WORLD TRADE
ORGANIZATIONG/TMB/25
17 September 2001
(01-4368)
Textiles Monitoring Body
EIGHTY-SECOND MEETING OF THE TMB
Note by the Chairman
1. The Textiles Monitoring Body met on 3, 4 and 13 September 2001.
2. The TMB authorized its Chairman to provide WTO Members with the following information.
Notification under Article 6.10 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 23 July 2001, Poland notified the TMB that it had decided, on 20 July 2001, to apply a
transitional safeguard measure on imports of acrylic/modacrylic staple yarn, pure or mixed with wool
or fine animal hair (HS numbers 5509 31, 5509 32 and 5509 61) from Romania, for a period of threeyears.
4. On 23 April 2001, Poland had requested consultations with Romania and had provided it
factual information, as referred to in Article 6.7, which had also been communicated to the Chairman
of the TMB.  Consultations were held which did not result in a mutual understanding as to whether
the situation called for restraint on the imports from Romania.  The safeguard measure was eventuallyimposed by Poland on 20 July 2001, and notified to the TMB in accordance with Article 6.10.
5. Article 6.10 requires the TMB to "… promptly conduct an examination of the matter,
including the determination of serious damage, or actual threat thereof, and its causes, and make
appropriate recommendations to the Members concerned within 30 days".  The TMB, therefore,
decided to conduct this examination at its meeting starting on 3 September 2001 and invited the
participation of representatives of Poland and Romania.
6. Article 6.10 further states that "…[i]n order to conduct such examination, the TMB shall have
available to it the factual data provided to the Chairm an of the TMB, referred to in Article 6.7, as well
as any other relevant information provided by the Members concerned".  The factual data referred to
above revealed, inter alia , that:
- in the reference period, i.e. 1 January 2000 to 1 January 2001 (i.e. the year 2000), the
production of the domestic industry producing like and/or directly competitiveproducts stood at 3 449.8 tonnes, an increase of 1.4 per cent in relation to the previous
year.  At the same time the domestic sales of the domestic industry decreased by
7.1 per cent.  Given the increase in the domestic consumption during the same period,
the share of the domestic market held by the domestic producers fell from 45 per cent
to 40.7 per cent.  Exports, non-existent in 1999, stood at 131.1 tonnes in 2000,representing about 3.8 per cent of the total sales of the domestic industry;
- data with respect to productivity, utilization of capacity, inventories, exports, wages
employment, domestic prices, profits and investments were provided only withG/TMB/25
Page 2
respect to the three companies which had applied for the safeguard action.  These
companies constituted 69.3 per cent of the domestic industry producing like and/or
directly competitive products, in terms of production volume, in the reference period.
In the remaining four companies, the liquidation process was underway, which
resulted in the lack of detailed data concerning their activities.  In the view of Poland,due to their current situation, it could be assumed that should these data be available,
they would show even more serious damage for the domestic industry;
- with respect to the three companies which had applied for the safeguard action, taken
together, the inventories increased by 43.4 per cent during the reference period,
employment decreased by 10.5 per cent and the average profit rate by 7.43 per cent.
Productivity increased by almost 20 per cent, average wages by 1.9 per cent
(expressed in US$), investment by 60 per cent.  Domestic prices (expressed in US$)decreased by 1 per cent for HS 5509 31, 3.8 per cent for HS 5509 32 and remained
stable for 5509.61 during the same period.  Capacity utilization decreased by
3.5 percentage points, from 65.1 to 61.6 per cent;
- in 2000 (i.e. the reference period), total imports of the products in question into
Poland amounted to 4 817.1 tonnes, an increase of 10.5 per cent over 1999.  At thesame time, imports from Romania stood at 1 619.4 tonnes, a 35.8 per cent increase
over 1999.  Consequently the share of imports from Romania in imports from all
sources increased from 27.3 to 33.6 per cent during the reference period, and that in
the Polish domestic market from 15.05 to 19.92 per cent.  The average price of
imports from Romania was 12 to 16.9 per cent below the average domestic price(expressed in US$) in 1999, and 15.7 to 19.9 per cent below in 2000.
7. In reply to the TMB’s invitation, Poland and Romania sent representatives to present their
respective cases.  The two Members made presentations and provided replies to questions posed by
the TMB.  The presentations focused on the determination made by Poland regarding the existence of
serious damage to its industry producing acrylic/modacrylic staple yarn, pure or mixed with wool orfine animal hair as caused by increased quantities in total imports of that product.
