2) — i.e. a subsidy available only to an enterprise, industry, group of

enterprises, or group of industries within the jurisdiction of the granting authority.

• FINANCIAL CONTRIBUTOR: Under the SCM Agreement, a subsidy may only

exist where a measure takes the form of a "financial contribution", or where there is any

form of income or price support in the sense of Article XVI of GATT 1994. Article 1

contains a list of measures that are deemed to provide a financial contribution. These

include direct transfers of funds (e.g. grants, loans, and equity infusion) and potential

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 direct transfers of funds or liabilities (e.g. loan guarantees). A financial contribution

also exists where government revenue that is otherwise due is foregone or not collected

(e.g. fiscal incentives such as tax credits); where a government provides goods or

services other than general infrastructure, or purchases goods; or where a government

entrusts or directs a private body to carry out these functions. If a measure confers

regulatory - but not financial - advantages, it would not constitute a subsidy. For

instance, assume that a government temporarily exempts a manufacturing facility in

financial difficulties from the obligation to observe anti-pollution laws. To the extent

that there is no element of financial contribution, this would not constitute a subsidy.

• BY A GOVERNMENT OR ANY PUBLIC BODY: In order for a financial

contribution to be a subsidy, it must be made by - or with the entrustment or direction

of - a government or any public body within the territory of a Member. The SCM

Agreement applies not only to measures of national governments, but also to measures

of sub-national governments and of such public bodies as state-owned companies. A

financial contribution made by a private body may still fall under the definition

provided in Article 1.1 of the SCM Agreement if a government or public body entrusts

or directs a private body, that is, if the contribution is made pursuant to the government's

instructions. For example, if a private non-governmental organization (NGO) gives

technical and financial assistance to coffee growers in certain WTO Members in Africa,

it would be a case of private, not governmental, assistance, presumably unless the

financial contribution was made at the direction of a government or public body within

the territory of the WTO Member.

• CONFERS A BENEFIT: A financial contribution by a government is not a subsidy

unless it confers a "benefit". The word ''benefit'', as used in Article 1.1 of the SCM

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 Agreement, is concerned with the ''benefit to the recipient'' and not with the ''cost to

government'' (Canada – Aircraft, Appellate Body Report, paras. 154-155. In many

cases, as in the case of a cash grant, the existence of a benefit and its value may be clear.

In some cases, however, the issue of benefit is more complex. For example, when does

a loan, an equity infusion or the purchase by a government of a good confer a benefit?

Although the SCM Agreement does not provide comprehensive guidance on these

issues, the Appellate Body has stated in Canada – Aircraft that the existence of a benefit

is to be determined by comparison with the market-place (i.e., whether the recipient has

received a financial contribution on terms more favourable than those available to the

recipient in the marketplace) (Canada – Aircraft, Appellate Body Report, para. 157).

Thus, for example, if a government makes a loan to a manufacturer on conditions

equivalent to those that the manufacturer could obtain from private banks, there is a

financial contribution but no benefit; under these conditions, the loan would not

constitute a subsidy.

In the context of countervailing duties, Article 14 of the SCM Agreement provides

some guidance with respect to determining whether certain types of measures confer a

benefit. While that provision furnishes contextual guidance for the meaning of

"benefit", as regards multilateral disciplines, the meaning of "benefit" is not fully

resolved.

• SPECIFICITY: Even if a measure is a subsidy within the meaning of the SCM

Agreement, it nevertheless is not subject to the SCM Agreement unless it has been

"specifically" provided to an enterprise or industry or group of enterprises or industries.

The basic principle is that only a subsidy that distorts the allocation of resources within

an economy should be subject to disciplines. Where a subsidy is widely available within

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 an economy, such a distortion in the allocation of resources is presumed not to occur.

There are four types of "specificity" within the meaning of the SCM Agreement:

i) Enterprise-specificity -a government targets a particular enterprise or

enterprises for subsidization

ii) Industry-specificity –a government targets a particular enterprise or enterprises

for subsidization

iii) Regional-specificity –a government targets producers in specified parts of its

territory for subsidization

iv) Prohibited subsidies – i.e. export subsidies and domestic content subsidies are

deemed to be specific.

