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WTO ANALYTICAL INDEX: AGREEMENT ON SAFEGUARDS

Agreement on Safeguards

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> Preamble
> Article 1
> Article 2
> Article 3
> Article 4
> Article 5
> Article 6
> Article 7
> Article 8
> Article 9
> Article 10
> Article 11
> Article 12
> Article 13
> Article 14
> Annex
> Other

 

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I. Preamble     back to top

A. Text of the Preamble

Members,

 

     Having in mind the overall objective of the Members to improve and strengthen the international trading system based on GATT 1994;

 

     Recognizing the need to clarify and reinforce the disciplines of GATT 1994, and specifically those of its Article XIX (Emergency Action on Imports of Particular Products), to re-establish multilateral control over safeguards and eliminate measures that escape such control;

 

     Recognizing the importance of structural adjustment and the need to enhance rather than limit competition in international markets; and

 

     Recognizing further that, for these purposes, a comprehensive agreement, applicable to all Members and based on the basic principles of GATT 1994, is called for;

 

     Hereby agree as follows:


B. Interpretation and Application of the Preamble

1.     In Korea — Dairy, the Appellate Body referred to the Preamble of the Agreement on Safeguards as additional support for its finding that all provisions of both Article XIX of GATT 1994 and the Agreement on Safeguards apply cumulatively and must be given their full meaning and legal effect:(1)

“Our reading … is consistent with the desire expressed by the Uruguay Round negotiators in the Preamble to the Agreement on Safeguards ‘to clarify and reinforce the disciplines of GATT 1994, and specifically those of its Article XIX … to re-establish multilateral control over safeguards and eliminate measures that escape such control …’ In furthering this statement of the object and purpose of the Agreement on Safeguards, it must always be remembered that safeguard measures result in the temporary suspension of treaty concessions or the temporary withdrawal of treaty obligations, which are fundamental to the WTO Agreement, such as those in Article II and Article XI of the GATT 1994.”(2)

2.     In a finding subsequently upheld by the Appellate Body, the Panel in US — Lamb rejected the United States argument that the term “domestic industry” under Article 4.1(c) should be defined on the basis of a “continuous line of production” and a “coincidence of economic interests”. The Panel then referred to the object and purpose of the Agreement on Safeguards, as evidenced in the Preamble, as relevant context for its more restrictive approach to the concept of “domestic industry”:

“In our view, [our] reading of the industry definition is consistent with the object and purpose of the Safeguards Agreement. In particular, this reading is consistent with the Agreement’s objectives of, on the one hand, creating a mechanism for effective, temporary protection from imports to an industry that is experiencing serious injury or threat thereof from imports in the wake of trade liberalization, and on the other hand, encouraging ‘structural adjustment’, and ‘clarify[ing] and reinforc[ing] the disciplines of … Article XIX of GATT’, in view of ‘the need to enhance rather than limit competition in international markets’.

 

If WTO law were not to offer a ‘safety valve’ for situations in which, following trade liberalization, imports increase so as to cause serious injury or threat thereof to a domestic industry, Members could be deterred from entering into additional tariff concessions and from engaging in further trade liberalization. It is for this reason that the safeguard mechanism in Article XIX has always been an integral part of the GATT. … [W]e note that SG Article XIX of GATT 1994 as well as SG Article 11.1 both refer to safeguard measures as ‘emergency’ measures, and the Appellate Body has characterized them as ‘extraordinary’ remedies.(3) A conceptual approach to defining the relevant domestic industry which would leave it to the discretion of competent national authorities how far upstream and/or downstream the production chain of a given ‘like’ end product to look in defining the scope of the domestic industry could easily defeat the Safeguards Agreement’s purpose of reinforcing disciplines in the field of safeguards and enhancing rather than limiting competition.”(4)

3.     The Appellate Body in US — Lamb referred to the object and purpose of the Agreement on Safeguards in distinguishing between the concepts of “serious injury” under the Agreement on Safeguards and “material injury” under the Anti-Dumping Agreement and the SCM Agreement:

“We believe that the word ‘serious’ connotes a much higher standard of injury than the word ‘material’. Moreover, we submit that it accords with the object and purpose of the Agreement on Safeguards that the injury standard for the application of a safeguard measure should be higher than the injury standard for antidumping or countervailing measures …”(5)

 

II. Article 1     back to top

A. Text of Article 1

Article 1: General Provision

     This Agreement establishes rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.


B. Interpretation and Application of Article 1

1. Relationship with Article XIX of the GATT 1994

(a) General

4.     In Korea — Dairy, the Appellate Body examined the relationship between Article XIX of the GATT 1994 and the Agreement on Safeguards in light of, on the one hand, Article II of the WTO Agreement(6), and, on the other, Articles 1 and 11.1(a) of the Agreement on Safeguards.(7) The Appellate Body concluded that any safeguard measure imposed after the entry into force of the WTO Agreement must comply with the provisions of both Article XIX and the Agreement on Safeguards:

“The specific relationship between Article XIX of the GATT 1994 and the Agreement on Safeguards within the WTO Agreement is set forth in Articles 1 and 11.1(a) of the Agreement on Safeguards:

Article 1 states that the purpose of the Agreement on Safeguards is to establish ‘rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.’ … The ordinary meaning of the language in Article 11.1(a) — ‘unless such action conforms with the provisions of that Article applied in accordance with this Agreement’ — is that any safeguard action must conform with the provisions of Article XIX of the GATT 1994 as well as with the provisions of the Agreement on Safeguards. Thus, any safeguard measure(8) imposed after the entry into force of the WTO Agreement must comply with the provisions of both the Agreement on Safeguards and Article XIX of the GATT 1994.”(9)

5.     In Argentina — Footwear (EC), the Appellate Body reversed a conclusion by the Panel in that dispute that “safeguard investigations and safeguard measures imposed after the entry into force of the WTO agreements which meet the requirements of the new Agreement on Safeguards satisfy the requirements of Article XIX of GATT.”(10) The Appellate Body noted that Articles 1 and 11.1(a) of the Agreement on Safeguards described the precise nature of the relationship between Article XIX of GATT 1994 and the Agreement on Safeguards within the WTO Agreement,(11) and then observed:

“We see nothing in the language of either Articles 1 or Article 11.1(a) of the Agreement on Safeguards that suggests an intention by the Uruguay Round negotiators to subsume the requirements of Article XIX of the GATT 1994 within the Agreement on Safeguards and thus to render those requirements no longer applicable. Article 1 states that the purpose of the Agreement on Safeguards is to establish ‘rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.’ … This suggests that Article XIX continues in full force and effect, and, in fact, establishes certain prerequisites for the imposition of safeguard measures. Furthermore, in Article 11.1(a), the ordinary meaning of the language ‘unless such action conforms with the provisions of that Article applied in accordance with this Agreement’ … clearly is that any safeguard action must conform with the provisions of Article XIX of the GATT 1994 as well as with the provisions of the Agreement on Safeguards. Neither of these provisions states that any safeguard action taken after the entry into force of the WTO Agreement need only conform with the provisions of the Agreement on Safeguards.“(12)’(13)

6.     The Appellate Body in Argentina — Footwear (EC) further rejected the Panel’s conclusion that because the clause “[i]f, as a result of unforeseen developments … concessions” in Article XIX:1(a) had been expressly omitted from Article 2.1 of the Agreement on Safeguards, safeguard measures that meet the requirements of the Agreement on Safeguards will automatically also satisfy the requirements of Article XIX. The Appellate Body considered this conclusion as inconsistent with the principles of effective treaty interpretation and with the ordinary meaning of Articles 1 and 11.1(a) of the Agreement on Safeguards:

“[I]t is clear from Articles 1 and 11.1(a) of the Agreement on Safeguards that the Uruguay Round negotiators did not intend that the Agreement on Safeguards would entirely replace Article XIX. Instead, the ordinary meaning of Articles 1 and 11.1(a) of the Agreement on Safeguards confirms that the intention of the negotiators was that the provisions of Article XIX of the GATT 1994 and of the Agreement on Safeguards would apply cumulatively, except to the extent of a conflict between specific provisions … We do not see this as an issue involving a conflict between specific provisions of two Multilateral Agreements on Trade in Goods. Thus, we are obliged to apply the provisions of Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 cumulatively, in order to give meaning, by giving legal effect, to all the applicable provisions relating to safeguard measures.”(14)

7.     The Panel in US — Lamb, referring to the statements by the Appellate Body on the relationship between the Agreement on Safeguards and Article XIX of the GATT 1994, observed:

“Thus the Appellate Body explicitly rejected the idea that those requirements of GATT Article XIX which are not reflected in the Safeguards Agreement could have been superseded by the requirements of the latter and stressed that all of the relevant provisions of the Safeguards Agreement and GATT Article XIX must be given meaning and effect.”(15)

8.     The Appellate Body in US — Lamb reiterated the conclusions drawn by the Appellate Body in Argentina — Footwear (EC) and in Korea — Dairy on the relationship between the Agreement on Safeguards and GATT Article XIX and observed that “Articles 1 and 11.1(a) of the Agreement on Safeguards express the full and continuing applicability of Article XIX of the GATT 1994, which no longer stands in isolation, but has been clarified and reinforced by the Agreement on Safeguards”.(16)

9.     The Panel in Argentina — Preserved Peaches also concluded that in disputes relating to safeguards measures, a panel must apply the Agreement on Safeguards and GATT Article XIX cumulatively.(17)

10.     The Panel in US — Steel Safeguards reiterated that GATT Article XIX and the Agreement on Safeguards apply “cumulatively” when assessing the WTO compatibility of safeguards measures taken by WTO Members:

“[T]here is no reference to unforeseen developments in the Agreement on Safeguards. However, as repeatedly affirmed by the Appellate Body, Articles 1 and 11.1(a) of the Agreement on Safeguards express the continuing applicability of Article XIX of GATT which has been clarified and reinforced by the Agreement on Safeguards.(18) This interpretation ensures that the provisions of the Agreement on Safeguards and those of Article XIX are given their full meaning and their full legal effect within the context of the WTO Agreement.“(19)’(20)

11.     Regarding judicial economy when it has been found that the requirements of Articles 2 and 4 of the Agreement on Safeguards have not been met, see the discussion of Article XIX in the Chapter on the GATT 1994.

(b) “unforeseen developments”

12.     Regarding the phrase “If, as a result of unforeseen developments … concessions” in GATT Article XIX:1(a), see the material on Article XIX in the Chapter on the GATT 1994. See also the GATT Analytical Index at p. 517.

 

III. Article 2     back to top

A. Text of Article 2

Article 2: Conditions

1.     A Member(1) may apply a safeguard measure to a product only if that Member has determined, pursuant to the provisions set out below, that such product is being imported into its territory 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.

 

(footnote original) 1 A customs union may apply a safeguard measure as a single unit or on behalf of a member State. When a customs union applies a safeguard measure as a single unit, all the requirements for the determination of serious injury or threat thereof under this Agreement shall be based on the conditions existing in the customs union as a whole. When a safeguard measure is applied on behalf of a member State, all the requirements for the determination of serious injury or threat thereof shall be based on the conditions existing in that member State and the measure shall be limited to that member State. Nothing in this Agreement prejudges the interpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT 1994.

 

2.     Safeguard measures shall be applied to a product being imported irrespective of its source.


B. Interpretation and Application of Article 2

1. General

(a) The two basic inquiries

13.     In US — Line Pipe, the Appellate Body referred to two basic inquiries that are conducted in interpreting the Agreement on Safeguards: (i) “is there a right to apply a safeguard measure?”; and (ii) “if so, has that right been exercised, through the application of such a measure, within the limits set out in the treaty?” The Appellate Body emphasized that these two inquiries are “separate and distinct” and should not be “confused” by the treaty interpreter:

“[There are] basic inquiries that are conducted in interpreting the Agreement on Safeguards. These two basic inquiries are: first, is there a right to apply a safeguard measure? And, second, if so, has that right been exercized, through the application of such a measure, within the limits set out in the treaty? These two inquiries are separate and distinct. They must not be confused by the treaty interpreter. One necessarily precedes and leads to the other. First, the interpreter must inquire whether there is a right, under the circumstances of a particular case, to apply a safeguard measure. For this right to exist, the WTO Member in question must have determined, as required by Article 2.1 of the Agreement on Safeguards and pursuant to the provisions of Articles 3 and 4 of the Agreement on Safeguards, that a product is being imported into its territory in such increased quantities and under such conditions as to cause or threaten to cause serious injury to the domestic industry. Second, if this first inquiry leads to the conclusion that there is a right to apply a safeguard measure in that particular case, then the interpreter must next consider whether the Member has applied that safeguard measure ‘only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment’, as required by Article 5.1, first sentence, of the Agreement on Safeguards. Thus, the right to apply a safeguard measure — even where it has been found to exist in a particular case and thus can be exercized — is not unlimited. Even when a Member has fulfilled the treaty requirements that establish the right to apply a safeguard measure in a particular case, it must do so ‘only to the extent necessary … .’“(21)

14.     The Appellate Body in US — Line Pipe considered the existence of “a natural tension between, on the one hand, defining the appropriate and legitimate scope of the right to apply safeguard measures and, on the other hand, ensuring that safeguard measures are not applied against ‘fair trade’ beyond what is necessary to provide extraordinary and temporary relief.”(22) Moreover, it found this natural tension to be “inherent” in the “two basic inquiries” that are conducted in interpreting the Agreement on Safeguards (see paragraph 13 above in this regard).(23)

15.     In US — Steel Safeguards, the Panel applied the two basic inquiries test under the Agreement on Safeguards as enunciated by the Appellate Body in US — Line Pipe (see paragraph 13 above) as follows:

“Throughout its examination, this Panel has kept the two enquiries distinct. The Panel is of the view that, first, it must examine whether the United States had the right to take the safeguard measures. Second, should the Panel consider that the United States had the right to take such safeguard measures, the Panel would then assess whether the measures were applied (as regards the type of measure, their level and duration) only to the extent necessary to remedy or prevent serious injury and allow for readjustment.

