RESTRICTED
WORLD TRADE G/SG/M/8
10June1997
ORGANIZATION(97-2399)
Committee onSafeguards
MINUTES OFTHE SPECIAL MEETING
HELD ON21FEBRUARY 1997
Chairman: Mr.A.Buencamino (Philippines)
1. TheCommittee onSafeguards ("theCommittee") heldaspecial meeting on21February 1997,
called attherequest oftheEuropean Community. TheChairman recalled that, assetforth in
WTO/AIR/523 dated 11February 1997, theEuropean Community hadrequested thisspecial meeting
todiscuss thesafeguard investigation oftheRepublic ofKorea ondairy products. Atthemeeting, the
delegations ofColombia andArgentina requested theChairman 'spermission toraiseadditional items
as"other business".
Discussion oftheRepublic ofKorea 'ssafeguard investigation ondairy products
2. Thedelegation ofKorea requested thattheChairman clarify therationale fortheconvening
ofthemeeting. Thedelegation oftheECstated thattheconvening ofspecial meetings attherequest
ofMembers wasanestablished GATT/WTO practice, andnoted thatArticle 13oftheAgreement on
Safeguards ("theAgreement") refers tocertain particular functions oftheCommittee, including general
vigilance withrespect toactions related tosafeguards. Thisdelegation stated thatinviewoftheEC's
doubts about theconformity withtheAgreement oftheproposed measure, which Korea hadnotified
would takeeffect on1March 1997, theECfeltthatitwasnecessary tocallthemeeting. Thedelegations
ofNewZealand andtheUSsupported anindividual Member 'srighttocallameeting, andthedelegation
oftheUSnoted thatsuchmeetings wereanexample ofthesystem working correctly, aswaiting until
aregular meeting oftheCommittee toaddress suchissues might prevent theCommittee fromoperating
asitshould.
3. TheChairmaninthisregardrecalledthattheCommittee'srulesofprocedure(G/SG/4),including
rules 1,2and4,foresee thepossibility ofspecial meetings being heldattherequest ofindividual
Members, inthattheDirector-General isauthorized tocallmeetings oftheCommittee upon atleast
10daysprior notice, aswasthecaseforthismeeting. Only ifashorter advance notice period were
requested byaMember would concurrence byamajority ofMembers benecessary, withrespect to
theshorter notice period butnotwithrespect towhether themeeting should takeplace. TheChairman
stated thatitwould bedifficult toimagine onwhatgrounds theDirector-General could refuse tocall
ameeting requested byaMember, orhowtheDirector-General could onhisowncallameeting without
anyrequest fromtheMembership. TheChairman recalled thelongtradition intheGATT (inparticular
theTokyo Round) Committees ofspecial meetings being heldupon request ofindividual Members,
andnoted thattheWTO Agreement specifically provides thatcustomary practices oftheGATT should
guide theactivities oftheWTO anditsbodies. Henoted thatsuchmeetings canhavethesalutary effect
ofidentifying andairing substantive andprocedural issues, which mayinturnleadtonon-confrontational
resolution ofpotentially contentious questions. Inlightoftheseconsiderations, theChairman suggested
thatitwould seem tobeintheinterests ofallMembers fortheCommittee tobeavailable asanadhoc
forum forsuchdiscussions.G/SG/M/8
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4. Therepresentative ofKorea indicated thatKorea stillhadquestions regarding therationale for
themeeting, noting thatthegrounds fortheDirector-General tocallspecial meetings arevague atbest,
thattherightofMembers torequest special meetings, which isspecifically provided forintheDSU,
forexample, isnotprovided forintheAgreement onSafeguards, andthattheflexibility inrules1and
2oftheCommittee 'srulesofprocedure exists toconvene special meetings todiscuss issues ofinterest
tothemajority ofMembers, forexample forthereview oflegislations, ashadbeen done bythis
Committee. Itwasimportant thatdiscretion beexercised inthecalling ofspecial meetings, toavoid
burdening delegations withaspecial meeting every timeameasure isproposed, particularly inview
ofthegeneral concern thatWTO meetings weretoofrequent. Korea alsowasconcerned thatthismeeting
might setaprecedent forthefuture. Notwithstanding these concerns, Korea welcomed theopportunity
todiscuss themeasure, andtoincrease other Members 'understanding ofit.
