WORLD TRADE
ORGANIZATIONG/TMB/N/407/Add.1
8 August 2001
(01-3934)
Textiles Monitoring Body Original:  English
AGREEMENT ON TEXTILES AND CLOTHING
Communication from the European Community
Addendum
The Textiles Monitoring Body has received a further communication from the
European Community in reply to its request for additional information in the context of the
preparation of the Body's Comprehensive Report on the implementation of the ATC during its
second stage, in accordance with Article 8.11.
The TMB is circulating this communication to WTO Members for their information.G/TMB/N/407/Add.1
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European Commission
Permanent Delegation
to the International Organizations in Geneva
Geneva, 14 June 2001
Subject: Request for information in the context of the TMB's comprehensive report on the
implementation of Stage 2
Dear Mr. Szepesi,
Further to your request for information of 11 May supplemented by further detail by letter of 31 May
I should like to reply as follows.
First, concerning its agreements with non-WTO Members, the European Communities (the "EC")
considers that these matters do not fall under the purview of the Textiles Monitoring Body (the
"TMB").
However, for the purpose of transparency, the EC is pleased to inform the TMB that in 1998 the EC
agreed with the Russian Federation to apply the provisions of the Partnership and Co-operation
Agreement between them to trade in textile and clothing products and removed all quotas on textiles
and clothing products.1
Similarly, the EC has by agreement removed its quotas with Ukraine.2
Mr. András SzepesiChairman of the TMB
WTO – Centre William Rappard
Rue de Lausanne 154
1211 Geneva 21
                                                     
1Agreement between the European Community and the Russian Federation on trade in textile products,
OJ No L 169/2 of 15.6.1998, Article 1(1) and 1(3).
2Agreement in the form of exchange of letters between the European Community and Ukraine
concerning the extension and amendment of the Agreement between the European Economic Community andUkraine on trade in textile products initialled on 5 May 1993, as last amended by the Agreement in the form ofan Exchange of Letters initialled on 15 October 1999, OJ No L 16/3 of 18.1.2001, Article 3.3 read in
conjunction with Appendix 3.G/TMB/N/407/Add.1
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Equally, the EC has removed restrictions with Bosnia-Herzegovina by agreement3 initialled on
24 November 2000 and also those maintained against Croatia by agreement4 initialled on
8 November 2000 prior to Croatia’s accession to the WTO on 30 November 2000.  Previously the
restrictions were maintained jointly against Bosnia-Herzegovina and Croatia.  The EC is currently in
the process of signing or exploring Stabilisation and Association Agreements, i.e. free tradeagreements with these countries.
In addition, these above-cited arrangements are designed to foster improved trade relations, and in
particular improved access in the textiles and clothing sector for both parties.  They therefore promote
trade liberalisation within the context of mutually beneficial arrangements.
As stated above, however, issues of these agreements and arrangements are not relevant to the TMB’s
review of the second stage of integration as foreseen by Article 8.11 of the Agreement on Textiles and
Clothing (the "ATC").
Secondly, the EC agrees with the United States, that circumvention is contrary to Article 5 of the
ATC.  Where, as a result of investigation, there is sufficient evidence that circumvention has occurred,Members may take certain remedies, including the adjustment of charges to restraint levels to reflect
the country or place of true origin.  The EC would like to recall that the question of circumvention is
therefore essentially one of fact and does not depend on the "guilt" or "innocence" of the country or
place from which the goods have been exported in circumvention of the quota in question.
Thirdly, the contention that notwithstanding incremen ts in growth the restrictive nature of trade has
not lessened when seen in the light of actual trade is incorrect.  Total EU trade in textiles and clothing
(T&C) represented €110 billion in total (import/export) in year 2000.  EU imports in 2000 reached
€69,5 billion, an increase of 16.6 per cent over 1999 and an increase of 54 per cent over 1995.
In 2000 EU imports of product categories subject to quotas were €19,7 or 28.4 per cent of total T&C
imports: the share is up from the 25.3 per cent recorded in 1998.  Thus the value of the share of
imports represented by goods under quota has increased in the context of an overall growing market.
The share of imports under quota has remained stable for non-WTO countries since 1998 but there
has been a marked increase for WTO countries (over 7 percentage points).  In addition total T&C
imports from countries subject to quotas has substantially increased in these two years (+ 34 per cent).
Fourthly, the EC has not made any downward reductions of quota.
Fifthly, the EC has not made its the ATC integrat ion process conditional on the fulfilment of demands
for additional market access.
The EC has fully complied with its ATC obligations relating to integration and a considerable degree
of liberalisation will result from its integration programme to date, in particular from the third stage
where quotas on gloves, underwear, anoraks, nightwea r, skirts, a number of woven fabric categories,
baby clothes and tracksuits will all be eliminated by integration.
                                                     
