WORLD TRADE WT/DS33/R
6January 1997
ORGANIZATION(97-0001)
Original: English
UNITED STATES -MEASURE
AFFECTING IMPORTS OFWOVEN WOOL
SHIRTS AND BLOUSES FROM INDIA
Report ofthePanel
Thereport ofthePanel onUnited States -Measure Affecting Imports ofWoven Wool
Shirts andBlouses fromIndiaisbeing circulated toallMembers, pursuant totheDSU.
Thereportisbeingcirculatedasanunrestricteddocumentfrom6January1997pursuant
totheProcedures fortheCirculation andDerestriction ofWTO Documents
(WT/L/160/Rev.1). Members arereminded thatinaccordance withtheDSU only
parties tothedispute mayappeal apanel report, anappeal shallbelimited toissues
oflawcovered inthepanel report andlegalinterpretations developed bythepanel,
andthatthere shallbenoexparte communications withthepanel orAppellate Body
concerning matters under consideration bythepanel orAppellate Body.-i-
TABLE OFCONTENTS
I. INTRODUCTION ...........................................1
II. CHRONOLOGY OFEVENTS ..................................1
United States Requests Consultations Under theMFA inDecember 1994 .........1
United States Requests Consultations Under theATC inApril 1995 ............2
United States Imposes Restraints onImports from India inJuly1995 ............3
Review bytheTextiles Monitoring Body .............................3
India Requests Review ofTMB Finding inOctober 1995 ...................3
India Requests theEstablishment ofaPanel inMarch 1996 ..................4
III. CLAIMS OFTHE PARTIES ...................................4
TheRequest ofIndia ..........................................4
TheRequest oftheUnited States ..................................5
Comments ontheRequest tothePanel ...............................5
IV. THIRD PARTY SUBMISSIONS .................................5
Submission ofCanada .........................................6
Submission oftheEuropean Communities ............................7
Submission ofNorway .........................................8
Submission ofPakistan ........................................9
V. MAIN ARGUMENTS OFTHE PARTIES ...........................10
A. Introduction ...............................................10
B. Burden ofProof ............................................10
C. Standard ofReview ..........................................11
TheFurFeltHatCase .........................................13
D. Article 6oftheATC .........................................16
TheATC Safeguard Mechanism ..............................16
Legal Analyses ofSerious Damage orActual Threat Thereof Suggested bythe
Parties .............................................18
Status oftheMarket Statement ...............................22
Sources oftheDataProvided bytheUnited States ..................22
E. Demonstration ofSerious Damage bytheUnited States ...................24
India'sReview oftheEconomic Variables .......................25
United States Review oftheEconomic Variables ...................25
TheIndustry andtheProducts ...............................26
(i) TheNature oftheWool Sector intheUnited States .............26
(ii) What Constitutes theDomestic Market ....................28
(iii) Products Manufactured Domestically ......................30
DataonDomestic Production ...............................31
DataonExports ........................................33
DataonEmployment, Man-hours andWages .....................36
Information onPrices ....................................38
Information onInvestment andCapacity .........................40-ii-
Table ofContents (cont'd)
F. Causal Link Between Increased Imports andtheDomestic Industry Situation ....41
G. Attribution toIndia ..........................................44
TMB Review oftheUnited States Action ........................45
H. Status ofOther Relevant Information ..............................46
Employment in"Other Relevant Information" .....................48
Establishments in"Other Relevant Information" ....................49
I. Consultations and Endorsement ofActions byTMB: Additional Procedural
Requirements ..............................................50
J. Date oftheSafeguard Action ....................................53
Article XIII:3(b) ofGATT 1994 ..............................55
Speculative RiseinImports .................................57
Unusual andCritical Circumstances ...........................58
K. Article 2oftheATC .........................................59
VI. INTERIM REVIEW .........................................60
VII. FINDINGS ................................................61
A. Introduction ...............................................61
B. Claims oftheParties .........................................62
C. General Interpretative Issues ....................................63
1. Burden ofProof ........................................63
2. Standard ofReview ......................................64
3. TheRoleoftheTMB Process Versus theRoleoftheDispute Settlement Mechanism
oftheDSU ...........................................66
D. Review oftheUSDetermination ..................................67
1. Article 6oftheATC .....................................67
2. India'sClaim Regarding theSubstantive Requirements inArticle 6oftheATC 69
3. Overall Assessment oftheUSDetermination ......................74
4. Serious Damage orActual Threat Thereof .......................75
5. TheObligation toConsult andtheAlleged Need forTMB Endorsement .....76
E. Alleged Retroactive Application oftheSafeguard .......................77
F. India'sClaim thatArticle 2oftheATC wasViolated ....................77
VIII. CONCLUSIONS ............................................77WT/DS33/R
Page1
I INTRODUCTION
1.1 Inacommunication dated 14March 1996, India requested thatapanel beestablished atthe
nextmeetingoftheDisputeSettlementBody(DSB)pursuanttoArticleXXIII:2ofGATT1994,Article6
oftheUnderstanding onRules andProcedures Governing theSettlement ofDisputes (DSU) and
Article 8.10 andother relevant provisions oftheAgreement onTextiles andClothing (ATC)
(WT/DS33/1). Thisarose fromarestraint introduced bytheUnited States inrespect ofIndia'sexports
ofwoven wool shirts andblouses (UScategory 440), under Article 6oftheATC.
1.2 India noted thatthematter hadremained unresolved inspiteofbilateral consultations between
IndiaandtheUnited States heldunder Article 6.7oftheATCinApril andJune1995; theexamination
ofthematter bytheTextiles Monitoring Body (TMB) under Article 6.10oftheATC inAugust and
September 1995; thecommunication senttotheTMB under Article 8.10oftheATC, within onemonth
oftheTMB recommendation under Article 6.10oftheATC, explaining thereasons forIndia'sinability
toconform totheTMB recommendations; andthereview ofthematter bytheTMB under Article 8.10
oftheATC inNovember 1995. Consequently, India considered thatithadmetallrequirements in
Article 8.10oftheATC fordirect recourse toArticle XXIII:2 ofGATT 1994. Atitsmeeting held
on17April 1996, theDSBestablished apanel pursuant totherequest ofIndia, withstandard terms
ofreference, inaccordance withArticle 6oftheDSU (WT/DSB/M/14).
1.3 On27June1996, theDSBinformed Members thattheterms ofreference andthecomposition
ofthepanel (WT/DS33/2) were asfollows:
Terms ofReference
"Toexamine, inthelightoftherelevant provisions ofthecovered agreements citedbyIndia
indocument WT/DS/33/1, thematter referred totheDSBbyIndia inthatdocument andto
make suchfindings aswillassist theDSBinmaking therecommendations oringiving the
rulings provided forinthose agreements."
Composition
Chairman: Mr.Jacques Bourgeois
Panelists: Mr.Robert Arnott
Mr.Wilhelm Meier
FiveMembers reserved theirrights toparticipate inthePanel proceedings asthirdparties; namely
Canada, theEuropean Communities, Norway, Pakistan andTurkey.
1.4 ThePanelmetwiththepartiestothedisputeon9and10Septemberandon4October1996.The
Panelsubmitteditscompletefindingsandconclusionstothepartiestothedisputeon12November1996.
*****
II CHRONOLOGY OFEVENTS
United States Requests Consultations under theMFA1inDecember 1994
2.1 Since theinception oftheMFA in1974, exports oftextile andclothing products from India
totheUnited States hadbeenregulated bybilateral textile agreements under Article 4oftheMFA.
1Arrangement Regarding International Trade inTextiles (the"Multifibre Arrangement" or"MFA").WT/DS33/R
Page2
Thelastbilateral textile agreement between India andtheUnited States expired on31December 1994
and,effective from1January 1995, trade intextiles andclothing between thetwoMembers hasbeen
governed bytheATC.
2.2 Inthelastbilateral textiles agreement between India andtheUnited States, India’sexports of
several cotton andman-made fibreproduct categories hadbeensubject tospecific quota limits (Group I)
andthose product categories thatwerenotsodesignated, plusallsilk-blended garments andvegetable
fibregarments, weresubject toagroup limit(Group II).Wool products (Group III)werenotsubject
tospecific orgroup limits, butweresubject totheconsultation mechanism inthebilateral agreement.
2.3 On30December 1994, theUnited States issued arequest forconsultations withIndia under
paragraphs 19and20ofthebilateral agreement forthepurpose ofestablishing restraints onIndia’s
exports totheUnited States ofwoven woolshirts andblouses (category 440inGroup III).2Therequest
forconsultations, accompanied byastatement entitled "Market Statement, Wool Woven Shirts and
Blouses: Category 440", stated thattheUnited States hadconcluded thatthelevelofimports from
India inthiscategory wascreating arealriskofdisruption intheUnited States 'domestic industry.
2.4 ConsultationsbetweenIndiaandtheUnitedStateswereheldinGenevaon18April1995pursuant
totherequest issued inDecember 1994. India considered thattherequest forconsultations, issued
onedaybefore theexpiry oftheMFA andthebilateral textiles agreement, wasnolonger validinApril
1995; from1January 1995theframework forinternational tradeintextiles wasprovided bytheATC
andtheother WTO agreements.
United States Requests Consultations Under theATC inApril 1995
2.5 Onthesame day,18April 1995, theUnited States requested newconsultations withIndiaon,
interalia,category 440under thetransitional safeguard mechanism inArticle 6oftheATC. The
UnitedStateswithdrewitspreviousconsultationrequestissuedon30December1994asIndiaconsidered
thattherequest wasnolonger valid duetotheentry intoforce oftheATC. Theconsultation request
intheformofadiplomatic notestated thattheUnited States hadconcluded thatthesharp andsubstantial
increase inimports from India inthiscategory "iscausing serious damage, oractual threat thereof
totheUnited States industry", andwasaccompanied bya"Statement ofSerious Damage" (hereinafter
referred toastheMarket Statement) which claimed thata"sharp andsubstantial increase inimports
ofwoven woolshirts andblouses, Category 440,iscausing serious damage totheUSindustry producing
woven woolshirts andblouses. TheUnited States proposed aquota limitforexports ofcategory 440
of76,698 dozen. Therequest forconsultations wasofficially published intheUSFederal Register
on23May1995 (60Fed.Reg.27274).
2.6 Further discussions wereheldbetween thetwodelegations inGeneva on19April 1995atthe
request oftheUnited States. However, astherequest forconsultations hadbeenissued onlyonthe
previous day,India hadnothadtimetocomplete itsreview oftheMarket Statement and,therefore,
considered these consultations tobepreliminary. Inthecourse ofthese consultations, India sought
clarification fromtheUnited States onanumber oftechnical points raised bytheMarket Statement.
Further consultations wereheldinWashington on14-16 June1995 which didnotresult inamutual
settlement ofthematter.
2Theaction bytheUnited States alsocovered twoother product categories, wool coats etc.formenand
boys (category 434ofGroup III)andwool coats etc.forwomen andgirls(category 435ofGroup III)which
arenotpartofthismatter.WT/DS33/R
Page3
United States Imposes Restraints onImports from India inJuly1995
2.7 On14July1995, asnomutual settlement wasreached within the60-day consultation period
provided intheATC, India wasinformed bytheUnited States thatarestraint would beapplied on
imports from India oftheproducts covered byUScategory 440,effective from 18April 1995 and
extending through 17April 1996. Thelevel oftherestraint wassetat76,698 dozen forthefirst
12-month period.
Review bytheTextiles Monitoring Body
2.8 Pursuant toArticle 6.10oftheATC, theUnited States notified theTMB oftherestraint. The
TMB examined thematter atitssessions from28August to1September and12-15 September 1995
andheard presentations from theUnited States andIndia.3With respect tocategory 440, the
United States submitted totheTMB adocument entitled "Other Relevant Information", containing
information onthesituation oftheUnited States industry producing woven wool shirts andblouses.
2.9 With respect tocategory 440,theTMB found:
"During itsreview under paragraphs 2and3ofArticle 6,ofthesafeguard action taken
bytheUnited States against imports ofcategory 440fromIndia, theTMB found that
theactual threat ofserious damage hadbeendemonstrated, andthat,pursuant to
paragraph 4ofArticle 6,thisactual threat could beattributed tothesharp andsubstantial
increase inimports from India." (G/TMB/R/3)
India Requests Review ofTMB Finding inOctober 1995
2.10 Indiasentacommunication on16October 1995totheTMB informing thatBody ofitsinability
toconform withitsrecommendations andexplaining thereasons therefor, asprovided inArticle 8.10
oftheATC. India requested theTMB togiveathorough consideration tothereasons ithadgiven
andtorecommend thattheUnited States rescind therestraint onIndia’sexports incategory 440.
2.11 TheTMB reviewed thematter raised byIndia atitsmeeting on13-17 November 1995, and
made thefollowing statement initsreport:
"The TMB reviewed thematter referred toitbyIndia under Article 8.10initsletter
dated 16October 1995. TheTMB heard thepresentation made byIndiaandconsidered
theelements putforward. TheBody could notmake anyrecommendation inaddition
3Restraintswerealsoappliedoncategories434and435,andatitssessionon28Augustto1September1995,
theTMB examined allthree actions. Forcategory 434,theTMB found that"serious damage, oractual threat
thereof, hadnotbeen demonstrated andrecommended thattheUnited States rescind themeasure". The
United States rescinded themeasure. Forcategory 435, theTMB found thatserious damage hadnotbeen
demonstrated, butcould notreach consensus ontheexistence ofactual threat ofserious damage. TheTMB
again reviewed thematter relating tocategory 435which hadbeen referred toitbyIndia under Article 8.6of
theATC during itsmeeting on13-17 November 1995. However, theBody could notmake anyrecommendations
inaddition totheconclusions ithadreached during itsearlier meeting. Since thematter relating tocategory 435
remained unresolved bytheTMB, India brought thematter before theDispute Settlement Body (DSB). On
23April 1996, India wasinformed thattheUnited States hadremoved therestraints oncategory 435through
anotification intheFederal Register on23April 1996. Inthelightofthis,India terminated further action under
theDSU without prejudice toitsstand ontheinconsistency oftheUSmeasure oronthevarious factual andlegal
issues outlined byIndia initsrequest forestablishment ofapanel.WT/DS33/R
Page4
totheconclusions ithadreached atitsmeeting on12-15 September 1995(G/TMB/R/3,
paragraph 26). TheTMB therefore considered itsreview ofthematter
completed". (G/TMB/R/6)
India Requests theEstablishment ofaPanel inMarch 1996
2.12 Since thematter relating tocategory 440remained unresolved, Indiabrought thematter before
theDSB. India filedarequest withtheDSBon14March 1996 fortheestablishment ofapanel on
therestraint, pursuant toArticle XXIII:2 ofGATT 1994, Article 6oftheDSU andArticle 8.10and
other relevant provisions oftheATC. Indiarequested thatthepanel beestablished withstandard terms
ofreference assetoutinArticle 7oftheDSU (WT/DS33/1). Atthemeeting heldon17April 1996,
theDSBagreed toestablish thepanel inrespect ofcategory 440withstandard terms ofreference as
requested byIndia (WT/DS33/2).
2.13 On18April 1996, theUnited States announced thecontinuation oftherestraint oncategory 440
until17April 1997.
2.14 On24June1996, thepresent Panel wasconstituted. (WT/DS33/2 dated 27June1996.)
*****
III CLAIMS OFTHE PARTIES
TheRequest ofIndia
3.1 Initsrequest fortheestablishment ofapanel (WT/DS33/1), India requested thatthePanel
consider andfindthat:
(i) TherestraintintroducedbytheUnitedStateson14July1995onimportsofcategory440
(woven wool shirts andblouses) from India effective from 18April 1995 was
inconsistent withArticles 6,8and2oftheATC.
(ii) Theaction oftheUnited States inimposing therestraint onimports ofcategory 440
from India nullified orimpaired thebenefits accruing toIndia under theWTO
Agreement andunder GATT 1994 andtheATC inparticular.
(iii) TheGovernment oftheUnited States should havebrought themeasure intoconformity
withtheATC bywithdrawing therestraint imposed byitonimports ofcategory 440
from India.
3.2 India alsorequested asupplementary finding bythePanel that:
(i) According totheATC, notably Article 6,theonusofdemonstrating serious damage
oritsactual threat wasontheUnited States, astheimporting Member. Ithadtochoose
atthebeginning oftheprocess whether itwould claim theexistence of"serious damage"
or"actual threat". These werenotinterchangeable because thedatarequirement would
varywiththechosen situation. Itwould notbevalidtotransfer atransitional safeguard
toasituation ofactual threat when theclaim ofserious damage hadfailed togain
acceptance.
(ii) There wasnoprovision intheATC under which theUnited States, astheimporting
Member, could haveimposed arestraint withretrospective effect.WT/DS33/R
Page5
TheRequest oftheUnited States
3.3 TheUnited States requested thePanel tofindthat:
(i) theUnited States 'application andmaintenance ofasafeguard restraint onwoven wool
shirts andblouses from India wasconsistent withArticle 6oftheATC;
(ii) therestraint wasnotinconsistent withArticle 2oranyotherprovision oftheATC; and
(iii) themeasure didnotnullify andimpair benefits accruing toIndia under theATC or
GATT 1994.
Comments ontheRequest tothePanel
3.4 TheUnited States referred toIndia'srequest tothePanel which appeared tobeseeking aspecific
remedy inthisdispute andexpressed theopinion thatsucharemedy felloutside thescope ofthePanel's
mandate asprovided intheDSU. Indiahadrequested thatthePanel interpret Article 19.1oftheDSU
torequire removal ofarestraint tobring theaction "inconformity" withtherelevant agreement. The
United States hadtaken issue withIndia'sassertion thatbringing asafeguard action intoconformity
withtheATC or,allegedly, withGATT 1994, totheextent itwasrelevant, required withdrawing the
restraint. What wasclear wasthattheDSU gaveWTO panels explicit instructions withrespect to
theoneandonlyrecommendation thatproperly maybeoffered ifthemeasures ofaMember were
found tobeinconsistent withitsobligations: tobring themeasures intoconformity withitsobligations.
Theavoidance ofgranting specific remedies, suchasthewithdrawal ormodification ofameasure,
wasawell-established practice under GATT 1947andhadbeencodified inArticle 19.1oftheDSU,
which provided: "Where apanel ortheAppellate Body concludes thatameasure isinconsistent with
acovered agreement, itshallrecommend thattheMember concerned bring themeasure intoconformity
withthatagreement," rather thanthattheMember "withdraw" themeasure.
3.5 Indianoted theUSviews inthepreceding paragraph withconcern andasked theUnited States
which legaloptions itwished topreserve bypresenting them. India stressed thatithadnotasked the
Panel tomake arecommendation ontheissueofimplementation inaccordance withArticle 19.1, first
sentence, oftheDSU, buttoexercise thediscretion thatthesecond sentence ofArticle 19.1conferred
uponit,namely, thatitcould, inaddition toitsrecommendations, "suggest waysinwhich theMember
concerned could implement therecommendations". IntheviewofIndia, there werenoalternatives
astohowasafeguard action taken inconsistently withArticle 6oftheATC could bebrought into
conformity andtheUnited States hadnotbeenabletoindicate anysuchalternatives. Therationale
ofthesecond sentence ofArticle 19.1oftheDSUwasprocedural economy; itwasdesigned toreduce
thelikelihood ofasecond proceeding about theimplementation oftheresults ofthefirst. Itwould
thusbeperfectly consistent notonlywiththewording butalsothespirit ofthatprovision ifthePanel
weretofindthattherewerenoalternatives towithdrawal inthepresent caseandtosuggest, therefore,
thattheUnited States implement thePanel'srecommendation bywithdrawing themeasure.
*****
IV THIRD PARTY SUBMISSIONS
4.1 Atthefirstsubstantive meeting ofthePanel on10September 1996, fourMembers (Canada,
EC,Norway andPakistan) which hadindicated theirinterests inthismatter asthirdparties attheDSU
meeting on17April 1996 (DS33/2, paragraph 4)made submissions. Turkey hadalsoindicated its
thirdparty interests andattended thePanel meeting butdidnotprovide asubmission.WT/DS33/R
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Submission ofCanada
4.2 Canada pointed outthatithadasubstantial interest inseveral issues relating totheinterpretation
oftheATC raised bytheparties tothedispute; namely, (i)thequestion oftheability ofaMember
tomaintain arestraint intheabsence ofan"endorsement" bytheTMB; (ii)theappropriate effective
datefortheapplication ofarestraint measure; (iii)thetypeofinformation aMember hadtosubmit
totheTMB tojustify arequest forconsultations andthetreatment given toadditional information
provided totheTMB; and(iv)whether theMember making therequest hadtospecify fromtheoutset
thebasis fortherequest.
4.3 Canada noted thatIndia hadrequested, interalia,asupplementary finding bythePanel that
because theTMB hadnotspecifically upheld thesafeguard action taken bytheUnited States, thisimplied
thattheTMB hadnotfound thesafeguard action tobejustified and,therefore, theUnited States had
alegalobligation towithdraw therestraint. ItwasCanada 'sviewthatsuchaninterpretation wastoo
narrow andwould unduly circumscribe theability ofMembers totakesafeguard actions asprovided
forintheATC. While theTMB hadasignificant roletoplayinthereview ofthesafeguard actions,
there wasnorequirement intheATC thattheTMB hadto"endorse" asafeguard action inorder for
ittobemaintained. Onthecontrary, during theUruguay Round negotiations leading totheATC,
several participants hadmade proposals torequire apositive decision ofthemultilateral reviewing
body (now theTMB) inorder forarestraint measure toremain inplace. Canada noted thatnoneof
theseproposals hadbeenincorporated intotheATCwhich reflected animplicit rejection oftheapproach
nowadvocated byIndia.
4.4 IntheviewofCanada, iftheTMB wasrequired tospecifically approve every safeguard action
taken, itwould rarely bepossible foranyMember toavailitselfoftheATC safeguard clause because
asingle TMB member could block aconsensus. Sucharesult would clearly beatoddswiththeintention
oftheATC,whichexplicitlyprovidedtotheMemberstheauthoritytomakethedeterminationofwhether
asafeguard action wasrequired.
4.5 Canada recalled thatIndia hadsubmitted thattheUnited States wasincorrect inimposing the
restraint measure fromthedateoftherequest forconsultations withIndia under Article 6oftheATC.
Inthisregard Canada noted thattheATC wassilent withrespect totheappropriate effective dateof
implementation ofasafeguard action. Intheabsence ofanyspecific prohibition, itwasopentoan
importing Member toapply thesafeguard action fromthedateoftherequest. Itwasmore appropriate
toimplement therestraint asclose aspossible tothedateoftherequest soastoavoid thepossibility
ofhaving thedomestic market flooded withimports aftertherequest, butbefore theconsultations were
completed. Afurther element wasthatthecalculation oftherestraint level, pursuant toArticle 6.8
oftheATC, wasbased ontheMFA formula ofthefirst12ofthelast14months preceding themonth
inwhich therequest forconsultations wasmade. Therationale forthiscalculation wastoavoid including
inthebaselevelwhatwasusually themostsevere partoftheimport surge thathadledtotherequest
forconsultations. Thecalculation ofthisformula supported theargument thatitwasmore appropriate
toimplement anyrestraint asclose aspossible tothedateoftherequest forconsultations.
4.6 Canada alsoreferred toIndia'ssubmission thatthereview bytheTMB should havebeen
conducted onlyonthebasisoftheinformation provided toIndiaatthetimeoftheconsultation request,
rather thanonsupplementary information provided bytheUnited States totheTMB atthetimeof
itsreview. Inthisregard, Article 6.10oftheATC stated thatinexamining asafeguard action, the
TMB shallhaveatitsdisposal thefactual dataaccompanying arequest forconsultations asprovided
totheChairman oftheTMB atthetimeoftherequest, pursuant toArticle 6.7oftheATC, "aswell
asanyother relevant information provided bytheMembers concerned". Theplain meaning of
Article 6.10oftheATC wasthattheTMB, inconducting itsexamination, mayconsider notonlythe
information thatwasprovided toitpursuant toArticle 6.7oftheATC, butalsoanyadditional
submissions ofaMember concerned. Asapractical matter, thisallowed theTMB toconsider theWT/DS33/R
Page7
mostup-to-date datainitsexamination ofthesafeguard action, including datathatwerenotavailable
atthetimeoftherequest forconsultations.
4.7 Withreference toIndia'sviewthattheonusofdemonstrating serious damage oractual threat
wasontheimporting Member which mustchoose attheoutset whether itwould claim theexistence
of"serious damage" orof"actual threat thereof" andthatthesetwocategories werenotinterchangeable
because eachcategory required different supporting data,Canada noted thatnodistinction wasmade
between thedefinition of"serious damage" or"actual threat thereof" inArticle 6oftheATC, nor
inthelistoffactors tobeconsidered byaMember inmaking adetermination under Article 6.2of
theATC. Accordingly, thepractice under theATC hadbeenfortheMember taking suchsafeguard
action toallege "serious damage oractual threat thereof" asawhole andtopermit theTMB initsreview
under Article 6.10oftheATC todetermine whether either element, orbothelements ofthestandard
hadbeensatisfied. Canada considered that,when reviewing anallegation of"serious damage oractual
threat thereof" theTMB must baseitsrecommendations ontheevidence before it.Itmayfindthat
theevidence supports adetermination of"serious damage" alone, of"actual threat" alone, ofboth,
orofneither. However, itdidnotfollow thatanimporting Member should berequired tochoose
which component ofthestandard toallege atthecommencement oftheArticle 6process. Toimpose
sucharequirement onanimporting Member would unreasonably restrict thescope ofitscase, and
would infringe uponthediscretion oftheTMB toconduct itsexamination andbaseitsrecommendations
onalltheevidence before it.
4.8 Inasubsequent submission, Indiadisagreed withthepointinthefirstsentence ofparagraph 4.3,
recalling that,under theMFA, theexporting country hadtherighttorefuse toaccept adiscriminatory
restraint while under theATC, theexporting Members hadlostthatright. Thecounterpart tothat
losswastherequirement ofaTMB examination andrecommendation. Therecourse available to
importingMembersundertheATCwas,therefore,notsignificantlydifferentfromtherecourseavailable
tothem under theMFA: theconsent oftheexporting country wasrequired under theMFA while
under theATC, itwasaTMB examination andrecommendation thatwasrequired.
4.9 Ontheabove point, theUnited States disagreed withIndia'sassertion astheMFA required
TSBexamination ofunilateral restraints andthattheTSBmake recommendations, justasrequired
oftheTMB.
Submission oftheEuropean Communities
4.10 TheEuropean Communities expressed theopinion thatarestraint could bejustified foreither
acaseofimports having caused serious damage orforacaseofimports actually threatening tocause
serious damage pursuant toArticle 6.2oftheATC. Nowhere intheATC wasthere anyobligation
ontheimporting Member tochoose atthebeginning oftheprocess whether itwould claim "serious
damage" or"actual threat". Thiswasbecause anysuchobligation would create consequences which
were clearly notintended bytheATC negotiators, namely: (i)thatanimporting Member claiming
"serious damage" might bepersuaded bytheexporting Member during theirconsultations thatthe
situation wasreally oneof"actual threat" butthatnorestraint could beestablished simply because
theimporting Member hadinitially claimed only"serious damage"; (ii)thatimporting Members would,
therefore, havesimultaneously torequest twoparallel setsofconsultations, thefirsttodiscuss arestraint
based on"serious damage" andthesecond todiscuss onebased on"actual threat". Clearly such
situations didnotfollow from theactual wording oftheATC andneither weretheyintended bythe
negotiators. Atanother level, iftheconsultations resulted inagreement under Article 6.9oftheATC
thenpresumable thetwoparties weresatisfied onthispoint. Ontheother hand, iftheconsultations
didnotreach agreement thenitwould beuptotheTMB to"promptly conduct anexamination ofthe
matter, including thedetermination ofserious damage, oractual threat thereof pursuant toArticle 6.10
oftheATC". Inthiscaseitwould betheTMB'sdetermination which would matter andtheoption
"chosen" bytheimporting Member would beirrelevant.WT/DS33/R
Page8
4.11 TheEuropean Communities considered thequestion ofthestandard ofreview tobeofgreat
importance. TheECreminded thePanel thatoneofthemostthorough discussions oftheproblems
relating tothestandard ofreview incases involving thelegal appreciation offactsinthelightof
evidentiary requirements laiddown intheTokyo Round Subsidies Code4,tookplace before thepanel
ontheUScountervailing duties imposed onleadandbismuth steeloriginating inFrance, theUKand
Germany.Althoughthatpanelreportwasneveradopted,itcontainedvaluableinsightsintothedifference
between theissues towhich thenormal rulesoftreaty interpretation weretobeapplied andtheissues
involving legalappreciation ofthefactsinthelightofevidentiary requirements laiddown intherelevant
agreement (paragraphs 368and369).
