RESTRICTEDWORLD TRADE
ORGANIZATIONG/L/650
28 October 2003
(03-5700)
REPORT (2003) OF THE TE XTILES MONI TORING BODY
1. This report is presented by the Textiles Monitoring Body (TMB) pursuant to the decision
adopted by the General Council on 15 November 1995 on the procedures for an annual overview of
WTO activities and for reporting under the WTO (WT/L/105).
2.  Since the adoption of its Report (2002) (G/L/574) on 15 October 2002, the TMB has held 11
meetings up to 22 October 2003.  The detailed reports of these meetings are contained in
G/TMB/R/93 to 103.1
3. The present report provides a summary of the matters referred to or taken up by the TMB
during this period, together with the main observations and conclusions made, and the related actionstaken except for the issues discussed at the last meeting of the Body (22 October 2003) which will be
reflected in G/TMB/R/103.  For further details, reference is made to the relevant sections of the
reports of the respective TMB meetings.
4. It should be noted that pursuant to the decision taken by the General Council on
10 February 2003 regarding the updating of its 2002 Report and those of its subsidiary bodies(WT/GC/M/78), the TMB also adopted on 23 June 2003 an update of its 2002 Report (G/L/632).  The
time-period addressed in that update forms part, in its entirety, of the period covered by the present
annual report.  Therefore, this report also reproduces the matters included in the update of the TMB's
2002 Report.
I. QUANTITATIVE RESTRICTIONS MAINTAINED ON TEXTILE AND CLOTHING
PRODUCTS UNDER THE PROVISIONS OF ARTICLE 2 OF THE AGREEMENT
ON TEXTILES AND CLOTHING (ATC)
Notifications under Article 2.1 of the ATC:  Quantitative restrictions notified following the
accession of a new Member
(i) European Communities/China
5. Having sought clarification and information from the European Communities and after
consideration of the respective observations made by China, the TMB took note of a notification
received pursuant to Article 2.1 from the European Communities following the accession of China to
the WTO.  Bearing in mind that China's observations, made pursuant to Article 2.2, had been taken
into account by the European Communities in the supplementary communications it had provided to
the original notification, the TMB observed, inter alia , that the notification contained details of the
restrictions in force on the day prior to the da te of China's accession to the WTO, including the
respective restraint levels, together with their growth  rates and the related flexibility provisions.  The
notification also specified the restraint levels applied for 2002 and identified those restrictions which
had been eliminated on the day of China's accession to the WTO as a result of the EC's
                                                     
1 G/TMB/R/103 will be issued at a later date, upon its adoption by the TMB.G/L/650
Page 2
implementation of the first and second stage integration programmes.  With regard to the
implementation of the growth-on-gr owth provisions provided for in Articles 2.13 and 2.14, the TMB
recalled that according to the Report of the Working Party on the Accession of China to the WTO,
"[t]o these base levels [i.e. applied on the day prior to China's accession], the increase in growth rates
provided for in Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date ofChina's accession".  It was also recalled that the TMB had already addressed in detail the issue of
implementation of these provisions with respect to China during one of its previous meetings and that
it had reached certain conclusions regarding those minimum requirements which had to be
implemented by the Members maintaining restrictions falling under Article 2.1.  It was noted from the
clarification provided by the European Communities that it had "increased the growth rate on the
remaining restraint levels with China by 25 per cent and then by 27 per cent on 1 January 2002".  In a
subsequent communication, the European Communitie s further stated that its "application of the
provisions of paragraph 241 of the report of the Working Party on China's accession implies that
China is benefiting from the full 25 per cent increase inherent in the second stage of integration in
spite of the fact that China became a Member of the WTO only at the very end of that period.  This
was of course followed by the 27 per cent applicable for the third stage.  The Community is therefore
well within the boundaries of application of the pertinent criteria 'as appropriate' stipulated in thisparagraph.  […]".  It was also noted that China had not made any observations under Article 2.2 on
the EC's implementation of the growth-on-grow th provisions.  The TMB observed that the
implementation of these provisions by the European Communities met the minimum requirements
described by the TMB in its examination of this issue.
6. The TMB noted that in its observations made under Article 2.2, China had requested that
"[t]he growth rates of the European Fairs quota with the application of Article 2.14(a) and (b) of the
ATC [be specified]".  It was recalled in this regard that some aspects of this matter had already been
dealt with by the TMB since a provision related to the European fairs' quota also formed part of the
administrative arrangements that had been notified jointly by China and the European Communities
pursuant to Article 2.17 and had been reviewed by the Body.  Having considered the matterthoroughly and also in light of the explanations and information provided by the European
Communities, the TMB noted that the quota levels for participation in European fairs applied on the
day prior to the date of China's accession had been included in the EC's notification pursuant to
Article 2.1.  Furthermore, the European Communities itself had stated that in practice the European
fairs' quota levels had remained unchanged over years.  Thus, the levels applied in 2001 were also
maintained for 2002 and were being proposed to be reconducted without modification in the
year 2003.  While noting the EC's reply, in particular the indication given for the year 2003, the TMBexpected that the same levels would continue to be maintained also in 2004.  Accordingly, the TMB
requested that the European Communities inform it in due course, at the latest in December 2003, of
the quota levels to be formally approved for participation in European fairs in the year 2004.
