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General principles back to top
The Agreement on Safeguards (“SG Agreement”)
sets forth the rules for application of safeguard measures pursuant to
Article XIX of GATT 1994. Safeguard measures are defined as “emergency"
actions with respect to increased imports of particular products, where
such imports have caused or threaten to cause serious injury to the
importing Member's domestic industry (Article 2). Such measures, which in
broad terms take the form of suspension of concessions or obligations, can
consist of quantitative import restrictions or of duty increases to higher
than bound rates. They are one of three types of contingent trade
protection measures, along with anti-dumping and countervailing measures,
available to WTO Members.
The guiding principles of the Agreement with respect to safeguard measures
are that such measures must be temporary; that they may be imposed only
when imports are found to cause or threaten serious injury to a competing
domestic industry; that they (generally) be applied on a non-selective
(i.e. most-favoured-nation, or “MFN”) basis; that they be progressively
liberalized while in effect; and that the Member imposing them (generally)
must pay compensation to the Members whose trade is affected. Thus,
safeguard measures, unlike anti-dumping and countervailing measures, do
not require a finding of an “unfair” practice, (generally) must be applied
on an MFN basis (See: Special and Differential Treatment (1),
and
(generally) must be “paid for” by the Member applying them (See:
Application of definitive safeguard measures.)
Historical background back to top Under GATT 1947, safeguards were regulated only
by Article XIX, and it was the Uruguay Round that created the SG
Agreement, which adds clarity and introduces certain changes. The SG
Agreement was negotiated in large part because GATT Contracting Parties
had been increasingly applying a variety of so-called “grey area” measures
(bilateral voluntary export restraints, orderly marketing agreements, and
similar measures) to limit imports of certain products. These measures
were not imposed pursuant to Article XIX, and thus were not subject to
multilateral discipline through the GATT, and the legality of such
measures under the GATT was doubtful. The Agreement now clearly prohibits
such measures, and has specific provisions for eliminating those that were
in place at the time the WTO Agreement entered into force.
Aims of Agreement back to top
In its own words, the SG Agreement, which explicitly applies equally to
all Members, aims to: (i) clarify and reinforce GATT disciplines,
particularly those of Article XIX; (ii) re-establish multilateral control
over safeguards and eliminate measures that escape such control; and (iii) encourage structural adjustment on the part of the industries adversely
affected by increased imports, thereby enhancing competition in
international markets.
Structure back to top
The Agreement consists of fourteen articles and one annex. In general
terms, it has four main components: (1) general provisions (Articles 1 and
2); (2) rules governing Members' application of new safeguard measures
(i.e., those applied after entry into force of WTO Agreement (Articles
3-9)); (3) rules pertaining to pre-existing measures that were applied
before the WTO entry into force (Articles 10 and 11); and (4) multilateral
obligations and institutions regarding application of safeguard measures
(Articles 12-14).
Coverage back to top
Article 1 establishes that the SG Agreement is the vehicle
through which measures may be applied pursuant to Article XIX of GATT
1994. That is, any measure for which the coverage of Article XIX (which
allows suspension of GATT concessions and obligations under the defined
"emergency" circumstances) is invoked, must be taken in accordance with
the provisions of the SG Agreement. The Agreement explicitly does not
apply to measures taken pursuant to other provisions of GATT 1994, to
other Annex 1A Multilateral Trade Agreements, or to protocols and
agreements or arrangements concluded within the framework of GATT 1994
(Article 11.1 (c)).
Conditions for application of safeguard measures back to top
Article 2 sets forth the conditions under which safeguard measures may be
applied. These conditions are: (i) increased imports and (ii) serious
injury or threat thereof caused by such increased imports It also contains
the requirement that such measures be applied on an MFN basis.
Increased quantity of imports back to top
The determination of increased quantity of imports that a Member must make
before it may apply a safeguard measure can be of either an absolute
increase or an increase relative to domestic production.
Injury: Two possibilities back to top Serious injury
The Agreement defines “serious injury” as a significant overall impairment
in the position of a domestic industry. In determining whether serious
injury is present, investigating authorities are to evaluate all relevant
factors having a bearing on the condition of the industry. Factors that
must be analyzed are the absolute and relative rate and amount of increase
in imports, the market share taken by the increased imports, as well as
changes in level of sales, production, productivity, capacity,
utilization, profits and losses, and employment of the domestic industry.
Threat of serious injury
“Threat of serious injury” is threat that is clearly imminent as shown by
facts, and not based on mere allegation, conjecture or remote possibility.
If present serious injury is not found, a safeguard measure nevertheless
can be applied if a threat of serious injury is found.
Domestic industry back to top
A “domestic industry” is defined as the producers as a whole of the
like or directly competitive products operating within the territory of a
Member, or producers who collectively account for a major proportion of
the total domestic production of those products. This definition allows a
broader consideration of effects than in anti-dumping or countervail
cases.
