RESTRICTED
WORLD TRADE G/C/M/13
9October 1996
ORGANIZATION(96-4112)
Council forTrade inGoods
19September 1996
MINUTES OFMEETING
Held inCentre William Rappard
on19September 1996
Chairman: Mr.S.Narayanan (India)
Theproposed agenda contained indocument G/C/W/60 wasadopted withtheinclusion ofitems
under "Other Business".
Page
1. Observer status forInternational Intergovernmental Organizations 3
- Statement bytheChairman
2. Circulation andDerestriction ofCouncil Documents 3
- Statement bytheChairman
3. Letter from theChairman oftheCommittee onTrade andDevelopment 3
- Statement bytheChairman
4. Requests forextensions ofwaivers duetoexpire on31December 1996 4
pursuant toparagraph 2oftheUnderstanding inrespect ofWaivers of
Obligations under GATT 1994
A. Cuba -Paragraph 6ofArticle XVofGATT 1994 4
(G/L/89, G/C/W/51/Rev.1)
B. United States -Former Trust Territory ofthePacific Islands 5
(G/L/101, G/C/W/53)
C. United States -Imports ofAutomotive Products (G/L/103 and 5
Corr.1, G/C/W/55)
D. United States -Andean Trade Preference Act 6
(G/L/102, G/C/W/54)
E. Canada -CARIBCAN (G/L/100, G/C/W/52) 6G/C/M/13
Page2
F. Communication from theEuropean Communities (G/L/107) 7
- European Communities -Fourth ACP-EEC Convention
ofLomé (G/L/108, G/C/W/58/Rev.1)
- France -Trading Arrangements withMorocco
(G/L/109, G/C/W/59/Rev.1)
G. South Africa -BaseDates under Article I.4 8
(G/L/104, G/C/W/56/Rev.1)
H. Zimbabwe -BaseDates under Article I.4(G/L/106, 8
G/C/W/57/Rev.1)
5. FreeTrade Agreement between theEFTA States andEstonia 8
- Communication from theParties totheAgreement
(WT/REG28/N/1 andWT/REG28/1)
6. FreeTrade Agreement between theEFTA States andLatvia 9
- Communication from theParties totheAgreement
(WT/REG29/N/1 andWT/REG29/1)
7. FreeTrade Agreement between theEFTA States andLithuania 10
- Communication from theParties totheAgreement
(WT/REG30/N/1 andWT/REG30/1)
8. Issues concerning Market Access andCircumvention astheyrelate 10
totheimplementation oftheAgreement onTextiles andClothing
- Communication from theUnited States (G/L/95)
9. Implementation oftheAgreement onTextiles andClothing and 20
Related Matters
- Communication from theEuropean Communities (G/L/97)
10. Implementation oftheAgreement onTextiles andClothing and 25
Related Matters
- Communication from Pakistan onbehalf ofanumber of
WTO Members (G/L/92)
Thefollowing items were included under "Other Business"
11. Further Industrial Tariff Negotiations 30
- Statement byAustralia
12. US:Request forConsultations concerning Restrictive Business 31
Practices intheJapanese Photographic FilmandPaper Market
- Statement bytheUnited States
13. Availability ofdocuments inSpanish 32
- Statement byElSalvador onbehalf ofGRULACG/C/M/13
Page3
14. Review under Article 6ofthePreshipment Inspection Agreement 33
- Statement bytheChairman
15. Dateofthenextmeeting 33
TheChairman welcomed delegations tothismeeting convened byWTO/AIR/418.
1. Observer status forInternational Intergovernmental Organizations
- Statement bytheChairman
1.1 TheChairman recalled thatatitsmeeting of18July1996, theGeneral Council hadapproved
the"Guidelines onObserver Status forInternational Intergovernmental Organizations" (Annex 3of
document WT/L/61). Atthelastmeeting, hehadproposed toholdinformal consultations onwhich
international intergovernmental organizations would begranted observer status intheGoods Council.
Heinformed Members thatthose consultations werecontinuing. Pending theoutcome, hehadinvited
those organizations which hadbeenfollowing theCouncil 'smeetings uptonowonanad-hoc basis,
toattend alsothismeeting onanad-hoc basis, assuming thatthiswould meet withtheapproval of
Council Members. Theorganizations concerned weretheFAO, IMF, ITCB, OECD, UN,UNCTAD,
World Bank andtheWCO. Heproposed thattheCouncil continue toinvite those organizations on
anadhocbasis alsotoitsforthcoming meetings untiltheinformal consultations onthismatter were
finalized.
1.2 TheCouncil soagreed.
2. Circulation andDerestriction ofCouncil Documents
- Statement bytheChairman
2.1 TheChairman stated thatanother pending issuewasresolved when theGeneral Council, also
atitsmeeting of18July1996, adopted aDecision onProcedures fortheCirculation andDerestriction
ofWTO documents (WT/L/160/Rev.1). Hewished todraw theCouncil 'sattention inparticular to
thefollowing points ofthedecision: (1)alldocuments werehenceforth tobecirculated asunrestricted
documents withtheexception ofthose specified intheAppendix todocument WT/L/160/Rev.1 for
which procedures forderestriction were setout; (2)notwithstanding theexceptions toparagraph 1
setoutintheAppendix, anyMember might, atthetimeitsubmitted anydocument forcirculation,
indicate totheSecretariat thatthedocument beissued asunrestricted, and(3)anyrestricted document
might beconsidered forderestriction bytheMinisterial Conference, theGeneral Council, orthebody
under theauspices ofwhich thedocument wascirculated, ormaybeconsidered forderestriction at
therequest ofanyMember.
2.2 TheCouncil tooknoteofthestatement.
3. Letter from theChairman oftheCommittee onTrade andDevelopment
- Statement bytheChairman
3.1 TheChairmanrecalledthatattheCouncilmeetingof22May1996,hehadinformedtheCouncil
thathehadreceived aletter fromtheChairman oftheCommittee onTrade andDevelopment requesting
informationontheimplementationofdevelopment-relatedprovisionsinthoseUruguayRoundinstruments
dealtwithbytheCouncil forTrade inGoods.G/C/M/13
Page4
3.2 Thisinformation wasnecessary inorder fortheCommittee onTrade andDevelopment tocarry
outthetasksetoutinitsterms ofreference which was"toreview periodically, inconsultation, as
appropriate, withtherelevant bodies oftheWTO, theapplication ofspecial provisions intheMultilateral
Trade Agreements andrelated Ministerial Decisions infavour ofdeveloping country Members, and
inparticular least-developed country Members, andreport totheGeneral Council forappropriate
action.". Suchareview wasalsoprovided forintheCommittee 'sprogramme ofwork for1996, and
represented apriority fortheCommittee 'sfuture work.
3.3 Atthesame meeting, hehadinformed theCouncil thathehadsentaletter totheChairpersons
ofthevarious subsidiary bodies ofthisCouncil requesting them toprovide information onthework
doneinthisarea. Hehadalsoindicated hisintention totakeaction asappropriate onceinreceipt of
thisinformation soastoenable theCommittee onTrade andDevelopment toconduct thereview.
Theresponses hadnowbeenreceived andforwarded totheChairman oftheCommittee onTrade and
Development. The Secretariat had made acompilation ofthose responses in
document WT/COMTD/W/16 dated 27August 1996andanAddendum which would beissued shortly.
Based onthisdocument, thematter wasnowunder consideration intheCommittee onTrade and
Development.
3.4 TheCouncil tooknoteofthestatement.
4. Requests forextensions ofwaivers duetoexpire on31December 1996pursuant toparagraph 2
oftheUnderstanding inrespect ofWaivers ofObligations under GATT 1994
4.1 TheChairman stated thatthefollowing agenda itemdealtwithaseries ofwaivers which were
duetoexpire attheendoftheyearunless extended pursuant toparagraph 2oftheUnderstanding in
respect ofWaivers ofObligations under theGATT 1994.
4.2 Therepresentative ofNorway noted withsome concern theimportant number ofrequests for
extensions ofwaivers fromtheobligations under paragraph 1ofArticle IofGATT 1994. Itshould
berecalled, aswaspreviously doneatlastyear'sconsideration oftherequest bytheUStoextend the
waiver covering theCaribbean Basin Initiative, thatstricter conditions applied under theWTO than
under GATT 1947 forthegranting ofwaivers ortheirpossible extensions. Hisdelegation noted in
particular theobligation oftherequesting Members todulydescribe themeasures covered bythewaiver,
thepolicyobjectivesandthereasonswhichpreventedtheobjectivesbeingachievedinaGATT-consistent
way. From thepoint ofviewofthepolitical andeconomic objectives oftherequests forextensions
ofwaivers-having regard inparticular tothose concerning theCARIBCAN, theLomé Convention,
theAndean Trade Preference ActandtheFormer Trust Territory ofthePacific islands -Norway did
nothaveanysubstantial objections. However, fortransparency purposes, hisdelegation would support
aproposal thataregular reporting mechanism beestablished allowing foranannual examination/review
ofthedevelopments under eachoftheagreements.
4.3 TheCouncil tooknoteofthestatement.
A. Cuba -Paragraph 6ofArticle XVofGATT 1994 (G/L/89, G/C/W/51/Rev.1)
4.4 TheChairman drew theCouncil 'sattention tothecommunication from Cuba contained in
document G/L/89 requesting awaiver fromitsobligations under paragraph 6ofArticle XVofGATT
1994. Adraftdecision wascirculated indocument G/C/W/51/Rev.1. Herecalled thatthisrequest
hadbeenbefore theCouncil atitsmeeting of5July1996, buttheCouncil haddecided torevert to
thisrequest inthelightoftheoutcome ofconsultations which wereinprogress inawider context on
anumber ofwaivers falling under paragraph 2oftheUnderstanding inrespect ofWaivers ofObligations
under theGATT 1994. Theconsultations hadledtoanunderstanding thatthesewaivers should followG/C/M/13
Page5
theprocedure setoutinparagraph 3ofArticle IXoftheWTO Agreement, i.e.suchrequests should
besubmitted initially totheCouncil forTrade inGoods forconsideration during atimeperiod which
shallnotexceed 90days. Attheendofthetimeperiod, theCouncil wastosubmit areport tothe
General Council.
4.5 Therepresentative ofCuba stated thattherequest from Cuba foranextension ofthewaiver
granted in1964wascirculated inJune1996. Adraftdecision submitted byhisdelegation wascirculated
indocument G/C/W/51. Insubsequent consultations guided bytheSecretariat, attention wasdrawn
tothefactthatthedraftdecision should reflect anexpiry dateforthewaiver, andforannual reporting
totheGeneral Council tobring itintolinewiththeprovisions oftheWTO. Thedraftdecision was
revised inlightofthese comments andcirculated indocument G/C/W/51/Rev.1.
4.6 TheCouncil approved thedraft decision contained indocument G/C/W/51/Rev.1, and
recommended thatitbeforwarded totheGeneral Council foradoption.
B. United States -Former Trust Territory ofthePacific Islands (G/L/101, G/C/W/53)
4.7 TheChairman drew theCouncil 'sattention tothecommunication from theUnited States
contained indocument G/L/101 requesting awaiver fromitsobligations under paragraph 1ofArticle
IofGATT 1994. Adraftdecision wascirculated indocument G/C/W/53.
4.8 Therepresentative oftheUnited States stated thatin1947, theUnited States hadbecome the
AdministeringAuthorityoftheTrustTerritoryofthePacificIslands.TheTrustTerritorywasterminated
in1994andtheformer territories werenowtheRepublic oftheMarshall Islands, theFederated States
ofMicronesia, theCommonwealth oftheNorthern Mariana Islands, andtheRepublic ofPalau, each
ofwhich wasself-governing. Since 1947, theUnited States hadextended historical preferences first
totheTrust Territory andnowtoitssuccessor states inthesame wayaspreferences wereprovided
toU.S.possessions covered byArticle I.2andAnnex D.Thepreferential treatment covered bythe
waiver ordinarily would havebeencovered byArticle I.2andAnnex Dbutforthetiming oftheUN
decision placing theislands under trusteeship. Details ontheprovisions andcoverage ofthisagreement,
aswellastheexceptional circumstances which justified theneedforthewaiver, wasprovided inthe
renewal request submitted byhisdelegation. Hisauthorities hadrequested thatthiswaiver beextended
fortenyears.
4.9 TheCouncil took note ofthestatement, approved thedraft decision contained in
document G/C/W/53 andrecommended thatitbeforwarded totheGeneral Council foradoption.
C. United States -Imports ofAutomotive Products (G/L/103 andCorr.1, G/C/W/55)
4.10 TheChairman drew theCouncil 'sattention tothecommunication from theUnited States
contained indocument G/L/103 anditscorrigendum requesting awaiver from itsobligations under
paragraph 1ofArticle IofGATT 1994. Adraftdecision wascirculated indocument G/C/W/55.
4.11 Therepresentative oftheUnited States sought aone-year renewal ofthewaiver forthetariffs
preferences contained intheUnited States-Canada Automotive Products Trade Agreement. This
agreement,signedin1965,allowedtheeconomicintegrationoftheUSandCanadianautomanufacturing
industry, which wasjoined geographically, butarbitrarily anduneconomically divided attheborder.
U.S.tariffs onallproducts covered bythiswaiver would beeliminated asof1January 1998 aspart
oftheimplementation ofthetariffelimination schedule oftheUS-Canada freetradeagreement, which
hasbeenincorporated intotheNAFTA. Details ontheprovisions andcoverage ofthisagreement,
aswellastheexceptional circumstances which justified theneedforeachwaiver, wasprovided in
therenewal request submitted byhisdelegation.G/C/M/13
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4.12 Therepresentative ofJapan stated thathisdelegation could not,atthisstage, support thisrequest
foranextension ofthewaiver duetoinsufficient information. Hisdelegation intended torequest the
United States formore information inorder todetermine itsposition.
4.13 TheCouncil tooknoteofthestatements agreed torevert tothisagenda itematitsnextmeeting.
D. United States -Andean Trade Preference Act(G/L/102, G/C/W/54)
4.14 TheChairman drew attention tothecommunication from theUnited States contained in
document G/L/102 requesting awaiver from itsobligations under paragraph 1ofArticle Iof
GATT 1994. Adraftdecision wascirculated indocument G/C/W/54.
4.15 Therepresentative oftheUnited States stated thattheAndean Trade Preferences Act(ATPA),
enacted in1992, wasoneofhisgovernment 'smajor trade initiatives tohelptheAndean beneficiary
countries reduce theproduction andtrafficking ofillicit drugs byoffering opportunities toexpand trade
inlegitimate products. Details ontheprovisions andcoverage ofthisagreement, aswellasthe
exceptional circumstances which justified theneedforeachwaiver, wasprovided intherenewal request
submitted byhisdelegation. TheATPA wasauthorized byCongress foraperiod oftenyears, ending
on4December 2001. Hisauthorities hadrequested anextension ofthewaiver forthisprogram for
thesame period.
