WORLD TRADE G/TMB/R/27
28April 1997
ORGANIZATION(97-1840)
Textiles Monitoring Body
REPORT OFTHE TWENTY-EIGHTH MEETING
1. TheTextiles Monitoring Body helditstwenty-eighth meeting on24to26March 1997.
2. Present atthismeeting werethefollowing members and/or alternates/second alternates, and
observers: Mrs. Dwarka-Canabady; Messrs. Malik; Mukerji/Ms. Shahin; Mr.Meemeduma;
MissOrozcoJaramillo/Messrs.DaCostaeSilva/Kravetz;Rey/Zapedowski;Richards;Saeki;Wentzel;
Tadpitakkul; Tagliani; Tong/Kim.
3. TheTMB adopted thereport ofitstwenty-seventh meeting (G/TMB/R/26).
Notifications under Articles 2.8(a) and2.11oftheAgreement onTextiles andClothing (ATC)
4. Inaddition tothereview ithadstarted atprevious meetings (G/TMB/R/23, paragraph 6,
G/TMB/24, paragraph 6,andG/TMB/R/26, paragraph 5),theTMB alsobegan itsreview under
paragraph 21ofArticle 2oftheprogrammes ofintegration notified pursuant toparagraphs 8(a)and
11ofArticle 2byfurther Members, anddecided torevert toitsreview atasubsequent meeting. In
themeantime,pursuanttoparagraph11ofArticle2,theTMBiscirculatingtheseadditionalnotifications
toWTO Members.
Notifications under Article 2.17oftheATC
5. TheTMB resumed itsreview ofadministrative arrangements notified bytheUnited States
pursuant toparagraph 17ofArticle 2and,seeking additional information fromsome oftheMembers
concerned, decided torevert tothisreview atasubsequent meeting.
Notification under Article 2.21oftheATC
6. TheTMB started itsconsideration ofanotification made byColombia, alsoonbehalf ofa
number ofWTO Members thatarealsomembers oftheITCB, pursuant toparagraph 21ofArticle 2,
alleging certain discrepancies intheprogramme ofintegration notified bytheEuropean Community
under paragraph 6ofArticle 2oftheATC, andrequesting theTMB toreview thismatter interms
ofparagraph 21ofArticle 2.TheTMB started theconsideration ofthismatter, heard presentations
byColombia andtheEuropean Community, putquestions tobothMembers, anddecided toresume
itsconsideration atitsnextmeeting.
Notification under Article 6.1oftheATC
7. TheTMB tooknoteofthenotification made pursuant toparagraph 1ofArticle 6bytheUnited
Arab Emirates thatitwished toretain therighttousetheprovisions ofArticle 6(G/TMB/N/245).G/TMB/R/27
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Notification under Article 6.11oftheATC
8. Pursuant toparagraph 11ofArticle 6,theTMB reviewed thenotification byBrazil andKorea
ofrestraint measures agreed between thetwoMembers onimports ofartificial andsynthetic fibre
products ofcategories 611,618,619,620and627fromKorea. According tothisnotification, restraints
were agreed fortheperiod 1June1996 to31May1999 atthefollowing annual levels:
- Category 611(woven fabrics containing 85percentormore byweight ofartificial
staple): 4,202,200 kg;
- Category 618(woven artificial filament fabrics): 1,421,428 kg;
- Category 619(polyester filament fabrics): 7,102,059 kg;
- Category 620(other synthetic filament fabrics): 6,765,068 kg;
- Category 627(sheeting ofstaple filament fibrecombination): 669,513 kg.
Thelevels agreed corresponded tothelevel envisaged inparagraph 8ofArticle 6(rollback level).
Annual growth forallcategories wassetat6percent,andtheapplication ofsuchgrowth would take
place, byanticipation, on1January ofeachcalendar yearduring which therestraints would beineffect.