 

In examining whether the United States had a right to impose the specific safeguard measures at issue, the Panel will concern itself with the application of Articles 2, 3 and 4 of the Agreement on Safeguards and Article XIX of GATT 1994 (the latter being relevant in particular for the assessment of whether the United States was faced with unforeseen developments) in reviewing the report of the competent authority. In relation to the second enquiry, when assessing the appropriateness of such safeguards measures, the importing Member is obliged, when challenged by a WTO Member who has made a prima facie case of inconsistency with Article 5.1 of the Agreement on Safeguards, to justify before the Panel that the safeguard measures were imposed only to the extent necessary to prevent or remedy injury and allow for readjustment. Reversals of this burden of proof may take place.”(24)

2. Article 2.1

(a) Relationship with Article XIX of the GATT 1994

16.     With respect to the relationship with Article XIX of the GATT 1994, see paragraphs 410 above.

(b) Findings under Article 4 and Article 2

17.     The question whether a violation of Article 4 necessarily implies a violation of Article 2 of the Agreement on Safeguards has been addressed mainly at the panel level. The Appellate Body has confirmed these findings. The Panel Report in Korea — Dairy discussed the relationship between claims under Article 4 and claims under Article 2 of the Agreement on Safeguards and concluded that a violation of parts of Article 4 would constitute a violation of Article 2:

“The European Communities raised various other arguments in support of its claims that Korea violated Article 4, and consequently Article 2, of the Agreement on Safeguards, namely that Korea did not adequately demonstrate the existence of serious injury and a causal link with the increased imports. We shall address the EC argument that Korea did not perform an adequate assessment of whether the products under investigation were being imported into its territory in such increased quantities and under such conditions as to cause serious injury to the domestic industry when we examine the European Communities’ more specific claims of inadequate serious injury and causation assessments made pursuant to Article 4.1 and 4.2 of the Agreement on Safeguards. We note that a violation of Article 4.2 or 4.3 (sic) would constitute a violation of Article 2 of the Agreement on Safeguards.”(25)

18.     However, despite holding that a violation of Article 4 would necessarily imply a violation of Article 2 of the Agreement on Safeguards, the Panel in Korea Dairy declined to reach a conclusion on Article 2, referring to the fact that this violation had not been argued by the complaining party:

Article 2.1 permits the application of a safeguard measure only if, inter alia, there has been a determination of serious injury pursuant to Article 4.2. Since we find that Korea’s determination of serious injury does not meet the requirements of Article 4.2, the application of the safeguard measure at issue would necessarily also violate Article 2.1 of the Agreement on Safeguards. We note that in its request for establishment of a panel, the European Communities claims generally that Korea violated Articles 2.1, 4.2(a), 4.2(b), 5.1 and 12.1 to 12.3 of the Agreement on Safeguards. However, in its submissions, the European Communities did not argue specifically, nor did it submit any evidence, in support of its claim under Article 2.1, other than those relating to ‘under such conditions’ … Therefore, we do not reach any conclusion on the issue of whether Korea’s determination of serious injury violates the provisions of Article 2.1 of the Agreement on Safeguards.”(26)

19.     The Panel in Argentina — Footwear (EC) considered Articles 2 and 4 largely in parallel:

“[W]e conclude that Argentina’s investigation did not demonstrate that there were increased imports within the meaning of Articles 2.1 and 4.2(a); that the investigation did not evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of the domestic industry within the meaning of Article 4.2(a); that the investigation did not demonstrate on the basis of objective evidence the existence of a causal link between increased imports and serious injury within the meaning of Article 2.1 and 4.2(b); that the investigation did not adequately take into account factors other than increased imports within the meaning of Article 4.2(b); and that the published report concerning the investigation did not set forth a complete analysis of the case under investigation as well as a demonstration of the relevance of the factors examined within the meaning of Article 4.2(c).

 

Therefore, we find that Argentina’s investigation and determinations of increased imports, serious injury and causation are inconsistent with Articles 2 and 4 of the Safeguards Agreement. As such, we find that Argentina’s investigation provides no legal basis for the application of the definitive safeguard measure at issue, or any safeguard measure.”(27)

20.     The Panel in US — Wheat Gluten also linked violations of Article 4 to Article 2.1, finding, inter alia:

“In light of the findings made in section VIII above, we conclude that the definitive safeguard measure imposed by the United States on certain imports of wheat gluten based on the United States investigation and determination is inconsistent with Articles 2.1 and 4 of the Agreement on Safeguards in that:

 

(i)     the causation analysis applied by the USITC did not ensure that injury caused by other factors was not attributed to imports; and

 

(ii)     imports from Canada (a NAFTA partner) were excluded from the application of the measure after imports from all sources were included in the investigation for the purposes of determining serious injury caused by increased imports (following a separate inquiry concerning whether imports from Canada accounted for a ‘substantial share’ of total imports and whether they ‘contributed importantly’ to the ‘serious injury’ caused by total imports).”(28)

21.     The Panel in US — Lamb also addressed the relationship between violations of Article 2 and Article 4, finding that the safeguard measure at issue was applied inconsistently with Articles 4.1(c) and 4.2(b) and subsequently holding that “by virtue of the above violations of Article 4 of the Agreement on Safeguards, the United States also has acted inconsistently with Article 2.1 of the Agreement on Safeguards.”(29)

22.     The Appellate Body in US — Lamb confirmed that a violation of Article 4.1(c) necessarily also implies a violation of Article 2:

“As a result, the imposition of the safeguard measure at issue was based on a determination of serious injury caused to an industry other than the relevant ‘domestic industry’. In addition, that measure was imposed without a determination of serious injury to the ‘domestic industry’, which, properly defined, should have been limited only to packers and breakers of lamb meat.

 

Accordingly, we uphold the Panel’s finding, in paragraph 7.118 of the Panel Report, that the safeguard measure at issue is inconsistent with Articles 2.1 and 4.1(c) of the Agreement on Safeguards.”(30)

23.     The Appellate Body in US — Lamb made an even clearer statement with respect to Article 4.2(b) and Article 2:

“In the absence of [an explanation by the investigating authority as to/concerning/regarding how it ensured that injury caused to the domestic industry by factors other than increased imports was not attributed to increased imports], we uphold, albeit for different reasons, the Panel’s conclusions that the United States acted inconsistently with Article 4.2(b) of the Agreement on Safeguards, and, hence, with Article 2.1 of that Agreement.”(31)

(c) “that such product is being imported … in such increased quantities”

(i) Relevance of quantity versus value of imports

24.     The Panel in Argentina — Footwear (EC) acknowledged that both parties had referred to data on both the quantity and the value of imports in connection with this requirement, but observed:

“The Agreement is clear that it is the data on import quantities … in absolute terms and relative to (the quantity of) domestic production that are relevant in this context, in that the Agreement refers to imports ‘in such increased quantities’ … Therefore, our evaluation will focus on the data on import quantities.”(32)’(33)

(ii) Relationship between Article 2.1 and Article 4.2(a)

25.     The Panel in Argentina — Footwear (EC), in examining whether in the case at hand there were “increased imports in the sense of Articles 2.1 and 4.2(a) of the Agreement,” noted that Article 2.1 “sets forth the conditions for the application of a safeguard measure,” and that Article 4.2 “sets forth the operational requirements for determining whether the conditions in Article 2.1 exist.”(34) The Panel in this connection made the following statement, subsequently expressly confirmed by the Appellate Body:

“Thus, 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.”(35)

(iii) Nature and timing of the increase in imports

26.     The Panel in Argentina — Footwear (EC) examined whether there is consistency with Articles 2.1 and 4.2(a) in making a finding of increased imports on the basis of a comparison between the volume of imports at the starting-point of an investigation period and the volume of imports at the end of that period (“endpoint- to-end-point-comparison”). The Panel, later upheld in this respect by the Appellate Body, came to the conclusion that:

“[I]n assessing whether an end-point-to-end-point increase in imports satisfies the increased imports requirement of Article 2.1, the sensitivity of the comparison to the specific years used as the end-points is important as it might confirm or reverse the apparent initial conclusion. If changing the starting-point and/or ending-point of the investigation period by just one year means that the comparison shows a decline in imports rather than an increase, this necessarily signifies an intervening decrease in imports at least equal to the initial increase, thus calling into question the conclusion that there are increased imports.

 

In other words, if an increase in imports in fact is present, this should be evident both in an end-point-to-end-point comparison and in an analysis of intervening trends over the period. That is, the two analyses should be mutually reinforcing. Where as here their results diverge, this at least raises doubts as to whether imports have increased in the sense of Article 2.1.”(36)

27.     In Argentina — Footwear (EC), the Panel, in a finding subsequently confirmed by the Appellate Body, considered, in this connection, that an analysis of intervening trends of imports was indispensable:

“[T]he question of whether any decline in imports is ‘temporary’ is relevant in assessing whether the ‘increased imports’ requirement of Article 2.1 has been met. In this context, we recall Article 4.2(a)’s requirement that ‘the rate and amount of the increase in imports’ be evaluated.(37) In our view this constitutes a requirement that the intervening trends of imports over the period of investigation be analysed. We note that the term ‘rate’ connotes both speed and direction, and thus intervening trends (up or down) must be fully taken into consideration. Where these trends are mixed over a period of investigation, this may be decisive in determining whether an increase in imports in the sense of Article 2.1 has occurred. In practical terms, we consider that the best way to assess the significance of any such mixed trends in imports is by evaluating whether any downturn in imports is simply temporary, or instead reflects a longer-term change.”(38)

28.     The Panel in Argentina — Footwear (EC) found that in the case before it the decline in the volume of imports could not be characterized as a temporary reversal of an increase in the volume of imports.(39) It then stated that:

“[T]he Agreement requires not just an increase (i.e., any increase) in imports, but an increase in ‘such … quantities’ as to cause or threaten to cause serious injury. … the increase in imports must be judged in its full context, in particular with regard to its ‘rate and amount’ as required by Article 4.2(a). Thus, considering the changes in import levels over the entire period of investigation, as discussed above, seems unavoidable when making a determination of whether there has been an increase in imports ‘in such quantities’ in the sense of Article 2.1.

