IP/99/996
Brussels, 17 December 1999
WTO panel backs EU as Korea and Argentina found
in breach of safeguard rules
The European Community has won two WTO dispute settlement cases
concerning import restrictions imposed by Argentina and Korea. Two WTO
Appellate Body reports issued this week confirm earlier findings that the
Argentinian measures on imports of footwear and Korean quotas on imports
of certain dairy products violate WTO rules.
In February 1997, Argentina imposed safeguard measures restricting imports of
footwear from all sources, except those of their Mercosur partners. In addition to
normal customs duties, imported footwear was subject to minimum specific duties of
up to US $16 per pair. As a result, EC exports of footwear have never enjoyed fair
access into the Argentinian market reflected by the fact that their total value does not
exceed an annual €10 million.
Korea introduced safeguard measures in the form of a quota on imports of certain
dairy products from all sources, including from the EC, in March 1997. The products
are milk powder blends used in the production of processed dairy products such as
yoghurt, ice-cream and biscuits. The EC being the main supplier of the product to
Korea (€ 75m in 1996 ), was severely affected by the measures with exports falling
by almost 40%.
Following unsuccessful rounds of consultations, the EC requested the establishment
of two WTO panels. In its reports issued on 14 December 1999 in Geneva, the WTO
Appellate Body fully confirmed the findings of the two panels published in June 1999
and against which Korea and Argentina had appealed. It held that in imposing the
import restrictions, Korea and Argentina did not comply with their obligations under
the WTO Agreement on Safeguards and GATT 1994.
As regards Argentina, the Appellate Body has found that Argentina’s safeguard
measures are not in conformity with WTO rules, notably because Argentina adopted
trade restrictive measures without having shown that imports into Argentina had
increased and caused serious injury to the Argentinean industry. In addition, the
Appellate Body has decided that Argentina was not allowed to remedy any possible
injury caused by imports from Mercosur members by imposing measures on imports
from other third countries.
Concerning Korea, it was found that the investigation conducted by the Korean
authorities did not establish in a properly conducted investigation that "serious injury"
was caused by increased imports of dairy products to the Korean dairy industry.
Korea's choice of the form of the measure, a quota, the most trade restrictive
measure, was not justified. Finally, procedural requirements under the WTO
concerning notification of procedural steps were not complied with.
In both cases the Appellate Body also agreed with a cross-appeal by the EC and
reversed the Panel's conclusion that safeguard measures could be taken without
showing that the increased imports result from “unforeseen developments” as
required by Article XIX GATT 1994.
Safeguard measures are an exceptional instrument for dealing with emergency
situations. EC exports, for a value of several hundreds million Euro per year, are
currently affected by over 30 safeguard procedures from third countries. Should third
countries abuse these measures to the detriment of the Community’s industry, the
EC will request the establishment of further Panels. It will now request that
Argentina and Korea comply fully and swiftly with the result of the reports and
withdraw the illegal measures without any further delay.
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