WORLD TRADE
ORGANIZATIONG/TMB/R/39
20 February 1998
(98-0622)
Textiles Monitoring Body
REPORT OF THE FORTIETH MEETING
1. The Textiles Monitoring Body held its fortieth meeting on 19 to 22 January 1998.
2. Following the decision adopted by the General Council on 10 December 19971 and the
appointment of new members, alternates and non- participating observers, the composition of the
TMB at the beginning of 1998 was as follows:
MEMBERS ALTERNATES SECOND ALTERNATES
Mr. Pedro da Costa e Silva (Brazil) Ms. Ana Cecilia  Gervasi (Peru) Mr. Patricio Grané (Costa Rica)
Mr. A. R. (Sandy) Moroz (Canada) Mr. Otto Wentzel (Norway)
Mr. John Richards (EC) Mr. Adebayo Babajide (EC)Dr. Adel M. Khalil (Egypt) Mr. Asoke Mukerji (India)
Mr. Timothy Tong (Hong Kong, China) Mr. Dong-Won Kim (Korea) Mr. M. Abdul Mannan (Bangladesh)
Mr. Kenji Kobayashi (Japan)Mr. Mumtaz Malik (Pakistan)  Ms. Cristina Morais (Macau)
Mr. Jean-Daniel Rey (Switzerland) Mr. Dimitr ij Graÿar (Slovenia) Mr. Ali Urkan (Turkey)
Mr. Arnupab Tadpitakkul (Thailand) Mr. Banudojo Hastjarjo (Indonesia)Mr. William Tagliani (United States)
Non-participating ob server for Africa:   Mrs. Usha Chandnee Dwarka-Canabady (Mauritius)
3. Present at this meeting were the following members, alternates and observer:
Messrs. Babajide;  Da Costa/Ms. Gervasi/Mr. Grané;  Mrs. Dwarka-Canabady;  Messrs. Kobayashi;Malik/Ms. Morais;  Messrs. Moroz;  Mukerji;  Rey/Graÿar;  Tadpitakkul;  Tagliani;  Tong/Kim.
4. The TMB adopted the report of its thirty-ninth meeting (G/TMB/R/38).
Notifications under Articles 2.6 and 2.7 (b), 2.8(a) and 2.11 of the ATC: Communications Received
from Members in Response to Questions Put by the TMB
5. A number of Members, as noted in paragraphs 6 to 9 below, responded to questions put by the
TMB with a view to verifying whether the statis tical information provided regarding integration
referred, where appropriate, to those portions of the HS lines covered by the ATC and not to the entirerespective HS 6-digit lines (G/TMB/R/29, paragraphs 43 to 45).
6. The TMB took note of communications  by Costa Rica (G/TMB/N/102/Add.2 and
G/TMB/N/220/Add.1) related to the notifications of its first and second stages of integration.
                                                     
1See WT/L/253.G/TMB/R/39
Page 2
Costa Rica stated that, as regards Stage 1, it had incl uded in its list of products integrated four "ex HS
lines" that appeared in the final part of the Annex to the ATC and that it would shortly submit its
assessment of the percentage integrated for Stage 1.  Regarding Stage 2, no "ex HS line" had been
integrated and there was, therefore, no need for Costa Rica to make corrections.
7. The TMB took note of a communication by Ko rea (G/TMB/N/235/Corr.1), related to the
notification of its second stage of integration.  With respect to the 12 HS 6-digit lines in Chapters 30to 49 and 64 to 96,  contained in its Stage 2 notification, Korea had found that:  (a)  in four cases, the
lines could be subclassified further than the 6-di git level, and it reaffirmed that there were no
non-ATC products among them;  (b)  in three cases, no non-ATC product had been included in the
volume of trade counted;  (c)  in one case, it had been able to identify the portion of imports of the6-digit line  corresponding to the product definition in the ATC;  and (d)  in four cases, it had not been
possible to make a distinction between the products covered by the ATC and those not covered. Korea
had, therefore, decided to revise its second stage in tegration programme by withdrawing the four lines
for which no distinction could be made and by adding 14 other tariff lines.  The figure for the total
volume of imports in 1990, of products covered by the ATC, had been revised to take into account thecase wherein Korea had been able to identify precisely the portion of imports of the 6-digit line
corresponding to the product definition in the ATC.  Korea’s second stage of integration, as revised,
therefore, amounted to 17.07 per cent of the products covered by the ATC.  The TMB also took note
of the fact that Korea’s first stage of integration amounted to 16.41 per cent of the products covered
by the ATC, on the basis of the revised total volume of imports in 1990 of products covered by
the ATC.
