WORLD TRADE
ORGANIZATIONG/C/W/339
6 November 2001
(01-5444)
Council for Trade in Goods Original:  English
SECOND MAJOR REVIEW OF THE IMPLEMENTATION OF THE AGREEMENT
ON TEXTILES AND CLOTHING BY THE COUNCIL FOR TRADE IN GOODS
Communication from Uruguay
At the request of the Permanent Mission of Uruguay on behalf of members of the ITCB1 that
are also Members or observers of the WTO, the text of the statement made at the meeting of the
Council for Trade in Goods on 26 October 2001 is being circulated to Members.
                                                     
1 The ITCB members and observers of the WTO are Argentina; Bangladesh; Brazil; China; Colombia;
Costa Rica; Egypt; El Salvador; Guatemala; Honduras; H ong Kong, China; India; Indonesia; Republic of Korea;
Macau, China; Maldives; Mexico; Pakistan; Paraguay; Peru; Sri Lanka; Thailand, Uruguay and Vietnam.G/C/W/339
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Meeting of the Council for Trade in Goods
26 October 2001
Second Major Review of ATC Implementation
Overall Assessment
General remarks
We re-emphasize the importance of major reviews of ATC implementation, in particular that of the
second review.
ATC provided for major reviews for a purpose: to forestall any problems along the way and to take
corrective steps to ensure that the process is on track. It flows from ATC Article 8:12 first sentence,which obliges and mandates the CTG to take such decisions as it deems appropriate, to ensure that the
balance of rights and obligations embodied in  the Agreement is not being impaired.
Article 8:12, first sentence, makes it compulsory for the CTG to take decisions. It is necessary for it to
do so, to ensure that the balance of rights and obligations under the Agreement is fully respected.
It is therefore important that the review be serious and objective, more so, because of the great
importance of textiles and clothing for developing countries, and of the systemic significance of phase
out of quota restrictions for restoring the sector to the same rules and disciplines of the GATT as for
any other sector.
ITCB has participated in this review exercise in all objectivity; with a resolve to engage in
constructive dialogue; to ensure both the integrity and the purpose of the review. It submitted detailed,reasoned analysis of ATC implementation, based on objective criteria. It presented sound arguments
and conclusions to establish that the balance of rights accruing to developing countries is being
seriously impaired. Therefore the CTG should take appropriate decisions to restore the balance.
We are a little disappointed that the restraining importing countries did not find appropriate or useful
to make any written contribution, to enable the CTG to arrive at considered conclusions. Perhaps theyaccept our analysis and conclusions! Grateful for that.
Nevertheless, taking into account their oral interventions, we are pleased to highlight some main
points again. In doing so, also like to offer comments/rebuttals on their interventions.
Will also make concrete suggestions for adoption by the CTG. These suggestions are designed to
restore the balance of rights under the ATC.
Points made by restraining countries
First with respect to certain general observations.
One, the remit and scope of the review. The US delegate appeared to argue that the review needed to
be confined to measures or developments that occurred only during the second stage . He also
appeared to argue that it was necessary to first rais e any particular issue in bilateral consultations, then
the TMB, and so on. And that only thereafter could it be raised in the CTG.G/C/W/339
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We are not persuaded. CTG review cannot be limited the way he would wish it to be. There is nothing
in the Agreement that the CTG review be limited in  the manner suggested by him. Any reading of the
first sentence of Article 8:11 would attest to that.
Two, the friends from importing countries appeared to suggest that as imports in their markets had
generally been on the upturn, it should be assumed that the ATC was working without any problems.
That all was well and fine.
Here again have to disagree. ATC is a legal instrument. It contains contractual rights and obligations.
Fulfilment of these rights and obligations is what is required by its implementation. Full and faithful
implementation of the provisions of the ATC is essential to that end. Justifying any violation or non-
fulfilment of legal obligations on the ground that imports might or might not have advanced cannot be
valid.
Moreover, as we demonstrated during discussions with respect to Article 1.5 of the ATC, purported
increases in imports could not be attributed to the implementation of the ATC. So few quotarestrictions have gone; that too on commercially insignificant products. Therefore, by definition, these
could not have been the main contributory factor to those increases.
Three, our friends from importing countries have ma de references to their perceptions as to the
drafters’ intentions behind particular ATC provisions. This approach is neither relevant, nor
convincing. ATC is an integral part of the legal framework of the WTO. Its terms deserve to beinterpreted in accordance with the same general pr inciples of interpretation as applied to any other
agreement.
