RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/M/24
5 November 1997
(97-4832)
Council for Trade in Goods
16 October 1997
MINUTES OF THE MEETING
Held in the Centre William Rappard
on 16 October 1997
Chairperson:  Mr. T. Johannessen (Norway)
1. The meeting was convened by Airgram WTO/AIR/699 to continue the discussion which
began on 6 October 1997 (item 5 of Airgram WT O/AIR/687) of the major review of the
implementation of the Agreement on Textiles and Clothing (ATC) during the first stage of the
integration process pursuant to Article 8.11 of the ATC.
2. The Chairman recalled that, at the last meeting, Hong Kong, China had provided a non-paper
on the issues under review and this paper was now available as document G/C/W/95.  However, due
to the short period of time since the last meeting, it was available only in English.  He further notedthat the short interval between meetings had not permitted the usual ten-day period for the circulation
of the Airgram and he appreciated Members' understanding that this would be an exception to the
Council's rules.
3. The Chairman then referred to the work plan adopted by the Council at its meeting on
6 October for the continuation of the discussion on the major review of the implementation of theAgreement on Textiles and Clothing (ATC) during the first stage of the integration process, pursuant
to Article 8.11 of the Agreement.  He recalled that this work plan set out dates for four meetings as
well as the main topics for discussion.  The dates decided for the meetings were, in addition to the
current meeting;  Monday, 20 October;  Friday, 7 November;  and Thursday, 13 November.  The
topics to be discussed during the first three sessions would be the integration process, followed by the
application of the transitional safeguard mechanism and then, the application of GATT 1994 rules and
disciplines as defined in Articles 2, 3, 6 and 7 of the ATC.  He suggested that, at the fourth meeting,any other pending issues could be taken up and the Council should develop an overall view of the
discussions, with whatever conclusions or observations it might feel appropriate.  The Chairman said
that he intended to take up these topics in this  order but without setting any time-limits for the
completion of each topic and keeping the flexibility of  reverting to these topics at a later stage.  He
also intended to continue consultations and possibly arrange informal meetings as may be required, tofacilitate and advance the overall review process.
4. Turning to the subject of the integration process, the Chairman recalled two points which
would be central to the discussion.  First, Article 2.6 of the ATC required that "each Member shall
integrate into GATT 1994 products which accounted for not less than 16 per cent of the total volume
of the Member's 1990 imports of the products in the Annex, in terms of HS lines or categories.  Theproducts to be integrated shall encompass products from each of the following four groups:  tops and
yarns, fabrics, made-up textile products, and clothing".  In this regard, he noted in paragraphs 14 and
28 of the TMB report that 49 Members had submitted notifications pursuant to Article 2.6 of the ATC
and that these had been circulated to all Members.  His second point was that the product integrationG/C/M/24
Page 2
lists for the second stage, covering a further 17 per cent of the total volume of the Member's 1990
imports which was to be integrated on 1 January 1998, had been required to be notified by
1 January 1997.  Also, according to the TMB report (paragraphs 41 and 45), these notifications had
been provided by 40 Members and circulated earlier this year.
5. The representative of Colombia also speaking on behalf of the Members of the WTO which
are members of the ITCB, (Argentina, Bangladesh, Brazil, Colombia, Korea, Costa Rica, Egypt,
El Salvador, Hong Kong, China, Honduras, Indi a, Indonesia, Jamaica, Macau, Mexico, Pakistan,
Paraguay, Peru, Thailand, Sri Lanka and Uruguay), stressed that the TMB was responsible for the
monitoring of the implementation of the Agreement from a technical point of view, while the Council
was responsible for carrying out a broader supervision relating to the functioning and the
implementation of the Agreement.  The task of the Council, therefore, was wider than that of the
TMB, having the fundamental aim of establishing whether or not the balance of rights and obligations
enshrined in the ATC had been respected.  Therefore, the analysis and review of the implementationof the ATC by the Council should focus on the question of whether the objectives of the ATC were
being fulfilled and if they were not, to take the appropriate decisions to correct the situation.
6. He commented that the ATC contained an integration process designed to be of a progressive
nature and that this concept had been noted when Ministers declared at Singapore:  "We attach
importance to the implementation of this Agreement so as to ensure an effective transition toGATT 1994 by way of integration which is progressive in character."  As the integration programmes
for the first two stages, covering seven years, had already been established, the Council should decide
whether these programmes provided for an effective transition and whether or not the process was
progressive.  As Article 2 of the ATC was one of its fundamental pillars, providing for a ten-year
programme to eliminate the quantitative restrictions carried over from the Multifibre Agreement,those Members which had the possibility and the responsibility of contributing to the liberalization of
trade in this sector were precisely those which maintained quantitative restrictions, that is, Canada, the
European Community, Norway and the United States.
7. The representative of Colombia also recalled that, in the first and second stages of the ATC,
the integration of textile and clothing products required was 16 per cent and 17 per cent, respectively,of the volumes of the Member's import for 1990.  He said, however, that even if these percentages had
been respected by the concerned Members, the programmes they had notified did not have any
commercial meaning for two reasons;  first, because the integration of products subject to quantitative
restrictions had been very low and second, because the integrated products were of very low value.
Of the four categories:  tops and yarns, fabrics, made-up textiles and clothing, the programmes of themain importing Members had ignored the sectors of made-up textile products and clothing, which
were of the highest monetary value.  He circulated a non-paper of a technical nature, containing
statistical tables, analysing the different integration programmes.
