WORLD TRADE  
ORGANIZATION  RESTRICTED  
 G/SG/M/10  
16 March 1998  
 (98-1044)  
  Committee on Safeguards   
 
 
 
MINUTES OF THE REGULAR MEETING  
HELD ON 22 OCTOBER 1997  
Chairman:  Mr. S. Nagatsuka (Japan)  
1. The Committee on Safeguards held a regular meeting o n 22 October 1997.  
2. The following agenda was adopted:  
Page  
 A. Observers - Intergovernmental Organizations  2 
 B. National Legislation  3 
(i) Examination of new or amended legislations not previously   
reviewed by the Committee (Art. 12.6)  
   (a) Bahrain  
    (G/SG/N/1/BHR/1)  
   (b) Fiji 
    (G/SG/N/1/FJI/1)  
   (c) Honduras  
    (G/SG/N/1/HND/2)  
   (d) United Arab Emirates  
    (G/SG/N/1/ARE/1)  
  (ii) Continuing review of legislative notifications previously  
   reviewed by the committee   
    Korea  
    (G/SG/Q 1/KOR/1)  
 (G/SG/Q1/KOR/2)  
  (iii) Status of legislative notifications   G/SG/M/10  
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 Page  
 C. Notifications of actions related to safeguard measures  6 
(i) Notifications of findings of serious injury or threat caused by  
increased imports (Art. 12.1(b)) - (G/SG/N/8/ARG/1 ) 
(ii)  Notifications of decisions to apply safeguard measures  
   (Art. 12.1(c)) - (G/SG/N/10/ARG/1+Corr.1+Suppl.1+Suppl.2)  
  (iii) Notifications regarding the non -application of safeguard  
    measures to developing countries (Art. 9.1 and footnote 2 to A rt. 9) - 
   (G/SG/N/11/ARG/1+Corr.1+Suppl.1+Suppl.2)  
(iv) Notifications regarding consultations (Arts. 12.4 and 12.5)  
(G/SG/14+Suppl.1)  
D. Korea - Safeguard investigation on certain dairy products  13 
E. Progress in phasing out measures covered by Articles 10 and 11.1  15 
 F. Other business  16 
G. Annual report to the Council for Trade in Goods  16 
 H. Date of next regular meeting  16 
A. Observers - Intergovernmental Organizations  
3. The Chairman  recalled that at its last regular meeting the Committee granted re gular observer 
status to a number of international intergovernmental organizations.  However, the Committee had not 
yet granted regular observer status to two organizations, the ACP Group and the OECD, for which 
requests had been made.  Turning first to th e request of the ACP Group, the Chairman informed the 
Committee that, since the last meeting the ACP Group had been granted regular observer status in a 
number of WTO bodies, including the Committees on Balance of Payments, Customs Valuation, 
Market Access , Rules of Origin, Trade and Development, and Trade and Environment.  In addition, 
the Chairman raised to Members' attention the horizontal process under way at the Council level with 
respect to requests by the ACP Group and by other international intergov ernmental organizations that 
have not requested observership in this Committee.  The Chairman also noted that it appeared that at 
that time the Committee would not be in a position to grant the ACP Group regular observership, in 
view of the ongoing horizon tal process.  He also noted however, that there appeared to be support for 
inviting the ACP Group to attend meetings of the Committee on an ad hoc basis pending the outcome 
of that process.  The Chairman suggested that the Committee agree, pending horizont al resolution of 
this issue, to invite the ACP Group on an ad hoc basis to participate as an observer in this and future 
meetings of the Committee.  
4.  The Committee so decided . 
5. With respect to the request by the OECD, the Chairman  recalled that at the spring meeting, 
the Committee had deferred action on the OECD's request, and had asked the Chairman to consult on 
this issue, given Members' concerns over reciprocity issues.  He further recalled that the Committees  G/SG/M/10  
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 on Subsidies and Countervailing Measures  and on Anti -dumping Practices had taken the same 
decision.  The Chairman noted that since concerns over reciprocity were of particular relevance in the 
Subsidies Committee, the other Chairs and himself had decided that it would be most appropriate for 
Mr. Gauthier, Chairman of the Subsidies Committee, to take the lead in the consultations with the 
OECD.  The Chairman informed Members that at the meeting of the Subsidies Committee which was 
to take place on 23 and 24 October 1997, Mr. Gauthier would inform Members of the informal 
consultations undertaken on this subject, and noted that the issue of observer status for the WTO was 
on the agenda of a meeting of the Participants Group in early November.  The Chairman informed 
Members that Mr. Gauthier was not p repared to make precise suggestions regarding the resolution of 
this question, although he considered that his contacts had been useful, and intended to continue his 
efforts on this score.  The Chairman therefore proposed that, pending the final outcome of  those 
consultations, the Committee also defer action on the OECD's request for observer status, and 
continue to invite the OECD to participate as an observer in its meetings on an ad hoc basis.  
6. The Committee so decided  .  
B. National legislation  
7. The Chairman  recalled the procedures adopted by the Committee at its May 1996 special 
meeting for the continuing review of legislations, both newly submitted and those that have been 
previously reviewed (G/SG/W/116).   
 (i) Examination of new or amended legis lations not previously reviewed by the 
Committee (Art. 12.6)  
8. The Chairman  noted that with respect to the legislative notifications to be reviewed at the 
meeting, as indicated in airgram WT O/AIR/681, written questions were to have been submitted to the 
Secretariat no later than 6 October 1997.  The Chairman pointed out that some questions had been 
received by the Secretariat after that date.  While the Members whose legislation was to be reviewed 
would be asked to respond to all questions put to them at t he meeting, the Chairman noted that late 
receipt of questions made it difficult for Members to respond, and reduced the effectiveness of the 
review process.  
9. The Chairman  reminded Members that follow -up questions could be asked orally at the 
meeting, and  that if written answers to such questions were desired, the questions should be submitted 
in writing to the Member whose notification was being reviewed, and to the Secretariat, no later than 
19 November  1997.  Written answers to all questions submitted i n writing should be submitted to the 
Secretariat no later than 17 December 1997.  
10. The Chairman  drew the Committee's attention to the fact that only four new or amended 
notifications not previously reviewed by the Committee were on the agenda for this m eeting.  
