RESTRICTEDWORLD TRADE
ORGANIZATIONWT/GC/W/283
3 August 1999
(99-3275)
General Council Original:  English
AGREEMENT ON TEXTILES AND CLOTHING:
EVALUATION OF IMPLEMENTATION
Communication1 Pursuant to Paragraph 8 of the Geneva
Ministerial Declaration
The following communication, dated 27 July 1999, has been received by the Chairman of the
General Council from the Hong Kong Economic and Trade Office.
_______________
In the context of evaluation of the implementation of individual WTO agreements and the
realization of their objectives pursuant to paragraph 8 of the Geneva Ministerial Declaration, I am
pleased to attach herewith a submission to the General Council on behalf of the Members of theInternational Textiles and Clothing Bureau that are also Members or Observers of the WTO.  I request
that this be circulated in a General Council document as the contribution of the Delegations concerned
to the evaluation of implementation of the Agreement on Textiles and Clothing which Ministers will
pursue at the Third Session of the Ministerial Conference.
_______________
I. INTRODUCTION
1. In paragraph 8 of their Declaration at the conclusion of the Second Session of WTO
Ministerial Conference, the Ministers agreed as follows:
"Full and faithful implementation of the WTO Agreement and Ministerial Decisions is
imperative for the credibility of the multilateral trading system and indispensable for
maintaining the momentum for expanding global trade, fostering job creation and raising
standards of living in all parts of the world.  When we meet at the third Session we shall
further pursue our evaluation of the implementation of individual agreements and the
realization of their objectives.  Such evaluation would cover, inter alia , the problems
encountered in implementation and the consequent impact on the trade and development
prospects of Members … .”
2. This paper is presented in order to facilitate a comprehensive evaluation of implementation of
the Agreement on Textiles and Clothing (ATC).
                                                     
1 By ITCB members that are also Members of the WTO, namely, Argentina; Bangladesh; Brazil; China
(Observer); Colombia; Costa Rica; Egypt; El Salvador; Honduras; Hong Kong, China; India; Indonesia; Korea;
Macau; Maldives; Mexico; Pakistan; Paraguay; Peru; Sri Lanka; Thailand and Uruguay.WT/GC/W/283
Page 2
II. SIGNIFICANCE OF TRADE IN TEXTILES AND CLOTHING
3. It is important to recall at the outset that textiles and clothing is one of the most important
sectors of international trade in as much as it accounts for about 9 per cent of world exports (1997) in
manufactured products.  For developing countries, its importance is much greater: it is typified in the
fact that the sector accounted for some 19 per cent of their exports of manufactures in 1997.  For somedeveloping countries, especially the least developed among them, its share in their export earnings is
even larger.  Moreover clothing is a labour-intensive activity.  The sector is therefore particularly
important for the creation of employment opportunities in these countries.  Liberalization of trade in
this sector through the Agreement on Textiles and Clothing was therefore seen as a principal area of
benefit for developing countries from the Uruguay Round.
III. EXPECTATIONS FROM ATC IMPLEMENTATION
4. At the conclusion of the Uruguay Round several attempts were made to gauge the economic
impact of the Uruguay Round.  It was concluded that, when fully implemented, the trade liberalization
agreed in the Round could boost world income by up to 1 per cent per year, or in other words by
US$200-500 billion.  The volumes of world trade were estimated to increase by 6-20 per cent.  Most
significantly, "more than one third of the benefits [were] expected to derive from liberalization of
textiles and clothing and another one third from liberalization of other manufactures".
2
Objective of the ATC
5. It is important to recall that the ATC was designed to integrate the textiles and clothing sector
into the GATT, thereby contributing to the objective of liberalization of trade.  Although the ATC did
not specifically define the phrase "integration of textiles sector into the GATT", the essential context
of the negotiations was the quantitative restrictions that had long been applied and maintained bysome developed countries against imports from developing countries under the Multi-Fibre
Arrangement.  Indeed, the 1989 Ministerial decision had stated that "... the process of integration ...
should inter alia  cover the phasing out of restrictions under the Multi-Fibre Arrangement and other
restrictions on textiles and clothing not consistent with GATT rules and disciplines ...".
6. It was further agreed in 1989, as was also specifically included in the second preambular
paragraph of the ATC, that the process of integration "should be progressive in character."  In the
Singapore Ministerial Conference declaration of 1996, too, the Ministers stated that "we attach
importance to the implementation of the [ATC] so as  to ensure an effective transition to GATT 1994
by way of integration which is progressive in character".
7. It follows therefore that the central objective of the ATC was to progressively phase out the
quota restrictions carried over from the former Multi-Fibre Arrangement (MFA) and, thereby, to
contribute to the liberalization of trade in the sect or.  A worthwhile analysis of the implementation of
the ATC should therefore lay specific emphasis on the extent to which concrete progress towards
achieving the realization of the above objectives has been made.