Causation back to top
A determination of serious injury cannot be made unless there is objective
evidence of the existence of a causal link between increased imports of
the product concerned and serious injury. Further, when factors other than
increased imports are causing injury to the domestic industry at the same
time, such injury must not be attributed to increased imports. The
criterion of a causal link falls short, however, of proposals made during
the Uruguay Round that would have required imports to be the “principal
cause” of injury.
Need for investigation back to top
New safeguard measures may be applied only following an investigation
conducted by competent authorities in accordance with established
procedures. Under Article XIX of GATT 1947, there was no explicit
requirement for an investigation.
Procedural transparency back to top
Investigation procedures must be established and published prior to being
used. Although the Agreement does not contain detailed procedural
requirements, it does require reasonable public notice of the
investigation. The relevant authorities are obligated to publish a
detailed analysis of the case in the form of a report presenting and
explaining their findings on all pertinent issues, including a
demonstration of the relevance of the factors examined.
Participation by interested parties back to top
Investigating authorities are required to hold public hearings or provide
other appropriate means for interested parties (importer, exporters,
producers, etc.) to present their views and to respond to the views of
others with respect to the matters being investigated. Among the topics on
which parties' views are required to be sought is whether or not a
safeguard measure would be in the public interest.
Confidential information back to top
The Agreement also contains specific rules for the handling of
confidential information in the context of an investigation. In general,
information for which confidential treatment is requested must be
accompanied by a public summary thereof, or an explanation why no such
summary is possible. If confidentiality is found not to be warranted, and
the party submitting the information is unwilling to summarize it or
authorize its disclosure, the authorities may disregard the information,
unless through other sources it is demonstrated that the information is
correct.
Definitive safeguard measures
Tariff measures back to top
Other than the general requirement that safeguard measures be applied only
to the extent necessary to remedy or prevent serious injury and to
facilitate adjustment, the Agreement provides no guidance as to how the
level of a safeguard measure in the form of an increase in the tariff
above the bound rate should be set.
Level of quotas and quota modulation back to top
If the measure takes the form of a quantitative restriction, the level
must not be below the actual import level of the most recent three
representative years, unless there is clear justification for setting a
different, lower, level. Rules also govern how quota shares are to be
allocated among supplier countries based on past market shares. These
levels may be departed from (i.e. the quota levels may be modulated) if (i)
the percentage increase in imports from certain Members has been
disproportionate to the overall increase in imports, (ii) the reasons for
the departure from the general rule are justified, and (iii) the
conditions of such a departure are equitable to all suppliers of the
product concerned.
Duration and review of measures back to top
The maximum duration of any safeguard measure is four years, unless it is
extended consistent with the Agreement's provisions. In particular, a
measure may be extended only if it is found, through a new investigation,
that its continuation is necessary to prevent or remedy serious injury,
and only if evidence shows that the industry is adjusting. The initial
period of application plus any extension generally cannot exceed eight
years (See: special and differential treatment). In addition, safeguard
measures in place for longer than one year must be progressively
liberalized at regular intervals during the period of application. If a
measure is extended beyond the initial period, and it should continue to
be liberalized. Any measure of more than three years duration must be
reviewed at mid-term. If appropriate, based on that review, the Member
applying the measure must withdraw it or increase the pace of its
liberalization.
Level of concessions and other obligations back to top General rule
Members applying safeguard measures generally must “pay” for them
through payment of compensation. A Member applying a safeguard measure
must maintain a substantially equivalent level of concessions and other
obligations with respect to affected exporting Members. To do so, any
adequate means of trade compensation may be agreed among the affected
Members through consultation. Absent such agreement on compensation within
30 days, the affected exporting Members individually may suspend
substantially equivalent concessions and other obligations (i.e.,
“retaliate”) unless the Council for Trade in Goods disapproves.
Partial exception
The right to retaliate, if compensation is not agreed on, cannot be
exercised during the first three years of application of a safeguard
measure if the measure is taken based on an absolute increase in imports,
and otherwise conforms to the provisions of the Agreement.
Reapplication of measures to a product back to top
Special rules limit re-application of safeguard measures to a given
product. Ordinarily, a safeguard may not be applied again to a product
until a period equal to the duration of the original safeguard measure has
elapsed provided that such period of non-application must generally be at
least two years. Nonetheless, if a new safeguard measure has a duration of
180 days or less, it may be applied so long as one year has elapsed since
the date the original safeguard measure was introduced, and so long as no
more than two safeguard measures have been applied on the product during
the five years immediately preceding the date of introduction of the new
safeguard measure ( See special and Differential
Treatment.)