5. Therepresentative oftheECstated thattheEChadnotlightly requested themeeting, butrather
haddonesoduetoserious procedural andsubstantive concerns overhowtheinvestigation wasconducted,
andoveritsformal andinformal contacts withKorea concerning theinvestigation, inwhich theEC
believed thatithadnotreceived sufficient information toundertake thenecessary analysis oftheproposed
measure.
6. Asthiswasoneofthefirstinvestigations under thenewAgreement, precedents were being
set,andstrict compliance withtheAgreement therefore wasimportant, aseachoftheprocedures and
disciplines intheAgreement hasareason. TheEChadanumber ofsubstantive andprocedural concerns,
withrespect tothenotifications made byKorea, theconduct oftheinvestigation andtheconsultations.
7. On11June1996, theopening oftheinvestigation wasnotified. Thatnotification referred only
toanincrease inimports, nottoserious injury factors, although Article 12.2 requires thatsuch
notifications contain bothtypes ofinformation. InDecember 1996, Korea notified afinding ofserious
injury duetoincreased imports, which hadbeenreached sixweeks earlier. Thisnotification contained
neither adefinition norananalysis ofthelikeordirectly competitive product. Thus, noinformation
wasprovided onthescope ofthenational industry withrespect towhich serious injury wasfound.
Thenotification contained noinformation ontheprice ofimports, capacity utilization, productivity,
oronanyfactors other thanimports thatmight cause injury, although aconsideration ofsuchfactors
isrequired bytheAgreement.
8. Atthe25October 1996regular meeting oftheCommittee, andinbilateral consultations with
theKoreangovernment,theECdelegationhadrequestedadditionalinformation.Theinformationreceived
inresponse amplified somewhat theinformation thatalready hadbeenprovided, butitwasnotsufficient.
9. Korea'snotificationunderArticle12.1(c),concerningadoptionofaresolutiontoapplyameasure,
containedinsufficientinformationonseriousinjuryandcausation,andfailedtoclarifythekindofdecision
taken. Inparticular, thenotification stated thatthemeasure would beapplied, butthelastparagraph
indicated thatafinaldecision onthemeasure would betaken atasubsequent date.
10. Todefend itsrights under Article 12.3, theEChadrequested consultations, andthisrequest
hadbeencirculated on10December 1996indocument G/SG/7. On13December, theEChadreiterated
thisrequest. Itwasnotuntil4February 1997 thattherequested consultations were held. According
toArticle 12.3, consultations musttakeplace before ameasure isadopted. Asofthedateofthemeeting,
theECremained uncertain iftheconsultations were prior consultations inthesense ofArticle 12.3,
because theKorean delegation hadnotyetinformed theECabout thenature ofthedecision notified
under Article 12.1(c).G/SG/M/8
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11. Inaddition, intheEC'sview theconsultations were notconducted inconformity with
Article 12.3. Thatarticle provides thattheobject ofsuchconsultations isreviewing information notified
under paragraph 2,exchanging views about theproposed measure, andreaching anunderstanding as
tocompensation. Intheconsultations, ithadnotbeenpossible toreview theinformation because it
wasincomplete, ithadnotbeenpossible toexchange views onthemeasure, asthere wasinsufficient
information regarding Korea 'sprocess fortaking decisions regarding application ofmeasures, andthe
question ofcompensation hadnotbeendiscussed. TheEChadundertaken considerable effort toprepare
fortheconsultations, which included sending adetailed written questionnaire totheKorean delegation
before theconsultations. Theanswers provided during theconsultations wereincomplete andtherefore
unsatisfactory, andnowritten answers hadbeenreceived since theconsultations, although theusual
practice intheGATT wasthatwritten answers areprovided towritten questions.
