The SG Agreement was negotiated largely because the GATT parties were increasingly applying a large number of so-called « grey area » measures (voluntary bilateral export restrictions, orderly marketing agreements and similar measures) in order to limit imports of certain products. These measures were not imposed in accordance with Article XIX and were therefore not governed by the multilateral discipline of the GATT, and the legality of such measures under the GATT was doubtful. The agreement now clearly prohibits such measures and contains specific provisions to eliminate those that were in force at the time of the entry into force of the WTO agreement. The main guiding principles of the Agreement with regard to safeguard measures are that such measures must be temporary; whereas they may be imported only if it is established that the imports are causing or threatening to cause serious injury to a competing domestic industry; that they are not applied selectively (i.e. most-favoured-nation or most-favoured-nation beneficiaries), that they are progressively liberalized during their application, and that the member imposing them must pay compensation to members whose trade is affected. Once a security measure has been implemented, it will have to be progressively liberalised over time. Protective measures cannot normally last more than four years, but they can be extended for a maximum of eight years if the country implementing the protection measure deems it necessary to prevent or repair serious damage. Developing countries can maintain security measures for up to ten years. All safeguard measures require the payment of compensation — in the form of substantially equivalent trade concessions — for each implementation after three years. An importing country must first investigate whether the imports have caused or are threatening to cause serious injury to a domestic industry producing like or directly competitive products.
If serious injury (material impairment of the position of the domestic industry) or the threat of serious injury (manifestly imminent and which must be demonstrated by facts and not mere assertions) is found, the government of the importing country may apply a safeguard measure to protect the industry concerned. Article 1 provides that the SG Agreement is the instrument by which the measures provided for in Article XIX of the GATT may be applied in 1994. In other words, any measure for which the scope of Article XIX (which allows for the suspension of GATT concessions and obligations in defined emergency situations) must be taken in accordance with the provisions of the SG Agreement. . . .