Provisional safeguard measures
Article 6 back to top
Under critical circumstances, defined as circumstances where delay would
cause damage that would be difficult to repair, provisional measures may
be imposed, on the basis of a preliminary determination that there is
clear evidence that increased imports have caused or threaten to cause
serious injury. Such measures should be in the form of refundable tariff
increases, and may be kept in place for a maximum of 200 days. The period
of application of any provisional measure must be included in the total
period of application of a safeguard measure.
Special and differential treatment
Introduction back to top
Developing country Members receive special and differential treatment with
respect to other Members' safeguard measures, in the form of a de minimis
import volume exemption. As users of safeguards, developing country
Members receive special and differential treatment with respect to
applying their own such measures, with regard to permitted duration of
extensions, and with respect to re-application of measures.
De minimis import exemption back to top
A safeguard measure shall not be applied to low volume from developing
country Members. That is, where imports from a single developing country
Member account for no more than 3 per cent of the total imports of the
product concerned, and provided developing country Members below this
threshold on an individual basis do not collectively account for more than
9 per cent of those imports, such imports shall be excluded from the
measure.
Provisions affecting developing country Members as users of safeguard
measures back to top
Duration of extensions of measures
In applying safeguard measures, developing country Members may extend the
application of a safeguard for an extra two years beyond that normally
permitted (i.e., to a total of six years, meaning that developing
countries may apply a measure for a total of 10 years, as compared with
the usual eight.
Re-application of measures
The rules for re-applying safeguard measures with respect to a given
product are relaxed for developing country Members. (The minimum period of
non-application for developing countries in most cases is one-half the
duration of the original measure, so long as this period is at least two
years).
Pre-existing measures
Article XIX measures back to top
Article XIX measures that were in effect at the time of the WTO
Agreement's entry into force are to be terminated no later than eight
years after they were first applied, or five years after the entry into
force of the WTO Agreement, whichever comes later (Article 10).
“Grey area” measures back to top “Grey area” measures that were in effect at the time of the WTO
Agreement's entry into force are to be brought into conformity with the SG
Agreement or phased out - pursuant to timetables to have been presented to
the SG Committee by 30 June 1995 —within four years of the WTO's entry
into force (i.e., by 31 December 1998) (Article 11). Although all Members
had the right to an exception with respect to a single specific measure,
whereby they would have had until 31 December 1999 for the required
phase-out, no Member other than the EC (whose single exception is
contained in the Annex to the Agreement itself) exercised this option.
Surveillance and notifications
Introduction back to top
Multilateral discipline on the use of safeguard measures is established
through notification requirements, as well as through the creation of a
Committee on Safeguards charged with reviewing safeguard notifications,
among other duties.
Committee on Safeguards back to top
The Committee's role generally is to monitor (and report and make
recommendations to the Council for Trade in Goods on) the implementation
and operation of the Agreement, to review Members' notifications, and to
make findings as to Members' compliance with respect to the procedural
provisions of the Agreement for the application of safeguard measures, to
assist with consultations, to monitor the phase-out of pre-existing
measures, to review proposed retaliation, and to perform any other
functions determined by the Council for Trade in Goods.
Extensive notification requirements back to top
Notification of legislative framework
Members are required to notify their own laws, regulations and
administrative procedures, and any changes thereto, to the Committee.
Notification of investigations and application of measures
Members are required to notify the Committee of initiations of
investigations into the existence of serious injury or threat and the
reasons therefore; findings of serious injury or threat caused by
increased imports; and decisions to apply or extend safeguard measures.
Such notifications must contain the relevant information on which the
decisions are based. Members are not obliged to disclose confidential
information in their notifications.
Members are required, before applying or extending a safeguard measure, to
provide an adequate opportunity for consultations with Members who have
substantial interests as exporters of the product. The aims of such
consultations shall include review of information as to the facts of the
situation, the exchange of views on the proposed measures, and the
reaching of understandings as to maintaining substantially equivalent
levels of concessions and obligations. The results such consultations must
be notified.
Provisional measures must be notified before being applied, and
consultations must be initiated immediately after such measures are
applied.
The results of consultations, of mid-term reviews of measures taken, any
form of concession, and/or proposed suspension of concessions, must be
notified immediately to the Council for Trade in Goods through the
Safeguards Committee by the Member concerned.
Notification of pre-existing measures
The Agreement requires that Members notify their pre-existing measures,
both Article XIX and grey-area mesures, that were in force as of the date
of entry into force of the WTO Agreement. With respect to grey-area
mesures, Members also are required to have notified a timetable according
to which such measures are to be phased out or brought into conformity
with the Agreement within the allowed transition period.
Counternotification
Members also are entitled to counternotify other Members' relevant laws
and regulations, actions, or measures in force.
Dispute settlement back to top
Consultations and disputes arising under the Agreement are to be conducted
in accordance with Articles XXII and XXIII of GATT 1994 as elaborated by
the Dispute Settlement Understanding.
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