RESTRICTED
WORLD TRADE G/TMB/R/13
3July1996
ORGANIZATION(96-2553)
Textiles Monitoring Body
REPORT OFTHE FOURTEENTH MEETING
1. TheTextiles Monitoring Body helditsfourteenth meeting on3-5June1996.
2. Present atthismeeting were thefollowing members and/or alternates/second alternates:
Messrs. Daly; Kacar; Kim/Jamaluddin; Malik; Saeki; Ms.Shahin/Mr. Mukerji; Messrs. Suboh;
Tagliani; Vanerio; andWentzel.
3. TheTMB adopted thereport ofitsthirteenth meeting (G/TMB/R/12).
Notification under Article 2.1oftheAgreement onTextiles andClothing (ATC)
4. TheTMB tooknoteofacorrection made bytheUnited States toitsnotification under
paragraph 1ofArticle 2.Thisnotification superseded theoriginal notification withrespect totheUnited
Arab Emirates, submitted totheTMB forinformation, asatthattimetheUnited Arab Emirates were
notaMember oftheWTO. When taking noteofittheTMB wasinformed bytheUnited States that
thequotas forUScategories 315(cotton printcloth) and361(cotton sheets), which amount toprohibition
ofimports, hadbeenagreed between theparties, priortotheentry intoforce oftheATC, withaview
topreventing transshipment bythirdparties (G/TMB/N/63/Add.8).
Notification under Article 2.2oftheATC
Macau/United States
5. TheTMB considered anotification byMacau pursuant toparagraph 2ofArticle 2.1Inthis
notification,MacaustatedthattheUnitedStatesnotificationreceivedundertheprovisionsofparagraph1
ofArticle 2oftheATC2contained restrictions which, according toMacau, werenotinforce onthe
daybefore theentry intoforce oftheATC under thebilateral agreement withMacau maintained under
Article 4oftheMFA. Accordingly, Macau invited theTMB torecommend thatthese restrictions
were notinconformity withparagraph 1ofArticle 2oftheATC.
6. TheTMB’sagenda didnotallow ittostartconsidering thisnotification before November 1995.
AstheTMB started itsconsideration, andinviewoftheimplications ofMacau ’srequest, theTMB
found thatclarification wasnecessary astowhether Macau wished theTMB toreview thisnotification
under paragraph 21ofArticle 2,orasenvisaged inparagraph 2ofArticle 2.Macau confirmed at
thebeginning of1996thatitwished theTMB toconsider thismatter asnotified, i.e.under paragraph 2
ofArticle 2.
1G/TMB/N/108.
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Page2
7. Forthatpurpose,andgiventhecomplexityofthematter,theTMBinvitedbothpartiestoprovide
inwriting anyadditional submission orexplanation theymight finduseful, which bothparties did.
TheTMB started toreview thismatter atitsthirteenth meeting, andconcluded thisreview atits
fourteenth meeting.
8. InawrittenstatementMacausaidthattheMemorandumofUnderstanding(MOU)signedbetween
Macau andtheUnited States on28January 1994 didnotallow fortheautomatic conversion bythe
United States ofdesignated consultation levels (DCLs) onimports ofproducts ofUScategories 219,
225,317,326,611and625-9 from Macau intospecific limits (SLs). According toMacau several
elements sustained theirview:
- ifsuchautomaticity hadbeenintended bytheparties, itwould havebeenmade explicit
either inthebilateral agreement itself, orintheMOU;
- theparties hadmerely agreed onthepossibility oftheconversion onlyincases where
thereview oftrade performance inthose categories demonstrated theneedtoimplement such
aconversion. Therefore, thereference intheMOU to"actual performance when establishing
newlimits" meant that,iftradeperformance didnotwarrant it,theconversion would nottake
place;
- iftheconversionweretobeautomatic,DCLswouldbetantamounttoSLs,andArticle4
oftheMFA would have required thattheUnited States notify theMOU totheTextiles
Surveillance Body forreview, justaswasthecaseforanyother restriction. Thishadnotbeen
done, neither hadtheMOU beenmentioned inthecontext ofthereview bytheTSBofthe
extended andmodified bilateral agreement between Macau andtheUnited States;
- when consultations between theparties tookplace inpursuance oftheMOU, atthe
endof1994, trade inthese categories wasnon-existent, withtheexception ofonecategory
forwhich itdidnotexceed 2.4percentoftheconsultation level.
