The footwear case provides an example of the complexities of World Trade Organization (WTO) rules on the use of safeguards, and of the interaction of multilateral and regional processes of liberalization. As a result both of Argentina's unilateral liberalization and the removal of barriers within Mercosur, imports of footwear increased rapidly. As Mercosur provides no intra-regional safeguard mechanism, the government of Argentina responded by applying import relief and WTO safeguards against third countries. The WTO Dispute Settlement Body addressed these measures and as a consequence, Argentina dismantled most of them, leading to four main 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 has to be maintained when developing countries implement trade liberalization programs. In fact, it detracts from this crucial goal. It is an error to negotiate ambiguous multilateral agreements on the expectation that the WTO Dispute Settlement mechanism will clarify them. An overvalued currency heightened the industry's problems. In the case of footwear, the decline in imports following the recent devaluation was more important than that following the implementation of earlier relief measures. The political economy of liberalization also indicates the need for regional agreements to include adequate transition mechanisms that will facilitate adjustment to free trade and to maintain support for it.
Details
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Author
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Document Date
2005/05/01
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Document Type
Policy Research Working Paper
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Report Number
WPS3614
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Disclosure Status
Disclosed
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Doc Name
WTO safeguards and trade liberalization: lessons from the Argentine footwear case
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Keywords
safeguard measure;central american common market;footwear industry;agreement on safeguards;impact of trade liberalization;flexible exchange rate regime;cost of living index;privatization of public enterprise;unilateral trade liberalization;Exchange rate policies;exchange rate policy;trade liberalization process;removal of barrier;export promotion program;dispute settlement system;open trade regime;dispute settlement process;trade diversion effect;main urban center;regional trade liberalization;real exchange rate;nominal exchange rate;tariff reduction schedule;economic reform program;international commodity price;multilateral trade system;multilateral trade liberalization;effect of tariff;provisional safeguard measure;price of imports;international trade institutions;ad valorem duty;international trade commission;high tax rate;high export taxes;regional integration agreement;internationalization of production;safeguard investigation;leather footwear;safeguard mechanism;unilateral liberalization;currency overvaluation;positive determination;tariff concession;Political Economy;import relief;Intra-regional Trade;footwear production;domestic producer;relief measure;labor-intensive industry;domestic industry;comparative advantage;
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Citation
Baracat,Elias Antonio Nogues,Julio
WTO safeguards and trade liberalization: lessons from the Argentine footwear case (English). Policy Research working paper series ; no. WPS 3614 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/571471468002637295/WTO-safeguards-and-trade-liberalization-lessons-from-the-Argentine-footwear-case