7. Concerning certain specified quantities within  several restraint levels reserved for the
European industry for a defined period in a calendar year, the TMB recalled that a detailed provisionof the administrative arrangements notified by China and the European Communities was also
devoted to this matter.  Also, the Body had already examined this issue and reflected upon it in the
context of its review of the said administrative arrangements.   The report of that meeting had
reproduced the explanations provided by the European Communities in response to a request for
clarifications, the observations made by China as well as the EC's subsequent reply to theseobservations.  In light of these elements, the TMB had been able to observe that "aspects related to the
elements involved in the operation of this system had been clarified and, if applicable, rectified.  As a
result, there appeared to be no disagreement be tween the two Members regarding its functioning".
The TMB had observed, furthermore, that the availability of such reserve levels was time-bound;
consequently the quantities reserved "are either fully used up during the respective time-frame, or anyunused portion can be allocated for exports to other potential EC buyers after expiration of the
respective deadlines.  Therefore, bearing also in mind:  (i) that in all cases, at least half of a yearG/L/650
Page 3
remained available for the purpose of filling up any unused portion of the respective 'reserve' restraint
levels with exports to buyers other than those of the EC's industry;  and (ii) that in six product
categories affected the levels to be 'reserved' were below 7 per cent of the respective annual quota
levels, while in two other categories the reserve applied up to 50 per cent of the related quota levels, it
was considered unlikely that the overall impact of the operation of this system would hinder theability of the exporting Member to fully utilize the export possibilities available under the respective
annual restraint levels".  (G/T MB/R/93, paragraphs 4 to 11)
(ii) Turkey/China
8. The TMB took note of a notification received pursuant to Article 2.1 from Turkey following
the accession of China to the WTO.  The TMB sought clarification and information from Turkey and
bore in mind that China's observations, made pursuant to Article 2.2, had been fully addressed by the
TMB and had been taken into account by Turkey in the supplementary communications to the originalnotification.  The TMB noted, inter alia , that the respective growth rates applied by Turkey on
10 December 2001, i.e. on the day prior to the date of China's accession to the WTO had been those
notified by Turkey in column F of the table co ntained in G/TMB/N/422/Add.5 and that there was no
disagreement between the two Members on this matter.   It was understood that these growth rates had
been increased by 27 per cent in order to calculate the restraint levels for the year 2002.  The TMBalso observed that China had not taken issue with the fact that Turkey had notified the relevant
quantitative restrictions under Article 2.1, bearing in mind the provisions of paragraph 241 of the
Report of the Working Party on the Accession of China, as well as those of Article 2.1 of the ATC,
which latter deal with "quantitative restrictions within bilateral agreements maintained under Article 4
or notified under Article 7 or 8 of the MFA in force on the day before the entry into force of the WTOAgreement".  With regard to the implementation of  the growth-on-growth provisions by Turkey with
respect to the quantitative restrictions on imports from China, the TMB observed that it was in line
with the methodology implied in th e observations of China and exceeded the minimum requirements
described by the TMB in its examination of this issue (G/TMB/R/96, paragraphs 5 to 11).
