WORLD TRADE
ORGANIZATIONG/TMB/26
23 November 2001
(01-5980)
Textiles Monitoring Body
EIGHTY-FOURTH MEETING OF THE TMB
Note by the Chairman
1. The Textiles Monitoring Body met on 19 and 21 November 2001.
2. The TMB authorized its Chairman to provide WTO Members with the following information.
Notification under Article 8.10 of the Agre ement on Textiles and Clothing (ATC)
Poland/Romania: imports of acrylic/modacrylic stap le yarn, pure or mixed with wool or fine animal
hair (HS numbers 5509 31, 5509 32 and 5509 61) from Romania
3. On 17 October 2001, the TMB received a communication from Poland with reference to
Article 8.10, following the examination by the TMB on 3, 4 and 13 September 2001, of the
transitional safeguard measure introduced by Poland on 20 July 2001, for a duration of three years, onimports of acrylic/modacrylic staple yarn, pure or mixed with fine animal hair (HS Numbers 5509 31,
5509 32 and 5509 61) from Romania.
4. In this communication, Poland stated that it considered itself unable to conform with the
recommendation the TMB had made
1 that the transitional safeguard measure introduced on imports of
the above products from Romania be rescinded.  The communication of Poland provided thefollowing reasons for this inability:
• conforming to the TMB's recommendation, i.e. withdrawing the safeguard measure
would result in the elimination of the acrylic yarn industry in Poland.  The
competition of low-priced imports during the last five years had resulted in
bankruptcy of five of eleven plants producing acrylic yarn in Poland;  three other
plants were in liquidation and the remaining three had been facing growing
difficulties for many years and were in serious danger of being driven out of the
business;
• apart from the economic indicators which clearly showed a negative trend in the
reference period (sales, share in the market, financial losses, employment), one could
observe opposing trends with respect to some other indicators which had been
considered as being neutral (inventories, investments and capacity utilization).  On
the one hand, the companies in liquidation were selling out their inventories andcapital equipment at low prices.  On the other, the three still-in-business companies
suffered from growing inventories, but neve rtheless tried to invest in the development
and slightly increased their production capacity.  This was why, while analyzing data
on capacity or inventories level for the industry as a whole, these indicators seemed to
be neutral in the reference period.  However, the market behaviour of the companiesin liquidation adversely affected the rema ining companies and the difficult situation
                                                     
1 For the TMB's examination and recommendation made pursuant to Article 6.10, see G/TMB/R/81,
paragraphs 7 to 34.G/TMB/26
Page 2
of the first ones had been caused by the competition of the low-priced imports.  In
this sense, there was a domino effect and imports made serious damage to the
industry, both directly and indirectly;
• Romania was the biggest exporter of yarn in question to the Polish market and these
imports were being realized under conditions of permanent undercutting of domestic
prices.
For these reasons and with a view to provide re scue to the still-in-business domestic producers,
Poland requested the TMB to reconsider its recommendation on the matter.
5. In conformity with the requirements of Article 8.7, the TMB invited the participation of both
Poland and Romania to the consideration of this communication by the TMB.  Both Members sent
representatives to present their respective arguments.