12. TheEChadnotrequested themeeting justtolament thelackofprogress achieved uptothat
point. Rather, theyhaddonesobecause theyviewed thesituation asurgent. Moreover, Article 13
oftheAgreement establishes certain surveillance andmonitoring functions fortheCommittee. Among
these, under Article 13.1(c), theCommittee canassist Members withtheirconsultations, andforthis
role,itisimportant thattheCommittee havesufficient information toreview. Notifications therefore
arenotamere formality, andprior consultations mustbesubstantive, withsufficient information and
substantive exchange ofviews, andtheymustbeabletoaffect thefinaldecision regarding ameasure.
Ifthese obligations were notsubstantive, Members would simply turntodispute settlement where
differences ofviewarose.
13. Inthiscase, theEChadfound deficiencies inKorea 'sprocedures anditsnotifications. The
notifications wereincomplete andlate,andbecause ofthis,theconsultations hadnotbeenabletofulfil
theobjectives ofArticle 12.3. Regarding thebasis fortheinvestigation, intheEC'sview, the
investigation hadbeendeficient andhadnotmettherequirements ofArticle XIXandoftheAgreement
onSafeguards.
14. Therepresentative oftheECidentified thefourfactors alleged byKorea tojustify themeasure.
First, theshare ofthemarket heldbydomestic producers haddeclined from91.1% in1993 to85.4%
in1996. IntheviewoftheEC,suchalossofapproximately fivepercentage points ofmarket share
wasnotsufficient toestablish serious injury, which isadifferent standard from the"material injury"
standard applicable inthecontexts ofanti-dumping andcountervailing measures. Second, regarding
theindustry 'sprofitability, onlylimited information wasprovided, andthatinformation raised questions.
Inparticular, notonlytheactivities related toproduction ofdairy products were included, butalso
activities oflivestock producers. Inaddition, thedataconsidered intheinvestigation covered only25%
ofpowdered milkproducers. Third, thefactthat,according tothedatanotified, thenumber oflivestock
producers haddeclined wastheresult ofKorean domestic policy. Fourth, theincrease ininventories
wasattributable topublic debate inKorea concerning thequality ofdomestic dairy products, which
hadledtoadecline inconsumption andacorresponding increase instocks. Nevertheless, stocks had
beenmaintained at6%,which wasnotexcessive. IntheviewoftheEC,these datadidnotsupport
adetermination ofacausal linkbetween increased imports andinjury todomestic producers.
15. Regarding theanalysis ofcausation itself, therepresentative oftheECindicated thatnodata
hadbeenprovided ontrends inthedairy market asawhole, andpointed outthatbutter andcheese
could notbemade frompowdered milk, thattheKorean producers hadimported milkpowder andother
dairy products, andthatthese imports should beexcluded from theanalysis ofinjury.
16. Therepresentative oftheECalsostated thatArticle 2oftheAgreement requires ananalysis
ofincreased imports andtheconditions inwhich theyoccur. Korea 'sinvestigation hadnotanalyzed
prices, which according totheEC,form abasic condition ofimportation, andthusshould havebeen
analyzed. Inaddition, Article XIXofGATT 1994 requires anunforeseen increase inimports asaG/SG/M/8
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justification forameasure. Inthiscase, theincrease inimports occurred duetotrade liberalization.
Theindustry hadbeenveryprotected, soanincrease inimports wastobeexpected. Article XIXrequires
ademonstration thatsuchanincrease inimports wasnotexpected, andKorea hadmade nosuch
demonstration.
17. Thetimeperiod (1993-1995) onwhich thenotified quota levels hadbeenestablished alsoraised
concerns fortheEC.Article 5.1foresees establishing quota levels onthemostrecent three years for
which dataareavailable, andwithregard tosome oftheanalysis intheinvestigation, datafor1996
were included. Inestablishing thequota levels, however, onlydatathrough 1995 were used, which
wasinappropriate.
18. Because thiswasoneofthefirstinvestigations toreach theendoftheprocess, intheEC's
viewitwasimportant forboththeletter andthespirit oftheAgreement toberespected. Safeguard
measures were legitimate although exceptional measures, andtherefore were allowed onlywhen the
specific conditions were met. Thiscasefailed tomeettherelevant obligations, withrespect toboth
form andsubstance.