Where … the volume of imports has declined continuously and significantly during each of the most recent years of the period, more than a ‘temporary’ reversal of an increase has taken place (as reflected as well in the sensitivity of the outcome of the comparison to a one-year shift of its start or end year).”(40)

29.     In applying this analytical standard to the facts of the case in Argentina — Footwear (EC), the Panel came to a conclusion contrary to the determination effectuated by the Argentine authorities:

“In sum, we find highly significant that the absolute volume of footwear imports and the ratio of those imports to domestic production, increased only until 1993, i.e., during the first two years of the period for which Argentina collected data, and declined continuously thereafter. We also find significant that these decreases were of such a magnitude that a one-year change in base year of the data series on the volume of imports transforms the increase relied upon by Argentina into a decline, and that the resolution applying the provisional measure refers only to anticipated increases in imports, showing that at that time, no increase in imports was present.”(41)

30.     In Argentina — Footwear (EC), the Panel found, in interpreting the phrase “is being imported … in such quantities”, that an investigation period of five years “can be quite useful” to the national authorities. The Panel also rejected the argument that the Agreement on Safeguards requires a “sharply increasing” trend in imports at the end of the investigation period. The Appellate Body reversed both of these findings. First, it did not find a five-year investigative period reasonable in the light of the phrase “is being imported” and emphasized the need to focus the investigation on the “recent past”:

“[T]he actual requirement, and we emphasize that this requirement is found in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, is that ‘such 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’. Although we agree with the Panel that the ‘increased quantities’ of imports cannot be just any increase, we do not agree with the Panel that it is reasonable to examine the trend in imports over a five-year historical period. In our view, the use of the present tense of the verb phrase ‘is being imported’ in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 indicates that it is necessary for the competent authorities to examine recent imports, and not simply trends in imports during the past five years — or, for that matter, during any other period of several years.(42) In our view, the phrase ‘is being imported’ implies that the increase in imports must have been sudden and recent.”(43)

31.     With regard to the nature of the increase in imports, the Appellate Body in Argentina — Footwear (EC), in contrast to the Panel, held that the increase in imports must have been recent, sudden, sharp and significant enough to cause or threaten to cause serious injury:

“[T]he determination of whether the requirement of imports ‘in such increased quantities’ is met is not a merely mathematical or technical determination. In other words, it is not enough for an investigation to show simply that imports of the product this year were more than last year — or five years ago. Again, and it bears repeating, not just any increased quantities of imports will suffice. There must be ‘such increased quantities’ as to cause or threaten to cause serious injury to the domestic industry in order to fulfil this requirement for applying a safeguard measure. And this language in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, we believe, requires 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’.”(44)

32.     Subsequently, the Panel in US — Wheat Gluten, echoing the findings of the Appellate Body in Argentina — Footwear (EC), interpreted the phrase “in such increased quantities”:

[A]rticle XIX:1(a) of the GATT 1994 and Article 2.1 [of the Agreement on Safeguards (“SA”)] do not speak only of an ‘increase’ in imports. Rather, they contain specific requirements with respect to the quantitative and qualitative nature of the ‘increase’ in imports of the product concerned. Both Article XIX:1(a) of the GATT 1994 and Article 2.1 SA require that a product is being imported into the territory of the Member concerned in such increased quantities (absolute or relative to domestic production) as to cause or threaten serious injury. Thus, not just any increase in imports will suffice. Rather, we agree with the Appellate Body’s finding in Argentina — Footwear Safeguard that the increase must be sufficiently recent, sudden, sharp and significant, both quantitatively and qualitatively, to cause or threaten to cause serious injury.”(45)

33.     In US — Line Pipe, the Panel found that the word “recent” implies a “retrospective analysis”; but that it does not imply an analysis of the conditions immediately preceding the authority’s decision nor does it imply that the analysis must focus exclusively on conditions at the very end of the period of investigation:

“[W]e note that the Appellate Body in Argentina — Footwear Safeguard found that ‘the phrase ‘is being imported’ implies that the increase in imports must have been sudden and recent’. According to Korea, the phrase ‘is being imported … in such increased quantities’ refers to ‘the period immediately preceding the authority’s decision’. The word ‘recent’ — which was used by the Appellate Body in interpreting the phrase ‘is being imported’ — is defined as ‘not long past; that happened, appeared, began to exist, or existed lately’. In other words, the word ‘recent’ implies some form of retrospective analysis. It does not imply an analysis of the conditions immediately preceding the authority’s decision. Nor does it imply that the analysis must focus exclusively on conditions at the very end of the period of investigation.

 

We consider that an analysis that compares the first semester of 1998 with the first semester of 1999 is not inconsistent with the requirement that the increase in imports be ‘recent’.”(46)

34.     In US — Line Pipe, the Panel found that “there is no need for a determination that imports are presently still increasing. Rather, imports could have ‘increased’ in the recent past, but not necessarily be increasing up to the end of the period of investigation or immediately preceding the determination”:

“[T]here remains the question of whether the finding of increased imports can be maintained in light of the decline in absolute imports from the first semester of 1998 to the first semester of 1999. In order to answer this question we recall our discussion regarding the meaning of ‘recent’, and our finding that ‘recent’ does not imply an analysis of the present. We are also of the view that the fact that the increase in imports must be ‘recent’ does not mean that it must continue up to the period immediately preceding the investigating authority’s determination, nor up to the very end of the period of investigation. We find support for our view in Article 2.1, which provides ‘that such product is being imported … in such increased quantities’. The Agreement uses the adjective ‘increased’, as opposed to ‘increasing’. The use of the word ‘increased’ indicates to us that there is no need for a determination that imports are presently still increasing. Rather, imports could have ‘increased’ in the recent past, but not necessarily be increasing up to the end of the period of investigation or immediately preceding the determination. Provided the investigated product ‘is being imported’ at such increased quantities at the end of the period of investigation, the requirements of Article 2.1 are met.”(47)’(48)

35.     In light of the provisions in Article 2.1 and Article XIX:1(a),(49) the Panel in US — Line Pipe reasoned that it is within its standard of review to examine the appropriateness of the methodology in evaluating the increase in the imports:

“[I]n determining whether the US methodology for the analysis of the existence of increased imports complied with its obligations under the Agreement on Safeguards and the GATT 1994, our review will consist of an objective assessment, pursuant to Article 11 of the DSU, of whether the methodology selected is unbiased and objective, such that its application permits an adequate, reasoned and reasonable explanation of how the facts in the record before the ITC support the determination made with respect to increased imports.”(50)

36.     In US — Line Pipe, Korea had argued that the period of investigation of five years chosen by the United States authorities was in conflict with the requirements of Article 2.1 and Article XIX:1(a). The Panel ruled that it is up to the discretion of the investigating authority of the importing Member to decide the “length of the period of investigation” and its “breakdown”:

“We note that the Agreement contains no requirements as to how long the period of investigation in a safeguards investigation should be, nor how the period should be broken down for purposes of analysis. Thus, the period of investigation and its breakdown is left to the discretion of the investigating authorities.

 

In the case before us the period selected by the ITC was five years and six months, which is a period similar in length to the one used by the Argentine investigating authority in Argentina — Footwear Safeguards. However, we note that the Appellate Body, in the findings relied upon by Korea to argue the question of the length of the period of investigation, emphasized not the length of the period per se, but that there should be a focus on recent imports and not simply trends over the period examined. In the case of the line pipe investigation the ITC did not merely compare end points, or look at the overall trend over the period of investigation, (as Argentina had done in the investigation at issue in Argentina — Footwear Safeguard). It analysed the data regarding imports on a year-to-year basis for the 5 complete years, and also considered whether there was an increase in interim 1999 as compared with interim 1998.

We are of the view that by choosing a period of investigation that extends over 5 years and six months, the ITC did not act inconsistently with Article 2.1 and Article XIX. This conclusion is based on the following considerations: first, the Agreement contains no specific rules as to the length of the period of investigation; second, the period selected by the ITC allows it to focus on the recent imports; and third, the period selected by the ITC is sufficiently long to allow conclusions to be drawn regarding the existence of increased imports.”(51)

37.     In US — Line Pipe, the Panel examined whether the United States’ authority was entitled to compare interim 1998 data with interim 1999 data in performing the analysis or whether it was, in addition, required to compare “the second half of 1998” with interim 1999 data.(52) The Panel found that the Agreement on Safeguards does not prescribe such practice by the importing Member:

“We recall that there are no provisions in the Safeguards Agreement which give any guidance on how the period of investigation should be broken down for purpose of analysis by the investigating authorities. In the case before us the period selected by the ITC would have allowed it to find that there was a decrease in the imports if the facts in the case supported such a finding. We do not believe that the methodology chosen by the ITC for the purposes of analysing whether or not there was an increase in imports was inherently biased or would have precluded it from performing a reasonable evaluation of the facts in the investigation. The United States asserts that the ITC acted according to its past practice, and that this shows that the methodology was objective and unbiased. We agree with the United States. The United States responds that a comparison of matching interim periods, in this case January-June, of different years, is the standard ITC practice. (53) According to the United States this standard practice helps eliminate the possible effect of any seasonal or cyclical distortions which may affect the comparison. Although the ITC concedes that line pipe is not a seasonal product, we are of the view that the methodology applied in the comparison was not chosen in order to manipulate the data and show a particular result. Nor is there any evidence of manipulation or bias resulting from an alleged inconsistency with the ITC’s serious injury analysis. Although the ITC did make some observations that include or make reference to the second half of 1998 in its determination on serious injury or threat of serious injury, we do not consider that the ITC was comparing the situation in the first half of 1999 to that in the second half of 1998. The ITC was simply describing factual circumstances that existed in the second half of 1998 and the first half of 1999. The ITC was not drawing conclusions based on a comparison of those periods.”(54)

38.     The Panel in Argentina — Preserved Peaches concurred with the Panel in US — Line Pipe (see paragraph 33 above) that the word “recent” does not imply that the analysis must focus exclusively on conditions at the end of the period of analysis.(55) The Panel believed that a recent and sharp increase in imports is a necessary, but not a sufficient, condition to satisfy Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994:

“The increase is not merely the product of a quantitative analysis, it must also be qualitative. This was the approach of the Appellate Body in the passage quoted above from Argentina — Footwear (EC), where it found that an increase in imports as required by Article 2.1 and Article XIX:1(a) must be recent, sudden, sharp and significant enough, both quantitatively and qualitatively. It is therefore not sufficient to find that an increase in imports is only recent, sudden, sharp and significant mathematically.

 

The qualitative analysis required was illustrated by the Appellate Body in Argentina — Footwear (EC) when it interpreted the requirement in Article 4.2(a) that the competent authorities evaluate the “rate and amount” of the increase in imports. They found that it meant that the competent authorities in that case should have considered the trends in imports over the period of investigation, rather than just comparing the end points, and to consider the sensitivity of their analysis to the particular end points of the investigation period used.”(56)’(57)

39.     In Argentina — Preserved Peaches, the Panel also concluded that there is no absolute formula to determine whether increased imports justify the application of a safeguard measure:

“[T]he point is that there is no fixed period of five years or any other length of time over which figures can simply be subtracted to yield an increase in imports in the sense of Article 2.1 and Article XIX:1(a). Accordingly, neither the mathematical increase in imports of preserved peaches in the last two years, nor the mathematical decrease over the whole five year period of analysis, is determinative.”(58)

40.     In US — Steel Safeguards, the Panel, in a finding upheld by the Appellate Body, concluded that: “a finding that imports have increased pursuant to Article 2.1 can be made when an increase evidences a certain degree of recentness, suddenness, sharpness and significance.”(59) In stating this, the Panel emphasized “that there are no absolute standards as regards how sudden, recent, and significant the increase must be in order to qualify as an ‘increase’ in the sense of Article 2.1 of the Agreement on Safeguards”, but added that one cannot conclude “that any increase between any two identified points in time meets the requirements of Article 2.1 of the Agreement on Safeguards.”(60)

41.     In US — Steel Safeguards, the Panel, in a ruling explicitly confirmed by the Appellate Body, insisted that there are no absolute standards in judging how sudden, recent and significant the increase must be in order to qualify as an “increase” in the sense of Article 2.1 of the Agreement on Safeguards.(61) The Panel said that the evaluation is not to be done in the abstract. Instead according to the Panel “[a] concrete evaluation is what is called for” and, thus, a “competent authority must conduct an analysis considering all the features of the development of import quantities and that an increase in imports has a certain degree of being recent and sudden.”(62) The Panel went on to state the importance of the analysis of the entire period of investigation:

“[A] competent authority’s findings on increased imports, distinct from its causality and injury findings, may be informed by the results of its entire investigation. The competent authority’s findings on the first requirement — increased imports — may have effects on the injury findings or on the causation findings, as prescribed by Article 4.2(a). As a competent authority considers the other conditions necessary for imposition of a safeguard, it determines, as directed by the Appellate Body in Argentina — Footwear (EC), whether the increase in imports was recent enough, sudden enough, and significant enough to cause or threaten serious injury to the relevant domestic producers.”(63)

42.     In US — Steel Safeguards, the Panel, in findings upheld by the Appellate Body, addressed the question of how recently the imports must have increased and concurred with the Panel’s view in US — Line Pipe (see paragraph 34 above) in stating as follows:

“As the Panel in US — Line Pipe did,(64) that Article 2.1 of the Agreement on Safeguards speaks of a product that ‘is being imported … in such increased quantities’. Thus, imports need not be increasing at the time of the determination; what is necessary is that imports have increased, if the products continue ‘being imported’ in (such) increased quantities. The Panel, therefore, agrees with the US — Line Pipe Panel’s view that the fact that the increase in imports must be ‘recent’ does not mean that it must continue up to the period immediately preceding the investigating authority’s determination, nor up to the very end of the period of investigation.(65) As pointed out by the Panel in US — Line Pipe,(66) the most recent data must be the focus, but should not be considered in isolation from the data pertaining to the less recent portion of the period of investigation. However, as indicated by the present continuous ‘are being’, there is an implication that imports, in the present, remain at higher (i.e. increased) levels.

 

Whether a decrease in imports at the end of the period of investigation, in the individual case, prevents a finding of increased imports in the sense of Article 2.1 of the Agreement on Safeguards will, therefore, depend on whether, despite the later decrease, a previous increase nevertheless results in the product (still) ‘being imported in (such) increased quantities’. In this evaluation, factors that must be taken into account are the duration and the degree of the decrease at the end of the relevant period of investigation, as well as the nature, for instance the sharpness and the extent, of the increase that intervened beforehand.

