WORLD TRADE
ORGANIZATIONWT/COMTD/39/Add.1
11 September 2002
(02-4769)
Committee on Trade and Development
APPLICATION OF ARTICLE XVIII, SECTION C, OF GATT 1947
Background Note
Addendum
I. BACKGROUND
1. This note has been prepared by the Secretariat at the request of the Chairman of the
Committee on Trade and Development.  It is intended to provide background information on the cases
in which Article XVIII:C of the GATT has been applied in the GATT, i.e., before the WTO came into
being.1
II. ORIGINS OF ARTICLE XVIII:C OF GATT 1947
2. The text of Article XVIII was replaced twice between 1947 and 1994.2  The first change
occurred at the Second Session of the CONTRA CTING PARTIES in September 1948.  At that time,
the CONTRACTING PARTIES decided to replace the original text of Article XVIII with provisions
reflecting Articles 13 and 14 of the Havana Charter.3  This amendment was effected through the
Protocol modifying Part II and Article XXVI of the GATT, which entered into effect on
14 December 1948.4
3. The second change, which resulted in the present text of Article XVIII, was agreed at the
1954-55 Review Session and entered into force on 7 October 1957.  The principal source concerning
the changes effected then is the Report of the Review Working Party on "Quantitative Restrictions".5
With respect to the general concept of Article XV III, the Review Working Party stated the following:
The general concept of the new Article is that economic development is consistent
with the objectives of the General Agreement and that the raising of the generalstandards of living of the underdeveloped countries which should be the result of
economic development will facilitate the attainment of the objectives of the
Agreement.  In that sense, the new text represents a new and more positive approach
to the problem of economic development and to the ways and means of reconciling
the requirements of economic development with the obligations undertaken under theGeneral Agreement regarding the conduct of commercial policy.
6
                                                     
1 The information contained in this note has been compiled principally on the basis of references which
can be found in GATT, Analytical Index : Guide to GATT Law and Practice, Updated 6th Edition (1995), and in
GATT,  Basic Instruments and Selected Documents (BISD).
2 The successive versions of relevant portions of Article XVIII can be found in Annexes 1 to 3 below.
3 Report on "Modifications to the General Agreement", GATT/CP.2/22/Rev.1, adopted 1 and 2
September 1948, BISD II/38, paras. 4 and 14.
4 GATT, Analytical Index . Guide to GATT Law and Practice, Updated 6th Edition (1995), p. 512.
5 Report of the Review Working Party on "Quantitative Restrictions", L/332/Rev.1 and Addenda,
adopted 2, 4 and 5 March 1955, BISD 3S/170.
6 Ibid., para. 35.WT/COMTD/39/Add.1
Page 2
4. Article XVIII, Section C, permitted contracting parties which were in the early stages of
economic development and whose economy could only support low standards of living to deviate
from certain provisions of the GATT 1947 in cases where governmental assistance was required to
promote the establishment of an industry with a view to raising the general standard of living of the
country concerned.7
5. In a Decision on Safeguard Action for Development Purposes adopted on
28 November 19798, the CONTRACTING PARTIES recognized that the implementation by less-
developed contracting parties of programmes and policies of economic development aimed at raising
the standard of living of the people:
may involve in addition to the establishment of particular industries the development
of new or the modification or extension of existing production structures with a view
to achieving fuller and more efficient use of resources in accordance with thepriorities of their economic development.
9
6. Accordingly, the Decision provides that a less developed contracting party may, where no
measure consistent with the other provisions of GATT 1947 is practicable to achieve these objectives,
have recourse to Section C of Article XVIII, with additional flexibility.10  The Decision also enables
developing countries to modify or withdraw conc essions or introduce quantitative restrictions on a
provisional basis immediately after notification in case of "unusual circumstances, where delay in the
application of measures may give rise to difficulties in the application of its programmes and policies
of economic development".11
7. A background paper prepared by the GATT Secretariat for the Negotiating Group on GATT
Articles provides further details on the objectives and provisions of Article XVIII:C.12
III. INSTANCES OF INVOCATION OF ARTICLE XVIII:C
8. A number of contracting parties invoked Article XVIII, Section C, both before its revision in
1957 and subsequently, and a number of releases were granted by the CONTRACTING PARTIES
under this provision.
9. Article XVIII:6, as revised in the 1954-55 Revi ew Session, provides for annual reviews by
the CONTARCTING PARTIES of all measures applied pursuant to the provisions of Sections C and
D of Article XVIII.  In accordance with this provision, the CONTRACTING PARTIES carried out
seven annual reviews of measures applied under Section C, with the last review taking place in
1967.13
10. This section lists specific instances of invocation of Article XVIII:C or its predecessor, and
describes the outcome and review of those instances of invocation.
                                                     
7 Ibid., para. 40.
8 Decision of 28 November 1979, "Safeguard Action for Development Purposes", L/4897, BISD
26S/209-210.
9 Ibid, para. 1.
10 Ibid.
11 Ibid, para. 2.
12 Background Paper by the Secretariat of 11 August 1987 on "Articles XII, XV and XVIII",
MTN.GNG/NG7/W/14, 11 August 1987, paras. 61 et seq.
13 BISD 7S/71, 8S/97, 9S/101, 10S/106, 11S/158, 13S/65, 14S/1227, 15S/65.WT/COMTD/39/Add.1
Page 3
1. Cuba - Fibres of Henequen and Sisal (1949)
11. These measures, notified by Cuba under Article XVIII:11, involved the fixing of an annual
import quota for the fibres of henequen and sisal.
12. A working party was established to examine the matter and report to the CONTRACTING
PARTIES.  The Working Party established that the measure had been duly notified; that Cuba had notassumed an obligation under Article II of the GATT 1947 in respect of the products at issue; that the
measure was not discriminatory in effect, although it was discriminatory in form; and that the
development aspect of the measure was sufficiently important to establish its eligibility under the
provisions of Article XVIII.  The Working Party also found that Cuba's application was in accordance
with Article XVIII:8(b).
13. In reporting to the CONTRACTING PARTIES, the Working Party recommended that Cuba
be granted a release under the provisions of Article XVIII for a period of five years on condition thatthe formal discrimination be removed as soon as possible.
14
14. The CONTRACTING PARTIES adopted the Working Party's report on 10 August 1949 and
decided on the same date that Cuba be granted a release under the provisions of Article XVIII for a
period of five years on condition that the formal discrimination be removed as soon as possible.15
15. In 1954, Cuba applied for an extension of the release granted in 1949.  The matter was again
referred to a working party.  The Working Party, having satisfied itself that there were no objections
and that Cuba had removed the formal discrimination as required, recommended that Cuba be granted
an extension until 10 August 1959.16  The CONTRACTING PARTIES adopted the Working Party's
report on 2 March 1955 and decided on the same date that Cuba be granted an extension until
10 August 1959.17
16. In 1959, Cuba sought a further extension, which was examined by a working party (panel) in
1960.18 Cuba assured the Panel that any further protection beyond the extended period of release
would be secured through GATT-consistent measures.  In the light of this assurance, the Panel
recommended that the CONTRACTING PARTIES gran t Cuba a further extension of three years
beginning on 10 August 1959.19  The CONTRACTING PARTIES adopted the Panel Report and
decided on the same date that Cuba be granted an extension of three years beginning on
10 August 1959.20
                                                     
14 Report of the Working Party on "Notifications of Existing Measures and Procedures",
GATT/CP.3/60/Rev.1, adopted 10 August 1949, BISD II/49, paras. 21-30.
15 Decision of 10 and 11 August 1949, "Releases granted to Cuba and India for the Maintenance of
Measures Notified under Article XVIII, Paragraph 11", BISD II/20.
16 Report of the Working Party on "Applications by Ceylon and Cuba", L/333, adopted 2 March 1955,
BISD 3S/52, paras. 14-17.
17 Decision of 2 March 1955, "Extension of Release granted to Cuba under Article XVIII", BISD
3S/45.
18 Panel Report on "Notification by Cuba", Part III of L/1113, adopted 20 November 1959, BISD
8S/98, paras. 25-26.
19 Panel Report on " Extension of Release (Henequen and Sisal) Accorded to Cuba", L/1231, adopted 4
June 1960, BISD 9S/100, paras. 1-6.
20 Decision of 4 June 1960, "Extension of Release (Henequen and Sisal) Accorded to Cuba", BISD
9S/25-26.WT/COMTD/39/Add.1
Page 4
17. The release was subject to a review under Article XVIII:6 conducted by the CONTRACTING
PARTIES in plenary session in 1961.21
2. India - Grinding Wheels (1949)
18. These measures, notified by India under Article XVIII:11, involved the prohibition of imports
of grinding wheels and segments.  At the time of  notification, the prohibition was not enforced, and
India noted that it would only be enforced in the event that tariff protection should fail to afford the
protection needed for the industry.
19. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party established that the measure had been duly notified; that it was non-discriminatory;
that India had not assumed an obligation under Ar ticle II of the GATT 1947 in respect of grinding
wheels; and that the measure was not otherwise permitted by the GATT 1947.
20. The Working Party also found that the measure fulfilled the conditions of
Article XVIII:7(a)(i).  Pursuant to that provision, a release had to be granted for a specified period.
India sought a 10-year period, while other member s of the Working Party considered that a much
shorter period would be sufficient.
21. In reporting to the CONTRACTING PARTIES, the Working Party recommended (i) that
India be allowed to reimpose the measure in question at any time within three years from the date ofthe decision, and (ii) that the period for which the measure could be maintained, would be decided by
the CONTRACTING PARTIES at the first session subsequent to the reimposition of the measure, in
the light of the facts relating to the industry, established by India at that time.
22
22. The CONTRACTING PARTIES adopted the Working Party's report on 10 August 1949 and
decided on the same date that (i) India should be allowed to reimpose the existing measures ongrinding wheels and (ii) that the period for which the measure could be maintained would be decided
by the CONTRACTING PARTIES, in accordance with Article XVIII:7, at the first session
subsequent to the reimposition of the measure, in the light of the facts relating to the industry,
established by India at that time.
23
3. Sri Lanka (Ceylon) – Plywood Products, Leather Goods, Acetic Acid, Shark-Liver Oil,
Pyrodite, Iron and Steel Products, Cotton Products, Rubber Products, Paper, Ink,
Brassware, China Ware (1949)
23. These measures, notified by Sri Lanka24 under Article XVIII, required importers to buy a
certain quantity of the local product if they wanted to obtain a licence to import a specified quantity of
certain regulated industrial products.  The regulated products included plywood panels and other
ornamental plywood, plywood chests, certain leather goods, acetic acid and wood preservative,
shark-liver oil, pyrodite (insecticide), iron and steel products, cotton (including sarongs) and cottonlace, rubber products (including rickshaw tyres), paper, brassware, ink, glassware, China ware and
porcelain ware.
24. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party, in an interim report, found that all but five of the above-noted products were eligible
                                                     
21 "Third Annual Review under Article XVIII: 6", 4 December 1961, BISD 10S/106-112.
22 Report of the Working Party on "Notifications of Existing Measures and Procedures",
GATT/CP.3/60/Rev.1, adopted 10 August 1949, BISD II/49, paras. 31-39.
23 Decision of 10 and 11 August 1949, "Releases granted to Cuba and India for the Maintenance of
Measures Notified under Article XVIII, Paragraph 11", BISD II/20.
24 At the time these notifications were made, Sri Lanka was referred to in the GATT as Ceylon.WT/COMTD/39/Add.1
Page 5
for consideration under Article XVIII:6.  The other five products remained in Sri Lanka's Schedule of
Concessions and were, therefore, considered under Article XVIII:5.
25. With respect to all but one of the products considered under Article XVIII:6, the Working
Party recommended that the CONTRACTING PARTIES grant a release under Article XVIII:7,
subject to certain conditions agreed to by Sri Lanka.  The periods of release granted were four years inthe case of shark-liver oil and ink, five years in the case of plywood panels, leather goods, acetic acid,
pyrodite, cotton products and rubber products , and six years in the case of iron and steel products and
paper.  With respect to one product considered under Article XVIII:6, i.e., brassware, the Working
Party recommended that the CONTRACTING PARTIES grant a conditional release under
Article XVIII:8 for a period of five years, prov ided no objection was lodged at the next ordinary
session of the CONTRACTING PARTIES.  If an  objection was lodged, Sri Lanka was to be
permitted to introduce the proposed measure affecting imports of brassware, pending a decision by theCONTRACTING PARTIES at thei r next ordinary session,.
26. As regards the products considered under Article XVIII:5 (i.e., plywood chests, glassware,
China ware and porcelain ware, leather goods and cotton textiles), the Working Party recommended
that the CONTRACTING PARTIES grant a conditional release under Article XVIII:5, in accordance
with the terms of any agreement reached between Sri Lanka and the materially affected contractingparties, subject to any limitations that might be agreed on between them and subject to there being no
objection to the results of these bilateral re-negotiations.
25
27. On 13 August 1949, the CONTRACTING PARTIES adopted the Working Party's reports and
its recommendations regarding Sri Lanka's applications under Articles XVIII:7, XVIII:5 and XVIII:8
(temporary waiver).26
28. In 1955, the Working Party recommended, at the request of Sri Lanka, that the
CONTRACTING PARTIES, acting under Article XVIII:5, extend the release granted to Sri Lanka in
respect of plywood chests (until 14 March 1958) and glassware (until 1 September 1956 for tumblers
and 15 October 1957 for chimneys).27  The CONTRACTING PARTIES adopted the Working Party's
report on 2 March 1955 and decided on the same date that Sri Lanka be granted the periods ofextension recommended by the Working Party.
28
29. Also in 1955, the Working Party recommended, at the request of Sri Lanka, that the
CONTRACTING PARTIES should decide to change the period of validity of the release granted in
1949 in respect of cotton sarongs such that it would be available until 13 October 1957.29  T h e
                                                     
25 Interim Report of the Working Party on "Ceylon Application under Article XVIII",
GATT/CP.3/73/Rev.1, adopted 13 August 1949, BISD II/65, paras. 1-59; Report of the Working Party on
"Ceylon Application in Respect of Brassware", GATT/CP.3/85, adopted 13 August 1949, BISD II/79,paras. 1-2.
26 Decision of 13 August 1949, "Releases granted to Ceylon under Article XVIII, Paragraphs 5 and 7",
BISD II/21; Decision of 13 August 1949, "Release granted to Ceylon under Article XVIII, Paragraph 8", BISD
II/26.
27 Report of the Working Party on "Applications by Ceylon and Cuba", L/333, adopted 2 March 1955,
BISD 3S/52, paras. 1-8.
28 Decisions of 2 March 1955, "Extension of Release granted to Ceylon under Article XVIII", BISD
3S/44-45.
29 Report of the Working Party on "Applications by Ceylon and Cuba", L/333, adopted 2 March 1955,
BISD 3S/52, paras. 9-13.WT/COMTD/39/Add.1
Page 6
CONTRACTING PARTIES adopted the Working Party's report on 2 March 1955 and decided on the
same date that Sri Lanka be granted the periods of extension recommended by the Working Party.30
4. Sri Lanka (Ceylon) – Cotton Verties (1950)
30. This measure was inadvertently omitted from Sri Lanka's application approved by the
CONTRACTING PARTIES on 13 August 1949.  Like the measures at issue in Sri Lanka (Ceylon) -
Certain Industrial Products  (1949) , notified by Sri Lanka under Article XVIII, required importers to
buy a certain quantity of the local product if they wanted to obtain a licence to import a specified
quantity of certain regulated industrial products.
31. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party considered this measure under Article XVIII:5, seeing that cotton verties were
included in Sri Lanka's Schedule of Concessions.
32. The Working Party recommended that the CONTRACTING PARTIES grant a release under
Article XVIII:5 for a period of five years, subject to certain limitations and subject to there being no
objection from a contracting party claiming to be materially affected under the terms of
Article XVIII:5.31
33. On 1 April 1950, the CONTRACTING PARTIES adopted the Working Party's reports and its
recommendations regarding Sri Lanka's applications under Articles XVIII:5.32
5. Haiti - Tobacco (1950)
34. These measures, notified by Haiti under Article XVIII:11, established a monopoly by the
State in the purchase, production and trading of tobacco, cigars and cigarettes.
35. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party found that the measure in question satisfied the requirements of Article XVIII.  TheWorking Party noted, in this regard, that the measure had been duly notified; that it was non-
discriminatory; that Haiti had not assumed an obligation under Article II of the GATT 1947 in respect
of the relevant products; and that the purpose of the measure was the development of the production
of raw tobacco.
36. In view of the aforementioned finding, the Working Party recommended that a release be
granted to Haiti for a period of five years, under Article XVIII:12, for the maintenance of the measure
in so far as it required importers to obtain an import permit.
33
37. The CONTRACTING PARTIES adopted the Working Party's report on 27 November 1950
and decided on the same date that (i) the measure notified by Haiti satisfied the requirements of
                                                     
30 Decisions of 2 March 1955, "Extension of Release granted to Ceylon under Article XVIII", BISD
3S/45.
31 Report of the Working Party on "Ceylon Appli cation under Article XVIII in Respect of Cotton
Verties", GATT/CP.4/32, adopted 1 April 1950, BISD II/85, paras. 1-8.
32 Decision of 1 April 1950, "Release granted to Ceylon under Article XVIII, Paragraph 5", BISD
II/26-27.
