WORLD TRADE G/L/179
31July1997
ORGANIZATION(97-3288)
COMPREHENSIVE REPORT OFTHE TEXTILES MONITORING BODY
TOTHE COUNCIL FOR TRADE INGOODS
ONTHE IMPLEMENTATION OFTHE AGREEMENT ONTEXTILES AND CLOTHING
DURING THE FIRST STAGE OFTHE INTEGRATION PROCESS
I. Thiscomprehensive report ontheimplementation oftheAgreement onTextiles andClothing
during thefirststage oftheintegration process issubmitted bytheTextiles Monitoring Body tothe
Council forTrade inGoods inorder toassist itinitsmajor review oftheimplementation ofthe
Agreement. Given thedeadline specified inArticle 8.11oftheAgreement, thereport covers theperiod
1January 1995 to24July1997.
II. Article 8.11requires thatthecomprehensive report should address inparticular matters with
regard totheintegration process, theapplication ofthetransitional safeguard mechanism, andrelating
totheapplication ofGATT 1994rulesanddisciplines asdefined inArticles 2,3,6and7respectively.
TheTMB'scomprehensive report mayinclude anyrecommendation asdeemed appropriate bytheTMB
totheCouncil forTrade inGoods.
III. TheintegrationprocessisaddressedinChapterIIofthereport,theapplicationofthetransitional
safeguard mechanism inChapter III.Matters relating totheapplication ofGATT 1994 rules and
disciplines asdefined inArticles 2,3,6and7,areaddressed inChapters II,IV,VandVIII.Chapters
VI,VIIandIXtoXIrelate totheother aspects oftheimplementation oftheATC. Additional comments,
observations andassessment bytheTMB aretobefound attheendoftherelevant Chapters.G/L/179
Page2
TABLE OFCONTENTS
I. INTRODUCTION ..........................................7
II. INTEGRATION PROCESS ...................................8
A. FIRST STAGE OFINTEGRATION: 1995 to1997 .....................9
1. Integration Pursuant toArticles 2.6and2.7(a) oftheATC .................9
(a) Review ofthenotifications pursuant toArticle 2.6and2.7(a) ..........9
(b) Advanced integration ofproducts during Stage 1..................11
(c) Further examination ofcertain aspects oftheintegration programme
submitted bytheEuropean Community pursuant toArticles 2.6and
2.7(a), attherequest ofColombia ............................11
2. Integration Pursuant toArticles 2.6and2.7(b) oftheATC, Including Notifications
Pursuant toArticle 6.1 .......................................12
(a) Article 6.1notifications ..................................12
(b) Review ofnotifications pursuant toArticles 2.6and2.7(b) ............13
(c) Advanced integration ofproducts during Stage 1..................14
3. Systemic Issues Arising outoftheReview oftheCommunications byColombia,
Pursuant toArticle 2.21, Referring toParticular Aspects ofIntegration
Programmes Notified under Articles 2.6,2.7(a) and2.7(b) .................15
(a) Issues arising outoftheexamination ofcertain aspects oftheEuropean
Community ’sintegration programme forthefirststage ..............15
(b) Issues related tocertain aspects oftheimplementation byMembers oftheir
programmes ofintegration ................................15
B. SECOND STAGE OFINTEGRATION, TOBEIMPLEMENTED ON
1JANUARY 1998 ..........................................16
1. Review oftheNotifications Pursuant toArticle 2.8(a) Made byMembers
Maintaining Restrictions Falling under Article 2.1......................16
2. Review ofnotifications Pursuant toArticle 2.8(a) Made byMembers which have,
Pursuant toParagraph 1ofArticle 6,Retained theRight tousetheProvisions of
Article 6.................................................18
(a) Review ofthenotifications pursuant toArticle 2.8(a) made byMembers
which have, pursuant toparagraph 1ofArticle 6,retained therighttouse
theprovisions ofArticle 6................................18
(b) Advanced integration ofproducts during Stage 2..................19
3. Systemic Issues arising outoftheReview oftheCommunication byColombia,
Pursuant toArticle 2.21, Referring toParticular Aspects ofIntegration
Programmes Notified under Articles 2.8(a) and2.11 .....................19
C. FURTHER ASSESSMENT AND OBSERVATIONS OFTHE TMB WITH
RESPECT TOTHE SECOND STAGE INTEGRATION PROGRAMMES .......20
1. Integration Programmes ofMembers Referred toinArticle 2.7(a) .............20
2. Integration Programmes ofMembers Referred toinArticle 2.7(b) .............24G/L/179
Page3
D. COMMENTS OFWTO MEMBERS ...............................25
E. OVERALL ASSESSMENT ....................................25
III. APPLICATION OFTHE TRANSITIONAL SAFEGUARD MECHANISM ....28
A. INTRODUCTION ..........................................29
B. THE APPLICATION OFTHE TRANSITIONAL SAFEGUARD MECHANISM
BYTHE UNITED STATES ....................................31
1. Imports ofCotton andMan-made Fibre Underwear (USCategory 352/652) .......31
(a) Costa Rica ..........................................32
(b) Honduras ...........................................33
(c) Thailand ............................................34
(d) Turkey .............................................34
(e) Colombia ...........................................34
(f) Dominican Republic ....................................34
(g) ElSalvador ..........................................35
2. Imports ofCotton andMan-made Fibre Pyjamas andOther Nightwear
(USCategory 351/651) .......................................35
(a) Honduras ...........................................35
(b) ElSalvador, Jamaica ....................................35
(c) Costa Rica ..........................................36
3. Imports ofMen'sandBoys'Wool Coats andOther thanSuit-type
(USCategory 434) ..........................................36
(a) India ..............................................36
(b) Brazil .............................................36
4. Imports ofWomen 'sandGirls'Wool Coats (USCategory 435) ..............36
(a) India ..............................................36
(b) Honduras ...........................................37
5. Imports ofWoven Wool Shirts andBlouses (USCategory 440)...............39
(a) India ..............................................39
(b) Hong Kong ..........................................40
6. Imports ofMan-made Fibre Luggage (USCategory 670-L) .................40
7. Imports ofArtificial Staple Yarn(USCategory 603) .....................40
8. Imports ofCotton andMan-made Fibre Shirts (USCategory 342/642) ..........41
(a) Guatemala ..........................................41
(b) ElSalvador ..........................................41
9. Imports ofWomen 'sandGirls'Wool Suits (USCategory 444) ...............42
10. YarnforSale, 85PerCentorMore byWeight Cotton Combed Spun (US
Category 301Part) ..........................................42
C. THE APPLICATION OFTHE TRANSITIONAL SAFEGUARD MECHANISM
BYBRAZIL ..............................................43G/L/179
Page4
1. Imports ofWoven Artificial Filament Fabric (Brazilian Category 618) ..........43
2. Imports ofMen'sandBoys'KnitShirts ofMaterial Other Than Cotton andMan-
Made Fibre (Brazilian Category 838)...............................46
3. Imports ofSynthetic Fibre Products (Brazilian Categories 611,618,619,620and
627) ...................................................46
D. MEASURES APPLIED BYECUADOR WITH REFERENCE TOTHE
SAFEGUARD MECHANISM OFTHE ATC .........................47
E. IMPLEMENTATION OFARTICLE 6.13 ...........................48
F. COMMENTS OFWTO MEMBERS ...............................48
G. COMMENTS AND OBSERVATIONS OFTHE TMB ...................48
IV. QUANTITATIVE RESTRICTIONS NOTIFIED UNDER ARTICLE 2AND
ISSUES RELATED TOTHE IMPLEMENTATION OFARTICLE 2........50
A. SCOPE OFRESTRICTIONS INHERITED FROM THE MFA ..............50
1. Notifications Made Pursuant toArticle 2.1...........................51
2. Observations WithRespect toArticle 2.1Notifications (Article 2.2)............52
3. Arrangements toBring Restrictions intoLinewithAgreement Year(Article 2.3)
andTreatment ofMFA Article 3Measures (Article 2.5) ...................53
4. Introduction ofNewRestrictions (Article 2.4) .........................54
B. ELIMINATION OFRESTRICTIONS PURSUANT TOARTICLE 2.15 ........54
C. IMPLEMENTATION OFGROWTH AND FLEXIBILITY PROVISIONS .......55
D. IMPLEMENTATION OFTHE PROVISIONS OFARTICLE 2.18(SMALL
SUPPLIERS) ..............................................55
E. ADMINISTRATIVE ARRANGEMENTS (ARTICLE 2.17) ................56
F. SAFEGUARD ACTIONS UNDER ARTICLE XIXOFGATT 1994 INTERMS
OFARTICLES 2.19AND 2.20OFTHE ATC ........................58
G. REVIEW OFIMPLEMENTATION OFARTICLE 2(ARTICLE 2.21) .........59
V. RESTRICTIONS OTHER THAN THOSE REFERRED TOINCHAPTER IV..59
A. RESTRICTIONS NOTIFIED PURSUANT TOARTICLE 3.1AND THEIR
REVIEW ................................................59
B. IMPLEMENTATION OFTHE PROVISIONS OFARTICLE 3.2............61
1. Measures Brought intoConformity withGATT 1994 (Article 3.2(a)) ...........62G/L/179
Page5
2. Programmes forthePhasing-out ofRestrictions (Article 3.2(b)) ..............62
C. INFORMATION WITH RESPECT TONEW RESTRICTIONS ORCHANGES
INEXISTING RESTRICTIONS (ARTICLE 3.3).......................62
D. REVERSE NOTIFICATIONS AND RESTRICTIONS NOT NOTIFIED
(ARTICLE 3.4)............................................63
E. OBSERVATIONS WITH RESPECT TOTHE APPLICATION OFARTICLE 3...63
VI. ADMINISTRATION OFRESTRICTIONS; CHANGES INPRACTICES,
RULES, PROCEDURES AND CATEGORIZATION OFPRODUCTS .......64
A. ADMINISTRATION OFRESTRICTIONS ...........................64
B. CHANGES INPRACTICES, RULES, PROCEDURES AND
CATEGORIZATION OFPRODUCTS .............................64
C. COMMENTS BYTHE TMB ...................................67
D. INTEGRATION UNDER THE ATC OFPARTS OFARESTRICTION ........68
VII. IMPLEMENTATION OFTHE PROVISIONS ONCIRCUMVENTION ......68
VIII. IMPLEMENTATION OFTHE PROVISIONS OFARTICLE 7............70
A. THE PROVISIONS OFARTICLE 7...............................70
B. NOTIFICATIONS BYMEMBERS PURSUANT TOARTICLE 7.2...........71
1. Implementation oftheProvisions Relating toMarket Access (Article 7.1(a)) ......71
2. Implementation oftheProvisions ofArticle 7.1(b) .......................73
3. Implementation oftheProvisions ofArticle 7.1(c) .......................74
C. ISSUES BROUGHT TOTHE ATTENTION OFTHE TMB PURSUANT TO
ARTICLE 7.3.............................................75
D. WTO MEMBERS COMMENTS ONCOMPLIANCE WITH REQUIREMENTS
OFARTICLE 7OFTHE ATC ..................................75
E. COMMENTS BYTHE TMB ...................................76
IX. IMPLEMENTATION OFPARTICULAR PROVISIONS INTHE ATC
RELATED TOSPECIAL INTERESTS OFCERTAIN WTO MEMBERS ....76
A. LEAST-DEVELOPED COUNTRY MEMBERS .......................76
1. Articles 6.6(a) and6.6(b) .....................................77
2. Article 2.18...............................................77
B. SMALL SUPPLIERS AND NEW ENTRANTS ........................78G/L/179
Page6
C. COTTON-PRODUCING EXPORTING MEMBERS .....................79
D. WOOL-PRODUCING EXPORTING MEMBERS .......................80
E. MORE FAVOURABLE TREATMENT TOBEACCORDED TORE-IMPORTS
INCASE OFRECOURSE TOTHE PROVISIONS OFARTICLE 6..........81
F. SPECIAL TREATMENT AFFORDED TOMEMBERS WHICH WERE NOT
MEMBERS OFTHE MULTIFIBRE ARRANGEMENT (MFA) .............81
G. SPECIAL PROVISIONS INFAVOUR OFDEVELOPING COUNTRY
MEMBERS ..............................................81
X. COMPLIANCE WITH NOTIFICATION REQUIREMENTS UNDER THE
ATC ...................................................82
XI. FUNCTIONING OFAND WORK CARRIED OUT BYTHE TMB .........83
A. WORKING PROCEDURES ....................................83
B. DISCHARGING FUNCTIONS ONANADPERSONAM BASIS ............83
1. TMB Working Procedures ......................................83
2. Decision oftheCouncil forTrade inGoods ...........................83
3. Code ofConduct Adopted bytheDispute Settlement Body ..................84
C. CIRCULATION OFREPORTS AND NOTIFICATIONS; DERESTRICTION OF
DOCUMENTS ............................................84
1. Circulation ofReports ........................................84
2. Circulation ofNotifications .....................................84
3. Derestriction ..............................................85
D. WORKLOAD; NUMBER OFMEETINGS, SCHEDULING OFMEETINGS ....85
E. TRANSPARENCY ..........................................85
F. DECISION-MAKING ........................................86G/L/179
Page7
I. INTRODUCTION
1. TheAgreement onTextiles andClothing (ATC), inaccordance withArticle 1.11,setsout
provisions tobeapplied byMembers during atransitional period oftenyears fortheintegration
ofthetextiles andclothing sector intoGATT 1994. Asspecified inArticle 9,theATC andall
restrictions thereunder shallstand terminated on1January 2005, onwhich datethetextiles and
clothing sector shallbefullyintegrated intoGATT 1994. There shallbenoextension ofthe
ATC.
2. Article 8.11provides that"inorder tooversee theimplementation ofthisAgreement, the
Council forTrade inGoods shallconduct amajor review before theendofeachstage ofthe
integration process. Toassist inthisreview, theTMB shall, atleastfivemonths before theend
ofeachstage, transmit totheCouncil forTrade inGoods acomprehensive report onthe
implementation ofthisAgreement during thestage under review, inparticular inmatters with
regard totheintegration process, theapplication ofthetransitional safeguard mechanism, and
relating totheapplication ofGATT 1994 rules anddisciplines asdefined inArticles 2,3,6and7
respectively. TheTMB'scomprehensive report mayinclude anyrecommendation asdeemed
appropriate bytheTMB totheCouncil forTrade inGoods". Asthefirststage oftheintegration
process under theATC comprises theperiod 1January 1995 (i.e.thedateofentry intoforce of
theWTO Agreement) to31December 1997, theCouncil forTrade inGoods isrequired to
conduct thefirstmajor review before theendof1997. Thepresent comprehensive report was
adopted andisbeing transmitted bytheTextiles Monitoring Body (TMB) totheCouncil forTrade
inGoods pursuant toArticle 8.11.
3. Thiscomprehensive report addresses alloftheoperational provisions oftheATC. As
required byArticle 8.11, particular emphasis hasbeenputonmatters withregard tothe
integration process, theapplication ofthetransitional safeguard mechanism, aswellasthose
relating totheapplication ofGATT 1994 rules anddisciplines asdefined inArticles 2,3,6and7
respectively. Since thesubmission ofintegration programmes forStage 2wasdueby
31December 1996, thereport alsocovers thefulfilment ofthisnotification obligation.
4. TheMinisterial Declaration adopted atthefirstMinisterial Meeting oftheWTO
(December 1996, Singapore), contains thefollowing section onTextiles andClothing: "We
confirm ourcommitment tofullandfaithful implementation oftheprovisions oftheAgreement on
Textiles andClothing (ATC). Westress theimportance oftheintegration oftextile products, as
provided forintheATC, intoGATT 1994 under itsstrengthened rules anddisciplines because of
itssystemic significance fortherule-based, non-discriminatory trading system anditscontribution
totheincrease inexport earnings ofdeveloping countries. Weattach importance tothe
implementation ofthisAgreement soastoensure aneffective transition toGATT 1994 bywayof
integration which isprogressive incharacter. Theuseofsafeguard measures inaccordance with
ATC provisions should beassparing aspossible. Wenoteconcerns regarding theuseofother
trade distortive measures andcircumvention. Wereiterate theimportance offullyimplementing
theprovisions oftheATC relating tosmall suppliers, newentrants andleast-developing country
Members, aswellasthose relating tocotton-producing exporting Members. Werecognize the
importance ofwool products forsome developing country Members. Wereaffirm thataspartof
theintegration process andwithreference tothespecific commitments undertaken bythe
Members asaresult oftheUruguay Round, allMembers shalltakesuchaction asmaybe
necessary toabide byGATT 1994 rules anddisciplines soastoachieve improved market access
fortextiles andclothing products. Weagree that,keeping inviewitsquasi-judicial nature, the
1Unless otherwise specified, allArticles mentioned refer totheAgreement onTextiles andClothing.G/L/179
Page8
Textiles Monitoring Body (TMB) should achieve transparency inproviding rationale forits
findings andrecommendations. Weexpect thattheTMB shallmake findings and
recommendations whenever called upon todosounder theAgreement. Weemphasize the
responsibility oftheGoods Council inoverseeing, inaccordance withArticle IV:5oftheWTO
Agreement andArticle 8oftheATC, thefunctioning oftheATC, whose implementation isbeing
supervised bytheTMB".
5. TheMinisterial Declaration hasalsobeengiven fullconsideration indrawing upthe
present report andtheparticular aspects oftheissues covered bytheDeclaration areaddressed in
thecontext oftherelevant ATC provisions.
6. Thereport isessentially based onnotifications submitted bytheMembers totheTMB and
ontheactions taken bytheTMB withrespect tothese notifications. According toArticle 8.3,the
TMB "...shallrelyonnotifications andinformation supplied bytheMembers under therelevant
Articles ofthisAgreement, supplemented byanyadditional information ornecessary details they
maysubmit oritmaydecide toseekfrom them ...". Alsoonthebasis oftheauthorization
contained inthisprovision, inFebruary 1997, theTMB issued arequest forinformation to
WTO Members, inviting them tosubmit notifications orinformation regarding theimplementation
ofparticular ATC provisions, forthepurpose ofthepreparation oftheTMB'scomprehensive
report (G/TMB/11). Replies received from Members tothisrequest havealsobeentaken into
consideration intherelevant sections ofthisreport.2Article 8.3provides, furthermore, thatthe
TMB "...mayalsorelyonnotifications toandreports from other WTO bodies andfrom such
other sources asitmaydeem appropriate". Relevant notifications to,andreports from other
WTO bodies havealsobeenconsidered, totheextent necessary, inthepreparation ofthereport.
7. TheTMB adopted detailed reports aftereachofitsmeetings. Itprovided totheCouncil
forTrade inGoods, asrequired, anannual report attheendof1995, and,inthecontext ofthe
preparation oftheSingapore Ministerial Conference, adetailed report covering theperiod
1January 1995 toOctober 1996. Thepresent report covers theperiod beginning on
1January 1995 andending on24July1997, thedateofitsadoption, andrelies toalarge extent
onthereports adopted bytheTMB. Inaddition, theTMB hasprovided further comments,
observations andassessment fortheconsideration ofMembers.
8. Bearing inmind themajor review tobeconducted bytheCouncil forTrade inGoods, the
TMB hasrequested theWTO Secretariat toprovide Members, asabackground document,
statistical information withrespect totrade intextiles andclothing (G/TMB/R/26, paragraph 31).
According toindications given totheTMB, thisdocument isexpected tobeissued bymid-
October 1997.
II. INTEGRATION PROCESS
9. Progressive, staged integration oftheproducts covered bytheATC intotheGATT 1994
isoneofthemain features oftheATC, which will“permit theeventual integration ofthissector
intoGATT onthebasis ofstrengthened GATT rules anddisciplines, thereby alsocontributing to
theobjective offurther liberalization oftrade”.Theimports ofaproduct integrated arenolonger
subject totherules oftheATC butaresubject toGATT 1994 rules anddisciplines. Incases
2Replies were received from thefollowing Members: Colombia, Egypt, theEuropean Community, India,
Mauritius, New Zealand, Pakistan andPeru. Inaddition, inreply toadditional specific questions posed bythe
TMB, submissions were received from Canada, theEuropean Community, Norway andtheUnited States.G/L/179
Page9
where imports ofaproduct integrated intotheGATT 1994 are,prior totheirintegration, subject
torestrictions maintained under Article 2,suchrestrictions areipsofacto eliminated.
10. According totheATC, integration takes place infourstages, asspecified inArticles 2.6
and2.8,except forthose Members which didnotmaintain restrictions under theMFA and,
pursuant toArticle 6.1,chose nottoretain therighttousethesafeguard provisions ofArticle 6.
Such Members are,according toArticle 2.9, deemed tohaveintegrated theirtextile andclothing
products intoGATT 1994 andare,therefore, exempted from complying withtheprovisions of
Articles 2.6to2.8and2.11.
A. FIRST STAGE OFINTEGRATION: 1995 to1997
11. Article 2.6states that“onthedateofentry intoforce oftheWTO Agreement, each
Member shallintegrate intoGATT 1994 products which accounted fornotlessthan16percentof
thetotalvolume oftheMember ’s1990 imports oftheproducts intheAnnex, interms ofHSlines
orcategories. Theproducts tobeintegrated shallencompass products from eachofthefollowing
fourgroups: topsandyarns, fabrics, made-up textile products, andclothing ”.TheMembers
which hadmade anotification under Article 2.1(i.e.those which hadmaintained restrictions
under theMFA, seeChapter IV)arecovered byArticle 2.7(a), andtheother Members by
Article 2.7(b).
12. According toArticles 2.7(a) and(b),theprogrammes ofintegration hadtobenotified
according toaprecise time-table, andcirculated toallMembers. Notifications received pursuant
toArticle 2.7(a) bytheGATT Secretariat byOctober 1994 were circulated byittotheother
participants intheUruguay Round negotiations, andmade available totheTMB, onceestablished,
forthepurpose ofArticle 2.21. TheTMB circulated thenotifications ithadreceived pursuant to
Article 2.7(b), aftertheentry intoforce oftheWTO Agreement, toWTO Members fortheir
information, inaccordance withthisArticle. Inaccordance withArticles 2.7(a) and(b),theTMB
reviewed theintegration programmes pursuant toArticle 2.21 (Article 2.21states, interalia,that
theTMB shallkeepunder review theimplementation ofArticle 2).
13. Inreviewing thenotifications made pursuant toArticle 2.6,theTMB verified, onthebasis
oftheproduct description andclassification notified byMembers, andoftrade dataprovided by
them, whether thebasic requirement ofintegrating notlessthan16percentofthetotalvolume of
thebaseyear'simports hadbeenmet,andwhether products ofthefourgroups referred toin
paragraph 6ofArticle 2hadbeenrepresented intherespective integration programmes. Inthe
caseofMembers submitting notifications pursuant toArticle 2.7(a), theTMB hadalsoexamined
whether ornotproducts previously subject toquantitative restrictions hadbeenincluded intothe
programme ofintegration. TheTMB'sreview andtaking noteofthenotifications iswithout
prejudice toMembers 'rights andobligations under therelevant provisions oftheATC.
1. Integration Pursuant toArticles 2.6and2.7(a) oftheATC
(a) Review ofthenotifications pursuant toArticle 2.6and2.7(a)
14. Pursuant toArticles 2.6and2.7(a), theMembers which hadmaintained restrictions under
theMFA hadtonotify theirrespective integration programmes totheGATT Secretariat nolater
than1October 1994, inaccordance withadecision taken byMinisters atMarrakesh on
15April 1994. Canada, theEuropean Community, Norway andtheUnited States submitted
notifications under these provisions within thedeadline prescribed; theGATT Secretariat
circulated them toother participants forinformation. Subsequently, these notifications were made
available totheTMB forthepurposes ofArticle 2.21. Inreviewing these notifications theTMBG/L/179
Page10
noted that,inaccordance withArticle 2.6,thevolume ofproducts integrated byCanada, the
European Community, Norway andtheUnited States amounted toatleast16percentofthetotal
volume oftherespective Members ’1990 imports oftheproducts falling under thecoverage ofthe
ATC. Canada integrated 16.36 percentofthevolume ofits1990 imports oftheproducts inthe
Annex, ofwhich 59percentwere oftopsandyarns, 26percentoffabrics, 8percentofmade-
upsand7percentofclothing products. TheEuropean Community3integrated 16.4percentof
thevolume oftheCommunity ’s1990 imports oftheproducts intheAnnex, ofwhich 27percent
were topsandyarns, 49percentfabrics, 22percentmade-ups and2percentclothing products.4
Norway integrated 16.26 percentofthevolume ofits1990 imports oftheproducts intheAnnex,
ofwhich 22percentwere topsandyarns, 73percentfabrics, 4percentmade-ups and1percent
clothing products.5TheUnited States integrated 16.21 percentofthevolume ofits1990 imports
oftheproducts intheAnnex, ofwhich 52percentwere topsandyarns, 15percentfabrics,
20percentmade-ups and13percentclothing products.
15. Inits1996 Report, adopted inthecontext ofthepreparation fortheSingapore Ministerial
Conference, theTMB made thefollowing additional observations withrespect tothefirststage of
integration programmes notified under Articles 2.6and2.7(a):
- Notwithstanding theprovisions ofArticles 2.6and2.7,theTMB wasaware that-
withtheexception ofCanada affecting oneproduct (work gloves) -theproducts
thusintegrated were not,prior totheirintegration intoGATT 1994, subject to
quantitative restrictions notified under Article 2.1;
- Article 2.6required Members tointegrate products selected from eachofthefour
groups mentioned inparagraph 11above; theintegration programmes submitted
bytheMembers concerned forthefirststage ofintegration metthisrequirement.
TheTMB observed, however, thattheshare oftopsandyarns, andfabrics inthe
integration programmes notified under Articles 2.6and2.7(a) wassignificantly
higher thanthatofmade-up textile products andclothing;
- Article 2.6alsorequired Members tointegrate inthefirststage products which
accounted fornotlessthan16percentofthetotalvolume oftheMember ’s1990
imports oftheproducts intheAnnex. However, theTMB observed thatasthe
products integrated were concentrated intherelatively lessvalue-added range of
products, itwould appear thattheshare ofproducts integrated, expressed invalue
terms, wassmaller thanthatexpressed involume;
- Theintegration ofaproduct intoGATT 1994 pursuant toArticle 2.6hadtwo
consequences: first, theprovisions ofArticle 6oftheATC cannot beinvoked
withrespect toimports ofsuchproduct; second, anyquantitative restriction onthis
product notified under Article 2oftheATC iseliminated;
- Inlightofthefirstoftheobservations under thisparagraph, itcould beobserved
thattheincreases inaccess tothemarkets ofMembers having notified restrictions
3EC12(atthetimethenotification wasmade, theEuropean Community comprised 12Member States; since
itwasanticipated thatitwould comprise 16Member States by1January 1995, dataforthose 16Members were
alsoprovided).
4Thepercentages indicated mayhave toberevised (seeparagraphs 17to23below).
5Thepercentages indicated mayhave toberevised (seeparagraphs 33and34below).G/L/179
Page11
pursuant toArticle 2.1hadbeenlimited inthefirststage, withoneexception, to
theannual increases inthelevels ofrestrictions required under Article(s) 2.13and,
ifapplicable, 2.18, andinonecasetotherecourse totheprovision ofArticle 2.15
(seeparagraph 203below);
- TheTMB wasaware oftheconcern expressed byseveral Members that,should
thepattern ofselection oftheproducts tobeintegrated inthesecond andthird
stages pursuant toArticles 2.8(a) and(b)reproduce thatofthefirststage, the
implementation oftheintegration ofthetextiles andclothing sector into
GATT 1994 on1January 2005, asstated inArticle 2.8(c), would prove difficult.
TheTMB wasequally aware that,intheviewofsome other Members, the
eventual integration ofthetextiles andclothing sector intoGATT hadtobeseen
alsointhecontext oftheliberalization builtintotheATC inArticles 2.13, 2.14
and,ifapplicable, 2.18(G/L/113).
(b) Advanced integration ofproducts during Stage 1
16. Article 2.10states, interalia,that“nothing inthisAgreement shallprevent aMember
which hassubmitted anintegration programme pursuant toparagraph 6or8[ofArticle 2]from
integrating products intoGATT 1994 earlier thanprovided forinsuchaprogramme ”.TheTMB
noted thatnonotification hadbeenmade under thisprovision withrespect tothefirststage of
integration byaMember having submitted anintegration programme under Article 2.7(a).
(c) Further examination ofcertain aspects oftheintegration programme submitted by
theEuropean Community pursuant toArticles 2.6and2.7(a), attherequest of
Colombia
17. InFebruary 1997, theTMB received anotification from Colombia, alsoonbehalf ofa
number ofother WTO Members thatarealsomembers oftheInternational Textiles andClothing
Bureau (ITCB), alleging certain discrepancies intheprogramme ofintegration notified bythe
European Community under Article 2.6oftheATC, andrequesting theTMB toreview this
matter interms ofArticle 2.21. Inparticular, intheviewofColombia, theEuropean Community
hadintegrated inthefirststage certain textile andclothing products ofHSChapters 30to49and
64to96forwhich theEuropean Community hadcounted thevolume oftrade fortheentire
six-digit HSlinesinstead ofcounting trade forthespecific products ofthe"ex-positions" referred
tounder theATC. According toColombia, ifthevolume ofimports which didnotqualify were
excluded, theEC'sintegration programme would account forlessthan16percentoftheEC's
totalvolume of1990 imports.
18. TheTMB considered thiscommunication atitstwenty-eighth, twenty-ninth andthirtieth
meetings, withtheparticipation ofbothColombia andtheEuropean Community. Thearguments
andobservations ofColombia andtheEuropean Community related tocertain six-digit HSlines
where theAnnex totheATC refers to“ex-positions ”together withadescription oftherelevant
products. These covered:
- woven, knitted ornon-woven fabrics coated, covered orlaminated withplastics (in
HSChapter 39);
- luggage, handbags andflatgoods withanouter surface predominantly oftextile
materials (inHSChapter 42);G/L/179
Page12
- certain footwear mainly oftextile material, aswellaslegwarmers andgaiters of
textile material (inHSChapter 64);
- yarns andwoven fabrics offibreglass (inHSChapter 70);and
- woven ribbons, ofman-made fibres, other thanthose measuring lessthan30mm
inwidth andpermanently putupincartridges (inHSChapter 96).
19. Following thedetailed, chapter-by-chapter review, theTMB reached, interalia,the
following overall conclusions.
20. TheTMB agreed withColombia thattheintegration programme oftheEuropean
Community forthefirststage hadalsoincluded certain imports which didnotqualify for
integration astheydidnotfallunder thecoverage oftheATC, asdefined initsAnnex. TheTMB
observed thatwithrespect toanumber ofHS"ex-positions" concerned thiswasnotcontested by
theEuropean Community, which inparticular referred todifficulties ortheimpossibility of
providing trade dataforthese products strictly conforming tothedescription contained inthe
Annex totheATC.
21. TheTMB wasoftheview, ontheother hand, thatthelikely share ofnon-ATC imports
andofthecorresponding trade volume thusnotproperly integrated, waslessthanclaimed by
Colombia. Thisfollowed from thefactthatnotallthediscrepancies alleged byColombia seemed,
following careful analysis, tobewell-founded, andthatColombia hadnotcorrected thefigure
related totheEC'stotalvolume ofimports in1990 bysubtracting theamount thatwasbelieved to
benon-ATC trade.
22. Alsoduetothelackofreliable statistical information, theTMB wasnotinaposition to
pronounce itself onthemagnitude ofthediscrepancies which hadoccurred. Itappeared,
however, possible thatafternecessary corrections, theEC'sintegration programme could account
forlessthan16percentoftheEC'stotalvolume of1990 imports. TheTMB believed thatthe
sizeoftheshortfall, ifany,could bestbeassessed bytheimporting Member itself.
23. TheTMB, therefore, recommended thattheEuropean Community re-examine itsfirst
stage integration programme inlightoftheTMB'scomments andfindings, asreflected inits
detailed report. TheTMB expected theEuropean Community toreport ontheresults ofthis
examination asrapidly aspossible. TheTMB agreed thatitwould keepthismatter under review
(G/TMB/R/29). TheEuropean Community subsequently informed theTMB that,following the
TMB'srecommendation, itwasreviewing itsintegration programme andwould communicate the
results ofthisreview totheTMB assoonascompleted.
2. Integration Pursuant toArticles 2.6and2.7(b) oftheATC, Including Notifications
Pursuant toArticle 6.1
24. According toArticle 2.9,"Members which havenotified, pursuant toparagraph 1of
Article 6,theirintention nottoretain therighttousetheprovisions ofArticle 6shall, forthe
purposes ofthisAgreement, bedeemed tohaveintegrated theirtextiles andclothing products into
GATT 1994. Such Members shall, therefore, beexempted from complying withtheprovisions of
paragraphs 6to8and11"ofthesame Article. Thenotifications received under Articles 2.6and
2.7(b) had,therefore, tobeexamined inthecontext ofnotifications made pursuant toArticle 6.1.
(a) Article 6.1notificationsG/L/179
Page13
25. Article 6.1states that"Members notmaintaining restrictions falling under Article 2shall
notify theTMB ...astowhether ornottheywishtoretain therighttousetheprovisions ofthis
Article". Sixty-four WTO Members notified theTMB tothiseffect, several afterthedeadline
specified bytheATC. Thefollowing 55Members notified thattheywished toretain therightto
usetheprovisions ofArticle 6:Argentina, Bangladesh, Bolivia, Brazil, Burkina Faso, Colombia,
Costa Rica, Côted'Ivoire, Cyprus, theCzech Republic, theDominican Republic, Ecuador, Egypt,
ElSalvador, Guatemala, Honduras, Hungary, India, Indonesia, Israel, Jamaica, Japan, Kenya,
Korea, Lesotho, Liechtenstein, Malaysia, Malta, Mauritius, Mexico, Morocco, Myanmar,
Nicaragua, Nigeria, Pakistan, Paraguay, Peru, thePhilippines, Poland, Romania,
Saint KittsandNevis, Senegal, theSlovak Republic, Slovenia, South Africa, SriLanka,
Switzerland, Thailand, Trinidad andTobago, Tunisia, Turkey, theUnited Arab Emirates,
Uruguay, Venezuela andZambia. With respect tonotifications addressed toitafterthedeadline
hadpassed, theTMB stated thatitstaking noteoflatenotifications waswithout prejudice tothe
legalstatus ofsuchnotifications.
26. Thefollowing nineWTO Members notified thattheydidnotwishtoretain therightto
usetheprovisions ofArticle 6:Australia, Brunei Darussalam, Chile, Cuba, Hong Kong6,
Iceland, Macau, NewZealand andSingapore. TheTMB tooknoteofthese notifications.
27. TheTMB haddrawn theattention7ofMembers tothefactthattheMembers which did
notmaintain restrictions falling under Article 2had,pursuant toArticle 6.1,theobligation to
notify within aspecific time-frame whether ornottheywished toretain therighttousethe
provisions ofArticle 6.Asignificant number ofsuchMembers havenotsubmitted the
notification under thisprovision.