8. He explained that the first table referred to the integration programmes showing that the
required minimum percentages of trade had been integrated, but in each case the import values of
integrated products were considerably lower than  the respective import volumes.  The proportions of
yarns and fabrics in the programmes were higher than for clothing.  In the case of the EuropeanCommunity in the first stage integration programme there was a considerable shortfall, as it included
certain products which were not covered by the ATC; this was referred to in paragraphs 17 to 23 of
the TMB report.  The second table revealed that the proportions of restrained products included in the
integration programmes were minimal and a very large proportion, over 96 per cent of restricted trade,
would remain to be integrated even after seven y ears of implementation.  The third table referred to
the number of quotas eliminated due to the integration of products and showed that very few quotas
would actually be removed.  In the case of Norw ay, even where some quotas were being eliminated,
the respective products were not being integrated, leaving open the possibility of future invocation ofG/C/M/24
Page 3
safeguard actions.  The fourth table referred to 1996 quota utilization in integrated product categories
and showed that the few restrained products to be integrated in 1998 were, in any case, not
commercially significant for the restrained countries as quota utilization rates were very low.  Finally,
the fifth table referred to the increase in quota le vels by the application of enhanced growth factors
and it showed that the effects of the application of the growth factors, also referred to as "growth-on-
growth" in loosening the restrictive nature of quotas would be minimal.  This process, therefore, couldnot be counted upon to deliver a smooth and effective transition to WTO rules.  In conclusion, he
stated that this analysis, taking all the tables together, revealed a lack of progress towards an effective
transition and that the integration programmes for the two stages had not contributed to any
meaningful liberalization of trade in the sector.
9. The representative of Norway recalled the observation made in respect of the TMB report that
since the main parameters of the second stage of integration were now available, the Council had
before it a rather clear, albeit incomplete picture of how integration will proceed for more than two-thirds of the ATC's period of implementation.  He agreed that the picture was not yet complete for the
first two stages as a number of elements leading up to the final integration would interact and,
therefore, should not be viewed  in complete isolation from each other.  It was particularly relevant to
review the overall integration of products in conjunction with the elimination of restrictions,
independent of whether this was done as a consequence of integration or in accordance withArticles 2.15 or 3.3 of the ATC.  In any case, the elimination of restrictions would contribute to and
facilitate the complete integration of textiles and cl othing trade into the WTO rules.  In this regard,
Norway's elimination by the end of next year, of 94 per cent of the imports restriction on textile and
clothing products should not be overlooked when an assessment regarding integration was made by
the Council.
10. He considered that, although important information concerning the integration programmes
had been notified so far, there was not yet a complete picture as additional integration might occur
through implementation of Article 2.10 of the ATC, relating to early integration or products.
Accordingly, Norway believed that the Council should take note of the TMB's observation in
paragraph 73 of its report, "that the final objective of the integration of the textiles and clothing sectorinto the GATT 1994 would be facilitated if Members would, whenever possible, have recourse to the
provisions of Articles 2.10 and 2.15".  This observation was understood to concern all Members
which maintained restrictions or had retained the right to apply the safeguard mechanism of the ATC.
11. Norway understood the concerns expressed by some exporting Members over the first and
second stages of the integration process and what they saw as being a lack of meaningful progresstowards increased market access in the textiles sector.  However, in Norway's assessment, the
countries concerned had acted as required by the ATC and they had restated that they were fully
committed to full integration by the year 2005.  No rway also reconfirmed its full commitment in this
regard.  Referring to the comments made that the integration process had been concentrated on less
processed textile products and only to a limited extent on made-up textiles and clothing, he had not
noted any substantial differences in the selection of products for integration as between importing and
exporting Members.  All Members seemed to have adopted a similar rationale, stemming from aperceived need to protect domestic industries.
12. He further recalled that Norway had been engaged in a discussion with the TMB regarding a
technical aspect of the integration obligations relating to a lack of complete concordance between
national import statistics and the ATC's definition of product coverage.  For some products there had
been differences between the products listed in the Annex to the ATC and the internationallyrecognized Harmonized System.  He informed the Council that Norway had decided to respond to the
TMB's detailed enquiries by integrating additional products into GATT 1994, this being done even if
it had already fulfilled its obligations, in order to demonstrate beyond any doubt that it would stand by
its obligations and to show Norway's commitment to full compliance with the ATC.  As aG/C/M/24
Page 4
consequence, Norway will have integrated more than 43 per cent of the products covered by the ATC
when Stage 2 begins.
13. The representative of the United States was of the view that the question before the Council
was whether or not the provisions of the ATC concerning the integration of products had been carried.
Article 2.6 of the ATC stated, "On the date of entry into force of the WTO Agreement, each Member
shall integrate into GATT 1994 products which accounted for not less than 16 per cent of the totalvolume of the Members 1990 imports of the products in the Annex, in terms of HS lines or categories.
The products to be integrated shall encompass products from each of the following four groups:  tops
and yarns, fabrics, made-up textile products and clothing."  In the case of the United States, this
requirement had been fully met.  He referred to paragraph 14 of the TMB report  which stated that
"The United States integrated 16.21 per cent of the volume of its 1990 imports of the products in the
Annex, of which 52 per cent were tops and yarns, 15 per cent fabrics, 20 per cent made-ups, and
13 per cent clothing products."  Although he did not believe that issues concerning the second stage ofintegration were of direct concern to the first stage review, he noted that paragraph 41 of the TMB
report stated that the United States had also fulfilled the second stage integration requirements.
14. He noted that nothing in the ATC stated that a certain percentage of products under quota
would be integrated;  it was the right of each WT O Member to choose the products from the Annex
for integration.  Any implication that a particular selection would fall short of the requirements of theATC was not supported by the text of the Agreement.  He considered that, in one sense, the
United States had exceeded the requirements of the ATC on integration.  At the time the list of
products to be integrated in the first stage had been published, the intentions for the second, third and
fourth stages had also been indicated.  With respec t to the second stage, the United States' integration
list was identical to the list published in 1994.  He  believed that knowing in advance the contents of
future integration lists was of great value to exporting Members by enabling them to make more
rational investment and production decisions.
15. The representative of Hong Kong, China stressed the importance of textiles and clothing to its
economy.  Although no longer so overwhelmingly domina nt as it used to be, trade in this sector was
highly significant, accounting for almost 40 per cent of exports of its own manufactures.  The textilesand clothing sector was the largest employer am ong manufacturing industries, employing one-third of
all manufacturing employees.  The services sectors were also heavily involved in textiles and clothing
trade, including multimodal freight services, financial services, design and other support services.