19. TheECtherefore requested thatKorea suspend application ofthemeasure untiltheappropriate
procedures werefollowed andsubstantive consultations held. Until then, theECreserved itsrightto
actunder Article 8oftheAgreement, andArticle XXII ofGATT 1994 andtheDispute Settlement
Understanding.
20. Therepresentative ofAustralia noted thatAustralia wasamajor exporter ofdairy products
toKorea. Australia wasconcerned withtheprocess andthecontent ofKorea 'sinvestigation andrelated
actions, andwiththeprecedents thatcould besetbythiscase. Australia hadconsulted bilaterally with
KoreaunderArticle12.3oftheAgreement,buthadfailedtoachieveprogressthroughthoseconsultations.
Therefore, Australia supported therequest forthespecial meeting. Korea 'sactions, notifications and
consultations hadbeenprocedurally andsubstantively deficient. Australia intended toexamine therange
ofoptions available toit,andreserved itsrights withrespect tothissituation.
21. Australia shared many oftheconcerns raised bytheEC. With respect toprocedures, there
hadbeenadelay inscheduling andholding theconsultations. Inparticular, on23December, Australia
hadrequested consultations withKorea, on21January ithadreceived aresponse fromKorea, andonly
on5February hadtheconsultations beenheld. Theconsultations hadbeenhindered byinadequacies
inthenotifications. Inparticular, thefailure toprovide theinformation required under Article 12.3,
andtheabstractedandsummarynatureoftheinformationthathadbeenpresented,hadledtosuperficiality
anddistortion. Moreover, Korea hadagreed tohold"prior" consultations onlyaftertaking thedecision
toapply themeasure. Inspiteoftheinadequacies oftheconsultations helduptothatpoint, Korea did
notwishtoconsult further, andasofthatdatehadnotresponded tothequestions raised byAustralia
intheconsultations.
22. Australia 'smain substantive concerns were overwhether Korea hadprovided therequired
information, andwhether ithaddemonstrated therequired causal linkbetween increased imports and
serious injury. Australia 'sspecific concerns were withrespect totheproduct definition usedinthe
investigation, withthedefinition oftherelevant sector orsegment ofthedairyindustry allegedly injured,
withthehandling oftheissue ofsubstitutability ofimports fordomestic products, andwiththelack
ofconsideration ofpossible factors other thanimports thatmight becausing thefinancial problems of
thedomestic industry. Examples ofsuchother factors werethe"antibiotic milk" issue which reduced
theconsumption oflocally-produced milk, andthepossible contribution ofthereform oftheKorean
milkindustry tothebuild-up ofsurplus milkstocks andtothereduction inthenumber ofdairy farms.
Inaddition, Australia wasconcerned overtheuseoftheperiod 1993-1995, which wasnotrepresentative
because, through theendof1995, Korea hadhadbalance ofpayments restrictions inplace oncertainG/SG/M/8
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ofthedairy products onwhich Korea proposed toapply themeasure. Moreover, Korea 'sexclusion
of1996 import levels from itscalculation ofquota levels wasinappropriate.
23. Inviewoftheseconcerns, Australia indicated thatmore information wasneeded, andthatmore
consultations should beheld. Australia joined theEC'srequest thatKorea delay application ofthe
measure untilthese concerns were adequately addressed.
24. Therepresentative ofNewZealand indicated thatitsconcerns were much thesame asthose
oftheECandAustralia. NewZealand hadacloseinterest intheinvestigation. Although NewZealand
wasnotatthetimeamajor exporter toKorea, itwasamajor exporter ofthesubject products generally,
anddidnotwantthismarket 'sdevelopment tobeimpeded. NewZealand hadcontacted theKorean
authorities directly, andtheTrade Minister attheMinisterial Conference inSingapore, toexpress its
concerns. Requirements forinformation under Article 12.1(b) and(c)hadnotbeenmet,andKorea
hadprovided mostly superficial information onserious injury andcausal link. NewZealand hoped
forbilateral resolution ofitsconcerns, butitsconsultations withKorea tothatdatehadbeeninconclusive,
andNewZealand continued tohavereservations regarding theinvestigation. Inaddition, NewZealand
hadconcerns overthenotifications andconsultations under Article 12.