The SCM Agreement covers not only subsidies which are de jure specific (their specific nature

is derived from an explicit limitation by the granting authority or the legislation pursuant to

which the granting authority operates), but also those that are de facto specific (the specific

nature of the subsidy is derived from the facts and circumstances surrounding its application;

in other words, the subsidy is "in fact" specific). In this regard, Article 2.1(c) of the SCM

Agreement provides that if there are reasons to believe that the subsidy may, in fact, be specific,

other factors listed in the Agreement - such as the use of a subsidy programme by a limited

number of certain enterprises, predominant use by certain enterprises, and the manner in which

discretion has been exercised by the granting authority in the decision to grant a subsidy - may

be considered. Information on the frequency with which applications for a subsidy are refused

or approved and the reasons for such decisions are also to be considered. The extent of

diversification of economic activities within the jurisdiction of the granting authority, as well

as the length of time during which the subsidy programme has been in operation are to be taken

into account.

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[II] Categories of Subsidies covered under the Subsidies & Countervailing

Measures (SCM) Agreement:

The agreement defines two categories of subsidies: prohibited and actionable (see below). It

originally contained a third category: non-actionable subsidies. This category existed for five

years, ending on 31 December 1999, and was not extended. The agreement applies to

agricultural goods as well as industrial products, subject to certain provisions of the Agreement

on Agriculture. The following are the two categories of Subsidies mentioned under The

Subsidies & Countervailing Measures (SCM) Agreement:

• Prohibited subsidies: subsidies that are conditioned on export performance, or on

the use of domestic goods instead of imported goods. They are prohibited because

they are specifically designed to distort international trade, and are therefore

presumed to hurt other countries’ trade. They can be challenged in the WTO dispute

settlement procedure, where they are handled under an accelerated timetable. If the

dispute settlement procedure confirms that the subsidy is prohibited, it must be

withdrawn immediately. Otherwise, the complaining country can take

countermeasures. Alternatively, if domestic producers are hurt by imports of

products benefiting from a prohibited subsidy, a countervailing measure can be

imposed.

• Actionable subsidies: for subsidies in this category, to obtain a remedy under the

dispute settlement system, the complaining country has to show that the subsidy has

an adverse effect on its interests. The agreement defines three types of damage that

can be alleged in a dispute. One country’s subsidized exported product can hurt a

domestic industry in an importing country. A subsidized product can hurt rival

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 exporters from another country when the two compete in third markets. Or domestic

subsidies in one country can hurt exporters trying to compete in the subsidizing

country’s domestic market. If the Dispute Settlement Body rules that the subsidy has

such an adverse effect, the subsidy must be withdrawn or its adverse effect must be

removed. Alternatively, if domestic producers are hurt by imports of products

benefiting from an actionable subsidy, a countervailing measure can be imposed.

The disciplines on countervailing measures are similar to those of the Anti-Dumping

Agreement. Countervailing duty (the parallel of anti-dumping duty) can only be charged after

the importing country has conducted a detailed investigation similar to that required for anti-

dumping action. There are detailed rules for deciding whether a product is being subsidized

(not always an easy calculation), criteria for determining whether imports of subsidized

products are hurting (“causing injury to”) domestic industry, procedures for initiating and

conducting investigations, and rules on the implementation and duration (normally five years,

extendable in certain circumstances) of countervailing measures. The subsidized exporter can

also agree to raise its export prices, or the subsidizing government can agree to remove or

reduce the subsidy or its effects, as an alternative to its exports being subject to a countervailing

duty.

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 SAFEGUARD MEASURES:

(An emergency protection from imports)

Article XIX of the GATT 1994 and the Agreement on Safeguards (or "Safeguards Agreement")

allow Members to apply safeguard measures only after determining, pursuant to an

investigation carried out in accordance with such rules, that a product is being imported in such

increased quantities and under such conditions as to cause or threaten to cause serious injury

to the domestic industry producing like or directly competitive products. While the Safeguards