Apart from the economic significance of the textiles and clothing sector, Hong Kong, China also
considered the ATC to be of critical systemic importance for the integrity of the WTO.  Leaving asideagriculture, textiles and clothing had been the darkest blot on the GATT's escutcheon for some
40 years.  Negotiation of the ATC was, theref ore, a major breakthrough in the Uruguay Round,
providing that, after some 50 years of derogation from fundamental GATT principles, textiles and
clothing trade would be liberalized by being fully integrated into GATT 1994.
16. While not wishing to dwell on past iniquities, he considered that their enormity could not be
ignored when considering the magnitude of the transition from the MFA to GATT 1994.  This was
because the ATC represented such a considerable undertaking that its faithful implementation wascritical to the credibility of the WTO and the conduct of this major review would be a key element in
maintaining this credibility.  Noting that their views on how the major review should be conducted
had been circulated at the last meeting of the Council on 6 October (G/C/W/95), he considered it
useful to address particular aspects of ATC implementation while keeping in mind the overall purpose
of the review.  The objective of the ATC was further liberalization of trade which should beprogressive in nature.  The overall purpose of the major review, therefore, should be to assess the
extent of this progressive liberalization and determine whether the ATC was on track.  Depending onG/C/M/24
Page 5
that assessment, the Council could then take such decisions, as it deemed appropriate, to ensure that
the balance of rights and obligations embodied in the ATC was not being impaired.
17. He considered that the Council was likely to find that there were some elements of the
implementation process which had contributed to progressive liberalization, while others had not, orindeed had been regressive, leading to greater protectionism.  A full assessment would be required to
balance the "pluses and minuses" and to relate each particular aspect to the other aspects of the ATC;
it would not be constructive only to address them in isolation.  It was very important to ensure that the
current programme of meetings would yield a clear overall assessment, without which the major
review would be incomplete.  Othe rwise, it would be necessary to institute a further work programme.
18. The representative of Hong Kong, China stressed that the first aspect of the ATC
implementation process to be addressed by the Council was integration while the main impact ofintegration on progressive liberalization should come from those Members which had carried over
restrictions from the MFA.  The integration programmes for Stages 1 and 2 of the Members carryingover MFA restrictions could be assessed, the former having been implemented and the latter notified.
Setting aside a technical error, which was being rectified, he accepted the conclusion in the TMB
report that these programmes had fulfilled the provisions of Articles 2.6 and 2.8(a).  It was, however,
also necessary to consider to what extent these programmes had contributed to progressive
liberalization.  When the integration programmes were examined, it could be seen:  (i) that theproducts selected for integration were concentrated in less value-added products such as tops, yarns
and fabrics, with only small shares of made-up textile products and clothing;  (ii) that the shares of
integrated products were substantially lower in terms of value of trade than in volume of trade;
(iii) that more of the integrated trade was accounted for by imports from developed countries than
from developing countries;  and most significantly, (iv)  that the proportion of the integrated tradeaccounted for by products that were under restraint was in the range of only 0-3 per cent.  In addition,
there had been a few instances of integration dates being advanced under Article 2.10 and restraints
being lifted under Article 2.15 of the ATC, but these actions did not affect the totality of integration in
Stages 1 and 2.
19. In the view of Hong Kong, China, the integration programmes had, overall, contributed very
little to progressive liberalization.  The result of the integration programmes for Stages 1 and 2,
covering the first seven years of the ATC, was that virtually all meaningful integration would be left
to the last three years of the ATC and this was not considered to be satisfactory.  Another aspect to
integration was the process of autonomous adju stment and increased competition in markets.
Article 1.5 of the ATC provided that these processes should facilitate integration.  With integration
being effectively left until the last three years of the ATC, such facilitation was going to be all the
more necessary.  Whether or not Members were allowing for continuous autonomous industrial
adjustment and increased competition in their markets, as required under Article 1.5, could not be
assessed in the absence of more detailed informat ion.  The Council should consider whether these
processes needed to be further studied before any conclusion could be drawn as to whether the ATC
was on track.  Ultimately, the Council would be required, in the light of the major review, to take such
decisions as it deemed appropriate to ensure that the balance of rights and obligations embodied in the
ATC were not being impaired.  Hong Kong, China believed that one decision that would be
appropriate would be to establish a more structured and continuous process in the Council foroverseeing the implementation of the ATC.
20. The representative of Pakistan recalled the achievements of the Marrakesh Ministerial
Meeting and the hope resulting from the accomplishments of the Uruguay Round.  Particularly
significant for many developing country Members was the promise to end the quotas applied to textile
and clothing imports.  The full and faithful implementation of the ATC represented a clear beginning
of the end of MFA regime which had stifled the textiles and clothing trade for over 40 years.  Three
years after the new trading system had come into effect, and in particular after the Singapore
Ministerial Meeting, their optimism had begun to wear out.  Largely, this could be ascribed to theG/C/M/24
Page 6
early experience with the implementation of the ATC as the initial liberalization path taken by some
major textile importing Members had provided no solace, as integration in the first two stages had, at
best, been a window-dressing.
21. He considered that the cornerstone of the ATC was its Article 2 which prescribed a ten-year
phase-out of MFA import quotas and established a four-phase liberalization schedule calling for the
gradual elimination of the quotas through a process of integration.  Seen against this built-inintegration schedule and its underlying spirit of progressivity, Pakistan was dismayed over the actual
manner in which the integration of textile and clothing products into GATT 1994 had been effected
by some major importing Members.
