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Safeguard Agreements

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Safeguard agreements are a series of emergency measures that countries can take in urgent situations where their companies are harmed by international business practices that threaten their economy.

In the event that an important group of companies are affected by the increase in imports, the WTO safeguard agreements allow them to carry out emergency measures to prevent national companies from being harmed. Among the measures that affected countries can take are the increase in tariffs or the establishment of export quotas.

In finance, the concept of a safeguard agreement refers to contracts that prevent the possibility that a group of shareholders can acquire an important package of shares of a company.

Conditions for the application of safeguard agreements

In order for a country to apply the measures established in the safeguard agreements, three conditions must be met:

- That there is an increase in imports.
- That there is damage to a relevant group of national companies or that there is a well-founded threat of damage.
- That there is a relationship between the increase in imports and the damage to national production.

Difference between serious damage and threat of damage

The safeguards agreement defines serious damage as a situation in which there is significant damage to the domestic industry. If it's determined that serious damage exists, an investigation should be carried out in which the following factors are evaluated:

- Rhythm and quantity in which imports increased.
- Changes in the level of sales.
- Level of employment in the affected sector.
- Part of the domestic market absorbed by imports.
- Losses in national companies.

On the other hand, the threat of damage, supposes the well-founded possibility that in the future there will be damage to the domestic industry. It shouldn't be based only on conjecture, it should be argued based on facts.

Definitive and provisional safeguard measures

Definitive Measures:

- Tariffs: Increase of the tariff above the consolidated rate. - Quotas or export quotas: Quantitative restrictions. A level lower than the imports of the last 3 representative years may not be established unless there is a justification for setting a different level.

Provisional Measures:

They are applied when any delay could cause irreparable damage. They can be established when the damage caused has been proven or that there is a threat of serious harm. These measures will entail an increase in tariffs for a maximum period of 200 days.

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