WORLD TRADE
ORGANIZATIONG/TMB/R/46
18 September 1998
(98-3574)
Textiles Monitoring Body
REPORT OF THE FORTY-SEVENTH MEETING
1. The Textiles Monitoring Body held its forty-seventh meeting on 30 and 31 July 1998.
2. Present at this meeting were the following members and alternates:
Mr. Da Costa/Miss Gervasi/Mr. Grané;  Messrs.  Grc ˇa r ;   K i m ;   K o b a y a s h i ;   M a l i k ;   M u k e r j i ;
Richards;  Tadpitakkul/Hastjarjo;  Tagliani;  Wentzel.
Notifications under Article 6 of the Agreement on Textiles and Clothing
Colombia/ Brazil and Colombia/India: imports of denim (tariff heading 5209.42)
3. Pursuant to Article 6 of the ATC, Colombia notified to the TMB, on 24 July 1998, that it had
introduced on 17 July 1998 transitional safeguard measures on imports of denim (tariff
heading 52.09.42) from Brazil and India, for a period of three years.
4. Though it was not specified in the notification, the TMB understood that the restraint had
been applied pursuant to Article 6.10.  On 17 April 1998, Colombia had requested consultations withfive WTO Members (Brazil, Chile, India, Peru and Venezuela) and had provided them factual
information as referred to in Article 6.7, which had also been communicated to the Chairman of the
TMB.  Colombia had held consultations with Brazil and India respectively, but these consultations
had not resulted in a mutual understanding that the situation called for restraint on the imports from
these two Members.
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 makeappropriate recommendations to the Members concerned within 30 days".  The TMB, therefore,
decided to conduct this examination at its meeting of 30-31 July 1998 and invited the participation of
representatives of Brazil, Colombia and India.
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:
- on 13 June1996, domestic producers had requested the Colombian authorities to
conduct an investigation with respect to a number of groups of products, including
denim.  This request alleged that a substantial increase in imports had caused seriousdamage to the domestic industry;
- the investigation was conducted by the Colombian Foreign Trade Institute
(INCOMEX) which prepared a technical report on the basis of which the Colombian
Government decided to seek consultations in April 1998 with the exporting Members
referred to in paragraph 4 above;
- the dates of the investigation and of the adoption of the technical report were not
specified in the report.  The latest data and information incorporated into the report
referred to the period January to September 1996, with the exception of an annex
which provided information on the imports effected in 1997.  These data, however,G/TMB/R/46
Page 2
were not directly comparable to the import data provided for 1996.  Also, no
information was provided on developments beyond the first six months of 1996
regarding any of the economic variables referred to in Article 6.3;
- the technical report found, inter alia , that ten out of the 15 indicators examined
yielded evidence of serious damage and that, out of the 15 indicators of causalrelationship between imports and the serious damage considered, eleven pointed to
the existence of such a relationship.
7. In reply to the TMB’s invitation, Brazil, Colombia and India sent representatives to present
their respective cases.  The three Members made presentations and provided replies to questions
posed by the TMB.  The presentations focused, in particular, as a first step on the TMB’s
consideration, on the determination made by Colombia regarding the existence of serious damage to
its industry producing denim as caused by increased quantities in total imports of that product.
8. In this context, the representative of Colombia stated, inter alia , that:
- the data provided by Colombia, related to the economic variables referred to in
Article 6.3, showed that the domestic industry in Colombia producing denim
experienced serious damage.  In order to make its determination Colombia had relied
on an investigation made by INCOMEX which had been concluded on9 January 1997.  This investigation had been based on data for the period
January 1993 to June 1996, the latest period for which data were available at the time
the investigation had been launched.  The internal procedures that had to be
completed in Colombia had not made it possible to take the decision to request
consultations pursuant to Article 6.7 of the ATC before 17 April 1998.  Thisexplained why the factual information referred to in Articles 6.2, 6.3 and 6.4 of the
ATC had been provided up to September 1996 or for the first half of 1996 at latest.
These data, however, were in the view of Colombia related as closely as possible to
identifiable segments of production and to the reference period set out in Article 6.8
of the ATC and, therefore, the information provided corresponded to the requirementsof Article 6.7;
- the analysis made by INCOMEX had also shown evidence that the serious damage
experienced by the Colombian industry was caused by increased quantities in total
imports of denim and not by such other factors as technological changes or changes
in consumer preference;
- information with respect to the economic variables referred to in Article 6.3 had not
been provided in absolute terms, in vi ew of the confidential character of that
information.  However, a detailed analysis of the trends and changes in all economic
variables had been provided by INCOMEX, and data in absolute terms were, in
addition, provided on a confidential basis to the TMB for its information during its
examination of the measures;
- it was Colombia’s contention, therefore, that denim was being imported into
Colombia in such increased quantities as to cause serious damage to its domestic
industry producing this product.