8. In this context, the representative of Poland stated, inter alia , that:
- in the mid-nineties there were eleven plants in Poland producing yarn of
polyacrylonitrile fibres.  In the second half of that decade production dropped
significantly as a consequence of  a dynamic increase in imports, leading to
liquidations and bankruptcies of Polish producers.  This led the domestic industry in
1999 to seek the introduction of safeguard measures, in particular regarding importsfrom Lithuania, which was the biggest exporter of these products to the Polish
market.  A safeguard measure was imposed on imports of acrylic yarn from
Lithuania, which was not, at that time, a WTO Member.  At that time, the second
most important exporter in terms of volume was  Romania.  As a result of the
introduction of the safeguard measure, imports of acrylic yarn from Lithuaniadropped; conversely, imports from Romania increased so as to make Romania the
main exporter of that product to Poland.  In the meantime, as the situation of the
domestic industry concerned was worsening, five plants (out of a total of eleven)
went bankrupt, and three others began a liquidation process.  The remaining three
producers (i.e., those which applied for a safeguard action on the imports of acrylicyarn from Romania, the "petitioners") were operating below the profitability level as
they were being forced to decrease production and sales, which had resulted in the
worsening of their financial situation and had forced them to lay-off employees.
Without any safeguard measure these remaining three producers would be driven outG/TMB/25
Page 3
of business by foreign producers.  The dramatic situation facing the domestic industry
was mostly due to the continuing increase in the volume of imports of the products in
question, and the price at which these products were imported, often below the cost of
Polish domestic production. The safeguard measures were meant to enable the
producers to carry out their restructuring programmes, comprising investment andmodernization projects, adapting the production technology to the requirements of the
market and lowering production costs in order to increase productivity;
- the increase in production from 1999 to 2000 did not describe faithfully what was the
real situation on the production side of the market, due to very likely differences in
the real metric number of the yarn produced, and one could assume that production
had remained stable over that period.  During the same period, the domestic industry's
sales on the domestic market had decreased by 7.1 per cent; and relative to theincrease in domestic consumption over the period, the drop in sales was even deeper,
the market share held by the domestic producers falling from 45 per cent to
40.7 per cent from the end of 1999 to the end of 2000.  With respect to inventories, in
answer to questions put by the TMB and after further checking by the Polish
authorities, it was found that the inventories of the three companies that had appliedfor the introduction of a restraint had increased by 20.1 tonnes or 12.3 per cent during
that period; however, taking the whole industry into account, inventories had
remained stable over the same period.  Similarly, after further checking, it was found
that the production capacity of the 3 "petitioners" had remained stable during the
reference period, while the other companies still operating had reduced theirproduction capacity, mostly by selling out basic pieces of capital equipment.  One, for
example, had lowered its production capacity by 73.2 per cent from 1998 to 2000.
The increase in average productivity was, in part, the result of the decrease in
employment experienced by the domestic industry, and was not the result of any
significant increase in the volume of production.  Average wages of the domesticindustry had increased slightly in the reference period, by 1.9 per cent in US$ and by
11.4 per cent expressed in PLN.  However, in comparison with the whole industry
average they had decreased from 73 per cent to 67.7 per cent of the average salary.
As for domestic prices, those of the "petitioners" had increased, expressed in PLN, by
7.8 per cent for HS 5509 31, 5.2 per cent for HS 5509 32 and 9.09 per cent for
HS 5509 61.  However, expressed in US$, the prices had respectively decreased by
1 per cent and 3.8 per cent while they had remained stable for the third HS number.Data on profitability were available only for the three "petitioners" and were negative
(-0.59, -19.80 and -1.89).  Given the fact that the remaining producers were on the
verge of bankruptcy, one could safely assume that their profitability was even worse.