 

To give an extreme example, a short and very recent slight decrease would not detract from an overall increase if imports have increased tenfold over the several years beforehand. Conversely, to give an opposite extreme example, one could no longer talk about a product that ‘is being imported in (such) increased quantities’, or in fact in any increased quantities at all, if, at the time of the determination, import numbers have plummeted nearly to zero or to a level below any past point in the period of investigation.(67)

 

The Panel believes that, in their investigation whether imports have increased in the recent period, and whether increased imports are causing serious injury to the domestic producers of like or directly competitive domestic products, competent authorities are required to consider the trends in imports over the period of investigation, as suggested by Article 4.2(a).(68) While Article 4.2(a) requires the evaluation of the ‘rate and amount of the increase in imports … in absolute and relative terms’, the Panel sees no basis for the argument that this rate must always accelerate or that the rate must always be positive at each point in time during the period of investigation.”(69)

43.     In US — Steel Safeguards, the Appellate Body reiterated the importance of trends over the entire period of investigation:

“A determination of whether there is an increase in imports cannot, therefore, be made merely by comparing the end points of the period of investigation. Indeed, in cases where an examination does not demonstrate, for instance, a clear and uninterrupted upward trend in import volumes, a simple end-point-to-end-point analysis could easily be manipulated to lead to different results, depending on the choice of end points. A comparison could support either a finding of an increase or a decrease in import volumes simply by choosing different starting and ending points.

 

For instance, if the starting point for the period of investigation were set at a time when import levels were particularly low, it would be more likely that an increase in import volumes could be demonstrated. The use of the phrase ‘such increased quantities’ in Articles XIX:1(a): and 2.1, and the requirement in Article 4.2 to assess the ‘rate and amount’ of the increase, make it abundantly clear, however, that such a comparison of end points will not suffice to demonstrate that a product ‘is being imported in such increased quantities’ within the meaning of Article 2.1. Thus, a demonstration of ‘any increase’ in imports between any two points in time is not sufficient to demonstrate ‘increased imports’ for purposes of Articles XIX and 2.1. Rather, as we have said, competent authorities are required to examine the trends in imports over the entire period of investigation.”(70)’(71)

44.     The Appellate Body in US — Steel Safeguards referred to the importance of an explanation concerning the trend in imports over entire period of investigation:

“In our view, what is called for in every case is an explanation of how the trend in imports supports the competent authority’s finding that the requirement of ‘such increased quantities’ within the meaning of Articles XIX:1(a): and 2.1 has been fulfilled. It is this explanation concerning the trend in imports — over the entire period of investigation — that allows a competent authority to demonstrate that ‘a product is being imported in such increased quantities’.”(72)

45.     In US — Steel Safeguards, the Appellate Body upheld the findings of the Panel that by not explaining the “most recent decrease” in absolute imports, the USITC had not provided an explanation concerning the overall trend in imports that had occurred during the period of investigation.

The Appellate Body stated: “Again we recall that, in Argentina — Footwear (EC), in clarifying the Agreement on Safeguards, we stated that ‘authorities are required to examine trends’. (73) In our view, by failing to address the decrease in imports that occurred between interim 2000 and interim 2001(the most recent decrease), the United States did not — and could not — provide a reasoned and adequate explanation of how the facts supported its finding that imports of hot-rolled bar ‘increased’, as required by Article 2.1 of the Agreement on Safeguards. This failure to account for the decrease in absolute imports is all the more serious in the light of the fact that the intervening trend that was not addressed by the USITC occurred at the very end of the period of investigation. In US — Lamb, we found that the competent authority ‘must assess’ the data from the most recent past ‘in the context of the data for the entire investigative period’.(74) As the Panel found, it is, precisely, those most recent data that the USITC failed to account for with respect to absolute imports.”(75)

47.     In US — Steel Safeguards, the Appellate Body confirmed that imports need not be increasing at the time of the determination and insisted on the investigating authority’s obligation to examine the trends of imports over the entire period of investigation (see paragraph 43 above):

“We agree with the United States that Article 2.1 does not require that imports need to be increasing at the time of the determination. Rather, the plain meaning of the phrase ‘is being imported in such increased quantities’ suggests merely that imports must have increased, and that the relevant products continue ‘being imported’ in (such) increased quantities. We also do not believe that a decrease in imports at the end of the period of investigation would necessarily prevent an investigating authority from finding that, nevertheless, products continue to be imported ‘in such increased quantities.”(76)’(77)

48.     The Appellate Body in US — Steel Safeguards, reiterated its ruling made in Argentina — Footwear (EC) (see paragraph 31 above) and emphasized the importance of reading “such increased quantities” in the context of Article XIX:1(a) of the GATT 1994 and Article 2.1 of the Agreement on Safeguards which confirm that such increased imports must be linked to the ability of the relevant increased imports to cause serious injury or threat thereof:

“We reaffirm this finding [Argentina — Footwear (EC)]. In that appeal, we underlined the importance of reading the requirement of ‘such increased quantities’ in the context in which it appears in both Article XIX:1(a) of the GATT 1994 and Article 2.1 of the Agreement on Safeguards. That context includes the words ‘to cause or threaten to cause serious injury’. Read in context, it is apparent that ‘there must be ‘such increased quantities’ as to cause or threaten to cause serious injury to the domestic industry in order to fulfill this requirement for applying a safeguard measure.’(78) Indeed, in our view, the term ‘such’, which appears in the phrase ‘such increased quantities’ in Articles XIX:1(a) and 2.1, clearly links the relevant increased imports to their ability to cause serious injury or the threat thereof. Accordingly, we agree with the United States that our statement in Argentina — Footwear (EC) that the ‘increase in imports must have been recent enough, sudden enough, sharp enough and significant enough … to cause or threaten to cause serious injury’(79), was a statement about ‘the entire investigative responsibility of the competent authorities under the Safeguards Agreement’,(80) and that ‘[w]hether an increase in imports is recent, sudden, sharp and significant enough to cause or threaten serious injury are questions that are answered as the competent authorities proceed with the remainder of their analysis (i.e., their consideration of serious injury/threat and causation).”(81)’(82)

(iv) Absolute or relative increase in imports

49.     In US — Line Pipe, the Panel faced the question of whether the finding of increased imports can be maintained in light of a decline in absolute imports during part of the investigation period. The Panel found that decline in absolute imports at the end of period of investigation should not be considered in isolation, and does not preclude a finding of imports “in such increased quantities” for the purpose of Article 2.1:

“In a safeguard investigation, the period of investigation for examination of the increased imports tends to be the same as that for the examination of the serious injury to the domestic industry. This contrasts with the situation in an anti-dumping or countervailing duty investigation where the period for evaluating the existence of dumping or subsidization is usually shorter than the period of investigation for a finding of material injury. We are of the view that one of the reasons behind this difference is that, as found by the Appellate Body in Argentina — Footwear Safeguard, “the determination of whether the requirement of imports “in such increased quantities” is met is not a merely mathematical or technical determination.” The Appellate Body noted that when it comes to a determination of increased imports “the competent authorities are required to consider the trends in imports over the period of investigation”. The evaluation of trends in imports, as with the evaluation of trends in the factors relevant for determination of serious injury to the domestic industry, can only be carried out over a period of time. Therefore, we conclude that the considerations that the Appellate Body has expressed with respect to the period relevant to an injury determination also apply to an increased imports determination.

 

In view of the considerations expressed above we do not believe that the analysis of data for the first semester of 1999 should be considered in isolation. We find the analysis of whether imports had increased on a yearly basis from 1994 to 1998 very relevant to the question of whether there were increased imports. Although we are aware that imports decreased for the first semester of 1999 when compared to the first semester of 1998, we note that regardless of the decrease for the first half of 1999, the ITC in their report found that imports of line pipe ‘remained at a very high level in interim 1999’. This high level of imports for 1999 supports a finding that imports were still entering the United States ‘in such increased quantities’ as prescribed in Article 2.1. In other words, although Korea may be correct in arguing that absolute imports declined, this does not preclude a finding of imports ‘in such increased quantities’ for the purpose of Article 2.1. Based on the above considerations we conclude that the ITC was correct in its finding of an absolute increase in imports of line pipe.”(83)

50.     Regarding an absolute increase in imports, see also the Appellate Body Report in US — Steel Safeguards(84) and the Panel Reports in US — Wheat Gluten(85) and Argentina — Footwear (EC).(86)

(d) “and under such conditions”

51.     The Panel reports in Korea — Dairy,(87) Argentina — Footwear (EC)(88) and US — Wheat Gluten(89) have held that the phrase “under such conditions” in Article 2.1 does not constitute a separate analytical requirement in a safeguards investigation. Related to this, these Panel Reports observe that this phrase does not necessarily require an analysis of the prices of imported products and like or directly competitive products. The Appellate Body agreed with these findings in US — Wheat Gluten.(90)

52.     The Panel in Korea — Dairy stated:

“We consider that the phrase ‘and under such conditions’ does not provide for an additional criterion or analytical requirement to be performed before an importing Member may impose a safeguard measure. We are of the view that the phrase ‘and under such conditions’ qualifies and relates both to the circumstances under which the products under investigation are imported and to the circumstances of the market into which products are imported, both of which must be addressed by the importing country when performing its assessment as to whether the increased imports are causing serious injury to the domestic industry producing the like or directly competitive products. In this sense, we consider that the phrase ‘under such conditions’ refers more generally to the obligation imposed on the importing country to perform an adequate assessment of the impact of the increased imports at issue and the specific market under investigation.”(91)

53.     In this connection, the Panel in Argentina — Footwear (EC) explained the relationship between the phrase “under such conditions” in Article 2.1 of the Agreement on Safeguards and the analysis under Article 4.2(a) and (b):

“In our view, the 7phrase ‘under such conditions’ does not constitute a specific legal requirement for a price analysis, in the sense of an analysis separate and apart from the increased import, injury and causation analyses provided for in Article 4.2. We consider that Article 2.1 sets forth the fundamental legal requirements (i.e., the conditions) for application of a safeguard measure, and that Article 4.2 then further develops the operational aspects of these requirements.”(92)

54.     In Argentina — Footwear (EC), the Panel also considered the phrase “under such conditions” as referring to the conditions of competition between the imported product and the domestic like or directly competitive products in the importing country’s market. The Panel held that the phrase “under such conditions” in fact refers to the substance of the causation analysis that must be performed under Article 4.2(a) and (b):

“We believe that the phrase ‘under such conditions’ would indicate the need to analyse the conditions of competition between the imported product and the domestic like or directly competitive products in the importing country’s market. That is, it is these ‘conditions of competition’ in the importing country’s market that will determine whether increased imports cause or threaten to cause serious injury to the domestic industry. The text of Article 2.1 supports this interpretation, as the relevant phrase in its entirety reads ‘under such conditions as to cause or threaten to cause serious injury’ (emphasis added). Seen another way, for a safeguard measure to be permitted, the investigation must demonstrate that conditions of competition in the importing country’s market are such that the increased imports can and do cause or threaten to cause serious injury. Article 4.2(a) confirms this interpretation, in requiring that the competent authorities ‘evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry’, which is further reinforced by Article 4.2(b)’s requirement that the analysis be conducted on the basis of ‘objective evidence’. In our view, these provisions give meaning to the phrase ‘under such conditions’, and support as well our view that for an analysis to demonstrate causation, it must address specifically the nature of the interaction between the imported and domestic products in the domestic market of the importing country. That is, we believe that the phrase ‘under such conditions’ in fact refers to the substance of the causation analysis that must be performed under Article 4.2(a) and (b).”(93)

55.     In the view of the Panel in Argentina — Footwear (EC), the factors underlying competition between domestic and imported like products are to be analysed within the context of the causation analysis:

“We note in this regard that there are different ways in which products can compete. Sales price clearly is one of these, but it is certainly not the only one, and indeed may be irrelevant or only marginally relevant in any given case. Other bases on which products may compete include physical characteristics (e.g., technical standards or other performance-related aspects, appearance, style or fashion), quality, service, delivery, technological developments consumer tastes, and other supply and demand factors in the market. In any given case, other factors that affect the conditions of competition between the imported and domestic products may be relevant as well. It is these sorts of factors that must be analysed on the basis of objective evidence in a causation analysis to establish the effect of the imports on the domestic industry.”(94)

56.     The Panel in US — Wheat Gluten also effectively equated the phrase “under such conditions” with the causation analysis:

“We are of the view that the phrase ‘under such conditions’ does not impose a separate analytical requirement in addition to the analysis of increased imports, serious injury and causation. Rather, this phrase refers to the substance of the causation analysis that must be performed under Article 4.2(a) and (b) SA.”(95)

57.     The Panel in Korea — Dairy specifically addressed the issue of the analysis of price competition between domestic and imported like products has been in the context of the phrase “under such conditions”:

“Although the prices of the imported products will most often be a relevant factor indicating how the imports do, in fact, cause serious injury to the domestic industry, we note that there is no explicit requirement in Article 2,(96) that the importing Member perform a price analysis of the imported products and the prices of the like or directly competitive products in the market of the importing country.”(97)

58.     In US — Wheat Gluten, the Appellate Body expressed its agreement with the Panel’s analysis. Like the Panel, the Appellate Body considered the phrase “under such conditions” to refer to the analysis to be performed under Article 4.2. The Appellate Body also referred to the phrase “under such conditions” in Article 2.1 as support for its view that Article 4.2 contemplates an analysis of whether increased imports, in conjunction with other relevant factors,(98) cause serious injury:

Article 2.1 reflects closely the ‘basic principles’ in Article XIX:1(a) of the GATT 1994 and also sets forth ‘the conditions for imposing a safeguard measure’, including those relating to causation. The rules on causation, which are elaborated further in the remainder of the Agreement on Safeguards, therefore, find their roots in Article 2.1. According to that provision, a safeguard measure may be applied if a ‘product is being imported … in such increased quantitiesand under such conditions as to cause …’ serious injury. Thus, under Article 2.1, the causation analysis embraces two elements: the first relating to increased ‘imports’ specifically and the second to the ‘conditions’ under which imports are occurring.