6. The representative of Poland stated, inter alia , the following:
• in order to shed light on the economic situation of the sector immediately prior to the
reference period (i.e. the year 2000), Poland had presented new data, providing
information for the whole industry producing the yarn in question (and not only for
the three companies that had applied for the safeguard action), and for the period
1996 to 2000, as well as for the first three quarters of 2001.  Poland hoped that thisbackground information would reflect more accurately the still deteriorating
economic situation of the companies, and make the Polish decision not to implement
the TMB's recommendation more understandable;
• imports had increased by 10.5 per cent during the reference period.  As there was an
absolute increase, the basic condition for the imposition of the safeguard measure was
fulfilled.  In addition, this increase represented in volume terms the annual production
of the average Polish yarn company.  While it was true that imports had decreased in
the immediately preceding years, this decrease had paralleled a similar trend in
domestic consumption and, from 1999 to 2000, the share of total imports in the
domestic market had risen from 36 to 59 per cent, and to 66 per cent for the first threequarters of 2001.  Poland considered that the increase in imports in 2000, as
compared to the domestic consumption, refl ected the adverse impact of the imports
on the domestic industry;
• an analysis of the state of the domestic industry based on the newly available data
mentioned above explained why Poland was convinced that the present difficult
situation of the domestic industry, caused by imports-inflicted losses that prevented
the companies from upgrading their capital equipment, would result in the
bankruptcies of the three companies still operating.  In particular, while it was true
that output had increased in the reference period, the level reached was not even half
that of the volume of production in 1996 and even the three companies still inoperation had not recovered in 2000 the level of 1996.  The increase in productivity
was the result of a dramatic reduction of the level of employment.  The increase in
exports was at an insignificant level and was the result of inward processing.  The
increase in average wages was insignificant in a longer term perspective.  The share
of inventories in domestic production, as from the new data, was much higher than
the TMB had depicted it, and had increased dramatically in 2001.  Capacity
utilization had dropped by 21 percentage points from 1996 to 2000, productioncapacity itself dropping by more than 50 per cent.  Domestic sales had decreased
significantly over the period 1996-2000 despite the fact that domestic prices wereG/TMB/26
Page 3
also going down as a result of price undercutting by imports mainly from Lithuania
and Romania.  Employment had dropped from 4,551 persons in 1996 to
1,281 persons at the end of September 2001.  As regards profitability, each of the
domestic companies still operating at the beginning of 1996 had suffered losses since
1997.  Poland doubted that the Polish industry seemed to enter into its final stage ofrestructuring, as stated by the TMB.  If this were true, the three companies still in
operation would have taken over at least part of the market share of the bankrupt
companies or, at the very least, would have kept their share and would have been
profitable.  But that was not the case;
• in the period 1996 to 2000, imports from Romania had more than doubled, and their
market share had gone up from 5 per cent in 1996 to 23 per cent for the three quarters
of 2001.  The prices of these imports had constantly been undercutting those of thedomestic producers;
• from a longer time perspective and taking into account the data for the whole industry
in question, Poland was convinced that the current economic situation of the Polishyarn producers was much worse that it seemed to have been as assessed on the basis
of the data previously submitted by Poland.  Moreover it was evident that rescindingthe transitional safeguard measure would eventually result in the bankruptcy of the
three companies still in operation.
7. The representative of Romania stated, inter alia , that:
• Poland, which had not challenged the TMB conclusions and recommendations at the
time they had been formulated and adopted, had exceeded the period allowed by the
ATC for making a communication to the TMB that it considered itself unable to
conform with the TMB's recommendation;
• in its communication to the TMB pursuant to Article 8.10, Poland had not provided
any legal argument for its request for the TMB to reconsider its recommendation on
the matter, nor had it provided any new factual argument, based on the ATCrequirements, to substantiate the reasons for which Poland had been unable to
conform to the TMB's recommendation.  Moreover, Poland had not, during the
review of the transitional safeguard measure by the TMB pursuant to Article 6.10,
presented a convincing assessment that, according to Article 6.2, it was facing a
