The President of the United States is concerned about the declining number of American companies engaged in the manufacture of computer chips. In order to reinvigorate U.S. computer chip manufacturers, the President has proposed that the United States

Question

unilaterally impose an absolute ban upon the importation of computer chips from Japan for an indefinite period of time to be determined in his complete discretion. The President has asked you whether his proposal is legal pursuant to the GATT. What is your response? Please explain the basis for your conclusions.

Answer 1

The president's proposal violates the GATT. The president's proposal is a safeguard measure. A safeguard measure is a temporary corrective action to protect domestic industry. In order for a safeguard to be lawfully imposed, the domestic industry must be suffering severe market disruption. Severe market disruption is defined as significant overall impairment of the competitive position of domestic industry. The imports must be the actual cause of the industry's decline before safeguards may be imposed.

The proposed safeguard violates the GATT for many reasons. First, the proposed safeguard violates the GATT as the president has made no provision for an administrative investigation. Second, the proposed safeguard violates GATT because it has no time limit. In a related vein, the proposed safeguard makes no provision for improving conditions. The proposal also violates the GATT because it utilizes a quota rather than the preferred method of increased tariffs. Finally, the proposed safeguard violates the GATT because it discriminates against goods from one state in violation of permanent normal trade relations.