(b) Review ofnotifications pursuant toArticles 2.6and2.7(b)
28. Forty-five Members submitted notifications pursuant toArticles 2.6and2.7(b)
(Argentina, Bangladesh, Bolivia, Brazil, Colombia, Costa Rica, Cyprus, theCzech Republic, the
Dominican Republic, Egypt, ElSalvador, Guatemala, Honduras, Hungary, India, Indonesia,
Israel, Japan, Korea, Liechtenstein, Malaysia, Malta, Mauritius, Mexico, Morocco, Myanmar,
Nicaragua, Pakistan, Paraguay, Peru, thePhilippines, Poland, Romania, Saint KittsandNevis, the
Slovak Republic, Slovenia, South Africa, SriLanka, Switzerland, Thailand, Tunisia, Turkey,
Uruguay, Venezuela andZambia). TheTMB completed thereview of42ofthem. Inthisreview
theTMB noted thatinallcases theproducts integrated amounted toatleast16percent8ofthe
respective Members ’totalimports oftheproducts falling under thecoverage oftheATC (inmost
cases involume of1990 imports, insome other cases invalue and/or withadifferent base-year),
andthatinallcases products from eachofthefourgroups (tops andyarns, fabrics, made-up
textile products, andclothing) hadbeenintegrated. Thereview ofthenotifications made byIsrael,
Myanmar andSaint KittsandNevis could notbeconcluded without thesubmission ofadditional
information sought bytheTMB from these Members.
29. Asnoted above, theTMB insome instances tooknoteofintegration programmes which,
incertain respects, didnotfullymeetthetechnical criteria established under Article 2.6.This
concerned cases where thedatawere notavailable involume, orfortheyear1990, orwhere the
share ofintegration wascalculated relative todataforthetextiles andclothing sector asawhole
6Thename ofthisMember hasbecome "Hong Kong, China" asfrom 1July1997 -seeWT/L/218.
7G/L/113, paragraph 19.
8Seealsoparagraphs 33and34below.G/L/179
Page14
since datafortheexact product coverage oftheATC were notavailable. Prior totaking noteof
suchnotifications, theTMB wasassured thatnobetter datacould beobtained (G/L/113,
paragraph 21).
30. Inits1996 Report, adopted inthecontext ofthepreparation fortheSingapore Ministerial
Conference (G/L/113), theTMB made, interalia,thefollowing observations withrespect tothe
firststage ofintegration programmes notified under Articles 2.6and2.7(b):
- Article 2.6requires Members tointegrate products selected from eachofthefour
following groups: topsandyarns, fabrics, made-up textile products, andclothing.
Theintegration programmes submitted byMembers pursuant toArticles 2.6and
2.7(b) metthisrequirement;
- TheTMB alsoobserved thatnine9Members (seeparagraph 26)hadnotified their
choice nottoretain therighttousetheprovisions ofArticle 6andthatforthose
Members theproducts falling under thecoverage oftheATC hadbeenintegrated
intoGATT 1994 asfrom 1January 1995. TheTMB commends these Members
forhaving opted forthisapproach;
- TheTMB observed furthermore thatamong the559Members which hadchosen to
retain therighttousetheprovisions ofArticle 6,ten9(Burkina Faso,
Côted'Ivoire, Ecuador, Jamaica, Kenya, Lesotho, Nigeria, Senegal,
Trinidad andTobago, andtheUnited Arab Emirates) hadnotsubmitted a
notification under Articles 2.6and2.7(b). TheTMB wished todraw theattention
ofMembers tothefactthatthenotification requirement contained inArticle 6.1,
andtheresulting notification requirement contained inArticle 2.7(b), were
mandatory andhadtobesubmitted totheTMB within prescribed deadlines;
- TheTMB noted thatinsome cases products integrated under Articles 2.6and
2.7(b) hadalready beensubject toquantitative restrictions, notified under Article 3
andjustified under aGATT 1994 provision, andthatsuchrestrictions were not
affected bytheintegration oftheproducts concerned. Among the459Members
which submitted anotification pursuant toArticles 2.6and2.7(b), 129hadmade
notifications under Article 3.1invoking justification under aGATT 1994 provision
fortherestrictions notified (seeparagraphs 230to234below).
31. Inaddition, theTMB noted thatamong those 45Members, four10hadnotified aphase-out
programme pursuant toArticle 3.2. Restrictions inplace under these programmes were not
affected bytherespective integration programmes notified.
(c) Advanced integration ofproducts during Stage 1
32. Article 2.10states, interalia,that"nothing inthisAgreement shallprevent aMember
which hassubmitted anintegration programme pursuant toparagraph 6or8[ofArticle 2]from
integrating products intoGATT 1994 earlier thanprovided forinsuchaprogramme". TheTMB
9Therelevant number hasbeen updated totakeintoaccount thenewnotifications received since G/L/113
wasprepared.
10OneMember (Cyprus) notified bothrestrictions forwhich aGATT 1994 provision hadbeeninvoked, and
restrictions withrespect towhich aphase-out programme wassubmitted, bywhich suchrestrictions werebrought
intoconformity withGATT 1994.G/L/179
Page15
noted thatnonotification hadbeenmade under thisprovision withrespect tothefirststage of
integration byaMember having submitted anintegration programme under Article 2.7(b).
3. Systemic Issues Arising outoftheReview oftheCommunications byColombia, Pursuant
toArticle 2.21, Referring toParticular Aspects ofIntegration Programmes Notified under
Articles 2.6,2.7(a) and2.7(b)
(a) Issues arising outoftheexamination ofcertain aspects oftheEuropean
Community ’sintegration programme forthefirststage
33. During thereview mentioned inparagraphs 17to23above, theTMB noted thestatement
oftheEC'srepresentative thatseveral other WTO Members hadincluded inthelistofproducts to
beintegrated inthefirst(andsecond) stage(s) ofimplementation oftheATC products ofthose
HSlinesintheAnnex forwhich onlypartofthelinefellunder thecoverage oftheATC
(indicated as“ex”HSlinesintheATC Annex).
34. With regard totheprogrammes forthefirststage ofintegration which hadalready been
reviewed bytheTMB, theBody noted thatithadnotascertained whether thestatistical
information provided byMembers fortheintegrated products under these HSlinesreferred tothe
whole HSlinesoronlytothatportion oftheHSlinescovered bytheATC. TheTMB, therefore,
decided toverify withthe21Members concerned (Brazil, Costa Rica, Cyprus, the
Czech Republic, Hungary, Japan, Liechtenstein, Mexico, Norway, Pakistan, thePhilippines,
Poland, Saint KittsandNevis, Slovenia, South Africa, SriLanka, Switzerland, Thailand, Turkey,
theUnited States andUruguay) whether thevolume ofimports theyhadnotified forthe“exHS
lines”(and, consequently, thedatafortotalimports) related precisely totheproducts described in
theAnnex.
35. TheTMB hastodatereceived replies tothese questions from seven oftheMembers
referred toinparagraph 34above (theCzech Republic, Hungary, Japan, Norway, South Africa,
SriLanka andTurkey). South Africa answered thatthetrade counted forthe"exitems" contained
initslistofproducts integrated onlypertained tothose products covered bytheATC, and
provided statistics tosubstantiate thisanswer. Thereview oftheother responses hasnotyetbeen
finalized.
36. Inasubsequent communication, theEuropean Community, stressing theimportance that
thesame principles, which hadbeenapplied inrespect oftheTMB'sfindings inthematter raised
byColombia, should beapplied toother Members inthesame position, requested theTMB,
pursuant toArticle 2.21, toreview whether ornottheMembers which hadintegrated products of
those HSlinesintheAnnex forwhich onlypartofthelinefellunder thecoverage oftheATC
hadprovided statistical dataforthewhole HSlinesoronlyforthose portions oftheHSlines
covered bytheATC. Thisnotification willbereviewed atasubsequent meeting.
(b) Issues related tocertain aspects oftheimplementation byMembers oftheir
programmes ofintegration
37. InNovember 1996, Colombia addressed, alsoonbehalf ofseveral other WTO Members
thatarealsomembers oftheITCB, acommunication totheTMB relating toparticular aspects
pertaining totheimplementation byWTO Members oftheprogramme ofintegration oftheATC,
suchastheconversion factors usedforthepurpose ofcalculating theimport volume ofthe
products tobeintegrated, aswellasthelackofuniformity intheclassification ofproducts inone
ofthefourproduct groups envisaged inArticles 2.6and2.8.With regard toconversion factors,
Colombia ’scontention wasthattheverification ofintegrated volumes would befacilitated iftheG/L/179
Page16
Members were requested tonotify theconversion factors alsointhenotification oftheir
integration programmes submitted totheTMB under Article 2.8.With respect toproduct
classification, Colombia wasoftheviewthatuniformity intheclassification oftheHSlinesinthe
Annex would bedesirable, andasked theTMB toprovide suitable guidance totheMembers.
38. TheTMB considered theissues raised inthiscommunication atitstwenty-third meeting
(G/TMB/R/22, paragraph 13),andaddressed them inawritten reply toColombia. Inthisreply,
interalia,inviewofthefactthatatthetimeofthereview bytheTMB thedeadline for
notification hadalmost beenreached, theTMB assumed that,withrespect toconversion factors, it
might perhaps beofgreater importance toobtain relevant information from those WTO Members
which maintain restrictions under Article 2.TotheTMB'sknowledge, conversion factors were
available withrespect totheUnited States, andwere notnecessary fortheEuropean Community
andNorway, which collected statistical datainauniform volume unit.Inaddition, theEuropean
Community hasnotified itsconversion factors inthecontext ofitsnotification under Article 2.1.
With respect toCanada, theTMB noted that,during theUruguay Round, theNegotiating Group
onTextiles andClothing hadbeenprovided withtrade datainvolume terms, onaline-by-line
basis, fortheproducts included intheAnnex totheATC. Such datacould beusedtocalculate the
conversion factors. Moreover, theTMB understood thatsuchdatacould again beprovided by
Canada early in1997.11Astothecategorization ofproducts inthefourgroups mentioned in
Articles 2.6and2.8oftheATC, theTMB feltthataproblem would onlyexistif,atagiven stage
ofintegration, allproducts inagiven group were, intheviewofoneormore WTO Members,
inadequately placed inthatgroup. Therefore, theTMB considered thattheimplication ofalack
ofafullyharmonized approach might notnecessarily affect theintegration programmes
themselves. TheTMB would, however, initsreview ofintegration programmes, payparticular
attention totheidentification ofanydiscrepancies there might betotheclassification ofproducts
inanyofthefourgroups.
B. SECOND STAGE OFINTEGRATION, TOBEIMPLEMENTED ON
1JANUARY 1998
39. Article 2.8(a) states that"theremaining products, i.e.theproducts notintegrated into
GATT 1994 under paragraph 6[ofArticle 2],shallbeintegrated, interms ofHSlinesor
categories, ...asfollows: onthefirstdayofthe37thmonth thattheWTO Agreement isineffect
[i.e.1January 1998], products which accounted fornotlessthan17percentofthetotalvolume
oftheMember ’s1990 imports oftheproducts intheAnnex. Theproducts tobeintegrated bythe
Members shallencompass products from eachofthefollowing fourgroups: topsandyarns,
fabrics, made-up textile products, andclothing".
40. Article 2.11states that"therespective programmes ofintegration, inpursuance of
paragraph 8,shallbenotified indetail totheTMB atleast12months before theircoming into
effect [i.e.by1January 1997], andcirculated bytheTMB toallMembers". TheTMB has
accordingly circulated thenotifications ithasreceived pursuant toArticle 2.8(a) to
WTO Members, andstarted toreview these integration programmes pursuant toArticle 2.21.
1. Review oftheNotifications Pursuant toArticle 2.8(a) Made byMembers Maintaining
Restrictions Falling under Article 2.1
41. Inreviewing these notifications theTMB noted that,inaccordance withArticle 2.8(a), the
volume ofproducts tobeintegrated byCanada, theEuropean Community, Norway andthe
11Conversion factors were provided byCanada inMay 1997.G/L/179
Page17
United States amounted toatleast17percentofthetotalvolume oftherespective Members ’
1990 imports oftheproducts falling under thecoverage oftheATC. Canada would integrate
18.61 percentofthevolume ofits1990 imports oftheproducts falling under thecoverage ofthe
ATC, ofwhich 3.5percentwere topsandyarns, 11.3percentfabrics, 76.4percentmade-up
textile products and8.8percentclothing products. TheTMB noted thatCanada would integrate
30products, ofwhich fivewere oftopsandyarns, three offabrics, 16ofmade-up textile
products andofsixofclothing. TheTMB further noted thattwoproducts (handbags oftextile
materials andtailored-collar shirts) withrespect towhich Canada maintained restrictions under the
ATC hadbeenincluded intheintegration programme andthat,therefore, suchrestrictions would
beeliminated on1January 1998. Restraints onthese twoproducts affected overall
22WTO Members. Inaddition, Canada hadinformed theTMB that,pending theintegration of
tailored-collar shirts intotheGATT 1994 on1January 1998, andwitheffect from 1July1997, it
would notenforce existing restrictions onimports oftailored-collar shirts from restrained WTO
Members, andthattheMembers concerned hadbeeninformed byCanada accordingly.G/L/179
Page18
42. TheEuropean Community would integrate 17.99 percent12ofthetotalvolume ofits1990
imports oftheproducts falling under thecoverage oftheATC, ofwhich 65percentwere tops
andyarns, 12percentfabrics, 11percentmade-up textiles and12percentclothing products.
TheTMB noted thattheEuropean Community would integrate 23ECproduct categories, of
which fouroftopsandyarns, fouroffabrics, sixofmade-up textile products andnineofclothing.
TheTMB further noted that12ECcategories withrespect towhich theEuropean Community
maintained restrictions under theATC hadbeenincluded intheintegration programme andthat,
therefore, suchrestrictions would beeliminated on1January 1998. Restraints onthese 12EC
categories affected overall fiveWTO Members.
43. Norway would integrate 24.26 percent12ofthetotalvolume ofits1990 imports ofthe
products falling under thecoverage oftheATC, ofwhich 27percentwere topsandyarns,
10percentfabrics, 46percentmade-ups and17percentclothing products. TheTMB observed
thatthenotification contained noproduct forwhich restrictions were currently maintained by
Norway. Inthisregard, theTMB noted thestatement byNorway thatit“iscommitted toa
continuation ofapolicy ofgradual liberalization andexpects tobeabletonotify laterthisyearto
theTMB (andtheWTO Members directly concerned) further steps taken pursuant toArticle 2,
Section 15,oftheATC”.TheTMB alsonoted, however, thatoneoftheproducts (HSNo.6210)
forwhich therestrictions, affecting 16WTO Members, hadbeeneliminated asfrom
1January 1996 pursuant toparagraph 15ofArticle 2,would beintegrated.
44. TheUnited States would integrate 17.03 percentofthetotalvolume ofits1990 imports
oftheproducts falling under thecoverage oftheATC, ofwhich 47percentwere topsandyarns,
14.7percentfabrics, 26.7percentmade-ups and11.6percentclothing products. TheTMB
noted thattheUnited States would integrate 38USproduct categories intheirentirety (oneof
fabric, three ofmade-ups and34ofclothing), and12USproduct categories partially (oneof
yarns, sixofmade-ups andfiveofclothing). TheTMB further noted that24UScategories or
parts ofcategories withrespect towhich theUnited States maintained restrictions under theATC
hadbeenincluded intheintegration programme andthat,therefore, suchrestrictions would be
eliminated on1January 1998. Restraints onthese 24UScategories orpartofcategories affected
overall 14WTO Members. Some oftherestraints which would beeliminated were intheform of
specific limits (i.e.thecategories themselves were under quantitative limit), while, insome other
cases, thecategory integrated was,prior toitsintegration, subject toaquantitative restriction
because, although thecategory itself wasnotunder specific limit, itfellunder anaggregate or
group limit.
2. Review ofnotifications Pursuant toArticle 2.8(a) Made byMembers which have, Pursuant
toParagraph 1ofArticle 6,Retained theRight tousetheProvisions ofArticle 6
(a) Review ofthenotifications pursuant toArticle 2.8(a) made byMembers which
have, pursuant toparagraph 1ofArticle 6,retained therighttousetheprovisions
ofArticle 6
45. Among the55Members which, pursuant toArticle 6.1,retained therighttousethe
provisions ofArticle 6,45ofwhich submitted anintegration programme forStage 1,
36(Argentina, Bolivia, Brazil, Colombia, Costa Rica, theCzech Republic, the
Dominican Republic, Egypt, ElSalvador, Hungary, India, Indonesia, Japan, Korea, Liechtenstein,
Malaysia, Malta, Mauritius, Mexico, Morocco, Nicaragua, Pakistan, Peru, thePhilippines,
Poland, Romania, Saint KittsandNevis, theSlovak Republic, Slovenia, SriLanka, Switzerland,
12Thepercentages indicated mayhave toberevised (seeparagraphs 48and49).G/L/179
Page19
Thailand, Tunisia, Turkey, Uruguay andVenezuela) notified anintegration programme under
Article 2.8(a), andninedidnot(Bangladesh, Cyprus, Guatemala, Honduras, Israel, Myanmar,
Paraguay, South Africa andZambia). TheTMB completed thereview of17ofthenotifications
received. Initsreview theTMB noted thatinallcases theproducts integrated amounted toat
least17percentoftherespective Members ’totalimports oftheproducts falling under the
coverage oftheATC (inmost cases involume of1990 imports, insome other cases invalue
and/or withadifferent base-year), andthatinallcases products from eachofthefourgroups
(tops andyarns, fabrics, made-up textile products, andclothing) hadbeenintegrated. With respect
tothose notifications forwhich thereview wasnotcompleted, theTMB decided toseekfurther
information andclarification from theMembers concerned, andtorevert toitsreview ata
subsequent meeting, when satisfactory replies would havebeenprovided.
46. Aswasthecaseforthenotifications made pursuant toArticle 2.7(b), theTMB insome
instances tooknoteofintegration programmes which, incertain respects, didnotfullymeetthe
technical criteria established under Article 2.8(a). Thisconcerned cases where thedatawere not
available involume, orfortheyear1990, orwhere theshare ofintegration wascalculated relative
todataforthetextiles andclothing sector asawhole since datafortheexact product coverage of
theATC were notavailable. Prior totaking noteofsuchnotifications, theTMB wasassured that
nobetter datacould beobtained, andverified thatthebasis ofthedataforeachMember wasthe
same asthatusedforitsfirststage ofintegration. Therefore, theirrespective stages ofintegration
would beimplemented inaconsistent manner.
(b) Advanced integration ofproducts during Stage 2
47. Article 2.10states, interalia,that"nothing inthisAgreement shallprevent aMember
which hassubmitted anintegration programme pursuant toparagraph 6or8[ofArticle 2]from
integrating products intoGATT 1994 earlier thanprovided forinsuchaprogramme". TheTMB
noted thatTurkey hadavailed itself oftheprovisions ofArticle 2.10tointegrate witheffect as
from 1January 1998 some products which would form partofTurkey ’sthirdstage ofintegration
(seeG/TMB/N/240).
3. Systemic Issues arising outoftheReview oftheCommunication byColombia, Pursuant to
Article 2.21, Referring toParticular Aspects ofIntegration Programmes Notified under
Articles 2.8(a) and2.11
48. During thereview mentioned inparagraphs 17to23above, theTMB noted thestatement
oftheEC'srepresentative thatseveral other WTO Members hadincluded inthelistofproducts to
beintegrated inthesecond stage ofimplementation oftheATC products ofthose HSlinesinthe
Annex forwhich onlypartofthelinefellunder thecoverage oftheATC (indicated as
"exHSlines" intheATC Annex).
49. Therefore, prior tofinalizing itsreview ofthenotifications received pursuant toArticles
2.8(a) and2.11, theTMB decided toverify withtheMembers concerned thatthevolume of
imports theyhadnotified forthe"exHSlines" (and, consequently, thedatafortotalimports)
related precisely totheproducts described intheAnnex. Thisverification wasconcluded with
respect toCanada andtheUnited States, which confirmed thatthevolume ofimports notified for
theirrespective second stages ofintegration related precisely totheproducts described inthe
Annex.
50. Inasubsequent communication, theEuropean Community, stressing theimportance that
thesame principles, which hadbeenapplied inrespect oftheTMB'sfindings inthematter raised
byColombia, should beapplied toother Members inthesame position, requested theTMB,G/L/179
Page20
pursuant toArticle 2.21, toreview whether ornottheMembers which hadintegrated products of
those HSlinesintheAnnex forwhich onlypartofthelinefellunder thecoverage oftheATC
hadprovided statistical dataforthewhole HSlinesoronlyforthose portions oftheHSlines
covered bytheATC. Thisnotification willbereviewed atasubsequent meeting.
C. FURTHER ASSESSMENT AND OBSERVATIONS OFTHE TMB WITH RESPECT TO
THE SECOND STAGE INTEGRATION PROGRAMMES
1. Integration Programmes ofMembers Referred toinArticle 2.7(a)
51. Asindicated above, Members referred toinArticle 2.7(a), withtheexception of
Norway13,alsoincluded intheirrespective integration programmes forStage 2some products or
categories orparts ofcategories withrespect towhich theymaintained restrictions affecting a
number ofMembers, asnotified pursuant toArticle 2.1. Asaresult oftheimplementation ofthe
integration, these restrictions willbeeliminated asfrom 1January 1998.
52. Inreply totheTMB'srequest, theUnited States provided information regarding the
restrictions applicable toWTO Members affected bytheUS'second stage ofintegration (see
Table 1).TheTMB understood thatsome oftherestrictions were intheform ofspecific limits,
while others, though notbeing subjected tospecific limits, fellunder anaggregate orgroup limit.
Ingiving thisinformation theUnited States didnotspecify theform oftheapplicable restraint
(i.e.specific limit, aggregate orgroup limit). Onthebasis ofthenotifications submitted bythe
United States pursuant toArticle 2.1itcanbeascertained that:
- Allofthecategories areatpresent under specific limitandwillbeintegrated,
therefore therestriction willbefullyeliminated inthefollowing cases:
category 239(except diapers) -affecting Hong Kong, Korea, Pakistan, the
Philippines, Singapore andThailand;
category 353/354/653/654 -affecting Korea (theUnited States maintains
onespecific limitforthecombined fourcategories against imports from
Korea);
category 632-affecting Korea;
- Inallother cases inrespect ofMembers listed intheinformation provided bythe
United States, theUnited States subjects imports togroup oraggregate limits (ina
fewcategories there arespecific limits affecting some Members -category 359-
fiveMembers; category 459-oneMember; category 659-fiveMembers;
category 369-seven Members; category 669-three Members -buttheHSlines
tobeintegrated arenotcovered bythese specific limits andthusthese restrictions
willnotbeeliminated asaresult ofintegration, except thattheparts ofcategories
concerned willnolonger fallunder group oraggregate limits);
- Inthelisting submitted bytheUnited States, Thailand wasomitted inrespect of
categories 369and669(group oraggregate limits).
53. Inlightoftheabove itcanbeestablished thatwiththeimplementation ofintegration for
Stage 2theUnited States willeliminate specific limits affecting three categories orcombined
categories, andaltogether sixMembers. TheTMB hasnoinformation atitsdisposal regarding
13SeealsoChapter IV,paragraph 204.G/L/179
Page21
therateofutilization ofthespecific limits bytheMembers concerned. Neither hasitreceived
information atthetimeofpreparing thepresent report, regarding whether theintegration will
affect theleveloftheexisting group oraggregate limits (seealsoChapter VI,paragraph 265).G/L/179
Page22
TABLE 1
RESTRICTIONS APPLICABLE TOWTO MEMBERS
AFFECTED BYUNITED STATES 'SECOND STAGE OFINTEGRATION
Product
GroupingTextile
CategoryBrief Description WTO Members
Apparel 239 Babies 'apparel, except
diapersBahrain, Brazil, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, Philippines,
Romania, Singapore, Thailand
Apparel 439 Babies 'apparel Bahrain, Brazil, Hong Kong, Indonesia, Macau, Malaysia, Romania, Korea, Philippines,
Thailand
Apparel 839 Babies 'apparel Bahrain, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Romania, Thailand
Apparel 349 Body supporting garments Bahrain, Brazil, Hong Kong, India, Indonesia, Romania, Korea, Malaysia, Philippines,
Thailand
Apparel 353 Down apparel Bahrain, Brazil, Hong Kong, Indonesia, Philippines, Romania, Korea, Malaysia, Thailand
Apparel 354 Down apparel Bahrain, Brazil, Hong Kong, Indonesia, Malaysia, Philippines, Romania, Korea, Thailand
Apparel 653 Down apparel Bahrain, Brazil, Hong Kong, Indonesia, Philippines, Romania, Korea, Malaysia, Thailand
Apparel 654 Down apparel Bahrain, Brazil, Hong Kong, Indonesia, Philippines, Romania, Korea, Malaysia, Thailand
Apparel 359 Footwear Bahrain, Brazil, Hong Kong, Indonesia, India, Malaysia, Philippines, Korea, Romania,
Thailand
Apparel 459 Footwear Bahrain, Brazil, Hong Kong, Indonesia, Macau, Malaysia, Philippines, Romania, Korea,
Thailand
Apparel 659 Footwear Bahrain, Brazil, Hong Kong, Indonesia, Malaysia, Romania, Korea, Philippines, Thailand
Apparel 859 Footwear Bahrain, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Romania, Thailand
Apparel 330 Handkerchiefs Bahrain, Brazil, Hong Kong, Indonesia, India, Romania, Korea, Malaysia, Philippines,
Thailand
Apparel 630 Handkerchiefs Bahrain, Brazil, Hong Kong, India, Indonesia, Romania, Korea, Malaysia, Philippines,
Thailand
Apparel 432 Hosiery Bahrain, Brazil, Hong Kong, Indonesia, Philippines, Korea, Macau, Malaysia, Romania,
Thailand
Apparel 632 Hosiery Bahrain, Brazil, Hong Kong, India, Indonesia, Malaysia, Romania, Korea, Philippines,
Thailand
Apparel 832 Hosiery Bahrain, Hong Kong, India, Indonesia, Malaysia, Philippines, Romania, Korea, Thailand
Fabric 229 Specialty fabric Brazil, Hong Kong, India, Indonesia, Malaysia, Philippines, Korea, Romania
Made-up 465 Carpets Brazil, Hong Kong, Indonesia, Macau, Malaysia, Philippines, Romania, Korea
Made-up 665 Carpets Brazil, Hong Kong, Indonesia, Korea, Malaysia, Philippines
Made-up 469 Carpets, certain wadding &
footwearBrazil, Hong Kong, Indonesia, Macau, Malaysia, Philippines, Korea
Made-up 369 Carpets, certain wadding &
footwearBrazil, Hong Kong, India, Indonesia, Korea, Philippines, Romania, United Arab Emirates
Made-up 669 Certain wadding and footwear Brazil, Hong Kong, Indonesia, India, Malaysia, Philippines, Korea
Made-up 899 Certain wadding, footwear
and silkblends and other
vegetable fibresRomaniaG/L/179
Page23
54. Inreply totheTMB'srequest forinformation, theEuropean Community alsosubmitted
details regarding those 12ECproduct categories inwhich, asaresult ofintegration tobe
implemented inStage 2,restrictions presently applied would beeliminated on1January 1998
(seeTable 2),affecting overall fiveWTO Members. TheTMB hasnoinformation regarding the
rateofutilization ofthespecific limits intheproduct categories concerned.
Table 2
Restrictions Applicable toWTO Members
Affected byECSecond Stage ofIntegration
Category Description WTO Members
19 Handkerchiefs Macau
46 Sheep 'sorlamb'swool Brazil, Argentina
61 Narrow woven fabrics Hong Kong
67 Clothing accessories Korea
70 Panty-hose andtights ofsynthetic fibres Korea
72 Swimwear Hong Kong
74 Women 'sorgirls'suits Hong Kong
77 Skisuits Hong Kong, Korea
86 Corsets Korea
91 Tents Korea
100 Textile fabrics, impregnated Korea
111 Camping goods Korea
55. Asregards Canada, theinitial notification submitted pursuant toArticles 2.8(a) and2.11
included oneproduct which wassubject torestraint, handbags oftextile materials, andthe
restriction affected oneWTO Member (Korea). Inasupplementary notification Canada indicated
thattailored-collar shirts, withrespect towhich Canada maintained restrictions, hadalsobeen
included intheStage 2integration programme andthatwitheffect from 1July1997, Canada
would notenforce existing restrictions onimports ofthisproduct from the22WTO Members
affected bytherestraints. These Members arethefollowing: Bangladesh, Bulgaria, Cuba,
Hong Kong, India, Indonesia, Korea, Macau, Malaysia, Mauritius, Myanmar, Pakistan, the
Philippines, Poland, Qatar, Romania, Singapore, South Africa, SriLanka, Swaziland, Thailand
andtheUnited Arab Emirates. TheTMB hasnoinformation regarding therateofutilization of
thespecific limits intheproduct categories concerned.
56. While observing thatthenotification made byNorway didnotinclude products currently
subject torestrictions, theTMB noted thestatement byNorway inreply totheTMB'srequest for
information that"Norway iscommitted toacontinuation ofapolicy ofgradual liberalization and
expects tobeabletonotify laterthisyeartotheTMB (andtheWTO Members directly
concerned) further steps taken pursuant toArticle 2,Section 15oftheATC" (seeparagraph 204
above).G/L/179
Page24
57. Abriefanalysis ofthebreakdown oftheproduct-groups oftheStage 2integration
programmes notified byMembers referred toinArticle 2.7(a) shows thatwhile there arenon-
negligible differences between therespective programmes, atleasttwoofthem seem toconfirm
certain similarities withtheoverall trends which characterized theapproach adopted forStage 1.
TheStage 1andStage 2programmes notified bytheUnited States inparticular reveal anoticeable
similarity interms ofproduct structure: above 10percentofthevolume of1990 imports
integrated inbothstages iscomprised oftopsandyarns, andfabrics (thetwogroups taken
together), withanoverwhelming share oftopsandyarns; followed bymade-ups, while theshare
ofclothing isroughly 2percent(inStage 1slightly above, inStage 2slightly below). Thesame
observation applies totheintegration programmes notified bytheEuropean Community, asfaras
theoverwhelming share ofthefirsttwoproduct groups (tops andyarns, andfabrics) isconcerned;
theshare ofthese twogroups forStage 1wasabove 12percentofthe1990 import volume, and
forStage 2isclose to14percent. Ashiftbetween therespective share heldbytopsandyarns,
andfabrics can,however, beobserved, since during Stage 1fabrics hadapreponderant share
which istaken overbytopsandyarns forStage 2.Therelative share ofmade-ups hasdecreased
from Stage 1toStage 2,while anopposite trend isapplicable toclothing, buttheshare of
clothing products interms ofthe1990 import volume integrated stillrepresents notmore than
2.5percent. While during Stage 1theintegration implemented byCanada wasconcentrated on
topsandyarns, andfabrics (with anoverall share ofclose to14percent), thebulkofintegration
forStage 2willbeeffected inmade-ups (above 14percentofthe1990 import volume). Clothing
represented 1.13and1.65percent, respectively, during thefirsttwointegration stages. In
Norway 'sintegration programme thepreponderant roleoffabrics during Stage 1(close to12per
centofthe1990 import volume) willshifttomade-ups inStage 2(above 11percent). A
noticeable increase intheshare ofclothing products canalsobeobserved (0.15 and4.16percent,
respectively).
58. While observing thattherequirements under Article 2.8(a) areexpressed involume terms,
itcanbeassumed onthebasis oftheabove overview that,atleastinthecaseoftheUnited States
andtheEuropean Community, theproducts tobeintegrated continue toshow aconcentration in
therelatively lessvalue-added range ofproducts, and,itwould appear, therefore, thattheshare of
products tobeintegrated expressed invalue terms, willbesmaller thanthatexpressed involume.
While thisstatement canalsobevalid fortheStage 2integration programmes notified byCanada
andNorway, itwould appear thatthegapbetween theshares expressed involume andinvalue
terms should besignificantly smaller, because oftherelatively higher share ofmade-ups.
59. Itwould alsoappear thatwiththeexception ofproducts orcategories referred toin
paragraphs 52to55above, aswellasoftherestrictions eliminated byNorway asfrom
1January 1996 pursuant toArticle 2.15, andwithout prejudice tosubsequent possible
developments (inparticular pursuant toArticles 2.10and2.15), theincreases inaccess
opportunities under theATC forrestrained products thathavenotbeenintegrated willbelimited
during Stage 2totheincreases envisaged inArticles 2.14and,ifapplicable, 2.18.
2. Integration Programmes ofMembers Referred toinArticle 2.7(b)
60. AsfarasStage 2integration programmes ofMembers referred toinArticle 2.7(b) are
concerned, itshould beobserved thatwhile 45Members submitted notifications pursuant to
Articles 2.6and2.7(b), asof24July1997 only36notifications hadbeenreceived pursuant to
Articles 2.8(a) and2.11.
61. Regarding thebreakdown oftheproduct groups ofthese integration programmes for
Stage 2,though widevariations between theprogrammes notified could beobserved, inthe
majority ofthecases theshare ofoneortwogroups (tops andyarns and/or fabrics) wasG/L/179
Page25
significantly higher thanthose oftheother groups. Inmost oftheprogrammes theshare of
clothing items remained relatively modest.
62. OfMembers submitting phase-out programmes ofquantitative restrictions pursuant to
Article 3.2(b), Slovenia andHungary notified theintegration ofsome products which previously
were orare,atpresent, subject toquantitative restrictions. Slovenia, incompliance withthe
phase-out programme notified (seeChapter V,paragraph 241), eliminated therestrictions affecting
3four-digit and73six-digit HSlineson1January 1997. According totheStage 2integration
programme notified bySlovenia, products belonging tothe3four-digit HSlines(i.e.43six-
digitHSlines) andto52outof73six-digit HSlineswillbeintegrated intoGATT 1994 on1
January 1998. Hungary willintegrate worn clothing andother worn articles (HSline63.09), at
present stillsubject toaglobal quota forconsumer goods (seeChapter V,paragraph 239).
D. COMMENTS OFWTO MEMBERS
63. Inreply totheTMB'srequest forinformation, oneMember stated that,initsview, an
important concept inthepreamble oftheATC isthatof"progressive integration", inorder to
eventually integrate thetextiles andclothing sector intoGATT onthebasis ofstrengthened GATT
rules anddisciplines; however, thedetails oftheintegration programmes ofthemajor importing
Members, asnotified totheTMB andcirculated toWTO Members, donotreflect anymajor
movement towards thisobjective. ThisMember added that,during thenegotiations oftheATC,
ithadraised theissue of"backloading". However, afterfinalization oftheATC, theproblem of
"backloading" hasonlybeencompounded bytheprocedure adopted bythemajor importing
countries fortheintegration oftextile products. Some importing countries havetechnically met
theATC stipulations without anyeffective integration, inthatalmost alloftheproducts which
theyhaveintegrated during thefirsttwostages haveeither beentotally outside restraints orthey
arecovered bygroup limits orsubstantially under utilized restraints. Thus, there hasbeenno
effective restraints onanyoftheproducts which havenowbeenintegrated.
64. Another Member stated thatithadtaken apositive approach tointegration bythe
inclusion ofproducts already covered byrestrictions. Forthose products notyetintegrated, and
covered byrestrictions, theprovisions concerning enhanced growth ratescontained inArticles
2.13and2.14would operate togiveverysubstantial increases inthevolumes covered by
restrictions. Inaddition, intheviewofthisMember, itshould benoted thatMembers were infull
conformity withtheirlegalobligations under theATC and,given thatthese concerns were felt
during thenegotiation oftheATC butnoprovisions designed toavoid sucharesult hadbeen
included intheAgreement, there wasnovalid argument ofunfulfilled expectation. ThatMember
didnotanticipate anydifficulties inachieving abalanced integration programme leading tofull
integration on1January 2005. Inaddition, intheviewofthisMember, itshould benoted that
Members hadtaken broadly similar courses inrespect oftheirintegration programs, whether these
resulted from Article 2.7(a) orfrom Article 2.7(b).
