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General principles   

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.