WORLD TRADE
ORGANIZATIONG/TMB/23
20 April 2000
(00-1622)
Textiles Monitoring Body
SIXTY-FIFTH MEETING OF THE TMB
Note by the Chairman
1. The Textiles Monitoring Body met on 10, 11, 12 and 17 April 2000.
2. The TMB authorized its Chairman to provide WTO Members with the following information.
Notification under Article 6.11 of the Agre ement on Textiles and Clothing (ATC)
Argentina/Korea: imports of products of categories 229/629, 619 and 620
3. On 5 November 1999, Argentina requested consultations with Korea pursuant to Article 6.11
of the ATC and provided it with factual information, as referred to in Article 6.7.  Such information
was, at the same time, communicated to the Chairman of the TMB, who informed members of the
TMB, in accordance with the relevant provisions of Article 6, of the request for consultations,indicating the requesting Member, the products in question and the Member having received the
request.
4. Argentina had decided to apply provisionally, with effect from 29 October 1999, a transitional
safeguard measure for a duration of three years on imports from Korea of woven fabrics of synthetic
filament, whether or not impregnated, consisting of three quotas, on products of categories 619(woven fabrics of pure polyester filament), 620 (other woven fabrics of synthetic filament) and
229/629 (special woven fabrics/other woven fabrics of mixed filaments).
5. On 2 March 2000, Korea notified the TMB that the bilateral consultations concerning the
provisional safeguard measure Argentina had taken under Article 6.11 on imports from Korea
concerning products of categories 229/629, 619 and 620 had not produced agreement.  Korea,
therefore, requested the TMB to examine the matter and make appropriate recommendations, in
accordance with Article 6.   The TMB scheduled to conduct this examination at its 64
th meeting
starting on 13 March 2000 and invited the participation of representatives from both Argentina and
Korea.
6. On 10 March 2000, Korea informed the TMB that consultations had resumed with Argentina
after the above communication had been made and accordingly requested the TMB to defer its
examination of the matter until a later communication.  The TMB took note of this request.  On31 March 2000, Korea further communicated to the TMB that the resumed bilateral consultations had
failed to produce agreement and, thus, requested that the TMB examine the matter, and make
appropriate recommendations, in accordance with Article 6 of the ATC.
7. Article 6.11, which is the basis of the measures taken by Argentina, requires the TMB to
"promptly conduct an examination of the matter, and make appropriate recommendations to theMembers concerned within 30 days."  Article 6.10, which is relevant to the examination of
transitional safeguard measures applied under Article 6 without the agreement of the Members
concerned, states, inter alia,  that "[i]n order to conduct such examination, the TMB shall haveG/TMB/23
Page 2
available to it the factual data provided to the Chai rman of the TMB, referred to in paragraph 7 [of
Article 6], as well as any other relevant information provided by the Members concerned".
8. In reply to the invitation of the TMB, Argentina and Korea sent representatives to present
their respective cases.  Both Members made presentations and provided replies to questions posed by
the TMB.
9. The factual information and data provided by Argentina, referred to above, and the statement
made by the representative of Argentina, set out, inter alia , the following:
- For the purpose of determining serious damage under Article 6.11 of the ATC, the
National Commission for Foreign Trade (CNCE) of Argentina had recorded the
trends in the variables referred to in the ATC in the whole of the domestic industry
examined.  For the purpose of supplementing the official statistics on which the
analysis was based, the CNCE had carried out a sampling procedure involving themajor producers in this branch of the industry, whose output in 1998 accounted for
48.5 per cent of the total volume.  The geographical distribution of the enterprises
forming the sample ensured that it did not relate to a particular region or to any
special economic situation.  Consequently, the sample was sufficiently representative
of the whole of the domestic industry examined and of each of its constituentcategories, on the basis of which it was decided to apply a special transitional
safeguard in conformity with the rules adopted by Argentina.  The companies making
up the domestic industry were medium and small enterprises and over the past five
years their number had decreased as a result of predatory competition from imports.
Supply was much more concentrated and apparent growth in the market had largelybeen covered by imports.  The equipment installed in this branch of the industry
allowed it to supply all the products of the branch, although there was a fair degree of
specialization.  Although investment had fallen in the recent past after having grown
in particular in the first half of the last decade, the quality and diversity of production
in this branch of the textile industry completely ruled out the possibility of importshaving made inroads as a result of technological obsolescence.  The physical
characteristics, quality and uses of the products manufactured by this branch of the
industry were identical or similar to those of imported goods, the only difference
being price.  Disruption of the domestic industry could not, therefore, have been
caused by changes in consumer preference.   For the purpose of complying with the
provisions of the ATC on identification of the precise sectors of production within the
industry, categories consistent with installed supply (namely, in the present case,categories 229/629, 619 and 620) had been adopted by Argentina, which were
virtually identical to those used by the United States and Brazil.
- Argentina had first examined, in its general considerations, the evolution of certain
economic variables, as mentioned below, for the whole industry (covering all three
categories) producing woven fabrics of synthetic filament and mixtures thereof(excluding mixtures with cotton), whether or not impregnated, on a calendar-year
basis for the period 1995–1998, as well as for the year-ending May 1998 and
May 1999 periods.  Output had risen from 1995 to 1997, that trend being interrupted
in 1998, which marked the beginning of a decline that was continuing.  Output in the
year-ending May 1999 was 18 per cent below the corresponding previous period.Investment had increased considerably up to and including 1997, but had fallen
sharply thereafter.  As a result of investme nt and of the re-opening of some closed
factories there had been a large expansion of the production capacity in 1998, but this
expansion had ceased subsequently.  This expansion, however, had not been
accompanied by an increase in output and, due to the sharp rise in imports at lowG/TMB/23
Page 3
prices, capacity utilization had continued to fall in 1997, 1998 and in the year-ending
May 1999.  Employment had risen in 1996 and 1997 as output was increasing, but
fallen in 1998 below the 1995 level.  This trend had continued in the year-ending
May 1999, employment falling by 11 per cent compared to the corresponding
previous period.  This reduction had been accompanied by plant closures.Productivity had increased together with employment up to 1997 but, from 1998
onwards, had decreased less rapidly than employment, still remaining higher in 1998
and in the year-ending May 1999 to that in 1995.  During the period 1995 to
May 1999 average wages had remained practically at a constant level.  Imports of
woven fabrics in volume had experienced rapid growth from 1996 onwards, the rate
of increase in imports being each year much higher than the increase in apparent
demand.  In line with the increase in the ra tio of imports as a percentage of apparent
consumption, the ratio of imports as a percentage of domestic production had also
increased.  The average c.i.f. prices of imports from all sources had fallen
systematically since 1995 (from US$10.80/kg. in 1995 to US$5.74/kg. in the year-
ending May 1999).  The significant decrease in the average prices of imports in 1998
compared to 1997 (by 18.6 per cent), even more if one compares year-endingMay 1999 with the corresponding previous period (minus 26 per cent) could not be
dissociated from the fall in prices that followed the series of devaluations which took
place in south-east Asia during the second half of 1997, and one significant
contributory factor was the volume of imports from the sources (Korea, Chinese
Taipei) to which the damage was attributed.  Over the same period, exports, whichrepresented a small percentage of apparent consumption in this sector, experienced
sustained growth up to 1997 but fell in 1998 .  Exports rose again in the first five
months of 1999.  Overall, exports, whic h went mainly to the Customs Union of
Mercosur, were rising at a much lower rate than imports.  Their prices had shown a
marked decrease of about the same level as that of the average price of imports.  As aresult, the trade balance of this sector ha d shown a marked and growing deficit, which
rose from US$ 26.26 million in 1995 to US$ 70.73 million in 1998.  Because of price
deflation and the growing pressure of imports, domestic sales in volume terms had
fallen systematically from 1996 (when they had recovered as compared to 1995) to
the year-ending May 1999 period.  Similarly, average domestic prices had fallen
consistently in comparison with 1995, so that the amounts invoiced had fallen by
24 per cent when comparing 1998 with 1995 (and by 14 per cent when comparingyear-ending May 1999 with the previous corresponding period).  Inventories had
grown continually since 1996 as a result of the marked fall in domestic sales, which
had not been offset by growth in exports, and by the decrease in output at rates lower
than the decrease in domestic sales from 1998 onwards.  As regards indicators for
profitability and indebtedness, which were enterprise-specific and were, therefore,difficult to assign to a particular sector, the average performance and levels of
indebtedness of the enterprises investigated were taken to be representative of the
sector’s situation.  Profitability had been negative from 1995 to 1998, with the
exception of 1997.  There had been a constant rise in indebtedness as compared to net
equity, reaching a preoccupying level (77 per cent) over the year-ending May 1999period.  These facts individually and collectively showed that the industry in question
had suffered damage during the period investigated, and that the damage had
worsened over the most recent period as a result of the disorientation of markets
caused by imports, due to their low prices.