E. OVERALL ASSESSMENT
65. Under theATC, thetransition tothesoleapplication ofGATT 1994 rules anddisciplines
istobeensured byprogressive integration oftheproducts falling under itsscope. Thetime-frame
forthistransition isclearly defined intheATC andtherespective stages forintegration arefirmly
established. Itisimportant toreiterate inthiscontext thatnineMembers opted infavour ofnot
retaining therighttousetheprovisions ofArticle 6,therefore theyaredeemed tohaveintegrated
alltheirtextile andclothing products intoGATT 1994 asfrom 1January 1995 (seeparagraph 26
above). Ontheother hand, theTMB noted that,ofthe131Members oftheWTO (112ofwhich
hadtonotify whether ornottheywished toretain therighttousetheprovisions ofArticle 6ofG/L/179
Page26
theATC), 55hadnotified thattheywished toretain therighttousethese provisions, ninethat
theydidnotwishtoretain thatright, while 48hadnotnotified whether ornottheywished to
retain therighttousethose provisions. Still, thegreat majority oftrade effected intextile and
clothing products continue tobegoverned bytheprovisions oftheATC. AsStage 1integration
hasalready beenimplemented andintegration programmes forStage 2havebeennotified,
sufficient information isavailable toMembers onthebasis ofwhich toreflect ontheimplications
ofthese twostages. Thefollowing paragraphs constitute theTMB'scontribution.
66. Under theATC, requirements inbroad terms arethesame inrespect ofallMembers
which submitted notifications pursuant toArticles 2.6and2.8(a). However, thedistinction made
byArticles 2.7(a) and2.7(b) between Members isimportant from twointerrelated points ofview:
- thetrade regime theMembers concerned havecarried overtotheATC; and
- theimplication ofintegrating products intoGATT 1994.
67. Members referred toinArticle 2.7(a) notified restrictions maintained under theMFA
regime andcarried overtotheATC. Asindicated earlier, inthecaseofthese Members the
integration ofaproduct intoGATT 1994 hastwoconsequences: first, theprovisions ofArticle 6
cannot beinvoked withrespect toimports ofsuchproducts; second, anyquantitative restrictions
onsuchproducts maintained under Article 2are,byvirtue ofintegration, eliminated. Forthe
Members referred toinArticle 2.7(b), theeffect ofintegration istoremove, withrespect tothe
products integrated, thepossibility ofhaving recourse totheprovisions ofArticle 6.Itis
important tonotethatofthe45Members which hadsubmitted notifications pursuant to
Articles 2.6and2.7(b), onlyonehasinvoked, upuntilnow, theprovisions ofArticle 6.
Therefore, though therequirements forintegration arethesame forallMembers, theeffect of
having selected products forintegration issubstantially different forMembers referred toin
Articles 2.7(a) and2.7(b).
68. Tocomply withtheobligations under Articles 2.6and2.8(a), theMembers concerned had
tointegrate through Stages 1and2(i.e.asof1January 1995 and1January 1998, respectively) in
totalatleast33percentofthetotalvolume oftheirrespective 1990 imports oftheproducts inthe
Annex oftheATC. Theproducts tobeintegrated hadtoencompass products from eachofthe
following groups: topsandyarns, fabrics, made-up textile products andclothing. These
requirements hadbeenmet(except fortheconsequences oftheissue discussed inparagraph 69
below) inalloftheintegration programmes ofwhich theTMB tooknote.
69. IntheviewoftheTMB, thesystemic problem identified byColombia withrespect tothe
firststage ofintegration programme notified bytheEuropean Community, butwhich alsoapplies
toavarying extent toagreat number ofother integration programmes presented forStage 1
and/or Stage 2aswell, isanimportant technical issue, which should behandled withparticular
attention andhastobeaddressed bytheMembers concerned. These technical problems have
resulted essentially from thenon-availability ofstatistical information corresponding totheprecise
product description contained intheAnnex. Asindicated inparagraphs 34and49,theTMB
decided toverify withalltheMembers concerned (i.e.withthose which integrated products
defined in"exHSlines" either during inStage 1orStage 2,orinboth) whether thevolume of
imports theyhadintegrated inthe"exHSlines" (and, consequently, thedatafortotalimports)
related precisely totheproducts described intheAnnex. During itsthirty-fifth meeting theTMB
hadafollow-up discussion onthismatter which ledtoaconclusion according towhich, in
principle, alltheMembers which havenotified integration programmes maybeaffected bythese
technical problems, independently ofwhether ornottheyhadincluded "exHSitems" intheir
respective integration programmes forStage 1and/or Stage 2.Thisresults from thefactthatin
quantifying andnotifying thetotalvolume of1990 imports eachMember concerned hadtoincludeG/L/179
Page27
therelevant datarelated tothe"exHSlines" defined intheAnnex totheATC. Therefore, the
TMB decided torequest thatallMembers which submitted integration programmes, including
those which hadnotasyetincluded insuchprogrammes "exHSitems", ascertain whether the
statistical datacounted incalculating thetotalvolume oftheMember ’s1990 imports ofthe
products intheAnnex referred tothewhole HSlines, oronlytothatportion ofthose HSlines
which wascovered bytheATC. TheTMB expected thatMembers would report toitonthe
outcome ofsuchverification (G/TMB/R/34).14
70. Astothepotential trade effects oftheintegration programmes notified byMembers
referred toinArticle 2.7(a) thefollowing observations canbemade onthebasis ofanalysing
Stage 1andStage 2integration taken together:
- Interms ofproducts selected forintegration theconcentration ontheless
value-added range ofproducts isconfirmed. Tops andyarns andfabrics
represent, respectively, roughly 76,65,60and47percentoftheimport volume
sofarintegrated (taking Stages 1and2together) bytheEuropean Community, the
United States, Norway andCanada. Theshare ofclothing inthevolume of
imports integrated remains modest (12.4, 10.6, 7.9and7.2percent, respectively,
inthecaseoftheUnited States, Norway, Canada andtheEuropean Community);
- Regarding specific quota limits eliminated, ortobeeliminated asaresult of
integration, itcanbeseenthattheUnited States willeliminate eight specific limits
outofthe650initially notified pursuant toArticle 2.1; theEuropean Community
willeliminate 14specific quotas outofthe199notified, while Canada eliminated
orwilleliminate altogether 28quotas outof205. Norway "hadnotfound
liberalisation bywayofintegration thebestwaytoproceed, buthadpursued a
policy ofgradual liberalisation ofproducts under restraint under Article 2.15.
Norway wascommitted tocontinuing thispolicy".15
71. TheATC includes anumber ofparticular features which should betaken into
consideration inproviding anoverall assessment oftheintegration process. Itisimportant tonote
inthisregard:
- thebroad product coverage oftheAnnex;
- theuseof1990 asabase-year forproviding statistical information;
- thefactthatintegration isimplemented onthebasis oftotalvolume ofimports as
opposed totherespective value;
- thatMembers arefreetochoose products/categories forintegration provided that
theirselection meets theessential technical requirements; and
- that,inconformity withtheATC, 67percentmayremain tobeintegrated after
Stage 2.
72. Thenotifications made pursuant toArticles 2.6and2.8(a) reviewed bytheTMB metthe
requirements contained inthese Articles, subject tosubsequent corrections tobemade, if
applicable, toensure thatthevolume ofimports integrated corresponds fullytotheproduct
14Thisreport willbecirculated later.
15SeeChapter IV,paragraph 204.G/L/179
Page28
descriptions contained intheAnnex oftheATC. However, upto67percentofthetotalvolume
of1990 imports mayremain tobeintegrated during aperiod ofonly36months (1January 2002
to1January 2005), andthelarge majority oftheproducts subject torestrictions under Article 2.1
willhavetobeintegrated during thesame period.
73. Onthebasis ofconsiderations detailed inthepreceding paragraphs, theTMB observes
thatthefinalobjective oftheintegration ofthetextiles andclothing sector intotheGATT 1994
would befacilitated iftheMembers would, whenever possible, haverecourse totheprovisions of
Articles 2.10and2.15.
74. One preoccupation oftheTMB ishowtheimplementation oftheintegration provisions of
theATC hasensured thefullandfaithful implementation oftheATC within thetime-frames
established therein. IntheviewoftheTMB, oneoftheconditions ofsuchanimplementation isa
steady progress interms ofstructural adjustment and,also,asaresult ofthis,anincreased
competition intheMembers ’markets. Thisinterrelation isrecognized byArticle 1.5,which states
thefollowing:
"Inorder tofacilitate theintegration ofthetextiles andclothing sector intoGATT 1994,
Members should allow forcontinuous autonomous industrial adjustment andincreased
competition intheirmarkets."
75. Initsrequest forinformation addressed toWTO Members theTMB sought information,
interalia,ontheimplementation ofArticle 1.5. Only twoMembers provided replies tothis
specific issue. OneMember (Colombia) stated that,inaccordance withArticle 1.5,itallows
competition initsdomestic market, asreflected intheabsence ofquantitative restrictions andthe
application ofactual tariffs which arelower thanthemaximum bound rates.
76. Another Member (theEuropean Community) explained thatthetextiles andclothing
sector, which occupied acentral position withover2.2million employees andcontributed to
about 4.2percentofvalue added inthemanufacturing sector, hadfaced overrecent years
constant revaluation ofmethods, technologies andmodes oforganization, partly caused by
external factors suchasthebadexternal conjuncture, theentry intothemarket ofnewproducers
andnewtechnological developments, butalsointernal factors ofadaptation andreorganisation.
Despite positive signs inrespect ofexports, production hadfallen in1996 and,asaresult, a
further 100,000 jobshadbeenlostduring thatyear, inaddition tothe600,000 jobslost,andsome
20,000 enterprises closed, between 1990 and1995. Against thisbackground thetextiles and
clothing sector had,nonetheless, improved itscompetitivity ataninternational levelinparticular
asaresult ofitsspecialisation inthehighadded value endofthesector andanactive export
strategy. Aseries ofECprogrammes assisted structural adjustment, suchasassistance toregions
ortotherequalification orconversion ofworkers most affected bypermanent adaptation,
programmes toassist technological research anddevelopment andsmall andmedium enterprises.
Thetextiles andclothing sectors were inaposition totakeadvantage ofsuchprogrammes.
77. Apart from theabove indications, theTMB doesnothaveinformation orempirical
evidence regarding whathasbeentheprogress andaccomplishment interms ofincreasing the
competition andimplementing autonomous industrial adjustment. TheTMB believes thatit
would beuseful tohaveabetter appreciation oftheprogress andtrends ofautonomous industrial
adjustment, asforeseen inArticle 1.5.
III. APPLICATION OFTHE TRANSITIONAL SAFEGUARD MECHANISMG/L/179
Page29
78. ThisChapter describes allthedevelopments which followed therequests forconsultation
which hadbeenmade byMembers pursuant toArticle 6oftheATC, onacase-by-case basis,
either within theframework oftheATC (including actions pursuant toArticles 8.5,8.6,8.7or
8.10), orwithin thebroader WTO framework (such astheDispute Settlement Understanding
(DSU)).
A. INTRODUCTION
79. Article 6oftheATC provides forthepossibility ofapplying transitional safeguard
measures onimports ofproducts covered bytheATC andnotyetintegrated intoGATT 1994 that
cause serious damage, oractual threat thereof, tothedomestic industry producing likeand/or
directly competitive products. Article 6.1specifies thatthetransitional safeguard should be
applied assparingly aspossible, consistently withtheprovisions ofArticle 6andtheeffective
implementation oftheintegration process under theATC. According toArticle 6.7,"theMember
proposing totakesafeguard action shallseekconsultations withtheMember orMembers which
would beaffected bysuchaction". Such consultations mayresult, ifnoagreement isreached, in
arestraint measure being applied unilaterally bytheimporting Member under Article 6.10, orina
restraint measure being agreed between theparties andnotified under Article 6.9. Incases where
arestraint measure isimposed unilaterally theTMB shall, according toArticle 6.10, "promptly
conduct anexamination ofthematter, including thedetermination ofserious damage, oractual
threat thereof, anditscauses, andmake appropriate recommendations totheMembers concerned
within 30days". Incases where ameasure isagreed between theMembers, Article 6.9states that
"theTMB shalldetermine whether theagreement isjustified inaccordance withtheprovisions of
thisArticle. ...TheTMB maymake suchrecommendations asitdeems appropriate tothe
Members concerned". There mayalsobecases where, asaresult ofsuchconsultations, the
importing Member maydecide nottointroduce thesafeguard measure envisaged. Inaddition,
Article 6.11provides that"inhighly unusual andcritical circumstances, where delay would cause
damage which would bedifficult torepair, action under paragraph 10maybetaken provisionally
onthecondition thattherequest forconsultations andnotification totheTMB shallbeeffected
within nomore thanfiveworking daysaftertaking theaction". Insuchcases, ifconsultations do
notproduce agreement, theTMB shallpromptly conduct anexamination ofthematter, andmake
appropriate recommendations totheMembers concerned within 30daysofthenotification ofthe
conclusion ofconsultations. Ifconsultations doproduce agreement, suchagreement shallbe
notified totheTMB bytheMembers concerned, towhich theTMB maymake such
recommendations asitdeems appropriate.
80. Articles 6.2,6.3and6.4establish parameters fortaking safeguard action under theATC.
These parameters havetobeconsidered bytheMembers andbytheTMB inassessing the
conformity ofanaction withtheATC. Article 6.2relates tothedetermination byaMember, and
itsdemonstration totheMember orMembers concerned, andeventually totheTMB, thata
particular product isbeing imported intoitsterritory insuchincreased quantities astocause
serious damage, oractual threat thereof, tothedomestic industry producing likeand/or directly
competitive products. Serious damage oractual threat thereof must demonstrably becaused by
suchincreased quantities intotalimports ofthatproduct andnotbysuchother factors as
technological changes orchanges inconsumer preference. Article 6.3specifies theeconomic
variables thathavetobeexamined bytheMember taking theaction inmaking adetermination of
serious damage, oractual threat thereof. Article 6.4outlines circumstances under which such
serious damage, oractual threat thereof, canbeattributed tocertain Members.
81. Article 8.10provides thepossibility toaMember which "considers itself unable to
conform withtherecommendations oftheTMB", to"provide theTMB withthereasons therefor
notlaterthanonemonth afterreceipt ofsuchrecommendations. Following thoroughG/L/179
Page30
consideration ofthereasons given, theTMB shallissue anyfurther recommendations itconsiders
appropriate forthwith. If,aftersuchfurther recommendations, thematter remains unresolved,
either Member maybring thematter before theDispute Settlement Body andinvoke paragraph 2
ofArticle XXIII ofGATT 1994 andtherelevant provisions oftheDispute Settlement
Understanding". TheTMB hasreceived twosuchnotifications andsince bothwere related to
recommendations adopted bytheTMB inthecontext ofitsconsideration ofparticular safeguard
measures, theirrespective review isincluded inthisChapter (seeparagraphs 130and152to158
below).
82. Article 8.5states that"intheabsence ofanymutually agreed solution inthebilateral
consultations provided forinthisAgreement, theTMB shall, attherequest ofeither Member, and
following athorough andprompt consideration ofthematter, make recommendations tothe
Members concerned". TheTMB hasreceived three notifications under thisprovision, oneof
which isrelated totheapplication ofaparticular safeguard measure andis,therefore, discussed in
thisChapter (seeparagraphs 101and102below). (Thetwoother notifications under thisArticle
arerelated toissues pertaining toArticles 4and5oftheATC andarediscussed inChapters VI
andVII.)
83. Article 8.6states that“attherequest ofanyMember, theTMB shallreview promptly any
particular matter which thatMember considers tobedetrimental toitsinterests under this
Agreement andwhere consultations between itandtheMember orMembers concerned havefailed
toproduce amutually satisfactory solution. Onsuchmatters, theTMB maymake such
observations asitdeems appropriate totheMembers concerned andforthepurposes ofthereview
provided forinparagraph 11”.TheTMB hasreceived fournotifications under thisprovision of
theATC, which were related totheapplication ofparticular safeguard measures; theyare,
therefore, discussed inthecontext ofthisChapter (seeparagraphs 101and102,116,121to127
and166to170below).
84. Article 8.7states that"before formulating itsrecommendations orobservations, theTMB
shallinvite participation ofsuchMembers asmaybedirectly affected bythematter inquestion".
TwoMembers havereferred tothisprovision intheirnotification and,since suchnotifications are
related totheapplication ofaparticular safeguard measure, theyare,therefore, discussed inthe
context ofthisChapter (seeparagraphs 94and121to127below). Inaddition, inallother
instances where theTMB hadtoformulate arecommendation oranobservation pursuant to
Article 8,itdidsoafterhaving invited theMember orMembers directly affected bythematter in
question.
85. TheUnited States made 26requests forconsultation pursuant toArticle 6.7: twenty-
fourin1995 (onproducts imported from Brazil, Colombia, Costa Rica, theDominican Republic,
ElSalvador, Guatemala, Honduras, Hong Kong, India, Jamaica, thePhilippines, SriLanka,
Thailand andTurkey), onein1996 (vis-a-vis ElSalvador) andonein1997 (onproducts imported
from Pakistan). Eleven resulted inrestraint measures being agreed either during theconsultation
period, prior to,orduring thereview ofthemeasure bytheTMB (inaddition, onerestraint
measure wasagreed aftertheTMB hadcompleted itsreview oftheaction pursuant to
Article 6.10). Intwocases theUnited States eventually decided nottoapply asafeguard measure.
Fiveunilaterally applied measures were dropped bytheUnited States before theirreview bythe
TMB, andanadditional oneduring thereview. TheTMB, therefore, completed thereview of
seven safeguard measures applied under Article 6.10bytheUnited States. Inthree outofthe
seven measures, theMembers affected bytheapplication oftherestraints subsequently requested
theestablishment ofdispute settlement panels. TheDispute Settlement Body established the
panels pursuant tothese requests. Intwocases thereports ofthepanels andtherelated reports of
theAppellate Body were adopted bytheDispute Settlement Body, while inthethirdcasetheG/L/179
Page31
importing Member decided toremove therestraint, andthecomplainant requested thetermination
ofthepanel proceedings. Astotherestraints agreed between theUnited States andtheMembers
concerned, theUnited States rescinded three restraints before theirreview scheduled bytheTMB,
thus, theTMB reviewed nineagreements ofrestraints notified pursuant toArticle 6.9.
86. Brazil made seven requests forconsultation under Article 6.7inJune1997, withrespect
toimports ofsixproduct categories (tworequests onimports from Hong Kong, fiveonimports
from Korea), atthesame timeintroducing provisional safeguard measures pursuant toArticle
6.11. Brazil andKorea reached anagreement onthemeasures introduced byBrazil. The
agreement related toallfiveproduct categories inquestion andwasreviewed bytheTMB. The
TMB alsocompleted itsreview ofthetworemaining unilateral measures introduced byBrazil on
imports from Hong Kong.
87. Measures applied byEcuador withreference, interalia,totheprovisions ofArticle 6
against imports from Korea andHong Kong were referred byKorea totheTMB, which reviewed
therelevant notification.
88. Thefollowing sections provide anoverview ofallthemeasures applied pursuant to,or
withreference totheprovisions ofArticle 6aswellas,ifapplicable, ontheirrespective follow-up
under other provisions oftheATC andunder theprovisions oftheDSU.
B. THE APPLICATION OFTHE TRANSITIONAL SAFEGUARD MECHANISM BYTHE
UNITED STATES
1. Imports ofCotton andMan-made Fibre Underwear (USCategory 352/652)
89. AttheendofMarch 1995, theUnited States requested consultations, pursuant to
Article 6.7,withColombia, Costa Rica, Dominican Republic, ElSalvador, Honduras, Thailand
andTurkey. Asaresult oftheconsultations heldbetween theUnited States andtherespective
Members concerned, anunderstanding wasreached withColombia, theDominican Republic and
ElSalvador regarding theintroduction ofagreed restraints forathree-year period. Since the
consultations held, respectively, withCosta Rica, Honduras, Thailand andTurkey didnotproduce
anagreement within thedeadline envisaged inArticle 6.10, theUnited States decided tointroduce
restraints onimports from these Members andreferred thematter totheTMB.
90. TheTMB reviewed thesafeguard measures applied bytheUnited States pursuant to
Article 6.10onimports ofcotton andman-made fibreunderwear from Costa Rica, Honduras,
Thailand andTurkey. Thailand hadalsomade anotification ofthesame action under Articles 8.5
and8.6.16During thisreview, theTMB wasinformed thattheUnited States andTurkey had
arrived atamutually agreed solution oftheissue which would benotified under Article 6.9. In
addition, while starting theexamination oftherequest submitted byThailand initsnotification,
theTMB wasinformed thattheUnited States haddecided torescind thissafeguard measure
against Thailand (G/TMB/R/2).
91. During itsreview under Articles 6.2and6.3ofthesafeguard action taken bytheUnited
States against imports ofcategory 352/652 from Costa RicaandHonduras, theTMB found that
serious damage, asenvisaged inthese provisions, hadnotbeendemonstrated. TheTMB could
not,however, reach consensus ontheexistence ofactual threat ofserious damage. TheTMB
recommended thatfurther consultations beheldbetween theUnited States andtheparties
16Seeparagraphs 101and102below.G/L/179
Page32
concerned, withaviewtoarriving atamutual understanding, bearing inmind theabove, andwith
dueconsideration totheparticular features ofthiscase, aswellasequity considerations. The
TMB alsorecommended thatthese consultations should beheldconsistent withtheATC, in
particular withArticles 6and4,andbeconcluded within 30days, andthattheparties should
report totheTMB ontheoutcome ofsuchconsultations nolaterthanattheendofthatperiod.
TheTMB equally noted that,withrespect totheintroduction ofasafeguard measure, theATC
didnotprovide anyindication withrespect totheeffective dateofimplementation ofthat
measure.
92. Inreaching itsrecommendation, theTMB hadexamined alltheinformation provided by
theparties, including theroleplayed byoutward processing trade. Onthatbasis, andkeeping
alsoinmind theparticular nature ofthistrade flow, theTMB wasoftheviewthatanumber of
important indicators, interalia,thedropintheUS'domestic production ofcotton andman-made
fibreunderwear, theparallel increase inimports ofthese products, andthestatus ofthisindustry,
were notsuchastowarrant aclaim ofserious damage being caused totheUS'industry by
imports. However, theTMB could notagree, onthebasis ofalltheinformation provided,
whether ornotthere existed athreat ofserious damage caused totheUS'industry byimports of
products ofcategory 352/652 (G/TMB/R/2).
93. Following theTMB'srecommendation, theTMB wasinformed bytheUnited States and
Honduras thattheyhadheldconsultations without reaching acommon position, but,subsequently
wasinformed under Article 6.9thatthetwoparties hadarrived atamutually agreeable resolution
ofthisissue (G/TMB/R/3) (seealsoparagraph 99).
(a) Costa Rica
94. Following thesame TMB recommendation, theTMB received reports byboththeUnited
States andCosta Ricaexplaining thatithadnotbeenpossible toreach amutually agreeable
resolution oftheissue. InviewofCosta Rica’srequest, pursuant toArticle 8.7,toparticipate in
theTMB'sexamination ofthese reports, theBody decided toinvite theparticipation ofboth
delegations. TheTMB tooknoteofthereports andofthefactthatthetwoparties didnotreach a
mutual understanding during theconsultations. TheTMB'sdiscussions confirmed theBody's
previous findings inthismatter. There being nofurther requests bytheparties involved, theTMB
considered itsreview ofthematter completed (G/TMB/R/3 and5).
95. InDecember 1995, Costa Ricarequested consultations withtheUnited States under
Article 4andtheother relevant provisions oftheUnderstanding onRules andProcedures
Governing theSettlement ofDisputes (DSU), Article XXIII ofGATT 1994 andthecorresponding
provisions oftheATC (WT/DS24/1). Consultations were held, butnomutually satisfactory
solution wasreached. InFebruary 1996, Costa Ricarequested theestablishment ofapanel
(WT/DS24/2), which theDispute Settlement Body (DSB) established (WT/DSB/M/12). The
Panel issued itsreport inNovember 1996 (WT/DS24/R), andCosta Ricaappealed certain legal
interpretations developed bythePanel (WT/DS24/5). TheAppellate Body circulated itsreport
inFebruary 1997 (WT/DS24/AB/R).
96. ThePanel concluded thattheUnited States violated itsobligations under Articles 6.2and
6.4oftheATC byimposing arestriction onCosta Rican exports without having demonstrated
thatserious damage oractual threat thereof wascaused bysuchimports totheUS'domestic
industry andunder Article 6.6(d) oftheATC bynotgranting more favourable treatment tore-
imports from Costa Rica. ThePanel alsoconcluded thattheUnited States violated itsobligations
under Article 2.4byimposing arestriction inamanner inconsistent withitsobligations under
Article 6oftheATC. With respect tothepermissible effective dateoftheapplication oftheG/L/179
Page33
safeguard measures (theonlyaspect ofthePanel'sconclusions appealed byCosta Rica) the
Appellate Body concluded thatgiving retroactive effect toasafeguard restraint measure wasno
longer permissible under theregime ofArticle 6oftheATC andwasinfactprohibited under
Article 6.10.
97. ThePanel recommended thattheDSBrequest theUnited States tobring themeasure
challenged byCosta Ricaintocompliance withtheUS'obligations under theATC. ThePanel
stated thatsuchcompliance could bestbeachieved, andfurther nullification andimpairment of
benefits accruing toCosta Ricaunder theATC bestavoided, bya"prompt removal ofthe
measure inconsistent withtheobligations oftheUnited States". ThePanel, therefore, suggested
thattheUnited States bring themeasure challenged byCosta Ricaintocompliance withtheUS'
obligations by"immediately withdrawing therestriction imposed bythemeasure".
98. Atitsmeeting of25February 1997, theDSBadopted theAppellate Body report andthe
report ofthePanel asmodified bytheAppellate Body report. Atasubsequent meeting ofthe
Dispute Settlement Body, inApril 1997, therepresentative oftheUnited States confirmed thatthe
measure atissue hadexpired without extension on28March 1997 andthustheUnited States had
metwithitsobligations under theWTO Agreement withrespect tothismatter. However, inview
ofaletter of26March 1997 from theUSGovernment toitscustoms authorities requesting the
monitoring ofimports from Costa Ricaofproducts falling within thetextile category which had
beenthesubject ofthePanel report, Costa Ricareserved therighttorequest theinclusion ofthis
itemonafuture agenda oftheDSBiftherestrictions referred tobytheUnited States intheletter
toitscustoms authorities were tobeapplied. TheUnited States stated thatthisletter didnot
represent, norshould itbeinterpreted asanextension ofthemeasure thathadbeenexamined by
thePanel andtheAppellate Body.
(b) Honduras
99. Inreviewing therestraint measure agreed between theUnited States andHonduras the
TMB recalled thatataprevious meeting, when reviewing theaction taken bytheUnited States
against imports ofcategory 352/652 from Costa RicaandHonduras, ithadfound thatserious
damage asenvisaged inArticles 6.2and6.3,hadnotbeendemonstrated. TheTMB hadnot,
however, reached consensus ontheexistence ofactual threat ofserious damage. TheTMB noted
thatthetotalleveloftheagreed restraint, aswellasthatportion oftherestraint which was
available unconditionally toHonduras (i.e.thespecific limit) were bothsubstantially above the
roll-back level. TheTMB alsoobserved thatnogrowth ratewasprovided forwithrespect tothe
GAL.17However, according toindications given bytheUSGovernment, theGAL could be
increased onrequest. Therefore, itwastheTMB'sunderstanding that,attherequest of
Honduras, theGAL would beincreased bynolessthan6percentannually (G/TMB/R/8).
100. InDecember 1995, theTMB received acommunication from Honduras relating tothe
implementation bytheUnited States ofthisagreed restraint measure. Inthiscommunication,
Honduras expressed concern thattheagreement wasnotimplemented consistently withitsterms
bytheUnited States, notably withrespect tothelevelofaccess totheUSmarket asof1January
1996, andthatthiswas,therefore, threatening toseriously disrupt trade from Honduras.
Honduras requested thattheTMB review theimplementation ofthelimits bilaterally agreed. The
TMB wasinformed thatitwastheUSGovernment ’sintention toimplement theagreement infull
17Guaranteed Access Levels (GALs) arequantities ofproducts ofacategory thatacountry canexport to
theUnited States without being subject toquantitative limitation, provided theactual product shipped qualifies
forsuch treatment, inter alia,bybeing made of"UScomponents".G/L/179
Page34
andtobeincontact withHonduras withaviewtoresolving thisquestion. TheTMB tooknoteof
this,informed Honduras oftheUS'communication, anddecided that,should problems remain, it
would revert tothisquestion atitssubsequent meeting. Bothparties were informed ofthis
decision (G/TMB/R/8). TheTMB wasinformed subsequently bybothparties thattheproblems
hadbeensolved.
(c) Thailand
101. Inthecontext ofthesafeguard action introduced bytheUnited States onimports ofcotton
andman-made fibreunderwear, theTMB received anotification from Thailand under Articles 8.5
and8.6oftheATC. According tothisnotification, since Article 6.4oftheATC provided thatno
safeguard measure shallbeapplied totheexports ofanyMember whose exports oftheparticular
products were already under restraint under theATC, theUnited States hadnorighttointroduce
asafeguard measure onimports ofcategory 352/652 from Thailand, asthatcategory wasalready
subject toagroup limit. Therepresentative ofThailand confirmed that,irrespective oftheUS'
decision torescind thesafeguard measure against imports from Thailand, Thailand wanted the
TMB toreview thequestion ofprinciple raised. After having heard thepresentation ofthe
parties, theTMB decided todefer theconsideration ofthisissue toasubsequent meeting
(G/TMB/R/2).
102. While theTMB didnotresume theconsideration ofthisissue withtheparticipation ofthe
twoMembers concerned, itrecalled initsreply toThailand thatwhen ithadreviewed the
safeguard measure introduced bytheUnited States onimports ofwoven wool shirts andblouses
(UScategory 440)from Hong Kong (G/TMB/R/4, seealsoparagraph 133below), ithadnoted
thatHong Kong'sexports ofproducts ofcategory 440intotheUnited States were already under
restraint under agroup limitnotified bytheUnited States andhadfound that,according toArticle
6.4,theapplication ofasafeguard measure under Article 6toHong Kong'sexports ofproducts of
category 440intotheUnited States was,therefore, notjustified.
(d) Turkey
103. Inreviewing therestraint measure agreed between theUnited States andTurkey, theTMB
recalled thatataprevious meeting, when reviewing theaction taken bytheUnited States against
imports ofcategory 352/652 from Costa RicaandHonduras under Articles 6.2and6.3,anaction
taken atthesame timeasthatonimports ofthesame product from Turkey, ithadfound that
serious damage, asenvisaged inthese provisions, hadnotbeendemonstrated. TheTMB hadnot,
however, reached consensus ontheexistence ofactual threat ofserious damage. TheTMB noted
thatthespecific limitagreed wassubstantially above theroll-back level(G/TMB/R/8).
(e) Colombia
104. Inreviewing therestraint measure agreed between theUnited States andColombia, the
TMB recalled thatataprevious meeting, when reviewing theaction taken bytheUnited States
against imports ofcategory 352/652 from Costa RicaandHonduras under Articles 6.2and6.3,an
action taken atthesame timeasthatonimports ofthesame product from Colombia, ithadfound
thatserious damage, asenvisaged inthese provisions, hadnotbeendemonstrated. TheTMB had
not,however, reached consensus ontheexistence ofactual threat ofserious damage. TheTMB
noted thatthetotalleveloftheagreed restraint, aswellasthatportion oftherestraint which was
available unconditionally toColombia (i.e.thespecific limit) were bothsubstantially above the
roll-back level(G/TMB/R/8).
(f) Dominican RepublicG/L/179
Page35
105. Inreviewing therestraint measure agreed between theUnited States andtheDominican
Republic, theTMB recalled thatataprevious meeting, when reviewing theaction taken bythe
United States against imports ofcategory 352/652 from Costa RicaandHonduras under
Articles 6.2and6.3,anaction taken atthesame timeasthatonimports ofthesame product from
theDominican Republic, ithadfound thatserious damage, asenvisaged inthese provisions, had
notbeendemonstrated. TheTMB hadnot,however, reached consensus ontheexistence ofactual
threat ofserious damage. TheTMB noted that,whilst thetotalleveloftheagreed restraint was
substantially above theroll-back level, thatportion oftherestraint which wasavailable
unconditionally totheDominican Republic (i.e.thespecific limit) waslower thanthatroll-back
level. TheTMB alsoobserved thatnogrowth ratewasprovided forwithrespect tothe
guaranteed access level(GAL). However, according toindications given bytheUSGovernment,
theGAL canbeincreased onrequest. Therefore, itwastheTMB'sunderstanding that,atthe
request oftheDominican Republic, theGAL would beincreased bynolessthan6percent
annually (G/TMB/R/7).
(g) ElSalvador
106. Inreviewing therestraint measure agreed between theUnited States andElSalvador, the
TMB recalled thatataprevious meeting, when reviewing theaction taken bytheUnited States
against imports ofcategory 352/652 from Costa RicaandHonduras under Articles 6.2and6.3,an
action taken atthesame timeasthatonimports ofthesame product from ElSalvador, ithad
found thatserious damage, asenvisaged inthese provisions, hadnotbeendemonstrated. The
TMB hadnot,however, reached consensus ontheexistence ofactual threat ofserious damage.
TheTMB noted thatthetotalleveloftheagreed restraint, aswellasthatportion oftherestraint
which wasavailable unconditionally toElSalvador (i.e.thespecific limit) were bothsubstantially
above theroll-back level. TheTMB alsoobserved thatnogrowth ratewasprovided forwith
respect totheGAL. However, according toindications given bytheUSGovernment, theGAL
canbeincreased onrequest. Therefore, itwastheTMB'sunderstanding that,attherequest ofEl
Salvador, theGAL would beincreased bynolessthan6percentannually (G/TMB/R/8).
2. Imports ofCotton andMan-made Fibre Pyjamas andOther Nightwear
(USCategory 351/651)
107. InMarch 1995, theUnited States requested consultations, pursuant toArticle 6.7,with
Honduras, ElSalvador andJamaica. During thebilateral consultations, theUnited States reached
anagreement withElSalvador andJamaica, respectively, ontheapplication ofarestraint fora
three-year period. Theconsultations heldbetween theUnited States andHonduras didnot
produce anagreement within thedeadline envisaged inArticle 6.10. TheUnited States decided to
introduce arestraint onimports from Honduras andreferred thematter totheTMB.
(a) Honduras
108. TheTMB reviewed under Articles 6.2and6.3thesafeguard measure introduced bythe
United States pursuant toArticle 6.10onimports ofcotton andman-made fibrepyjamas andother
nightwear from Honduras. TheTMB, having examined alltheinformation provided bythe
parties, found thatserious damage, oractual threat thereof, hadnotbeendemonstrated and
recommended thattheUnited States rescind themeasure (G/TMB/R/2). Subsequently, theTMB
wasinformed thattheUnited States haddecided torescind themeasure. TheTMB tooknoteof
thisdecision (G/TMB/R/3).