IV. EXPERIENCE WITH ATC IM PLEMENTATION 1995 - 1999
8. The ATC came into effect from 1 January 1995.  As such almost half of the transition period
of ten years of its implementation has already elapsed.  Indeed, the integration programmes for thefirst two stages of the implementation process (covering a period of seven years) have already been
put in place.  Consequently these programmes in fact cover 70 per cent of the transition period.
                                                     
2 WTO Annual Report 1998, Globalization and Trade, page 36.WT/GC/W/283
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9. To facilitate a thorough consideration of the implementation of the ATC and the concerns
arising therefrom, this paper is designed to analyze implementation with respect to various provisions
of the Agreement article-by-article.
Article 1:   Some Guiding Principles
10. Article 1 of the ATC established certain basic principles for the implementation of the
Agreement.  These include, inter alia , the products to which the ATC applies; the principle that
meaningful increases in quota access will be permitted for small suppliers and least-developed
countries; the principle that the particular interests of cotton-producing countries should be reflected
in implementation in consultation with these countries; the principle that Members should allow for
continuous autonomous industrial adjustment and increased competition in their markets; and the
principle that the other GATT rights and obligations (i.e., those not covered by the ATC) shall remainunaffected.
11. Actual experience with reference to these principles is discussed below.
(i) Meaningful increases in access possibilities for small suppliers
12. Article 1:2 of the ATC laid out the guiding principle that the provisions of Article 2:18 and
6:6(b) should be so used as to allow for "meaningful increases" in access possibilities for smallsuppliers and the development of "commercially significant" trading opportunities for new entrants.
13. Contrary to the above principle, additional access in quotas for small suppliers during the first
stage of implementation had been only marginal, i.e. far from being "meaningful".  In fact it had been
partly due to the difference in methodologies employed in giving effect to the provision of
Article 2:18 by the EU on the one hand, and by US A and Canada on the other.  Table 1 below shows
the additional access for small suppliers for both stages 1 and 2, under respective methodologies used
by the EU and USA/Canada.
TABLE 1
Additional Access for Small Suppliers*
Comparative Additions in Access
Stage** Annual Additional Access by
Canada and the USAnnual Additional Access by
EU
1 0.52% 1.67%
2 1.17% 3.54%
* Compared to normal growth-on-growth increase on a notional pre-ATC growth rate of 6 per cent.
** Stage 1 is for three years combined, and stage 2 for four years combined.
14. The above table reveals that the additional access for small suppliers has indeed been
minuscule and has not come up to the principle laid down in Article 1:2.  It is also noteworthy that the
increases afforded by the methodology used by Canada and the US are less than half of that yielded
by the EU method.WT/GC/W/283
Page 4
15. Contrary to the marginal increases in access possibilities as shown above, a number of
safeguard actions by the US involved exports from small suppliers, namely, Colombia, Costa Rica,
Dominican Republic, El Salvador, Guatemala and Jamaica.  In addition, Honduras which came under
the purview of Article 1:2 as a new entrant in the field of textiles and clothing trade, was also affected
by such safeguard actions. The US did not provide any information as to whether favourabletreatment had been accorded to these small suppliers and the new entrant concerned.
(ii) Meaningful increases in access possibilities for least-developed exporting countries
16. A footnote to Article 1:2 establishing the guiding principle for meaningful increases in access
possibilities for small suppliers provided that "to the extent possible, exports from a least-developed
country Member may also benefit from this provision".
17. No transitional safeguard action has so far been invoked by any restraining country against
imports from least-developed countries.
18. However as for increased growth rates for existing quotas, Canada and the US do maintain
quotas against imports from least-developed countries.  Both gave the benefit of additional access in
certain cases of least-developed countries, albeit on the basis of the methodology which, as shown
above, yielded smaller increases in quotas when compared with the methodology employed by the
EU.  In the case of Bangladesh, however, similar treatment has not been accorded either by Canada orthe US.  Consequently, imports from Bangladesh in a number of product categories consistently
exceeded the quota levels, thus severely restricting its growth possibilities.  Table 2 highlights this
point.
TABLE 2
Bangladesh Exports
Import market Year Total number of
quotas*Number of quotas in
which imports exceeded
quota ceilings**
US 1997
199820
2012
14
Canada 1997
19989
84
2
* The numbers do not include sub-limits and limits on part categories.
** Quota ceilings have been calculated by application of growth rates to quota levels notified at the start of
the integration process.
(iii) Reflection of the interests of cotton-producing exporting Members
19. Article 1:4 of the ATC provided that the particular interests of cotton-producing exporting
countries should, in consultation with them, be reflected in the implementation of the provisions of the
Agreement.
20. The restraining countries have claimed that since they have been holding numerous
consultations, including with the cotton-producing countries, they had faithfully fulfilled their
obligation as to Article 1:4 of the ATC.WT/GC/W/283
Page 5
21. However no particular information has been made  known with respect to the manner in which
the specific provision may actually have been reflected in the implementation of various elements of
the ATC.  It is apparent that no additional quota access has been granted to these countries by any
restraining country.  Similarly although the integration programmes do contain a number of products
from the cotton universe, they do not appear to have been included in response to the specific interestsof the cotton-producing exporting countries.