10. In addition to the overall examination of certain economic variables for the whole industry
producing woven fabrics of synthetic filament and mi xtures thereof (excluding mixtures with cotton),
whether or not impregnated, Argentina had analysed in detail, with respect to each of the individualG/TMB/23
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product categories subject to this  provisional safeguard measure, the evolution of imports and their
impact on the state of the domestic industry producing like and/or directly competitive products.
- With respect to products of  category 229/629  (woven fabrics of synthetic filament
mixed with other fibres, except cotton, coated and/or impregnated woven fabrics,
except for those covered with polyvinyl chloride or polyurethane), the trend inimports showed that imports in 1998 were 150 per cent higher than in 1995.
Comparing the year-ending May 1999 period wi th the  previous corresponding period
the increase was 15 per cent.  Because of the increase in imports the increase in
apparent consumption had not led to an increase in domestic output which, on the
contrary, had fallen sharply from 1997 onwards.  The share of the apparent
consumption held by imports had increased from 32 per cent in 1995 to 54 per cent in
1998, and to 57 per cent in the year-ending May 1999 period.  As a result of thelevels achieved by imports there had been declines in output, domestic sales,
domestic prices (also under the pressure of import prices), utilization of capacity,
employment and wages; exports also fell while inventories and (up to 1997)
productivity rose.  As mentioned above in the general considerations, the sector had
continued to make substantial investments in order to maintain its competitivenessand for years there had been a steady flow to industries demanding such fabrics.
However, as a result of imports, the share of apparent consumption held by the
domestic producers had fallen from 72 to 48 per cent between 1995 and the year-
ending May 1999.  Over the same period, the growth of imports exceeded that of the
domestic output by 166 per cent.  The excessive increase in imports during the periodunder investigation (i.e. between 1995 and the year-ending May 1999) had caused
serious damage to the industry manufacturing goods in category 229/629, none of
which could be attributed to technological innovations or changes in consumer
preferences.
- With respect to products of category 619  (woven fabrics of pure polyester filament,
whether or not textured), the trend showed that in 1998 imports were 471 per cent
higher than in 1995.  During the intervening period there had been a highly
significant and continuously rising annual trend and this trend had intensified in the
year-ending May 1999 period, when imports had increased by 81 per cent over the
previous corresponding period.  There had been a continuous and strong increase in
apparent consumption, significantly lower, however, than the increase in imports,
whose growth at very low prices had led to a fall in domestic output from 1997onwards, both in volume and in share of apparent consumption.  Imports had
increased their share of apparent consumption from 48 per cent in 1995 to 83 per cent
in 1998, and to 86 per cent over the 12-month period ending May 1999, showing an
increase of 14 percentage points as compared to the corresponding previous period.
As a result of the levels achieved by imports, there had been declines in output,domestic sales, domestic prices (also under the pressure of import prices), utilization
of capacity, employment and wages; exports also fell, albeit slightly.  At the same
time inventories and (up to 1997) productivity had risen.  The sector had continued to
make substantial investments in order to ma intain its competitiveness, as mentioned
above under the general considerations, and for years there had been a steady flow tothe industries demanding such fabrics.   However, as a result of imports, between
1995 and the year-ending May 1999, domestic producers had lost 70 per cent of the
share of apparent consumption while, over the same period, the growth of imports
had exceeded that of the domestic output by 499 per cent.  During the 12-month
period ending May 1999, as compared to the corresponding previous period, the ratioof imports over output had increased by 124 per cent.  The excessive increase in
imports since 1995 (i.e. during the period under investigation) had caused seriousG/TMB/23
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damage to the industry manufacturing goods in category 619, none of which could be
attributed to technological innovations or changes in consumer preferences.
- With respect to products of category 620  (woven fabrics of pure polyamide and other
filament), the trend showed that in 1998 imports were 117 per cent higher than in
1995.  During the intervening period there had been a significant and continuouslyrising annual trend.   There had also been an almost continuous increase in apparent
consumption, which was, however, significantly lower than the increase in imports,
whose growth at very low prices had led to a fall in domestic output both in terms of
volume and in share of apparent consumption.  Imports had increased their share of
apparent consumption from 69 per cent in 1995 to 85 per cent over the year-ending
May 1999 period.  As a result of the levels achieved by imports, there had been
declines in output, domestic sales, domestic prices (also under the pressure of importprices), capacity utilization, employment , productivity (in 1998) and wages; exports
fell as well, while inventories and productivity (up to 1997) rose.  The sector had
continued to make substantial investments, as mentioned above under the general
considerations, in order to maintain its competitiveness and, for years, there had been
a steady flow to the industries demanding such fabrics.  However, as a result ofimports, domestic producers had lost 61 per cent of the share of apparent
consumption between 1995 and the year-ending May 1999 while, over the same
period, imports had exceeded domestic output by 215 per cent.  The excessive
increase in imports since 1995 (i.e. during the period investigated) had caused serious
damage to the industry manufacturing goods in category 620, none of which could beattributed to technological innovations or changes in consumer preferences.
11. For all the reasons detailed in paragraphs 9 and 10 above, Argentina had concluded that there
was serious damage as a result of the increase in imports of the products belonging to the three
categories mentioned above, and had decided to apply the safeguard measures subject to the present
examination by the TMB.
12. The representative of Korea stated, inter alia , the following:
- the transitional safeguard measures taken by Argentina had neither been applied
sparingly, nor consistently with the provisions of Article 6;
- in view of the fact that Argentina resorted to the provisions of Article 6.11, which
refer to "highly unusual and critical circumstances, where delay would cause damage
which would be difficult to repair", it was difficult to understand that it had taken
eight months for Argentina to complete th e investigation regarding the determination
of the existence of serious damage, or actual threat thereof, to the domestic industry
producing like and/or directly competitive products, and a further three months before
the application of the safeguard measures.  In the view of Korea, the lapse of time
strongly indicated the absence of highly unusual and critical circumstances and also
that Argentina had violated the procedural requirements under Article 6.Furthermore, at the time of the application of the safeguard measures Korea had no
information on the methodology on how the quota levels had been set, in the absence
of any official import statistics being provided by Argentina;
- the consultations referred to in Article 6.11 were held more that 60 days after the date
of the implementation of the action, in violation of that Article;
- when assessing the evolution of imports in the context of Article 6.2, Argentina had
not taken into account imports taking place at the time, i.e. 29 October 1999, it had
decided to introduce the safeguard measures.  There was a five-month gap betweenG/TMB/23
Page 6
the end of the period investigated (i.e. up to May 1999) and the application of the
safeguard measures.  Therefore, Argentina had failed to establish the substantial
increase in imports under Article 6.2.  Argentina had also violated the provision in
Article 6.7 which states that "the information shall be related, as closely as possible,
to … the reference period set out in paragraph 8" of Article 6, which refers to "the 12-month period terminating two months preceding the month in which the request for
consultation was made";
- the specific and relevant factual information mentioned in Article 6.7 and provided by
Argentina did not establish that the Argentinian domestic industry had suffered from
serious damage.  Since the period investigated ended in May 1999, it could not reflect
the situation of the industry at the time of the application of the safeguard measures.
Moreover, the analysis of the economic variables set out in Article 6.3 made byArgentina was flawed since it lacked adequate reasoning as to why the alleged
changes in the economic variables should be considered as an indication of the
serious damage.  For example, Argentina had not provided any reason why the
decrease during the 12-month period ending May 1999 of domestic output in the
products belonging to the three categories was indicative of the serious damage of thedomestic industry.  In the view of Korea, this change rather indicated the structural
problems of the industry, since domestic consumption had increased by 35 per cent
during the same period.  Also, Argentina had argued that certain decreases in
investments and installed capacity in 1998 indicated serious damage to its domestic
industry.  Korea considered that in view of the significant increases in investmentparticularly between June 1997 and May 1998, an alleged drop in investment between
June 1998 and May 1999 was not necessarily an indication of serious injury.  In the
view of Korea, the low level of capacity utilization could be attributed to the
substantial increase in production capacity, in particular from 1997 to 1998.  There
was no explanation in the factual information submitted by Argentina as to why thealleged fluctuations in the low level of capacity utilization should be considered an
indication of serious injury despite the notable increase in production capacity;
- Korea found no analysis in the information provided by Argentina, pursuant to
Article 6.7, with respect to the causal relationship between the alleged serious
damage and the increased imports.  Moreover, Argentina merely stated that the
alleged serious damage could not be attributed either to technological changes or
changes in consumer preference, but did not provide an analysis refuting the possiblecausality between those factors and serious damage.  Korea considered that two
factors demonstrated the absence of causal link between the alleged serious damage
and imports.  First, the correlation between the increase in imports and the
performance of the domestic industry appeared low.  Second, the decreasing exports
of the Argentine industry during the period investigated was an indication that anydeterioration of the state of the domestic industry was attributable to its structural
problems and not to the increase in imports, because its performance in the export
market would have little to do with the increase in imports.  Korea concluded,
therefore, that Argentina had failed to discharge its obligation under Article 6.2 to
properly assess and prove the causal relationship between the increase in imports andserious damage to its domestic industry;
- Argentina had not demonstrated that the situation its industry was facing was that of
"highly unusual and critical circumstances, where delay would cause damage which
would be difficult to repair", as envisaged in Article 6.11.  Past rulings of the TMB
indicated that such circumstances had to be clearly demonstrated, that the expectationwas that the elements envisaged in Articles 6.2, 6.3 and 6.4 would indicate, asG/TMB/23
Page 7
unambiguously as possible the highly unusual and critical nature of the
circumstances, and that unless such circumstances were met any action taken under
Article 6 should be preceded by consultations between the parties.  In the present case
there was no evidence presented by Argentina that if the safeguard action had been
taken after due consultations the damage would have been difficult to repair.  Even ifArgentina had been justified in applying the safeguard measure, it should have used
the last 12 month period of the investigation to set the quota level.  Argentina should
have requested consultation with Korea immediately after it had made a
determination of injury in July 1999 so that the reference period could be the same as
the investigation period, i.e. June 1998-May 1999.
