On the 3rd of September 2019, the WTO informed its members and other interested parties about Jordan’s safeguard investigation on Potato Chips.[1] Jordan, in pursuance of Article. (‘Art’)2 of the Agreement on Safeguards (‘AoS’), decided to conduct a safeguard investigation on Potato Chips and Potato preserved in any manner other than by acetic acid or vinegar.[2] This also includes the freezing of potatoes. Under Art.12.1(A) of the AoS, members of the WTO have an obligation to inform the safeguard committee if the member is investigating a measure posing a serious injury or threat, reasons regarding the same should also be provided to the safeguards committee.[3]
A safeguard measure is anything that alters a General Agreement on Tariffs and Trade (‘GATT’) obligation of one party in order to protect the nation’s economy from the actions of another party which may threatens or causes serious injury to implementing party’s economy.[4] As per Art. 7 of the AoS, a safeguard measure can be implemented for a duration of four to eight years, during which time the measure which is disputed must be resolved.[5] In the case the dispute is not resolved the duration of the safeguard measure can be extended as per Art. 7(2) of the AoS.[6]
Safeguard measures are available to any member of the WTO under Art.19 of the General Agreement on Tariffs and Trade (‘GATT’). [7] The AoS aims to regulate the use of these Safeguard measures by providing for certain conditions that are enshrined under Art. 2 of the AoS. Safeguard measures can be applied only after an investigation is conducted into the measure that poses a serious injury or threat.[8] Reading both Art. 19 of the GATT and Art.2 of the AoS, it can be concluded that once the threatening measure is assessed, and its impacts on the economy determined, the investigating member can take actions to mitigate such impact. Art.2 of the AoS also grants the investigating nation power to impose upon any infringing product safeguard measures disregarding its source of origin.[9]
In the present investigation, questions were raised regarding evidence and reason for conducting the investigation. The delegation of Jordan stated that the investigation was conducted as a result of a petition from their domestic industry which claimed that the product has caused serious injury, by affecting not just the domestic industry. It also states that the product is affecting competitive products from other nations .[10] For the application of these Articles from different agreements, it is important that we read both of these sections in a harmonized fashion. The WTO dispute of Argentina-Footwear (EC) has clarified the Appellate Body’s (‘AB’) position with regard to this issue.[11] The AB in Argentina-Footwear (EC) held that a violation of a GATT or an AoS provision does not necessarily occur if either of these Article’s specific conditions are violated.[12] In short, one of these articles cannot be ‘substituted’ for the other. The right procedure for interpreting the two provisions is to cumulatively use the conditions of both provisions to determine whether a violation exists or not.[13]
One way of how a cumulative interpretation helps ease a potentially threatening measure is to weigh in its merits and demerits.[14] However, similar both Art.2.1 of the AoS and Art.19 of the GATT appears to be, analysis of measures can lead to scenarios where conditions of both agreements conflict.[15] One Agreement may find the measure violative to a higher degree than the other. Therefore, there exists a question of whether the higher threshold or, the lower threshold should be considered when a remedy is provided to the aggrieved party. In such a case a dilemma arises as to what relief is to be granted. In my opinion this dilemma can differ on a case to case basis – therefore, the solution must be on a case to case basis. It is possible that the lower threshold and the higher threshold when analyzed cumulatively, depending on the situation, might mitigate or aggravate the type of remedy provided.
A more pressing issue at hand is not just a potential violation of an Agreement but how countries could misuse its powers under Art.19 of the GATT and Art.2.1 of the AoS, to impose safeguard measures arbitrarily creating problems for one party.[16] Fortunately, Art.3 of the AoS imposes an instruction on the member to investigate to ensure that there is a determination of an unfair trading measure before implementing a safeguard measure.[17] These investigations are known as safeguard investigations, and this is the phase that Jordan is presently navigating through.
Two key aspects of Art.3 of the AoS, which is fundamental to ensure that the safeguard measures are not misused are: requirements of a valid investigation and the duty to give a public notice. Any activity undertaken by the domestic authority cannot be called an investigation under the AoS. There are specific conditions that must be satisfied for an activity to be called an investigation. These conditions were laid down by the AB in US-Gluten.[18] The AB in that dispute held that there were certain conditions for an investigation. By simplifying the judgement of the appellate body in that case, five conditions are required to constitute a valid investigation:[19]
The investigation should be carried out by the competent authorities and not the interested parties.
All relevant factors under 4.2(a) of the AoS should be investigated upon.
Other factors relevant to the domestic industry should be investigated upon provided its essence falls under 4.2(a) of the AoS.
The investigation should include all the steps mentioned under 3.1 of the AoS and further steps if necessary, but the original steps are mandatory.
If the circumstance deems it necessary, the investigating authorities should take further steps to ensure that all the relevant factors have been investigated upon.
These conditions, although not adopted in the AoS, act as guidelines while carrying out an investigation. Their primary purpose is to ensure that the investigation conducted provides accurate data so that the investigating country’s government can resolve the issue internally. Since a safeguard measure is a solution to restore the balance of the domestic market, it is more of a counter measure rather than a dispute between two countries. If the issue is still unresolved, it could, at some point develop into a trade dispute.