33 Report of the Working Party on "Notification by Haiti under Article XVIII", GATT/CP.5/25,
adopted 27 November 1950, BISD II/87, paras. 1-6.WT/COMTD/39/Add.1
Page 7
Article XVIII and (ii) a release be granted , for a period of five years, under Article XVIII:12, for the
maintenance of the measure in so far as it required importers to obtain an import permit.34
6. Sri Lanka (Ceylon)  - Towels, Rubber Footwear, Cotton Banians, Dried Fish (1952)
38. These measures, notified by Sri Lanka under Article XVIII, required importers to buy a
certain quantity of the local product if they wanted to obtain a licence to import a specified quantity ofcertain regulated industrial products.  The regulated products included towels and towelling, rubber
footwear, cotton banians, dried fish.
39. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party found that the above-noted products were eligible for consideration under
Article XVIII:7.
40. The Working Party recommended that the CONTRACTING PARTIES grant a release under
Article XVIII:7 with respect to the relevant products, subject to certain conditions agreed to bySri Lanka.  The periods of release granted were three years in the case of cotton banians and dried
fish, four years in the case of rubber footwear and five years in the case of towels and towelling.
35
41. On 8 November 1952, the CONTRACTING PART IES adopted the Working Party's report
and its recommendations regarding Sri Lanka's application under Articles XVIII:7.36
7. Sri Lanka (Ceylon)  - Ceramic Ware and Petroleum Products (1955)
42. These measures, affecting imports of ceramic ware, required importers to buy a certain
quantity of the local product if they wanted to obtain a licence to import a specified quantity of
ceramic ware.
43. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party found that the above-noted products were eligible for consideration underArticle XVIII:7.
44. The Working Party recommended that the CONTRACTING PARTIES grant a release under
Article XVIII:7 for a period of five years.
37
45. The same Working Party also examined another measure for which Sri Lanka sought a
release under Article XVIII.  That measure involved a quantitative restriction on the importation ofspecified petroleum products.  The Working Party found that the above-noted products were eligible
for consideration under Article XVIII:7.
46. The Working Party recommended that the CONTRACTING PARTIES grant a release under
Article XVIII:7 for a period of ten years.
38
                                                     
34 Decision of 27 November 1950, "Release granted to Haiti under Article XVIII, Paragraph 12
Relating to the Import of Tobacco", BISD II/27.
35 Report of the Working Party on "Ceylon App lication under Article XVIII:7", L/62, adopted
8 November 1952, BISD 1S/34, paras. 1-28.
36 Decisions of 8 November 1952, "Releases granted to Ceylon under Article XVIII:7",
BISD 1S/26-28.
37 Report of the Working Party on "Applications by Ceylon", L/461, adopted 30 November 1955, BISD
4S/34, paras. 2-7.
38 Ibid., paras. 8-14.WT/COMTD/39/Add.1
Page 8
47. On 30 November 1955, the CONTRACTING PART IES adopted the Working Party's report
and its recommendations regarding Sri Lanka's applications under Articles XVIII:7.39
48. On 18 November 1960, the CONTRACTING PA RTIES decided to extend the period of
validity of the Decision of 30 November 1955 until the close of the Eighteenth Session.40
8. Sri Lanka (Ceylon)  - Cycles, Dry-Cell Batteries, Accumulators, Cotton Sarees and
Sarongs and Razor Blades (1956)
49. These measures, notified by Sri Lanka under Article XVIII, required importers to buy a
certain quantity of the local product if they wanted to obtain a licence to import a specified quantity of
certain regulated industrial products.  The regulated products included cycles (mainly bicycles), dry-
cell batteries, accumulators, cotton sarees, cotton sarongs and razor blades.
50. A working party examined the matter and reported to the CONTRACTING PARTIES.  The
Working Party found (i) that cycles, dry-cell batteries, accumulators and cotton sarees were eligiblefor consideration under Article XVIII:7; (ii) that cotton sarongs were eligible for consideration under
Article XVIII:8; and (iii) that razor blades were eligible for consideration under Article XVIII:5.
51. With respect to the products considered under Article XVIII:7, the Working Party
recommended that the CONTRACTING PARTIES grant a release, subject to certain conditions
agreed to by Sri Lanka.  The period of release granted was five years.  With respect to the productconsidered under Article XVIII:8, i.e., cotton sarongs, the Working Party recommended that the
CONTRACTING PARTIES grant a release for a period of five years, subject to certain conditions
agreed to by Sri Lanka.  As regards the product considered under Article XVIII:5, i.e., razor blades,
the Working Party recommended that the CONTRACTING PARTIES grant a release for a period of
five years, subject to certain conditions agreed to by Sri Lanka.
41
52. On 16 November 1956, the CONTRACTING PART IES adopted the Working Party's report
and its recommendations regarding Sri Lanka's applications under Articles XVIII:7, XVIII:8 and
XVIII:5.42
9. Sri Lanka (Ceylon)  - Cotton Piece-Goods, Plywood Chests, Crown Corks, Cycle Tyres
and Tubes and Cotton Textiles (1957)
53. These measures, notified by Sri Lanka under Article XVIII, required importers to buy a
certain quantity of the local product if they wanted to obtain a licence to import a specified quantity of
certain regulated industrial products.  The regulated products included cotton piece-goods, plywood
chests, crown corks, cycle tyres and tubes and cotton textiles.  With respect to cotton piece-goods,
Sri Lanka essentially sought to broaden the scope of the Decision of 16 November 1956 so as to
include products which are not cotton sarongs but which nevertheless compete with sarongs.43  With
respect to cotton piece-goods, Sri Lanka essentially sought to broaden the scope of the Decision of16 November 1956 so as to include products which are not cotton sarong but which nevertheless
                                                     
39 Decision of 30 November 1955, "Release granted to Ceylon under Article XVIII Regarding Two
Items of Ceramic Ware", BISD 4S/29-30; Decision of 30 November 1955, "Release granted to Ceylon underArticle XVIII Regarding Petroleum Products", BISD 4S/30.
40 Decision of 18 November 1960, "Extension of Release (Ceramic Ware) Accorded to Ceylon", BISD
9S/24-25.
41 Report of the Working Party on "Applications by Ceylon", L/591, adopted 16 November 1956, BISD
5S/90, paras. 1-19.
42 Decisions of 16 November 1956, "Releases granted to Ceylon", BISD 5S/30-32.
43 Report of the Working Party on "Applications by Ceylon", L/591, adopted 16 November 1956, BISD
5S/90, paras. 1-19.WT/COMTD/39/Add.1
Page 9
compete with the sarongs.44  With respect to plywood chests, Sri Lanka essentially sought an
extension of the Decision of 2 March 1955.45  Finally, with respect to crown corks and cycle tyres and
tubes and cotton textiles, Sri Lanka sought additional releases.
54. A panel was established to examine the matter and report to the CONTRACTING PARTIES.
The Panel found that the above-noted products were eligible for consideration under Article XVIII:C.
55. With respect to sarongs and piece-goods with a repetitive pattern characteristic of sarongs and
which can be cut into sarongs, the Panel recommended that the CONTRACTING PARTIES grant
Sri Lanka a release, subject to certain conditions, for a period of five years.  The Panel further
recommended that, in respect of cotton piece-goods (bleached) and cotton piece-goods (other),
Sri Lanka should be granted a release for the period of one year, subject to certain conditions and
subject to review by the CONTRACTING PARTIES at the Thirteenth Session.
56. With respect to plywood chests, the Panel recommended that the CONTRACTING PARTIES
grant Sri Lanka a further release, subject to certain conditions, for a period of five years.  With respect
to crown corks and cycle tyres and tubes, the Panel recommended that the CONTRACTING
PARTIES grant Sri Lanka a release, subject to certain conditions, for a period of three years.  Finally,
with respect to cotton textiles, the Panel recommended that the CONTRACTING PARTIES grant
Sri Lanka a release, subject to certain conditions, for a period of five years.  With respect to onecotton textile product (bleached cotton piece goods), however, the Panel recommended release until
31 December 1958, subject to review at the Thirteenth Session.
46
57. On 28 November 1957, the CONTRACTING PARTIE S adopted the Panel's report and its
recommendations regarding Sri Lanka's application under Articles XVIII:C.47
58. These releases were the subject of the first annual review under Article XVIII:6.48 For each of
the releases, the Panel considered (a) the standard ratio applied in the course of the year, (b) the level
of production, imports and prices of the domestic and imported products, and (c) the prospects of
relaxing or eliminating the restriction or the replacement of those restrictions by alternative measures
available under the Agreement.  It noted in conclusion its opinion that
"the annual review provided for in paragraph 6 of Article XVIII serves a very useful
purpose and, in particular, this annual opportunity of discussing the measures after
they have been concurred in provides a safeguard which should enable the
CONTRACTING PARTIES to adopt more flexible procedures in dealing with
notifications under Section C of the Article in the mutual interests of the notifying
country and the interested exporting countries."