Recourse to supplementary means of interpretation, including any negotiating history, can be invoked
only to confirm the meaning of the provisions.
Four, our friends also assert as though our complaints or concerns derive from our perceptions
regarding non-fulfilment of some “expectations” on our part.
A couple of clarifications are necessary in this regard.
Our expectations have been grounded in our hope that the provisions of the ATC would be
implemented in good faith, in the light of its object and purpose of securing gradual phase out of
quota restrictions during and over  a transition period, not just at the end of the transition period . The
progressivity of the process is a necessary and inherent condition of full implementation.
Also, we can perhaps be excused if we expected that there would be no violation of any provision of
the Agreement, be it concerning the introduction of  new restrictions, changes in rules or procedures,
or so on.
Fifth, some further points raised by our friends with respect to the implementation of particular
provisions of the ATC can perhaps be better addressed while dealing with those issues. It would also
be more efficient. Would do accordingly.G/C/W/339
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Recapitulating the discussions in the CTG
The integration process
We have demonstrated and established through our written submissions and interventions in the last
CTG meeting that the restraining countries fa iled to implement the integration programmes in
accordance with the object and purpose of the Agreement. So few quota restrictions have been
eliminated. In certain cases, the programmes have not come up to fulfilling even the minimumnecessary technical requirements, although the purpose of integration could not be relegated to a mere
technicality.
The purpose of integration is grounded in the Agreement in specific terms. It was, and is, to secure
progressive phase out of quota restrictions. Restraining Members were also required to “allow for”
continuous industrial adjustment to facilitate the process.
Reviewing the process in accordance with the purpose and objective of the ATC, however, the CTG
cannot escape the conclusion that the restraining Memb ers have so far failed to fulfill their obligations
fully.
Turning to restraining countries’ insistence that they expected the transitional period to be 10-years in
which to complete the integration process. We have no quarrel with their right to the 10-years period.
However, the 10-year period and "progressivity of the phase out process" are mutually exclusive.
They have to go hand in hand. As we already said, the Agreement did not provide that all quotarestrictions, or even a large majority of them, be eliminated only at the end of 10-years .
We note that the restraining Members have agai n reaffirmed that they remain committed to full and
faithful  implementation of the ATC, within its timeframe; in other words, not just at the end of the 10-
year period.
In light of the foregoing, we ask the CTG to take  note of their reiteration, and request the CTG
to decide that:
(i) The restraining Members utilize the provisions of the ATC,  that already exist in the
Agreement, relating to early integration of products and elimination of quota
restrictions. And that they achieve liberalizatio n, by the start of stage 3, of at least 50%
of the volume of 1990 imports of products that were under specific quota limits. It is notunreasonable that 50% be achieved by what would be 70% of the 10-year period.
(ii) Also, that in accordance with the object ive of the Agreement to liberalize trade in
restrained products, they avoid any downward adjustment of quotas in cases of partial
integration of certain categories.
At this point we should clarify that the ATC established the 16%, 17% and 18% as the minima for
integration at various points in the process. ATC did not establish any ceilings. If, as we heard from
the distinguished representative of the US in the last meeting, the United States drafted its domesticlegislation as though these percentages were ceilings, this would appear not to be fully consistent with
its obligation under Article XVI, paragraph 4, of the WTO Agreement. It reads as follows: “Each
Member shall ensure  the conformity of its laws, regulations and administrative procedures with its
obligations as provided in the annexed Agreements.”
Increase in rates of quota growthG/C/W/339
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Here also, our submissions and interventions in th is review, demonstrated that increases in growth
rates in the two stages did not provide for any significant increases in quota access.
The TMB also agreed that increases in growth rate s cannot substitute for integration of the relevant
products.
With respect to small suppliers, the methodology us ed by Canada and the US in implementing Article
2:18 of the ATC, was not consistent with the purpose provided for in Article 1:2, nor was it consistentwith the ordinary textual reading of Article 2:18 itself.
As for least-developed countries, they failed to gi ve any meaning or effect to the relevant provisions
of the Agreement, including the Ministerial decision in that regard.
We therefore request the CTG to decide:
(i) That the restraining Members apply the methodology used by the EU in
implementing the growth-on-growth for small suppliers; extend the same
treatment to least-developed country Members; and, where possible, eliminatequota restrictions on imports of such Members; and
(ii) That they advance the growth-on-grow th with respect to other restrained
Members to 1 January 2000, and increase any resultant growth rates lower than
6% to that percentage.
