WORLD TRADE G/TMB/N/297
23September 1997
ORGANIZATION(97-3872)
Original: English Textiles Monitoring Body
AGREEMENT ONTEXTILES AND CLOTHING
Communication from India
TheTextiles Monitoring Body hasreceived acommunication fromIndiainreply toitsrequest
foradditional information1inthecontext ofthepreparation oftheBody'sComprehensive Report on
theimplementation oftheATC during itsfirststage, inaccordance withparagraph 11ofArticle 8.
TheTMB iscirculating thiscommunication toWTO Members fortheirinformation.
1SeeG/TMB/11, issued on14February 1997.G/TMB/N/297
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6June1997
Dear Mr.Chairman,
Kindly refertoAmbassador S.Narayanan 'sletter of30April 1997andwithreference tothe
invitation bytheTextiles Monitoring Body, contained indocument no.G/TMB/11 dated
14February 1997, totheMembers tosubmit suchnotifications orinformation, asappropriate, tothe
Textiles Monitoring Body tobetaken intoconsideration inthecomprehensive report thattheTMB
willfinalize inJune1997. Theinput from India isenclosed.
Yours faithfully,
(Seal)
Permanent Mission ofIndia
H.E. Mr.A.Szepesi
Chairman
Textiles Monitoring Body
WTO Secretariat
GenevaG/TMB/N/297
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Input from India forthePreparation oftheTMB'sComprehensive Report
ontheImplementation oftheATC during itsFirstStage inaccordance withParagraph 11of
Article 8oftheATC
Preamble
Animportant concept inthepreamble oftheATCisthatof"progressive integration", inorder
toeventually integrate thetextiles andclothing sector intoGATT onthebasis ofstrengthened GATT
rules anddisciplines. However, thedetails oftheintegration programmes ofthemajor importing
Members,asnotifiedtotheTMBandcirculatedtoWTOMembers,doesnotreflectanymajormovement
towards thisobjective. (Seecomments onArticle 2below.)
Article 1
ItisfeltthattheTMB should paydueattention asmandated inArticle 1.4,inreflecting the
particular interest ofthecotton-producing exporting Members intheimplementation oftheprovisions
oftheATC, including thereview ofthefirststage ofintegration.
Inconducting itsreview ofthefirststageofintegration, theTMB should alsoindicate whether
theproducts integrated inthisstage byimporting country Members conformed totheAnnex ofthe
ATC, asstipulated inArticle 1.7.
Article 2
During thenegotiations oftheATC, Indiahadraised theissueofbackloading. However, after
finalizationoftheATC,theproblemofbackloadinghasonlybeencompoundedbytheprocedureadopted
bythemajor importing countries fortheintegration oftextile products. Some importing countries
havetechnically mettheATC stipulations without anyeffective integration, inthatalmost theentire
products which theyhaveintegrated during thefirsttwostages haveeither beentotally outside restraints
ortheyarecovered bygroup limits orsubstantially underutilized restraints. Thus, there hasbeenno
effective restraints onanyoftheproducts which havenowbeenintegrated. Butthere isanadditional
problem intheintegration programme ofoneoftheimporting countries inthatsome oftheproducts
included forintegration arenotactually covered bytheAnnex totheATC.
Article 2.4states thattherestrictions notified shallbedeemed toconstitute thetotality ofsuch
restrictions applied bytherespective Members onthedaybefore theentry intoforce oftheWTO
Agreement. Nonewrestriction interms ofproducts orMembers shallbeintroduced except under
theprovisions ofthisAgreement orrelevant GATT 1994 provisions. Thequantitative restrictions
introduced byoneMember with effect from 1January 1996, after thecoming intoforce ofa
Customs Union ofwhich itisaMember, isviolative ofthisprovision.
Inthelistofitems included byoneimporting Member initsprogramme forintegration under
Article 2.6oftheATC there arediscrepancies interms oftheproduct coverage. Details regarding
thisarealready available withtheTMB inthecasebrought before theBody under Article 2.21by
Colombia onbehalf ofseveral WTO Members.
Article 2.15oftheATCstipulates thatinconsidering theelimination ofrestrictions envisaged
inthisparagraph theMembers concerned shalltakeintoaccount thetreatment ofsimilar exports from
other Members. Thisprovision ismeant toensure thatthebenefit ofremoval ofrestriction isaccorded
simultaneously toallsignatories under WTO. However, itisunderstood thatoneimporting Member
hasproposed removal ofrestrictions oncategory 239(baby garments) foronemajor supplier, evenG/TMB/N/297
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though thisitemisscheduled tobeintegrated witheffect from1January 1998. Thebenefit accruing
tothismajor supplier atthebeginning oftheagreement yearduring thetransition period hasnotbeen
accorded toother Members including India, asrequired byArticle 2.15.
Inreviewing theadministrative arrangements notified under Article 2.17, theTMB should
indicate unambiguously thatallsucharrangements which havebeennotified areinconformity with
theprovisions ofArticle 2oftheATC, andthatincaseofanydivergence between some oftheprovisions
ofsucharrangements andtheprovisions oftheATC, theprovisions oftheATC willprevail.