(iii) United States/China
9. The TMB reverted to its examination of a notification received pursuant to Article 2.1 from
the United States following the accession of China to the WTO.  With regard to the US's
implementation of the growth-on growth provisions, it was recalled, inter alia , that the United States
had prorated the 25 per cent increase foreseen in Article 2.14(a) for the period (altogether 21 days)
during which China had been a Member in the second-stage integration process under the ATC.  The
TMB had already reached the conclusion in July 2002 that it had not been justified under the relevant
provisions of China's accession instruments and the ATC to prorate the 25 per cent increase for theshort period of China's actual membership during Stage 2.  Therefore, the TMB had invited the United
States at its meeting in July 2002 to reconsider its position and to implement the necessary
adjustments to the respective methodology applied.  At its meeting in November 2002, the TMB
observed that no follow-up information had been provided as yet from the United States in response
to this invitation.  The TMB, therefore, decided to reiterate its request to the United States to provideinformation on this matter as soon as possible.  At its meeting in December 2002, having received an
additional communication from the United States in response to the Body's invitation and subsequent
request, the TMB noted with concern that it had taken almost three months before the relevant follow-
up information was provided by the United States.  It was also observed that the United States had not
provided specific arguments as to why its reasoning on the matter remained unchanged and that,therefore, it had not found it appropriate to make any adjustments to its methodology applied.  In
particular, in view of the fact that the communication by the United States had been received just prior
to the start of the meeting, the TMB decided to revert  to this matter at its subsequent meeting.  At that
meeting the TMB observing, once again, the absence of new or additional arguments by the
United States, reiterated its conclusion that it had not been justified under the relevant provisions ofG/L/650
Page 4
the accession instruments and the ATC to prorate the 25 per cent increase applicable to Stage 2 for the
short period of China's actual membership during that stage.  It was recalled in this regard that this
conclusion had been reached by the TMB after careful consideration of the relevant provision of the
Report of the Working Party on the Accession of China and of the language of Article 2.14(a) of the
ATC and that it was further supported by the fact that no WTO Member, not even the United States,had ever in the past used prorated increase in the respective growth rates in relation to any other
Member.  Therefore, the TMB continued to be of the view that, with regard to the implementation of
the growth-on-growth provisions provided for in Articles 2.13 and 2.14 with respect to China, the
minimum requirements that had to be implemented, inter alia , by the United States were, that as from
1 January 2002, the base levels in force on 10 December 2001 had to be increased by the respective
growth rates applied for the year 2001 (prior to China's accession), increased by the full 25 per cent
applicable to Stage 2, and further increased by the 27 per cent applicable to Stage 3.  The TMB alsorecalled that in two of its notifications made pursuant to Article 2.2, China had made observations
with respect to the implementation of the growth-on- growth provisions by the United States.   These
observations had also been addressed by the TMB during its discussion of the implementation of the
growth-on-growth provisions, as reflected in G/TMB/R/90.  The TMB noted that according to
Article 2.2, the Body, inter alia, "may make recommendations, as appropriate, to the Membersconcerned".  Noting that both China and the United States had had ample opportunities to make their
observations and respective arguments known and also that the TMB's conclusion had been reached
with full knowledge of the observations and argument s presented in the respective notifications of the
two Members concerned, the TMB decided to recommend to the United States to implement the
necessary adjustments in its respective methodology applied, with a view to bringing it in line withthe TMB's conclusion regarding the minimum requirements that had to be met.
10. The TMB further recalled that at its February 2002 meeting, in starting its review of the
notification received pursuant to Article 2.1 from th e United States following the accession of China
to the WTO, the Body had decided to seek clarifications and additional information from the United
States with respect to a number of other specific aspects of its notification, inter alia , also in light of
the related observations made by China with reference to Article 2.2.  In particular, at its
September 2002 meeting, the TMB had considered in detail a number of issues involved, also on the
basis of additional information received from the United States in response to the observations
provided by China.  The TMB had considered the following:  the interaction between specific limits
and group limits, the downward adjustment of quota levels for partially integrated products and the
cap maintained by the United States on the combined use of carryover and carry forward.  On the
same occasion, the TMB had also considered and addressed the respective observations made byChina.  Furthermore, during its October 2002 meeting, the TMB had noted that the United States had
made an administrative correction to certain group-limits notified, in order to correct an inadvertent
error.  In view of the above and noting that it had addressed all the relevant issues, the TMB
considered that, bearing in mind the recommendation with respect to the implementation of the
growth-on-growth provisions it had made to the United  States, it was in a position to take note of the
notification made by the United States pursuant to Article 2.1 (G/TMB/R/95, paragraphs 6 to 11).
(iv) United States/Former Yugoslav Republic of Macedonia
11. The TMB began its examination of a notification received pursuant to Article 2.1 from the
United States following the accession of the Former Yugoslav Republic of Macedonia (FYROM) to
the WTO.  The TMB decided to seek clarifications from the United States, inter alia , on the extent to
which the restrictions maintained had been affected by the ATC integration process and on the
manner in which the growth-on-growth provisions forese en in Article 2.14 and also referred to in the
accession instruments of the FYROM, had been implemented with a view to providing the increase in
the respective growth rates of the restrictions maintained.  The TMB also decided to seek clarification
as to how the special shift available for some of the quantitative restrictions notified was beingimplemented in practice.G/L/650
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12. In its reply, the United States stated that the limits notified were those in force on
3 April 2003, i.e. on the day before the entry in to force of the WTO Agreement for the FYROM.
None of these restrictions had been eliminated as a result of the integration by the United States of
certain products under Stages 1, 2 or 3 of the ATC, since the relevant categories were not part of the
respective integration programmes.  The United States also explained how the special shift availablefor some of the quantitative restrictions notified was being implemented in practice.  The TMB took
note of these clarifications.
