RESTRICTEDWORLD TRADE
ORGANIZATIONG/TMB/R/103
28 November 2003
(03-6338)
Textiles Monitoring Body
REPORT OF THE ONE HUNDRED AND FOURTH MEETING
1. The Textiles Monitoring Body held its one hundred and fourth meeting on 22 October 2003.
2. Present at this meeting were the following members and/or alternates:  Messrs. Lakhal;  Tae-
Yong Lee;  Ms. Miranda/Mr. Santana;  Mr. Seppey;  Ms. Simopoulos;  Messrs. Tagliani;  Yaman;
Yoshikawa;  Ms. Zhang.
3. The TMB adopted the report of its one hundred and third meeting (G/TMB/R/102).
Notification under Article 2.1 of the Agre ement on Textiles and Clothing (ATC)
4. The TMB reverted to its examination of a notification received pursuant to Article 2.1 from
the United States following the accession of the Former Yugoslav Republic of Macedonia (FYROM)
to the WTO1, also in light of the replies provided by the United States in response to questions raised
by the TMB.2  Observing that the TMB has already taken note of certain clarifications received from
the United States3, it was also recalled that at its previous meeting the TMB had begun to address the
issue of the methodology applied by the United States in implementing the growth-on-growth
provisions of the ATC in relation to imports subject to restrictions from FYROM.  The report of
the 103rd meeting states the following:
"As to the implementation of the growth-on-growth provisions of the ATC to the quantitative
restrictions notified, the United States explained that the 'annual growth rate for 2004 quotas[would] be 2.54 per cent' and that, for the 2003 lim its, the effective annual growth rate had
been increased by prorating the growth rate of  2.54 per cent to reflect the number of days in
2003 that FYROM would be a Member of the WTO,  'resulting in a prorated growth rate for
2003 of 2.40241096 per cent.'  The TMB recalled that the Report of the Working Party on the
Accession of the Former Yugoslav Republic of Macedonia stated, inter alia, that 'for the
purposes of FYROM’s accession to the WTO, the phrase "day prior to the date of entry into
force of the Agreement on Textiles and Clothing" shall be deemed to refer to the day prior tothe date of accession of FYROM to the WTO.  To this base level the increase in growth rates
provided for in Article 2.14 of the Agreement on Textiles and Clothing shall be applied, as
appropriate, in the Agreement on Textiles and Clothing from the date of FYROM’s
accession.'  In addition, the TMB recalled that it had already examined notifications made
under Article 2.1 by the United States where the growth-on-growth provisions had been
reported to be implemented by the United States, with respect to the quantitative restrictions
notified, in a similar way (i.e. by using proration).   Before proceeding further with the review
of this element of the notification by the United States, the TMB decided to bring the
additional information provided by the United States to the attention of the Former Yugoslav
Republic of Macedonia."  [footnotes omitted]
4
                                                     
1 See G/TMB/R/100, paragraph 4.
2 See G/TMB/R/102, paragraphs 5 and 6.
3 Idem, paragraph 5.
4 Idem, paragraph 6.G/TMB/R/103
Page 2
5. The TMB noted that the additional information received from the United States had been
brought to the attention of the Former Yugoslav Republic of Macedonia and that no observation or
follow-up communication had been received so far from FYROM.  In view of the fact that more than
six months had already elapsed since FYROM's accession to the WTO, the TMB was of the view that,
without prejudice to FYROM's rights arising from th e provisions of Article 2.2, it should resume the
consideration of this element of the notification submitted by the United States.
6. The TMB recalled that FYROM became a Member of the WTO on 4 April 2003 and,
pursuant to the provisions of the legal instrument of accession, to the base level of the restrictions
notified under Article 2.1, "… the increase in growth rates provided for in Article 2.14 of the
Agreement on Textiles and Clothing shall be applied, as appropriate, in the Agreement on Textiles
and Clothing from the date of FYROM’s accession."5  Article 2.14 reads as follows:
"Except where the Council for Trade in Goods or the Dispute Settlement Body decides
otherwise under paragraph 12 of Article 8, the level of each remaining restriction shall be
increased annually during subsequent stages of this Agreement by not less than the following:
(a) for Stage 2 (from the 37th to the 84th month that the WTO Agreement is in effect,
inclusive), the growth rate for the respective restrictions during Stage 1, increased by
25 per cent;
(b) for Stage 3 (from the 85th to the 120th month that the WTO Agreement is in effect,
inclusive), the growth rate for the respective restrictions during Stage 2, increased by
27 per cent."
7. The TMB noted that Article 2.14 provides for the annual increase in the respective growth
rates taken over from the pre-ATC regime for both Stages 2 and 3 of the ATC integration process,
while FYROM became a Member during the second year of the implementation of the third stage of
the integration process (i.e. during the 100th month of ATC implementation).  In this regard, the TMB
recalled having observed the following:
"[T]he ATC does not contain any disposition that gives guidance on how the growth-on-
growth provisions should be implemented in relation to Members acceding to the WTOseveral years after the entering into force of the WTO Agreement.  Articles 2.13 and 2.14 of
the ATC, providing for specific staged increases of the annual growth rates of the respective
quantitative restrictions taken over from the former MFA regime and notified pursuant to
Article 2.1 of the ATC, were essentially designed to provide clear rules applicable in relation
to those exporters under restraint that became Members at the time when the WTO
Agreement entered into force.  […]  There is no provision in the ATC regarding the base
levels and the related increase in growth-rates to be applied in cases of restrained exportersthat acceded to the WTO only during the second or the third stage of the integration process."