(b) ElSalvador, JamaicaG/L/179
Page36
109. Subsequent totheTMB'sreview oftherestraint introduced against imports from
Honduras (seeparagraph 108above), andbefore theBody could starttoreview therestraints
agreed withElSalvador andJamaica, theUnited States informed theTMB thatithadrescinded
these agreed restraints.
(c) Costa Rica
110. InJune1995, theUnited States requested consultations withCosta Ricapursuant to
Article 6.7. Astheconsultations didnotproduce anagreement between theparties, the
United States introduced aunilateral restraint against imports ofcategory 351/651 products from
Costa Ricaandinformed theTMB accordingly. Subsequently, before theTMB could startthe
review ofthisrestraint, theUnited States decided torescind themeasure andinformed theTMB
ofthisdecision.
3. Imports ofMen'sandBoys'Wool Coats andOther thanSuit-type
(USCategory 434)
(a) India
111. InApril 1995, theUnited States requested consultations withIndia pursuant toArticle 6.7.
Astheconsultations didnotproduce anagreement between thetwoparties, theUnited States
introduced arestraint against imports from India under Article 6.10andreferred thematter tothe
TMB.
112. TheTMB considered thesafeguard measure taken bytheUnited States onimports of
UScategory 434from India. TheTMB, having examined alloftheinformation provided byboth
parties inthelightoftheconditions established under Articles 6.2and6.3,found thatserious
damage, oractual threat thereof, hadnotbeendemonstrated, andrecommended thattheUnited
States rescind themeasure. Subsequently, theTMB wasinformed andtooknotethattheUnited
States haddecided torescind thissafeguard measure (G/TMB/R/3 and5).
(b) Brazil
113. InApril 1995, theUnited States requested consultations pursuant toArticle 6.7with
Brazil. Subsequently, theTMB wasinformed thattheUnited States haddecided nottotakeany
action against imports ofcategory 434products from Brazil.
4. Imports ofWomen 'sandGirls'Wool Coats (USCategory 435)
114. InApril 1995, theUnited States requested consultations pursuant toArticle 6.7withIndia
andHonduras. Asthebilateral consultations didnotproduce anyagreement, theUnited States
decided tointroduce unilateral restraints against imports ofcategory 435products from India and
Honduras andaccordingly referred thematter totheTMB.
(a) India
115. TheTMB considered, under Articles 6.2and6.3,thesafeguard measure taken bythe
United States under Article 6.10onimports ofUScategory 435from India. TheTMB found that
serious damage, asenvisaged inthese provisions, hadnotbeendemonstrated. TheTMB could
not,however, reach consensus ontheexistence ofactual threat ofserious damage. TheTMB
added that,when reviewing theimplications ofthediscussions intheTMB andtheBody’sfindingG/L/179
Page37
inthismatter, theparties should keepinmind thefactthattheATC wassilent astowhether the
import restraint could continue tobemaintained (G/TMB/R/3).
116. Subsequently, theTMB received acommunication from India under Article 8.6. Inthis
communication, India noted thattheTMB hadarrived ataconsensus ontheabsence ofserious
damage, butcould notreach aconsensus ontheexistence ofactual threat thereof. Thus, theTMB
hadnotbeenabletomake appropriate recommendations, though Article 6.10mandated ittodoso
insituations where there hadbeennoagreement between theMember proposing totakea
safeguard action andtheMember which would beaffected bysuchaction. Itwasthe
understanding oftheGovernment ofIndia that,intheabsence ofaclear recommendation ofthe
TMB upholding thevalidity oftherestraint action bytheUnited States, itwasincumbent upon the
United States towithdraw therestraint. India, therefore, requested theTMB toreview theaction
bytheUnited States incontinuing itsrestraint onimports ofcategory 435from India, assuch
action wasdetrimental toIndia’sinterests. TheTMB heard thepresentation byIndia, and
considered theelements putforward. TheBody could notmake anyrecommendation inaddition
totheconclusions ithadreached ataprevious meeting (G/TMB/R/3), norcould theTMB reach a
consensus onwhether ornottherestraint oncategory 435could continue tobemaintained inlight
oftheabsence ofconsensus ontheexistence ofactual threat ofserious damage. TheTMB,
therefore, considered itsreview ofthematter under therelevant provisions oftheATC completed
(G/TMB/R/6).
117. InMarch 1996, India requested theestablishment ofapanel pursuant toArticle XXIII:2
ofGATT 1994, Article 6oftheDSU andArticle 8.10andother relevant provisions oftheATC
(WT/DS32/1). TheDispute Settlement Body decided toestablish apanel. Inasubsequent
communication dated 25April 1996, India stated thatithadbeeninformed bytheUSAuthorities
thattheUnited States hadremoved therestraint oncategory 435products. Inthelightofthis,the
Government ofIndia decided torequest thetermination ofanyfurther action inpursuance ofthe
decision taken bytheDSBtoestablish apanel toexamine matters arising from theUS'action
withregard tocategory 435. Thisrequest waswithout prejudice toIndia'sstand thattherestraint
introduced bytheUnited States onimports ofcategory 435wasinconsistent withtheATC and
alsowithout prejudice toIndia'sstand onvarious factual andlegalissues outlined byIndia inits
request fortheestablishment ofapanel (WT/DS32/2).
(b) Honduras
118. TheTMB started itsreview ofthesafeguard measure introduced bytheUnited States
pursuant toArticle 6.10onimports ofUScategory 435from Honduras, andafterthepresentation
oftheirarguments, wasinformed bytheparties thattheyhaddecided toresume bilateral
consultations, andasked forsuspension oftheconsideration ofthisissue bytheTMB. TheBody
wasinformed subsequently thattheUnited States andHonduras hadarrived atamutually
agreeable resolution oftheissue which would benotified under Article 6.9(G/TMB/R/3).
119. Inreviewing therestraint measure agreed between theUnited States andHonduras, the
TMB recalled thatataprevious meeting, when reviewing theaction taken bytheUnited States
against imports ofcategory 435from India under Articles 6.2and6.3,anaction taken atthesame
timeasthatonimports ofthesame product from Honduras, ithadfound thatserious damage, as
envisaged inthese provisions, hadnotbeendemonstrated. TheTMB hadnot,however, reached
consensus ontheexistence ofactual threat ofserious damage. TheTMB noted thatthetotallevel
oftheagreed restraint, aswellasthatportion oftherestraint which wasavailable unconditionally
toHonduras (i.e.thespecific limit) were bothabove theroll-back level. TheTMB alsonoted thatG/L/179
Page38
theagreed growth rateof2percentwasjustified inaccordance withArticle 6.13.18TheTMB
alsoobserved thatnogrowth ratewasprovided forwithrespect totheGAL. However,
according toindications given bytheUSGovernment, theGAL canbeincreased onrequest.
Therefore, itwastheTMB'sunderstanding that,attherequest ofHonduras, theGAL would be
increased bynolessthan2percentannually (G/TMB/R/8).
120. InDecember 1995, theTMB alsoreceived acommunication from Honduras relating to
theimplementation bytheUnited States ofthisagreed restraint measure. Inthiscommunication,
Honduras expressed concern thattheagreement wasnotimplemented consistently withitsterms
bytheUnited States, notably withrespect tothelevelofaccess totheUS'market asof1January
1996, andthatthiswas,therefore, threatening toseriously disrupt trade from Honduras.
Honduras requested thattheTMB review theimplementation ofthelimits bilaterally agreed. The
TMB wasinformed thatitwastheUSGovernment ’sintention toimplement theagreement infull
andtobeincontact withHonduras withaviewtoresolving thisquestion. TheTMB tooknoteof
this,informed Honduras oftheUS'communication, anddecided that,should problems remain, it
would revert tothisquestion atitssubsequent meeting. Bothparties were informed ofthis
decision (G/TMB/R/8). TheTMB wasinformed subsequently bybothparties thattheproblems
hadbeensolved.
121. Subsequently, Honduras, inacommunication ofMarch 1997, under Articles 8.6and8.7,
requested theTMB to"consider andmake arecommendation atitsnextmeeting concerning the
appropriateness oftheUnited States maintaining thisrestraint". TheUnited States sent,
inApril 1997, acommunication totheTMB inwhich itexplained thatintheviewofthe
United States thematter referred tobyHonduras wasthesubject ofasigned bilateral agreement
between thetwoGovernments andhadalready beenreviewed bytheTMB inaccordance with
Article 6.9oftheATC; thataccording totheUSGovernment, Article 8.7didnotpermit the
reopening ofagreements between Members oncetheyhadbeenreviewed bytheTMB for
conformity withtheAgreement; andthattheUnited States therefore requested that"theTMB not
agree toHonduras 'request forasecond review ofthisissue based onevents thathavetaken place
since theTMB’sfirstreview".
122. Atitstwenty-ninth meeting, during itsreview ofthecommunication byHonduras, andin
thepresence ofarepresentative ofHonduras, theTMB observed, interalia,thatwhen, in
December 1995, ithadreviewed theagreement concluded between Honduras andthe
United States onimports ofwomen 'sandgirls'wool coats (category 435)from Honduras, ithad
notreached adetermination whether thatagreement wasjustified inaccordance withthe
provisions ofArticle 6oftheATC.
123. TheTMB further observed that,following therequest byIndia thatapanel beestablished
toexamine matters arising outoftheUS'action withregard toimports ofproducts of
category 435from India, theUnited States hadremoved therestraint onsuchimports, since the
United States hadbecome convinced thattherestraint oncategory 435wasnolonger necessary.
TheTMB understood that,subsequently, Honduras hadraised withtheUnited States thequestion
oftheappropriateness fortheUnited States tomaintain therestriction onimports ofproducts of
category 435from Honduras, buthadreceived nopositive reply from theUnited States. The
TMB alsonoted thearguments ofHonduras thatthemaintenance ofthisrestraint onimports from
Honduras wasdetrimental toHonduras 'interests under theATC.
18Seeparagraph 171.G/L/179
Page39
124. Inlightoftheelements mentioned above, theTMB expected thattheUnited States would
reassess thesituation toseewhether inallthecircumstances itwasstillappropriate forthe
United States tomaintain therestraint oncategory 435against Honduras. TheTMB further
expected thattheUnited States would keepitinformed oftheoutcome ofitsreassessment.
125. Atitsthirty-second meeting, theTMB reverted tothematter, onthebasis ofa
communication received from theUnited States according towhich ithadreviewed therestraint
onHonduran exports ofproducts ofUScategory 435and,asaresult ofthisreview, decided to
rescind thisrestraint nolaterthan31October 1997. TheUnited States would communicate the
exact timing ofthisrescission totheTMB inearly July1997. TheTMB tooknoteofthis
communication, andexpected thattheUnited States would rescind therestraint assoonas
possible, andthatitwould communicate thedateinquestion totheTMB atthelatest
by10July1997. TheTMB decided torevert tothisissue during thelatter partofitsthirty-fourth
meeting.
126. Atthatmeeting theTMB considered communications received from Honduras which
expressed disappointment thattheUnited States hadnotyetcomplied withtheTMB
recommendation, andrequested that,iftheUnited States reply didnotcomply withthesubstance
oftheTMB recommendation, theTMB “continue withtheprocess offullyreviewing theU.S.
measure onCategory 435...promptly ”,i.e.atthemeeting scheduled for21to25July1997.
TheTMB alsoconsidered acommunication from theUnited States according towhich thereview
bytheUnited States todetermine whether itwaspossible torescind thatrestraint
before 31October 1997 depended ontheavailability ofnewproduction data, which were notyet
available butwould beavailable before thenextTMB meeting. Therefore, theUnited States
assured theTMB thatitwould beinaposition toinform itofitsdecision atthattime. TheTMB
tooknoteofthese communications, andexpressed concern that,contrary toitsexpectation, the
United States hadnotyetcommunicated thedateonwhich itwould rescind themeasure on
imports ofproducts ofUScategory 435from Honduras totheTMB. TheTMB decided torevert
tothisissue, referred toinparagraph 26ofG/TMB/R/31, during itsthirty-fifth meeting scheduled
for21to25July1997, towhich bothMembers were invited.
127. Atitsthirty-fifth meeting theTMB, inthepresence ofarepresentative ofHonduras, took
noteofafurther communication received from theUnited States according towhich theUnited
States, having received andreviewed thedatarelated tocategory 435along withallother
information related tothiscase, haddecided torescind therestraint onimports ofproducts of
UScategory 435from Honduras, thesubject ofanArticle 6agreement withHonduras,
on30September 1997.
5. Imports ofWoven Wool Shirts andBlouses (USCategory 440)
128. InApril 1995, theUnited States requested consultations pursuant toArticle 6.7
respectively withIndia andHong Hong. Bilateral consultations didnotproduce agreement
between theMembers concerned. TheUnited States decided tointroduce restraints under
Article 6.10onimports ofcategory 440products from India andHong Kong andatthesame time
themeasures were referred totheTMB.
(a) India
129. TheTMB considered, under Articles 6.2and6.3,thesafeguard measure taken bythe
United States onimports ofcategory 440products from India. TheTMB found thattheactual
threat ofserious damage hadbeendemonstrated, andthat,pursuant toArticle 6.4,thisactualG/L/179
Page40
threat could beattributed tothesharp andsubstantial increase inimports from India
(G/TMB/R/3).
130. Subsequently, theTMB received acommunication from India under Article 8.10,
following thereview bytheTMB ofthesafeguard action taken bytheUnited States. Inthis
communication, India conveyed itsinability toconform withtherecommendation theTMB had
made, which allowed forthecontinuance oftherestraint levels imposed bytheUnited States.
TheTMB heard thepresentation andconsidered theelements putforward byIndia. TheBody
could notmake anyrecommendation inaddition totheconclusions ithadreached ataprevious
meeting. TheTMB, therefore, considered itsreview ofthematter completed (G/TMB/R/6).
131. Inacommunication ofMarch 1996, India requested theestablishment ofapanel pursuant
toArticle XXIII:2 ofGATT 1994, Article 6oftheDSU andArticle 8.10andother relevant
provisions oftheATC (WT/DS33/1). TheDispute Settlement Body established thePanel
pursuant totherequest ofIndia. InDecember 1996, theUnited States decided towithdraw the
restraint "duetoasteady decline inimports ofwoven wool shirts andblouses from India andthe
adjustment oftheindustry". ThePanel issued itsreport inJanuary 1997 (WT/DS32/R/12). The
Panel concluded thattheUSrestraint applied onimports ofcategory 440products from India and
itsextensions violated theprovisions ofArticles 2and6oftheATC andthesaidmeasure
nullified andimpaired thebenefits ofIndia under theWTO Agreement, inparticular theATC.
India appealed certain aspects ofthePanel'sfindings. TheAppellate Body'sreport, upholding the
findings andconclusions ofthePanel, wascirculated inApril 1997 (WT/DS33/AB/R).
132. Atitsmeeting inMay1997, theDispute Settlement Body adopted thereport ofthePanel
andthatoftheAppellate Body.
(b) Hong Kong
133. TheTMB reviewed thesafeguard measure introduced bytheUnited States pursuant to
Article 6.10onimports ofcategory 440products from Hong Kong. TheTMB, having considered
thearguments putforward bytheparties, noted thatHong Kong'sexports ofproducts of
category 440intotheUnited States were already under restraint under agroup limitnotified by
theUnited States inaccordance withArticle 2.1oftheATC. Itfound that,according toArticle
6.4,theapplication ofasafeguard measure under thisArticle toHong Kong'sexports ofproducts
ofcategory 440intotheUnited States was,therefore, notjustified, andrecommended thatthe
United States rescind themeasure. Subsequently, theTMB wasinformed andtooknotethatthe
United States haddecided torescind thissafeguard measure (G/TMB/R/4 and6).
6. Imports ofMan-made Fibre Luggage (USCategory 670-L)
134. InApril 1995, theUnited States requested consultations pursuant toArticle 6.7withthe
Philippines, SriLanka andThailand. Consultations withSriLanka produced anagreement ona
restraint, while those conducted withthePhilippines andThailand didnot.TheUnited States
introduced restraints onimports from these twoMembers, butdecided afterwards towithdraw
these restrictions before theTMB could review them. Subsequently, theUnited States also
rescinded therestraint agreed withSriLanka.G/L/179
Page41
7. Imports ofArtificial Staple Yarn(USCategory 603)
135. InApril 1995, theUnited States requested consultations pursuant toArticle 6.7with
Thailand. Astheconsultations didnotproduce anagreement, theUnited States introduced a
unilateral restraint pursuant toArticle 6.10, butsubsequently, withdrew therestraint before the
TMB could review it.
8. Imports ofCotton andMan-made Fibre Shirts (USCategory 342/642)
136. InMay1995 andMarch 1996, theUnited States requested consultations pursuant to
Article 6.7respectively withGuatemala andElSalvador. Inbothcases theconsultations resulted
inanagreement onrestraints.
(a) Guatemala
137. TheTMB reviewed therestraint measure agreed between theUnited States andGuatemala
onimports ofcategory 342/642 products from Guatemala, communicated totheTMB pursuant to
Article 6.9. TheTMB examined theinformation made available bytheUnited States to
Guatemala during thebilateral consultations, inparticular, andalsoother relevant information
provided bytheUnited States attheTMB'srequest. While itobserved thatsome datamight point
todiverging directions, theTMB concluded thatthisagreement inoverall terms wasjustified in
accordance withtheprovisions ofArticle 6oftheATC. TheTMB noted thatthetotallevelof
theagreed restraint, aswellasthatportion oftherestraint thatwasavailable unconditionally to
Guatemala (i.e.thespecific limit), were substantially above theroll-back level. Itobserved that
nogrowth ratewasprovided forwithrespect totheGAL. However, according toindications
given bytheUSGovernment, theGAL could beincreased onrequest. Therefore, itwasthe
TMB'sunderstanding that,attherequest ofGuatemala, theGAL would beincreased bynoless
than6percentannually (G/TMB/R/13).
(b) ElSalvador
138. TheTMB reviewed therestraint measure agreed between theUnited States andEl
Salvador onimports ofcategory 342/642 products from ElSalvador, communicated totheTMB
pursuant toArticle 6.9.TheTMB noted thatthevolume ofimports intotheUnited States of
products ofcategory 342/642, from allsources, hadincreased in1993 and1994, andhad
continued toincrease in1995. Thishadtaken place inthecontext ofaproduct subject to
quantitative restrictions foralarge number ofcountries, including some small suppliers inthis
category.
139. TheTMB observed thatcertain economic variables (production, market share,
employment, domestic prices) indicated thattheUS’industry producing cotton andman-made
fibreskirts wasexperiencing problems asaresult ofincreased imports. Ontheother hand, some
other economic variables could point toadifferent direction. With respect tosome other
variables, theTMB noted thatexports remained atalowlevelandwere declining; productivity
hadremained stable despite reductions inemployment. Dataonsome elements, supplied ata
higher levelofindustry aggregation, suchas,forexample, profits, investment, inventories and
capacity utilization, could notprovide sufficient guidance. TheTMB concluded that,taking into
account theelements mentioned above, thecircumstances described inArticle 6.2were observed
intheUS'market forcotton andman-made fibreskirts.
140. TheTMB further observed thatimports ofproducts ofcategory 342/642 intotheUnited
States from ElSalvador hadincreased significantly, particularly in1995. Thiswastaking place inG/L/179
Page42
thecontext ofincreased imports from several other sources, bothrestrained andunrestrained,
whose share ofoverall imports waslarger thanthatofElSalvador. ElSalvador ’sexports were
however, onaverage, priced substantially below theUS'average domestic price and,withone
exception, below theaverage prices ofimports from countries withahigher share ofimports.
TheTMB therefore considered thatthecircumstances described inArticle 6.2could beattributed
toincreased imports from ElSalvador.
141. TheTMB noted thatthetotalleveloftheagreed restraint, aswellasthatportion ofthe
restraint thatwasavailable unconditionally toElSalvador (i.e.thespecific limit), were
substantially above theroll-back level. Itobserved thatnogrowth ratewasprovided forwith
respect totheGAL. However, keeping alsoinmind indications given bytheUSGovernment that
GALs could beincreased onrequest, itwastheTMB'sunderstanding andrecommendation that
theGAL would beincreased bynolessthan6percentannually.
142. Onthebasis oftheconsiderations mentioned above, theTMB concluded thatthisrestraint
measure agreed between theUnited States andElSalvador wasjustified inaccordance withthe
provisions ofArticle 6oftheAgreement onTextiles andClothing (G/TMB/R/19).
143. Atitstwenty-third meeting, theTMB considered acommunication received from El
Salvador, related totheTMB’sexamination, mentioned above, ofthenotifications byElSalvador
andtheUnited States ofarestraint measure agreed between thetwoMembers, pursuant to
Article 6.9. Inthiscommunication, dated 22November 1996, ElSalvador, interalia,urged the
TMB toinvite ittopresent itsobservations onthismatter, “sothattheywillbetaken intoaccount
iftheTMB decides tomake recommendations orobservations onthiscase”.Inviewofthefact
thatthisagreed restraint measure hadalready beenreviewed bytheTMB on29and30October
1996, theTMB decided toseekclarification from ElSalvador regarding thiscommunication
(G/TMB/R/22, paragraph 12). Nofurther communication wasreceived from ElSalvador onthis
matter.
9. Imports ofWomen 'sandGirls'Wool Suits (USCategory 444)
144. InMay1995, theUnited States requested consultations withColombia andthePhilippines
pursuant toArticle 6.7. Consultations withColombia ledtoarestraint agreed bythetwoparties,
whereas theUnited States introduced, afterconsultations, aunilateral restraint against imports
from thePhilippines. Subsequently, theUnited States withdrew thismeasure against the
Philippines before theTMB could review it.
145. TheTMB reviewed therestraint measure agreed between theUnited States andColombia
onimports ofcategory 444products from Colombia, communicated totheTMB pursuant to
Article 6.9.TheTMB examined theinformation made available bytheUnited States toColombia
during thebilateral consultations, aswellasother relevant information provided bytheUnited
States attheTMB'srequest. While itobserved thatsome data, notably thepaceofincreased
imports from Colombia, might leadtodifferent findings, theTMB concluded thatthisagreement
inoverall terms wasjustifiable inaccordance withtheprovisions ofArticle 6oftheATC. As
such, theagreement wasconsidered justified. TheTMB noted, however, that,whilst thetotal
leveloftheagreed restraint wassubstantially above theroll-back level, thatportion oftherestraint
available unconditionally toColombia (i.e.thespecific limit) waslower thantheroll-back level
(G/TMB/R/11).
10. YarnforSale, 85PerCentorMore byWeight Cotton Combed Spun (US
Category 301Part)G/L/179
Page43
146. InApril 1997, theUnited States requested consultations withPakistan. Subsequently the
United States informed theTMB that,afterconsultations withPakistan, ithaddecided notto
impose arestraint onimports ofcategory 301from Pakistan.
C. THE APPLICATION OFTHE TRANSITIONAL SAFEGUARD MECHANISM BY
BRAZIL
147. InJune1996, Brazil requested consultations withHong Kong andKorea pursuant to
Articles 6.7and6.11, andatthesame timeintroduced seven provisional safeguard measures (two
onimports from Hong Kong, fiveonimports from Korea). Theparties subsequently
communicated totheTMB thatconsultations hadnotproduced agreement within thedeadline
envisaged inArticle 6.11.
148. InSeptember 1996, theTMB wasinformed byBrazil andKorea thattheyhaddecided to
resume consultations withrespect tothesafeguard measures introduced byBrazil pursuant to
Article 6.11onimports ofthefollowing Brazilian product categories from Korea: category 611
(woven fabrics containing 85percentormore byweight ofartificial staple); category 618(woven
artificial filament fabric); category 619(polyester filament fabric); category 620(other synthetic
filament fabric); andcategory 627(sheeting ofstaple filament fibrecombination). Bothparties,
consequently, requested theTMB todefer itsconsideration ofthese measures (G/TMB/R/16).
Subsequently, Brazil andKorea informed theTMB thattheyhadreached anagreement on
restraints, thedetails ofwhich were notified totheTMB.
1. Imports ofWoven Artificial Filament Fabric (Brazilian Category 618)
149. TheTMB considered thesafeguard measure introduced byBrazil, pursuant toArticle
6.11, onimports ofproducts ofBrazilian category 618from Hong Kong atitsmeetings in
September andNovember 1996. Onthebasis ofadetailed examination theTMB found thatthe
Brazilian industry wasshowing somewhat contradictory symptoms andtheevolution ofanumber
ofeconomic indicators andtheirpossible interrelation could leadtodiverging interpretations. The
slight increase inproduction, improvement ofproductivity, increase ofexports andriseinwages
could allow aninterpretation thattheindustry hadalready beenrelatively successful interms of
restructuring andadjusting tothenewcompetitive conditions. Developments regarding
employment, thenumber ofenterprises, capacity utilization, profits andinvestment could point to
theopposite direction. Thedataprovided anunambiguous indication thattheindustry hadbeen
unable totakeadvantage ofthesubstantial increase initsdomestic market. Partofthestrength of
thedomestic demand could beattributed totheimplementation oftheeconomic stabilization
programme, andinparticular totheliberalization ofimports undertaken byBrazil during thelast
decade. Adjustment efforts hadbeenundertaken, which hadnotenabled theBrazilian industry to
compete successfully withimports, inparticular given theprice levels prevailing intheBrazilian
market. TheTMB tooktheviewthat,under these circumstances, theBrazilian industry
producing, interalia,woven artificial filament fabrics wasexperiencing serious damage.
150. Onthebasis ofthedatasubmitted byBrazil, itwasdifficult toassess theextent towhich
thisdamage could beattributed specifically tothedifficulties experienced bytheproducers of
products ofcategory 618. TheTMB, while accepting thatserious damage totheindustry
producing category 618could bedemonstrated, expressed concern that,withrespect tosome
variables, ithadtorelyonarguments byinference, inviewofthelackofsufficiently specific data
relating tothecategory itself. TheTMB therefore hadtoconsider whether thisserious damage
could beattributed toimports from Hong Kong. Inthisregard, theTMB concluded thatthe
serious damage experienced bytheBrazilian industry could beattributed inparttoimports from
Hong Kong inaccordance withArticle 6.4.Furthermore, theTMB noted thatBrazil hadinvokedG/L/179
Page44
theprovisions ofArticle 6.11andapplied therestraint provisionally, asithadconsidered thatits
industry wasexperiencing “highly unusual andcritical circumstances, where delay would cause
damage which would bedifficult torepair ”.Ittooknoteofthelimited information provided by
Brazil toHong Kong onthismatter, andoftheinformation ithadprovided totheTMB,
according towhich afurther increase inimports wasimminent, inviewoftheamount ofimport
licences issued, aswellasoftheamounts ofgoods thatcould beimported intoBrazil atshort
notice from Brazilian customs 'warehouses. TheTMB noted thatthese expectations hadnot
materialized. TheTMB wasoftheviewthatincases where theprovisions ofArticle 6.11were
invoked, theexpectation wasthattheelements envisaged inArticles 6.2,6.3and6.4would
indicate asunambiguously aspossible thehighly unusual andcritical character ofthe
circumstances. TheTMB wasalsooftheviewthat,unless suchcircumstances were met,any
action taken under Article 6should bepreceded byconsultations between theparties. In
conclusion, theTMB observed thatthere were indications totheeffect thattheBrazilian industry
producing products ofcategory 618hadalready beenundertaking important restructuring and
adjustment. InlightofthistheTMB considered thatashorter period oftimethanthemaximum
time-frame envisaged inArticle 6.12(a) should enable theindustry inBrazil tosuccessfully
accomplish itsadjustment tothechanged competitive environment. TheTMB recommended
therefore thatthemeasure taken byBrazil against imports from Hong Kong ofproducts of
category 618should berescinded atthelatest by31December 1997 (G/TMB/R/20).
151. Atitstwenty-third meeting, theTMB tooknoteofacommunication received from Brazil
that,inaccordance withArticle 8.9oftheATC, theBrazilian Government would endeavour to
accept infulltherecommendation oftheTMB concerning transitional safeguards applied to
imports ofcategory 618from Hong Kong. TheGovernment ofBrazil also"reserved itsrights
under paragraph 12ofArticle 6oftheATC inrelation tosuchrecommendations" (G/TMB/R/22).
152. Subsequently, theTMB received anotification from Hong Kong pursuant toArticle 8.10.
Inthiscommunication, Hong Kong conveyed itsinability toconform withtherecommendation
made bytheTMB regarding thetransitional safeguard measure applied byBrazil withrespect to
products ofcategory 618. Hong Kong, therefore, requested theTMB toreconsider thematter in
lightofthereasons itgaveinitscommunication andtoissue revised recommendations.
153. Atitstwenty-sixth andtwenty-seventh meetings, theTMB gavethorough consideration to
thereasons andarguments putforward byHong Kong, aswellasofthecomments and
clarifications provided byBrazil. Insumming uptheconsideration ithadgiven tothereasons
presented byHong Kong, theTMB agreed thatincaseofrecourse toArticle 6,itwasimportant
toprovide asmuch factual information anddataaspossible thatwasspecific totheproduct
category itself, asproduct-specific information anddatashould haveamajor impact ontheoverall
assessment whether serious damage, oractual threat thereof could bedemonstrated.
154. Inthisregard andwithrespect totheparticular casebefore it,itwastheunderstanding of
theTMB thatHong Kong didnotdisagree withitinaccepting thatithadnotbeenpossible for
Brazil toprovide category-specific information anddatawithrespect toeachandevery economic
variable envisaged inArticle 6.3. TheTMB heldtheviewthatinsuchacaseandinrespect of
suchvariables, iffactual information anddatathatrelated asclosely aspossible totheproduct
category itself were examined, these information anddatahadalsotobesubmitted totheMember
towhich therequest forconsultations wasaddressed, aswellastotheTMB.
155. Inthecontext oftheabove theTMB noted that,intheviewofHong Kong, theATC
required thatonlyinformation anddataspecific tothe"particular industry" could beexamined in
making adetermination ofserious damage tothedomestic industry. TheTMB haddeclined to
pronounce itself onissues which would require theadoption ofmore general interpretations oftheG/L/179
Page45
ATC, butitrecalled itsobservation oftheimportance ofproduct-specific information anddata
(seeparagraph 153). TheTMB noted thatitwasnotapartofHong Kong'scontention torequest
theBody toconduct adenovoexamination withaviewtoestablishing whether serious damage in
thisparticular casecould bedetermined exclusively onthebasis oftheeconomic variables for
which category-specific information hadbeenprovided.
156. Inconclusion, theBody agreed withHong Kong'smain contention according towhich a
determination ofserious damage could notbemade almost entirely byreference to,andtherefore
byinferences drawn from, datarelating tomuch broader industries inrespect ofwhich damage is
claimed. Ontheother hand, incarefully considering itsexamination oftheparticular case(i.e.
theBrazilian measures against imports ofcategory 618products from Hong Kong), theTMB
could notreach thesame conclusions asHong Kong did,since inthiscasethedetermination of
serious damage hadnotbeenmade almost entirely byreference todatarelating tosuchbroader
industries, assome important dataandfactual information provided byBrazil were
category-specific.
157. TheTMB recognized, however, thatcertain formulations ofitsreport ontheexamination
ofthismatter pursuant toArticle 6.11could bereadsoastoleadtoslightly divergent
conclusions, which could bedifferent from thestatement contained inthepreceding paragraph.
Thisapplied inparticular toparagraphs 20and21ofthereport (G/TMB/R/20). Thereference in
thereport tothefactthattheTMB, withrespect tosome variables, hadtorelyonarguments by
inference inviewofthelackofspecific datarelating thecategory itself, wasaimed atindicating
theserious limitations thattheBody hadindrawing reliable conclusions onthebasis ofdatawhich
were related tobroader industries thantothecategory 618industry.
158. TheTMB recalled thatithadalready expressed concerns withrespect tosome ofthe
non-category specific dataprovided byBrazil, which hadmade itdifficult toassess theextent to
which developments insome economic variables could beattributed totheevolution ofthemarket
incategory 618products. While inlightoftheconclusions reached (inparagraphs 18,23,27and,
inparticular, 28ofG/TMB/R/26), theTMB didnotconsider itappropriate torevise its
recommendations adopted inNovember 1996 ortoissue further recommendations, theBody
recalled thatithadobserved thatthere were indications totheeffect thattheBrazilian industry
producing products ofcategory 618hadalready beenundertaking important restructuring and
adjustment. TheTMB, therefore, expected Brazil tokeepthedevelopments ofthemarket of
category 618products under review, andrecalled thatithadrecommended toBrazil thatthe
measure taken against imports from Hong Kong ofproducts ofcategory 618should berescinded
atlatest by31December 1997.
159. Atthemeeting oftheDispute Settlement Body on30April 1997, Hong Kong made a
statement, according towhich itwasitsunderstanding thatthespirit oftheTMB'sreport wasthat
Brazil wasexpected torescind themeasure earlier than31December 1997. Hong Kong had
anticipated thatBrazil would rescind themeasure ingood time. Thestatus ofthedispute between
Brazil andHong Kong wasthatHong Kong'sauthorities were stillawaiting aresponse from
Brazil. Hong Kong might needtorevert tothisdispute atafuture meeting oftheDSB. Ifso,it
washoped thatthiswould beanotification under Article 3.6oftheDSU. Inresponse, Brazil
recalled, interalia,thatithadinformed theTMB thatitwould endeavour toaccept infullthe
recommendations concerning thetransitional safeguards applied toimports ofproducts of
categories 618from Hong Kong, andthatithadreserved itsrights under Article 6.12oftheATC
inrelation tosuchrecommendations. Brazil stated thatwithregard toproducts ofcategory 618,
taking intoconsideration theTMB'srecommendations, andinlightofitsrights andobligations
under theATC, itwascarefully following developments intheindustry producing these products.G/L/179
Page46
2. Imports ofMen'sandBoys'KnitShirts ofMaterial Other Than Cotton andMan-Made
Fibre (Brazilian Category 838)
160. TheTMB considered thesafeguard measure introduced byBrazil, pursuant to
Article 6.11, onimports ofproducts ofcategory 838from Hong Kong. Having examined the
factual datapresented toitpursuant toArticle 6.7,aswellastherelevant information and
arguments provided byBrazil andHong Kong, theTMB came totheconclusion thatBrazil had
notdemonstrated thattheBrazilian industry producing products ofcategory 838hadexperienced
serious damage, asenvisaged inArticle 6.2,andrecommended thatBrazil rescind themeasure.
TheTMB equally observed thattherecourse byBrazil totheprovisions ofArticle 6.11wasnot
appropriate. TheTMB reiterated itsviewthatincases where these provisions were invoked, the
expectation wasthattheelements envisaged inArticles 6.2,6.3and6.4would indicate as
unambiguously aspossible thehighly unusual andcritical character ofthecircumstances, andthat,
unless suchcircumstances were met,anyaction taken under Article 6should bepreceded by
consultations between theparties (G/TMB/R/20).
161. Atitstwenty-third meeting, theTMB tooknoteofacommunication received from Brazil
that"inaccordance withparagraph 9ofArticle 8oftheATC, theBrazilian Government shall
endeavour toaccept infulltherecommendations oftheTMB concerning transitional safeguards
applied toimports ofcategory 838(men’sandboys’shirts, knitted orcrocheted, ofother textile
materials) from Hong Kong". Atitstwenty-fifth meeting theTMB tooknoteofacommunication
byBrazil thatithaddecided, witheffect asfrom 6January 1997, torescind thetransitional
safeguard itapplied toimports oftextile products from Hong Kong classified incategory 838.