Special shiftof30percentfromcategory 620tocategory 619would beallowed, plusaspecial carry
forward of25percentapplicable tocategory 619. Bothflexibilities willbegranted uponnotification
byKorea. Swing of8percentwasavailable between allcategories. Carry forward and/or carryover
of10percent,ofwhich carry forward shallnotrepresent more than5percent,wereavailable, and
aspecial carryover of10percentofthepro-rated annual quota for1996 wasavailable in1997, for
allcategories.
9. TheTMB expressed serious concern thatthisnotification hadbeen received only on
18March 1997, farbeyond the90-day deadline envisaged inparagraph 11ofArticle 6forsuch
notification. Itrecalled inthisregard thattherestraints hadbeenintroduced provisionally byBrazil
asfrom 1June1996. Asconsultations hadnotproduced agreement within thetime-frame specified
inparagraph 11ofArticle 6,theTMB hadscheduled toconduct anexamination ofthematter atits
meeting inSeptember 1996, buthadbeeninformed byBrazil andKorea thattheyhaddecided toresume
consultations andconsequently requested theTMB todeferitsconsideration. TheTMB further recalled
thatthematter, including theoutcome ofsuchconsultations, hadeventually beenscheduled tobe
reviewed bytheTMB on17to19December 1996. Subsequently, theTMB hadbeeninformed by
Korea thatKorea accepted Brazil ’srequest forapostponement ofthereview untilthenextmeeting
oftheTMB “sothatBrazil mayconduct domestic consultations onthebilateral agreement between
Brazil andKorea ”.TheTMB hadunderstood, therefore, thatanagreement onrestraints remained
subject tosuchconsultations. However, bearing inmind, interalia,theprovisions ofparagraph 11
ofArticle 6theTMB haddecided, while accepting therequest topostpone thereview, toconvey to
theinterested Members itsconcern that,incontradiction withthese provisions, theTMB wasstillnot
inaposition toreview these measures. TheTMB had,therefore, invited representatives ofBrazil
andKorea toitsmeeting on13to15January 1997, when itintended toconduct anexamination of
thismatter, incasetheagreement between Brazil andKorea onrestraints hadnotmaterialized. In
thecasewhere anagreed solution would havebeenreached, theTMB urged these Members tonotify
it,sothatitcould bereviewed bytheBody atthatmeeting. Atthatmeeting, theTMB wasinformed
thatanagreed solution hadbeenreached, andthatitsdetails would becommunicated inthenearfuture
totheTMB.
10. WhiletakingnoteoftheindicationsgivenbyBrazilandKoreathatmoretimehadbeennecessary
tofinalize thedetails oftheagreement, theTMB recalled theimportance ofadhering strictly tothe
substantive andprocedural requirements defined bytheATC, including thedeadlines specified therein.G/TMB/R/27
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11. TheTMB examined therelevant factual information (market statements), referred toin
paragraph 7ofArticle 6,made available byBrazil toKorea during consultations. Itnoted that,for
allcategories, specific datawere provided byBrazil withrespect tosome oftheeconomic variables
mentioned inparagraph 3ofArticle 6(output, market share, exports anddomestic prices), andthat,
inaddition, specific dataonimport prices werealsoprovided. However, withrespect tosome other
variables (productivity, utilization ofcapacity, wages, employment, profits andinvestment), thedata
provided byBrazil forallcategories referred toabroader industry thanthatofthespecific product
categories. Dataoninventories werenotconsidered byBrazil toberelevant, sincestocks wererotating
inabout 30daysinBrazil.
12. TheTMB keptinmind theelements ofitsreview ofthesafeguard measure introduced against
imports ofproducts ofcategory 618fromHong Kong insofarasthefivecategories onwhich Brazil
hadprovisionally introduced ameasure werepartofthesame sector oftheweaving industry, andthat
datawithrespect toproductivity, utilization ofcapacity, wages, employment, profits andinvestment
were thesame forallthefivecategories subject totheagreement between Brazil andKorea.
