WORLD TRADE  
ORGANIZATION  G/SG/N/8/ARG/5 
G/SG/N/10/ARG/5 
G/SG/N/11/ARG/5 
26 April 2007 
 
 (07-1730) 
Committee on Safeguards Original:   Spanish 
 
 
 
NOTIFICATION UNDER ARTICLE 12. 1(b) OF THE AGREEMENT ON 
SAFEGUARDS ON MAKING A FINDING OF SERIOUS INJURY OR 
THREAT THEREOF CAUSED BY INCREASED IMPORTS 
 
NOTIFICATIONS UNDER ARTICLE 12.1(c) AND ARTICLE 9, FOOTNOTE 2, 
OF THE AGREEMENT ON SAFEGUARDS 
 
ARGENTINA 
 
Compact Discs-Recordable (CD-Rs)  
   The following communication, dated 13 Apr il 2007, has been received from the Permanent 
Mission of Argentina.  
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  NOTIFICATIONS UNDER ARTICLE 12.1(b) AND (c) 
 
Notification to the Committee on Safeguards when a Finding of Serious Injury or Threat Thereof 
Caused by Increased Imports is Made:  Notification when a Decision is Taken  
to Apply or Extend a Safeguard Measure  
 
  The investigation was initiated pursuant to  a request by the Argentine Chamber of 
Manufacturers of Magnetic and Optical Me dia (CAFMO), as notified in documents 
G/SG/N/6/ARG/6, dated 7 July 20 06, and G/SG/N/6/ARG/6/Corr.1
*, dated 10 July 2006. 
  The evidence gathered by the im plementing authority for this investigation is set out below. 
 1. Evidence of the serious injury or threa t thereof caused by increased imports and 
information on whether there is an absolu te increase in exports or an increase in 
imports relative to domestic produc tion (see Article 12.1 for the context) 
 
 1. Introduction:  situation in the market
 
 
 "Firstly, it is important to bear in mind that  the product investigated is a digital optical 
medium susceptible to the technological and commerc ial cycle characteristic of markets such as the 
computer, audio, video and data storage markets.  CD-Rs started to be produced in the early 1990s in 
factories in developed countries, but then ove r time and as processes were standardized production 
became concentrated in Asia, mainly in Taiwan, India and China. Production worldwide grew 
strongly and then stabilized around 2004 so global s uppliers are now converting their production lines 
to manufacture other media such as DVDs to repl ace CD Rs.  Global demand for CD-Rs has followed 
a trend similar to that for production, although in some markets, for example, in Latin America and 
the Middle East, there is still sizeable potential for expanding consump tion of this product. 
  In Argentina, CD-Rs started to be manuf actured towards the end of 1999 by the company 
IPC, joined by Teltron and Videolar in 2000 and 2001, respectively.  Since then, domestic output, 
wholly destined for the domestic  market, has increased every year with the exception of 2005, when 
there was a slight downturn.  This was at a ti me when domestic demand also showed strong and 
constant expansion, with the ex ception of 2002, which was atypical because of the macroeconomic 
crisis suffered by Argentina at that time.  In fact, between 2000 and 2005, apparent consumption of 
CD-Rs showed a marked upward trend as the pr oduct became widely available on the domestic 
market.  Although the rate of appa rent consumption decreased each year, there were annual increases, 
in absolute terms, from 25 to over 40 million CD -Rs, which shows that this market has not yet 
reached saturation or fatigue level, as has already been indicated for Latin America." 
  2. Unforeseen developments
 
 
 Article XIX.1(a) of the GATT 1994 provides the following:  
"If, as a result of unforeseen developments and of the effect of the obligations incurred by a 
contracting party under this Agreement, incl uding tariff concessions, any product is being 
imported into the territory of that contrac ting party in such increased quantities and under 
such conditions as to cause or threaten serious in jury to domestic producers in that territory of 
like or directly competitive products, the contrac ting party shall be free, in respect of such 
                                                     
 
* In Spanish only.  G/SG/N/8/ARG/5 
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  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." 
 
Consequently, the increased imports must be the result of two factors: 
 
(a) Unforeseen developments;  and 
 
(b) the effect of the obligati ons, including tariff concessions. 
 
 As regards subparagraph (b), the report of the Appellate Body in Argentina – Safeguard 
Measures on Imports of Footwear  stated the following:  "With resp ect to the phrase 'of the effect of 
the obligations incurred by a Member under this Agreement, including tariff concessions … ', this 
phrase simply means that it must be demonstrated, as a matter of fact, that the importing Member has 
incurred obligations under the GA TT 1994, including tariff concessions."
1 
  "In the case of CD-Rs in particular, Argentin a has contracted obligations that cover the 
product investigated, both in the form of general re gulations and by binding ta riffs at 30 per cent for 
those tariff nomenclature lines in which CD-Rs are classified.
2 
 
 In addition to the general explanation give n below, it should be recalled that CD-Rs only 
appeared on the market recently and they were not widely available at the time the Uruguay Round was negotiated.  Even though other optical inform ation media with a similar technological base 
already existed, the initiation of this investigation a nd a large part of the period it covers occurred ten 
years after the Round had ended. 
 