3. Imports ofSynthetic Fibre Products (Brazilian Categories 611,618,619,620and627)
162. Atitstwenty-eighth meeting, theTMB reviewed, pursuant toArticle 6.11, thenotification
byBrazil andKorea ofrestraint measures agreed between thetwoMembers onimports of
artificial andsynthetic fibreproducts ofcategories 611,618,619,620and627from Korea. The
levels agreed corresponded tothelevelenvisaged inArticle 6.8(roll-back level). Annual growth
forallcategories wassetat6percent, andtheapplication ofsuchgrowth would takeplace, by
anticipation, on1January ofeachofthethree calendar years during which therestraints would be
ineffect. Special shiftof30percentfrom category 620tocategory 619would beallowed, plusa
special carry forward of25percentapplicable tocategory 619. Bothflexibilities would be
granted upon notification byKorea. Swing of8percentwasavailable between allcategories.
Carry forward and/or carryover of10percent, ofwhich carry forward shallnotrepresent more
than5percent, were available, andaspecial carryover of10percentoftheprorated annual
quota for1996 wasavailable in1997, forallcategories.
163. TheTMB expressed serious concern thatthisnotification hadbeenreceived farbeyond the
90-day deadline envisaged inArticle 6.11forsuchnotification. Itrecalled inthisregard thatthe
restraints hadbeenintroduced provisionally byBrazil asfrom 1June1996. While taking noteof
theindications given byBrazil andKorea thatmore timehadbeennecessary tofinalize thedetails
oftheagreement, theTMB recalled theimportance ofadhering strictly tothesubstantive and
procedural requirements defined bytheATC, including thedeadlines specified therein.
164. Having considered indetail alltherelevant factual information (market statements),
referred toinArticle 6.7,made available byBrazil toKorea during theconsultations, andbearing
inmind thefactthatalltheelements oftheagreements were inconformity withtherelevant
paragraphs ofArticle 6,theTMB concluded thattherestraint measure agreed between Brazil and
Korea onimports ofproducts ofcategories 611,618,619,620and627from Korea were justified
inaccordance withtheprovisions ofArticle 6oftheATC.G/L/179
Page47
165. TheTMB noted that,withrespect toallthecategories subject toagreement withKorea,
Brazil hadinvoked theprovisions ofArticle 6.11andapplied therestraints provisionally, asithad
considered thatitsindustry wasexperiencing “highly unusual andcritical circumstances, where
delay would cause damage which would bedifficult torepair ”.Itobserved inthisregard that
Brazil hadnotprovided toKorea initsmarket statements dataasuptodateascould beexpected
tosubstantiate thecritical circumstances. TheTMB recalled itsviewthatincases where the
provisions ofArticle 6.11were invoked, theexpectation wasthattheelements envisaged in
Articles 6.2,6.3and6.4would indicate asunambiguously aspossible thehighly unusual and
critical character ofthecircumstances. TheTMB wasalsooftheviewthat,unless such
circumstances were met,anyaction taken under Article 6should bepreceded byconsultations
between theparties (G/TMB/R/27).
D. MEASURES APPLIED BYECUADOR WITH REFERENCE TOTHE SAFEGUARD
MECHANISM OFTHE ATC
166. Atitstwenty-third meeting, theTMB considered anotification received from Korea
requesting theTMB toconduct, pursuant toArticle 8.6,anexamination ofsafeguard measures
introduced byEcuador, referring totheprovisions oftheAgreement onTextiles andClothing, on
imports ofseveral textile andclothing products from Korea andHong Kong. Korea subsequently
requested theTMB thatthisexamination bepostponed untilFebruary 1997, reflecting theview
which hadbeenexpressed byEcuador thatmore timewasnecessary foranadequate examination
ofthecase. BothEcuador andHong Kong hadbeeninformed ofthisrequest. However, the
TMB wasconcerned that,contrary totherequirements ofArticle 6.11, ithadnotbeenplaced ina
position toreview thisissue despite thefactthatthemeasures hadbeeninplace foralmost five
months. Ittherefore decided toinvite representatives ofEcuador, Korea andHong Kong toits
twenty-fourth meeting, when itintended toconsider thismatter (G/TMB/R/22).
167. Atthatmeeting, theTMB, heard andconsidered thepresentations andstatements made by
theMembers concerned. Intaking noteofthese statements, andoftheinformation provided by
Ecuador, theTMB noted thattheaction taken wasnotconsistent withtheprovisions ofArticle 6
oftheATC, bothbecause oftheprice-based nature ofthemeasures themselves, andbecause the
procedural andsubstantive requirements contained inArticle 6oftheATC were notmet. The
TMB observed thatArticle 6provides, interalia,thatthough aMember canintroduce quantitative
restrictions "theMember proposing totakesafeguard action shallseekconsultations withthe
Member orMembers which would beaffected bysuchaction", andthat,in"highly unusual and
critical circumstances, where delay would cause damage which would bedifficult torepair, action
…maybetaken provisionally onthecondition thattherequest forconsultations andnotification
totheTMB shallbeeffected within nomore thanfiveworking daysaftertaking theaction".
168. TheTMB registered itsconcern that:(a)Ecuador hadadopted thisaction on9August
1996 invoking Article 6oftheATC, buthadnotinformed theTMB ortheaffected Members of
thisaction until27November 1996; (b)consultations hadnottaken place untilKorea, having
noticed thatthemeasures were being applied, raised theissue intheCouncil forTrade inGoods
andtheTMB; (c)Ecuador didnotinform theTMB that,initsview, themeasures didnot
constitute measures taken pursuant toArticle 6oftheATC untilitstwenty-fourth meeting.
169. TheTMB, while bearing inmind thestatement byEcuador thatthese measures hadnot
beentaken under theprovisions oftheATC, noted thatsuchmeasures hadbeeninforce forsome
fivemonths andwould remain applicable until9February 1997 withpossible effects ontrade
between theMembers concerned, andexpected thatEcuador would takethenecessary steps to
disinvoke Article 6oftheATC withrespect tothese measures, andcomply withthelegaland
procedural requirements under theWTO (G/TMB/R/23).G/L/179
Page48
170. Subsequently, Ecuador submitted acommunication totheTMB informing itthatthe
measures asdetailed above hadexpired on9February 1997.
E. IMPLEMENTATION OFARTICLE 6.13
171. TheChairman informed theTMB during itsfirstmeeting thathehadreceived from the
Chairman oftheTrade Negotiating Committee atofficial levelaNote fortheRecord regarding
Article 6.13oftheAgreement onTextiles andClothing, according towhich "thephrase 'unless
otherwise justified totheTMB',referred toinArticle 6.13, isintended tobelimited toimports of
wool products intotheUnited States, subject tothecondition thatthegrowth rateapplied under
thisprovision shallinnocasebelessthan2percent. Forthispurpose, wool textiles andclothing
products aredefined asthose covered bythe400series oftheUnited States 'textile category
system". TheTMB transmitted thisnotetoWTO Members fortheirinformation.
F. COMMENTS OFWTO MEMBERS
172. Inacommunication sentinresponse totherequest forinformation bytheTMB
(G/TMB/11), oneMember stated withrespect toArticle 6that"itisafacttobenoted bythe
TMB thataMember, which isthelargest single importer oftextile products, heralded theWTO
erabyinitiating more thantwodozen additional restraints ontheirimports. Though technically the
actions forsuchrestraints were taken under theprovisions oftheATC, thefactthatsomany
restraints were initiated during thefirstfewmonths oftheopening yearoftheATC, indicates lack
ofsincerity onthepartofthislargest importing country foraneffective phasing outofrestraints.
Itisalsonoteworthy thatmany ofthese restraints didnotstand thescrutiny oftheTMB andthe
onlycases which ultimately reached theDSBPanels were decided against thisimporting
Member". ThatMember further stated that"itisawelcome trend thatrestraints havebegun to
beexamined byDSBpanels. Thiswillensure thattheWTO rules areproperly followed and
implemented inthetextile sector andwillalsohelptheinternational trade inthetextile products to
graduate intotheWTO regime, bythetimethephase outperiod isover. Another issue istheneed
foramechanism toensure proper compliance oftherecommendations ofTMB aswellasthe
Dispute Panels. Since thenewrestraints under Article 6oftheATC arepermissible foraperiod
ofthree years, itmaybepossible fortheimporting countries toachieve theirobjective justby
delaying theimplementation oftherecommendations oftheTMB ortheDispute Panel tocover
suchperiod".
G. COMMENTS AND OBSERVATIONS OFTHE TMB
173. While 55Members notified theirwishtoretain therighttousetheprovisions ofArticle 6
(seeChapter II),andthusaltogether 59Members (counting theEuropean Community asone)
could haveclaimed theuseofthetransitional safeguard mechanism, itisimportant tonotethat
during theperiod 1January 1995 to24July1997 twoofthem invoked theprovisions of
Article 6,involving 33cases intotal. TheUnited States sought consultations with14Members inG/L/179
Page49
26cases, while Brazil tookprovisional actions against imports from twoMembers inseven cases.
Abreakdown ofsuchinvocations byquarters shows thefollowing pattern:
Year Quarter Requests
1995 Firstquarter
Second quarter
Third quarter
Fourth quarter10requests (United States)
14requests (United States)
none
none
1996 Firstquarter
Second quarter
Third quarter
Fourth quarter1request (United States)
7requests (Brazil)
none
none
1997 Firstquarter
Second quarternone
1request (United States)
TOTAL 33requests
174. Ofthe26actions initiated bytheUnited States, ninetransitional safeguard measures
remained inforce asoftheendofJuly1997, allintheform ofagreed restraints, while in
17cases themeasures hadalready beenrescinded ortheactions dropped (oneofthenine
measures would berescinded inadvance ofitsscheduled termination date-seeparagraph 127
above). Asithadnoted initsreport adopted inthecontext ofthepreparation oftheSingapore
Ministerial Conference, theTMB isaware oftheimplications fortrade ofrequests for
consultations made withaviewtointroducing safeguard measures, inparticular, when transitional
measures were applied andsubsequently rescinded.
175. Asindicated inparagraph 173,thebulkofrequests forconsultations (altogether 24)was
concentrated inthefirsthalfof1995, andthuscoincided withtheentering intoforce oftheATC
andother Uruguay Round Agreements. Thisconcentration interms oftiming and,inparticular,
thegreat number ofcases:
- caused serious concerns tocertain Members, asexpressed intheTMB bythose
Members directly affected, andalsobythesame Members, andanumber of
others, intheCouncil forTrade inGoods; and
- placed theTMB inasituation which made itdifficult forittocopewiththese
cases andallother types ofnotifications ithadtoreview.
176. Theexamination oftherequests forconsultations andoftheresulting measures made by
theTMB and,insome cases, subsequently, DSBpanels, ledtotheconclusion thatinmost cases
theUnited States didnotcomply withimportant obligations arising from Article 6.
177. Outoftheseven safeguard actions taken byBrazil, onewasrescinded, asrecommended
bytheTMB. Onemeasure adopted pursuant toArticle 6.11remained inforce buttheTMB
recommended thatBrazil eliminate thatrestraint earlier (i.e.atthelatest bytheendof
December 1997) thanthetime-frame foreseen intherelevant provisions oftheATC; whereas it
hadbeenagreed withtheMember concerned thatthefiveothers remain inforce forathree-year
period. TheTMB found these fiverestraints tobejustified inaccordance withtheprovisions of
Article 6.ThefactthataMember, which hadchosen toretain therighttouseArticle 6,had
decided toapply theprovisions ofArticle 6maybeanindication oftheongoing changes intrade
patterns inthisarea.G/L/179
Page50
178. AsBrazil hadtaken provisional measures pursuant toArticle 6.11, inreviewing the
measures theTMB hadalsotoassess thisparticular aspect aswell. Itsconclusions inthisregard
(seeparagraphs 150,160and165above) should provide some guidance toMembers withrespect
totheinvocation oftheprovisions ofArticle 6.11.
179. Asfrom thesecond halfof1995, theslow-down intherecourse toArticle 6mayhave
resulted from theinteraction ofanumber offactors. Among these, intheviewoftheTMB, the
recognition thatArticle 6provides strict requirements could haveplayed animportant role,
supported bythestandards established bytheTMB, atleastwithrespect tothedetermination of
serious damage claimed, andbytheavailability ofthepossibility ofhaving recourse tothe
provisions oftheDispute Settlement Understanding.
180. Theoperation oftheATC sofarhasdemonstrated inpractical terms that,unlike the
MFA, theATC isnotanisolated Agreement butanintegral partoftheWTO system, particularly
when itrelates tothesettlement ofdisputes. ThetwoPanel andAppellate Body reports adopted
bytheDSBduring theearly partof1997 havemade asignificant contribution inthisregard. The
Ministerial Declaration adopted inSingapore hasalsohadanimportant impact, inparticular in
directing theTMB tofurther increase transparency byproviding more detailed explanations and
rationale behind itsfindings andrecommendations, thusassisting theTMB inimproving its
standards overtimeandtheTMB'sefforts inthisregard arereflected initsrecent reports.
181. TheTMB hadageneral discussion onthereports ofthepanels “United States -
Restrictions onimports ofcotton andman-made fibreunderwear ”from Costa Ricaand
“United States -Measure affecting imports ofwoven wool shirts andblouses from India”,andof
therespective subsequent Appellate Body reports. Theobjective ofthediscussion wastoconsider
these reports, andinparticular toidentify those aspects ofthelegalfindings provided inthe
particular cases which could provide further guidance alsototheTMB interms ofitsapproach
andmethodology fortheexamination ofthemeasures referred toitpursuant toArticle 6.The
TMB agreed torevert tothisdiscussion.
IV. QUANTITATIVE RESTRICTIONS NOTIFIED UNDER ARTICLE 2AND ISSUES
RELATED TOTHE IMPLEMENTATION OFARTICLE 2
A. SCOPE OFRESTRICTIONS INHERITED FROM THE MFA
182. Article 2.1oftheATC requires thatallquantitative restrictions within bilateral agreements
maintained under Article 4oftheMFA ornotified under Article 7or8oftheMFA inforce on
thedaybefore theentry intoforce oftheWTO Agreement shall, within 60daysfollowing such
entry intoforce, benotified indetail, including therestraint levels, growth ratesandflexibility
provisions, bytheMembers maintaining suchrestrictions totheTextiles Monitoring Body. All
suchrestrictions maintained between GATT 1947 contracting parties andinplace on
31December 1994 aregoverned bythisAgreement. Article 2continues, inparagraph 4,thatthe
restrictions notified pursuant toparagraph 1are"deemed toconstitute thetotality ofsuch
restrictions" on31December 1994 andnonewrestrictions interms ofproducts orMembers are
tobeintroduced except under theprovisions ofthisAgreement orrelevant GATT 1994
provisions. Inpractice, these obligations applied tofourWTO Members, Canada, theEuropean
Community, Norway andtheUnited States. These notifications were circulated indocuments
G/TMB/N/60 to63andaddenda.G/L/179
Page51
1. Notifications Made Pursuant toArticle 2.1
183. Canada provided acombined notification ofrestraints under Articles 2.1and3.1
(G/TMB/N/62) which included bilateral agreements maintained under Article 4oftheMFA or
notified under Article 7or8oftheMFA with26WTO Members (Bangladesh, Brazil,
Costa Rica, Czech Republic, Dominican Republic, Hong Kong, Hungary, India, Indonesia,
Jamaica, Korea, Macau, Malaysia, Mauritius, Myanmar, Pakistan, Philippines, Romania,
Singapore, Slovak Republic, South Africa, SriLanka, Swaziland, Thailand, Turkey and
Uruguay). Theinformation onunilateral restraints notified under Articles 7and8oftheMFA
andnotcovered byArticle 2oftheATC, with17exporters comprising GATT 1947 contracting
parties thatwere notyetWTO Members andtrading partners thatwere neither GATT 1947
contracting parties norWTO Members, isaddressed inChapter V,paragraph 235. Itwasstated
thatATC benefits would beextended toGATT contracting parties upon theentry intoforce ofthe
WTO Agreement forthose Members. With respect tonon-WTO/non-GATT trading partners,
these matters would begoverned bytheterms oftheiraccession totheWTO. Thenotification
alsolisted therespective growth andflexibility provisions.
184. Canada 'snotification relevant toArticle 2.1comprised 205quotas plus39sub-limits
affecting 26WTO Members. There were alsothree group limits (India, Macau andSwaziland)
andtwoexport authorizations without levels (Hong Kong). Subsequently, upon theaccession of
Bulgaria totheWTO, on1December 1996, Canada notified thattheseven restrictions inplace on
thedayprior totheaccession would becarried overintotheATC, inaccordance withthe
provisions ofthereport oftheWorking Party ontheAccession ofBulgaria, withnecessary
adjustments, pursuant toArticle 2.1.
185. TheEuropean Community listed allrestrictions (G/TMB/N/60) covered bythisArticle
vis-à-vis GATT contracting parties which were thenMembers oftheWTO. These were separated
intotwocategories ofmeasures: Community levelquantitative restrictions fordirect imports and
additional Community quantitative levels forgoods re-imported under outward processing trade
(OPT) programmes. Growth andflexibility provisions were alsogiven.
186. Thenotification ofrestrictions fordirect imports involved 14Members (Argentina, Brazil,
Hong Kong, India, Indonesia, Macau, Malaysia, Pakistan, Peru, Philippines, Singapore, Korea,
SriLanka andThailand) withatotalof199specific quota levels plus19sub-limits. The
notification ofadditional levels forOPTcovered nineofthese Members (India, Indonesia, Macau,
Malaysia, Pakistan, Philippines, Singapore, SriLanka andThailand) andatotalof35quota
measures. AstheEuropean Community wasenlarged to15Member States onthesame dayas
theATC entered intoforce, thenotification presented boththeamounts foreseen inthebilateral
agreements for1994, andadjusted quota levels totakeintoaccount theenlargement.
187. TheEuropean Community notified inJune1996 that,inrecognition ofimproved market
access fortextile andclothing products extended byPakistan andIndia, itagreed thatitwould
provide tothese Members further flexibility forthemanagement ofexisting quota restriction
(including carryover, carry forward andinter-category transfers), inaddition totheflexibility
already provided.
188. Norway notified the54specific quotas itmaintained onimports from 16WTO Members
(theCzech Republic, Hong Kong, Hungary, India, Indonesia, Korea, Macau, Malaysia, Pakistan,
thePhilippines, Poland, Romania, Singapore, theSlovak Republic, SriLanka andThailand).
Norway alsoincluded initsnotification 12quotas maintained onimports from three non-WTO
Members (China, North Korea andVietnam) aswellasanon-automatic import licensing
procedure onimports offourproduct categories from Chinese Taipei. Norway stipulated,G/L/179
Page52
however, thatitwould extend thebenefits oftheATC onlytoWTO Members. Thenotification
alsosetoutgrowth andflexibility provisions foreachofthese restrictions (G/TMB/N/61).
189. TheUnited States notified measures (G/TMB/N/63) maintained with25WTO Members
(Bahrain, Bangladesh, Brazil, Costa Rica, theCzech Republic, theDominican Republic, Hong
Kong, Hungary, India, Indonesia, Jamaica, Kenya, Korea, Macau, Malaysia, Mauritius, Pakistan,
thePhilippines, Romania19,Singapore, Slovak Republic, SriLanka, Thailand, Turkey and
Uruguay) and,forinformation purposes, themeasures maintained with12non-WTO Members at
thattime(Bulgaria, China, Chinese Taipei, Colombia, Egypt, ElSalvador, Fiji,Guatemala,
Nepal, Oman, Poland andtheUnited Arab Emirates). Thenotification ofmeasures withWTO
Members listed 650specific limits comprising single categories, parts ofcategories orgroupings
ofcategories. Provision wasmade forgroup limits in12ofthecountries listed andanaggregate
limitinoneofthem. Thenotification ofmeasures maintained withnon-WTO Members
comprised 251specific limits andthree countries withgroup limits. Thenotifications included
information onthe1995 levels aswellasgrowth ratesandflexibility provisions.
190. Insubsequent addenda totheoriginal notification, those exporters which hadbecome
WTO Members were moved from thelisting provided "forinformation only" tothelistof
measures inplace withWTO Members, thatis,Bulgaria, Egypt, Fiji,Guatemala, Haiti, Poland,
Qatar, andtheUnited Arab Emirates. Inaddition, following theconsent bytheUnited States to
theapplication between theUnited States andRomania oftheWTO Agreement andthe
Multilateral Trade Agreements inAnnexes 1and2,thequantitative restrictions maintained bythe
United States onimports from Romania inforce onthedaybefore theimplementation ofthe
decision bytheUnited States were notified, together withapplicable growth ratesandflexibility
provisions.
191. Alsoinasubsequent addendum, theUnited States corrected itsnotification ofguaranteed
access levels (GALs) withCosta Rica, Dominican Republic, ElSalvador, Guatemala, Haiti and
Jamaica originally made under Article 3.1. Since these restrictions hadbeennotified tothe
Textiles Surveillance Body andhadbeeninforce on31December 1994, theUnited States
concluded thatthisnotification should havebeenmade under Article 2.1. Italsocorrected the
notification ofthree restrictions withKuwait, from Article 3.1toArticle 2.1.
2. Observations WithRespect toArticle 2.1Notifications (Article 2.2)
192. Article 2.2allowed Members tobring before theTMB anyobservation theydeemed
appropriate withregard tonotifications made under Article 2.1,within 60daysofsuch
notification. Four notifications were made, byColombia (G/TMB/N/105), Hong Kong
(G/TMB/N/106 and148)andMacau (G/TMB/N/108), eachinrespect ofthenotification ofthe
United States, andbyKorea (G/TMB/N/120) inrespect ofnotifications byCanada, theEuropean
Community andtheUnited States. Inreviewing thenotifications made byColombia, Hong Kong
andKorea, theTMB noted thatthese observations hadbeentaken intoaccount incorrigenda or
addenda tothenotifications made under Article 2.1bytheWTO Members concerned.
193. Thenotification byHong Kong, which referred tothelistofrestrictions notified bythe
United States requested, interalia,thatthefullproduct descriptions, conversion factors
applicable, coverage andstructure ofthegroups andsub-groups should benotified withrespect to
Hong Kong aswellasthecategory number formade-to-measure suits. Intheensuing discussion,
19Thenotification withrespect toRomania waswithout prejudice totheUS'invocation ofArticle XIIIof
theWTO Agreement.G/L/179
Page53
theTMB understood thatthese elements would benotified bytheUnited States under
Article 2.17; however, atthetimeofthepresent report, theUnited States hasnotyetnotified the
administrative arrangements withHong Kong.
194. InMacau 'sobservation, itwasstated thattheUS'notification under Article 2.1contained
restrictions which were notinforce onthedaybefore theentry intoforce oftheATC under
Macau 'sMFA bilateral agreement withtheUnited States. TheTMB invited bothparties to
provide written submission onthismatter and,onthisbasis, itconsidered theelements put
forward bybothparties. Macau inessence argued thattheMemorandum ofUnderstanding
(MOU) signed between Macau andtheUnited States on28January 1994 didnotallow forthe
automatic conversion bytheUnited States ofdesignated consultation levels (DCLs) onimports of
products ofUScategories 219,225,317,326,611and625-9 from Macau intospecific limits
(SLs), andthisconversion should beconsidered nullandvoid. TheUnited States essentially
maintained thattheobservations ofMacau withrespect totheUSnotification under Article 2.1
andtherequest totheTMB, were without merit. According totheUnited States, intheMOU,
signed inJanuary 1994, Macau expressly agreed totheestablishment ofspecific limits onfabric
categories 219,225,317,326,611and625-9 forthepurposes oftheUruguay Round transition
mechanism (i.e.theATC).
195. TheTMB considered alltheelements putforward bybothparties intheirsubmissions,
including thereference made byMacau tothereview ofthebilateral agreement bytheTSBin
1994. Inparticular, theTMB’sattention centred ontheMOU signed bythetwoparties
on28January 1994, which, interalia,envisaged theconversion ofdesignated consultation levels
onimports ofproducts ofUScategories 219,225,317,326,611and625-9 from Macau into
specific limits. TheTMB noted thattheparties didnotagree onwhether ornotparagraph 2of
thisMOU allowed fortheconversion offabric DCLs intoSLsbytheUnited States intheabsence
ofagreement between theparties during theconsultations envisaged inthisparagraph.
196. TheTMB noted thatitsreview wasconducted under Article 2.2. Itfound thata
recommendation, asrequested byMacau, thatintheabsence ofeither anagreement overthe
conversion ofDCLs onUScategories 219,225,317,326,611and625-9 intoSLs,oractual
trade inthese fabric categories, thenotification bytheUnited States ofthose specific limits should
beconsidered nullandvoid, wasnotwarranted. Inarriving atitsconclusions, theTMB tooknote
thattheconversion ofDCLs intoSLstookplace in1994 under theMFA. TheTMB noted with
concern, however, thatSLswere introduced bytheUnited States inthealmost complete absence
oftrade inthese categories. Itwastheexpectation oftheTMB that,inmonitoring developments
inthisarea, theUnited States would bearinmind thisobservation. TheTMB alsodrew the
attention ofMembers tothefactthat,withtheentry intoforce oftheATC, specific provisions
hadbeeninoperation fortheestablishment ofnewrestrictions.
3. Arrangements toBring Restrictions intoLinewithAgreement Year(Article 2.3)and
Treatment ofMFA Article 3Measures (Article 2.5)
197. Articles 2.3and2.5were designed tofacilitate the"bridge" between theformer MFA and
theentry intoforce oftheATC. Article 2.3provides ameans forbringing intolineanyperiod of
restriction having a12-month time-frame which isdifferent from thecalendar yearenvisaged in
theATC. Members could agree onanotional levelforthe12-month period ending
31December 1994. While nonotifications were made under thisprovision, theTMB understood
thatincertain cases some adjustments hadbeenmade andincorporated intothenotifications of
levels under Article 2.1.G/L/179
Page54
198. Article 2.5wasintended toprovide forthetreatment ofanyMFA Article 3actions taken
before 1January 1995, whereby theywould bepermitted toremain ineffect forupto12months
withreview oftheirconsistency either bytheTextiles Surveillance Body upto31December 1994
ortheTMB thereafter, butunder MFA rules. Further provision wasmade forthehandling of
disputes inrespect ofMFA Article 4agreements, initiated before 1January 1995, whereby they
could bereviewed laterbytheTMB, applying MFA rules. Nonotifications were made citing
these provisions.
4. Introduction ofNewRestrictions (Article 2.4)
199. Article 2.4stipulates thattherestrictions notified under Article 2.1constitute thetotality
ofsuchrestrictions inforce on1January 1995 andnonewrestrictions would beintroduced
except under theATC orrelevant GATT 1994 provisions. AstheTMB hadcompleted itsreview
ofnotifications under Article 2.1andobservations under Article 2.2,itwasassumed thatthe
totality ofrestrictions applied pursuant toArticle 2.1hadbeennotified, andthatnoneofthe
elements contained inthese notifications were either contested byother Members orrequired
further consideration bytheTMB.
200. Initsexamination oftherequest made byCosta Rica, thePanel "United States -
Restrictions onimports ofcotton andman-made fibreunderwear" stated, interalia,thatinits
view"theUnited States byviolating itsobligations under Article 6oftheATC hasipsofacto
violated itsobligations under Article 2.4oftheATC aswell".
201. Initsexamination oftherequest made byIndia, thePanel "United States -Measures
Affecting Imports ofWoven Shirts andBlouses from India" stated, interalia,that"since we
conclude thatthesafeguard action taken bytheUnited States violated theprovisions ofArticle 6
oftheATC, itisourviewthattheUnited States applied arestraint notauthorized under theATC,
which, therefore, constitutes alsoaviolation ofArticle 2.4oftheATC".
202. Intherequest forconsultations addressed totheUnited States withreference tomeasures
affecting textile andapparel products (WT/DS85/1), theEuropean Community stated, interalia,
"that these changes [totheUSrules oforigin fortextile andapparel products] arenotin
conformity withtheobligations oftheUnited States under theWTO Agreement onTextiles and
Clothing. Article 2.4oftheAgreement onTextiles andClothing requires thatnonewrestriction
interms ofproducts orMembers shallbeintroduced".
B. ELIMINATION OFRESTRICTIONS PURSUANT TOARTICLE 2.15
203. InSeptember 1995, Norway notified theTMB andtheMembers concerned ofits
elimination ofcertain restrictions maintained under theATC effective 1January 1996, citing
Article 2.15(G/TMB/N/130). Specifically, Norway removed restrictions on:(i)one-piece suits
(partofcategory 1);(ii)trousers (category 2),bothaffecting 14exporting countries;
(iii)products falling under HS6210 (partofcategory 1)affecting 16exporting countries;
(iv)knitted bed-linen (partofcategory 7)affecting 15exporting countries; and,traps andpots
(partofcategory 70)affecting sixcountries. Fourteen outof54restraints hadbeeneliminated
(see(ii)above), aswellasrestraints onpartcategories. TheTMB commended Norway forthe
early elimination ofsome ofitsATC restrictions.
204. Inreply tospecific questions putbytheTMB, inJune1997, Norway hadstated, inter
alia,thatit"was committed toacontinuation ofapolicy ofgradual liberalisation andexpects to
beabletonotify laterthisyeartotheTMB (andtoWTO Members directly concerned) further
steps taken pursuant toArticle 2,Section 15,oftheATC. Norway maintains restraints foravery
limited group ofproducts, andinthissituation Norway hadnotfound liberalisation bywayofG/L/179
Page55
integration thebestwaytoproceed, buthadpursued apolicy ofgradual liberalisation ofproducts
under restraint under Article 2.15. Norway wascommitted tocontinuing thispolicy".
C. IMPLEMENTATION OFGROWTH AND FLEXIBILITY PROVISIONS
205. TheTMB noted thatgrowth andflexibility provisions hadbeennotified along withthe
restraint levels under Article 2.1andthese hadnotbeenchallenged byanyother Member. The
TMB received noinformation which would haveindicated thataproblem hadarisen inthe
implementation ofArticle 2.13and2.16. Further, theTMB didnotseeanyindication of
quantitative limits being placed onthecombined useofswing, carryover andcarry forward.
D. IMPLEMENTATION OFTHE PROVISIONS OFARTICLE 2.18(SMALL
SUPPLIERS)
206. Article 2.18states that,withrespect totheMembers whose exports were subject to
restrictions on31December 1994 andwhose restrictions represented 1.2percentorlessofthe
totalvolume oftherestrictions applied byanimporting Member asof31December 1991 and
notified under Article 2,meaningful improvement inaccess shallbeprovided, through
advancement byonestage ofthegrowth ratessetoutinArticles 2.13and2.14, orthrough atleast
equivalent changes asmaybemutually agreed withrespect toadifferent mixofbaselevels,
growth andflexibility provisions.
207. TheTMB examined notifications byCanada, theUnited States andtheEuropean
Community (G/TMB/N/183-185) ontheimprovements inaccess provided tothose Members
whose exports were subject torestrictions on31December 1994 andwhose restrictions
represented 1.2percentorlessofthetotalvolume oftheimporting Members 'restrictions on
31December 1991. TheTMB understood thatnoexporting Member qualified under this
provision inthecaseofNorway. Canada listed 16Members which qualified forimproved access
under thisprovision: Costa Rica, Cuba, theCzech Republic, theDominican Republic, Hungary,
Jamaica, Lesotho, Macau, Mauritius, Myanmar, Poland, theSlovak Republic, South Africa,
SriLanka, Swaziland andUruguay. Thisimprovement inaccess waseffected byincreasing the
annual growth ratesfortherestrictions inforce on31December 1994 by25percent, inlieuof
16percent. Canada included inthislistnotonlytheMembers qualified on31December 1991
butalsothose qualified on31December 1994, bothgroups ofMembers representing altogether
over9percentofthevolume ofCanada 'stotalrestraints.
208. TheUnited States listed 22Members qualified under thisArticle forimproved access:
Bahrain, Colombia, Costa Rica, Czech Republic, theDominican Republic, Egypt, ElSalvador,
Fiji,Guatemala, Haiti, Hungary, Jamaica, Kenya, Kuwait, Macau, Mauritius, Poland, Qatar,
Romania, theSlovak Republic, theUnited Arab Emirates andUruguay. Forthese Members, the
annual growth ratesapplicable totherestraints were advanced byonestage byincreasing them by
25percentforthefirststage, inlieuof16percent.
209. TheEuropean Community notified thattwoMembers were qualified under thisArticle for
improved access: PeruandSriLanka. Forthese Members, theannual growth ratesapplicable to
therestraints were advanced byonestage byincreasing theannual growth ratesapplied tothe
restraints forthefirststage firstby16percentandsecond by25percent, inlieuof16percent.
210. TheTMB observed thattheimplementation ofthisprovision oftheATC hadbeenmade
bytheMembers concerned using different methodologies andnoMember usedtheoption of
equivalent changes withrespect toadifferent mixofbaselevels, growth andflexibility provisions.
Itwasobserved thatArticle 2.18doesnotprovide precise guidance astohowtoimplement theG/L/179
Page56
advancement byonestage ofthegrowth ratessetoutinArticles 2.13and2.14, orhowtoapply
"atleastequivalent changes asmaybemutually agreed withrespect toadifferent mixofbase
levels, growth andflexibility provisions". However, itwasnoted thattheresult interms of
market access inthefirststage would havebeenimproved ifthemethodology chosen forthe
advancement byonestage ofthegrowth ratesincluded thegrowth factor ofthefirststage, as
donebyoneMember.
211. Intheircontribution totherequest forinformation made bytheTMB, twoMembers
provided comments relevant totheimplementation ofArticle 2.18. OneMember stated thatthe
methodology usedforcalculating theadvancement byonestage ofgrowth forsmall suppliers
needed tobeclarified. Another Member expressed theviewthattheATC hadnotbeen
implemented inafashion which provided anypreferential treatment tosmall suppliers. Even
where quotas notified totheTMB on1January 1995 were verysmall, theimporting countries had
notmade anyspecial dispensation forsuchsuppliers either atthetimeofthecommencement of
theATC implementation orthrough thesubsequent integration schedules notified totheTMB.
ThisMember stated thatthedefinition ofsmall suppliers should cover countries which have
marginal access tothemarkets oftheimporting countries inspecific categories.
212. When preparing thepresent report, theTMB hadanother discussion onwhether itcould
provide further clarification withrespect tothemethodology tobeusedincalculating the
advancement byonestage ofgrowth forsmall suppliers. Thisdiscussion confirmed theviewthat
Article 2.18doesnotprovide precise guidance inthisregard. Attention wasdrawn, however,
onceagain tothefactthatthemethodology chosen bytheEuropean Community forthe
implementation ofthisprovision ismore beneficial interms ofproviding meaningful improvement
inaccess tothemarket fortheirexports. TheTMB expects thattheMembers which notified
restrictions pursuant toArticle 2.1,willinduecourse, butinanycaseprior tothe
implementation, notify totheTMB astohowtheyintend toimplement theprovisions of
Article 2.18during thesecond stage ofintegration.
213. Astothereference toMembers having amarginal access tothemarkets oftheimporting
countries inspecific categories (seeparagraph 211above), theTMB observed thattheparticular
provisions ofArticle 2.18provided adefinition related totheshare ofrestrictions taken globally
andnotspecific toindividual product categories. However, Members having onlymarginal
access inanumber ofspecific categories would presumably qualify forbenefitting from the
provisions ofArticle 2.18. TheTMB reiterated theimportance ofafaithful andcredible
implementation oftheprovisions oftheATC related tosmall suppliers andnewentrants,
including those inscribed inArticle 2.18.
