The WTO Agreement on Safeguards A Commentary

The protection of troubled industries against import surges, called safeguard measures under WTO law, are controversially justified on the basis of economic concerns. This book reviews the economic literature bearing on the soundness of safeguard policies. It also addresses the complex legal issues relating to the constraints on safeguard measures under WTO law, and affords a thorough discussion and critical analysis of the WTO disputes in the area, including the most recent case involving measures protecting the U.S. steel industry.

Alan Sykes received his law degree from Yale University in 1982, and his Ph.D. in economics from Yale in 1987. He was in private practice in Washington, D.C. at the law firm of Arnold in Porter from 1982-86, specializing in international trade matters, including escape clause cases under U.S. law. He joined the University of Chicago faculty in 1986, and became the Frank and Bernice Greenberg Professor in 1996. His principal research interest is international trade, on which he has published numerous books and articles. His books include Product Standards for internationally Integrated Goods Markets (Brookings 1995), and Legal Problems of International Economic Relations (West 2002), co-authored with John H. Jackson and William J. Davey.

Preface

ix

Table of WTO Panel and AB Reports

xvi

Table of GATT/WTO Documents

xx

Table of Other International Instruments and Legislation

xxv

List of Abbreviations

xxvii

CHAPTER 1: THE EVOLUTION OF SAFEGUARD MEASURES IN THE WTO/GATT SYSTEM: AN OVERVIEW

1

(33)

A The Genesis of the Safeguards Concept in the Pre-GATT Era

2

(3)

B The GATT Agreement

5

(9)

1 Mechanisms for Adjusting the GATT Bargain Over Time

5

(2)

2 The Design of Article XIX

7

(7)

C GATT Practice Under Article XIX and the Rise of Grey-Area Measures

14

(12)

1 Formal Reliance on Article XIX During the GATT Years

14

(1)

2 Safeguards Practice in Context: The GATT Dispute Settlement System

15

(2)

3 Textual Obsolescence: The "Unforeseen Developments" Clause

17

(2)

4 The Causation Conundrum

19

(2)

5 Prelude to the Uruguay Round: Grey-Area Measures and Their Critics

21

(5)

D Introduction to the Safeguards Agreement

26

(4)

E Safeguard Measures to Date in the WTO

30

(4)

1 Notified Legislation and Procedures

31

(1)

2 Provisional or Definitive Measures Undertaken

31

(1)

3 Safeguard Measures in the Dispute Resolution System

32

(2)

CHAPTER 2: ECONOMIC POLICY CONSIDERATIONS

34

(39)

A The Basic Economics of International Trade and Protectionism

35

(12)

B Basic Economics of Safeguard Measures: Efficiency and Distribution

47

(12)

1 The Economic Consequences of Safeguard Measures: A First Cut

47

(3)

2 Conventional Arguments for Safeguard Measures

50

(9)

(a) Restoring Competitiveness

51

(1)

(b) Orderly Contraction and Structural Adjustment

52

(4)

(c) Equity and Redistribution

56

(3)

C Safeguard Measures from a Political Economy Perspective

59

(14)

1 The Domestic Safety Valve Hypothesis

59

(2)

2 Safeguard Measures and "Cheating"

61

(3)

3 The Contractarian Perspective: Ex Ante vs. Ex Post Protection

64

(22)

(a) Some Preliminaries: Basic Lessons from Public Choice Theory

64

(3)

(b) Positive Implications

67

(3)

(c) Normative Implications

70

(3)

CHAPTER 3: PRELIMINARY ISSUES IN WTO SAFEGUARDS DISPUTES: BURDEN OF PROOF, STANDARD OF REVIEW, AND THE "RECORD"

73

(12)

A The Burden of Proof

73

(2)

B The Standard of Review at the Panel Stage: What Degree of Deference to National Authorities?

75

(6)

C The "Record" on Review and Related Issues

81

(3)

D The Standard of Review in the Appellate Body

84

(1)

CHAPTER 4: PROCEDURAL OBLIGATIONS IN THE AGREEMENT ON SAFEGUARDS

85

(16)

A The Committee on Safeguards

85

(1)

B The Procedural Obligations of National Authorities

86

(15)

1 Advance Publication and Notification of Investigative Procedures

87

(1)

2 Notification of Investigations

88

(1)

3 Due Process Requirements for the Conduct of Investigations

89

(1)

4 Publication Requirements Following an Investigation

89

(1)

5 Notification Requirements Following an Investigation or a Decision to Apply a Measure

90

(3)

6 Consultation Requirements Prior to Application of a Measure

93

(3)

7 Miscellaneous Notification and Consultation Requirements

96

(1)

