UNITED STATES DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS Stu Carroll Hatice Cellik Erika Chiang 1 6/4/2014.

UNITED STATES — DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS

Stu Carroll

Hatice Cellik

Erika Chiang

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Statement by the President

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March 5, 2002 “Today I am announcing my decision to impose temporary safeguards to help give America's steel

industry and its workers the chance to adapt to the large influx of foreign steel.  This relief will help steel workers, communities that depend on steel, and the steel industry adjust without harming our economy. These safeguards are expressly sanctioned by the rules of the World Trade Organization, which recognizes that sometimes imports can cause such serious harm to domestic industries that temporary restraints are warranted.  This is one of those times.

I take this action to give our domestic steel industry an opportunity to adjust to surges in foreign imports, recognizing the harm from 50 years of foreign government intervention in the global steel market, which has resulted in bankruptcies, serious dislocation, and job loss.  We also must continue to urge our trading partners to eliminate global inefficient excess capacity and market-distorting practices, such as subsidies.

The U.S. steel industry must use the temporary help today's action provides to restructure and ensure its long-term competitiveness. Restructuring will impact workers and the communities in which they live, and we must help hard-working Americans adapt to changing economic circumstances.  I have proposed a major expansion of the National Emergency Grants program to assist workers affected by restructuring with effective job training and assistance.  I have also proposed direct assistance with health insurance costs that will be available to workers and retirees who lose their employer-provided coverage.  And I support coordinated assistance for communities and a strengthened and expanded trade adjustment assistance program.  America's workers are the most highly skilled in the world, and with effective training and adjustment assistance we will help them find better, higher paying jobs to support their families and boost our economy.”

History

The U.S. adopted safeguard measures on imports from most countries of certain steel products on March 5, 2002, in the form of additional tariffs ranging from 8, 13, 15 and up to 30% for a 3-year period starting on March 20, 2002.

The international community was surprised at this development because of the U.S.’s commitment to free trade

The USTR later admitted that these tariffs were implemented because of domestic pressures

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Complaint

U.S. imposing definitive safeguard measures on a wide range of steel products :

1.Increase in duties on imports of certain flat steel, hot-rolled bar, cold-finished bar, rebar, certain welded tubular products, carbon and alloy fittings, stainless steel bar, stainless steel rod, tin mill products and stainless steel wire as well as Tariff rate quota on imports of slabs

2.Safeguard measures were effective as of March 20, 2002

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Flat Steel

Used in major appliances, magnetic cores, and the construction of automobiles, trains, and ships

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Hot-rolled & Cold-rolled bar 6

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Carbon Fittings7

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Stainless Steel Bar8

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Stainless Steel Wire9

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Steel Slab10

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U.S. - Steel Safeguards Complainants

BrazilCanadaChinese TaipeiCuba European Union China Japan Republic of Korea

MexicoNew ZealandNorwaySwitzerlandThailandTurkeyVenezuela

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Basic Question To Be Answered

Did U.S. definitive safeguard measures on a wide range of steel products violate its obligations to the WTO?

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"Although all complaints made by the eight co-complainants were considered in a single panel process, the United States requested the issuance of eight separate panel reports, claiming that to do otherwise would prejudice its WTO rights, including its right to settle the matter with individual complainants.”

Case Dates

Initial complaint filed by EU: March 7, 2002

Complaint filed by China: March 26, 2002

Panel Established: June 24, 2002 Panel Report: May 2, 2003 Appellate Body Report: November 10,

2003

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Principal WTO Agreements and Articles Involved

Agreement on Safeguards 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the

GATT of 1994 Articles I:1, II, X:3, XIX:1 and XIX:2

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Article 2: Conditions

2.1 A Member may apply a safeguard measure to a product only if that Member has determined, pursuant to the provisions set out below, that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.