8. The TMB took note of communications by Thailand (G/TMB/N/41/Corr.2 and
G/TMB/N/223/Rev.1/Corr.1) related to the notifications  of its first and second stages of integration.
With regard to Stage 1, Thailand stated, inter alia , that a product it had notified under an "ex HS line"
did not correspond to the respective precise product description contained in the ATC, moreover,
since it had not been possible at that time to differentiate precisely as to what constituted a "textile"
and a "non-textile" product, and in view of the fact that the first stage integration programme had been
brought under GATT 1994 rules for over three years, it had decided to add six products to its
programme in order to avoid any doubts about the fulf ilment of its obligations under the ATC.  As a
result, the volume of products integrated for Stage 1 amounted to 16.57 per cent of 1990 imports, so
that, should the volume corresponding to the "ex HS line" contained in the programme be deducted, itwould still be above 16 per cent of 1990 imports.  With regard to Stage 2, six "ex HS lines" had been
withdrawn from the integration programme and replac ed by three other HS lines, so that the volume
of imports for the products integrated in the second stage by Thailand amounted to 17.02 per cent of
the 1990 imports of the products falling under the coverage of the ATC.  Thailand further confirmed
to the TMB that the changes made to the integration programme for Stage 2 had been effective asfrom 1 January 1998.
9. The TMB started its consideration of the relevant communication received from Indonesia
and, seeking further information and clarification, decided to revert to its review at a subsequent
meeting.
Notifications under Articles 2.8(a) and 2.11 of the ATC
10. The TMB reviewed, pursuant to Article 2.21, the notifications made under Articles 2.8(a)
and 2.11 by Korea (G/TMB/N/235, Add.1 and Corr .1) and Thailand (G/TMB/N/223, Rev.1 and
Rev.1/Add.1).  During these reviews 2, the TMB noted that, in accordance with Article 2.8(a), the
volume of the products integrated amounted to 17.07 per cent for Korea and 17.02 per cent for
Thailand, of the volume of imports in 1990 of the products falling under the coverage of the
                                                     
2See also paragraphs 6 and 7 above.G/TMB/R/39
Page 3
Agreement.  The TMB also noted that, in accordance with Article 2.8(a), the products integrated
included products from each of the four groups:  tops and yarns, fabrics, made-up textile products and
clothing.
Notifications under Articles 2.17 and 5.4 of the ATC
11. The TMB reverted to its consideration of the notifications made by Pakistan under
Article 2.17 and by the United States under Article 5.4 of a mutually satisfactory understanding
reached, following consultations, between the two Members 3 , and decided to continue its review at a
subsequent meeting.
Notifications under Article 3.3 of the ATC
12. The TMB considered a notification by the European Community under Article 3.3 according
to which the European Community no longer maintained any consultation levels with Malta, Morocco
and Tunisia4, with effect from 1 January 1998.  The TMB took note of this notification
(G/TMB/N/313).
13. The TMB considered a notification by the European Community under Article 3.3 of agreed
changes to the consultation levels it maintained vis-à-vis  Egypt.5  According to this notification, these
consultation levels, established for 1998 and 1999, had been introduced in the context of a preferential
trade agreement with Egypt and were being notified under Article XXIV of the GATT.  The TMB
took note of this notification (G/TMB/N/314).