4.12 TheEuropean Communities alsoconsidered itimportant forthePanel totakeaccount ofthe
factthatthetestofreasonableness proposed bytheUS,eventhough itwastaken from theFurFelt
Hatcasecarried fortheUSconnotations ofextreme deference tothejudgement ofthenational
government. Itshould benoted thatthepanel inLead andBismuth Steelsaidthat:
"...thecriteria forareview byapanel offactual assessments bydomestic investigating
authorities ofsignatories against therequirements oftheagreement could notbebased ona
simple transposition ofstandards applied indomestic administrative lawofsignatories."
TheEuropean Communities attached great importance toanapproach inthese issues inthespirit of
thepanel report onLeadandBismuth Steel.Itshould beclearthatinthecaseoffactual assessments
bynational investigating authorities ofMembers inthelightoftherequirements oftheagreement (as
interpreted inaccordance withthecustomary rules ofinterpretation ofinternational law), amargin
ofdiscretion should belefttothese authorities, butthePanel could notborrow from oneparticular
legalsystem incircumscribing thismargin ofdiscretion. InthiscasethePanel must beinspired by
theadministrative lawsystems oftheMembers.
Submission ofNorway
4.13 Norway stated thatitsconcern inthiscasewasprimarily ofasystemic nature andnoted that
thePanel wasconsidering adispute which twice, andwithconsensus recommendations, hadbeendealt
withbytheTMB. Itwasconcerned thattheeffect ofthecasemight notonlybethepositive resolution
ofadispute, buttheundermining offuture TMB recommendations andthustheTMB'sefficiency.
Theresult ofthisefficiency sofarhadbeenthatquotas hadbeendismantled considerably faster than
whatwould havebeenpossible bywayofpanels. Norway questioned India'sasking thepanel toaddress
theissues of"TMB endorsement" andof"serious damage" asopposed to"actual threat ofserious
damage". Onthequestion ofretroactive implementation, itaccepted India'srequest forclarification.
4.14 ItwastheviewofNorway thatboththeTMB andIndia werewrong inclaiming, withrespect
totheintroduction ofasafeguard action, thattheATC didnotprovide anyindication withrespect
totheeffective dateofimplementation ofameasure, although India wasrightinsaying thatthere was
no"explicit authorization intheATC'stransitional safeguard clause toimpose theadditional burden
ofretroactive application". Norway wasoftheopinion thatthere were sufficient indications tobe
found andthatitwasunnecessary aswellasunjustifiable toresort toArticle XIII:3(b) ofGATT 1994.
Article 6.10oftheATC suggested thattheterm"apply" wasdistinct from theterm"implement".
Saying thataMember "...mayapply therestraint bydateofimport ordateofexport ..."could not
bereadtomean thesame asifthesentence hadsubstituted theword "implement" for"apply". The
term"apply" wasconcerned more withthemanner ofimplementation thanwithitseffective timing.
Itwasperfectly reasonable torequire thatameasure beapplied onlyaftercertain procedures hadbeen
4Agreement onInterpretation andApplication ofArticles VI,XVIandXXIII oftheGeneral Agreement
onTariffs andTrade.WT/DS33/R
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completed andthentoallow discretion toimplement thesamemeasure insuchawayastogiveiteffect
from adifferent date. Thiswasalsoindirectly supported bythefactthatameasure maybeapplied
"within 30daysfollowing the60-day period forconsultations". IntheviewofNorway itwas,therefore,
legitimate toquestion whether onewas,infact,dealing withacaseofretroactive implementation.
Another argument, ifonewereindeed dealing witharetroactive measure, wasthefactthatthere was
provision foritinthepredecessor agreement, suggesting thatanexplicit provision tothecontrary would
havebeenincluded intheATC ifnegotiators wereconcerned withmaking aclean break withthepast
inthisrespect.
4.15 Norway alsopointed outthatArticle 6.10oftheATC should bereadinconjunction with
Article 6.11. Ifoneweretoaccept India'sarguments, itwould inalllikelihood undermine thevaluable
consultation procedure inArticle 6.10oftheATCandencourage importers tointroduce quotas without
prior consultation, under Article 6.11oftheATC. Norway alsoagreed withtheUSargument that
India'sposition would encourage anexporter tofloodtheimporting market withimports aftertherequest
andbefore consultations werecompleted. Norway supported Indiatotheextent thatthematter needed
clarification; however, itdisagreed withIndia'sinterpretation oftheATC onseveral points and
respectfully asked thePanel togivefavourable consideration totheinterpretations andarguments it
putforward.
Submission ofPakistan
4.16 Pakistan pointed outthattheATC represented abalance ofrights andobligations between the
exporting Members andtheimporting Members. TheATC wasanimprovement overtheMFA and
evenduringthetransitionalperiodtheprogressmadeinthenegotiationoftheATCcouldnotbenullified.
Pakistan urged thePanel toconsider thesystemic implications ofthepresent casefromthisperspective
andtoreach adecision which didnotinanywayretard theprogress already made orimpair thebenefits
accruing totheexporting Members. Pakistan considered thatthePanel should lookintotheelement
ofgoodfaithonthepartofauthorities initiating asafeguard action, including (a)whether theauthorities
hadbased their decision onallavailable data; (b)whether theanalysis ofavailable datawasin
accordance withnormal andgenerally recognized principles andprocedures; (c)whether there was
anelement ofarbitrariness; and(d)whether anyaction wastaken onunsubstantiated presumptions.
Inexamining thedifferent stages ofthecaseitwould beimportant toexamine whether theauthorities
hadadopted aconsistent position throughout thedifferent stages orwhether theyhadchanged their
position orintroduced newelements atdifferent stages oftheprocess. Good faithcould notandshould
notco-exist withex-post justifications.
4.17 Pakistan considered thatthePanel wasrequired topronounce onthedistinction between "serious
damage" and"actual threat ofserious damage". While Article 6.2and6.3oftheATC listed thesame
economic variables tobeconsidered inbothcases, itwasalsotruethatdifferent analysis andinformation
inrespect ofthesame economic variables would berequired toprove either serious damage oractual
threat ofserious damage, asthecasemaybe.Inacaseofserious damage, theanalysis should clearly
demonstrate thedamage thathadalready occurred, while incaseofaclaim foractual threat ofserious
damage, theanalysis should include thereasons which mayleadtoserious damage. ThePanel should
alsodetermine whateffect theintroduction ofnewinformation byparties could haveonthelegality
ofthewhole proceeding. Animportant stepintheATC wastheconsultations, which mustbebased
onthe"specific andrelevant" information provided bytheimporting Member totheexporting Member
under Article 6.7oftheATC. Anynewinformation supplied attheTMB'sreview ofthesafeguard
action would puttheexporting Member atagreatdisadvantage. According toArticle 6.10oftheATC,
theTMB mayhave"anyotherrelevant information provided bytheMember concerned", butthiscould
notbeinterpreted tomean newinformation. Whenever anynewinformation wasintroduced, thelegal
process should startafresh. Newinformation introduced atthetimeoftheTMB'sreview could be:
(i)information pertaining totheperiod aftertherequest forconsultations wasissued andshould not
berelevant tothecaseinquestion; (ii)information available earlier butnotused, which demonstratedWT/DS33/R
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alackofserious effort which would notsupport thecontention ofgood faith; or(iii)information
pertaining totheperiod before therequest forconsultations wasissued butnotavailable atthetime
oftherequest. Thiswould alsobeanex-post justification andwould puttheexporting Member at
adisadvantage which could berectified onlybyissuing afresh request forconsultations.
*****
V MAIN ARGUMENTS OFTHE PARTIES
A. Introduction
5.1 ThePanel noted thatIndiahadarranged itsfirstsubmission inasequence beginning withgeneral
points onthesafeguard mechanism followed byarguments onburden ofproof andstandard ofreview
(Part A).Thiswasfollowed byanargument thatthesafeguard action onwhich theUnited States sought
consultations wasnotthesafeguard action endorsed bytheTMB (Part B).There thenfollowed the
claim thattheUnited States hadfailed todemonstrate serious damage intheconsultations and,therefore,
hadacted inconsistently withArticle 6oftheATC (Part C); aconsideration ofsupplementary
information (Part D)andretroactive application (Part E).Inthisdescriptive partofthePanel'sreport,
much ofIndia'sstructure hasbeenused, butnotfully. Rather, thedescriptive partfollows theapproach
adopted bythePanel insetting outitsfindings which, itwasconsidered, would facilitate inrelating
thearguments oftheparties tothePanel'sfindings onthese arguments.
B. Burden ofProof
5.2 Indiaargued thattheUnited States boretheburden ofproving thatithadmettherequirements
ofArticle 6oftheATC. TheCONTRACTING PARTIES toGATT 1947hadconsistently found that
exceptions mustbeinterpreted narrowly andthattheparty invoking anexception boretheburden of
proving thatithadmetthelegalrequirements justifying theinvocation. Indiareferred totwodocuments
inthiscontext (BISD 30S/140 and36S/345). Based onthisprinciple alone, thePanel would need
tofindthatitwastheUnited States thatboretheburden ofproving thatithadmade thedetermination
inaccordance withArticle 6oftheATC. Moreover, Article 6.2oftheATCclearly permitted safeguard
action onlyifitwasdemonstrated thatanincrease inimports caused serious damage oractual threat
thereof. Itwas,consequently, uptotheMember taking safeguard action tomake thatdemonstration.
Thisfollowed notonlyfromthegeneral principle oflawrecognized bypanels butalsofromthetext
ofArticle 6.2oftheATCitself. Itpermitted safeguard action byaMember when "...itisdemonstrated
thataparticular product isbeing imported intoitsterritory insuchincreased quantities astocause
serious damage, oractual threat thereof ..."andgoesontostatethat"[s]erious damage orthreat thereof
must demonstrably becaused bysuchincreased quantities ...". Therequirement todemonstrate an
increase inimports, serious damage andthecausal linkbetween thetwowasclearly arequirement
imposed ontheMember thatchose toapply thesafeguard action, notontheMember(s) against which
theaction wasdirected.
5.3 India alsoconsidered thattheMember invoking Article 6oftheATC hadthepossibility to
make thedemonstration bysubmitting positive evidence onthebasis ofdataithadcollected. Ifthe
Member against which theaction wastaken hadtobeartheburden ofproof, itwould havetodemonstrate
thenegative, which wasoften impossible, onthebasis ofthedataavailable toitwhich were likely
tobemore limited thanthose available totheimporting Member. Thepurpose ofArticle 6oftheATC,
which wastoimpose astrict discipline ontheuseofsafeguards could, therefore, notbeachieved if
theburden ofproof wasshifted from theimporting totheexporting Members.
5.4 TheUnited States argued that,consistent withaccepted GATT 1947dispute settlement practice
which hadbeencarried overintheWTO, theburden wasonIndia inthefirstinstance tomake a
prima faciecasethattheUnited States 'application ofatransitional safeguard onimports ofwovenWT/DS33/R
Page11
woolshirts andblouses fromIndiahadbeeninconsistent withtheATC. Thelanguage ofArticle XXIII
ofGATT 1994andpractice under GATT 1947supported thisprinciple. Article XXIII ofGATT 1994,
asreferenced inArticle 8.10oftheATC, provided recourse toadispute settlement proceeding when
aMember considered thatanybenefit accruing toitdirectly orindirectly wasbeing nullified orimpaired
asaresult ofthefailure ofanother Member tocarry outitsobligations under thatAgreement. Inthis
case, India hadtheinitial burden ofdemonstrating thattheUnited States hadfailed tocarry outits
obligations under theATC and,intheviewoftheUS,India hadfailed tosustain thatburden.
5.5 TheUnited States further argued thattheburden wasnotontheUStore-demonstrate that
itsactions werejustified. TheATC allowed aMember toimpose asafeguard when ithaddetermined
thatimports werecausing orthreatened tocause serious damage toitsmarket. Itwastheviewofthe
UnitedStatesthatthetaskofthePanelwastodeterminewhetherIndiahadadvancedfactswhichprovided
convincing evidence thatitwasunreasonable fortheUnited States todetermine, inaccordance with
Article 6.2and6.3oftheATC, thattheadverse effects ofincreased woven woolshirtandblouse imports
ontheUSdomestic industry amounted toserious damage oractual threat thereof. IfIndia hadnot
advanced suchevidence, thenthePanel should findthatthedetermination under Article 6.2ofthe
ATC hadbeenproperly made andwasconsistent withtheUnited States 'obligations under theATC.
Asimilar examination should beapplied withrespect todeterminations under Article 6.4oftheATC.
5.6 TheUnitedStatesconsideredthatIndia'sargumentthattheATCwasanexceptiontoGATT1994
andthatthis"inconsistency" wassufficient toplace theburden onthedefending Member toestablish
conformity withATCobligations would overturn thebalance ofthisAgreement andmany oftheother
Multilateral Trade Agreements. Inthisrespect theATC wassimilar, forexample, totheAgreement
ontheApplication ofSanitary andPhytosanitary Measures, theAgreement onTechnical Barriers to
Trade andtheAgreement onSafeguards andtheAgreement onTrade-Related Aspects ofIntellectual
Property Rights.
C. Standard ofReview
5.7 IntheviewofIndia, there wasnostandard ofreasonableness foreseen intheATC andgiven
thehighly exceptional character oftheATC’ssafeguard provisions, itwould belegally inadmissible
to"import" intotheATC thestandard ofreview included attherequest oftheUnited States inthe
Anti-DumpingAgreement5.Infact,theMinisterialDecisiononReviewofArticle17.6oftheAgreement
onImplementation ofArticle VIoftheGeneral Agreement onTariffs andTrade 1994clearly implied
thatthisstandard wasrelevant onlyfortheAnti-Dumping Agreement andthatithadnogeneral
applicability. According totheDSU, thedispute settlement system served, interalia,toclarify the
provisions oftheWTO agreements "inaccordance withthecustomary rulesofinterpretation ofpublic
international law".6According togeneral principles ofinternational law,every treaty mustbeperformed
ingood faith.7ThetaskofthePanel was,consequently, toascertain whether theUnited States had
carried outitsobligations under Article 6oftheATCingoodfaith. India wasnotrequesting thePanel
toconduct adenovoreview ofthematter andtoreplace theUnited States 'determination byitsown,
butwasasking thePanel toobjectively assess, inaccordance withArticle 11oftheDSU, whether
theUnited States hadmade itsdetermination inaccordance withitsobligations under Article 6ofthe
ATC.
5.8 Inaresponse tothePanel, India pointed outthatinapplying theUnited States 'domestic law,
inparticular thelawgoverning thereview ofanti-dumping andcountervailing dutyactions, courts had
5Agreement onImplementation ofArticle VIoftheGeneral Agreement onTariffs andTrade 1994.
6Article 3:2oftheDSU.
7SeeArticle 26oftheVienna Convention ontheLawofTreaties.WT/DS33/R
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accorded deference toadministrative agencies inaccordance withthe“Chevron doctrine ”.Courts did
notreview whether theagency administering anti-dumping orcountervailing duties hadinterpreted
thelawcorrectly, butwhether itsinterpretation wasreasonable. Similarly, United States courts did
notexamine whether theagency hadapplied thelawcorrectly butwhether their application was
reasonable. Thenotion of“reasonableness ”was,thus,usedtodefine thescope ofalegaldoctrine that
hadcreated considerable scope ofdiscretion foragencies andasignificant shiftofpower fromthecourts
totheexecutive branch. Article 17oftheAnti-Dumping Agreement wasareflection ofthe"Chevron
doctrine". During thecourse oftheproceedings ofthisPanel, theUnited States, without referring to
Article 17oftheAnti-Dumping Agreement directly, hadpresented arguments tothePanel which, if
accepted, would constitute anincorporation oftheprinciples ofthatprovision intotheATC.
5.9 TheUnited States argued thatallparties toanagreement must apply itingood faith. This
wasanimportant principle intreaty anddomestic contract law.Making adetermination inareasonable
manner andingood faithfollowed from thefirststepofapplying atreaty ingood faith. Itdidnot
"replace" theobligation toapply atreaty ingoodfaith. TheUnited States hadstated that,inapplying
theprovisions ofArticle 6oftheATC ingood faith, ithadmade areasonable determination after
examining relevant datathatatransitional safeguard wasnecessary. Ithadalsofollowed Article 6.7
oftheATC andultimately Article 6.10when nomutual solution wasreached withIndia. TheTMB
findings required under Articles 6.10and8oftheATC hadsupported theUSapplication ofthe
safeguard.
5.10 TheUnited States further argued thatthere wasnoneedforaspecific provision onstandard
ofreview intheATC orinanyother agreement, although thenegotiators oftheAnti-Dumping
Agreement hadseentheneedtonegotiate aspecific standard ofreview forthose cases because ofthe
nature andproblems found intheanti-dumping area. Thestandard ofreview inArticle 17.6ofthat
Agreement wasnotrelevant inthismatter andtheUnited States hadnotadvanced thatstandard for
thiscase. TheUShadnotcited anyanti-dumping orsubsidy caselaw,asIndia haddone. India's
assertion thattheUnited States hadsought toapply anti-dumping andsubsidy standards tothiscase
wasincorrect.
5.11 India recalled thattheroleofpanels was,according toArticle 3.2oftheDSU, topreserve
therights andobligations ofWTO Members. IfthisPanel weretosanction "reasonable" deviations
from therequirements setoutinArticle 6oftheATC rather thandetermine whether theyhadbeen
observed ingood faithorifitwere tosanction anexercise ofdiscretion onthegrounds thatitwas
“reasonable ”rather thandetermine whether theMember hadexercised itingood faith, itwould
effectively diminish therights andobligations ofMembers and,therefore, actinconsistently withthat
basic principle oftheDSU. ThetextoftheATC clearly delineated therange ofdiscretion available
toMembers making determinations forthepurpose ofimposing safeguard actions. IfthePanel were
toexpand thatrange byapplying thenotion ofreasonableness, itwould beacting without anybasis
inthetextoftheATCandcontrary tothegeneral principles ofinternational lawanditwould, therefore,
notbefinding andconfirming theexisting WTO law,aswasitstask. Rather, itwould beinventing
newlawwhich noMember hadaccepted. Thiscould not,inIndia'sview, butundermine theMembers ’
confidence inthenewly established dispute settlement procedures.
5.12 TheUnited States reiterated thattheappropriate standard ofreview wasoneofreasonableness
andgoodfaithexamination ofthedata. Theprinciple of"good faith" application oftreaties wasrelevant,
butitwasargued thatthisprinciple wasintegral tothestandard ofreasonableness. Oneresulted from
theother. TheUSconsidered itself-evident thatallMembers mustfollow theinternational lawprinciple
ofgoodfaithapplication oftreaties andindoing sotheymustcome to"reasonable" conclusions based
ontheexamination conducted. TheUnited States hadapplied theATC consistently withthatentire
precept. Referring firsttotherelevant Uruguay Round principles other thanunder theATC, itwas
noted thatArticle 3.1oftheDSU provided that: "Members affirm theiradherence totheprinciples
forthemanagement ofdisputes ...applied under Articles XXII andXXIII ofGATT 1947, andtheWT/DS33/R
Page13
rules andprocedures asfurther elaborated andmodified herein." Article XVI:1 oftheAgreement
Establishing theWTO alsoprovided that"[e]xcept otherwise provided under thisAgreement orthe
Multilateral Trade Agreements, theWTO shallbeguided bythedecisions, procedures andcustomary
practices followed bytheCONTRACTING PARTIES toGATT 1947 andthebodies established in
theframework ofGATT 1947".
5.13 TheUnited States alsonoted thatArticle 3.2oftheDSU provided, inpart,that:
"The Members recognize that[thedispute settlement system oftheWTO] serves topreserve
therights andobligations ofMembers under thecovered agreements, andtoclarify theexisting
provisions ofthose agreements inaccordance withcustomary rulesofinterpretation ofpublic
international law.Recommendations andrulesoftheDSBcannot addtoordiminish therights
andobligations provided inthecovered agreements."
Itwas,therefore, clearunder Article 3.2oftheDSU thatwhile WTO dispute settlement alsoserved
toclarify provisions ofcovered agreements, theprocess could notaddtoordiminish therights and
obligations provided inthose agreements.
5.14 TheUnited States further pointed outthatArticle 11oftheDSU provided, inpart,that:
"...apanel should make anobjective assessment ofthematter before it,including anobjective
assessment ofthefactsofthecaseandtheapplicability ofandconformity withtherelevant
covered agreements, andmake suchother findings aswillassist theDSB inmaking the
recommendations oringiving therulings provided forinthecovered agreements".
Article 11oftheDSU incorporated paragraph 16ofthe1979 GATT Understanding Regarding
Notification, Consultation, Dispute Settlement andSurveillance.8Thedrafters oftheDSUhadsought
tomake theDSUacomprehensive textincorporating allpriorcodification efforts ondispute settlement.
TheCONTRACTING PARTIES toGATT 1947 hadintended the1979 Understanding anditsannex
toreflect customary practice andimprovements inpractice, including thestandard ofreview enunciated
inthe1951 GATT working party report concerning thewithdrawal bytheUnited States under
Article XIXofatariff concession onwomen 'sfurfelthatandhatbodies (FurFeltHatcase).9
5.15 TheUnited States argued that,insum, anobjective assessment bythePanel, inaccordance
withArticle 11oftheDSU, required examining whether theUnited States hadacted consistently with
therequirements oftheATC andingoodfaithandwhether thedetermination wasreasonable inlight
ofthedatabefore theinvestigating authority.
TheFurFeltHatCase
5.16 TheUnited States argued thattheFurFeltHatcaseprovided authoritative guidance from
GATT 1947 practice andprocedures concerning thestandard ofreview toapply inthiscase. The
standard ofreview enunciated inthatcasewasalsoconsistent withprinciples ofinternational law
concerning thegoodfaithapplication oftreaties. TheFurFeltHatcasesuggested thatthisPanel must
determine whether theUnited States hadapplied theprovisions ofArticle 6oftheATC ingood faith
andhadmade areasonable orgood faithassessment ofthefactstomake thedeterminations required
ofitunder Article 6oftheATC. Article 6stated that"[s]afeguard action maybetaken ...when,
onthebasis ofadetermination byaMember, itisdemonstrated...". Clearly thefocus oftheATC
8L/4907, adopted 28November 1979.
9GATT/CP/106, report adopted on22October 1951, Sales No.GATT/1951-3.WT/DS33/R
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wasonadetermination made bytheimporting Member based ondataavailable. While theFurFelt
HatWorking Party hadexamined action taken under Article XIX:1 ofGATT 1947, thedetermination
required inthatcaseinGATT 1947practice wassimilar tothedetermination required under Article 6.2
oftheATC.10
5.17 InthatcasetheCzechoslovak Government hadsought adetermination thattheUnited States
invocation ofArticle XIXhadbeenimproper andhadasserted thattheUnited States hadnotmetcertain
conditions under Article XIXtotakeaction, seeking revocation ofthemeasure. TheWorking Party
hadrejected theCzechoslovak argument andstated:
"...itmaybeobserved thattheWorking Party naturally could nothavethefacilities
availabletotheUnitedStatesauthoritiesforexamininginterestedpartiesandindependent
witnesses from theUnited States hat-making areas, andforforming judgements on
thebasis ofsuchexamination. ...Moreover, theUnited States isnotcalled upon to
prove conclusively thatthedegree ofinjury caused orthreatened inthiscasemustbe
regarded asserious; since thequestion under consideration iswhether ornottheyare
inbreach ofArticle XIX, theyareentitled tothebenefit ofanyreasonable doubt."11
5.18 TheUnited States argued that,justasinthiscase, theinformation examined bytheFurFelt
HatWorking Party asabasis foritsconclusions, although strong, wasnotperfect; forinstance the
USauthorities hadfailed toseparate figures onproduction ofmen'sandwomen 'shatbodies. However,
theWorking Party decided that"theavailable datasupport[ed] theviewthatincreased imports caused
orthreatened someadverse effect onUnited States producers."12TheWorking Party further determined
thattheUnited States 'authorities inthatcasehadinvestigated thematter thoroughly "onthebasis of
thedataavailable tothem atthetimeoftheirenquiry andhadreached ingood faiththeconclusion
thattheproposed action fellwithin theterms ofArticle XIX...".13Thereasoning oftheFurFeltHat
Working Party applied tothestandard ofreview thePanel must follow inthepresent case.
5.19 IntheviewoftheUnited States, theregime nowgoverning textile andclothing trade inthe
WTO wasasafeguards regime, justasArticle XIXofGATT 1994andtheAgreement onSafeguards
wasasafeguards regime. Bothregimes permitted aMember torestrict trade infairly traded goods
onthebasisofadetermination made byaMember, subject tocertain limitations. Thetextile regime
diverged fromArticle XIXofGATT 1994butmany ofitsbasicconcepts depended onthefundamental
concepts behind Article XIX. Where thenegotiators hadindicated theirdesire thatthetworegimes
differ, thedifference inrights andobligations provided inthenegotiated textmust berespected.
However, theFurFeltHatcase, anaccepted precedent which predated thedivergence between the
tworegimes, waspersuasive ininterpreting theprovisions inboth,oreither, oftheseregimes concerning
theinitial decision totakeasafeguard action. Guidance from thatcasedidnotinvolve wholesale
incorporation ofArticle XIXofGATT 1994 orAgreement onSafeguards principles ortheissue of
compensation andnon-discriminatory treatment asIndia would argue.
10Infact,furfelthatsandhatbodies arelisted asproducts covered under theATC intheATC Annex. Such
products would have, fortheUnited States, been subject totheATC Article 6safeguard mechanism, butthe
United States hasintegrated theproduct intoGATT 1994 inaccordance withArticle 2oftheATC. Article XIX
nowapplies again tothose products fortheUnited States.
11FurFeltHatatparagraph 30.
12Id.
13Id.atparagraph 48.WT/DS33/R
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5.20 TheUnited States noted that,initsfirstsubmission, India hadargued thatthestandard for
thePanel'sreview should notinclude anyexamination ofthereasonableness ofthedetermination, but
should instead focus onwhether theauthorities hadcarried outtheirobligations "ingood faith", as
didtheWorking Party intheFurFeltHatcase. Although theUSdisagreed withIndia'sposition with
regard totheroleofreasonableness, itdidagree thatgood faithapplication oftheATC'sprovision
wasarelevant yardstick forPanel review. "Good faith" hadbeendefined as"inaccordance with
standards ofhonesty, trust, sincerity etc....".14ForthePanel todetermine whether theauthorities
hadcarried outtheirobligations "ingood faith", itdidnotneedtoascertain whether thePanel would
havereached thesame determination astheauthorities. Instead, thePanel would examine thebasis
fortheauthorities 'conclusions, including anexamination ofthedataupon which theauthorities had
relied, inorder todetermine whether thedetermination reflected agoodfaithapplication oftheATC
standards. InthiscasetheUSauthorities hadexercised theirdiscretion andfollowed therelevant ATC
provisions incomplete good faith.
5.21 TheUnited States argued, therefore, thatthereasoning oftheFurFeltHatcaseapplied equally
tothecasepresented tothePanel. Since thekeyquestion waswhether thedetermination bytheUS
Committee ontheImplementation ofTextile Agreements (CITA) wasconsistent withtherequirements
ofArticle 6.2and6.3oftheATC, therelevant question tobeconsidered wasnotwhether serious
damage orthreat ofserious damage currently existed, butwhether CITA haddetermined reasonably
andingood faiththatitexisted atthetimeoftheCITA determination inApril 1995. TheCITA
determination could, therefore, onlybeevaluated onthebasis ofdataexisting atthattime. Thedata
presented latertotheTMB infacthadcorroborated theanalysis doneinApril 1995.