situation of "such increased quantities" in total imports, nor had Poland demonstratedthat the products in question were "being imported into its territory in such increased
quantities as to cause serious damage" to its domestic industry.  In effect, Poland had
made a mere general reference to a 10.5 per cent increase in total imports of the
product in question.  Romania had doubts as to whether such an increase was
sufficient, particularly since it followed two consecutive annual decreases.  Inaddition, Poland had not presented a substantive and coherent analysis of the effects
of such increased imports on the state of its industry.  The data and information
presented by Poland with reference to Article 6.3 related, for the most part, to a
selected number of companies and not to the entire domestic industry, and this was
not a sufficient basis to assess  the state of the industry.  Romania concurred with the
assessment of the economic variables made by the TMB in its examination pursuant
to Article 6.10, in particular with respect to its analysis of domestic consumption,productivity, employment, profits and exports.  Romania, therefore, maintained its
position that Poland had not made a proper determination of serious damage in the
sense of Article 6.2;G/TMB/26
Page 4
• even though, on the basis of its examination of the state of the Polish domestic
industry, the TMB had stated in its report of its examination of the matter that "therewas no need for the TMB to examine the possible causal relationship between
developments in imports and the state of the domestic industry, as reflected in
changes in the economic variables mentioned in Article 6.3" of the ATC, Poland had
not, according to Romania, demonstrated the existence of such a a causalrelationship;
• regarding the additional data provided by Poland during the present meeting, such
data should have been provided at the time the request for consultations pursuant toArticle 6.7 had been made.  In any event, an analysis of the additional information
provided  did not change the assessment of the state of the industry but rather
confirmed it;
• should the TMB engage in a re-examination of the fulfilment by Poland of the
requirements of Articles 6.2 and 6.3, such exercise should be based on theinformation available at the time Poland had requested consultations with a view to
applying a transitional safeguard measure.  For Romania, all the information
available, as well as the examination of the measure by the TMB, indicated that the
difficulties invoked by Poland were related to the restructuring of its industry ratherthan to the evolution of imports;
• Romania suggested that the TMB invite Poland to reconsider its position and to
rapidly withdraw the measure.
8. In starting its examination of the matter referred to it, the TMB recalled that the
communication by Poland providing the reasons for its inability to conform with the recommendation
of the TMB had been submitted pursuant to Article 8.10.  This provision of the ATC required the
TMB to give thorough consideration to the reasons provided by the Member which considered itself
unable to conform with the TMB's recommendati on and to issue any further recommendations it
considered appropriate forthwith.
9. The TMB noted that the inter-related reasons given by Poland in its communication under
Article 8.10 for its inability to conform with th e recommendation of rescinding the transitional
safeguard measure affecting imports from Romania were essentially three-fold and were related to:
• the developments that had affected the Polish domestic industry during the last
five years;
• the assessment of developments in certain economic variables listed in Article 6.3;
and
• the share and the respective price level of imports from Romania in the Polish market.
On the basis of these reasons, Poland considered that the elimination of the safeguard measure would
drive the remaining domestic producers out of business.
10. The TMB noted, furthermore, that in his oral presentation to the TMB, the representative of
Poland in part reiterated and further developed the arguments and reasons already included into the
written communication received with reference to Article 8.10.  At the same time, the TMB also noted
that the presentation of the representative of Poland contained, inter alia , elements which constituted
new information and evidence in the sense that they had not been included in the specific and relevantfactual information pursuant to Article 6.7 and that it had not been raised during the examination ofG/TMB/26
Page 5
the matter by the TMB under Article 6.10 either.  The TMB, therefore, requested clarification as to
whether Poland expected the TMB to review the transitional safeguard measure on the basis of a new
reference period (i.e. 1 January 1996 to 31 September 2001), different from the one that had been
presented under Articles 6.7 and 6.10, also taking into account a new set of data covering the entire
domestic industry (as opposed to the information previously provided, which had included data on theentire domestic industry for some economic variables and on the three "petitioners" with respect to all
other indicators).
