Safeguards and the Perils of Preferential Trade Agreements: Dominican Republic Safeguard Measures

Abstract

The legal-economic implications of how WTO members apply an import-restricting safeguard measure become more complex in light of the increasing web of trade concessions undertaken through their preferential trade agreements (PTAs) in addition to their WTO commitments. This paper examines a number of complex issues that arose in the WTO litigation between five new PTA partners through the Dominican Republic-Safeguard Measures disputes. First, we highlight the difficulties in assessing the extent to which safeguards imposed following a PTA are the result of PTA concessions relative to developments that pre-date or are otherwise unrelated to the PTA. Second, we examine how the WTO Panel resolved a number of previously unanswered questions in the WTO's safeguards jurisprudence that arose in these cases. We suggest that the Panel rightly foreclosed a number of potentially dubious practices that WTO members might otherwise have pursued when using safeguards to circumvent trade concessions. Third, we identify how safeguardrelated provisions within a PTA may give rise to constraints that subsequently affect how a country may apply safeguards available under the WTO Agreements, and we describe some implications for PTA design and negotiation. Finally, we analyze the broader implications that arise from the interplay of PTAs, safeguards, and dispute settlement in light of the availability of both relatively substitutable policy instruments and dispute resolution forums.

Does Safeguards Need Saving? Lessons from the Ukraine–Passenger Cars Dispute

“…Earlier safeguard disputes have already shown that developing countries might not fully internalize the complexities and consequences of the obligations they undertake, e.g. Bown and Wu (2014) analyze the case of Dominican Republic's safeguard measure. Thus, our findings suggest a need for more capacity building to help developing countries better use of WTO-sanctioned investment and trade policy tools.…”

“…The safeguard investigation came three years after Ukraine's WTO accession in 2008 liberalized import tariffs for passenger cars from 25% to 10%. Bown and Wu (2014) suggest that safeguard and antidumping measures frequently arise following a new trade agreement as a result of market shocks brought by the agreement. At the same time, just months after the accession the country was hit by the global economic crisis that sharply reduced credit availability and consumer demand for passenger cars.…”

Indonesia – Safeguard on Certain Iron or Steel Products

“… 29 Panel Report Dominican Republic – Safeguard measures on Imports of Polypropylene Bags and Tubular Fabrics , WT/DS415, 416, 417, 418/R, 31 January 2012. Bown and Wu (2014) provide a detailed analysis of the Panel Report.…”

“… 31 Supposedly, the DR used a safeguard measure for the same reason as Indonesia did in the galvalume case: to enable it to cover imports from its PTA partners within the scope of the measure which it could not have done if it had simply raised its MFN tariff (Bown and Wu, 2014). …”

Is the WTO passé?

“…We note that there are also important examples of countries facing WTO disputes brought by PTA partners after they have imposed a safeguard in a way that increased the level of import protection against PTA partners relative to non-partners. An example is the Dominican Republic -Safeguard Measures dispute; for an analysis seeBown and Wu (2014).1 5 3 There are many high-pro…le examples of countries "borrowing" enforcement through trade retaliation to achieve other objectives, including countries implementing trade sanctions for allegedly political or national security purposes(Hufbauer et al, 2009) -e.g., those imposed recently on North Korea, Iran, and Russia.…”