Sykes' text, which forms part of the interesting series of Oxford Commentaries on the GATT/WTO Agreements, discusses in a very coherent and accessible manner the many legal, economic and policy issues associated with the use of safeguard measures in the WTO system. Sykes's incisive, direct, and effective style of writing and his sound substantive knowledge of the law and economics of safeguards make this book an intellectual pleasure to read.
The WTO Agreement on Safeguards establishes rules for the application of safeguard measures, a term understood to refer to those measures provided for in GATT Article XIX, entitled ‘Emergency Action on Imports of Particular Products’. Building on some of the articles Sykes has published in the past about this subject, Sykes's Commentary fully meets the stated objective of providing a thorough analysis of the legal requirements relating to safeguard measures with special focus on the aspects of the treaty text that have been in the past, or are likely to be in the future, a subject of legal dispute. Sykes offers a succinct but complete overview of the GATT/WTO case law, which still today, two years after the first publication of this book in 2006, is entirely up to date as no disputes involving safeguard measures were brought before the WTO after the dispute involving a challenge of the US safeguards measures on steel back in 2003.
In his book, Sykes discusses the history of safeguard measures under the GATT and examines the important question of the rationale of safeguard measures in international trade agreements in order to explain the introduction of the WTO Agreement on Safeguards at the end of the WTO Uruguay Round. Sykes discusses the various rationales offered in the literature and explains why, in his view, they are to be dismissed. Sykes' view is that a safeguards clause plays an important role in a trade agreement as it permits political officials to take back concessions that prove unduly burdensome from a political standpoint and is similar to force majeure clauses in ordinary contracts. He refers to the theory of efficient breach and considers that the implication is that a safeguard clause will allow concessions to be revoked when the import competing industry is suffering severe dislocation, and when the exporting industry that would be harmed by revocation of the concession is prosperous and has expanded it sales considerably. This ‘contractarian’ perspective suggests that safeguards are a mechanism that allows the negotiators/politicians to go further in trade liberalization than they otherwise would have been able or willing to as it reduces the riskiness of making trade concessions. The only problem, as Sykes acknowledges, is that in order to avoid abuse the safeguard mechanism should be properly designed to limit its use to cases where safeguards are politically efficient. Unfortunately, neither GATT Article XIX nor the WTO Agreement on Safeguards appear to accomplish this objective very well and the jurisprudence has done little to improve on matters.
He subsequently addresses the various conditions for lawful imposition of safeguard measures that allow a WTO Member country to restrict trade in case unforeseen developments result in increased imports causing serious injury to the domestic industry producing a like or directly competitive product. Finally, Sykes briefly discusses some of the questions related to the lawful application of safeguard measures that have arisen in WTO case law.
Sykes makes painfully clear how deficient the WTO Agreement on Safeguards is and he exposes the additional problems created by the WTO Appellate Body's jurisprudence, which failed to address some of the basic questions that Sykes rightly puts at the heart of the discussion.
What a mess! That is, unfortunately, the correct impression the reader is left with after reading Sykes' insightful analysis relating to the Appellate Body's re-insertion of the requirement to demonstrate that ‘increased imports’ resulted from ‘unforeseen developments’ and that such imports ‘caused’ serious injury. While in 1947 it was clear which baseline to use for determining whether imports had increased, or at what time and by whom the developments that resulted in such increased imports should have been foreseen, today the answers to such questions are very unclear. More importantly perhaps, as pointed out by Sykes, the Appellate Body has failed to link the perceived need to demonstrate the existence of such unforeseen developments to the rationale for safeguards or to address the impact of such unforeseen developments on the question of the causal relationship between increased imports and serious injury.
While the precise meaning of the terms ‘unforeseen developments’ and ‘increased imports’ is unclear, Sykes considers that the more important and central legal question that remains open is associated with the requirements of ‘causation’ and ‘non-attribution’ under GATT Article XIX and the Agreement on Safeguards.
Sykes explains through various examples and hypothesis that an increase in imports as such can never ‘cause’ injury, as the level of imports is simply a function of supply and demand. The same set of factors (exogenous variables, like technology, cost structure etc.) that influence imports also influence domestic supply. Hence, it can never be the case that imports cause injury. Rather, investigating authorities should look elsewhere (to exogenous variables) for what causes injury to their domestic production. Hence, in Sykes' view, the WTO judge has in his hands an intellectually unworkable tool in the form of the causality requirement. Rather than to have acknowledged such problem, the WTO jurisprudence has made matters even worse by requiring a ‘reasoned and adequate’ explanation and forcing Members to show that they did not attribute injury to increased imports when such injury was caused by other factors. Since these ‘other factors’ are likely to have influenced the level of imports by affecting supply and demand, and thus are arguably the ‘cause’ of the increase in imports, this non-attribution requirement is simply nonsense built on stilts. As evidenced by the fact that no finding of causation examined by WTO dispute settlement panels in the safeguards context has been upheld thus far, the non-attribution requirement has become an insurmountable hurdle and the effect of the current state of affairs is to discourage the use of safeguard measures, which in turn will increase the appeal of other forms of contingent protection such as anti-dumping or the re-emergence of the use of grey area measures.
But Sykes does more than simply criticize this unworkable test as he discusses various possible solutions to this causation problem. One is to consider that injury due to shifts in the import supply curve suggest that imports are the ‘cause’ of such injury; another is to attribute injury to ‘increased quantities’ of imports to the degree that a counterfactual quantitative restriction equal to some baseline level of imports would have averted injury. A third one, and the one actually preferred by Sykes is the return to the GATT Article XIX approach and the question whether some exogenous unforeseen developments had caused injury. While Sykes is right to point to the practical challenges involved in the implementation of these alternatives and expresses the view that neither is clearly desirable as a policy matter, it is clear that any informed approach is to be preferred over the completely arbitrary and misguided ‘correlation-equals-causation’ approach that currently prevails in this respect.
Sykes also discusses the interesting related issue concerning the permissible scope of safeguard measures as being limited to what is necessary to address that part of the serious injury which is caused by increased imports alone, as well as for example the question of selectivity in the application of safeguard measures. And each time, the discussion reveals to what extent the pseudo-textual approach of the WTO Appellate Body is deficient as the text cannot be divorced from its object and purpose and the Agreements cannot be interpreted in a meaningful way without addressing the basic question of why the Agreement exists in the first place or what the role of safeguards in international trade is or could be.
In sum, Sykes's Commentary on the WTO Agreement on Safeguards, which incorporates many aspects of his previously published outstanding articles in respect of safeguards, shows that a highly problematic Agreement, interpreted in a fundamentally flawed manner, make for very interesting and intellectually challenging literature.