 Likewise, the existence of intern ational price cycles for industrial commodities  – as 
technology progresses, prices fall – as well as other developments that respond to normal competitive 
conditions, are all reasonably foreseeable circumstanc es, which were evaluated within the framework 
of the obligations contracted by Argentina.  
 The possible future of an industry that comb ines technological change, lower prices and mass 
consumption is therefore considered to be a reas onably foreseeable development, not only in the case 
of CD-Rs but also for other electr onics and data-processing-related products. 
  As explained in detail below, what did c onstitute an unforeseen development were certain 
changes in the global production pattern that resulte d in an overproduction crisis and the resulting fall 
in prices beyond that to be expected in the context of the sector's normal performance.   Firstly, it is important to highlight the changes in the location of global production centres over the period investigated.  Even though Asia still  predominated in global supply overall, over this 
period there was a sustained transfer of regional pr oduction from Japan and Taiwan to other countries, 
notably India, with lower production costs no doubt being one of the incentives.  In 2001, India 
accounted for less than 15 per cent of regional prod uction, but this figure rose to around 50 per cent in 
2005.
3 
 
                                                      
1 (WT/DS121/AB/R) of 14 December 1999, paragraph 91. 
2 In 2005, Argentina increased the tariff applied to 26 per ce nt, which then became almost 75 per cent 
of the bound tariff, but the increase in imports did not slow down. 
3 Based on the licences granted by Philips, there ar e producers in 21 countr ies, with Hong Kong, 
Taiwan and Japan having the largest number, although the biggest global producer – Moser Baer – is in India. G/SG/N/8/ARG/5 
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   The production process has become highly standa rdized and the owners of the technology 
have granted licences to various producers both in the aforementioned countries and in other regions. 
In addition, international trademarks, inter alia , under which CD-Rs are sold use supplies obtained 
from these production plants, which according to Philips' database number over 50. 
  These specific features of the way in whic h the CD-R industry is organized, against a 
background of growing demand, led to a situati on that caused significant imbalances in the global 
market.  For example, with the aim of taking advantage of the increase in global consumption, both 
new manufacturers and those already existing invest ed in the sector, causing a substantial increase in 
plant capacity.   During this global expansion of the market, suppl y tended to grow more rapidly than demand, 
causing an overproduction crisis that led to a price war in which prices fell sharply; despite this, the 
large stocks built up at the beginning of the cris is did not decrease but even increased in absolute 
terms.   The starting-point of the crisis could be situ ated in 2001, when world production increased by 
over 2,000 million units whereas demand only grew by  barely 1,000 million units – both figures in 
comparison with the preceding year – which meant that stocks more than tripled over this period.  In 
2002, production contin ued to outstrip demand so stocks once again increased and finally represented 
more than half of global production (see Chart No. 1).  
Chart No. 1 
Trend in the International Market for CD-Rs 
2000-2005 
 Source :  CNCE based on data in File No. 01/06. 
 500 2500 4500 6500 8500 10500 12500 
2000 2001 2002 2003 2004 2005 
YearVolume (millions of CD -Rs)  
0,0000,2000,4000,6000,8001,0001,2001,4001,600
Ratios and prices (US$/unit)  Global production  
Global demand  
Accumulation of stocks  
Average price  
Stocks/production ratio  
Production/demand ratio   G/SG/N/8/ARG/5 
 G/SG/N/10/ARG/5 
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   "From this moment on, production surpluses started to decrease and in 2005 supply and 
demand evened out.  In this situation, not only w as it impossible to absorb the accumulation of stocks 
dating from the start of the crisis but their absolu te levels increased, from 3,700 million units in 2002 
to just over 5,000 million in 2004 and 2005.  Th e stocks/production and stocks/demand ratios
4, in a 
situation in which both indicators continually incr eased, remained at a level of around 50 per cent, 
which is undeniably high.   Even though the overproduction which caused the crisis started to disappear, when supply and 
demand evened out towards the end of the period, th e sector was unable to achieve a reduction in the 
stocks/production and/or stocks/dem and ratios, which remained at levels over twice those in 2000. 
  Furthermore, the trend in average prices for imports into Argentina – as a reflection of the 
trend in international prices – shows that the larg est decrease actually occurred during the early years 
of the crisis, even though a less marked downward trend can also be seen over the remainder of the 
period.
5 
  It can therefore be concluded that this overp roduction crisis accelerated the natural downward 
trend in prices that could be expected as a result of  the 'technological maturity of the market', bringing 
internationally traded prices down to levels that did not allow producers to remain present in other 
markets.  As can be seen from the file, several European producers closed their plants because it was 
impossible to compete with the low prices reached during the initial period of the crisis between 2000 
and 2001.   The extent, gravity and duration of the crisis can be substantiated by the fact that, although 
European plants disappeared, global production a nd stock levels continued to rise, thereby 
maintaining or even accentuating the lo w prices at the international level. 
  In conclusion, the overproduction crisis a nd the resulting fall in prices were unforeseen 
developments, both when considering what was re asonably foreseeable for the negotiators of the 
Uruguay Round and for the major national producer s which until the late 1990s and early in 2000 – 
prior to the aforementioned internationa l crisis – started to produce CD-Rs." 
  3. Increased imports
 