13.  As to the implementation of the growth-on-growth provisions of the ATC to the quantitative
restrictions notified, the United States explained that the "annual growth rate for 2004 quotas [would]
be 2.54 per cent" and that, for the 2003 limits, the effective annual growth rate had been increased by
prorating the growth rate of 2.54 per cent to re flect the number of days in 2003 that FYROM would
be a Member of the WTO, "resulting in a prorated growth rate for 2003 of 2.40241096 per cent."  The
TMB recalled that the Report of the Working Party on the Accession of the Former Yugoslav
Republic of Macedonia stated, inter alia , that "for the purposes of FYROM’s accession to the WTO,
the phrase 'day prior to the date of entry into fo rce of the Agreement on Textiles and Clothing' shall be
deemed to refer to the day prior to the date of accession of FYROM to the WTO.  To this base levelthe increase in growth rates provided for in Article 2.14 of the Agreement on Textiles and Clothing
shall be applied, as appropriate, in the Agreement on Textiles and Clothing from the date of
FYROM’s accession."  In addition, the TMB recalled  that it had already examined notifications made
under Article 2.1 by the United States where the grow th-on-growth provisions had been reported to be
implemented by the United States, with respect to the quantitative restrictions notified, in a similarway (i.e. by using proration).  Before proceeding further with the review of this element of the
notification by the United States, the TMB decided to bring the additional information provided by
the United States to the attention of the Former  Yugoslav Republic of Macedonia.  (G/TMB/R/100,
paragraph 4 and G/TMB/R/102, paragraphs 4 and 5).
Notifications under Article 2.2 of the ATC:  Observations by Members with regard to
notifications made pursuant to Article 2.1 by another Member
14. The TMB considered the observations made by China, pursuant to Article 2.2, with regard to
the notifications made by the European Communities
2, Turkey3 and the United States.4
Notification under Article 2.17 of the ATC:  Admi nistrative arrangements deemed necessary in
relation to the implementation of Article 2
15. The TMB reviewed, pursuant to Article 2.21, the notification made by Canada of
administrative arrangements agreed between Canada and the Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu (Chinese Taipei), taking also into account the replies provided in
response to the TMB's request for additional information from both Canada and Chinese Taipei.  The
TMB observed that the administrative arrangements contained detailed provisions regarding theoperation by Chinese Taipei of an export control system, the implementation of the flexibility
provisions notified by Canada pursuant to Article 2.1, exchange of statistics, the treatment of re-
exports and consultations with respect to any matter arising from the implementation or operation of
the ATC or of the administrative arrangements or any matter germane thereto.  The TMB noted, inter
alia, that most of the provisions of administrative arrangements agreed between Canada and Chinese
Taipei were designed to ensure the implementation of measures notified by Canada under Article 2.
The TMB sought, inter alia , clarifications from both Members on how, in their view, the provision of
statistics relating to the export or import of products not contained in the Article 2.1 notification of
                                                     
2 See paragraphs 5 to 7 above.
3 See paragraph 8 above.
4 See paragraphs 9 and 10 above.G/L/650
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Canada's quantitative restrictions on imports from Chinese Taipei were deemed necessary in relation
to the implementation of any provision of Article 2 of the ATC.  Canada stated that "[p]aragraph 13 of
the Administrative Arrangements, which reserves the right of both parties to seek additional statistics
from the other, including statistics for non-restrained products, is common to all of Canada’s
administrative arrangements pertaining to apparel and textile restraints.  It is intended, inter alia , to
address issues concerning circumvention and transshi pment.  In this context, we note that Article 5.1
of the ATC explicitly acknowledges the importance of this issue, indicates that 'Members should
establish the necessary legal provisions and/or administrative procedures to address and take action
against such circumvention', and calls on all Members to cooperate fully to address these problems."
Chinese Taipei stated that "[p]aragraph 13 is derived from the bilateral arrangement prior to [Chinese
Taipei's] accession to the WTO.  For the purpose of facilitating textiles trade between both parties, we
have agreed to keep this paragraph in the Arrangement and for this reason we consider it appropriatenot to modify the Arrangement in this regard".  As to the TMB's question concerning the provision of
the administrative arrangements which states that "Canada will, so far as possible, inform Chinese
Taipei when imports into Canada of restrained textile products are subsequently re-exported from
Canada", so that Chinese Taipei could credit back the quantity involved to the appropriate quantitative
limits, Canada replied that "[s]uch situations occur regularly, for example when Chinese Taipeicancels an export licence for a shipment which is subsequently not exported to Canada.  In this case,
Chinese Taipei would inform Canada through our electronic verification system that the relevant
export licence had been cancelled and then would re-credit automatically its quota so that it may re-
allocate the amount to another shipment.  However, no credit would be authorized in a situation where
Chinese Taipei were seeking to cancel an export licence against which a shipment had already beenentered into Canada.  This is exceedingly rare in the case of Chinese Taipei given the aforementioned
electronic verification system" (G/T MB/R/94, paragraphs 10 to 14).