13. In addition to this general analysis of the safeguard measures taken by Argentina, Korea had
also analysed, with respect to each of the individual product categories subject to provisionalsafeguard measures, the evolution of imports and their possible impact on the state of the domestic
industry producing like and/or directly competitive products.
- With respect to products of  category 229/629  also, as explained above, Argentina
had not established the increase in imports at the time it had decided to introduce the
safeguard measure, as required under Article 6.2, and had failed to provide reasonedexplanations as to why the alleged changes in the variables should be considered an
indication of serious injury.  Therefore, Korea considered that Argentina had failed to
establish serious damage to its domestic industry.  As to the causal relationship
between the alleged damage and imports, Korea considered that the changes in the
economic variables might have been caused by factors other that imports.  Forinstance, the alleged increase in inventories may have been due to the increase in
production capacity and it was not explained how the alleged damage was attributed
to imports rather than to structural problems in the Argentine industry.
- With respect to products of category 619 , Korea considered that Argentina had failed
to demonstrate the increase in imports at the time it had decided to apply thesafeguard measure, since it had not provided sufficiently up-to-date import data.
Argentina had also failed to explain why the changes in the economic variables it had
examined should be considered as an indication of serious damage.  With respect to
the causal link between the increased imports and the alleged damage to the domestic
industry, Argentina had not provided reasoned explanations.  The low rate of capacity
utilization could be attributed to structural problems in the Argentine industry rather
than to increased imports.
- With respect to products of category 620 , Korea considered that Argentina had failed
to demonstrate the increase in imports in this category for the same reasons as
mentioned above for categories 229/629 and 619.  The determination of serious
damage made by Argentina was arbitrary as it was not based on a reasoned analysis
of the alleged changes in the economic variables set out in Article 6.3.  Also, thecausal relationship between the increase in imports and the alleged damage had not
been explained.  For instance, Argentina alleged that the increase in imports had
caused the decrease in exports.  This decrease could rather be attributable to structural
problems faced by the Argentinian industry and have little to do with imports.  In
addition, the required analysis on possible causes for damage other than an increasein imports had not been provided.
14. For all the reasons detailed in paragraphs 12 and 13 above, Korea requested the TMB to
recommend that Argentina rescind the safeguard measures applied on imports from Korea of products
of categories 229/629, 619 and 620.G/TMB/23
Page 8
Preliminary Comments and Observations
15. Recalling that, pursuant to Articles 6.10 and 6.11, it had to conduct an examination of the
matter referred to it, including the determination of serious damage and its causes, and make
appropriate recommendations to the Members concerned, the TMB considered that before embarking,
in accordance with Articles 6.2, 6.3 and, if appropriate, 6.4, on such a systematic examination of thesafeguard measures applied provisionally by Argentina, it would be necessary to address certain
procedural and substantive aspects involved in these cases, also in the light of some of the arguments
raised by Korea, applicable to all the three categories.
Compliance with the deadlines specified in Article 6.11
16. The TMB recalled that, according to Article 6.11, "[i]n highly unusual and critical
circumstances, where delay would cause damage which would be difficult to repair, action under
paragraph 10 [of Article 6] may be taken provisionally on the condition that the request forconsultations and notification to the TMB shall be effected within no more than five working days
after taking the action".  The TMB observed that the resolution establishing the safeguard measures
had entered into force on 29 October 1999 and that the respective request for consultation and the
notification to the TMB had been effected on 5 November 1999 which was within the deadline of "no
more than five working days after taking the action".
17. Article 6.11 also requires that the TMB shall be notified at the conclusion of the
consultations, but in any case no later than 60 or 90 days from the date of the implementation of the
measure, depending on, respectively, whether the consultations do not, or do produce agreement
between the two Members concerned.  The TMB noted that in the particular case subject to its
examination, since the consultations did not produce agreement, the 60-day deadline was applicableand that this deadline had expired before the end of December 1999.  However, Argentina had not
submitted any notification in this regard, either before or after the expiration of this deadline, while
Korea had requested the TMB to examine the matter pursuant to the provisions of Article 6 only on
2 March 2000, more than two months after the expiration of 60 days from the date of the
implementation of the safeguards.  Thus, the respective deadline had not been respected by either ofthe two Members and this, in the view of the TMB, ga ve rise to concerns.  The TMB observed that the
language of Article 6.11 does not specify explicitly which of the Members involved has to submit
such a notification within the deadline clearly defined.  However, it followed from the logic and
structure of Article 6, in particular of Articles 6.10 and 6.11, that the Member invoking the provisions
of Article 6.11 and applying a safeguard measure provisionally was under clear obligation to respect
also the relevant procedural requirements, includin g those related to notifications within established
time-frames.  It could be assumed as well that the Member affected by the provisional application ofthe safeguard measure would also have every interest in informing the TMB about developments as
expeditiously as possible, in particular in case of lack of agreement as a result of consultations, since
in these circumstances the provisionally applied safeguard measure would remain in place, at least
until the TMB would have conducted its examinat ion and made appropriate recommendations to the
Members concerned. The TMB also observed that the tight deadlines inscribed in Article 6.11 hadbeen defined on purpose:  while this provision enabled the importing Member to take action
immediately, on a provisional basis, the respective procedures had been accelerated compared to those
foreseen under Article 6.10 with a view to limiting th e uncertainties regarding the justification of the
measures, or lack thereof, thus introduced and limiting also the potentially adverse effects of the
safeguards applied in case they were not to be found justified by the TMB under the provisions ofArticle 6.
18. The TMB noted that Korea had viewed as a violation of the requirements of Article 6.11 the
fact that consultations were only held more than 60 days after the date of the implementation of the
measures.  The TMB also noted the indication given by the representative of Argentina according toG/TMB/23
Page 9
which official contacts between the two Members had been continuous in this matter.  The Body,
reiterating its concerns regarding the adherence to the deadlines specified in the relevant provisions of
the ATC, observed that neither Argentina, nor Korea had brought any such problem to the TMB’s
attention prior to the present examination.  Moreov er, following Korea's first request for a review of
this measure by the TMB, a further communication had been submitted by Korea, just three daysbefore the scheduled start of the examination of the measure by the TMB, requesting the TMB to
defer its examination of the matter until a further communication, since bilateral consultations had
resumed between Argentina and Korea.
Time-period covered by the factual information and data provided by Argentina and related issues
19. The TMB noted the argument of Korea according to which there had been a five-month gap
between the end of the period investigated and the application of the safeguard measures.  Korea held
the view that, as a result of this gap, Argentina had failed to establish the substantial increase inimports in the sense of Article 6.2 and violated the provisions of Article 6.7.  Also, the specific and
relevant factual information provided by Argentina had not established that the domestic industry had
suffered from serious damage, because this information could not reflect the situation of the industry
at the time of the introduction of the safeguard measures.
20. The TMB recalled that Argentina had decided to apply the safeguard measures provisionally,
on 28 October 1999, and that the measures had been implemented as from 29 October 1999.  The
TMB also noted that in the factual information, referred to in Article 6.7, Argentina had provided data
regarding developments in total imports as well as on the economic variables listed in Article 6.3 for
four calendar years (i.e. for the period 1995 to 1998) and, in addition, for two rolling-year periods (i.e.
for June 1997-May 1998 and June 1998-May 1999).  The Body recognized that providing data in thispresentation afforded a reliable means to analyse and compare developments in the Argentinian
domestic industry.  The TMB could not agree with the contention of Korea that practically all the
information referred to in Articles 6.2 and 6.3 should have been provided by Argentina reflecting the
situation of the industry at the time of the introduc tion of the safeguard measures, since, as claimed by
Korea, this would have required the submission of information and data for the period October 1998-September 1999 which would not have been practicable and was not required under Article 6.  The
TMB noted, however, that the reference period referred to in Article 6.8, that is "the 12-month period
terminating two months preceding the month in which the request for consultations was made"
corresponded, in this particular case, to the period August 1998-July 1999, for which information had
not been made available.