22. He described some of the main features of the integration programmes as implemented by the
four MFA restraining Members:  (i) while they had more or less met the technical requirements for
integrating the specified percentages of products as required by the ATC, the distribution of these
integrated products remained highly skewed in favour of low value-added yarns and fabrics;  (ii) invalue terms, integration in the first and the second  stages was significantly lower than in terms of
volume (on average 23 per cent in value vis-à-vis  36 per cent in volume).  This discrepancy denoted
the fact that integration of commercially meaningful products had virtually not taken place;  (iii) the
products included in the integration programmes of  the restraining Members for the first two stages
had mostly been free of restrictions, the few restrained products that were integrated did not representany substantial proportion of the value of the overall imports in those Members.  Integration of
restrained products in relation to the 1990 volume of imports in respect of Stage 2 was 1.30 per cent
in the case of the United States, 3.15 per cent in the case of the European Community and
2.05 per cent in the case of Canada;  and (iv) the fact that importing Members had effectively
postponed the integration of restrained products was further evidenced by the number of quotas to beeliminated from 1 January 1998.  In case of the United States, out of the total number of 750 quotas
only two would be eliminated on 1 January 1998;  for the European Community, the number was 14
out of the total of 219 and the numbers were no different in case of the remaining restraining
Members.
23. The representative of Pakistan further noted that it was not only the cosmetic nature of the
integration programmes which had contributed little to the process of liberalization in textile trade but
that there had also been an increasing use of other policy instruments by some countries, further
limiting access to their markets for textile exporters.  One example was the initiation of a series of
anti-dumping proceedings by one major textile importing Member against certain textile exporting
developing country Members.  Another major textile importing Member had decided to maintain visaarrangements for integrated products.  He considered visa arrangements to be part of administrative
arrangements under Article 2.17 of the ATC while Article 2 referred to quantitative restrictions within
bilateral agreements.  Therefore, once the importing Member had integrated items previously
restrained under Article 2, the legal justification for maintaining any restriction, whether in the shape
of a quota or in any other form, became totally untenable.  He also noted that Article 7.1(a) of the
ATC made it amply clear that "as a part of the integration process ... Members shall take such actions
as may be necessary to achieve improved access to markets for textile and clothing products throughsuch measures as tariff reductions and bindings, reduction or elimination of non-tariff barriers and
facilitation of customs, administrative and licensing formalities".  The continuation of visa
arrangements would also be incompatible with Article I and Article VIII of GATT 1994.
24. He referred to the argument of some Members that the accelerated quota growth rates as
required in Article 2 of the ATC, would significantly contribute to the liberalization of textiles andclothing trade.  The empirical evidence, however, suggested that the actual contribution of "growth-
on-growth" would be minimal for tw o reasons:  first, the base growth rates for many textile and
clothing products were low, thus resulting in lower incremental growth.  Second, "growth-on-growth"
needed to be assessed in the light of normal grow th in demand for textile products.  One independentG/C/M/24
Page 7
study had concluded that, based on past trends in the demand for textile and clothing imports in some
major countries, the increase in quotas as stipul ated in the ATC would not lead to any significant
increase in market access.  This was confirmed by the data provided by Colombia which showed that
incremental access on account of "growth-on-growth " provisions had ranged between 0.84 per cent to
1.97 per cent over the three years of the first stage.  The representative of Pakistan noted, however,
that Canada had announced that it would eliminate qu ota restriction in respect of tailored-collar shirts
in terms of Article 2.15 and, in accordance with Article 2.10, would integrate the HS lines pertaining
to that category.  Norway, which had relatively fewer quotas in place, had notified early elimination
of restrictions under Article 2.15 in the case of certain products.  He questioned if Norway would also
integrate these products pursuant to Article 2.10 of the ATC.  He considered these to be important
steps towards liberalization and encouraged others to emulate these examples.
25. In summary, Pakistan considered that the statistical evidence provided earlier illustrated that
the integration process thus far had not resulted in any progressive or commercially meaningfulliberalization of trade.  Most integrated products were free of restrictions and those which were under
restraint carried insignificant weight.  He drew attention to the Singapore Ministerial Declaration
which confirmed Members' commitment to full and faithful implementation of the ATC and the
importance of an effective transition to GATT 1994 by way of an integration that was progressive in
character.  He was concerned that the integration process was not meeting this requirement.
26. The representative of Malaysia, speaking on behalf of the WTO Members of ASEAN noted
that the current review was one of only two oc casions when the Council could monitor the ongoing
progress of the implementation and recalled that the primary objective of the exercise was not to
review the TMB report but to oversee the implementation of the ATC.  It was important that the major
review should embrace the broad scope of the implementation process, beyond that which waspresented by the TMB report.
27. He stressed that, over the past three decades of ASEAN's economic development, the
importance of trade in textiles and clothing in terms of its economic and social contribution was
profound and far-reaching;  it was one of the backbones of ASEAN manufacturing industries.  A
substantial portion of foreign exchange earnings as well as domestic employment in themanufacturing sector depended on textile trade perfor mance.  ASEAN's textiles and clothing sector
was regarded as a viable trade vehicle that should continue to expand and adjust well into the next
century, provided that the international environment was equitable and undistortive.
28. He recalled the Singapore Declaration wherein Ministers had agreed to "attach importance to
the implementation of this Agreement so as to ensure an effective transition to GATT 1994 by way ofintegration which is progressive in character".  He considered that the integration process was
designed to remove the restrictions progressively and that this could only be achieved by substantial
elimination of restrictions at each stage.  Therefore, it was expected that the Council would assess
whether  liberalization, as a result of the integration, had so far been tangible.  The question was
whether the ATC would be a ten-year waiting period or a credible modality to provide for a
progressive and meaningful return of textiles and clothing trade to WTO rules which had been the
understanding of developing countries during the Uruguay Round negotiations.  Putting off theremoval of quotas to the end of the transition would make it difficult to take that "precipitous plunge
off a steep cliff" and would jeopardize the carefully drawn balance of rights and obligations embodied
in the Agreement by cultivating and inviting political and economic pressures towards the end of the
transition.
29. The representative of Malaysia considered that there were two different types of integration
which could not be compared with one another.  One was the elimination of quantitative restrictions
inherited from the MFA regime and still maintained by a number of importing Members.  The other
was the notional integration basically involving Members which had not applied MFA restrictions.G/C/M/24
Page 8
It was not appropriate to treat these two types of integration in the same manner and, therefore, the
main focus of the review should be on the integration programmes of Members which had maintained
MFA restrictions.