Notification under Article 8.10 of the ATC:  Inability of a Member to conform with a
recommendation made by the TMB
16. The TMB reviewed a communication from the United States with reference to the provisions
of Article 8.10, following the recommendation of the TMB, included in the report of its 96
th meeting5,
that the United States implement the necessary ad justments in its methodology applied in providing
the increase for Stage 2 of the integration process in the respective growth rates of the restrictions
maintained on imports from China.  In this communication, the United States stated, inter alia , the
following:
"In assessing whether WTO Members have complied with their obligations to China under
the ATC, due consideration has to be given to the applicable provisions of the Report of the
Working Party on the Accession of China to the WTO.  [...]  [T]he TMB also recognized that
'the relevant provisions of the legal instruments of China's accession, in particular the term "as
appropriate" in the third sentence of paragraph 241 of the Report of the Working  Party on the
Accession of China, had not provided unambiguous guidance regarding some of the aspectsinvolved'.  In the view of the United States, this paragraph of the Working Party report not
only makes it clear that the increase in growth rates should be applied from the date of China's
accession, but the inclusion of the phrase 'as appropriate' also implies that this obligation
should be implemented in a manner that corresponds to the length of time of China's actual
WTO membership during the given stage of the ATC integration process.  This is why theUnited States believes it is appropriate to apply an accelerated growth rate of 25 per cent pro-
rated for the period of time when China was a Member of the WTO in Stage 2.  In view of
[this], the United States continues to be of the view that the methodology used is consistent
with paragraph 241 of the Working Party report and that, therefore, it would not be
appropriate to make any adjustment to the methodology applied."
                                                     
5 See paragraph 9 above.G/L/650
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On this basis, the United States considered itself unable to conform with the recommendation
made by the TMB on the methodology to be applied by the United States with a view to providing the
increase, for Stage 2 of the integration process, in the respective growth rates of the restrictions
maintained on imports from China and requested the TMB  to reconsider its own recommendation.
17. The TMB considered the reasons given by the United States for its inability to conform with
the TMB's recommendation, also bearing in mind the observation made by China in a communication
provided to the TMB.  The TMB observed, inter alia , that the United States did not provide any
reason or argument for its inability to conform with the TMB's recommendation that had not already
been raised by it earlier or would have been ignored by the TMB during previous stages of its
examination of the same matter.  It was also noted that in its communication China did not raise any
new argument either;  it simply referred to its previous observations.  The TMB recalled, inter alia ,
that it had already stated that "there is no provision in the ATC regarding the base levels and the
related increase in growth-rates to be applied in cases of restrained exporters that acceded to the WTO
only during the second or the third stage of the integration process.  [...].  Therefore, in order to
discharge its responsibilities, the TMB was also required to examine and to reach an understanding on
the modalities agreed and guidance provided by Members in the respective legal instruments ofaccession vis-à-vis  the implementation of the growth-on-growth provisions of the ATC."
Furthermore, the TMB had already also observed that "[t]he provision inscribed in paragraph 241 of
the Working Party report states that '[t]o these base levels, the increase in growth rates provided for in
Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of China's
accession'.  [...]  [T]he TMB was of the view that the notion 'as appropriate' was related to one or toboth of the following two matters:  (i) which of the articles enumerated should apply in the given
circumstances;  (ii)  what should be the date of their actual implementation or application.  However,
nothing in this reading suggested that it would also  provide an authorization not to implement in full
any of the articles listed, once its application had been found to be 'appropriate' for the purpose of
application of the ATC.  In other words, once the United States concluded that since China hadbecome a Member during Stage 2 of the ATC, it had been appropriate to apply the provisions of
Article 2.14(a) to China;  these provisions should have been implemented in full (i.e. for the entire
year of China's accession) and the language did not seem to imply or allow for any further flexibility
in this regard."
18. As to the reasoning included in the communication submitted by the United States under
Article 8.10, the TMB expressed the view that there was no justification to give such a far-reaching
reading to the relevant provisions of the Working Pa rty report that would have entitled the restraining
Members to apply the 25 per cent increase in the respective growth rates prorated to the length of time
of China's actual membership during Stage 2.  In examining the relevant provisions of the ATC and
the Report of the Working Party on China's accession together, the TMB could not find any element
or argument that would have supported the US 's position.  It was a clear obligation under the
provisions of the Working Party report that, "[t]o [the] base levels [applied on the date prior to China'saccession], the increase in growth rates provided for in Articles 2.13 and 2.14 of the ATC should be
applied, as appropriate, from the date of China's accession."  Nothing in this language, including the
term "as appropriate" suggested that the implementa tion of the obligations of Article 2.14, according
to which "the level of each restriction shall be increased annually […]" (emphasis added) could be
altered.  Therefore, the TMB continued to be of the view that the provisions of the Working Party
report did not provide an authorization not to implement in full for the year 2001 the annual increase
foreseen in Article 2.14(a).  In light of this, the TMB confirmed its view that for the year 2001 China
had been entitled to benefit from the "full" 25 per cent increase in the respective growth rates.