  "During the period investigated, there was a su stained increase in imports and in unit terms 
CD-R imports rose from over 37 million in 2001 to almost 107 million in 2005, an increase of 183 per 
cent.  For the reasons mentioned above, imports in  2002 showed a significant decline but by 2003 had 
almost returned to their 2001 levels.  In terms of units, imports continued to increase strongly, but at 
lower rates:  94 per cent in 2004, 53 per cent in 2005 and 6 per cent in January-May 2006.  Despite 
the lower rate of growth in imports, it should be noted that between 2003 and 2005 annual increases – 
in absolute terms – were around 35 million units (see Chart No. 2). 
 
                                                     
 
4 These ratios take into account the accumulation of stocks in comparison with annual production or 
demand. 
5 Even though there was a change in the blend of imports during this period, which tended to bring 
down average values, it is considered th at this fact is not really pertinent in view of the 60 per cent decrease in 
the price of imports noted between 2000 and 2002.  Moreover, this approximation with international prices is 
the best source of information available in th e investigation with regard to this indicator. G/SG/N/8/ARG/5 
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  Chart No. 2 
Imports of CD-Rs into Argentina – Units and Linear Trend 
2000-2005 
 
 Source :  CNCE based on data in File No. 01/06. 
 
 "In order to avoid any bias caused by compari ng an incomplete year (with reference to the 
first five months of 2006 vs. a similar period for the preceding year), it was decided to examine the 
volume of imports over 12-month peri ods between June and May.  This revealed that imports showed 
a trend similar to that previously analysed although th ere were differences in the rates of variation.  
From this perspective, imports fell by 50 per cen t over the period June 2002–May 2003 and increased 
by 279 per cent, 53 per cent and 28 per cent over the corresponding periods in subsequent years. 
  Consequently, it was determined that during the period investigated imports of CD-Rs had 
increased significantly in absolute terms, thereby complying with the criterion laid down in Article 2 
of the WTO Agreement on Safeguards.  Imports we re also analysed in comparison with domestic 
production and this showed that the coefficient decreased when January-May 2006 was compared 
with 2001.   It is, however, considered that this compar ison shows a bias because the figures recorded at 
the beginning of the period are atypical in a certa in sense.  In 2001 (as in the preceding year) they 
were deemed atypical inasmuch as the domestic i ndustry was beginning production and only a low 
level of plant capacity was being used.  On the ot her hand, in 2002, the reasons were linked to the 
sharp fall in imports as a result of the devaluation of the national currency, which meant an extremely 
low imports/domestic production ratio.  For these r easons, it was considered that the most relevant 0 20.000.000 40.000.000 60.000.000 80.000.000 100.000.000 120.000.000 
2000 2001 2002 2003 2004 2005Volume (units)  IMPORTS  
Linear (IMPORTS) G/SG/N/8/ARG/5 
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  comparison was between the year 2003 and the peri od January-May 2006, when the imports/domestic 
production ratio (calculated in unit terms) rose from 110 per cent to 215 per cent over the period."
6 
 
 4. Causal link between the increased imports and the unforeseen developments  
  "As already indicated, the unforeseen developm ents were the global overproduction crisis 
which caused to a sharp fall in in ternational prices and a large increase in stocks, both factors having a 
significant impact throughout the period investigated .  Stock levels that largely exceeded consumption 
in various countries – including Ar gentina – together with restrict ed access to certain markets because 
of the application of trade protection measures
7 and price levels lower than  those required to enable 
the domestic industry to be viable in the long te rm, provided the conditions for the aforementioned 
increase in imports.  
 Although it must be remembered that dur ing the period analysed domestic apparent 
consumption exceeded plant capacity, there are two rele vant factors that mitigate the impact of this 
element.   Firstly, at no time did the domestic industry use plant capacity to the full, so imports were not 
simply complementary but became clearly competitiv e.  This becomes even clearer when analysing 
the commercial modus operandi  of various importers that only dealt with foreign makes and/or 
suppliers and did not therefore obtain supplies from domestic producers.   Secondly, the low prices at which imports entered, irrespective of their difference in 
comparison with domestic products
8, did not allow suitable conditions for investment to be created 
and the negative profitability was a decisive factor in the performance and grow th rate of the domestic 
industry.  In 2003, for example, plant capacity in the domestic industry was able to supply virtually 
70 per cent of apparent consumption, after havi ng more than doubled capacity in comparison with 
2001.  Subsequently, the industry's rate of growth st agnated in 2004 and came to a halt altogether in 
2005.  The fact that at a time when apparent consumption was growing the domestic industry was 
unable to use its production capacity to the full rein forces the idea that the increase in imports took 
over the place held by the domestic industry and did not solely supplement local supplies. 
  In summary, the causal link between unforeseen developments and increased imports is that 
the emergence of a significant volume of stocks worl dwide led to increased imports by means of two 
mechanisms:  firstly, the search for markets on whic h to sell the surpluses and, secondly, the resulting 
fall in prices allowing them to penetrate the Argen tine market.  Imports at prices lower than those 
required to achieve normal profitab ility in this industry did not only  take over the place held by the 
                                                     