                                                     
44 Report of the Working Party on "Applications by Ceylon", L/591, adopted 16 November 1956, BISD
5S/90, paras. 1-19.
45 Decision of 2 March 1955, "Extension of Release granted to Ceylon under Article XVIII", BISD
3S/44-45.
46 Report of the Panel on "Applications by Ceylon", L/751, adopted 28 November 1957, BISD 6S/90,
paras. 13-53.
47 Decisions of 28 November 1957, "Releases Granted to Ceylon", BISD 6S/14-17.
48 Report of the Panel, "First Annual Review under Article XVIII:6", L/933, adopted 22 November
1958, BISD 7S/71-75.WT/COMTD/39/Add.1
Page 10
59. The releases on textile items and plywood chests were also considered during the second
annual review in 1959 (the releases on crown corks, bicycle tyres and tubes had not been used and
were therefore not reviewed)49.  They were further reviewed in 1960,50 196151 and 1962.52
10. Sri Lanka (Ceylon) – Tooth Brushes, Electric Bulbs, Cotton Sarees (1958)
60. These measures, notified by Sri Lanka under Article XVIII, required importers to buy a
certain quantity of the local product if they wanted to obtain a licence to import a specified quantity of
certain regulated industrial products.  The regulated products included tooth brushes, electric bulbs
and cotton sarees.  With respect to tooth brushes and electric bulbs, Sri Lanka sought additional
releases.  With respect to cotton sarees, Sri Lanka essentially sought to broaden the scope of the
Decision of 16 November 1956 so as to cover a range of products including saree cloth and sarees of
mixed materials with cotton, silk, or synthetic fibre as a base. 53
61. A panel examined the matter and reported to the CONTRACTING PARTIES.  The Panel
considered that Ceylon  was entitled to avail itself of the provisions of Article XVIII:C.
62. With regard to tooth brushes, the Panel recommended that the CONTRACTING PARTIES
grant Sri Lanka a release, subject to certain conditions, for a period of five years.  With regard to
electric bulbs, the Panel recommended that the CONTRACTING PARTIES grant Sri Lanka a release,
subject to certain conditions, for a period of three years.  With regard to cotton sarees, the Panelrecommended that the CONTRACTING PARTIES grant Sri Lanka a release, subject to certain
conditions, for a period of five years.
54
63. On 22 November 1958, the CONTRACTING PARTIE S adopted the Panel's report and its
recommendations regarding Sri Lanka's application under Articles XVIII:C.55
64. On 9 March 1964, the CONTRACTING PARTIES decided to extend the period of validity of
the Decision of 22 November 1958 insofar as it related to cotton sarees (as well as other textile
products) until 27 August 1968.56
65. Releases granted to Sri Lanka on textile items were considered during the second annual
review under Article XVIII:6 in 1959 (the releases on tooth brushes and electric bulbs had not been
used and were therefore not reviewed).57 Releases on cotton sarongs and cotton textiles were further
considered in the annual review of 1960,58 196159 and 1962.60
                                                     
49 Report of the Panel, "Annual review under Article XVIII:6", Part II of L/1113, adopted
20 November 1959, BISD 8S/97-98.
50 Report of the Panel, "Second Annual Review under Article XVIII:6", L/1228, adopted 4 June 1960,
BISD 9S/101-104.
51 "Third Annual Review under Article XVIII: 6", 4 December 1961, BISD 10S/106-112.
52 "Fourth Annual Review under Article XVIII: 6", 31 October 1962, BISD 11S/158-164.
53 Decisions of 16 November 1956, "Releases granted to Ceylon", BISD 5S/30-32.
54 Report of the Panel on "Notifications by Ceylon", L/932, adopted 22 November 1958, BISD 7S/75,
paras. 5-21.
55 Decisions of 22 November 1958, "Notifications by Ceylon", BISD 7S/25-27.
56 Decision of 9 March 1964, "Extension of Release Granted to Ceylon", BISD 12S/35-36.
57 Report of the Panel, "Annual review under Article XVIII:6", Part II of L/1113, adopted
20 November 1959, BISD 8S/97-98.
58 Report of the Panel, "Second Annual Review under Article XVIII:6, L/1228, adopted 4 June 1960,
BISD 9S/101-104.
59 "Third Annual Review under Article XVIII: 6", 4 December 1961, BISD 10S/106-112.
60 "Fourth Annual Review under Article XVIII: 6", 31 October 1962, BISD 11S/158-164.WT/COMTD/39/Add.1
Page 11
66. The releases on sarongs, sarees and cotton piece-goods, the validity of which had been
extended by the decision of 9 March 1964, was subject to a further review under Article XVIII:6 in
196561 and in 1966.62  The following year, it was noted during the seventh (and last) annual review
under Article XVIII:6 that Sri Lanka was no l onger applying measures under Section C of
Article XVIII and that the release granted to Sri Lanka in 1964 was no longer necessary.63
11. Sri Lanka (Ceylon) – Aluminium Foil and Hollow-Ware, Asbestos Cement Products,
Textile goods (1959, 1960)
67. These measures, notified by Sri Lanka under Article XVIII, required importers to buy a
certain quantity of the local product if they wanted to obtain a licence to import a specified quantity of
certain regulated industrial products.  The regulated products included aluminium foil for packing,
wood screws, aluminium hollow-ware, asbestos cement products and textile goods.
68. A panel examined the matter and reported to the CONTRACTING PARTIES.  The Panel
considered that Sri Lanka was entitled to avail itself of the provisions of Article XVIII:C.
69. With respect to aluminium foil, the Panel concluded that the notification by Sri Lanka did not
meet the requirement laid down in paragraph 13 of Section C of Article XVIII and recommended that
the Sri Lanka Government reconsider the desirability of the proposed measure and examine other
appropriate action consistent with the GATT 1947.  With respect to wood screws, the Panelrecommended that the CONTRACTING PARTIES grant Sri Lanka a release, subject to certain
conditions, for a period of five years.  With resp ect to aluminium hollow, the Panel recommended that
the CONTRACTING PARTIES grant Sri Lanka a release, subject to certain conditions, for a period
of three years.
70. With respect to asbestos cement products, the Panel found itself unable to arrive at any final
view on the merits or otherwise of this notification.  The Panel recommended that Sri Lanka should, if
it so desired, present to the CONTRACTING PARTIES a revised statement on the difficulties
confronting the domestic industry and that the request be re-examined at the following session.
Finally, with respect to textile goods, the Panel felt that more time and information were needed
before a conclusion could be reached and recommended, with the concurrence of Sri Lanka, thatSri Lanka re-examine the text of its notification and that the request be considered at the following
session.  The Panel also recommended that a supplementary release be granted in relation to one
particular textile product omitted from the release granted by virtue of the Decision of
22 November 1958.
64  This supplementary release was to be granted under the same terms and
conditions as laid down in the 1958 Decision.65
71. On 20 November 1959, the CONTRACTING PARTIE S took note of the Panel's report and
agreed to its recommendations regarding Sri Lanka's application under Article XVIII:C.66
72. The measures notified by Sri Lanka concerning aluminium foil, asbestos cement products and
certain textile products were further examined in terms of the provision of Article XVIII:C at the
following session of the CONTRACTING PARTIES.
                                                     
61 "Action under Section C of Article XVIII – Fifth Annual Review under Article XVIII:6",
22 March 1965, BISD 13S/65-67.
62 "Action under Section C of Article XVIII – Sixth Annual Review under Article XVIII:6",
1 April 1966, BISD 14S/127-128.
63 "Measures Applied under Section C", BISD 15S/65-66.
64 Decisions of 22 November 1958, "Notifications by Ceylon", BISD 7S/25-27.
65 Report of the Panel on "Notifications by Ceylon", Part I of L/1113, taken note of 20 November 1959,
BISD 8S/90, paras. 1-20.
66 Decision of 20 November 1959, "Notifications by Ceylon", BISD 8S/21.WT/COMTD/39/Add.1
Page 12
73. With regard to aluminium foil, the Panel recommended that the CONTRACTING PARTIES
grant Sri Lanka a release, subject to certain conditions, for a period of two years.  With respect to
asbestos cement products, the Panel recommended that the CONTRACTING PARTIES grant
Sri Lanka a release, subject to certain conditions, for a period of three years.  With regard to the
textile products, the Panel recommended that, since the products at issue were products in respect ofwhich Sri Lanka had assumed obligations under Article II of the GATT 1947, Sri Lanka should enter
into consultations with certain contracting parties in accordance with paragraph 18 of Article XVIII.