Agreement does not expressly delimit the possible form of a safeguard measure, it envisages

that safeguard measures may take the form of tariffs above the bound rate or quantitative

restrictions. Unlike anti-dumping and countervailing measures, the application of safeguard

measures does not require an unfair trade action. Instead, the objective of safeguard measures

is to provide a temporary remedy while facilitating structural adjustment of the industry

adversely affected by increased imports, thereby enhancing competition in international

markets. An affected WTO Member may challenge another Member's failure to comply with

any of the requirements provided for the imposition of safeguard measures through the WTO

dispute settlement mechanism. The provisions on safeguard measures apply to all products,

including agricultural goods. Safeguard measures restrict imports of a product temporarily if a

domestic industry is seriously injured or threatened with serious injury caused by a surge in

imports. The Agreement on Safeguards (the Safeguards Agreement) establishes rules for the

application of safeguard measures by Member governments, as provided in Article XIX of

GATT 1994. Effective safeguard rules are important to the viability and integrity of the

multilateral trading system. The availability of a safeguard mechanism gives WTO Members

the assurance that they can act quickly to help industries adjust to import surges, providing

them with flexibility they would not otherwise have to open their markets to international

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competition. At the same time, WTO safeguard rules ensure that such actions are of limited

duration and are gradually less restrictive over time. Under certain circumstances,

compensation is also authorized.

[I] Relationship between Article XIX of the GATT, 1994 & the Agreement on

Safeguards:

Safeguard measures were available under Article XIX of the GATT 1947 (the so-called "escape

clause"). The general provisions on safeguards contained in Article XIX of the GATT 1947

(superseded by Article XIX of the GATT 1994) were clarified and reinforced by the Agreement

on Safeguards adopted during the Uruguay Round. Some clarity about the relationship between

Article XIX of the GATT 1994 and the Agreement on Safeguards is provided in Articles 1 and

11.1(a) of the Agreement on Safeguards: the Safeguards Agreement establishes rules for the

application of safeguard measures (i.e. those measures provided for in Article XIX); and a

Member shall not take or seek any emergency action on imports of particular products as set

forth in Article XIX of GATT 1994 "unless such action conforms with the provisions of that

Article applied in accordance with [the Safeguards Agreement]". Thus, any safeguard measure

imposed after the entry into force of the WTO Agreements must comply with the provisions of

both the Agreement on Safeguards and Article XIX of the GATT 1994 (Korea - Dairy,

Appellate Body Report, para. 77

[II] Procedure for the Application of Safeguard Measures:

It includes two types of Requirements: Substantive & Procedural Requirements

1. SUBSTANTIVE REQUIREMENTS:

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Article 2.2 of the Agreement on Safeguards provides that safeguard measures shall be applied

to a product being imported irrespective of its source. Thus, safeguard measures must be

applied, in principle, on an MFN basis. Article 2 also sets forth the conditions under which

safeguard measures may be applied.

Conditions for the Application of Safeguard Measures Safeguard measure may only be applied

as a result of unforeseen developments and of the effect of the obligations incurred by a

contracting party under the GATT (Article XIX of the GATT 1994). According to Article 2 of

the Agreement on Safeguards, a Member may apply a safeguard measure only after

determining, pursuant to an investigation, the existence of the following conditions:

• Increased quantity of imports in absolute or relative terms

• Serious injury caused, or threatened to be caused, to the domestic industry producing

the "like or directly competitive" products; and,

• Causal link between the increased imports and the injury

RESULT OF UNFORESEEN DEVELOPMENTS AND OF THE EFFECT OF

THE OBLIGATIONS INCURRED UNDER THE GATT 1994:

According to Article XIX of the GATT 1994, a safeguard measure may only be applied as a

result of unforeseen developments and of the effect of the obligations incurred by a Member

under the GATT, including tariff concessions. In this regard, the Appellate Body has stated

that safeguard measures may only be taken in circumstances not reasonably expected when the

Member bound its tariff levels (Argentina- Footwear, Appellate Body Report, paras. 91-96).

According to the Appellate Body, the existence of unforeseen developments is a "pertinent

issue of fact and law" under Article 3.1 of the Safeguards Agreement; hence, the published

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report of the competent authorities must contain a "finding" or "reasoned conclusion" on

unforeseen developments (US- Lamb, Appellate Body Report, para. 76).

INCREASED IMPORTS:

As noted, the determination of increased quantity of imports that a Member must make before

it may apply a safeguard measure can be of either an absolute increase or an increase relative

to domestic production. In Argentina – Footwear, the Appellate Body stated that the increase

in imports must have been recent, sudden, sharp and significant enough, both quantitatively

and qualitatively, to cause or threaten to cause injury (Argentina – Footwear, Appellate Body

Report, para. 131).