 
6 The interannual variations in the ratio between imports and domestic production were: 280 per cent in 
2001, 49 per cent in 2002, 110 per cent in 2003, 149 per cent in 2004, 242 per cent in 2005 and 215 per cent in January-May 2006, calculated upon the basis of variables expressed in units. 
7 As already indicated, at the same time as large stocks were being built up, South Korea applied an 
anti-dumping duty against Taiwan and the European Union did the same against Taiwan and India (anti-dumping and countervailing duties respectively), and bearing in mind that the European Union market alone 
accounted for over 25 per cent of global demand in those years, this is anothe r factor in addition to the pressure 
exercised by these stocks both as regards the decrease in international prices and the entry of imports into 
Argentina. 
8 As will be explained later, although some users may be prepared to pay extra for specific international 
makes (certain imported CD-Rs), this determines a set of  prices for domestic products so any reduction in the 
higher prices would undoubtedly tend to lower the othe r prices and/or lead to an increased preference for 
products with internationally recognized trademarks. G/SG/N/8/ARG/5 
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  domestic industry but also meant that the latter could not grow at the expected rate because, as shown 
in the file, investment was no longer being made."  
 5. Conditions under which the products were imported
 
  "Against a background of increasing apparent consumption, imported CD-Rs penetrated the 
market deeply and from 2003 onwards – the year in which the market was divided approximately equally between sales of domestic products and imports – the latter dynamically increased and took 
over 70 per cent of apparent consumption during th e last period examined.  The share of imports in 
apparent consumption is of course slightly lower if  the two end points of the period investigated are 
compared (from 75 per cent in 2001 to 70 per cent in January-May 2006), but what is relevant is that 
they continued to account for a large share of the market.  As already indicated, an analysis using 
annual data for June to May of the peri od examined leads to similar conclusions. 
 
 It should be noted that the expansion in the domestic market was virtually taken up by 
imports, which accounted for almost 90 per cent of the increase in apparent consumption between 
2003 and 2005.  The slower pace of growth in imports  in the first five months of 2006 does not appear 
to be sufficiently marked to alter the growing trend in  import penetration or at least this slower growth 
does not appear to suggest that the share of im ports could noticeably shrink in the short term. 
 
 The large increase in the volume of CD-R imports coincided with a downward trend in the average f.o.b. price for imports (in dollars per unit) throughout the peri od investigated, which 
prompted a decrease in the price of like domestic products.  As can be seen, even if domestic CD-Rs 
were marketed at the same price as that of im ported products, in any event the domestic industry 
would have shown ne gative profitability. 
  Imports were replacing sales of domestic production on the domestic market and this process applied both to imports which entered at lower pric es (such as those from Taiwan), as well as those at 
higher prices (those from India).
9 
 
 It should be noted that, although India was the origin of the fastest growing imports in the 
Argentine market, over half of these imports betw een 2003 and 2005 were by companies for which 
India only accounted for 50 per cent of their supplies.  As already indicated, therefore, it is important to mention that in many cases sales on the domestic ma rket represent a blend of prices based on prices 
for different origins, so a comparison with the price of total imports is more relevant. 
 
 In addition, bearing in mind that some importe rs (whether subsidiaries of foreign companies 
or exclusive agents) sell well-known makes (for audi o purposes and/or as other information media), it 
can be expected that over a certain period of time higher prices for imports replace domestic 
production.  This would indicate that internationall y recognized makes have an effect on purchasing 
decisions, at least in cases in which the prices of domestic and imported CD-Rs are relatively similar." 
 
                                                     
 
9 This conclusion is reached by comparing the domestic prices of national production of CD Rs in bulk 
with the domestic prices of imported CDs (of all types), which were deemed to be the most relevant as they 
include all imports of the products investigated (unlike the third comparison which only covers a single importer 
representing 7 per cent of total imports) and until the end of the period CD-Rs in bulk were the most important 
imports.  G/SG/N/8/ARG/5 
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   6. Analysis of serious injury
 