19. The TMB concluded that the reasons provided by the United States did not lead it to change
its recommendation adopted during its 96th meeting, continuing to be of the view that it had not been
justified under the relevant provisions of the accession instruments and the ATC to prorate the 25 perG/L/650
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cent increase for the short period of China's actual membership during Stage 2.  The TMB
recommended, therefore, that the United States reconsider its position and implement forthwith the
necessary adjustments in its respective methodology applied, with a view to bringing it in line with
the TMB's conclusion regarding the minimum requirements that had to be met (G/TMB/R/98,
paragraphs 5 to 27).
20. In a subsequent communication, the United States stated that it had given full consideration to
the TMB’s recommendation contained in paragraph  27 of G/TMB/R/98, and that "the US position
continues to be that the methodology used by the United States is consistent with our WTO
obligations, including paragraph 241 of the Working Party report [on the Accession of China to the
WTO].  Consequently, the United States does not intend to amend its methodology to conform to the
TMB’s recommendation".
21. The TMB recalled that it had adopted the recommendation in question at its 99th meeting after
thorough consideration of the reasons presented by the United States, pursuant to Article 8.10, for its
inability to conform with the respective recommendation made by the TMB at its 96th meeting in
January 2003.  The TMB further recalled that this first recommendation had been made following its
in-depth examination in July 2002 of the implemen tation of the growth-on-gr owth provisions by the
Members concerned. Also in view of the fact that this matter had been examined by the TMB onseveral occasions and over a particularly long period of time, the TMB expressed regret that the
matter remained unresolved.  In taking note of the US's communication, the TMB observed that,
following the recommendation it had made under Article 8.10, it was neither required nor mandated to
address the substance of the communication received from the United States, and recalled that, under
that Article, "[i]f, after such further recommenda tions, the matter remains unresolved, either Member
may bring the matter before the Dispute Settlement Body and invoke paragraph 2 of Article XXIII of
GATT 1994 and the relevant provisions of the Dispute Settlement Understanding." (G/TMB/R/100,
paragraphs 5 to 7).
II. INTEGRATION OF PRODUCTS COVERED BY THE AGREEMENT ON TEXTILES
AND CLOTHING INTO GATT 1994
Notification under Articles 2.8(a) and 2.11 of the ATC:  Second stage of integration into
GATT 1994 of products covered by the ATC
22. The TMB reverted to its examination of a notification received pursuant to Article 2.8(b) and
2.11 from Bolivia, also on the basis of an additional notification from Bolivia in response to the
TMB's request for clarification.  The TMB decided to seek clarification from Bolivia regarding certain
aspects of this additional notification (G/TMB/R/97, paragraph 4).
III. NOTIFICATIONS UNDER ARTICLE 3 OF THE ATC
Notification under Articles 3.1 and 3.2(b) of the ATC:  Restrictions on textile and clothing
products other than those covered by the provisions of Article 2 and their progressive phase-out
23. The TMB resumed its examination and took note of a notification received pursuant to
Article 3.1 from China, following its accession to the WTO, also on the basis of additional
information submitted by China in response to clarifications sought by the TMB.   China notified that
it maintained quantitative export restrictions for silk  yarn and woven fabrics of silk.  In examining this
matter, the TMB considered different aspects involved in or related to this notification, such as the
scope of the application of Article 3 (i.e. whether it also applies to export restrictions);  how therecourse to the provisions of Article 3 fits with provisions of the Report of the Working Party on the
Accession of China dealing with export restrictions;  the management and administration of the
restrictions in question and their system of allocation, including the availability of information, or theG/L/650
Page 9
lack thereof, on the possible breakdown of export quotas according to destinations;  as well as the
examination of the phase-out programme provided by China in the sense of Article 3.2(b).  The TMB
recalled that in its additional notification provided in response to the TMB's queries, China had
provided information regarding the management and administration of the export restrictions,
including their system of allocation.  Though issues had been raised regarding the possibility ofreceiving indications or statistical information on the possible allocation of export quotas according to
destinations, it was understood that the quotas were applied on a global basis and that allocation by
the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), also through its provincial
offices, was limited to the designation of Chinese domestic enterprises that could apply for export
licences within their allocated quota limits.  With re gard to the elements of the additional notification
of China which constitute a phase-out programme in the sense of Article 3.2(b), the TMB noted the
reaffirmation by China that the two export quotas would be eliminated no later than 1 January 2005.Furthermore, the respective levels of both quotas for silk yarn and woven fabrics of silk had been
increased by 10 per cent for the year 2002, compared to the levels in 2001.  In addition, China
indicated that, in both cases, the quota levels for 2003 and 2004 would be determined by applying
respectively an increase of 10 per cent over the levels of the previous year (G/TMB/R/93,
paragraphs 18 to 22).
