Does Safeguards Need Saving? Lessons from the Ukraine–Passenger Cars Dispute

The Panel Report in Ukraine–Passenger Cars provides an opportunity to revisit an old debate over the role of safeguard measures in the WTO. With regard to the legal findings, the Panel followed the established jurisprudence in this area, and found a number of violations of the Safeguards Agreement. With regard to the economics, we delve more deeply into the economic and political background of the safeguards investigation. Ukraine was hit by the economic crisis shortly after its WTO accession that significantly liberalized import tariffs on passenger cars. Next, we offer a de novo look at the injury and causation issues in this case, and discuss the challenges of an industry reliant on offshored production that sees a safeguard as a mechanism to attract foreign direct investment (FDI) for production. We conclude with an assessment of the operation of the WTO's safeguards regime, along with some tentative suggestions for reform. Overall, our examination of the economic analysis by the investigating authority and the legal review by the WTO Panel raises questions about particular aspects of the domestic and WTO processes, but concludes that the system worked well in this case.