  "Against a background of increasing apparent c onsumption, the domestic industry invested in 
expanding its production capacity so it could increase the volumes produced and sold, provide more 
specialized jobs and increase output (measured in te rms of the average physical output per employee).  
Nevertheless, despite the increase in all these variab les, during these years the industry's performance 
was negative as far as financial and accounting indicators were con cerned, thereby affecting its 
capacity to invest and increase output.  Moreover, the idle capacity available could not be reoriented 
to the market, which was being supplied by imports. 
  Domestic production of CD-Rs increased during all the years examined, with the exception of 2005 – when it fell by 6 per cent – while the increase over the first five months of 2006 (13 per cent) was significantly lower than that recorded in previo us years.  Domestic sales showed a similar trend to 
that described for production. 
  The level of employment in the domestic industry increased, with over 100 persons involved 
in production in January-May 2006, while producti vity per employee increased, except in 2003 when 
the growth in production was lower than the increase in the number of employees.  
 Domestic production capacity increased be tween 2001 and 2004 and thereafter remained 
constant, even though there was a marked increase in  apparent consumption.  The large increase in 
imports from 2003 onwards did not allow use of th e domestic industry's plant capacity to exceed a 
level that would enable it to take full advantag e of economies of scale and of the growth in the 
domestic market for a product that involved a high degree of technological change and, consequently, 
had a short life cycle.  In markets such as Argentin a's, its share of consumption is larger than in 
developed countries where the transition to alternative media is relatively advanced. 
  From 2003 onwards, there was a marked decline in the average profitability of the domestic 
CD-R industry and even taking into account the benef its of industrial promotion the price/cost ratio 
was lower for the major part of the remaining period .  Even though there was a slight improvement in 
the price/cost ratio during the first five months of  2006, this branch of industry still shows negative 
profitability.   The company Teltron, in particular, had a pos itive balance in 2003 a nd 2004 but negative in 
2005 and January-May 2006, whereas IPC – even ta king into account the benefits of industrial 
promotion – never managed to sell at prices that would cover its costs from 2003 onwards.  Lastly, 
Videolar experienced large losses in 2005 and in Janua ry-May 2006, although it was just profitable in 
2002 and 2004.   The negative profitability of national companies is related to the grow th in imports and the 
decrease in their average f.o.b. prices, which take n together – in view of imports' large share of 
apparent consumption – determine market prices and compel the domestic industry to align itself with 
these.   As a result, all the companies composing th e domestic industry had ne gative operating figures 
in their accounts at 31 December 2005, while in the previous three years two of these three companies 
had always shown the same negative performance.  In  the case of Teltron, in particular, the negative 
operating figures were recorded throughout the peri od investigated, whereas this was the case for IPC 
in 2002 and 2005 and for Videolar in the last three y ears.  Taking into account the benefits of special 
promotion regimes, the figures in the balance sheet s improved (except in the case of Videolar in 2004 
and 2005) and the companies had positive or negativ e figures alternately depending on the year.  To G/SG/N/8/ARG/5 
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  summarize, even though the balance sheets of th e three producing companies showed figures that 
were different, they highlighted difficult situations  with low (Teltron) or negative (IPC and Videolar) 
profits. 
 
 The balance sheets, however, contain information on variables that go beyond the like CD R product so it is necessary to examine in detail the specific accounts provided by the companies or the 
cost and price tables in order to determine more acc urately the profitability of this domestic industry.  
In this respect, the specific accounts of IPC and Vi deolar show that for both companies sales almost 
never reached the break-even point and only did so dur ing one year each because of tax benefits.  In 
the case of IPC, its sales level never reached th e break-even point from 2003 onwards, except in 2005 
because of tax benefits when it rose slightly above the break-even point.  In the case of Videolar, it 
was never able to reach the break-even point, ex cept in 2002, because of tax benefits, as already 
mentioned. 
 
 As for the direct figures for sales of CD-Rs,  it is calculated that since 2003 the accumulated 
losses of national companies amount to over Arg$8 million.
10 
  To summarize, the analysis of the cost and price tables, the specific accounts and the balance 
sheets of the companies shows that the domestic  industry faced daunting profitability problems 
throughout almost all the period examined.  The national companies, even though they were able to 
increase production capacity and consequently productio n, were not able to do so to the extent 
expected in the aforementioned context of increased apparent consumption.  Th is is explained by the 
negative impact of the imports, which affected the prices at which the domestic industry could sell its 
goods, and these were unable to achieve the levels needed to cover the co mpanies' total production 
costs. 
  Consequently, these profitab ility problems prevented the co mpanies from following up the 
growth of the market and also from generating suffi cient own funds to be used to increase production 
and expand production capacity in order to benef it from lower unit production and marketing costs. 
 
 Furthermore, as shown above, the domestic indus try was affected by the rate and amount of 
the increase in imports (in absolute and relative te rms), as well as the share of the domestic market 
taken up by the increased imports.   In conclusion, even though during the peri od investigated the domestic industry increased 
production, sales on the domestic market, the level of specific employment, output (measured in terms 
of the average physical output per employee) and pl ant capacity, the negative trend in the profitability 
indicators for the domestic industry at a time when there was a sizeable increase in imports at lower 
prices clearly constitutes a serious injury under the terms of the Agreement."   7. Causal link between the increased imports and the serious injury
 
 
7.a. Effect of other factors 
  According to Article 4.2(b) of the Agreem ent on Safeguards, it is necessary to examine 
whether factors other than increased imports are caus ing injury to the domestic industry at the same 
                                                     