Macau therefore heldtheviewthatintheabsence ofaspecific agreement ontheautomaticity ofthe
conversion, andinthealmost totallackoftradeinthesecategories, theUSnotification oftheconversion
ofsuchDCLs intoSLs(made on31December 1994) wastantamount toaunilateral introduction of
quantitative restrictions aftertheentry intoforce oftheATC. Macau submitted thatthisconversion
should beconsidered nullandvoid.
9. Inawritten statement, theUnited States maintained thattheobservation ofMacau withrespect
totheUnited States notification under paragraph 1ofArticle 2,andtherequest totheTMB, were
without merit. According totheUnited States:
- intheMOU, signed inJanuary 1994, Macau specifically agreed totheestablishment
ofspecific limits onfabric categories 219,225,317,326,611and625-9 forthepurposes of
theUruguay Round transition mechanism (i.e.theATC);
- thishadbeenagreed inthecontext ofnegotiations toextend thebilateral agreement
under theMFA, inreturn forthedismantling bytheUnited States oftheexisting aggregate
andgroup limits, andwithaviewtoproviding limits onsome fabric categories thatMacau
anticipated exporting;
- theconsultations envisaged intheMOU aimed atproviding apossibility toadjust the
levels oftheSLsatthetimeoftheconversion ofDCLs intoSLs; theconversion itself was
notanissue forconsultations. These hadbeenscheduled forearly 1995, astheMOU wasG/TMB/R/13
Page3
concluded intheexpectation thattheimplementation oftheresults oftheUruguay Round would
beaslateasJuly1995;
- consultations wereheldinDecember 1994inviewofthefactthattheATC would be
implemented asfrom January 1995. Consultations didnotproduce agreement, since Macau
objected totheconversion offabric DCLs intoSLs,andtotheUnited States 'offertoextend
theprevious agreement structure. TheUnited States stated itsintention toeffect theconversion
oftheDCLs intoSLsaccording totheterms oftheMOU. Subsequent consultations heldin
February 1995 atMacau ’srequest didnotproduce mutual agreement.
TheUnited States hadtherefore faithfully executed theterms ofitsagreement withMacau. Macau
wasinfactrequesting theTMB toissue arecommendation thatwould overturn partsofanegotiated
settlement, while retaining thenegotiated concessions. TheUnited States therefore asked theTMB
todismiss Macau ’srequest.
10. TheTMB considered alltheelements putforward bybothparties intheirsubmissions, including
thereference made byMacau tothereview ofthebilateral agreement bytheTSBin1994.3Inparticular,
theTMB’sattention centred ontheMemorandum ofUnderstanding signed bythetwoparties
on28January 1994, which interaliaenvisaged theconversion ofdesignated consultation levels on
imports ofproducts ofUScategories 219,225,317,326,611and625-9 from Macau intospecific
limits. TheTMB noted thattheparties didnotagree onwhether ornotparagraph 2ofthisMOU
allowed fortheconversion offabric DCLs intoSLsbytheUnited States intheabsence ofagreement
between theparties during theconsultations envisaged inthisparagraph. TheTMB tooknoteofthese
different interpretations.
11. TheTMB noted thatitsreview wasconducted under paragraph 2ofArticle 2.Itfound that
arecommendation,asrequestedbyMacau,thatintheabsenceofeitheranagreementovertheconversion
ofDCLs onUScategories 219,225,317,326,611and625-9 intoSLs,oractual tradeinthese fabric
categories, thenotification bytheUnited States ofthose specific limits should beconsidered nulland
void, wasnotwarranted.
12. Inarriving atitsconclusions, theTMB tooknotethattheconversion ofDCLs intoSLstook
place in1994 under theMFA. TheTMB noted withconcern however thatSLswereintroduced by
theUnited States inthealmost complete absence oftrade inthese categories. Itwastheexpectation
oftheTMB that,inmonitoring developments inthisarea, theUnited States would bearinmind this
observation.
13. TheTMB alsowished todraw theattention ofMembers tothefactthat,withtheentry into
force oftheATC, specific provisions hadbeeninoperation fortheestablishment ofnewrestrictions.