11. In reply, the representative of Poland stated that while certain data and information had not
been available at the time the TMB had conducted its examination of the case under Article 6.10, the
Polish authorities this time had managed to provide all the relevant information and had decided to
share it with the TMB in order to underscore certain basic facts regarding the extremely serious
situation facing the domestic industry.  In his view, had the TMB been provided with this information,the overall conclusion the TMB had arrived at during its examination pursuant to Article 6.10 would
have been different.  This also implied that, on the basis of the selected and limited set of data
available to it, the TMB had not erred in its reach ing its previous conclusions.  By providing the
fullest possible picture at the present meeting, Poland was not making a formal request that the TMB
conduct a de novo  review on the basis of an extended reference period and of a broader industry
coverage.  Finally, the representative of Poland also recognized that, from a strict legal standpoint, the
question could arise whether new information could be introduced at all, or not, in the context of the
TMB's consideration of the case pursuant to Article 8.10.  In summing-up, the representative of
Poland stated that his authorities still held the view that the Polish industry producing the yarn in
question had suffered serious damage as a result of increased quantities of total imports.  Furthermore,by rescinding the transitional safeguard measure, th e survival of the entire domestic industry would be
jeopardized.
Preliminary Comments
12. The TMB first addressed the argument made by Romania that Poland's communication
regarding its inability to conform with the TMB' s recommendation had not been made within the
period established by Article 8.10, which requires that the Member concerned submit such a
communication "not later than one month after receipt of such recommendations".  Noting the
arguments of Romania in this regard, the TMB took the view that the one-month period started on the
date when the report containing the TMB's examination, together with the conclusions reached and
recommendations adopted, had been officially communicated to the Member concerned.  In this
particular case, this had been done on 17 September 2001 when the TMB's report on the examination
of the safeguard measure had been circulated to all WTO Members2 and the Chairman of the TMB
had provided a separate official communication to  the Polish authorities in this regard.  The
communication made by Poland under Article 8.10 was dated 17 October 2001 and had been received
by the TMB on that same day, i.e. within the deadline specified in Article 8.10.
13. The TMB next turned to the issue of the new information and evidence included in the
presentation made by the representative of Poland.  The TMB noted that Poland did not make aformal request for a de novo  review by the TMB on the basis of this new information and evidence.  It
was also noted that the representative of Poland recognized that introducing new data and information
in the context of an examination made under Article 8.10 might have legal implications.  The TMB
understood that the basic objective of Poland in providing additional information was to give the
fullest possible picture regarding the state of, and developments in, the domestic industry.  The TMBrecalled that it had already stated, when reviewing the measure under Article 6.10, that its
examination had to be based essentially on the information made available by Poland under
Article 6.7, at the time Poland had requested consultations with Romania.
3  It noted, furthermore, that
                                                     
2 See G/TMB/25.
3 See G/TMB/R/81, paragraphs  15 and 17.G/TMB/26
Page 6
the present review had to be guided by the same approach.  It was also observed that though the data
and information provided by Poland at the present meeting filled some gaps in terms of giving a fuller
picture of the developments affecting the Polish industry, they did not contain elements which the
TMB had been completely unaware of and that would lead the Body to a significantly different
assessment, compared to the one it made under Article 6.
14. Having made the preliminary comments, as above, the TMB considered one-by-one the
reasons given by Poland for its inability to conform with the recommendation the TMB had made.
i) Developments in the Polish Domestic Industry During the Last Five Years
15. In essence, Poland argued that the competition of low-priced imports during the last five years
had resulted in bankruptcy of five plants and forced three others to begin a liquidation process.  Since
the three further remaining companies had also been facing difficulties, the withdrawal of the
safeguard measure would have driven them out of business.
16. As to the arguments related to developments in the Polish market and domestic industry
during the last five years, i.e. during the period starting with 1996, the TMB made the following
observations:
• the TMB recognized that the ATC does not provide specific guidance as to how long
the period of investigation (and, consequently, the period covered in the specific and
relevant information in the sense of Article 6.7) should be.  Therefore, the definitionof the length of the period of investigation is very much left to the discretion of the
authorities of the Member invoking the provisions of Article 6.  While the use of the
present tense of the verb in Article 6.2 (i.e. "… a particular product is being
imported …") and the reference to the information "as up-to-date as possible" in
Article 6.7 appear to indicate that the information to be provided should at theminimum, include developments of the recent past, there is no similar guidance
regarding what should be the starting-point of the period covered by the factual
information.  In view of this, the TMB had proceeded to the examination of the
matter under Article 6.10 on the basis of the information provided by Poland for the
period of 12 months (from 1 January 2000 to 1 January 2001);
• it follows from the above that reference to developments that occurred prior to the
period covered by the factual information provided pursuant to Article 6.7 can hardly
be considered as a valid reason for a Memb er's inability to conform with the TMB's
recommendation;
• the TMB was aware, however, that in his presentation of the case under Article 6.10,
the representative of Poland had provided some additional information, part of whichhad also touched upon aspects related to developments in the period 1996 to 1998.