21. Recalling the provisions of Article 6.7, according to which "…the information shall be
related, as closely as possible, to … the reference period set out in paragraph 8 [of Article 6]", theTMB noted the statement made by the representative of Argentina that the period of investigation did
not necessarily have to coincide with the reference period referred to in Articles 6.7 and 6.8.  The
TMB was also aware of the view held by Argentina, expressed on a previous occasion involving a
comparable gap between the reference period and the actual period for which information had been
made available.  In that view, the period specified in Article 6.8 was not defined for the purposes ofanalysing the increase in imports referred to in the fi rst part of Article 6.2, but solely for the purposes
of calculating the quantitative restrictions should the Member conclude that it was necessary to apply
a transitional safeguard measure.
1  As to whether the increase in the total volume of imports has to be
observed in the period referred to in Articles 6.7 and 6.8, the TMB had stated, on the same occasion,
that the best practical way to ascertain that the products were being imported in increased quantitieswas to observe whether imports had increased during the period referred to in Article 6.8.
2
                                                     
1 See G/TMB/R/60, paragraph 10.
2 See G/TMB/R/60, paragraph 11.G/TMB/23
Page 10
22. As regards the time-period covered by the factual information submitted by Argentina, the
TMB continued to be of the view that its earlier observation, as reflected above, remained valid.  In
the present case, Argentina should have provided in the relevant factual data information at least with
respect to the developments in total imports and imports from Korea for the period August 1998-
July 1999.  At the same time, the TMB recognized that the formulation of Article 6.7 (i.e. that theinformation shall be related as closely as possible to the reference period) permitted certain flexibility
in providing information on the different economic va riables listed in Article 6.3, depending on the
availability of the relevant data and information.  However, the safeguard measures in question had
been applied by Argentina pursuant to the provisions of Article 6.11, which required the existence of
"highly unusual and critical circumstances, where delay would cause damage which would be difficult
to repair".  The TMB was of the view that the existence of such circumstances could only be proven if
information was provided regarding developments which occurred in the very recent period, i.e.during or very close to the reference period.
23. With reference to the five-month gap between the end of the period investigated (i.e.
May 1999) and the provisional application of the sa feguard measures in question (i.e. October 1999),
as raised by Korea, the TMB observed that the National Commission for Foreign Trade of Argentina
had made its finding regarding the determination of the existence of serious damage caused byincreased imports on 30 July 1999, on the basis of information including the 12-month period ending
in May 1999.  Therefore, had the Government of Argentina decided to invoke the provisions of
Article 6 soon thereafter, it could have provided all the information referred to in Articles 6.2 and 6.3
covering the reference period specified in Articles 6.7 and 6.8.  The TMB noted the explanation of the
representative of Argentina that this finding had only been a step in the internal administrativeprocedures, and that the formal determination of serious damage could only be made by the Minister
for the Economy and Public Works and Services.  In view of the administrative procedures involved,
this decision was made only on 28 October 1999.  Th e TMB considered that it would be inappropriate
for it to comment on the internal administrative proc edures involved in any Member’s recourse to the
provisions of the ATC.  The Body had to observe, however, that possible delays in taking decisions,as a result of such procedures, may have an impact on the findings and conclusions the TMB could
reach, in accordance with the provisions of the ATC, regarding the justification of the measures in
question or aspects thereof.
Argentina’s recourse to the procedures of Article 6.11
24. Turning to the view expressed by Korea that Argentina had not demonstrated that the
situation its industry was facing was that of "hig hly unusual and critical circumstances, where delay
would cause damage which would be difficult to repair", the TMB observed that on a number ofoccasions, in the context of earlier examinations of recourses to the provisions of Article 6.11, the
Body had already made a number of observations
3 which had defined the TMB’s attitude towards the
examination of similar cases.  Though some aspects affecting also the recourse to Article 6.11 had
already been addressed (see paragraphs 16 to 18 and 22-23 above), the TMB was of the view that, like
in any other cases involving the use of the provisions of this Article, substantive aspects of such arecourse and their possible implications on the conclusions to be reached, would have to be taken up
in the context of the detailed examination of the three restraints provisionally applied.
Other issues raised by Korea
25. The TMB observed that some additional arguments raised by Korea such as whether the
existence of serious damage had been successfully demonstrated and whether the causal relationship
                                                     
3 See G/TMB/R/58, paragraphs 41 to 45, G/TMB/R/60, paragraph 22 and G/TMB/R/61, paragraphs 51
to 55.G/TMB/23
Page 11
between the serious damage claimed and increased imports had been established, or not, could best be
addressed when conducting a detailed examination of the respective safeguard measures.
Examination of the Safeguard Measures Category by Category
Category 229/629
26. The volume of total imports by Argentina of the products of category 229/629 increased by
15 per cent from the year-ending May 1998 period to the year-ending May 1999 period.  On a
calendar-year basis, compared to the previous year, imports increased by 50 per cent in 1998,
14 per cent in 1997 and 46 per cent in 1996.  Therefore it could be established, on the basis of the
information supplied by Argentina in the factual info rmation referred to in Article 6.7, that the volume
of total imports of these products had significantly increased during the period investigated, though it
appeared that this increase had decelerated in the most recent period for which data were available.
27. The TMB next turned to the examination of the possible effects of increased imports on the
state of the Argentinian domestic industry, as reflected in changes in the economic variables listed in
Article 6.3.  It was noted in this regard that Argentina had provided, in addition to the general
considerations analysing developments in the branch of industry producing all three products subject
to safeguards, category-specific information with respect to 9 of the 11 variables enumerated in
Article 6.3.  Information on investment had been given for the three categories taken together, whilewith respect to profits, the average performance of  the enterprises investigated had been taken to be
representative of the sector’s situation.  All the information had been provided with respect to the
same time-periods as those related to imports.
28. During the 12-month period ending May 1999, when imports increased by around
127,000 kg. (+15 per cent), apparent consumption increased by roughly 10,000 kg. (+1 per cent),while output decreased by about 148,000 kg. (-15 per cent), domestic sales of the local production by
66,000 kg. (-9 per cent).  During the same period exports decreased by 32,000 kg. (-26 per cent), and
the share of domestic output exported was of about 11 per cent.  In the calendar year 1998, with an
increase in imports of almost 324,000 kg. over 1997, apparent consumption rose by over 263,000 kg.
(+17 per cent), while domestic output decreased by 175,000 kg. (-16 per cent), domestic sales of localproduction by about 183,000 kg. (-21 per cent) and exports (representing 6 per cent of output) by
115,000 kg. (-68 per cent).  As regards developments in 1997 compared to 1996, imports increased by
78,000 kg. (+14 per cent), output decreased by 12,000 kg. (-1 per cent) while domestic sales of local
production decreased by 144,000 kg. (-14 per cent).  Exports increased by 53,000 kg. (+47 per cent)
but represented only 16 per cent of the domestic production.  These changes resulted in an increase of
about 12,000 kg. (+1 per cent) in apparent consumption.  In 1996, when imports increased by
179,000 kg. (+46 per cent) over 1995, apparent consumption increased by 307,000 kg. (+25 per cent),output by 200,000 kg. (+23 per cent), domestic sales of local production by 206,000 kg.
(+26 per cent) and exports by about 72,000 kg. (+169 per cent).  The market share taken by imports
had increased significantly during the period investigated: from 32 per cent in 1995 to 37 per cent in
1996, 42 per cent in 1997, 54 per cent in 1998 and 57 per cent in the 12-month period ending
May 1999.
29. Productivity, measured as output per employee, increased in 1996 (+5 per cent) and 1997
(+3 per cent), compared to the respective previous years.  It fell, however, in 1998 (-4 per cent), as
well as in the 12-month period ending May 1999, compared to the corresponding previous period
(-3 per cent).  According to Argentina, the steady increase in productivity up to 1997 was a result of
the need for enterprises to adapt to the new terms of competition imposed by the international market
and imports and was achieved through investment.  However, the information related to investment
could not be attributed to individual product categories.  The number of persons employed in the
production of this category of products increased by 17 per cent in 1996, and dropped by 4 per cent inG/TMB/23
Page 12
1997 and a further 13 per cent in 1998, compared to the previous year.  It dropped by 12 per cent in
the 12-month ending May 1999 period, compared to the corresponding previous period.