25. Regarding theconduct oftheinvestigation, theinformation provided byKorea initsnotifications
andduring theconsultations wasnotsufficient toestablish serious injury andcausation. Inaddition,
there were insufficient grounds fortaking safeguard action. Therequirement inArticle XIXof
"unforeseen developments" hadnotbeenaddressed byKorea. Theincrease inimports citedbyKorea
wasduetotrade liberalization, andtherefore wasnot"unforeseen". Also, there wasnoevidence of
acausal linkbetween theincrease inimports andthealleged injury, astheKorean Trade Commission 's
("KTC 's")analysis wasbased onstock levels andimport patterns atahighlevelofgenerality, which
wasnotsupported bymore rigorous scrutiny. There hadbeennoconsideration ofother factors causing
injury, inparticular, thechanging structure oftheindustry caused bygovernment policy. Regarding
thecalculation ofthequota level, byexcluding theimport datafor1996 from thatcalculation, Korea
hadlimited thequota levelinamanner contrary totherequirements oftheAgreement.
26. NewZealand hadasked fordata, which ithadnottothatpoint received. NewZealand was
concerned withtheshorttimeframe fortheconsultations, astheconsultations weresupposed toprovide
amechanism toreview thegrounds onwhich asafeguard action would bebased. NewZealand therefore
urged Korea todefer itsfinaldecision onsafeguard action untilmeaningful consultations hadbeenheld.
Ifaction wasnotdelayed, thenextWTO avenue available foraddressing thecasewasdispute settlement.
27. Therepresentative ofKorea stated thatthequestions andconcerns raised bydelegations deserved
careful consideration, andthathisdelegation hadtaken noteofallofthem. Hewould notventure to
duplicate theconsultations thathadbeenheldtothatpoint, butrather, hewould make general comments
toserve theprimary purpose ofthemeeting, i.e.,toenhance Members 'understanding withrespect
tothesituation.
28. Regarding theprocedural concerns astothedecision-making process, Korea hadatwo-tiered
system. First, theKTC investigated thecomplaint andmade afinding regarding serious injury, and
thenrecommended ameasure, onthebasisofitsfindings, totherelevant authorities. Second, therelevant
authorities made afinaldecision regarding theproposed measure. Thedecision described inthe
21January notification wasnotafinaldecision butonlytheKTC'srecommendation oftheproposed
measure, priortofinalgovernment action. TheKorean authorities planned tomake theirfinaldecision
bythefollowing week, asstated atpage4ofthenotification. Therepresentative ofKorea indicated
inthisregard thatthereference toArticle 12.1(c) oftheAgreement inthatnotification might havebeen
confusing tothose whoarenotfamiliar withthetwo-tiered system.G/SG/M/8
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29. Therepresentative ofKorea recalled thatKorea hadmade three notifications withrespect to
theinvestigation. Thefirstofthese wasunder Article 12.1(a), regarding initiation. Thesecond was
under 12.1(b), regarding afinding ofserious injury. Thethirdwasunder Article 12.1(c), regarding
proposedapplicationofameasure.Thesenotifications,takentogether,containedallpertinentinformation
asrequired byArticle 12.2. Korea wasconsidering making anadditional Article 12.1(c) notification
regarding itsfinaldecision, withadditional information asnecessary, which might alsoserve asa
supplement totheanswers provided during thebilateral consultations andatthismeeting.
30. Korea hadheldconsultations withtheEC,Australia andNewZealand, from1to5February.
Theresults ofthose consultations werebeing considered bytheKorean authorities inpreparation for
theirfinaldecision. Thus, theconsultations hadbeenheldprior toadoption ofthefinalmeasure.
