15. Trade remedies: Safeguards

A safeguard is an emergency action taken by a government to provide temporary protection to domestic producers against unanticipated surges in imports caused by changes in competitive circumstances due to the reduction or removal of tariffs or other trade concessions.

When certain import surge's cause or threatens to cause serious injuries to domestic industry, safeguard measures may be used to give time to domestic producers to adjust to the new conditions.

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

Safeguards are permitted under GATT Article XIX on certain terms. The WTO Agreement on Safeguards establishes the rules for the application of safeguard measures provided for in GATT Article XIX, and a Committee on Safeguards to oversee their application.

Such measures, which take the form of suspension of concessions or obligations, can consist

• of quantitative import restrictions or

• of duty increases to higher than bound rates

However, the WTO encourages trading nations to move away from quantitative restrictions.

Serious injury as: “a significant overall impairment in the position of the domestic industry” taking into account such factors as:

• the rate and amount of the increase in imports;

• the share of domestic market taken by increased imports and;

• the changes in the level of sales, production, productivity, capacity utilization, profits, and employment in the importing country.

If a causal link between the surges in imports and the serious injury is established, then safeguard measures may be applied.

A WTO member proposing to take a safeguard action must offer to consult with those members whose exports will be substantially affected by it. Under the Agreement on Safeguards, the member must endeavour to maintain the benefits of its trade concession to affected exporting countries. To achieve this it may agree with the exporting countries on compensation sufficient to offset the adverse effects of the safeguard measure.If no agreement is reached, the exporting members may suspend concessions they had agreed to for the benefit of the member applying to safeguards.

Competent authorities might apply safeguard measures after

• following an investigation conducted by

• pursuant to previously published procedures.

• reasonable public notice of the investigation, and that interested parties be given the opportunity to present their views 

• publishing a report presenting and explaining their findings on all pertinent issues

or Confidentiality!

• Maximum protection – 8 (10) years

• Progressive liberalization

• Review of the measures (if longer than 3 years)

• De minimis import exemption 

  • A safeguard measure shall not be applied to low volume from developing country Members (3% for individual Member and 9% from all developing countries).

Forbidden grey area measures include such protective devices as

• voluntary export restraints,

• orderly marketing arrangements, and

• discretionary impact on export licensing schemes.

Although they have been used as an alternative to safeguards to deal with similar economic phenomenon, they are quite distinct from safeguards. However, they are dealt with (and prohibited) in the WTO Safeguards Agreement.

Safeguards must be: temporary or applied on an MFN basis*

States applying safeguards have notification and consultation obligations Developing countries are accorded special rights regarding the application of safeguard provisions. Disputes arising under the WTO Agreement on Safeguards may be referred to the WTO Dispute Settlement Mechanism. By contrast anti-dumping and subsidy/countervail actions are taken on the basis of quasi-judicial procedures, and no compensation is required for "dumpers" or "subsidizers" as they are deemed to be acting in contravention of "fair trade" principles.