67
74. On 4 June 1960, the CONTRACTING PARTIES adopted the Panel's report and its
recommendations.68
75. On 23 September 1960, considering that Sri Lanka had concluded consultations required
under paragraph 18 of Article XVIII and having been authorized by the CONTRACTING PARTIES
to take the necessary action to complete the procedure provided for in paragraph 18 of Article XVIII,the Council agreed on behalf of the CONTRACTING PARTIES to grant Sri Lanka a release in
respect of the relevant textile products.
69  It was decided that this release constituted part of the release
granted by the Decision of 22 November 1958.70
76. On 18 December 1963, the CONTRACTING PARTIES extended until the close of the
Twenty-First Session the period of validity of the Decision of 22 November 1958, as subsequentlyamended, in respect of the textile products subject to that Decision.  On 9 March 1964, the
CONTRACTING PARTIES decided, at the request of Sri Lanka, to extend the period of validity, in
respect of the textile products subject to the Decisions of 22 November 1958, as subsequently
amended, until 27 August 1968.
71
77. The releases granted to Sri Lanka on cotton sarongs and cotton textiles were considered in the
annual review under Article XVIII:6 in 1960.72 The releases on sarongs, sarees and cotton piece-
goods, and asbestos cement products were subject to further review in 196173 and 1962.74
78. The release on sarongs, sarees and cotton piece-goods, the validity of which was extended by
a decision of 9 March 1964, was subject to a further review under Article XVIII:6 in 196575 and in
1966.76  The following year, it was noted during the seventh (and last) annual review under
Article XVIII:6 that Sri Lanka was no longer applyi ng measures under Section C of Article XVIII and
that the release granted to Sri Lanka in 1964 was no longer necessary.77
                                                     
67 Report of the Panel on "Notifications by Ceylon", L/1224, adopted 4 June 1960, BISD 9S/95,
paras. 1-13.
68 Decision of 4 June 1960, "Notifications by Ceylon", BISD 9S/22-23.
69 Council Decision of 23 September 1960, "Release (Textile Products) Accorded to Ceylon", BISD
9S/23-24.
70 Decisions of 22 November 1958, "Notifications by Ceylon", BISD 7S/25-27.
71 Decision of 9 March 1964, "Extension of Release Granted to Ceylon", BISD 12S/35-36.
72 Report of the Panel, "Second Annual Review under Article XVIII:6, L/1228, adopted 4 June 1960,
BISD 9S/101-104.
73 "Third Annual Review under Article XVIII: 6", 4 December 1961, BISD 10S/106-112.
74 "Fourth Annual Review under Article XVIII: 6", 31 October 1962, BISD 11S/158-164.
75 "Action under Section C of Article XVIII – Fifth Annual Review under Article XVIII:6",
22 March 1965, BISD 13S/65-67.
76 "Action under Section C of Article XVIII – Sixth Annual Review under Article XVIII:6", L/2615,
1 April 1966, BISD 14S/127-128.
77 "Measures Applied under Section C", BISD 15S/65-66.WT/COMTD/39/Add.1
Page 13
12. Other invocations
79. Contracting parties other than those mentioned above have notified certain import regulations
taken for development purposes under Section C of Article XVIII.  They include Greece, Indonesia
and Malaysia.  These notifications are described below.
80. In 1970, Greece  notified in accordance with the provisions of Article XVIII, Section C, that it
had decided to include electric batteries in a list of products which could be imported only under
cover of a license issued by a special committee.  The communication indicates that the measure
related to an item which was subject to a concession and that Greece was prepared to enter into
consultations, in accordance with Article XVIII:18, with interested contracting parties.78
81. In January 1983, Indonesia notified a number of decisions issued by the Ministry of Trade
and Cooperatives of Indonesia concerning the import regimes for several groups of industrial products
(electrical and electronic goods; chemicals; motor vehicle spare parts; textiles; heavy equipment andspare parts).  Under the various decisions, certain listed products were to be imported by approved
importers, and import quotas were to apply to some products.  The decisions were to be in force
initially for two years and subsequently to be adju sted to the level of industrial development.  The
notification indicates that the policy on this import regime was based on Article XVIII, particularly
Section C thereof, and that Indonesia was willing to provide any further information contracting
parties might have required.
79
82. In December 1983, Indonesia notified another decision, whereby imports of foods, beverages
and fruits were to be subject to licensing requirements.  This notification was made with reference to
the Decision of 28 November 1979 on Safeguard Ac tion for Development Purposes, as well as to
Article XVIII, Sections A and C.80
83. In July 1984, Malaysia notified a temporary suspension of the issuing of licences for the
import of batik sarong items.81
                                                     
78 "Greek Import Restrictions under Article XVIII:C – Electric batteries", L/3460, 12 November 1970.
79 "Article XVIII:C – Action by Indonesia", L/5452, 25 January 1983.
80 "Article XVIII: Sections A and C – Action by Indonesia", L/5597, 22 December 1983.
81  C/W/448, page 38.WT/COMTD/39/Add.1
Page 14
ANNEX 1
Article XVIII:C of the GATT 1947 as of 7 October 1957
Article XVIII *
Governmental Assistance to Economic Development
1. The contracting parties recognize that the attain ment of the objectives of this Agreement will
be facilitated by the progressive development of their economies, particularly of those contracting
parties the economies of which can only support low standards of living* and are in the early stages of
development.*
2. The contracting parties recognize further that it may be necessary for those contracting
parties, in order to implement programmes and policies of economic development designed to raise
the general standard of living of their people, to take protective or other measures affecting imports,
and that such measures are justified in so far as th ey facilitate the attainment of the objectives of this
Agreement.  They agree, therefore, that those contracting parties should enjoy additional facilities toenable them ( a) to maintain sufficient flexibility in their ta riff structure to be able to grant the tariff
protection required for the establishment of a particular industry* and ( b) to apply quantitative
restrictions for balance of payments purposes in a manner which takes full account of the continued
high level of demand for imports likely to be generated by their programmes of economic
development.
3. The contracting parties recognize finally that, with those additional facilities which are
provided for in Sections A and B of this Article, the provisions of this Agreement would normally be
sufficient to enable contracting parties to meet the requirements of their economic development.  They
agree, however, that there may be circumstances where no measure consistent with those provisions is
practicable to permit a contracting party in the process of economic development to grant thegovernmental assistance required to promote the esta blishment of particular industries* with a view to
raising the general standard of living of its people.  Special procedures are laid down in Sections C
and D of this Article to deal with those cases.
4. (a) Consequently, a contracting party, the economy of which can only support low
standards of living* and is in the early stages of development,* shall be free to deviate
temporarily from the provisions of the other Articles of this Agreement, as provided
in Sections A, B and C of this Article.
(b) A contracting party, the economy of which is in the process of development, but
which does not come within the scope of subparagraph (a) above, may submit
applications to the CONTRACTING PART IES under Section D of this Article.
5. The contracting parties recognize that the export earnings of contracting parties, the
economies of which are of the type described in paragraph 4(a) and (b) above and which depend onexports of a small number of primary commodities, may be seriously reduced by a decline in the sale
of such commodities.  Accordingly, when the exports of primary commodities by such a contracting
party are seriously affected by measures taken by another contracting party, it may have resort to the
consultation provisions of Article XXII of this Agreement.
6. The CONTRACTING PARTIES shall review annually all measures applied pursuant to the
provisions of Sections C and D of this Article.
[…]WT/COMTD/39/Add.1
Page 15
Section C
13. If a contracting party coming within the scope of paragraph 4(a) of this Article finds that
governmental assistance is required to promote the establishment of a particular industry* with a viewto raising the general standard of living of its people, but that no measure consistent with the other
provisions of this Agreement is practicable to achieve that objective, it may have recourse to the
provisions and procedures set out in this Section.*
14. The contracting party concerned shall notify the CONTRACTING PARTIES of the special
difficulties which it meets in the achievement of the objective outlined in paragraph 13 of this Article
and shall indicate the specific measure affecting imports which it proposes to introduce in order to
remedy these difficulties.  It shall not introduce that measure before the expiration of the time-limitlaid down in paragraph 15 or 17, as the case may be, or if the measure affects imports of a product
which is the subject of a concession included in the appropriate Schedule annexed to this Agreement,
unless it has secured the concurrence of the CONTRACTING PARTIES in accordance with
provisions of paragraph 18;  Provided that, if the industry receiving assistance has already started
production, the contracting party may, after informing the CONTRACTING PARTIES, take suchmeasures as may be necessary to prevent, during that period, imports of the product or products
concerned from increasing substantially above a normal level.*
15. If, within thirty days of the notificatio n of the measure, the CONTRACTING PARTIES do
not request the contracting party concerned to consult with them,* that contracting party shall be free
to deviate from the relevant provisions of the other Articles of this Agreement to the extent necessaryto apply the proposed measure.