4.16 Therepresentatives ofPeruandColombia supported thiswaiver request. Therepresentative
ofColombia added thattheATPA adopted bytheUnited States Congress wasofgreat importance
tonotonlyhiscountry, butalsotoBolivia, Ecuador andPeru. Thecreation ofopportunities inmany
ofthese countries hadhelped fightagainst trafficking ofillicit narcotics. Colombia wasmaking great
efforts toensure thesubstitution oftheseillegal crops withother crops. Thisrequest, should therefore,
alsobeassessed onhumanitarian grounds.
4.17 TheCouncil took note ofthestatements, approved thedraft decision contained in
document G/C/W/54, andrecommended thatitbeforwarded totheGeneral Council foradoption.
E. Canada -CARIBCAN (G/L/100, G/C/W/52)
4.18 TheChairman drew theCouncil 'sattention tothecommunication from Canada contained in
document G/L/100 requesting awaiver from itsobligations under paragraph 1ofArticle Iof
GATT 1994. Adraftdecision wascirculated indocument G/C/W/52.
4.19 Therepresentative ofCanada stated thatCARIBCAN wasaneconomic andtradedevelopment
assistance program fortheCommonwealth Caribbean countries andterritories established asaresult
ofacommitment byCanada attheCommonwealth meeting inNassau inOctober 1985. Herdelegation
referred todocument G/L/100 of4September forthedetails regarding Canada 'sCARIBCAN initiative.
Although thiswaiver wasinitially granted fortheperiod starting from15June1986until15June1998,
thewaiver would expire on31December 1996 pursuant totheUnderstanding inrespect ofWaivers
ofObligations under theGATT 1994. Inthelightofthecontinuing relevance oftheconsiderations
raised intheabove-mentioned documents andtaking intoaccount theinformation pertaining tothe
initiative, herdelegation requested thatWTO Members approve Canada 'sapplication fortheextension
ofthiswaiver.
4.20 The Council took note ofstatement, approved thedraft decision contained in
document G/C/W/52, andrecommended thatitbeforwarded totheGeneral Council foradoption.G/C/M/13
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F. Communication from theEuropean Communities (G/L/107)
- European Communities -Fourth ACP-EEC Convention ofLomé (G/L/108,
G/C/W/58/Rev.1)
4.21 TheChairman drew theCouncil 'sattention tothecommunication from theEuropean
CommunitiescontainedindocumentG/L/108inwhichtheEuropeanCommunitiesandtheGovernments
oftheACP States which were alsoMembers oftheWTO hadrequested anextension ofthewaiver
from theobligations under paragraph 1ofArticle IofGATT 1994 fortheEuropean Communities.
Adraftdecision wascirculated indocument G/C/W/58/Rev.1.
4.22 Therepresentative oftheEuropean Communities referred toparagraph 2ofdocument G/L/108
andstated thatthemain features oftheConvention, asdescribed intheoriginal request forawaiver
hadnotchanged withregard tothesubject matter covered bythewaiver. Theprovisions ofthe
Convention continued torequire preferential treatment bytheCommunity including dutyfreeaccess
toproducts originating fromACPcountries. TheConvention alsocontinued "toprovide forasystem
toguarantee thestabilisation ofACPearnings fromtheirexports, either totheCommunity ortoother
destinations, ofagricultural andmining products onwhich theireconomies aredependent andwhich
areaffected byfluctuations inprices and/or supply." Headded thattheaimoftheConvention was
toimprove thestandard ofliving oftheACP states including theleastdeveloped amongst them.
4.23 Therepresentatives ofZimbabwe andMauritius supported therequest foranextension ofthis
waiver.
4.24 Therepresentative ofJapan stated thatwhile hisdelegation wasprepared tojointheconsensus
hewished topoint outthatparagraph 8ofthePreamble ofthedraftdecision stated that"Noting that
therequest foranextension ofLomé IVhasbeenmade bytheParties totheConvention without
prejudice totheirposition thattheConvention isentirely compatible withtheirobligations under Article
XXIV ofGATT 1994inthelightofPartIVofGATT 1994;" Hisdelegation noted thatthemeasures
inquestion namely dutyfreeimports from ACP countries were inconsistent withtheobligations of
paragraph 1ofArticle IofGATT 1994 andthattheywould become consistent onlyoncethewaiver
hadbeenobtained.
4.25 TheCouncil took note ofthestatements, approved thedraft decision contained in
documentG/C/W/58/Rev.1,andrecommendedthatitbeforwardedtotheGeneralCouncilforadoption.
- France -Trading Arrangements withMorocco (G/L/109, G/C/W/59/Rev.1)
4.26 TheChairman drew theCouncil 'sattention tothecommunication from theEuropean
CommunitiescontainedindocumentG/L/109requestingawaiverfromitsobligationsunderparagraph1
ofArticle IofGATT 1994. Adraftdecision wascirculated indocument G/C/W/59/Rev.1.
4.27 TherepresentativeoftheEuropeanCommunitiesstatedthatoriginallythiswaiverwasrequested
toensure auniformity intherelationship between France andtheKingdom ofMorocco. PartofMorocco
wascovered byparagraphs 2and4ofArticle IoftheGATT andthereby abeneficiary ofpreferences.
France sought awaiver inorder toextend these preferences toother partsoftheterritory ofMorocco.
Theadvantages thatMorocco derived from these trading arrangements hadbeen absorbed inthe
Euro-Mediterranean Agreement between theCommunity andMorocco andtheextension ofthewaiver
wassought untilsuchadatethattheEuro-Mediterranean Agreement would enter intoforce oruntil
31December 1997, whichever wasearlier. Arequest forarenewal ofthewaiver wasalsopossible
should thisbenecessary.G/C/M/13
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4.28 TherepresentativeofMoroccostatedthatthiswaiverwasaimedatmakinguniformthetreatment
given toproducts originating fromtheformer French zoneofMorocco andproducts originating from
other parts oftheterritory ofMorocco, particularly thespanish territories inthenorth. Tobein
conformity withmultilateral agreements, anextension ofthewaiver hadbeenrequested untilsucha
timewhen theEuro-Mediterranean Agreement entered intoforceoruntil31December 1997, whichever
wasearlier. Arequest forarenewal ofthewaiver wasalsopossible should thisbenecessary.
4.29 TheCouncil took note ofthestatements, approved thedraft decision contained in
documentG/C/W/59/Rev.1,andrecommendedthatitbeforwardedtotheGeneralCouncilforadoption.
G. South Africa -BaseDates under Article I.4(G/L/104, G/C/W/56/Rev.1)
4.30 TheChairman drew theCouncil 'sattention tothecommunication fromSouth Africa contained
indocument G/L/104 requesting awaiver from itsobligations under paragraph 4ofArticle Iof
GATT 1994. Adraftdecision wascirculated indocument G/C/W/56/Rev.1.
4.31 Therepresentative ofSouth Africa stated thattheCONTRACTING PARTIES ofGATT had
given successive waivers toSouth Africa andthethenFederation ofNorthern andSouthern Rhodesia
andNyassaland since 1947 toretain inplace certain preferential arrangements. Until 1960 when it
wasdecided tomodify therequirements under Article I.4andalsoinAnnex Gtotheextent thatthe
South African basedates of1July1938 bemoved forward to30June1960 inrespect ofthetreaties
withtheFederation andNyassaland atthattime. There wasnospecific time-limit totheoriginal waiver
untiltheinception oftheWTO. South Africa wasasking foraone-year extension ofthiswaiver.
TheTrade Protocol recently initialled bythegovernments oftheSouthern African Customs Union
(SACU) countries, provided interaliaforthecreation ofafreetrade zoneamongst thetwelve SACU
Members. Itcould beenvisaged thatallexisting bilateral agreements between theSACU Members
would beeventually incorporated intoasingle treaty oncethatinstrument hadbeenratified bythe
member governments. Thiswould bereported toMembers attheappropriate time. Thiswaiver request
wasinkeepingwiththeobjectivesoftheWTOnamelyregionalintegrationtostimulateeconomicgrowth.
4.32 TheCouncil took note ofthestatement, approved thedraft decision contained in
documentG/C/W/56/Rev.1,andrecommendedthatitbeforwardedtotheGeneralCouncilforadoption.
H. Zimbabwe -BaseDates under Article I.4(G/L/106, G/C/W/57/Rev.1)
4.33 TheChairman drewtheCouncil 'sattention tothecommunication fromZimbabwe contained
indocument G/L/106 requesting awaiver from itsobligations under paragraph 4ofArticle Iof
GATT 1994. Adraftdecision wascirculated indocument G/C/W/57/Rev.1.
4.34 Therepresentative ofZimbabwe referred totherequest submitted byhisdelegation andhoped
thatitwould beconsidered favourably.
4.35 TheCouncil took note ofthestatement, approved thedraft decision contained in
documentG/C/W/57/Rev.1,andrecommendedthatitbeforwardedtotheGeneralCouncilforadoption.
5. FreeTrade Agreement between theEFTA States andEstonia
- CommunicationfromthePartiestotheAgreement(WT/REG28/N/1andWT/REG28/1)
5.1 TheChairman drewtheCouncil 'sattention tothenotifications fromtheparties totheAgreement
contained indocument WT/REG28/N/1. TheFreeTrade Agreement between theEFTA States on
theonesideandEstonia ontheother sidewassigned on7December 1995 andhadbeenapplied onG/C/M/13
Page9
aprovisional basis asof1June1996, pending ratification bytheParties totheAgreement. Thetext
ofthisAgreement hadbeencirculated indocument WT/REG28/1.
5.2 Therepresentative ofIceland recalled thatattheCouncil meeting of22May1996, hehad
informed theCouncil oftheimminent entry intoforce ofthese three FreeTrade Agreements andthe
formal notifications weresentinJune1996. Theratification procedures hadbeencompleted withrespect
totheFreeTrade Agreements between theEFTA states ontheonesideandEstonia andLatvia on
theother side. Theratification procedures regarding theFreeTrade Agreement between theEFTA
states andLithuania were stillunderway, andwould becompleted laterthisyear.
5.3 TheChairman proposed thattheCommittee onRegional Trade Agreements carry outthe
examination ofthisagreement inaccordance withthefollowing terms ofreference:
"toexamine, inlightoftherelevant provisions oftheGATT 1994, theFreeTrade
Agreement between theEFTA States andEstonia, andtosubmit areport totheCouncil
forTrade inGoods."
5.4 Itwasunderstood thattheunderstanding readoutbytheChairman oftheCouncil forTrade
inGoods under item7oftheAgenda ofthemeeting oftheCouncil forTrade inGoods on
20February 1995, ascontained indocument WT/REG3/1, would apply mutatis mutandis tothis
examination. Itwasalsounderstood that,during theexamination, dueaccount would betaken ofthe
intrinsic differences between customs unions andfree-trade areas.
5.5 TheCouncil forTrade inGoods soagreed.
6. FreeTrade Agreement between theEFTA States andLatvia
- CommunicationfromthePartiestotheAgreement(WT/REG29/N/1andWT/REG29/1)
6.1 TheChairman drewtheCouncil 'sattention tothenotification fromtheparties totheAgreement
contained indocument WT/REG29/N/1. TheFreeTrade Agreement between theEFTA States on
theonesideandLatvia ontheother sidewassigned on7December 1995 andhadbeenapplied on
aprovisional basis asof1June1996, pending ratification bytheParties totheAgreement. Thetext
ofthisAgreement hadbeencirculated inthedocument series WT/REG29/1.
6.2 TheChairman proposed thattheCommittee onRegional Trade Agreements carry outthe
examination ofthisagreement inaccordance withthefollowing terms ofreference:
"toexamine, inlightoftherelevant provisions oftheGATT 1994, theFreeTrade
Agreement between theEFTA States andLatvia, andtosubmit areport totheCouncil
forTrade inGoods."
6.3 Itwasunderstood thattheunderstanding readoutbytheChairman oftheCouncil forTrade
inGoods under item7oftheAgenda ofthemeeting oftheCouncil forTrade inGoods on
20February 1995, ascontained indocument WT/REG3/1, would apply mutatis mutandis tothis
examination. Itwasalsounderstood that,during theexamination, dueaccount would betaken ofthe
intrinsic differences between customs unions andfree-trade areas.
6.4 TheCouncil forTrade inGoods soagreed.G/C/M/13
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7. FreeTrade Agreement between theEFTA States andLithuania
- CommunicationfromthePartiestotheAgreement(WT/REG30/N/1andWT/REG30/1)
7.1 TheChairman drewtheCouncil 'sattention tothenotification fromtheparties totheAgreement
contained indocument WT/REG30/N/1. TheFreeTrade Agreement between theEFTA States on
theonesideandLithuania ontheother sidehadbeenapplied onaprovisional basis asof1August
1996, pending ratification bytheParties totheAgreement. ThetextofthisAgreement hadbeen
circulated indocument WT/REG30/1.
7.2 TheChairman proposed thattheCommittee onRegional Trade Agreements carry outthe
examination ofthisagreement inaccordance withthefollowing terms ofreference:
"toexamine, inlightoftherelevant provisions oftheGATT 1994, theFreeTrade
Agreement between theEFTA States andLithuania, andtosubmit areport tothe
Council forTrade inGoods."
7.3 Itwasunderstood thattheunderstanding readoutbytheChairman oftheCouncil forTrade
inGoods under item7oftheAgenda ofthemeeting oftheCouncil forTrade inGoods on
20February 1995, ascontained indocument WT/REG3/1, would apply mutatis mutandis tothis
examination. Itwasalsounderstood that,during theexamination, dueaccount would betaken ofthe
intrinsic differences between customs unions andfree-trade areas.
7.4 TheCouncil forTrade inGoods soagreed.
8. Issues concerning Market Access andCircumvention astheyrelate totheimplementation of
theAgreement onTextiles andClothing
- Communication from theUnited States (G/L/95)
8.1 TheChairman recalled thatregarding agenda items 8,9and10,which dealt withdifferent
aspects oftheimplementation oftheAgreement onTextiles andClothing (ATC), attheHeads of
Delegation meeting of16September, theDirector-General hadstated thatamongst themain issues
which appeared tostand outfortheattention ofMinisters anddelegates inconnection with
implementationwasthe"prioritywhichthedevelopingcountriesattachedtotextiles".Atthelastmeeting
oftheCouncil,on25July1996,therehadbeenasubstantivediscussiononthecommunicationregarding
theimplementation oftheATCfromPakistan alsoonbehalf ofanumber ofWTO Members, asreflected
intherecords ofthemeeting (G/C/M/12). Because oftimeconstraints, ithadbeenagreed todiscuss
theremaining twoagenda items ofthatmeeting which related tocommunications fromtheUnited States
andtheEuropean Communities onthesame matter, atthepresent meeting oftheCouncil. Ithadalso
beenagreed thatdelegations should beabletorevert tothesaidcommunication byPakistan ,ifthey
hadadditional comments.
8.2 Therepresentative oftheUnited States stated thatherdelegation feltstrongly thattheCouncil
would benefit from having theTMB report before itwhen considering thismatter. Herdelegation,
asmentioned initscommunication (G/L/95), hadtwoareas ofbroad concern concerning the
implementation oftheATC, i.e.market access andcircumvention oftheAgreement through
transshipment.