31. Regarding thesubstantive concerns thathadbeenraised, therelevant domestic industry had
beendefined astheindustry producing rawmilkaswellasthemilkpower industry. Themilkpowder
industry wasessentially asubset oftherawmilkindustry. Rawmilkspoiled quickly, sounconsumed
rawmilkwasturned intopowder within 5to6days. Most milkpowder wasproduced from excess
rawmilk, andthemilkpowder industry therefore absorbed thelion'sshare ofinjury inflicted onthe
milkindustry asawhole. Thatis,themilkpowder industry wasmore directly susceptible tomarket
forces, suchasincreased imports, thantherawmilkindustry. Forthese reasons, theinvestigation had
considered boththemilkpowder industry andtheentire industry. Anadditional reason wasthatthe
structure oftherawmilkindustry made data-gathering verydifficult. Inparticular, approximately 23,000
small-scale farming households produced rawmilk.
32. Theabsolute increase inimports waswell-documented inKorea 'snotifications, aswasthe
evidence ofserious injury. Inparticular, there hadbeenasubstantial decline inthesalesandmarket
share ofthedomestic industry, therehadbeena342% increase indomestic stocks oftheproduct, there
hadbeenadecline intheprice ofdomestic products, andmore thana20%reduction inthenumber
ofdomestic dairy farming households. Thecontraction oftheindustry wasnottheresult ofdomestic
policy. Livestock cooperatives hadsuffered particularly severe financial losses, because theyfeltthe
effects ofimports directly, astheyhadtoaccept excess rawmilk, process it,andstore theresulting
powder, withnoprospect ofsale. These cooperatives hadlostmoney, atever-wider margins, forthree
consecutive years, andthiswasanexample ofunforeseen developments.
33. Regarding causation, theKTChadproduced an11-page analysis initsreport, andthisdetailed
analysis wasnotfullyreflected inKorea 'snotifications. Thiscould havecaused some misunderstanding.
Infact,theKTC hadlooked atallrelevant factors thatmight havecaused injury, andhadconducted
apricing analysis. TheKTC hadfound nofactors other thanincreased imports tobecausing injury
ofsuchmagnitude aswasbeing experienced. TheKorean authorities might provide further information
onthese points asnecessary, upon itsfinalnotification ofthetaking ofthemeasure.
34. Regardingtheexemptionfromthemeasurefordevelopingcountries,onlyonedevelopingcountry
wasasupplier oftheproduct toKorea, andthatcountry would notbesubject tothemeasure unless
itsshare oftotalimports exceeded 3%.Korea hadsubmitted anotification tothiseffect, which would
circulate shortly.
35. Thecomments made byalldelegations atthemeeting would bedulyconveyed backtothecapital.
TheKorean mission inGeneva wasopentofurther requests forclarification ofother questions.
36. Therepresentative oftheUnited States stated, withrespect totheprocedural aspects ofthe
investigation, thattheUnited States hadbeenstruck bytherelative lackofinformation inthenotifications
provided byKorea, particularly thefirstthereof. TheUnited States recognized inthisregard the
difficulties ofmembers whose official language wasnotoneofthethreeWTO working languages, butG/SG/M/8
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stated thatitwould havebeenhelpful iftheinformation from theKTC'sreport hadbeenincluded in
thenotifications.
37. Regarding some ofthesubstantive points thathadbeenraised atthemeeting, therepresentative
oftheUnited States questioned theEC'sstatement thatprice analysis wasafundamental partof,and
wasrequired by,thereference intheAgreement andArticle XIXtothe"conditions" under which
increased imports takeplace. Regarding thecontrast drawn bytheECbetween "serious injury" and
"material injury" theUnited States hadnotunderstood thateither Article XIXortheSafeguards
Agreement addressed whether therewasasubstantive difference between thetwostandards. Regarding
theconcerns thathadbeenraised overtherepresentative period usedtodetermine thequota level, the
United States understood theEC'spoint tobethatthethree years usedwerenotthemostrecent three
years, andthatofAustralia andNewZealand tobethatdatafor1996werenotused, andthattheperiod
therefore wasnotrepresentative. IntheviewoftheUnited States, therequirement isnotthethatlast
three years form thebasis foraquota level, butthatthelastthree representative years forwhich data
areavailable form thisbasis. Inpractice, thisdistinction wassignificant.