The TMB could learn from this additional information that total consumption of this
yarn had continuously and significantly decreased in the period 1996 to 1999 (in 1999
by 45.8 per cent, compared to the level achieved in 1996) and that in the years 1998
and 1999 there had been a significant and successive decrease in the volume of total
imports of the yarn subject to the transitional safeguard measure.  In analyzing trendsin total imports, the TMB had noted that "there had been an increase in the volume of
total imports in the year 2000, the reference period, compared to the previous year.  It
could not be ignored, however, that the vo lume of imports continuously decreased in
1998 and 1999, and that the level achieved in 2000 still remained well below the
volume of total imports in 1996 and 1997, respectively.  In this light, the trendsindicated, at most, a recovery of total imports, but did not appear to substantiate theG/TMB/26
Page 7
claim of a significant increase compared to the performance achieved in previous
years.  As to the argument of Poland that the decrease experienced in 1998 and 1999
was only in absolute terms, but not relative to consumption, the TMB observed that
the ATC does not incorporate the concept of increased quantities of imports relative
to other factors";4
• the new information and data provided by Poland confirmed the overall picture the
TMB had already observed during its examination pursuant to Article 6.10.
Important changes had started in the middle of the 90s, characterized by a drastic
decline in consumption, a continuously shrinking domestic market and production
consolidating down to three companies.  However, imports were also fluctuating and,
in any case, did not increase in such quantities (during the reference period either)
that would have justified recourse to the provisions of Article 6;
17. In light of these facts and considerations, the TMB could not reach the conclusion that the
competition of low-priced imports had caused the bank ruptcy of five plants and led to the liquidation
process of three other companies.  In any event, the five plants had gone bankrupt prior to the period
for which information was provided by Poland under Article 6.7.  Furthermore, all the indicationsreceived also pointed to the fact that the liquidation process of the three other companies had either
begun earlier than the reference period or in no case could the situation of these companies be
attributed to the increase in total imports in 2000.
18. The TMB took the view that the claim that the withdrawal of the safeguard measure would
result in the elimination of the entire Polish industry producing the yarn in question, could best beaddressed after having considered all the reasons given by Poland in its Article 8.10 communication.
(ii) Assessment of Developments in  Certain Economic Variables
19. Another reason raised by Poland for its inability to conform with the TMB's recommendation
could be described as an assessment different from the one made by the TMB with respect to
developments in certain economic variables specified in Article 6.3.  According to the Polishcommunication, apart from the economic indicators which clearly showed a negative trend in the
reference period (domestic sales, market share, financial losses and employment), there were
opposing trends with respect to some other indicators which had been considered by the TMB as
being neutral (inventories, investments and capacity utilization).  While these latter indicators seemed
to be neutral during the reference period at the level of the domestic industry taken as a whole, therespective performances of the three companies in liquidation and of the three other companies were
very much different.  Poland had stated in this regard that the market behaviour of the companies in
liquidation had had an adverse effect on the situation of the remaining plants.
20. The TMB also noted that the oral presentation of the representative of Poland had contained a
brief analysis of the state of the domestic industry relying, inter alia , on the newly available data and
information.  In the light of this analysis, Poland had doubted that the domestic industry seemed to
enter into its final stage of restructuring, as stated by the TMB.