14. The TMB considered a notification by the European Community under Article 3.3 according
to which the European Community no longer maintained any quantitative limits  vis-à-vis  Bulgaria,
the Czech Republic, Hungary, Poland, Romania and the Slovak Republic6, with effect from
1 January 1998.  The TMB took note of this notification (G/TMB/N/315).
Notification under Article 6.9 of the ATC
15. The TMB started its review pursuant to Article 6.9 of the restraint measure agreed between
the United States and Thailand on imports of artificial staple fibre yarn for sale (US category 603)
and, seeking further information and clarification, decided to revert to its review at a subsequent
meeting.
Honduras/United States:  Notification Pursuant to Articles 8.5 and 8.6 of the ATC
16. On 7 January 1998, Honduras addressed a communication to the TMB expressing the view
that there was no justification for the United States to maintain the restraint measure previously
agreed between Honduras and the United States in respect of exports of cotton and man-made fibre
underwear (category 352/652) from Honduras.  As the continuation of the restraint was detrimental toHonduras' interests under the ATC, and since consultations held by Honduras with the United States
had failed to produce a mutually satisfactory solution, Honduras requested the TMB, pursuant to
Articles 8.5 and 8.6 of the ATC, to promptly  consider the matter and recommend that the
United States withdraw the measure forthwith.
                                                     
3See G/TMB/R/11, paragraph 12 and G/TMB/R/35, paragraph 16.
4See G/TMB/N/152 and G/TMB/R/12, paragraph 17.
5See footnote 4 above.
6See G/TMB/N/151 and G/TMB/R/12, paragraph 16.G/TMB/R/39
Page 4
17. In accordance with the provisions of Article 8.7, the TMB invited the participation of both
Honduras and the United States to its review.  It was informed that Honduras would participate in the
meeting, whereas the United States sent a written communication presenting its views on the matter
raised by Honduras.  Subsequently, the United States decided to send a representative, who
participated in part of the TMB's review of this issue.
18. The representative of Honduras stated that the continuation of the restraint was detrimental to
its interests for the following main reasons:
- since consultations had not produced an agreement, the United States had first
introduced a unilateral restraint against imports from Honduras with effect from
March 1995.  During its review of the measure, the TMB had determined that there
had been no damage to the industry from imports of underwear products of category
352/652, but had not been able reach a consensus on the existence of actual threat of
serious damage.  The TMB recommended another round of consultations to see if theparties could reach a mutual understanding.  Honduras proposed administrative
measures on the monitoring of trade as an appropriate response as there had been no
damage, but the United States insisted on the imposition of a restraint;
- as a mutual understanding had not been achieved, this was reported to the TMB, but
subsequently, as part of a broader understanding, Honduras reached an agreementwith the United States and accepted a restraint on category 352/652 products;
- the agreed restraint was notified to the TMB pursuant to Article 6.9.  In taking note of
the agreement, the TMB made no reference to  its justification in accordance with the
provisions of Article 6, as required under Article 6.9;
- in the meantime, at the request of Costa Rica, the Dispute Settlement Body
established a Panel to review the restraint introduced by the United States against
imports of the same products.  The Panel and the Appellate Body ruled that the
United States had violated its obligations, inter alia , under Article 6 of the ATC and
the DSB adopted their reports which recommended the withdrawal of the restraint
against imports from Costa Rica.  The United States complied with thisrecommendation in March 1997;
- since Honduras had been included in the same market statement on the basis of which
the restraint on Costa Rica was found to be in violation of the ATC, Honduras
expected the United States to apply the recommendation adopted by the DSB to its
trade as well.  As the United States had not adopted this approach, Hondurasrequested the withdrawal of the measure in October 1997.  Since no satisfactory
response was received, Honduras  renewed its request, but bilateral consultations held
in December 1997 yielded no solution;
- the maintenance of the restraint lacked legal justification. It was also detrimental to
the interests of Honduras under the ATC, as it resulted in an inequitable and
disadvantageous position vis-à-vis  unrestricted competitors and put an additional
burden on the Honduran industry, resulting in further disruption and loss of futureorders to other suppliers.