5.22 India pointed outthatnoGATT 1947 panel hadfollowed theapproach oftheFurFeltHat
Working Party. Infact,thepanels onNewZealand -Imports ofElectrical Transformers fromFinland
andCanadian Countervailing Duties onGrain Corn fromtheUnited States hadfullyreviewed the
importing countries 'actions without applying astandard ofreview andhadimposed ontheimporting
countries thedutytoestablish allthefactsonwhich theyhadbased theiractions. Thedisciplines applied
bythose GATT 1947 panels inthecases ofactions against dumped andsubsidized trade should, as
aminimum, beapplied inthecaseofdiscriminatory actions against exports oftextiles andclothing
thatwereneither dumped norsubsidized. India further argued thattotranspose thecriteria applied
intheFurFeltHatcasetoaction under theATC would belegally incorrect.
5.23 TheUnited States rejected India'scomment, above, thattheFurFeltHatcasewaslegally
incorrect intheseproceedings. Thatcaseinvolved review ofsafeguard action atatimewhen thereview
would havebeensimilar inthetextile context. Certainly dumping cases withastandard ofreview
different from Article 17.6oftheAnti-Dumping Agreement were nolonger applicable indumping
cases, anditwasquestioned whyIndia'suseofNewZealand Transformers ortheprinciples itwished
tointerpose inthiscase,atextiles safeguard case,should beanybetter. Inessence, while thestandard
intheFurFeltHatcasemight bemodified bythespecific provisions oftheAgreement onSafeguards,
principles notrelevant toactions taken under thatAgreement were useful here. Instead, India had
resurrected thestandard pre-Article 17.6oftheAnti-Dumping Agreement, inacaseclose tofirst
impression, involving aspecial safeguard fortextiles andclothing.
5.24 Alsowithrespect totheFurFeltHatcase,Indiaconsidered thatitsfindings hadbeenovertaken
bytheAgreement onSafeguards, which declared initsArticle 4thatinjury determinations forthe
purpose ofArticle XIXaction mayonlybemade ifaninvestigation bytheimporting Member
demonstrated, onthebasis ofobjective evidence, thatariseinimports hadcaused serious injury.
Thelegalsituation inwhich theFurFeltHatcriteria weredeveloped were, therefore, notanalogous
tothesituation arising under Article 6oftheATCandnotevenanalogous tothesituation arising under
14Webster 'sEncyclopedic Unabridged Dictionary oftheEnglish Language (1989).WT/DS33/R
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Article XIXasinterpreted bytheAgreement onSafeguards. Theanalogy theUnited States wished
thePanel todrawwas,forthese reasons, misplaced. Thecriteria setoutintheFurFeltHatcasewere,
therefore, nolonger partofthelawoftheWTO. Moreover, thefindings ofthatWorking Party related
toasafeguard mechanism under which theWTO Members adversely affected bythesafeguard action
maytakecompensatory action; theATC'ssafeguard mechanism, however, didnotauthorize textile
exporting Members totakecompensatory action. Itwould, forthisreason alone, beinappropriate
toaccord toMembers invoking theATC safeguards provisions, under which nocompensation was
due,thelatitudes theyhadunder Article XIXofGATT 1994. India alsoconsidered thatithad
demonstrated thatitwould belegally incorrect andillogical ifthePanel were toinfer, justbecause
boththeFurFeltHatcaseandthecasebefore itconcerned safeguard actions, thatthestandard ofreview
applied intheFurFeltHatcasemust alsobeapplied inthepresent case.
5.25 Inresponse tothese views, theUnited States argued thatthiscasewasclose toacaseoffirst
impression andithadcited andsought guidance from aGATT 1947 safeguard casethatwasmost
comparable tothesituation faced inmaking safeguard determinations under theATC. Itwasincorrect
forIndia tostatethatnoGATT 1947 panel hadfollowed theapproach oftheFurFeltHatWorking
Party andthatitwasnolonger partofthelawoftheWTO. GATT precedent interpreting Article XIX:1
(forinstance, asrecorded inthechapter onArticle XIXintheGATT Analytical Index) consisted almost
entirely ofthefindings andrecommendations ofthisWorking Party. Under Article XVI:1 ofthe
Agreement Establishing theWTO, theWTO anditsMembers were tobeguided bythedecisions,
procedures andcustomary practices oftheGATT 1947system. Article 3.1oftheDSUstated thesame.
TheFurFeltHatdecision hadcontinuing relevance evenafternegotiation ofthenewAgreement on
Safeguards.
5.26 TheUnited States further argued thatthestandards forsafeguard action provided inthe
Agreement onSafeguards reflected ashiftinfocus incorporating thejurisprudence oftheFurFeltHat
case. These standards werenotphrased interms offactsthattheimporting Member mustprove, if
necessary, toapanel. Rather, theywerephrased explicitly interms oftheinvestigation tobeundertaken
bythecompetent authorities intheimporting Member. Thus, apanel'sevaluation ofmeasures taken
pursuant totheAgreement onSafeguards should follow theapproach taken intheFurFeltHatcase.
5.27 TheUnited States alsoreferred toIndia'spointregarding compensation inrespect ofasafeguard
action andnoted thatpursuant toArticle 8.2oftheSafeguards Agreement, there wasnoright to
compensation foraperiod ofthree years. Itwasnocoincidence thatthiswasthemaximum duration
ofarestraint pursuant toArticle 6oftheATC. There wasnosignificant lossof"GATT rights" in
thisrespect. India'sarguments regarding theneedformultilateral approval ifaMember wished to
takeasafeguard action without payment ofcompensation were simply incorrect. Thesituation was
alsothesame inrespect ofdispute settlement. Under boththeATC andtheSafeguards Agreement
parties hadrecourse toArticle XXIII dispute settlement. Moreover, before theSafeguards Agreement
andtheATC, theMFA hadpermitted recourse toArticle XXIII dispute settlement. TheUSdrew
thePanel'sattention toArticle 11.10 oftheMFA. Therefore, thelegalsituation forsafeguards under
Article XIXofGATT 1994, forpurposes ofthediscreet discussion ofstandard ofreview, wasnomore
analogous thananyother caselaw.
D. Article 6oftheATC
TheATC Safeguard Mechanism
5.28 India argued thatthetransitional safeguard mechanism established under theATC wasan
exception tothebasic principles oftheGeneral Agreement andthegeneral safeguard provisions of
Article XIXofGATT 1994anditmustbeinterpreted accordingly. Article XIofGATT 1994provided
forageneral prohibition ofquantitative restrictions; oneoftheexceptions tothisgeneral prohibition
wasArticle XIXofGATT 1994, which permitted safeguard actions intheform ofquantitativeWT/DS33/R
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restrictions. However, suchrestrictions mustbeimposed consistently withArticle XIIIofGATT 1994,
thatis,non-discriminatorily. Thetextiles andclothing sector had,however, remained outside theGATT
system foralongtimeandtheATC setoutprovisions tobeapplied byMembers fortheintegration
ofthetextiles andclothing sector intoGATT 1994 during atransitional period. Thescheme ofthe
ATC wasthatallquantitative restrictions maintained under theprovisions oftheMFA andineffect
onthedaybefore theentry intoforce oftheWTO Agreement would begoverned bytheprovisions
oftheATC (Article 2.1)andthatnonewrestrictions would beintroduced except under theprovisions
oftheATC orGATT 1994 (Article 2.4). TheATC envisaged, inrespect ofsafeguard action, that
Article XIXofGATT 1994would apply inrespect ofproducts already integrated intoGATT 1994,
while Article 6oftheATC would apply inrespect ofproducts yettobeintegrated intoGATT 1994.
Article 6oftheATC established atransitional safeguard mechanism thatpermitted WTO Members
notonlytoimpose quantitative restrictions inconsistently withArticle XIofGATT 1994 butalsoto
dosoona"Member-by-Member" basis, which weretheterms usedinArticle 6.4oftheATCtodescribe
discriminatory actions inconsistent withArticle XIIIofGATT 1994.
5.29 India further argued thattoimpose burdens onparticular exporters notbecause theyengaged
indumping orbenefitted fromsubsidies butmerely because theyweremore efficient thanothers was
contrary tothebasicpurpose ofthemultilateral trading order. There was,therefore, noother provision
inthewhole oftheWTO legalsystem thatpermitted theimposition ofrestraints onimports from a
particular WTO Member merely because itcaused, orthreatened tocause, damage toadomestic
industry. Thedrafters oftheATChadexplicitly recognized theexceptional character ofthetransitional
safeguard inArticle 6.1oftheATC, according towhich thatsafeguard "should beapplied assparingly
aspossible".
5.30 TheUnited States argued that,inthepresent case, ithadfaithfully applied theprocedures of,
anditsaction wasfullyconsistent with, Article 6oftheATC. Article 6should beinterpreted in
accordance withtheordinary meaning ofitsterms, intheircontext andinlightoftheATC'sobject
andpurpose. Article 31.1oftheVienna Convention provided that: "Atreaty shallbeinterpreted
ingood faithinaccordance withtheordinary meaning tobegiven totheterms ofthetreaty intheir
context andinthelightofitsobject andpurpose." Applying these principles, theordinary meaning
oftheactual terms ofArticle 6.2oftheATC wassimply thatasafeguard action maybetaken based
onaMember 'sdetermination thatdemonstrated thattherequisite conditions ofserious damage oractual
threat thereof caused byincreased import quantities existed andthattheserious damage oractual threat
thereof wasproperly attributable totheMember against which themeasure hadbeenapplied. There
wasnobasisinthetextofArticle 6toassume thatitmustbeinterpreted narrowly orasanexceptional
provision.
5.31 IntheviewofIndia, thehighly exceptional character ofthetransitional safeguard inArticle 6
oftheATCmustbetaken intoaccount ininterpreting thatprovision. GATT 1947panels hadrepeatedly
recognized thatexceptions mustbeinterpreted narrowly (seeforinstance BISD 30S/140 and36S/345).
Thisprinciple mustbeparticularly strictly applied inthecaseofaprovision which constituted notonly
anexception totheprinciples setoutinArticle XIofGATT 1994 butalsotothose setoutinits
Article XIII. Thisimplied, interalia,thatitwould belegally incorrect toweaken thedisciplines
establishedunderArticle6oftheATCbyextendingtothetransitionalsafeguardmechanism,byanalogy,
legalprinciples developed under other safeguard provisions oftheWTO legalsystem.
5.32 TheUnited States argued thatthesafeguard mechanism inArticle 6oftheATCmustbeviewed
asanintegral partoftheATC andnotasa"highly exceptional" provision. TheUruguay Round
negotiators haddesigned theATC tobalance theinterests ofpredominantly exporting Members and
predominantly importing Members untilthe10-year transitional period wasover. Exporting Members
wereguaranteed thatby1January 2005, alltextile andclothing products would besubject tonormal
GATT rules. Inaddition, theywereguaranteed that,where applicable, during thetransition, products
under quota would enjoy accelerated growth inaccess. Exporting Members werealsoguaranteed thatWT/DS33/R
Page18
specified percentages ofproducts listed intheAnnex totheATCwould beintegrated intoGATT 1994
inthreestages. Once suchproducts wereintegrated, quotas could notbemaintained orplaced onthem
except pursuant toArticle XIXofGATT 1994. Importing Members, fortheirpart,were provided
withaspecial mechanism forsafeguard actions thatcould beusedduring the10-year transitional period
iftheywerefaced withserious damage oranactual threat thereof totheirproducers asaresult ofsharply
increased imports. Thisbalance ofinterests between accelerated quota growth andspecified integration
fortheexporting Members andaspecial safeguard mechanism fortheimporting Members hadenabled
allsides toagree totheATC.
5.33 IndiadisagreedwiththeUSviewthatimportingMembershadobtainedtherighttotakesafeguard
action inexchange foraccelerated quota growth andspecified integration fortheexporting Members.
Thisargument overlooked thefactthattherestraints applied under theMFA were inconsistent with
theobligations ofimporting countries under GATT 1947. Theremoval ofquotas provided forunder
theATC inthetextiles andclothing sector wasnottrade liberalization. Furthermore, India didnot
accept thatthesafeguard mechanism mustbeviewed asanintegral partoftheATCandnotasa"highly
exceptional" provision; rather, India, while accepting thatthesafeguard provision wasanintegral
partoftheATC, considered thatitwasalsoanexception tothebasic principles oftheGATT andthe
general safeguard provisions ofArticle XIXoftheGATT andmustbeinterpreted accordingly bythe
Panel.
5.34 Onthisaspect, theUnited States considered thecontext, object, andpurpose ofArticle 6of
theATCtobeimportant. Theability torespond toimport surges through theapplication ofatransitional
safeguard action wasakeyconcession made intheUruguay Round negotiations topredominantly
importing Members. Itcounterbalanced thesubstantial -andirreversible -trade liberalization that
wassetoutelsewhere intheATC. Forthisreason, Article 6oftheATC occupied acentral position
intheoperation oftheATC during the10-year transitional period. Itwould notbeconsistent with
thecircumstances ofthenegotiations tounduly circumscribe themanner inwhich Article 6was
interpreted. Thereference inArticle 6.1oftheATC tothefactthatthetransitional safeguard "should
beapplied assparingly aspossible" didnotalterthisresult. Thephrase didnotspeak tohowArticle 6
should beinterpreted withregard toaspecific instance ofserious damage, oractual threat thereof.
Theterm"sparing" comes directly from Article 3.2oftheMFA. Under theMFA andnowunder
theATC, "sparing" didnotanddoesnotamount toabstaining fromtaking safeguard action when the
requirements inArticle 6oftheATC were fulfilled.
5.35 TheUnited States alsopointed outthatimports ofwoven wool shirts andblouses fromIndia
hadincreased 414percentfrom theyearending January 1994 toyearending January 1995. There
wasadefinite decline inUSdomestic production concurrent withthissurge inimports which compelled
afinding ofserious damage oractual threat thereof tothedomestic industry. Inmaking that
determination, theUShadfollowed allofthenecessary procedures intheATC ingoodfaith-taking
intoaccountsomeoftherelevantfactorslistedinArticle6.3oftheATCforwhichpublishedinformation
wasavailable aswellasinformation fromcontacts withproducers onother factors forwhich published
information wasnotavailable. Thereasonableness ofthisdetermination wasfurther illustrated by
thefactthattheTMB, comprised ofmembers from exporting andimporting Members, hadreached
aconsensus supporting theapplication ofasafeguard action bytheUnited States.
Legal Analyses ofSerious Damage orActual Threat Thereof Suggested bytheParties
5.36 India argued thattheonusofdemonstrating serious damage oritsactual threat wasonthe
importing Member which hadtochoose atthebeginning oftheprocess whether itwould claim the
existence ofserious damage orofactual threat. These were notinterchangeable because thedata
requirements would varywiththechosen situation. Actual threat could onlybeestablished bythe
necessary dataonimminent measurable imports, without which, thedemonstration ofactual threat
waslikely tobebased onconjecture andnotonconcrete facts.WT/DS33/R
Page19
5.37 TheUnited States argued inresponse thatArticle 6oftheATC didnotrequire ittochoose
between serious damage oractual threat thereof andthere were nocriteria, definitions orotherwise
thatseparated thephrase "serious damage, oractual threat thereof". Norhadanysuchcriteria existed
under theMFA fromwhich thisphrase andthecriteria intheATCcame. Thetestssuggested byIndia
which supplied criteria forserious damage andthreat separately didnotexistintheATC. Inparticular,
noseparate testforactual threat wasnegotiated intothetextoftheATC. Since theTMB mustexamine
"serious damage, oractual threat thereof.", itwasnotconstrained tomake afinding based onwhether
aMember alleged bothornotandtheATC didnotrequire theTMB andtheinvestigating authorities
tochoose between serious damage oractual threat. TheATC alsodidnotrequire theTMB tomake
afinding based ontheentire phrase.
5.38 India insisted thattheATC diddelineate between serious damage andactual threat thereof.
Thisdelineation wasreflected intheroutine practice oftheTMB todistinguish between serious damage
andactual threat thereof initsrecommendations. Therefore, iftheTMB hadactually come tothe
conclusion thatasituation of"serious damage" existed, itwould havesaidsoinitfindings. Since
theTMB hadnotsaidinitsfinding thatasituation of"serious damage" hadbeendemonstrated, it
wasobvious thattheydidnotconsider thatasituation of"serious damage" hadbeendemonstrated.
Bycomparing themanner inwhich theTMB hadgiven itsfindings inrespect ofanumber ofother
cases, itbecame clear thatiftheTMB hadcome totheconclusion that"serious damage" hadbeen
demonstrated, itwould nothavegivethefinding that"actual threat ofserious damage" hadbeen
demonstrated.
5.39 India referred tothespecific safeguard action onwhich theUnited States andIndia hadheld
consultations inJune1995andnoted thatitwasanaction based onadetermination ofserious damage
whiletheTMBhadendorsed,inAugust1995,anactionbasedonallegedactualthreatofseriousdamage.
India considered thattheUnited States must have haddoubts astothelegal justification ofits
determination ofserious damage andtheadequacy ofitsdatabecause, when theUSmeasure was
reviewed bytheTMB, itmade theclaim thatimports from India hadalsopresented anactual threat
ofinjury andtheUnited States hadpresented entirely newdata. TheTMB endorsed thatnewclaim
butnottheoneonwhich India andtheUnited States hadheldconsultations. TheDiplomatic Note
oftheUnitedStatesconveyingitsrequestforconsultationshadincludeda"StatementofSeriousDamage"
butithadnotincluded anystatement claiming anactual threat ofserious damage. Thesafeguard action
onwhich theUnited States hadheldconsultations wasthusanaction allegedly designed toremedy
theserious damage tothedomestic industry which hadalready beencaused byimports from India.
Thelimited amount ofdatathathadbeenmade available during theconsultations allrelated tothe
actual stateoftheindustry andtheimports thathadalready taken place. Besides, thePublic Notice
ofCITA, dated 17May1995(published intheUSFederal Register on23May1995), onlymentioned
"serious damage totheUSindustry producing woven wool shirts andblouses". Under these
circumstances,therequestbytheUnitedStatescouldonlybeunderstoodbyIndiaasarequestconcerning
serious damage andIndia, therefore, examined therequest onlyfromthatangle. Nothaving obtained
theTMB'sendorsement ofthedetermination onwhich ithadheldconsultations withIndia, the
United States should haveimmediately withdrawn itssafeguard action.
5.40 Indiaalsoclaimed thatsincethesafeguard action endorsed bytheTMB wasanaction onwhich
theUnited States hadnever heldanyconsultations withIndia, ittherefore, never hadanyopportunity
tochallenge suchaction. India wasoftheviewthattheTMB hadcommitted aserious error infailing
torecognize thatasituation ofserious damage andasituation ofactual threat ofserious damage were
twoentirely different matters. Aclaim ofserious damage mustbeaccompanied byademonstration
thatserious damage hadalready occurred andconsequently substantiated according toArticle 6.7of
theATC by"specific andrelevant factual information" related tothatclaim. Inthecaseofserious
damage, aretrospective analysis wasrequired andtheissuewas:whatdamage hadalready beencaused
byimports? Aclaim ofactual threat ofserious damage mustbeaccompanied byademonstration that
thedomestic industry hadreached avulnerable stage andwasonthebrink ofserious damage, sothatWT/DS33/R
Page20
anyfurther sharp andsubstantial increase inimports would pushtheindustry intoastateofserious
damage. Inthecaseofactual threat, aprospective analysis must beperformed andtheissue was:
which imports wereimminent andwhatdamage weretheylikely tocause? Different factshadtobe
demonstrated foreachcaseandaconsultation onserious damage could, therefore, notbedeemed to
comprise aconsultation onthreat ofserious damage.
5.41 Furthermore, intheview ofIndia, thefootnote toArticle 6.4oftheATC clarified thatthe
imminent increase inimports shallbemeasurable andshallnotbedetermined toexistonthebasis
ofallegation, conjecture ormere possibility. There were twoelements inthistypeofsituation:
"imminence" interms oftimeand"measurable" interms ofquantity. Imminent andmeasurable imports
could bededuced fromcircumstances suchas:goods werealready onthehighseasandduetoarrive
intheimmediate future orwhen measurable quantities ofgoods hadbeendelivered atthedockside
forshipment orwhen thegoods hadbeenfirmly contracted andwere awaiting shipment, etc.The
measurable quantities should belargeenough tosatisfy thestipulation of"sharp andsubstantial increase
inimports".
5.42 TheUnited States accepted thattheMarket Statement hadreferenced only"serious damage."
However, theuseofthisshorthand phrase intheinitial document wasofnosubstantive consequence
andwasquickly corrected. TheUnited States hadexpressly informed India initsdiplomatic notethat
thecasewasbased ontheexistence of"serious damage, oractual threat thereof" andduring consultations
theUnited States hadexplained toIndiaallofthefactors foritsdetermination. Indiahadalsocomplained
thattheUShadnotexpressly examined eachandevery factor listed inArticle 6.3oftheATC, but
hadfailed toshow whytheUSwasrequired todoso.Article 6.3referred to"such relevant economic
variables as"those listed andthat"none of[these factors] either alone orcombined withother factors,
cannecessarily givedecisive guidance". TheUnited States clearly hadexamined factors "such as"
thelisted factors. Theissuewasnotwhether theUShaddiscussed aparticular setoffactors initsentirety
(even where dataonsome factors might nothave beenavailable), butwhether theUnited States '
examination wassufficiently meaningful soastoreasonably support thefinding andtoconstitute a
good faithapplication oftheArticle 6standard.
5.43 Inaresponse tothePanel, theUnited States pointed outthatatnotimebefore theTMB
proceeding hadIndia taken issuewiththereference intheUSdiplomatic noterequesting consultations
onthebasis ofserious damage oractual threat thereof orthattheshorthand hadbeenusedinthetext
oftheMarket Statement. India alsohadnotasked theUnited States toclarify whether ithadchosen
between serious damage orthreat inlightoftheapparent different reference intheDiplomatic Note
andtheApril Market Statement. India hadonlyasserted thispoint during theTMB proceeding. The
United States Diplomatic Note toIndia wastheofficial request forconsultations. Thereference to
serious damage oractual threat thereof wasalways intheDiplomatic Note, therefore, no"correction"
wasnecessary. Inresponse toaquestion fromIndia, theUnited States alsoexplained that,initsview,
India wasaware thattheentire phrase wasthebasisforthecall,especially since neither theATC nor
theMFA, which hadusedthesame phrase asadefinition of"market disruption," separated thetwo
orprovided different criteria foreach.
5.44 Withrespect totheabove, Indiaconsidered thatnocorrection totheterminology intheMarket
Statement waspossible since theDiplomatic Notewhich preceded theMarket Statement transmitted
adetermination thathadalready beenmade andthatdetermination related toserious damage only.
Thenature ofthatdetermination could notbechanged through theDiplomatic Note transmitting it.
Indiahadtoconclude, therefore, thatanalleged situation ofserious damage andnotactual threat thereof,
wasthebasisfortheUnited States 'request forconsultations andforthesubstantive discussions during
those consultations. Thedistinction between serious damage andactual threat thereof onlybecame
anissue inthiscaseatthetimeoftheTMB review.WT/DS33/R
Page21
5.45 TheUnited States insisted thatithadfollowed allprocedures required under Article 6.2and
6.3oftheATC. Thesafeguard standard was"serious damage, oractual threat thereof."15Article 6.2
oftheATC provided, inpart,that:
"...safeguard action may betaken under thisArticle when, onthebasis ofa
determination byaMember, [footnote omitted] itisdemonstrated thataparticular
product isbeing imported intoitsterritory insuchincreased quantities astocause
serious damage, oractual threat thereof, tothedomestic industry producing likeand/or
directly competitive products. Serious damage oractual threat thereof must
demonstrably becaused bysuchincreased quantities intotalimports ofthatproduct
andnotbysuch other factors astechnological changes orchanges inconsumer
preferences".
5.46 TheUnited States further submitted thatArticle 6oftheATC provided noseparate definition
orseparate factors applying toactual threat ofserious damage asdistinguished fromserious damage.
Thephrase "serious damage, oractual threat thereof" wasderived from thedefinition ofmarket
disruption inArticle 3ofAnnex AoftheMFA. There, too,noseparate factors forthetwoelements
hadbeenprovided andtheMFA'sTSBhadnever supplied any.Article 6.3oftheATCsetoutvarious
factors fordetermining serious damage oractual threat thereof, resulting from increased quantities
intotalimports. ThatArticle provided that:
"[i]nmaking adetermination ofserious damage, oractual threat thereof, asreferred
toinparagraph 2,theMember shallexamine theeffect ofthose imports onthestate
oftheparticular industry, asreflected inchanges insuchrelevant economic variables
asoutput, productivity, utilization ofcapacity, inventories, market share, exports,
wages, employment, domestic prices, profits andinvestment; noneofwhich either
alone orcombined withother factors, cannecessarily givedecisive guidance".
5.47 Intheview oftheUnited States, thestatement prepared byCITA hadincluded sufficient
information tojustify itsfinding. Concerning serious damage oractual threat thereof caused bytotal
imports, Article 6.2and6.3oftheATC, thefactswere, asprovided intheMarket Statement, that
when CITA made itsdetermination: (i)there wasasurge intotalimports of94percentfortheyear
ending January 1995 compared totheyearending January 1994; (ii)there wasserious damage or
actual threat thereof toUSproduction ofwoven wool shirts andblouses asaresult ofthatmassive
increase intotalimports; (iii)theproducts involved were"like" and/or "directly competitive" woven
wool shirts andblouses; USmanufacturers competed withimports from India andother suppliers
andweresoldtothesame stores; and(iv)there wereadverse effects oninvestments, market share,
employment (about 6percentoftheworkers inthewoven woolshirtindustry losttheirjobsfrom 1994
to1995asaresult ofimports), inthissmall andvolatile USindustry. More specifically, theUSfound
thatimports ofcategory 440hadsurged from 44,363 dozen in1992 to141,569 dozen in1994. At
thesame timedatashowed thatproduction, afterslightly rising in1993, hadsuffered adecline of
8.4percentin1994. Production continued todecline in1995, 5.3percentbelow theyearending
June1994level. Market share ofdomestic manufacturers declined, employment declined, investment,
profits andcapacity were adversely impacted byimports ofcategory 440.
5.48 Inaresponse tothePanel, theUnited States further explained thatitdidnotconsider thata
finding of"actual threat ofserious damage" required some sortofdata, analysis orargumentation
different from thatrequired forafinding of"serious damage". Inmaking itsdetermination, theUS
15Article 3oftheMFA provided thataction could betaken tolimit exports "causing market disruption as
defined inAnnex A..." Annex AoftheMFA setforth atestfor"market disruption," which wasbased onthe
existence of"serious damage todomestic producers oractual threat thereof". Annex Aalsosetsforth factors
foradetermination similar tothose found inArticles 6.3and6.4oftheATC.WT/DS33/R
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wasrequired tofollow Article 6.2and6.3oftheATC which provided thestandard andsome ofthe
factors important inmaking aserious damage oractual threat thereof determination. Unlike the
Agreement onSafeguards, there wasnothing inArticle 6oftheATC providing different conditions
tobemetforserious damage ontheonehandandactual threat thereof ontheother hand. There were
alsonoseparate criteria. There wasnorequirement intheATC spelling outthesortofanalysis or
argumentation required forserious damage oractual threat thereof. TheUnited States didnotbelieve
itappropriate toreadintotheATC anyparticular threat criteria.
5.49 IntheviewofIndia, therewasadefinite differentiation between theexistence ofserious damage
andactual threat thereof andtheabsence inArticle 6oftheATC ofdifferent conditions tobemet
foroneortheother didnotremove thiscleardistinction. Thefactors contained inArticle 6.3and6.4
oftheATC mustbereviewed todetermine whether ornottheindustry wasfacing asituation where
serious damage existed orasituation where there wasathreat ofserious damage. TheUSMarket
Statement clearly identified theUSdetermination that"serious damage" existed atthetimeoftherequest
forconsultations andthere wasnoindication, ordatasupplied, thatthelimited factors reviewed by
theUSpointed toacondition which could becharacterized as"actual threat" ofserious damage to
thedomestic industry.
Status oftheMarket Statement
5.50 TheUnited States stated thattheinformation contained intheMarket Statement constituted
thetotality oftheinformation usedbyCITA inmaking itsdetermination ofserious damage, oractual
threat thereof. Other relevant information hadbeen supplied during consultations orpursuant to
Article6.10oftheATCandwasprovidedasupdatesoruponrequesttoconfirmtheinitialdetermination.
TheUnited States found noguidance intheATC orDSU onwhether theMarket Statement should
bethesolebasis forthePanel toassess whether theUShadacted inconformity withArticle 6ofthe
ATC. Article 6mayleadonetoconclude thattheoriginal dataavailable atthetimeofthedetermination
waslegally relevant concerning thereasonableness ofthedetermination oftheimporting Member.