8.3 Ithadbeenagreed intheATC, thataspartoftheintegration process Members would undertake
commitments toachieve improved access totheirmarkets fortextile andclothing products. Therelevant
provision wasArticle 7oftheATC, andthereference to"Members" included alsoexporting countries.
President Clinton hadalsomade acommitment toCongress thattheUS"willingness tophase outtheG/C/M/13
Page11
MFA belinked directly totheachievement ofeffective market access inindividual countries byremoval
ofnon-tariff barriers andlowering oftariffs".
8.4 TheUSwassuffering fromhugetrade deficits intextile andapparel trade, andtherewasalso
large unemployment inthatsector. Ithadbeencritical toherGovernment 'scommitment totheUS
industry anditsworkers, andinlinewiththespirit andtheletter oftheAgreement toobtain greater
market access during thistransitional period. Herdelegation hadhighlighted inthepaper that
improvements werenecessary invarious areas. TheUSremained concerned thatexporting countries
were falling short ofthespirit, andinsome cases, theletter oftheATC, intheareaofremoval of
tariff andnon-tariff barriers. Concerning tariff barriers, theUShadhaditsmarket access inthird
countries significantly hampered bybarriers suchasthefollowing, some ofwhich might beinconsistent
withthecountries 'WTO commitments.
8.5 OneMember, having oneoftheworld 'sfastest-growing economies andabalance-of-payments
surplus oftheorder offourbillion dollars, hadincreased tariffs on64different textile andapparel
products, sometimes by200and300percent. Another Member hadintroduced additional duties on
topofexisting duties of65percentinthetextile andclothing sector, andcertain other Members had
begun touseselective andarbitrary minimum pricing valuations, inaddition totheuseofspecific duties.
Asexample ofnon-tariff measures, onetrading partner continued touseadiscretionary import licensing
régime forimports inthetextile andclothing sector under which licences wereissued onapricebasis
tominimize competition inthedomestic market. Another trading partner hadrecently established,
without complying withthenotice andcomment requirements oftheAgreement onTechnical Barriers
toTrade, onerous labelling requirements forimported textile andapparel products. Certain exporting
Members stillmaintained negative restrictive listsforkeyproducts.
8.6 Turning toanassessment ofUScompliance withtheATC incomparison toother Members,
theproduct integration commitments oftheATC were tointegrate inthree stages products which
amounted tocertain percentages ofthe1990 imports involume terms drawn from thefourmajor
products: topsandyarns, fabrics, made-up products andclothing. Thechoice ofproducts hadbeen
lefttoeachimporting Member. Members which didnotapply quantitative restrictions under Article 2,
butwhowished toreserve theirrights toinvoke Article 6safeguards, weresubject totheintegration
commitment.
8.7 Inaddition totheintegration obligations which tookeffect on1January 1995, theUS,inorder
toprovide certainty tothetrading community, hadselected andpublished thelistofproducts thatwould
beintegrated inthesecond andthirdstage, which wasnotrequired bytheATC. With respect tothe
those Members whowished toreserve theirrights toinvoke thesafeguard mechanism, herauthorities
hadnoted thatproducts thatwereconsidered "sensitive" inthecontext ofthetrading community had
not,byandlarge, beennotified bymostMembers. Also, Members hadnotified products thatincluded
entire product groups thatwerenotevenimported intotheircountries during theATCreference period.
Thefollowing wereexamples offirststageintegration ofselected exporting Members thatherauthorities
hadidentified, andwhich showed thepercentage oftheir1990 imports integrated ineachofthefour
major product groups. Country A:yarn-14%; fabric -1.52%; apparel -0.01%; made-ups -0%.
Country B:yarn-6.35%; fabric, apparel andmade-ups -0%.Country Chadsimilar results. Country
D:yarn-0.3%; fabric andapparel -0%,made-ups -27%. Country E:yarn-15%; fabric -0%;
apparel -0.23%; made-ups -0.69%.
8.8 Thefigures demonstrated that,forthemostpart,exporting Members hadnotintegrated any
meaningful orsensitive products inthefabric, apparel ormade-up groups.
8.9 Inaddition toproduct integration commitments, theUShadapplied progressively increasing
growth ratesasrequired byArticles 2.3and2.18totheeligible quantitative restrictions maintainedG/C/M/13
Page12
under Article 2.1.These restrictions would benefit fromthecontinued growth rateincreases provided
inArticle 2.14totheextent thattheywere notintegrated infuture stages. Particularly compelling
wasthatthequota growth rateacceleration under theATCwould expand access available toMembers
byanestimated 4billion square meters bytheendofthetransition period.
8.10 Regarding thelevelofoverall access intotheUScompared withaccess intoselected exporting
countries, some exporting Members hadlarge consumer markets oftheirowntowhich USexporters
sought access. Under theATC, these countries hadobtained substantially greater access totheUS
market, while increased access totheirownmarkets hadnotbeencomparable. Forexample, theUS
hadfound thatbytheendof1995 aparticular trading partner wasshipping totheUSapproximately
87times more textiles thanitimported from theUS. In1995, aMember hadexported totheUS,
56times more textiles andapparel thanitimported fromtheUS.Bytheendof1995, aMember was
exporting 35times more textiles andapparel totheUSthanitimported from theUS.
8.11 Shenoted thatexporting countries hadcomplained that,while following theletter oftheATC,
inorder fortheUStoprovide more market access, itshould accelerate integration ofproducts under
quota. Shealsonoted thatwhile some exporting countries hadfollowed theletter ofthe10-year tariff
reduction commitment, perhaps exporting countries should alsoconsider accelerating tariffreductions,
since onaverage theirtariffs were much higher thantheUStariff. High tariffs hadaworse effect
onmarket access thanquotas. High tariffs virtually prohibited imports, while quotas allowed access
ofacertain quantity thatprovided certainty ofmarket access. Withgrowth-on-growth, many products
under quota would haveevengreater access totheUSmarket.
8.12 Regarding thesecond USconcern which wascircumvention oftheAgreement through
transshipment, herauthorities hadmade ititstoppriority. Prevention ofcircumvention wasimportant
totheimplementation oftheATC. Anagreement wasonlyasgood asitwasenforced, andthiswas
something thatallMembers, importers andexporters hadtoensure. TheUSimported over44billion
dollars oftextiles andapparel annually. Such goods hadbeendocumented asbeing imported from
over180countries, territories andentities. TheUShadnegotiated andmaintained quantitative
restrictions with46countries orterritories ontheamount oftextile andapparel which could beexported
totheUS.
8.13 TheUSwasoneoftheworld 'slargest consumer markets fortextiles andapparel. Because
ofthelarge consumer demand fortextiles andapparel intheUS,andexcess production capacity in
somecountries,transshipmenthadbecomeaneconomicallyviableoption.Thisresultedingoodsentering
theUSmarket incircumvention ofquota agreements, andtherefore inviolation ofquotas maintained
under theATC. Inthepast,transshipment hadbeeneasier todetect. Exporters hadusedunsophisticated
means tofalsify thetruecountry oforigin. Suchmeans, which included labelchanges, alteration of
apparel forpurposes ofmis-classification toevade quotas, andentry document alteration, wereoften
detected bytheCustoms Service atborder ports ofentry. After numerous seizures byUScustoms
officials atports ofentry inrecent years, transshippers hadresorted tomore sophisticated means of
quota evasion e.g.totheoutright smuggling ofwearing apparel intotheUS.Imported textiles had
beendeclared asother commodities. Thesupporting entry documentation, which included invoices,
shipping documents, purchase orders, etc.indicated commodities other thanapparel. However, upon
extensive examination ofcontainers, hundreds ofcartons ofapparel hadbeenfound tobesmuggled,
inviolation ofbilateral textile agreements.
8.14 Transshipment could notbeeasily identified bysimply examining thegarments orthe
accompanying shipping andentry documents. Requesting documentation showing production didnot
yieldresults, sincetransshippers could fabricate therecords which wererequested. Themosteffective
method todetermine production wastohave theability tovisitafactory andconfirm production
capability.G/C/M/13
Page13
8.15 Tracing documentation toshow theoriginating country could bedifficult when fictitious
companies wereshown ondocumentation usedtomake anentry, orwhere legitimate companies names
appeared onfalse invoices. Inthelatter instance, thecompany 'sname wassimply usedbythe
transshipper without theknowledge ofthecompany. There hadbeeninstances where theUScustoms
officials hadvisited suchfirms onlytofindoutthatinstead ofwearing apparel, thecompany was
manufacturing electronics, orfabricating goldjewellery.
8.16 Thequestion washowtodealwiththissituation. Herauthorities hadtaken certain measures,
e.g.,since 1990, UScustoms hadvisited over68countries andterritories toidentify theproblem of
transshipment. Over US$600 million worth oftextile goods hadbeencharged tothecorrect country
oforigin, inaccordance withbilateral andmultilateral commitments andprocedures. Thisamount
would beevengreater, butinmany cases thetruecountry oforigin could notbeidentified because
oflackofcomplete documentation atthelevelrequired byinternational obligations.
8.17 TheUShadbrought circumvention charges fourseparate times against oneparticular exporting
Member. Thiscountry, alarge cotton-producing exporting Member, hadbeenfound tobeillegally
transshipping cotton fabrics, bedsheets andtowels. Inallfourofthese illegal transshipment schemes,
UScustoms officials hadvisited thetruecountry oforigin anditsfactories aswellasthecountries
where thegoods werealleged tohavebeenproduced, inorder toprovide totheMember documents
andevidence showing themovement ofgoods from thetruecountry oforigin through thecountry
oftransshipment totheUS.
8.18 TheUShadprovided training andtechnical assistance forexporting countries toassist inthe
prevention ofcircumvention, andhadworked withexporting countries toautomate andstreamline "visa"
orexport authorization systems, which helped toeliminate fraudulent export documentation and
circumvention. Theestablishment bytheUSofan"assembly" based ruleoforigin forimported apparel
products helped toharmonize requirements among themajor importing countries, andtominimize
theconfusion about origin requirements inthemajor markets. TheUShadalsorecently established
newrequirements forimporters toensure andverify thecountry oforigin oftheirgoods, andexpanded
penalties intheseareastoinclude penalties based onnegligence. Inaddition, newtransparency initiatives
hadmade thetrading community intheUS,andalsotheexporting countries, aware ofcountries that
hadengaged inillegal transshipment.
8.19 Thefocus ofthereview exercise should alsobethemeasures thatcould betaken bytheexporting
countries. Without effective actions byMembers, tofulfiltheircommitments "toprevent, toinvestigate
and,where appropriate, totakelegaland/or administrative action against circumvention practices within
theirterritory", andwithout fullcooperation among Members, transshipment would become evenmore
difficult toeliminate. AstheUShadnoted initscommunication, "effective implementation ofthe
ATC depends onexporting countries adopting effective measures toprevent circumvention ofthe
Agreement." Inthecontext ofencouraging closer cooperation inthisarea, theUSproposed the
following: theenactment ofdomestic legislation, making transshipment oftextiles andapparel illegal,
andtheestablishment ofpenalties; theenactment oflegislation which required theretention of
documents/records forthepastthree tofiveyears, illustrating theproduction/manufacturing ofthe
merchandise; thecreation ofprogrammes which would encourage thetextile industry tocome forward
andreport instances oftransshipment; theconducting ofunannounced production verification visits;
partnerships withimporting countries toshare information andtechniques; establishment ofaborder
inspection system which focused ontheseshipments; ininstances where transshipment wassuspected,
provision ofinformation totheimporting country soaction could betaken before thegoods hadactually
entered theconsumer market; therequirements thatthemanufacturer whowasreceiving thequota
allocation report allsub-contracting work (names andaddresses), verification ofwhere theproduction
wasdone; examination andverification oftheproduction intheforeign trade orfreetrade zones.G/C/M/13
Page14
Inthepast,freetrade zones hadoffered anexcellent opportunity tochange shipping documentation,
thereby masking thetruecountry oforigin.
8.20 Shewished tochallenge eachMember toimplement astrong andaggressive anti-circumvention
programme andtochallenge Members towork together todevelop newsolutions tostopthe
transshipment oftextile products inviolation oftheAgreement. Inconclusion, shewished tohighlight
thatafteralmost twoyears under theATC, andwhen looking atintegration, exporting countries had
notnotified sensitive products, andmany hadnotfollowed theATC reference period inmaking these
notifications. Looking attheentry intotheUSmarket, herauthorities hadfound thatmarket access
intotheUSwassubstantially greater thanaccess totheexporting country market. Shehadalsonoted
theexistence ofvarious tariff andnon-tariff barriers. While some ofthem might beconsistent with
WTO commitments, theywerestillgreat impediments toaccess, andinsome cases barred entry into
exporting country markets. USconcerns regarding thelevelofcircumvention through transshipment,
which wasclearly against thespirit andtheletter oftheAgreement hadbeenhighlighted, andall
Members hadanobligation toactively prevent it.TheUSwould implement thetextithadnegotiated
withother Members, andalsoexpected exporting Members toabide bytheletter andthespirit ofthe
ATC.
8.21 Therepresentative ofColombia, speaking alsoasChairman oftheInternational Textile and
Clothing Bureau (ITCB)1stated thathewasgrateful thattheChairman hadreferred tothestatement
made bytheDirector-General recently ataHeads ofDelegation meeting ontheperception hehad
obtained fromthemultiple consultations hehadbeenholding withMembers regarding theimportance
andtheimplementationoftheATCinthegeneralreviewofimplementation.Tothisextent,thisCouncil
wascomplying withaveryserious responsibility which waspartoftheproper preparation forthe
Singapore Ministerial Conference. Hethanked theUSforthepresentation thatwasgiven onthisissue.
Hisremarks would belimited, atthisstage, tothecommunication from theUS,circulated in
document G/L/95.
8.22 Initscommunication, theUShadrequested thatthere beananalysis onthewayinwhich
countrieshadcompliedwiththeobligationtoeliminateimpedimentstotextileimports.TheUS,therefore,
assumed thatthiswasacommitment thattheexporting countries hadmade asatrade-off forprogressive
liberalization ofimport restraints imposed byimporting countries thatusedquantitative restrictions
under theformer Multifibre Agreement (MFA). However, there wasnoprovision intheATC which
established alinkage between integration commitments andthedismantling ofquantitative restrictions
withtheremoval oftradebarriers intextiles indeveloping countries. Theobligations thatwereassumed
bythetextile-exportingWTOMemberswhichincludeddismantlingoftradebarrierswerethosecontained
inthevarious Agreements. Consequently, theobligation toreduce bound tariffs wasonederiving from
whatwascontained ineachMember 'sschedule.
8.23 TheUShadalsorequested thatthere beareview ofcompliance withcommitments interms
ofcircumvention practices bythetextile andclothing exporting developing countries. Atthisstage,
itsufficed toindicate thatparagraph 1ofArticle 5oftheATCplaced anobligation onWTO Members
toadopt provisions toavoid circumvention ofquantitative restrictions, tocombat suchpractices and
topermanently cooperate tosolve problems resulting from circumvention. TheAgreement didnot
establish anyobligation tonotify measures adopted inresponse totheprovisions ofArticle 5.1.Thus
intheabsence ofanyspecific request forinformation, theconclusion should bedrawn thattheobligation
ofArticle 5.1wasfullycomplied with.