30. He said that the report of the TMB confirmed that the integration programmes of the
restraining Members for the first two stages were of little commercial significance;  nor did they
contribute to the progressivity of the liberalization process.  The TMB had acknowledged(paragraph 72 of its report) that Stages 1 and 2 of the integration programmes of the restraining
Members would leave up to 67 per cent by volume of their 1990 imports to be integrated during the
period of only 36 months (1 January 2002 to 1 January 2005) and that a large majority of the products
subject to restrictions would have to be integrated in that short span of time.  He also noted that, in its
overall assessment of the integration programmes (paragraph 70), the report of the TMB had found
that there had been a concentration in the less value-added range of products.  Tops and yarns and
fabrics had represented 76, 65, 60 and 47 per cent of import volume so far integrated by theEuropean Community, the United States, Norway and Canada respectively.  The share of clothing in
the volume of imports integrated remained modest at 12.4, 10.6, 7.9 and 7.2 per cent respectively
among these Members.  He further noted that in terms of specific quotas eliminated or to be
eliminated in the first seven years of the transition period, the United States would eliminate just eight
specific items out of the 650 notified by it as being under quota restraints;  the European Communitywould eliminate 14 of 199 items notified;  while Canada would eliminate 28 out of 205 quotas.
31. Turning to the statistical paper provided by the representative of Colombia, he noted that the
four restraining Members had largely fulfilled the technical requirements for integrating the
percentages required under the ATC; however, the import values of the integrated products for
Stages 1 and 2 were substantially lower than the resp ective volumes.  It had also been shown that only
small percentages of the products under restraint would have been integrated during the two stages
combined and since these two stages spanned seven years of the ten-year transition period, a very
large proportion of restricted trade would remain to be integrated towards the end.  A further table
indicated that a small number of quotas would be eliminated in the first two stages.  For the
United States, the European Community and Canada, the proportions were very small compared towhat would remain under restriction, raising some serious questions.  The representative of Malaysia
further observed that the tables showed that the utilization of quotas in the categories which would be
integrated in their entirety was significantly low.  Also, the calculation in the fifth table showed that
the additional access owing to enhanced growth factors was not very substantial.  He was
apprehensive that such modest increase might be neutralized by the application of transitionalsafeguard actions and other trade restrictive measures such as anti-dumping actions, changes in rules
of origin, etc.
32. Based on the facts and information provided, as was evident from the tables circulated and
from the TMB report, the integration process for the first two stages had not contributed to any
meaningful liberalization as the products included in the programmes had largely been free of
restrictions under the MFA and the ATC;  the few restrained products which had been integrated did
not represent any substantial proportion of the value of overall imports in these countries;  the rates ofquota utilization for the integrated products subject to quota were quite low;  and the integration of
restrained products had effectively been postponed until the last stages of the process.
33. The representative of Malaysia noted, however, that there were some positive elements
contributed by a number of Members:  Canada had announced in June 1997 that it would eliminate
quota restrictions on tailored-collar shirts, pursuant to Article 2.15 of the ATC, and that it wouldeventually integrate this item in the second stage, in accordance with Article 2.10.  Also, out of
54 restrictions notified under Article 2.1 of the ATC, Norway had earlier rescinded (though not yet
integrated) 14 quotas.  It was also recently announced by Norway that a total of 32 quotas would be
eliminated (though not yet integrated) by the end of this year and another five quotas by the end ofG/C/M/24
Page 9
next year.  These were important steps in the direction of liberalization and the Council should
recommend similar steps to be taken by other Member s so as to demonstrate their commitment to the
effective transition to GATT 1994 as stated in the Ministerial Declaration.  It was also recalled that
the TMB had pointed out (paragraph 73 of its report) that the final objective of integration of the
textiles and clothing sector into the GATT 1994 would be made easier if Members had recourse to the
provisions for advanced integration or elimination under Articles 2.10 and 2.15 of the ATC.
34. The representative of Malaysia agreed with an earlier speaker that the linked processes of
autonomous industrial adjustment and increased competition in markets, in the context of Article 1.5
of the ATC, were aspects that should be facilitated and be given serious attention by Members, as a
substantial portion of restrained products would be integrated on the last day of the ATC.
Considering the pace at which the integration programmes of restraining Members were proceeding,
such facilitation was deemed all the more necessary and should be strongly encouraged.
35. The spokesman for the European Community agreed with the view expressed by some
speakers that the mandate of the Council was wider than that of the TMB in examining the issues
before it.  The mandate was, however, not unlimited and it would be necessary to work within the
parameters of the ATC.  He stressed that the European Community took its obligations under the ATC
very seriously and was committed to full integration of this sector into WTO rules on 1 January 2005.
Its approach to integration was balanced and positive, as demonstrated by the second state ofintegration which contained a mixture of restricted and unrestricted products.  He recalled that this list
of products had been developed following full consultations with Members affected by restrictions on
their exports to the European Community.  Furthe r, they would have been open to considering
additional liberalization if such requests had been received from the exporting Members and in
circumstances where Members had demonstrated a more positive position in response to requests forgreater access to their own market for exports from other Members, in particular the
European Community.
36. He informed the Council that the European Community had virtually completed the review of
its integration programme, following the findings of the TMB in respect of the matter referred to it by
Colombia on behalf of the ITCB.  This referred to the inclusion in the first integration stage ofproducts covered by 6-digit HS lines qualified by "ex" in the ATC.  The examination of these matters
by the TMB had indicated that the discrepancy was less than alleged and was not considered by the
European Community to be a "considerable shortfall" as referred to earlier.  The TMB had also noted
that some other Members had faced the same problem of a lack of statistics going beyond the 6-digit
level.  That was the reason why the European Community had considered that the TMB should reviewall integration programmes of Members to ensure that the same principles were applied equally to all
Members concerned.  He stressed that they accepted the findings of the TMB and would report to it as
soon as possible.