38. Therepresentative oftheEC,responding tothestatement bytheUnited States regarding the
baseperiod forthequota level, andtheimplications ofArticle 5.1,stated thatKorea hadmade no
consideration ofwhether ornot1996wasarepresentative year. Byexcluding 1996, Korea hadmade
thequota levellower thanitwould havebeenif1996datahadbeenincluded. Regarding the"conditions"
ofimportation, thisreference mustinclude price. Ifitdidnot,itwasunclear towhatelseitmight refer.
39. Therepresentative oftheEC,responding tothestatement byKorea, expressed satisfaction that
additional information would beprovided, butstated thatthiswastheheartoftheproblem. Article 12.3
consultations haveadifferent goalfrom GATT Article XXII (dispute settlement) consultations, and
iftheinformation wasprovided afterthemeasure wasinplace, itwould notbepossible towork with
Korea asenvisioned under Article 12.3. Thatis,itwould bepossible totakethematter todispute
settlement, butnottoresolve itearlier. Theconsultations heldtothatpoint hadnotbeensufficient
toaddress allnecessary points.
40. Regarding Korea 'sresponses concerning theinjury andcausation analysis, theECnoted that
thestatistics provided byKorea showed thatmilkpowder producers hadbeenprofitable during themost
recent threeyears, andthatthelosses thathadbeenincurred werewithrespect toamuch broader base,
including livestock operations, etc.TheEChadreceived reports thatthemajor livestock cooperatives
which solddairy products hadrecorded vastprofits in1996, andthishadnotbeenexplained during
theconsultations. Korea alsohadtotally disregarded theconditions ofthe75%ofthemilkpowder
industry thatwasoutside thelivestock cooperatives. Thestatistics alsoshowed thatproduction bydairy
farmers hadincreased, inspiteofadecline inthenumber ofdairy farmers. TheArticle 4.2factors
pertaining toserious injury didnotsupport afinding ofserious injury. There hadbeenonlyafive
percentage point decline intheindustry 'smarket share, production hadincreased, andtheindustry 's
saleshadnotbeenaddressed. Theproductivity ofmilkpowder producers hadnotbeenaddressed, but
might haveincreased given thatthere were fewer farmers andcows, butmore milkproduced. This
wasnotevidence ofinjury, butrather ofnatural consolidation ofthisindustry, which wastaking place
allaround theworld andwhich wasinlinewithKorean policy. Moreover, capacity utilization, which
hadnotbeenaddressed byKorea, wasactually 100% formilkpowder production. Overall, these data
didnotshow anindustry indistress.
41. Asforcausation, Korea hadadmitted inconsultations thatthequality dispute accounted for
4,000 ofthe11,000-16,000 tonsofmilkpowder inventories. Moreover, there wasnodataonthe
development ofthewhole dairy product market, suchasregarding changes indemand forproducts
thatcould notbemade from milkpowder, butsuchinformation wascrucial given Korea 'sdefinition
ofmilkandmilkpowder asdirectly competitive products. Thisshould havebeenconsidered asafactorG/SG/M/8
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other thanimports intheanalysis ofcausation. Inaddition, theKorean industry hadimported large
amounts ofmilkpowder, andtheseimports should havebeenexcluded fromthedetermination ofinjury
andcausation. Therefore, there wasnoserious injury, andnocausal linkbetween increased imports
andthecondition ofthedomestic industry.
42. Therepresentative ofKorea stated thattheEChadmisunderstood theinformation regarding
theprofitability oftheindustry. Some companies wereprofitable overall, butsome ofthose hadmultiple
linesofbusiness, e.g.,milkpowder, dairy products, etc.Profits onsome other products could offset
thesecompanies 'losses onotherproducts. TheKorean industry 'slossof5.7% ofmarket share, referred
tobytheEC,hadbeensufficient toinflict serious damage tothemilkpowder industry inpartbecause
theimports wereconcentrated inthisarea. Korea didnotpreclude thatother temporary orlesser factors
affected theindustry, butrather found thatserious injury ofthismagnitude could havebeencaused
onlybytheincreased imports.