1WTO Members ofITCB: Argentina, Bangladesh, Brazil, Colombia, Costa Rica, Egypt, ElSalvador,
Hong Kong, Honduras, India, Indonesia, Jamaica, Korea, Macau, Mexico, Pakistan, Peru, SriLanka, Thailand,
Turkey, andUruguay.G/C/M/13
Page15
8.24 Therepresentative ofPakistan noted withsatisfaction thattheUSwasconfident thatitwould
implement itsobligations under theATC. Thatwasprecisely whathisdelegation wanted. Hewished
toadd,thatinaccordance withthelawoftreaties, theimplementation ofanAgreement hadtobedone
inawaythatwasconsistent withitscentral objectives, andthatanyactions thatweretantamount to
thesubversion ofthecentral objectives ofthatAgreement were ipsofacto contrary totheletter and
thespirit andthesubstance ofthecommitments contained inthatAgreement.
8.25 Inconnection withtheremarks made bytheUSrepresentative, hewished tostatethatthe
UruguayRoundAgreementsrepresentedacarefullynegotiatedbalanceofrightsandobligations.Market
access commitments relating totariffs were undertaken byallcountries participating intheRound.
These commitments weretohisdelegation 'sknowledge being fulfilled inaccordance withthestaging
established ineachcountry 'sSchedule. Developing exporting countries hadmade great sacrifices in
binding theirtariffs eveninrelation totextiles andclothing. Pakistan hadagreed tobindtextile tariffs
inaddition toeliminating quantitative restrictions, eventhough these werejustified under theBalance
ofPayment provisions oftheGATT. What theUSrepresentative hadhowever advanced wasthe
proposition thattheUSintended toimplement itsobligations under theATCinexchange foranticipated
market access liberalization bythetextile exporting countries. That, wasnotwritten anywhere inthe
ATC, andwascontrary tothebalance ofobligations setoutintheAgreement. Nofurther concessions
could bedemanded byimporting countries fortheimplementation ofobligations under theATC. The
USrepresentative hadcitedextensive trade datatotryandestablish thattheUSmarket wasliberal
andopen, whereas themarkets oftheexporting countries werenot.Infactoneoftheexamples chosen
wasthatfrom onecountry theUSimported 80times thevolume oftextiles thatitexported tothat
country. International trade could notbeconducted onthecriteria ofsectoral reciprocity. Totake
anexample, making aproposition forsectoral reciprocity withtheUSintheimport andexport of
computers fromPakistan totheUS,andviceversa, would notstand uptoanyrational analysis. The
USrepresentative hadalsostated that,inherview, hightariffs wereevenworse thanquotas asbarriers
totrade. Ifthatwerethecase, thenhisdelegation would propose totheUSthatallquotas andtariffs
beeliminated, andtextiles trade beliberalized completely.
8.26 While onthesubject ofmarket access, attention should bedrawn tothefactthat,unlike most
developing countries, theUShadagreed toimplement itstariff reductions overaperiod oftenyears,
rather thanthegenerally agreed six.This, despite thefactthatthelevels ofthesereductions weremuch
lower thantheaverage reductions agreed tobytheUSfortheindustrial sector asawhole, thereby,
denying therelevant exporting countries themuch needed access totheUSmarket inasector ofsuch
great importance totheireconomies. Hisdelegation hoped thattheimporting countries would abide
bytheircommitments andimplement theATC totheletter andspirit.
8.27 Withregard tocircumvention, hewished tofirstofallplace theproblem inperspective. The
USrepresentative hadstated thatUSimports oftextiles amounted to44billion dollars annually. She
hadalsocited thatsince 1990, theUShadtaken action oncircumvention forimports ofover
600million dollars. Arough calculation indicated thattheamount oftrade which hadbeensubjected
tocircumvention action waslessthan0.2% ofUSimports. Hisdelegation feltthatthisinordinate
focus onaproblem thatapplied tosuchasmall share ofimports wastosome extent distorting the
focus ofattention thatwasrequired regarding theimplementation oftheATC asawhole. Thisdid
notmean thatcircumvention should bejustified orcondoned. However, hisdelegation believed that
theATC provided sufficient remedies, which hadbeenpainstakingly negotiated, forthispurpose.
Iftheintention wastoreopen negotiations onthisaspect, negotiations could alsobeopened onother
aspects. However, hisdelegation didnotbelieve thatthiswasthetimetodoso.Itsconcern was
thesubjective manner inwhich thecircumvention provisions were being interpreted andapplied.
Moreover, there hadbeenanarbitrary manner inwhich theUShadbeenshifting andimplementing
itsrulesoforigin relating totextiles andclothing products. Alongdiscussion hadtaken place during
theCouncil 's25Julymeeting onthechanges intherulesoforigin thathadbeenintroduced andwhichG/C/M/13
Page16
hadproduced uncertainty intextiles trade andinthefullutilization ofaccess possibilities intotheUS
market. Furthermore, problems hadbeencreated byarecent Committee fortheImplementation of
Textile Agreements (CITA) directive which appeared toexceed thescope ofArticle 5.3oftheATC.
Thedirective authorized theUSCustoms todenyentry ofcertain textile products if,forexample, the
country oforigin forsucharticles might nothave permitted theUSCustoms toconduct on-site
verification oftheirproduction. Thiswasanextremely subjective interpretation, andanextension
ofthecircumvention provisions oftheATC which didnotconform withitsletter orspirit. His
delegationurgedtheUStoensurethattheprovisionsanddisciplinesoftheATCrelatingtocircumvention
were fullycomplied withinanyalleged instances ofcircumvention.
8.28 Therepresentative ofHong Kong stated thattheissues raised bytheUSdidnotappear tobe
pertinent totheimplementation oftheATC. More specifically, hisdelegation could seenobasis for
theUStextileintegrationprogrammestobeequatedtotheWTOMarketAccesscommitments.Similarly
theATC disciplines governing theinvocation oftransitional safeguard actions could notbeequated
tothetypeofcircumvention issues raised bytheUS.Contention wasmade intheUSproposal (G/L/95)
thatthere wasatrade-off between progressive liberalization ofMFA restraints ontheonehand, and
theall-embracing exercise toimprove access tomarkets ontheother hand. Such acontention was
notsupported bythestructure ofprovisions oftheATC. Theobligation tophase outMFA restraints
applied tofourimporting countries, because theywere theonlyparties maintaining suchrestraints.
TheATCintegration programmes hadaspecial meaning tothesefourimporting parties, inthatitmeant
rectification ofpastMFA restraints which werederogations fromGATT rules. Their responsibilities
under theATC integration programmes were different from those oftheother WTO Members who
didnotmaintain MFA restraints, butwereobliged tosubmit integration programmes. Forclarity of
reference, thefourimporting parties weresometimes called ATC Article 2.7(a) Members, while the
WTO textile exporters required tomake integration programmes were called ATC Article 2.7(b)
Members.
8.29 Itwasevenmoredifficult toseehowtheintegration programmes ofthefourimporting Members
could becompared withmarket access commitments. However, ifclaims oftrade-offs orlinkages
were made inrespect ofmarket access, theycould onlybemade inthecontext oftherespective
commitments ofallWTO Members inthemarket access exercise. However, there wasnoevidence
thatthetextile exporting Members hadnotfulfilled theirmarket access obligations. Inanyevent, even
ifevidence could beproduced thematter would bemore appropriately dealtwithintheMarket Access
Committee.
8.30 Regarding circumvention, Article 5oftheATC hadclearly defined therights andobligations
ofWTO Members inthisrespect. There were commitments toestablish necessary mechanisms to
dealwiththeproblems ofcircumvention, andcommitments tocloser cooperation (Article 5.3ofthe
ATC). Suchcommitments werenecessarily qualified bytherequirements ofconsistency withMembers '
domestic laws andprocedures. Furthermore, there were clear andunambiguous provisions for
"appropriate action" tobetaken, "totheextent necessary" tocurbcircumvention. Suchaction "may
include denial ofentry" or"adjustment...to restraint levels" (Article 5.4oftheATC). These were
powerful provisions, andhadbeencarefully negotiated during theUruguay Round toaddress precisely
theproblems raised bytheUS.Itwaspartofthebalance thatprovisions foraction could beinvoked
onlyaftercertain essential requirements were met,namely thatinvestigations hadtaken place, that
sufficient evidence hadbeensecured, thatconsultations between theMembers concerned hadtaken
place, butthatamutually satisfactory solution hadnotbeenfound (Article 5.4oftheATC).
8.31 Hisdelegation hadnoproblem withthesuggestion thatMembers commit themselves tocloser
co-operation andre-affirm theirdetermination toeradicate circumvention oftheATC. From theUS
proposal, however, itwasnotclearastowhether anything further thanareaffirmation wassought,
andifso,why. Hong Kong wasdetermined toimplement theATC provisions, including Article 5andG/C/M/13
Page17
expected other Members todothesame. TheUShadrecently imposed additional import measures
oncertain textile andclothing categories, from anumber ofWTO Members, including Hong Kong.
Hisauthorities hadexpressed theviewthattheydidnotthink thattheUS,inintroducing thisaction,
hadfullyfollowed theprocedural andsubstantive provisions ofArticle 5.Inlinewiththespirit of
theWTO 'sdispute settlement mechanism, hisauthorities hadbeentrying toresolve thematter with
theUSbilaterallyandhopedthatamutuallysatisfactorysolutioncouldbefound.However,anysolutions
inorder tobesatisfactory would havetobeinconformity withthemultilateral rules.
8.32 Therepresentative ofThailand, speaking onbehalf oftheASEAN Members, stated thatthe
attention which hadbeengiven sofartothetextile andclothing tradebyWTO Members wasindicative
ofthehighpriority thatwasplaced onthisparticular issue. Therefore, trade intextiles andclothing
hadtohaveaprominent place ontheagenda oftheSingapore Ministerial Conference.
8.33 These delegations shared theUSviewthat"animportant element oftheATCisincreased market
access fortextile exports". Atthesame time, theyrecalled thattheATC clearly referred tothe
commitments resulting fromtheUruguay Round, andthatallMembers should ensure fairandequitable
application oftextile policies inallaspects. However, astotheUSstatement that"atrade-off forthe
progressive liberalization ofimport restraints byimporting countries wastheremoval ofvarious
impediments totextile imports byexporting countries", noprovision intheATC required thatthe
integration beconditional ontheremoval ofimpediments totextile imports bytheexporting countries.
Theapproach taken bysome importing countries inoffering more meaningful integration inexchange
forgreater market access indeveloping countries wasnotjustified. Suchconditionalities would inhibit
thefulfilment oftextile commitments reflected intheFinal ActoftheUruguay Round. Theintegration
under theATC wasdesigned toremove theMFA restrictions progressively. Theverypurpose ofthe
transition period could onlybeserved bysubstantial elimination ofrestrictions ateachstage. Itwas
unfortunate thatthefirststage integration programmes bysome importing countries didnotmeetthis
objective. Themarket access obligations ofASEAN members, however, hadbeenfullycomplied with.
Todate, thereports oftheMarket Access Committee didnotreveal anyfailure onthepartofany
WTOMemberstofulfilmarketaccesscommitments.Improvedmarketaccess,asaresultoftheUruguay
Round negotiations, didnotnecessarily translate intohigher volume oftrade inevery case. The
commitments provided theexistence ofsecure andpredictable trading opportunity forallMembers.
Itwasacommon economic phenomenon thatonecountry might dobetter thantheothers inoneproduct
sector owing toitscompetitiveness inthatparticular sector. Market access commitments could not
bemeasured orassessed bymerely looking attrade data. Trade wasnotazero-sum game. These
delegations agreed withtherepresentative ofPakistan regarding theimpossibility ofconducting
international trade onthebasis ofsectoral reciprocity.
8.34 Asconcernedcircumvention,ASEANhadalwaysplacedhighpriorityonthisissueandcontinued
tofullyimplement necessary anti-circumvention measures intheiradministration oftextile trade in
order toprevent andguard against possible circumvention inaccordance withArticle 5.1oftheATC.
They hadtotheutmost oftheirabilities cooperated withtrading partners atcombatting andredressing
circumvention issues.
8.35 Therepresentative ofKorea stated that,asamatter ofprinciple, Korea hadnoobjection to
thediscussion ofincreased market access inthetextile sector, aswellasenhancing theeffectiveness
ofmeasures toprevent circumvention andother fraudulent trade practices. However, hisdelegation
didnotagree thattheGoods Council should examine compliance withmarket access commitments
andthatMembers berequested tosubmit tradedatatodemonstrate thefulfilment ofthose commitments.
Itwaswellrecognized thatoneofthegreatest achievements oftheUruguay Round negotiations was
increased market access through tariffreductions andtheremoval ofnon-tariff barriers inmany areas.
Thatachievement reflected thespirit ofcompromise andbalance embodied intheconcessions ofeach
Member. Theresult wasageneral equilibrium between advantages andcommitments among developedG/C/M/13
Page18
anddeveloping countries. Inthisregard, hisdelegation considered many oftheobligations ofsome
Members under theATCastrade-offs forotherbenefits enjoyed inotherWTO Agreements. Therefore,
hisdelegation didnotthinkthattherewasanycontractual linkbetween theintegration oftextile products
byimportingcountriesandtheremovalofexportingcountries'restrictions.Regardlessofwhathappened
inother fields, hisdelegation wished tounderscore itsfirmbelief thatprogressive liberalization of
MFA restrictions should beimplemented fullyasprovided forintheATC.
8.36 Oncircumvention, while thedetermination ofMembers toeradicate circumvention should
bereaffirmed, thisdidnotnecessarily justify anyunilateral actions suchasdenial ofentry andthe
imposition ofpunitive charges. Anypunitive action hadtofollow theappropriate procedures, ofthe
ATC, andbepursued onlyifproven through suchprocedures thataMember hadnottaken measures
tocomply withitscommitments. Inaddressing thisissue, twopoints hadtobekeptinmind, soas
toensure ajustapproach andresolution tothisproblem. Theflowofnormal tradehadtobesafeguarded
fromthesimple assumption ofcircumvention. Whatever measures wereeventually taken toprevent
circumvention, theprovisions anddisciplines stipulated inArticle 5hadtobestrictly adhered to.In
short, hisdelegation wasconcerned about thepossibility thatexcessive unilateral action onthepart
ofcertain importing countries onquestions suchascircumvention might damage ordelay theprocess
ofintegration. Finally, ithaddifficulty inagreeing thatdiscussion bytheGoods Council ofcertain
ATC-related items should waitforthearrival oftheTMB'sreport. TheTMB hadbeencreated by
theATC, andtheGoods Council hadthecompetence andauthority todeliberate onanyATC-related
issues including thereport oftheTMB.
8.37 Therepresentative ofIndia thanked theUnited States forhaving submitted itsviews onthe
implementation oftheATC. Hisdelegation would reflect ontheUSpaper submitted atthismeeting
andrevert withcomments later. Hisunderstanding wasthatthereport expected fromtheTMB was
nottheTMB review contained intheATC butrather anadministrative requirement fromthisCouncil
totheTMB, toprovide areport fortheconsideration oftheCouncil andfortransmission toMinisters.
