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Australian investigation raises wider WTO issues on use of safeguards under FTA arrangements

August 28, 2013

At the beginning of July 2013, the US Department of Agriculture (USDA) reported on the financial stress being felt by the Australian processed fruit and vegetable sector as a result of the appreciation of the Australian dollar. USDA reported that the Australian Productivity Commission (APC) has initiated safeguard inquiries into the impact of imports of processed fruit and tomatoes on Australian producers. The products under investigation include: tomatoes, citrus fruit, pears, apricots, peaches (including nectarines), and other mixtures of products under tariff code 2008. The APC has been requested to make an initial report within 3 months, followed by a definitive report by 21 December 2013. The Australian action was notified to the WTO on 21 June 2013.

According to analysis from the South African Trade Law Centre, TRALAC, both safeguard and anti-dumping investigations have been launched, following a complaint from Australias largest food processor, SPC Ardmona, which in April 2013 halved its fruit purchases from Australian farmers. These initiatives potentially have implications for South African exports of nectarines and canned peaches, with Australia being South Africas fourth largest export market for canned peaches (8% of South Africas canned peach exports in 2012). SPC Ardmona claims that South African canned peaches are being exported at a price less than the normal value, thus causing material injury to the Australian domestic industry.

In order for any action taken against imports to be WTO compliant, it needs to be demonstrated that South African imports have caused the material injury to the domestic industry in Australia. According to TRALAC, under bilateral agreements between Australia and New Zealand and Australia and Singapore imports of processed fruits have been excluded from the safeguards investigation, despite New Zealand being the fourth largest exporter of the processed fruit products under investigation.

The TRALAC analysis notes that this raises important issues under WTO jurisprudence, which currently has not solved the issue of how WTO members that are part of a regional or bilateral trade agreement should conduct and apply safeguard investigations. The analysis does, however, point out certain precedents in WTO case law, most notably the Appellate Body finding in the Argentina Safeguards (EC) case. This case introduced the concept of parallelism, which means that if the imports from a particular country, which happens to be a party to a joint preferential trade arrangement, are included in the injury determination they should also be subject to the application of the safeguard measure.

The TRALAC analysis raises a number of key questions related to application of WTO safeguard measures to bilateral trade agreements:

  • Are safeguards not other restrictive regulations of commerce under the provisions of Article XXIV:8 (a) and (b) of the General Agreement on Tariffs and Trade (GATT) of 1994?
  • Do the requirements in Article XXIV:8(a) and (b) create an obligation on trading partners to exclude goods covered by regional or bilateral trade agreements from the safeguard investigations?
  • Can countries [that are] a party to a bilateral or regional trade agreement apply safeguard measures only to third party imports?
  • Should safeguard measures be applied on a non-discriminatory (MFN) basis, irrespective of whether countries are a party to bilateral and regional trade agreements?
  • Can preferential trade arrangements between selected WTO member countries suspend the recourse of a WTO member to WTO law vis--vis other WTO members [that are] a party to the preferential trade agreement?