30. Production capacity decreased by 4 per cent in 1996, but since then increased consistently
over the previous year, by 7 per cent in 1997 and 12 per cent in 1998.  Production capacity increased
by 7 per cent in the 12-month period ending May 1999, compared to the previous correspondingperiod.  The TMB understood from the factual information provided by Argentina that this expansion
of the production capacity was in part the result of the investment made and in part the result of the
re-opening of factories that had previously been closed.  It observed that the increase in production
capacity had not been accompanied by a commensurate increase in output.  As a result, the rate of
utilization of the production capacity remained lo w throughout the period investigated (50 per cent in
1995, 64 per cent in 1996, 59 per cent in 1997, 44 per cent in 1998 and 42 per cent in the 12-month
period ending May 1999).  The TMB noted that, in the view of Argentina, the low rate of utilizationand its decreasing trend was due to the sharp rise in low priced imports.  The TMB observed that this
rate had already been low in 1995.
31. After a decline in 1996 over the previous year, end-product inventories increased both in 1997
(+38 per cent) and in 1998 (+104 per cent).  In the 12-month period ending May 1999, end-product
inventories were 58 per cent higher than in the previous corresponding period.  End-productinventories accounted for 17 per cent of output in 1995, whereas in May 1999 they had reached a
level of 43 per cent of production.
32. The average domestic prices of products of category 229/629 declined since 1995.  A
decrease by 2 per cent in 1996 was followed by a drop of 17 per cent in 1997 and a further 3 per cent
drop in 1998 over the previous year.  Average domestic prices were 4 per cent lower in the 12-monthperiod ending May 1999 than in the previous corresponding period.  In the factual information
Argentina explained that this evolution was a result of the domestic producers’ need to adapt prices to
those of the foreign competition to counter the lower prices of imports from the major sources, whose
average entered prices were lower at a comparable stage of commercial transaction.
33. The TMB, noting that average wages had remained at a similar level throughout the period,
considered that the information relative to wages did not provide a meaningful contribution to a better
understanding of the situation facing the Argentinian industry.  The same applied to profits, since
these were enterprise-specific and not product-specific.  The TMB noted, however, that according to
Argentina the domestic price squeeze and subsequent decrease caused by the price of imports had
resulted in negative profit margins.
34. The TMB noted that in the factual information provided, Argentina ruled out the possibility of
the difficulties experienced in the domestic market resulting from technological obsolescence or fromchanges in consumer preference.
35. Turning to an overall assessment of the state of the industry producing category 229/629
products, as reflected in changes in the various economic variables, the TMB recognized that the
factual information submitted by Argentina revealed a domestic industry facing difficulties. The
performance in 1995 had been exceptionally low as a result, as explained by Argentina, of therecession caused by the Mexican financial crisis.  A significant recovery of consumption, but also in
output, began in 1996, though the volume of the increase in output was only slightly above that of the
increase in imports.  Apparent consumption stab ilized in 1997 (imports growing while domestic
output was slightly decreasing), and picked up again in 1998, as imports were increasing further,
while the decline of domestic output accentuated.  It appeared from the data that some of thedifficulties experienced by the domestic industry had started in 1997 and accentuated in 1998.  An
analysis of the changes that occurred in 1998, in  particular in output, domestic sales of local
production, market share and inventories on the one hand, and in the volume of imports, on the other,
pointed to a situation where the domestic industry could suffer serious damage as a result, inter alia ,G/TMB/23
Page 13
of increased imports.  However, in answering the question as to whether increased imports had caused
serious damage to the domestic industry in the most recent period, further reflection seemed to be
necessary.  During the latest period for which comparable data had been provided, i.e. June 1998-
May 1999, imports continued to increase, but only at a slower rate, and while output declined further,
the decrease of the domestic sales of local output significantly slowed down.  Furthermore, as theinformation at the Body’s disposal did not go beyond May 1999, the TMB had no knowledge of the
developments that had taken place in June and July 1999, a period which was part of the reference
period set out in Article 6.8.  There were indications, however, that total imports slowed down further
in June-July 1999.  Against the background mentioned a bove, even if one could claim that increased
imports could contribute to serious damage to the domestic industry producing like and/or directly
competitive products, the TMB came to the conclusion that the overall situation in the most recent
period had not been characterized by the existence of highly unusual and critical circumstances, wheredelay in taking the action would have caused damage which would be difficult to repair.  The
difficulties experienced by the industry had started earlier and the situation, overall, had not worsened
during the latest period.  At the end of July 1999 (when the National Commission for Foreign Trade
made its finding), the data available for June 1998-May 1999 had not substantiated the existence of
highly unusual and critical circumstances.  The TMB observed that though Argentina had decided toapply the measure provisionally pursuant to the provisions of Article 6.11, it had not provided any
explanation or information in the relevant factual data which would  question the above conclusion.
36. The TMB noted the arguments of Korea that the alleged damage had perhaps been caused by
structural problems in the Argentine industry, and that the increase in inventories may have been due
to the increase in production capacity.  While the existence of problems of a structural nature couldnot be a priori  excluded, the Body observed that the representative of Korea had not explained what
kind of structural problems he had referred to and the TMB had no information at its disposal either
which would have enabled it to consider this argument more in depth.  Furthermore, the TMB was
unable to follow Korea’s reasoning regarding the impact of the increase in production capacity on the
level of inventories, since the increase in production capacity had not resulted in an increase of output.
37. The TMB recalled that in examining a previous  case involving recourse to the provisions of
Article 6.11 it had stated, inter alia , the following: "[w]hether … an inappropriate recourse to
Article 6.11 can invalidate a transitional safeguard measure or not, was, in the view of the TMB, a
decision to be taken case-by-case, on the basis of the consideration of all the relevant elements
involved" ( emphasis added )4.  In the present case the TMB, in its thorough analysis of the
developments affecting the Argentinian industry, was unable to identify any significant element of the
case where it could find that the situation corresponded to the circumstances defined in Article 6.11.
Conclusion and recommendation
38. The TMB concluded that Argentina had not demonstrated successfully that the products of
category 229/629 were being imported into Argentina in the reference period in such increased
quantities as to cause serious damage to the domestic industry producing like and/or directly
competitive products and, in particular, as to substantiate the highly unusual and criticalcircumstances where delay would cause damage that would be difficult to repair.  The TMB
recommended, therefore, that Argentina rescind the safeguard measure applied provisionally on
imports of these products originating from Korea.
Category 619
39. The volume of total imports by Argentina of category 619 products increased by 81 per cent
in June 1998-May 1999, when compared to imports of the corresponding previous period.  As regards
developments on a calendar-year basis, compared to the previous year, imports increased by
                                                     
4 G/TMB/R/61, paragraph 55.G/TMB/23
Page 14
71 per cent in 1998, by 75 per cent in 1997 and 90 per cent in 1996.  Therefore, it could be established
that the volume of total imports of these products had significantly increased during the last period for
which comparable data had been made available by Argentina in the factual information and that this
significant increase had been continuous throughout the period investigated.  Also, with a view to
refuting possible statements that this trend could be reversed if one considered developments duringthe reference period, the representative of Argentina provided import data during the TMB’s
deliberations for the period August 1998 to July 1999 and the corresponding previous period, showing
that total imports had increased by roughly 22 per cent during this most recent period.  The TMB,
while emphasising that it had to rely essentially on the information that had been made available
pursuant to Article 6.7 when the request for consultations had been made, noted that this additional
information did not call into question the conclusion it had reached above.  In the period August 1998
to July 1999, though the rate of increase in total imports had started to decelerate, the increaseremained substantial.
40. The TMB turned, therefore, to the examination of the possible effects of the increased imports
on the state of the Argentinian domestic industry as reflected in changes in the economic variables
listed in Article 6.3.  It was noted in this regard that Argentina had provided, in addition to the general
considerations analysing developments in the branch of industry producing all the three productssubject to safeguards, category-specific informa tion with respect to nine of the 11 variables
enumerated in Article 6.3.  Information on investments had been given for the three categories taken
together, while regarding profits the average performance of the enterprises investigated had been
taken to be representative of the sector's situation.  All the information had been provided with respect
to the same time-periods as those related to imports.
41. In June 1998-May 1999, when imports had increased by almost 4,300,000 kg., apparent
consumption increased by roughly 3,809,000 kg. (+52 per cent), while output decreased by almost
435,000 kg. (-19 per cent) and domestic sales of the local production by 205,000 kg. (-11 per cent).
During the same period, exports increased by 73,740 kg. (+38 per cent), but their ratio to output did
not exceed 15 per cent.  In the calendar-year 1998, with an increase of imports of slightly less than3,640,000 kg., apparent consumption rose by almost 3,240,000 kg. (+44 per cent), while domestic
output decreased by 407,000 kg. (-17 per cent), domestic sales of local production by 247,600 kg.