6
[In these cases,] "the relevant issues such as the definition of the base levels to which theprovisions of Article 2 of the ATC should apply and the manner in which to these base levels
the increase in growth rates should be im plemented had been agreed between the WTO
Members and the new Members concerned as part of the respective negotiations uponaccession to the WTO."
7
8. Therefore, in order to assess whether the impl ementation of the growth-on-growth provisions
by the United States in relation to FYROM met the applicable requirements, the relevant provision of
                                                     
5 See WT/ACC/807/27, paragraph 192.
6 See G/TMB/R/90, paragraph 7.
7 Idem, paragraph 8.G/TMB/R/103
Page 3
the Report of the Working Party on the Accession of FYROM had to be read in conjunction with the
language of Article 2.14.  It was recalled in this regard that the TMB had already conducted similar
detailed examinations when it had considered th e implementation of the growth-on-growth provisions
in relation to previously acceded new Members, and in particular in the case of China.8  It was noted
that in its present consideration of this matter the TMB could, in a number of respects, rely on theprevious examinations mentioned above.
9. It was observed that, unlike in the case of China (and also Chinese Taipei), the relevant
provision (paragraph 192) of the Report of the Working Party on the Accession of FYROM makes no
mention of Article 2.13 at all.  Therefore, it coul d be established that the terms of accession agreed
between the WTO Members and FYROM do not provid e for the application of the 16 per cent growth
factor stipulated in Article 2.13 and applicable for Stage 1 of the integration process under the ATC.
10. Paragraph 192 of the Working Party report refers, however, to the application of Article 2.14,
without being more specific or providing any furthe r guidance.  In light of this, the issues to be
addressed were:
• Whether the United States was required, pursuant to the terms of the accession
instruments, to apply the not less than 25 per cent increase in the growth rates takenover from the pre-ATC regime, as provided for in Article 2.14, subparagraph (a), for
Stage 2, when FYROM had not been a Member of the WTO;
• whether the United States was required under the same terms to apply the not less
than 27 per cent increase in the respective growth rates as provided for in
Article 2.14, subparagraph (b) for Stage 3, also for 2002, which had been the first
year of the implementation of the third stage of the integration process, though
FYROM had not, as yet, become a Member;
• what was the methodology required for providing the increase in the respective
growth rates for the year 2003, when FYROM joined the WTO.
(i) Whether the United States was required to apply the not less than 25 per cent increase in the
growth rates taken over from the pre-ATC regime, as provided for in Article 2.14, subparagraph (a),for Stage 2, when FYROM had not been a Member of the WTO.
11. The third sentence of paragraph 192 of the Working Party report states that "[t]o this base
level the increase in growth rates provided for in Article 2.14 of the Agreement on Textiles and
Clothing shall be applied, as appropriate, in the Agreement on Textiles and Clothing from the date of
FYROM’s accession" (emphasis added).  The TMB observed that if one were to read this sentence by
omitting the expression "as appropriate", that provision would unambiguously require that the growth
rates taken over from the pre-ATC regime should have increased, first, by not less than 25 per cent as
foreseen in Article 2.14(a).  On the other hand, as already reflected upon by the TMB9, the inclusion
of the term "as appropriate" could introduce an element of flexibility into the sentence (and hence into
the legal commitments reflected therein).  This notion of possible flexibility could not be defined with
more precision;  it seemed to be designed to respond to the particular occasion or the prevailingcircumstances.  In any event, the inclusion of the term "as appropriate" in the language could also
imply that not necessarily everything provided for in this sentence should be implemented in the way,
or within the time-frame, it should have been implemented, had this term or qualification not been
attached thereto.  In the view of the TMB, this observation could raise another question as to which
part of the sentence the term "as appropriate" referred to.  It was noted that there seemed to be nounambiguous answer to this question either.  One possible reading of the third sentence of
                                                     
8 See in particular G/TMB/R/90, paragraphs 5 to 44.
9 See G/TMB/R/90, paragraph 17.G/TMB/R/103
Page 4
paragraph 192 was that the notion "as appropriate" was related to the very last part of the sentence,
i.e. to the portion indicating that the respectiv e commitments had to apply "[in the Agreement on
Textiles and Clothing] from the date of FYROM’s accession".  Accordingly, there could be a
commitment to apply the increase provided for in Ar ticle 2.14(a), but only from the date of FYROM's
accession, i.e. in the present case with retroactive effect.  There was, however, another possiblereading, according to which it was appropriate to extend the benefits of the increased growth rates to
FYROM in 2003, since it had become a Member of the WTO during that year, but according to which
it was not appropriate to apply the 25 per cent increase provided for in Article 2.14(a) since, during
Stage 2, FYROM had not been a Member.