(iv) Autonomous industrial adjustment
22. Article 1:5 of the ATC provided that "in order to facilitate the integration of … the sector …,
Members should allow for continuous autonomous industrial adjustment and increased competition in
their markets".
23. Information on the implementation of this provision is not readily available.  However,
Norway and Canada did adopt some specific measures to allow for increased competition in theirmarkets.  Thus:
- Norway has eliminated virtually all quota restrictions (except for three quotas on fishing
nets from Indonesia, Malaysia and Thailand), pursuant to Article 2:15 of the ATC which
envisions advance elimination of restrictions.
- Likewise Canada eliminated all restrictions on an otherwise sensitive product (tailored-
collar shirts).  It also increased quotas for one product (winter out-wear) for all
WTO Members by 10 per cent and removed quotas on a number of product categories
on a partial basis.
24. The two largest restraining Members however have not taken any specific measures to
facilitate increased competition in their markets.  On  the contrary, at the very start of the integration
process, the US administration announced its policy to postpone integration of the large bulk of
restrained products until the end of the transitional period of the ATC.  The EU, on its part, has
insisted on additional reciprocal market opening commitments by developing countries before it couldconsider any meaningful liberalization of its restrictions.
Article 2:  The Integration Process (MFA Restrictions)
25. Article 2 represents the crux of the integration scheme. It is useful to divide the review of its
implementation with respect to (a) the substantive, and (b) the procedural aspects of its provisions,
separately.
(a) Substantive provisions of Article 2
26. The substance of Article 2 is in its provisions relating to (i) the integration process, and (ii)
the additions in access by increases in quota growth rates.
(i) The integration process
27. Paragraphs 6 to 8 of this Article established the obligation for integration of textile products at
the start of each of the three stages:  16 per cent from January 1995;  17 per cent from January 1998and 18 per cent from January 2002.  The remaining 49 per cent would automatically stand integrated
at the end of the transitional period, i.e. as of January 2005.WT/GC/W/283
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28. The above integration percentages are provided as the absolute minimum required at the start
of each stage.  The Agreement however provided implicit encouragement to accelerate the process of
integration, should a Member choose to do so.  In f act, advanced integration is consistent with the
spirit of Article 1:5 under which Members agreed to allow for continuous autonomous industrial
adjustment and increased competition in their markets.
(ii) Integration programmes at a glance
29. Table 3 summarizes the integration programmes for stages 1 and 2 (combined) of WTO
Members that maintained restrictions under the MFA.  These programmes are meant to cover a period
of seven years, i.e. 70 per cent of transition period of the ATC.
TABLE 3
Integration Programmes at a Glance
Integration as percentage of the volume of 1990 imports
WTO Member Yarns Fabrics Made-ups Clothing Total
USA 16.46 4.15 8.73 3.90 33.24
EU 16.04 9.47 5.27 2.53 33.31
Canada 10.26 6.43 15.50 2.78 34.98
Norway 10.10 14.26 14.66 4.32 43.34
Source:  TMB notifications.
30. It is obvious that the above programme s have neglected the clothing products.
31. The products selected for integration have been concentrated in less value-added items such
as tops, yarns and fabrics, with only small shares of clothing products.
(iii) The integration programmes analysed
32. In view of the ATC objective of phasing out the MFA restrictions in a progressive manner, it
is appropriate to analyse the above programmes to assess the extent to which they may have
contributed to the actual elimination of restrictions. Table 4 best enables such an assessment.WT/GC/W/283
Page 7
TABLE 4
Number of Quotas Eliminated
Number of quotas eliminated
WTO
memberTotal
number of
quotas*By Integration
in Stages 1 and
2By early
elimination
under
Article 2:15Total Notes
USA 750 2 11** 13 Also integrated one category
partially – babies’ garmentsexcluding diapers (cat. 239) forwhich 6 countries were restrained
EU 219 14 0 14
Canada 295 29 0 29 Also eliminated quotas partiallyunder Art. 2.15: on children’sblouses & shirts of cat. 7.3 & 8.1,WG knit blouses & shirts of cat.8.1, WG blouses & shirts of silk &
other vegetable fibres (17 QRs);
Saris of cat. 4.3 & WG ensemblesof cat. 4.1 (5 QRs); babies’snowsuits, coats & jackets ofcat. 14.1 (9 QRs); and rainwear of
cat. 1.3 (11 QRs
 )
N o r w a y 5 405 1 5 1
Source:  TMB notifications.
* Total number of quotas includes specific limits and sub-limits and is only in respect of WTO
Members.