However, these had not been the only notifications received since the last meeting.  Other legislative 
notifications received since then were not able to be translated and circulated at least six weeks before 
the meeting, the minimum amount of tim e agreed by the Committee as necessary for review and 
formulation of questions.  This meant that some notifications would not be reviewed by this 
Committee until the Committee's next meeting, approximately one year after they were submitted for 
circulation . 
11.  The Chairman  pointed out that he did not suggest changing the requirement for translation 
into all languages, or reducing the number of weeks for advance circulation of legislations.  Both of 
these requirements seemed to be essential for the proper functioning of the Committee's legislative 
review function.  He also noted that legislative texts tend to be relatively long and complicated, 
meaning that they should be available for review by Members in whichever WTO working language G/SG/M/10  
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 reviewing Members pr efer.  Having such notifications available only in one language, for example, 
would entirely prevent many Members from considering them substantively.  The Chairman also 
considered that reducing the minimum advance period for circulation was not advisable or feasible.  
Due to the length and complexity of legislative texts, a period of at least several weeks for review in 
capitals and formulation of questions is necessary, as is a period of several weeks for formulation of 
answers to questions to be discusse d at Committee meetings.   
12.  The Chairman  drew the attention of Members to the fact that there was a serious problem of 
delays in the processing (and especially the translation) of documentation in the Secretariat.  The 
reason clearly being that althoug h the volume of documentation being processed by the Secretariat is 
vastly greater than that during the pre -WTO period, the level of resources allocated to the translation 
activities of the Secretariat has not changed.  In the Chairman's opinion the increa sed volume of 
documentation was not the result of cyclical phenomena, but rather of a structural change, with three 
major causes:  first, the increased number of notification requirements in the WTO Agreements; 
second, the increased number of Members in th e organization; and third, the increased volume of 
dispute settlement documentation.  None of these elements was likely to change in a way that would 
reduce the volume of documentation being handled by the Secretariat.  Rather it could be expected 
that the  volume of notifications would remain at least at its current level unless the Agreements were 
substantially amended, that the number of Members would continue to increase, and that the volume 
of dispute settlement would, if anything, increase, rather than  decline.   
13. The Chairman  urged all Members to give this issue their priority attention, as under the 
existing conditions, the regular work of the WTO, including of this Committee was being 
significantly impaired.  If delays such as those being experien ced were accepted, the Committee 
would not be in a position to effectively carry out its task of monitoring and reporting on the 
implementation of the Agreement.  Such an outcome could only damage the credibility and usefulness 
of this task, and should not  be accepted.  
14. The Committee proceeded to the substantive review of the legislation on the agenda.  
15. The questions concerning the legislation of Bahrain  can be found in the following document:  
 G/SG/Q1/BHR/1   submitted by the United States.  
Answers t o these questions can be found in the following document:  
 G/SG/Q1/BHR/2   to the United States.  
16. The questions concerning the legislation of Fiji can be found in the following document:  
 G/SG/Q1/FJI/1   submitted by the United States.  
NO WRITTEN ANSWERS HAVE YET BEEN PROVIDED BY FIJI.  
17. The questions concerning the legislation of United Arab Emirates  can be found in the 
following documents:  
 G/SG/Q1/ARE/1   submitted by the United States.  
Answers to these questions can be found in the following document:  
 G/SG/Q1/ARE/2   to the United States.   G/SG/M/10  
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 18. The delegation of Honduras  stated that it was not ready to answer the questions during the 
meeting and asked the committee that review of its legislation be included in the Agenda for the next 
regular meeting.  
19. The Committee so agreed . 
20. The questions concerning the legislation of Honduras , submitted prior to the meeting, can be 
found in the following documents:  
 G/SG/Q1/HND/1  submitted by Mexico.  
 G/SG/Q1/HND/2  submitted by the United States.  
Subsequent to th e meeting, Honduras provided written answers to the questions posed by Mexico and 
the United States.  These answers can be found in the following document:  
 G/SG/Q1/HND/1  to Mexico and the United States.   
 (ii) Continuing review of legislative notification s previously reviewed by the Committee  
21. The Chairman reminded the Committee that Korea's legislation had been on the agenda for 
follow -up review at the Committee's previous meeting, in May 1997, and that written questions and 
answers had been exchanged between Canada and Korea prior to that meeting.  (The questions can be 
found in document G/SG/Q1/KOR/1, and the answers in document G/SG/Q1/KOR/2).  Because both 
the questions and the answers were submitted after the applicable deadlines, the legislation h ad been 
placed on the agenda for this meeting.   
22. No further questions were raised concerning this legislation.   
23. The Chairman  reminded Members that any follow -up questions concerning any legislative 
notification on the agenda of this meeting for wh ich a written reply was requested should be 
submitted in writing to the Member concerned and to the Secretariat no later than 19 November 1997, 
and that the written replies should be submitted to Members posing the questions and to the 
Secretariat no later  than 17 December 1997.  
24. The Chairman  also reminded Members that, to place any previously -reviewed legislative 
notification on the agenda for the Committee's next regular meeting, written questions about such 
legislation would need to be transmitted to the Member in question as well as to the Secretariat no 
later than six weeks before the meeting, or by 9 March 1998.  Written answers to such questions 
would need to be provided to the Member posing the questions and to the Secretariat no later than two 
weeks before the meeting, or by 6 April 1998.   
 (iii) Status of legislative notifications  
25. The Chairman  reported on the status of legislative notifications received from Members, 
noting that compliance with this obligation was less than complete.  As of 22 October 1997, no 
legislative notification had been received from the following 45 Members:  Angola, Antigua & 
Barbuda, Bangladesh, Barbados, Belize, Benin, Burkina Faso, Burundi, Cameroon, Central African 
Republic, Chad, Congo, Democratic Republic of th e Congo, Cyprus, Djibouti, Dominica, Gabon, the 
Gambia, Grenada, Guinea Bissau, Guyana, Haiti, Jamaica, Kuwait, Lesotho, Madagascar, Malawi, 
Mali, Mauritania, Mongolia, Mozambique, Namibia, Niger, Panama, Papua New Guinea, Qatar, 
Rwanda, Saint Kitts & Nevi s, Saint Vincent & Grenadines, Sierra Leone, Solomon Islands, Suriname, 
Swaziland, Tanzania, and Togo.  The Chairman  recalled that this situation continued to create a gap in 
transparency with respect to certain legislative notifications.  The Chairman  urged all Members which G/SG/M/10  
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 had not notified to make the required notifications, which in many cases was a very simple "nil" 
notification from Members with no safeguards legislation.  
