New rules for a challenged trading system: the role of safeguards

This chapter draws attention to the potential of safeguards in a system with a variable geometry. Section 1 considers the benefits from safeguards, but also the need to discipline their use. Section 2 considers why under the GATT system troubled industries preferred other forms of legal and extra-legal protection. Section 3 describes how instead of making WTO rules for safeguards more-user friendly as envisaged by the Agreement on Safeguards in the Uruguay Round, WTO dispute settlement rulings by the Appellate Body have made their application by developed country members virtually impossible. Paradoxically, the usefulness of safeguards and the perverse impact of the dispute settlement system are demonstrated by the increased use of safeguards by many developing countries that are protected from most challenges at the WTO by their tariff overhangs (the differences between their bound and applied rates). Section 4 considers the experience of Special Safeguards with China and argues that the failure to use them to deal with the dislocation caused by China by the Geroge W. Bush administration was a missed opportunity and that the experience with these safeguards and their ability to meet WTO requirements illustrates the potential for more effective safeguard rules provided countries are willing to use them. Section 5 proposes several revisions to the current WTO safeguards rules that would allow them to play a central role in the rules of a trading system with variable geometry by giving countries with a legal means to limit the damage caused by import surges by their trading partners.