RESTRICTED
WORLD TRADE G/L/92
10July1996
ORGANIZATION(96-2780)
COUNCIL FOR TRADE INGOODS Original: English
IMPLEMENTATION OFTHE AGREEMENT ONTEXTILES AND
CLOTHING AND RELATED MATTERS
Thefollowingcommunication,dated4July1996,hasbeenreceivedfromthePermanentMission
ofPakistan, withtherequest thatitbecirculated asaformal document oftheCouncil forTrade in
Goods onbehalf ofASEAN Members oftheWTO, namely, Brunei Darussalam, Indonesia, Malaysia,
Philippines, Singapore andThailand, andHong Kong, India, Korea, andPakistan.
_______________G/L/92
Page2
IMPLEMENTATION OFTHE AGREEMENT ONTEXTILES AND
CLOTHING AND RELATED MATTERS
I. Introduction
1. Representing about 9%ofworld export ofmanufactures in1994, textile andclothing isone
ofthemost important sectors inworld trade. Itsimportance fordeveloping countries isevenmore
significant inasmuch asthesector accounts forover20%oftheirtotalexports; forsome developing
countries, especially theleastdeveloped among them, itsshare intheiroverall export earnings isstill
larger (over 60%ofexports).
2. TheAgreement onTextiles andClothing (ATC) wastherefore hailed asoneoftheprincipal
achievements oftheUruguay Round, bothinterms ofthesystemic significance ofthephase outof
MFArestrictionsforarule-basednon-discriminatorytradingsystemandofitscontributiontotheincrease
inexport earnings ofdeveloping countries.
3. Itisalsoimportant torecall thatinits"Overview oftheResults ofMarket Access inGoods
andServices" (November 1994)1,eventhemostconservative version oftheModel developed bythe
GATT Secretariat toestimate theincrease inexports duetotheimplementation ofliberalisation
commitmentsmadeintheUruguayRound,projectedanincreaseof18%fortextilesand69%forclothing
overa10-year period. These increases weresignificantly higher thanformostother sectors andwere
mainly attributable totheelimination ofquantitative restrictions under theMulti-Fibre Arrangement,
andforthestrong estimated gainofsome 14%inthemerchandise exports ofdeveloping andtransition
economy countries.
II. Review ofImplementation oftheTextile Agreement andRelated Matters
A. Purpose oftheReview
4. Against theabove backdrop, itisimportant thatareview oftheimplementation oftheATC
becarried outinthecontext oftheWTO Ministerial Conference (SMC) atSingapore withthepurpose
ofmaking anevaluation oftheimplementation sofar,andtomake appropriate recommendations to
theSMC. Theevaluation should aimtoidentify andassess theelements necessary forfaithful
implementation oftheATC andforaneffective process ofintegration ofthesector intothenormal
rulesoftheGATT/WTO. Theevaluation mayalsoconsider other matters affecting trade intextiles,
especially fortheexport interests ofdeveloping countries.
B. Scope oftheReview
5. Webelieve thatthereview mayusefully bestructured around consideration ofcertain topical
elements asfollows:
1Source: General Agreement onTariffs andTrade (November 1994), TheResults oftheUruguay
Round ofMultilateral Trade Negotiations, Market Access forGoods andServices: Overview ofthe
Results.G/L/92
Page3
(i) Integration programmes: Acentral feature oftheATC wastheprogressive character ofthe
integration process2.Itwasalsoenvisaged (Article 1:5)thatinorder tofacilitate theintegration process,
Membersshouldallowforcontinuousautonomousadjustmentsandincreasedcompetitionintheirmarkets.
- GiventhatthefirststageoftheintegrationprogrammesundertakenbyMFArestrainingMembers
havenotincluded anyrestrained items, except foroneitembyoneMember, thereview exercise
mayconsider itsimpact forthelaterstages oftheintegration process. Assessment maybe
made especially inthecontext ofcontributions tosmooth transition toGATT disciplines.
Examination mayalsocover elements oftheintegration programmes ofthese Members for
thesecond stage, bearing inmind thatprogressive liberalization ofrestrictions isintheinterest
ofbothrestraining andexporting Members.
(ii) UseofTransitional Safeguards: TheATC provides forasafeguard mechanism during the
transition period tobe"used assparingly aspossible" and"consistently withtheprovisions (i.e.
disciplines) ofthisArticle andtheeffective implementation oftheintegration process" (Article 6:1).
- Against these basic principles, thereview mayconsider theinvocation ofalarge number of
safeguard measures against theexport interests ofdeveloping country Members, andassess
theimplications ofsuchactions foreffective implementation oftheintegration process during
theremainder ofthetransition period.
(iii) Bilaterally agreed arrangements: Afundamental concept oftheATC wastostrengthen the
multilateral disciplines inthefieldoftextile trade soastoensure thefinalintegration ofthesector
intothenormal rulesoftheGATT/WTO. Accordingly, MFA'saccent onbilateral arrangements was
excluded from itsbasic architecture. Inthelimited context inwhich bilateral arrangements were to
bepossible, multilateral disciplines werestrengthened including through stricter oversight bytheTMB.
- Given thatanumber ofbilateral arrangements havebeenconcluded including inthecontext
oftheinvocation ofsafeguard measures, andsome ofthesearrangements werenotsubsequently
confirmed bytheTMB, thereview mayexamine theimpact ofbilateral arrangements forthe
integrity ofthemultilateral rules anddisciplines.