E. ADMINISTRATIVE ARRANGEMENTS (ARTICLE 2.17)
214. TheATC provides thatadministrative arrangements, asdeemed necessary inrelation to
theimplementation ofanyprovision ofArticle 2,shallbeamatter foragreement between the
Members concerned. Accordingly, sucharrangements were concluded byCanada, with
24Members (Bangladesh, Brazil, Costa Rica, Cuba, Hong Kong, Hungary, India, Indonesia,
Korea, Lesotho, Macau, Malaysia, Mauritius, Pakistan, Philippines, Poland, Romania, Singapore,
Slovak Republic, SriLanka, Swaziland, Thailand, Turkey andUruguay). Initsexamination, the
TMB noted thatthese arrangements hadbeenbilaterally agreed andcontained provisions which
implemented administrative aspects oftheexport control systems (export licenses, monitoring of
exports, quota flexibility provisions, exchange ofstatistics, re-exports byCanada and
consultations).G/L/179
Page57
215. TheTMB alsoexamined theadministrative arrangements concluded between the
European Community and13Members (Argentina, Hong Kong, India, Indonesia, Korea, Macau,
Malaysia, Pakistan, Peru, thePhilippines, Singapore, SriLanka andThailand). TheTMB
observed that,inthecaseofIndia, Indonesia, Korea, Macau, Malaysia, Pakistan, Peru, the
Philippines, Singapore, SriLanka andThailand, theadministrative arrangements reproduced
certain provisions ofprevious bilateral textile agreements. InthecaseofArgentina, provisions of
theprevious agreement were notified, which, asagreed between thetwoMembers, would be
notified asadministrative arrangements under Article 2.17. TheEuropean Community and
Hong Kong hadnegotiated aself-contained administrative arrangement.
216. Theadministrative arrangements notified bytheEuropean Community, though differing in
some aspects, alladdressed theissues ofproduct classification, determination oforigin, treatment
ofre-imports afterprocessing andimports forre-export afterthesame, exchange ofstatistical
information, cooperation inpreventing circumvention, "regional concentration", consultation
procedures, double-checking systems forproducts subject torestraints andadministrative
cooperation and,inthemajority ofcases, exemption ofhand-made cottage industry products and
traditional folklore handicraft products from quantitative restrictions under certain criteria.
217. TheTMB recalled that,pursuant toArticle 2.17, Members could agree onadministrative
arrangements asdeemed necessary inrelation totheimplementation oftheprovisions ofthis
Article. Itrecognized thatanumber ofprovisions intheadministrative arrangements notified,
designed toensure theproper administration oftherestrictions notified under Article 2.1,fell
within theparameters defined inArticle 2.17. Itobserved, however, thatnotalltheprovisions in
these arrangements were fullyrelated totheimplementation oftheprovisions ofATC Article 2,
butcould havebeenaddressed insome ofitsother Articles. Itnoted thattheEuropean
Community andtheMembers concerned haddeemed itnecessary toinclude intheadministrative
arrangements provisions oftheprevious bilateral agreements which could haveapotential effect
ontheimplementation andadministration ofquantitative restrictions notified bytheEuropean
Community pursuant toArticle 2.1. Inaddition, theattention oftheTMB wasdrawn tothe
provisions oftheEC'simplementing legislation onthecommon import regime fortextile and
clothing products, which clarified thattheimplementation ofprovisions suchastheonesincluded
intheadministrative arrangements wasnotintended toconstitute aderogation from theprovisions
oftheATC. Inlightoftheabove, theTMB expected thatthese administrative arrangements
would beimplemented bytherespective Members inconformity withtherelevant provisions of
theATC.
218. TheUnited States notified administrative arrangements bilaterally agreed between the
United States andBangladesh, Brazil, Colombia, Costa Rica, theDominican Republic, Egypt,
Fiji,Guatemala, Haiti, Hungary, India, Indonesia, Jamaica, Kenya, Korea, Macau, Malaysia,
Mauritius, Pakistan, thePhilippines, Poland, Qatar, Romania, SriLanka, Thailand, Turkey,
theUnited Arab Emirates andUruguay, respectively. These arrangements were intheform of
provisions which hadbeendrawn from previous bilateral agreements concluded between the
United States andtheMembers concerned; these provisions hadbeenagreed asbeing necessary
fortheproper implementation ofrestrictions notified totheTMB bytheUnited States under
Article 2.1oftheATC. TheTMB observed thatthisapproach resulted insome respects intexts
which were noteasily understood, andalsoinsome instances gavetheimpression thatsome ofthe
provisions oftheadministrative arrangements were notfullyconsistent withothers. Thewritten
replies oftheUnited States totheTMB'srequests forclarification provided some guidance inthis
regard.
219. While thestructure andlanguage ofthese administrative arrangements differed from one
another, theyalladdressed issues suchas:product coverage andrelated issues ofclassification;G/L/179
Page58
flexibility adjustments; overshipment charges; spacing provisions; exchange ofdataand
information; USassistance inimplementing thelimitation provisions;consultation on
implementation questions; "mutually satisfactory administrative arrangements"; andcooperation
intheprevention ofcircumvention. Themajority alsocontained provisions related toacorrect
category/quantity visasystem andtocommercial samples andpersonal shipments. Some also
contained provisions concerning thetreatment ofimports ofhandloom products.
220. Inreviewing these arrangements pursuant toArticle 2.21, theTMB observed thatin
several instances theconsistency ofsome provisions oftheadministrative arrangements withthe
ATC could bequestioned, suchas,forexample, thepossibility fortheparties tothe
United States/Guatemala arrangements "toagree toputupnewcategories under quota"; orthe
possibility fortheDominican Republic, Guatemala andHaiti toapply fornewguaranteed access
levels; oraprovision inthecontext offlexibility adjustments ofsome arrangements which enabled
theUnited States to"supply adjustments ...toanyspecific limitwhenever thatadjustment appears
appropriate tofacilitate theflowoftrade andthesound administration" oftheadministrative
arrangement. Inreply toclarifications sought bytheTMB, theUnited States stated thatwhen
provisions oftheadministrative arrangements were inconsistent withtheATC, theprovisions of
theATC would apply.
221. TheTMB noted thatanumber oftheprovisions oftheadministrative arrangements were
related totheimplementation oftherestrictions notified pursuant toArticle 2.1and,thus, were
qualified forinclusion intothearrangements agreed upon under Article 2.17. TheTMB
observed, however, thatsome oftheprovisions could havebeenaddressed insome Articles other
thanArticle 2oftheATC. Thisapplied inparticular totheprovisions related tocooperation in
theprevention ofcircumvention. TheTMB noted, interalia,thatArticle 5.4oftheATC seemed
toprovide some flexibility interms ofremedies oragreed actions thatcould beforeseen incases
when circumvention hadoccurred, butobserved, however, thatArticle 5contained noreference to
thepossibility fortheimporting Member toimpose triple charges onquotas, asadeterrent to
circumvention. TheTMB noted inthisregard thatthisprovision hadnotbeenutilized bythe
United States. TheTMB recalled thattheUnited States hadstated thatwhen provisions ofthe
administrative arrangements were inconsistent withtheATC theprovisions oftheATC would
apply. TheTMB understood thatthisstatement applied toeachandevery provision ofthe
arrangements notified, andexpected, therefore, thatalltheprovisions ofthese administrative
arrangements would beimplemented bytherespective Members inconformity withtherelevant
provisions oftheATC. TheTMB’staking noteoftheadministrative arrangements notified bythe
United States waswithout prejudice totherights andobligations ofWTO Members arising from
theATC (G/TMB/R/31).
222. Nonotification pursuant toArticle 2.17wasreceived from Norway. TheTMB understood
inthisrespect thatsofaradministrative arrangements forthepurpose ofimplementing the
provisions ofArticle 2hadnotbeendeemed necessary.
F. SAFEGUARD ACTIONS UNDER ARTICLE XIXOFGATT 1994 INTERMS OF
ARTICLES 2.19AND 2.20OFTHE ATC
223. Articles 2.19and2.20refertosafeguard actions taken under GATT Article XIXduring
thelifeoftheATC butwithin oneyearoftheintegration ofthatproduct pursuant toATC
Article 2.Itsetsoutprovisions relating totheappropriate levels forsuchrestrictions. Inthe
period under review these provisions havenotbeeninvoked. With theexception oftheinitiation
byArgentina ofaninvestigation withaviewtoimposing provisional safeguard measures under
Article 12oftheAgreement onSafeguards onimports offootwear products, some ofwhich fall
within thecoverage oftheATC, there havebeennosafeguard actions initiated under GATTG/L/179
Page59
Article XIXonproducts covered bytheATC. TheTMB notes however that,inrespect ofthe
action byArgentina, those products subject totheinvestigation which fallwithin thecoverage of
theATC havenotbeenintegrated intotheGATT 1994 byArgentina.
G. REVIEW OFIMPLEMENTATION OFARTICLE 2(ARTICLE 2.21)
224. Article 2.21requires theTMB tokeeptheimplementation ofArticle 2under review. In
thisregard, theTMB reviewed notifications made pursuant toArticles 2.1,2.2,2.6and2.7(a)
and(b),2.8(a) and2.11, 2.15, 2.17and2.18. Further, Article 2.21obligates theTMB toreview
anymatter relevant toArticle 2attherequest ofaMember. Inthisregard, theTMB reviewed a
communication made byColombia, alsoonbehalf ofseveral other WTO Members thatare
members oftheInternational Textiles andClothing Bureau (ITCB), concerning theconversion of
import dataintoacommon volume unit,using appropriate conversion factors, andpossible
inconsistencies withrespect totheallocation ofproducts intothefourgroupings: topsandyarns,
fabrics, made-up textile products andclothing. TheTMB wasasked toconsider thismatter and
provide suitable guidance toMembers. TheTMB alsoreviewed another notification made by
Colombia, alsoonbehalf ofanumber ofother WTO Members thataremembers oftheITCB,
alleging certain discrepancies intheprogramme ofintegration notified bythe
European Community under ATC Article 2.6(G/TMB/N/1), andrequesting theTMB toreview
thismatter interms ofArticle 2.21.
225. TheTMB received, on7July1997, acommunication from theEuropean Community,
referring totheexamination andrecommendation bytheTMB oftheabove-mentioned
communication byColombia, andrequesting theTMB toreview pursuant toArticle 2.21the
matter ofwhether certain Members, which hadincluded intheirintegration programmes products
covered bytheHSlinesdefined byreference to"ex-positions" inHSChapters 30to49and64to
96intheAnnex totheATC, hadcounted insuchprogrammes thevolume ofimports ofthe
precise products described intheAnnex, orthevolume ofimports ofthewhole relevant six-
digitHSlines.
226. Asthese questions related tovarious aspects oftheproduct integration process, theyare
addressed inChapter IIofthisreport.
V. RESTRICTIONS OTHER THAN THOSE REFERRED TOINCHAPTER IV
A. RESTRICTIONS NOTIFIED PURSUANT TOARTICLE 3.1AND THEIR REVIEW
227. Article 3.1provides forthenotification, within 60daysfollowing thedateofentry into
force oftheWTO Agreement, ofallrestrictions ontextile andclothing products, other thanthose
maintained under theMFA andcovered byArticle 2oftheATC (seeChapter IV),whether
consistent withGATT 1994 ornot.Thenotifications were toindicate, where applicable, the
GATT 1994 justification fortherestrictions.
228. Twenty-nine Members submitted notifications under Article 3.1(Bangladesh, Canada,
Chile, Cyprus, Egypt, theEuropean Community, Hungary, India, Indonesia, Japan, Kenya,
Korea, Macau, Malaysia, Malta, Mauritius, Mexico, Morocco, NewZealand, Pakistan, Peru,
Philippines, Saint KittsandNevis, Singapore, Slovenia, SriLanka, Thailand, theUnited States
andVenezuela). Ofthese, tenMembers (though notrequired under theprovisions ofArticle 3)
reported thattheymaintained norestrictions ofthetypereferred tointhisArticle (Chile,
Indonesia, Kenya, Macau, Mauritius, NewZealand, Philippines, Saint KittsandNevis, Singapore
andSriLanka). TheTMB tooknoteofthese tennotifications.G/L/179
Page60
229. Nineteen Members (Bangladesh, Canada, Cyprus, Egypt, theEuropean Community,
Hungary, India, Japan, Korea, Malaysia, Malta, Mexico, Morocco, Pakistan, Peru, Slovenia,
Thailand, theUnited States andVenezuela) notified quantitative restrictions, usually onspecific
textile andclothing products, although some measures were broad intheircoverage. Inmost of
these cases, theTMB sought further information orclarification, inorder toensure abetter
understanding ofthemeasures inquestion forWTO Members.
230. Inthree notifications under Article 3.1,theprovisions ofGATT Article XVIII:B were
citedwiththemeasures being partoftheoverall reviews ofsuchrestrictions bytheCommittee on
Balance-of-Payments Restrictions (Bangladesh, India andPakistan). Thelistofrestricted products
submitted byBangladesh (G/TMB/N/80) comprised awidevariety ofwoollen andknitted fabrics
ofcotton andsynthetic fibres plussecond-hand clothing. Thenotification ofPakistan
(G/TMB/N/81) extended towoven fabrics ofcotton andsynthetic fibres, carpets, knitted fabrics,
made-up textile articles andclothing. India, inresponse toarequest forclarification, informed
theTMB (G/TMB/N/72) thatallproducts intheAnnex totheATC hadbeencovered by
quantitative restrictions interms ofGATT Article XVIII:B asof1January 1995; however,
imports ofseveral textile andclothing items hadbeenliberalized inFebruary 1995 withanumber
offibres, yarns andindustrial fabrics permitted tobeimported freely byallpersons without an
import licence andanumber offabrics, made-ups andgarments permitted tobeimported against
special import licences. Inaddition, twonotifications (Egypt, Korea) referred alsotomeasures
which hadbeenmaintained withreference toArticle XVIII:B andwhich would continue toremain
inplace foracertain period oftimeaftertheformal disinvocation ofthesaidprovisions. Korea
provided information (G/TMB/N/68) onitsrestriction onimports ofsilkyarnandcertain silk
fabrics under Article XVIII:B. TheTMB noted thatthese measures were covered byKorea 's
programme ofliberalization ofbalance-of-payments measures notified totheGATT Council
in1994 andwere scheduled toberemoved orbrought intoconformity withGATT on
1July1997. Alsoinresponse toarequest formore information ontherestrictions inplace,
Egypt reported (G/TMB/N/91) thatitwasmaintaining aconditional prohibition onimports of
textiles until1January 1998 andonclothing until1January 2003, aspartofitsprogramme for
thedisinvocation ofArticle XVIII:B undertaken in1995 whereon theCommittee on
Balance-of-Payment Restrictions stated that"theCommittee understood thatEgypt hasthus
disinvoked Article XVIII:B witheffect from 30June1995, andthat,onthebasis ofthe
implementation ofthecommitments byEgypt inSchedule LXIII, Members would exercise due
restraint intheapplication oftheirrights under theMultilateral Agreements onTrade inGoods in
relation tofabrics, apparel andmade-up items remaining subject toconditional prohibition". The
TMB tooknoteofthese notifications.
231. TheTMB noted thatMalaysia maintained anon-automatic licensing measure onbatik
sarongs which, according tothenotification (G/TMB/N/93), wasjustified under GATT
Article XVIII:C andhadbeennotified toGATT 1947 inJuly1984.
232. Four Members reported restrictions ontheimportation ofusedorworn clothing, three
citing theprovisions ofGATT Article XX(b) (Morocco, Peru, Venezuela (G/TMB/N/188, 83,
85)). TheTMB tooknoteofthese notifications. According toitsnotification (G/TMB/N/70),
Mexico maintained abanonimports ofusedclothing, which found its"basis andjustification in
theProtocol ofAccession ofMexico toGATT 1947, which forms anintegral partofGATT 1994
inaccordance withAnnex 1A,paragraph 1(b)(ii) oftheFinal ActoftheUruguay Round". The
TMB sought additional information from Mexico withrespect totheparticular provision ofthe
Protocol ofAccession under which thisimport prohibition fell. Intheabsence ofadditional
information from Mexico despite further reminders, theTMB decided toconclude the
consideration ofthisnotification, noting thatMexico hadnotprovided theadditional information
which hadbeenrequested bytheTMB. Malta (G/TMB/N/67) reported quantitative restrictions onG/L/179
Page61
theimportation ofhand-made lace,which, according tothenotification, hadbeenjustified under
theterms ofGATT Article XX(f).
233. Thailand (G/TMB/N/71) notified thatitmaintained non-automatic import licensing under
GATT Article XVIII:C onsilkyarnandjutebags, applicable toallsources. TheTMB sought
more detailed information from Thailand onthisnon-automatic import licensing system, including
whether ithadbeennotified totheGATT ortotheWTO. Intheabsence ofadditional
information despite further reminders, theTMB decided toconclude theconsideration ofthis
notification, noting thatThailand hadnotprovided theadditional information.
234. TheEuropean Community provided twonotifications (G/TMB/N/64 and65),oneforits
quantitative limits withBulgaria, theCzech Republic, Hungary, Poland, Romania andSlovakia,
which were covered byAdditional Protocols totheEurope Agreements notified tothe
GATT/WTO under Article XXIV. These Additional Protocols provided fortheelimination ofthe
restrictions by1January 1998. Theother notification referred toconsultation levels maintained
withEgypt, Malta, Morocco, Tunisia andTurkey inthecontext ofpreferential trade agreements
notified under GATT Article XXIV. Theconsultation levels withEgypt, Morocco andTunisia
would beeliminated through theexpected completion offree-trade areas withthese countries
while inthecaseofMalta andTurkey theconsultation levels would beeliminated inthecontext
oftheexpected customs unions withthese countries (seealsoparagraph 243below).
235. Canada andtheUnited States provided notifications under Article 3.1tosetoutthe
quantitative restrictions inplace withexporters which were not,atthattime, WTO Members. In
thecaseofCanada (G/TMB/N/62), acombined notification under Articles 2.1and3.1was
provided inorder topresent atotalpicture ofallquantitative restrictions withWTO Members,
plusGATT 1947 contracting parties thatwere notyetWTO Members andtrading partners that
were neither GATT 1947 participants norWTO Members (Bulgaria, Cambodia, China, Cuba,
North Korea, Laos, Lebanon, Lesotho, Nepal, Oman, Poland, Qatar, Russia, Syria, Taiwan,
United Arab Emirates andVietnam). TheUnited States notified quantitative restrictions
(G/TMB/N/66) inplace withGATT contracting parties which hadnotyetbecome WTO Members
andwithcountries which were neither GATT contracting parties norWTO Members (Haiti, Laos,
Former Yugoslav Republic ofMacedonia, Qatar andUkraine). TheUnited States subsequently
reported amendments tothisnotification, allofwhich were noted bytheTMB. IntheTMB's
review ofthese notifications, measures applicable tocountries which hadsince become Members
oftheWTO andwould fallunder thecoverage ofArticle 2.1were examined under theprovisions
ofthatArticle.
236. Other notifications ofquantitative restrictions, submitted byHungary, Japan andSlovenia,
provided phase-out programmes pursuant toArticle 3.2(b) (seeparagraphs 239to241), while the
notification byCyprus wasultimately considered tobemore appropriate toArticle 3.2(a)
(seeparagraph 238).
B. IMPLEMENTATION OFTHE PROVISIONS OFARTICLE 3.2
237. Article 3.2provides fortherestrictions notified inArticle 3.1,except those justified under
aGATT 1994 provision, tobeeither: (a)brought intoconformity withGATT 1994 within
oneyearfollowing theentry intoforce oftheWTO Agreement; or(b)phased outprogressively
according toaprogramme tobepresented totheTMB notlaterthansixmonths afterthedateof
entry intoforce oftheWTO Agreement.G/L/179
Page62
1. Measures Brought intoConformity withGATT 1994 (Article 3.2(a))
238. Cyprus notified restrictions (G/TMB/N/69) onimports ofseveral textile andclothing
products, including aprohibition onimports offishing netsandnetsforcatching birds, which,
according tothenotification, wasapplied under GATT Article XX(b) inorder toprotect the
environment. Subsequently, therestrictions were eliminated witheffect asfrom 1January 1996,
withtheexception thatimports offishing netsremained subject toimport licensing. TheTMB
tooknoteofthisnotification. Thislicensing requirement wasnotified totheCommittee onImport
Licensing (G/LIC/N/3/CYP/1/Rev.1).
2. Programmes forthePhasing-out ofRestrictions (Article 3.2(b))
239. Three Members notified phase-out programmes pursuant toArticle 3.2.(b): Hungary,
Japan andSlovenia (G/TMB/N/147, 175and186). TheTMB tooknoteofthese programmes. In
thecaseofHungary, afour-step programme wasreported which would remove therestrictions on
fivecategories oftextile andclothing products maintained under aconsumer goods global quota.
On1January 1995, 20percentofthetotalvolume of1992 imports oftextile andclothing
products subject tothese quotas wasliberalized, tobefollowed byafurther 25percentofthe
remaining volume on1January 1998, thenafurther 50percentoftheremaining volume on
1January 2002; theremaining restrictions would beliberalized on1January 2005. TheTMB
observed thatinviewofthegeneral nature ofthisprogramme, itexpected thatthedetails ofits
implementation intherespective stages would benotified totheTMB, prior totheir
implementation, foritsconsideration.
240. InthecaseofJapan, itwasreported thattheremoval ofthemeasures relating tothe
importation ofsilkyarns andfabrics from Korea would beachieved within theparameters of
Article 3.2(b), however, thespecific programme wastobelinked totheimport system forraw
silkwhich would notbefinalized untilthelastyearoftheimplementation oftheAgreement on
Agriculture. Hence, thefinalterms ofthephase-out forfabrics andyarns could onlybeprovided
atthattime. TheTMB expressed theexpectation thattheimplementation oftheprogramme, in
conformity withArticle 3.2(b), would besuchastoprovide appropriate progressive increases to
thelevelofrestrictions onimports ofsilkyarnandsilkfabric from Korea.
241. Slovenia notified athree-phase programme toremove quantitative restrictions onan
extensive listoftextile andclothing products, identifying thespecific products forliberalization on
1January 1997, 1January 2001 and1January 2005. Inaddition, thequota levels for1996 had
beenincreased by7percent. Slovenia subsequently confirmed thatfor95products outofthe
totalof140products therestrictions hadbeenabolished on1January 1997 (G/TMB/N/243).
C. INFORMATION WITH RESPECT TONEW RESTRICTIONS ORCHANGES IN
EXISTING RESTRICTIONS (ARTICLE 3.3)
242. Article 3.3requires thatMembers provide totheTMB, foritsinformation, notifications
submitted toanyother WTO bodies withrespect toanynewrestrictions orchanges inexisting
restrictions ontextile andclothing products, taken under anyGATT 1994 provision, within
60daysoftheircoming intoeffect.
243. TheTMB received three notifications made pursuant tothisparagraph bythe
European Community (G/TMB/N/150-152). Twonotifications contained agreed changes
increasing thequantitative limits maintained vis-à-vis theCzech Republic, Hungary, Poland,
Romania andtheSlovak Republic, andincreasing theconsultation levels withEgypt, Malta,
Morocco andTunisia (seeparagraph 234). Thethirdnotification stated that,asaresult oftheG/L/179
Page63
completion ofthecustoms union between theEuropean Community andTurkey, theconsultation
levels notified bytheECunder Article 3.1vis-à-vis Turkey (G/TMB/N/65) hadbeeneliminated
asof1January 1996. TheTMB tooknoteofthisinformation.
D. REVERSE NOTIFICATIONS AND RESTRICTIONS NOT NOTIFIED (ARTICLE 3.4)
244. Article 3.4allows anyMember tomake reverse notifications totheTMB forinformation
purposes, inregard totheGATT 1994 justification formeasures maintained, orinregard toany
restrictions thatmaynothavebeennotified under theprovisions ofthisArticle. Actions with
respect tosuchnotifications maybepursued under relevant GATT 1994 provisions orprocedures
intheappropriate WTO body. Nonotification wasmade explicitly under thisprovision.
E. OBSERVATIONS WITH RESPECT TOTHE APPLICATION OFARTICLE 3
245. TheTMB recalled inparticular theprovision inArticle 3.3calling onMembers toprovide
totheTMB "notifications submitted toanyother WTO bodies withrespect toanynewrestrictions
orchanges inexisting restrictions ontextile andclothing products, taken under anyGATT 1994
provisions ...". Inthisregard, theTMB wasaware thatsome measures hadbeentaken resulting
intheintroduction ofquantitative restrictions orchanges inexisting quantitative restrictions on
textiles andclothing trade. Citing Article 2oftheATC, Hong Kong hadformally requested
consultations withTurkey inFebruary 1996 under GATT Article XXII:1 andpursuant toDSU
Article 4,regarding theunilateral imposition ofquantitative restrictions byTurkey onimports ofa
broad range oftextile andclothing products from Hong Kong, effective 1January 1996
(WT/DS29/1). Hong Kong considered these restrictions tobeinconsistent withcertain
GATT Articles andwithobligations under Article 2oftheATC. Turkey hadaccepted toenter
intobilateral consultations withHong Kong inorder todiscuss thismatter, which, intheviewof
Turkey, wascovered byArticle XXIV:8(a) oftheGATT 1994. Turkey further stated thatthe
measures inquestion hadbeenadopted inorder tofulfil theobligations pursuant totherelevant
decision oftheEC-Turkey Association Council under which Turkey wasexpected totranspose the
EC'simport regulation intoitsdomestic legislation. Subsequently, requests tojoininthese
consultations pursuant toDSU Article 4.11were made byBrazil, Canada, theEuropean
Community, India, Korea, Malaysia, Peru, Philippines andThailand (WT/DS29/- series). In
March 1996, India, andinJune1996, Thailand formally requested consultations withTurkey
under GATT Article XXIII.I andArticle 4oftheDSU, alsociting Article 2oftheATC
(WT/DS34/1 andWT/DS47/1). Hong Kong andIndia hadprovided copies oftheirrequests for
consultation withTurkey totheTMB. TheTMB observed thatthenotification ofthese measures,
which itunderstood hadbeensubmitted totherelevant WTO body, hadnotbeenprovided bythe
Member adopting them totheTMB foritsinformation, inaccordance withArticle 3.3.
246. Some measures hadbeenreported totheCommittee onBalance-of-Payments Restrictions,
which would appear torepresent changes inexisting restrictions affecting textiles andclothing
trade. Nigeria reported theremoval oftextile fabrics andarticles from itsImport Prohibition List
(WT/BOP/6/Rev.1/Add.2); Pakistan referred totheelimination ofcertain products from its
Negative Listwiththeimports ofmost textile items being allowed asfrom 1994-1995
(WT/BOP/15, paragraph 61); Tunisia reported thatthelistofproducts subject toimport
restriction (ListB)hadbeenshortened inNovember 1995 byeliminating made-up textile products
(WT/BOP/15); India advised ofaliberalization ofitsimport regime withrestrictions being lifted
onanumber ofproducts including some clothing (WT/BOP/16, paragraph 26). Inaddition, India
notified totheCommittee (WT/BOP/N/24) aliberalization ofquantitative restrictions maintained
onimports since December 1995.G/L/179
Page64
247. TheTMB observed thatnoneofthenotifications ofthemeasures mentioned in
paragraph 246above hadbeenprovided totheTMB, foritsinformation, bytheMembers
concerned. Itisimportant thattheTMB beinformed alsoabout thechanges inexisting
restrictions ontextile andclothing products taken under anyGATT 1994 provision, inaccordance
withArticle 3.3.
VI. ADMINISTRATION OFRESTRICTIONS; CHANGES INPRACTICES, RULES,
PROCEDURES AND CATEGORIZATION OFPRODUCTS
A. ADMINISTRATION OFRESTRICTIONS
248. Article 4.1oftheATC states that"restrictions referred toinArticle 2andthose applied
under Article 6,shallbeadministered bytheexporting Members. Importing Members shallnot
beobliged toaccept shipments inexcess oftherestrictions notified under Article 2,orof
restrictions applied pursuant toArticle 6".
249. Theadministrative arrangements notified totheTMB byCanada, theEuropean
Community andtheUnited States entrust theexporting countries withtheadministration of
restrictions (seeparagraphs 214to221). Asnoted bytheTMB during itsreview, some ofthe
arrangements concluded byoneimporting Member provided thatMember withthepossibility of
making adjustments tothelevels ofexisting restrictions. TheTMB expects inthisrespect thatall
theprovisions ofthese administrative arrangements would beimplemented bytherespective
Members inconformity withtherelevant provisions oftheATC, including Article 4.1. Apart
from thenotifications oftheadministrative arrangements, theTMB hasnotreceived anyspecific
notification related totheimplementation oftheprovisions ofArticle 4.1.
B. CHANGES INPRACTICES, RULES, PROCEDURES AND CATEGORIZATION OF
PRODUCTS
250. According toArticle 4.2,"...theintroduction ofchanges, suchaschanges inpractices,
rules, procedures andcategorization oftextile andclothing products, including those changes
related totheHarmonized System, intheimplementation oradministration ofthose restrictions
notified orapplied under thisAgreement should not:upset thebalance ofrights andobligations
between theMembers concerned under thisAgreement; adversely affect theaccess available toa
Member; impede thefullutilization ofsuchaccess; ordisrupt trade under thisAgreement".
251. Theadministrative arrangements agreed between theEuropean Community andthe
respective exporting Members include certain provisions related tosubject matters covered by
Article 4.2. These provisions confirm thatanyamendment totherules oforigin, tothetariff and
statistical nomenclatures inforce intheEuropean Community oranydecision which results ina
modification ofclassification ofproducts shallnothavetheeffect ofreducing anyquantitative
limit(maintained under theATC). Theadministrative arrangements concluded byCanada andthe
United States donotcontain similar provisions.
252. Article 4.4provides thatwhere changes mentioned inArticle 4.2arenecessary, the
Members initiating suchchanges inform and,wherever possible, initiate consultations withthe
affected Member orMembers withaviewtoreaching amutually acceptable solution regarding
appropriate andequitable adjustments. Consultations, wherever possible, shallbeheldprior tothe
implementation ofthechanges. Ifthisisnotfeasible, consultations attherequest ofthe
Member(s) concerned havetobeheld, ifpossible, within aperiod of60days. Ifamutually
satisfactory solution isnotreached, anyoftheMembers involved mayreferthematter tothe
TMB forrecommendations asprovided forinArticle 8oftheATC.G/L/179
Page65
253. Theadministrative arrangements concluded bytheEuropean Community foresee
consultations withtheexporting Members withaviewtohonouring these obligations (see
paragraph 251above). Theadministrative arrangements concluded byCanada andtheUnited
States donotcontain specific provisions forsimilar types ofcases.
254. TheTMB received onecommunication which referred totheprovisions ofArticle 4.In
July1966, thePhilippines submitted acommunication pursuant toArticles 8.5and4.2regarding
changes intheUSrules oforigin, which, itwasargued, adversely affected imports intothe
United States ofcertain textile products from thePhilippines andupset thebalance ofrights and
obligations between thetwoparties under theATC. Atitsmeeting inJuly1996, theTMB was
informed bythePhilippines andtheUnited States thattheyhaddecided tocontinue consultations
onthematter, andtherefore, requested theTMB todefer itsconsideration ofthiscommunication.
Attherequest ofthePhilippines, thisissue waskeptontheagenda ofsubsequent TMB meetings,
butitsconsideration wasrepeatedly deferred, asbothMembers indicated thattheypreferred to
waitfortheoutcome oftheirbilateral consultations. Atitstwenty-seventh meeting (in
March 1997), theTMB tooknoteofafurther communication from thePhilippines whereby it
requested thatthematter ithadraised regarding changes intheUSrules oforigin beremoved
from theTMB'sagenda, inviewofamutually agreed solution between thePhilippines andthe
United States. ThePhilippines stated thatthiswaswithout prejudice toitsrights under theATC,
inparticular under theprovisions ofArticle 8.Since thentheTMB hasnotreceived anyfurther
communication from theparties.
255. TheTMB wasinformed thaton22May1997, theEuropean Community hadrequested
consultations withtheUnited States pursuant toArticle 4oftheUnderstanding ofRules and
Procedures Governing theSettlement ofDisputes, Article 8.4oftheAgreement onTextiles and
Clothing, Article 7oftheAgreement onRules ofOrigin, Article 14oftheAgreement on
Technical Barriers toTrade andArticle XXII oftheGATT 1994 regarding thechange toUSrules
oforigin fortextile andclothing products. Inthissubmission, theEuropean Community referred
tothefactthattheUnited States hadintroduced changes toitsrules oforigin fortextile and
clothing products, which entered intoforce on1July1996. Some ofthese rules, inparticular
therules contained inSection 334oftheUruguay Round Agreements Actandimplemented
through customs regulation, adversely affect exports ofEC'sfabrics, scarves andother flattextile
products totheUnited States. Asaresult ofthischange, theEuropean Community products are
nolonger recognized intheUnited States asbeing ofECorigin andlosethefreeaccess totheUS
market thattheyenjoyed before.
256. Therequest forconsultations states, interalia,thefollowing: "The European Community
considers thatthese changes arenotinconformity withtheobligations oftheUnited States under
theWTO Agreement onTextiles andClothing. Article 2.4oftheAgreement onTextiles and
Clothing requires thatnonewrestriction interms ofproducts orMembers shallbeintroduced.
Article 4.2ofthesame Agreement prescribes thattheintroduction ofchanges inthe
implementation oradministration ofrestrictions notified totheWTO shallnot:upset thebalance
ofrights andobligations between theMembers; adversely affect theaccess available toaMember;
impede thefullutilisation ofsuchaccess; ordisrupt trade under theAgreement. TheEuropean
Community isoftheviewthatthechange inUSrules oforigin causes precisely those effects and
thattheUnited States should haveinitiated consultations withtheEuropean Community prior to
theimplementation ofsuchchanges, inaccordance withArticle 4.4oftheAgreement".
257. Incommunications, dated June1997, addressed totheDispute Settlement Body andthe
twoMembers concerned, theDominican Republic, Honduras, Hong Kong, India, Japan, Pakistan
andSwitzerland notified thattheyconsidered themselves tohaveasubstantial trade interest intheG/L/179
Page66
consultations requested bytheEuropean Community andtherefore wished tojoininthese
consultations.
258. Theissues subject tothecomplaint oftheEuropean Community havenotbeenreferred to
theTMB. However, theEuropean Community hascommented onthisissue inacommunication to
theTMB inresponse totheTMB'srequest forinformation regarding theimplementation of
particular ATC provisions (thesubstance ofthiscommunication istobefound inparagraph 262
below).
259. Theissue ofcontemplated changes intheUSrules oforigin wasalsoraised inthe
Committee onRules ofOrigin, atitsmeeting of8March 1996. Therepresentatives ofCanada,
theEuropean Community andSwitzerland expressed concern withrespect tothese changes,
whereas therepresentative ofHong Kong stated, interalia,thatthechanges were expected to
haveasevere impact ontextiles andclothing trade withtheUnited States. Itwasalsoregretted
thatmajor changes were tobeintroduced atatimewhen work wasinprogress onthe
Harmonization Work Programme which wasintended tobring about auniform setofharmonized
rules forapplication toallnon-preferential trade purposes. Therepresentative oftheUnited States
tooknoteofthecomments made.