19. On the basis of the above-mentioned reasons, Honduras requested the TMB to recommend to
the United States the immediate withdrawal of the restraint.G/TMB/R/39
Page 5
20. The representative of the United States stated that she did not agree that the maintenance of
an agreement until its scheduled expiration on 26 March 1998 was inconsistent with the
US’ obligations under the World Trade Organization or any of its agreements.  Furthermore, the
United States did not agree that the maintenance of the bilateral agreement was detrimental to the
interests of Honduras.  The United States therefore requested that the TMB dismiss the complaint of
Honduras.  This was for the following main reasons:
- the recommendation of the Panel contained in WT/DS24/R applied to the measures
maintained under Article 6.10 regarding imports from Costa Rica and not to imports
from other Members.  A mutually satisfactory bilateral agreement had been reached
between Honduras and the United States under the terms of Article 6.8 and,
furthermore, Honduras had not requested the opportunity to be a third party in the
dispute between Costa Rica and the United States that was subject of the panel review
and recommendation.  The United States also stated that it was in compliance withthe recommendation of the Costa Rica Panel;
- the TMB had already reviewed the rest raint agreed between Honduras and the
United States and had not made a finding that the maintenance of the restraint was
improper or inconsistent with the provisions of the WTO or the ATC, nor had it
issued a recommendation concerning the agreement.  The United States expressed itsconcern regarding the appropriateness of the request made by Honduras to the TMB
to review this matter again.  There was no provision in the ATC for an annual review
of restraint measures agreed pursuant to Article 6.8.  In addition, the United States
was concerned about the possible consequences of a review by the TMB, outside the
context of Article 6.9, of an agreement concluded pursuant to Article 6.8;
- the final agreement period was for the term 1 January to 26 March 1998. The
United States did not agree that the implementation of the agreed restraint was
detrimental to the interests of Honduras sin ce the restraint levels had never been fully
utilized, despite the fact that imports from Honduras had grown substantially under
the agreement.
21. In conducting, pursuant to the provisions of Article 8, its review of the matter brought to it by
Honduras, the TMB considered the elements, views and arguments put forward by both Honduras and
the United States, as summarized above.
22. The TMB recalled that the measure referred to it by Honduras had been agreed with the
United States for a period of three years ending on 26 March 1998, and had been notified pursuant toArticle 6.9.  The TMB also noted that when it had reviewed this agreed restraint measure in
December 1995
7 it had, inter alia,  recalled that at its second meeting, when reviewing the action taken
by the United States pursuant to Article 6.10 against imports of category 352/652 from Costa Rica and
Honduras under Articles 6.2 and 6.3 it had found that serious damage, as envisaged in these
provisions, had not been demonstrated.  The TMB had not, however, reached consensus on the
existence of actual threat of serious damage.8  The TMB was aware of the fact that, during this
review, it had not pronounced itself on the justification of this agreed restraint measure in accordancewith the provisions of Article 6.  The TMB had also noted in December 1995 that the total level of the
                                                     
7G/TMB/R/8, paragraphs 9 to 12.
8G/TMB/R/2, paragraph 16.G/TMB/R/39
Page 6
agreed restraint, as well as that portion of the restraint which was available unconditionally to
Honduras (i.e. the specific limit) were both substantially above the rollback level as defined in
Article 6.8.
23. The TMB further noted that Honduras considered that the continuation of the measure was
detrimental to its interests because (i) when the TM B had reviewed the agreed restraint measure it had
not determined whether this agreement was justified in accordance with the provisions of Article 6;(ii)  a WTO panel, reviewing subsequently the market statement on the basis of which the
United States had made requests for consultations pursuant to Article 6.7 of the ATC on
category 352/652 vis-à-vis  a number of WTO Members including Honduras, had concluded that the
United States violated its obligations under Article 6 of the ATC by imposing restrictions on imports
from Costa Rica and that, therefore, in the view of Honduras, there was no legal basis for the
United States to maintain the measure;  (iii)  imports from Honduras of products of category 352/652
continued to be restrained at the levels set in th e bilateral agreement despite the fact that restraint
measures applied by the United States under Article 6 on imports of the same products from some
other sources had ceased to exist, thereby adversely affecting business opportunities.