** These quotas have been eliminated only in respect of Romania.
33. Since however it could be contended that all quotas are not equal in terms of trade
significance, it is advisable to look at the integration programmes, as carried out, from another angle.Accordingly Table 5 shows the extent of restrained tr ade that has been freed of quota restrictions as a
result of these integration programmes.
TABLE 5
Restrained Trade Freed of Quotas
(As percent of imports in each of the recent years)
EU USA Year
In volume In value In volume In value
1995 4.74% 4.28% 6.23% 6.40%
1996 4.92% 4.34% 6.03% 6.14%
1997 4.77% 4.18% 6.00% 6.12%WT/GC/W/283
Page 8
Note:  Percentages derived from official US a nd EU data. For EU, Eurostat, Intra- and Extra-
EU trade; for USA, US Department of Commerce , Office of Textiles and Apparel , TQ data for MFA
product categories, 1997.
34. It may be seen that the trade accounted for by products that have been freed of quota
restrictions represented only small shares in total restrained imports of the two largest Members:
about 6 per cent in the case of the US, and less than 5 per cent in the case of EU.
Summing up the integration programmes
35. It is apparent therefore that although 33 per cent of trade has been integrated to fulfil the
minimum legal requirements of the Agreement, the process has contributed little towards the
realization of the main objectives of the ATC, i.e. the progressive phase out of quotas or liberalization
of trade.
Some signs in the positive direction
36. Canada carried out advanced integration pursuant to Article 2:10.  Thus it eliminated all
quotas on a sensitive product, i.e. tailored-collar shirts. Subsequently it added the product in its
integration programme for stage 2.
37. Norway took the initiative and eliminated virtually all its quotas pursuant to Article 2:15.
Consequently it now maintains only three quotas (on fishing nets from Indonesia, Malaysia and
Thailand). Canada also eliminated a number of restrictions on a partial basis pursuant to this
paragraph. Its details have already been incorporated in Table 4.
(iv) Additional quota access
38. Paragraphs 13 and 14 of Article 2 provide for additional increases in quota access.
Accordingly restraining countries were required to in crease the existing growth rates of quotas by no
less than the following percentages in each of the 3 stages: 16 per cent during stage 1; another 25 per
cent for stage 2; and a further 27 per cent for stage 3.
Growth-on-growth analysed
39. These numbers may appear to be impressive at first sight.  In reality they did not afford any
substantial additions in access because the pre-existing growth rates carried over from the MFA were
generally small relative to its norm of 6 per cent.  Table 6 shows the extent of additional access for the
first two stages (seven years) of the transition period.
TABLE 6
Increase in Quotas by Applicatio n of Enhanced Growth Factors
(Stages 1 and 2 combined)
WTO Member Average pre-ATC
growth ratesTotal access increase Annual access increase
1995 – 2001
EU 3.44% 4.49% 0.73%
Canada 5.26% 7.53% 1.22%
USA 4.61% 6.36% 1.03%WT/GC/W/283
Page 9
40. It is apparent from Table 6 that the increase in annual access by virtue of this growth-on-
growth provision has been only minimal, especi ally when viewed against the background of the
healthy consumer demand in these countries.  Consequently the additional access has not led to any
lessening in the biting nature of existing quotas.  This is apparent from Table 7 below.
TABLE 7
How Quotas Continue to Bite!*
Import markets Year Total number of
quotas**Number of quotas in
which imports
exceeded quota
ceilings***
USA 1997 648 148
1998 635 171
EU 1996 200 46
1997 200 48
* Data are in respect of WTO Members only.
** The total number of quotas is different from table 4 because it excludes sub-limits and limits on part
categories.
*** Quota ceilings are those calculated by application of growth rates (including growth-on-growth) to
the respective base levels notified at start of implementation period.
41. The large number of quotas in which imports have continued to exceed the respective access
levels, as reflected in the above table, has obviously impeded the trade and development prospects of
developing countries.
(b) Procedural provisions of Article 2
42. Article 2 established a number of procedural provisions having a bearing on the substance of
the Agreement, especially in terms of the manner in  which it is implemented and supervised.  Thus it
provided for notification of (i) all MFA restrictions existing immediately before the coming into effect
of the ATC;  (ii) cross notifications with respect to those notifications;  (iii) the integration
programmes;  (iv) administrative arrangements in relation to the implementation of restrictions, etc. It
also provided that the TMB shall keep under review the implementation of the Article.
(i) Notification of integration programmes
43. Article 2:7 provided that “full details of the actions to be taken pursuant to Paragraph 6
(integration for stage 1) shall be notified by the Members concerned …”.  Article 2:11 likewise
provided that “the respective programmes of integration [for stage 2 and 3] shall be notified in detail
to the TMB …”.