260. During adiscussion intheCouncil forTrade inGoods intheAutumn of1996 onthe
implementation oftheATC, concerns were expressed thattheUnited States hadimplemented
changes initsrules oforigin fortextile andclothing products asaninstrument oftrade policy.
This, itwasargued, wascontrary totheprovisions oftheAgreement onRules ofOrigin aswell
asArticle 4oftheATC, andhadintroduced great uncertainty andunpredictability withadverse
effects ontheexports ofalarge number ofMembers. Itwasalsoclaimed thatthese changes had
hadtheeffect ofrestricting theaccess ofcertain items forcertain Members where noMFA
restrictions existed before.
261. Inresponse, therepresentative oftheUnited States stated thatArticle 4oftheATC
involved changes suchasthose intherules andpractices concerning theimplementation and
administration ofrestrictions maintained under theATC. Onrules oforigin, Members requesting
consultations under Article 4were required toshow thatthere hadbeenachange inthe
implementation oftherestrictions andifthatwasthecase, thattheyhadbeenadversely affected
ortrade disrupted. Inanumber ofconsultations withvarious Members itcould beestablished
thattheimplementation ofrestrictions onsome ofthetrade hadinfactnotchanged. Inother
cases, where change could bedemonstrated, theUnited States wasworking towards amutually
satisfactory solution. Nocountry hadbrought totheTMB, asrequired bytheATC, any
difficulties thattheycould havehadwiththerevised USrules oforigin (seeG/L/134, paragraphs
16.22 and16.23).
262. Some ofthereplies received from Members withregard totheTMB'srequest for
information regarding theimplementation ofparticular ATC provisions alsoaddressed thechanges
intheUSrules oforigin. OneMember stated, interalia,thatArticle 4.2stipulated thatthe
introduction ofchanges, suchaschanges inrules including those relating totheHarmonized
System should notobstruct thebalance ofrights andobligations between theMembers or
adversely affect theaccess available toaMember under theATC. TheUnited States hadeffected
changes intherules oforigin fortextile products originating worldwide. Themost prominent
change wasinthemade-ups, where thenewrulestipulated thatthecountry oforigin wasthe
country where thefabric wasformed rather thanthecountry where theproduct wasmade. This
Member further stated thatthese changes would havefarreaching consequences forexport of
finished fabrics especially when these fabrics were converted intobedlinen/bed sheets inathird
country. These newrules hadshifted thebasis oforigin inrespect ofbedlinen tothecountry inG/L/179
Page67
which thefabric waswoven rather thanthecountry inwhich substantial transformation ofthe
fabric tookplace. Instances hadalready come tonotice where theMember 'ssuppliers offabrics
hadobtained quotas toclear heldupconsignments inthisimporting Member eventhough the
fabrics hadbeencleared dutypaidintothecountry ofimportation. Byamending therules of
origin atatimewhen theWTO wasengaged informulating acomprehensive setofguidelines on
thematter, theconcerned importing Member appeared tobepursuing itsownprotectionist
agenda. Itwas,therefore, considered thatthese measures were meant torestrict themarket access
oftheexporting countries intheimporting Member concerned, notwithstanding theglobal
commitment withworld trade liberalization. Intheviewofanother Member, thechanges inthe
rules oforigin notified andimplemented bytheUnited States in1996 hadtrade distortive
implications. Theexporting countries, contrary totheprovision ofArticle 4,hadbeenplaced ina
situation ofdisadvantage. Theoptions available totheexporting countries were either tolosethe
trade inaparticular category duetotheadministrative changes ortoseekcompensation through
bilateral consultations. Another Member stated that"given theeffect thatchanges inpractices,
procedures andcategorization canhaveontheimplementation oradministration ofrestrictions, the
ATC makes specific provision concerning theintroduction ofthose changes. Inparticular they
should notupset thebalance ofrights andobligations between Members, adversely affect access
available toMembers, impede thefullutilisation ofsuchaccess ordisrupt trade under theATC.
OneMember, nonetheless, [had] introduced farreaching changes initsrules oforigin which have
hadtheabove effects. Inparticular, products previously exported asof[thatMember 's]origin
now[fell] under theorigin ofthesupplier country ...ofthecloth from which suchproducts
[were] made, creating problems, inparticular, withlabelling andinrespect ofquotas where the
cloth inquestion [was] subject torestriction intheMember that[had] effected thechanges".
263. Inreply totheTMB'srequest forinformation andcomments, theUnited States stated that
itbelieved thatArticle 4.4oftheATC permitted rules oforigin changes. While theUnited States
generally didnotviewthatthere hadbeena"change" inthecontext ofclaims made byvarious
countries, Article 4oftheATC recognized thatcertain disruption mayresult from rules oforigin
changes, andlaidoutprocedures onhowtodealwithsuchdisruption. Forexample Article 4
stipulated thatifchanges were necessary, thecountry making thechange should inform and,
where possible, consult withthecountries concerned inadvance. Inthecaseofissues raised about
theUSrules oforigin, thealleged changes hadbeenpublished more thantwoyears before their
implementation. Therules hadbeensubject topublic comment prior totheirimplementation,
including from exporting countries thatbelieved thattheywere somehow affected. Consultations
hadbeenheldwithanumber ofcountries prior totheimplementation oftherules. These
consultations hadlargely resulted inmutually satisfactory conclusions. TheUnited States hadbeen
available toconsult withitstrading partners ontheirconcerns.
C. COMMENTS BYTHE TMB
264. Onthebasis oftheoverview included inparagraphs 254to262,itappears that,inthe
viewofanumber ofMembers, thechanges implemented intheUSrules oforigin canhave
substantial implications ontheimplementation ofcertain particular provisions oftheATC. The
TMB recalled inthisregard theprovisions ofArticle 4.2that"theintroduction ofchanges, such
aschanges inpractices, rules, procedures andcategorization oftextile andclothing products,
including those changes relating totheHarmonized System, intheimplementation or
administration ofthose restrictions notified orapplied under thisAgreement should not:upset the
balance ofrights andobligations between theMembers concerned under thisAgreement;
adversely affect theaccess available toaMember; impede thefullutilization ofsuchaccess; or
disrupt trade under thisAgreement". TheTMB alsorecalled theimportance offollowing the
procedures ofArticle 4.4,when suchchanges were necessary. TheTMB noted thattheUnited
States remained available toconsult withitstrading partners ontheirconcerns. TheTMB tookG/L/179
Page68
noteofthefactthattheEuropean Community, andtheMembers which hadrequested tojoinin
consultations, hadopted tohaverecourse, interalia,totherelevant provisions ofthe
Understanding onRules andProcedures Governing theSettlement ofDisputes andtoArticle XXII
ofGATT 1994.
D. INTEGRATION UNDER THE ATC OFPARTS OFARESTRICTION
265. Article 4.3provides that"ifaproduct which constitutes onlypartofarestriction is
notified forintegration pursuant totheprovisions ofArticle 2,Members agree thatanychange in
thelevelofthatrestriction shallnotupset thebalance ofrights andobligations between the
Members concerned under thisAgreement". When changes arenecessary inthisregard, the
provisions ofArticle 4.4apply (seeparagraph 252above). With respect tothefirststage of
integration Article 4.3hasnotbeenofapplication, asnopartofarestriction wasincluded inthe
respective integration programmes. These particular provisions oftheATC seem tobemore
relevant forstage 2,astheUnited States notified thatinsome cases, thecategories tobe
integrated were, prior tothisintegration, subject toaquantitative restriction, because, although
thecategory itself wasnotunder aspecific limit, itfellunder anaggregate orgroup limit(see
paragraph 44). TheTMB hasreceived noindication from theMembers concerned sofar
regarding theapplication ofArticle 4.3and,ifappropriate, Article 4.4withrespect tothese cases.
VII. IMPLEMENTATION OFTHE PROVISIONS ONCIRCUMVENTION
266. Article 5provides detailed rules andprocedures foraddressing problems arising from the
potential circumvention oftheATC bytranshipment, re-routing, falsedeclaration concerning
country orplace oforigin, fibrecontent, quantities, description orclassification ofmerchandise
andfalsification ofofficial documents. Inessence, these provisions arebased onacombination of
thefollowing elements:
(a) Establishing thenecessary legalprovisions and/or administrative procedures to
address andtakeaction against circumvention bytranshipment, re-routing, false
declaration concerning country orplace oforigin, fibrecontent, quantities,
description orclassification ofmerchandise andfalsification ofofficial documents;
(b) Agreeing totakenecessary action, consistent withtheirdomestic lawsand
procedures, toprevent, toinvestigate, and,where appropriate, totakelegaland/or
administrative action against circumvention practices within theirterritory;
(c) Committing tocooperate fully, consistent withtheirdomestic lawsandprocedures,
toestablish therelevant factsininstances ofcircumvention oralleged
circumvention;
(d) Should aMember believe thattheATC isbeing circumvented, itshould consult
withtheMember(s) concerned withaviewtoseeking amutually satisfactory
solution; ifsuchasolution isnotreached, thematter maybereferred totheTMB
forrecommendations byanyoftheMembers involved;
(e) Where, asaresult ofinvestigation, there issufficient evidence thatcircumvention
hasoccurred, appropriate action maybetaken afterconsultations withaviewto
arriving atamutually satisfactory solution between theMembers concerned; any
suchaction shallbenotified totheTMB withfulljustification andtheTMB may
make suchrecommendations totheMembers concerned asitdeems appropriate;G/L/179
Page69
ifamutually satisfactory solution isnotreached, anyMember mayreferthe
matter totheTMB forprompt review andrecommendations.
267. Asnoted inChapter IV,theadministrative arrangements concluded, respectively bythe
European Community andtheUnited States withagreat number ofMembers included provisions
related tocircumvention. Inlightoftheexplanations received theTMB noted thattheEuropean
Community andtheMembers concerned haddeemed itnecessary toinclude provisions ofthe
previous bilateral agreements intheadministrative arrangements, including provisions on
circumvention, which could haveapotential effect ontheimplementation andadministration of
quantitative restrictions notified bytheEuropean Community pursuant toArticle 2.1. Asan
overall conclusion ofitsreview oftheadministrative arrangements notified bythe
European Community, theTMB expected thatthese arrangements, including theprovisions on
circumvention, would beimplemented bytherespective Members inconformity withtherelevant
provisions oftheATC (seeparagraph 217).
268. With respect totheprovisions oncircumvention, contained intheadministrative
arrangements concluded andnotified bytheUnited States, theTMB sought information astohow
suchprovisions were deemed necessary inrelation totheimplementation ofanyprovision of
Article 2oftheATC. Italsoasked forexplanations astohowthese provisions, inparticular that
enabling theimporting Member toimpose, inparticular circumstances, triple charges onquotas,
would fitwithin theprovisions oftheATC. Inreply, theUnited States stated thatcircumvention
often damages acountry 'slegitimate trade bymaking itimpossible toadminister effectively its
Article 2.1quotas. TheUnited States andtheMembers concerned deemed thecircumvention
provisions tobenecessary fortheimplementation ofthese quotas. Triple charging, which was
agreed upon inmost oftheadministrative arrangements, hadalsobeendeemed bythe
United States andtherespective Members tobeanecessary deterrent tocircumvention. Since its
application would affect therestraint levels contained intheUS'Article 2.1notifications, these
particular provisions were, intheviewoftheUnited States, appropriately included inthe
administrative arrangements.
269. Noting thatalltheprovisions oftheadministrative arrangements, including those related
tocooperation intheprevention ofcircumvention, hadbeenagreed between theMembers
concerned, theTMB observed thatArticle 5oftheATC contained detailed descriptions ofthe
rules andprocedures tobefollowed. TheTMB noted, interalia,thatArticle 5.4oftheATC
seemed toprovide some flexibility interms ofremedies oragreed actions thatcould beforeseen
incases when circumvention hasoccurred. Itobserved, however, thatArticle 5contained no
reference tothepossibility fortheimporting Member toimpose triple charges onquotas, asa
deterrent tocircumvention. TheTMB noted inthisregard thatthisprovision hadnotbeen
utilized bytheUnited States. TheTMB recalled thattheUnited States hadstated thatwhen
provisions oftheadministrative arrangements were inconsistent withtheATC, theprovisions of
theATC would apply. TheTMB understood thatthisstatement applied toeachandevery
provision ofthearrangements notified. TheTMB expected, therefore, thatalltheprovisions of
these administrative arrangements, including those related tocircumvention, would be
implemented bytherespective Members inconformity withtherelevant provisions oftheATC
(seeparagraph 221).
270. Asnoted inparagraph 266above, Article 5oftheATC provides aMember withthe
possibility toreferthematter totheTMB forprompt review andrecommendation, when a
mutually satisfactory solution isnotreached inbilateral consultations withrespect toalleged
circumvention.G/L/179
Page70
271. TheTMB received onesuchnotification from Pakistan, inwhich Pakistan referred, under
Articles 5.4and8.5,todebits made bytheUnited States toPakistan 'squotas for
UScategory 361(bedsheets) onaccount ofalleged circumvention byPakistani companies. The
TMB started toconsider thisnotification atitsmeetings inFebruary andMarch 1996, towhich
delegations from bothMembers participated. AtitsMarch meeting, theTMB wasinformed by
thetwodelegations that,following consultations, amutually satisfactory understanding hadbeen
reached between them, andthatthisunderstanding would benotified totheTMB (G/TMB/R/10
and11). TheTMB received anotification regarding thisunderstanding from theUnited States in
October 1996, butPakistan requested, withtheconsent oftheUnited States, thattheTMB defer
theconsideration ofthisnotification, asthere wasapossibility thatthetwoMembers would
submit ajointnotification totheTMB. On24July1997 acommunication wasreceived from
Pakistan onthesame matter. Thecommunications bybothMembers willbeconsidered bythe
TMB atasubsequent meeting.
272. Inthediscussion oftheCouncil forTrade inGoods intheAutumn of1996, some
Members expressed concern thattheeffective implementation oftheATC alsodepended on
exporting Members adopting effective measures toprevent circumvention oftheATC. Itwas
stated thattranshipment, inparticular, wasalarge andgrowing problem, much bigger thanthe
amount ofimports which hadbeensubject tocharge-back onquotas. Members hadcommitted
themselves intheATC toestablish thenecessary mechanism regarding thisproblem andthey
should abide bythisandcommit themselves tocloser cooperation inthisarea. Inresponse, itwas
stated thattheconcerned Members continued tofullyimplement anti-circumvention measures.
They hadfullycooperated withtheirtrading partners incombatting andredressing situations
which might suggest theexistence ofcircumvention. They reaffirmed theircommitments toclose
cooperation butstated thatrecourse totheremedies provided forintheATC wastheproper
course tofollow. Onetheofthemain problems wasthesubjective manner inwhich the
circumvention provisions were being interpreted andapplied. Themagnitude oftheproblem
should notbeexaggerated andtheimplementation oftheATC could notbemade conditional on
effective anti-circumvention measures.
273. TheTMB noted thatintheviewofsome Members, asexpressed inthediscussion heldin
theCouncil forTrade inGoods referred toabove, circumvention and,inparticular,
transshipment, wasalarge andgrowing problem. However, theTMB observed thatapart from the
caseofalleged circumvention mentioned inparagraph 271above, noother casehadbeenbrought
before theTMB pursuant totheprovisions ofArticle 5asofthedateofadoption ofthisreport.
VIII. IMPLEMENTATION OFTHE PROVISIONS OFARTICLE 7
A. THE PROVISIONS OFARTICLE 7
274. Article 7.1states that"aspartoftheintegration process andwithreference tothespecific
commitments undertaken bytheMembers asaresult oftheUruguay Round, allMembers shall
takesuchactions asmaybenecessary toabide byGATT 1994 rules anddisciplines soasto:
(a)achieve improved access tomarkets fortextile andclothing products through suchmeasures as
tariff reductions andbindings, reduction orelimination ofnon-tariff barriers, andfacilitation of
customs, administrative andlicensing formalities; (b)ensure theapplication ofpolicies relating to
fairandequitable trading conditions asregards textiles andclothing insuchareas asdumping and
anti-dumping rules andprocedures, subsidies andcountervailing measures, andprotection of
intellectual property rights; and(c)avoid discrimination against imports inthetextiles and
clothing sector when taking measures forgeneral trade policy reasons".G/L/179
Page71
275. Article 7.2requires Members tonotify theTMB ofsuchactions referred toinArticle 7.1
"which haveabearing ontheimplementation ofthisAgreement". Ifthese actions hadbeen
notified toother WTO bodies, asummary, withreference totheoriginal notification, would be
sufficient tofulfil therequirements under thisprovision. AnyMember canmake reverse
notifications totheTMB inthisregard.
276. Article 7.3further provides thatwhere anyMember considers thatanother Member has
nottaken therequired actions andthatthebalance ofrights andobligations under theATC has
beenupset, thatMember maybring thematter before therelevant WTO bodies andinform the
TMB. Anysubsequent findings orconclusions bytheWTO bodies aretoform apartofthe
TMB'scomprehensive reports ontheimplementation oftheATC during therespective stages of
integration.
B. NOTIFICATIONS BYMEMBERS PURSUANT TOARTICLE 7.2
277. Nonotifications orreverse notifications were received under thisprovision in1995 and
1996. Towards theendof1996 andinanticipation ofthecurrent report, theTMB discussed,
interalia,theavailability ofinformation pertaining totheapplication ofGATT 1994 rules and
disciplines inthecontext ofArticle 7oftheATC. Itrequested theSecretariat toprepare a
compilation ofnotifications received bycertain WTO bodies, andoftherelevant portions oftheir
reports which would berelevant inthecontext ofthepreparation ofthisreport. Further, the
TMB decided tosendtoMembers areminder regarding notification requirements under some
ATC provisions, recalling, interalia,thenotification provisions ofArticle 7.2.
278. Accordingly, acompilation ofreferences totextiles andclothing innotifications toand
reports onmeetings ofother WTO bodies wasprovided toTMB members andthereminder was
senttoallWTO Members (G/TMB/11, dated 14February 1997).
279. Responses tothereminders were provided byColombia, Egypt, theEuropean
Community, India, Mauritius, NewZealand, Pakistan andPeru, some parts ofwhich addressed
issues related toArticle 7.Intheirresponses, Colombia, NewZealand andPeruprovided, inter
alia,information ontheirimplementation ofArticle 7.1; Egypt noted withreference to
Article 7.2thatithadnotmade anynotifications relevant totextiles toother WTO bodies; the
European Community expressed concern about thelackofimplementation oftheprovisions
contained inArticle 7;India commented ontheincreasing resort totheinitiation ofanti-dumping
procedures; Pakistan provided views ontheimpact oftheintegration programmes ofthemajor
importers onmarket access; andMauritius noted thatithadnotmade anyreverse notifications
pursuant toArticle 7.2totheTMB.
1. Implementation oftheProvisions Relating toMarket Access (Article 7.1(a))
280. Inresponse tothereminder andrelevant toArticle 7.1(a), Colombia stated thatithad
bound the1,208 tariff items relating toproducts covered bytheATC, andhadimplemented its
obligations maintaining tariffs atrateslower thanthebound ones. Inaddition, itmaintained no
quantitative restrictions onimports andhadnoimport licensing requirements. TheEuropean
Community expressed concern thatcertain Members didnotconsider theobligation toachieve
improved access tomarkets fortextile andclothing products asanimportant partofthe
integration process, assetoutinArticle 7.Thus, according totheEuropean Community, there
wasaconcern thatwhile thestages ofintegration would ensure theintegration ofthesector asfar
astheabolition ofrestrictions wasconcerned, certain Members would havedonelittleornothing
toimprove conditions foraccess totheirownmarkets forimports. Some were infactinthe
process ofreducing thataccess. Thiseffect could beobserved, intheviewoftheEuropeanG/L/179
Page72
Community, overabroad range ofissues suchasincreases intariff rates(either going beyond
bound ratesornot),theintroduction oflabelling andcertification requirements, changes inthe
rules oforigin andmaintenance ofbalance-of-payments provisions affecting textiles andclothing.
NewZealand commented onitstextile policy, thatquantitative restrictions hadbeenremoved for
some timeandimport licensing requirements hadalsobeenremoved fortextiles in1991 and
clothing in1992. Textile andclothing tariffs would bereduced by50percentbytheyear2000
when maximum textile tariffs would be10percentandclothing tariffs 15percent. Inaddition,
thespecific tariffs onmost items ofchildren 'sclothing hadbeenremoved. NewZealand had
decided nottoretain therighttousetheATC safeguard mechanism. Pakistan expressed its
concern thattheintegration schedules ofthemajor importing countries were notresulting in
enhanced market access andsuch"backloading" would cause problems inthefinalstages. Peru
noted thatitdidnotmaintain anynon-tariff barriers orimport licensing systems while certificates
oforigin forcertain fabrics applied onlytoproducts subject toanti-dumping and/or countervailing
duties.
281. Alsowithreference totheprovisions ofArticle 7.1(a), theTMB hadnoted inits
1996 report, prepared inthecontext oftheSingapore Ministerial Conference (G/L/113,
paragraph 99),theconclusions reached bytheCommittee onMarket Access inApril 1995.
According tothatCommittee, insupervising theimplementation ofconcessions relating totariffs
andnon-tariff measures, theapproach tobefollowed wastorelyoncross- orreverse-notifications
toidentify problems thatmight ariseoutoftheimplementation ofthese concessions. From the
information available totheTMB, nosuchcross- orreverse-notification hadbeensubmitted upto
thatdate, orsince then, totheCommittee onMarket Access.
282. Asregards matters raised in,ornotifications made toother WTO bodies, theTMB noted
that,inMarch 1996, Korea expressed concern intheCommittee onMarket Access thatEcuador
hadincreased tariffs onawiderange oftextile products from Korea, Hong Kong andsome
non-WTO sources. Themeasures were applied inaselective manner toimports from some
countries andtheincreased tariffs exceeded thebound ceiling level(G/MA/M/5). In
November 1996, thismatter (i.e.thereintroduction ofthesame measures forafurther period)
wasalsoraised intheCouncil forTrade inGoods (G/C/M/16). Inparallel, Korea referred this
issue totheTMB (fordetails refertoparagraphs 166to170). AlsoinMarch 1996, theEuropean
Community hadraised intheCommittee onMarket Access complaints from itsindustry that
Argentina hadbeenapplying higher advalorem ratesforcertain textiles, footwear andleather
products thanthebound specific duties (G/MA/M/5). Thismatter wasalsoraised intheCouncil
forTrade inGoods bytheUnited States andKorea (G/C/M/11) (fordetails ofsubsequent actions
taken bytheEuropean Community andtheUnited States refertoparagraph 293below). The
TMB wasalsoaware ofanotification made totheCommittee onMarket Access byIndonesia
(G/MA/SP/1) informing thatBody ofimprovements inIndonesia 'stariff concessions ontextile
andclothing products.
283. From notifications addressed toandreports adopted byother WTO bodies, theTMB
understood thatanumber ofMembers hadalsoreported measures toother bodies which mayalso
berelevant inthecontext oftheimplementation oftheATC. India notified theCommittee on
Balance-of-Payments Restrictions, andinformed theTMB, that,interalia,theimports ofseveral
textile andclothing items, previously covered byquantitative restrictions interms ofGATT
Article XVIII:B, hadbeenliberalized inFebruary 1995 withanumber offibres, yarns and
industrial fabrics permitted tobeimported freely byallpersons without animport licence anda
number offabrics, made-ups andgarments permitted tobeimported against special import licence
(WT/BOP/N/11 andCorr.1; WT/BOP/N/24). According tonotifications totheCommittee on
Balance-of-Payments Restrictions, Nigeria hadtaken steps toliberalize itsimport regime by,inter
alia,removing textiles from theimport prohibition list(WT/BOP/R/25); Pakistan hadnotified aG/L/179
Page73
listofproducts, including products covered bytheATC, onwhich import restrictions were
applied forbalance-of-payment reasons (WT/BOP/N/14) andhadreferred totheelimination of
certain products from itsNegative List,withtheimports ofmost textile items being allowed as
from 1994-1995 (WT/BOP/15, paragraph 61); Poland 'scomprehensive import surcharge regime,
introduced prior totheentry intoforce oftheWTO Agreement, hadbeenprogressively reduced at
thebeginning of1995 and1996 andwaseliminated by31December 1996 (WT/BOP/N/16);
Tunisia hadreported thatthelistofproducts subject toimport restriction (ListB)hadbeen
shortened inNovember 1995 byeliminating made-up textile products (WT/BOP/15). The
Slovak Republic hadnotified theCommittee thatitsimport surcharge onconsumer goods and
foodstuffs (implemented asfrom March 1994) would bereduced in1996 andremoved on
1January 1997 (WT/BOP/N/15). Subsequently, inJune1997, theSlovak Republic submitted a
notification tothesame Committee regarding theintroduction ofanimport deposit scheme,
covering alsoanumber ofATC products. TheCzech Republic hadalsonotified animport
deposit scheme which alsocovered anumber ofATC products. Hungary undertook to
progressively reduce itsimport surcharge measure, introduced inMarch 1995, beginning on
1January 1997, withfullelimination ofthemeasure asof1July1997 (WT/BOP/R/17 and
WT/BOP/N/26). Bulgaria notified inMarch 1997 theapplication ofacomprehensive import
surcharge regime.
284. South Africa hadnotified thatithadcarried outaprogressive phase outofitsimport
surcharge measure andfinally abolished iton1October 1995. Turkey alsoprogressively reduced
itsexceeded bindings tothebound ratesasof1January 1997 andthereby disinvoked GATT
Article XVIII:B onthatdate(WT/BOP/N/22).
285. Anumber ofMembers provided notifications totheCommittee onImport Licensing which
contained specific references totextiles andclothing. TheEuropean Community notified,
interalia,thelicensing procedures forimports oftextile products; in1995, Cyprus provided lists
ofproducts subject toimport licensing andtoquantitative restrictions, including bothtextile and
clothing products. Subsequently, in1996, inarevised notification, onlyfishing netsremained
subject toimport licensing. Malta listed itstextile products subject tolicenses while Japan didthe
same forsilkproducts. Hong Kong reported itssurveillance procedures which served asa
back-up foritsexport control system. Hungary explained thatitssystem ofimport licensing was
usedinthecontext ofitsglobal quota forconsumer goods andNorway reported thatlicenses were
required fortextile andclothing products subject toquotas under theATC andforsome other
textile products forsurveillance purposes. ThePhilippines required licenses toimport usedor
newrags, twine, etc.Slovenia reported thatlicenses were required forcertain textile andclothing
products which were subject toquantitative restrictions.
286. TheTMB alsowasaware of21notifications relating totextile andclothing products tothe
Committee onTechnical Barriers toTrade bytenWTO Members (theCzech Republic, the
European Community, Finland, Germany, India, Japan, Korea, Mexico, theSlovak Republic and
theUnited States). Eighteen ofthese notifications provided information onstandards fortesting
orcertification fortextile orclothing products, tworeferred tolabelling requirements andoneto
changes inrules oforigin. TheBody alsoobserved thatinformation hadbeenprovided to
Members through submissions totheCommittee onRegional Trade Arrangements onthe
implementation ofprovisions relating totextiles andclothing trade inseveral customs unions and
free-trade areas.
2. Implementation oftheProvisions ofArticle 7.1(b)
287. Inresponse totheTMB'srequest forinformation (paragraph 278above), oneMember
(Colombia) stated thatithadnotusedanti-dumping orcountervailing measures inthetextiles andG/L/179
Page74
clothing sector. Inaddition, another Member (India) noted theincreasing resort totheinitiation of
anti-dumping procedures, used, initsview, inaprotectionist way. Insome cases newactions
were being initiated shortly afterthetermination ofearlier ones. Itwasconsidered that
anti-dumping measures could be"farmore potent" thanquota restraints. Theconcern was
expressed thatanti-dumping actions would replace thequotas, thusneutralizing theimpact ofthe
removal ofthequantitative restraints. Alsoinreply totheTMB'srequest forinformation,
another Member (theEuropean Community) stated thatitoperated theanti-dumping instrument
within anarrowly-defined legislative framework, which wasinlinewithitsWTO commitments
andensured afairandtransparent procedure.
288. Apart from theobservations referred toinparagraph 287,theTMB received no
notifications referring tospecific actions taken within theareas oftheWTO referred toin
Article 7.1(b) andnoreferences tonotifications made elsewhere interms ofArticle 7.2.
Members 'semi-annual reports totheCommittee onAnti-Dumping Practices revealed, however, a
number ofanti-dumping measures involving textile andclothing products. Intotal, 12Members
(Argentina, Brazil, Canada, theEuropean Community, Japan, Korea, Mexico, NewZealand, the
Philippines, South Africa, Turkey andtheUnited States) hadintroduced orcontinued tomaintain
anti-dumping actions ononeormore textile andclothing products. These measures affected
15exporting Members (Bangladesh, Brazil, Egypt, Hong Kong, India, Indonesia, Japan, Korea,
Malaysia, Pakistan, Portugal, Romania, Thailand, Turkey andtheUnited States).
289. Concerns hadalsobeenexpressed byseveral Members thattheclosure andsubsequent
rapid reopening ofanti-dumping proceedings could leadtosystematic "trade harassment" over
several years untilsuchtimeastheinvestigating authorities were inaposition toprove the
allegations made (seethediscussions onthe"Statement byIndonesia onSelected European Union
(EU) Anti-Dumping Practices", supported byHong Kong, India, Japan, Korea andMalaysia
speaking onbehalf oftheASEAN countries, inOctober 1996 intheCommittee onAnti-Dumping
Practices relating toproceedings bytheEuropean Community inrespect ofcertain cotton fabrics
from several Members: G/ADP/M/9). Inresponse, theMember responsible fortheproceedings
(EC) hadstated, interalia,thattheprovisions oftheAnti-Dumping Agreement hadbeenmet,and
hadinvited aclear statement whether there wasanysuggestion ofabreach oftheAnti-Dumping
Agreement ortheGeneral Agreement.
290. Four Members (Argentina, Coted'Ivoire, theEuropean Community andtheUnited States)
hadprovided notifications totheCommittee onSubsidies andCountervailing Measures describing
measures taken which hadspecific reference tothesectors oftextiles andclothing (initiation,
provisional/final measures, termination/case withdrawal). These involved tenexporting Members
(Argentina, Bangladesh, Brazil, India, Mexico, Pakistan, Peru, Sweden, Thailand andTurkey). In
addition, anumber ofMembers notified arange ofprogrammes topromote general assistance to
theirindustries (research anddevelopment, marketing, education, etc.)which would beavailable
either specifically oramong others totheirtextile andclothing industries.
291. IntheCouncil forTrade-Related Aspects ofIntellectual Property Rights, anumber of
Members tooktheopportunity toposequestions during thereview oflegislations ontrademarks,
geographical indications andindustrial designs onother Member 'smeasures toprotect textile
designs. Subsequently, theresponses tothese questions were reproduced inworking documents of
thatCouncil.
3. Implementation oftheProvisions ofArticle 7.1(c)
292. Nonotification wasaddressed totheTMB regarding theimplementation oftheprovisions
contained inArticle 7.1(c). Onthebasis ofinformation available toit,theTMB wasnotaware ofG/L/179
Page75
anyfailure tocomply withtheobligation toavoid discrimination against imports inthetextiles and
clothing sector when taking measures forgeneral trade policy reasons.
C. ISSUES BROUGHT TOTHE ATTENTION OFTHE TMB PURSUANT TO
ARTICLE 7.3
293. TheTMB wasinformed ofactions instituted bytheEuropean Community andthe
United States inrespect ofcertain measures taken byArgentina regarding textiles, clothing and
footwear products. InOctober 1996, theUnited States hadrequested consultations withArgentina
pursuant toArticle 4oftheDSU, Article XXII:1 ofGATT 1994 aswellasprovisions ofthe
TBTAgreement, theAgreement ontheImplementation ofArticle VIIofGATT 1994 andthe
ATC, regarding measures implemented byArgentina affecting, interalia,textile andclothing
imports. These measures included, according totheUS'request, theimposition ofspecific duties
inexcess ofthebound advalorem rate,andimposition ofanadvalorem statistical tax.The
European Community andHungary requested tojoininthese consultations. InJanuary 1997, the
United States requested thatapanel beestablished andthiswasdoneinFebruary 1997 (WT/DS56/-
series). InApril 1997, theEuropean Community alsorequested consultations withArgentina on
thismatter, citing Article 4oftheDSU, Article XXII:1 ofGATT 1994, theTBTAgreement and
theATC, referring inparticular toproblems arising from theimposition ofspecific duties in
excess ofthebound ratesandalsotolabelling requirements. TheUnited States requested tojoin
inthese consultations (WT/DS77/- series).
D. WTO MEMBERS COMMENTS ONCOMPLIANCE WITH REQUIREMENTS OF
ARTICLE 7OFTHE ATC
294. IntheCouncil forTrade inGoods, inthecontext ofadiscussion ontheimplementation of
theATC, certain Members raised thequestion ofthecompliance withtheprovisions ofits
Article 7(G/L/134, paragraphs 16.30 to16.33).
295. Inthisdiscussion, some Members "stated thatanimportant element oftheATC was
increased opening ofthetextiles markets ofallWTO Members. ...Concerns were expressed that
some exporting Members hadnotcomplied withtheirobligations under Article 7.Inexamining
theextent towhich thecommitment toachieve improved access tomarkets hadbeencomplied
with, attention should alsobepaidtoanyinstances where defacto market access hadbeen
reduced through theraising ofapplied tariff rates, inaddition tothereduction orelimination of
non-tariff barriers. OneMember hadinvited exporting Members tomake itclear inwhatway
theywould beprepared togiveeffect tothiscommitment. Atrade-off fortheprogressive
liberalization ofrestraints byimporting Members wastheremoval ofvarious impediments to
textile imports byexporting Members".
296. Another view, inresponse totheforegoing, wasthat"...theUruguay Round results
constituted atotalpackage withageneral equilibrium between rights andobligations forall
Members. Benefits given tocertain Members intheATC through progressive integration ofthe
textile andclothing trade intotheATC were trade-offs fortheobligations these Members had
undertaken inother Agreements. Besides, Article 7explicitly referred to'specific commitments
undertaken byMembers asaresult oftheUruguay Round 'andtherefore there wasnoobligation
onthepartofanyMember toprovide additional market access overandabove thecommitments
already included initsSchedule ofCommitments. International trade could notbeconducted ona
basis ofsectoral reciprocity. There hadbeennotifications expressing appreciation tocertain
exporting Members forhaving provided effective access intheirmarkets fortextile andclothing
products. Noprovisions intheATC required thattheintegration beconditional ontheremoval of
impediments totextile imports byexporting Members. Theapproach undertaken byimportingG/L/179
Page76
Members atoffering more meaningful integration inexchange forgreater market access in
exporting Members wasnotjustified. Thesuggestion thatattention should alsobepaidto
increased applied tariff rateswasrejected because themultilateral trading system had,asits
cornerstone, theconcept ofbindings oftariffs. ItwastherightofanyMember toapply anyrates
solongasthese were within thebound levels initsschedule. Applied ratescould fluctuate
depending ontherevenue anddevelopment needs ofMembers".