24. The TMB also noted that the United States did not agree that the continuation of the measure
was detrimental to Honduras’ interests, in particular  in view of the fact that the restraint had never
been fully utilized by Honduras.  The United States emphasised that this measure had been bilaterallyagreed with Honduras.  It also stated that Hondur as had not been a party in the consideration of the
matter raised by Costa Rica in the DSB.
25. The TMB was aware of the conclusions of the report of the Panel, as modified by the
Appellate Body report, adopted by the DSB in February 1997, referred to by Honduras.
9  The TMB
also noted the explanation by the United States that the measure at issue with Costa Rica had expiredon 28 March 1997 without being extended.  The TMB further noted that, according to Honduras, the
United States had provided on request in the recent past substantial increases in the restraint measure
applied on the same product to another WTO Member.
26. The TMB observed that the agreed restraint measure had been introduced for a three-year
period.  It understood, as confirmed by the United States, that the measure would end at latest on26 March 1998.  The TMB further observed that, in accordance with Article 6.12, this measure could
not be extended.
27. The TMB, bearing in mind its December 1995 review of the agreed measure as described in
paragraph 22, the evolution of imports from Honduras into the United States of products of
category 352/652 and the corresponding level of the restraint, the fact that the restraint was due toexpire at latest on 26 March 1998, and the statement and arguments by Honduras that its maintenance
was detrimental to Honduras’ interests, invited the United States to reconsider the necessity to
maintain the restraint in force until its scheduled expiration date.
28. The TMB noted that until the expiration of the measure positive consideration can be given
by the United States to any possible concern that would be brought to its attention by Honduras, so as
to avoid future exports of this product to the Unit ed States from Honduras being adversely affected.
                                                     
9WT/DS24/R and WT/DS24/AB/RG/TMB/R/39
Page 7
Communication from Brazil
29. The TMB took note of a communication by Brazil according to which, following the
recommendation made by the TMB in November 1996 (G/TMB/R/20, paragraph 26)10 ,Brazil had
decided to rescind the transitional safeguard it applied pursuant to Article 6.11 to imports of woven
artificial filament fabric (category 618) from Hong Kong, China as of 1 January 1998(G/TMB/N/317).
Communication from Canada
30. The TMB considered a communication made by Canada pursuant to Article 2.15 of the ATC,
according to which it had accorded "ex-quota treatment" to imports from all sources of: children’s
blouses and shirts of categories 7.3 and 8.1;  women’s and girls’ knitted blouses and shirts of
category 8.1; women’s and girls’ blouses and shirts of silk;  women’s and girls’ blouses and shirts of
tariff item 6206.90.00.00;  saris of category 4.3;  women’s and girls’ ensembles of category 4.1;babies’ snowsuits;  coats and jackets of category 14.1;  and rainwear of category 1.3.  As a result,
Canada would no longer request export licences for those products as a condition for import into
Canada.  However, these products remained subject to Canadian import permit requirements for
monitoring and surveillance purposes.  In addition, Canada had unilaterally provided a one-time
permanent increase of 10 per cent to the existing quotas for winter outerwear of category 2.0 withrespect to WTO Members.  This increase had been applied after the adjustment that was due in 1998,
pursuant to Article 2.14.  For future years, the growth provisions of the ATC would be applied on the
basis of the higher 1998 restraint.  The TMB understood that "ex-quota treatment" implied the
elimination of restrictions notified pursuant to Article 2.1 by Canada with respect to the products
involved.  It observed that Article 2.15 contained certain specific deadlines for notification which hadnot been met by Canada;  on the other hand, the TMB observed that the affected WTO Members had
been informed accordingly. The TMB took note of this communication (G/TMB/N/316).
Dates of the Next TMB Meeting
31. The TMB decided to reschedule its meeting, previously scheduled for 18 to 20 February, to
16 and 17 February 1998.
_____________
                                                     
10See also G/TMB/R/26, paragraph 30.