(-13 per cent) and exports (representing 9 per cent of output) by about 6,094 kg. (-3 per cent).  As
regards developments in 1997, compared to 1996, imports increased by 2,200,000 kg. (+75 per cent),
output also increased by 255,000 kg. (+12 per cent), while on the other hand, domestic sales of the
local production decreased by 115,000 kg. (-6 per cent). Exports rose by almost 86,000 kg.
(+77 per cent), but represented only 8 per cent of the domestic production.  These changes resulted inan increase of 2,370,000 kg. (+48 per cent) in the apparent consumption.  In 1996, when imports
increased by 1,384 kg., apparent consumption increased by 1,750,000 kg. (+55 per cent), output by
437,000 kg. (+25 per cent), domestic sales of local production by roughly 420,000 kg. (+25 per cent),
and exports by almost 65,000 kg. (+139 per cent).
42. In analysing the changes detailed in paragr aph 41 above, the TMB considered that the
performance in 1995 had been exceptionally low, which had resulted, as explained by Argentina, from
the recession caused by the Mexican financial crisis.  A significant recovery in consumption, but also
in output began in 1996, though the volume of incr ease in output represented roughly only one-third
of the increase in imports.  Consumption continue d to show a dynamic growth also in 1997, when
imports increased significantly, coupled with a much lower increase in output.  The data indicated thatthe difficulties experienced by the domestic industry had started in 1998:  while consumption and
imports showed an impressive increase, output declined, coupled with a decline in domestic sales of
local production.  This trend could also be observed during the latest period for which data had been
available (June 1998-May 1999).  It appeared, therefore, that as from the beginning of 1998 only
imports could take a real advantage of the dynamic growth of consumption.  The market share takenG/TMB/23
Page 15
by imports increased significantly during the period investigated:  from 48 per  cent in 1995 to
59 per cent in 1996, 70 per cent in 1997, 83 per cent in 1998 and 86 per cent in June 1998-May 1999.
43. Productivity, measured as output per employee, increased in 1996 (+5 per cent) and 1997
(+3 per cent), compared to the respective previous years.  It fell, however, in 1998 (-4 per cent) and
also in the period June 1998-May 1999 (-3 per cent).  Argentina explained in the factual informationthat the steady increase in labour productivity from 1995-1998 "was a result of the enterprises to adapt
to the new terms of competition imposed by the international market and imports, and was achieved
through investment".  Though information related to  investments could not be assigned to individual
product categories, the amount invested in the production of the three products subject to safeguards
seemed to be relatively modest (slightly more than 421,000 pesos) in 1995, followed by an increase of
174 per cent in 1996 and 249 per cent in 1997, compared to the respective previous years.  Investment
fell by 43 per cent in 1998 and by 37 per cent in June 1998-May 1999.  The number of personsemployed in the production of this category of products increased by 19 per cent in 1996, and by
9 per cent in 1997, dropping by 13 per cent in 1998 and 11 per cent in June 1998-May 1999,
compared to the corresponding previous periods.
44. The installed capacity decreased by 3 per cent in 1996, but this was followed by a significant
increase (+22 per cent) in 1997 and (+15 per cent) in 1998.  Compared to the previous correspondingperiod, capacity increased by 8 per cent in the period June 1998-May 1999.  The TMB understood
from the factual information that the relatively important expansion of installed capacity had been the
result, in part, of the investments made and, in part, of the re-opening of some factories that had been
previously closed.  It had to be observed, however, that the increase in the installed capacity had not
been accompanied by a commensurate increase in output.  Also, as a result, the rate of utilization ofthe production capacity remained very low throughout the period investigated (50 per cent in 1995,
65 per cent in 1996, 59 per cent 1997, 43 per cent in 1998, 52 per cent in June 1997-May 1998 and
39 per cent in June 1998-May 1999).  The TMB noted that, in the view of Argentina, the low rate of
utilization and its decreasing trend had been due to the sharp rise in low priced imports.  The TMB
observed that though increased imports could contribute to the low rate of utilization, this rate hadalready been very low in 1995.  Noting that, in the view of Korea, the low rate of capacity utilization
could be attributed to structural problems in the Argentine industry rather than to increased imports,
the TMB observed that it had no information to analyse whether structural problems had existed, or
not.
45. Inventories increased by 170,000 kg. (+13 per cent) in June 1998-May 1999, by 116,000 kg.
(+9 per cent) in 1998, by almost 270,000 kg. (+28 per cent) in 1997, though they decreased by
roughly 14,000 kg. (-1 per cent) in 1996.  While the Argentinian authorities attributed this trend to theimpact of increased imports, the TMB observed that compared to the level of output, inventories had
already been very high in 1995 (56 per cent), the respective ratios for the subsequent periods being
44 per cent (1996), 51 per cent (1997), 67 per cent (1998), 57 per cent (June 1997-May 1998) and
79 per cent (June 1998-May 1999).
46. The average domestic prices of category 619 products showed a continuously declining trend,
a decrease of 12 per cent in 1996 was followed by a further decrease of 3.5 per cent in 1997 and of
3 per cent in 1998.  Comparing the average domestic prices prevailing in June 1998-May
 1999  with
those of the corresponding previous period, a decrea se of 6 per cent could be observed.  Argentina
explained in the factual information that this trend was a result of the domestic producers' need to
adapt prices to those of the foreign competition to counter the lower prices of imports from majorsources, whose average entered prices were lower at a comparable stage of commercial transaction.
Though no information had been provided on the average prices of imports from all sources, the TMB
noted that data related to the average entered prices of imports from Korea seemed to support the
Argentinian statement.  The level of the average prices of imports from Korea, compared to the
average domestic prices of the Argentinian products showed the following trend: in 1995 the KoreanG/TMB/23
Page 16
import prices were 3.5 per cent higher than the domestic prices, but this was reversed in 1996, when
import prices from Korea were 1.1 per cent below the domestic prices; and as from 1997 this gap
substantially increased (1.8 per cent in 1997; 31.7 per cent in 1998, 25.3 per cent in June 1997-
May 1998 and 41.3 per cent in June 1998-May 1999).  These developments, in particular since 1998,
seemed to indicate that the increased volume of low-priced imports could put such a pressure on theArgentinian market that it could make it almost impossible for the domestic producers to remain
competitive.
47. The TMB considered that the information related to wages had not provided any meaningful
contribution to a better understanding of the situation facing the Argentinian industry.  The same
applied to profits, since this information was enterprise-specific and not product-specific.  The TMB
noted, however, that according to Argentina the domestic price squeeze and subsequent decrease
caused by the price of  imports had resulted in negative profit margins.
48. The TMB noted that in the factual information provided, Argentina had ruled out the
possibility of the difficulties experienced in the domestic market as a result of the technological
obsolescence or of changes in consumer preference.  It was observed that Korea had argued that
Argentina had not provided an analysis refuting the possible causality between these factors and
serious damage.  The TMB was of the view that Argentina had, at least, addressed this issue, and thatits statement did not seem to be without any foundation.  While investments made did not support the
existence of possible technological obsolescence, the nature of the products subject to the measure
called also into question the possibility of changes in consumer preference.
49. Turning to an overall assessment of the state of the industry producing category 619 products,
as reflected in changes in the various economic variables, the TMB recognized that the factualinformation submitted by Argentina revealed a domestic industry facing serious difficulties which
could have begun earlier, but which had become accentuated as from the beginning of 1998.  A
thorough analysis of changes, in particular in ou tput, domestic sales of local production, market share,
inventories and domestic prices on the one hand, and in the volume of imports and their price level,
on the other, revealed a situation where the domestic industry had been suffering serious damage as aresult of increased imports.  It could be concluded, therefore, that Argentina had successfully
demonstrated that increased imports of products of this category had caused serious damage in 1998
and in June 1998-May 1999 to the Argentinian domestic industry producing like and/or directly
competitive products.
50. In the light of the above the TMB proceeded to  the examination of the attribution of the
serious damage to imports from Korea.
