2
16 September 1999 (99-3807) Working Party on GATS Rules

issues for future discussions on emergency safeguards

Note by the Secretariat

Revision

The Secretariat has produced this second revision of an earlier Note on safeguards-related issues, initially dated 20 November 1998, at the request of the Working Party on GATS Rules.
Concerns have been voiced, however, that the ability to negotiate the inclusion of safeguards may depend on bargaining power, thus disadvantaging small economies; that it could prove conceptually and politically difficult to identify sectors where "unforeseen circumstances" are likely to occur or otherwise earmark potential areas for safeguard action; and that there is no legal basis in the GATS to underpin a conditional and/or sector-specific approach to safeguards.
The volume trigger, which leads to the non-discriminatory application of additional duties, is sensitive to the degree of import penetration, while the price trigger, which may result in additional duties on a consignment-by-consignment basis, is related to certain base-year prices in domestic currency.
The idea has also been raised that, presuming the existence of a horizontal safeguards mechanism, Members might be free to forgo its use in individual areas by way of an Additional Commitment under Article XVIII, and that it might be possible to link the availability of such a mechanism to the quality of commitments scheduled under Articles XVI and XVII; the dividing line between the two concepts might thus be less sharp than initially conceived.
In the goods case, safeguard action is taken on behalf of a domestic industry - defined to mean the producers as a whole of the like or directly competitive products operating within the territory of a Member, or those whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products.
one view has been that the goods precedent should be followed, and safeguard action be taken to protect all domestically established suppliers – possibly including natural persons - of like or directly competitive services, regardless of nationality, ownership and control.
Thus, it would seem that measures could either be taken against suppliers of the like or directly competitive products located outside the territory of the relevant Member, or also against foreign suppliers of such products located in the territory of the Member.
The idea has also been raised that safeguard actions under certain modes should be given priority over others; for example, measures under modes 3 and 4 might be taken only after measures under modes 1 and 2 had proven ineffective.
mutatis mutandis, the rules provided for in Article 4:2(a) and 4:2(b) of the Agreement on Safeguards:
"(a) In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry under the terms of this Agreement, the competent authorities shall evaluate all the relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute or relative terms, the share of the domestic market taken by increased imports, changes in level of sales, production, productivity, capacity utilisation, profits and losses, and employment.
There seems to be a general view that macro-economic disruptions and other problems of an economy-wide nature would not justify the use of safeguards in individual areas This is commensurate with Article 4:2(b) of AS which stipulates that "when factors other than increased imports are causing injury … at the same time, such injury shall not be attributed to increased imports".
2860, dated 17 May 1999) has been widely considered a useful basis for future discussion; the Secretariat was requested to use it as starting-point for a working document listing any conceivable indicators proposed by Members and the comments made in the Working Party.

With regard to provisional safeguard measures, it may be useful to consider Article 6 of the AS which permits the adoption of such measures in “critical circumstances where delay would cause damage which it would be difficult to repair .
The Agreement on Implementation of Article VI of GATT (Antidumping Agreement) has been cited as an approach which provided for the necessary flexibility in injury determinations, allowing for action based on "best information available" and for the possibility of consultations with affected Members during an investigation.
No delegation has ruled out the possibility that Additional Commitments under Article XVIII might also be suspended in safeguard situations; a point has been made, however, that the suspension of regulatory disciplines, including those under the telecom Reference Paper, might not be a suitable or desirable course of action.
The relevant elements of the AS include: Article 3 on Investigation which requires public notice to interested parties, public hearings and publication of findings; Article 12 on Notification and Consultation which requires notification to the Committee on Safeguards at each stage on initiation of an investigation, finding serious injury, and taking a decision to apply measures, as well as giving Members with substantial export interest in the product an opportunity for prior consultations; and Article 13 on Surveillance which establishes the Committee on Safeguards with responsibility inter alia for monitoring the implementation of the AS.
This provision stipulates that safeguard measures shall not be taken against a product originating in a developing country Member as long its share of imports of the product concerned in the importing country does not exceed certain threshold levels.