44. The notifications made by the restraining importing countries revealed that they had notified
only the lists of products to be integrated.  These notifications did not specify the consequentialactions to be taken such as that restrictions and related administrative requirements (export
certificates, visas, etc.) shall no more be required.  Only Canada notified, at the time that it integrated
the tailored collar shirts, that it would no more require the shipments to be accompanied by export
certificates.WT/GC/W/283
Page 10
45. The above lack of details resulted in the US desire to maintain the visa requirements even for
those products that had been integrated by it in stage 2, leading to avoidable consultations and
recourse to the TMB. It was only after the matter was referred to the TMB by three ITCB members
that the requirement was withdrawn.
(ii) Administrative arrangements
46. Article 2:17 provided that administrative arrangements to implement the provisions of this
Article shall be a matter for agreement between the Members concerned and that any such
arrangements shall be notified to the TMB.
47. The administrative arrangements notified by the restraining countries revealed that these
arrangements covered a much broader range of issues than could be deemed to fall under the scope of
strictly “implementation matters”.  These included, for example, provisions relating to circumvention
issues and, even, to procedures under which changes in the level of restrictions could be implemented.
48. The TMB went through such apparent problems in the relevant notifications. While
expressing guarded reservations about such provisions, the TMB only expressed the expectation that
the administrative arrangements would be implemented by the respective Members in conformity
with the relevant provisions of the ATC.
Overall evaluation of the integration process
49. The foregoing analysis reveals that few restrained products have been liberalized. The bulk of
restrictions still remain in effect. The additional access due to growth-on-growth has not lessened the
biting nature of quotas. In a nutshell, the process so far has contributed little towards achieving the
main objective of the ATC.
Article 3:  The Integration Process (Non-MFA Restrictions)
50. Article 3.2 relates to the elimination and phas e-out of non-MFA restrictions, except those
justified under a GATT 1994 provision. It provides that such GATT-inconsistent restrictions should
be notified to the TMB at the start of the ATC and, thereafter, phased out progressively.
51. Most of these restrictions notified under this Article were originally adopted under the MFA.
They were notified under this article as they appare ntly involved countries with whom the restraining
WTO Members had concluded preferential arrangements.
52. From the beginning of 1998, the EU has withdr awn all but two quotas notified under this
Article. These quotas were against imports from Turkey, Central/East European countries and certain
Mediterranean countries. The two remaining restrictions are on imports from Egypt.
Article 4:  Implementation/Administration of Quota Restrictions
53. This Article provided that the introduction of changes in the ‘implementation or
administration’ of restrictions should not (i) upset the balance of rights and obligations between
Members, (ii) adversely affect the access available to a Member, (iii) impede the full utilization of
such access, and (iv) disrupt trade under the ATC.WT/GC/W/283
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54. Developments having a bearing on the above principles are analyzed below:
(i) Changes in the US rules of origin
55. As part of its legislation implementing the results of the Uruguay Round, the US substantially
altered its rules for determining the origin of textile and clothing products. The modified rules, put
into effect from 1 July 1996, resulted in major changes. For example:
- Under the old rule, the origin of fabric was determined either by where the fabric was
formed or, if the fabric underwent dyei ng plus printing (and two finishing
operations), its origin was determined by where the fabric was thus processed. The
modified rules eliminated these processes. Thus, the origin of fabric is now
determined by where the fabric is formed irrespective of whether it may have been
dyed, printed and finished in a different country.
- For made-up articles of HS Chapter 63 (bed-linen, table-linen, tents, quilts,
embroidered products, etc.,) also, now the origin is determined by where the
constituent fabric is formed. This modification also ignored all operations such as
dyeing, printing, finishing, designing,  cutting, sewing, embroidering, etc.
- For garments, under the old rule, the origin depended upon whether it was a finished
garment or a simple assembly item. For finished clothes, sewing was origin
conferring. For assembly items, the place of cutting to shape was the country of
origin. This recognized multi-country processing which is so prevalent in the world
these days. The modified rules confer origin with reference to a vague standard, i.e.where the most important assembly operation is undertaken.
56. As a consequence of these changes, exports to  intermediary countries have been adversely
affected. They disrupted normal patterns of trade and created a psychological impact for importers
causing them to source their materials elsewhere, i.e. from countries free of the possibility of beingrestrained through quotas.
57. Even the EU complained about the in-conformity of these changes with the US obligations
under the ATC/WTO. The US is reported to have agreed to revert to the pre-existing rules, but only
partially. This agreement between the tw o has not yet been implemented however.
58. On balance, it is obvious that the changes led to upsetting of rights under the ATC.
59. These changes have also given rise to concerns with respect to the US proposing the adoption
of its new rules as standard for universal application through the harmonization work programmeunder the Uruguay Round Agreement on Rules of Origin. Questions have emerged about the practical
implications of this approach for the flow of trade in  the future. It has been pointed out that if the rules
of origin are harmonized on that basis, it would adversely affect the access available under the ATC,
cause difficulties for exporting countries to administer the quotas, and create confusion about the
implementation of a number of provisions of the ATC.
