WTO Safeguards and Trade Liberalization: Lessons from the Argentine Experience in the Footwear Industry

Abstract

The footwear case provides an example of the complexities of WTO rules on the use of safeguards, and of the interaction of multilateral and regional processes of liberalization. As a result of Argentina's trade liberalization policies, footwear imports increased rapidly. The WTO DSB addressed these measures and as a consequence, Argentina had to dismantle most of them. The events support the following conclusions: - The jurisprudence of the WTO's Appellate Body, has created serious uncertainty as to when a country can use safeguards. This does not contribute to the political balance that is crucial when developing countries implement liberalization policies. - It is an error to negotiate ambiguous multilateral agreements on the expectation that the WTO Dispute Settlement mechanism will later clarify them. - An overvalued currency heightened the industry's problems. The decline in imports following the recent devaluation was more important than that following the implementation of earlier relief measures. - Mercosur Members should have created an adjustment-smoothing instrument.