 

Each of these two elements is, in our view, elaborated further in Article 4.2(a). While Article 2.1 requires account to be taken of the ‘increased quantities’ of imports, both in ‘absolute’ terms and ‘relative to domestic production’, Article 4.2(a) states, correspondingly, that ‘the rate and amount of the increase in imports of the product concerned in absolute and relative terms, [and] the share of the domestic market taken by increased imports’ are relevant.

 

As for the second element under Article 2.1, we see it as a complement to the first. While the first element refers to increased imports specifically, the second relates more generally to the ‘conditions’ in the marketplace for the product concerned that may influence the domestic industry. Thus, the phrase ‘under such conditions’ refers generally to the prevailing ‘conditions’, in the marketplace for the product concerned, when the increase in imports occurs. Interpreted in this way, the phrase ‘under such conditions’ is a shorthand reference to the remaining factors listed in Article 4.2(a), which relate to the overall state of the domestic industry and the domestic market, as well as to other factors ‘having a bearing on the situation of [the] industry’. The phrase ‘under such conditions’, therefore, supports the view that, under Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards, the competent authorities should determine whether the increase in imports, not alone, but in conjunction with the other relevant factors, cause serious injury.”(99)’(100)

59.     The Appellate Body in US — Steel Safeguards concluded that assessing whether increased imports justify the application of a safeguard measure calls for the assessment of the “conditions” under which those imports occur:

“We further note that Article XIX:1(a) of the GATT 1994 and Article 2.1 of the Agreement on Safeguards require that the relevant product ‘is being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury’. The question whether ‘such increased quantities’ of imports will suffice as ‘increased imports’ to justify the application of a safeguard measure is a question that can be answered only in the light of ‘such conditions’ under which those imports occur. The relevant importance of these elements varies from case to case.”(101)

(e) The relevance of price analysis when assessing the situation of the domestic industry

60.     As the Panel in Argentina — Footwear (EC) reveals, a price analysis may be required in the specific circumstances of a particular case:

“Therefore, in the present dispute, while the phrase ‘under such conditions’ does not require a price analysis per se, it nevertheless has an implication for the nature and content of a causation analysis, which may logically necessitate a price analysis in a given case. Moreover, the absence of an analysis of the conditions of competition in the domestic market for the product in question, in which the interaction of the imported with the domestic product is explained in the report on the investigation (including inter alia a price analysis where relevant), results in an incomplete analysis of the causal link.”(102)

61.     The Panel in US — Wheat Gluten also adopted an approach to price analysis as a non-mandatory, but potentially relevant point of analysis:

“‘Price’ is not expressly listed in Article 4.2(a) [of the Agreement on Safeguards ] as a ‘relevant factor’ having a bearing on the situation of the domestic industry. However, this is not to say that ‘price’ may not be a relevant factor in a given case. An imported product can compete with a domestic product in various ways in the market of the importing country. Clearly, the relative price of the imported product is one of these ways, but it is certainly not the only way, and it may be irrelevant or only marginally relevant in a given case.

 

Therefore, in the context of safeguards measures, the relevance of ‘price’ will vary from case to case, in light of the particular circumstances and the nature of the particular product and domestic industry involved. Given that this is the nature of the ‘price’ factor under the Agreement on Safeguards, we consider that the phrase ‘under such conditions’ does not necessarily, in every case, require a price analysis.”(103)

62.     The Panel in US — Steel Safeguards was of the view that price is the most important factor when analysing conditions of competition:

“A consideration of the various factors that have been mentioned provides context for the consideration of price, which, in the Panel’s view, is an important, if not the most important, factor in analysing the conditions of competition in a particular market, although consideration of prices is not necessarily mandatory.(104) The Panel agrees with the argument advanced by the European Communities insofar as it submits that price will often be relevant to explain how the increased volume of imports caused serious injury. Indeed, we consider that relative price trends as between imports and domestic products will often be a good indicator of whether injury is being transmitted to the domestic industry (provided that the market context for such trends are borne in mind) given that price changes have an immediate effect on profitability, all other things being equal. In turn, profitability is a useful measure of the state of the domestic industry.”(105)

63.     After referring to the Panel Reports on Argentina — Footwear (EC) (see paragraph 55 above) and US — Wheat Gluten (see paragraph 61 above), the Panel in US — Steel Safeguards noted that pricing trends must always be considered in context:

“With respect to the argument made by the European Communities that if imports are sold at a higher price than domestic products, it is unlikely that such imports are responsible for any serious injury, the Panel considers that the existence or absence of underselling by imports cannot, on its own, lead to a definitive conclusion regarding the presence or otherwise of a causal link between the increased imports and the serious injury. In our view, pricing trends must always be considered in context. It is only after this contextual consideration that conclusions can be drawn regarding the existence or otherwise of the causal link.”(106)

(f) Scope of application of a safeguard measure in the case of a regional trade agreement

64.     The Panel in Argentina — Footwear (EC) considered whether Argentina was permitted under the Agreement on Safeguards to take MERCOSUR imports into account in the analysis of injury factors and of a causal link between increased imports and the alleged (threat of) serious injury, and was at the same time permitted to exclude MERCOSUR countries from the application of the safeguard measure imposed.(107) Relying on footnote 1 to Article 2.1 and Article XXIV:8 of the GATT 1994, the Panel concluded that “in the case of a customs union the imposition of a safeguard measure only on third country sources of supply cannot be justified on the basis of a member-state- specific investigation that finds serious injury or threat thereof caused by imports from all sources of supply from within and outside a customs union.”(108) Upon appeal, the Appellate Body reversed the legal reasoning and findings of the Panel relating to footnote 1 to Article 2.1 since it considered that footnote 1 to Article 2.1 did not apply to the safeguard measures imposed by Argentina in this case:

“We question the Panel’s implicit assumption that footnote 1 to Article 2.1 of the Agreement on Safeguards applies to the facts of this case. The ordinary meaning of the first sentence of footnote 1 appears to us to be that the footnote only applies when a customs union applies a safeguard measure “as a single unit or on behalf of a member State”.

 

MERCOSUR did not apply these safeguard measures, either as a single unit or on behalf of Argentina.

It is Argentina that is a Member of the WTO for the purposes of Article 2 of the Agreement on Safeguards, and it is Argentina that applied the safeguard measures after conducting an investigation of products being imported into its territory and the effects of those imports on its domestic industry. For these reasons, we do not believe that footnote 1 to Article 2.1 applies to the safeguard measures imposed by Argentina in this case … .”(109)

 

65.     The Appellate Body in Argentina — Footwear (EC) also rejected the Panel’s view that Article XXIV of GATT 1994 was relevant to the issue before it. Recalling its finding in Turkey — Textiles, the Appellate Body reiterated that Article XXIV may serve as an “affirmative defence” and emphasized that Argentina had not argued expressly that Article XXIV provided it with such an affirmative defence:

“This issue, as the Panel itself observed, is whether Argentina, after including imports from all sources in its investigation of ‘increased imports’ of footwear products into its territory and the consequent effects of such imports on its domestic footwear industry, was justified in excluding other MERCOSUR member States from the application of the safeguard measures. In our Report in Turkey — Restrictions on Imports of Textile and Clothing Products, we stated that under certain conditions, ‘Article XXIV may justify a measure which is inconsistent with certain other GATT provisions.’ We indicated, however, that this defence is available only when it is demonstrated by the Member imposing the measure that ‘the measure at issue is introduced upon the formation of a customs union that fully meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV’ and ‘that the formation of that customs union would be prevented if it were not allowed to introduce the measure at issue.’

 

In this case, we note that Argentina did not argue before the Panel that Article XXIV of the GATT 1994 provided it with a defence to a finding of violation of a provision of the GATT 1994. As Argentina did not argue that Article XXIV provided it with a defence against a finding of violation of a provision of the GATT 1994, and as the Panel did not consider whether the safeguard measures at issue were introduced upon the formation of a customs union that fully meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV, we believe that the Panel erred in deciding that an examination of Article XXIV:8 of the GATT 1994 was relevant to its analysis of whether the safeguard measures at issue in this case were consistent with the provisions of Articles 2 and 4 of the Agreement on Safeguards.”(110)

(g) Parallelism

66.     In Argentina — Footwear (EC), the Appellate Body examined “whether … there is an implied ‘parallelism between the scope of a safeguard investigation and the scope of the application of safeguard measures.’”(111) In this connection, the Appellate Body held:

“Taken together, the provisions of Articles 2.1 and 4.1(c) of the Agreement on Safeguards demonstrate that a Member of the WTO may only apply a safeguard measure after that Member has determined that a product is being imported into its territory in such increased quantities and under such conditions as to cause or threaten to cause serious injury to its domestic industry within its territory. According to Articles 2.1 and 4.1(c), therefore, all of the relevant aspects of a safeguard investigation must be conducted by the Member that ultimately applies the safeguard measure, on the basis of increased imports entering its territory and causing or threatening to cause serious injury to the domestic industry within its territory.

 

While Articles 2.1 and 4.1(c) set out the conditions for imposing a safeguard measure and the requirements for the scope of a safeguard investigation, these provisions do not resolve the matter of the scope of application of a safeguard measure. In that context, Article 2.2 of the Agreement on Safeguards provides:

 

‘Safeguard measures shall be applied to a product being imported irrespective of its source.’

 

As we have noted, in this case, Argentina applied the safeguard measures at issue after conducting an investigation of products being imported into Argentine territory and the effects of those imports on Argentina’s domestic industry. In applying safeguard measures on the basis of this investigation in this case, Argentina was also required under Article 2.2 to apply those measures to imports from all sources, including from other MERCOSUR member States.

 

On the basis of this reasoning, and on the facts of this case, we find that Argentina’s investigation, which evaluated whether serious injury or the threat thereof was caused by imports from all sources, could only lead to the imposition of safeguard measures on imports from all sources. Therefore, we conclude that Argentina’s investigation, in this case, cannot serve as a basis for excluding imports from other MERCOSUR member States from the application of the safeguard measures.”(112)

67.     The Appellate Body in Argentina — Footwear (EC) also stressed that it was not ruling on “whether, as a general principle, a member of a customs union can exclude other members of that customs union from the application of a safeguard measure”.(113)

68.     In US — Wheat Gluten, the Appellate Body upheld the finding by the Panel in that dispute that the United States had acted inconsistently with Articles 2.1 and 4.2 of the Agreement on Safeguards when, after including imports from all sources in their investigation of increased imports of wheat gluten into the United States and the consequent effects of such imports on the domestic industry, the United States investigating authorities excluded imports from Canada from the application of the safeguard measure. This exclusion was based on a separate inquiry concerning whether Canada accounted for a substantial share of total imports and whether imports from Canada contributed “importantly” to the serious injury caused by imports. The Appellate Body reiterated its findings from Argentina — Footwear (EC) on the existence of parallelism between a safeguard investigation and the application of a safeguard measure:

[A]rticle 2.1 of the Agreement on Safeguards … provides that a safeguard measure may only be applied when ‘such increased quantities’ of a ‘product [are] being imported into its territory … under such conditions as to cause or threaten to cause serious injury to the domestic industry’. As we have said, this provision, as elaborated in Article 4 of the Agreement on Safeguards, sets forth the conditions for imposing a safeguard measure. Article 2.2 of the Agreement on Safeguards, which provides that a safeguard measure ‘shall be applied to a product being imported irrespective of its source’, sets forth the rules on the application of a safeguard measure.