 
10 This figure emerges from the cost tables of the co mpanies as well as the table of average costs for the 
domestic industry, together with the table of sales by the companies in terms of units, taking into account the 
differential between selling prices (with  tax benefits) and production costs.  G/SG/N/8/ARG/5 
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  time, in which case injury may not be attributed to  the increased imports.  Below there is a detailed 
analysis of the other factors taken into account by the Commission.  
• Trend in consumption 
  "As already pointed out, during the investigati on period, with the exception of 2002, apparent 
consumption showed a clear upward trend as a result of the mass availability of this product on the 
domestic market.  Even though the rate of increase in apparent consumption declined in all the years, 
over the period investigated apparent cons umption increased from 50.5 million units to 
149.9 million units.  Consequently, the trend in dema nd did not contribute to the injury suffered by 
the domestic industry."  
• Prices, technological developments and efficiency of domestic producers 
  "As pointed out when analysing the unforeseeab le developments, the accelerated decrease in 
international prices for CD-Rs during the period anal ysed – and consequently the price of Argentine 
imports – can mainly be attributed to overproducti on at the global level and the stocks that built up 
from 2002 onwards as a result, so technological de velopments, which by this stage had reached a 
highly advanced level, only had a minor impact.   On the other hand, in general terms, tec hnological progress means lower costs which, in a 
competitive situation, lead to lower prices, but this factor alone could not determine negative 
profitability for CD-R manufacturers that use a similar technological level.   In this respect, in the particular case of domestic producers, according to an INTI report
11, the 
production equipment available is adequate and is sim ilar to that used by international manufacturers.  
This would indicate that they had incorporated production-related technological developments and 
particularly so when they started to manufacture CD-Rs over ten years after their creation at a time when technology had already reached a high level of sophistication.   Consequently, in view of the homogeneity of the technologies used by domestic and foreign 
producers, technological progress could not be a factor affecting the downturn in the profitability of 
the domestic industry."  
• Efficiency of producers 
  "Firstly, the only concrete reference in the file  indicating that the cause of the injury is related 
to problems of efficiency is the cost structure for Moser Baer, which, in addition to not being verified 
by the National Foreign Trade Commission (CNCE), rela tes to the major producer in India, a country 
to which the European Union had applied count ervailing measures in June 2003 for a period of 
five years.  Consequently, the payment of subsidies affected costs for this origin so it cannot be taken 
as a parameter for the purposes of comparison.
12 
 
 Moreover, this investigation concerns the po ssible application of a safeguard measure, which 
would be accompanied by a plan for the reorganizati on of the domestic industry.  This entails the need 
                                                      
11 Annex III to ITDF GI/GN No. 01/07. 
12 In view of the fact that, for this same origin, the European Union reached a negative conclusion in a 
dumping investigation as there was no price discrimination, implies that the subsidies do not only affect export 
prices but are also linked to production costs. G/SG/N/8/ARG/5 
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  to make certain improvements in its commercial an d production efficiency.  As far as improvements 
in production efficiency are concerned,  these do not imply changes in technology. 
 
 As shown above, the technology used by domestic producers does not limit their efficiency 
but a ceiling is reached because higher production le vels cannot be achieved owing to the presence of 
imports.  To summarize, it is considered that varia tions in efficiency, in the context of a safeguard 
measure, did not constitute another factor to expl ain the serious injury to the domestic industry." 
 
• Quality of the product and makes 
  "As already pointed out, during the investig ation it was shown that the CD-Rs produced by 
the domestic industry not only used the same tec hnology in the production process but also the same 
raw materials, thus meeting the standards laid down by Philips, which licences CD-R manufacturers 
at the global level, so there can be no grounds fo r claiming differences in performance.  This was 
noted in INTI's reports on the qualit y of domestic and imported products. 
  Regarding the argument that the absence of inte rnationally-recognized makes in the domestic 
industry was an additional factor of injury, firs t of all, it does not appear from the information 
available that these represent the majority of CD-R imports into Argentina.  Secondly, inasmuch as 
there are no differences in performance betwee n domestic and imported CD-Rs, these products 
compete with each other and, regardless of a certain price difference for international makes, it is the 
decrease in their price that has eroded th e profitability of domestic manufacturers. 
  In this respect, quality and international tradem arks do not constitute a factor contributing to 
the serious injury to the domestic industry." 
 
• Life cycle of the product 
  "As mentioned in the section on like or direc tly competitive products, there are other products 
that replace CD-Rs and in any event have a be tter performance, while the market price of these 
imported and domestic products largely exceeds that of the product investigated.  It is also useful to 
point out that CD-Rs are used for particular purpo ses that make it difficult to envisage their immediate 
replacement, particularly when one takes into account  the need to change the hardware and also the 
high price of some of the new media available.   It can therefore be stated that competition fro m replacement products has been very limited to 
date so has had no significant impact on the selling pr ice of the product investigated.  With regard to 
the introduction of DVDs in particular, the level of replacement is governed by the existing stock of 
equipment using CD-Rs (both for audio and data  purposes), which are still in the majority in 
Argentina.  This can be seen from the fact that DVD imports in 2005 only accounted for 13 per cent 
of the apparent consumption of CD-Rs, and together  with the fact that they are only competitive for 
certain purposes, this confirms that they have not had any noticeable impact on prices. 
 