26. The Committee took note  of the statements made.  
C. Notifications of actions related to safeguard measures  
(i) Notifications of findings of serious injury or threat caused by increased imports 
(Art.  12.1(b))  
 (ii) Notifications of decisions to apply safeguard measures (Art. 12.1(c))  
 (iii) Notifications regarding the non -applicatio n of safeguard measures to developing 
countries (Art. 9.1 and footnote 2 to Art. 9)  
(iv) Notifications regarding consultations (Arts. 12.4 and 12.5)  
27. The Committee  reviewed Argentinaÿs notifications regarding their investigation concerning 
footwear, wh ich had been circulated since the previous meeting.  The Committee also reviewed two 
notifications of the results of consultations regarding Argentina's measure on footwear.  These 
notifications can be found in documents, G/SG/N/8/ARG/1,  G/SG/N/10/ARG/1 +  Corr.1 + Suppl.1 + 
Suppl.2, G/SG/N/11/ARG/1 + Corr.1 + Suppl.1 + Suppl.2 and G/SG/14 +Suppl.1.  
28. The representative of the United States  expressed his concerns about Argentina's final 
determination imposing definitive safeguard measures on footwear, whi ch replaced the provisional 
safeguard measures on the same product.  The United States remained unconvinced about the 
appropriateness of these measures.  The United States also reported on the consultations held with 
Argentina on this issue, and indicated that the information obtained during these consultations was 
still being evaluated.  There were a number of troubling issues with respect to Argentina's injury 
determination and safeguard measure.  First, according to Argentina's own information the volume  of 
imports declined steadily from 1993 to 1996.  The value of imports in 1995 and 1996 was lower than 
in 1994.  The decline in import value was less dramatic than the decline in import volume because the 
average unit value of imports increased over the pe riod.  Argentina had failed to explain how imports 
could be said to cause serious injury when their volume was falling and their unit values were rising.  
Second, Argentina's notification indicated that its authorities found not just present material injur y, 
but threat of future injury.  However, like the provisional relief finding, the final threat finding was 
not based on criteria on which determinations of clearly imminent threat typically are based, such as 
surging imports, rapidly increasing import inv entories, excess foreign factory capacity and the like.  In 
fact, the threat finding in this case appeared to be based on pure conjecture, contrary to Article 4.1(b) 
of the Agreement on Safeguards.  Third, Argentina's provisional and now final safeguard me asures 
were similar to its previous specific duties.  Argentina's resort to safeguard measures appeared to be 
an after the fact means to try to lend legitimacy to its WTO -inconsistent specific duties, rather than an 
objective endeavour to address injury to  domestic producers.  The United States questioned whether it 
was consistent with the intent of the negotiators for a Member to impose WTO -illegal duties and then 
justify their continuation based on a threat of injury, where these were duties which the Mem ber itself 
caused to be removed.  Fourth, the United States was also concerned about the Foreign Trade 
Commission's finding that there was but a single domestic industry which included producers of all 
footwear from hockey skates to women's dress shoes.  T he United States was studying whether the 
Commission had obtained sufficiently detailed information on factors such as production process, 
commercial channels and intended market to allow it to make a meaningful evaluation of which 
footwear products are li ke or directly competitive with others.  Fifth, the United States was examining 
other issues relating to the methodology Argentina used to arrive at certain figures in its report, such 
as those figures pertaining to domestic production and import prices.   G/SG/M/10  
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 29. The delegate of the European Community  shared the US concerns and pointed out two other 
issues that had not been addressed by the United States.  Firstly, the notifications of actions had raised 
issues as to the timing of their submission and circulatio n.  On 25 July 1997, Argentina sent a 
notification of an injury determination pertaining to a decision adopted by the Argentine Foreign 
Trade Commission on 12 June 1997.  This notification was sent to the Secretariat on 25 July and was 
circulated on 21  August.  Consultations were offered by Argentina to interested Members, through 
this notification, to take place between 6 August and 26 August 1997.  On 1 September 1997, 
Argentina sent another notification to the Secretariat in which it communicated its int ention of 
applying a definitive measure (SG/N/10/ARG/1).  In this notification Argentina also communicated 
the non -application of the measure to certain developing countries, and offered to hold consultations 
between 8 -10 September.  This notification was circulated on 15 September, which meant that it was 
impossible for any Member to hold consultations within the dates as mentioned, unless, as was the 
case for the Community, a bilateral contact with Argentina was arranged.  The circulation of these 
documen ts was in Spanish only, making the problem more difficult.  Thus, there were delays both by 
Argentina in notifying the decision of determination of injury, and by the Secretariat in the circulation 
of these documents.  
30. The delegate of the European Commu nity stated that his delegation's concerns in connection 
with these matters were not limited to formal aspects but also involved substantive aspects.  Argentina 
was fully aware of the Community's concerns, since these had been raised in consultations held on 
12 May and 19 September 1997.  There were five substantive issues with regard to Argentina's 
notifications:  
31. First, was the definition of the like or directly competitive product.  Argentina had divided the 
product under investigation into five diffe rent categories.  Factors of injury were only investigated as 
a whole for three of these categories.  For the other two, only data on production had been used.  It 
appeared that a method similar to best information available had been used, which might be 
legitimately used for anti -dumping or countervailing investigations but not for safeguards.   
32.  Second, Article 2 of the Agreement states as an indispensable condition that there must be 
growth in imports for safeguard measures to be applied.  As the Uni ted States had also pointed out, 
Argentine imports had declined both in value and in quantity terms.  From the point of view of 
quantity, the decline started in 1993, and from the point of view of value in 1994, with a slight 
increase in imports of the inv estigated product in 1996.  The European Community believed that the 
argument used by the Argentine authorities, that there had been a decrease of imports when 
comparing figures corresponding to 1991 and 1995, was not justified and was irrelevant.  The 199 1-
1995 period had been selected  arbitrarily and in any case did not indicate an emergency situation.  