E. COMMENTS BYTHE TMB
297. While noting theconcerns expressed bysome Members inthisregard (seeparagraphs 280
and295above), theinformation submitted oravailable totheTMB suggests that,apart from the
issues raised intheCouncil forTrade inGoods andintheMarket Access Committee (see
paragraph 282above), theimplementation ofspecific market access commitments undertaken asa
result oftheUruguay Round andaffecting theproducts covered bytheATC hasnotgiven riseto
particular problems.
298. Astothe"maintenance ofbalance-of-payment provisions affecting textiles andclothing"
andtheincreases intariff ratesbeyond thebound rates, asraised byaMember initsresponse to
theTMB, theTMB observed thatthese issues were dealtwithinother appropriate WTO bodies,
under therelevant provisions ofGATT 1994.
299. TheTMB alsonoted theconcerns expressed intheCommittee onAnti-Dumping Practices
aswellasthose formulated byoneMember initscommunication totheTMB regarding theuseof
anti-dumping procedures andtheirpotential effects. Itrecalled thattaking suchactions asmaybe
necessary toabide byGATT 1994 rules anddisciplines, soastoensure theapplication ofpolicies
relating tofairandequitable trading conditions asregards textiles andclothing intheareaof
dumping andanti-dumping rules andprocedures, asreferred toinArticle 7.1(b), isanobligation
toberespected byallMembers. TheTMB observed thatnonotification orreverse notification
indicating abearing ofsuchmeasures ontheimplementation oftheATC hadbeenaddressed toit
pursuant toArticle 7.2.Italsoobserved thattheconsistency orotherwise ofmeasures withthe
relevant provisions ofGATT 1994 and/or theapplicable Uruguay Round Agreements, isamatter
which maybebrought before therelevant WTO bodies, inwhich casetheTMB shallbeinformed
accordingly.
300. TheTMB observed furthermore thatthecompliance ofMembers withthenotification
requirements ofArticle 7.2hadnotbeensatisfactory. TheTMB expressed thehopethatprogress
would beachieved inthisregard intheupcoming period.
IX. IMPLEMENTATION OFPARTICULAR PROVISIONS INTHE ATC RELATED
TOSPECIAL INTERESTS OFCERTAIN WTO MEMBERS
A. LEAST-DEVELOPED COUNTRY MEMBERS
301. Theprovisions oftheATC explicitly mentioning theleast-developed country Members can
besummarized, asfollows:
(a) Thethirdpreambular paragraph recalls that"itwasagreed thatspecial treatment
should beaccorded toleast-developed country Members";
(b) Afootnote toArticle 1.2specifies thattotheextent possible, exports from
least-developed country Members mayalsobenefit from thisprovision.G/L/179
Page77
(According toArticle 1.2,theprovisions ofArticle 2.18(improved access for
small suppliers) and6.6(b) (differential andmore favourable treatment inthe
fixing oftheeconomic terms ofrestraint agreed pursuant toArticle 6)should be
usedinsuchamanner astopermit meaningful increases inaccess possibilities for
small suppliers andthedevelopment ofcommercially significant trading
opportunities fornewentrants inthefieldoftextiles andclothing trade);
(c) Article 6.6(a) provides thatintheapplication ofthetransitional safeguard,
least-developed country Members shallbeaccorded treatment significantly more
favourable thanthatprovided totheother groups ofMembers referred tointhe
same Article, preferably inallitselements, butatleast, onoverall terms.
302. Astotheimplementation oftheprovisions detailed inparagraph 301,thefollowing
observations canbemade:
1. Articles 6.6(a) and6.6(b)
303. Since nosafeguard action hasbeennotified byanyMember onimports from any
least-developed country Member during theperiod under review, thisparagraph, therefore, has
notbeenapplied.
2. Article 2.18
304. Totheextent thatleast-developed country Members areconcerned bytheimplementation
ofthisprovision, theTMB hasnoted thatonlyCanada andtheUnited States hadnotified
restrictions under Article 2.1vis-à-vis least-developed country Members, andthat:
(a) Canada notified restrictions onimports from Bangladesh, Lesotho, andMyanmar.
Improvement inaccess inthesense ofArticle 2.18wasprovided withrespect to
exports from Lesotho andMyanmar through theadvancement byonestage ofthe
growth ratessetoutinArticle 2.13;
(b) TheUnited States notified restrictions onimports from Bangladesh, Haiti and
Myanmar. Improvement inaccess inthesense ofArticle 2.18wasprovided with
respect toexports from Haiti through theadvancement byonestage ofgrowth
ratessetoutinArticle 2.13.
305. Inthediscussion oftheCouncil forTrade inGoods onissues related tothe
implementation oftheATC, itwasrecalled thattheATC provided that,totheextent possible,
exports from aleast-developed country Member might alsobenefit from theprovisions of
Article 2.18(concerning improved growth inquota levels) soastopermit meaningful increases in
access possibilities forsuchMembers. Provisions onspecial treatment ofLDCs hadalsobeen
provided inthepreamble, inthefootnote toArticle 1.2andinArticle 6.6(a). These provisions
didnotspecify theprecise modalities foraccording suchtreatment, butonewaymight beto
review thequotas inplace, including more favourable growth rates. IntheMarrakesh
Declaration, Ministers hadrecognized theimportance oftheimplementation ofspecial provisions
fortheLDCs andhaddeclared theirintention tocontinue toassist andfacilitate theexpansion of
theirtrade andinvestment opportunities. They hadagreed tokeepunder regular review bythe
Ministerial Conference andtheappropriate bodies oftheWTO theimpact oftheresults ofthe
Uruguay Round ontheLDCs withaviewtofostering positive measures toenable them toachieve
theirdevelopment objectives. Positive measures were required tostopthefurther marginalizationG/L/179
Page78
ofLDCs, whose integration intotheglobal trading system would beintheinterest ofallWTO
Members.
306. Inresponse, itwasstated thatMembers were abiding nowandwould continue toabide by
thebestendeavour provisions infavour ofLDCs. OneMember added thatalthough itmaintained
restraints oncertain textile exports ofanLDC Member, thatMember, although being averylarge
supplier, hadunusually freeaccess andbenefitted from initial quota growth ratesinexcess of
8percent. Another Member added thatithadnorestraints onLDCs andthatitapplied zero
tariffs. Thisposition waskeptunder review withaviewtoexamining whether therelaxation of
theGSPsystem would bepossible tofurther benefit textile exports from certain LDC Members
andnon-Members (G/L/134, paragraphs 16.18 and16.19).
307. TheTMB noted thatthecomprehensive andintegrated WTO planofaction fortheleast-
developed countries adopted bytheMinisterial Conference inSingapore on13December 1997
states, interalia,that"WTO Members should endeavour tomake use,when possible, ofthe
relevant provisions oftheAgreement onTextiles andClothing toincrease market access
opportunities forleast-developed countries" (WT/MIN(96)/14).
308. TheTMB recalls theparticular importance ofafullandfaithful implementation ofthe
provisions oftheATC infavour ofleast-developed country Members, aswellastherelevant
provisions oftheplanofaction fortheleast-developed countries, andinvites Members toexamine
thepossibilities forproviding, whenever possible, substantially increased market access
opportunities forthetextile andclothing products oftheleast-developed country Members. In
suchcases theTMB expects thatitwillbenotified accordingly.
B. SMALL SUPPLIERS AND NEW ENTRANTS
309. Article 2.18oftheATC isprimarily intended toprovide improvement inaccess toexports
ofaspecific group ofcountries, asdefined intheArticle itself (i.e.Members whose restrictions
represent 1.2percentorlessofthetotalvolume oftherestrictions applied byanimporting
Member asof31December 1991 andnotified under Article 2).(Fortheimplementation of
Article 2.18, seeChapter IV,paragraphs 206to213.)
310. Article 6.6(b) provides that,ifasafeguard measure istaken onimports from Members
whose totalvolume oftextile andclothing exports issmall incomparison withthetotalvolume of
exports ofother Members andwhoaccount foronlyasmall percentage oftotalimports ofthat
product intotheimporting Member, differential andmore favourable treatment shallbeaccorded
infixing theleveloftherestraint, itsgrowth rateandtheapplicable flexibility provisions. The
Members corresponding tothisdefinition arenotnecessarily thesame astheMembers envisaged
inArticle 2.18. TheTMB received noinformation astowhether ornottheMembers with
respect towhich theUnited States andBrazil hadintroduced restrictions under Article 6fell
within thedefinition inArticle 6.6(b), andwhether, consequently, theprovisions ofArticle 6.6(b)
hadbeenimplemented. TheTMB observed, however, thattheMembers withrespect towhich
Brazil hadintroduced safeguard measures didnotseem tofallwithin thisdefinition.
311. Inthediscussion oftheCouncil forTrade inGoods onissues related tothe
implementation oftheATC, itwasrecalled that,according toArticle 1.2,meaningful increases in
access possibilities must beprovided forsmall suppliers, using theprovisions ofArticles 2.18
and6.6(b). Concern wasexpressed thattheonlywaytodetermine iftheprovisions were being
complied withwastoreceive notifications from Members imposing ormaintaining restrictions,
indicating thewayinwhich "meaningful increases" inaccess possibilities were beingG/L/179
Page79
implemented. Inresponse itwasstated thattheMembers were abiding nowandwould continue
toabide bytheirobligations tosmall suppliers (G/L/134, paragraphs 16.16 and16.17).
C. COTTON-PRODUCING EXPORTING MEMBERS
312. Article 1.4provides that"theparticular interests ofthecotton-producing exporting
Members should, inconsultation withthem, bereflected intheimplementation oftheprovisions
ofthisAgreement".
313. Inthediscussion oftheCouncil forTrade inGoods onissues related tothe
implementation oftheATC, some Members pointed outinthisregard, thataswasclear from the
wording ofArticle 1.4,theonusofconsultations wasontheimporting Member integrating
products intoGATT 1994. Concern wasexpressed thatnosuchconsultation hadbeennotified,
norheld. TheTMB hadreceived nonotifications relating totheimplementation ofthisprovision.
Itwasfurther stated thatitshould havesought information from Members concerned. Therefore,
therequirements ofthisprovision hadnotbeenfulfilled andtheparticular interests ofthecotton-
producing exporting Members hadnotbeenreflected intheimplementation oftheprovisions of
theATC. Inresponse, some other Members stated thatthisprovision hadbeenfaithfully
implemented. Nospecific consultations hadbeenrequested from anyMember withrespect tothis
provision. Some Members hadheldconsultations withanumber ofcountries which they
considered toberelevant toArticle 1.4. There wasnoobligation tonotify theTMB andno
Member hadtaken thisissue totheTMB (G/L/134, paragraphs 16.20 and16.21).
314. Inreply totheTMB'srequest forinformation regarding theimplementation ofparticular
provisions oftheATC, including itsArticle 1.4,oneMember stated thattheTMB should paydue
attention asmandated inArticle 1.4,inreflecting theparticular interests ofthecotton-producing
exporting Members intheimplementation oftheprovisions oftheATC, including thereview of
thefirststage ofintegration. Intheviewofanother Member, themajor importing countries had
notallowed anyspecial concessions tocotton-producing andexporting countries, which would
havebeeninconformity withtheletter andspirit oftheATC. Onthecontrary, certain non-
cotton producing countries hadbeenprovided freemarket access incountries liketheEuropean
Community forcategories inwhich theycompeted withthatMember. Theresult wasthatthey
hadalarger access totheimporting countries thanthecountries which were facing quantitative
restrictions. Whereas thejustification forsuchtreatment wasonthebasis ofthese countries being
LDCs, thewhole justification ofmaintaining stringent quantitative restrictions onthecompetition
needed tobereassessed.
315. Inreply toadditional specific questions posed bytheTMB, oneMember (Canada) stated
thatithadheldconsultations withexporting countries in1990 to1993, prior tothenotification by
Canada oftherestrictions pursuant toArticle 2.1,consultations during which cotton-producing
exporting countries hadample opportunity toraiseissues andconcerns aswellastheirparticular
interests. Asaresult ofthese consultations, anumber ofimprovements hadbeenmade toexisting
restraints inorder toaccommodate exporters 'requests. Itshould benoted thatCanada 'srestraint
category structure, withfewexceptions, didnotdifferentiate products according tofibretype. In
most cases where cotton-specific products were restrained, theaffected Members didnotappear to
becotton-producing exporting countries. Thebulkofimports ofthecategory liberalized asa
result ofCanada 'sfirststage ofintegration were cotton products, andmore thanhalfofthe
imports oftailored-collar shirts20were alsocotton products. Canada remained willing tolisten and
discuss theparticular interests ofthecotton-producing exporting Members and,should particular
20Seeparagraph 41above.G/L/179
Page80
interests bemade known, would beprepared toconsult withtheinterested Members. Another
Member (theEuropean Community) hadstated thatprior totheentry intoforce oftheATC, and
alsoasapartofitsdetermination ofitssecond stage ofintegration, ithadheldconsultations with
cotton-producing exporting Members, during which noparticular concern orfactor hadbeen
expressed regarding theimplementation bytheEuropean Community oftheprovisions ofthe
Agreement, inparticular Article 1.4;nofurther consultations were sought concerning this
provision. Theposition expressed byoneMember thatcertain non-cotton producing countries had
beenprovided freemarket access incountries liketheEuropean Community forcategories in
which theycompeted withthatMember wasaresult oftherestrictions existing prior totheentry
intoforce oftheATC, notfrom anyperceived discrimination between cotton-producing andnon-
cotton producing countries. AthirdMember (Norway) stated thatduring theconsultation process
thathadpreceded theentry intoforce oftheATC, andthrough aprocess ofbilateral
consultations, anumber ofbilateral restrictions hadbeenrescinded, andtheprovisions forgrowth
andflexibility improved, tothebenefit oftheexporting countries. Inaddition, thelimitations on
thecombined useofcarryover, carry forward andswing hadalsobeenremoved. Inparticular,
consultations were heldin1994 withonecotton-producing exporting country regarding knitted
bedlinen, ofwhich thatcountry wasanimportant supplier ofthecotton products toNorway. As
aresult ofthese consultations, therestraint onknitted bedlinen hadbeenremoved. Further
liberalization hadbeenpursued byNorway aftertheestablishment oftheWTO. Prior tothe
elimination ofrestrictions made pursuant toArticle 2.15(seeChapter IV),Norway consulted with
allWTO Members subject torestrictions. Afourth Member (theUnited States) stated thatboth
before andaftertheentry intoforce oftheATC ithadheldnumerous consultations with
cotton-producing exporting countries. TheUnited States tookitsobligations seriously under
Article 1.4andthishadconstituted thebackground against which these consultations hadbeen
concluded. Atnotimeinanyofthese consultations hadanyparty feltitnecessary todirectly
invoke Article 1.4.TheUnited States waswilling toenter intoconsultations withanycotton
producing country thatwished toraiseanissue pursuant tothisArticle.
316. Onthebasis oftheabove, itappears totheTMB thatMembers havedifferent perceptions
onhowtheparticular interests ofthecotton-producing exporting Members should be-andwere -
reflected intheimplementation oftheprovisions oftheATC. TheTMB notes inthisrespect that
theMembers maintaining restrictions under Article 2hadstated thattheywere prepared tohave
consultations onthismatter withtheMembers concerned. TheTMB encourages interested
Members toenter intoconsultations withaviewtoclarifying theissues related tothe
implementation ofArticle 1.4.TheTMB alsorecalls inthisregard that,should theneedarise, the
provisions ofArticle 8.4areavailable forthispurpose.
D. WOOL-PRODUCING EXPORTING MEMBERS
317. Theonlyexplicit provision intheATC referring towool-producing developing country
Members isArticle 6.6(c), which provides that"with respect towool products from wool-
producing developing country Members whose economy andtextiles andclothing trade are
dependent onthewool sector, whose totaltextile andclothing exports consist almost exclusively
ofwool products, andwhose volume oftextiles andclothing trade iscomparatively small inthe
markets oftheimporting Members, special consideration shallbegiven totheexport needs of
suchMembers when considering quota levels, growth ratesandflexibility". Nosafeguard action
hasbeennotified under Article 6onexports ofwool products from wool-producing developing
country Members whose economy andtextile andclothing trade aredependant onthewool sector,
whose textile andclothing exports consist almost exclusively ofwool products, andwhose volume
oftextile andclothing trade iscomparatively small inthemarkets oftheimporting Members.
Thisprovision has,therefore, notbeenofapplication.G/L/179
Page81
E. MORE FAVOURABLE TREATMENT TOBEACCORDED TORE-IMPORTS IN
CASE OFRECOURSE TOTHE PROVISIONS OFARTICLE 6
318. Article 6.6(d) states that"more favourable treatment shallbeaccorded tore-imports bya
Member oftextile andclothing products which thatMember hasexported toanother Member for
processing andsubsequent reimportation, asdefined bythelawsandpractices oftheimporting
Member, andsubject tosatisfactory control andcertification procedures, when these products are
imported from aMember forwhich thistypeoftrade represents asignificant proportion ofits
totalexports oftextiles andclothing".
319. Inreviewing therestraints agreed pursuant toArticle 6.9between theUnited States and
theDominican Republic, Honduras, ElSalvador, Colombia (imports ofcotton andman-made
fibreunderwear), Honduras (imports ofwomen 'sandgirls'wool coats), andGuatemala (cotton
andman-made fibreskirts), theTMB noted thatmore favourable treatment hadbeenprovided to
theproducts envisaged inparagraph 6.6(d). Thistooktheform ofguaranteed access levels
(GALs), i.e.quantities ofproducts ofacategory thataMember canexport totheUnited States
provided theactual product shipped qualifies forsuchtreatment, interalia,bybeing made of
"UScomponents". When reviewing suchagreed restraints, theTMB observed that,except for
Colombia, nogrowth ratehadbeenprovided forwithrespect toGALs. However, according to
indications given bytheUSGovernment, GALs could beincreased onrequest. Therefore, itwas
theTMB'sunderstanding that,upon request, theGALs would beincreased bynolessthan
6percentannually (except forthewool coats, where theGAL should beincreased bynoless
than2percentannually).
320. TheTMB noted, however, thataccording tothePanel Report onUSrestrictions oncotton
andman-made fibreunderwear against imports from Costa Rica, adopted bytheDispute
Settlement Body (seeparagraph 96),theUnited States hadviolated itsobligations under
Article 6.6(d) oftheATC, astherestriction imposed onCosta Rican imports wasidentical tothe
levelrequired under Article 6.8anddidnotmake allowances forreimports inaquantitative or
anyother way.
F. SPECIAL TREATMENT AFFORDED TOMEMBERS WHICH WERE NOT
MEMBERS OFTHE MULTIFIBRE ARRANGEMENT (MFA)
321. Article 1.3states that"Members shallhavedueregard tothesituation ofthose Members
which havenotaccepted theProtocols extending ...theMFA since 1986 and,totheextent
possible, shallafford them special treatment inapplying theprovisions ofthisAgreement". The
TMB received noinformation ontheextent towhich recourse wasmade tothisprovision ofthe
ATC. Itcanbenoted, however, thatnoaction hasbeeninitiated pursuant toArticle 6against
imports ofanyMember falling under Article 1.3.
G. SPECIAL PROVISIONS INFAVOUR OFDEVELOPING COUNTRY MEMBERS
322. Thebriefoverview provided intheprevious sections ofthisChapter alsoindicates that
some oftheprovisions oftheATC refertoaparticular category ofMembers. Apart from the
provisions related explicitly totheleast-developing country Members, Members qualifying forthe
status ofsmall suppliers andnewentrants were mostly developing countries/territories. Thesame
applies totheapplication ofthesubparagraphs under Article 6.6. Another provision which is
applicable onlytodeveloping countries isparagraph 3(a)oftheAnnex totheATC. This
paragraph provides thatactions under thetransitional safeguard provisions inArticle 6oftheATC
shallnotapply todeveloping country Member 'sexports ofhandloom fabrics ofthecottage
industry, orhand-made cottage industry products made ofsuchhandloom fabrics, ortraditionalG/L/179
Page82
folklore handicraft textile andclothing products, provided thatsuchproducts areproperly certified
under arrangements established between theMembers concerned. Inaccordance withthis
provision nosafeguard action under Article 6wasintroduced onsuchproducts.
323. TheTMB reiterated that,inaddition totheprovisions specifically designed toprovide
favourable treatment toexports oftextile andclothing products from developing country and/or
least-developed country Members, andinaddition totheArticles already mentioned inthis
Chapter, there areseveral other provisions intheATC which, although notspecifically applicable
onlytosuchMembers, could beapplied insuchawayastoprovide favourable treatment, orto
bebeneficial, interalia,tothem. Such provisions include, among others, those related tothe
integration process (Articles 2.6,2.7.2.8and2.10), provisions regarding growth rates(Articles
2.13and2.14), elimination ofquantitative restrictions (Article 2.15), phasing outofnon-MFA
restrictions (Article 3.2), changes (i.e.reductions) inexisting restrictions (Article 3.3), improved
access tomarkets andtheapplication ofpolicies relating tofairandequitable trading conditions
(Article 7.1)(G/L/113; WT/COMTD/W/17).
X. COMPLIANCE WITH NOTIFICATION REQUIREMENTS UNDER THE ATC
324. TheATC contains abroad range ofnotification requirements tobecomplied withbythe
Members. Most ofthese notification obligations aretime-bound, some others areadhocin
nature.
325. Inorder toprovide assistance, inparticular todeveloping country andleast-developed
country Members, theWTO Secretariat issued aTechnical Cooperation Handbook onNotification
Requirements. Thehandbook consists ofself-contained sections -oneperagreement -andthe
firstsetofthese sections, including, interalia,thatrelated totheATC (WT/TC/NOTIF/TEX/1),
waspublished inAugust 1996.
326. Initsreport adopted andsubmitted totheCouncil forTrade inGoods, inthecontext of
thepreparation oftheSingapore Ministerial Conference, theTMB stated thefollowing:
"The implementation oftheATC cannot bemonitored fullyunless Members comply with
itsnotification requirements. Inthisrespect, theoverall picture isamixed one. Onthe
onehand, theMembers accounting forthemajority ofinternational trade intextiles and
clothing under theATC complied withtheessential notification requirements oftheATC.
Anumber ofnotifications have, however, beenaddressed totheTMB aftertherespective
deadlines foreseen. Inthisrespect theTMB observed thatitstaking noteoflate
notifications waswithout prejudice tothelegalstatus ofsuchnotifications. Ontheother
hand, ...theTMB noted withconcern thatanimportant number ofMembers hadnot
provided anynotification. TheTMB observed thattheSecretariat hadsentreminders to
Members ontheirnotification obligations. TheTMB expressed itsserious concern that
theabsence ofnotifications ortheirlatesubmission mayhaveimplications forthe
implementation oftheATC." (G/L/113)
327. Asrecommended bytheTMB, theCouncil forTrade inGoods tooknoteoftheabove
observations andconcerns andrecalled toMembers theparticular importance ofstrictly adhering
tothenotification requirements under theATC (G/C/M/14, paragraph 5.35).
328. Inthecontext ofthepreparation forthepresent report, theTMB issued, inFebruary and
inApril 1997, arequest forinformation toWTO Members, reminding them alsoofsomeG/L/179
Page83
notification obligations contained intheATC (G/TMB/11). TheTMB received replies from eight
Members.
329. Ithastobeobserved thatadherence tothenotification obligations hasnotimproved over
time. While 49Members submitted notifications pursuant toArticles 2.6and2.7,by24July
1997 (more thansixmonths aftertheexpiration oftherelevant deadline) only40Members had
notified theirsecond stage integration programme. Inaddition, there hasbeenanincrease inthe
number oflatenotifications. Thisisregrettable asthenon-compliance withnotification
requirements, including thedeadlines, mayhaveserious implications ontheimplementation ofthe
ATC andonMembers 'rights andobligations arising therefrom.
330. TheTMB suggests thattheCouncil forTrade inGoods recall toMembers theparticular
importance, bothlegally andfortransparency purposes, ofstrict compliance withthenotification
requirements oftheATC.
XI. FUNCTIONING OFAND WORK CARRIED OUT BYTHE TMB
331. According toArticle 8.1,theTMB wasestablished inorder tosupervise the
implementation oftheATC, toexamine allmeasures taken under itsprovisions andtheir
conformity therewith, andtotaketheactions specifically required ofitbytheATC.
332. Thecomposition oftheTMB forthefirststage ofimplementation oftheATC (1995 to
1997) wasdecided bytheGeneral Council on31January 1995 (WT/L/26) andsubsequently
modified bytheGeneral Council on6February 1996 (WT/L/26/Add.1). Ambassador András
Szepesi wasappointed Chairman oftheTMB forthesame period bytheGeneral Council on
31January 1995 (WT/GC/M/1). ThelistofTMB members, alternates, observers, andsuccessive
changes, arecontained inthereports oftheTMB.
A. WORKING PROCEDURES
333. TheTMB devoted seven formal andseveral informal sessions ofitsfirstmeeting tothe
elaboration andadoption ofitsworking procedures pursuant toArticle 8.2(G/TMB/R/1).
B. DISCHARGING FUNCTIONS ONANADPERSONAM BASIS
1. TMB Working Procedures
334. Article 8.1oftheATC states thatTMB members discharge theirfunction onan
adpersonam basis. Theworking procedures adopted bytheTMB specify that“indischarging
theirfunctions ...,TMB members andalternates undertake nottosolicit, accept oractupon
instructions from governments, nortobeinfluenced byanyother organisations orundue
extraneous factors. They shalldisclose totheChairman anyinformation thattheymayconsider
likely toimpede theircapacity todischarge theirfunctions onanadpersonam basis. Should
serious doubts ariseduring thedeliberations oftheTMB regarding theability ofaTMB member
toactonanadpersonam basis, theyshallbecommunicated totheChairman. TheChairman shall
dealwiththeparticular matter asnecessary ”.
2. Decision oftheCouncil forTrade inGoods
335. When adopting itsworking procedures, theTMB invited itsChairman tosubmit tothe
Council forTrade inGoods thefollowing forappropriate action: “WTO Members which,G/L/179
Page84
pursuant tothedecision oftheGeneral Council of31January 1995, appoint TMB members under
Article 8.1oftheAgreement onTextiles andClothing accept thatTMB members serve intheirad
personam basis andnotasgovernment representatives. Consequently, theyshallnotgiveTMB
members instructions, norseektoinfluence them, withregard tomatters before theTMB. The
same applies toalternates. ”Thisproposal wastransmitted totheCouncil forTrade inGoods in
July1995.
336. Inthecontext ofitsannual report totheCouncil forTrade inGoods (G/L/113,
paragraph 107), theTMB requested theCouncil totakeappropriate action onthisproposal. On
12February 1997, theCouncil forTrade inGoods, following consultations heldbyitsChairman,
adopted adecision ontheadpersonam status ofTMB members, asfollows: “WTO Members
which, pursuant tothedecision oftheGeneral Council of31January 1995, appoint TMB
members under Article 8.1oftheAgreement onTextiles andClothing accept thatTMB members
discharge theirfunction onanadpersonam basis andnotasgovernment representatives.
Consequently, theyshallnotgiveTMB members instructions, norseektoinfluence them, with
regard tomatters before theTMB. Thesame applies toalternates ”(G/C/W/20/Rev.1).
3. Code ofConduct Adopted bytheDispute Settlement Body
337. TheTMB tooknoteofthedecision oftheDispute Settlement Body on3December 1996
toadopt theRules ofConduct fortheUnderstanding onRules andProcedures Governing the
Settlement ofDisputes (WT/DSB/RC/1), inviewofthefactthatsuchRules apply, interalia,to
theChairman oftheTMB andother members oftheTMB secretariat called upon toassist the
TMB informulating recommendations, findings orobservations pursuant totheATC, aswellas,
totheextent prescribed intherelevant Section oftheRules, tomembers oftheTMB
(G/TMB/R/22, paragraph 17).
C. CIRCULATION OFREPORTS AND NOTIFICATIONS; DERESTRICTION OF
DOCUMENTS
1. Circulation ofReports
338. TheTMB adopted reports ofitsmeetings, which were circulated toWTO Members for
theirinformation (G/TMB/R/1 to33). TheTMB adopts suchreports atthesubsequent meeting at
thelatest, onthebasis ofadraftproposed bytheTMB secretariat incorporating thetextofany
recommendation, finding andobservation bytheTMB; these textsthemselves havealready been
adopted bytheTMB. TheTMB’sreports are,therefore, normally circulated toWTO Members
more thanamonth aftereachmeeting oftheTMB. TheTMB feltthatthistime-lag wastoolong.
It,therefore, authorized itsChairman onseveral instances, inparticular when theTMB had
reviewed dispute cases between WTO Members, toissue anoteforwarding information onthe
TMB’srecommendations, findings andobservations toWTO Members (G/TMB/1 to10,and12).
339. TheGeneral Council decided atitsmeeting on15November 1995 onprocedures tobe
followed bytherelevant WTO bodies foranannual overview ofWTO activities andforreporting
under theWTO (WT/L/105). Pursuant tothisdecision, thefirstannual report oftheTMB was
submitted inNovember 1995 andiscontained indocument G/L/40. Thesecond annual report was
submitted inOctober 1996, alsointhecontext ofthereporting procedures fortheSingapore
Ministerial Conference (WT/L/145), andiscontained indocument G/L/113.
2. Circulation ofNotificationsG/L/179
Page85
340. Inconformity withitsworking procedures (G/TMB/R/1 and11),notifications received by
theTMB pursuant toArticles 2.1,2.2,2.7(a) and(b),2.8(a) and(b),2.10, 2.11, 2.15, 3.1,3.3,
3.4,6.1and7.2oftheAgreement havebeencirculated toWTO Members without delay, itbeing
understood thattheTMB mayexamine orreview these notifications atalaterstage. Notifications
addressed totheTMB forreview other thanthose above were, aftersuchreview, transmitted to
WTO Members.
3. Derestriction
341. Following thedecision adopted bytheGeneral Council atitsmeeting on18July1996, the
TMB considered thequestion ofthederestriction ofitsworking documents (G/TMB/W/- and
G/TMB/SPEC/- series). TheTMB recalled thatinadopting itsownworking procedures on
13July1995 ithadagreed thatitwould "...decide ontheimplementation ofthedecision ofthe
General Council onderestriction ofdocuments when theGeneral Council hasadopted itsdecision
onthismatter ”(G/TMB/R/1). TheTMB tooknoteoftheGeneral Council ’sdecision anddecided
thatitwould actinfullcompliance withit(G/TMB/R/16).
D. WORKLOAD; NUMBER OFMEETINGS, SCHEDULING OFMEETINGS
342. Until theendofJuly1997, theTMB hadheld35meetings totalling overall 129working
days. Ithadcompleted itsreview ofseven safeguard measures introduced pursuant to
Article 6.10, aswellastwosafeguard measures imposed under Article 6.11. TheTMB also
reviewed sixmatters referred totheTMB under Article 8,forwhich ithadinvited participation of
theMembers concerned, inaccordance withitsworking procedures. Itfurther reviewed nine
restraint measures agreed andnotified pursuant toArticle 6.9,aswellasfiverestraint measures
agreed under Article 6.11. Inaddition theTMB reviewed, interalia,46notifications made
pursuant toArticles 2.6and2.7(a) and(b),19notifications under Articles 2.8(a) and2.11(the
TMB hasalsostarted thereview of23additional notifications under thatArticle, andoneunder
Articles 2.8(b) and2.11), 29notifications under Article 3.1,andtaken noteof65administrative
arrangements notified under Article 2.17, aswellasof64notifications under Article 6.1. For
thispurpose, theTMB inmany instances sought additional information orexplanations from the
Members before thereview could becompleted. Thisinmany cases ledtomodifications ofthe
original notifications, withaviewtobringing them inlinewiththerelevant provisions ofthe
ATC.
343. Initsreport totheCTG in1996, theTMB noted thatanorganizational aspect hadalsoa
bearing onitswork. Anumber ofTMB members were nominated byWTO Members represented
bysmall delegations. These members had,inaddition totheTMB, anumber ofother important
duties toperform intheircapacity asrepresentative oftheircountry orterritory. While theTMB,
incompliance withthedecision oftheGeneral Council, submitted wellinadvance itstentative
schedule ofmeetings for1996, thiswasoften notaccommodated intheWTO schedule of
meetings. Onanumber ofoccasions, meetings oftwoorthree other WTO bodies tookplace in
parallel withTMB meetings, making itdifficult forsome members oralternates toparticipate in
TMB meetings. TheTMB, therefore, hadrecommended thatinorder tofacilitate itswork, due
consideration should begiven totheschedule ofmeetings oftheTMB intheWTO ’soverall
schedule ofmeetings (G/TMB/113, paragraph 119). TheCouncil forTrade inGoods tooknoteof
thisrecommendation atitsmeeting on15October 1996 (G/C/M/14, paragraph 5.37), but
scheduling difficulties remain.
E. TRANSPARENCYG/L/179
Page86
344. Asnoted initsreport totheCouncil forTrade inGoods in1996, theTMB hasmade
substantial efforts toensure andtoimprove thetransparency ofitsproceedings. Ithasdecided to
circulate most ofthenotifications received toWTO Members without delay, asreflected inits
working procedures. Ithasalsotriedtoprovide asmuch information aspossible initsreports,
reproducing inparticular theviews oftheparties toadispute, andalsogiving, totheextent
possible, thereasons forthedecisions reached byconsensus. Furthermore, theconcern for
transparency wasgermane tothefactthatindeveloping itsworking procedures theTMB agreed
that,indispute cases, representatives oftheMembers involved could bepresent andparticipate in
thediscussion, within certain limits, throughout thereview, upto,andinsome cases, including,
thedrafting oftherecommendations. TheTMB hadalsoauthorized itsChairman tocirculate a
notetoWTO Members immediately following theconclusion ofitsreview ofdispute cases, so
thatitsrecommendations orfindings would beavailable toWTO Members inadvance ofthe
circulation oftherelevant report oftheTMB.
345. IntheSingapore Ministerial Declaration adopted on13December 1996, Ministers “agree
that,keeping inviewitsquasi-judicial nature, theTextiles Monitoring Body (TMB) should
achieve transparency inproviding rationale foritsfindings andrecommendations". Inparticular
since theMinisterial Conference, theTMB endeavoured toimprove thequality oftheexplanations
itprovided interms oftherationale foritsfindings andrecommendations.
F. DECISION-MAKING
346. Inconformity withtherelevant decision oftheGeneral Council (WT/L/26, paragraph 6),
theTMB takes allitsdecisions byconsensus. Consensus doesnotrequire theassent or
concurrence ofmembers appointed byMembers involved inanunresolved issue under review by
theTMB (Article 8.2).
347. Thisruleindecision-making implies thatnotonlyincases ofdisputes between WTO
Members, butpractically inallinstances, including thetaking noteofnotifications andthe
adoption ofitsreports, theTMB hastoproceed byconsensus. TheTMB noted inthisregard the
important number ofmatters ithadtoconsider.
348. During theearly period oftheimplementation oftheATC, theTMB had,intwodispute
cases, beenunable toreach consensus. Initsreport (1996) totheCouncil forTrade inGoods, the
TMB expressed itsconcern that,inthese cases, itcould notarrive ataconsensus decision onthe
matters brought toitand,therefore, could notfulfil itsmandate (G/L/113). Thiswasalso
discussed intheCouncil forTrade inGoods. IntheSingapore Ministerial Declaration, Ministers
"expect thattheTMB shallmake findings andrecommendations whenever called upon todoso
under theAgreement". Ithastobenoted that,apart from thecases mentioned above, theTMB
succeeded toreach consensus decisions withrespect toallother matters, andmade findings and
recommendations when called upon todosounder theAgreement.