13. With respect tothose variables forwhich datawerethesame forthefiveproduct categories,
theTMB observed thefollowing:
- Productivity intheartificial andsynthetic fibre industry registered anincrease of
10.8percentfrom1994to1995. Suchadevelopment could beunderstood asahealthy
signofanindustry becoming more efficient. Itcould alsobeanindication thatthe
industry wasrestructuring;
- Capacity utilization inthefactories producing artificial andsynthetic fabrics hadfallen
from 60percentin1994 to40percentin1995. Thiscould beattributed, atleast
inpart,toinvestments innewmachinery bytheBrazilian industry, which hadresulted
inanincrease ininstalled capacity. Onthebasisofdatasupplied foraperiod tooshort
toprovide atrend, itwasnoted, however, thatthevolume ofinvestment hadremained
relatively modest compared tothetotalinstalled capacity, andthatithaddecreased;
- Average wages increased by26.75 percentbetween 1994 and1995, afactgenerally
associated withahealthy industry. However, thisincrease compensated inpartthe
riseinthegeneralpriceindex(15.39percent)whiletheremainder,inessence,reflected
productivity gains (10.8 percent);
- Employment forthewhole weaving industry registered adecrease of17.6percent
between 1994and1995, andofsome 29percentintheregion ofAmericana, themain
production centre inBrazil forartificial andsynthetic fabrics. Thenumber offirms
inthissector inBrazil declined from 832in1994 to621inmid-1996;
- According tothedatasubmitted byBrazil, thegreat majority ofenterprises inthe
weaving sector hadregistered losses in1995, upto15percent;
- Inventories remained atlowlevels during theperiod considered, usually ahealthy sign.
However,theTMBnotedtheargumentbyBrazilaccordingtowhich,inviewofBrazil’s
pastexperience withhighinflation andhighinterests rates, theindustry hadbeenforced
towork onthebasis ofarotation ofstocks ofabout 30days.
14. Since thedatareferred toinparagraph 13above related toeither thewhole weaving sector
ortotheindustry producing artificial andsynthetic fabrics, itwasdifficult fortheTMB toassess the
extenttowhichdevelopmentsregardingproductivity,capacityutilization,investment,wages,employmentG/TMB/R/27
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andprofits could beattributed totheevolution ofthemarket incategory 611,618,619,620and627
products, taken one-by-one. TheTMB expressed concern regarding thelimitations itfaced intrying
todraw reliable conclusions onthebasis ofdatawhich were related tobroader industries than,
respectively, thecategory 611,618,619,620and627industries.
15. Inconsidering theinformation provided byBrazil during consultations which wasspecific to
thecategories subject totheagreed restraints, theTMB observed thefollowing.
16. With respect tocategory 611(woven fabrics containing 85percentormore byweight of
artificial staple), production haddeclined involume bymore than13percentfrom1994to1995, the
share ofthemarket heldbydomestic manufacturers hadgonedown from58percentto34percent,
andthevolume oftotalimports hadincreased bymore than122percent,ataverage prices significantly
below those ofdomestic production (although domestic prices hadfallen). Exports from Brazil had
increased by23percentinvolume butaccounted forasmall share ofdomestic production.
17. TheTMB considered allthefactors mentioned above, noneofwhich, either alone orcombined
withother factors, cannecessarily givedecisive guidance, inassessing whether theBrazilian industry
producing products ofcategory 611wasexperiencing serious damage. Bearing inmind alsoitsview
thatproduct-specific information anddatashould haveamajor impact ontheoverall assessment whether
seriousdamageoractualthreatthereofcouldbedemonstrated,1theTMBconcludedthatthecircumstances
described inparagraph 2ofArticle 6wereobserved inBrazil ’smarket forwoven fabrics containing
85percentormore byweight ofartificial staple.