Investments in the sector had increased by 60 per cent from 1999 to 2000.  This
investment had been financed from the companies own resources and was aimed atmodernizing machinery, improving product quality, decreasing energy consumption
and improving management methods.  This investment was done by the three
"petitioners".  The investment programme was scheduled to take place over the next
few years.  The other remaining producers could not afford to make any investment
and were, rather, gradually selling out capital equipment.  According to Poland,exports were an insignificant factor in the determination of damage to the domestic
industry and its causation.  They amounted to 131.1 tonnes in 2000, representing
about 3.8 per cent of the total sales of the domestic industry.  In 1999, there had been
no exports.  The Polish authorities had concluded that in the reference period the
overall situation of the domestic producers of the products in question had worsenedsignificantly, which was reflected mainly in the decrease in sales, market share and
employment, as well as in the negative profit rate and the previously reported sharp
increase in inventories (which information was subsequently rectified);G/TMB/25
Page 4
- as to the causal link between imports from all sources (and from Romania) and the
serious damage claimed, it was found that there had been a sharp increase in the
volume of imports, both absolute and relative to the domestic market, in parallel with
a worsening of the state of the domestic industry as reflected in the main economic
indicators.  The increase in domestic production had not been followed by an increasein domestic sales by the domestic producers.  Despite the growth in domestic
consumption, the market share held by the domestic producers had decreased by
4.3 percentage points.  The threat of a surge in the costs of production forced the
companies to reduce employment.  As regards competition between domestic
production and imports, the domestic producers, despite selling at 13.7 per cent below
costs, were unable to compete with low-priced imports, and their share of the market
decreased gradually over time;
- after having made an assessment of the Polish market it seemed that changes in
consumer preferences had no impact on the situation of the Polish yarn producers.
Similarly, the Polish authorities could not detect any significant difference in the
technologies being used in Poland and in other countries, including Romania, which
could result in different quality of the product.  The investments made by thepetitioners were geared at upgrading the equipment in order to manufacture the same
product at a lower cost and not at the technological innovations themselves;
- in addition, Poland had considered the possible effects of the prices being charged by
the Polish companies in liquidation on the average domestic market prices.  Such
prices were within the price range of the petitioners and did not depart from theaverage domestic market price.
9. Answering further questions put by the representative of Romania and by the TMB, the
representative of Poland further stated, inter alia , the following:
- domestic consumption of the products in question had dropped steadily from
14 609 tonnes in 1996 to 7 928 tonnes in 1999, and increased to 8 130.6 t onnes in
2000.  The impact of the decrease in consumption on the serious damage suffered by
the domestic industry was aggravated by the constantly increasing share of the market
held by low-priced imports;
- in so far as the decrease in the volume of imports in Poland of the product in question
from 1997 to 1999, Poland observed that this was only a drop in absolute terms, since
the rate of decrease of apparent consumption had outpaced the decrease of imports.
The share of imports in domestic consumption had increased from 35.8 per cent in1996 to 59.2 per cent in 2000.  This meant that the share of the domestic sales in
domestic consumption had constantly been decreasing, dropping from 64.2 per cent
in 1996 to 40.8 per cent in 2000;
- as regards production capacity, Poland submitted data for the years 1998, 1999 and
2000, in particular for the three "petitioners", which indicated that, overall, theirproduction capacity had decreased by 14.5 per cent in 1999 over the previous year,
and had increased by about 1.6 per cent in 2000.  As regards the other companies still
in operation, production capacity was decreasing rapidly as these companies were in
liquidation.