37. On the question of "backloading" of the integration process, the European Community
believed that it was taking a positive approach to integration by the inclusion in Stage 2 of products
subject to restrictions.  Those products not yet integrated but covered by restrictions would receive
substantial increases over time from the enhanced growth rates in Articles 2.13 and 2.14 of the ATC.If there was a problem in the ATC, it was not strictly a problem of implementation but referred to the
quality of the Agreement itself.  Some participants  in the debate came close to suggesting that the
importing Members had not fully met their obligations, however, in the view of the
European Community, it had respected the requirements of the Agreement and was committed to full
integration on 1 January 2005.
38. The representative of Turkey expressed the view that the integration process should be
assessed in respect of two aspects:  the first being the rights and obligations of the Members under the
ATC which, it could be said, had been met by the Members.  As regards the second, it was not easy toG/C/M/24
Page 10
state that the integration process, on the whole, had contributed to a significant increase in export
earnings of the developing country as foreseen by the Ministerial Declaration adopted at the first
Ministerial meeting of the WTO.
39. The representative of Canada noted that a number of Members had expressed some
disappointment with the implementation of the ATC, in that they had not received the expected
benefits of the integration process and had suggested some actions which the Council might take inthis respect.  He agreed that the full implemen tation of the ATC was important to all Members.  He
suggested that the Council should review all actions taken thus far under the ATC and judge them
pursuant to the provisions set out in the Agreement.  There should be no doubt that full integration
would be achieved by the end of the transition period with the elimination of all bilateral,
discriminatory restraints inconsistent with WTO rules.  Canada was fully committed to this goal.  The
review of the integration process must be based on the relevant provisions of the ATC.  In this regard,
paragraph 71 of the TMB report listed the points to be noted in respect of the integration process.  Inthe case of its integration programme, Canada had met its obligations in terms of Stages 1 and 2 and
for the products which had been integrated, there was no possibility of future recourse to safeguard
actions.  In addition, Canada had chosen to include some restrained products.  The percentage of
made-up textile products had increased significantly in Stage 2.  As regards the "growth-on-growth"
provisions, he considered them to be important and noted that they would grow over time.  The
representative of Canada reiterated its commitment to fully implement the ATC.
40. The representative of India said that integration meant bringing the concerned textile and
clothing products under the GATT 1994 discipli ne, which was based on non-discrimination. For about
40 years, various discriminatory restrictions had been imposed by major developed importing
Members on trade in textiles and clothing, leading to the non-application of  the rules and disciplinesof GATT in this important sector of trade.  Indeed, the MFN principle itself was not being applied.
This discriminatory and protectionist system was symbolised by the Multifibre Arrangement (MFA).
Therefore, integration would refer to the application of GATT 1994 to products which were, prior to
their integration, governed by the regime inherited from the MFA era.  When the Uruguay Round was
negotiated, developing countries expected that textiles and clothing trade would be integrated into theWTO system. In India almost 40 million workers, the majority of them in the small scale sector, owed
their livelihood to this sector;  therefore, the restrictions had had a major direct impact on their
prosperity and well-being.  Conversely, liberalization of textiles and clothing trade would have a
major impact on improving their  conditions of life and would be in keeping with the objectives of the
multilateral trading system.
41. India’s expectation for the full integration of textiles and clothing trade into GATT was even
more valid in the light of the initiatives taken by  the Members maintaining restraints to extend the
scope of the multilateral trading system to certain  new areas of interest to them. However, these
expectations were belied as the ATC, in a sense, perpetuated the MFA-type regime over a period of
ten years, even though the ATC called for liberalization through progressive integration during the
transition period.  The representative of India considered it ironical that developing countries were
being exhorted by developed importing Members to fully adopt the principles of the free market inworld trade and being called upon to demonstrate their commitment to trade liberalization in other
sectors, while the discriminatory restrictions imposed by these developed importing Members
remained in place in the textiles and clothing sector .  This distorted not only international trade in this
sector but the very principles of the free market and trade liberalization which these Members claimed
to espouse.  He also recalled the ultimate objective of the ATC, set out in its Article 9, that on31 December 2004, the "textiles and clothing sector shall be fully integrated into GATT 1994".
Members must not lose sight of this mandatory  provision.
42. He noted that the TMB had clarified the impact of integration on trade (paragraph 9 of its
report) stating "The imports of a product integrated are no longer subject to the rules of the ATC butG/C/M/24
Page 11
are subject to GATT 1994 rules and disciplines. In cases where imports of a product integrated into
the GATT 1994 are, prior to their integration, subject to restrictions maintained under Article 2, such
restrictions are ipso facto  eliminated."  Accordingly, integra tion in the Council's review concerned
those products which were subject to MFA-inherited restraints and which, through the process of
integration, should come into the mainstream of GATT 1994 disciplines. Therefore, in discussing the
impact of the integration process, the Council s hould focus on achieving the objective of trade
liberalization in the textiles and clothing sector.  Integration did not refer to that part of trade in
textiles and clothing products already being conducted according to GATT 1994 provisions.
References to restricted products, in the context of integration, concerned products under
MFA-inherited discriminatory restrictions, not products restricted under GATT 1994 provisions.
These restrictions were maintained by the four major importing developed Members operating the
MFA-inherited quota regime.  Therefore, in the course of the review,  when addressing the issue of
trade liberalization in the context of integration, the Council's focus must be basically on these fourMembers.
43. The representative of India further noted that efforts had been made last year by the importing
developed Members to divert attention from the impact of their integration programmes, asserting that
the obligations and implicitly their impact on trade,  were the same for all Members.  India disagreed
with such a distortion of the provisions of the ATC.  He then drew attention to the TMB’s reference tointegration requirements (paragraphs 66 and 67 of its report).  The distinction between the Members
referred to in Article 2.7(a) of the ATC, i.e. the four developed importing Members, and the other
WTO Members referred to in Article 2.7(b), was important and the TMB had explained this
distinction.  While Members in both categories had recourse to the transitional safeguard in Article 6
of the ATC, it was clear from paragraph 67 of the TMB report that as far as the trade liberalizationimpact of integration was concerned, only the integration of products under MFA-inherited restraints
was relevant to the Council's review. Therefore, to make an appropriate assessment, it would be
necessary to look at the integration programmes of the four major importing developed Members
which had notified their programmes under Article 2.7(a) of the ATC.