18. TheTMB further observed thatimports ofproducts ofcategory 611intoBrazil from Korea
hadincreased bymore that287percentinvolume from1994to1995, sothatKorea hadconsolidated
itsposition asthemain supplier ontheBrazilian market forcategory 611. Korea ’sshare ofthetotal
volume ofimports ofproducts ofcategory 611intoBrazil hadincreased from 36.8percent to
64.1percentbetween 1994and1995. Theaverage priceofimports ofproducts ofcategory 611from
Korea hadfallen overthesameperiod, andwas33percentbelow domestic prices in1995. TheTMB
therefore considered thatthecircumstances described inparagraph 2ofArticle 6could beattributed
toasharp andsubstantial increase inimports from Korea.
19. Onthebasis oftheabove considerations andbearing inmind thefactthatalltheelements of
theagreement, mentioned inparagraph 8above, wereinconformity withtherelevant paragraphs of
Article 6,theTMB concluded thatthisrestraint measure agreed between Brazil andKorea wasjustified
inaccordance withtheprovisions ofArticle 6oftheATC.
20. Withrespect tocategory 618(woven artificial filament fabrics), theTMB observed that,from
1994 to1995, domestic production hadincreased involume by3.2percent, theshare ofthemarket
heldbydomestic manufacturers haddecreased from63.8percentto35.3percent,thevolume oftotal
imports hadincreased by229percent,ataverage prices below those ofdomestic production, sothat
theshare ofthemarket heldbyimports hadreached 64.7percentin1995. Exports fromBrazil had
increased involume by34percentbutrepresented asmall share ofdomestic production.
21. Considering allthefactors mentioned above, noneofwhich, either alone orcombined with
other factors, cannecessarily givedecisive guidance, andbearing inmind alsoitsviewthatproduct-
specific information anddatashould haveamajor impact ontheoverall assessment whether serious
damage oractual threat thereof could bedemonstrated, theTMB concluded thatthecircumstances
1SeeG/TMB/R/26, paragraph 25.G/TMB/R/27
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described inparagraph 2ofArticle 6wereobserved inBrazil ’smarket forwoven artificial filament
fabrics.
22. TheTMB further observed thatimports ofproducts ofcategory 618intoBrazil from Korea
hadincreased bymore that186percentinvolume from 1994 to1995, sothatKorea hadremained
thesecond supplier ontheBrazilian market forcategory 618,although Korea ’sshare ofthetotalvolume
ofimports ofproducts ofcategory 618intoBrazil haddecreased from28.1percentto24.5percent.
Theaverage priceofimports ofproducts ofcategory 618fromKorea hadfallen overthesame period.
TheTMB therefore considered thatthecircumstances described inparagraph 2ofArticle 6could be
attributed toasharp andsubstantial increase inimports from Korea.
23. Onthebasis oftheabove considerations andbearing inmind thefactthatalltheelements of
theagreement, mentioned inparagraph 8above, wereinconformity withtherelevant paragraphs of
Article 6,theTMB concluded thatthisrestraint measure agreed between Brazil andKorea onimports
ofproducts ofcategory 618wasjustified inaccordance withtheprovisions ofArticle 6oftheATC.
24. TheTMB further recalled that,inthecontext ofitsreview ofthesafeguard measure taken
atthesame timebyBrazil onimports fromHong Kong ofproducts ofcategory 618,ithadobserved
thatthere wereindications totheeffect thattheBrazilian industry producing products ofcategory 618
hadalready beenundertaking important restructuring andadjustment. InlightofthistheTMB had
considered thatashorter period oftimethanthemaximum time-frame envisaged inparagraph 12(a)
ofArticle 6should enable theindustry inBrazil tosuccessfully accomplish itsadjustment tothechanged
competitive environment, andhadtherefore recommended thatthemeasure taken byBrazil against
imports from Hong Kong ofproducts ofcategory 618 should berescinded atlatest
by31December 1997.2
25. Withrespect tocategory 619(polyester filament fabrics), theTMB observed that,from1994
to1995, domestic production haddeclined involume by12.7percent,theshare ofthemarket held
bydomestic producers haddeclined from76.4percentto61.8percent,thevolume oftotalimports
hadincreased by74percentatanaverage price lessthanhalftheaverage domestic price. Exports
from Brazil hadincreased involume by32.3percentbutrepresented asmall share ofdomestic
production.