However, Article 6.10oftheATCallowed additional ornew/updated dataforTMB review. Implicitly
onewould expect thatif,during consultations, more datawererequested, thatdatacould besupplied,
ifavailable, toconfirm adetermination. Article 6.7oftheATC onlyprovided fordatatoaccompany
therequest forconsultations. Inthecontext ofconsultations andArticle 6.10oftheATC, otherrelevant
dataandtheTMB proceeding inthiscase, mayonlybepersuasive information during Panel review.
TheUnited States believed thattheDecember 1994 Market Statement hadnolegalstatus before this
Panel since India hadrejected therequest forconsultations based onthatStatement andhaddemanded
thattheUnited States re-submit itsrequest under theATC. TheMarket Statement wastheStatement
accompanying therequest under Article 6oftheATC andtheonlyStatement withstatus inthis
proceeding. However, some factual information intheDecember Market Statement wasalsoreflected
intheMarket Statement inApril 1995.
5.51 India argued thattheUnited States hadnotfulfilled therequirements ofArticle 6oftheATC
intheMarket Statement submitted toIndiainApril 1995asthebasisforconsultations ontheproposed
safeguard action. Furthermore, theUSdetermination inthisMarket Statement wasoneofonly"serious
damage" which conveyed theconditions which theUnited States believed existed andshould havebeen
thelimitofanyTMB review. Also, theinformation contained intheMarket Statement didnotrepresent
dataonthe"industry" which theUnited States claimed wasexperiencing "serious damage" dueto
increased imports butanother, much larger industry andwasnotrelevant totheeconomic variables
tobeexamined inmaking thedetermination.
Sources ofData Provided BytheUnited States
5.52 TheUnited States explained thatithadrelied asmuch aspossible onofficial datasources to
assess objectively conditions inthedomestic textile andclothing industries. Because theindustryWT/DS33/R
Page23
producing category 440,woven woolshirts andblouses, wasasmall one,therewerelimited published
dataavailable tosupplement theofficial dataonproduction andimports thatformed thebasisofCITA 's
determination ofserious damage oractual threat thereof. Accordingly, indeveloping theadditional
information required tomake itsdetermination, CITA hadrelied heavily oninformation furnished by
clothing manufacturers, particularly thetwomajor companies thatproduced garments incategory 440.
Thisinformation hadbeencollected byCITA through multiple phone callsandtelefax exchanges.
Becausetheinformationwascollectedfromindividualcompanies,itwastreatedonabusinessconfidential
basis. Further, theATCdidnotprovide amethodology forcollecting data; itonlynoted inArticle 6.7
oftheATC thatwhen requesting consultations, theaccompanying datamustbe"specific andrelevant
factual information, asup-to-date aspossible."
5.53 While India accepted thatArticle 6.7oftheATC required thattherequest forconsultations
beaccompanied by"specific andrelevant factual information, asup-to-date aspossible", therequirement
nottoignore thelatest information available didnotimply thattheUnited States wasfreed ofits
obligation under Article 6.2and6.3oftheATC tocollect allthekeyeconomic datanecessary to
demonstrate thatthedomestic industry wassuffering serious damage. Toaccept theargument ofthe
United States onthispoint would turntheadditional requirements setoutinArticle 6.7oftheATC
intoanexemption from therequirements setoutinArticle 6.2and6.3oftheATC which could not
becorrect.
5.54 TheUnited States further pointed outthatCITA hadalsousedinformation anddataprovided
bytradeassociations andlabour unions which represented thecompanies andworkers ofthisindustry.
Thelatter twosources wereconsidered tobeespecially valuable because theyhadbothanoverview
ofindustryinformationandamoreobjectiveperspectivethattheindividualcompaniesdidnotnecessarily
have. Using theabove sources, CITA hadidentified thecompanies thatmanufactured woven wool
shirts andblouses among themany manufacturers thatproduced woven shirts andblouses ofallfibres
andhadquestioned them oncurrent business conditions, particularly theeconomic variables called
forinArticle 6oftheATC. Thisinformation wasthenanalyzed anddetailed intheMarket Statement.
Because thetextile andclothing programme wasdesigned toadopt safeguard action expeditiously, it
wasnotpossible fortheOffice ofTextiles andApparel (OTEXA) toconduct anyextensive, formal
written surveys ofmanufacturers toobtain thisinformation. Such formal surveys required advance
notice andanextensive public comment period which would haveprevented theadoption ofasafeguard
action intimetoprevent serious damage oractual threat thereof totheindustry inquestion.
5.55 India disagreed withsome oftheinformation inthepreceding paragraph, arguing thatofficial
dataonimportsincategory440werepublishedintheirentirety,includingnotonlytheaggregateimports
assigned tocategory 440,butalsothequantity, value, dateofexport, dateofimport, andcountry of
origin foreachoftheHTSlines. Interms ofthe"official dataonproduction", itwaslimited andthere
hadbeennoindication thattheUShadbeenabletosupplement thislimited datainorder todemonstrate
production levels andtrends ofdomestic production thatwould becomparable toalltheproducts
contained inimport category 440. Thespecific andrelevant dataofficially maintained bythe
United States onexports ofproducts comparable tothose contained inimport category 440hadalso
beenignored bytheUS.
5.56 TheUnited States pointed out,inresponse toaquestion from India, thatinthecaseofthe
woven wool shirtandblouse industry, twofirms accounted foramajority ofUSproduction, sothe
information reported wasreasonably relied upon byCITA isindicative ofconditions intheindustry.
Some information applied specifically tothewoven woolshirtandblouse industry andsome, incases
where theoverall trend wasreflective ofconditions inthespecific industry inquestion, reflected a
broader scope.WT/DS33/R
Page24
E. Demonstration ofSerious Damage bytheUnited States
5.57 India argued thattheUnited States hadfailed initsMarket Statement todemonstrate during
theconsultations thatimported woven wool shirts andblouses were causing serious damage toits
domestic industry and,therefore, hadactedinconsistently withArticle 6oftheATC. Under Article 6.2
oftheATC, aWTO Member maytakeasafeguard action when
"onthebasis ofadetermination byaMember, itisdemonstrated thataparticular
product isbeing imported intoitsterritory insuchincreased quantities astocause
serious damage, oractual threat thereof, tothedomestic industry producing likeand/or
directly competitive products".
Inmaking suchadetermination, Article 6.3oftheATC stated thataMember
"shall examine theeffect ofthose imports onthestateoftheparticular industry, as
reflected inchanges insuch relevant economic variables asoutput, productivity,
utilizationofcapacity,inventories,marketshare,exports,wages,employment,domestic
prices, profits andinvestment; none ofwhich, either alone orcombined withother
factors, cannecessarily givedecisive guidance".
5.58 TheUnited States argued thatCITA haddetermined thathighlevels andsurging imports of
woven wool shirts andblouses coincided withadeterioration inthedomestic industry 'scondition in
terms ofsuchfactors asdomestic output, market share, investment, employment, man-hours worked
andtotalannual wages. Therefore, CITA hadconcluded thatthesurge inimports ofwoven woolshirts
andblouses hadcaused serious damage oractual threat thereof totheindustry. Inthecourse ofCITA 's
investigation intoserious damage oractual threat thereof tothedomestic industry producing woven
woolshirts andblouses, therewasnoindication whatsoever thattechnological changes and/or changes
inconsumer preferences hadresulted intheserious damage oractual threat thereof.
5.59 TheUnited States considered thatthefirststepforthePanel wastodecide whether, pursuant
toArticle 6.2oftheATC, there wasevidence supporting CITA 'sdecision thatthedomestic industry
producing category 440hadbeenseriously damaged orthreatened withsuchdamage byreason oftotal
imports -notimports fromIndia. TheUnited States argued thatithaddemonstrated thattotalimports
hadcaused, oractually threatened, serious damage toitshighly sensitive industry producing woven
wool shirts andblouses. Thisfinding wasconsistent withArticle 6.2oftheATC, which provided
thatserious damage oractual threat thereof mustdemonstrably becaused bysuchincreased quantities
in"total imports" ofthatproduct andnotbysuchother factors astechnological changes orchanges
inconsumer preference. Article 6.3oftheATC provided that"[i]nmaking adetermination ofserious
damage oractual threat thereof" theUnited States mustexamine theeffect ofimports onthestateof
theindustry. Insodoing theUnited States wastoexamine variables suchasthose listed inArticle 6.3
oftheATC, "none ofwhich, either alone orcombined withother factors, cannecessarily givedecisive
guidance." Support fortheinterpretation thatthelistwasillustrative isalsofound inArticle 6.7of
theATC. There, datawastoinclude "thefactors, referred toinparagraph 3[ofArticle 6],onwhich
theMember invoking theaction hasbased itsdetermination oftheexistence ofserious damage oractual
threat thereof".
5.60 India considered thatthelistoffactors included inArticle 6.3oftheATC wasnotmeant to
imply thattheinitiating Member wasprovided theliberty toselect dataforthose "relevant economic
variables" which were convenient orthatthelistof"relevant economic variables" wasmeant tobe
anexhaustive listofvariables tobereviewed. Rather theyrepresented theprimary, minimum factors
thatshould beavailable forreview inorder tomake aninformed anddemonstrable determination of
serious damage oractual threat thereof, toaspecific industry.WT/DS33/R
Page25
5.61 IndiafurtherarguedthattheissuebeforethePanelwasnotwhethertheATCprescribedaspecific
evidentiarystandard,butwhethertheUnitedStateshaddemonstratedacausallinkbetweenrisingimports
anddeclining production bynoting theirco-existence. Indiaconsidered thatrising imports anddeclining
production mustnecessarily bepresent inallsafeguard actions under theATC, buttheco-existence
ofthetwocould, therefore, notbesufficient toconstitute adetermination ofacausal link.
India'sReview oftheEconomic Variables
5.62 IndiaarguedthatArticle6.3oftheATCrequiredaMembertoexaminethestateoftheparticular
industry, asreflected inchanges ineleven factors: output, productivity, utilization ofcapacity,
inventories, market share, exports, wages, employment, domestic prices, profits andinvestment. The
United States 'Market Statement onwoven wool shirts andblouses provided figures ononlyfourof
theseeleven factors: output, market share, wages andemployment. Inaddition, theStatement included
"industry statements" providing figures ondomestic prices, andanecdotal information oninvestment
andutilization ofcapacity. ThislefttheMarket Statement deficient withrespect tofourrelevant
economic variables, namely exports, profits, productivity andinventories.
5.63 Indiafurther argued thatalthough Article 6.3oftheATCindicated anillustrative listoffactors,
onwhich datahadtobeexamined, itwould beinorder ifanimporting Member alsoexamined other
factors while making adetermination. However, itwould beinconsistent withArticle 6.7oftheATC
ifallthefactors mentioned inArticle 6.3oftheATC werenottaken intoaccount bytheimporting
Member. The"other relevant information" provided totheTMB bytheUSon28August 1995 was
inconsistent withArticle 6.10oftheATC, because these were notthedatasupplied totheIndian
delegation during theconsultations. These datawerealsonotavailable totheUnited States when it
made itsdetermination.
5.64 TheUnited States noted thatIndia hadquestioned thevalidity andrelevance ofsome ofthe
dataintheMarket Statement andthedatafurnished totheTMB inAugust 1995 andconsidered that
theseclaims werewithout merit. Withregard toIndia'sclaims thatCITA 'sdetermination wasinvalid
because itdidnotcontain dataonevery factor listed inArticle 6.3oftheATC, theUnited States argued
thatCITA hadexamined factors forwhich information wasavailable. Thelistoffactors inArticle 6.3
oftheATC wasillustrative. Theinformation supplied toIndia, andtothePanel, represented astrong
casethatwould notbeaffected bydataonother factors. Under Article 6.3oftheATC, theissuewas
notwhether CITA haddiscussed aparticular setoffactors initsentirety (even where dataonsome
factors might nothavebeenavailable), butwhether CITA 'sexamination wassufficiently meaningful
soastoreasonably support thefinding andtoconstitute agoodfaithapplication oftheArticle 6standard.
5.65 TheUnited States alsopointed outthatithadtried toprovide information ontheother,
unpublished factors which India hadcharacterized asanecdotal andunverifiable. Dataondomestic
prices wasavailable from contacts withindividual firms. There were about 15firms thatproduced
woven wool shirts andblouses intheUnited States andtwofirms accounted foratleast60percent
oftotalUSproduction. Theinformation presented inconnection withthiscasewasbased mainly on
conversations withthese twofirms; therefore, thatinformation wasrelevant andaccurate.
United States Review oftheEconomic Variables
5.66 TheUnited States argued that,inaccordance withArticle 6.3oftheATC, ithadreviewed
relevant economic datasuchasoutput, market share loss,import penetration, employment, man-hours,
wages, anddomestic prices. Ithadalsolooked atother variables suchasprofits, investment, capacity,
andsales. Asdescribed intheMarket Statement, totalimports ofwoven woolshirts andblouses had
surged to141,502 dozen intheyearending January 1995, nearly double theleveloftheyearending
January 1994. Theratioofimports todomestic production hadincreased rapidly from 88percentWT/DS33/R
Page26
in1993to151percentduring January-September 1994, thusindicating thatimports hadfarsurpassed
thelevelofdomestic production.
5.67 TheUnited States further argued thatthesehighandsurging imports, atlowprices, coincided
withadeterioration intheindustry ’scondition interms ofsuchfactors asdomestic output, market
share, investment, employment, man-hours worked andtotalannual wages. Among these findings
were that:
(a) USproduction ofclothing incategory 440haddeclined inthefirstninemonths of
1994 withthelevel falling to61,000 dozen -8percentbelow the66,000 dozen
produced during January-September 1993.
(b) USproducers 'share ofthedomestic market hadfallen from 53percentin1993 to
40percentinthefirstninemonths of1994.
(c) Employment intheindustry producing woven shirts andblouses including shirts and
blouses made from wool declined 6percentbetween 1993 and1994.
(d) Total annual production worker wages intheindustry producing woven shirts and
blouses including shirts andblouses made from wool hadfallen 3percentoverthe
same timeperiod.
(e) Averageman-hoursworkedintheindustryproducingwovenshirtsandblousesincluding
shirts andblouses made fromwool haddropped 6percentbetween 1993 and1994.
(f) Prices fordomestically produced woven wool shirts andblouses were substantially
higher thanimports.
(g) Profit margins haddeteriorated across thewoven wool shirtandblouse industry as
aresult ofrawmaterial costincreases andthefactthatcompanies wereunable toraise
prices because oflow-priced imports.
(h) Investment levels were stagnant throughout much oftheindustry.
(i) Production capacity ofseveral companies haddeclined, withonemanufacturer ofwoven
woolshirts andblouses reporting thatthedropping ofoutside contracting represented
theequivalent ofclosing fourplants. Thatcompany ranatonly70percentofits
capacity foritsownmanufacturing plants.
(j) Most companies hadreported salesdeclines astheylostmarket share tolower priced
imports; some companies reported declines of20percentormore.
TheIndustry andtheProducts
(i) TheNature oftheWool Sector intheUnited States
5.68 TheUnited States explained thatthewoolproducts sector oftheUStextile andclothing industry
wasverysensitive toimports. Ateachstageofprocessing, theproduction ofwoolproducts wasmore
expensive and/or more complicated thanproduction ofmostcotton andman-made fibreproducts and
thesector was,therefore, more vulnerable tolow-price import competition. Also, themarket forwool
products intheUnited States wasverysmall relative tothemarket forcotton andman-made fibre
products. OftheUnited States 'totalconsumption offibre(including thefibrecontent ofimported
products), woolaccounted foronly1.9percentin1995compared to56.9percentforman-made fibreWT/DS33/R
Page27
and38.5percentforcotton. Theshare offibre consumption represented byUSwool products
manufacturers wasevenlower. With suchalowshare ofthetotaltextile andclothing market, US
woolproducts manufacturers werenotably exposed toserious damage orthreat thereof fromimports.
While imports ofalltextile andclothing products averaged 10.0percentannual growth between 1990
and1995, imports ofwool products averaged 13.9percentannual growth.
5.69 TheUnited States alsoadvised thatUSfirms producing wool clothing wereingeneral much
smaller compared tocotton andman-made fibreclothing manufacturers. Thesmall sizeofwoolclothing
companies leftthemespecially vulnerable toincreased imports. Without thefinancial reserves oflarger
firms, wool clothing producers could notasreadily withstand asudden reduction insalesoradrop
inprices duetoimport competition. TheUnited States alsonoted thatthesensitivity ofthewoolsector
oftheUStextile andclothing industry hadbeenrecognized within theframework oftheMFA and
theATC. Under theMFA regime, while growth ratesforquotas onmostman-made fibreorcotton
products were traditionally setat6percentperyear, theUnited States hadnegotiated onepercent
growth rates forwool quotas. TheTextiles Surveillance Body (TSB) under theMFA allowed this
exception tothestandard growth ratesforother fibreproducts. Thenegotiators oftheATC similarly
hadlimited thegrowth rateto2percentforwoolproducts,16whereas allother products wererequired
tobeafforded a6percentannual growth rateunder Article 6.13oftheATC. IntheviewoftheUS,
because ofthissensitivity inthewool sector, evenarelatively small increase inimports could have
averypronounced anddevastating impact onUSproducers ofwool products.
5.70 IntheviewofIndia, there werenoprovisions intheATC thatwould merit thewoolclothing
industry oftheUnited States tobetreated more favourably thananyother sector oftheUSindustry
ortheclothingindustryofanyotherMember.Thelowergrowthstipulatedforrestraintlevelsintroduced
under Article 6forwool products came intooperation onlyafterthestage ofjustifying therestraint
totheTMB andarriving attheappropriate level. Moreover, USimport duties forwoollen clothing
werelower thanthecorresponding duties forwoollen fabrics. Thus, itwould appear thattheUSwas
more concerned about protecting itsweaving industry inthewoolsector rather thantheclothing one.
Theexporters ofIndia supplying woven woolshirts andblouses totheUnited States wereallsmaller
infinancial sizeascompared tothewoven woolshirts andblouses industry unitsoftheUnited States.
Theadverse impact onsuchsuppliers arising from arestraint hadmuch more serious consequences
thancould occur totheUSmanufacturers from increased imports.
5.71 India further argued thatitwasnottruethatduring theMFA regime a6percentgrowth rate
hadapplied toother textile products and1percentgrowth ratehadapplied towoolproducts. Infact,
some ofthebilateral agreements ofIndiahadgrowth ratesoflessthan1percentforsome items which
werenotwoolproducts. There wereseveral restraints under India'sbilateral agreements with6percent
growth ratewhere woollen products were partoftherestraints. Thus, growth ratesranging upto
6percenthadoperated under theMFA regime forseveral woolproducts andgrowth ratesof1percent
orevenlesshadoperated fornon-wool products also. While aninformal exception hadbeenprovided
inthegrowth ratetobeprovided forrestrained woollen products outside thetextoftheATC, there
wasnoother formal orinformal indication inthecontext oftheATCthatthemanufacturers ofwoollen
products wereeligible foranyother special consideration orexceptional treatment inprotection against
imports. Itwasalsonotcorrect fortheUnited States tostatethatithadnegotiated 1percentgrowth
ratesforwool products withallcountries under theMFA. Forexample, thereported growth rates
forselected wool clothing products from Colombia andMexico were many times higher.
5.72 TheUnited States considered thattheabove views ofIndiadidnotcontradict theessential truth
oftheUSsubmission which wasthatthesensitivity ofthewool sector oftheUnited States 'textile
16SeeNote fortheRecord dated 16December 1993, Chairman Peter D.Sutherland, Trade Negotiations
Committee, General Agreement onTariffs andTrade, reprinted inG/TMB/N/107, 30June 1995.WT/DS33/R
Page28
andclothing industry hadbeenrecognized within theframework oftheMFA andtheATC. ForUS
bilateral textile import restraint agreements under theMFA, growth ratesforquotas onmostman-made
fibreorcotton products weretraditionally setat6percentperyear, while theUnited States negotiated
1percentgrowth ratesforwoolquotas. Insaying this,theUnited States wasreferring tospecific limits
onindividual categories. USwoolcategories under group limitasinitsbilateral agreement withIndia
hada6percentgrowth rate.None ofthesecategories hadspecific limits applicable toitalone. Finally,
India'slaststatement wasnotcorrect. Theprevious MFA Agreement withColombia provided for
onepercentgrowth forallwool clothing categories andthesame could besaidfortheMexican
agreement prior totheNAFTA.
5.73 TheUnited States, inresponse toaquestion fromIndia, further argued thatithadtheflexibility
under Article 6.6(c) oftheATC, togivetoeligible Members agrowth rateofmore than2percent,
butlessthan6percent. Thus, evenArticle 6.6(c) oftheATC recognized thesensitivity ofimporting
Member 'swool production toimports. TheUnited States noted, however, thatArticle 6.6(c) ofthe
ATC clearly didnotapply toIndia since, interalia,India'stotaltextile andclothing exports didnot
consist "almost exclusively" ofwool products. India'svolume wasnotevencomparatively small in
themarkets ofimporting Members. Further, eventhisprovision didnotmandate a6percentgrowth
rateforwoolaftersafeguard action wastaken, butallowed importing Members leeway when considering
quota levels, growth rate,andflexibility.
5.74 Also inresponse toaquestion from India, theUnited States explained thattheMFA had
recognized thedifficulties faced byimporting countries withsmall markets, highlevels ofimports and
correspondingly lowlevels ofproduction inbothitsAnnex B,paragraph 2andinparagraph 12of
the1986 Protocol ofExtension. These paragraphs authorized lower positive growth ratesthannormally
required under MFA Annex B.Although thislanguage didnotoriginate asaresult oftheUSwool
textile andclothing market, ithadlongbeenapparent thatthelanguage applied tothismarket. As
aresult, theUnited States hadnegotiated restraints onwooltextile andclothing exports sincetheearly
1970s, inallcases withonepercentgrowth ratesforallspecific limits covering wool textiles and
clothing. TheUnited States hadnegotiated growth ratesoflessthanonepercentforwool textiles,
buthadnever negotiated growth ratesabove onepercent. These rateshadbeenaccepted bytheTSB
afterUSexplanations ofthedifficulties facing thewool textile andclothing producers. Itwasnoted
thattheUS'firstwritten submission andoralstatement noted thattheATC "limits" thegrowth rate.
Toclarify, theATC, through theSutherland Note (seefootnote 16),provided thattherateshallbe
"nolessthan" 2percentinthecontext ofArticle 6.13oftheATC. Similarly, Article 6.13required
thatforother products theratecould be"nolessthan" 6percent. Assuch, theUS'argument was
thattheminimum threshold forwoolproducts under theATCwasconsiderably lessthantheminimum
threshold forother fibres because oftheimport sensitivity ofwoolinimporting Members, particularly
intheUnited States.
5.75 IndiastressedthattheMFAhadnotprovidedanyexplicitstatementsconcerningthevulnerability
ofthewoolsector toharm caused byevenmodest increases inimports. TheMFA didrecognize small
markets which didnotrefertoparticular products within theoverall market. Therefore, intheabsence
ofanydatasupporting theUSconclusion ofthevulnerability ofwool products intheUS'market,
theapplication oftheminimum allowable rateoftwopercentandtherequest forconsultations atlow
levels based onthevulnerability ofthewoolsector hadnovalidity intheactions taken bytheUnited
States oncategory 440from India.
(ii) What Constitutes theDomestic Market
5.76 India argued thatmostofthefactswhich theUnited States hadsubmitted firsttoIndia during
thecourse oftheconsultations tosupport itsclaim of"serious damage", andsubsequently totheTMB
tosupport thelaterclaim of"actual threat ofserious damage", didnotrelate tothestateoftheindustry
producing woven wool shirts andblouses, buttothestateoftheindustry producing woven shirts andWT/DS33/R
Page29
blouses generally. These datawould beirrelevant because theATC required theUnited States to
demonstrate thattheparticular industry producing woven woolshirts andblouses hadsuffered serious
damage orthreat thereof. Thatparticular industry, however, represented lessthanonepercentof
theemployment intheindustry producing woven shirts andblouses generally. Thestateofthatindustry
gave, therefore, noindication ofthestateoftheparticular industry tobeprotected bytherestraints
onimports ofwoven wool shirts andblouses. TheUnited States hadsubmitted onlytwopieces of
datathatrelated totheparticular industry designed tobeprotected byitssafeguard action, namely,
thedatashowing thatinthefirstninemonths of1994, imports ofwoven wool shirts andblouses had
increased to92,000 dozen fromalevelof43,000 dozen, i.e.anincrease of114percent,while domestic
production ofthese products hadmarginally declined by5,000 dozen from 66,000 dozen, thatisby
8percent. Other information specifically related tothewoven woolshirtandblouse industry onwhich
theUnited States hadbased itsdetermination wasnotpositive evidence butmereallegation, including
the"finding" that"production capacity ofseveral companies haddeclined" without ascertaining the
overall changes incapacity andthefactthatitproduced 5,000 dozen woven wool shirts andblouses
lessduring abriefperiod oftime.
5.77 India alsonoted that,withrespect tomarket share loss,theUSMarket Statement stated that
"theshare oftheUSwoven wool shirtandblouse market heldbydomestic manufacturers fellfrom
53percentin1993to40percentin1994". InTable IIoftheMarket Statement, theterm"market"
wasusedtodescribe anartificial construct based onthesumofimports anddomestic production, not
thetotalquantity ofwoven woolshirts andblouses purchased byUnited States consumers. Thisresulted
inmisleading conclusions when asubstantial share ofdomestic production wasexported, aswasthe
casefortheUnited States industry. IntheviewofIndia, aportion ofUnited States domestic production
ofwoven wool shirts andblouses wasexported and,therefore, must besubtracted from production
figures toarrive attheportion ofdomestic production supplied toUnited States 'consumers. Inaddition
totheportion ofdomestic production thatwasnotexported, domestic consumers maypurchase from
imported sources. Thedomestic market (consumption) forwoven woolshirts andblouses, therefore,
constituteddomesticproductionminusexportsplusimports.Todeterminechangesintheshareofimports
inthedomestic market, itwas,consequently, necessary toexamine notonlychanges inproduction
andimports butalsochanges inexports.
5.78 Concerning theabove, theUnited States explained that,forsome time, CITA hadtreated the
totalmarket foratextile orclothing category asproduction plusimports. Similar market share findings
byCITA hadlongbeenaccepted bytheTSBintheirexamination ofrequests bytheUnited States.
CITA hadfound thatthemarket share heldbydomestic producers haddeclined inthefaceofsurging
totalimports from 53to40percent. These datawere public information intheDepartment of
Commerce 'spublication onUSimports, production, markets, import penetration ratesanddomestic
market shares fortextile andclothing product categories. India hadcontended thattheinformation
examinedbyCITAonmarketsharewasirrelevantorotherwisedeficient,particularlybecausethemarket
examined byCITA hadnotincluded changes inthequantity ofexports. TheUShadrepeatedly informed
India, theTMB andthePanel thatUSexport quantity datawasunreliable because ofthelowincentive
ofexporters toreport thedata. Thisfactwasneither newnorunique totheUnited States astheexport
datafrom many other Members suffered from thesame problems.
5.79 TheUnited States alsonoted thecomparability limitation inallofitswoolclothing categories.
Thissituation waslong-standing, going backtothecreation ofthewoolclothing category system when
itwasdetermined thatimported clothing offibres otherthanwoolbutcontaining greater than17percent
byvalue ofwoolactually competed inthesamemarket asdomestically produced woolclothing, which
forproduction datapurposes hadalways beendefined as51percentorgreater ofwool byweight.
When theUnited States adopted theHarmonized Tariff Schedule (HTS) inJanuary 1989, thisdefinition
wasretained inshifting fromachiefvalue toachiefweight system byaltering thedefinition forimported
wool clothing tothose containing 36percentorgreater ofwool byweight. With fullawareness of
theanomaly inthedata,CITA hadconsidered thesituation inthedomestic woven woolshirtandblouseWT/DS33/R
Page30
industry, asdescribed inthedefinition oftheUSdomestic industry production dataitexamined,
i.e.woven wool shirts andblouses with51percentorgreater wool content. Although theimport
dataincluded likeandcompetitive products withawool content aslowas36percent, there wasno
indication, intherecord before CITA, theTMB orthePanel thatimported lower woolcontent products
didnotcompete withornegatively impact upon thedomestic industry. TheUnited States alsonoted
thatproducts fromIndia wereactually chiefly 51percentormore woolandtheUSindustry wasnot
producing lessthan51percentwool.