33. Third, was the necessary evidence of a causal link between imports and the existence of 
injury.  In the opinion of the Community, the investigation ha d not demonstrated that the problems for 
the Argentine industry were the consequence of an increase of imports.  What could be observed was 
a considerable increase of exports on the part of the domestic industry which had replaced the sales on 
the domestic  market.  This was undoubtedly a healthy result of integration in Mercosur.  The 
Argentine industry had demonstrated its competitivity in this market and had replaced a great part of 
its domestic sales with sales to other member states in Mercosur.  Causes  contributing to injury were a 
contraction of demand in consequence of the economic crisis - the so -called "Tequila effect" - and the 
possible threat of injury resulting from the removal of the specific duty applicable until 
14 February  1996.  In addition,  it had to be considered that a good part of Argentine imports of the 
subject merchandise were carried out by the very same domestic industry.  In the view of the 
Community, a domestic industry should not be able to seek relief for an injury which was self -
inflicted as a result of its own actions.   G/SG/M/10  
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 34. The Community shared the doubts expressed by the United States as to the existence of 
serious injury.  Additionally, the information given in the report by the National Foreign Trade 
Commission was very limi ted as concerned the profitability of the petitioning industry, as well as 
regarding price comparisons between the domestic product and the imported product.  Some of the 
categories of footwear had increased sales considerably;  for example, ladies footwea r had increased 
76 per cent in value, and formal dress footwear had increased 124 per cent, as shown on page  21 of 
the injury notification.  There had also been investments to increase productivity, and capacity had 
also been increased.  The market share o f imports had decreased in all cases, in some categories 
starting in 1993 and in other categories starting in 1995, as evidenced on page 34 of the injury 
notification.  The report said nothing about the market share of the domestic industry, but presumably  
this was increasing in like measure, as there had been a decrease in the import volume.  The 
Community agreed with the analysis carried out by the United States, and believed that from the 
investigation by the National Commission of Foreign Trade it was n ot possible to deduce that there 
was a situation of serious injury such as the Agreement on Safeguards demands.  
35. A further point was the absence of an in -depth price analysis, especially the lack of a 
comparison of prices between the domestic product an d the imported product.   
36. Further, regarding the notification by Uruguay acting as Chairman pro tempore  of Mercosur, 
the Community did not object to the fact that a customs union could apply measures as a single entity.  
Footnote  1 of the Agreement gra nted this right and the Community did not contest that.  However, 
Footnote 1 must be strictly adhered to.  The Argentine authorities and the Mercosur authorities thus 
should decide whether they wished  the measure adopted to be applied by all members of Me rcosur or 
just by a single country, but in any case the conditions in Footnote 1 must be observed strictly.  
According to the European Community's analysis of the report, imports from Mercosur members had 
been included in the determination of injury.  In o ther words, imports from Mercosur countries 
apparently were not excluded but rather were considered as factors contributing to the injury.  The 
Community sought clarification on this issue from the Presidency of Mercosur or from Argentina.  
This was releva nt because according to the Community's understanding, the measure was not 
applicable to the member states of Mercosur.  Since in the view of the Community the notification 
provided did not contribute to clarifying these issues, the Community posed the que stion whether 
imports from Mercosur were taken into account to determine the basis for the injury, and whether the 
safeguard measure would be applied to the member states of Mercosur.  Further, the notification made 
by Uruguay referred to safeguards legisl ation adopted by Mercosur, which allegedly had been notified 
to the WTO.  Since the Community's delegation had not been able to find a notification of this 
legislation to the Safeguards Committee, they asked for clarification by the delegations concerned.  
37. The representative of Argentina  shared the Community's concern regarding the delay in 
circulation of notifications.  Argentina did not share the view that there had been any delay on the part 
of Argentina in the submission of the notification on findi ng of serious injury, however.  The date on 
which the finding was issued, 12 June 1997, was a date for internal purposes appearing on the act 
which contained such finding.  This act was then remitted first to the Sub -Secretary of Foreign Trade 
in the Minis try of Economy and the Secretary of Industry, which was the competent authority to apply 
the measure. Later the act had to be sent to the Ministry of Foreign Affairs, which in turn sent it to the 
Argentine Mission in Geneva to make the pertinent notificati on to the Committee.  Argentina could 
not accept the attribution of any delay on their part, since it was necessary to perform these  
formalities before notifying the Committee.  Argentina also took note of the comments by the 
Chairman regarding the high v olume of documents to be circulated and the problems generated by 
this, but was of the opinion that when dealing with notifications that affected the rights and 
obligations of Members, which have precise deadlines and which in some cases include offers to hold 
consultations, such as the  notifications of initiation of an investigation or of the intention to apply a 
safeguard measure, all efforts should be made so these notifications reach the Members of the 
Committee with enough time for them to react to th e offers being made.  In this case, Argentina had  G/SG/M/10  
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 previously alerted Members who had formulated questions at the time of imposition of the provisional 
measure, as well as the Chairman, that this notification was being made.  
38. The delegate of Argentina  stated that the Commission's report was not based on conjectures, 
but was the result of an investigation that had been carried out in a deep and thorough way, and that 
technically and legally it was in conformity with the Agreement on Safeguards and with Arg entina's 
national legislation, which had been notified to the WTO.  The National Commission on Foreign 
Trade had evaluated all the factors that might be considered as having an influence on the case.   
Argentina requested those Members who were analysing t he report to carry out a comprehensive 
assessment of all the factors, rather than to break it down into individual aspects whose results might 
lean to one side or another.  Regarding the issues that had been raised by the delegations of both the 
United Sta tes and the European Community, Argentina believed that in the period under review, 
1991 -1995, there had been an increase in imports both in absolute terms and in relative terms.  There 
had been an absolute increase in the value of imports of 157  per cent,  while the imports' share of  
apparent domestic consumption went from 10  per cent at the start of the period to 27  per cent in 1995.  
From that point of view, Argentina believed that the requirement of an increase in imports had been 
fulfilled.   
39. Regar ding like product, page 15 of the notification showed that the Foreign Trade 
Commission (the Commission) had recognized the heterogeneous nature of both the demand and 
supply of footwear, which meant that segmentation of the market was needed for the inves tigation.  
Even in a unitary investigation for one single like or directly competitive product, it could be 
necessary to differentiate the degree to which different segments of the product could be affected by 
imports.  From the background accumulated duri ng the investigation, the Commission had concluded 
that it was reasonable to maintain the unity of the footwear market for the purposes of analysing the 
injury.  This conclusion resulted from analysing factors relating to both demand and supply.  On the 
demand side, the Commission concluded that there was a broad range of footwear types, prices, 
qualities, uses and marks which, although not in strong competition with other footwear with extreme 
differences, did compete with resembling groups of products.  T herefore, although a definition of 
footwear as a protective foot covering was a simplification, it acquired great significance when 
considering the substitutability between different kinds of footwear.  On the supply side, the 
Commission had concluded that  the concept of a footwear industry was also significant since, 
although it was well -known that manufacturers specialized in different segments of the market, they 
shared various critical factors that made possible the reallocation of resources, re -special ization and 
significant competitive shifts.  Thus, it was easy to reallocate labour between different product lines, 
and this also applied to much of the equipment and many of the raw materials.  So the Commission 
had concluded that it was relevant to main tain the unity of the market when analysing the injury.  