26. TheTMB considered allthefactors mentioned above, noneofwhich, either alone orcombined
withother factors, cannecessarily givedecisive guidance, inassessing whether theBrazilian industry
producing products ofcategory 619wasexperiencing serious damage. Bearing inmind alsoitsview
thatproduct-specific information anddatashould haveamajor impact ontheoverall assessment whether
seriousdamageoractualthreatthereofcouldbedemonstrated,theTMBconcludedthatthecircumstances
described inparagraph 2ofArticle 6wereobserved inBrazil ’smarket forpolyester filament fabrics.
27. TheTMB further observed thatimports ofproducts ofcategory 619intoBrazil from Korea
hadincreased bymore that139percentinvolume from1994to1995, sothatKorea hadconsolidated
itsposition asthemain supplier ontheBrazilian market forcategory 619. Korea ’sshare ofthetotal
volume ofimports ofproducts ofcategory 619intoBrazil hadincreased from 43.9percentto
60.1percentbetween 1994and1995. Theaverage priceofimports ofproducts ofcategory 619from
Korea hadfallen overthesame period, andwas44.4percentbelow domestic prices in1995. The
TMBthereforeconsideredthatthecircumstancesdescribedinparagraph2ofArticle6couldbeattributed
toasharp andsubstantial increase inimports from Korea.
2SeeG/TMB/R/20, paragraph 26.G/TMB/R/27
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28. Onthebasis oftheabove considerations andbearing inmind thefactthatalltheelements of
theagreement, mentioned inparagraph 8above, wereinconformity withtherelevant paragraphs of
Article 6,theTMB concluded thatthisrestraint measure agreed between Brazil andKorea onimports
ofproducts ofcategory 619wasjustified inaccordance withtheprovisions ofArticle 6oftheATC.
29. Withrespect tocategory 620(other synthetic filament fabrics), theTMB observed that,from
1994 to1995, domestic production haddeclined involume by5.5percent, theshare ofthemarket
heldbydomestic producers haddeclined by7.1percent, thevolume oftotalimports hadincreased
by243percentatanaverage price 42percentbelow theaverage domestic price (in1995). Exports
fromBrazil haddecreased involume by10.3percentfrom1994to1995andrepresented asmall share
ofdomestic production.
30. TheTMB considered allthefactors mentioned above, noneofwhich, either alone orcombined
withother factors, cannecessarily givedecisive guidance, inassessing whether theBrazilian industry
producing products ofcategory 620wasexperiencing serious damage. Bearing inmind alsoitsview
thatproduct-specific information anddatashould haveamajor impact ontheoverall assessment whether
seriousdamageoractualthreatthereofcouldbedemonstrated,theTMBconcludedthatthecircumstances
described inparagraph 2ofArticle 6were observed inBrazil ’smarket forother synthetic filament
fabrics.
31. TheTMB further observed thatimports ofproducts ofcategory 620intoBrazil from Korea
hadincreased bymore that600percentinvolume from1994 to1995, sothatKorea hadbecome the
main supplier ontheBrazilian market forcategory 620.Korea ’sshare ofthetotalvolume ofimports
ofproducts ofcategory 620intoBrazil hadincreased from 24.9percentto53.5percentbetween
1994and1995. Theaverage price ofimports ofproducts ofcategory 620fromKorea hadfallen over
thesameperiod, andwas36.9percentbelow theaverage domestic pricein1995. TheTMB therefore
considered thatthecircumstances described inparagraph 2ofArticle 6could beattributed toasharp
andsubstantial increase inimports from Korea.
