Decisions of the Appellate Body of the World Trade Organization United States - Definitive Safeguard Measures on Imports of Certain Steel Products 2. Analysis of Appellate Body Report A. Reasoned and Adequate Explanation of Unforeseen Developments under Art. XIX:1(a) of GATT and Art. 3.1 of the Agreement on Safeguards First, the U.S. questioned the panel's application of the "reasoned and adequate explanation'standard of review of the U.S. determination of "unforeseen developments.' "Unforseen developments'is mentioned only in GATT, and not in the Agreement on Safeguards, while the Appellate Body developed the "reasoned and adequate explanation'standard in the context of the Agreement on Safeguards, as Articulated in U.S. - Lamb Safeguards. However, the Appellate Body read Article XIX of GATT and the Safeguards Agreement as an "inseparable package,'as stated in Argentina - Footwear (EC). The Appellate Body therefore determined that it was appropriate for the panel to apply the "reasoned and adequate explanation'standard to obligations under Art. XIX.1 This requirement is an elaboration of the obligation under the last sentence of Art. 4.2(b) of the Agreement on Safeguards, but it also supports the possibility of review under WTO law, for without a "reasoned and adequate explanation,'a panel could not objectively assess the national measure, as required under Art. 11 of the DSU.2 Here, the Appellate Body seems to develop a principle of administrative law: the failure to provide a reasoned and adequate explanation of an action itself may constitute a violation of the substantive requirements to perform the analysis required to be reflected in the explanation. 3 The initial U.S. report did not address the issue of "unforeseen developments'and its causation of increased imports. While Art. XIX requires that increases in imports giving rise to safeguard measures result from unforeseen developments, this criterion is not reflected in U.S. law. The panel found that the U.S. had failed to demonstrate that unforeseen developments resulted in increased imports of specific products subject to particular safeguard measures. The Appellate Body, analyzing the text of Art. XIX, approved the panel's decision.4 B. Reasoned and Adequate Explanation of Facts Supporting Finding of Increased Imports under Arts. 2.1 and 3.1 of the Agreement on Safeguards Appeals in this case differed according to the particular product category at issue. With respect to certain carbon flat-rolled steel (CCFRS), hot-rolled bar and stainless steel rod, the U.S., inter alia, challenged the panel's interpretation of the requirement of increased imports in Art. 2.1 of the Agreement on Safeguards. The U.S. argued that the panel incorrectly required "a certain degree of recentness, suddenness, sharpness and significance'in the increase in imports. In response, the Appellate Body referred to its decision in Argentina - Footwear (EC), in which it found that not just any increase in imports would suffice, but that the increase "must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause `serious injury.'"5 The Appellate Body agreed with the U.S. that these questions cannot be answered in the abstract, but must be answered by the competent authority as it proceeds to consider the existence and causation of serious injury or its threat.6 The Appellate body then turned to the panel's consideration of increased imports in the circumstances of particular products. It began with CCFRS, where the panel found that there were substantial increases until 1998, and then decreases in 1999, 2000 and 2001, back to levels nearly as low as the 1996 level.7 The Appellate Body agreed with the U.S. that Art. 2.1 does not require that imports need to be increasing at the time of the determination.8 In effect, the Appellate Body (and the panel) placed the burden on the U.S. to establish a "reasoned and adequate explanation'of how the facts supported its finding of importation in "such increased quantities . . . .'9 This burden was not met in light of its failure to address the decrease during the later period. The Appellate Body's discussion of stainless steel rod added little to its analysis with respect to CCFRS and hot rolled bar. With respect to tin mill products, the panel found that inconsistent and irreconcilable conclusions of three U.S. International Trade Commission Commissioners formed the basis for President Bush's determination, and concluded that it is not permissible under Arts. 2.1 and 3.1 of the Safeguards Agreement to base a determination on such irreconcilable analyses.10 A "reasoned and adequate'explanation is not provided by a set of irreconcilable findings. However, the Appellate Body decided that the panel should have reviewed each of the individual findings in order to determine whether any of them individually provided a reasoned and adequate explanation for a single institutional determination.11 This Appellate Body position seems to assume, counterfactually, that the panel can choose among varying explanations the one that formed the basis for the administrative decision. It is indeed interesting that the Appellate Body is finding fault under WTO law with U.S. administrative law practice, at the same time that it is constructing WTO-law based rules for administrative practice. The Appellate Body's discussion of stainless steel wire added little to its discussion of tin mill products. C. Parallelism: Reasoned and Adequate Explanation Establishing Explicitly that Imports from Non-Excluded Sources Satisfy Conditions for Application of Safeguard Measures under Arts. 2.1 and 4.2 of the Agreement on Safeguards The U.S. excluded imports from Canada, Israel, Jordan and Mexico from the scope of its safeguard measures. The panel found that the U.S. had failed to establish that imports from the included sources alone satisfied the conditions for the application of a safeguard measure. The requirement of parallelism is based on an interpretation of Art. 2 of the Agreement on Safeguards. The question of whether safeguards measures must be applied between members of a customs union or free trade area has never been definitively answered in the WTO. However, the Appellate Body has applied the doctrine of parallelism to require that the scope of the investigation equal the scope of the measure. That is, if the U.S. excludes its NAFTA partners from its safeguard measure, it must exclude their products from its investigation. The Appellate Body described the elaboration of its jurisprudence on this issue of parallelism, concluding that the requirement to establish explicitly that the imports from sources covered by the measure satisfy the conditions for application of the measure requires a "reasoned and adequate explanation'of this connection. Where the U.S. report states that the investigating authority considered imports from "all sources,'while imports from Canada, Israel, Jordan, and Mexico were excluded from the safeguard measure. The U.S. argued that it was not required to prepare a distinct or explicit analysis of the effects of imports from sources not subject to the measure. Here, the Appellate Body linked its understanding of parallelism under Arts. 2.1 and 2.2 of the Safeguards Agreement to the "non-attribution requirement'of the last sentence of Art. 4.2(b). Thus, the reference to increased imports in Art. 4.2(b) is read by the Appellate Body to refer only to imports included in the safeguards measure.12 "Consequently, imports excluded from the application of the safeguard measure must be considered a factor `other than increased imports' within the meaning of Article 4.2(b)."13 Thus, the Appellate Body concluded that the U.S. was required to prepare a distinct or explicit analysis of the effect of excluded imports, as a result of the non-attribution requirement. The Appellate Body upheld the panel's determination that the U.S. therefore failed to satisfy the parallelism requirement. Joel P. Trachtman 1 Appellate Body Report, paras. 276, 279, 291. 2 Appellate Body Report, paras. 297-298. 3 Appellate Body Report, para. 303. 4 Appellate Body Report, paras. 316-319. 5 Appellate Body Report, para 345, quoting Appellate Body Report, Argentina -Footwear (EC), para. 131. 6 Appellate Body Report, para. 346. 7 Panel Reports, para. 10.181. 8 Appellate Body Report, para. 367. 9 Appellate Body Report, para. 368. 10 Panel Reports, para. 10195. 11 Appellate Body Report, para. 418. 12 Appellate Body Report, para. 450. 13 Appellate Body Report, para. 450.
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