Safeguard

Safeguard is a tool used by a state to restrain international trade to protect a certain home industry from foreign competition. In the World Trade Organization (WTO) system, a member may take a “safeguard” action (i.e., restrict imports of a product temporarily) to protect a specific domestic industry from an increase in imports of any product which is causing, or which is threatening to cause, serious injury to the domestic industry that produces like or directly competitive products.

Background

Safeguard measures were always available under the General Agreement on Tariffs and Trade (GATT) (Article XIX). However, they were infrequently used, and some governments preferred to protect their industries through “grey area” measures (“voluntary” export restraint arrangements on products such as cars, steel and semiconductors). As part of the WTO deal, members gave up these “grey area” measures and adopted a specific WTO Safeguards Agreement [http://www.wto.org/english/tratop_e/safeg_e/safeg_e.htm] which disciplines the use of safeguard measures.

Safeguards are usually seen as responses to fair trade behaviour, as opposed to responses to unfair trade practices such as

* Dumping
* Subsidy

As such they are supposed to be used only in very specific circumstances, with compensation, and on a universal basis, "i.e." a member restricting imports for safeguard purposes will have to restrict imports from all other countries. However, exceptions to this non-discriminatory rule are provided for in the Agreement on Safeguards itself as well as in some ad hoc agreements. In this last respect it is worthwhile noting that the People's Republic of China has accepted that discriminatory safeguards may be imposed on its exports to other WTO members until 2013.

Regional trading arrangements have their own rules relating to safeguards. Some safeguard measures can be resorted to in the area of services, as provided for in the General Agreement on Trade in Services (GATS).

Mexico abused of this when imposed prohibitive tariffs on China.

See also

* World Trade Organization (WTO)

* [http://www.wto.org/english/tratop_e/safeg_e/safeg_info_e.htm Technical Information on Safeguard Measures]

References

* Yong-Shik Lee (2005), "Safeguard Measures in World Trade: The Legal Analysis", Aspen publishers [http://www.aspenpublishers.com/Product.asp?catalog_name=Aspen&category_name=&product_id=9041123768&cookie%5Ftest=1] .
* Edwin Vermulst and Folkert Graafsma (2002), WTO Disputes Anti-Dumping, Subsidies and Safeguards, Cameron May
* Fabio Spadi (2002), "Discriminatory Safeguards in the Light of the Admission of the People's Republic of China to the World Trade Organization", "Journal of International Economic Law" 2002 5(2), 421-443. [http://jiel.oxfordjournals.org/cgi/reprint/5/2/421]
* [http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=629289 Paolo Farah] (2006) [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=916768 Five Years of China’s WTO Membership. EU and US Perspectives about China’s Compliance with Transparency Commitments and the Transitional Review Mechanism,] "Legal Issues of Economic Integration", Kluwer Law International, Volume 33, Number 3, pp. 263-304.

2002