WORLD TRADE G/TMB/N/303
23September 1997
ORGANIZATION(97-3924)
Original: English Textiles Monitoring Body
AGREEMENT ONTEXTILES AND CLOTHING
Communication from theEuropean Community
TheTextiles Monitoring Body hasreceived acommunication fromtheEuropean Commission
inreply toitsrequest foradditional information1inthecontext ofthepreparation oftheBody's
Comprehensive Report ontheimplementation oftheATC during itsfirststage, inaccordance with
paragraph 11ofArticle 8.
TheTMB iscirculating thiscommunication toWTO Members fortheirinformation.
1SeeG/TMB/11, issued on14February 1997.G/TMB/N/303
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European Commission
Permanent Delegation inGeneva
8July1997
To: Mr.András Szepesi
Chairman oftheTMB
From: R.E.Abbott
Ambassador, Permanent Representative totheWTO
Subject: Submission from theEUforthepreparation bytheTMB oftheReport foreseen by
Article 8.11oftheATC
_______________
Submission from theEuropean Community
forthePreparation bytheTMB
oftheReport Foreseen byArticle 8.11oftheATC
Introduction
TheEuropean Community isoneofthemajor textile andclothing markets intheworld. Imports
ofclothing products in1996 amounted toECU 30.6billion, anincrease of6.8percentinvolume
and7.2percentinvalue compared with1995. Imports oftextiles amounted toECU 13.3billion (an
increase of1.5percentinvolume and0.1percentinvalue compared with1995). Inaddition, the
Community isamajor exporter oftextiles andclothing. Exports ofclothing in1996 amounted to
ECU 11.9billion (anincrease of14percentinvolume and12percentinvalue over1995). The
European Community exported textiles tothevalue ofECU 18.4billion.
Thus theEuropean Community considers thattheprogressive character oftheprocess of
integration (assetoutintherecitals totheATC) should cover notjusttheintegration programmes
ofMembers butalsotheapplication ofstrengthened GATT 1994 rules anddisciplines covering, in
particular, access tomarkets.
Least-developed country Members, small suppliers andnewentrants
TheEuropean Community hasapplied theprovisions ofArticle 2.18byincreasing thegrowth
ratesduring thefirststageofintegration firstby16percentandsecondly byanadditional 25percent
inrespect ofPeruandSriLanka, being those Members falling under thedefinition ofsmall suppliers.G/TMB/N/303
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TheEuropean Community doesnotagree withaconstruction ofArticle 2.18which would leadtothe
conclusion thattheprovision should apply toindividual restrictions asopposed tothetotality of
restrictions applicable toaMember.
Insofarasleast-developed country Members areconcerned theEuropean Community does
notmaintain anyrestrictions onproducts covered bytheATC. Inaddition, whether asaresult of
theLomé Convention ortheGeneral System ofPreferences (GSP), mostimports totheCommunity
fromLLDCs benefit fromzerodutyprovisions concerning tariffs. Thisposition iskeptunder review
andtheEuropean Community iscurrently examining whether arelaxation oftheGSPsystem willbe
possible tofurther benefit textile exports from certain LLDC Members andnon-Members.
Cotton-producing exporting Members
During thenegotiations oftheATC theEuropean Community engaged inconsultations with
allmajor exporting Members including thecotton-producing exporting countries. Further, prior to
itsdetermination ofthesecond stage ofintegration theEuropean Community consulted withallthose
WTO Members affected byrestrictions withaviewtoachieving abetter mutual understanding ofthe
positions oftherespective Members concerning theimplementation oftheATC. The
European Community considers thatthisprocess hasbeeneffective inallowing theinterest ofcotton-
producing Members tobereflected intheimplementation oftheATC. None ofthecotton-producing
exporting Members have, atanytime, raised anyspecific concern orfactor which theyconsidered
theCommunity hadfailed totakeintoaccount concerning theirinterests intheimplementation ofthe
provisions oftheATC.
Continuous autonomous adjustment
Thetextiles andclothing sector occupies acentral position intheeconomy ofthe
European Community withover 2,200,000 employees andacontribution toadded value inthe
manufacturing sector intheregion of4.2percent. Over recent years thesector hasfaced aconstant
revaluation ofmethods, technologies andmodes oforganization partly caused byexternal factors such
asthebadexternal conjuncture ofthelastyears, theentry intothemarket ofnewproducers andnew
technological developments butalsointernal factors ofadaptation andreorganization.
Despite positive signs inrespect ofexports, production fellin1996and,asaresult, afurther
100,000 jobswerelostduring thelastyear(inaddition tothe600,000 jobsalready lostbetween 1990
and1995). Between 1990 and1996 some 20,000 enterprises haveclosed down.
Against thisbackground thetextiles andclothing sector has,nonetheless, improved its
competitivity ataninternational levelinparticular asaresult ofitsspecialization inthehighadded
value endofthesector andanactive exporting strategy.