Notification under Article 3.2(b) of the ATC:  Progressive phase-out of restrictions not justified
under a GATT 1994 provision
24. The TMB took note of a bilateral agreement between Brazil and Chinese Taipei, notified by
Brazil together with the notification it made under Article 6.9 of a restraint measure agreed withChinese Taipei
6, with reference to the phase-out programme of the quantitative restriction maintained
by Brazil on imports from Chinese Taipei of certain man-made knitted or crocheted fabrics that had
been notified by Brazil pursuant to Article 3.2(b).  The original phase-out programme had been
examined by the TMB at its meeting in July 2002.  A ccording to the bilateral agreement, the restraint
level for the last quota year had been significantly increased and the termination of the restriction wasbrought forward to the end of June 2003 (instead of mid-September 2003) (G/TMB/R/97,
paragraph 51).
IV. TRANSITIONAL SAFEGUARD MEASURES INTRODUCED UNDER THE ATC
Notifications under Article 6.9 of the ATC:  Restraint measures agreed between Members
25. The TMB reviewed, pursuant to Article 6.9, the notification by Brazil of a restraint measure
agreed with Chinese Taipei on imports from Chinese Taipei of other woven fabrics, containing 85 per
cent or more by weight of textured polyester fi laments, dyed, without rubber filaments (HS/NCM
Code 5407.5210) and of other woven fabrics, containing 85 per cent or more by weight of non-
textured polyester filaments (HS/NCM Code 5407.6100).  In order to reach a conclusion as to whether
the agreement was justified in accordance with the provisions of Article 6, the TMB conducted a
detailed examination of the specific and relevant factual information provided by Brazil in accordance
with Article 6.7, with a view to determining whet her Brazil had successfully demonstrated, pursuant
to the provisions of Articles 6.2 and 6.3, that the products subject to the agreed restraint were being
imported into its territory in such increased quantities as to cause serious damage to its domestic
industry producing like and/or directly competitive products.  As subsequent steps, the TMB
considered whether Brazil had been right, pursuant to the provisions of Article 6.4, in attributing theserious damage to a sharp and substantial increase in imports from Chinese Taipei and whether the
respective agreement complied with the applicable provisions of Article 6 (such as Article 6.8
regarding the level of the agreed restraint, Article 6.12 concerning the duration of the measure,
Article 6.13 as regards the growth rates and flexibility provisions) and, if appropriate, whether it met
                                                     
6 See paragraph 25  below.G/L/650
Page 10
other requirements specified by the ATC.  The TMB found that Brazil had successfully demonstrated,
pursuant to the provisions of Articles 6.2 and 6.3, that the two products subject to the agreed restraint
were being imported into its territory in such increas ed quantities as to cause serious damage to its
domestic industry producing like and/or directly competitive products and agreed with Brazil that the
serious damage caused to its domestic industry could be attributed, inter alia , to imports from
Chinese Taipei.  Furthermore, the TMB found that the agreement reached complied with the
applicable provisions of Article 6.  On the basis of the above, the TMB determined that the agreement
reached between Brazil and Chinese Taipei was justified in accordance with the provisions of
Article 6 (G/TMB/R/97, paragraphs 5 to 41).
26. The TMB reviewed, pursuant to Article 6.9, the notification by Brazil of a restraint measure
agreed with Korea on imports from Korea of other woven fabrics, containing 85 per cent or more by
weight of textured polyester filaments, dy ed, without rubber filaments (HS/NCM Code 5407.5210)
and of other woven fabrics, containing 85 per ce nt or more by weight of non-textured polyester
filaments (HS/NCM Code 5407.6100).  The TMB observed that the request for consultations pursuant
to Article 6.7 had been addressed by Brazil to Korea on the same date as a similar request addressed
to Chinese Taipei7,  and that it covered the same two products.  Moreover, the specific and relevant
factual information provided to Korea together with the request for consultations pursuant to
Article 6.7, concerning developments in total imports and the factors referred to in Article 6.3, on
which Brazil had based the determination of the existence of serious damage, was the same as that
provided to Chinese Taipei, referred to above.   Therefore, the TMB considered that its examination
of the information provided, as summarized in paragraph 25 above, and its finding that Brazil had
successfully demonstrated, pursuant to the provisions of Articles 6.2 and 6.3, that the two productssubject to the agreed restraint were being imported in to its territory in such increased quantities as to
cause serious damage to its domestic industry producing like and/or directly competitive products,
applied also to the case of the restraint agreed between Brazil and Korea.  As subsequent steps, the
TMB considered whether Brazil had been right, pursuant to the provisions of Article 6.4, in
attributing the serious damage to a sharp and substantial increase in imports from Korea and whetherthe respective agreement complied with the applicable provisions of Article 6 (such as Article 6.8
regarding the level of the agreed restraint, Article 6.12 concerning the duration of the measure,
Article 6.13 as regards the growth rates and flexibility provisions) and, if appropriate, whether it met
other requirements specified by the ATC.  The TM B agreed with Brazil that the serious damage
caused to its domestic industry could be attributed, inter alia , to imports from Korea.  Furthermore,
the TMB found that the agreement reached complied with the applicable provisions of Article 6.  On
the basis of the above, the TMB determined that the agreement reached between Brazil and Korea wasjustified in accordance with the provisions of Article 6 (G/TMB/R/97, paragraphs 42 to 50).