43. TheCommittee tooknoteofthestatements made.
Other business
44. Therepresentative ofArgentina stated thatearlier thatday,hisdelegation hadnotified opening
aninvestigation concerning shoes, andhadotherwise notified inthisregard under Article 12ofthe
Agreement. TheArgentine delegation hadreceived thenotification onlyafewhours before, sono
further information could beprovided atthemeeting, butthenotification wasinthehands ofthe
Secretariat andwould becirculated veryshortly.
45. TherepresentativeoftheUnitedStatesthankedtherepresentativeofArgentinafortheinformation,
andindicated thattheUnited States would review thenotification withinterest, inviewoftheagenda
forthemeeting oftheDispute Settlement Body totakeplace onthefollowing Tuesday.
46. Therepresentative ofColombia raised fourconcerns, andmade aformal request forinformation,
regarding theUnited States 'safeguard measure onbroom cornbrooms. First, Colombia questioned
themerits ofthebasis forthemeasure. Second, Colombia questioned theinformation regarding
application ornon-application ofthemeasure toimports from developing countries, inparticular,
Article 9.1ondeminimis. Third, Colombia questioned howitsshare ofthemeasure hadbeencalculated.
Fourth, inColombia 'sview, theconsultations thathadtaken placewiththeUnited States hadnotprovided
arealopportunity fortheviews ofColombia tobetaken intoaccount bytheUnited States inreaching
itsdecision onthemeasure andtheshare allocated toColombia. Colombia wastherefore requesting
certain statistical information tobetter understand themeasure. Inparticular, Colombia asked the
United States toprovide information for1990-1995 onimports bycountry oforigin, andinformation
for1993-1995 ondomestic industry production. Colombia would make thisrequest inwriting, with
acopytotheSecretariat.
47. Therepresentative ofHong Kong stated thathisdelegation alsohadconcerns about themeasure,
particularly astotheimplementation ofthedeveloping country provision under Article 9.1ofthe
Agreement. InHong Kong'sview, theUnited States hadbeenapplying Article 9.1oftheAgreement
ondeminimis imports from developing countries onanapparently selective andarbitrary basis. The
effect onHong Kong ofthemeasure wasminimal, butHong Kong nevertheless hadserious concerns
astothesystemic implications oftheUnited States 'invocation ofArticle 9.1andimplementation of
thedeveloping country provisions oftheAgreement. Hong Kong asked forclarification from the
United States onthedrawing upofthelistofbeneficiary countries under Article 9.1,andreserved the
righttorevert tothematter atalatermeeting.G/SG/M/8
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48. Therepresentative ofMexico indicated thatsince thefirstnotification fromtheUnited States
withregard totheinvestigation onbroom cornbrooms, hisdelegation hadbeenregistering itsconcerns
overtheinvestigation andhadindicated thattheinvestigation wasnotbeing undertaken intheproper
waygiven theprovisions oftheWTO concerning application ofsafeguard measures andtheinitiation
ofinvestigations ofthistype. Unfortunately, ameasure hadbeenapplied bytheUnited States onthis
product. Theresults oftheinvestigation confirmed thattheinvestigation never should havebeeninitiated,
andthatthere hadbeenaseries ofdeficiencies intheapplication ofthesafeguard measure. Mexico
hoped thattheUnited States would correct thesituation inlightofitsinternational commitments assoon
aspossible.
49. Therepresentative oftheUnited States stated thathebelieved thattheinformation requested
byColombia wasintheU.S. International Trade Commission 'sreport which wasonfilewiththe
Secretariat, where itwasavailable forreview byinterested delegations. Heindicated thathewould
check thatreport, andifthedatadidnotappear there, hewould provide them totheColombian
delegation. Healsostated, inresponse toHong Kong'sconcerns, thatasindicated intherelated
notification, theapplication ofArticle 9.1hadbeen determined based onthebeneficiaries ofthe
Generalized System ofPreferences asreflected intheUnited States 'version oftheHarmonized Tariff
System. Heleftittodelegations whether thiswasselective andarbitrary.
50. TheCommittee tooknoteofthestatements made.
51. Themeeting wasadjourned.