Law & Economics Working Papers
The recent WTO dispute between the United States and eight complainant nations over protective measures for the steel industry brought widespread attention to a little known area of WTO law—the rules governing "safeguard measures," the temporary protection of troubled industries against import surges. The use of safeguard measures is normatively controversial, although their welfare implications are much less clear than their critics sometimes suggest. This paper makes the point that WTO rules, as interpreted by recent Appellate Body decisions and applied by the dispute panel in the steel case, pose nearly insurmountable hurdles to the legal use of safeguard measures by WTO members. Among other things, the current interpretation of the "nonattribution" requirement for the use of safeguard measures in the WTO Safeguards Agreement obliges members to make a demonstration that is logically impossible as an economic matter. Those who believe that safeguard measures are merely wasteful protectionism may welcome such impediments to their use, but it is not obvious that the trading system will benefit in the long run, and there can be little doubt that one key objective of the Uruguay Round negotiators—to revive the use of disciplined, temporary safeguard actions—is being frustrated.
Alan O. Sykes, "The Persistent Puzzles of Safeguards: Lessons from the Steel Dispute" (John M. Olin Program in Law and Economics Working Paper No. 212, 2004).