Many definitions have been advanced by numerous scholars in trying to give the most fitting meaning of safeguard action. However, for the purposes of this writing, we are going to adopt the much reverenced definition of the Australian government (2001) which simply says safeguard action is an emergency action that “May be taken where a surge of imports causes or threatens to cause, serious material injury to a domestic industry.”
In effect, it helps a country to easily respond to significant yet “Unforeseen, sharp and sudden increase of imports” which have caused surmountable material injury to a country also professionally termed as a serious injury, state or region (European Commission, 2009). The European commission further adds that safeguards are fundamentally meant to “give the industry a temporary breathing space to make necessary adjustments.”
When talking of “A sharp increase in imports”, we basically refer to the spontaneous upsurge in imports which negatively affects the economy. It is normally something unplanned for and that is why finding a solution to it is extremely important. On the other hand, “a serious injury” is a detrimental effect on an industry or a country resulting from a number of factors (but for the purpose of this essay, the spotlight is going to be on the sharp increase in imports). The action of one facet, as explicated above, leads to the other. This is why they are sometimes described as being “causal”; and failure to curb them eventually leads to the taking a safeguard measure (United Nations, (2003, p.16 & 17).
In a nutshell, United Nations (2003, p. 19) simply says that determination of a serious injury involves “An assessment that the increased imports have caused or threatened to cause serious injury to the domestic industry producing the like or directly competitive product.” On the other hand, sharp increase in imports can be determined by either by assessing it absolutely (through increase in units like tons) or the degree of its relativity to the domestic production of competitive products (p. 12).
If someone is to tentatively investigate serious injury, he/she must do it with regards to a whole domestic industry or part of it depending on the nature of the injury United Nations, 2003, p. 20). Similarly, in order for a safeguarding action to occur, there must first be justification of quantity restrictions based on the stipulated rules of the European commission. According to the European commission, 2009), a safeguarding action can only take place after a comprehensive enquiry is conducted by proficient authorities mandated by the Productivity Commission in Australia. The enquiry may take a short or long duration depending on the nature of the issue at stake as well as its perceived urgency.
During this duration, the commission also debriefs the World Trade Organization (WTO) and affected countries of the commencement of investigations. In most cases, the government of the country perceived to have the problem normally frontlines the investigations into the problem. Similarly, in circumstances that involve domestic industries, domestic investigations are conducted (GATT, 1994, p. 136).
As an inherent rule for assessors and implementers of safeguarding measures; all they do must be governed by professionalism, transparency, accountability and having the publics’ interest at heart. So in as much as many countries have directly or indirectly benefited from safeguarding measures, the actions are not meant for selfish gains (World Trade Organization, 2010).
If credible and valuable evidence is found -by the Australia’s Productivity Commission- in favor of sharp and unforeseen surge of imports causing serious injury to an industry, country or region; restrictions are temporarily placed against importation of particular products. In other words, action is only taken once there is a “Causal link between increased imports of the product concerned and serious injury or threat thereof” to the industry (GATT, 1994, p.136).
In a case where there are several causal factors of an injury, it is wrong to deductively say that sharp increase in import is the cause. At such times, it is advisable that the many causal factors are divided then the percentage for sharp increase in import is found independently (United Nations, 2003, p. 27). It is important to note that such measures are only meant for countries or regions that are members of the WTO.
Through various citations and supporting examples, Wilson (1998) outlines that the “sharper” the increase in imports without regulation; the more serious a country’s or organization’s injuries become. He goes ahead and says that in as much as safeguard measure invaluably help getting institutions back on their feet, the key solution lies in clearly demarcating the boundaries that should not be crossed by these measures. Wilson retorts that the clause that deals with the safeguard has serious issues that undermines the spirit in which the paper was written. Paradoxically, its wording is in many places too ambiguous, inviting exploitation, yet at the same time is structured in such a way as to discourage its use.”
According to United nations (2003, p.19), “The presence of serious injury or threat thereof to the domestic industry as a result of the increased imports is a major substantive requirement for the imposition of a safeguard measure.” This is why it is very important that increase in import is checked so as to avoid incurring huge losses through miscellaneous expenses which could have otherwise been avoided.
Application of safeguarding measures when facing a serious injury is- in most cases- a double-sided tool that benefits some people while plunging others into deep loses. For the purposes of fairness, GATT (1994, p. 137) states that “A member country proposing to apply safeguard measures is expected to offer adequate trade compensation to countries whose trade interests would be adversely affected by such measures.” This offers a relative chance for progress by all member states and not just one Country making positive economic progress while the other languishing in abject economic down-surge.