V. COMMUNICATIONS RECEIVED BY THE TMB
Communication received from Canada
27. The TMB took note of a communication by Canada, for the Body's information, of the
notification Canada had submitted to the Committee on Trade and Development (CTD) with respect
to improvements to the Canadian preferential scheme for least-developed countries (LDCs).  Canada
stated that "[a]s it is indicated in the above-mentioned notification, effective 1 January 2003, Canada
provides duty-free access for all products from LDCs, with the exception of over-quota tariff items for
dairy, poultry and egg products.  Canada also introduced new rules of origin requirements that applyto the newly covered textile and apparel products entering the Canadian market from LDCs.  Finally,
in relation to Article 2.15 of the Agreement on Textiles and Clothing, Canada's initiative provides for
quota-free access for all products covered by the Agreement."  Canada also enclosed in the
communication an "Introductory Guide to the Market Access Initiative for the Least-Developed
                                                     
7 See paragraph 25 above.G/L/650
Page 11
Country and the Least-Developed Country Tari ff" providing more details on the initiative
(G/TMB/R/98, paragraph 28).
Communication received from the Chairman of the Special Session of the Committee for Trade
and Development
28. The TMB considered a communication received from the Chairman of the Special Session of
the Committee on Trade and Development requesting information on any discussions or other
developments that had taken place in the TMB since the Body's communication of January 2002  on
this matter.  The TMB adopted a response to this communication which stated, inter alia , that the
Body had not had a general discussion relating to the special and differential treatment provisions
contained in the ATC during the period referred to.  At the same time, the TMB drew the attention of
the Committee to the Body's Report (2002), which referred, among other issues, to theimplementation of the provisions of Article 2.18 of the ATC during the third stage of the integration
process.  The TMB's view was that the information contained therein could provide a useful
background to the Special Session's discussion of the relevant proposals that had been referred to it.
The TMB authorized its Chairman to transmit this response to the Chairman of the Special Session of
the Committee on Trade and Development (G/TMB/R/93, paragraph 23).
Communication received from the Chairman of the Working Group on Trade and Transfer of
Technology
29. The TMB also considered a communication received from the Chairman of the Working
Group on Trade and Transfer of Technology, reque sting information on any discussion, submissions
and/or other developments relating to trade and technology transfer that had taken place in the TMB.
The response adopted indicated, inter alia , that the ATC contains no specific provision that would
require or lead the Body to monitor developments or issues related to trade and transfer of technology.
Presumably for the same reasons, no submission relevant to this subject had been provided to the
TMB by Members.  The TMB, therefore, had not had any discussion in this regard.  The TMBauthorized its Chairman to transmit this response to the Chairman of the Working Group on Trade and
Transfer of Technology (G /TMB/R/93, paragraph 24).
VI. OTHER MATTERS ADDRESSED BY THE TMB
WTO Members' compliance with notification requirements
30. During its 99
th meeting, in April 2003, the TMB had a discussion on the Members'
implementation of the notification and information requirements embodied in the ATC.  The TMBrecalled that, inter alia , Article 3.3 states that "[d]uring the duration of this Agreement, Members shall
provide to the TMB, for its information, notifications submitted to any other WTO bodies with respect
to any new restrictions or changes in existing restrictions on textile and clothing products, taken under
any GATT 1994 provision, within 60 days of their coming into effect."  The TMB stressed the
importance of the Members' adherence to the notification requirements contained in the ATC.  It wasalso observed that measures or actions, other than those falling under the provisions of Article 3.3,
having a bearing on the implementation of other provisions of the ATC should also be brought to the
TMB's attention, for its information (G/TMB/R/98, paragraph 29).
31. In September 2003, at its 103
rd meeting, the TMB reverted to the same matter.  It observed,
inter alia , that since the report of its April 2003 meeting had been issued, no related notification or
information from Members had been received.  The TMB assumed, however, that agreements had
been reached between certain Members or policies adopted and developed by some Members, falling
under the provisions of Article 3.3 or having a bearing on the implementation of other provisions of
the ATC, without being notified to any WTO body or brought to the attention of the TMB.  ReferenceG/L/650
Page 12
was made in this context to certain comments and observations included by the TMB in its
comprehensive report to the Council for Trade in Goods on the implementation of the Agreement on
Textiles and Clothing during the second stage of the integration process.8  The TMB, therefore, urged
the Members concerned to provide to the TMB, pursuant to Article 3.3, any relevant notifications
submitted to any other WTO bodies with respect to su ch agreements or policies and/or to bring to the
TMB's attention those measures or actions having a bearing on the implementation of other provisions
of the ATC, in particular on that of Article 2.  (G/TMB/R/102, paragraph 6).
_____________
                                                     
8 See G/L/459, in particular paragraphs 335 and 336.