8.38 Market access wasasignificant issue forIndia astextiles andclothing exports accounted for
amajor share inIndia'stotalexport earnings. Market access provisions were negotiated aspartof
anintegrated package intheATC. Hisdelegation wastherefore surprised thattheUSargued that
"atradeofffortheprogress ofliberalization ofimport restraints byimporting countries wastheremoval
ofvarious impediments totextile imports byexporting countries". Hisdelegation could notfindany
provision intheATC, which boreoutthisUSviewpoint andsought clarification onthelegal basis
forthisargument. Negotiations onallsubjects covered bytheUruguay Round, hadbeenconducted
asatotalpackage, andhedidnotrecall anyagreement during these negotiations tolinktheremoval
ofGATT inconsistent MFA restrictions maintained bytextile importing developed countries withGATT
consistent restrictions maintained bytextile exporting developing countries.
8.39 Thenegotiations leading uptotheATC hadbeendifficult andhadtaken place against the
backgroundof40yearsofarbitraryregulationoftradeinthetextileandclothingunderthediscriminatory
MFA. Theeffort inthenegotiations hadbeentobring thissector intothenon-discriminatory GATT
system. Asthenegotiations during theUruguay Round hadprogressed, thetextile exporting countries
realised theenormous price thattheywerebeing asked topayfordoing away withtheMFA regime,
namely toagree tobring newareas suchasintellectual property rights andtrade inservices intothe
multilateral trading system. Negotiations hadbeenfurther hampered bytheinsistence ofimporting
developed countries thattheintegration oftextiles andclothing trade intoGATT would require a
transitional period of10years. Inaddition, theyhadnegotiated theirright totakediscriminatory
safeguard action during thistransitional period. Heconsidered itironic thatcountries which considered
themselves strong proponents oftradeliberalization haddemanded andhadobtained provisions which
wentagainst theobjectives towhich themultilateral trading system wascommitted.G/C/M/13
Page19
8.40 Ashadbeenstated earlier, theobligation ofthefourdeveloped entities wastobring theirtextile
trade intotheGATT system through integration. Theintegration bytheother countries whose trade
wasunder GATT disciplines evenbefore theATC, wasanotional integration. Hisdelegation considered
thatithadalready paidthepriceforexpecting realintegration bythefourdeveloped importing entities.
Ithadnotheard anycomplaints, based ontheprovisions oftheATC, thatmarket access commitments
made inthissector during theUruguay Round hadnotbeenmet. TheCommittee onMarket Access
haddecided asearly as25April 1995 (paragraphs 5.1and5.2ofdocument G/MA/M/1), thatifany
problems arose withtheimplementation ofthese concessions thenMembers should relyoncross or
reverse notifications. Heenquired whether theUnited States hadmade anysuchnotifications tothe
Market Access Committee which could serve asareliable basis fortheviews ithadexpressed.
Furthermore, henoted theremark bytheUSonthepreference forquotas overtariffs.
8.41 Hisdelegation hadmade substantial efforts toprovide significant market access. Aspartof
theconcessions during theUruguay Round, hisGovernment hadagreed tolower itstariffs fromover
100% to40%. Suchconcessions onreductions oftariffs hadbeenmade bymostdeveloping countries,
andwere insharp contrast tothecosmetic integration oftrade intextiles andclothing bythefour
developed importing Members. Headded thathisdelegation hadnotified itsdecision tosignificantly
liberalize imports oftextiles andclothing items asfrom15February 1995. Asaresult, specified fibres,
yarns andindustrial fabrics were permitted tobeimported freely without animport license. Also,
alargenumber offabrics andgarments hadbeennotified totheWTO asbeing permitted tobeimported
against special import licences intoIndia. HisGovernment 'strading partners hadwelcomed andutilized
theseopportunities. Hecontrasted hisGovernment 'sefforts toremove so-called "impediments totextile
imports" withtheattempts byoneMember tocontinue tomaintain protectionist barriers totrade in
textiles andclothing asevidenced byitspublicly announced integration programme andits
indiscriminatory useofthetransitional safeguard provisions oftheATC.
8.42 Therepresentative oftheUnited States clarified thathersubmission andoralremarks noted
theUSPresident 'scommitment totheCongress andalsotothetextile industry. Article 7oftheATC
contained thecommitment ofallMembers toachieve andimprove market access; negotiation ofthese
provisions hadestablished thelinkbetween market access commitments andtheATC. While shedid
notusethenotion ofreciprocity, clearly inthenegotiation oftheATC there hadbeenagiveandtake
inwhatwould bethecommitments. Although shevoiced doubts about therepresentative ofPakistan 's
ideaonremoving allquotas andtariffs, shewasalways willing todiscuss these issues. Shesuggested
thatdelegations consider accelerating theirtariff reductions since theywereasking theUnited States
todolikewise withintegration. Shereiterated thattheUSmarket wasoneofthelargest markets in
theworld towhich many countries wanted access; atthesame timetheUSwanted access toother
markets too.
8.43 Sheadded thattheamount ofimports which hadbeensubject tocharge-backs didnotshow
theoverall problem oftranshipment. Many millions ofdollars worth ofmerchandise which her
Government hadseized could notbecharged backagainst quotas. Transhipment wasillegal andshould
notbeignored. InArticle 5.3,Members hadagreed "totakenecessary action, consistent withtheir
domestic lawsandprocedures, toprevent, toinvestigate and,where appropriate, totakelegaland/or
administrative action against circumvention practice within theirterritory". Therefore anobligation
existed before, during andafteraninvestigation ofcircumvention.
8.44 Therepresentative ofPakistan recalled thatArticle 7referred tocommitments which hadalready
beenmade onmarket access andwhich wereincluded ineachcountry 'sschedule oftariffs. Therefore
there wasnoquestion offurther concessions onmarket access inlieuoftheimplementation ofthe
obligation oftherestricting Members tointegrate textile trade inaccordance withtheATC'sschedule
ofintegration. There seemed tobeafundamental misunderstanding ordifference ofposition withG/C/M/13
Page20
regard totheinterpretation ofArticle 7which hadtobeclarified, because otherwise therewould continue
tobeaconsiderable degree ofdisagreement withregard totheimplementation oftheentire ATC.
8.45 Healsonoted thattheUSpaper contained areference totheestablishment ofanassembly-based
ruleoforigin forimported apparel products which, itwassaid,hadhelped toharmonize requirements
among themajor importing countries. Inthisconnection, herecalled thattheAgreement onRules
ofOrigin mandated therelevant Committee toharmonize rules oforigin inaperiod of3years. His
delegation wasdisturbed thatthissortofharmonization hadtaken place among themajor importing
countries without consultations andwithout agreement being reached inthatcommittee. Helooked
forward toafurther productive andconstructive dialogue withtheUSsoastoensure thesmoother
implementation ofATC inthefuture.
8.46 TheCouncil tooknoteofthestatements.
9. Implementation oftheAgreement onTextiles andClothing andRelated Matters
- Communication from theEuropean Communities (G/L/97)
9.1 Therepresentative oftheEuropean Communities saidthathisdelegation tookaperspective
similar totheUSwithregard tomarket access andalsohadexperience withtheserious problem of
circumvention. Hereiterated thestatement byhisdelegation atthemeeting oftheCouncil of25July,
thatwhile accepting thefreedom oftheCouncil todiscuss anyitemrelating totrade ingoods thatit
considered appropriate, there wasaneedtorespect thespecial status andtheresponsibilities given
totheTMB. Hisdelegation looked forward toitsreport inearly October.
9.2 Inapplying theATC, heconsidered itimportant toensure thatthespirit andletter ofthe
Agreement wererespected. Cooperation wasimportant andinthatrespect hedrewattention toarecent
appeal bySirLeon Brittan inwhich hestated that"theCommission isabout todecide onitsproposal
forthesecond phase oftextiles liberalization under theUruguay Round. Weareopen-minded and
wanttobeasliberal aspossible inorder tocontribute totheworldwide opening ofthetextiles trade.
However, theCommission willneedtoreflect onthedegree ofaccess given toourownexporters before
deciding howambitious ourownproposals canafford tobe.I,therefore, appeal urgently totextiles
exporting nations interested infurther multilateral opening oftheEUmarket topropose serious
improvements tomarket access intheirowncountries".
9.3 Henoted thattheoverall balance ofadvantage wasdelicate andcould easily bedisturbed and
atthesame time, serious political andeconomic constraints existed. Theconcept ofdemanding
concessions oftheexporting countries wasalientotheWTO which wasbased onconcepts more close
topersuasion, cooperation andconsensus, asborne outbythereference inthePreamble oftheGeneral
Agreement tomutual advantageous arrangements directed atthesubstantial reduction intariffs and
other barriers totrade andtotheelimination ofdiscriminatory treatment ininternational commerce.
Article 7oftheATCtookthislanguage onestepfurther inthespecific context oftextiles withitsappeal
thatallMembers should takesuchactions asmaybenecessary toabide byGATT 1994 rules and
disciplines soas"toachieve improved access tomarkets fortextile andclothing products through such
methods astariffreductions", andgoing ontoenumerate anumber ofother waysinwhich thatprocess
could befacilitated. Although notlooking forstrict reciprocity regarding theopening ofmarkets, the
political andeconomic constraints putthisdelegation intheposition where ithadtobeabletoshow
thatprovisions suchasArticle 7werebeing met.Thus, therewasnoimposition ofanykindofcondition
butanacknowledgement ofaparticular political difficulty which, ifresolved, would betothemutually
advantageous benefit ofallWTO Members.
9.4 Withregardtorulesanddiscipline,hisdelegation'ssubmissionalsodrewattentiontotheproblem
ofcircumvention withwhich ithadhaditsownunfortunate experience. Ittherefore supported muchG/C/M/13
Page21
ofwhattheUShadsaid,andrecalled itsownproposal thattheGoods Council examine theextent to
which WTO Members havecomplied withtheGATT 94rules anddisciplines.
9.5 Therepresentative ofColombia, while agreeing ontheimportance oftheTMB report, noted
thatthiswould bedifferent fromananalysis oftheimplementation oftheATCconducted bytheGoods
Council. TheTMB report would befactual anddescribe thecases anddebates thathadtaken place.
TheCouncil 'sanalysis would examine retrospectively theimplementation oftheATC andwould also
haveaperspective analysis astohowimplementation would continue. TheATC contained aclear,
concrete andspecific built-in agenda andthiswaswhere analysis hadtobeconducted onaforward
looking basis.
9.6 Hereiterated thatthesuggestion thatanincrease intheapplied tariff uptothebound ratewas
adefacto market access reduction wasnotwell-founded inthelightoftheATC noranyother WTO
Agreement. Theobligations thatexisted intheWTO foreachMember werethose thatwereexpressly
contained intheGATT/WTO rules, inthelightofinterpretations, prevailing common sense, andin
viewoftheaimandpurpose ofeachAgreement. Regarding tariff ratesandlevels, GATT provisions
onlyconcerned obligations onbound tariffrates; moving theapplied tariffratesuptothebound level
inaMember 'sSchedule wasalegitimate rightcompatible withGATT 1994 provisions andwiththe
letter andthespirit oftheATC. Theverynature oftheATC wastoprovide aframework inwhich
tointegrate textile products intotheGATT andthusensure aprogressive dismantling ofmeasures that
wereincompatible withtheGATT. Astomeasures inforce indeveloping countries, notonlywere
theycompatible withtheATCbuttheywerealsocompatible withtheprovisions ofGATT. Thusthere
could notbeaconnection between dismantling ofaGATT consistent measure andonethatwasnot
GATT consistent. Innosubsidiary body oftheGoods Council, inparticular theMarket Access
Committee, norintheTMB ortheDSBhadthere beenanycomplaints astothewayinwhich textile
exporting developing countries hadbeencomplying withtheobligations oftheATC.
9.7 Finally, regarding circumvention, towhathehadstated withregard totheUScommunication,
headdedthataneffectiveevaluationoftheimplementationoftheATCwouldrequireMembersrestricting
themselvestothecommitmentsthatcamedirectlyfromthatAgreementwithoutextendingittocompliance
withalltheother disciplines contained intheWTO. IftheCommunity wished toevaluate compliance
withanti-dumping, balance ofpayments, subsidies, andintellectual property requirements, reference
would havetobemade tothecorresponding committee.
9.8 Therepresentative ofCanada stated thatherGovernment wascommitted andhadalways been
committed tothefullimplementation oftheATC. Thediscussion intheCouncil hadshown thatall
Members werealsocommitted tothatgoal. Animportant pointwasthatalthough therewasconsiderable
reference tothespirit andtheletter oftheATC, there wasnotanyspecific reference toaMember
being inbreach ofitsobligations under theATC. Sheconsidered itfairtosaythatallshared thesame
objectives, whether asimporters orexporters, interms ofimplementation andtheneedtoshow that
theWTO asaninstitution wascapable ofensuring thatrights andobligations were being fullymet.
Therefore, shefound thedistinction thatsome hadmade between whatwascalled anArticle 2.7(a)
andanArticle 2.7(b) Member perhaps aninappropriate categorization. Itwasimportant thatactions
ensuring complete integration were being taken byallMembers.
9.9 Herdelegation would reflect thoroughly upon theparticular aspects raised intheUSpaper.
However, sheacknowledged thatthese aspects would needtobeconsidered inthedetailed review of
theimplementation oftheATC. Inthatrespect herdelegation hadalways beenoftheviewthatthe
Goods Council hadtheclear authority toreview thefunctioning oftheATC. However, ithadalso
noted thattheATC itselfrequired theGoods Council toconduct amajor review oftheimplementation
oftheATC before theendofeachstage oftheintegration process anditalsofurther stipulated, that
inorder toassist inthisreview, theTMB should transmit totheGoods Council acomprehensive reportG/C/M/13
Page22
ontheimplementation oftheATC. Herdelegation considered thatithadbeenclearly intheminds
ofthedrafters oftheATC thatareport fromtheTMB would beanimportant andindeed anessential
precursor toanymajor review bythisCouncil. Shebelieved thatthereport thattheTMB waspreparing
fortheSingapore Ministerial Conference waswellunder wayandontrack.
9.10 Therepresentative ofPakistan believed thatArticle IVoftheWTO Agreement made itclear
thattheGoods Council hadtheauthority toconduct areview. What wasexpected fromtheTMB could
beanadditional input butitcould notreplace thereview thathadtobemade bytheMembers inthe
Goods Council oftheimplementation oftheATC. Regarding thepoints made bytheCommunities
onArticle 7oftheATCamounted, inhisview, toaninterpretation ormisinterpretation. Heconsidered
theArticle tobeabsolutely clearwhere itstated that"partoftheintegration progress andwithreference
tothespecific commitments undertaken bytheMembers asaresult oftheUruguay Round, allMembers
shalltakeactions asmaybenecessary toabide byGATT 1994 etc". Thisreference clearly wasto
thecommitments made inthese agreements andthere could benointerpretation thatthecommitments
fortheATC'simplementation wereinexchange foranticipated market access. Members didnotwrite
ablank cheque when theynegotiated theATC. Hewondered whether theUSandtheCommunities '
interpretation ofArticle 7implied thattheimporting countries wereunder noobligation tointegrate
theMFA restricted items intotheWTO/GATT within the10yearperiod ifthereweretobenofurther
market access byexporting countries outside ofwhattheyhadcommitted inthese agreements. Ifthat
wastheassertion being made itwould beaserious violation oftheletter andthespirit oftheATC.