Regarding allegations that injury was only verified in  three of the five categories in the market, it 
needed to be clarified that the Commission initially put forward a segmentation of the market in to five 
types of footwear, but later, when carrying out the final analysis, concluded that it was better to 
associate two main groups, "sports footwear" and "others", under the heading of "others", and 
analyzed globally the whole market.  
40. Regarding the profitability of the domestic industry, Argentina  disagreed with the allegation 
that no efforts had been made to investigate this matter, and referred Members to page 20 of the 
notification and the Tables on pages 46 and 48, as well as to Annex 4 of the te chnical report, which 
evidenced that there had been a full analysis of the profitability matter.  
41. Regarding prices, the delegate of Argentina  pointed out that on page 25 of the notification 
there was an analysis of prices.  In any case this was not a co ndition imposed by the Agreement, but 
in view of the general requirements they had done it.  With respect to prices, the Commission had 
analyzed the price indexes drawn up by the Argentine National Institute of Statistics and Census for 
wholesale and retai l, and also had analyzed the price information obtained during the investigation G/SG/M/10  
Page 10 
 
 
 from the questionnaires sent out to both producers and importers, which had been duly verified by the 
Commission.   
42. On the subject of the question relating to Mercosur, th e delegate of Argentina  pointed out that 
the Mercosur Common Market Council, in its Decision 17/96, approved the regulations for the 
application of safeguard measures to imports from countries that were not members of Mercosur.  
This regulation was notifie d to the WTO and could be found in document WT/COMTD/1/Add.11.  
On the basis of that notification, the regulation was analyzed at the Committee on Regional Trade 
Agreements and in this context, the Mercosur delegations had replied to specific questions on that text 
at the meeting held on 1 May 1997.  The questions could be found in document 
WT/COMTD/1/Add.4/Rev.1;  and in particular replies to questions 35, 49, 51 and 52 covered these 
specific topics.  The regulation laid down a transitional period during w hich the Parties continued to 
apply their national legislation for the organization of investigations relating to the application of 
safeguard measures on behalf of the Party.  It also provided for drawing up additional rules that might 
be necessary and th at were considered appropriate for the future implementation of the rules.  It was 
on the basis of that regulation that Argentina had carried out the investigation, in conformity with its 
national legislation which had been duly notified to the Committee o n Safeguards and which had been 
the subject of review at the last session of that Committee.  
43. The delegate of Argentina  remarked that the Mercosur regulation contained a requirement 
establishing that during the transitional period, Mercosur Parties whe n applying a safeguard measure 
in conformity with their national legislations, were to exclude from their application imports from 
other Parties to Mercosur.  This could be found in Article 98 of that regulation.  This investigation had 
been conducted in c onformity with the requirements of the Footnote to Article 2.1 - Footnote 1 - of 
the Agreement on Safeguards which establishes that when a safeguard measure is applied on behalf of 
a member state of a Customs Union, all the requirements for the determinati on of serious injury or 
threat thereof shall be based on the conditions existing in that member state.  This was also mentioned 
in the notification by Uruguay as pro-tempore  President of Mercosur.  As a point of clarification, as 
contained in document G/SG /N/10/ARG/1/Suppl.1, Article 8 of the resolution imposing the measure 
prescribed that the Council of Mercosur would be requested to clarify the scope of the measure.  
44. The delegate of Argentina  addressed the issue raised by the United States regarding c ertain 
allegedly inconsistent specific duties that Argentina had applied in the past to the footwear sector and 
which today had been abrogated.  First, Argentina regretted that this point had been raised, because it 
was a point that already had been discus sed at the 5  May 1997 meeting of the Committee.  Argentina 
could not accept that these specific duties applied to the footwear sector be described as inconsistent 
with GATT since this issue was being analyzed by a Panel which still had not concluded its wo rk. 
Second, Argentina rejected the similarity implied by the United States between the specific duties and 
the safeguard measure, because there were substantial and essential differences in respect of the rules 
presently in force.  Third, Argentina could n ot accept the United States' argument that Argentina had 
used safeguards to legitimize those specific duties.  Argentina had followed the steps laid down in the 
Safeguards Agreement, and had met all the requirements laid down both in that Agreement and in the 
relevant national legislation when applying the safeguard measure.  
45. The delegate of Argentina  reiterated Argentina's willingness to hold consultations under 
Article  12.3 of the Agreement, the results of the first round of which had already been noti fied in 
document G/SG/14.  
46. The delegate of the European Community  reiterated that it was not justified to apply these 
measures.  Concerning the like product and the extension of injury to all five categories, there had 
been no complete analysis of inju ry for the five types of footwear.  Concerning  the analysis of prices, 
it was very limited, in particular since there had been no comparison of prices between the imported 
product and the domestic product.   G/SG/M/10  
 Page 11 
 
 
 47. Regarding the issues concerning Mercosur, the  representative of the European Community  
stated that the regulation referred to by Argentina, Decision 17/96, was one which regulates the 
imposition of safeguard measures.  Since it was clear that there was an obligation in the Agreement on 
Safeguards to notify the legislations and regulations applying or implementing the Agreement on 
Safeguards, this notification needed to be sent to the Committee on Safeguards, as it was that 
committee which was the competent Committee as concerns legislation on safeguar ds.  This was 
independent of the fact that it might be necessary to make a separate notification to the Committee on 
Regional Trade Agreements.  Concerning the substance of the matter, the Community understood that 
imports from Mercosur member countries ha d been taken into account in order to reach a 
determination of injury.  However, the measure was not to be applied to Mercosur countries.  The 
European Community had no difficulty with the application of Footnote 1 of the Agreement;  it was 
up to the Argen tine and Mercosur authorities to decide which option to select, but once they had 
selected an option they must be coherent.  It was not at all permissible that they take into account 
imports from Mercosur countries in order to reach a determination of inju ry and that the measure not 
be applied to these countries.  What was then the real effect of this safeguard measure if, as it seemed, 
a major part of imports reaching Argentina came from Mercosur?  