(iv) Functioning oftheTMB: TheATC requires theTMB tosupervise theimplementation ofthe
ATC, toexamine allmeasures taken under theATC andtheirconformity therewith, andtotakeother
actions specifically required oftheTMB bytheATC (Article 8:1). TheTMB hasthusbeenassigned
theimportant task,interalia,ofadjudicating among Members.
- Thereview exercise mayconsider ways toimprove theworking oftheTMB through, inter
alia,enhancing thetransparency ofitsprocess andbyensuring participation ofitsmembers
strictly onanadpersonam basis soastoensure impartiality.
(v) Treatment ofLeast Developed Countries andsmall suppliers: TheATC provided thattothe
extent possible, exports fromaleast-developed country Member mayalsobenefit fromtheprovisions
ofArticle 2:18insuchawayastopermit meaningful increases inaccess possibilities fortheseMembers
asforsmall suppliers andnewentrants inthefieldoftextiles andclothing trade.
- Given thatthese improvements have notbeen extended totherestrained least-developed
Members, thereview mayconsider theimpact ofthesituation fortheexport possibilities of
theMembers concerned.
2Cf.thesecond preambular paragraph oftheATC.G/L/92
Page4
(vi) Particular interests ofcotton-producing countries: Article 1:4oftheATC provided that"the
particular interests ofthecotton producing exporting Members should, inconsultation withthem, be
reflected intheimplementation oftheprovisions oftheAgreement".
- Given thatnosuchconsultations havebeennotified, thereview mayassess itsimplications
fortheparticular interests oftheexporting Members concerned, andforfullandeffective
implementation oftheATC.
(vii) RulesofOrigin:TheATCenvisagedthatintroductionofchangesinpractices,rules,procedures,
etc.,should not:upset thebalance ofrights andobligations between theMembers concerned; adversely
affect theaccess available toaMember; impede fullutilisation ofsuchaccess; ordisrupt tradeunder
theATC (Article 4:1). TheURAgreement onRules ofOrigin further provided thatpending the
completion ofthework programme forharmonization ofRules ofOrigin, Members shallensure, inter
alia,thattheir "rules oforigin arenotusedasinstruments topursue trade objectives directly or
indirectly "3.
- Given thatonerestraining Member hasimplemented changes initsRules ofOrigin relating
toimports oftextile andclothing products asaninstrument oftrade policy, andthese changes
haveintroduced great uncertainty andunpredictability forthefullutilization ofquota access,
thereview exercise should consider thesituation withaviewtoproposing corrective measures.
(viii) Other ATCissues (O.P.T., special regimes, etc.): Afundamental principle oftheGATT/WTO
istheelimination ofdiscriminatory treatment ininternational commerce. Contrary tothis,however,
special regimes arecontinually being extended toprovide forbetter access tocertain Members or
countries.
- Thereview exercise should ensure thatsuchspecial privileges donotundermine theaccess
rights ofrestrained Members.
(ix) Relationship between Restrictions andRegionalism:
- Inviewofthetremendous adverse implications ofanexpanding coverage ofrestrictions in
thecontext ofregionalism, especially fortheexport prospects ofdeveloping country Members,
thereview mayfocus onways toensure thataccess fortheexports ofthese Members isnot
impeded orundermined.
(x) Useoftrademeasures fornon-trade purposes: Recently pressures havebeengrowing fortrade
measures inpursuit oftherealisation offurtherance ofnon-trade objectives andpurposes, particularly
affecting thetextile products. Often, these measures carry aprotectionist bias.
- Given thattrade measures fornon-trade purposes arebased oncriteria outside theframework
ofWTO disciplines, andproduce serious disruptive effects forthetradeinterest andprospects
ofdeveloping country Members, thereview exercise mayconsider ways toensure strict
compliance withtherules anddisciplines ofthemultilateral trading system.
3Cf.Article 2(b)oftheAgreement onRules ofOrigin.G/L/92
Page5
III. TheReview Mechanism
6. Unlike theother Uruguay Round agreements, theATC doesnothaveaspecific multilateral
bodytoundertake reviews withtheparticipation ofallWTO Members. TMB members perform their
functions intheirindividual capacities, anditdoesnotassuchreflect theconcerns andviews ofWTO
Members. Article IVoftheAgreement establishing theWTO provides thattheCouncil forTrade
inGoods (CTG) should oversee thefunctioning oftheMultilateral Trade Agreements inAnnex 1A
including theATC. TheCTG therefore hasanimportant roletoplayinthereview exercise proposed
inthiscommunication.
IV. Conclusion
7. Inviewoftheimmense systemic importance oftheintegration oftextiles intotheWTO body
ofrules, andthecommitment totheprogressive elimination ofMFA restrictions fortheexport interests
ofdeveloping countries, thefirstMinisterial Conference following theconclusion oftheUruguay Round
must provide thenecessary political impulse foracommercially meaningful process ofintegration.
TheMinisters should confirm astrong policy commitment tothefullimplementation oftheATC and
should direct theGeneral Council tokeepitsprogress under review andreport tothenextMinisterial
Conference. Tofacilitate consideration oftheissue bytheMinisters atSingapore, theCouncil for
Trade inGoods should present itsreport withappropriate recommendations inaccordance withthe
Reporting Procedures fortheSMC adopted bytheGeneral Council indocument WT/L/145.