Hisdelegation hoped thatthiswasnotthecaseandthatnewconditions were notbeing imposed for
theimplementation oftheATC. Headded thatthere could benoparity between theobligations of
those countries which hadrestrictions thatwere inconsistent withGATT under theMFA andthose
thathadrestrictions which were consistent withGATT.
9.11 Heagreed thatifnoMember wasfound inbreach oftheATC, thatwasonlybecause this
evaluation wasstillintheprocess ofbeing made. Thesubmissions byhisdelegation andothers indicated
thatthepurpose andobjective oftheATC, ofintegrating restricted trade intotheWTO, hadnotbeen
fulfilled inthefirstphase oftheimplementation. Ifthiswasso,itpresented asituation ofbreach or
atleastofgrave departure from thespirit andtheobjectives oftheATC. Thiswould havetobe
concluded attheendofthedebate. Hisdelegation wasnotencouraged bywhatithadheard atthis
meeting.
9.12 Therepresentative ofEgypt considered theCommunities 'submission ambitious inproposing
totheGoods Council many items which fellwithin thecompetence ofother bodies oftheWTO, and
many which wentbeyond thescope ofthepresent analysis, which waslimited tothereview ofthe
implementation oftheATC. Referring tomarket access, shestressed thedelicate balance ofrights
andobligations negotiated under theUruguay Round agreements. Theconditionality transpiring from
theremarks onmarket access made bytheCommunities andtheUSwentbeyond therequirements
oftheATC andwould notfitintothecurrent exercise.
9.13 Todatetherehadbeennocomplaints regarding theimplementation ofcommitments undertaken
bytheexporting countries asincluded intheirSchedules ofConcessions. TheMarket Access Committee
hadreported nodefault, norhadthere beenanynotifications orreverse notifications totheTMB in
accordance withArticle 7oftheATC thathadanybearing ontheimplementation oftheAgreement.
Anyevidence thatexporting countries hadnotfulfilled theirmarket access obligations should betaken
upintheMarket Access Committee which wastheappropriate forum.
9.14 Onrulesanddisciplines shewondered whether theGoods Council could atthisstage examine
theextent towhich WTO Members hadcomplied withGATT 1994 rules anddisciplines having an
impact ontradeinthetextile sector. Itmight, however, beworthwhile, onthebasisofavailable relevant
information, tolookintothemany measures taken thatwere unjustified andunfounded andservedG/C/M/13
Page23
onlyasdisguised protectionist purposes andobstructed theflowoftrade. Inthiscontext, investigation
procedures against exporting countries wereinmany instances onquestionable grounds. Themisuse
ofanti-dumping proceedings onproducts thatwerealready under restrictions wasbutoneexample.
There were instances ofrepeated investigations thatamounted tonothing, andthatwere dropped a
longtimeaftertheallotted twelve-month period. Others remained inspiteofthefactthatinjury had
notbeenfound. Such actions deserved tobebrought tothenotice oftheGoods Council.
9.15 Onother aspects oftheECpaper suchasthefunctioning oftheTMB, noonehadevercontested
theimportance ofthatbody. BoththeTMB andtheGoods Council wereentitled topresent theirreports
ontheimplementation oftheATC through parallel channels totheGeneral Council. TheTMB had
toreport whathadtranspired throughout thetwo-year implementation period through itsregular review
ofnotifications whereas theGoods Council wasamore forward looking body. Inaddition, whatwas
being sought wasapolitical message totheSingapore Ministerial Conference andforthistheTMB
wasnottheappropriate forum. Ministers hadtodemonstrate thepolitical willtoimplement theATC
inletter andinspirit, andthefunctioning oftheTMB wasoneoftheissues inthatcontext. Therole
oftheGoods Council ingeneral asitrelated totheTMB alsoneeded tobeconsidered. These issues
could beexamined independently without waiting fortheTMB report. Herdelegation wasinterested
inthegoodfunctioning oftheTMB anditsimage asaserious andobjective bodyinthesystem would
strengthen itsability todischarge itsresponsibilities inaccordance withArticle 8.1oftheATC.
9.16 Therepresentative oftheUnited States noted thatherGovernment wasexamining closely the
market access commitments andwould probably have complaints tobring totheMarket Access
Committee. Sheexpected Members torecognize thecommitment tomarket access intheATC and
expected concerned Members tocontinue totakeactions toachieve andimprove market access asstated
inArticle 7.Herdelegation didnotadvocate thenotion ofreciprocity butemphasized freeandfair
trade. TheATC wasaproduct ofthisandaproduct ofthegive-and-take forwhich abalance should
beensured.
9.17 Therepresentative ofMexico stated thattariff bindings constituted theverycorner-stone of
theGATT/WTO system. Tariff bindings gave certainty bothtoimporters andtoexporters and
represented rights andobligations toberespected byallWTO Members. Eachcountry hadtheright
toapply tariff rateswithonlytheobligation thattheratesapplied should notexceed thebound levels
contained initsWTO schedule.
9.18 Therepresentative ofNorway shared theviewexpressed by,among others, theCommunities
andCanada thattheGoods Council wastheproper forum inwhich tohavethisdiscussion. However,
hisdelegation believed thattheCouncil would haveabetter andmore informed debate inthisforum
onthebasisoftheTMB report. Secondly, hisdelegation considered thatitwasproper thatthequestions
onmarket access andrules anddisciplines hadbeenbrought intothedebate. There wasalegaland
political sidetothese matters which needed toberecognized anddiscussed. Hethought thatoneof
thepoints ofhaving adebate inthisCouncil which wassuperior tothecommittees wasthatrelevant
questions could beexamined infull.Thediscussion should notbeartificially limited because Members
didnotlikecertain aspects ofthediscussion. Onthequestion ofcircumvention, hisdelegation insupport
oftheUSandtheCommunities feltthatthesizeofthebreach ofrules waslesssignificant thanthe
question ofwhether ornotthere hadbeenabreach.
9.19 Therepresentative ofIndia recalled thatthese discussions weretaking place inthecontext of
theanalysis oftheimplementation oftheATC. Noting therequest thattheCouncil examine theextent
towhich allcommitments entered intoduring theMarket Access negotiations hadbeencomplied with,
heasked whether theCommunities hadmade anycross orreverse notification inkeeping withthe
Decision oftheMarket Access Committee inparagraphs 5.1and5.2ofdocument G/MA/M/1. Such
notificationscouldserveasabasisfordiscussingtheconcernsexpressedbytheCommunities.HerecalledG/C/M/13
Page24
themarket access commitments made byhisGovernment, asexplained inhisintervention ontheUS
submission, andadded thattheEChadpublicly stated itsappreciation forIndia'scontribution to
achieving effective access toitsmarket fortextile andclothing products inacommunication circulated
bytheTMB indocument G/TMB/N/60/Add.3. Hisdelegation wastherefore somewhat confused about
theCommunities viewaswellasalittleaggrieved tobeimplicitly accused ofnotfulfilling commitments
made. India could notconsider going beyond theprovisions oftheATC toprovide anyadditional
market access. Inthiscontext, herequested clarification ontheECpolicy onthisissue. Ifthisproposed
opening wastobemultilateral, didthismean newnegotiations? Hisdelegation didnotseeknew
negotiations, butonlytheimplementation ofalready negotiated provisions oftheATC.
9.20 WithreferencetotheinterpretationofArticle7.1oftheATC,herecalledthattheword"achieve"
market access hadanegotiating history which theCommunities andtheUSwereaware of.Hetherefore
expected boththese Members tounderstand andaccommodate hisdelegation 'sinterpretation thatit
hadalready paidtheprice forthisprovision asreflected inIndia'sUruguay Round schedule. He
requested theECdelegation toclarify theveracity ofarecent report inwhich ithadmade anoffer
to12leading textile exporting countries tocutquotas onthemostprotected textile andclothing items
oncondition thatthesecountries would dismantle barriers toECimports. Hisdelegation alsohadserious
political andeconomic considerations inconsidering anysuchalinkage orsuggestion ofreciprocity.
9.21 Therepresentative ofThailand, speaking onbehalf oftheASEAN Members, alsorecognized
thattherewerepoliticalandeconomicconstraintsinthissectorandpersuasion,cooperationandconsensus
were certainly thekeyelements inworking towards amutually beneficial trade solution. Itwasa
welcome signthattheCommunity hadstated during thelastmeeting thattheGoods Council wasan
appropriate forum forthediscussion ontextiles. These delegations alsoconsidered thataconstructive
andnon-confrontational discussion ontheATCwasanimportant element inMembers 'common quest
tobalance theagenda fortheSingapore Ministerial Conference. Noting theECrequest thattheGoods
Council examine theextent towhich allcommitments entered intoduring themarket access negotiations
hadbeencomplied with, hepointed outthatthese commitments intheform oftariff bindings and
reductions hadbeendulyimplemented since thedaytheWTO wentintoeffect.
9.22 Secondly thenotion thatmarket access hadbeenreduced through theraising ofapplied tariff
ratestothebound levels wasnotavalidargument. Theraising ofapplied rateswithin thebound levels
didnotinanywayconstitute abreach ofcommitments; applied ratescould fluctuate under thebound
ratedepending upon therevenue andthedevelopment needs ofMembers. Healsotooknoteofthe
comments made byNorway thatMembers should bemore opentosubject matters intheareas ofrules
anddisciplines. With regard tothisissue, henoted hisdelegation 'sconcern regarding thechanges
intherulesoforigin recently introduced byoneimportant trading partner which hadbrought uncertainty
andhadbegun todisrupt tradeunder theATC. Anychanges intherulesoforigin should beconsistent
withtheprovisions oftheATC, theAgreement onRules ofOrigin andArticle IXofGATT 1994.
Inprinciple therulesoforigin should notthemselves create restrictive, distorting ordisruptive effects
oninternational trade.
9.23 Another important concern ofthepasttwoyears wasthegrowing misuse ofantidumping
proceedings ontextile products. These proceedings should notbeemployed inarepeated manner since
thiscould onlyresult inthedisruption anddislocation oftrade flows. There hadbeeninstances of
repeated investigations byanimporting country onsimilar textiles products. Insome cases, the
investigations hadremained ineffect forovertwoyears which wentfarbeyond thenormal twelve-month
period inspiteofthefactthatnoinjuries hadbeenfound. Suchactions amounted totrade harassment
anddeserved tobebrought tothenotice oftheGoods Council.
9.24 Therepresentative oftheEuropean Communities clarified thathewasnottrying tosaythat
iftherewasnofurther access given byexporting countries totheirownmarkets, theCommunity wouldG/C/M/13
Page25
havenofurther obligations under theATC. Ithadclearobligations under theATCandstood bythem.
Hisdelegation wasnottrying toestablish anykindoflegallinknoranykindofreciprocity, butitwould
beillusory toconclude thatthere wasnolinkage between what happened inrespective markets. In
thelightofthepolitical andeconomic realities ofwhich hehadspoken earlier, heasked what, inconcrete
terms, would exporting countries beprepared tocontribute toworldwide liberalization oftradeintextile
andclothing. Theanswer tothatquestion would haveanimpact onthenature ofthedecisions which
wereimminent, andwhich would betaken withregard totheimplementation ofPhase IIoftheATC.
Hisdelegation wasnotseeking toestablish anewkindofconditionality butwaslooking forthewidest
possible contribution totheworldwide liberalization oftrade intextiles andclothing.
9.25 Withregard totheIndian question, onarecent report referred to,theEChadinvited countries
toconsult withitonwhattheywould wishtoseeincluded intheproposals forPhase IIoftheATC.
Theresponse tothose invitations hadbeensomewhat disappointing. Onthequestion ofbound rates,
aMember might adjust theapplied tariff rateupwards toasfarasthebinding itself, butheseriously
questioned thelogic ofthose whowould argue thatthere wasnodeterioration oftherealconditions
ofaccess tomarkets ofcountries thatmade suchanadjustment.
9.26 TheCouncil tooknoteofthestatements.
10. Implementation oftheAgreement onTextiles andClothing andRelated Matters
- Communication from Pakistan onbehalf ofanumber ofWTO Members (G/L/92)
10.1 Therepresentative ofColombia referred totheimportance ofmaintaining anon-going dialogue
amongst exporting andimporting countries aswellasamong participants fromthepublic andprivate
sector ontheanalysis oftheimplementation oftheATC andthewayinwhich integration intoGATT
rulesshould takeplace. There wasaserious concern feltbyexporting countries onthewayinwhich
theATChadbeenimplemented. These concerns related notonlytointegration butalsotoothermatters
thathadcapital importance suchasthose concerning theuseofthesafeguard clause orlegislation on
rulesoforigin. Heconsidered thattheATC'sintegration provisions weredesigned toprogressively
eliminate thequantitative restrictions oftheMFA. Thiswasthemostimportant element oftheATC
andshould bemetinthree stages andonthebasis ofaveryserious analysis ofthefirststage of
integration. Itwasextremely important thattheintegration percentages thatwereprovided forinthe
second stage becommercially significant, thuscontributing totheliberalization process. Tothisend
abalance hadtobesought between products thatweresubject torestrictions andthose thatwerenot
aswellasabalance between sensitive andnon-sensitive products, laying emphasis onmade-up products.
Itwasalsonecessary toanalyze whathadhappened totheuseofthetextile safeguard. In1995, the
UShadresorted tosafeguard action inarather disproportionate manner, contrary totheobligation
inArticle 6.1,thatthe"transitional safeguard should beapplied assparingly aspossible, consistently
withtheprovisions ofthisArticle andtheeffective implementation oftheintegration process....".
Ithadledtofurther quantitative restrictions being placed ontheimports oftextile products which,
together withanintegration programme withlittletradesignificance hadanetnegative effect ontrade
flows. Anadditional problem thatwasaffecting theimplementation oftheATC concerned rules of
origin. While work wasstillbeing doneontheharmonization ofrulesoforigin which wasexpected
tobefinalized bytheendof1997, inJulytheUnited States hadadopted newruleswhich, according
toanalysts, would affect existing patterns oftrade asthese rulestended tofavour chains ofproduction
inasingle country rather thanrecognizing andallowing fortheuseofcomparative advantage resulting
from different sources ofproduction ineachstage ofproduction. Thisrancounter totheprinciple
ofapplication ofadvantages thatresulted fromglobalization andwould alsohaveanegative effect on
patterns ofproduction inseveral developing countries. Inverybroad terms, these were thecentral
issues concerning implementation oftheATCthathadtobediscussed forthepurpose ofthepreparation
oftheMinisterial Meeting atSingapore.G/C/M/13
Page26
10.2 Therepresentative ofPakistan wished toidentify themainareas where Members would need
tomake anevaluation andtopronounce themselves inthecontext oftheSingapore Ministerial
Conference. Ithadbeenstrongly reaffirmed thattextiles wasasector which wasimportant foravery
large number ofdeveloping countries, important forthedevelopment process itself, important forthe
expansion ofworld trade andimportant fortheevolution ofabalanced agreement attheConference.