32. Onthebasis oftheabove considerations andbearing inmind thefactthatalltheelements of
theagreement, mentioned inparagraph 8above, wereinconformity withtherelevant paragraphs of
Article 6,theTMB concluded thatthisrestraint measure agreed between Brazil andKorea onimports
ofproducts ofcategory 620wasjustified inaccordance withtheprovisions ofArticle 6oftheATC.
33. Withrespect tocategory 627(sheeting ofstaple filament fibrecombination), theTMB observed
that,from 1994 to1995, domestic production haddeclined involume by14.1percent, theshare of
themarket heldbydomestic producers haddeclined by8.4percent,thevolume oftotalimports had
increased byover250percentatanaverage price 32percentbelow theaverage domestic price (in
1995).ExportsfromBrazilhaddecreasedinvolumeby40.1percentfrom1994to1995andrepresented
averysmall share ofdomestic production.
34. TheTMB considered allthefactors mentioned above, noneofwhich, either alone orcombined
withother factors, cannecessarily givedecisive guidance, inassessing whether theBrazilian industry
producing products ofcategory 627wasexperiencing serious damage. Bearing inmind alsoitsview
thatproduct-specific information anddatashould haveamajor impact ontheoverall assessment whether
seriousdamageoractualthreatthereofcouldbedemonstrated,theTMBconcludedthatthecircumstances
described inparagraph 2ofArticle 6wereobserved inBrazil ’smarket forsheeting ofstaple filament
fibrecombination.
35. TheTMB further observed thatimports ofproducts ofcategory 627intoBrazil from Korea
hadincreased bymore that229percentinvolume from1994 to1995, sothatKorea hadmaintained
itsposition asthemain supplier ontheBrazilian market forcategory 627,although Korea ’sshare ofG/TMB/R/27
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thetotalvolume ofimports ofproducts ofcategory 627intoBrazil haddecreased from39.7percentto
37.3percentbetween 1994and1995. Theaverage priceofimports ofproducts ofcategory 627from
Korea hadfallen overthesame period, andwas40.9percentbelow theaverage domestic price in
1995. TheTMB therefore considered thatthecircumstances described inparagraph 2ofArticle 6
could beattributed toasharp andsubstantial increase inimports from Korea.
36. Onthebasis oftheabove considerations andbearing inmind thefactthatalltheelements of
theagreement, mentioned inparagraph 8above, wereinconformity withtherelevant paragraphs of
Article 6,theTMB concluded thatthisrestraint measure agreed between Brazil andKorea onimports
ofproducts ofcategory 627wasjustified inaccordance withtheprovisions ofArticle 6oftheATC.
37. TheTMB noted that,withrespect toallthecategories subject toagreement withKorea, Brazil
hadinvoked theprovisions ofparagraph 11ofArticle 6andapplied therestraints provisionally, as
ithadconsidered thatitsindustry wasexperiencing “highly unusual andcritical circumstances, where
delay would cause damage which would bedifficult torepair ”.Itobserved inthisregard thatBrazil
hadnotprovided toKorea initsmarket statements dataasuptodateascould beexpected tosubstantiate
thecriticalcircumstances.TheTMBrecalleditsview3thatincaseswheretheprovisionsofparagraph11
ofArticle 6wereinvoked, theexpectation wasthattheelements envisaged inparagraphs 2,3and4
ofArticle 6would indicate asunambiguously aspossible thehighly unusual andcritical character of
thecircumstances. TheTMB wasalsooftheviewthat,unless suchcircumstances weremet,anyaction
taken under Article 6should bepreceded byconsultations between theparties.
Observations withrespect tolatenotifications
38. With respect tonotifications addressed totheTMB aftertherespective deadlines foreseen in
theATC, theTMB reiterated thatitstaking noteoflatenotifications waswithout prejudice tothelegal
status ofsuchnotifications.
3SeeG/TMB/R/20, paragraph 24.