2.2 Safeguard measures shall be applied to a product being imported irrespective of its source.

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Article 3: Investigation

3.1  A Member may apply a safeguard measure only following an investigation by the competent authorities …This investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views…

3.2 Any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities…

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Article 4: Determination of Serious Injury of Threat Thereof 4.1.     For the purposes of this Agreement:

(a)  serious injury” shall be understood to mean a significant overall impairment in the position of a domestic industry; 

(b)  threat of serious injury” shall be understood to mean serious injury that is clearly imminent, in accordance with the provisions of paragraph 2. A determination of the existence of a threat of serious injury shall be based on facts and not merely on allegation, conjecture or remote possibility; and 

(c)  in determining injury or threat thereof, a “domestic industry” shall be understood 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.

4.2. (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 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 and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment”

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Article 5: Application of Safeguard Measures

5.1 A Member shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment...

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Article 7: Duration and Review of Safeguard Measures back to top

7.1  A Member shall apply safeguard measures only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. The period shall not exceed four years, unless it is extended under paragraph 2.

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Article 8

8.1 A Member proposing to apply a safeguard measure or seeking an extension of a safeguard measure shall endeavor to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure, in accordance with the provisions of paragraph 3 of Article 12. To achieve this objective, the Members concerned may agree on any adequate means of trade compensation for the adverse effects of the measure on their trade.

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Article 9

9.1 Safeguard measures shall not be applied against a product originating in a developing country Member as long as its share of imports of the product concerned in the importing Member does not exceed 3 per cent, provided that developing country Members with less than 3 per cent import share collectively account for not more than 9 per cent of total imports of the product concerned

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Article 12: Notification and Consultation

A Member shall immediately notify the Committee on Safeguards upon:

(a) initiating an investigatory process relating to serious injury or threat thereof and the reasons for it;

(b) making a finding of serious injury or threat thereof caused by increased imports; and

(c) taking a decision to apply or extend a safeguard measure.

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GATT 1943 Article XIX 1 (a)

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Unforeseen Developments: an investigating authority must provide a "reasoned conclusion" in relation to "unforeseen developments" for each specific safeguard measure at issue;

Four Issues

Unforeseen Development – those things that “resulted in increased imports causing or threatening to cause serious injury to the relevant domestic producers” (GATT 1994 Art. XIX:1(a))

Increased Imports - such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products (SA Arts. 2.1 and 3.1)

Parallelism – safeguard measures must meet both requirements of both paragraphs 1 and 2 of Article 2 and include all factors in analysis leading up to safeguard(SA Arts. 2 and 4)

Causation – demonstration of causal link between “increased imports” and serious injury or threaten of serious injury to the domestic industry that produces like or directly competitive products (SA Arts. 2.1, 3.1 and 3.2(b))

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Prevailing Party and Final Determination (Part I)

• GATT Article XIX:1(a) (“Unforeseen Developments”): The Appellate Body upheld the Panel's findings that an investigating authority must provide a "reasoned conclusion" in relation to "unforeseen developments" for each specific safeguard measure at issue; and that the USITC's relevant explanation was not sufficiently reasoned and adequate and thus inconsistent with GATT Art. XIX:1(a).

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“Unforeseen Development”

Panel and AB found that USITC's relevant explanation for the safeguard was not sufficiently reasoned and adequate and thus inconsistent with GATT Art. XIX:1(a)  If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession.

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Prevailing Party and Final Determination (Part II)• SA Arts. 2.1 and 3.1 (“Increased Imports”): Recalling the

relevant legal standard that it elaborated in Argentina – Footwear Safeguards and rejecting the US argument (comparison of end-points), the Appellate Body upheld the Panel's conclusions that the measures on CCFRS, hot-rolled bar and stainless steel rod were inconsistent with Arts. 2.1 and 3.1 because the United States failed to provide a "reasoned and adequate" explanation of how the facts (i.e. downward trend at the end of the period of investigation) supported the determination with respect to "increased imports" of these products. However, the Appellate Body, reversing the Panel's finding with respect to "tin mill products and stainless steel wire", found that the ITC determination containing "alternative explanations" was not inconsistent with Arts. 2.1 and 4, as the Safeguards Agreement does not necessarily "preclude the possibility of providing multiple findings instead of a single finding in order to support a determination” under Arts. 2.1 and 4.