There were, intheviewofhisdelegation andseveral others, atleasttenareas onwhich evaluation
would needtofocus. Thefirstarea, wasthatoftheintegration process. Members were aware of
theconcerns oftheexporting countries thatinthefirststage ofintegration theproducts which had
beenintegrated werenotsubject toMFA restrictions. Theproducts integrated werehighinvolume
butlowinvalue andtherefore theconclusion wasthatthefourmajor textile importing Members had
failed toprovide meaningful market access. Hisdelegation hoped thatinthesecond andthirdstage
theoutcome would bebetter. However, whathadsofarbeenpublished intheUnited States andthe
indications which hadbeenreceived fromtheCommunities, didnotreflect apositive signal withrespect
tothesecond stage either. Inthiscontext hisdelegation wished toreiterate theviewthatthere was
noaspect ofsectoral reciprocity inthecontext oftheintegration process. Thesecond areaofconcern
wastheapplication oftransitional safeguards which wassupposed tobeusedas"sparingly" aspossible.
Theuseofsuchsafeguard measures byonemajor Member in24cases within aspanofafewmonths
against 14Members, which werealldeveloping countries, could notbeconsidered tobethesparing
useofthetransitional safeguard. Thirdly, therewasconsiderable disappointment withtheperformance
oftheTMB. TheTMB'sdecisions hadnotalways lived uptotheexpectations thatwere ascribed
tothisBody intheATC. Most importantly, there hadbeenmany decisions where therationale for
itsdecisions hadnotbeenprovided andtheprocess ofdecision-making hadremained rather opaque.
Itwashoped thattheTMB'sperformance would bebetter inthefuture andthatitwould liveupto
theexpectations oftheATC. Thefifthareaconcerned thetreatment oftheleast-developed countries,
where there wasnoindication ofanyspecial measures thathadbeentaken intheirfavour. Sixth, the
question ofspecial treatment forcotton-producing countries, which hadnotreceived anysuchtreatment,
norindeed hadtheybeenconsulted intheprocess ofdrawing uptheintegration programmes aswas
implied intheATC. Theseventh areawasthatofrules oforigin where onemajor trading partner
hadannounced changed rulesoforigin inlate1994. These ruleshadbrought alotofuncertainty and
hadbegun todisrupt textiles trade. Theeighth concern wasthatofspecial regimes maintained bycertain
countries which provided more preferential treatment tocertain regimes atthecosttoother exporting
countries. Theninthareawastheimpact ofregional trading arrangements thegrowth ofsome ofwhich
hadclearly hadanegative impact onthedegree ofliberalization ontextiles trade. Forexample, when
three Members joined theEuropean Union, thishadcreated anetdeterioration forthestatus of
liberalization. Finally, thespectre ofsocial andenvironmental issues being usedasnon-tariff barriers
totrade. There wastalk,forexample, ofataskforce being setupinonemajor trading country which
would overlook whether theimports oftextiles products were produced under humane working
conditions. Thiswasinducing subjective judgement overimports which waslikely tohaveavery
negative impact onmany developing countries. Hisdelegation feltthattherecommendations and
conclusions thatcame from anyevaluation ofthesituation wereself-evident andwould hopethatin
thenearfuture itwould bepossible toholdconsultations withaviewtopresenting fortheconsideration
oftheGoods Council conclusions andrecommendations withregard towhatshould besaidabout textiles
attheSingapore Ministerial Conference.
10.3 Therepresentative ofHong Kong stated thatthetimehadarrived toconvey theconcerns of
Members forconsideration byMinisters. Hisdelegation hadnoproblem proceeding withthetenareas
indicated bytherepresentative ofPakistan. Alternatively, thetenareas could begrouped under five.
Thefirstwould beintegration. Thesecond, newquantitative restrictions, inparticular restrictions
arising from theinvocation ofArticle 6.Thethirdwould beother measures affecting textile trade,
under which rules oforigin, anti-dumping anduseofother non-quantitative restrictive measures for
protective purposes would becovered. Thefourth, would dealwiththequestion ofspecial treatment
forcotton-producers, andsmall suppliers indeveloping countries. Finally, thequestion ofsupervisingG/C/M/13
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andoverseeing theimplementation oftheATC would needtobeaddressed. Thetworelevant bodies
were theTMB andtheGoods Council.
10.4 Regarding thelastpoint, itwasevident from Article 8.1oftheATC thattheTMB hadan
important roletoplay. However, discussions sofarintheGoods Council suggested, atleasttosome
Members, thatthiswasnotclear. Hong Kong'sexpectations oftheBody were thatitbeopen, fair
andfullyacceptable toMembers. Open didnotonlymean affording adequate transparency toparties
outside theTMB ofitsmode ofoperation. Equally, ifnotmore importantly, reasons hadtobegiven
fortherecommendations made bytheBody, or,where recommendations should havebeenmade but
were notmade, thereasons why. Thelatter wasnottaboo; times hadchanged since thedaysofthe
MFA. Anymajor difficulties theTMB faced andwhich could seriously affect thedischarge ofits
functions hadtobebrought totheattention ofWTO Members. Openness enhanced accountability,
andwouldencourageconsistencyandcoherenceofactions.Thiswouldfurtherstrengthentheconfidence
ofWTO Members thatthewaytheTMB functioned wasfair.Hisdelegation supported concrete action
tobetaken intheGoods Council notonlytofurther improve thefunctioning oftheTMB, butalso
toensureitsfullacceptabilitybyWTOMembers.Hisdelegationsupportedacloserworkingrelationship
between theGoods Council andtheTMB.
10.5 Therepresentative ofIndia stated thathisdelegation hadexpressed itsviews onseveral ofthe
points contained inthecommunication byPakistan onbehalf ofanumber ofMembers including India,
during theprevious meeting oftheCouncil. Hisdelegation remained convinced ofthemerits ofits
arguments made onthatoccasion evenafterhearing thecontrary views ofimporting Members. It
therefore requested thattheCouncil keepIndia'sarguments inmind when deliberating onthefurther
course ofaction. Hisdelegation strongly supported thestatements made bythedelegations ofColombia,
Pakistan andHong Kong. ItwasIndia'sview thatthisissue hadtobeappropriately placed before
theMinisters atSingapore fortheirconsideration andguidance. Hewished toreiterate hisGovernment 's
conviction thattheMinisters hadtobeinformed thatallwasnotwellwiththeimplementation ofthe
ATC. Arenegotiation oftheAgreement wasnotbeing sought, merely thatitbeimplemented properly.
10.6 Therepresentative ofThailand, speaking onbehalf oftheASEAN Members, stated thatthey
feltthatthefirstandforemost taskfacing Members wastoexamine andtakestock oftheimplementation
oftheUruguay Round results. TheMinisterial Meeting wasanimportant opportunity forassessing
whathadbeenachieved todateaswellaswhathadtobedonetoensure fullandfaithful implementation
oftheletter andspirit oftheobligations undertaken aspartoftheUruguay Round Agreements. With
theimportance oftextile andclothing trade asattested bybothimporting industrialized countries and
exporting developing countries alike, therecould benoquestion thattradeintextiles andclothing must
have arightful place intheagenda oftheMinisterial Meeting. ASEAN fully endorsed the
communications presented byPakistan onbehalf ofanumber ofMembers andthecontents appearing
intheITCB'sBangkok communiqué ofMay1996. Themostimportant aspect oftheATC wasthe
integration oftextile products which wasdesigned toremove theMFA restrictions progressively. The
implementation programme ofthefirststage bythefourmajor importing Members didnotcontain
commercially meaningful products ofinterest toanyASEAN members. ASEAN could onlyurgethe
restraining countries toprepare theircommercially meaningful integration programmes forthesecond
stage, contributing substantially totheliberalization ofrestrictions. These should include ajudicious
mixture ofrestrained andunrestrained products, abalanced proportion ofsensitive andnon-sensitive
products withagreater emphasis onclothing products. Anintegration programme ontheselinesalone
would ensure asmooth transition from thepresent system totheGATT disciplines, andwasinthe
interests ofbothrestraining andexporting countries. ASEAN wasoftheviewthatonewayinwhich
theMinisterial Conference could bemost effective inimproving thefunctioning oftheTMB would
betoadvocate greater transparency intheTMB. Thiswould enable WTO Members togainabetter
understanding onhowtheBody worked andthereasons underlying thedecisions thattheTMB took.
Bytransparency, ASEAN wasreferring tothepublic issuance ofwritten decisions andrecommendationsG/C/M/13
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thatarticulated thefactors andrulesconsidered andthereasons forthefindings andrecommendations
produced. Rationales andprecedents wereespecially necessary inthecaseoftheTMB, asmembership
ofthebody, particularly those ofexporting developing countries changed onanannual basis. Toensure
continuity andconsistency intheworking oftheTMB andtoeducate future TMB members, acomplete
andwell-documented record ofprecedent wasessential. ASEAN believed thatamandate forsuch
transparencyintheTMBwouldbeanextremelysignificantaccomplishmentfortheSingaporeMinisterial
Meeting. ASEAN wasverymuch concerned atthelarge scaleintroduction oftransitional safeguards
byonemajor trading partner in1995. Itbelieved thatsuchusewasinviolation ofthecommitment
to"sparingly" usethesafeguard system contained intheATC. Inoneinstance, thetransitional safeguard
wasintroduced unjustifiably onimports ofaproduct fromThailand which wasalready under restraint.
TothisendASEAN urged Members tobeverycareful intheapplication oftransitional safeguards,
andtoscrupulously respect thedisciplines andprocedures contained intheATC. ASEAN believed
thattheMinisterial Conference should alsoaddress themisuse ofrules oforigin forprotectionist
purposes. Thenewtextiles rulesoforigin introduced byoneMember hadaffected themarket access
available tosome members ofASEAN, anddisrupted trade under theATC. TheConference had
toreiterate theimportance ofavoiding disruption oftrade through changes inrules oforigin, andof
theneedtomake nonewchanges inrules oforigin except inthecontext oftheharmonization work
programmeundertakenundertheAgreementonRulesofOrigin.Trademeasuresfornon-tradepurposes
hadthepotential oflimiting themarket access forthetextile-exporting countries. There hadbeenreports
ofincidence ofsuchmeasures being applied totextile exports fromdeveloping countries, andASEAN
urged theGoods Council toexamine theappropriateness ofsuchmeasures withaviewtoseeking a
Ministerial Decision.
10.7 Therepresentative ofJapan sought clarification regarding theissue oftransparency orlack
oftransparency inthefunctioning oftheTMB. TheTMB wasaquasi judicial body which placed
reasonable limits regarding howtransparent itcould be,andalsomeant thatitsreports hadtobecarefully
drafted. Itwasdifficult tocitenames ofTMB members whoworked onanadpersonam andona
consensus basis.
10.8 Therepresentative ofNorway stated thatthedebate hadreaffirmed thattextile wasimportant
totrade andtodevelopment, andhadrecognized thatthiswasanimportant issue fortheSingapore
Ministerial Meeting. Healsoagreed that,forthereasons advanced, anexporting Member might be
disappointed withthefirstintegration phase. However, withrespect totransitional safeguard mechanism
anditssparing use,reference hadbeenmade ofonecountry having useditin24cases involving
14countries, anditwassaidthatthiswasnot"sparing". Inhisviewtheterm"sparing" wasrelative.
Hedidnotagree withthedisappointment expressed regarding thefunctioning oftheTMB. His
delegation hadalways supported apolicy ofgreater transparency, however, inthecaseoftheTMB,
Norway agreed withthecomments made byJapan. There werereasonable limits totransparency in
view ofthefactthattheTMB wasaquasi judicial body. AsTMB members were acting onanad
personam basis, having thekindoftransparency where people wereidentified would openupthatbody
tooutside pressure. Withrespect tosocial andenvironmental issues being usedasobstacles totrade,
hereminded Members ofanother context when Norway hadlaunched, together withtheUS,theissue
oflabour standards. Atthattime, hisdelegation hadargued thatthisissue wastrade-related, andthe
general response hadbeenthatitwasnot.Today itwasbeing brought upagain, butinanother context
andithadbecome trade-related.
10.9 Therepresentative ofCanada sought clarifications onsome oftheissues contained inPakistan 's
communication onbehalf ofanumber ofWTO Members. Itwasproposed thatthereview might address
integration atthesecond phase byrestraining Members. Sofar,onlyoneWTO Member hadannounced
itssecond stage integration list.Given thatthesecond stage programmes were tobenotified tothe
TMB atleast12months before theirentry intoforce (i.e.bythebeginning of1997) andthencirculated
bytheTMB toWTO Members, howwasitbeing proposed toproceed inviewofthefactthatsomeG/C/M/13
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Members were working tothisdeadline? Itwasproposed toconsider therecourse byoneMember
toalarge number ofsafeguard actions against thecriteria ofwhether thiswasdone"sparingly" and
consistently withtheprovisions oftheATC, andtheimplications fortheeffective implementation of
theintegration programmes. TheATC provided thattheTMB should supervise theimplementation
oftheATC andherdelegation wondered whether itwasnottherefore uptoMembers thatmight have
concerns inthisregard tobring issues before theTMB. Furthermore, itwasnotclear whether the
proposal wastoassess theimplications ofallactions including those thathadbeenwithdrawn orwere
notpursued asaresult oftheTMB'sreviews. Inthatcase, onecould assess theTMB'simpact in
moderating theuseofsafeguard measures byrestraining Members in1996compared tothefirstyear
oftheATC. OnBilaterally Agreed Arrangements, shewondered whether itwasbeing proposed that
theGoods Council review sucharrangements evenbefore theTMB reviewed them, orwhether the
Goods Council wasonlytoreview arrangements onwhich theTMB hadbeen unable toreach a
consensus. Recalling thattheATC dealt, e.g.witharrangements under Article 6.9(agreed safeguard
measures), Article 2.17(administrative arrangements), Article 5.2,(mutual arrangements todealwith
transshipment), sheenquired whether itwasbeing proposed toreview theATC withtheobject of
changing some ofitsprovisions, orofgiving directions totheTMB astohowitshould assess such
agreements. OntheTMB, wasitbeing proposed thattheGoods Council examine ways toimprove
itsfunctioning andspecifically toimprove transparency andtoensure thatitsmembers operate on
anadpersonam basis? Ithadtaken theTMB over4months oflengthy meetings, bothformal and
informal, todecide onitsrules ofprocedure. Thelength ofthese rules andtheminutia theycovered
made itclearthatthiswasahard-fought issue, which involved strongly-held opinions ofTMB members.