48. The representative of Uruguay  stated that Uruguay had n otified the Committee of a Safeguard 
measure imposed by Argentina, which had emerged from a determination by Argentina, after 
consultations undertaken by Argentina, of which Mercosur Members had been informed.  After all of 
the steps followed by Argentina in conformity with the requirements for the imposition of a safeguard 
measure, Argentina had imposed the measure and notified to that effect in document 
G/SG/N/10/ARG/1/Suppl.1.  The notification submitted by Uruguay acting as representative of the 
pro tem pore Presidency of Mercosur and in the name of Argentina (G/SG/N/10/ARG/1/Suppl.2), was 
sufficiently clear and delimited the scope of application for the safeguard measure imposed.  
Regarding the notification of the Mercosur Decision 17/96, in the case of Uruguay a decree was 
necessary to implement this regulation, which would be notified once it came into force.  
49. The delegate of Australia  shared the concerns expressed by the European Community, in 
particular with regard to the treatment by customs union s and free trade areas of the provisions of the 
Agreement.  Putting aside considerations of interpretation of Article XXIV:8 of GATT  1994, 
Members of free trade areas could not have it both ways and exclude their partners from the 
imposition of measures wh ile using their exports to justify injury determinations on third parties.  
Moreover, a temporary emergency that needed to go back to 1991 to demonstrate increased imports 
called into question the nature of the action, so it did not seem that safeguard act ion was the correct 
course.  
50. The representative of Brazil  sympathized with all the doubts and questions raised regarding 
regional agreements, but believed that the Committee should limit its attention to safeguards, and 
leave examination of regional agr eements and customs unions to the appropriate forum for that 
discussion, i.e. the Committee on Regional Trade Agreements.  Brazil understood that imports from 
Mercosur members were used in the investigation by the Argentine Commission, and noted document 
G/SG/N/8/ARG/1, Section 2, Part 7, in which the Commission explained why imports from Mercosur 
were taken into account: "it is reasonable to consider [imports from Mercosur] on equal terms for 
injury analysis purposes since in the absence of DIEM or protect ive measures there would be at least 
an equal flow of imports from the rest of the world into the Argentine Republic."  This was fully 
compatible with the terms of the Agreement. Article 4.2(a) establishes that the competent authority 
"shall evaluate all r elevant factors of an objective and quantifiable nature having a bearing on the 
situation of the industry".  Imports from Mercosur were relevant, they were examined in an objective 
and quantifiable nature, they had a bearing on the situation of the industr y, and it was appropriate to 
take them into consideration as an imperfect substitute for imports from the rest of the world.  G/SG/M/10  
Page 12 
 
 
 51. The delegate of Argentina  clarified that on the subject of notification of the Mercosur 
safeguards regulation, there was no obj ection to notifying this regulation to the Committee.  The 
problem was that the regulation was now in a transitional stage, which would end on 
31 December  1998.  If Argentina were to notify this regulation to the Committee, the Committee 
would conduct a re view of legislation which according to the provisions of its own Article 100 might 
be modified after the transitional period foreseen ended.  Thus, the Mercosur regulation was not 
complete, it was subject to possible modifications, only part of the regulat ion which concerned the 
transitional provisions was in effect, and this was why the measure had been taken under the 
Argentine legislation. Argentina would notify once the regulation as a whole had been defined.  
Concerning the inclusion of Mercosur import s in the injury analysis, Argentina recalled that 
footnote  1 of the Agreement states that "nothing in this Agreement prejudges the interpretation of the 
relationship between Article XIX and Paragraph  8 of Article XXIV on GATT  1994".  This issue 
would be th e object of a review by the Mercosur Common Market Council according to Article 8 of 
the determination imposing the measure.  
52. The representative of the European Community  remarked, in respect of imports from 
Mercosur, that Article 4.2(b) of the Agreemen t established that other factors which contributed to 
injury were to be examined and taken into account.  It was the Community's understanding that 
Mercosur imports fell into this situation and as such should not have been considered as part of the 
increas ed imports which contributed to injury, but rather as other factors.  It was not the intention of 
the European Community to analyze the issue of customs unions in this forum.  Rather, the issue was 
that in this particular investigation, the question of cau sality had not been resolved.  
53. Regarding the comments by Argentina and the European Community on the late circulation 
of notifications, the Chairman  stated that he believed this to be yet another illustration of the problems 
in the translation and distr ibution of documents currently being experienced by the Secretariat.  He 
hoped that Members appreciated that this problem is beyond the control of the Secretariat.  When 
notifications were received by the Secretariat, in this case, the Rules Division, they  were immediately 
forwarded to the documentation division for translation, and for immediate distribution in the original 
language.  In the case of this notification, because of its length, even circulation in Spanish was 
delayed due to the need for the 70 -odd pages of text submitted by Argentina to be retyped and 
proofread in Spanish.  The English and French versions were further delayed by translation.  As the 
Chairman had indicated earlier, demands on the documentation division had increased enormously, 
and due to conflicting demands and ever -changing priorities imposed on that division with no increase 
in resources, its personnel often were forced to set aside documents marked "Urgent" for others 
identified as even more urgent.  This was a problem that o nly an additional commitment of resources 
by Members could solve.  In addition, in this particular case, the delays might have been considerably 
less if Argentina had followed the agreed format for notifications of decisions to apply a safeguard 
measure (f ound in document G/SG/1), rather than, or in addition to, submitting such a lengthy text as 
the substantive body of its notification.  The Chairman did not mean to single out Argentina, as it was 
certainly not the only Member to follow this practice.  He r ecognized that Members might find it 
difficult to identify exactly which and how much information to include when using the notification 
format.  But, departing from the agreed format by providing the entirety of lengthy official documents 
might aggravate delays in circulation of notifications, causing problems for notifying Members and 
also for those reviewing notifications.  He urged all Members to bear these issues in mind when 
drafting their notifications, and to use the formats on which the Committee h ad agreed.  Additional or 
supplemental information could always be submitted for separate circulation, or left on file with the 
Secretariat for consultation by interested Members, if notifiers wished to provide more ample detail.  