(ii) Attempts to justify introduction of new restrictions under Article 4
60. Article 2:4 of the ATC provides that no new restrictions shall be introduced except under the
relevant provisions of the ATC/GATT.
61. As brought out at the beginning of this se ction, Article 4 is designed to deal with
“implementation or administration” of restrictions. It did not provide for the establishment of newWT/GC/W/283
Page 12
restrictions. Contrary to this, however, certain new restrictions have been sought to be justified under
this article. This has led to concerns that it could be used to undermine the integrity of multilateral
disciplines of the ATC.
(iii) Quota adjustment following partial in tegration of categories/group limits
62. Article 4:3 provides that if some products fa lling under a restraint (on a category or a group of
categories) are integrated, any change in the level of that restraint shall not upset the balance of rights
and obligations between the Members concerned.
63. In stage 2 integration programmes, two restraining countries integrated certain categories on a
partial basis. In certain other cases, the category integrated in its entirety fell under group limits for
some Members. The restraining countries adjust ed the quotas downward on the ground that trade in
the remaining products did not justify the larger quota. Aside from giving rise to apprehensions about
the extent of downward adjustment, the reduction in quotas goes against the object and purpose ofliberalizing trade in the sector.
Article 5:  Circumvention of Quotas
64. This Article relates to the issue of circumvention of quotas. It exhorts Members to establish
the necessary procedures to address, and to take ac tion against such circumvention. It also prescribes a
consultation mechanism in instances of circumvention. An equally important element of theconsultation mechanism is to guard against arbitrary actions on the basis of mere allegations. To this
end, the Article lays particular emphasis on investigations and sufficient evidence.
65. The Article also lays down that where sufficient evidence is available that circumvention has
occurred, action may be taken which may include adjustment of charges to restraint levels.  It further
requires that any such action may be taken only after consultations and must be notified to the TMBwith full justification.
66. The restraining countries in general have allege d that illegal transshipment and circumvention
accounted for a large amount of textile and clothing imports into their markets.  In one instance,
estimates of such imports have been placed between $2-4 billion per year.
Experience with implementation67. Based on these perceptions, a number of measures have been adopted by restraining
countries. These include frequent factory visits, inspection of production and other records, bond
requirements for all textiles and clothing imports, special certificates of origin from certain exporting
countries containing information about production capacity, machinery installed, number of workers
employed, production records, and so on.
68. In addition, in some cases, the introduction of new restrictions has been sought on the basis of
alleged circumvention of quotas.
69. The above actions, although designed to address the alleged problem of circumvention, in fact
operate to add to the cost of doing business, large amount of extra documentation, undermining the
integrity of the exporting countries concerned, and disruption of otherwise genuine trade. Indeed, it is
noteworthy that in the case of one restraining Member, its customs authorities produced a report on
illegal transshipment in 1997.  The report revealed that the seized circumvented shipments were only$8.5 million and those detained as suspected transshipments $59 million during the year.  Even
putting the two figures together, the allegedly circumvented shipments amounted to a mere 0.125 per
cent of the total imports in the year, far less than $2-4 billion as generally claimed.WT/GC/W/283
Page 13
Article 6:  Transitional Safeguard Measures
70. Article 6 prescribed the conditions and proc edures under which new restrictions on textile
products covered by the ATC might be imposed. It provided, inter alia , that such restrictions should
be applied as sparingly as possible. They should be applied consistently with the provisions ofArticle 6 and the principle of effective implementation of the integration process. Furthermore that
they may be applied only when it could be demonstrated that increased imports of the particular
product caused serious damage or actual threat of serious damage to the domestic industry producing
like and/or directly competitive products.
Experience of last four years
71. One restraining country has had extensive recourse to transitional safeguard actions under this
article. Table 8 encapsulates the results of the examination of these actions.
TABLE 8
Transitional Safeguards*
Year Number of actions Outcome
1995 24 14 Either no restriction imposed or restrictions
withdrawn after imposition;
2 Restrictions rescinded following DSB
recommendations;
6 Restrictions imposed; TMB was unable to
reach consensus on their justification;
2 Restrictions imposed; TMB found them to
be justified only in overall terms
1996 1 Restriction imposed; TMB found it to be
justified
1997 2 1 Restriction not imposed;
1 Restriction imposed; TMB found it to be
justified
1998 1 Restriction imposed; TMB found it not to be
justified
* Involving only those exporting countries that are WTO Members.
Review of safeguard actions
72. It may be seen from Table 8 that safeguard actions in 1995 did not come up to the essential
principles prescribed in Article 6, i.e. that they be sparing and consistent with effective
implementation of the integration process. In fact, subsequent examination of these measures led tothe conclusion that, in all but a few cases, the restrictions were not justified and that the restraining
country had not complied with its obligations under the Agreement. It also bears mentioning that a
number of these actions involved exports from small suppliers.