Aseries ofCommunity programmes assist structural adjustment. Thus, thetextiles andclothing
sector isinaposition totakeanadvantage ofaseries ofCommunity programmes destined tofavour
autonomous adjustment suchasreconversion andmodernization bywayofassistance fromthestructural
funds inregions mostaffected bypermanent adaptation inthesector. TheEuropean social fundprovides
animportant instrument toassist therequalification orconversion ofworkers inallsectors affected
byrestructuring including textiles andclothing. Thetextiles andclothing sector canalsotakeadvantage
ofprogrammes concerning technological research anddevelopment andsmall andmedium enterprises.G/TMB/N/303
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Integration programmes
TheEuropean Community hasadopted apositive andbalanced approach tointegration as
demonstrated byitssecond stage ofintegration which contains amixture ofrestricted andunrestricted
products. TheEuropean Community drewupitssecond stageofintegration, asstated above, following
fullconsultation withallMembers affected byrestrictions ontheirexports totheEuropean Community.
Asstatedatthetime,theEuropeanCommunitywouldhavebeenopentoconsideringfurtherliberalization
haditeither received requests todosofromexporting Members andincircumstances where Members
haddemonstrated amore positive position inrespect ofthequestion ofaccess totheirownmarkets
fortheexports tothem from other Members, notably theEuropean Community.
TheEuropeanCommunityiscurrentlyreviewingitsintegrationprogrammefollowingthefindings
oftheTMB inthematter referred toitbyColombia relating totheinclusion inthe
European Community 'sfirststage ofintegration ofcertain textile andclothing products covered by
6-digit HSlinesqualified by"ex"intheATC. Once thisreview iscomplete theEuropean Community
willnotify theTMB oftheresults. However, theexamination ofthese matters bytheTMB indicated
thatmany oftheproblems faced bytheCommunity hadalsobeenfaced byother Members (lack of
statistics going beyond the6-digit level, etc.)andtheEuropean Community therefore considers that
theTMB musttakeactive steps toreview allintegration programmes ofMembers toensure thatthe
same principles areapplied equally toallMembers concerned bythese issues.
Insofarasthecomments ofcertain Members about "backloading" areconcerned the
European Community, asstated above hastaken apositive approach tointegration bytheinclusion
ofproducts already covered byrestrictions. Forthose products notyetintegrated, andcovered by
restrictions, theprovisions concerning theenhanced growth ratescontained inArticles 2.13and2.14
willoperate togiveverysubstantial increases inthevolumes covered byrestrictions. Inaddition,
itshould benoted thatMembers areinfullconformity withtheirlegalobligations under theATCand,
given thatthese concerns were feltduring thenegotiation oftheATC butnoprovisions designed to
avoid sucharesult wereincluded intheAgreement thereisnovalidargument ofunfulfilled expectation.
TheEuropean Community doesnotanticipate anydifficulties inachieving abalanced integrated
programme leading tofullintegration on1January 2005.
Inaddition, itshould benoted thatMembers havetaken broadly similar course inrespect of
theirintegration programmes, whether these result fromArticle 2.7(a) orArticle 2.7(b) oftheATC.
Changes inrules oforigin
Given theeffect thatchanges inpractices, procedures andcategorization canhave onthe
implementation oradministration ofrestrictions theATC makes specific provision concerning the
introduction ofthose changes. Inparticular theyshould notupset thebalance ofrights andobligations
between Members, adversely affect access available toMembers, impede thefullutilization ofsuch
access ordisrupt tradeunder theATC. OneMember, nonetheless, hasintroduced farreaching changes
initsrules oforigin which havehadtheabove effects. Inparticular, products previously exported
asofCommunity origin nowfallunder theorigin ofthesupplier country totheCommunity ofthe
clothfromwhich suchproducts aremade, creating problems, inparticular, withlabelling andinrespect
ofquotas where theclothinquestion issubject torestriction intheMember thathaseffected thechanges.
Transitional safeguard mechanism
TheEuropean Community hasnothadrecourse totheprovisions ofArticle 6oftheATC.G/TMB/N/303
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Anti-dumping
TheEuropean Community operates theanti-dumping instrument within anarrowly defined
legislative framework which isinlinewithitsWTO commitments andensures afairandtransparent
procedure.
Market access
There isconsiderable concern thatcertain Members donotconsider theobligation toachieve
improved access tomarkets fortextile andclothing products asanimportant partoftheintegration
process, assetoutinArticle 7oftheATC. Thus, thereisaconcern thatwhile thestages ofintegration
upto1January 2005 willensure theintegration ofthesector sofarastheabolition ofrestrictions
isconcerned certain Members willhavedonelittleornothing toimprove conditions foraccess totheir
ownmarkets forimports. Some, indeed, areintheprocess ofreducing access totheirmarkets.
Theeffect ofthisisseenoverabroad range ofissues suchasincreases intariff rates(either
going beyond bound ratesornot,nonetheless constituting considerable increases), theintroduction
oflabelling andcertification requirements, changes intherulesoforigin andmaintenance ofbalance-of-
payments provisions affecting textiles andclothing.
TheTMB'sapproach tothisprovision, essentially onebased onnotification, hasresulted in
littleornoexamination ofthisobligation taking placetodatedespite itsimportance intheoverall balance
ofrights andobligation ofMembers.
Functioning oftheTMB
Theunique roleoftheTMB under theATC issuchthatitisabletoreview theaction of
Members inbotharulebased andaconciliatory fashion. Overthecourse ofthefirststageofintegration
theTMB, following initial difficulties, hasbeenabletogiveincreasingly detailed recommendations
andfindings, which aretobewelcomed.