54. The delegate of Argent ina clarified that the injury notification in no way constituted the 
totality of the record related to the investigation or to the work of the Argentine Foreign Trade 
Commission. This file, which was available for consultation with the Commission, was more  than six 
volumes in length.  The injury notification was just a synthesis, following the format agreed by the  G/SG/M/10  
 Page 13 
 
 
 Committee, which intended to reflect the minimum of necessary information considered as basic for 
the other Members to understand in greater deta il the investigative process, and in particular, the 
injury determination.  It was Argentina's intention to provide the Committee with as much 
information as possible on the investigation.  
55. The Committee took note  of the statements made.  
D. Korea - Safeguard investigation on certain dairy products  
56. The delegate of the European Community , referring to the Korean investigation into imports  
of certain dairy products, stated that this investigation had already received the attention of the 
Committee and recalled the special meeting of 21 February 1997 and the previous regular meeting of 
the Committee.  The European Community had recently held consultations on this issue with Korea 
under Article XXII of the GATT, and although there had been considerable ef forts on the preparation 
of these consultations by both sides, these had not led to any positive results.  The Community was 
considering what other steps to take in this matter.  
57.  The delegate of the European Community  identified the substantive issues  which in the view 
of the Community demonstrated a lack of consistency between the safeguard measure applied by 
Korea and the WTO rules. Regarding the finding of serious injury, according to Article 4 
paragraph  2(a) of the Safeguards Agreement, Korea must provide sufficient evidence that the 
producers of like or directly competitive products had suffered serious injury as reflected in a decline 
of profitability, sales, employment, market share, production capacity utilization and productivity.  In 
this part icular case, Korea had defined the domestic industry as the producers of raw milk and milk 
powder.  The Korean Trade Commission however, had not investigated the profitability of the Korean 
dairy farmers, which constituted over 90  per cent of the domestic industry, but had only investigated 
the financial situation of the petitioners, that is, the livestock cooperatives which purchase raw milk 
from their members and then process it.  The financial situation of the milk processors could not serve 
as an indica tor of the financial situation of the raw milk producers, because changes in raw milk 
prices had opposite effects on their respective profitability.  Furthermore, most economic indicators 
for the dairy farmers investigated by the KTC such as production, sa les, capacity utilization and 
productivity had shown positive trends.  Only employment and market share had fallen.  The latter, 
however, had increased during the last six months of the investigation period.  Although the milk 
powder producers seemed to ha ve suffered losses, Korea had not investigated data regarding 
employment, productivity and capacity utilization to establish trends.  The evidence provided by 
Korea did not show an industry in distress, and most importantly, Korea had not investigated all 
factors having a bearing on the domestic industry.  In the view of the Community delegate this 
constituted a clear violation of Article 4 paragraph 2(a) of the Safeguards Agreement.  
58. On the issue of causality, the delegate of the European Community  said that increased imports 
of milk powder blends could not have had an effect on employment or on the condition of the raw 
milk industry in general.  The raw milk price was fixed by the government at a high level and 
livestock cooperatives guaranteed all Kore an dairy farmers the purchase of their raw milk, therefore 
providing a guaranteed stream of income for the Korean raw milk industry.  Furthermore, the Korean 
Trade Commission had not attributed any injury to other factors, such as a public dispute over the  
quality of Korean milk, which had caused milk powder stocks to increase.  Finally, imports of milk 
powder blends by the domestic industry should have been considered as not having caused industry to 
the domestic industry because the domestic industry was responsible for these imports and had 
benefitted from them.  Alternatively, such imports should have been considered under the heading 
"other factors", since such injury was self -inflicted.  G/SG/M/10  
Page 14 
 
 
 59. The delegate of the European Community  recalled Article 2.1 of  the Agreement, which refers 
to the conditions under which products are being imported.  In the Community's view, this referred to 
a price analysis.  In the present case, although there was some evidence of price undercutting, sales 
prices for imports had increased over the preceding three years by 13 per cent according to global 
Korean data.  Therefore, the delegate of the EC considered that if Korea had conducted a proper 
analysis of import prices, this requirement was unlikely to have been met.  
60.  The delegate of the European Community  also referred to the measure itself and to the way in 
which the quota had been calculated.  The quota, which was the form of the measure adopted by 
Korea, had not been calculated in accordance with the provisions of Artic le 5 of the Agreement.  The 
quota was not based on the level of the most recent three -year period for which the statistics were 
available.  The Korean authorities had calculated the quota on the basis of imports from July  1993 -
June 1996 even though the inf ormation for the full year for 1996 was available when the measure was 
due to be applied i.e. March 1997.  Imports to Korea originating in the European Community had 
been much higher in the last semester in 1996 than in the last semester of 1993.  
61. The r epresentative of New Zealand  shared the concerns expressed by the European 
Community and remained unconvinced that Korea had satisfied the requirements of the Safeguards 
Agreement in justifying its safeguard action.  
62. The delegate of Australia  also supp orted the concerns expressed by the European Community.  
After consultations with the delegation of Korea, Australia remained unconvinced about the 
consistency of the safeguard measures that had been introduced.  Australia was particularly concerned 
about the way that Korea had approached the issues of domestic industry and directly competitive 
product.  Having taken all dairy farmers plus powder processors as the definition of domestic 
industry, Korea was then obliged to look at the injury question - wheth er there was injury, whether 
there was threat of injury and whether there was causation with respect to that entire domestic 
industry.  Australia did not think that this had been done with respect to dairy farmers.  It was not 
clear that injury to the powd er processors or causal link had been demonstrated.  The situation with 
the dairy farmers where the returns to dairy farmers were ensured by government policy in the form of 
higher milk prices, did not allow injury to be caused to them.  Overall there seem ed to be very little 
injury if any being caused to the domestic industry, and certainly not caused by the imports of the 
relevant products. There had been some reduction in the number of dairy farmers, but Australia 
understood this to be consistent with Ko rean government policy.  The high prices for all milk for 
dairy farmers had exacerbated what problems there were for the milk powder processors because of 
high-priced inputs.  This was hardly something that had been caused by the imports;  this was a matte r 
of government policy - government action.  
63. Australia  was also concerned about the way that Korea had bundled together all the products.  
Australia appreciated that Korea was faced with a technical issue of having a safeguards investigation 
of two catc h-all categories which for one reason or another had flat tariff entry under the Korean 
tariff.  There was quite a dispersion in products involved, as had been shown by the fact that after the 
event Korea had excised some of those products from the quota c overage.  Australia did not criticize 
Korea for excising products from quota coverage, but this did raise the issues of how these wide 
categories of products should be treated, and whether a more intensive analysis was necessary as to 
what the impact on th e market was.  Australia had yet to be convinced that a case had been made for 
the application of safeguard measures or for the level of quotas that had been imposed.  