21. In examining the arguments of Poland, the TMB made the following observations:
• first, the TMB continued to be of the view that some indicators revealed positive
developments during the period for which information had been provided pursuant to
Article 6.7.  Output had increased slightly, average productivity
 had significantly
improved and exports were begun.  While it was true that the three companies still in
                                                     
4 See G/TMB/R/81, paragraph 21.G/TMB/26
Page 8
operation had not yet recovered in the year 2000 the output level of 1996, they had
increased their production by 7.3 per cent compared to the previous year.  The
impressive improvement in productivity could not be solely or mainly attributed to
the reduction of the level of employment, as claimed by Poland, but reflected the
impact of investments made and also the fact that there still seemed to be possibilityfor improvement in terms of organizing and managing the production process.
Independently of whether exports resulted from inward processing, they indicated
that one of the three companies concerned had been able to use part of its production
capacity by relying on the external markets;
• second, average wages of the domestic industry could be increased in real terms and
the level of domestic prices, even if expressed in US dollars, did not seem to indicate
an excessive decrease;
• third, while according to Poland domestic sales, market share, profitability and
employment appeared to reveal negative trends during the reference period, the TMB
recalled that its respective assessments had been more nuanced and balanced;
• though it was factually correct that domestic sales of the Polish industry had
decreased by 7.1 per cent in 2000 compared to 1999, the TMB had already drawn the
attention to the fact that in 1999 the volume of domestic sales was by 4.8 per cent
higher than the volume of total domestic production and, that in 2000, the volume of
domestic sales and exports taken together amounted to 99.9 per cent of the total
domestic production reported.5  It could not be argued, therefore, that a significant
portion of domestic production could not be so ld at all.  Furthermore, as it had also
been noted by the TMB, while consumption had increased by 202.6 tonnes in 2000,
output had increased only by 47.1 tonnes;6
• in the view of the TMB, the undeniable decrease in the share of the Polish market
held by the domestic producers should also be seen in light of the TMB's assessment
with respect to developments in the field of domestic sales.  The decrease of the
market share could mainly be attributed to two factors, namely to the increase in
consumption and to the fact that slightly less than 4 per cent of the output was
exported.  In this context the TMB noted also that the ratio of total domestic output to
domestic consumption had not increased, but had remained practically stable during
the period examined;  it represented 42.9 per cent in 1999 and 42.4 per cent in 2000;
• as to the financial losses, the TMB recalled that it had already stated, inter alia , the
following:
- "negative profit rates were, by definition, indications of problems in the
production of the companies concerned, and the viability of production insuch circumstances could not be sustained in the longer term;
- the apparent improvement registered in this regard during the reference
period constituted, however, positive signs, indicating that there was a chance
to return to profitability in the forthcoming period."
7
                                                     
5 See G/TMB/R/81, paragraph 28.
6 Ibid.
7 See G/TMB/R/81, paragraph 31.G/TMB/26
Page 9
• in further analyzing this aspect of the case, the TMB also recalled that in the
presentation made under Article 6.10 (and this was confirmed once again in hispresentation under Article 8.10), the representative of Poland had indicated, inter
alia, that the three petitioners (i.e. the three still-in-business plants) had suffered
financial losses in 1997, 1998, 1999 and 2000 and that this situation could not
continue indefinitely.  This information revealed to the TMB that the negative profitrates had seemingly constituted a lasting trend for the past four years and it could not
be claimed that the otherwise improving, but still negative profitability experienced in
2000 could be attributed to the roughly 10 per cent increase in total imports.