Notifications under Articles 2.6and2.7(b) oftheATC
14. TheTMB reviewed under paragraph 21ofArticle 2thenotifications made, pursuant to
paragraphs 6and7(b)ofArticle 2,byHonduras (G/TMB/N/59 andAdd.1), Malaysia (G/TMB/N/93
andCorr.1), Nicaragua (G/TMB/N/42 andCorr.1), thePhilippines (G/TMB/N/76 andAdd.1) and
Zambia (G/TMB/N/178). During thisreview theTMB noted that,inaccordance withparagraph 6
ofArticle 2,thevolume ofproducts integrated amounted tothefollowing percentage of1990imports
oftheproducts falling under thecoverage oftheAgreement: Honduras, 16.0percent; andthe
Philippines, 16.13 percent. TheTMB alsonoted thatthevolume ofproducts integrated byNicaragua
3COM.TEX/SB/1982.G/TMB/R/13
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amounted to16.64 percentof1990 imports oftextiles andclothing. Itfurther noted thatthevalue
ofproducts integrated byMalaysia amounted to18.09 percentof1990imports oftheproducts falling
under thecoverage oftheATC, andthatthevalue ofproducts integrated byZambia to16.01 percent
ofimports oftextiles andclothing. TheTMB noted thatinthese notifications, inaccordance with
paragraph 6ofArticle 2,theproducts integrated included products from eachofthefourgroups:
topsandyarns, fabrics, made-up textile products andclothing.
Notifications under Article 2.17oftheATC
15. TheTMB considered thedetailed notifications byCanada ofadministrative arrangements
concluded withBangladesh, Brazil, Costa Rica, Cuba, Hungary, India, Indonesia, Korea, Lesotho,
Macau, Malaysia, Mauritius, Pakistan, thePhilippines, Romania, Singapore, theSlovak Republic,
SriLanka, Swaziland, Thailand, Turkey andUruguay. Thearrangements hadbeenbilaterally agreed
andcontained provisions which implemented, inaccordance withtheprovisions ofparagraph 1of
Article 4oftheATC, administrative aspects oftherespective export control systems (export licences,
monitoring ofexports, quota flexibility provisions, exchange ofstatistics, re-exports byCanada,
consultations). TheTMB tooknoteofthesenotifications (G/TMB/N/153-156, 158-173, 179and180).
Notification under Article 3.1oftheATC
16. TheTMB considered anotification made under paragraph 1ofArticle 3byPeru. According
tothisnotification imports fromanysource ofusedend-products intended tomeetclothing needs had
beensuspended. Thismeasure hadbeennotified totheGATT Textiles Surveillance Body in1992,
anditsjustification hadbeenbased onGATT Article XX(b); itwasnotapplied inthecaseofgifts
tocharitable private institutions orthenon-business public sector. TheTMB tooknoteofthisnotification
(G/TMB/N/83 andAdd.1).
Notification under Article 6.9oftheATC
United States/Guatemala: imports ofcotton andman-made fibre skirts (UScategory 342/642)
17. Pursuant toparagraph 9ofArticle 6,theTMB reviewed anotification bytheUnited States
ofanagreed restraint concluded onimports ofcotton andman-made fibreskirts (UScategory 342/642)
fromGuatemala. According tothisnotification aspecific limitof285,685 dozen (notional annual level:
485,000 dozen) wasagreed fortheperiod 31May1995 -31December 1995. Thelevelenvisaged
inparagraph 8ofArticle 6(therollback level) was319,417 dozen. For1996, thelevel wassetat
408,100 dozen, andaGuaranteed Access Level (GAL)4of100,000 dozen wasestablished. For1997
andtheremaining period of1998 theannual growth forthespecific limitwassetat6percent; the
measure wasagreed forathree-year period, i.e.until30May1998.
18. TheTMB examined theinformation made available bytheUnited States toGuatemala during
thebilateralconsultations,inparticular,andalsootherrelevantinformationprovidedbytheUnitedStates
attheTMB’srequest. While itobserved thatsome datamight point todiverging directions, theTMB
concludedthatthisagreementinoveralltermswasjustifiedinaccordancewiththeprovisionsofArticle6
oftheAgreement onTextiles andClothing.
19. TheTMB noted thatthetotalleveloftheagreed restraint, aswellasthatportion oftherestraint
thatwasavailable unconditionally toGuatemala (i.e.thespecific limit), weresubstantially above the
4Guaranteed Access Levels (GALs) arequantities ofproducts ofacategory thatacountry canexport tothe
United States provided theactual product shipped qualifies forsuch treatment, inter alia, bybeing made of"US
components".G/TMB/R/13
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rollback level. Itobserved thatnogrowth ratewasprovided forwithrespect totheGAL. However,
according toindications given bytheUnited States Government, theGALcanbeincreased onrequest.
Therefore, itistheTMB’sunderstanding that,attherequest ofGuatemala, theGALwould beincreased
bynolessthan6percentannually (G/TMB/N/181).
Communication bytheUnited States
20. TheTMBreceivednotificationfromtheUnitedStatesofthewithdrawaloftheunilateralrestraint
imposed onimports ofwomen ’sandgirls’woolcoats (UScategory 435)fromIndia. TheTMB took
noteofthisnotification (G/TMB/N/182).