16. If it is requested by the CONTRACTING PARTIES to do so, *the contracting party
concerned shall consult with them as to the purpose of the proposed measure, as to alternative
measures which may be available under this Agreement, and as to the possible effect of the measure
proposed on the commercial and economic interests of other contracting parties.  If, as a result of suchconsultation, the CONTRACTING PARTIES agree that there is no measure consistent with the other
provisions of this Agreement which is practicable in order to achieve the objective outlined in
paragraph 13 of this Article, and concur* in the proposed measure, the contracting party concerned
shall be released from its obligations under the relevant provisions of the other Articles of this
Agreement to the extent necessary to apply that measure.
17. If, within ninety days after the date of the notification of the proposed measure under
paragraph 14 of this Article, the CONTRACTING PA RTIES have not concurred in such measure, the
contracting party concerned may introduce the measure proposed after informing the
CONTRACTING PARTIES.
18. If the proposed measure affects a product which is the subject of a concession included in the
appropriate Schedule annexed to this Agreement, the contracting party concerned shall enter into
consultations with any other contracting party with which the concession was initially negotiated, andwith any other contracting party determined by the CONTRACTING PARTIES to have a substantial
interest therein.  The CONTRACTING PARTIES shall co ncur* in the measure if they agree that there
is no measure consistent with the other provisions of this Agreement which is practicable in order to
achieve the objective set forth in paragraph 13 of this Article, and if they are satisfied:
(a) that agreement has been reached with such other contracting parties as a result of the
consultations referred to above, orWT/COMTD/39/Add.1
Page 16
(b) if no such agreement has been reached within sixty days after the notification
provided for in paragraph 14 has been received by the CONTRACTING PARTIES,
that the contracting party having recourse to this Section has made all reasonable
efforts to reach an agreement and that the interests of other contracting parties are
adequately safeguarded.*
The contracting party having recourse to this Section shall thereupon be released from its obligations
under the relevant provisions of the other Articles of this Agreement to the extent necessary to permit
it to apply the measure.
19. If a proposed measure of the type described in paragraph 13 of this Article concerns an
industry the establishment of which has in the initial period been facilitated by incidental protection
afforded by restrictions imposed by the contracting party concerned for balance of payments purposesunder the relevant provisions of this Agreement, that contracting party may resort to the provisions
and procedures of this Section;  Provided that it shall not apply the proposed measure without the
concurrence* of the CONTRACTING PARTIES.*
20. Nothing in the preceding paragraphs of this Section shall authorize any deviation from the
provisions of Articles I, II and XIII of this Agreement.  The provisos to paragraph 10 of this Articleshall also be applicable to any restriction under this Section.
21. At any time while a measure is being applied under paragraph 17 of this Article any
contracting party substantially affected by it may suspend the application to the trade of the
contracting party having recourse to this Section of such substantially equivalent concessions or other
obligations under this Agreement the suspension of which the CONTRACTING PARTIES do notdisapprove;* Provided that sixty days' notice of such suspension is given to the CONTRACTING
PARTIES not later than six months after the measure has been introduced or changed substantially to
the detriment of the contracting party affected.  Any such contracting party shall afford adequate
opportunity for consultation in accordance with the provisions of Article XXII of this Agreement.
Ad Article XVIII
The CONTRACTING PARTIES and the contracting parties concerned shall preserve the
utmost secrecy in respect of matters arising under this Article.
Paragraphs 1 and 4
1. When they consider whether the economy of a contracting party "can only support low
standards of living", the CONTRACTING PARTIES shall take into consideration the normal position
of that economy and shall not base their determination on exceptional circumstances such as those
which may result from the temporary existence of exceptionally favourable conditions for the stapleexport product or products of such contracting party.
2. The phrase "in the early stages of development" is not meant to apply only to contracting
parties which have just started their economic development, but also to contracting parties the
economies of which are undergoing a process of industrialization to correct an excessive dependence
on primary production.WT/COMTD/39/Add.1
Page 17
Paragraphs 2, 3, 7, 13 and 22
The reference to the establishment of particular industries shall apply not only to the
establishment of a new industry, but also to the establishment of a new branch of production in an
existing industry and to the substantial transformation of an existing industry, and to the substantialexpansion of an existing industry supplying a relatively small proportion of the domestic demand.  It
shall also cover the reconstruction of an industry destroyed or substantially damaged as a result of
hostilities or natural disasters.
Paragraph 7(b)
A modification or withdrawal, pursuant to para graph 7(b), by a contracting party, other than
the applicant contracting party, referred to in paragraph 7(a), shall be made within six months of the
day on which the action is taken by the applicant contracting party, and shall become effective on the
thirtieth day following the day on which such modification or withdrawal has been notified to the
CONTRACTING PARTIES.
Paragraphs 13 and 14
It is recognized that, before deciding on the introduction of a measure and notifying the
CONTRACTING PARTIES in accordance with paragraph 14, a contracting party may need areasonable period of time to assess the competitive position of the industry concerned.
Paragraphs 15 and 16
It is understood that the CONTRACTING PARTIES shall invite a contracting party
proposing to apply a measure under Section C to consult with them pursuant to paragraph 16 if they
are requested to do so by a contracting party the trade of which would be appreciably affected by the
measure in question.
Paragraphs 16, 18, 19 and 22
1. It is understood that the CONTRACTING PARTIES may concur in a proposed measure
subject to specific conditions or limitations.  If the measure as applied does not conform to the terms
of the concurrence it will to that extent be deemed a measure in which the CONTRACTING
PARTIES have not concurred.  In cases in whic h the CONTRACTING PARTIES have concurred in a
measure for a specified period, the contracting party concerned, if it finds that the maintenance of the
measure for a further period of time is required to achieve the objective for which the measure wasoriginally taken, may apply to the CONTRACTING PARTIES for an extension of that period in
accordance with the provisions and procedures of Section C or D, as the case may be.
2. It is expected that the CONTRACTING PARTIES will, as a rule, refrain from concurring in a
measure which is likely to cause serious prejudice to exports of a commodity on which the economy
of a contracting party is largely dependent.
Paragraph 18 and 22
The phrase "that the interests of other contracting parties are adequately safeguarded" is
meant to provide latitude sufficient to permit consideration in each case of the most appropriatemethod of safeguarding those interests.  The appropriate method may, for instance, take the form of
an additional concession to be applied by the contracting party having recourse to Section C or DWT/COMTD/39/Add.1
Page 18
during such time as the deviation from the other Articles of the Agreement would remain in force or
of the temporary suspension by any other contracting party referred to in paragraph 18 of a concession
substantially equivalent to the impairment due to the introduction of the measure in question.  Such
contracting party would have the right to safeguard its interests through such a temporary suspension
of a concession;  Provided  that this right will not be exercised when, in the case of a measure imposed
by a contracting party coming within the scop e of paragraph 4(a), the CONTRACTING PARTIES
have determined that the extent of the compensatory concession proposed was adequate.
Paragraph 19
The provisions of paragraph 19 are intended to cover the cases where an industry has been in
existence beyond the "reasonable period of time" referred to in the note to paragraphs 13 and 14, andshould not be so construed as to deprive a contracting party coming within the scope of
paragraph 4 (a) of Article XVIII, of its right to resort to the other provisions of Section C, including
paragraph 17, with regard to a newly established industry even though it has benefited from incidental
protection afforded by balance of payments import restrictions.
Paragraph 21
Any measure taken pursuant to the provisions of  paragraph 21 shall be withdrawn forthwith if
the action taken in accordance with paragraph 17  is withdrawn or if the CONTRACTING PARTIES
concur in the measure proposed after the expiration of the ninety-day time limit specified inparagraph 17.WT/COMTD/39/Add.1
Page 19
ANNEX 2
Article XVIII of GATT 1947 (as of 14 December 1948)
Article XVIII
Governmental Assistance to Economic Development
and Reconstruction
1. The contracting parties recognize that special governmental assistance may be required to
promote the establishment, development or reconstruction of particular industries or branches of
agriculture, and that in appropriate circumstances the grant of such assistance in the form of protectivemeasures is justified.  At the same time they reco gnize that an unwise use of such measures would
impose undue burdens on their own economies and unwarranted restrictions on international trade,
and might increase unnecessarily the difficulties of adjustment for the economies of other countries.
2. The CONTRACTING PARTIES and the contractin g parties concerned shall preserve the
utmost secrecy in respect of matters arising under this Article.
A.