Violation of certain obligations
We demonstrated through our submission and the discussion in these meetings that there have been
several instances of violation of obligations by certain restraining Members.
Introduction of new restrictions (Article 2:4)
Recall that there have been instances of introduction of new restrictions on ATC products in violation
of the provisions of the Agreement. These included the introduction of a new restriction on Turkey’sexports of underwear to the United States, and Turkey’s own restrictions on a number of exporting
countries following its customs union with the EC.
It is important to note and address what the distinguished representatives of the US and Turkey said in
this regard in the last CTG meeting.
The US representative argued that they thought the restriction under reference was valid, consistent
with Article 4 of the ATC.
In this connection, regret that US and Turkey did not feel it important to assert this view earlier, thus
frustrating the proper functioning of the TMB.
And recall that the TMB had already examined this  contention, when it examined this restraint. The
conclusion was that there was nothing in Article 4 which could be interpreted as justifying such a
restriction. That Article 4, in fact, related to the implementation or administration of restrictions
already in place  under Article 2 of the ATC or applied under its Article 6 subject to the proceduresG/C/W/339
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and substantive requirements thereunder. Article 4 did not provide for or justify introduction of new
restrictions.
As for Turkey’s restrictions, a dispute settlement panel and the Appellate Body found that these were
inconsistent with Article 2:4 of the ATC, and coul d not be justified by Article XXIV of the GATT.
Therefore, the request by the distinguished representative of Turkey that its restrictions be viewed in
the overall context of general liberalization of its trade regime is not very relevant.
We accordingly request the CTG to decide that the Members concerned withdraw these
restrictions and avoid recurrence of such instances.
Continuation of discriminatory and procedural requirements (Articles 2:11 and 2:17)
Note with satisfaction the confirmation, by Canada and EU in the last meeting, of their understanding
that, following the integration of products, the rela ted procedural requirements such as issuance of
export licenses/permits by restrained Members need also to go.
However take issue with Canada’s suggestion that in formation with respect to the above, in relation to
integrated products, needed to be provided only as  a matter of courtesy. Remind him of Articles 2:6
and 2:11, which require that details of actions to be taken pursuant to integration needed to be spelt
out to the TMB .
In this connection, failure of the US to announce the withdrawal of visa requirement on integrated
products becomes an even more important and serious issue.
TMB has also stated (paragraph 85 of its report) that this requirement could be deemed necessary only
for implementation of restrictions . After those restrictions, these requirements become redundant and
discriminatory. For full and faithful integration of relevant products, they should be withdrawn.
Accordingly request the CTG to decide that visas, or any other similar requirements, on
integrated products be withdrawn.
Elimination of restrictions on non-WTO me mbers while maintaining them on WTO Members
(Article 1:6)
We have made a compelling case in this regard.
EU, US, Canadian delegates sought to argue that the ATC permitted them to eliminate any restriction,
implying that on non-MFN basis.
Without saying so, they seemed to refer to Article 2:15 of the ATC. The argument is not persuasive.
Article 2:15 says: "Nothing in this Agreement shall prevent a Member from eliminating any
restriction maintained pursuant to this Article…"
It is more than obvious from a plain reading of the above that Article 2:15 is not relevant in the case
of restrictions under question. Those on Russia, etc., and eliminated by the EU, were not restrictions
maintained under Article 2, or even under the ATC.G/C/W/339
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Obviously therefore their argument is misplaced. Regret that EU continues to assert that the matter
does not belong to this review.
We request the CTG to decide and recommend that the EC bring itself into conformity with its
obligations under the WTO.
Changes in rules of origin (Article 4)
Apparent that the US changes in rules of origin violated its obligations, and therefore impaired rights
accruing to exporting countries.
Some of these changes (for example the one that altered the definition of cotton products under which
certain made-ups articles containing as little as 16% by weight of cotton are now treated as cotton
products) can also not be reconciled with Article 1:4 relating to the reflection of the particular
interests of cotton producing exporting countries in the implementation of the Agreement.
Therefore request the CTG to decide that the US bring itself into conformity with its obligations
and restore the balance of exporting countries’  rights to access accruing to them under the
Agreement.
Cotton producing exporting countries (Article 1:4)
Recalling our submission in G/C/W/304, and the discussion this morning, request the CTG to take
note of the expressions of dissatisfaction in this regard and stress the need for the restraining Members
to give full meaning and effect to the relevant ATC provisions.
The circumvention issue (Article 5)
We request that the CTG take note of our views and comments concerning the alleged extent of
the problem of circumvention.
