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TOPIC : Safeguard Duty
When imports of a particular product, as a result of tariff concessions or other WTO obligations undertaken by the importing country, increase unexpectedly to a point that they cause or threaten to cause serious injury to domestic producers of like or directly competitive products, a safeguard which is a form of temporary relief is used. Safeguards give domestic producers a period of grace to become more competitive vis-à-vis imports.
If this happens, the government of the importing country may suspend the concession or obligation, but will be expected to provide compensation by offering some other concession. Otherwise, the affected WTO member(s) can retaliate by withdrawing equivalent concessions. Industries or companies often request safeguard action by their governments.
Safeguards usually take the form of increased duties to higher than bound rate or standard rates or quantitative restrictions on imports.
SAFEGUARD DUTY IN INDIA:
The Central Government after conducting an enquiry is satisfied that any article is imported into the country in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry, then it may by notification impose a safeguard duty on that article.
Provided that no such duty shall be imposed on an article originating from a developing country so long as the share of imports of that article from that country does not exceed 3% or where the article is originating from more than one developing countries then so long as the aggregate of the imports from all such countries taken together does not exceed 9% of the total imports of that article into India.
WHY SAFEGUARD DUTY IS IMPOSED:
Safeguards can be seen as the brakes on the trade liberalization car. By offering a temporary escape route, safeguards give WTO members, confidence to offer each other greater liberalization measures in trade negotiations than they might otherwise do.
HISTORY OF SAFEGUARDS:
The roots of this trade remedy lie in Article XIX of GATT, 1994 (and its pre-WTO version). This provision allows a WTO member to restrict temporarily imports of a product (known as ‘safeguards’ action) if its domestic industry is affected by a surge in imports.
Safeguards were rarely used before the Uruguay Round. Some governments preferred to protect their domestic industries by persuading exporting countries to restrain exports “voluntarily” or to agree to other means of sharing markets. “Grey area measures” of this kind, circumventing the GATT were negotiated bilaterally for a wide range of products including motor vehicles, steel and semi-conductors. These measures were not subject to multilateral discipline through the GATT and their legality was doubtful. Some safeguard actions actually taken under Article XIX were left in place indefinitely, providing a permanent level of protection.
AGREEMENT ON SAFEGUARDS:
The Agreement on Safeguards sets out the rules for application of safeguard measures and requirements for safeguard investigations by national authorities. The Agreement emphasizes transparency and avoidance of arbitrariness through laying down rules. The goal of the Agreement is to encourage structural adjustment on the part of the industries adversely affected by increased imports, thereby enhancing competition in international markets.
The agreement also aims to cure the problems caused by grey area measures, permanent safeguard actions, Voluntary Export Restrains and orderly marketing arrangement. The Agreement prohibits the future use of grey area measures for the purpose of trading multilateral control. The Agreement on Safeguards requires the existing ‘grey area measures’ to be phased out and to be brought in conformity into the Agreement on Safeguards by the end of December, 1998.
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TRADE INDIA MAIL