 Furthermore, the product has not reached satur ation point in the Argentine market, as can be 
seen from the trend in apparent consumption, whic h has risen sharply in the years examined.  To 
summarize, it is considered that the life cycle of the product and the introduc tion of some replacement 
media were not important factors in the domestic i ndustry's profitability trend and, as a result, did not 
materially contribute to the serious injury suffered by the domestic industry." 
  G/SG/N/8/ARG/5 
 G/SG/N/10/ARG/5 
 G/SG/N/11/ARG/5 
 Page 13 
  
  • Salaries and costs 
  "Firstly, the impact of the cost of wage incr eases was offset by the increase in productivity.  
There were no relevant changes during the period as re gards the share of wages in the cost structure 
and, even when wages did not increase, profitability in 2005 continued to be negative, with relatively 
insignificant changes.
13  It is thus clear that wage increases did not contribute to the serious injury 
suffered by the domestic industry."  
• Competition among domestic producers 
 
 "Some parties have indicated that it was the competition among domestic producers and their 
price policies which led to the aforementioned profita bility problems.  In this connection, it should be 
pointed out that domestic producer s only represented a majority on the domestic market in 2002, 
whereas for the remainder of the period they were always in a minority.  Prices were thus basically 
determined by the presence of imports at increasi ngly lower prices and from 2003 onwards they were 
not only the majority but also increased their market share.  In conclusion, competition among 
producers has not been sufficiently important to cons titute a factor contributing to the serious injury 
suffered by the domestic industry."  
7.b. Imports and serious injury 
 
 "As has already been pointed out in this documen t, serious injury is based on the fact that the 
domestic industry was unable to ach ieve a reasonable level of prof itability from 2002 onwards.  In 
order to establish the causal link between the serious  injury – shown through profitability – and the 
increase in imports and the conditions under which they entered, it is first necessary to examine 
whether there was a time link between the trends in these variables.  Secondly, it is necessary to 
analyse the existence of a causal link between these trends. 
  With regard to levels of profitability,  between 2002 and 2005 there was a clear downward 
trend both in the domestic industry's level of prof itability (price/cost ratio) and in the average 
f.o.b. prices of imports.  As can be seen fro m Chart No. 3, in 2000 and 2001 there was positive 
profitability coinciding with an average price leve l for imports of around US$0.5/unit.  Over the next 
biennium (2002-2003), the aforementioned price fell to US$0.20/unit, and during this period problems 
of profitability started to emerge as the price/cost ratio fluctuated around the unit.
14  Lastly, during the 
2004-2005 biennium the price of imports fell to US$0.12/unit while the average profitability in those years declined to 0.90;  and these figures were re peated during the period January-May 2006, which 
means that the trend indicated has not been reversed." 
 
                                                     
 
13 Regarding the effects of inflation, it should be noted that the price which increased the most during 
the period examined was that of the imported input, which is related to international prices and not to local 
inflation. 
14 It should be noted that the 2002 crisis does not appear to have triggered the profitability problems 
inasmuch as the price/cost rati o was slightly positive that year. G/SG/N/8/ARG/5 
G/SG/N/10/ARG/5 G/SG/N/11/ARG/5 
Page 14 
  
  Chart No. 3 
Imports (Amounts and Average F.O.B. Prices) and Profitability 
 
 
Year0.05  0.25  0.45  0.65  0.85  1.05  1.25  1.45  
2000  2001  2002 2003 2004 2005  Price/cost  and f.o.b. price coefficients (US$/unit)  
0 20406080100120
Amounts (millions of units)  
Price/cost domestic industry  
F.o.b. import price  
Imports
 
 Source :  CNCE based on data in File No. 01/06. 
 
 "Argentina's macroeconomic crisis led to a dr op in apparent consumption in 2002, which was 
accompanied by an even greater decline in imports, do wn to their lowest market share (35 per cent).  
With the exception of that year, imports consta ntly increased and during the periods 2003-2004 and 
2004-2005 showed the highest increase in absolute terms (around 35 million units annually), clearly 
denoting an upward trend throughout the period.   This shows that there was a correlation in time between the decline in profitability, the fall in 
average prices for imports and the increased amounts of imports. 
  Below there is an analysis of the causal link between the trend in imports (prices and volume) 
and the decline in profitability.  
 As already mentioned, between 2000/2002 th is market's performance had certain special 
features, particularly with regard to the market sh ares of the domestic industry and imports.  In 2000 
and 2001, the domestic industry's share was 9 per cent and 25 per cent, respectively, mainly owing to 
the fact that it had only recently started up, whereas in 2002 it had risen to around 65 per cent as a result of the macroeconomic crisis in Argentina, which caused a contraction in demand and, to a 
larger extent, in imports. 
 