73. Overall, these restrictive actions affected more than 1 billion dollar worth of exports from the
countries concerned. Please see Table 9 annexed for details.WT/GC/W/283
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Article 7:  Observance of Strengthened GATT Rules and Disciplines
74. Article 7 was designed to encourage the observance of GATT rules and disciplines as they
apply to products covered by the ATC. It lays down that “... with reference to the specific
commitments undertaken by the Members as a result of the Uruguay Round, all Members shall takesuch actions as may be necessary to abide by GATT rules and disciplines”. These actions cover a
wide area of disciplines including those relating to (a) improved market access, through such
measures as tariff reductions and bindings, reduction or elimination of non-tariff barriers, facilitation
of customs, administrative and licensing formalities; (b) policies concerning fair and equitable trading
conditions in areas such as anti-dumping rules and procedures, subsidies and countervailing measures,
and protection of intellectual property rights  and (c) avoidance of discrimination against imports in
the textiles and clothing sector when taking measures for general trade policy reasons.
75. Developments bearing on these aspects are discussed below.
(i) Anti-dumping actions
76. A major restraining Member has had recourse to a number of anti-dumping actions targeted at
textile products. Many of these actions involved products that had already been under severe quota
restrictions from the countries concerned. Besides causing double jeopardy for these countries, theyresulted in substantial disruption of their exports.
77. A peculiar feature of a number of these actions was successive investigations at short
intervals that however did not result in the imposition of definitive anti-dumping duties. The failure of
the investigations notwithstanding, the damaging effects of these investigations had been obvious.
Such effects have been experienced in a number of instances. Typical of these were sharp declines inimports from countries whose companies had been targeted for alleged dumping investigations.
Table 10 is particularly instructive in this regard.
TABLE 10
Effects of Anti-Dumping Actions
Data in thousand tons
Product Total extra-EU imports Imports from countries subject to
anti-dumping actions
1996 1997 Change % 1996 1997 Change %
Grey fabric
cotton230 215 -6.52 132 88 -33.33
Bed linen 84 92 +9.52 48 48 -
Source:  Eurostat data.
78. The disruptive effects of anti-dumping investigations are apparent from Table 10. In the case
of cotton fabrics, for example, total imports declined by 6.52 per cent but imports from the six
countries targeted for investigations declined by over 33 per cent. Their share in imports dropped
from 57 per cent to 41 per cent. Over the entire period that these investigations were in process
(1993-97), imports from the targeted countries declined at an annual rate of 7 per cent.WT/GC/W/283
Page 15
(ii) Market access
79. From available information, it appears that the specific commitments with respect to market
access for textiles and clothing products listed by WTO Members in their respective schedules of
Uruguay Round concessions are being complied with.
80. It needs mentioning however that such comm itments by the four major economies (the US,
EU, Canada and Japan) were scheduled by them to be implemented over a period of ten years
compared to five years for other sectors.
(iii) Customs and administrative formalities
81. A number of measures implemented by a restraining country have amounted to tightening of
customs and administrative formalities, although these might have been adopted to address the
problem of alleged circumvention.  The list includes enforcement of bond requirements for shipments
suspected of transhipments, later extended to all textile and apparel imports from all sources, thusadding to the cost of doing business.
82. Other administrative procedures (such as additional certification and information about
production details) have also been implemented by some developed restraining countries on a
selective basis. These requirements also serve as hindrance to the normal flow of trade and sourcing
of imports from particular countries or companies.
Article 8 :  Supervision of ATC Implementation by the TMB
83. Article 8 relates to the supervision of implem entation of the Agreement on a continuing basis.
ATC provided for the establishment of a standing Textiles Monitoring Body (TMB) to ensure proper
supervision of implementation of the Agreement on a regular basis.
84. In order to achieve the above objective, the TMB was mandated "to examine all measures
taken under the Agreement and their conformity with its provisions".
Experience with TMB functioning
85. Initially the TMB has had to review a host of notifications. In addition it was called upon to
examine the conformity of a number of safeguard actions that a restraining Member had adopted
within the short span of a few months from the coming into effect of the ATC. It was under this latter
function that the TMB performance came under intense scrutiny, and gave rise to questions and
concerns about, in particular, the transparency of its process.
86. The process of review of safeguard actions by the TMB revealed that some of its members
saw its role essentially the same as under the MFA. In a few instances the TMB recommended the
parties to a dispute to resume consultation with a view to reaching mutually satisfactory solutionrather than examining the legal conformity of the relevant measures with the provisions of the ATC.
In several cases the TMB could not reach consensus. This lack of consensus encouraged the
restraining Member to continue with its restraint measures. The TMB reports also failed to provide
sufficient transparency as to the reasoning behind its findings and recommendations.
87. In two instances, the TMB outcome was contested by the affected WTO Members through
dispute settlement procedures of the WTO. In both these cases, the dispute settlement panels found
the restraint measures to have been in violation of a number of provisions of the ATC. The panel
process also resulted in shedding light on important provisions of the Agreement and served to bring
home the fact that the ATC was an integral part of the WTO system of rights and obligations and thatWT/GC/W/283
Page 16
actions taken thereunder ought to be assessed in accordance with the same standards of review as
actions under any other WTO agreement.