(iii) Products Manufactured Domestically
5.80 India considered thattheUShasmischaracterized theindustry thatCITA hadclaimed as
comparable toimports incategory 440. IntheUSMarket Statement, thatindustry wascharacterized
asproducing woven shirts andblouses ofwool fabric. However, according totheUSCorrelation
describing products assigned toimports incategory 440,itwasnoted thatwoven shirts andblouses
ofman-made fibrefabric wereincluded ifthefabric contained 36percentormore byweight ofwool.
These man-made fibrewoven shirts orblouses accounted for15to25percentofallUSimports in
category 440butnoneofthese blended man-made fibre/wool shirts orblouses wereincluded inthe
USproduction oremployment data. According totheofficial Department ofCommerce export data,
over35,000 dozen oftheman-made fibreshirts containing 36percentbyweight ofwoolwereexported
in1993. Thecomplete exclusion ofexport datainconjunction withtheproduction andmarket data
inrelation tocategory 440made anyconclusion regarding thelinkage between imports andproduction
forthedomestic market extremely questionable.
5.81 Inthisregard, theUnited States argued thatithadnotmischaracterized theindustry producing
woven woolshirts andblouses andthatitwascomparable toimports incategory 440. AstheUShad
pointed out,CITA waswellaware ofthiscomparability limitation inallofitswoolclothing categories.
Thebackground ofthissituation waswelldocumented intheUSsubmission. Itwasimportant topoint
outthatthecurrent definitions underlying theimport category system havebeeninplace formany
years, waswellknown toallofthemajor participants ininternational textile tradeandhadbeenexplicitly
accepted andagreed under theMFA andtheATC. India fullyunderstood theUScategory system
andwasthoroughly familiar withthedatathatCITA employed toarrive atitsdeterminations. Itwas
disingenuous forIndia tosuggest thattheUnited States "hasmischaracterized theindustry" andthat
theinformation theUnited States provided contained "significant oversights". Furthermore, given
thedefinition ofwoolclothing forproduction datapurposes, therehadnever beenanyattempt tocollect
domestic production dataonwoven man-made fibreshirts andblouses containing 36percentormore
byweight wool. Moreover, theUnited States haspreviously stated thattheUSindustry, asdefined
bytheproduction datacorresponding tocategory 440,didnotandhadnever manufactured thisclothing.
Thisfactwasnotcontroverted bytheexistence ofaUSexport classification thatidentified man-made
fibreclothing containing 36percentormore byweight ofwool. Likewise, India'suseoftheseexport
data, elsewhere shown bytheUnited States tobeerroneous, didnotaltertheconclusion thattheUS
industry, asdefined, didnotproduce suchclothing.
5.82 TheUnited States further explained thatUSdomestic manufacturers ofwoven woolshirts and
blouses didnotproduce thisclothing inblends ofgreater than36andlessthan50percentbyweight
ofwool. Themajority ofthewoven wool shirts andblouses produced intheUSwas100percent
wool; thefewproducts withman-made fibreblends wereofmore than50percentbyweight ofwool.
Therefore, theproduction dataprovided intheMarket Statement related onlyto"wool rich" woven
shirts andblouses. Official dataonexport quantities could notberelied uponwhile estimates byindustry
sources indicated thatlessthan10percent ofUSwoven woolshirtandblouse production wasexported.
Therefore, sincethedomestic manufacturers produced onlychiefweight woolwoven shirts andblouses,
itcould beconcluded thatnoshirts of36percentormore butlessthan50percentormore byweight
woolwereexported. USimports ofwoven shirts andblouses containing 36percentormore byweightWT/DS33/R
Page31
ofwool weredeemed tobewool garments, assuch, theycompeted directly withother domestically
produced orimported woven wool shirts andblouses incategory 440.
Data onDomestic Production
5.83 India noted that,incontrast tothedeclining production inthewool segment oftheindustry,
production intheindustry asawhole hadrisenfrom30,509 thousand dozen in1993to32,767 thousand
dozen in1994, anincrease of7.4percent. Declining production inthewool sector might, infact,
beexplained bytherising production inshirts andblouses made fromfibres otherthanwool, asmachines
wereshifted fromwoolproduction linestootherlines. Aplausible explanation fortheshiftinproduction
within thewoven shirts andblouses industry wasthecommercial attraction ofother product linesand
notincreased imports. IftheUnited States industry hadbeenunable orunwilling torespond tothe
upsurge inUnited States consumer demand forwoven woolshirts andblouses, thiswasnotanindication
of"serious damage" fromimports. Also, ifhighcapacity utilization intheproduction ofother fibres
hadmade more commercial sense tothewoven shirtandblouse industry thantheproduction ofwool
shirts andblouses, amarket which hadbeenshrinking fortwelve years, thenthemarginal decline in
theproduction ofwool shirts andblouses could notpossibly beattributed toincreasing imports.
According toArticle 6.2serious damage oractual threat thereof mustdemonstrably notbecaused by
"such other factors astechnological change orchanges inconsumer preference". Thestatement of
serious damage clearly didnotconstitute agood faitheffort tofulfil thatrequirement.
5.84 Inaresponse tothePanel, India explained itsview thatthere wasademonstrable lackof
correlation between changes inimports andchanges inUSdomestic production andthat,ingeneral,
thelevel ofUSdomestic production hadnotchanged inproportion tothelevel ofimports. Itwas
notcorrect, inIndia'sview, toassume thatthisdecline wascaused byanincrease inimports. Inthe
Market Statement itwasstated that"there areapproximately 748establishments intheUnited States
thatmanufacture woven shirts andblouses including shirts andblouses made fromwool". Theofficial
dataonUSproduction indicated thatthetotalproduction ofwoven shirts andblouses hadincreased
from29.6million dozen in1992to30.8million dozen in1993, anincrease of4percent,andproduction
in1994hadgrown by5.9percentoverthe1993levelto32.6million dozen. These datawould indicate
thattheUSindustry producing woven shirts andblouses hadincreased production during theperiod
from 1992 to1994. India argued thatadecision bythese establishments astotheselection offibre
andfibreblends might havechanged, butthefactthattheactual production ofthese woven shirts and
blouses hadincreased could notbedenied.
USProduction, Total Imports andImports from India
Woven Wool Shirts andBlouses
Category 440
(Dozen)
1993 1994Year Ending June
1994 1995 95/94 Percent
Change
Production 81,000 74,000 76,000 73,000 -3.9
Imports
Total 72,302 141,569 80,456 144,034 79.0
India 14,787 76,809 22,994 70,856 208.2
Source: USSubmission, 20September 1996
5.85 India noted withrespect totheabove Table thattheUnited States hadexcluded thedata
for1992 which wasavailable atthetimeoftheMarket Statement. The1992 datawould show that
production hadincreased from 1992to1993ashadimports. Thus, thecorrelation between productionWT/DS33/R
Page32
declines andimport increases wasnotdemonstrated. Furthermore, iftheUSweretohaveincluded
theexport dataaswell, there would besignificant changes inCITA 'sreported sizeofthemarket and
perhaps different conclusions concerning theimpact ofdeclining exports onthelevelofUSproduction.
InIndia'sopinion, based ontheavailable official USdata,thedeclining export levels would havehad
agreater impact onthissub-industry thananyother feature. Inaddition, theUSshould havenoted
thattheproduction datapresented initsTable didnotinclude anyman-made fibrewoven shirts and
blouses containing 36percentormore byweight wool, while between 15to25percentoftheimport
datacontained these particular products.
5.86 Inresponse, theUnited States explained thatthe1992 production dataforwoven woolshirts
andblouses thatwasavailable atthetimeoftheApril 1995 request waspreliminary data. Since the
preliminary datawasbeing reviewed atthattimeandfinal1992 production numbers would bepublished
shortly thereafter, theUnited States chose nottoinclude thepreliminary 1992 production number in
theMarket Statement. Production dataforwoolclothing categories wassmall compared toproduction
dataforother clothing categories. Given thesmall quantities ofwoolclothing production, evenminor
revisions tothepreliminary production numbers could result insignificantly different finalproduction
numbers. However, intheparticular caseofcategory 440,woven wool shirts andblouses, thefinal
1992 production number wasthesame asthepreliminary number: 80,000 dozen.
5.87 Commentingfurtherontheabovepoints,theUnitedStatesconsideredthatIndiawasintroducing
USexport dataidentifying shipments ofman-made fibreshirts containing 36percentormore wool
asevidence ofUSproduction ofthese shirts andinsupport ofitsargument thatadecline inexports
ofthese shirts accounted fortheobserved decline inwoven wool shirtandblouse production bythe
USindustry. TheUnited States pointed outthatithadpreviously stated thattheUSindustry under
consideration inthiscasedidnotandhadnever manufactured theclothing oflowwoolcontent defined
bythisexport classification. Moreover, theUnited States hadrepeatedly pointed outtheunreliability
andinaccuracy ofUSexport datainquantity terms, making thisinformation unsuitable foranalytical
purposes.
5.88 India noted thattheUShadrejected itscontention thatagiven decline inproduction might
havebeentheresult ofreduced export demand butinsisted thatthedecline inUSexports wasofficial
andindicated aprecipitous decline from 1992 to1993 to1994. These dataappeared notonlyinthe
USDepartment ofCommerce, Bureau ofCensus data,butalsointheUSDepartment ofAgriculture
data.
5.89 TheUnited States replied toaquestion byIndiaconcerning thedecline indomestic production
of5,000 dozen unitsinthefirstninemonths of1994while imports more thandoubled to92,000 dozen
inthesame period inrelation tothetrend ofthepastdecade when domestic production hadnotvaried
inproportion toimports. IntheUSview, theproduction dataforcategory 440wasnotcomparable
withdataprior to1992. However, thedatamade available totheTMB inAugust 1995 showed that
forthethree comparable, consecutive calendar years ofproduction andimport data, theproportion
ofimports todomestic production hadmore thantripled, increasing from 56percentin1992 to
191percentin1994.
5.90 TheUnited States alsoreplied toaquestion from India thatthedecline inproduction of
5,000 dozen units could beexplained byalossofexport orders rather thananincrease inimport
competition. TheUSrejected India'sview thatagiven decline inproduction might havebeenthe
result ofreduced export demand. CITA hadfound ample evidence ofdamage orthethreat ofdamage
occurring toUSproducers ofwoven woolshirts andblouses duetoimport competition andhadreceived
noinformation thattherehadbeenadecline inexport orders. TheUnited States alsopointed outthat,
because oftherelatively small number ofwoven wool shirts andblouses produced intheUS,after
rounding, thepreliminary andfinal1992 production datareflected inDecember 1994, April 1995,
andcurrently were thesame -80,000 dozen.WT/DS33/R
Page33
Data onExports
5.91 India argued that,todetermine whether theshare ofimports ofwoven woolshirts andblouses
intotheUnited States 'market roseorfellin1994, itwasnecessary fortheUnited States tocollect
dataonexports thatwerecomparable tothose forimports andproduction. TheUnited States Market
Statement hadnotincluded suchdata.17Itwastheresponsibility ofaMember thatdecided toimpose
asafeguard action tobeinaposition toprovide alldatarelevant toanassessment ofserious damage
oractual threat thereof, andinparticular exports. Otherwise, asafeguard action could notbetaken
consistently withArticle 6oftheATC. India hadobtained figures onUnited States exports ofwoven
wool shirts andblouses fromofficial United States publications.18According tothese data,virtually
alltheUnited States production ofwoven wool shirts andblouses wasexported, leaving imports to
satisfy demand. Thissuggested thatimports hadsatisfied adomestic market thathadnotbeensupplied
bydomestic producers andthatchanges inthelevelofimports could consequently notcause damage
tothedomestic industry.
5.92 Inaddition, India considered that,inorder todetermine whether, andtowhatextent Indian
shirts andblouses wereactually competing withUS-made shirts andblouses intheUnited States market,
theUSwould needtoexamine, interalia,which portion ofUSproduction wassolddomestically and
which portion wassoldabroad. TheUnited States hadrefused todoso,claiming thatitsofficial export
datawere unreliable andthatitcould proceed onthebasis ofthe"best dataavailable". However,
under theATC, theUnited States mustbaseitsdetermination onademonstration thatitwastheincrease
inimportsandnototherfactorsthathadcausedtheseriousdamageandtheUnitedStatesmust,therefore,
collect thedatanecessary tomake thatdemonstration. Ifthebestinformation available didnotinclude
export statistics, while thesestatistics werenecessary tomake thatdemonstration, thentheUnited States
could nottakethesafeguard action.
5.93 InresponsetoIndia'sclaimsthatthedomesticindustrycouldnotbedamagedbyimportsbecause
domestic producers hadchosen toexport virtually theirentire production, theUnited States explained
thatbecause oftheknown inaccuracy oftheUSexport data, which hadbeenpointed outatthetime
oftheTMB proceeding inAugust 1995, official USexport datacould notbeusedtocalculate thevolume
oftheUSmarket. Thepoint made byIndia, thattheentire production oftheUSwoven wool shirt
andblouse industry hadbeenexported, wascompletely falseandneeded tobecorrected. Official data
onexport quantities washighly suspect andcould notberelied upontoassess conditions intheindustry.
Estimates byindustry sources indicated thatapproximately 10percentofUSwoven wool shirtand
blouse production hadbeenexported.
5.94 TheUnited States expanded upontheabove points, explaining thatitalready knew fromthe
twolargest manufacturers intheindustry thatonly10percentoftheirproduction wasexported. This
information hadbeencollected onabusiness confidential basis andnorandom sampling orscientific
analysis wasrequired orcould bereadtoberequired intheATC. Norwasitnecessary inthiscase
where only15firms comprised theentire domestic industry. Thedatacovering 60percentofthe
industry wasexcellent coverage andcertainly CITA 'sreliance onthisdatawasreasonable. Interms
ofexports, other sources werebetter thantheofficial USdataandthiswasalsoaproblem withexport
dataofother countries. India waswrong instating thatifitweretruethatthere wasaweak incentive
17InitsAugust 1995 submission totheTMB, theUnited States provided dataonthedollar value ofexported
wool woven shirts andblouses. These datacannot becompared tothedataprovided onimports andproduction.
Thereason isthattheexport datasupplied bytheUnited States isinvalue (dollar) terms while thedataonimports
andproduction isinquantity terms (dozens). TheUnited States explained inafootnote thatexport quantity data
arequestionable duetoreporting inconsistencies.
181993: Production 82,000 andExports 85,000. 1994: Production 76,000 andExports 76,000.WT/DS33/R
Page34
toreport export dataaccurately, thiswastruealsoofproduction andimport data. IntheUnited States
reporting ofproduction datafrommanufacturers wasrequired bylawandbetter reporting ofimport
datawasalsorequired bylawfordutycollection andquota monitoring purposes inparticular. This
wasnotthecaseforexports.
5.95 TheUnited States alsoexplained thatithadnotprovided India withthetable referred toin
paragraph 43ofIndia'sfirstsubmission tothePanel; India hadevidently developed thetableonits
own. TheUSreiterated thatithadpointed outduring consultations withIndia andduring theAugust
TMB proceedings thatUSexport quantity datacould notbeusedtocalculate thevolume oftheUS
market because oftheknown inaccuracies oftheexport data. Even afteralltheshortcomings ofthe
export quantity datawere explained bytheUSindetail during theTMB review, India continued to
usetheinaccurate export dataitobtained toincorrectly point outthattheentire production oftheUS
wool woven shirtandblouse industry wasexported.
5.96 India reiterated thatofficial USexport datawere available andwaspublished notonlyby
OTEXA, butalsobytheUSDepartment ofCommerce, Bureau ofCensus andtheUSDepartment
ofAgriculture. Thedetailed, andofficial export dataoftheUnited States allowed forareview of
thequantity, value, andtrends ofexports ofveryspecific andparticular products including those that
would becomparable totheimport datacontained incategory 440.Thefacts, aspresented intheofficial
exportdata,indicatedacleardeclineinUSexportlevelsofproductscomparabletothoseincategory440.
Inparticular, HSnumber 6205.30.15.00 identified exports ofman-made fibreshirts containing atleast
36percentbyweight ofwool andevenif,asCITA contended, thedatawerenotaccurate, itatleast
indicated thatasignificant decline intheexport ofthese products occurred between 1992 and1994.
5.97 Inresponse, theUnited States further advised thatestimates obtained byCITA fromthetwo
largest individual domestic producers indicated thatnomore than10percentofUSwoven woolshirt
andblouse production wasexported. Ifthemarket wasadjusted forexports, assuming exports accounted
for10percentofthedomestic production, thedomestic market share in1993 would decline from
53to51percentandforthefirstninemonths of1994would fallfrom40to37percent. Asaresult,
theimport market share in1993would increase from47to49percentandforJanuary-September 1994
would increase from60to63percent. More generally, incharacterizing theUSdataasunreliable,
Indiawasapparently contending thatanimporting Member could notresort toitsATCArticle 6rights
totakeasafeguard action without firstobtaining allofthedatanecessary torespond toanyconceivable
challenge theexporting Member might make, andthatallofthese datamust bepublicly available.
Acceptance ofthisargument would require thatthedatapresented byimporting Members injustification
belimited onlytoinformation obtainable from public sources, however limited orinapplicable that
information might be.Infact,there wasnosuchlimitintheATC.
5.98 Insumming upitsargumentation, Indiaclaimed thattheresponsibility forcompiling, examining
andsupplying totheexporting country therelevant datainrespect offactors referred toinArticle 6.3
oftheATC wasentirely thatoftheimporting Member. Inthepresent case, theUShadnotsupplied
anyinformation toIndia either intheconsultation request orduring theconsultations, relating toone
veryimportant element todetermine thestateoftheUSindustry vis-à-vis theexports effected bythe
USindustry incategory 440. India hadcollected USexport datafrom thefigures published bythe
USDepartment ofCommerce. TheUStermed itsownpublished dataas"inaccurate" and"unreliable"
butwerenotinaposition tofurnish anymore reliable andaccurate export data. Ifthepublished US
datacould notbeusedtoassess thevolume ofUSexports thenthere wasnoother wayofcorrectly
doing so.Different figures onproduction andexports aspublished bytheUShavebeentabled by
India andthese figures have shown thataquantity equal totheentire production oftheUSin
category 440wasexported. TheUSpresentation claimed thatthepublished official dataofthe
United States onexport quantities washighly suspect andsuggested that"estimate byindustry sources
indicate thatapproximately 10percentofwool shirts andblouses production isexported". IndiaWT/DS33/R
Page35
submitted thattheestimate ofapproximate quantities bytheindustry sources could notbeheldmore
reliable thantheofficial datapublished bytheUS.
5.99 IntheviewofIndia, theUSsubmission alsofailed toexplain whether theexports ofman-made
fibre/wool blended shirts containing between 50percentand64percentofman-made fibrehadbeen
taken intoaccount while estimating wool shirtandblouse exports, while forimport purposes, these
wereconsidered under category 440. ItwasIndia'sunderstanding thatintheabsence ofanyspecified
procedure forculling outtheexport data, these were classified asman-made fibreshirts forexport
purposes. USdataontheexport oftheseblended fibreshirts hadbeensubmitted tothePanel inIndia's
response toquestions on20September 1996andthese datahadshown thattheentities exporting these
products hadexperienced asignificant decline in1994whether reported indollars, dozen, orrawfibre
equivalents. Itwas,therefore, more thanreasonable toassume thatthisdecline inexports would have
more ofanimpact ontheindustry datasupplied bytheUnited States thananyincrease inimports.
5.100 TheUnited States alsosummed upitsposition which hadconsistently beenthatUSexport
quantity datawasunreliable andcould notbeusedinassessing conditions intheUSindustry. India
hadpersisted inusing thisflawed evidence notonlytosupport itsuntrue assertion thatmost of
USproduction incategory 440wasexported butalsotodenigrate theUSproduction dataandmarket
share calculations. Thedeficiency oftheexport datastemmed from thelowincentive ofexporters
toproperly report thedataandtheabsence ofprocedures toverify itsaccuracy. Aspointed outin
anattachment tothefirstUSsubmission tothePanel, theTrade DataDivision ofOTEXA andthe
Bureau oftheCensus conducted aninvestigation ofUSexports ofwoven woolshirts andblouses and
found thatin53ofthe201exportations, thequantity reported waseither zeroorunrealistic; theCensus
Bureau talked withtwoUSexporters whosaidtheyexported clothing buthadnoideaofitsfibrecontent.
The6-digit Schedule Bnumber wasreported incorrectly in4ofthe6records examined andthecorrect
Schedule Bnumber could notbedetermined. More recently, inresponse toquestions raised byIndia
regarding USexports under Schedule Bnumber 6205.30.1500, men'sandboys'shirts ofman-made
fibre, containing 36percentormore byweight ofwool, theTrade DataDivision hadconducted a
shipment-by-shipment investigation ofthisexport data. Thisinvestigation covered 1994 shipments
of7,554 dozen shirts which weremade in32separate shipments. Most oftheshipments weresmall
andfromdifferent companies todifferent countries. However, fourshipments weremade bythesame
company toHonduras andrepresented 51percentofthetotalexports inthisparticular Schedule B
number,i.e.3,840dozen.TheTradeDataDivisionrequestedtheForeignTradeDivisionoftheBureau
oftheCensus toreview thedatareported inthese shipments. They found thatalltheshirts inthese
export shipments wereinfactcotton woven shirts andwereincorrectly classified. The3,840 dozen
shirts should havebeenclassified under Schedule Bnumber 6205.20.3000, men'sandboys'woven
shirts ofcotton, not6205.30.1500, forwool.
5.101 IntheUnited States 'view, theresults ofthisinvestigation supported OTEXA 'sprevious
investigations anddeterminations thatUSexport quantity datawerenotreliable. India'sassertion that
theestimate ofapproximate quantities ofexports obtained by"industry sources cannot beheldmore
reliable thantheofficial datapublished bytheUnited States Government" waswrong. Investigations
conducted byOTEXA andtheBureau oftheCensus clearly indicated thatUSexport quantity data
wereunreliable andinaccurate, making thisinformation unsuitable foranalytical purposes. CITA had,
asmentioned above, obtained estimates fromthetwolargest individual domestic producers ofwoven
woolshirts andblouses, representing atleast60percentofdomestic production, andtheyhadindicated
thatnomore than10percentofUSwoven wool shirtandblouse production wasexported. There
wasnobasistocontend thatinformation specifically requested fromandsupplied bycompanies about
animportant component oftheirsaleswould notbemore reliable thanunverified datathathadbeen
proven incorrect.
5.102 Indiaargued thatthecalculation ofexport levels should havebeenmade onthebasisofreliable
datawhen thedetermination ofserious damage wasmade, andnotsubsequently inresponse toaqueryWT/DS33/R
Page36
byIndia inthecontext ofapanel proceeding. Therecalculations oftheUnited States onlyserved to
highlight thepoint made byIndia thatexport datawereessential forthecalculation ofmarket share,
andthatdataandother information usedinadetermination ofserious damage must beverifiable to
constitute thebasis ofthedemonstration required under Article 6oftheATC.
5.103 India alsonoted theUnited States hadclaimed thatitwasconsistent withtherequirements of
Article 6.2and6.3oftheATC tocollect dataontotalproduction bydirectly contacting theproducers
benefitting from thesafeguard action andatthesame timeitclaimed thatthedataontheexports of
domestic production wasnotavailable because theofficial export statistics werenotreliable. Itwas
questioned whytheUnited States considered itconsistent withtheATC tocollect theinformation
favourable todomestic producers (total production) informally through direct contacts, butitwasonly
afteritsdetermination ofserious damage thattheUnited States informally contacted twoofthefifteen
producers toobtain information ontheshare ofitsproduction exported. Whywasthisnotdonebefore
making thedetermination?
Data onEmployment19,Man-hours andWages
5.104 India pointed outthat,withrespect toemployment, man-hours andtotalannual wages, the
information provided intheMarket Statement referred tothe"748 establishments intheUSthat
manufacture woven shirts andblouses including shirts andblouses made fromwool". TheStatement
madereferencetothefactthat"employmentintheindustryproducingwovenshirtsandblousesincluding
shirts andblouses made fromwool haddeclined to31,929 production workers in1994, sixpercent
below the1993 level andalossof2,125 jobs". Ifthelossof2,125 jobswasplaced inrelation to
adecline inUnited States production ofwoven shirts andblouses fromwoolof5,000 dozen between
January-September 1993andJanuary-September 1994, itimplied thatadecline inproduction of3dozen
woven shirts andblouses onanannual basis ledtothelossofonejob,clearly anabsurd inference.
TheStatement wentontoclaim that"theaverage annual man-hours worked dropped" andtotalannual
production worker wages fell", eventhough bothclaims referred totheindustry producing allwoven
shirts andblouses, nottheportion producing woven wool shirts andblouses. Thefactthatdataon
theindustry producing allwoven shirts andblouses wasentirely irrelevant tothesub-sector making
woven wool shirts andblouses wasconfirmed bytheinformation submitted bytheUnited States to
theTMB inAugust 1995 under "Other Relevant Information". IntheAugust 1995 submission, it
wasmade clearthat200workers wereemployed intheproduction ofwoven wool shirts andblouses
in1994, ascompared to215workers in1993, atotallossof15positions. India considered thatdata
onemployment, wages andman-hours atamore disaggregated levelforthespecific industry producing
woven wool shirts andblouses should haveformed partoftheMarket Statement provided toIndia
asthebasisfortheconsultations inApril 1995, andwererequested byIndia atthetime. Employment
figures submitted bytheUnited States inApril 1995 andAugust 1995 were:
Year April 1995 August 1995
Workers Average
annual
man-hoursTotal annual
wagesWorkers Average
annual
man-hoursTotal
annual
wages
1993 34054 62500000 $423100000 215 413000 $2713000
1994 31929 58900000 $411200000 200 382000 $2590000
Sources: April 1995 employment data from Table IIIofUnited States statement ofserious damage; August 1995
employment datafrom Table IIIofUnited States submission toTMB.
19Seealsoparagraphs 5.154 to5.156.WT/DS33/R
Page37
5.105 India alsonoted thatthedataonemployment inthewool shirt andblouse sector was
specifically requested during theconsultations andtheIndian delegation wasinformed thatsuchdata
didnotexist. However, thedataonemployment inthewool shirtandblouse industry wasincluded
intheso-called "other relevant information" provided totheTMB on28August 1995.
5.106 India further pointed outthatifthefigures onemployment provided bytheUnited States in
August 1995 wereplaced inrelation tothose provided bytheUnited States initsApril 1995 Market
Statement, theyindicated thatthewool sub-sector accounted for0.6percentofemployment inthe
woven shirtandblouse industry. Since thesub-sector wasanextremely small, ifnotnegligible, portion
ofemployment inthedomestic woven shirts andblouses industry, thefigures provided bythe
United States onemployment, man-hours andwages initsMarket Statement weretotally irrelevant.
5.107 Withrespect totheabove point, theUnited States claimed thatithadindicated toIndia during
consultations thatemployment datarelating specifically tocategory 440werenotavailable, meaning
onlythatsuchdatacould notbeobtained directly frompublished sources norwasitregularly compiled
forCITA. Dataonemployment andwages werepublished onlyatahigher levelofaggregation than
thewoven wool shirt andblouse industry andatthetimeoftherequest thedatagiven inthe
Market Statement wasthemostdetailed thatCITA wasabletoprovide. Itwasnottrue,asIndia was
implying, thattheUnited States deliberately withheld suchdatafrom theIndian delegation during
consultations. Inactuality, when itbecame apparent thatthejustification fortherequest wasbeing
questioned byIndia because ofthelackofthisdataandafterindications fromtheTMB thatsuchdata
would beanecessary element oftheirconsideration ofthecase, CITA pursued ways ofdeveloping
therequested information. Onlyafterdeveloping amethodology tofurther disaggregate theavailable
datawasOTEXA laterabletoprovide, attheinsistence ofIndiaduring consultations andinaccordance
withthewishes oftheTMB, more specific estimates based onadditional information obtained from
official andindustry sources, which confirmed thedownward trendofthebroader category datareflected
inApril 1995.
5.108 Inresponse tothepoints raised byIndia, theUnited States commented thatitwascorrect that
theemployment-related information fromtheMarket Statement wasapplicable totheindustry producing
woven shirts andblouses. CITA believed themore aggregated datatobegenerally indicative ofthe
trend inthewoven woolshirtandblouse industry atthattimeandreceived information fromindustry
sources confirming thisfact. OTEXA waslaterabletoprovide more specific estimates based on
additional information obtained from official andindustry sources.
