Agreement on Safeguards
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.
Agreement on Safeguards
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. 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.
Major 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 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 must pay compensation to the Members whose trade is affected.
The SG Agreement was negotiated in large part because GATT Contracting Parties increasingly had been 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.
In its own words, the SG Agreement, which explicitly applies equally to all Members, aims to: (1) clarify and reinforce GATT disciplines, particularly those of Article XIX; (2) re-establish multilateral control over safeguards and eliminate measures that escape such control; and (3) encourage structural adjustment on the part of industries adversely affected by increased imports, thereby enhancing competition in international markets.
Structure of the Agreement
The Agreement consists of 14 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's entry into force (Articles 10 and 11); and (4) multilateral surveillance and institutions (Articles 12-14).
Coverage of the Agreement
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. (Art. 11.1(c))
Conditions for Application of Safeguard Measures
Article 2 sets forth the conditions (i.e., serious injury or threat thereof caused by increased imports) under which safeguard measures may be applied. It also contains the requirement that such measures be applied on an MFN basis.
Rules governing new safeguard measures (applied after entry into force of WTO Agreement)
New safeguard measures may be applied only following an investigation conducted by competent authorities pursuant to previously published procedures. Although the Agreement does not contain detailed procedural requirements, it does require reasonable public notice of the investigation, and that interested parties (importers, exporters, producers, etc.) be given the opportunity to present their views and to respond to the views of others. Among the topics on which views are to be sought is whether or not a safeguard measure would be in the public interest. The relevant authorities are obligated to publish a report presenting and explaining their findings on all pertinent issues, including a demonstration of the relevance of the factors examined. The Agreement also contains specific rules for the handling of confidential information in the context of an investigation.
Factual Basis for Determination of Serious Injury or Threat Thereof
The Agreement defines “serious injury” as significant impairment in the position of a domestic industry. “Threat of serious injury” is threat that is clearly imminent as shown by facts, and not based on mere allegation, conjecture or remote possibility. 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.
In determining whether serious injury or threat is present, investigating authorities are to evaluate all relevant factors having a bearing on the condition of the industry, and are not to attribute to imports injury caused by other factors. 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, and changes in level of sales, production, productivity, capacity utilization, profits and losses, and employment of the domestic industry.
Application of Measures
Safeguard measures may only be applied to the extent necessary to remedy or prevent serious injury and to facilitate adjustment, within certain limits. 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 doing otherwise. Rules also apply as to how quota shares are to be allocated among supplier countries, as to compensation to Members whose trade is affected, and as to consultations with affected Members.
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 its continuation is found to be 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 normally cannot exceed eight years. 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 of application, it can be no more restrictive during this period than it was at the end of 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.
Under critical circumstances, defined as circumstances where delay would cause damage that would be difficult to repair, provisional measures may be imposed. Such measures may be in the form of tariff increases only, and may be kept in place for a maximum of 200 days. In addition, the period of application of any provisional measure must be included in the total period of application of a safeguard measure.
Repeated application of safeguards with respect to a given product is limited by the Agreement. Ordinarily, a safeguard may not be applied again to a product until a period equal to the duration of the original safeguard has elapsed, so long as the period of non-application is 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.
Concessions and Other Obligations
In applying a safeguard measure, the Member 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 with the affected Members. Absent such agreement, the affected exporting Members individually may suspend substantially equivalent concessions and other obligations. This latter right 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.
Developing Country Members
Developing country Members receive special and differential treatment with respect to other Members' safeguard measures, and with respect to applying their own such measures. A safeguard measure shall not be applied to low volume imports from developing country Members, that is, where a single developing country Member's products account for no more than 3 percent of the total subject imports, as long as products originating in those low-import-share developing country Members collectively do not exceed 9 percent of imports.
In applying safeguard measures, developing country Members may extend the application of a safeguard measure for an extra two years beyond that normally permitted. In addition, the rules for re-applying safeguard measures with respect to a given product are relaxed for developing country Members.
Rules governing pre-existing measures (applied before the WTO's entry into force)
Pre-existing measures imposed pursuant to GATT Article XIX 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.
Pre-existing “grey area” measures that were in effect at the time of the WTO'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 December 31, 1998). Although all Members had the right to an exception with respect to a single specific measure, whereby they would have had until December 31, 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.
Multilateral surveillance and institutions
Multilateral oversight of the use of safeguard measures is conducted through notification requirements, as well as through the creation of a Committee on Safeguards charged with reviewing safeguard notifications, among other duties.
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 are required to contain the relevant information on which the decisions are based.
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, exchanging views on the proposed measures, and reaching an understanding as to maintaining a substantially equivalent level of concessions and obligations.
Provisional measures must be notified before being applied, and consultations must be initiated immediately after such measures are applied.
The results of consultations, mid-term reviews of measures taken, compensation, and/or suspension of concessions, must be notified immediately to the Council for Trade in Goods through the Safeguards Committee by the Member concerned.
Members are obligated to notify their own laws, regulations and administrative procedures to the Committee, as well as their own pre-existing Article XIX and grey area measures. Members also are entitled to counternotify other Members' relevant laws and regulations, actions, or measures in force. Members are not obligated to disclose confidential information in their notifications.
The Committee's role generally is to monitor (and report 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, and to review proposed retaliation.
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.