Singapore Ministerial Declaration
88. The problems and concerns outlined above resulted in the Singapore Ministerial Conference
deciding that “the TMB should achieve transparency in providing rationale for its findings and
recommendations”, and that “we expect that the TMB shall make findings and recommendations
whenever called upon to do so under the Agreement”.
Later developments
89. The process of open discussion about the functioning of the TMB, as also the guidelines
emanating from the findings of dispute settlement panels, have had a positive effect. The TMB reportsand findings are now more detailed. Its examination of safeguard actions has become more intensive.
Yet concerns remain. These include ensuring that the standards of review developed through a
rigorous pursuit over the past years, including through the dispute settlement process, are duly taken
into account, and are applied consistently with resp ect to all aspects of the implementation of the
ATC.
90. Concerns also remain about ensuring that the TMB review captured all measures adopted by
the restraining importing countries under the ATC because if some measures escaped proper scrutiny,
they could undermine the effective implementation of the Agreement.
V. CONCLUSIONS
91. The analysis in this paper has shown that implementation of the Agreement on Textiles and
Clothing during the first five years of the transition period has failed to come up to developing
countries’ expectations. The committed liberalization has yet to materialize.
92. Although 33 per cent of trade may have been in tegrated by the restraining countries in a
narrow legal sense, only a few quota restrictions have actually been liberalized, leaving the bulk still
in place. The additional access, allowed by limiting to minimum increases in quota growth rates underthe Agreement, has not resulted in any lessening in the restrictive nature of quotas. Developing
countries including small suppliers and least-developed countries have not received any meaningful
increases in their access possibilities.
93. Thus, despite solemn commitments, the process of liberalization has failed to be progressive
in character. It has not allowed developing countries to benefit from strong consumer demand. The
restraining Members have made few efforts to facilitate increased competition in their markets.
94. On the contrary, attempts have continuously been made to condition the implementation of
already-agreed commitments on additional reciprocal and sectoral access by developing countries. A
large number of actions for new restrictions were invoked by a major developed restraining Member,
affecting over a billion dollar worth of additional trade. Significantly a large majority of these actions
were found to be inconsistent with the provisions of the ATC. Many of these involved exports from
small suppliers for whom the Agreement, in fact , envisaged more favorable treatment. Changes in
rules of origin and tightening of customs and administrative procedures created substantial disruptive
effects for trade and impeded the full utilization of access under the Agreement. Another major WTO-
Member entity invoked many anti-dumping actions targeting particularly at products that were
already under quota restrictions.WT/GC/W/283
Page 17
95. In summary, the balance of advantages for developing countries has been impaired. Hence the
necessity for immediate corrective measures by the developed restraining Members, without any
further concessions by developing countries.WT/GC/W/283
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TABLE 9
Trade Affected by US Transitional Safeguard Actions
1995-1998
Volume:  million SME
Value:  million $
Volume Value
Product Year Category US imports Imports from
countries
subject to
safeguard calls(5) as % of
(4)US imports Imports from
countries
subject to
safeguard calls(8) as %
of (7)
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Skirts 1995 342/642 137.8 5.2 3.8 714.6 23.6 3.3
Nightwear 1995 351/651 518.4 52.7 10.2 780.3 55.6 7.1
Underwear 1995 352/652 1,285.2 639.3 49.7 1,471.9 622.1 42.3
Suit-type coats 1995 434 6.1 1.2 19.7 73.0 6.2 8.5
Coats 1995 435 59.6 2.0 3.4 487.9 11.6 2.4
Shirts andblouses1995 440 1.9 0.7 36.8 15.3 3.2 21.0
Suits 1995 444 5.2 0.5 9.6 100.7 5.0 5.0
Yarn 1995 603 77.9 6.6 8.5 46.0 3.3 7.2
Luggage 1995 670-L 358.0 133.9 37.4 922.7 245.9 26.6
Total 1995 2,450.1 842.1 34.4 4,612.4 976.5 21.2
Skirts 1996 342/642 148.7 4.2 2.8 764.8 17.2 2.2
Total 1996 148.7 4.2 2.8 764.8 17.2 2.2
Cotton yarn 1997 301-Part 181.4 23.0 12.7 100.5 9.0 9.0
Staple yarn 1997 603 83.2 13.3 16.0 49.0 6.1 12.4
Total 1997 264.6 36.3 13.7 149.5 15.1 10.1
Cotton yarn 1998 301 251.1 37.8 15.1 121.2 14.3 11.8
Total 1998 301 251.1 37.8 15.1 121.2 14.3 11.8
Note:  The figures shown for cat. 301-Part in volume and value and 670-L in value correspond to the entire category.
Source:  US Department of Commerce, Major Shippers Report in volume and value.
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