5.109 Indiacommented thattheUShadnotexplained whythemoreaggregated dataofthetotalwoven
shirtandblouse industry wasnotindicative ofthetrend interms ofproduction, prices, profits, exports,
imports, oranyoftheother relevant economic variables thatshould bereviewed prior tomaking a
determination ofserious damage oractual threat thereof. Theincreased production inthetotalwoven
shirtandblouse industry appeared tobeignored attheaggregate level because itcontradicted the
conclusion made bytheUnited States concerning thetrend inproduction data.
5.110 TheUnited States referred totheabove claim ofIndia thatthefigures supplied bythe
United States onemployment, man-hours, andwages wereirrelevant because theycovered theentire
woven shirtandblouse industry andnotjustthewoven woolshirtandblouse industry. TheUSpointed
outthatemployment datapresented intheMarket Statement encompassed theentire USwoven shirt
andblouse industry andwere derived from official Bureau ofLabour Statistics (BLS) datacovering
evenhigher clothing production aggregates. Thiswasthebestinformation available atthetimeof
therequest forconsultations. Asaresult ofquestions during consultations mandated byArticle 6of
theATC andasindicated bytheTMB, theUnited States hadprovided theTMB withabreakdown
ofemployment forcategory 440,woven woolshirts andblouses. CITA believed themore aggregated
datatobegenerally indicative ofthetrend inthewoven wool shirtandblouse industry atthattime
andreceived information fromindustry sources confirming thisfact. CITA didnotlookatthetrendWT/DS33/R
Page38
inproduction forthewoven shirtandblouse industry sinceCITA already hadproduction datarelevant
tothewool sector ofthisindustry.
5.111 TheUnited States pointed toIndia'sclaim thatbecause laterdatahadshown thatthenumber
ofjobslostinthewoven wool shirtandblouse industry wasestimated atonlyfifteen jobs, there was
nobasis fortheUSdetermination ofserious damage oractual threat thereof. Inthisregard theUS
recalled thatthedomestic industry incategory 440wasverysmall, representing only15firms. Even
though thelossof15jobsmay, atfirstglance, appear small inabsolute terms, itrepresented almost
a7percentdecline inthenumber ofproduction workers inoneyear. Itwould bedifficult toargue
thatthiswasnotasignificant relative lossofemployment. Furthermore, theUnited States found no
indication inthelanguage ofArticle 6.2and6.3oftheATC thattheterm"domestic industry" was
reserved forlarger groupings ofcompanies withgreater numbers ofworkers. Indeed, thelanguage
ofArticle 6.2oftheATC referred to"safeguard action" andthe"domestic industry producing like
and/or directly competitive products." Thislanguage placed nolegalbarriers onthemaintenance of
asafeguard action where theproduct maybenarrowly defined ortheindustry small.
5.112 Inresponse toaquestion fromIndia asking ifthenumber ofproduction workers certified as
eligible toapply forWorker Adjustment Assistance (220workers) wasmore thanninetimes thedecline
ofproductionworkers(24workers)duringtheApril1993-April1995period,theUnitedStatesexplained
thatthe220workers employed infacilities producing woven woolshirts andblouses, thatwerecertified
aseligible forWorkers Adjustment Assistance during thetwoandahalfyearperiod, January 1993-
July1995, included production workers aswellasthose workers employed inadministrative, sales,
anddistribution positions associated withsuchproduction. Notallworkers certified aseligible for
Workers Adjustment Assistance hadpermanently losttheirjobs; inmany cases, workers werepartially
separated ortemporarily laidoff.(Seealsoparagraphs 5.157 to5.159.)
Information onPrices
5.113 India questioned iftheinformation ondomestic prices intheMarket Statement could be
considered toberepresentative ofthesituation oftheparticular segment oftheindustry producing
woven woolshirts andblouses. According totheMarket Statement, theindustry statements were"based
oninformation supplied byindividual USfirms domestically producing shirts andblouses", and"in
general ...applies tocompanies producing men’sandwomen ’swoven wool shirts andblouses". In
other words, theinformation hadbeenobtained fromenterprises thatmanufactured woven woolshirts
andblouses aspartoftheirproduction ofwoven shirts andblouses. Itwasalsoquestioned ifitwas
appropriate touseinformal surveys ofenterprises asthebasisfortaking anaction against theimports
ofatrading partner. During thebilateral consultations heldinApril andJune1995, India'sdelegation
hadsought clarifications fromtheUnited States 'delegation regarding theunderlying methodology that
hadbeenused. TheUnited States delegation 'hadconfirmed thatthere wasnoprocedure forregular
orperiodic compilation ofprice data. Datarelating toprice andthedisaggregation ofemployment
dataforspecified product segments suchaswoven woolshirts andblouses etc.werebased oninformal
surveys ofalimited number offirms producing these items. There wasnoscientific random method
orastipulated sample sizeforsuchsurveys. Itwasalsonoted thatthefirms responding tosuchsurveys
werealways aware thatthepurpose ofthesurvey wastoinitiate asafeguard action toprotect thatsegment
oftheindustry.
5.114 IntheviewofIndia, theinformal methods usedtosurvey enterprises might explain thewide
variations oftheresults ofsuchsurveys reflected inthedifferent industry statements furnished by
United States. Forexample, intheDecember 1994request forconsultations, theaverage producers ’
pricewasreportedas$215-225,whileintheMarketStatement,theaverageproducers’pricewasreported
as$525-550. Since itwasunlikely thatproducer prices would double insuchashort period oftime,
thisdiscrepancy between thetwoStatements bytheUnited States castdoubt ontheconsistency of
information collected byinformal surveys.WT/DS33/R
Page39
5.115 TheUnited States explained thatthedifference inthetwoprices wasnotcaused byanincrease
indomestic prices; rather, thetwoprices represented theaverage prices oftwodifferent groups of
products. Prices asreported intheDecember 1994market statement forcategory 440under theMFA
reflected theaverage domestic producer prices forwoolshirts comparable towoolshirts imported from
India which were concentrated inoneofthe24,10-digit product classifications intheHarmonized
Tariff Schedule oftheUnited States Annotated (HTSUSA) thatmade upcategory 440. Thishadbeen
donebecause MFA determinations werebased onsharp andsubstantial increases inproducts bycountry.
TheUShadcompared theaverage, landed duty-paid value ofwoolshirts imported fromIndiaclassified
under HTSUSA 6205.10.2010 -men'swoolshirts, other thanhandloomed andfolklore shirts -with
theaverage price ofdomestically produced men'swoven wool shirts. Theaverage USproducers '
price intheMarket Statement issued inApril 1995 under theATC represented theaverage domestic
price forallwoven woolshirts andblouses produced intheUSwhich competed withallwoven wool
shirts andblouses imported from every country incategory 440. Under theATC, theinitial
determination wasontotalimports inthecategory. Therefore, the$525/$550 perdozen average import
price intheMarket Statement wasexamined based ontheUnited States 'reading ofArticle 6.2ofthe
ATC requirement ofanexamination of"total imports". Bycontrast, the$215/$225 average import
priceinDecember 1994wasbased onaparticular product fromaparticular country (i.e.India) which
wastheanalytical approach required bytheMFA.
5.116 TheUnited States, inresponse toaquestion byIndia whether thesubstantial pricedifferences
could beexplained byquality differences (lowpriced imports andhighpriced domestic production),
responded thattheaverage landed duty-paid import value fortotalUSimports ofcategory 440,woven
wool shirts andblouses, was$US187.23 perdozen while suchimports from India were valued at
$US133.85 perdozen or75percentbelow theaverage USproducers 'pricefordomestically produced
woven woolshirts andblouses, and29percentbelow thecategory 440average landed duty-paid value
fortotalUSimports ofwoven wool shirts andblouses. Theprice difference between domestically
produced woven wool shirts andblouses andimports (including those from India) wasprimarily the
result ofdifferences inlabour coststhatvaried among allcountries producing woven wool shirts and
blouses. Quality differences reflected inprices ofwoven woolshirts andblouses included differences
inhandtailoring, thequality ofwoolfabric, fibrecontent, fibreblending, detail included, etc.which
varied among allcountries thatproduced woven woolshirts andblouses. Thedomestic priceforwoven
wool shirts andblouses reflected theaverage price ofalldomestically produced woven wool shirts
andblouses andwascompared withtheaverage landed, duty-paid import values atthecategory level
(allproducts imported inthecategory) from eachcountry supplying theUSmarket andtheaverage
import value forallsupplying countries. TheUnited States didnotaccept India'sassumptions that
inasingle market prices ofcompeting products would "normally tendtoconverge" orthatproducts
ofdifferent quality andwhich were soldatvarying retail prices could not"compete".
5.117 Inresponse totheabove point, India noted thattheUShadestablished anumber of"quality
differences" forthese woven wool shirts andblouses, butoffered nodataonthevarious quantities
thatwere produced among these various quality differences. Itwould havebeeninteresting tosee
thetrend inproduction ofthose shirts which inDecember 1994wereat$225 perdozen forcomparable
shirts being imported fromIndia, whereas theaverage USpriceforallwoven woolshirts andblouses
was$550 perdozen. Thiswould haveindicated thatnotonlywasthereawidequality difference among
theshirts produced intheUnited States, butalsothatthose shirts which weredirectly comparable and
competitive withtheshirts fromIndia mayhaveincreased orproducers mayhaveshifted tothehigher
value shirts. There musthavebeensome discrimination inthepresentation ofprice andproduction
datathatwould indicate thatUSdatawerecomparable tothose products incategory 440which were
claimed tobeseriously damaging oractually threatening serious damage toUSproducers of"likeand/or
directly competitive products".
5.118 TheUnited States noted inthisregard thatquality differences, asreflected inprices ofwoven
woolshirts andblouses varied among allcountries thatproduced woven woolshirts andblouses. TheWT/DS33/R
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domestic priceforwoven woolshirts andblouses reflected theaverage priceofalldomestically produced
woven wool shirts andblouses andwascompared withtheaverage landed, duty-paid import values
atthecategory level from eachcountry supplying theUSmarket andtheaverage import value for
allsupplying countries. Domestic producers ofwoven woolshirts andblouses intherelatively narrow
category 440competed withimports from India andfrom alltheother suppliers.
Information onInvestment andCapacity
5.119 India noted thattheMarket Statement hadincluded information oninvestment andutilization
ofcapacity based onindustry statements. Asfollows:
Variable Information provided intheApril 1995 Market Statement
Investment “Investment levels arestagnant across much oftheindustry. ”
Utilization of
capacity“Several companies reported adecline incapacity. One company reported ending
alloutside contracting production (formerly about 25percent oftheir
manufacturing), representing theequivalent ofclosing four plants. Thecompany ’s
own manufacturing plants arenow running atonly 70percent ofcapacity.
Furthermore, thiscompany alsooperates several woollen fabric mills which supply
theapparel manufacturing plants, andthese mills arenow running atabout 65per
cent ofcapacity. ”
5.120 Thisinformation was,intheopinion ofIndia, anecdotal andunverifiable. Itwasalsounclear
whether theinformation referred totheparticular segment ofthewoven shirtandblouse industry
producing garments made fromwool. Forexample, thefactthat"several companies reported adecline
incapacity" didnotappear tobesignificant inthecontext ofanindustry reported bytheUnited States
initsMarket Statement ascomprising 748establishments. Itwasalsoargued thatonecompany reported
dropping ofcontracts orreduced capacity utilisation which wasnotanappropriate indication ofthe
capacity utilisation fortheentire industry. Iftheproduction capacities ofseveral companies thathad
actually declined wererelated tothewoolshirtandblouse industry, thedecline indomestic production
during 1994should havebeenmuch more thananestimated 8percent. Other information provided
intheMarket Statement, (andreproduced below) wasequally anecdotal andunverifiable. The
information on"profits" wasinfacton"profit margins", leaving itunclear whether totalprofits had
declined orincreased. India argued thattheUnited States hadprovided noproof fortheassertions
intheindustry statement regarding theroleof“lower-priced ”imports inindustry developments.
Variable Information provided intheApril 1995 Market Statement
Employment “Several companies reported declines intheir employment, some ofwhich were
specifically attributed totheimpact ofcompetitive goods. Some employment
declines were intherange of25-30 percent.”
Sales “Most companies reported sales declines asthey lostmarket share tolower priced
imports. Some companies experienced sales declines of20percent.”
Prices “Prices ofdomestic product, manufactured mainly from USmade fabric, are
substantially higher than import competition. ”
Profits “Profit margins have been eroded across theboard inthewool shirt industry asraw
materials costs increased while companies were unable toraise prices because of
low-priced import competition. ”
5.121 Inresponse toIndia'sassertion thatonecompany reporting dropping ofcontracts orcapacity
utilization wasnotanappropriate indication ofthecapacity utilization fortheentire industry, theWT/DS33/R
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United States argued that,given thesmall sizeofthewoven woolshirtandblouse industry, thedecline
incapacity utilization fromthisonecompany alone washighly indicative ofwhatwasgoing oninthe
entire woven wool shirtandblouse industry. India hadalsoalleged thatthedecline indomestic
production during 1994 should havebeenmore thananestimated 8percent; however, thelossin
capacity utilization didnotnecessarily correlate withacommensurate dropinproduction during the
sametime-period. Rather, thelossincapacity utilization wasanindication ofdeteriorating conditions
inthisindustry thatwould leadtomore severe production declines inthefuture.
F. Causal Link Between Increased Imports andtheDomestic Industry Situation
5.122 According toIndia, theMarket Statement submitted bytheUnited States inApril 1995stated
that"thesharp andsubstantial increase inimports ofwoven wool shirts andblouses, category 440,
iscausing serious damage totheUSindustry producing woven wool shirts andblouses". Since the
figures onmarket share, employment andwages were, asargued byIndia, irrelevant, andthefigures
ondomestic prices andinformation onother relevant economic variables werebased onquestionable
survey methods andwereunverifiable, theonlyrealevidence provided bytheUnited States insupport
ofitsassertion ofserious damage wasthefactthatimports ofcategory 440hadincreased in1994 by
69,296 dozen tonearly double theprevious year’slevel, while domestic production haddropped
marginally by5,000 dozen during January-September. While ithadbeenclaimed bytheUSthat
production haddeclined duetoimports, noanalysis wasprovided tolinkthetwo. Norwasthedecline
inproduction proportionate totheincrease inimports. Intheindustry statement, there were claims
oflossofemployment, closure ofplants, lossofprofits etc.arising fromimports; however, noattempt
hadbeen made tolinkthese developments toimports. TheMarket Statement submitted bythe
United States inApril 1995 never wentbeyond assertions.
5.123 TheUnited States argued thatthecausation requirement inArticle 6.2oftheATC, linking
serious damage, orthethreat thereof tototalimports, hadbeenmetinthiscase. Asevidenced inthe
information provided intheMarket Statement andlatertotheTMB: (i)imports hadnotonlyincreased,
butsurged; there werenegative industry indicators occurring contemporaneously withthose surging
imports; (ii)about 7percentoftheworkers inthewoven wool shirtindustry hadlosttheirjobs
from 1993 to1994 (from 1994 to1995 there wasalossof5.9percent); laterdatasupported this
trend thattheadverse impact ofimports onemployment wasevidenced bytheUStrade adjustment
assistance certifications (byUSlawaconnection hastobemade toimports tobeeligible for
certification); and(iii)USmarket share haddeclined asimports increased andproduction declined
atthesame timethatimports increased.
5.124 IntheviewoftheUnited States, CITA haddemonstrated intheMarket Statement andatthe
TMB proceeding thecausation required under theATC. Although India hasasserted onthisissue
that"positive evidence" wasrequired, theUnited States found noevidentiary standard intheATC
andcould onlyconclude thatIndiawasadding tothetextoftheATCprovisions thatwerenotnegotiated
andwere notintended asaninterpretation oftheAgreement bytheUS.
5.125 TheUnited States considered thatIndia wasseeking tomodify theATC bycreating a
proportionality requirement toestablish acausal link. India hadclaimed thattheUnited States must
demonstrate thatthedecline inproduction evident before CITA was"proportionate totheincrease
inimports". TheUnited States found nosuchtestinArticle 6.2or6.3oftheATC. Norwasthere
afactual oreconomic justification thatwould require afinding thatserious damage tothedomestic
woven woolshirtandblouse industry byimports would bereflected byexactly proportional changes
inproduction andimports. TheUnited States 'imports ofwoven woolshirts andblouses fromanumber
ofcountries were limited byquotas. There wasalsoasharp seasonal variation inthese imports as
wellasdifferences inthetiming ofproduction andimport activity.WT/DS33/R
Page42
5.126 India stated thatithadnever proposed aproportionality requirement, buthadremarked that
USproduction hadnever varied previously withimports andthatthislackofcorrelation suggested
thatfactors other thanimports musthaveinfluenced thelevelofdomestic production and,inparticular,
developments ontheexport market. Indiaagreed thatfactors suchassharp seasonal variations inimports
anddifferences inthetiming ofproduction andimport activity made itimpossible toconclude from
themere co-existence ofrising imports anddeclining production thatthetwowere causally linked.
5.127 India further argued thatademonstration thatthere hadbeenariseinimports andadecline
inproduction wasnotademonstration thattherewasacausal relationship between thetwo; logically,
additionalfactsanddatawerenecessary.Article6.2oftheATCexplicitlystipulatedthatademonstration
thatthere hadbeenanincrease inimports andserious damage orthreat thereof wasnotsufficient but
mustbesupplemented byanadditional demonstration thattheincrease inimports andnotother factors
werecausing theserious damage oractual threat thereof. Thisdemonstration ofcausality hadnotbeen
attempted bytheUnited States.
5.128 Concerning thelackofacausal link,India referred tothedataonthedollar value ofexports
submitted bytheUnited States totheTMB inAugust 1995 which indicated thatthevalue ofexports
ofwoven wool shirts andblouses from theUnited States hadincreased by41percentin1993 and
bynearly 30percentin1994. Since amajor portion ofdomestic production ofwoven wool shirts
andblouses wasexported, thedomestic industry was,infact,experiencing asignificant improvement
intheperiod prior totheimposition ofthesafeguard action inJuly1995. Also, initssubmission to
theTMB inAugust 1995, India hadpointed outthatimports fromIndia ofcategory 440weresteadily
dropping in1995. Thisstatement wasconfirmed byfigures onimports submitted bytheUnited States.
During thefirstsixmonths of1995, imports from India hadamounted to2,887 dozen, 67percent
below theearlier year'sfigure. Thecondition ofincreased imports wastherefore notmetinJuly1995
when theUnited States unilaterally imposed restraints onimports ofcategory 440fromIndia. During
theperiod 18April 1996 to2August 1996, i.e.thefirstthree months ofthesecond yearofthe
continuation oftherestraints, theactual imports from India hadbeenlessthanonepercentofthe
restraint levelimposed bytheUnited States. Thus thesubsequent dataandimport statistics proved
beyond anydoubt thattheattribution ofactual threat ofserious damage tothedomestic industry to
imports fromIndiahadbeengrossly misplaced andthefinding oftheTMB onthispointwas,therefore,
wrong.
5.129 India further argued thattheabsence ofacausal linkbetween increased imports anddeclining
production ofwoven wool shirts andblouses wasdemonstrated byfigures overalonger timeperiod.
From 1985to1992, imports ofwoven woolshirts andblouses hadfallen consistently andsubstantially,
from262,000 dozen in1985to44,000 dozen in1992. During thesame period, production hadalso
declined substantially, from 445,000 dozen to80,000 dozen. Thus, declining production was
accompanied bydeclining imports fortheperiod 1985-92. In1993, theUnited States market forwoven
woolshirts andblouses hadbegun torecover, withbothproduction andimports rising. In1994, imports
nearly doubled, while production declined by7.5percent. Since amajor portion ofUnited States
production wasexported, theincrease inimports wasobviously related toexpanding domestic demand
forwoven wool shirts andblouses. TheUnited States industry producing woven shirts andblouses
hadprobably notanticipated thisdevelopment inthewoolsegment sincethemarket hadbeendeclining
foranumber ofyears. Oneexplanation foralackofcorrelation between imports fromIndia andUS
domestic production wasthatIndian andUSproducts werenotactually competing withoneanother
intheUSmarket because theyfellintodifferent price andquality categories. Another possible
explanation wasthat,while Indiasupplied theUSmarket, theUSproducers supplied boththedomestic
andtheexport markets. India'sexports, therefore, varied solely withthedemand intheUSmarket;
USproduction varied alsowiththedemand inother countries.
5.130 India noted that,inrespect oftheimport datagoing backto1983, these datarelated tothe
imports andproduction ofproducts defined incategory 440, were derived bytheUnited StatesWT/DS33/R
Page43
Department ofCommerce, OTEXA, andwerecontained intheirperiodic publications. Theimport
datafor1983 and1985 were thetotalreported imports ofwoven wool shirts andblouses thatwere
inchief value wool while thereported imports from 1989 through 1994 were forwoven shirts and
blouses inchiefweight woolandinchiefweight man-made fibreiftheycontained 36percentormore
byweight ofwool. There wasnopublicly available dataforproduction anditwasassumed thatthis
datarelating tocategory 440byOTEXA wasderived bythatagency forusebyCITA inassessing
theUSdomestic market forthese products.
5.131 TheUnited States considered thatthereference byIndia toproduction andimport datagoing
backasfaras1983 wasaneffort todeflect attention away from thesurge inimports fromIndia that
hadoccurred inthetimeleading uptotheissuance oftherequest forconsultations. India'sproposed
timeseries dating backto1983wastechnically flawed astheproduction datacitedcovered atimeperiod
thatincluded twocensus survey benchmark years, 1987 and1992. Dataprior tothose years were
notcomparable tothesubsequent years'dataduetodifferences inthecomposition ofthesurvey sample.
Import datawerelikewise notcomparable overtheperiod ofyears given, because, beginning in1989,
theUnited States hadshifted totheHarmonized Tariff System classification. Thisshiftinvolved a
change inthewool shirtdefinition from a"chief value wool" basis toa"chief weight wool" basis,
thatcaused thedatapriorto1989tobenotcomparable withsubsequent years'data. OnIndia'sassertion
thatamajor portion ofUSproduction wasexported anditssubsequent assumption thatasaresult the
domestic industry wasinfactexperiencing improvement, theUnited States noted thattheassertion
andtheassumption werefalsebecause export datawasextremely unreliable. TheUnited States had
already illustrated thatpoint byconfirming thatonly10percentoftheproduction wasexported by
theindustry representing 60percentofUSproduction andthatthereweremisclassifications ofcotton
exports under thewool heading.
5.132 India considered thattheUS'view inthefirstsentence ofthepreceding paragraph wasa
misrepresentation ofthearguments made byIndia, which referred thePanel totheabsence ofaconsistent
relationship between changes inimports andchanges indomestic production. Thisargument would
remain valid irrespective oftheshiftintheUnited States datacollection methods. Forinstance,
between 1985and1989, aperiod inwhich dataonimports andproduction werepresumably collected
onaconsistent basis, bothimports andproduction declined substantially. Starting from 1990, there
wasagain noconsistent pattern between changes inimports anddomestic production, undoubtedly
reflecting developments inthedomestic andexport markets. Itwasforthisreason thatIndiahadasked
forinformation onexports.
5.133 TheUnited States argued thatIndia'sassertion thatbetween 1985and1989, dataonproduction
hadbeencollected onaconsistent basis wasnottrue. Asstated intheUS'firstsubmission, India's
datacovered atimeperiod thatincluded onecensus survey benchmark year, 1987. Dataprior tothat
yearwasnotcomparable tothesubsequent years'dataduetodifferences inthecomposition ofthe
survey sample.
5.134 Inresponsetothesearguments,Indiasubmittedthatthereliabilityorcomparabilityofproduction
datacould notdiffer significantly from onecensus survey toanother ifallthecensus surveys were
objectively andscientifically done. Inassessing theroleofimports ininfluencing ornotinfluencing
theproduction trends, itwasnotonlyjustified butessential tolookattherelation between imports
andproduction during aslongaperiod aspossible. These dataestablished thefact,overasignificant
period oftime, thatchanges inimport levels werenotcorrelated proportionately orotherwise tothe
changes indomestic production. Interms oftheUSshifttotheHarmonized Tariff System, theUS
submission wasfactually incorrect. Thewool shirtdefinition prior totheHarmonized Tariff System
hadbeenbased onachiefvalue determination. Under theHarmonized Tariff System, theclassification
wasbased onachiefweight determination, buttheUShaddeveloped statistical breakdowns forboth
exports andimports toidentify shirts andblouses inchief weight man-made fibre butcontaining
36percentormore byweight wool. Thestatistical breakdowns were developed andimplementedWT/DS33/R
Page44
inorder toidentify those woven shirts andblouses inchief weight man-made fibre, but,onthebasis
ofestimates bytheUnited States, similar tothose woven shirts andblouses thatwereinchief value
wool. Thus, thesechiefweight man-made fibreshirts andblouses wereincluded aspartofcategory 440
eventhough theywere infactman-made fibreshirts andblouses.
5.135 Inresponse, theUnited States argued thatIndia'sassertion wasincorrect thatthereliability
andcomparability ofproduction datacould notdiffer significantly fromonecensus survey toanother.
First, there wasnoissue ofreliability butonlyofcomparability. Comparability waslostbecause,
intheprocess ofrevising thefive-year Census ofManufacturers, newfirms wereidentified andanew
sample andsample sizewasestablished which included adifferent group offirms thantheprevious
survey. Asaresult, thefive-year Census ofManufacturers established anewbenchmark, anddata
generated bythisnewsurvey were notdirectly comparable withprevious years'datawhich were
generated from reports oftheoldsample offirms. TheBureau oftheCensus production datainits
quarterly Current Industrial Report (CIR) were based ondatacollected from firms identified inthe
five-year Census ofManufactures. Starting withproduction datacollected for1992 intheCIR, the
number offirms originally identified inthe1992 Census ofManufactures wasrevised every yearwith
theAnnual Survey ofManufactures, which wastaken during theintermediate census years. Theannual
revisions tothesample sizewerereflected intheCIRproduction data. Thisdatacollection process
wasnotineffect prior to1992.
5.136 Regarding India'sstatement ontheUSshifttotheHTS, theUnited States stated thatitdid
develop statistical breakdowns toidentify wool garments thatprior totheHTSwerebased onachief
value determination. When thewool clothing category system wascreated, itwasdetermined that
importedclothingoffibresotherthanwoolbutcontaininggreaterthan17percentbyvaluewoolactually
competedinthesamemarketasdomesticallyproducedwoolclothing,whichforproductiondatapurposes
hadalways beendefined as51percentorgreater ofwoolbyweight. When theUnited States adopted
theHarmonized Tariff Schedule (HTS) inJanuary 1989, thisdefinition wasretained inshifting from
achief value toachief weight system byaltering thedefinition forimported wool clothing tothose
containing 36percentorgreater wool byweight. The36percentdetermination wasdone forall
wool clothing categories, notjustwoven wool shirts andblouses. Thefibrecontent thatprevailed
intailored clothing hadthedominant influence ontheconversion fromthechiefvalue concept tothe
chief weight concept. Forthereasons outlined above, itwasnotvalid tocompare dataacross time
periods containing these breaks inthecontinuity ofthereported data,evenwiththecaveats thatIndia
proclaimed.
G. Attribution toIndia
5.137 TheUnited States argued that,having properly established both(a)theexistence ofserious
damage oractual threat thereof, and(b)thecausal relationship between suchdamage orthreat byreason
oftotalimports, thenextstepwasforCITA todetermine towhich Member orMembers thecause
ofserious damage oractual threat thereof could beattributed. There wasnorequirement under
Article 6.4oftheATC fortheUStomake adetermination thatIndia wasthesolecause oftheserious
damage oractual threat thereof. Indeed, thatfinding would already have been established under
Article 6.2oftheATCbefore itwould bepossible toproceed totheanalysis under Article 6.4.Rather,
theUnited States wasrequired todetermine towhich ofvarious Members 'imports toattribute the
damage orthreat. TheUnited States rejected anyinterpretation thatwould suggest thatthetestin
Article 6.2oftheATC wasintegral toorfolded intothetestinArticle 6.4oftheATC. Thatwould
notbealegitimate reading ofthetextinaccordance withprinciples ofinternational lawfound in
Article 31oftheVienna Convention ontheLawofTreaties.WT/DS33/R
Page45
5.138 TheUnited States further argued thatithadfollowed therequirements under Article 6.4of
theATC inattributing theserious damage oractual threat thereof toIndia.20Article 6.4oftheATC
provided that,afteraMember haddetermined thatserious damage oractual threat thereof existed,
theMember mustattribute thatdamage orthreat toaMember orMembers, onthebasis ofasharp
andsubstantial increase inimports from theMember, actual orimminent, andother factors. Itwas
clearherethatthephrase "actual orimminent" accompanied Article 6.4oftheATCreference to"sharp
andsubstantial" increases ofimports fromaMember orMembers -notthe"serious damage, oractual
threat thereof" examination required under Article 6.2and6.3oftheATC asoffered byIndia.