3. If a contracting party, in the interest of its economic development or reconstruction, or for the
purpose of increasing a most-favoured-nation rate of duty in connection with the establishment of a new
preferential agreement in accordance with the provis ions of paragraph 3 of Article I, considers it
desirable to adopt any non-discriminatory measur e affecting imports which would conflict with an
obligation which the contracting party has assumed unde r Article II of this Agreement, but which would
not conflict with other provisions of this Agreement, such contracting party
(a) shall enter into direct negotiations with  all the other contracting parties.  The
appropriate Schedules to this Agreement shall be amended in accordance with any
agreement resulting from such negotiations; or
(b) shall initially or may, in the event of failure to reach agreement under sub-
paragraph (a), apply to the CONTRACTING PARTIES.  The CONTRACTING
PARTIES shall determine the contracting party or parties materially affected by the
proposed measures and shall sponsor negotiations between such contracting party or
parties and the applicant contracting party with a view to obtaining expeditious andsubstantial agreement.  The CONTRACTING PARTIES shall establish and
communicate to the contracting parties concerned a time schedule for such
negotiations, following as far as practicable any time schedule which may have been
proposed by the applicant contracting party.  The contracting parties shall commence
and proceed continuously with such negotiations in accordance with the timeschedule established by the CONTRACTING PARTIES.  At the request of a
contracting party, the CONTRACTING PARTIES may, where they concur in
principle with the proposed measure, assist in the negotiations.  Upon substantial
agreement being reached, the applicant contracting party may be released by the
CONTRACTING PARTIES from the obligation referred to in this paragraph, subjectto such limitations as may have been agreed upon in the negotiations between the
contracting parties concerned.WT/COMTD/39/Add.1
Page 20
4. (a) If as a result of action initiated under paragraph 3 there should be an increase in imports
of any product concerned, including products wh ich can be directly substituted therefor,
which if continued would be so great as to jeopardize the establishment, developmentor reconstruction of the industry or bran ch of agriculture concerned, and if no
preventive measures consistent with the pr ovisions of this Agreement can be found
which seem likely to prove effective, th e applicant contracting party may, after
informing, and when practicable cons ulting with, the CONTRACTING PARTIES,
adopt such other measures as the situation may require, provided that such measures do
not restrict imports more than necessary to offset the increase in imports referred to in
this sub-paragraph; except in unusual circumstances, such measures shall not reduce
imports below the level obtaining in the mo st recent representative period preceding the
date on which the contracting party initiated action under paragraph 3.
(b) The CONTRACTING PARTIES shall determin e, as soon as practicable, whether any
such measure should be continued, discontinue d or modified.  It shall in any case be
terminated as soon as the CONTRACTING PARTIES determine that the negotiations
are completed or discontinued.
(c) It is recognized that the relationships betw een contracting parties under Article II of this
Agreement involve reciprocal advantages, and therefore any contracting party whose
trade is materially affected by the action ma y suspend the application to the trade of the
applicant contracting party of substantially equivalent obligations or concessions under
this Agreement provided that the contracting party concerned has consulted the
CONTRACTING PARTIES before taking such action and the CONTRACTING
PARTIES do not disapprove.
B.
5. In the case of any non-discriminatory measure affecting imports which would apply to any
product in respect of which the contracting party has assumed an obligation under Article II of this
Agreement and which would conflict with any other provision of this Agreement, the provisions of
sub-paragraph (b) of paragraph 3 shall apply; Provided  that before granting a release the
CONTRACTING PARTIES shall afford adequate opportunity for all contracting parties which they
determine to be materially affected to express their views.  The provisions of paragraph 4 shall also be
applicable in this case.
C.
6. If a contracting party in the interest of its economic development or reconstruction considers it
desirable to adopt any non-discriminatory measure affecting imports which would conflict with the
provisions of this Agreement other than Article II,  but which would not apply to any product in respect
of which the contracting party has assumed an oblig ation under Article II, such contracting party shall
notify the CONTRACTING PARTIES and shall transmit to the CONTRACTING PARTIES a written
statement of the considerations in support of the adoption, for a specified period, of the proposed
measure.
7. (a) On application by such contracting pa rty, the CONTRACTING PARTIES shall concur
in the proposed measure and grant the necessary release for a specified period if, having
particular regard to the applicant contract ing party’s need for economic development or
reconstruction, it is established that the measureWT/COMTD/39/Add.1
Page 21
(i) is designed to protect a particular industry established between January I,
I939, and March 24, I948, which was protected during that period of its
development by abnormal conditions arising out of the war; or
(ii) is designed to promote the establishment or development of a particular
industry for the processing of an i ndigenous primary commodity, when the
external sales of such commodity have been materiality reduced as a result of
new or increased restrictions imposed abroad; or
(iii) is necessary in view of the possibilities and resources of the applicant
contracting party to promote the establishment or development of a particular
industry for the processing of an i ndigenous primary commodity, or for the
processing of a by-product of such indus try, which would otherwise be wasted,
in order to achieve a fuller and more economic use of the applicant contracting
party’s natural resources and manpower and, in the long run, to raise the
standard of living within the territory of  the applicant contracting party, and is
unlikely to have a harmful effect, in the long run, on international trade; or
(iv) is unlikely to be more restrictive of international trade than any other
practicable and reasonable measure permitted under this Agreement, whichcould be imposed without undue difficulty, and is the one most suitable for
the purpose having regard to the economics of the industry or branch of
agriculture concerned and to the applicant contracting party’s need for
economic development or reconstruction.
The foregoing provisions of this sub-paragr aph are subject to the following conditions:
(1) Any proposal by the applicant contracting party to apply any such measure, with or
without modification, after the end of the initial period, shall not be subject to theprovisions of this paragraph;  and
(2) The CONTRACTING PARTIES shall not c oncur in any measure under the provisions
of (i), (ii) or (iii) above which is likely to cause serious prejudice to exports of a primary
commodity on which the economy of the territory of another contracting party is
largely dependent.
(b) The applicant contracting party shall apply any measure permitted under sub-paragraph
(a) in such a way as to avoid unnecessary damage to the commercial or economic
interests of any other contracting party.
8. If the proposed measure does not fall within the pr ovisions of paragraph 7, the contracting party
(a) may enter into direct consultations with the contracting party or parties which, in its
judgment, would be materially affected by the measure.  At the same time, the
contracting party shall inform the CONTRACTING PARTIES of such consultationsin order to afford them an opportunity to determine whether all materially affected
contracting parties are included within the consultations.  Upon complete or
substantial agreement being reached, the contracting party interested in taking the
measure shall apply to the CONTRACTING PARTIES.  The CONTRACTING
PARTIES shall promptly examine the application to ascertain whether the interests ofall the materially affected contracting parties have been duly taken into account. If the
CONTRACTING PARTIES reach this conclusion, with or without further
consultations between the contracting parties concerned, they shall release theWT/COMTD/39/Add.1
Page 22
applicant contracting party from its obligations under the relevant provision of this
Agreement, subject to such limitations as the CONTRACTING PARTIES may
impose, or
(b) may initially, or in the event of failure to reach complete or substantial agreement
under sub-paragraph (a), apply to the CONTRACTING PARTIES.  TheCONTRACTING PARTIES shall promptly transmit the statement submitted under
paragraph 6 to the contracting party or parties which are determined by the
CONTRACTING PARTIES to be materially affected by the proposed measure. Such
contracting party or parties shall, within the time limits prescribed by the
CONTRACTING PARTIES, inform them whether, in the light of the anticipated
effects of the proposed measure on the economy of the territory of such contracting
party or parties, there is any objection to the proposed measure.  TheCONTRACTING PARTIES shall,
(i) if there is no objection to the proposed measure on the part of the affected
contracting party or parties, immediately release the applicant contracting
party from its obligations under the relevant provision of this Agreement; or
(ii) if there is objection, promptly examine the proposed measure, having regard to
the provisions of this Agreement, to the considerations presented by the
applicant contracting party and its need for economic development or
reconstruction, to the views of the contra cting party or parties determined to be
materially affected, and to the effect  which the proposed measure, with or
without modification, is likely to have , immediately and in the long run, on
international trade, and, in the long r un, on the standard of living within the
territory of the applicant contracting part y.  If, as a result of such examination,
the CONTRACTING PARTIES concur in  the proposed measure, with or
without modification, they shall release the applicant contracting party from its
obligations under the relevant provision of this Agreement, subject to suchlimitations as they may impose,
9. If, in anticipation of the concurrence of the CONTRACTING PARTIES in the adoption of a
measure referred to in paragraph 6, there should be an increase or threatened increase in the imports
of any product concerned, including products which can be directly substituted therefor, so substantial
as to jeopardize the establishment, development or reconstruction of the industry or branch of
agriculture concerned, and if no preventive measures consistent with this Agreement can be found
which seem likely to prove effective, the applicant contracting party may, after informing, and whenpracticable consulting with, the CONTRACTING PARTIES, adopt such other measures as the
situation may require, pending a decision by the CONTRACTING PARTIES on the contracting
party’s application; Provided  that such measures do not reduce imports below the level obtaining in
the most recent representative period preceding the date on which notification was given under
paragraph 6.