64. The delegate of Korea  reminded Members that in February 1997, an entire special meeti ng of 
the Committee had been dedicated to this issue, and that consultations had also been held, where 
Korea had answered in full sincerity the questions raised by interested members, and had addressed 
their concerns to the extent possible despite internal  pressures from the domestic dairy producers. It 
was regrettable that some Members still had expressed their discontent with the Korean safeguards  G/SG/M/10  
 Page 15 
 
 
 measures.  Korea had exercised its rights provided for in the Agreement, to remedy serious injury to 
its dome stic dairy producers and to protect them from further injury by the surge of imports. Korea 
was confident that in applying this measure, it had followed all the notification requirements in 
conformity with the Agreement, and had done its best to ensure the  objectivity, neutrality and 
transparency of the investigation process and the determination of serious injury.  
65. The Committee took note  of the statements made.  
E. Progress in phasing out measures covered by Articles 10 and 11.1  
66. The Chairman  recalle d that Article 13.1(d) of the Agreement required the Committee to 
monitor the phase -out of measures covered by Articles 10 and 11.1, and that the Committee had 
decided, at its meeting of 24 February 1995, that such monitoring should be conducted on an annu al 
basis.  Two Members, the European Community and Korea, had notified pre -existing Article XIX 
measures covered by Article 10.  In addition, five Members, Cyprus, the European Community, 
Korea, Slovenia and South Africa, had notified pre -existing grey are a measures, along with timetables 
for the phase -out of such measures.  Each Member having so notified was asked to make a brief 
statement regarding its progress in phasing -out its notified measures.   
67. The Committee took note   of the fact that Cyprus wa s not represented at the meeting.  The 
Chairman  proposed that Cyprus be requested to report to the Committee in writing on its progress in 
phasing -out its notified measures.  The Committee so agreed .  After the meeting the requested 
progress report from Cy prus was received by the Secretariat and circulated as document 
G/SG/N/5/CYP/Rev.1/Suppl.1.  
68. The representative of the European Community  indicated that measures covered by Article  10 
would, in keeping with the requirements of the Agreement, be eliminat ed by 31  December  1999.  
Regarding measures covered by Article 11.1 the situation was as follows: Two of the measures had 
been terminated on 31  December  1996 i.e. the measures on canned sardines and canned tuna.  A third 
measure on coal, which was a restri ction administered by Spain, would be terminated on 
31 December  1998.  A fourth measure on lignite, which was a restriction administered by Austria, 
was terminated on 31 December 1996. Last, a fifth grey area measure, referring to supply limits of 
potatoes  to the Canary Islands, would remain in place until 1 November 1998.  In the meantime, the 
phase -out plan continued to apply as notified.  
69. The representative of Korea  indicated that Korea had notified two pre -existing Article XIX 
measures and five priva te sector voluntary arrangements described in Articles 10 and 11.1(b), as 
contained in documents G/SG/N/2/KOR and G/SG/N/5/KOR. Out of the two pre -existing measures 
notified under Article 10, one, import licensing restraints on salt fermented shrimp, had a lready been  
terminated on 31  December  1996.  The other measure, import licensing restraints on hot bean paste, 
was to be terminated by the end of 1999 as stipulated in Article 10.  Regarding the five voluntary 
export restraints, the measures on Korean exp orts of microwave ovens and colour picture tubes to the 
European  Community had been eliminated on 2 June 1997, well ahead of the notified timetable, that 
is at the end of 1998 and the end of 1997, respectively.  The three remaining measures would be 
elimin ated by the end of 1998.  
70. The representative of Slovenia  referred to the notifications made under the Safeguards 
Agreement in documents G/SG/N/3/SVN and G/SG/N/5/SVN, and provided information about the 
phase -out plan of the measures notified in these do cuments.  On 1 January 1997 Slovenia abolished 
the export tax for all the products that were notified in the documents mentioned except for wood in 
the rough, for which the export tax had been reduced from 15 per cent to 4 per cent, and would be 
eliminated  by the end of 1998.  G/SG/M/10  
Page 16 
 
 
 71. The representative of South Africa  indicated that regarding the measures identified in the 
phasing -out timetable notified in document G/SG/N/5/ZAF, the phase -out schedule was proceeding as 
planned.  He also reported that the measur es applying to polymers of propylene, tyres and tubes had 
been phased -out by December 1996 in the case of polymers or propylene, and by February 1997 in 
the case of tyres and tubes.  In the case of tyres and tubes, automatic import licensing requirements 
still applied.  Regarding the measures applying to oil and petrochemical products, the target date for 
phase -out remained the end of 1998.  
72. The Chairman  reminded Members that any delegation that wished to receive a written 
response to any question raised  under this agenda item should submit the question in writing, to the 
Secretariat and to the notifying Member, no later than 19 November.  Written responses to any such 
questions would need to be received not later than 17 December.  
73. The Committee took note of the statements made.   
F. Other business  
74. The delegation of the United States  informed the Committee that on 26 September 1997 the 
US International Trade Commission had initiated an investigation on wheat gluten (H.T.S. 1109.00.10 
and 1109.00.90 ).  This investigation had recently been notified to the Secretariat, but the notification 
had not yet been circulated.  
75. The Committee took note  of the statement made.  
G. Annual report to the Council for Trade in Goods  
76. The Committee adopted  its annu al report to the Council for Trade in Goods (subsequently 
circulated as G/L/200).  
H. Date of next regular meeting  
77. The Committee decided  that its regular Spring meeting for 1998 would be held on 
22 April  1998, that is, in conjunction with the regular me etings of the Committees on Anti -dumping 
Practices and on Subsidies and Countervailing Measures.  
78. The Chairman  reminded the Committee that previously -reviewed legislative notifications 
would be placed on the agenda of the Spring meeting only if question s concerning such notifications 
were received from Members no later than six weeks before the meeting, and that such questions 
should be submitted directly to the Member concerned and to the Secretariat.  Members receiving 
such questions were reminded to s ubmit their written answers no later than two weeks before the 
meeting so that the discussion at the meeting could proceed on the basis of the written questions and 
answers.  
79. The meeting was adjourned . 
__________