Dominican Republic Safeguard Case Enters Next Stage

26 January 2011

After a first request was blocked by the Dominican Republic in this weeks' DSB meeting, Costa Rica, Guatemala, Honduras, and El Salvador requested a special session of the DSB to be held 7 February to establish a panel to determine the legality of the Dominican Republic's protective measures against imports of certain plastic bags and a fabric used to manufacture them. The panel will presumably be established in early February.

Since 16 March, the Dominican Republic has imposed tariffs of 38 percent on imports of polypropylene bags and the so-called tubular fabric.  To justify the duties, it invoked the Agreement on Safeguards (SG), which allows for temporary release from tariff concessions when imports of a product increase to such an extent that it threatens "serious" injury to domestic producers of that product.

The Dominican Republic claims that unforeseen developments resulting from tariff cuts arising from the Central American Free Trade Agreement (CAFTA), which involved all of the parties to the dispute as well as the US, have led to increased imports in the disputed products that have significantly injured its domestic producers.  Thus, Santo Domingo argues that it is in compliance with WTO rules under the Safeguards Agreement.

However, Costa Rica and the other complainants take issue with the methodology, calculations, and procedures used by the Dominican Republic during its investigation and subsequent imposition of safeguards.  They also claim the investigations fail to demonstrate that the increased imports were a result of unforeseen developments, that a serious injury occurred, or that the increased imports were the cause of the injuries as required under the WTO Agreements.

Since the WTO dispute settlement system's inception in 1995, relatively few developing countries have brought disputes to the body, with the exception of Brazil, India, and more recently China.  This case is part of a growing trend of ‘south-south' disputes among developing countries at the WTO.  It is also notable for involving four countries from the same region and party to a regional trade pact (CAFTA).

Costa Rica initiated the dispute on 15 October, while the other Central American countries followed suit a week later.  Subsequent consultations failed to generate a solution, which led to the initial request for a panel during this weeks' DSB meeting.  Under WTO rules, a responding party can only block a panel once.

The DSB meeting also saw the US formally announce its plan to implement the ruling (see Bridges Weekly, 19 January 2010).  In addition, China and the EU asked to extend the deadline for appealing the WTO panel decision in the steel fastener dispute, in order to relieve pressure on the Appellate Body, which is currently working on the massive Boeing/Airbus cases involving the US and EU. The new deadline for China and the EU would be the end of March.

ICTSD reporting.

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