Financial losses had previously occurred in a period when imports had been
significantly declining;
• as regards employment, the TMB had already observed that the reported decrease of
10.5 per cent during the reference period could be explained, at least in part, by the
investments aimed at modernizing machines, and related production factors.8
Reflecting further on the change in the level of employment, the TMB noted thatduring the bilateral consultations held with Romania pursuant to Article 6.7, Poland
had stated that the decrease in employment referred not only to the three "petitioners",
but to the yarn industry as a whole.  In this regard, Poland had also recognized thatthe modernization of production lines and reorganization of management methods
influenced the level and the structure of employment in the three companies in
question.  On the other hand, the companies forced to leave the market (bankrupted or
in liquidation) reduced their employment totally (or significantly).  The TMB
observed that by providing this explanation, Poland had also recognized that thedecrease of the employment level constituted a negative phenomenon in particular in
relation to the bankrupted plants or to the companies in liquidation.  The TMB noted
in this regard that the bankruptcy or the liquidation process under way could not
result from the effect of increased imports during the reference period;
9
• fourth, turning to the indicators which had been presented in the Polish
communication as being considered neutral, the TMB observed that developmentsaffecting one of them, i.e. investments had not been considered by the Body as
neutral.  Investments made had increased by 60 per cent during the reference period,which represented a significant improvement.  As already stated by the TMB, "the
significant increase in investments aimed at modernization of machinery,improvement of product quality, saving of energy and improvement of management
methods also seemed to indicate that the domestic producers had started to regain
some confidence and had made business strategies for the longer term, after years of a
shrinking market characterized by a significant drop in domestic consumption and
production during the period 1996 to 1999".
10  It was obvious that these investments
had been made by the three plants still in business and not by those under liquidation.
The policy of the latter of disinvesting was considered to be natural and in no waycould put into question the positive effects of the investments made by the remaining
companies;
• as regards inventories, the TMB could not agree with the contention that the three
petitioners had suffered seriously from growing inventories.  The TMB observed that
Poland had rectified during the examination of the safeguard measure underArticle 6.10 the data previously provided for the level of inventories.  According to
                                                     
8 See G/TMB/R/81, paragraph 30.
9 See also paragraph 17 above.
10 See G/TMB/R/81, paragraph 24.G/TMB/26
Page 10
this corrected information, the inventories of the three companies in question had
increased by 20.1 tonnes in 2000, compared to their level in the previous year.  While
it could be true that this represented an increase of 12.3 per cent during the reference
period, based on the data provided during the examination of the case pursuant to
Article 6.10, the TMB noted also that the ratio of the level of inventories of the threecompanies to the volume of their production remained almost unchanged
(7.3 per cent in 1999 and 7.6 per cent in 2000).  The TMB continued to be of the view
that this inventory level remained relatively low and did not in itself point to an
industry facing serious problems in selling its production.  Moreover, the TMB found
it somewhat disturbing that, after having revised the relevant information during the
examination conducted by the TMB under Article 6.10, Poland had returned, without
providing any explanation, to the original higher figure, and on this ground hadclaimed that the share of inventories in domestic production was much higher that the
TMB had depicted it;
• as far as utilization of capacity was concerned, based on the information provided by
Poland during the examination pursuant to Article 6.10 (and also confirmed now), the
TMB observed that the performance of the three "petitioners" had improved by3.4 percentage points during the reference period;  the rate of utilization in 1999 stood
at 58.2 per cent and had increased to 61.6 per cent in 2000.  While it could be argued
that neither of the two rates could be considered to be satisfactory, it could not be
claimed that there was no improvement in terms of capacity utilization during the
period examined.  Furthermore, the low rate of utilization could also raise questionsregarding the adequacy of the adjustments implemented or of the forecasts made with
respect to future selling possibilities;
• on the basis of the considerations as above, the TMB concluded that as regards the
three "petitioners", investments implemented represented positive developments
during the period examined;  a slight improvement in terms of capacity utilizationcould also be registered, while no important change had occurred regarding the level
of the inventories.