Moreover, members who apply for safeguard measures must ensure that they pay for it through compensations. World Trade Organization (n.d) documents that Members applying a safeguard measure must ensure that they uphold a considerably equal amount of concessions and other responsibilities with respect to the other affected members. In order for them to do this, an adequate amount of trade compensation is agreed on.
Safeguarding measures are mostly applied on a global basis. They are named differently; these measures are product specific and thus operate differently. It is again vital to note that the measures/actions are temporary and thus change over time depending on the situation at hand (Ministry of Economic development, 2010).
Yet still, safeguarding measures are also implemented on a regional basis. In spite of their growing popularity, these non-global factions of the World Trade Organization WTO) are only a handful at the moment. In addition, they are incepted just for special occasion and only a few countries have systems that can accommodate the complicated dynamics of these safeguards. Examples include the Thailand-Australia free trade agreement and the recently incepted New Zealand-china free trade agreement. Under these special circumstances, additional safeguarding measures may be included or secluded depending on the nature of the agreement. This type of safeguards is what most scholars call bilateral safeguards (Ministry of Economic development, 2010).
As a staunch rule, quantitative restrictions (quotas) imposed should not be reduced lower than the annual average for the previous three years of the WTO member involved. For normal industries, and other related sectors, a safeguard is only implemented to the point of being able to resuscitate it from the serious injury and help it to re-adjust. Anything more is considered outside the legal confines of the WTO and is subject to punishment by law (World Trade Organization, 2010).
Notably, bilateral safeguard differ from WTO safeguards mainly because they targeted at solving serious injuries from sharply increased imports that arise from tariff elimination while WTO’s focus on the exact opposite of that. However, in spite of the autonomy that they have in some areas and thus making them different from global safeguards, both these safeguards ascribe to the laws stipulated under General Agreements of Tariff and Trade (GATT) and WTO (Ministry of Economic development, 2010).
According to the European Commission (2009), there are special cases and circumstances where different rules are applied to different member states. For example, automatic licensing over a particular period of time (commonly known as Surveillance) may be allowed if the trend of imports of a product threatens to cause serious injuries to European commission members who are very important in production.
Another example is that the agreement provides an exceptional treatment to developing countries in the implementation of safeguarding measures. GATT (1994, p. 137) affirms that “Imports from a developing country are exempt from safeguard measures if its share in the imports of the product concerned into the country taking the measure is less than 3%.”
There is also the salient policy on agriculture which has not been fully advanced but is already present in some states. This policy tends to give autonomy to members of some developing countries as a motivation to perform better. At the moment, it has not yet been entrenched in the GATT laws but agricultural countries are striving hard to put it in place Ministry of Economic development, 2010).
In addition, the duration for safeguard measures can be extended up to eight (8) years from the stipulated four (4) based on competent assessment by the relevant authorities and evidence of adjustment in an industry. According to GATT (1994, 134), the purpose of the lengthy 4(four) year duration is “To give industries time to adjust gradually to the increased competition resulting from reductions in tariffs and from the removal of other barriers to trade.”
This addition of years has however faced criticisms from numerous quarters as being used for selfish gains. Luckily enough, not many countries or regions have been accorded this privilege in the recent past. This has consequently silenced the highly volatile and vocal critics; at-least for a while World Trade Organization, 1998, p. 6).
Latest researches also reveal that there are specials rules that govern re-application that is done to safeguard measures to given products. On normal occasions, re-applications are normally done until a period equal to the duration of the original safeguard measure if finished. The special rules however propagate that if a new safeguard measure has a duration of 180 days or less, the involved institution can re-apply so long as at least 1 year has elapsed from the original date the safeguard measure was introduced (World Trading Organization, 2001).
As a final example of specialized circumstances and thus specialized rules; New Zealand and China got to maintain “Their existing WTO rights and obligations” on the use of global safeguard measures under the New Zealand-China free trade agreement of October 2001. The free Trade agreement articulated that “A global safeguard measure may exclude imports originating from China” provided that they are certified to be non harmful (Ministry of Economic development, 2010).
In general, the provision of such specialized packages to members not only acts as a great incentive to them; but also facilitates accommodativeness which is a very vital statute for any industry or country that is prospecting for positive economic growth. Of course there have been numerous accusations of corruption and unequal distribution of resources; some true while some false. This should however not hinder the invaluable contributions that have been made through safeguard actions (Wilson, 1998).