5.139 TheUnited States noted thatimports from India, byanyrelevant benchmark, hadincreased
sharplyandsubstantially.Indiawasthelargestsupplierofwovenwoolshirtsandblouses(category440),
totheUnited States during theyearending January 1995, with54percentoftotalUSimports. Imports
fromIndia hadreached 76,698 dozen fortheyearending January 1995, fivetimes the14,914 dozen
imported intheyearending January 1994. Inaddition, imports from India fortheyearending
January 1995hadexceeded thequota levels theUnited States hadinplace withthree other suppliers.
Further, theUnited States hadexamined thelevels ofimports fromIndiacompared toimports ofwoven
woolshirts andblouses fromothersources, market share andimport anddomestic prices atacomparable
stage ofcommercial transaction. Thedatahadshown thatimports from India fortheyearending
January 1995 wereequal tototalUSproduction ofwoven wool shirts andblouses intheyearending
September 1994. In1993, imports fromIndia incategory 440hadbeen20percentoftotal1993US
imports ofcategory 440andwas18percentofUSproduction in1993. Thisinformation, coupled
withthepersistent decline inproduction uptothatpoint andreports fromtheindustry thatproduction
hadcontinued tofall,reinforced theperception thatfurther damage totheindustry wasimminent.
Asdescribed intheMarket Statement, theUShadfound thatUSimports ofwoven wool shirts and
blouses from India incategory 440during 1994 hadentered atanaverage landed duty-paid value of
$133.85 perdozen, 75percentbelow theUSproducers 'average price forwoven wool shirts and
blouses. TheUS'examination ofsuchfactors hadfullysupported itsdetermination thatserious damage
oractual threat thereof wasattributed toIndia'sexports totheUnited States. Other relevant information
provided totheTMB, some ofwhich wasprovided asaresult ofinquiries fromIndia during bilateral
consultations, further buttressed thecaseforattribution. BythetimetheUnited States hadpresented
itscasetotheTMB more up-to-date datashowed thatimports from India were 49percentoftotal
USimports;33percentofthetotalmarketin1994;and96percentofUSdomesticproductionin1994
(thisshareincreasedto98percentofUSdomesticproductionintheyearendingJune1995).Therefore,
thetrend andcurrent status described intheMarket Statement wasfullysupported bythetimeofthe
TMB review.
TMB Review oftheUnited States Action
5.140 TheUnited States pointed outthatithadpresented itscasetotheTMB asprovided in
Article 6.10 oftheATC andhadfully responded toallrequests bytheTMB forinformation.
Furthermore, asexpressly setoutinArticle 6.10oftheATC, theUShadprovided theTMB with
other relevant dataontheindustry 'scondition. TheTMB hadheldhearings overaperiod ofdays
atwhich thematter wasaddressed inconsiderable detail. India hadpresented extensive arguments
andattheendofitsproceedings, theTMB haddetermined that"actual threat could beattributed to
thesharp andsubstantial increase inimports from India".
5.141 TheUnitedStatesconsideredthattheTMBfindingupholdingtheUSdeterminationandrejecting
India’schallenge wasconsistent withArticle 6oftheATC. Iftheconsultations provided forin
Article 6.7oftheATC didnotresult inamutual solution, theimporting Member must exercise its
20Anattribution ofserious damage oractual threat thereof wasalsomade against Hong Kong inrespect of
thisproduced category.WT/DS33/R
Page46
option totakeaction tolimittherelevant imports within 30daysafterthe60daytime-frame noted
inArticle 6.10oftheATC. Once thataction wastaken, Article 6oftheATCrequired automatic review
bytheTMB. TheTMB mustreview thecase, determine whether thesafeguard action wasjustified
andmake appropriate recommendations totheMembers concerned. Inaddition tothedatasupplied
inaccordance withArticle 6.7oftheATC, Article 6.10oftheATCalsoprovided thattheTMB "shall
haveavailable toitanyother relevant information provided bytheMembers concerned". Importing
Members mustnotify theChairman oftheTMB withrelevant factual dataatthesame timetherequest
forconsultations wasmade. Subsequent andadditional datasupplied totheTMB supported theoriginal
determination andwere entirely appropriate under theATC.
5.142 IntheviewofIndia, theTMB hadnotupheld theUSaction; rather, theUSaction hadbeen
based onasituation of"serious damage" andtheTMB didnotfindthatasituation of"serious damage"
wasdemonstrated bythedatapresented bytheUSGovernment.
H. Status ofOther Relevant Information
5.143 IntheviewofIndia, theTMB hadmade aserious errorinpermitting theUnited States tosubmit
information inAugust 1995designed tojustify itsclaim before theTMB thatitssafeguard action was
based on"actual threat ofserious damage" though "actual threat ofserious damage" hadnotformed
thebasisfortheconsultations heldwithIndia. Article 6.7oftheATCrequired theimporting Member
seeking consultations tosupply totheexporting Member "specific andrelevant" information pertaining
tothereference period inregard tofactors onwhich ithadbased itsdetermination ofserious damage
oractual threat. Once the60-day consultation period wasover, anynewinformation could onlybe
introduced bycancelling therequest forconsultations andsubmitting anewrequest forconsultations
onthebasis ofthenewinformation; otherwise, therequirement tosupply specific andrelevant
information during theconsultation period would bemeaningless.
5.144 India pointed outthat,according toArticle 6.10oftheATC, theTMB, when reviewing the
safeguard action aftertheexpiry ofthe60-day consultation period, shallhavebefore itnotonlythe
information supplied bytheMember seeking consultations inaccordance withArticle 6:7butalso“any
other relevant information provided bytheMembers concerned ”.This"other relevant information"
could, forinstance, beanarrative report bytheimporting Member relating totherestraint imposed
butcould notbenewdataintroduced tojustify thedetermination onwhich theconsultations hadbeen
sought. Thispossibility could notbeconstrued topermit theMember initiating theaction additional
timeafteritsaction todevelop further data. Ifcertain information ordatahadeither notbeenavailable
toCITA orhadnotbeenconsidered byCITA atthetimeofitsdetermination ofserious damage, such
information ordatacould notbeintroduced byCITA atalaterstage as"other relevant information"
tojustify expost,theapplication ofasafeguard action.
5.145 TheUnited States, inresponse toIndia'sallegation thatinformation notavailable toCITA
ornotconsidered byCITA atthetimeofitsdetermination ofserious damage could notbeintroduced
byCITA atalaterstage tojustify theapplication ofasafeguard action, stated thatithadprovided
asubmission of"other relevant information", aspermitted inArticle 6.10oftheATC, inorder to
provideupdateddatatoreflectthemostcurrentconditionsinthedomesticmarketandasregardsimports,
andalsotorespond specifically toconcerns raised inbilateral consultations andnotto"justify" the
decision. TheUnited States directed thePanel toArticle 6.10oftheATC which provided thatthe
TMB shallhaveavailable toitnotonlythedatasubmitted atthetimeoftherequest, butinaddition,
"anyother relevant information". Further, there wasnodefinition ofthatphrase.
5.146 India considered that,iftheTMB weretogivetheimporting Member therighttointroduce
newdataatthetimeofthereview bytheTMB, itwould effectively denytheexporting Member the
righttochallengethatinformationinpriorbilateralconsultationsandwouldaccordtheimportingMember
theright toskipanimportant stepintheprocedures thathadtobefollowed under Article 6oftheWT/DS33/R
Page47
ATC before asafeguard action maybetaken. Thus, byallowing theintroduction ofnewdataatthe
timeofitsreview, theTMB would effectively bewaiving theimporting Member ’sobligations. The
TMB, however, didnothavetheauthority toaccord Members therighttoderogate from theATC.
AstheTMB didnotgiveanyreasons foritsdecisions onthesafeguard actions, itwasnotknown why
itendorsed asafeguard action based onalleged "actual threat" ofserious damage onwhich noprior
consultations hadbeenheld, andtoconsider information thatwasnotthesubject ofconsultations.
India considered thatthisdecision deprived itoftherighttoholdconsultations withtheUnited States,
based onrelevant andspecific facts, onthespecific safeguard action endorsed bytheTMB.
5.147 India repeated thatthedatasubmitted toTMB on28August 1995 wasentirely newinsome
oftheelements suchasthenumber ofestablishments, employment, wages, etc.forthewoven wool
shirts andblouse segment ofthewoven shirtandblouse industry. TheUnited States 'Market Statement
furnished inApril 1995 didnotinclude anydataonexports. InitsAugust 1995 submission tothe
TMB, theUnited States provided dataonthedollar value ofexported woven woolshirts andblouses.
Inother factors many ofthefigures were revisions towhat hadearlier beensupplied totheIndian
delegation. Therefore, thefresh datapresented before theTMB didnotamount to"other relevant
information" asdefined inArticle 6.10oftheATC.
5.148 TheUnited States disagreed withthisviewandpointed outthatthe"other relevant information"
wasprovided indirect response toissues raised inbilateral consultations, andaspetitioned bytheTMB.
Nodataonthenumber ofestablishments wasmade available inthesubmission of"other relevant
information".
5.149 Inaresponse tothePanel, theUnited States argued thatArticle 6.10oftheATC expressly
provided thattheTMB "shall haveavailable toitthefactual dataprovided totheChairman oftheTMB,
referred toinparagraph 7[Article 6.7oftheATC], aswellasanyother relevant information provided
bytheMembers concerned". There wasnodefinition of"other relevant information" andnolimitation
onhowmuch orwhatkindofinformation could besupplied totheTMB. Theonlystipulation was
thattheinformation be"relevant". Therefore, theUnited States interpreted theATC toallow new
oradditional datatoconfirm thedataavailable atthetimeofthedetermination.
5.150 Inresponse tothepreceding, India argued thatrevisions tothedatawhich formed thebasis
forthedetermination would require are-examination ofthebasis forthedetermination andresult in
either thewithdrawal oftheaction, ortheinitiation ofanewaction. Thenewdatasubmitted bythe
UShadnotbeenusedbyitinmaking itsinitial determination, norcould itbecharacterized asdata
which clarified orconfirmed thedatausedbytheUStodetermine anddemonstrate thatitsactions
wereconsistent withArticle 6oftheATC. Article 6.7oftheATC wasveryclearinrequiring that
theMember seeking consultations shall, atthetimeofrequesting consultations, "communicate tothe
Chairman oftheTMB therequest forconsultations, including alltherelevant factual dataoutlined
inparagraphs 3and4,together withtheproposed restraint level". Thesubmission of"other relevant
information" could notbeusedtojustify theabsence of"alltherelevant factual data" required tobe
submitted atthetimeoftherequest forconsultations, norcould itbesubstituted inthereview to
determine ifthesituation ofserious damage, oractual threat thereof, hadbeen demonstrated in
accordance withthecriteria ofArticle 6oftheATC.
5.151 Indiapointedoutthatwiththeexceptionofimportdata,thereappearedtobenoreliablepublished
official sources indicating anyofthedataregarding awoven wool shirtandblouse industry inthe
United States. India further argued thateven ifthesupplementary information submitted bythe
United States aftertheconsultations wastaken intoaccount, theUnited States could notbedeemed
tohavemettherequirements ofArticle 6oftheATC. Itwastheposition ofIndiathattheTMB review
oftheUnited States 'safeguard action should havebeenconducted onlyonthebasisofthedocumentation
provided toIndia inApril 1995 atthetimeoftheconsultation request. Theinformation submitted
totheTMB was, therefore, irrelevant fortheproceedings ofthePanel. However, even ifthisWT/DS33/R
Page48
information wastaken intoaccount, theUnited States could notbedeemed tohave fulfilled the
requirements setoutinArticle 6.2and6.3oftheATC.
5.152 TheUnited States reiterated that,following theissuance oftheMarket Statement, there were
consultations, questions wereasked during consultations andduring theTMB review. Attheendof
thisextended process inJuly,therewereadditional datathatCITA didnothaveaccess toinApril 1995;
someoftheemployment andemployment-related datareflected intheMarket Statement wasnotfocused
onthewoven wool shirtandblouse industry. Some oftheevidence obtained afterconsultations and
fortheTMB process wasdifferent, some ofthedatawere more focused onthedomestic industry
producing woven woolshirts andblouses, butallofthedatapointed inthesame direction asthedata
originally outlined intheMarket Statement (i.e.thatthedomestic industry wasseriously damaged or
actually threatened thereof asaresult oftotalimports andthatimports fromIndia werecontributing
tothecondition). Where thereweredatathatclearly didnotmeetthetestofreliability, suchasexports,
itwasnotusedbyCITA inreaching itsdetermination. Even thefactors thatwere more indicative
oftrends orthesituation atthetime, according toArticle 6.3oftheATC, didnothavetobealone
ortogether determinative forCITA. CITA hadfollowed itsnormal practice andprocedures inusing
andderiving information fromreliable published official sources. CITA hadalsofollowed itsnormal
practice byconsulting withthekeyproducers, representing asubstantial percentage ofdomestic
production, onabusiness confidential basis, toverify certain information.
5.153 India argued thatitfollowed fromtheabove thataPanel reviewing whether asafeguard action
mettherequirements oftheATCcould alsorelyonlyontheinformation made available bytheimporting
Member totheexporting Member during theconsultations, thatis,theMarket Statement. IfthePanel
weretoproceed otherwise, itwould effectively denytheexporting Member therighttoholdmeaningful
consultations onthebasis oftheinformation thathadformed thebasis ofthedetermination andthis
would create aserious moral hazard astheimporting Member would thennolonger haveanincentive
tosubmit totheexporting Member alltheinformation available toitatthetimeoftheconsultations.
Moreover, itwould enable importing Members toinitiate asafeguard action merely onthebasis of
conjecture andthenmaintain itifsubsequent information were toconfirm thefacts. India citedthe
twofollowing instances where theUShadattempted tointroduce information inAugust 1995thatwas
notpresented atthetimetheinitial action wastaken.
Employment in"Other Relevant Information"
5.154 India noted thatinthefirstinstance, theUSdataforemployment (Table IIIoftheMarket
Statement) included employment dataforallproduction workers producing woven shirts andblouses.
InAugust 1995, theUShadpresented an"updated Table III"which purported toidentify those
productionworkersproducingwovenshirtsandblousesthatwereprimarilyengagedinproducingwoven
wool shirts andblouses. These "newly identified" workers constituting the"woven wool shirtand
blouse industry" represented 0.6percentofallproduction workers engaged inthewoven shirtand
blouse industry. These newdatawerederived fromthe1992 Census ofManufacturers, Apparel Current
Industrial Reports, Bureau ofLabour Statistics, andindustry survey. Asthese datawerenotpublicly
available intheCensus publications, orfrom theBureau ofLabour Statistics, itwaspresumed that
these datacame fromanindustry survey thatwasnotprescribed andpossibly wasnotavailable when
thedetermination torequest consultations wasmade inApril.
5.155 Inresponse tothepoints onemployment inthepreceding paragraph, theUnited States explained
thattheprocesses usedbyCITA demonstrated thefallacy ofIndia'sargument. Asageneral policy,
afterarequest wasmade, theefforts tocollect dataandotherrelevant information werenotdiscontinued.
CITA wassatisfied thatithadsufficient information atthetimeoftherequest totakeaction based
ontheexistence ofserious damage oractual threat thereof tothedomestic woven woolshirtandblouse
industry. However, during andaftertheconsultation period, additional enquiries andanalysis had
beenconducted torefine theexisting information andtofurnish more datapertaining tothecase,WT/DS33/R
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especially afteritappeared thattheadequacy ofCITA 'sinformation wasbeing challenged. Unlike
other regimes, there wasnobarorrequirement under theATC concerning thisaction byCITA. By
providing more information, CITA wasnottrying tojustify itsaction afterthefact,butrather tomake
thisinformation available inresponse toquestions from India during consultations andinaneffort
toreach amutually satisfactory agreement inthiscase. TheUnited States alsowaslaterinformed
thattheTMBfeltitneededemployment-relateddataonamorespecificcategorylevelbasisinconsidering
thematter.
5.156 TheUnited States further explained that,regarding theUSemployment datamade available
inthiscase,atthetimeCITA requested consultations ithaddataonthenumber ofworkers inthewoven
shirtandblouse industry andinformation fromconsultations withindustry sources indicating thatthe
declining trend ofemployment atthebroader industry levelwasreflective andrepresentative ofthe
situation inthemore narrowly defined woven wool shirtandblouse industry. After further analysis
andmore discussions onabusiness confidential basiswiththetwomajor manufacturers ofwoven wool
shirtsandblouses,anemploymentnumberwascomputedindicatingthenumberofemployeesspecifically
producing woven wool shirts andblouses andthese datawerepresented aspartoftheother relevant
information attheTMB session inAugust 1995.
Establishments in"Other Relevant Information"
5.157 Thesecond instance citedbyIndiainvolved thelocation oftheestablishments producing woven
woolshirts andblouses. IntheMarket Statement, the"Industry Profile" stated thattheestablishments
producing woven wool shirts andblouses were located mainly inOregon, Washington, Nebraska,
andIowa. Nonetheless, thenewdataprovided bytheUnited States initsAugust Market Statement
included, forthefirsttime, alisting ofworkers certified fortradeadjustment assistance inthe"woven
woolshirtandblouse" area. Ofthe200orsoproduction workers thatconstituted apresumed "woven
woolshirtandblouse industry", theUnited States presented datathatindicated 220workers hadbeen
certified fortrade adjustment assistance between 25April 1993and15April 1995. Ofinterest inthe
USpresentation wasthefactthatthese workers werefromTennessee, Utah, Pennsylvania, andSouth
Carolina. These States werealmost afullcontinent removed fromwhere theestablishments producing
these woven woolshirts andblouses werelocated. Thisraised significant questions astowhether or
notthedatareviewed bytheUnited States inApril 1995 wasaccurate and/or relevant inlightofthis
newdatapresented inAugust 1995.
5.158 Inregard toIndia'sviews onthelocation oftheestablishment, theUnited States noted that
thetwomajor producers ofwoven wool shirts andblouses, accounting formore than60percentof
domestic production, hadwool clothing manufacturing facilities inOregon, Washington, Nebraska,
IowaandPennsylvania. These twomanufacturers alsocontracted outtheproduction ofwoven wool
shirts andblouses. Oneofthese producers ofwoven wool shirts andblouses hadtoendalloutside
contracting production duetotheimpact ofimports. Thiswasreported tobetheequivalent ofclosing
fourplants. Thisreduction incontract work could account fortheWorkers Adjustment Assistance
certification forworkers attheproduction facilities inTennessee, UtahandSouth Carolina. Theother
major producer ofwoven wool shirts andblouses hadproduction operations inPennsylvania, which
would account fortheWorkers Adjustment Assistance certification forworkers attheproduction facility
inPennsylvania.
5.159 TheUnited States referred toIndia'sarguments inthissection andnoted thatdataavailable
toCITA inApril 1995 hadshown, among other things, veryhighlevels ofincreased imports and
declining USproduction andthesubsequent andadditional datasupplied bytheUnited States tothe
TMB hadconfirmed thevalidity oftheoriginal determination andconstituted "relevant" datathatwere
expressly allowed forTMB review under Article 6.10oftheATC -which wasclearafterthe60-day
consultation period.WT/DS33/R
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I. Consultations andEndorsement ofActions byTMB: Additional Procedural Requirements
5.160 India argued thatthesafeguard action onwhich theUnited States hadheldconsultations had
notbeenendorsed bytheTMB andthesafeguard action which hadreceived theendorsement ofthe
TMB hadnotbeen thesubject ofconsultations. Therefore, thesafeguard action didnotmeet the
procedural requirements inArticle 6oftheATC, which werethatthesafeguard action musthavebeen
thesubject ofbilateral consultations andhavebeenendorsed bytheTMB. AstheTMB hadnotendorsed
thesafeguard action, theUnited States should havewithdrawn it.Thisrequirement ofanendorsement
bytheTMB ofthesafeguard action ensured amultilateral examination oftheconformity ofthesafeguard
action withtheprovisions oftheATC; boththerighttoconsultations andtherighttoamultilateral
examination were extremely important shields against abuse oftheATC safeguard provisions.
5.161 India based itsargument inthisregard onthenature andpurpose oftheATC andthe
circumstances ofitsconclusion. Indiaessentially invited thePanel tointerpret Article 6insuchamanner
astogiveeffect tothepivotal roleofthatprovision inpreserving thebalance ofrights andobligations
under theATC. Acontextual- andpurpose-oriented interpretation ofArticle 6oftheATC mustlead
thePanel totheconclusion thatthecreation ofarighttodiscriminatory safeguard action without any
offsetting righttocompensation orretaliation noranymultilateral endorsement would putexporting
Members intoalegalposition under theATC worse thanwhattheyhadunder theMFA andwould
consequently becontrary tothebasicobjectives oftheATC. Indiadidnotbelieve thatthesearguments
could bedismissed merely ontheground thattheATC referred to"recommendations" andnotto
"decisions" when itrequired theTMB toact.Further, if,notwithstanding thefactthattheATCobliged
WTO Members tosubmit alltheirsafeguard actions totheTMB andthattheTMB clearly hadthe
obligation toexamine theATC-conformity ofallsafeguard actions andtomake recommendations on
allofthem, thePanel weretorulethatafailure tomake arecommendation hadnolegalconsequence,
thePanel would fundamentally upset thebalance ofrights andobligations under theATC. TheTMB
would become theonlybody oftheWTO whose decision whether ornottomake arecommendation
waslegally irrelevant.
5.162 TheUnited States referred toIndia'sarguments onTMB endorsement andexpressed itsview
thatCITA 'sdetermination hadbeenbased onashowing of"serious damage, oractual threat thereof",
andthere wasnorequirement thattheTMB "endorse" ameasure forittobemaintained. TheTMB
hadreached consensus thatthefinding ofactual threat ofserious damage attributable toIndia inthis
casewasjustified. Itmade nofinding fororagainst "serious damage" perseandtheTMB wasonly
required under theATC tomake "appropriate" recommendations afterexamining serious damage or
actual threat thereof. Whatever aTMB finding orrecommendation was,Members wereonlyrequired
under Article 8.9oftheATCto"endeavour toaccept infulltherecommendations oftheTMB." There
wasnofurther obligation concerning themaintenance ofasafeguard intheATC onthatmatter. For
aMember tomaintain atransitional safeguard, TMB approval wasnotrequired.
5.163 TheUnited States alsoreferred toIndia'sassertion thatthere wasnodifference between
"recommendations" oftheTMB andthisPanel, theDSBandtheAppellate Body. Thetextsofthe
ATCandDSUclearly demonstrated theerrorofthisargument. Thereport ofthisPanel oranAppellate
Body Report adopted bytheDSB required action onthepartofacomplaining party receiving a
recommendation tobring itsmeasures intoconformity withitsobligations. TheDSU inArticles 21
and22specified those actions andtheconsequences ofinaction. Asalready pointed out,Article 8.9
oftheATConlyrequired withrespect toTMB recommendations, thatMembers "endeavour toaccept
infull". There wasnorequirement intheATCconcerning TMB findings andobservations. Moreover,
pursuant toArticle 8.10oftheATC, Members thenhadrecourse toGATT Article XXIII andDSU
procedures.
5.164 Alsoconcerning theneedforTMB endorsement ofadetermination, India noted thatunder
Article 1.6oftheMFA, allrights ofthecontracting parties under GATT 1947hadbeenfullyreservedWT/DS33/R
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and,notwithstanding theexistence oftheMFA, theyhadnotbeenlegally entitled totakesafeguard
actions inconsistent withArticle XIXofGATT 1947. Ifanexporting country didnotagree withthe
determination ofanimporting country, itcould invoke itsrights under GATT 1947andthereby force
thatcountry totakenon-discriminatory action under Article XIXofGATT 1947. Thatpossibility,
though hardly made useof,waspartofthechecks andbalances under theMFA. Given thatlegal
situation, theTSBcould onlyperform conciliatory functions. Under theATC, however, theexporting
Member'srightsunderGATT1994werelegallycurtailed.ImportingMemberswerenowlegallyentitled
totakediscriminatory safeguard action without having tocompensate theexporting Member concerned.
Thetextiles exporting Members could nolonger invoke theirright tonon-discriminatory treatment
andtocompensation under Articles XIII andXIX ofGATT 1994 ifthey disagreed with the
determinations onwhich theimporting Member hadbased itssafeguard action. Thissignificant loss
ofGATT rights hadbeencompensated bytherequirement ofaformal review andendorsement by
theTMB ofallinvocations oftheATC'ssafeguard provisions aswellasanexplicit reference in
Article 8.10oftheATC totheright ofaMember tobring thematter before theDSB andinvoke
Article XXIII:2 incasethematter remained unresolved evenaftercompletion oftheTMB process.
Thisrequirement didnottakeaway fromtheimporting Members anyoftherights theyhadunder the
GATT orunder theMFA. Iftheimporting Member didnotobtain theTMB'sapproval, itcould exercise
itsright tointegrate theproduct concerned intoGATT 1994 andinvoke Article XIXtoprotect its
industry. Therequirement ofaTMB approval, therefore, didnotmean thatimporting Members could
takesafeguard action onlywithmultilateral approval; itmeant thattheyneeded multilateral approval
iftheywished todosoonadiscriminatory basis andwithout offering anytrade compensation tothe
exporting Member.
5.165 Inresponse, theUnited States disputed India'sclaims thattheUScharacterization oftheMFA
waswrong. India hadclaimed thattheMFA wasnotanexception totheGATT andArticle 1.6of
theMFA, saying thattheMFA would notaffect therights andobligations ofparticipating countries
undertheGATT.India,however,neglectedtomentionparagraph7ofthatsameArticle,whichprovided
"[t]he participating countries recognize that,sincemeasures taken under thisArrangement areintended
todealwiththespecial problems oftextile products, suchmeasures should beconsidered asexceptional,
andnotlending themselves toapplication inother fields." Itwasthisparagraph thattheUnited States
hadinmind when itstated earlier thattheMFA wasestablished asanexception totheGATT rules
regarding application ofquantitative restrictions.
5.166 Indiafurther emphasized thatthesafeguard mechanism intheATCwasacompromise reached
duringnegotiationswithastipulationthatitshouldbeappliedassparinglyaspossibleandwithdisciplines
which would reduce theriskofmisuse. The"two-tier approach" withregard todetermination aswell
astherequirement forreview bytheTMB, contained inArticle 6oftheATC, wasmeant toreduce
theriskofmisuse ofthetransitional safeguard mechanism. According toArticle 6.9to11,allsafeguard
actions mustbesubmitted totheTMB forexamination andmaybeintroduced ormaintained bythe
importing Member onlyiftheyhadbeenendorsed bytheTMB. Therequired examination bythe
TMB would bemeaningless andthepurposes ofArticle 6.10oftheATC could notbeachieved if
unilateral safeguard action could betaken orcontinued without theendorsement oftheTMB. The
ATC incorporated thenecessary balance inArticle 6oftheATC bygiving importing Members the
possibility toresort tosafeguard action during thetransitional period andbygiving theexporting
Members theprotection ofareview ofthesafeguard action bytheTMB, andifnecessary, byapanel.
Thisbalance would belostifthePanel were tofindthattheUnited States wasentitled totakethe
safeguard action notwithstanding thelackofendorsement bytheTMB ofthespecific action itproposed
totakewhen itrequested India toconsult.
5.167 India further pointed outthat,inorder tobeconsistent withtheATC, asafeguard action must
meettheprocedural requirements ofArticle 6oftheATC. Foractions other thanagreed restraints,
these requirements were essentially thefollowing:WT/DS33/R
Page52
(i) "TheMember proposing totakesafeguard action shallseekconsultations" (Article 6.7).