10. The representative of Romania stated, inter alia , that on the basis of the information presented
by Poland together with the request for consultation, of that attached to the notification of the
introduction of the safeguard measure, and of the introductory statement made by Poland, RomaniaG/TMB/25
Page 5
maintained its position that Poland had not fulfilled its obligations under each and every of
Articles 6.2, 6.3 and 6.4 of the ATC.  In particular:
- Poland had not presented a convincing assessment that, in accordance with
Article 6.2, it was facing a factual situation of consisting of "such increased quantities
in total imports" of the product subject to the measure.  Romania had serious doubtsas to whether an increase in total imports of only 10.5 per cent was sufficient in the
sense of Article 6.2, suggesting rather a normal evolution, following two consecutive
annual decreases in 1998 (-12 per cent) and 1999 (-8 per cent).  The level of imports
for 2000 was still 10.48 per cent below that of 1997.  Poland did not demonstrate, as
required by that same Article, that the product "is being imported into its territory in
such increased quantities as to cause serious damage" to its domestic industry;
- Poland had not made, either before requesting consultations or during the bilateral
consultations (nor during its presentation to the TMB), a convincing "determination
of serious damage" as required by Articles 6.2 and 6.3;
- even assuming the existence of increased total imports, Poland did not present a
substantive and coherent analysis of the effects of "such increased quantities in total
imports" on the state of its industry.  Critical information and data required byArticle 6.3 were missing and those presented were of a general nature, often being
contradictory.  Moreover, with respect to the "economic variables" mentioned in
Article 6.3, Poland recognized that the information presented, with a few exceptions,
did not refer to the whole industry but only to a selection of a number of companies
operating in this field.  Also, the statement made by Poland in its notification that "inthe remaining four companies the liquidation process is underway" seemed to be an
indication that the Polish industry was facing systemic difficulties not related to
imports;
- even assuming the existence of increased imports and serious damage, Poland had not
demonstrated the existence of a causal link between the two;
- the measure adopted by Poland was a unilateral restriction not complying with
Poland's obligations under the ATC, undermining the letter and the spirit of the ATC
as well as the  very core of the Agreements' purpose, which was to "facilitate the
integration of the textiles and clothing sector into GATT 1994".  This was why
Romania had suggested that the immediate necessary action to be taken was the
withdrawal of the measure;
- with respect to the production data supplied by Poland, Romania was of the view that
it was not sufficient to indicate that for a number of companies "the liquidation
process is underway".   It would be useful to compare the evolution of production in
the "viable" segments of the industry with that of the companies where the liquidation
process was underway, and which could help in understanding the decrease in sales;
- Poland did not present, under the ATC procedures, concrete information on domestic
consumption, but rather noted the "increase of the domestic consumption in the
reference period".  It seemed that the increase in consumption in the reference period
was significant, ranging, according to Romania's calculations, between 8 and
13 per cent;
- in the case of certain economic variables such as productivity, investment, profits (as
from Poland's answer to Romania's request for clarification), on the basis of the
limited information available, it seemed that the situation was improving;G/TMB/25
Page 6
- in the view of Romania, a Member seeking to have recourse to the transitional
safeguard mechanism of the ATC should, in accordance with Article 6.7, make an
overall assessment and determination in line with Articles 6.2, 6.3 and 6.4 before
requesting consultations with the Member affected.  In the view of Romania, Poland
had failed to comply with this requirement;
- the restraint was, in practical terms, established on a quarterly basis and not on an
annual basis, contrary to the ATC.  Moreover the Romanian exporters reported that in
administering the restraint the Polish authorities limited the issuance of individual
import licences for 50 tonnes.  Adverse effects on Romanian exports were already
registered.
Preliminary Comments
11. In starting its examination of the transitional safeguard measure introduced by Poland on
imports from Romania, the TMB noted that the factual information ("market statement") provided by
Poland pursuant to Article 6.7 covered the period of 12 months between 1 January 2000 and
1 January 2001, which, as explained by Poland, was related as closely as possible to the reference
period set out in Article 6.8.  The TMB observed that, in its presentation of the case before the TMB,
the representative of Poland had provided some additional details, in particular with respect to trendsin total imports and their breakdown according to country of origin during the reference period, as
well as regarding the evolution of some of the economic variables listed in Article 6.3.  While
recognizing that this additional information co uld contribute, in some respect, to a better
understanding of developments that had affected the domestic producers and the Polish market, the
TMB reiterated its statement made on previous similar occasions that its examination of the respectivemeasures had to be based essentially on the information made available by the importing Member in
accordance with Article 6.7 at the time the request for consultation had been made.
12. The TMB noted that, in the factual information provided by Poland pursuant to Article 6.7,
data related to production, domestic sales, market share and exports covered the entire Polish industry
producing the yarns in question, while all the other data (inventories, employment, profits,productivity, capacity utilization, wages, domestic prices, investments) reflected the performance of
the three companies which had applied for the introduction of the safeguard measure (the
"petitioners").  In the same factual informati on, Poland had explained that these three companies
constituted, in terms of the volume of production, roughly 70 per cent of the domestic industry during
the reference period and, therefore, indicators describing their situation could be considered as
representative of the whole domestic industry.  Accord ing to Poland, this was all the more so  since, in
the remaining four companies, the liquidation process was underway and, had data been availableregarding these producers also, they would have shown even more serious damage for the domestic
industry.