SERIOUS INJURY:

Before a safeguard measure can be imposed, the WTO Member must have determined that

serious injury is caused or is threatened to be caused to the domestic industry producing the

like or directly competitive product. Article 4.1(a) of the Agreement on Safeguards defines

serious injury as "a significant overall impairment in the position of a domestic industry" and

a "threat of serious injury" as "serious injury that is clearly imminent", "based on facts, and not

merely on allegation, conjecture or remote possibility". If serious injury is not found, a

safeguard measure nevertheless can be applied if a threat of serious injury is found.

In determining injury or threat thereof, a "domestic industry" shall be understood to mean "the

producers as a whole of the like or directly competitive products operating within the territory

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of a Member, or those whose collective output of the like or directly competitive products

constitutes a major proportion of the total domestic production of those products" (Article

4.1(c)).

This definition is broader than the one provided for the application of anti-dumping and

countervailing measures, since it may include not only producers of "like products" but also

producers of "directly competitive products". In determining whether serious injury is present,

investigating authorities are to "evaluate all relevant factors of an objective and quantifiable

nature having a bearing on the situation of that industry" (Article 4.2(a); see e.g. Argentina –

Footwear, Appellate Body Report, paras. 136, 138). Article 4.2(a) provides that competent

authorities shall evaluate, in particular: the rate and amount of the increase in imports of the

product concerned in absolute and relative terms, the share of the domestic market taken by

increased imports, changes in the level of sales, production, productivity, capacity utilisation,

profits and losses and employment of the domestic industry.

The standard of "serious injury" required for the application of safeguard measures is higher

than the "material injury" envisaged in the Anti-Dumping Agreement and the SCM Agreement.

According to the Appellate Body, this accords with the object and purpose of the Agreement

on Safeguards since the application of a safeguard measure does not depend upon "unfair" trade

actions, as is the case with anti-dumping or countervailing measures (US – Lamb, Appellate

Body Report, para. 124).

CAUSAL LINK BETWEEN THE INCREASED IMPORTS AND INJURY:

The determination of serious injury cannot be made unless there is objective evidence of the

existence of a causal link between increased imports of the product concerned and serious

injury. Further, when factors other than increased imports are causing injury to the domestic

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industry at the same time, such injury must not be attributed to increased imports (the so-called

"non-attribution requirement") (Article 4.2(b)). However, this does not require that increased

imports be ''sufficient'' to cause, or threaten to cause, serious injury. Nor does this require that

increased imports ''alone'' be capable of causing, or threatening to cause, serious injury. The

causal link between increased imports and serious injury may exist, even though other factors

are also contributing, at the same time, to the situation of the domestic industry. According to

the Appellate Body, the non-attribution language in Article 4.2(b) means "that the effects of

increased imports, as separated and distinguished from the effects of other factors, must be

examined to determine whether the effects of those imports establish a "genuine and substantial

relationship of cause and effect" between the increased imports and serious injury" (US –

Wheat Gluten Safeguard, Appellate Body Report, para. 67; and, US – Lamb, Appellate Body

Report, paras. 168-170).

2. PROCEDURAL REQUIREMENTS:

As mentioned above, as with the other trade remedy measures, a crucial pre-condition to be

satisfied before a safeguard measure can be imposed is that an investigation must be conducted

by competent authorities in accordance with established procedures (Article 3). The

investigations under the Agreement on Safeguards have to fulfil certain requirements, which

are similar to those provided for the investigations on anti-dumping and countervailing

measures.

The main rules applicable to safeguard investigations are the following:

TRANSPARENCY, DUE PROCESS PROVISIONS AND PUBLIC

INTEREST:

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The Agreement on Safeguards requires publication of a report on the case explaining the

investigating authorities' findings and reasoned conclusions on all pertinent issues of fact and

law, including a demonstration of the relevance of the factors examined. In addition,

investigating authorities are required to provide reasonable public notice of the investigation

to all interested parties (importers, exporters, producers, etc.) and hold public hearings or

provide other appropriate means for interested parties to present their views, including on the

issue of whether or not the application of a safeguard measure would be in the public interest

(see Articles 3.1 and 4.2(c)).