12. In summarizing its consideration of the relevant language of paragraph 192 of the Report of
the Working Party on the Accession of FYROM, bearing in mind, mutatis mutandis , the
considerations the Body had made in its review  of the implementation of the growth-on-growth
provisions in relation to China
10, the TMB arrived at the view that this language in itself provided
neither a clear answer nor unambiguous guidance as to whether the restraining Member, i.e. the
United States, was also required to apply the not less than 25 per cent increase in the original growth
rates as provided for in Article 2.14(a) of the ATC.  By using the term "as appropriate", the drafters
had not only introduced the possibility for some flexibility and adjustments to be made in the actualimplementation but had also left an important element of ambiguity in the respective language.
Therefore, the TMB could not, in these circumstances, reach a clear conclusion on the issue of
whether the United States was required to apply the not less than 25 per cent increase provided for in
Article 2.14(a) to the growth rates taken over fr om the pre-ATC regime in the case of FYROM.
(ii) Whether the United States was required under the same terms to apply the not less than
27 per cent increase in the respective growth rates as provided for in Article 2.14, subparagraph (b)
for Stage 3, also for 2002, which was the first year of the implementation of the third stage of the
integration process, though FYROM had not, as yet, become a Member of the WTO.
13. The TMB observed that though there is no clear response as to the applicability of
subparagraph (a) of Article 2.14, subparagraph (b) of that same Article, by definition, applies, sincethere is an explicit reference to Article 2.14 in paragraph 192 of the report of the Working Party and
also since FYROM had become a Member of the WTO during Stage 3, the stage when Article 2.14(b)
applies.  However, the same arguments and counter-arguments, as expressed in paragraph 11 above,
can be used regarding the question as to whethe r there was a commitment to apply the 27 per cent
increase in the growth rates also for 2002, given th at FYROM had not yet become a Member of the
WTO during that year.  Therefore, since both readings can be made given the flexibility brought about
by the notion "as appropriate", there was no clear and unambiguous answer to this question either.This lack of clear guidance made it difficult for the TMB to take a firmer position on this matter, and
it could not, therefore, reach a clear conclusion on the issue as to whether the United States was
required to apply for 2002 the not less than 27 per cent increase in the respective growth rates, as
provided for in Article 2.14, subparagraph (b).
(iii) What was the methodology required for provid ing the increase in the respective growth rates
for the year 2003 when FYROM joined the WTO.
14. In light of the uncertainties related to the matters addressed in (i) and (ii) above, the TMB
considered the question of the minimum requirements which, in any event, had to be met by the
United States.  The TMB recalled that the United States had used the following methodology for the
purpose of implementing the provisions of Article 2.14 with respect to FYROM:  for the 2003 limits,
the United States had calculated the effective growth rate to be applied by prorating the increase in the
growth rate in force on 3 April 2003 to reflect th e number of days in 2003 that FYROM would be a
Member of the WTO (272 days of the 365 days in 2003).  This pro-rated growth rate was applied to
                                                     
10 See G/TMB/R/90, paragraphs 18 to 21.G/TMB/R/103
Page 5
the 2002 base levels to calculate the revised 2003 limits.  For the 2004 quotas, the growth rate to be
applied to these revised 2003 limits would be the growth rate in force on 3 April 2003 increased by
27 per cent, as envisaged in Article 2.14(b).
15. The TMB considered whether the provisions of the Report of the Working Party on the
Accession of FYROM and Article 2.14 of the ATC entitled the United States to use thismethodology.  In so doing, the TMB had in mind, in particular, the observations it had made when
examining the issue of the implementation of the growth-on-growth provisions of the ATC with
respect to recently acceded Members, in particular paragraphs 25 to 28 of G/TMB/R/90, and
paragraphs 17 to 27 of G/TMB/R/98.  Following a similar line of arguments, mutatis mutandis , the
TMB was of the view that since FYROM had become a Member in 2003, during Stage 3 of the ATC
and, therefore, it had been appropriate to apply the provisions of Article 2.14(b) to it, these provisions
should have been implemented in their entirety (i.e. for the entire year of FYROM's accession) andthat the language of the Working Party report and that of Article 2.14(b) did not seem to allow for any
further flexibility in this regard.
16. Thus, in the view of the TMB, once the United States had concluded that it had been
appropriate to apply the provisions of Artic le 2.14(b) to FYROM fo r 2003 (since FYROM had
become a Member in that year), the 27 per cent increase in the respective growth rates should have
been implemented in full for the year 2003, instead of prorating it for the period of FYROM's actual
membership during that year.
17. The TMB, therefore, invited the United States to reconsider its position and to implement the
full 27 per cent increase in the respective growth rates applicable to Stage 3 also for the year 2003.
The TMB expected that the United States would report back to it on the results of this re-examinationas soon as possible.
18. Bearing in mind the foregoing conclusions, the TMB took note of the notification by the
United States (G/TMB/N/63/Add.14 and G/TMB/N/63 /Add.14/Suppl.1).
Report (2003) of the TMB
19. The TMB considered and adopted its report for 2003 (G/L/650).
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