13. Noting the statement of the representative of Romania that, for most economic variables
mentioned in Article 6.3, the information presented by Poland referred "only to a selection of a
number of companies operating in this field", the TMB also noted that, in his presentation to theTMB, the representative of Poland had made an effort to provide relevant information covering the
domestic industry as a whole, in most respects including also the remaining 30 per cent of the
domestic production represented by the companies under liquidation.  Reiterating its statement that
the examination by the TMB 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, the TMB alsoobserved that though the additional information, included in the presentation of the representative of
Poland, contained some important details, including corrections of some of the information previously
provided, it did not significantly alter the over all picture that had emerged from the factual
information provided pursuant to Article 6.7.G/TMB/25
Page 7
Developments in Total Imports in Poland
14. Recalling that pursuant to Article 6.2, Poland had to determine and demonstrate (to Romania
as well as to the TMB) that the product subject to the safeguard measure was being imported into its
territory in such increased quantities as to cause serious damage (or actual threat thereof) to the
domestic industry producing like and/or directly competitive products, the TMB turned to theexamination of developments in total imports into Poland of the subject yarns.
15. It was noted that the factual information provided by Poland with reference to Article 6.7
contained only one global figure concerning developments in total imports.  According to this factual
information, in the reference period total imports of  the yarns in question into the Polish customs
territory amounted to 4 817.1 tonnes which constituted an increase of 10.5 per cent in comparison
with the preceding 12 months.  In the course of the bilateral consultations with Romania and also in
the presentation to the TMB, Poland provided a more detailed breakdown of the volume of importseffected in 1999 and 2000 according to countries of origin.  Also, it appeared that in the bilateral
consultations, Poland had made available data relating to total imports in the period 1996 to 1998,
which were presented to the TMB as well.  On the basis of these indications, trends in total imports of
the yarns subject to the safeguard measure could be summarized as follows:
Year Total imports (in
tonnes)Previous year = 100 1996 = 100
1996 5,234.2 - 100.00
1997 5,381.2 102.81 102.81
1998 4,729.4 87.89 90.36
1999 4,359.8 92.19 83.29
2000 4,817.1 110.49 92.03
16. As far as the drop in the volume of imports in 1998 and 1999 was concerned, Poland
emphasized that this was a decrease only in absolute terms, as the rate of decrease in apparent
consumption outpaced the decrease in imports.
17. In analysing the above information, the TMB 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.  Itcould not be ignored, however, that the volume 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 trends indicated, at most, a recovery of total imports, but did not
appear to substantiate the claim of a significant increase compared to the performance achieved in
previous years.  As to the argument of Pola nd 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.
18. In light of the trends described above, the TMB was of the view that the 10.5 per cent
increase in total imports reported for the reference period should be assessed in its proper context.
Noting the argument by Romania that it had serious doubts as to whether an increase of total imports
of this magnitude could constitute a sufficient demonstration in the meaning of Article 6.2, which
requires the demonstration that "a particular product is being imported into its territory in such
increased quantities  as to cause serious damage, or actual threat thereof, to the domestic industryG/TMB/25
Page 8
producing like and/or directly competitive products" (emphasis added), the TMB also expressed its
doubts that the alleged serious damage could be caused by the 10.5 per cent increase in total imports
during the reference period.  These doubts notwithstanding, the TMB decided to review the state of
the Polish domestic industry and to revert to this aspect of the case, if necessary, at a subsequent stage
of its examination.
State of the Polish Domestic Industry
19. Recalling that, pursuant to Article 6.3, in making a determination of serious damage caused
by such increased quantities of total imports, the Member invoking the provisions of Article 6 had to
examine the effect of the increased quantities of total imports on the state of the particular industry, as
reflected in changes in the economic variables mentioned in Article 6.3, the TMB turned to the
examination of the information submitted by Poland in this regard.