44. He also referred to the TMB report (paragraph 15) where it stated:  "Notwithstanding the
provisions of Articles 2.6 and 2.7, the TMB was aware that - with the exception of Canada affecting
one product (work gloves) - the products thus integrated were not, prior to their integration into
GATT 1994, subject to quantitative restrictions notified under Article 2.1."  That, in his view, was an
extremely clear indication that the first stage of integration had had no impact on trade liberalization
of MFA restrained products.  For India, the first stage of integration had been of no benefitwhatsoever, as the four importing Members had not integrated any product under restrictions relevant
to India.  In the light of these comments, it was recommended for the consideration of the Council that
it should conclude that the first stage of integration process had not resulted in the integration of any
product subject to quantitative restrictions as notified under Article 2 of the ATC, with the exception
of the removal of restraints on work gloves notified by one Member and, therefore, it had no impact
on real trade liberalization.
45. Reference was then made to the individual integration programmes notified by the four
importing Members, and it was noted that in technical terms, these Members had integrated at least
16 per cent of their 1990 volume of imports.  A cl oser look, however, would reveal the extent of
"protectionist window-dressing" applied by these Me mbers to their integration programmes.  Each of
the four Members had notified items which were not under quota restrictions, including such products
as parachutes and seat-belts, making the whole concept of integration completely devoid of meaning.This confirmed India's view that the inclusion of non-restricted products in the Annex to the ATC had
been done to seriously impede actual integration of restrained products.  India's second
recommendation for the consideration of the Council was that it should request  the four Members to
give special emphasis to products under restraint in their integration programmes.G/C/M/24
Page 12
46. While the TMB had given details of the percentage of each of the four product groupings
integrated as a share of the total products integrated (in paragraph 14 of its report), India believed that
a more realistic picture would emerge if consideration were given to those four categories as a
percentage of the 1990 volume of imports, as required by the ATC.  A look at the figures contained in
the tables circulated by Colombia would demonstrate the lack of trade liberalization in the integration
programmes of the four Members.  He noted that the bulk of the integration had been ofnon-restrained products under the categories of yarns and fabrics, both of which were low-value
product categories.  The share of clothing imports, which were of substantial importance in terms of
trade, accounted for 1.92 per cent, 0.38 per cent, 1.13 per cent and 0.15 per cent respectively for the
four major importing Members (United States, Eur opean Community, Canada and Norway).  India's
third recommendation for the consideration of the Council was that it should note the insignificance,
in trade terms, of the integration process notified by the major importing Members.
47. He also referred to the integration programme of one of the major importing Members, for
which clothing products represented just 0.38 per cent of the products integrated in the first stage and
which had been rendered even less meaningful by a significant shortfall in the mandatory 16 per cent
required to be integrated.  The Member concerned had apparently cited the lack of adequate data,
leading to some technical difficulties which had caused it to fall short of its obligations.  It was
considered ironical that this Member could not provide trade data for the products in question that ithad chosen to integrate as the reason for the shortfall while in other sectors that Member had
demanded even  greater trade liberalization from de veloping country Members, even though statistics
regarding trade flows  in these new areas were generally not adequately known for many of them.  In
light of the discrepancies noted by the TMB, the importing Member concerned should at the very least
have taken immediate steps to fulfil its obligations to integrate products from the Annex representingat least 16 per cent of its 1990 volume of imports and notify this action to the WTO.  Any shortfall in
that Member’s integration programme would have ramifications for the integration and liberalization
of trade in this sector, especially given the size of the concerned Member’s market.  India's fourth
recommendation for the consideration of the Council, therefore, was that the concerned Member be
asked to immediately remedy this serious situation.
48. India's representative noted that Members were also in possession of data regarding the
second stage of integration as referred to in the TMB's report (paragraphs 39 to 44 and paragraphs 51
to 59).  He referred, with serious concern, to the analysis made by the TMB in paragraphs 57 and 58
of its report which demonstrated the lack of commercial meaningfulness of even the second stage
integration programmes of these Members.  The report stated "while there are non-negligibledifferences between the respective programmes, at least two of them seem to confirm certain
similarities with the overall trends which characterized the approach adopted for Stage 1" and "the
products to be integrated continue to show a conc entration in the relatively less value-added range of
products, and it would appear, therefore, that the share of products to be integrated expressed in value
terms, will be smaller than that expressed in volume."   It was found that the share of clothing
products in the second stage integration programmes was, in terms of the same 1990 volume of
imports, 1.98 per cent, 2.09 per cent, 1.65 per cent and 4.17 per cent respectively for the fourimporting Members (United States, European Community, Canada and Norway).
49. It was observed that, apart from some minor impact on exports to one importing Member
resulting from that Member having included a few products which were under restraint for India in its
second stage integration programme, the overall impact of the second stage for India would be the
same as that of the first stage, which was next to nothing.  It was further noted that the TMB hadreported (paragraph 70 of its report) that "Regarding specific quota limits eliminated, or to be
eliminated as a result of integration, it can be seen  that the United States will eliminate eight specific
limits out of the 650 initially notified pursuant to Ar ticle 2.1;  the European Community will eliminate
14 specific quotas out of the 199 notified, while Canada eliminated or will eliminate altogether
28 quotas out of 205.  Norway had not found liberalization by way of integration the best way toG/C/M/24
Page 13
proceed, but had pursued a policy of gradual liberalization of products under restraint under
Article 2.15."
50. Pointing to this assessment, India made its fifth recommendation for the consideration of the
Council, namely that it should conclude that the implementation of the integration obligations, in both
the first and second stages of integration, by these four Members had not demonstrated any substance
in terms of trade liberalization, and that, therefore, the implementation of the ATC was beingimpaired  by such an approach.