Just like any other high performing organizations, the WTO has an elaborate and comprehensive bureaucracy of leadership that ensures its high performing standards. Apart from the aforementioned leadership roles, there is a committee on safeguards who most people consider as the backbone of safeguards and all other issues relating to it. The committee’s fundamental role is to monitor the implementation of safeguard measures in relations to the sharp increase in imports noted as well as the level of injuries sustained by an institution. After doing this, they analyze their findings then tabulate reports which they then forward to the council for trade in goods.
Through their vast knowledge and experience, they are occasionally allowed to include their recommendations in the reports; although this is highly prohibited for rookies because they may end up mixing up unrelated issues thus leading to confusion.
Another important job for the committee is solving of disputes. This is crucial more so with the highly polarized nature of different institutions which normally leads to quarrels. Sometimes disputes also come as a result of difference in opinions. The committee members should therefore be very tactful in how they handle the victims involved in the disputes. If disputants are unwilling to resolve their differences, the committees should then forward the dispute to a higher authority. However, it is the advisable that the committee members totally exhaust their potentialities before deciding to forward the issue to a higher authority (United Nations, 2003, p. 49).
Other duties for member of this committee include: ensure members comply with stipulated rules, assist those who make consultations, review proposed retaliation from members, conduct any kind of job that is directed by the Council for Trade Goods and maintain high professionalism in their endeavors for example, observe confidentiality, tactfulness among many others (World Trade Organization, 2010).
The success of the process of implementing a safeguard measure greatly depends on overall contribution from all areas. The process is equally important right from the assessment and much caution should be observed by those doing the observation as well as those being observed so as not to relay any false information. Some of the vital roles that should be observed by members include: firstly, they should make sure that they notify the committee of initiation of investigation of the existence of serious injuries that they face. Such notifications should have all the relevant details that will make the process easier. Secondly, they ensure that they follow all the rules and regulations stipulated for them whether they are being monitored or not. Failure to follow such regulations results into dire consequences which, I believe, nobody would love to be a part of (All Business, 2010).
According to United Nations (2003, p.3) the main reason why the many governing bodies strive for the upholding of the GATT and WTO rules is simply to: Promote international trade and therefore is also expected to increase import flows mutually advantageous concessions. It might therefore appear astonishing and somewhat contradictory that the same agreement allows WTO Members to “back-pedal” and place restrictions on imports in the form of safeguard measures if those imports increase.
In addition, WTO has been marred with a lot of challenges and criticisms which have slowed down its progress. Firstly, there have been inadequate funds to support all the members of the WTO thus limiting their scope of help. Secondly, there are allegedly lazy members, who drag back positive movements. Thirdly; the difference in laws of different states becomes very challenging when international meetings are held. Something that is relative in one place may be tentative in another thus limiting consensus. Fourth and finally, there have been numerous accusations of the GATT and WTO laws of not being clear thus leading to varied misconceptions by different members (Wilson, 1998).
On a more positive note though, it is commendable that more institutions are realizing the need for working together as one. In effect, many institutions are joining the WTO, more discoveries are being made; more help is being offered to the needy and generally, the world being made a suitable place. Nevertheless, this is not enough. So much more still needs to be done if things like sharp increasing imports are to be stalled European Commission, 2010).
In conclusion, going by the various articles that have been written for and against safeguard action, it can be deductively said that most researchers tend to see it as a good thing. Its numerous advantages like bringing people together, helping in forging good international relations, uplifting companies, industries or even countries in time of need, generally propels positive movement (Kaplan, 2010). On the other hand, safeguard measures has also received its share of criticism more so in-terms of its diction. It is therefore fundamental that we learn lessons from our past, focus on the present, while planning cautiously for the future (Articlesbase, 2010).
As individuals, we may not be able to treat ourselves from the serious injuries we constantly get, but with the help of others, we will not only get treatment but also learn from others on how we can ultimately blunt the sharp increase in imports which constantly leads to injuries.
References
All Business. (2010). European Union External Trade Policy: Multilevel Principal-Agent Relationship. Web.
Articlesbase. (2010). Global Business Environment.. Web.
European Commission. (2009). Trade defense: Safeguards.
European Commission. (2010). Business Environment. Web.
GATT. (1994). Safeguard measures to restrict imports in emergency Situations. Web.
Kaplan. (2010). Global Business Environment.. Web.
Ministry of Economic Development. (2010). Trade remedies under the New Zealand – China free trade agreement. Web.
United Nations. (2003). Dispute settlement. Web.
Wilson, G. (1998). The safeguards clause. Web.
World Trade Organization. (2010). Committee reviews, 43 safeguard actions. Web.