Second, we request the CTG to
• reiterate the importance of cooperation in add ressing problems arising from circumvention,
• emphasize the need for any remedies to be proportionate to the problem, and
• recommend that any measures taken should not cause unnecessary burden for governments
/ economic operators or impede the utilization of quota access by exporters concerned.G/C/W/339
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Use of transitional safeguard mechanism (Article 6)
We noted with satisfaction the deceleration in recourse to safeguard actions. Also emphasized that the
use of transitional safeguards had not been consistent with effective implementation of the integration
process, as all but a few of these actions had been found to be justified.
Request that the CTG take note of these in its conclusions. Stress that the CTG recommend
that, during the remaining three years of the Agreement, safeguards be applied with utmost
restraint, consistent with the provisions of Article 6, and, importantly, with effective
implementation of the integration process.
Market access (Article 7)
Reiterate that there has been no non-compliance with any specific market access commitments
undertaken as a result of the Uruguay Round. Moreover, a number of developing countries in fact
have adopted significant autonomous measures in their markets.
Antidumping actions (Article 7)
Reiterate the concerns about anti-dumping actions  on products already under quota restriction, as well
as about targeting of textile sector for general trade policy reasons, and the adverse effect of these
measures on access under the Agreement.
Note that the general methodology applied by EC  Commission in dumping determinations has been
faulted by the Appellate Body on several scores.
Note the adverse effect of EU antidumping actions in terms of impeding the realization of ATC’s
objective.
Therefore request the CTG to decide that in order to avoid double jeopardy to the exporting
countries concerned, the restraining Members should  agree not to initiate anti-dumping actions
against products under quota restriction. And to lend certainty to trade, they should not takesuch actions during a period of two years after elimination of quotas.
Autonomous industrial adjustment
It is only this morning that this subject was revi ewed. The EU delegate sought to justify his views
regarding the scope of Article 1.15 by invoking some view expressed by the authors of the
Negotiating History of the ATC published by the ITCB. The implication seemed to be as though itreflected the ITCB position, on the subject.
In this connection, we wish to draw attention, to the following on page x of the publication:
"We are fully aware that our interpretation is no more valid than any other opinion….
They should not be considered as reflecting the views of the ITCB or of any of its
members".G/C/W/339
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During discussions in the CTG, we noted the TMB observation that we do not have sufficient
information at our disposal to make a thorough analysis and assessment on the extent to which
autonomous industrial adjustment and increased competition in Members’ markets, in the sense of
Article 1:5, has been achieved.
It was also noted that the information provided by the restraining countries was at best patchy and
incomplete, not sufficient to assess the contributio n that ATC implementation might or might not have
made to facilitating the integration process.
As to purported increases in import figures, it was demonstrated that these could not be solely
attributed to ATC implementation.
Also, the question to address in the context of Article 1:5 is whether the restraining Members
“allowed for” continuous autonomous industrial adjustment in their markets in order to facilitate the
integration process.
In light of the above, we believ e that the CTG should emphasize th e necessity of facilitating the
integration process, and, in this context, of the importance of allowing continuous autonomous
industrial adjustment and further information to review progress in this regard.
Functions of the TMB (Article 8)
Recognize the improvement in the functioning of the TMB realized over time, especially in its
examination of safeguard actions. Also commend the Body for its painstaking efforts and producing a
most valuable contribution to the major review.
Believe in the importance of the functions of the TMB. More importantly, of its broad responsibility
to supervise the implementation of the ATC, to examine all measures taken under the Agreement and
their conformity therewith.
Concluding remarks
All in all, for reasons submitted in our paper and elaborated herein, the implementation of ATC by
developed importing countries has impaired the balance of rights accruing to developing exporting
countries under the Agreement.  We request the CTG to so conclude.
This conclusion derives from instances of violation, by certain restraining Members, of their
obligations or from instances in which the attainment of the objective of the Agreement has been
impeded. In some other cases, the implementation of certain ATC provisions has not been consistent
with the object and purpose of the ATC or these have not been given full meaning and effect.
We also conclude that in the light of the foregoing, and pursuant to its mandate under Article 8:12,
first sentence, the CTG should take decisions as suggested above.
Finally, we suggest that, pursuant to its mandate under Article IV:5 of the WTO Agreement, the CTG
should decide and resolve to regularly oversee the functioning of the ATC and of progress in theimplementation of the Agreement, especially in view  of the continuing problems identified in the
review process.
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