51. The representative of India recalled that the MFA-inherited restrictions were supposed to
have been "notified in detail" to the WTO by 1 March 1995, and that these restrictions, according to
Article 2.4 of the ATC, were "deemed to constitute the totality of such restrictions", and further, that
"no new restrictions in terms of products or Members shall be introduced except under the provisions
of this Agreement or the relevant GATT 1994 provisions".  However, he wished to express serious
concern at the introduction of new restrictions, with effect from 1 January 1996, on India's textiles andclothing exports by a Member which apparently had not even notified these new restrictions to the
TMB, although they were affecting India's exports to  that particular Member of products covered by
the Annex to the ATC.  This was a disturbing situation, because it denoted the resurgence of
discriminatory trade restrictions at a time when, through the mechanism of the ATC, Members were
committed to removing such MFA-type restrictions.  This was a matter of systemic concern as well,because of the cumulative effects of such trade restrictions, applied on a discriminatory basis, on the
entire sector of trade in textiles and clothing.  It was tantamount to bringing "through the back door"
the discriminatory MFA system, and undermining the principles of non-discrimination and
multilateralism on which the WTO was based.  India's sixth recommendation for the consideration of
the Council, therefore, was that it should express serious concern at the introduction of newGATT-inconsistent restrictions on textiles and clothing trade by any Member, and to request
Members to abide by the principles of non-discrimination and multilateralism to which all were
committed.
52. It was India's assessment that, instead of moving towards trade liberalization, the major
importing Members were, in fact, delaying meaningful integration even at the second stage.  Such a"back-loading" of integration would not be conducive to meeting the objectives of trade liberalization
to which the multilateral trading system was committed.  India, therefore, called upon the Council to
recommend to the importing Members to review their second stage integration programmes in an
appropriate manner to make trade in this sector both more commercially meaningful for exporting
countries and  consistent with GATT 1994.
53. Responding to some of the issues raised by others during the current discussions, it was
explained that from India's perspective it was absolutely necessary to be clear as to what was the
scope and purpose of the review required by Article 8.11 of ATC.  He was concerned by the
observations of one Member that as far as the review of the integration process was concerned, all that
had to be done was to see whether or not the concerned Members had integrated 16 per cent as
provided for in Article 2.6 of the ATC.  The major review could not be reduced to a purely arithmetic
exercise; rather, the Council should be conducting the major review with a view to assessing theoverall implementation of the ATC in the first stage based on its consideration of various elements
like integration process, safeguard measures, etc.  It was also clear that the assessment of the
implementation of the Agreement could not be divorced from the purpose, context and object of the
Agreement.  There were 132 Members represented in the Council and the review should reflect the
status and stature of this Body.   Another important aspect of the review should be to see whether the
implementation of the ATC preserved the balance of rights and obligations provided for in the
Agreement or whether there was an impairment of  the rights and obligations.  Members could not
ignore the fact that the ATC was one of the WTO agreements and there was a broad balance inter se
among the various agreements.  If exporting Members did not receive the anticipated benefits fromG/C/M/24
Page 14
the ATC because of the manner in which it was implemented, this would mean that the overall
balance of rights and obligations of the Uruguay Round was disturbed.  Developing countries had
been asked to accept obligations in new areas like TRIPs,  Services etc. as a quid pro quo for the
textile sector being brought into the mainstream of GATT 1994 disciplines. Therefore, if the
developing countries were not deriving the anticipated benefits from the ATC, there was a serious
problem.  India was not seeking a change in the ATC;  rather the full and faithful implementation ofthe Agreement, taking into consideration the object, purpose and context as well as the need to
preserve the balance of rights and obligations.  Therefore, India was looking for a review of the
quality of the implementation of the ATC and not the quality of that Agreement.
54. He then referred to the growth factors or "g rowth-on-growth" issue, and endorsed the figures
given in the paper presented by Colombia.  The appropriate way to look at the effect of the growth
factors was to first work out  the access levels that would exist if the bilateral agreements negotiated
under the MFA had been continued for ten years and then calculate the access levels taking theadditional element of growth factors into consider ation and compare these figures with a situation
where access levels were not restrained over the ten-year period.  The difference between these two
figures would be the real indication of improvement in access.  The contention as reflected in
Table V, that growth factors had not significantly improved access level, was absolutely correct.
55. India also noted that the removal of restrictions in respect of certain products was not the
same  as integration of these products.  Removing restrictions without integrating the products
concerned still enabled a Member to resort to discriminatory safeguard action under Article 6 of the
ATC and not the non-discriminatory Article XIX safeguard provisions of GATT.  While the removal
of restrictions on some products by some Members was welcomed, it was hoped that these products
would be integrated without further delay.  In summing up, it was observed that this major review ofATC could not avoid certain political realities. Repeatedly in the WTO, developing country Members
had been required to undertake additional commitments;  however, when it came to sectors such as
textiles, which were of relevance for the developing countries, the developed countries had not
adopted the free-market approach, as in other areas.  It was, therefore, not possible for developing
countries to convince their domestic constituencies that this type of dichotomy in approach adoptedby the developed countries was reasonable and fair.  The Council should keep this broader political
dimension in view during the process of this major review.
56. The representative of Japan recalled the procedural aspects of the integration process and
noted that 40 Members had notified their second stage integration programmes.  In this regard, the
TMB had requested that the Council recall to all Members the importance of strict compliance withthe notification requirements.  He underlined the importance of full compliance with these
obligations.
57. The representative of Hong Kong, China stressed that, in addressing particular aspects of the
implementation of the ATC, it would be necessary to relate those to other aspects being dealt with.  In
effect, the Council was examining the whole Agreemen t, that is the entire implementation process.
The Council should avoid compartmentalizing the ex amination in this area as a number of points
raised in the discussion would have to be developed further, later on in the review.
58. In concluding the discussions, the representative of Colombia urged all Members to give
consideration to the six recommendations made by India.  He stressed the importance of textiles and
clothing trade for all developing countries and, hence the reason why the implementation of the ATC
and its careful review took on such importance.  He also highlighted the fact that the supervision of
the ATC must be broad and general in nature.G/C/M/24
Page 15
59. The Chairman concluded the meeting commenting that there had been a good debate with
clear explanations of Members' views.  He noted that future meetings were scheduled for 20 October,
7 and 13 November.
60. The Council took note of the statements made.