The Agreement on Safeguards

  • April 27, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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The Agreement on Safeguards

Subject: Economy

Section: External Sector

Context:

India, together with South Korea, China, Japan, Switzerland, Brazil and Turkey, has called for withdrawal of safeguard duties on steel imports imposed by the EU arguing that it was no longer appropriate since the bloc’s imports had already declined.

Concept:

The EU’s safeguard duties- tariff rate quotas (TRQs) on steel imports beyond which the items attract additional import duties of 25 per cent, were introduced in 2018 and extended last year till June 2024,in reaction to the US decision to impose additional unilateral duties on steel, citing security concerns, from India, South Korea, Japan, China, Russia and Turkey.

The EU’s logic was that the TRQs would help avoid diversion of exports from the US to the EU market.

The Agreement on Safeguards (“SG Agreement”) sets forth the rules for application of safeguard measures in the 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. It is one of three types of contingent trade protection measures, along with anti-dumping and countervailing measures, available to WTO Members.

Criteria:

  • such measures must be temporary;
  • they may be imposed only when imports are found to cause or threaten serious injury to a competing domestic industry;
  • they be applied on a non-selective (i.e., most-favoured-nation, or “MFN”, basis);
  • they be progressively liberalized while in effect;
  • the Member imposing them 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.

Components:

It has four main components:

  • general provisions (Articles 1 and  2)
  • rules governing Members’ application of new safeguard measures (i.e., those applied after entry into force of WTO Agreement (Articles  3-9))
  • rules pertaining to pre-existing measures that were applied before the WTO entry into force (Articles 10 and 11)
  • multilateral obligations and institutions regarding application of safeguard measures (Articles 12-14)

A safeguard measures may be applied when:

  • there are increased imports – the increased quantity of imports may be either an absolute increase or an increase relative to domestic production.
  • There is serious injury or a threat of serious injury
‘Serious injury’ is defined as a significant overall impairment in the position of a domestic industry. In determining whether serious injury is present, investigating authorities must evaluate all relevant factors having a bearing on the condition of the industry, including 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, profit and losses, and employment of the domestic industry.
  • ‘Threat of serious injury’ means a clear and imminent danger of serious injury.
  • There must be objective evidence of the existence of a causal link between increased imports of the products concerned and serious injury. Injury caused to the domestic industry at the same time by factors other than increased imports must not be attributed to increased imports to the domestic industry.
economy The Agreement on Safeguards