8 The Issue of Confidential Information

97

(4)

CHAPTER 5: "UNFORESEEN DEVELOPMENTS" AND "THE EFFECT OF THE OBLIGATIONS INCURRED"

101

(19)

A The Resurrection of Article XIX(1), First Clause

102

(4)

B Establishing the "Effect of Obligations Incurred"

106

(2)

C Establishing the Link to "Unforeseen Developments"

108

(12)

1 In General

108

(3)

2 Factual Issues in Individual Cases

111

(9)

CHAPTER 6: THE INCREASED QUANTITIES REQUIREMENT

120

(17)

A The Baseline Issue During GATT

121

(2)

B Baselines and "Increased Quantities" in WTO Disputes to Date

123

(11)

C Summary and Critique

134

(3)

CHAPTER 7: SERIOUS INJURY, THREAT AND INDUSTRY DEFINITION

137

(19)

A Defining the "Industry"

138

(10)

1 General Guidance on the Meaning of "Like" and "Directly Competitive"

139

(3)

2 Industry Definition Issues in Safeguard Disputes to Date

142

(25)

(a) Imports and Prior Stages of Processing

143

(3)

(b) Multiproduct Firms

146

(2)

B "Serious Injury"

148

(3)

C Threat of Serious Injury

151

(5)

CHAPTER 8: THE CAUSATION REQUIREMENT AND "NON-ATTRIBUTION"

156

(55)

A The Economics of "Causation"

158

(9)

B The Causation Test Under U.S. Law

167

(7)

1 Determining the "Causal Contribution" of Increased Imports

168

(2)

2 Weighing the Effect of Imports Under the Substantial Cause Test

170

(4)

C The Causation Test in WTO Case Law

174

(16)

1 Korea—Dairy

174

(1)

2 Argentina—Footwear

175

(2)

3 United States—Wheat Gluten

177

(4)

4 United States—Lamb

181

(2)

5 United States—Line Pipe

183

(1)

6 Chile—Agricultural Products

183

(1)

7 United States—Steel

184

(5)

(a) Demonstrating the Causal Link to Imports

184

(4)

(b) Non-Attribution Analysis

188

(1)

8 Summary

189

(1)

D Possible Solutions

190

(21)

1 Sweep the Issues Under the Rug

191

(1)

2 Focus on the Unforeseen Developments

192

(2)

3 Focus on the Import Supply Curve

194

(7)

4 Focus on Hypothetical Quantitative Restrictions

201

(7)

5 Summary and Implications

208

(3)

CHAPTER 9: PERMISSIBLE MEASURES AND THEIR DURATION

211

(34)

A "To the Extent Necessary"

212

(6)

1 Justification for the Measure: The Timing Issue

212

(1)

2 Injury Attributable to "Other Factors"

213

(3)

3 The Adjustment Issue

216

(1)

4 Article 5.1, Sentence Two

217

(1)

B Selectivity

218

(18)

1 Economic Note

218

(2)

2 The Core Obligation: Article 2.2

220

(1)

3 Selective Quantitative Restrictions

221

(5)

4 The Doctrine of Parallelism

226

(6)

5 The Ultimate Question: Article XXIV and Selective Safeguards

232

(4)

C Duration and Review

236

(5)

1 Limits on Duration

237

(1)

2 Progressive Liberalization

238

(1)

3 Previously Protected Industries

239

(2)

D Provisional Measures

241

(1)

E Special Rules for Developing Countries

242

(3)

CHAPTER 10: COMPENSATION, RETALIATION AND THE PROHIBITION OF GREY-AREA MEASURES

245

(7)

A The New Rules on Compensation and Retaliation

245

(4)

B The Prohibition of Grey-Area Measures

249

(3)

Concluding Remarks

252

(2)

References

254

(5)

Appendices:

259

(80)

Appendix 1: General Agreement on Tariffs and Trade, Article XIX

261

(2)

Appendix 2: The WTO Agreement on Safeguards

263

(9)

Appendix 3: US. National Legislation (Sections 201-204 of the Trade Act of 1974, codified as 19 U.S.C. paras 2251-54)

272

(21)

Appendix 4: EC Legislation (Council Regulation (EC) No 3285/94 of 22 December 1994)

293

(16)

Appendix 5: National Legislation Notified to the Committee on Safeguards

309

(4)

Appendix 6: Safeguard Measures Notified to the Committee on Safeguards Since the Inception of the WTO

313

(21)

Appendix 7: Active Safeguard Investigations and Existing Safeguard Measures in Place as of November 3, 2005

334

(5)

Index

339

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The WTO Agreement on Safeguards A Commentary

Summary

Author Biography

Table of Contents

Supplemental Materials