20. During the reference period, output  increased by 1.4 per cent.  Though the representative of
Poland raised the argument in his presentation to the TMB that the increase in volume expressed in
tonnes might not accurately reflect the actual performance of the domestic producers, he did not
suggest that output had actually decreased, but rather that the production level had remained stable
during the period in question.  Average productivity  of the domestic producers increased by almost
20 per cent, which appeared to be a considerable improvement within a short period of time.  Notingthe argument of Poland that this was largely due to the decrease in employment, the TMB expressed
the view that this could not be dissociated either from the positive impact of the  investments  made,
which increased by 60 per cent during the reference period.  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 startedto 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.  The TMB considered as a positive development that, in the year 2000,
companies had started to export , while in the preceding year there had been no exports at all.  This
was a favourable phenomenon even if the volume exported represented slightly less than 4 per cent ofthe domestic production, since it indicated the efforts of producers to increase their competitivity and
to capture a small portion of the international market.  Average wages  of the Polish industry
producing the yarns in question increased by 1.9 per cent in the reference period (expressed in US$),
though, as reported by Poland, this increase could not cope with the rate of increase in the industry-
wide average salary.  While the existence and widening of the gap between salary levels in the textiles
sector and all the industrial branches taken together was not specific to Poland, but a much broader
phenomenon, it was important to note that a salary increase, in real terms, could be achieved in thecompanies producing the subject yarn.
21. In the factual information provided pursuant to Article 6.7, Poland reported an increase in the
inventories  of the domestic producers of the magnitude of 43.4 per cent during the reference period.
Subsequently, in reply to specific questions of the TMB, the representative of Poland rectified this
information and stated that inventories, overall, remained stable during this period.  The TMBobserved that inventories not only did not increase, but that their levels compared to the production
(less than 5 per cent of the volume of domestic production) did not point to an industry facing serious
problems in selling its production.  In the factual information Poland stated that domestic producers
had noted, in the reference period, a decrease in the capacity utilization  by 3.5 percentage points
(from 65.1 to 61.6 per cent).  The TMB noted that in the bilateral consultations held with Romania,Poland had already admitted that the decrease in capacity utilization had not resulted directly from the
increased imports of the subject yarns, but had ra ther been the consequence of an increase of the
production capacity itself.  It was also observed that, subsequently, in his presentation to the TMB and
in reply to questions posed, the representative of Poland had provided more detailed information on
the evolution of production capacity in the reference period.  This information did not confirm anyG/TMB/25
Page 9
significant increase in the production capacity: as far as the three companies initiating the invocation
of the provisions of Article 6 were concerned, the overall production capacity had remained
practically stable in 2000 compared to the previous year, and a reduction in capacity could be
observed if data for the year 2000 were to be compared to those reported for the year 1998.  On the
basis of the information presented, it appeared to the TMB that, instead of decreasing, capacityutilization had rather slightly increased in the reference period.
22. It was noted that the factual information provided by Poland indicated unfavourable
developments during the reference period with respect to domestic sales of the domestic industry,
resulting in their decreasing share of the Polish market, as well as regarding domestic prices,
employment and profits.
23. As far as the domestic sales  of the industry were concerned, Poland reported that the increase
in the domestic production during the period of investigation had not been followed by an increase indomestic sales of the domestic producers, since these latter dropped by 7.1 per cent (from 3,567.7
tonnes in 1999 to 3,315.5 tonnes in 2000).  Furthermore, given the increase of the domestic
consumption in the same period, the drop in sales was even deeper and the market share held by the
domestic producers fell from 45 per cent in 1999 to 40.7 per cent in 2000.  The TMB recalled in this
regard that in the factual information submitted purs uant to Article 6.7 and in the presentation to the
TMB, Poland had provided the following information regarding consumption, production, domestic
sales, exports and imports:
1999 (tonnes) 2000 (tonnes) Change (%)
Consumption 7,928.0 8,130.6 +2.55
Production 3,402.7 3,449.8 +1.38
Exports 0 131.1 …
Domestic production
available for domestic
sales *3,402.7 3318.7 -2.47
Actual domestic sales ofdomestic producers3,567.7 3,315.5 -7.07
Imports 4,360.0 4,817.1 +10.48
* without taking into consideration stocks from previous periods.
