The Puzzle of WTO Safeguards and RTAs Joost Pauwelyn Duke University, Law School WTO Seminar on RTAs...

The Puzzle of WTO Safeguards and RTAs

Joost Pauwelyn

Duke University, Law School

WTO Seminar on RTAs and the WTOGeneva, 14 November 2003

WTO Seminar on RTAs Geneva, 14 November 2003

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What is a Safeguard ?

Emergency action in case a product is imported

“in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers”

(GATT Article XIX)


3

Safeguards in RTAs ?

The RTA (EU) imposes a WTO safeguard

One regional partner (USA) imposes a WTO safeguard

The RTA has its own internal safeguard mechanism (SADC)


4

US Safeguard on Steel

CAN the US exclude Mexico & Canada ?

(MNF nature of safeguards)

MUST the US exclude Mexico & Canada ? (RTA must liberalize internal trade)

CHOICE


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Proposed Solution:

Injury determination must exclude regional imports (in most cases)

Safeguard measure itself can exclude regional imports (whether it must do so will depend on the RTA itself)


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Injury Determination must exclude Mexico & Canada

GATT Article XIX:

Increased imports causing injury must be

“as a result of … the effect of the obligations incurred … under this Agreement [GATT], including tariff

concessions”


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Based on GATT Art. XIX the injury determination cannot take account of surges in regional imports since they

are caused by the RTA (not GATT) and it is the RTA (not GATT) that prevents a

tariff hike in response

Injury Determination must exclude Mexico & Canada

(cont. …)


8

End of support

Strike

Regional Imports

Other Imports

TOTAL INJURY SERIOUS INJURY

Injury Determination based solely on third party imports


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The Safeguard Itself

SG Article 2.2 (MFN):

“safeguard measures shall be applied to a product being imported irrespective of

its source”

USA & Argentina included all imports for injury determination & excluded regional imports from eventual safeguard


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Can Safeguard Exclude Regional Imports?

Appellate Body

Parallelism requirement

Cases so far violate parallelism

ProposalSafeguard is clearly discriminatoryQuestion is whether GATT Article XXIV justifies itTackle inclusion of all imports in injury determination under GATT Article XIX


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Problems with Parallelism

INJURY DETERMINATION SAFEGUARD ITSELF

All imports Exclude Canada & Mexico

Only third parties Only third parties ?? (contra MFN)

Only China Only China ??

(contra MFN)


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GATT XXIV and Safeguards

Can safeguards be imposed within a RTA?

RTA must liberalize internal trade

Can GATT XXIV justify safeguards that exclude regional imports?

MNF nature of safeguards


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GATT XXIV permits intra-regional safeguards

Duties and regulations must only be “eliminated with respect to substantially all the trade” (GATT XXVI:8)List of permitted restrictions (XI, XII, XIII, XIV and XX) is not exhaustiveIntra-regional safeguards (be it under WTO or RTA itself) are consistent with WTO rules


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Can GATT XXIV justify a violation of the Safeguards

Agreement?

Is GATT XXIV available as a defense under the Safeguard Agreement: YES

What conditions must be met for GATT XXIV to justify a selective safeguard?


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Appellate Body criteria(Turkey – Textiles)

SG exclusion must be “introduced upon the formation of” the RTA

SG exclusion must be necessary to form RTA consistent with GATT XXIV

SG exclusion is after RTA formation

SG exclusion is not necessary to have RTA conform XXIV (flexibility permits regional SG)


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The AB’s Timing Criterion is Flawed

GATT provisions “shall not prevent … the formation of a customs union or of a free-

trade area” (XXIV:5, chapeau)

No reference to timing or “measures introduced upon the formation of”a RTA

Absurd: if perfect RTA after its conclusion, violation would remain


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The AB’s Necessity Criterion is Flawed

“the provisions in this Agreement [GATT] shall not prevent … the formation of a customs union or free-trade area … Provided that …” (XXIV:5,

chapeau)

No reference to “measures necessary for the formation of” a RTAContrast with XX(b): “nothing in [GATT] shall be construed to prevent … measures … necessary to protect human … health”Absurd: if perfect already valid RTA then it is not necessary


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An Alternative Proposal

AGGREGATE TESTS

Economic test

XXIV:5

Definitional test

XXIV:8

INDIVIDUAL TESTS

Measure must be part of “the formation of” a RTA

Part of formation to be interpreted with reference to other provisions


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Is Excluding Regional Imports “part of” the formation of a

CU/FTA?Removing intra-regional restrictions is implied in the definitional test (XXIV:8)

Safeguard on third parties is not based on XXIV but because of import surge from those third parties (unlike Turkey - Textiles)

Check objective of “facilitating trade … and not to raise barriers” with third parties (XXIV:4)


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In Summary

Exclude regional imports from the injury determination (less WTO safeguards)Parallelism requirement is an unnecessary complicationGATT XXIV does not prohibit intra-regional safeguardsUnder current AB criteria, GATT XXIV cannot justify safeguard excluding regional importsAB criteria are flawed; GATT XXIV can justify a safeguard on third parties only

The Puzzle of WTO Safeguards and RTAs Joost Pauwelyn Duke University, Law School WTO Seminar on RTAs...

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