Ifithadtaken theTMB 4months toagree onthese rules, shewondered howlongitwould takethe
124Members oftheWTO toimprove uponthem. Wasitbeing proposed thattheGoods Council give
direction ormake suggestions totheTMB astohowitshould goabout itswork? IftheCouncil sought
togivedirection totheTMB, would theCouncil notthenbeinterpreting theATC? Interms ofthe
functioning oftheTMB, therecord showed thatsince itsinception, theTMB hadheard anumber of
disputes, andhadreviewed notifications byMembers. Shethought thatitmight beuseful, inanyreview
ofthework oftheTMB toexamine whathadbeenthedegree ofcompliance byMembers withTMB
recommendations. OnRules ofOrigin, itwasargued thatoneMember hadimplemented changes to
itsrules oforigin which either might runcounter totheprovisions oftheATC oroftheAgreement
onRules ofOrigin orthatthese changes might havebeenimplemented inways thatdidnotaccord
withtheprovisions ofeither agreement. Shewondered whether WTO Members hadsought recourse
onthismatter either before theTMB, theCommittee onRules ofOrigin ortheDispute Settlement
Body. Canada hadexpressed concern about these newrulesintheCommittee onRules ofOrigin as
theywould haveanegative impact onCanada 'sexports. Herauthorities were consulting withthe
Member inquestion, butsofarCanada hadnotrequested theintervention ofanyWTO body, norhad
Canada suggested thatthismatter beraised intheGoods Council.
10.10 Therepresentative ofEgypt hoped thattheSingapore Ministerial Conference would provide
anopportunity foralltrading partners toreaffirm theircommitment totakeappropriate andcorrect
actions toensure thatthe10-year transition wasbeneficiary toallparties, andthattheultimate objectives
oftheAgreement could andwould bemetwithin thattime-frame.
10.11 Therepresentative ofMexico stated thatitwashisdelegation 'sview thatdiscussion on
regionalismshouldnotbesegmented.TheWTOhadsetupaCommitteeonRegionalTradeAgreements,
andtherefore anydiscussion about suchagreements should beconducted intheframework ofthat
Committee.
10.12 Therepresentative ofHong Kong stated thatinresponse tothequestion raised byJapan on
transparency, heagreed thattheTMB wasaquasi judicial bodyandthereought tobecertain limitations
regarding transparency withrespect tosuchaBody. Itwasex-post transparency that,intheviewof
hisdelegation, wasmostappropriate, relevant andnecessary. Theobjective oftransparency shouldG/C/M/13
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beanindication ofthearguments, atleastthemainarguments, onthebasisofwhich different opinions
wereformed leading toasituation inwhich noconsensus could bereached. Theconcern wastoenhance
thesystemic effectiveness oftheBody, andnottotarget individual members. Concerning thepoint
raised byCanada onthetimetaken bytheTMB toformulate itsworking procedures, thiswasdefinitely
notagood enough reason fortheGoods Council nottoseekimprovement ofthose procedures. In
fact,thequestion ofwhytheTMB hadtaken solongtoformulate itsworking procedure could bea
separate question thatthisCouncil might wanttoexamine.
10.13 Therepresentative ofThailand, inreference toJapan'squestion ontransparency, stated that
theobjective oftransparency wasnottoidentify inaTMB report amember whohadagreed ornot
agreed withtheothers. Theobjective wasthatthereasons forthefindings orrecommendations produced
bytheTMB bewell-recorded.
10.14 Therepresentative ofPakistan stated thatthebasic objective thathadtobeevaluated wasthe
degree ofliberalization thathadtaken place asaresult oftheconclusion oftheATC, whatmechanisms
hadbeenusedforliberalization andwhat hadbeenusedtoprevent liberalization. Inthiscontext,
Canada hadliberalized onerestricted item(work gloves) inthefirstphase oftheliberalization process.
Butthequestion wasalsolinked totheuseoftransitional safeguards, andwhether 25times wassparing
ornotsparing. Outofthose 25actions, 11hadresulted insome formofrestraints through bilateral
arrangements andtheamount oftrade which wasrestricted asaresult ofthose 11arrangements was
1.7billion dollars, 100times more thantheamount oftrade thatwasliberalized inthefirstphase.
Soifonewere toevaluate whether these measures hadbeenusedsparingly, whether theyhadbeen
usedinthespirit oftheATC, theconclusion would beinevitable: following theadoption oftheATC,
textile trade hadbeenrestricted further rather thanliberalized. Whether bilateral agreements were
preferred ornot,thewhole spirit oftheATCwastomove away fromthebilateral arrangements which
weresomuch apartoftheculture oftheMFA, anditwasbecause ofthenecessity tohaveamultilateral
supervision oftheATC thatimportance wasattached totheroleoftheGoods Council. With regard
totheTMB, andtheremarks made byJapan, Norway andCanada, theGoods Council wasasuperior
body, comprising allWTO Members TheTMB wassupposed toplayanimportant rolebutitwas
notquiteevident thattheTMB hadbeenabletoplaythatrole. Ifithad,restraints of1.7billion dollars
oftrade aftertheconclusion oftheATC would notexist. Asregarded thetransparency oftheTMB,
names were notsought, however, reasons were. WhywasitthattheTMB wasnotabletoreach a
decision? Whywasitthatitwasabletoreach adecision which always favoured theimporting countries?
Inreference totheremarks byNorway, onthesocial andenvironmental obstacles totrade, thiswas
innowayanadmission oflegality oftheuseoflabour standards asatrademeasure. Onthecontrary,
itwaspreciselytheillegalityofsuchmeasureswhichwasbeingcomplainedabout.Thenationalpositions
andmeasures thathadbeenadopted, onsubjective criteria bytheimporting countries, would affect
theexports oftextiles frommany developing countries andwasafurther measure ofrestraint contrary
tothespirit oftheATC, andcontrary tothespirit ofthewhole Uruguay Round Agreements.
10.15 TheCouncil tooknoteofthestatements.
11. Further Industrial Tariff Negotiations
- Statement byAustralia
11.1 Therepresentative ofAustralia, speaking under "Other Business", stated thathisdelegation
hadtabled aformal proposal atthelastmeeting oftheGoods Council inthecontext ofthereport of
theGoods Council totheSingapore Ministerial Conference. Theproposal hadearlier beenraised at
theHeads ofDelegation meeting chaired bytheDirector General andithadbeenagreed thatitbe
referred totheGoods Council. TheAustralian proposal contained twoelements. First, Australia
proposed thattheCouncil recommend toMinisters atSingapore thattheyagree thatliberalizingG/C/M/13
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negotiations begin onindustrial tariffs intheyear2000, tocoincide withthenegotiations onagriculture
andservices mandated inthebuilt-in agenda oftheWTO. Australia hadargued thattheabsence of
amandate forsuchnegotiations inthebuilt-in agenda wasaninadvertent oversight duetothelack
ofacovering agreement specific toindustrial tariffs. Secondly, Australia proposed thattheCouncil
recommend toMinisters thattheyinstruct either theGoods Council ortheMarket Access Committee
tobegin preparations forsuchnegotiations.
11.2 Since tabling itsproposal, Australia hadheldinformal discussions withawiderange ofother
Members. Asaresult ofthese discussions ithadbecome cleartoAustralia thatsome Members held
unwarranted concerns about thenature oftheAustralian proposal. There wereinparticular fourpoints
thatneeded tobemade about theproposal.
11.3 First, acommitment toconduct further industrial tariff negotiations would helptobalance the
negotiations onservices andagriculture tobeconducted under thebuilt-in agenda, andwould provide
anavenue forthepursuit ofthemarket access interests ofallMembers. Itwould contribute tothe
balance andcomprehensiveness thatMembers hadidentified askeyrequirements intheagenda for
theSingapore Ministerial Conference. Secondly, acommitment toconduct further industrial tariff
negotiations would notentail theacceleration ofanyUruguay Round commitments onindustrial tariffs.
Equally, itwould notpreclude thepossibility ofnegotiation ofsectoral liberalization initiatives (such
astheITA) which enjoyed thesupport ofindividual Members. Thirdly, theproposal should notbe
seenaslikely toimpose newburdens onindividual economies asUruguay Round implementation of
industrial tariffcommitments would belargely completed. Inanyevent, many economies werealready
lowering theirtariffs unilaterally oraspartofregional trading arrangements, andthistrend could be
expected tocontinue overthenextseveral years. Fourthly, inproposing apreparatory process starting
in1997 andleading uptonegotiations in2000, Australia didnotsupport "negotiations about
negotiations". Anypreparatory process should befocused onthe"process ofanalysis andinformation
exchange which would allow Members tounderstand theissues involved andidentify theirinterests
inrespect ofthem before undertaking negotiations". (This quote istaken from thereference tothe
built-in agenda atparagraph 9ofthestatement oftheChair attheAPEC Christchurch Trade Ministers
Meeting). Theproposal foratariff continuation clause similar tothose forservices andagriculture
hadbeentabled formally. Hisdelegation would behappy forthere tobefurther consultations onthis
proposal intheframework ofanyinformal meetings thattheChairman oftheGoods Council might
conduct onthepreparation oftheCouncil 'sreport totheSingapore Ministerial.
11.4 TheCouncil tooknoteofthestatement.
12. US:Request forConsultations concerning Restrictive Business Practices intheJapanese
Photographic FilmandPaper Market
- Statement bytheUnited States
12.1 Therepresentative oftheUnited States, speaking under "Other Business", stated thattheU.S.
Government hadrequested consultations withtheGovernment ofJapan concerning restrictive business
practices intheJapanese photographic filmandpaper market. TheUnited States hadrequested these
consultations withtheGovernment ofJapan pursuant totheCONTRACTING PARTIES 'decision on
"Restrictive Business Practices: Arrangements forConsultations" under theGeneral Agreement on
Tariffs andTrade assetforthinBISD 9S/170. Thisdecision waspartofGATT 1994asdefined under
Article I(b)ofthatAgreement. Consequently, thisCouncil hadresponsibility foroverseeing the
functioning oftheDecision onRestrictive Business Practices.
12.2 Inadopting itsdecision, theCONTRACTING PARTIES hadrecommended that,uponrequest,
"acontracting party should enter intoconsultations onsuchpractices onabilateral oramultilateral
basis asappropriate." TheUnited States wished tobring totheCouncil 'sattention thatmore thanG/C/M/13
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threemonths hadpassed since theUnited States 'hadpresented itsrequest totheGovernment onJapan
on13June1996. TheCommunity hadrequested tobejoined inthese consultations on5Julyand
theUnited States hadaccepted thisrequest on15August.
12.3 Japan hadnotyetaccepted theseconsultations norhaditresponded totheCommunity 'srequest
tojoin. Instead, Japan on24Junehadrequested further information onthemeasures andpractices
thattheUnited States intended todiscuss attheconsultations. Hisgovernment hadprovided afull
response on8July. Then, afteranadditional delay ofonemonth, Japan hadsenttheUnited States
aletter on9August setting forth alistofpreconditions tobemetbefore accepting therequest for
consultations.
12.4 TheUnited States hadreplied on21August, noting thattheGATT Decision didnotimpose
preconditions onthesubject matter ortheconduct oftheconsultations thatwould prevent aproductive
dialogue about thepotential resolution of,issues concerning business practices intheJapanese
photographic filmandpaper markets which appeared torestrict competition ininternational trade.
Itwasappropriate thattheconsulting parties beabletodiscuss factors andconditions, including market
structure andregulatory environment, thatmight provide afuller understanding oftheenvironment
inwhich thebusiness practices weretaking place andtheirimpact oncompetition ininternational trade.
12.5 Ithadveryrecently come totheUnited States 'attention thattheGovernment ofJapan might
beontheverge ofaccepting therequest forconsultations. Hisdelegation hoped thistobethecase
andurged Japan toenterintotheconsultations without further delay andwithout seeking inappropriate
orunnecessary preconditions.
12.6 Therepresentative oftheEuropean Communities wished toconfirm thattheCommunity had
requested tobejoined inthese consultations, asindicated bytherepresentative oftheUnited States.
TheCommunity hadasubstantive interest inthequestions raised bythiscase. Heagreed withthe
USthatanearly answer would bewelcomed intheinterest oftherespect andsupport oftheWTO
system.
12.7 Therepresentative ofJapan stated thathisgovernment wastaking seriously therequest for
consultations fromtheUnited States since Japan recognized thatthe"Decision onRestrictive Business
Practices" waspartoftheWTO Agreement. However, Japan hadconsidered thatacareful examination
would berequired asthisrequest forconsultations based uponthisdecision seemed tobethefirstcase
inhistory andtheDecision itself didnotgiveclear guidelines astotheagenda orprocedures for
consultations. Inthisregard, based uponthedecision, Japan hadsought clarification fromtheUnited
States regarding thecoverage oftheconsultations andtheprocedures. Hisgovernment hadfound in
thereply from theUSthatJapan'sandUS'understanding ofthedecision differed onsome points.
Heassured theUSthattherewasnodeliberate attempt todelay theconsultations andthathisauthorities
would beinaposition torespond totherequest intheverynearfuture.
12.8 TheCouncil tooknoteofthestatements.
13. Availability ofdocuments inSpanish
- Statement byElSalvador onbehalf ofGRULAC
13.1 Therepresentative ofElSalvador, speaking onbehalf ofGRULAC andunder "Other Business",
expressed concern feltbyGRULAC atthefactthatdocuments werenotmade available intheSpanish
language intimeformeetings. Hewished tomake arequest thatinsofar aspossible documents were
made available inallthreelanguages sufficiently inadvance ofmeetings inorder toenable delegations
toprepare formeetings.G/C/M/13
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13.2 Therepresentative ofMorocco supported thestatement made byElSalvador onbehalf of
GRULAC, andindicated thatthesameproblem hadarisen regarding documents inFrench. Anyaction
undertaken should cover alltheWTO working languages.
13.3 TheCouncil tooknoteofthestatements.
14. Review under Article 6ofthePreshipment Inspection Agreement (PSI)
- Statement bytheChairman
14.1 TheChairman, speaking under "Other Business", stated thatArticle 6ofthePSIAgreement
envisaged areview oftheprovisions, implementation andoperation ofthisAgreement bytheMinisterial
Conference attheendofthesecond yearfromthedateoftheentry intoforce oftheWTO Agreement,
which wastheendofthisyear. However, there wasnospecific body, designated toconduct such
areview. Heproposed toholdinformal consultations onthismatter.
14.2 TheCouncil soagreed.
15. Dateofthenextmeeting
15.1 TheChairman stated thatheintended toholdaninformal meeting oftheGoods Council on
7October 1996. Heintended tohavetheadvice andviews ofdelegations onprimarily theformat
andcontent oftheCouncil 'sreport totheSingapore Ministerial Conference. Inthisconnection, he
wished tohavetheviews ofMembers onthefollowing foursubject areas: 1)theCouncil 'streatment
ofthereportsofitssubsidiarybodies;2)Australia'sproposalon"FurtherIndustrialTariffNegotiations";
3)thebody which should bedesignated toconduct thereview under Article 6oftheAgreement on
Pre-shipment Inspection aswellasthetiming oftheexercise; and(4)thepreparation oftheCouncil 's
report onthe"Implementation oftheAgreement onTextiles andClothing (ATC) andrelated matters"
fortheSingapore Ministerial Conference. Members might wishtodiscuss thebroad themes andcontents
oftheCouncil 'sreport onthisitem. Heintended toholdaformal meeting oftheCouncil on
15October 1996.
15.2 TheCouncil tooknoteofthestatement.