51. The representative of Argentina stated, inter alia , that:
- the growing participation of imports from Korea in domestic apparent consumption at
decreasing prices appeared as an essential factor in the difficulties encountered by this
production sector.  In the 12-month period ending May 1999 imports from Korea had
increased by 81 per cent over the previous corresponding period, representing
51 per cent of total imports.  For the 12-month period ending May 1999, imports fromKorea amounted to 44 per cent of apparent domestic consumption;
- the average price of imports from Korea of the products of category 619 amounted to
59 per cent of the average domestic prices at a comparable stage of commercial
transaction in the 12-month period ending May 1999, having dropped by about
33 per cent as compared to the previous corresponding period.G/TMB/23
Page 17
52. The representative of Korea stated, inter alia , that:
- in its market statement Argentina, by not providing data as up-to-date as possible at
the time it had requested consultations with Korea, had failed to demonstrate that
imports from Korea of the products of category 619 were increasing sharply and
substantially.  Comparing imports from Korea in the period June 1998-May 1999 andAugust 1998-July 1999 showed that imports from Korea in the two months June-
July 1999 had decreased as compared to imports in June-July 1998.  Therefore, at the
time of the application of the safeguard measure the Korean products were no longer
being imported into Argentina in substantially increased quantities and the increase in
imports was neither actual nor imminent;
- the share of the Argentinian market for the products of category 619 held by imports
from Korea remained rather constant from 1995 to 1998;
- therefore, Korea considered that the attribution of the alleged damage to the imports
from Korea was improper.
53. The TMB recalled that according to Article 6.4, "[t]he Member or Members to whom serious
damage, or actual threat thereof, referred to in paragraphs 2 and 3 [of Article 6] is attributed, shall be
determined on the basis of a sharp and substantial increase in imports, actual or imminent, from such aMember of Members individually, and on the basis of the level of imports as compared with imports
from other sources, market share, and import and domestic prices at a comparable stage of
commercial transaction, none of these factors, ei ther alone or combined with other factors, can
necessarily give decisive guidance".
54. Considering the latest period for which comparable data had been available, it could be noted
that imports from Korea had increased by more than 2,175,000 kg. (+81 per cent) in June 1998-
May 1999, compared to the previous corresponding period.  Imports from Korea had increased by
roughly 1,528,000 kg. (+60 per cent) in 1998, by slightly above 925,000 kg. (+59 per cent) in 1997
and by around 586,000 kg. (+57 per cent) in 1996.  These developments, in particular in the latter
period, constituted by any standards, a sharp and substantial increase.  As to the level of imports fromKorea compared to imports from other sources, it was observed that the share of imports originating
in Korea in total imports represented 50 per cent in June 1998-May 1999, 47 per cent in 1998,
50 per cent in 1997 and 55 per cent in 1996, indicating that Korea had been the single most important
supplier to the Argentinian market.  Imports from Korea held a share of 44 per cent in apparent
consumption in June 1998-May 1999;  39 per cent in 1998;  35 per cent in 1997 and 32 per cent in
1996.  Regarding developments in the Argentinian domestic prices and prices of imports from Korea,
the TMB referred to the data indicated and the observations made in paragraph 46 above.  It alsoobserved that for the 12 months ending May 1999, the average prices of imports from Korea had
barely represented 59 per cent of the Argentinian domestic prices.  The TMB did not disagree with
Korea that, according to the additional information received, imports from Korea decreased in June-
July 1999, compared to June-July 1998.  However, imports from Korea continued to represent a
determining share in total imports in the period August 1998-July 1999 as well.
55. Considering all the elements examined in paragraph 54 above, the TMB concluded that the
serious damage experienced by the domestic industry of Argentina in 1998 and during the 12 months
ending May 1999 could be attributed, inter alia , to imports originating in Korea.
56. The TMB recalled that Argentina had decided to apply provisionally the safeguard measure
on imports from Korea pursuant to the provisions of Article 6.11, which refers to "highly unusual andcritical circumstances, where delay would cause damage which would be difficult to repair".  It was
observed that in its findings, on 30 July 1999, the National Commission for Foreign Trade of
Argentina had considered, inter alia , that "the unusual and critical circumstances mentioned inG/TMB/23
Page 18
Article 6.11 of the ATC existe[d], enabling the provisional application of measures".  Though no
separate analysis was provided by this Commission to substantiate this statement, on the basis of the
examination of this case pursuant to Articles 6.2, 6.3 and 6.4, the TMB came to the view that at the
end of July 1999 the existence of the highly unusual and critical circumstances had been demonstrated
on the basis of data covering the period June 1998-May 1999.  Practically all the elements examinedsupported such a conclusion: the sharp and continuous rise of imports, both from all sources and from
Korea; the significant and continuous decline of output and domestic sales of local production, while
consumption continued to increase dynamically; the decline in productivity and employment; the low
rate of utilization of capacity and, not the least, the important pressure import prices put on the
domestic market.  All these, i.e. the elements envisaged in Articles 6.2, 6.3 and 6.4, seemed to
indicate without ambiguity the existence of the highly unusual and, in particular, the critical nature of
the circumstances.
57. The TMB was aware, however, that this first finding made by the competent Argentinian
authority had been transformed into a decision of the Government of Argentina only three months
later and, in view of lack of relevant updated information the Body could not assess whether (and to
what extent) the highly unusual and critical circumstances had continued to exist close to the time
when the decision had been taken by the Government.  Given the difficulties the industry had beenfacing at the end of May 1999, and considering that the period June-July 1999 could be, in any case,
too short to halt and reverse the overall very serious situation, the TMB accepted that the recourse of
Argentina, in this particular case, to the provisions of Article 6.11 had been justified.  It observed,
however, that once such highly unusual and critical circumstances were identified, the Member
concerned should have acted much more expeditiously and should not have waited three additionalmonths before taking action.
58. The TMB noted that the gap of three months between establishing the existence of highly
unusual and critical circumstances and taking the formal action could have implications on
substantive elements involved in the safeguard measure in question.  Had Argentina applied the
urgent procedure foreseen in Article 6.11 properly, the restraint on imports from Korea, pursuant tothe provisions of Article 6.8, should have been fixed at a level not lower than the level of imports
from Korea during the period June 1998-May 1999, which amounted to 4,868,640 kg.  However, the
quota established by Argentina was of 3,701,667 kg., i.e. 24 per cent below the minimum level
otherwise applicable during the reference period.  The TMB noted the explanations of the
representative of Argentina that this gap stemmed from two factors, namely that (i) the size of the
restraint had been adjusted to the actual level of imports from Korea in the period August 1998-
July 1999 and (ii) only imports for final domestic consumption had been included both in the settingof the quota level and on the imports covered by the quota (meaning that temporary imports which,
after processing, had been or would be exported, were exempt from the restraint).
59. With respect to the method of calculating the level of the restraint, the TMB made the
following observations:
- while imports from Korea in the period August 1998-July 1999 were lower than in
the period June 1998-May 1999, Argentina had not been right in adjusting the level of
the restraint to the level of actual imports in the later period, because its finding
regarding the existence of highly unusual and critical circumstances had been based
on data (including those related to imports from Korea) referring to the period
June 1998-May 1999;
- Argentina had not made any differentiation between the two categories of imports
(i.e. between those for home use and those entering under a temporary admission
scheme) when analysing the effects of total imports on the state of the domestic
industry, pursuant to Articles 6.2 and 6.3.  Under Article 6.2 a Member has toG/TMB/23
Page 19
demonstrate, as done also by Argentina, that all imports of a given product or
category of products were being effected in such increased quantities as to cause
serious damage, or actual threat thereof, to the domestic industry producing like
and/or directly competitive products.  Therefore, on the basis of such a determination,
there was no justification to implement subsequently a differentiation betweenvarious types of imports, independently of whether this could be perceived to be in
the interest, or not, of certain domestic industries, or to the exporters themselves.
60. The TMB concluded, therefore, that the appropriate level of the restraint in the first year of its
application would correspond, as a minimum, to the actual level of imports from Korea during the last
12-month period ending in May 1999.  Furthermore, should the restraint remain in place for a
duration of three years, as envisaged in the relevant decision taken by the Government of Argentina,
the growth and flexibility provisions specified in  Article 6.13 had to be implemented in full.
Conclusion and recommendation
61. On the basis of its detailed examination, the TMB concluded that the products of
category 619 were being imported into Argentina in such increased quantities as to cause serious
damage to its domestic industry producing like and/or directly competitive products.  The TMB found
also that the serious damage caused to the Argentine industry could be attributed, inter alia , to the
increased imports of such products from Korea.
62. In the light of the observations made in paragraphs 56 and 57 above, the TMB found,
furthermore, that the highly unusual and critical circumstances, where delay would cause damage
which would be difficult to repair, as referred to in Article 6.11, had existed and, therefore, that
Argentina’s recourse to the provisions of Article 6.11 had been justified.
63. In light of the observations made in paragraphs 58 to 60 above, the TMB recommended that:
(i) Argentina increase the level of the restraint during its first year of application to a
level not lower than 4,868,640 kg.;  and
 (ii) should the restraint remain in place for more than one year, the provisions of
Article 6.13 be fully implemented by Argentina.