24. Also in light of the above, the TMB understood that, following years of significant decline,
domestic consumption had increased slightly in the year 2000.  This increase was, in any case, higher
than the reported increase in domestic production (consumption increased by 202.6 tonnes, production
by 47.1 tonnes), this difference of 155.5 tonnes could have been supplied either by imports, or from
the stocks accumulated by the domestic producers.  In addition, as indicated earlier, slightly less than4 per cent of the domestic production was exported (131.1 t onnes), thus the difference between the
increase in Polish domestic consumption and in the domestic production available for domestic sales
amounted to 286.6 tonnes which, in any case, was higher than the volume of stocks reported, as
reflected in the inventories.  In the view of th e TMB, a better assessment of the developments could
be provided by analysing the volume and the structure of sales of the domestic production during the
reference period.  In 1999, when no exports took place, the volume of actual domestic sales was
4.8 per cent higher than the reported volume of to tal production, implying that roughly 165 tonnes hadG/TMB/25
Page 10
been sold from the stocks accumulated.  In 2000, domestic sales and exports taken together amounted
to 99.9 per cent of the total domestic production reported and, theoretically, only 3.2 tonnes could not
be sold, which had to be reflected in the level of inventories reported.  In light of this, the only
perceived unfavourable development was limited to the fact that the level of inventories could not be
reduced in the year 2000.  This development in itself, however, did not provide sufficient ground toclaim that domestic producers could not benefit from the slight increase in total domestic
consumption.  Also, the undeniable decrease of the market share of the domestic producers could not
be assessed without taking into account exports and the fact that practically all the domestic
production could be sold (mostly in the domestic market and, in small part, abroad).
25. Turning to the developments in the level of domestic prices , the TMB noted that they
increased if expressed in the national currency, while  in US$ they remained stable in the case of one
HS line and decreased, respectively, by 1 and 3.8 per cent with respect to the two other HS lines
concerned.  These developments did not seem to indicate an excessive decrease in the respective price
levels, all the less since, in all likelihood, they could be attributed, at least in part, to the investments
made and to the resulting increase in productivity.
26. Noting that employment  in the domestic industry decreased by 10.5 per cent during the
reference period, the TMB observed that this decrease could be explained, at least in part, by theinvestments aimed at modernizing machines, and related production factors.
27. In his presentation to the TMB, the representative of Poland indicated that at the end of the
reference period, for the three companies initiating the safeguard procedures, profitability  (as
expressed by profit rates calculated on the basis of sales as a factor of the cost of production of the
products sold) had been negative and amounted to -0.59, -19.80 and -1.89.  The TMB observed thatthe factual information presented by Poland pursuant to Article 6.7 appeared to be somewhat
misleading in this regard.  In this information, it wa s stated that "at the same time  employment in the
domestic industry decreased (by 10.5 per cent) and so did the average profit rate in the reference
period (-7.43 per cent)" (emphasis added).  This statement created the impression that profit rates had
decreased in 2000 compared to the respective rates achieved in 1999.  However, the figure presented
(i.e. –7.43 per cent) did not apparently indicate the magnitude of a decrease compared to the previous
period, but rather appeared to be the arithmetical average of the negative profit rates reported by the
three companies concerned.  Furthermore, the representative of Romania explained that the Polish
answer to Romania's request for clarifications during the bilateral consultations had revealed,
inter alia ,  that profit rates in the reference period "registered an evolution in a good direction: in the
case of one company from –10.2 per cent to –0.59 per cent, and in the case of another company from
–43.6 per cent to –19.80 per cent". Observing that this information had not been challenged by therepresentative of Poland, the TMB noted the following:
• negative profit rates were, by definition, indications of problems in the production of the
companies concerned, and the viability of production in such 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.
28. After having examined one-by-one the developments in the different economic variables as
reported by Poland, the TMB reached the following overall conclusions:
• a number of important economic indicators (output, productivity, investments, exports)
revealed positive developments, while the trends in some others (inventories, utilization ofcapacity, wages) could be considered to be neutral.  Though the market share of domesticG/TMB/25
Page 11
producers decreased somewhat, practically all their production could be sold.  Domestic
prices did not show a dramatic decline, while the decrease in employment could be, in most
part, explained by the effects of investments made.  Negative profitability was an issue of
concern, but trends indicated favourable changes also in this regard as well as the possibility
of returning to positive profit rates in the forthcoming period;
• 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 period examined, it hadstarted to recover and the factual information provided by Poland and analysed by the TMB
revealed a domestic industry in the process of restructuring.  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 sufferingserious 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.
Conclusion and Recommendation
29. The TMB concluded 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 industry producing like and/or directly competitive products.
30. The TMB recommended, therefore, that Poland rescind the transitional safeguard measure
introduced on imports of acrylic/modacrylic staple yarn, pure or mixed with wool or fine animal hair
(HS numbers 5509 31, 5509 32 and 5509 61) from Romania.
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31. The eighty-third meeting of the TMB is scheduled for 15 to 17 October 2001.
32. The full report of the eighty-second meeting will be circulated at a later stage.
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