10. The CONTRACTING PARTIES shall, at the earlie st opportunity but ordinarily within fifteen
days after receipt of an application under the provisi ons of paragraph 7 or sub-paragraphs (a) or (b) of
paragraph 8, advise the applicant contracting party of the date by which it will be notified whether or notit is released from the relevant obligation.  This shal l be the earliest practicable date and not later than
ninety days after receipt of such application; Provided  that, if unforeseen difficulties arise before the
date set, the period may be extended after consultation with the applicant contracting party.  If theapplicant contracting party is not so notified by the date set, it may, after informing the
CONTRACTING PARTIES, institute the proposed measure.WT/COMTD/39/Add.1
Page 23
11. Any contracting party may maintain any non-d iscriminatory protective measure affecting
imports in force on September 1, I947, which has been imposed for the establishment, development or
reconstruction of a particular indus try or branch of agriculture and which is not otherwise permitted by
this Agreement; Provided  that notification has been given to the other contracting parties not later than
October 10, I947, of such measure and of each product on which it is to be maintained and of its nature
and purpose.
12. Any contracting party maintaining any such m easure shall within sixty days of becoming a
contracting party submit to the CONTRACTING PARTIE S a statement of the considerations in support
of the maintenance of the measure and the period for which it wishes to maintain it.  TheCONTRACTING PARTIES shall, as soon as possible, but in any case within twelve months from the
date on which such contracting party becomes a contracting party, examine and give a decision
concerning the measure as if it had been s ubmitted to the CONTRACTING PARTIES for their
concurrence under paragraphs I to I0 inclusive of this article.
13. The provisions of paragraphs II and I2 of this Article shall not apply to any measure relating to
a product in respect of which the contracting party has assumed an obligation under Article II of thisAgreement.
14. In cases where the CONTRACTING PARTIES deci de that a measure should be modified or
withdrawn by a specified date, they shall have regard to the possible need of a contracting party for a
period of time in which to make such modification or withdrawal.WT/COMTD/39/Add.1
Page 24
ANNEX 3
Article XVIII of the GATT 1947 (as of 30 October 1947)
Article XVIII
Adjustments in Connection with Economic Development
1. The contracting parties recognize that special governmental assistance may be required to
promote the establishment, development or reconstruction of particular industries or particular
branches of agriculture, and that in appropriate circumstances the grant of such assistance in the form
of protective measures is justified.  At the same time they recognize that an unwise use of such
measures would impose undue burdens on their own economies and unwarranted restrictions on
international trade, and might increase unnecessarily the difficulties of adjustment for the economiesof other countries.
2. (a) If a contracting party, in the interest of its programme of economic development or
reconstruction, considers it desirable to adopt any non-discriminatory measure which
would conflict with any obligation which it has assumed under Article II, or with any
other provision of this Agreement, such applicant contracting party shall so notify theCONTRACTING PARTIES and shall transmit to them a written statement of the
considerations in support of the adoption of the proposed measure.
(b) The CONTRACTING PARTIES shall promptly  transmit such statement to all other
contracting parties, and any contracting party which considers that its trade would be
substantially affected by the proposed measure shall transmit its views to theCONTRACTING PARTIES within such period as shall be prescribed by them.
(c) The CONTRACTING PARTIES shall then promptly examine the proposed measure
to determine whether they concur in it, with or without modification, and shall in
their examination have regard to the provisions of this Agreement, to the
considerations presented by the applicant contracting party and its stage of economic
development or reconstruction, to the views presented by contracting parties whichmay be substantially affected, and to the effect which the proposed measure, with or
without modifications, is likely to have on international trade.
3. (a) If, as a result of their examination pursuant to paragraph 2(c) of this Article, the
CONTRACTING PARTIES concur in principl e in any proposed measure, with or
without modification, which would be inco nsistent with any obligation that the
applicant contracting party has assumed under Article II, or which would tend to
nullify or impair the benefit to any other contracting party or parties of any such
obligation, the CONTRACTING PARTIES shall sponsor and assist in negotiations
between the applicant contracting party and the other contracting party or partieswhich would be substantially affected with a view to obtaining substantial agreement.
The CONTRACTING PARTIES shall establish and communicate to the contracting
parties concerned a time schedule for such negotiations.
(b) Contracting parties shall commen ce the negotiations provided for in
sub-paragraph (a) of this paragraph within such period as the CONTRACTINGPARTIES may prescribe and shall thereafter, unless the CONTRACTING PARTIESWT/COMTD/39/Add.1
Page 25
decide otherwise, proceed continuously with such negotiations with a view to
reaching substantial agreement in accordance with the time schedule laid down by the
CONTRACTING PARTIES.
(c) Upon substantial agreement being reached, the CONTRACTING PARTIES may
release the applicant contracting party from the obligation referred to in
sub-paragraph (a) of this paragraph or from any other relevant obligation under this
Agreement, subject to such limitations as may have been agreed upon in the
negotiations between the contracting parties concerned.
4. (a) If, as a result of their examination pursuant to paragraph 2(c) of this Article, the
CONTRACTING PARTIES concur in any pr oposed measure, with or without
modifications, other than a measure referred to in paragraph 3(a) of this Article,
which would be inconsistent with any provision of this Agreement, the
CONTRACTING PARTIES may release the applicant contracting party from any
obligation under such provision, subject to such limitations as they may impose.
(b) If, having regard to the provisions of paragraph 2(c) of this Article, it is established in
the course of such examination that such measure in unlikely to be more restrictive of
international trade than any other practicable and reasonable measure permitted under
this Agreement which could be imposed without undue difficulty and that it is the one
most suitable for the purpose having regard to the economics of the industry or thebranch of agriculture concerned and to the current economic condition of the
applicant contracting party, the CONTRACTING PARTIES shall concur in such
measure and grant such release as may be required to enable such measure to be made
effective.
(c) If in anticipation of the concurrence of the CONTRACTING PARTIES in the
adoption of a measure concerning which notice has been given under paragraph 2 of
this Article, other than a measure referred to  in paragraph 3(a) of this Article, there
should be an increase or threatened increase in the importations of the product or
products concerned, including products which can be directly substituted therefor, so
substantial as to jeopardize the plans of  the applicant contracting party for the
establishment, development or reconstruction of the industry or industries or branchesof agriculture concerned, and if no preventive measures consistent with this
Agreement can be found which seem likely to prove effective, the applicant
contracting party may, after informing, and when practicable consulting with, the
CONTRACTING PARTIES, adopt such other measures as the situation may require
pending a determination by the recent representative period preceding the date onwhich the contracting party's original notification was made under paragraph 2 of this
Article.
5. (a) In the case of measures referred to in paragraph 3 of this Article, the
CONTRACTING PARTIES shall, at the ear liest opportunity but ordinarily within
fifteen days after receipt of the statement referred to in paragraph 2(a) of this Article,
advise the applicant contracting party of the date by which they will notify it whether
or not they concur in principle in the proposed measure, with or without modification.
(b) In the case of measures referred to in paragraph 4 of this Article, the
CONTRACTING PARTIES shall, as in sub-paragraph (a) of this paragraph, advise
the applicant contracting party of the date by which they will notify it whether or not
it is released from such obligation or obligations as may be relevant;  Provided that, if
the applicant contracting party does not receive a final reply by the date fixed by theWT/COMTD/39/Add.1
Page 26
CONTRACTING PARTIES, it may, after communicating with the CONTRACTING
PARTIES, institute the proposed measure upon the expiration of a further thirty days
from such date.
6. Any contracting party may maintain any non-discriminatory measure, in force on
September 1, 1947, which has been imposed for the establishment, development or reconstruction of
particular industries or particular branches of agriculture and which is not otherwise permitted by this
Agreement;  Provided that any such contracting party shall have notified the other contracting parties,
not later than October 10, 1947, of each product on which any such measure shall, within sixty daysof becoming a contracting party, notify the CONTRACTING PARTIES of the measure concerned,
the considerations in support of its maintenance and the period for which it wishes to maintain the
measure.  The CONTRACTING PARTIES shall, as soon as possible but in any case within twelve
months from the day on which such contracting party becomes a contracting party, examine and give
a decision concerning the measure as if it had been submitted to the CONTRACTING PARTIES for
their concurrence under the provisions of the preceding paragraphs of this Article.  The
CONTRACTING PARTIES, in making a decision under this paragraph specifying a date by which
any modification in or withdrawal of the measure is to be made, shall have regard to the possible needof a contracting party for a suitable period of time in which to make such modification or withdrawal.
7. The provisions of paragraph 6 of this Article shall not apply, in respect of any contracting
party, to any product described in the appropriate Schedule annexed to this Agreement.
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