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“Increased Imports”

Safeguard measures on CCFRS, hot-rolled bar and stainless steel rod were inconsistent with Arts. 2.1 and 3.1 U.S. failed to provide a "reasoned and adequate" explanation of how the facts (i.e. downward trend at the end of the period of investigation) supported the determination with respect to "increased imports" of these products.

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“Increased Imports”

Panel found ITC’s determination for "tin mill products and stainless steel wire” did not reasonably prove increased imports

AB reversed the decision saying that having "alternative explanations" was consistent with Arts. 2.1 and 4 as the Safeguards Agreement

Safeguards Agreement does not necessarily "preclude the possibility of providing multiple findings instead of a single finding in order to support a determination”

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Prevailing Party and Final Determination (Part III)• SA Arts. 2 and 4 (“Parallelism”): The Appellate Body

upheld the Panel's finding that the USITC did not satisfy the "parallelism" requirement, as it should have considered any imports excluded from the application of the measure as an "other factor" in the causation and non-attribution analysis under Art. 4.2(b) and it should have provided one single joint, rather than two separate, determination[s] (i.e. excluding either Canada and Mexico, or, alternatively, Israel and Jordan) based on a reasoned and adequate explanation on whether imports from sources other than the FTA partners (i.e. Canada, Israel, Jordan, and Mexico), per se, satisfied the conditions for the application of a safeguard measure

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“Parallelism”

USITC did not satisfy the "parallelism" requirement, as it should have considered any imports excluded from the application of the measure as an "other factor" in the causation and non-attribution analysis under Art. 4.2(b) and it should have provided one single joint, rather than two separate, determination

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Prevailing Party and Final Determination (Part IV)• SA Arts. 2.1, 3.1 and 4.2(b) (“Causation”): As

regards the Panel's findings of violations for the USITC's causation analyses concerning all products other than stainless steel rod, the Appellate Body (i) reversed the Panel's findings with respect to tin mill and stainless steel wire based on its reversal of the Panel's decision on increased imports, and (ii) declined to rule on the issue of causation for all the other seven products based on its findings of violations in respect of previous claims discussed above.

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“Causation”

Panel found that the USITC did not prove “causation”

AB reversed the decision specific to tin mill and stainless steel rod

AB declined to rule on causation relating to the other products due to its findings of violations in the previous issues

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APPELLEE SUBMISSION OFTHE UNITED STATES

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The Complainants’ conditional appeals on like product Article 5.1, and Article 9.1 do not satisfy the prerequisites for the appellate body to complete the panel’s analysis.

There is no basis for the Appellate Body to complete the analysis of complainants’ claims pertaining to like product issues.

Completing the analysis regarding complainants’ Article 5.1 arguments would require the Appellate Body to make findings of Fact.

APPELLEE SUBMISSION OFTHE UNITED STATES – II

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The Panel did not make any findings of fact and the record does not contain undisputed facts sufficient to complete the analysis of the complainants’ Article 5.1 claims

Article 9.1 and the qualification of members as developing countries are novel issues that there is no need to address if it makes findings in favor of the United States.

According to USA

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China failed at every point during the Panel proceedings to present any evidence that it was entitled to treatment as a developing country for purposes of Article 9.1.

Thus, it failed to present a prima facie case that the U.S. decision not to exclude it from the steel safeguard measures was inconsistent with Article 9.1.

USA Decision

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For the reasons set forth above, the United States asked the Appellate Body to reject each of the requests set forth by China

STATEMENT BY THE PRESIDENT

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December 4, 2003 “Today, I signed a proclamation ending the

temporary steel safeguard measures I put in place in March 2002. Prior to that time, steel prices were at 20-year lows, and the U.S. International Trade Commission found that a surge in imports to the U.S. market was causing serious injury to our domestic steel industry. I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods. These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them.”

Implementation

At the December 10, 2003 DSB meeting, U.S. informed Members that on December 4, 2003, the President of the United States issued a proclamation that terminated all of the safeguard measures subject to this dispute, pursuant to section 204 of the US Trade Act of 1974.

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Significance

Primary violation: the USITC's failure to provide a reasoned and adequate explanation of unforeseen developments, increased imports, and non-attribution

Will impact how USITC argues in future cases: Provide more reasoned, detailed

explanation and analyses

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