 

The same phrase — ‘product … being imported’ — appears in both these paragraphs of Article 2. In view of the identity of the language in the two provisions, and in the absence of any contrary indication in the context, we believe that it is appropriate to ascribe the same meaning to this phrase in both Articles 2.1 and 2.2. To include imports from all sources in the determination that increased imports are causing serious injury, and then to exclude imports from one source from the application of the measure, would be to give the phrase ‘product being imported’ a different meaning in Articles 2.1 and 2.2 of the Agreement on Safeguards. In Article 2.1, the phrase would embrace imports from all sources whereas, in Article 2.2, it would exclude imports from certain sources. This would be incongruous and unwarranted. In the usual course, therefore, the imports included in the determinations made under Articles 2.1 and 4.2 should correspond to the imports included in the application of the measure, under Article 2.2.”(114)’(115)

69.     Furthermore, the Appellate Body in US — Wheat Gluten rejected the United States argument that its safeguard measure was nevertheless justified because its authorities had conducted an additional investigation focusing specifically on imports from Canada:

“In the present case, the United States asserts that the exclusion of imports from Canada from the scope of the safeguard measure was justified because, following its investigation based on imports from all sources, the USITC conducted an additional inquiry specifically focused on imports from Canada. The United States claims, in effect, that the scope of its initial investigation, together with its subsequent and additional inquiry into imports from Canada, did correspond with the scope of application of its safeguard measure.

 

In our view, however, although the USITC examined the importance of imports from Canada separately, it did not make any explicit determination relating to increased imports, excluding imports from Canada. In other words, although the safeguard measure was applied to imports from all sources, excluding Canada, the USITC did not establish explicitly that imports from these same sources, excluding Canada, satisfied the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards. Thus, we find that the separate examination of imports from Canada carried out by the USITC in this case was not a sufficient basis for the safeguard measure ultimately applied by the United States.”(116)

70.     The Appellate Body in US — Line Pipe reiterated its ruling in US — Wheat Gluten by stating as follows:

“As we then stated in US — Wheat Gluten, ‘the imports included in the determinations made under Articles 2.1 and 4.2 should correspond to the imports included in the application of the measure, under Article 2.2.’ We added that a gap between imports covered under the investigation and imports falling within the scope of the measure can be justified only if the competent authorities ‘establish explicitly’ that imports from sources covered by the measure ‘satisf[y] the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.’ And, as we explained further in US — Lamb, in the context of a claim under Article 4.2(a) of the Agreement on Safeguards, ‘establish[ing] explicitly’ implies that the competent authorities must provide a ‘reasoned and adequate explanation of how the facts support their determination.’”(117)

71.     The Appellate Body in US — Line Pipe further concluded that by demonstrating the gap between imports covered under the investigation performed by the importing Member’s competent authority and imports falling within the scope of the safeguard measure, the exporting Member established a prima facie case of the absence of “parallelism” with respect to the safeguard measure.(118)

“It is clear, therefore, that, in its investigation, the USITC considered imports from all sources, including imports from Canada and Mexico. Nevertheless, exports from Canada and Mexico were excluded from the safeguard measure at issue. Therefore, there is a gap between imports covered under the investigation performed by the USITC and imports falling within the scope of the measure.

 

In our view, Korea has demonstrated that the USITC considered imports from all sources in its investigation. Korea has also shown that exports from Canada and Mexico were excluded from the safeguard measure at issue. And, in our view, this is enough to have made a prima facie case of the absence of parallelism in the line pipe measure. Contrary to what the Panel stated,(119) we do not consider that it was necessary for Korea to address the information set out in the USITC Report, or in particular, in footnote 168 in order to establish a prima facie case of violation of parallelism. Moreover, to require Korea to rebut the information in the USITC Report, and in particular, in footnote 168, would impose an impossible burden on Korea because, as the exporting country, Korea would not have had any of the relevant data to conduct its own analysis of the imports.”(120)

72.     In addition, the Appellate Body in US — Line Pipe found that a footnote in the importing Member’s safeguard determination report, which explained that it would have reached the same result had it excluded imports from FTA members in the investigation, does not meet the “establishes explicitly” requirement, and it is not a “reasoned and adequate explanation”:

“Although footnote 168 contains a determination that imports from non-NAFTA sources increased significantly, footnote 168 does not, as we read it, establish explicitly that increased imports from non-NAFTA sources alone caused serious injury or threat of serious injury. Nor does footnote 168, as we read it, provide a reasoned and adequate explanation of how the facts would support such a finding. To be explicit, a statement must express distinctly all that is meant; it must leave nothing merely implied or suggested; it must be clear and unambiguous.

 

Footnote 168 does not express distinctly or state clearly and unambiguously how the facts would support a finding by the USITC that imports from non-NAFTA sources alone caused serious injury or threat of serious injury. Footnote 168 may, as the Panel found, provide a basis for a finding that imports from non-NAFTA sources, alone, caused serious injury, but this is not enough. Footnote 168 does not establish explicitly that imports from sources covered by the measure ‘satisf[y] the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.’ Footnote 168 does not amount to a ‘reasoned and adequate explanation of how the facts support [the] determination.’“(121)

73.     However, the Appellate Body in US — Line Pipe avoided ruling on whether Article 2.2 of the Agreement on Safeguards “permits a Member to exclude imports originating in member states of a free-trade areas from the scope of a safeguard measure”, or on the question of whether Article XXIV of the GATT 1994 permits excepting other members of an FTA from a safeguard measure. (122) For the latter question, the Appellate Body ruled as follows:

“The question of whether Article XXIV of the GATT 1994 serves as an exception to Article 2.2 of the Agreement on Safeguards becomes relevant in only two possible circumstances. One is when, in the investigation by the competent authorities of a WTO Member, the imports that are exempted from the safeguard measure are not considered in the determination of serious injury. The other is when, in such an investigation, the imports that are exempted from the safeguard measure are considered in the determination of serious injury, and the competent authorities have also established explicitly, through a reasoned and adequate explanation, that imports from sources outside the free-trade area, alone, satisfied the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2.”(123)

74.     The Panel in US — Steel Safeguards, in a finding upheld by the Appellate Body,(124) recalled that the requirement of parallelism, as developed by panels and the Appellate Body, meant that the competent authorities must explicitly establish that imports covered by the safeguard measure satisfy the conditions for its application.(125) The Panel further added:

“This implies that the competent authorities must provide a reasoned and adequate explanation of how the facts support their determination.(126) As the Appellate Body has also clarified, ‘to be explicit, a statement must express distinctly all that is meant; it must leave nothing merely implied or suggested; it must be clear and unambiguous.’(127)

 

The Panel believes that the requirement of parallelism also exists in the interest of the other Members. The other Members who are facing the safeguard measure should be able to assess its legality on the basis of the determination and explanations provided by the competent authorities. This function would not be fulfilled if the other Members were left with statements such as those to the effect that the exclusion of subsets of all imports would not change the conclusions and, elsewhere in the report, that certain imports are very small.

 

Finally, the Panel notes the dispute between the parties as to whether competent authorities must consider imports from sources excluded by the measure as an ‘other factor’ in the sense of Article 4.2(b) of the Agreement on Safeguards, when they perform the exercise of establishing explicitly that imports from sources covered by the measure satisfy the requirements set out in Article 2.1 and elaborated in Article 4.2.

 

As clarified by the Appellate Body, if the scope of the measure does not match the scope of the determination, competent authorities must ‘establish explicitly that increased imports from non-[FTA] sources alone’(128) caused serious injury or threat of serious injury.(129) Increased imports from sources ultimately excluded from the application of the measure must hence be excluded from the analysis. The increase of these imports and their effect on the domestic industry cannot be used to support a conclusion that the product in question ‘is being imported in such increased quantities so as to cause serious injury’. This makes it necessary — whether imports excluded from the measure are an ‘other factor’ or not — to account for the fact that excluded imports may have some injurious impact on the domestic industry. As said, this impact must not be used as a basis supporting the establishment of the Article 2.1 criteria.”(130)

75.     In US — Steel Safeguards, the Appellate Body indicated that the requirement of “parallelism” is found in the “parallel” language used in the first and second paragraphs of Article 2 of the Agreement on Safeguards:

“The word ‘parallelism’ is not in the text of the Agreement on Safeguards; rather, the requirement that is described as ‘parallelism’ is found in the ‘parallel’ language used in the first and second paragraphs of Article 2 of the Agreement on Safeguards.”(131)

76.     In US — Steel Safeguards, the Appellate Body concluded that the competent authority has an obligation to establish that imports from sources other than the excluded members satisfy, alone, and in and of themselves, the conditions for the application of a safeguard measure:

“[It was] incumbent on the USITC, in fulfilling the obligations of the United States under Article 2 of the Agreement on Safeguards, to justify this gap by establishing explicitly, in its report, that imports from sources covered by the measures — that is, imports from sources other than the excluded countries of Canada, Israel, Jordan, and Mexico — satisfy, alone, and in and of themselves, the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards. Further, and as we have already explained, to provide such a justification, the USITC was obliged by the Agreement on Safeguards to provide a reasoned and adequate explanation of how the facts supported its determination that imports from sources other than Canada, Israel, Jordan, and Mexico satisfy, alone, and in and of themselves, the conditions for the application of a safeguard measure.”(132)

77.     In US — Steel Safeguards, the Appellate Body clarified that imports excluded from the application of the safeguard measure must be considered a factor “other than increased imports” within the meaning of Article 4.2(b):

“Since the non-attribution requirement is part of the overall requirement, the competent authorities must explain how it ensured that it did not attribute the injurious effects of factors other than included imports — which subsume ‘excluded imports’ — to the imports included in the measure.

 

As a result, the phrase ‘increased imports’ in Articles 4.2(a) and 4.2(b) must, in our view, be read as referring to the same set of imports envisaged in Article 2.1, that is, to imports included in the safeguard measure. Consequently, imports excluded from the application of the safeguard measure must be considered a factor ‘other than increased imports’ within the meaning of Article 4.2(b). The possible injurious effects that these excluded imports may have on the domestic industry must not be attributed to imports included in the safeguard measure pursuant to Article 4.2(b). The requirement articulated by the Panel ‘to account for the fact that excluded imports may have some injurious impact on the domestic industry’ is, therefore, not, as the United States argues, an ‘extra analytical step’ that the Panel added to the analysis of imports from all sources. To the contrary, this requirement necessarily follows from the obligation in Article 4.2(b) for the competent authority to ensure that the effects of factors other than increased imports — a set of factors that subsumes imports excluded from the safeguard measure — are not attributed to imports included in the measure, in establishing a causal link between imports included in the measure and serious injury or threat thereof.

 

The non-attribution requirement is part of the overall requirement, incumbent upon the competent authority, to demonstrate the existence of a ‘causal link’ between increased imports (covered by the measure) and serious injury, as provided in Article 4.2(b).Thus, as we found in US — Line Pipe, ‘to fulfill the requirement of Article 4.2(b), last sentence, the competent authorities must establish explicitly, through a reasoned and adequate explanation, that injury caused by factors other than increased imports is not attributed to increased imports’.

 

In order to provide such a reasoned and adequate explanation, the competent authority must explain how it ensured that it did not attribute the injurious effects of factors other than included imports — which subsume ‘excluded imports’ — to the imports included in the measure. As we explained in US — Line Pipe in the context of Article 3.1 and ‘unforeseen developments’ in this Report , if the competent authority does not provide such an explanation, a panel is not in a position to find that the competent authority ensured compliance with the clear and express requirement of non-attribution Articles 4.2(b) of the Agreement on Safeguards.”(133)

78.     The Appellate Body in US — Steel Safeguards determined that a series of separate and partial determinations cannot satisfy the requirement to establish explicitly that imports from sources covered by a measure, alone, satisfy the conditions for the application of a safeguard measure:

“The requirement of the Agreement on Safeguards to establish explicitly that imports from sources covered by a measure, alone, satisfy the conditions for the application of a safeguard measure cannot be fulfilled by conducting a series of separate and partial determinations.

 

For example, where a WTO Member seeks to establish explicitly that imports from sources other than A and B satisfy the conditions for the application of a safeguard measure, if that Member conducts a separate investigation, and makes a separate determination, on whether imports from sources other than A satisfy the relevant conditions, and then, subsequently, conducts another separate and distinct investigation, and makes a separate determination, on whether imports from sources other than B satisfy the relevant conditions, then these two separate determinations, in our view, do not demonstrate that imports from sources other than A and B together satisfy the requirements for the imposition of a safeguard measure. By making these two separate determinations, that Member will, logically, for each of them, be basing its determination, in part, either on imports from A or on imports from B. If this were permitted, a determination on the application of a safeguard measure could be easily subjected to mathematical manipulation. This could not have been the intent of the Members of the WTO in drafting and agreeing on the Agreement on Safeguards.