9. The representative of Brazil stated, inter alia , that:
- the information provided by Colombia at the time it had made its request for
consultations was inadequate for two reasons.  First, there had been a significant lapseof time between the data that had been used in the Colombian investigation (up to
September 1996) and the date of the request for consultations (April 1998).  This
rendered almost impossible any precise and objective evaluation of the situation ofG/TMB/R/46
Page 3
the Colombian industry.  Second, Colombia had not provided data in absolute terms,
which made it difficult to understand the data provided;
- no assessment had been provided in the analysis made by Colombia as to the impact
of technological changes or of consumer preference on the situation of the domestic
industry.  In this respect it was Brazil’s view that factors related with technologicalinnovation and consumer preference were the real explanation for the presence of
Brazilian denim in the Colombian market;
- Brazil had ascertained that the volume of total imports of denim into Colombia had
been lower in 1997 than in 1996;
- therefore, the transitional safeguard clearly did not meet the requirements of Article 6
of the ATC and should be rejected by the TMB.
10. The representative of India stated, inter alia , that:
- the data provided by Colombia at the time the request for consultations had been
made was deficient, since it did not fulfil the requirements of Article 6.7 as no
specific and factual information on the basis of which the safeguard action had been
initiated had been provided.  The data provided covered the period January 1993 to
September 1996 and, therefore, was not up-to-date.  The data provided in respect ofmany factors such as production, prices, employment, wages, exports, inventories,
had not been provided in absolute terms.  This made it impossible to make an
assessment of the health of the industry in a meaningful way.  Also, the import data
for each year had been split into two semesters;
- the two Colombian companies producing denim were viewed by Colombia as the
"domestic industry producing like and/or directly competitive products",
notwithstanding the fact that these two co mpanies were vertically integrated and
produced a range of products which included fibres, fabric as well as garments;
- the data provided by Colombia for many of the parameters analysed were related not
only to denim but to other lines of production as well;
- Colombia, by referring to some documents available within certain Colombian
authorities, and not providing them directly, had failed to supply specific and relevant
factual information;
- data on profits, the effect of increased imports on the evolution of domestic producer
prices, did not indicate that the industry was experiencing serious damage;  in
addition, it appeared that the two companies that produced denim had not modernized
their production facilities and equipment, contributing to the decline in capacityutilization and to the absence of expansion of capacity.  It was, therefore, reasonable
to infer that serious damage to the industry, if any, was on account of technological
changes rather than rising imports;
- even though Colombia had determined the existence of serious damage on the basis
of data for the period January 1993 to September 1996, Colombia had taken intoaccount import trends during the year from February 1997 to January 1998 inclusive,
in establishing the quota;
- therefore, the data furnished by the Colombian authorities did not justify a
determination of serious damage and the safeguard action taken by Colombia against
imports of denim from India, with effect from 17 July 1998, was totally unjustified.G/TMB/R/46
Page 4
11. In starting its examination of the matter, the TMB first had to assess the determination of
serious damage resulting from increased quantities in total imports made by Colombia.  In order to
make this assessment, the TMB had to check, inter alia , that the volume of imports of denim into
Colombia had increased, the effect of those increased imports on the state of the particular industry as
reflected in changes in the economic variables listed in Article 6.3, and that the damage was caused bysuch increased quantities in total imports of denim and not by such other factors as technological
changes or changes in consumer preference.
12. Before proceeding to such a systematic detailed examination, the TMB addressed the time-lag
of about fifteen months that had taken place be tween the investigation concluded by INCOMEX and
the time at which Colombia had requested consultations with, inter alia , Brazil and India.  The TMB
recalled in this respect that, according to Article 6.7, the information referred to in Articles 6.3 and 6.4
shall be related, as closely as possible, to the reference period set out in Article 6.8, i.e. the 12-monthperiod terminating two months preceding the month in which the request for consultation was made
(i.e. the period February 1997 to January 1998).  The TMB recognised that this formulation allowed
for some flexibility, in particular in view of the availability of most recent data.  In the view of the
TMB, however, this did not provide for the possibility of taking a safeguard measure on the basis of
economic variables describing the status of the indust ry almost two years before the time at which the
request for consultation had been made.
13. In this regard, the TMB noted that Article 6.2 referred to a situation where "a particular
product is being imported  […] in such increased quantities as to cause serious damage, or actual threat
thereof, to the domestic industry" (emphasis added).  This causal link seemed to indicate that the
serious damage had to occur in a period close to the time at which the request for consultation wasmade.  It followed that the information provided to demonstrate the serious damage had to be recent.
14. The time-lag referred to in paragraph 12 had resulted in the consideration by Colombia of
data for a period which, in the view of the TMB, was clearly not related as closely as possible to the
reference period set out in Article 6.8.  Claiming serious damage, in April 1998, on the basis of data
referring to the state of an industry in the first half of 1996 at the latest could not be found to be inaccordance with the requirements of Article 6.  The evolution of the economic situation since then
could have resulted in significant developments.  In particular, it was clear from the information
provided by both Brazil and India that, although total imports of denim into Colombia had increased
in 1994, 1995 and 1996, such imports had decreased in 1997.
15. The TMB further observed that Article 6.10 required that a restraint be introduced at the latest
"within 30 days following the 60-day period for consultations".  Colombia had requested
consultations with, inter alia , Brazil and India on 17 April 1998 and the transitional safeguard
measures had been introduced on 17 July 1998, after the deadline had lapsed.
16. In view of the elements mentioned above, the TMB found that since Colombia had failed to
demonstrate that its industry producing denim was experiencing serious damage caused by increased
quantities in total imports of that product, the restraint measures it had introduced on imports of denim
from Brazil and India were not justified in accordance with Article 6. The TMB, therefore,recommended that Colombia rescind these measures.
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