One of the reasons to ensure that the data is accurate is to make the government conduct the investigation instead of the interested parties.[20] If the data is accurate and the measures adopted are fair, then the measures would be satisfactory to both the importing nation and exporting nation, and the matter will cease to be a dispute. This is, however, to a large extent, a utopian notion. The remaining four conditions laid down above are vital boxes that the investigating authority must check when conducting the investigation to see whether there are any fundamental factors that are out of order. These conditions also impose an obligation on the investigators to ensure that steps are taken to investigate nation specific concerns so that indigenous factors of concern are not ignored.
The other fundamental requirement before conducting an investigation is the process of issuing a public notice. Art.12.1(a) of the AoS clearly states the nation shall inform the WTO if it initiates a procedure to carry out an assessment investigation for implementing safeguards in scenarios where a product is causing serious threat or harm.[21] The idea behind providing a general notice is to get a thorough understanding of the issue under consideration. This was stated by the Panel in Ukraine- Passenger Cars, the Panel in the dispute stated that by issuing notices to other nations at large, other parties to the WTO might be able to strengthen or weaken the claim of the party conducting the investigation.[22] This is done when other interested parties bring evidence that aggravate or mitigate the claims of the investigating party.[23] This provides a perspective to the Panel that adjudges the dispute as to whether the claims are legitimate or frivolous.
Funnily enough, after analyzing the conditions laid down by the WTO with respect to safeguard investigations, it can be concluded that the WTO does not trust its member countries and has thus imposed safeguards on the safeguard agreement. In reality, however, these conditions play a vital role in the investigation and implementation of safeguard measures. In my opinion these conditions systematically disincentivize parties from bringing in frivolous claims. The conditions laid down for a valid investigation ensure that the investigation procedures are flexible yet rigid. One such example is that it incorporates the investigating body with the power to investigate the local concerns and requirements, while not actually transferring the power to investigate the issue to the domestic industry of the nation.[24]
The other condition, i.e., the issuance of public notice ensures that other countries have an active part to play in any potential dispute that can arise. One of the finer and peculiar aspects of the WTO dispute settlement system is that it lets other parties involve themselves in disputes that they are not concerned with in the first place. In my opinion this essentially means that if a country has been involved in a dispute, other countries can come to its aid (in the case that it has done no wrong) or can hinder its claim (in the case it has done wrong). Either ways whatever the outcome the Panel or AB can plug existing holes in the system. This means that an increase in the number of disputes can make the WTO Agreements more watertight. This means that every case affects each member country of the WTO.
In the present case, these conditions to the Safeguard Investigation also arose as the judgment of Panels and Appellate Bodies of various disputes. Even after conditions, parties still circumnavigate the conditions of the agreements. However, to a large extent, these conditions get the job done. The importance of Safeguard measures is paramount to the protection of a country’s economy. The abuse of the measure is a malicious activity issue that plagues the system. As more and more loose ends get tied up, it is vital that we understand that everything related to a safeguard begins from the investigation. This includes the origin point of the potential measures and the origin of the safeguards on safeguards. If the investigation is lady justice, then the safeguard is the blindfold.
This article has been authored by Jacob Abraham, Second Year, National University of Juridical Sciences, Kolkata.
[1] Jordan- Safeguard Investigation on Potato Chips, Doc No. G/SG/N/6/JOR/19; Jordan launches safeguard investigation on potato chips, WTO.org, available at: https://www.wto.org/english/news_e/news19_e/safe_jor_04sep19_e.htm, (Last visited on: 9th December, 2019).
[2] Jordan- Safeguard Investigation on Potato Chips, Doc No. G/SG/N/6/JOR/19.
[3] Art.12.1(A), Agreement on Safeguards, Uruguay Round Agreements, available at: https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm, (Last visited on: 9th December, 2019).
[4] Panel Report, Indonesia – Iron or Steel Products, paras. 7.14-7.15.
[5] Art.7, Agreement on Safeguards, Uruguay Round Agreements, available at: https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm, (Last visited on: 9th December, 2019).
[6] Id.
[7] Art.19, General Agreement on Tariffs and Trade, available at: https://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm#art19, (Last visited on: 9th December, 2019).
[8] Art.2(1), Agreement on Safeguards, Uruguay Round Agreements, available at: https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm, (Last visited on: 9th December, 2019).
[9] Art.2(2), Agreement on Safeguards, Uruguay Round Agreements, available at: https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm, (Last visited on: 9th December, 2019).
[10] Jordan- Safeguard Investigation on Potato Chips, Doc No. G/SG/N/6/JOR/19.
[11] Appellate Body Report, Argentina – Footwear (EC), para. 89.
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] Appellate Body Report, US – Gasoline, p. 23.
[17] Art.3, Agreement on Safeguards, Uruguay Round Agreements, available at: https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm, (Last visited on: 9th December, 2019).
[18] Appellate Body Report, US – Wheat Gluten, paras. 53-54.
[19] Id.
[20] Appellate Body Report, US – Wheat Gluten, para. 55.
[21] Art.12.1(A), Agreement on Safeguards, Uruguay Round Agreements, available at: https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm, (Last visited on: 9th December, 2019).
[22] Panel Report, Ukraine – Passenger Cars, paras. 7.409-7.410.
[23] Id.
[24] Supra, Note.18
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