22. Keeping in mind all the above, the TMB next turned to the argument of Poland according to
which, as far as inventories and capacity utilization were concerned, the market behaviour of thecompanies in liquidation adversely affected th e operation of the remaining companies, and the
difficult situation of the first ones had been caused by the competition of low-priced imports.  The
TMB observed that by using these arguments, Poland indirectly seemed to recognize that factors other
than increased imports during the reference period could cause or largely contribute to the state of the
domestic industry producing like and/or directly competitive products.  If Poland considered that the
situation of the three in-business companies had no t been satisfactory, Poland recognized at the same
time that this had largely been attributable to the adverse effects of the market behaviour of thecompanies in liquidation and not to the increase in total imports during the reference period.  In
analysing the situation at the outset, Poland should have distinguished the serious damage allegedly
caused by increased imports during the period examined from the damaging effects caused by
possible other factors.
(iii) Share and Price Level of Imports fr om Romania in the Polish Market
23. Poland referred to the fact that Romania had been the biggest exporter to the Polish market
and that these imports had been realized under conditions of permanent undercutting of domestic
prices, as a reason for its inability to conform with the TMB's recommendation.G/TMB/26
Page 11
24. The TMB noted that before addressing issues specified in Article 6.4 (attribution of serious
damage to imports from individual Members), it had first to be fully satisfied with the determination
made by the importing Member that the product in question was being imported in such increased
quantities as to cause serious damage to the domestic industry.  This had not been the case when
reviewing the same measure under Article 6.10 and the arguments raised by Poland with reference toArticle 8.10 and considered so far by the TMB did not change the TMB's views and conclusion in this
regard.  Therefore, the TMB had to decline from considering issues related to the share and price level
of imports from Romania in the Polish market.
(iv) Possible Effects of the Withdrawal of the Safeguard Measure on the Polish Domestic Industry
25. In conformity with its position as reflected in paragraph 18 above, the TMB turned to the
claim of Poland that the withdrawal of the transitional safeguard measure would result in the
elimination of the entire Polish industry producing acrylic/modacrylic staple yarn.  The TMB recalledthat in examining the specific and relevant information provided by Poland pursuant to Article 6.7, the
Body had already concluded, inter alia , the following:
• " it was understood that the Polish market for the products in question had been faced
with serious challenges in the period 1996 to 1998.  However, in the periodexamined, it had started to recover and the factual information provided by Poland
and analysed by the TMB revealed a domestic industry in the process ofrestructuring.  Restructuring had started earlier than the reference period and in 2000
it  seemed to enter into its final stage;
• on the basis of the information available to it, and keeping in mind the above, the
TMB concluded that the overall picture presented had not shown a domestic industry
suffering serious damage in 2000;
• in light of this conclusion, there was no need for the TMB to examine the possible
causal relationship between developments in imports and the state of the domestic
industry, as reflected in changes in the economic variables mentioned in
Article 6.3."
11
26. Furthermore, the TMB noted that its consideration of the reasons provided by Poland for its
inability to conform with the TMB's recommendation did not lead the Body to change its assessment
with respect to any important as pects involved in the case and, in particular, that Poland had not
demonstrated that the yarns subject to its safeguard measure were being imported into its territory in
the reference period in such increased quantities as to cause serious damage to the domestic industryproducing like and/or directly competitive products.  Therefore, the TMB could not agree with the
contention that without keeping the transitional safeguard measure in place the entire domestic
industry, i.e. the three still-in-business companies, would be driven out of business.
Conclusion and Recommendation
27. Having given thorough consideration to the reasons presented by Poland for its inability to
conform with the TMB's recommendation, the TMB concluded that these reasons did not lead it to
change the conclusion and recommendation arrived at by it during the examination of the transitionalsafeguard measure in question pursuant to Article 6.10.
                                                     
11 See G/TMB/R/81, paragraph 32.G/TMB/26
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28. The TMB recommended, therefore, that Poland reconsider its position and that the safeguard
measure introduced on the imports from Romania of acrylic/modacrylic staple yarn, pure or mixed
with wool or fine animal hair, be rescinded forthwith.
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29. The eighty-fifth meeting of the TMB is scheduled for 12 December 2001.
30. The full report of the eighty-fourth meeting will be circulated at a later stage.
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