PROVISIONAL MEASURES:

In critical circumstances where delay would cause damage which it would be difficult to

repair, a provisional safeguard measure may be imposed if there is clear evidence and a

preliminary determination that increased imports have caused or are threatening to cause

serious injury. Such measures should take the form of tariff increases to be promptly refunded

if the subsequent investigation does not determine that increased imports have caused or

threatened to cause serious injury to the domestic industry. The duration of the provisional

measure shall not exceed 200 days. The period of application of any provisional measure must

be included in the total period of application of the safeguard measure (Article 6). À

CONFIDENTIAL INFORMATION:

The Agreement contains specific rules for the handling of confidential information in the

context of an investigation. In general, there is a basic obligation to respect the confidentiality

of any information which is by nature confidential or which is provided on a confidential basis,

upon good cause being shown (Article 3.2).

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CONSULTATIONS:

A Member proposing to apply or extend a safeguard measure shall provide.

To conclude, Safeguard measures restrict imports of a product temporarily if a domestic

industry is seriously injured or threatened with serious injury caused by a surge in imports. The

Agreement on Safeguards (the Safeguards Agreement) establishes rules for the application of

safeguard measures by Member governments, as provided in Article XIX of GATT 1994.

Effective safeguard rules are important to the viability and integrity of the multilateral trading

system.

The availability of a safeguard mechanism gives WTO Members the assurance that they can

act quickly to help industries adjust to import surges, providing them with flexibility they

would not otherwise have to open their markets to international competition. At the same time,

WTO safeguard rules ensure that such actions are of limited duration and are gradually less

restrictive over time. Under certain circumstances, compensation is also authorized.

The Committee on Safeguards (the Safeguards Committee) was established to administer the

Safeguards Agreement. It oversees the operation of the Agreement and is responsible for the

surveillance of Members’ commitments. Governments have to notify and provide copies of

their legislation authorizing the application of safeguard measures to the Committee, as well as

report each phase of a safeguard investigation and related decision-making. The Committee

reviews these reports and provides a forum for discussion of measures in place.

The Safeguards Agreement incorporates into WTO rules many of the concepts embodied in

U.S. safeguards law (section 201 of the Trade Act of 1974, as amended).

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Among its key provisions, the Safeguards Agreement:

• Requires a transparent, public process for making serious injury determinations;

• Sets out clearer definitions of the criteria for serious injury determinations;

• Requires that safeguard measures be steadily liberalized over their duration;

• Establishes maximum periods for safeguard actions;

• Requires a review no later than the mid-term of any measure with a duration exceeding

three years;

• Allows safeguard actions to be taken for three years, without the requirement of

compensation or the possibility of retaliation; and

• Prohibits so-called “grey area” measures, such as voluntary restraint agreements and

orderly marketing agreements.

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 CONCLUSION:

The WTO permits members to impose trade remedies or trade defence measures against

imports to protect their domestic industries from unfair practices such as dumping and

subsidies, or to cope with a sudden surge of foreign goods. However, its sets out comprehensive

rules that members must follow in the launching, investigation and imposition of anti-dumping,

countervailing and safeguard measures. Today large numbers of countries have become

frequent users of anti-dumping measures, subsidies & countervailing measures, safeguard

measures. Trade Remedies has unique combination of political and economic manipulability.

During the last fourteen years of WTO, the use of these practices has become rampant that it

is criticized as threatening to limit the market access achieved under GATT/WTO trade

negotiations over the last fifty years or so. On the one hand, there is fear that these measures

are used for protectionist purpose. On the other hand, many support it because it can be used

as encounter against ‘unfair’ trade practices. It has been seen that these are being initiated

mostly by major players in the business. These dominants producers lobby and litigate such

cases. In the process, they incur huge expenditure sacrificing economic efficiency. Thus, these

policies that are designed to ensure fair competition and improve economic efficiency may in

fact reduce them. To minimise the manipulation of the law for protectionist purpose and to

limit discretionary powers of the authorities, more explicit rules should be developed and

definitions of different concepts used in the process should be given clearly and the procedure

of determining these measures specifically should be made more transparent.

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