3Agreement between the Community and Bosnia-Herzegovina on trade in textile products,  OJ No
L 83/2 of 22.3.2001, Article 3(1).
4Agreement between the European Community and the Republic of Croatia on trade in textile products,
OJ No L 25 of 26.1.2001, Article 3(1).G/TMB/N/407/Add.1
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The EC considers that Article 7 of the ATC is an important part of the ATC.  In particular
Article 7(1)(a) represents a positive, self-standing obligation and not merely a reminder that
obligations exist in other domains.  As the TMB is aware, it states:
'As part of the integration process and with reference to the specific commitments undertaken
by the Members as a result of the Uruguay Round, all Members shall take such actions as
may be necessary to abide by GATT 1994 rules and disciplines so as to … achieve improved
access to markets for textiles and clothing  products through such actions as tariff
reductions and bindings, reduction or e limination of non-tariff barriers, and the
facilitation of customs, administrative and licensing formalities .' (emphasis supplied)
The EC has consistently pointed out that, in addition to the ongoing liberalisation resulting from the
ATC, by 2005 it will apply no quotas under the ATC, will have a very liberal import regime and will
apply low tariffs.  However, for some other WTO Members access to their markets is highly restricted
by high tariffs and/or non-tariff barriers.  It appears likely that this same degree of highly restricted
access to their markets will barely change throughout the ten-year period of the ATC.
As a result of these difficulties the EC, at the same time as it adopted the third stage of integration,
also set up a framework allowing for bilateral negotiations on market access going beyond the
liberalisation and improvement arising from the EC’s  ATC commitments.  Thus, the EC is prepared to
examine the possibility of improving access to its market for textile and clothing products going
beyond the European Community’s full compliance under the ATC where WTO Members subject toquota are prepared to consider their own position in  this regard.  The EC has not made any demands
of WTO Members but it has explained to them the nature of this framework for possible discussion.
To date, the EC has entered into a Memorandum of Understanding with one WTO Member,
Sri Lanka, concerning market access in the textiles and clothing sector.
5 This involves reduction and
bindings of tariffs and commitments concerning non-tariff barriers on the side of Sri Lanka and the
suspension of the application of the quotas on the EC side.6  The quotas have not been eliminated but
their application has been suspended subject to ongoing compliance by Sri Lanka with the terms of
the agreement.  Therefore, the EC considers that its agreement with Sri Lanka is not covered by the
requirements of Article 2(15) of the ATC.
The EC is engaged in active negotiation with a number of other WTO partners creating the potential
for further agreements of a similar kind and hopes thus to contribute to further improving market
access in the sector in advance of 2005.  In this  respect, the EC would like to emphasise that
Article 2.15 of the ATC explicitly acknowledges the right of Members to eliminate restrictions
towards individual countries during the integration phase.  This deviation from Article I of the GATT
1994 ensures that such additional liberalisation of trade in textiles is not de facto  inhibited by the
application of the general MFN principle..
As to changes in classification, the EC has not effected any changes to its classification of
products/categories giving rise to any difficulties , of which it is aware, with WTO Members against
which it maintains restrictions.
The EC’s overall policy, as outlined above, has favoured trade and provided the potential for
improved access, which has been taken up by a number of exporting countries as is shown above.
                                                     
5Memorandum of Understanding between the European Community and the Democratic Socialist
Republic of Sri Lanka on arrangements in the area of market access for textile and clothing products,OJ No L 80 of 20.3.2001.
6Point 3 of the MoU.G/TMB/N/407/Add.1
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The EC has not taken any action to provide additiona l access going beyond the above in regard to the
United States and/or Canada.
As to the cotton-producing exporting Members, the EC has consulted such Members at earlier stages
of the ATC’s integration process and afforded full scope for consultation prior to establishing its thirdstage of integration, by specifically offering consultations with all exporting WTO Members against
which it maintained restrictions.
Yours sincerely,
(Signed for)
Carlo Trojan
Ambassador
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