 

We are, therefore, of the view that the Panel raised a valid methodological concern when it stated that ‘it would … be required for the competent authorities to actually express the findings required under parallelism with regard to increased imports other than those from Canada, Mexico, Israel and Jordan.”(134)’(135)

79.     The Appellate Body in US — Steel Safeguards added that even if the amount of imports that would be excluded is small, it still must be adequately explained by the competent authority:

“As we explained in US — Wheat Gluten and US — Line Pipe, a competent authority must establish, unambiguously, with a reasoned and adequate explanation, and in a way that leaves nothing merely implied or suggested, that imports from sources covered by the measure, alone, satisfy the requirements for the application of a safeguard measure. We are not suggesting that very low imports volumes, either from some, or from all, of the excluded sources at issue, are irrelevant for a competent authority’s findings or the reasoned and adequate explanation underpinning such findings. We recognize that, where import volumes from excluded sources are very small, it is quite possible that the explanation underpinning the competent authority’s conclusion need not be as extensive as in circumstances where the excluded sources account for a large proportion of total imports. Nevertheless, even if an explanation need not necessarily be extensive, the requisite explicit finding must still be provided. That finding must be contained in the authority’s report, must be supported by a reasoned and adequate explanation, and — as we stated above — must address imports from all covered sources, excluding all of the non-covered sources. Nowhere in the Agreement on Safeguards is there any indication that these important principles can be disregarded in circumstances where imports from some or all sources are at low levels.”(136)

(h) “cause or threaten to cause serious injury”

(i) Necessity of discrete determination of serious injury or of threat of serious injury

80.     In US — Line Pipe, the Appellate Body held that a discrete finding of injury or threat of serious injury was not required under Article 2.1.(137) Although the Appellate Body agreed with the Panel that the definitions of “serious injury” and “threat of serious injury” are two distinct concepts, it reversed the Panel’s finding(138) by clarifying that the crucial word “or” in the text of Article 2.1 could mean either one or the other, or both in combination:

“We emphasize that we are dealing here with … whether there is a right in a particular case to apply a safeguard measure. The question at issue is whether the right exists in this particular case. And, as the right exists if there is a finding by the competent authorities of a ‘threat of serious injury’ or — something beyond — ’serious injury’, then it seems to us that it is irrelevant, in determining whether the right exists, if there is ‘serious injury’ or only ‘threat of serious injury’ — so long as there is a determination that there is at least a ‘threat’. In terms of the rising continuum of an injurious condition of a domestic industry that ascends from a ‘threat of serious injury’ up to ‘serious injury’, we see ‘serious injury’ — because it is something beyond a ‘threat’ — as necessarily including the concept of a ‘threat’ and exceeding the presence of a ‘threat’ for purposes of answering the relevant inquiry: is there a right to apply a safeguard measure?

 

Based on this analysis of the most relevant context of the phrase ‘cause or threaten to cause’ in Article 2.1, we do not see that phrase as necessarily meaning one or the other, but not both. Rather, that clause could also mean either one or the other, or both in combination. Therefore, for the reasons we have set out, we do not see that it matters — for the purpose of determining whether there is a right to apply a safeguard measure under the Agreement on Safeguards — whether a domestic authority finds that there is ‘serious injury’, ‘threat of serious injury’, or, as the USITC found here, ‘serious injury or threat of serious injury’. In any of those events, the right to apply a safeguard is, in our view, established.”(139)

81.     The Appellate Body in US — Line Pipe also found that a “threat of serious injury” finding sets a lower threshold for the right to apply a safeguard measure than a “serious injury” finding:

“In the sequence of events facing a domestic industry, it is fair to assume that, often, there is a continuous progression of injurious effects eventually rising and culminating in what can be determined to be ‘serious injury’. Serious injury does not generally occur suddenly. Present serious injury is often preceded in time by an injury that threatens clearly and imminently to become serious injury, as we indicated in US — Lamb. Serious injury is, in other words, often the realization of a threat of serious injury. Although, in each case, the investigating authority will come to the conclusion that follows from the investigation carried out in compliance with Article 3 of the Agreement on Safeguards, the precise point where a ‘threat of serious injury’ becomes ‘serious injury’ may sometimes be difficult to discern. But, clearly, ‘serious injury’ is something beyond a ‘threat of serious injury’.

 

In our view, defining ‘threat of serious injury’ separately from ‘serious injury’ serves the purpose of setting a lower threshold for establishing the right to apply a safeguard measure. Our reading of the balance struck in the Agreement on Safeguards leads us to conclude that this was done by the Members in concluding the Agreement so that an importing Member may act sooner to take preventive action when increased imports pose a ‘threat’ of ‘serious injury’ to a domestic industry, but have not yet caused ‘serious injury’. And, since a ‘threat’ of ‘serious injury’ is defined as ‘serious injury’ that is ‘clearly imminent’, it logically follows, to us, that ‘serious injury’ is a condition that is above that lower threshold of a ‘threat’. A ‘serious injury’ is beyond a ‘threat’, and, therefore, is above the threshold of a ‘threat’ that is required to establish a right to apply a safeguard measure.”(140)

82.     In addition, the Appellate Body in US — Line Pipe ruled that Article 5.2(b) is an “exception” to the general rule, and not relevant to the non-discrete determination of injury or threat thereof:

Article 5.2(b) excludes quota modulation in the case of threat of serious injury. It is, in our view, the only provision in the Agreement on Safeguards that establishes a difference in the legal effects of ‘serious injury’ and ‘threat of serious injury’. Under Article 5.2(b), in order for an importing Member to adopt a safeguard measure in the form of a quota to be allocated in a manner departing from the general rule contained in Article 5.2(a), that Member must have determined that there is ‘serious injury’. A Member cannot engage in quota modulations if there is only a ‘threat of serious injury’. This is an exception that must be respected. But we do not think it appropriate to generalize from such a limited exception to justify a general rule. In any event, this exceptional circumstance is not relevant to the line pipe measure. We find nothing in Article 5.2(b), viewed as part of the context of Article 2.1, that would support a finding that, in this case, the USITC acted inconsistently with the Agreement on Safeguards by making a non-discrete determination in this case.”(141)

83.     In conclusion, the Appellate Body in US — Line Pipe also cited the 1947 US — Fur Felt Hats case, in which it noted that the Working Party had “conducted a single analysis based on the presence of serious injury or threat of serious injury, and that it did not consider it necessary to make a discrete determination of serious injury or threat of serious injury”:

“Following the Vienna Convention approach, we have also looked to the GATT acquis and to the relevant negotiating history of the pertinent treaty provisions. We have concluded that our view is reinforced by the jurisprudence under the GATT 1947. In the only relevant GATT 1947 case, Report on the Withdrawal by the United States of a Tariff Concession under Article XIX of the General Agreement on Tariffs and Trade (‘US — Fur Felt Hats’), the Working Party established under the GATT 1947 was required to assess the consistency of a safeguard measure with Article XIX of the GATT 1947. The Working Party concluded that the available data presented supported the view ‘that increased imports had caused or threatened some adverse effect to United States producers.’ We note that the Working Party conducted a single analysis based on the presence of serious injury or threat of serious injury, and that it did not consider it necessary to make a discrete determination of serious injury or of threat of serious injury. The question of a discrete determination apparently was not an issue in that case.”(142)

(i) Relationship with other Articles

84.     The Panel in US — Lamb, after making findings of inconsistency with Article XIX:1(a) of the GATT 1994 and with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards, exercised judicial economy with respect to claims raised under Articles 2.2, 3.1, 5.1, 8, 11 and 12 of the Agreement on Safeguards.(143)

85.     The Panel in Argentina — Footwear (EC) considered that, in light of its findings “concerning the investigation and the definitive measure” (the Panel had found a violation of Articles 2.1, 4.2(a), 4.2(b) and 4.2(c)), it did not find it necessary to make a finding concerning a claim under Article 6.(144)

86.     The Appellate Body in US — Line Pipe ruled that Article 5.2(b) is an “exception” to general rules, and not relevant to the non-discrete determination of injury or threat thereof under Article 2.1. See paragraph 82 above.

(j) Relationship with other WTO Agreements

(i) Article XXIV of the GATT 1994

87.     See paragraphs 6573 above and the material on Article XIX in the Chapter on the GATT 1994.

3. Article 2.2

(a) Scope of application of safeguard measures in the case of regional trade agreements

88.     With respect to the scope of application of safeguard measures in the case of regional trade agreements, see paragraphs 6469 above.

(b) Relationship with other Articles

89.     The Panel in US — Lamb, after making findings of inconsistency with Articles 2.1, 4.1(c) and 4.2(b) of the Agreement on Safeguards (and with Article XIX:1(a) of the GATT 1994), exercised judicial economy with respect to claims raised under Article 2.2 (and Articles 3.1, 5.1, 8, 11 and 12) of the Agreement on Safeguards.(145)

(c) Relationship with other WTO Agreements

90.     The Panel in US — Lamb, after making findings of inconsistency with Article XIX:1(a) of the GATT 1994 (and with Articles 2.1, 4.1(c) and 4.2(b) of the Agreement on Safeguards), exercised judicial economy with respect to claims raised under Article 2.2 (and Articles 3.1, 5.1, 8, 11 and 12) of the Agreement on Safeguards.(146)

 

Footnotes:

1. With respect to Article XIX of GATT 1994 in general and the term “unforeseen developments” in particular, see Section II.B.1 of this Chapter. back to text
2. Appellate Body Report, Korea — Dairy, para. 88. See also Appellate Body Report, Argentina — Footwear, para. 95. back to text
3. (footnote original) Appellate Body Report on Argentina — Footwear, para. 94. back to text
4. Panel Report, US — Lamb, paras. 7.76 and 7.77. back to text
5. Appellate Body Report, US — Lamb, para. 124. back to text
6. See also the Appellate Body’s analysis under Article II of the WTO Agreement (under Article II in the Chapter on the WTO Agreement). back to text
7. The issue of the relationship between GATT Article XIX and the Agreement on Safeguards arose in these disputes because the investigating authority in each case had not examined whether the import trends investigated were the result of “unforeseen developments” within the meaning of Article XIX:1(a) of the GATT 1994. back to text
8. (footnote original) With the exception of special safeguard measures taken pursuant to Article 5 of the Agreement on Agriculture or Article 6 of the Agreement on Textiles and Clothing. back to text
9. Appellate Body Report, Korea — Dairy, paras. 76–77. See also Appellate Body Report, Argentina — Footwear (EC), para. 84. back to text
10. Panel Report, Argentina — Footwear (EC), para. 8.69. back to text
11. Appellate Body Report, Argentina — Footwear (EC), para. 82. back to text
12. (footnote original) We note that the provisions of Article 11.1(a) of the Agreement on Safeguards are significantly different from the provisions of Article 2.4 of the Agreement on the Application of Sanitary and Phytosanitary Measures, which state:
“Sanitary or phytosanitary measures which conform to the relevant provisions of this Agreement shall be presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b).” (emphasis added) back to text
13. Appellate Body Report, Argentina — Footwear (EC), para. 83. back to text
14. Appellate Body Report, Argentina — Footwear (EC), para. 89. back to text
15. Panel Report, US — Lamb, para. 7.11. back to text
16. Appellate Body Report, US — Lamb, para. 70. back to text
17. Panel Report, Argentina — Preserved Peaches, para. 7.12. back to text
18. (footnote original) See for instance the Appellate Body Report in Korea — Dairy at para. 74: “We agree with the statement of the Panel that: It is now well established that the WTO Agreement is a “Single Undertaking” and therefore all WTO obligations are generally cumulative and Members must comply with all of them simultaneously …” and para. 78: “Having found that the provisions of both Article XIX:1 of the GATT 1994 and Article 2.1 of the Agreement on Safeguards apply to any safeguard measure taken under the WTO Agreement”. back to text
19. (footnote original) Appellate Body Reports, Argentina — Footwear (EC), para. 95; Korea — Dairy, para. 85; US — Lamb, para. 71. back to text
20. Panel Reports, US — Steel Safeguards, para. 10.36. back to text
21. Appellate Body Report, US — Line Pipe, para. 84. back to text
22. Appellate Body Report, US — Line Pipe, para. 83. back to text
23. Appellate Body Report, US — Line Pipe, para. 84. back to text
24. Panel Reports, US — Steel Safeguards, paras. 10.15–10.16. back to text
25. Panel Report, Korea — Dairy, para. 7.53. back to text
26. Panel Report, Korea — Dairy, para. 7.86. back to text
27. Panel Report, Argentina — Footwear (EC), paras. 8.279–8.280. See also Panel Report, US — Wheat Gluten, paras. 9.1–9.2 and Panel Report, US — Lamb, para. 8.1. back to text
28. Panel Report, US — Wheat Gluten, para. 9.2. back to text
29. Panel Report, US — Lamb, para. 8.1. back to text
30. Appellate Body Report, US — Lamb, para. 96. back to text
31. Appellate Body Report, US — Lamb, para. 188. back to text
32. (footnote original) We note that the trends in the data on import values generally confirm those on import quantities. back to text
33. Panel Report, Argentina — Footwear (EC), para. 8.152. back to text
34. Panel Report, Argentina — Footwear (EC), para. 8.140. The Appellate Body characterized Article 2.1 as a provision which sets forth the conditions for imposing a safeguard measure. See para. 66 of this Chapter. back to text
35. Panel Report, Argentina — Footwear (EC), para. 8.141. See Appellate Body Report, Argentina — Footwear (EC), para. 144, confirming the Panel’s finding. back to text
36. Panel Report, Argentina — Footwear (EC), paras. 8.156–8.157. See Appellate Body Report, Argentina — Footwear (EC), para. 129, confirming the Panel’s finding. back to text
37. (footnote original) We recognise that Article 4.2(a) makes this reference in the specific context of the causation analysis, which in our view is inseparable from the requirement of imports in “such increased quantities” (emphasis added). Thus, we consider that in the context of both the requirement that imports have increased, and the analysis to determine whether these imports have caused or threaten to cause serious injury, the Agreement requires consideration not just of data for the end-points of an investigation period, but for the entirety of that period. back to text
38. Panel Report, Argentina — Footwear (EC), para. 8.159. See Appellate Body Report in Argentina — Footwear (EC), para. 129, confirming the Panel’s finding. back to text
39. Panel Report, Argentina — Footwear (EC), para. 8.160. back to text
40. Panel Report, Argentina — Footwear (EC), paras. 8.161–8.162. back to text
41. Panel Report, Argentina — Footwear (EC), para. 8.164. back to text
42. (footnote original) The Panel … recognizes that the present tense is being used, which it states “would seem to indicate that, whatever the starting-point of an investigation period, it has to end no later than the very recent past.” (emphasis added) Here, we disagree with the Panel. We believe that the relevant investigation period should not only end in the very recent past, the investigation period should be the recent past. back to text
43. Appellate Body Report, Argentina — Footwear (EC), para. 130. back to text
44. Appellate Body Report, Argentina — Footwear (EC), para. 131. back to text
45. Panel Report, US — Wheat Gluten, para. 8.31. See also para. 8.33. back to text
46. Panel Report, US — Line Pipe, para. 7.204. back to text
47. (footnote original) We observe that an increase in imports before the date of a determination, but not sustained at the date of the determination, could still cause actual serious injury at the time of the determination. back to text
48. Panel Report, US — Line Pipe, para. 7.207. back to text
49. Panel Report, US — Line Pipe, para. 7.193. back to text
50. Panel Report, US — Line Pipe, para. 7.194. back to text
51. Panel Report, US — Line Pipe, paras. 7.196, 7.197 and 7.201. back to text
52. Panel Report, US — Line Pipe, para. 7.192. back to text
53. (footnote original) The fact that the ITC conformed to its previous practice does not necessarily mean that the methodology used, or that such past practice, is in conformity with the Agreement. Nevertheless, it has not been established that the usual ITC practice regarding the period of investigation was not appropriate for the line pipe investigation. back to text
54. Panel Report, US — Line Pipe, para. 7.203. back to text
55. Panel Report, Argentina — Preserved Peaches, para. 7.53. back to text
56. (footnote original) Appellate Body Report in Argentina — Footwear (EC), para. 129. back to text
57. Panel Report, Argentina — Preserved Peaches, paras. 7.54–7.55. back to text
58. Panel Report, Argentina — Preserved Peaches, para. 7.52 back to text
59. Panel Reports, US — Steel Safeguards, para. 10.167. back to text
60. Panel Reports, US — Steel Safeguards, para. 10.168. back to text
61. Panel Reports, US — Steel Safeguards, para. 10.168. back to text
62. Panel Reports, US — Steel Safeguards, para. 10.168. back to text
63. Panel Reports, US — Steel Safeguards, para. 10.171. back to text
64. (footnote original) Panel Report, US — Line Pipe, para. 7.207. back to text
65. (footnote original) Panel Report, US — Line Pipe, para. 7.207. back to text
66. (footnote original) Panel Report, US — Line Pipe, para. 7.207. back to text
67. (footnote original) We do not intend to rule out that an exception could be made, if, despite the deep drop, there are indications that this drop is only temporary and in some sense artificial. See, also, Panel Report, Argentina — Footwear (EC), para. 8.159. back to text
68. (footnote original) Appellate Body Report on Argentina — Footwear (EC), para. 129; and Panel Report on Argentina — Footwear (EC), para. 8.276. back to text
69. Panel Reports, US — Steel Safeguards, paras. 10.162–10.166. back to text
70. (footnote original) Appellate Body Report, Argentina — Footwear (EC), para. 129. back to text
71. Appellate Body Report, US — Steel Safeguards, paras. 354–355. back to text
72. Appellate Body Report, US — Steel Safeguards, para. 374. back to text
73. (footnote original) Appellate Body Report on Argentina — Footwear (EC), para. 129. back to text
74. (footnote original) Appellate Body Report on US — Lamb, para. 138. back to text
75. Appellate Body Report, US — Steel Safeguards, para. 388. back to text
76. (footnote original) We note that a decrease at the end of a period of investigation may, for instance, result from the seasonality of the relevant product, the timing of shipments, or importer concerns about the investigation. As we have said, the text of Article 2.1 does not necessarily prevent, in our view, a finding of “increased imports” in the face of such a decline. back to text
77. Appellate Body Report, US — Steel Safeguards, para. 367. back to text
78. (footnote original) Appellate Body Report, Argentina — Footwear (EC), para. 131. back to text
79. (footnote original) Ibid. back to text
80. (footnote original) United States’ appellant’s submission, para. 107. back to text
81. (footnote original) Ibid. back to text
82. Appellate Body Report, US — Steel Safeguards, para. 346. back to text
83. Panel Report, US — Line Pipe, paras. 7.209–7.210. See also the Panel Report, Argentina — Preserved Peaches, paras 7.54–7.55. back to text
84. Appellate Body Report, US — Steel Safeguards, paras. 338–389. back to text
85. Panel Report, US — Wheat Gluten, paras. 7.206–7.210. back to text
86. Panel Report, Argentina — Footwear (EC), paras. 8.153–8.164. back to text
87. Panel Report, Korea — Dairy, para. 7.52. back to text
88. Panel Report, Argentina — Footwear (EC), para. 8.249. back to text
89. Panel Report, US — Wheat Gluten, para. 8.108. back to text
90. Appellate Body Report, US — Wheat Gluten, para. 78. back to text
91. Panel Report, Korea — Dairy, para. 7.52. back to text
92. Panel Report, Argentina — Footwear (EC), para. 8.249. back to text
93. Panel Report, Argentina — Footwear (EC), para. 8.250. back to text
94. Panel Report, Argentina — Footwear (EC), para. 8.251. back to text
95. Panel Report, US — Wheat Gluten, para. 8.108. back to text
96. (footnote original) Contrary to the explicit references to prices in Article 3 of the Agreement on Implementation of Article VI of GATT 1994 (“AD Agreement”) and Article 15 of the Agreement on Subsidies and Countervailing Measures (“SCM Agreement”). back to text
97. Panel Report, Korea — Dairy, para. 7.51. back to text
98. With respect to the analysis of other relevant factors, see paras. 197–208 of this Chapter. back to text
99. (footnote original) We do not, of course, exclude the possibility that “serious injury” could be caused by the effects of increased imports alone. back to text
100. Appellate Body Report, US — Wheat Gluten, paras. 76–78. back to text
101. Appellate Body Report, US — Steel Safeguards, para. 350. back to text
102. Panel Report, Argentina — Footwear (EC), para. 8.252. back to text
103. Panel Report, US — Wheat Gluten, paras. 8.109–8.110. back to text
104. (footnote original) The Panel agrees with the following comments made by the panel in Korea — Dairy at para. 7.51 in this regard: “Although the prices of the imported products will most often be a relevant factor indicating how the imports do, in fact, cause serious injury to the domestic industry, we note that there is no explicit requirement in Article 2, that the importing Member perform a price analysis of the imported products and the prices of the like or directly competitive products in the market of the importing country.” back to text
105. Panel Reports, US — Steel Safeguards, para. 10.320. back to text
106. Panel Reports, US — Steel Safeguards, para. 10.322. back to text
107. (footnote original) Panel Report, Argentina — Footwear (EC), para. 8.75. back to text
108. (footnote original) Panel Report, Argentina — Footwear (EC), para. 8.102. back to text
109. Appellate Body Report, Argentina — Footwear (EC), paras. 106–108. back to text
110. Appellate Body Report, Argentina — Footwear (EC), paras. 109–110. back to text
111. Appellate Body Report, Argentina — Footwear (EC), para. 111. back to text
112. Appellate Body Report, Argentina — Footwear (EC), paras. 111–113. back to text
113. Appellate Body Report, Argentina — Footwear (EC), para. 114. back to text
114. (footnote original) The United States relies on Article 9.1 of the Agreement on Safeguards in support of its argument that the scope of the serious injury investigation need not correspond exactly to the scope of application of a safeguard measure. Article 9.1 is an exception to the general rules set out in the Agreement on Safeguards that applies only to developing country Members. We do not consider that it is of relevance to this appeal. back to text
115. Appellate Body Report, US — Wheat Gluten, paras. 95–96. back to text
116. Appellate Body Report, US — Wheat Gluten, paras. 97–98. back to text
117. Appellate Body Report, US — Line Pipe, para. 181. back to text
118. Appellate Body Report, US — Line Pipe, para. 187. back to text
119. (footnote original) Panel Report, US — Line Pipe, para. 7.171. back to text
120. Appellate Body Report, US — Line Pipe, paras. 186–187. back to text
121. Appellate Body Report, US — Line Pipe, paras. 194–195. back to text
122. The Panel in US — Line Pipe had interpreted the definition of a FTA in Article XXIV:8 “to mean that Members are authorised, under certain prescribed circumstances, to eliminate ‘duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) … on substantially all the trade’ between them and their free-trade area partners.” The Panel further found that such an authorisation existed “despite the fact that the formation of a free-trade area will necessarily result in more favourable treatment for free-trade area partners than for non-free-trade area partners”. The Panel concluded that the United States were entitled to rely on Article XXIV defense against Korea’s claims of discrimination under Articles I, XIII and XIX (Panel Report, US — Line Pipe, paras. 7.140 and 7.146). However, the Appellate Body declared the Panel’s findings in paragraphs 7.135 to 7.163 (which comprises the issues discussed above) moot and as having no legal effect. Appellate Body Report, US — Line Pipe, para. 199. back to text
123. Appellate Body Report, US — Line Pipe, para. 198. back to text
124. Appellate Body Report, US — Steel Safeguards, para. 450. back to text
125. Panel Reports, US — Steel Safeguards, para. 10.595. back to text
126. (footnote original) Appellate Body Report, US — Line Pipe, para. 181. back to text
127. (footnote original) Appellate Body Report, US — Line Pipe, para. 194. back to text
128. (footnote original) In the view of the Panel, “alone,” in this context means: “to the exclusion of increased imports from other sources (i.e. sources excluded from the measure)”; it does not mean: “to the exclusion of other factors, i.e. non-increased imports factors in the sense of Article 4.2(b), second sentence”. The Appellate Body has clarified that increased imports precisely need not, by themselves, cause serious injury (Appellate Body Report, US — Wheat Gluten, paras. 70 and 79; Appellate Body Report, US — Lamb, para. 170). There is no reason why this latter aspect should be any different in the context of parallelism, where the same test of Articles 2 and 4 is applied, only to a narrower base of imports. See also Appellate Body Report, US — Wheat Gluten, para. 98: “establish explicitly that imports from these same sources, excluding Canada, satisfied the conditions for the application of a safeguard measure”. back to text
129. (footnote original) Appellate Body Report, US — Line Pipe, para. 194; back to text
130. Panel Reports, US — Steel Safeguards, paras. 10.595–10.598. back to text
131. Appellate Body Report, US — Steel Safeguards, para. 439. back to text
132. Appellate Body Report, US — Steel Safeguards, para. 444. back to text
133. Appellate Body Report, US — Steel Safeguards, paras. 450–452. back to text
134. (footnote original) Panel Reports, para. 10.622. back to text
135. Appellate Body Report, US — Steel Safeguards, paras. 466–467. back to text
136. Appellate Body Report, US — Steel Safeguards, para. 472. back to text
137. The issue arose from the USITC injury determination which was in conjunctive, “Line Pipe… is being imported into the United States in such increased quantities as to be a substantial cause of serious injury or the threat of serious injury.” back to text
138. The Panel concluded that the exporting Member could not have it both ways; it needed to find either serious injury or threat. Panel Report, US — Line Pipe, para. 7.264. back to text
139. Appellate Body Report, US — Line Pipe, paras. 170–171. back to text
140. Appellate Body Report, US — Line Pipe, paras. 168–169. back to text
141. Appellate Body Report, US — Line Pipe, para. 173. (footnote omitted) back to text
142. Appellate Body Report, US — Line Pipe, para. 174. back to text
143. Panel Report, US — Lamb, para. 7.280. back to text
144. Panel Report, Argentina — Footwear (EC), para. 8.292. back to text
145. Panel Report, US — Lamb, para. 7.280. back to text
146. Panel Report, US — Lamb, para. 7.280. back to text

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