Article 4
Article 4.2stipulates thattheintroduction ofchanges, suchaschanges inrulesincluding those
relating totheHarmonized System, should notobstruct thebalance ofrights andobligations between
theMembers oradversely affect theaccess available toaMember under theATC. Oneimporting
Member haseffected changes intheRules ofOrigin fortextile products originating worldwide. The
most prominent change isinthemade-ups, where thenewrulestipulates thatthecountry oforigin
isthecountry where thefabric isformed rather thanthecountry where theproduct ismade. These
changes havefarreaching consequences forexport offinished fabrics fromcountries likeIndiaespecially
when these fabrics areconverted intobedlinen/bedsheets inathirdcountry. These newrules have
come intoforcefromJuly1996andhaveshifted thebasisoforigin inrespect ofbedlinentothecountry
inwhich thefabric iswoven rather thanthecountry inwhich substantial transformation ofthefabric
takes place. Instances havealready come tonotice where Indian suppliers offabrics haveobtained
quotas toclearheldupconsignments inthisimporting Member eventhough thefabrics havebeencleared
dutypaidintothecountry ofimportation. Byamending therulesoforigin atatimewhen theWTO
isengaged informulating acomprehensive setofguidelines onthematter, theconcerned importing
Member appears tobepursuing itsownprotectionist agenda. These measures aremeant torestrict
themarket access oftheexporting countries intheimporting Member concerned, notwithstanding the
global commitment toworld trade liberalization.
Thegradual phasing outofquotas overaperiod oftenyears i.e.byendoftheyear2004,
hasledtheimporting countries toincreasingly resort toprotectionist measures likeinitiation of
anti-dumping proceedings. Inthelastfewyears atleastseven anti-dumping proceedings onimport
oftextiles fromIndiahavebeeninitiated byoneimporting Member. Insome cases likecotton fabrics,
freshproceedings havebeeninitiated within 24hours ofthetermination ofanearlier one.Inthecase
ofbedlinen afresh complaint hasbeen accepted within three weeks oftermination ofanearlier
proceeding. While initiating theproceedings, thisimporting Member hasalsonotexamined thestanding
ofthecomplaint andhasgone bythestatement ofanassociation without satisfying itself about the
extent ofsupport forthecomplaint amongst theproducers belonging tothisimporting Member, in
spiteofthefactthattheearlier proceeding wasterminated onaccount ofalackofresponse fromthem.
Anti-dumpingleviesarefarmorepotentthanquotarestraintsespeciallyastheyhavethepotential
torestrict salesanderode competitive edgeinviewofthedirect impact ontheprice oftheproduct.
Thespateofanti-dumping proceedings being initiated ontextile products exported fromIndiasuggests
thatbythetimequotas areremoved onspecific items, importing countries would haverestrained imports
ofthese items afresh byimposing anti-dumping levies soastoneutralize theimpact oftheremoval
ofquantitative restraints.
Article 6
Itisthefacttobenoted bytheTMB thataMember, which isthelargest single importer of
textile products, heralded theWTO erabyinitiating more thantwodozen additional restraints ontheir
imports. Though technically theaction forsuchrestraints weretaken under theprovisions oftheATC,G/TMB/N/297
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thefactthatsomany restraints were initiated during thefirstfewmonths oftheopening yearofthe
ATC, indicates lackofsincerity onthepartofthislargest importing country foraneffective phasing
outofrestraints. Itisalsonoteworthy thatmany ofthese restraints didnotstand thescrutiny ofthe
TMB andtheonlytwocases which ultimately reached DSBpanels weredecided against thisimporting
Member.
Itisawelcome trend thatrestraints havebegun tobeexamined byDSBpanels. Thiswillensure
thattheWTO rulesareproperly followed andimplemented inthetextile sector andwillalsohelpthe
international trade inthetextile products tograduate intotheWTO regime, bythetimethephase-out
period isover.
Another issueistheneedforamechanism toensure proper compliance oftherecommendations
ofTMB aswellastheDispute Panels. Since thenewrestraints under Article 6oftheATC are
permissible foraperiod ofthree years, itmaybepossible fortheimporting countries toachieve their
objective justbydelaying theimplementation oftherecommendation oftheTMB ortheDispute Panel
tocover suchperiod.
Article 8
There isscope fortheTMB toplayamore effective roleinensuring effective implementation
oftheATC. Since theATCprovided foranautomatic review ofconsultation callsandtheirconformity
withtheATC withtheTMB, exporting countries hadhighhopes ofamore effective policing ofpolicy
onrestraints bytheTMB ascompared withwhattheTSBhadbeendoing under theMFA regime.
However, theactual review ofrestraints byTMB sofarhasbelied these hopes. Themajor irritants
inthefunctioning oftheTMB areitsreluctance togivedetailed recommendations explaining the
arguments leading toitsrecommendations.