Did the Agreement on Safeguards Nullify their Use?

Abstract

The Agreement on Safeguards (ASG) clarified the obligation to apply measures in accordance with the most favored nation (MFN) principle. Because foreign supply shocks can be non-uniform, MFN can induce nullification and impairment (N&I) complaints at the World Trade Organization from (third party) foreign suppliers not benefitting from the shock. These suppliers’ exports are reduced by both the beneficial shock to other exporters and the safeguard (SG) action by the home country. Although the ASG made use of SG more attractive by delaying requests for retaliation for three years in the absence of compensation for N&I, this may have been negated by the MFN requirement. Thus, it becomes a plausible explanation for the proliferation of antidumping actions. For recent U.S. anti-dumping cases against multiple exporting countries, dumping margins differing by over an order of magnitude were common. This suggests that alternative use of SG with an MFN requirement would elicit third party N&I.