Category 620
64. The volume of total imports by Argentina of category 620 products increased by 8 per cent in
June 1998-May 1999, compared to the previous corresponding period.  On a calendar-year basis,
imports increased by 25 per cent in 1998, by 3 per cent in 1997 and by 69 per cent in 1996.  It was
observed that such imports amounted to 1,793,756 kg. in 1988 and to 1,650,902 kg. in the period June
1998-May 1999, indicating that the level of imports in January-May 1999 was lower than that
achieved in January-May 1998.  It could be established, on the basis of the information supplied byArgentina in the factual information referred to in Article 6.7, that the volume of total imports of these
products had significantly increased from 1995 to 1996 and from 1997 to 1998.  However, the rate of
increase had been much smaller in the latest period for which comparable data were available and it
also appeared that imports had begun to decelerate since the beginning of 1999.
65. In starting the examination of the state of the Argentinian domestic industry, as reflected in
changes in the economic variables listed in Article 6.3, it was noted that during the 12-month period
ending May 1999, when imports increased by about 120,000 kg. (+8 per cent), apparent consumption
increased by roughly 74,000 kg. (+4 per cent), while output decreased by slightly above 67,000 kg.
(-16 per cent), domestic sales of the local production by 2,600 kg. (-1 per cent).  During the sameG/TMB/23
Page 20
period, exports decreased by over 21,000 kg. (-27 per cent), and the share of domestic output exported
was about 17 per cent.  In the calendar year 1998, with an increase in imports of about 360,000 kg.
over 1997, apparent consumption rose by some 316,000 kg. (+18 per cent), while domestic output
decreased by 85,000 kg. (-19 per cent), domestic sales of local production by 106,000 kg.
(-31 per cent) and exports (representing about 16 per cent of output) by about 40,000 kg.(-40 per cent).  Looking back at developments in 1997 compared to 1996, imports increased by
36,000 kg. (+3 per cent), output decreased by 99,000 kg. (-18 per cent) while domestic sales of local
production decreased by 99,000 kg. (-22 per cent).  Exports decreased by 11,000 kg. (-10 per cent)
representing about 22 per cent of the domestic production. Apparent consumption decreased by about
53,000 kg. (-3 per cent).  In 1996, when imports increased by about 568,000 kg. (+69 per cent) over
1995, apparent consumption increased by some 633,000 kg. (+53 per cent), output remained stable at
552,000 kg., domestic sales of local production increased by around 39,000 kg. (+9 per cent), whileexports decreased by 65,000 kg. (-37 per cent).
66. In analysing the changes detailed in paragraph 65 above, the TMB bore in mind the
explanation given by Argentina that the performance in 1995 had been exceptionally low as a result of
the recession caused by the Mexican financial crisis.  However, unlike in the case of the two other
categories subject to the provisional safeguards, the domestic output did not increase in 1996 either.A recovery of consumption took place in 1996 and, after a slight downturn in 1997 (output
decreasing, while imports stabilized), also in 1998, imports increased while the decline of domestic
output accentuated. The dynamics of changes slow ed down during the most recent period, i.e. in
June 1998 to May 1999, in particular with respect to imports, apparent consumption and domestic
sales of the local production.  It was noteworthy that exports declined throughout the periodinvestigated, indicating perhaps the persistence of more general problems in terms of competitiveness.
The market share taken by imports had increased from 69 per cent in 1995 to 76 per cent in 1996,
80 per cent in 1997 and 85 per cent in 1998 as well as in the 12-month period ending May 1999.  It
was noted in this regard that this share had already been very high at the beginning of the period
investigated.
67. Productivity, measured as output per employee, increased in 1996 (+5 per cent) and 1997
(+3 per cent) compared to the respective previous years.  It fell, however, in 1998 (–4 per cent), as
well as in the 12-month period ending May 1999, compared to the corresponding previous period
(-3.2 per cent). According to Argentina, the stead y increase in productivity up to 1997 was a result of
the need for enterprises to adapt to the new terms of competition imposed by the international market
and imports, and was achieved through investment.  Though the information related to investment
could not be attributed to individual product categories, it could be observed that possible investmentsmade had not been reflected in the size of the production capacity during the period when productivity
had increased.  Production capacity actually decreased over the previous year by 24 per cent in 1996
and 8 per cent in 1997.   Subsequently, it increased by 18 per cent in 1998 and by 10 per cent in the
12-month-period ending May 1999, compared to the pr evious corresponding periods while, at the
same time, productivity declined.  In addition, the increasing production capacity had beenaccompanied by a further decline in output.  These controversial developments could raise questions
which would go beyond the scope of an examination to be conducted by the TMB, such as whether
the industry did not react with too much delay to the difficulties it had already been faced with at the
outset of the period investigated.  In any case, the rate of utilization of the production capacity
remained low throughout the period investigated (50 per cent in 1995, 66 per cent in 1996, 59 per centin 1997, 40 per cent in 1998 and 38 per cent in the 12-month period ending May 1999).
68. After a decline of 3 per cent in 1996 over the previous year, end-product inventories increased
in 1997 (+4 per cent) and 1998 (+40 per cent). In the 12-month period ending May 1999, they were
26 per cent higher than in the previous corresponding period.  End-product inventories accounted forG/TMB/23
Page 21
30 per cent of domestic output in 1995, whereas in May 1999 they had reached a level of 70 per cent
of domestic production which was a clear indication of the existence of serious problems.
69. The average domestic price of the products of category 620 increased by 3 per cent in 1996
over 1995, remained stable in 1997 and declined by 4 per cent in 1998 and by 5 per cent in the 12-
month period ending May 1999, compared to the previous corresponding period.  In the factualinformation, Argentina explained that this evolution was a result of the domestic producers’ need to
adapt prices to those of the foreign competition to counter the lower prices of imports from the major
sources, whose average entered prices were lower at a comparable stage of commercial transaction.
The TMB observed that, unlike in the case of the two other categories subject to the provisional
safeguards, domestic prices had started to decrease only in 1998 and the magnitude of the decline had
been smaller, compared, in particular, to that registered with respect to category 619 products.
70. The number of persons employed in the production of this category of products dropped by
5 per cent in 1996 over 1995, by 20 per cent in 1997 and 16 per cent in 1998 compared to the
respective previous year.  It dropped by 11 per cent in the 12-month period ending May 1999,
compared to the corresponding previous period.  The TMB, noting that average wages had remained
at a similar level throughout the period, considered that the information relative to wages did not
provide a meaningful contribution to a better understanding of the situation facing the Argentinianindustry.  The same applied to profits, since these were enterprise-specific and not product-specific.
71. The TMB also noted that in the factual in formation provided, Argentina ruled out the
possibility of the difficulties experienced in the domestic market resulting from technological
obsolescence or from changes in consumer preference.
72. Turning to an overall assessment of the state of the industry producing category 620 products,
as reflected in changes in the various economic variables, the TMB was of the view that the factual
information submitted by Argentina revealed a domestic industry facing difficulties.  These
difficulties were reflected in particular in developments regarding output, domestic sales of local
production, inventories, market share and exports.  In examining in detail all the related information
provided by Argentina and the arguments raised by Korea, the TMB came, however, to the view thatArgentina had failed to demonstrate a causal relationship between the state of the domestic industry
and the increased quantities in total imports, in particular in view of the only slight increase in imports
registered during the most recent period for which comparable data were available and also of the fact
that imports appeared to have decelerated since the beginning of 1999.  It appeared to the TMB that
the industry's difficulties could stem from problems which had already existed in 1995 (or perhaps
even earlier), as evidenced by the fact that domestic output had not increased at all during the period
investigated.  Also, though not formally examining, pursuant to Article 6.4, the attribution of theserious damage claimed to imports from Korea, the TMB also noted, in particular in the context of a
safeguard measure introduced provisionally under th e provisions of Article 6.11, that during the
12-month period ending May 1999, imports from Korea had not shown a sharp and substantial
increase, since they had only increased by 4 per cent (whereas the overall increase in total imports
was 8 per cent).
73. In reaching the conclusion reflected in paragraph 72 above, the TMB also found that the
recourse to the procedures of Article 6.11 by Argentina had not been appropriate in this particular
case.  Nothing in the factual information provided by Argentina had substantiated the existence of
highly unusual and critical circumstances in the most recent period, where delay would cause damage
which would be difficult to repair.  The TMB reiterated its views expressed on earlier occasionsregarding the invocation of the provisions of Article 6.11.G/TMB/23
Page 22
Conclusion and recommendation
74. On the basis of its detailed examination, the TMB concluded that Argentina had not
demonstrated successfully that products of category 620 were being imported into Argentina in such
increased quantities as to cause serious damage to its domestic industry producing like and/or directly
competitive products.  This also implied that Argentina’s recourse to the procedures of Article 6.11had not been appropriate.  The TMB recommended, th erefore, that Argentina rescind the provisional
safeguard measure applied on imports of these products from Korea.
********
75. The sixty-sixth meeting of the TMB is scheduled for 23 to 25 May 2000.
76. The full report of the sixty-fifth meeting will be circulated at a later stage.
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