 The domestic industry – following the sharp reduction in international prices – showed positive profitability in 2000 and 2001 and at the same  time captured a larger share of the market.  
Leaving aside the special situation in 2002, in 2003 imports virtually returned to their 2001 levels and  G/SG/N/8/ARG/5 
 G/SG/N/10/ARG/5 
 G/SG/N/11/ARG/5 
 Page 15 
  
  against this background the domestic industry mana ged to supply almost 50 per cent of the market, 
although its profitability was negative as a result of the low prices of the imports supplying the other 
half of the market. 
 
 From 2003 onwards, there was a sustained incr ease in the market share of imports, from 
51 per cent to 71 per cent in 2005, wh en they took up almost all th e increase in apparent consumption 
and prevented the domestic industry from increasing th e level of utilization of plant capacity – which 
never reached its maximum – and in a situation where prices were depressed prevented it from 
recovering its profitability, all of which mean t limiting and postponing investment projects. 
  As a result, since 2003 the increase in imports – both in absolute terms and in terms of market 
share – and the continued fall in their average prices constituted a limitation to which domestic 
producers had to adapt their prices and sales levels, accumulating a negative result of over 
Arg$8 million for sales at prices below production costs. 
  To summarize, the serious injury suffered by the domestic industry – which made it 
impossible for the industry to reach sales levels (p rices and amounts) that would allow it to achieve 
reasonable profitability in order to pursue the e xpected expansion of production when demand was 
growing – was caused by the increase in imports and the conditions under which they entered. 
 
 With regard to the requirement that injury should not be attributed to factors other than imports, already examined at the beginning of this section, the Commission found that the link established between imports (amounts and prices) and the losses suffered by the domestic industry were the only significant factor in the loss of profitability and sales by the domestic industry.  
Consequently, the impact of the other factors, wh ich had previously been examined, does not sever 
the causal link between the imports and the serious injury determined for the domestic industry. 
  Taking into account the foregoing, this Commi ssion found that the significant impairment 
suffered by the domestic industry was characterized by a significant decrease in profitability levels 
and the return on capital." 
 
 As a final conclusion, the Commission determined, on the basis of the analysis of the information contained in the file, that " … th ere was sufficient evidence that, as a result of 
unforeseeable developments and because of the obliga tions contracted by Argentina, imports of 
'compact discs-recordable (CD-Rs ) have increased in such quantiti es and under such conditions as to 
cause serious injury to the domestic industry that produces like or directly competitive products' in 
Argentina".  
2. Description of the product involved 
 
 Compact discs-recordable (CD-Rs). 
 
 This product appears under MERCOSUR tariff heading 8523.90.10.  
3. Description of the proposed measure 
  The definitive safeguard measure is in the form of minimum specific duties on imports of 
compact discs-recordable (CD-Rs), under MERC OSUR common nomenclature tariff heading 
8523.90.10 for a duration of three (3) years, as shown in the following table.  G/SG/N/8/ARG/5 
G/SG/N/10/ARG/5 G/SG/N/11/ARG/5 
Page 16 
  
   Year 1 Year 2 Year 3 
DIEM ($US/unit) 0.13 0.11 0.08 
 
4. Proposed date of introduction of the measure 
 
 The proposed date of introducti on of the measure is May 2007. 
 
5. Expected duration of the measure 
 
 The expected duration of the measure is three (3) years.  
6. Proposed date for the review to be held not later than the mid-term of the measure (for 
a measure with a duration of more than three years) 
 
 Not applicable.  
7. Expected timetable for the progressive lib eralization of the measure (if the expected 
duration is over one year) 
 
 Year 1 Year 2 Year 3 
DIEM ($US/unit) 0.13 0.11 0.08 
 
8. Information to be provided in the event of the duration of the measure having to be 
extended 
 
 Not applicable.  G/SG/N/8/ARG/5 
 G/SG/N/10/ARG/5 
 G/SG/N/11/ARG/5 
 Page 17 
  
  NOTIFICATION UNDER ARTICLE 9, FOOTNOTE 2 
 
Notification to the Committee on Safeguards of non-Application of a Safeguard Measure to 
Developing Countries under Article 9. 1 of the Agreement on Safeguards  
  
1. Description of the measure 
 
 Year 1 Year 2 Year 3 
DIEM ($US/unit) 0.13 0.11 0.08 
 
2. Product subject to the measure 
  Compact discs-recordable (CD-Rs). 
  This product appears under MERCOSUR tariff heading 8523.90.10.  
3. Specify the developing countries to which th e measure is not applied under Article 9.1 of 
the Agreement on Safeguards, and the import  shares of these countries individually and 
collectively 
 
Country Share 
China 1.61% 
Hong Kong 1.08% 
Mexico 0.41% 
Democratic People's 
Republic of Korea 0.34% 
Indonesia 0.22% 
Republic of Korea 0.04% 
Pakistan 0.01% 
Singapore 0.00% 
Philippines 0.00% 
Chile 0.00% 
Panama 0.00% 
 
 The share is calculated on the basis of the total number of units imported during the period 2003 2005. 
 
4. If there is a change in the list of deve loping countries exempted from the safeguard 
measure pursuant to Article 9.1, please notify 
 
 Not applicable. 
 
__________