(ii) Thisrequest "shall beaccompanied byspecific andfactual information" (Article 6.7).
(iii) Iftheconsultations failandanaction istaken, theTMB "shall promptly conduct an
examination" (Article 6.10).
(iv) Following thatexamination, theTMB "shall ...make appropriate recommendations
totheMembers concerned" (Article 6.10).
Byusing theterm"shall" inalloftheabove-cited provisions, thetextofArticle 6oftheATC made
clearthatasafeguard action would beconsistent withtheATC onlyifalloftheabove requirements,
including therequirement thattheTMB make arecommendation onthesafeguard action, werefulfilled.
Inthecasebefore thePanel, theTMB hadmade norecommendation onthesafeguard action onwhich
theUnited States hadmade adetermination andonwhich ithadconsulted withIndiaandtheprocedural
requirements listed above had,therefore, notbeenmet.
5.168 TheUnited States argued thatalthough theTMB hadanimportant roleinreviewing safeguard
actions andMembers wererequired toendeavour tocomply withitsrecommendations, there wasno
requirement thattheTMB "endorse" ameasure forittobemaintained. Furthermore, there wasno
requirement thattheTMB make afinding onbothserious damage andactual threat. Article 6.10of
theATC provided thattheTMB "conduct anexamination ofthematter, including thedetermination
ofserious damage, oractual threat thereof, anditscauses, andmake appropriate recommendations
...". Contrary toIndia'sclaim, there wasnorequirement thattheTMB produce aconsensus finding
ontheUS'complete determination of"serious damage, oractual threat thereof". TheTMB hadnot
made anycomment ontheexistence ofserious damage withrespect tocategory 440,butinstead had
noted thattherehadbeenaconsensus intheTMB ontheexistence ofactual threat andthatsuchactual
threat could beattributed tothesharp andsubstantial increase inimports from India (G/TMB/2 and
G/TMB/R/3). Therefore, itwasnotappropriate toassume thatthere wasanyfinding orconclusion
bytheTMB concerning serious damage onewayortheother. TheUnited States referred toIndia's
claim thattheATC hadspecifically assigned totheTMB legalfunctions thathadnotbeenassigned
totheTSB. TheUS,however, wasoftheviewthatArticle 6.9and6.10oftheATCvirtually mirrored,
totheextent ofTSBresponsibility, Article 3.4and3.5oftheMFA, respectively. Therefore, India's
contention thatthedrafters oftheATC hadgiven theTMB powers beyond those accorded totheTSB
waswithout merit.
5.169 IndiapointedoutthattheATCwasnottheonlyWTOagreementthatattachedlegalconsequences
totheexistence ornon-existence ofarecommendation ofaWTO body. TheGeneral Council may
adopt abudget only iftheCommittee onBudget Finance andAdministration submitted a
"recommendation" toit(Article VIIoftheWTO Agreement). TheMinisterial Conference mayadopt
aninterpretation oftheGATT onlyonthebasis ofa"recommendation" bytheCouncil forTrade in
Goods(ArticleIXoftheWTOAgreement).AWTOMembermaysuspendconcessionsunderArticle22
oftheDSU onlyifthe"recommendations" ofapanel ortheAppellate Body were notimplemented
within areasonable period oftime. Indiaconcluded fromthisthattheargumentation oftheUnited States
invited thePanel totakeanextraordinary step,namely, todeclare theTMB tobetheonlyWTO body
whose decision tomake ornottomake arecommendation would nothaveanylegalconsequence and
thisinspiteofthefactthattheATC hadspecifically assigned animportant legaltasktothisbody.
5.170 India rejected thecharacterization oftheTMB bytheUnited States asa"special board and
conciliation typebody" similar totheTSBandtheUnited States 'contention thatasafeguard action
maybetaken under theATC eveniftheTMB failed tomake arecommendation onit.India pointed
outthat,according toArticle 8oftheATC, theTMB wastoWT/DS33/R
Page53
"...supervise theimplementation ofthisAgreement, toexamine allmeasures taken under this
Agreement andtheirconformity therewith, andtotaketheactions specifically required ofit
bythisAgreement ..."
while thecorresponding provision oftheMFA, (Article 11)stated thatthetaskoftheTSBwasto"...
supervise theimplementation ofthisArrangement".
5.171 According toIndia, there wasnoreference intheabove provision foraTSBexamination of
theMFA-consistency ofallsafeguard actions. Moreover, theTSBmerely hadthetasktoreview, "...
attherequest ofanyparticipating country, ...promptly anyparticular measure orarrangements which
thatcountry considered tobedetrimental toitsinterests ...". Thecomplaints submitted totheTSB
could, therefore, becomplaints ofanon-legal, economic nature. Itclearly followed from theabove
thattheTMB hadalegalfunction because itscentral taskwastoexamine theATC-conformity ofall
safeguard actions, while theTSBhadmerely aconciliatory function because itwastobecome active
onlyifcountries requested ittoconsider measures detrimental totheirinterests. Bydeclaring that
theTMB hadfunctions equivalent tothose oftheTSB, theUnited States hadsimply ignored thefact
thatthemandates oftheTMB andtheTSBwere defined incompletely different ways inthelegal
instruments establishing them.
5.172 India indicated, while fullyreserving itsposition onthequestion ofendorsement, thatinthe
casebefore thePanel thequestion ofwhether theTMB must approve thesafeguard action neednot
necessarily beanswered. Given theabsence ofanydecision oftheTMB onthesafeguard action on
which theUnited States hadconsulted withIndia, itwould besufficient forthePanel torulethata
safeguard action under theATC mayonlybetaken iftheTMB hadmade arecommendation andto
leave aside thequestion ofwhether approval wasrequired. Thiswould enable thePanel torely
exclusively ontheexplicit wording ofArticle 6.10oftheATC ("The TMB shall...make appropriate
recommendations") rather thanonthecontextual andpurpose-oriented interpretation ofthatprovision
thatIndia considers tobetheappropriate one. Therefore, incasethePanel weretoconclude thata
TMB endorsement wasnotrequired orifitwere toconclude thatthecasedidnotrequire aruling
onthispoint, Indiasubsidiarily requested thePanel tofindthatthesafeguard action oftheUnited States
wasinconsistent withitsobligations under theATC because theTMB, contrary totheexplicit
requirement setoutinArticle 6.10oftheATC, hadnotmade anyrecommendation ontheaction on
which theUnited States hadconsulted withIndia.
5.173 TheUnited States questioned whether India could posthocamend itspleadings inthiscase
asithaddoneinthepreceding paragraph. There, India hasmade asubsidiary request ofthePanel
notfound initsoriginal request. Thiswasinconsistent withtheDSU andWTO andGATT practice
asseenintheAppellate Body Report onReformulated Gasoline. Inthatdispute, theAppellate Body
hadrefused toaddress issues thatVenezuela didnotraiseinarequest forappeal.
J. Date oftheSafeguard action
5.174 India argued thattheUnited States ’retroactive application ofthesafeguard action violated
Article XIIIofGATT 1994andwasnotjustified byArticle 6.10oftheATC. On14July1995, India
wasinformed bytheUnited States thatarestraint would beapplied onimports fromIndia, interalia,
incategory 440,during theperiod beginning on18April 1995andextending through 17April 1998.
TheUnited States, therefore, haddecided thattheperiod ofrestraint would begin onthedateofits
request forconsultations withIndia under Article 6oftheATC. Thismeant that,indetermining the
amount ofpermitted imports during theperiod ofrestraint, theimports thattookplace during theperiod
ofconsultations were tobededucted tothedetriment ofIndian exporters.
5.175 IntheviewofIndia,Article1.6oftheATCspecificallyreservedtherightsoftheWTOMembers
under GATT 1994 "unless otherwise provided inthisAgreement" (ATC). Therestraint imposed byWT/DS33/R
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theUnited States wasinconsistent withArticle XIIIofGATT 1994 andwasconsequently justified
onlyif,andtotheextent, permitted under theATC. Article XIII:3(b) didnotpermit aretroactive
application ofimport restraints. TheGATT panel onEEC-Restrictions onImports ofDessert Apples -
Complaint byChile therefore considered that"backdated quotas, thatis,quotas declared tohavealready
beenfilled atthetimeoftheirannouncement, didnotconform totherequirements ofArticle XIII:3(b)
...".21TheATC didnotprovide foranexception tothatprinciple. ItsArticle 6.10merely provided
that"theMember which proposed totakesafeguard action mayapply therestraint bydateofimport
ordateofexport" if,"after theexpiry oftheperiod of60daysfrom thedateonwhich therequest
forconsultations hasbeenreceived", noagreement hasbeenreached. There wasnowhere intheATC
anyindication thattherestraints maybeback-dated.
5.176 TheUnited States referred toIndia'srationale astowhytheDessert Apples casewascomparable
towhattheUShaddoneinthismatter andfound itillogical. There wasadistinct difference between
declaring aquota tobetotally filled andonepartially filled. Thus, itdidnotcomprehend India's
reasoning inthismatter. TheUScasewasnotthesame orsimilar totheoneinDessert Apples .
Therefore, thecasewasnotevenpersuasive here.
5.177 India replied thatitwastruethatthispanel hadexamined anextreme case, namely acaseof
backdating withtheeffect thatthetotalquota declared tobeavailable forfuture tradehadalready been
totally filled atthetimeoftheannouncement. However, thereasoning ofthepanel alsoapplied in
thecaseinwhich aquota declared tobeavailable atthetimeofitsannouncement would bealready
partially filled.
5.178 TheUnited States alsoargued thattheapplication ofthetransitional safeguard fromthedate
oftherequest forconsultations wasconsistent withtheATC. TheUShadapplied thesafeguard restraint
onwoven wool shirts andblouses from India from thedatetherequest forconsultations wasmade.
TheATC didnotbarsuchachoice. Even theTMB hadnoted that"with respect totheintroduction
ofasafeguard action, the[ATC] doesnotprovide anyindication withrespect totheeffective dateof
implementation ofthatmeasure."22Thus, intheabsence ofanyprovision tothecontrary, the
UnitedStateswasnotprohibitedfromapplyingthesafeguardactionfromthedateoftherequest.Indeed,
application asfromtherequest datewasapractical necessity assucharequest would trigger speculative
trade. Iftraders believed thatimports before completion oftheconsultation process would notbe
counted against aprospective restraint, speculative imports would aggravate thedamage orbankrupt
theremaining industry. Although imports inmany instances continued toincrease following the
notification ofarequest, traders wereinformed bytheUSFederal Register notice thatanyunilateral
quota established would beapplied tocover exports since thedateoftherequest. TheUSmaintained
thateventhough therequest forconsultations wasofficially published afterthedateoftherequest itself,
theUnited States didnot"enforce" therestraint untilwellafterpublication, albeit applying toshipments
fromthetimeoftherequest. Entry ofthose shipments would notbeaffected untilaftertherestraint
wasenforced (after publication) andthequota forIndia would notbededucted untillater, orafter
publication.
5.179 TheUnited States stressed thatitdidnotaccept India'sinterpretation ofArticle 6.10ofthe
ATC andArticles XIIIandX:2ofGATT 1994 ontheissue oftheeffective dateofasafeguard. It
added tothepoints inthepreceding paragraph made above thatwithrespect toArticle X:2itbelieved
thatitwasquestionableifanATCtransitionalsafeguardfellunderthe"generalapplication"requirement.
21BISD 36S/93
22G/TMB/R/2WT/DS33/R
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Asbothparties agreed, ATCtextiles safeguards wereapplied onaMember-by-Member basisandwere
notsubject tothenon-discriminatory application ofquantitative restrictions under GATT 1994. Even
so,theUnited States maintained thatithadnot"enforced" thesafeguard within themeaning of
GATT 1994 Article X:2untilafterpublication. Assuch, Article X:2ofGATT 1994 waslikely not
applicable.
5.180 Indianoted thattheMFA specifically determined thebeginning ofthe12-month restraint period
toremove anyuncertainty during consultations following arequest forconsultations andthere was
nooption provided intheMFA forthecountry toapply therestraint fromanyother datethanthedate
specified intheMFA. TheATC, unlike theMFA, allowed forarestraint tobeapplied forthreeyears
andexplicitly stated thattheapplication ofthatrestraint must occur atatime, tobedetermined by
theimporting country, during the30daysfollowing the60-day consultation period. Itwasfactually
incorrect fortheUnited States topresent theATC asallowing Members theoption ofselecting the
dateupon which the12-month restraint period would become effective.
5.181 TheUnited States reiterated thatinsome cases, asinthecaseofwoollen products, seasonality
ofshipments indicated lessimports, notanunwillingness toshipwhen arequest wasannounced.
Nevertheless, ifshipments exported aftertherequest were notcounted against thequota thatwould
almost guarantee asurge inthetradeformonths immediately following therequest withnosubsequent
price tobepaidforcausing additional damage tothedomestic industry. IfthePanel prohibited this
practice, which wasnotprohibited bytheATC, thePanel would besignalling totraders thattheycould
flood themarket withimports before consultations were completed.
5.182 Insum,Indiaargued thattheUnited States hadsubmitted noevidence that"speculative exports"
would occur following arequest forconsultations. There may, ormaynot,bearealorimagined
incentive toshipproducts quickly inorder toexport goods priortothestartofaquota, butnoevidence
wasgiven demonstrating thatthiswas,infact,thecase. TheUSdataonshipment timewasconsidered
tobe,inthisinstance, meaningless. IntheviewofIndia, itonlyindicated thattransit timebetween
India andtheUnited States wassomewhere between 48hours and50days. Amore meaningful
examination would review thetimebetween theplacing ofanorder oropening anirrevocable letter
ofcredit, receiving theappropriate export documentation, actual dateofexport, anddateofimport.
None ofthese wereindicated tohavebeenreviewed bytheUnited States inorder todiscern "actual
shipping patterns" ofgoods prior tothestartofaquota, orafterthestartofaquota.
Article XIII:3(b) ofGATT 1994
5.183 India argued thattheTMB hadcorrectly noted that"with respect totheintroduction ofa
safeguard action, the[ATC] doesnotprovide anyindication withrespect totheeffective dateof
implementation ofthatmeasure."23However, itwould becompletely erroneous toconclude fromthat
factthattheimporting Members hadtherighttoapply theirrestraints retroactively. Exactly theopposite
wastrueintheopinion ofIndia. Because therewasnoexplicit authorization intheATC’stransitional
safeguard clause toimpose theadditional burden ofretroactive application, thegeneral prohibition
ofretroactiveimportrestraintssetoutinArticleXIII:3(b)ofGATT1994appliedandimportingMembers
weretherefore notentitled toimpose thatburden. Theperception thatappeared tobeimplicit inthe
TMB’sstatement wasthateverything thatwasnotprohibited byArticle 6oftheATC waspermitted.
Thatperception turned therelationship between thegeneral principles ofGATT 1994 andthehighly
exceptional provisions ofArticle 6onitshead. Thelackofaprovision intheATC permitting
retroactivity hadnotbeenanoversight. Article 3.5(i) oftheMFA explicitly stated that,if,afteraperiod
of60daysfromthedateonwhich therequest forconsultations hadbeenreceived, noagreement had
23G/TMB/R/2WT/DS33/R
Page56
beenreached, theimporting country could impose restraints ataspecified level"forthetwelve-month
period beginning onthedaywhen therequest wasreceived bytheparticipating country". Allthe
negotiators oftheATC were familiar withtheMFA andnevertheless itwasdecided nottoinclude
acorresponding provision intheATC.
5.184 India considered thatthedateofpublication oftherequest forconsultations wasirrelevant in
thecontext ofArticle 2.4oftheATC andArticle XIIIoftheGATT andstressed thattherequirement
ofadvance public announcement ofArticle XIIIwould notbemetiftheimporting Member wereto
make, atthetimeoftherequest forconsultations apublic announcement ofthequantity orvalue of
theproducts thatmaybeimported inaspecified future period ifthegovernment were todecide to
restrict imports subsequent totheconsultations. Theverypurpose ofArticle XIIIwastoachieve
predictability intraderelations byobliging WTO Members toindicate clearly thefuture trading regime.
Thisinterpretation would alsofrustrate theintent ofArticle X:2ofGATT 1994because itwould allow
governments toenforce measures before theyhadannounced theireventual decision toapply them.
5.185 India alsoconsidered therequirement ofadvance publication ofquotas under Article XIIIof
GATT 1994andtherequirement ofArticle 6.10oftheATCthatasafeguard action mayonlybetaken
within the30daysfollowing the60-day period forconsultations mustbeinterpreted consistently with
oneanother. Iftherequirement ofanadvance publication ofthequota under Article XIIIcould be
metbymerely announcing thepossibility ofaquota rather thanthequota itself, thenitwould logically
havetobeconsidered tobeconsistent withArticle 6.10oftheATC tomerely announce during the
30-day interval thepossibility ofaquota rather thanthequota itself. These considerations made it
clear thatallowing WTO Members tomeet their advance publication requirements under the
WTOagreementsbypermittingthemtoannouncethepossibilityofatradeactionexanteandthedecision
toactually impose itexpostwould havefar-reaching consequences undermining theroleoftheWTO
agreements assources oflawandpredictability ininternational trade relations. ThePanel should not,
therefore, arrive atacompromise between theposition ofIndiaandthatoftheUnited States bydeclaring
thedateofthepublication oftherequest forconsultations asthedatetowhich aquota maybebackdated.
5.186 TheUnited States cited India'sargument concerning Article XIII:3(b) ofGATT 1994, and
argued thatArticle XIIIwasoutside theterms ofreference ofthisPanel. Indiahadstated initsrequest
thatthePanel findthat"[t]here wasnoprovision intheATC under which theUnited States ...can
impose arestraint withretrospective effect". Initsrequest forPanel review, India hadmade noclaim
under GATT 1994 concerning thisissue andassuch, India'sargument should notatthistimebe
addressed under GATT 1994. Inanyevent, intheviewoftheUnited States, application ofthemeasure
inthisinstance would befullyconsistent withtheprovisions ofArticle XIII:3(b) ofGATT 1994 as
public notice hadbeengiven ofthetotalquantity (notlessthan76,698 dozen woven wool shirts and
blouses) thatwould bepermitted from thedateoftherequest forconsultations, intheevent thatno
mutual solution would bereached withIndia. TheUnited States hadalsoprovided public notice that
products exported orenroute afterthedateoftherequest, butentering before theeffective dateof
therestraint (which was90daysafterthedateoftherequest) would notbeexcluded fromentry, but
would becharged against theearlier announced quota amount.
5.187 India referred totheargument oftheUnited States thatArticle XIIIofGATT didnotform
partofthePanel'sterms ofreference andrecalled thatinparagraph 12ofitsrequest fortheestablishment
ofaPanel ithadrequested ittofindthat"There isnoprovision intheATC under which the
United States, astheimporting Member, canimpose arestraint withretrospective effect." Inthisregard
India argued thattheATC wasanexception tothebasic rulesofGATT 1994andanyWTO Member
requesting consultations withtheclaim thatacertain measure didnotconform totheATC was,in
effect, claiming thattheATC didnotjustify thedeviation fromthebasic GATT provisions. India's
request foraPanel finding must, therefore, havebeenunderstood bytheUnited States andother WTOWT/DS33/R
Page57
Members asarequest forafinding bythePanel that,given theabsence ofaruleintheATCpermitting
theretroactive application ofsafeguard actions, India wasentitled tothenon-retroactive application
prescribed byGATT 1994. Thetextofarequest fortheestablishment ofaPanel should beinterpreted
likeanyother legaltext,thatis,byexamining notmerely thewords usedbutalsotheircontext and
purpose. India considered thatitsrequest foraPanel finding onretroactivity, inthecontext inwhich
itwasmade andgiven thepurpose itserved, mustbeinterpreted tocomprise arequest forafinding
under GATT 1994 inrespect oftheissue ofretroactivity.
5.188 Inresponse toaquestion astowhich provision oftheWTO Agreement, theGATT andthe
ATC, ifany,India wasreferring toinparagraph 11.2ofitsrequest forapanel (WT/DS33/1), India
noted thatArticle 6.2oftheDSUstated thattherequest fortheestablishment ofapanel shall"provide
abriefsummary ofthelegalbasis ofthecomplaint sufficient topresent theproblem clearly". This
Article didnotrequire thatthecomplaining Member should indicate specific provisions ofthecovered
agreement(s) invoked norwasthiscustomary forMembers. Article 7oftheDSU would appear to
indicate thatparties tothedispute wererequired tocitethenames ofthecovered agreements andthe
Panel would examine thematter inthelightoftherelevant provisions inthecovered agreements cited.
Themanner inwhich brackets hadbeenusedinthestandard terms ofreference contained inArticle 7
oftheDSU alsoappeared toconfirm this. Paragraph 11.2ofIndia'srequest forestablishment ofa
Panel andparagraph 79(ii) ofIndia'sfirstwritten submission requested thePanel tofind,inaccordance
withArticle 3.8oftheDSU, thesafeguard action oftheUnited States nullified orimpaired thebenefits
accruing toIndia under theWTO Agreement, under theATC andunder GATT 1994 inparticular.
Thephrase "WTO Agreement" referred to"Agreement Establishing theWorld Trade Organization"
asperthestandard listofabbreviations. According toArticle II:2oftheWTO Agreement, the
Agreement andtheassociated legalinstruments included inAnnexes 1,2and3were integral parts
oftheWTO Agreement. Inbrief, theterm"WTO Agreement" alsoincluded "theMultilateral Trade
Agreements". Under these circumstances, paragraph 11.2ofIndia'srequest fortheestablishment of
aPanel andparagraph 79(ii) ofIndia'sfirstwritten submission should beunderstood bythePanel as
arequest thatthePanel findinaccordance withArticle 3.8oftheDSUthattheUnited States 'actions,
being inconsistent withtheprovisions oftheATC andGATT 1994, which were Multilateral Trade
Agreements included inthe"WTO Agreement", nullified orimpaired benefits accruing toIndiaunder
theprovisions ofthese Agreements.
Speculative RiseinImports
5.189 India further pointed outthattheUnited States hadindicated thatitconsidered theretroactive
application ofrestraints necessary toprevent aspeculative riseinimports after therequest for
consultations. Iftraders believed thatimports before thecompletion oftheconsultations were not
counted,sotheyargued,therequestforconsultationswouldtriggerspeculativetradethatwouldaggravate
thedamage tothedomestic industry. IntheviewofIndia, thisargument wasnotbased oncommercial
realities. Most textile andclothing products were made toorder anditwasgenerally impossible to
complete theprocess ofcontracting, manufacturing andshipping within aperiod ofonly60days.
Thereality wasthatrequests forconsultations, because oftheuncertainty theycreated, more often
discouraged trade and,therefore, hadacommercial impact equivalent totherestraints theimporting
Member wasproposing totake.
5.190 Inaresponse tothePanel, India expanded upon itsclaim thatitwasgenerally impossible to
produce andshiptextile products onsuchnotice as60days. Itexplained that,inIndia, quotas were
distributed onthebasis ofapolicy notification bytheGovernment. During theyears 1994 to1996,
oneofthesystems ofquota allotment wascalled theFirstCome FirstServed (Small Order) system
which wasdesigned toprovide thequickest turnaround timeforservicing ofexport orders. Quotas
wereallotted against Letters ofCredit obtained fromtheimporters forsmall orders withthestipulationWT/DS33/R
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thatthequantities allotted under thissystem should beutilized within aperiod of60daysofallotment.
There werepersistent representations fromtheclothing exporting industry thattheperiod of60days
wasinsufficient forprocessing theexport orders. Therefore, ithadbecome necessary forIndia to
stipulate avalidity period of75daysfrom1996onwards. Furthermore, therehadbeenrepresentations
from theexporters ofwoollen clothing forextending thevalidity to90dayssince eventhe75days'
period appeared tobeinsufficient forprocessing theexport orders forwoollen clothing. India'sexports
ofwoven wool shirts andblouses totheUnited States consisted almost entirely ofregenerated wool
products, thatis,products made from woollen ragswhich required extracting andregenerating their
fibrecontent, andconverting itintoyarn, fabrics andthenclothing. Since export orders wereforspecific
fabric andclothing designs most ofthese processes hadtobecarried outafterreceipt oftheexport
order forclothing. Itwasthusobvious thatforwoven wool shirts andblouses tobeexported tothe
US,thetimerequired wasevenmore thanwhatwasrequired forexport ofother clothing.
5.191 Inaresponse tothePanel, theUnited States expressed theview thatwhen arequest for
consultationswasannouncedintheFederalRegister,interestedpartieswereinformedthatifnoagreement
wasreached inconsultations, theUnited States maydecide toestablish alimitforthe12-month period
beginning from thedateoftherequest forconsultations. IftheUnited States didnotsoinform the
public, there would beanincentive toshipproducts quickly inorder toexport goods prior tothestart
ofaquota. Insituations ofrapidly rising imports, thegoalforimporters toshipquickly wastoavoid
having theirgoods caught inaquota embargo. India'sclaim thatitwould takemore than60days
forimporters toreceive anysuchimports fromIndiawascontrary tothefactsofactual shipping patterns.
Areviewofshipmentsofcategory440exportedfromIndiaduringthe12-monthperiodof18April1995
to17April 1996, thefirstcontrol period oftheArticle 6action, showed adifferent situation. Of
approximately 200entries, 25percenthadarrived within 48hours ofexportation from India using
anaircarrier. There wasonlyoneentrythathadtaken longer than50daystoarrive intheUnited States,
withmostentries arriving within three tofourweeks fromthedateofexport fromIndia. Inthisera
ofinstantaneous communication, ittakes verylittle timetohandle therelatively simple business
transactions foranongoing programme. Regardless ofthetimeneeded tobegin anewpurchase
transaction, there could beanincentive for"speculative exports" toavoid theimposition ofaquota
fororders already placed andwaiting tobeshipped. Once itwaslearned thatthere maybeaquota
imposed within 60days, theconcerned business entity could seektospeed uptheshipping ofanorder
orcould haveitshipped byair,asevidenced bythedatapresented above.
5.192 India considered, withrespect tothepreceding views, thatamore meaningful examination
ofshipment timewould review thetimebetween theplacing ofanorder, oropening anirrevocable
letterofcredit, receiving theappropriate export documentation, actual dateofexport, anddateofimport.
None ofthese wereindicated tohavebeenreviewed bytheUnited States inorder todiscern "actual
shipping patterns" ofgoods prior tothestartofaquota, orafterthestartofaquota. India explained
thatithadnever claimed thatgoods could notbeshipped fromIndia totheUnited States byairfreight
within averyshort period oftime. India hadclaimed thattextiles products were generally made to
order andthattheperiod between theplacing oftheorder andtheexports from India wasnormally
longer than60days. TheUnited States pointed outthatitlooked attheshipping pattern during the
timemostrelevant tothisissue, which wasthetimeofthefirstcontrol period ofthisaction orbetween
18April 1995 and17April 1996. That examination revealed thatofapproximately 200entries,
25percenthadarrived within 48hours ofexport fromIndiausing anaircarrier. Most entries arrived
three tofourweeks from thedateofexport from India.
Unusual andCritical Circumstances
5.193 India noted thattheATC provided forhighly unusual andcritical circumstances inwhich a
delay intheapplication ofrestraint could cause damage thatwould bedifficult torepair anditwasWT/DS33/R
Page59
notexcluded thatsuchcircumstances might ariseasaresult ofthetraders ’reaction toarequest for
consultations. Inthatcasetheimporting Member hadtherighttoresort toArticle 6.11oftheATC,
andsubject tothestrictconditions setoutinthatprovision, apply asafeguard action provisionally prior
tothelapse oftheconsultation period. Thecircumstances thattheUnited States invoked tojustify
theintroduction ofanewright forimporting Members under theATC were thusspecifically dealt
withinthatprovision. IfthePanel weretorecognize theexistence ofageneral righttoimpose restraints
retroactively todealwithspeculative imports aggravating thedamage tothedomestic industry, itwould
effectively permit importing Members toescape thestrictures oftheveryATC provision thatallowed
Members todealwithsuchsituations.
5.194 WithrespecttoIndia'sargumentthatsafeguardactionincriticalcircumstancesunderArticle6.11
oftheATC addressed theissue, theUnited States disagreed, arguing thatArticle 6.11oftheATC
wasdesigned torespond totrueemergency casesandnottotheproblem ofspeculative tradethatexisted
invirtually allcases. Even under theMFA, a"critical circumstances" action wasnotrelevant tothe
issue oftheeffective dateofasafeguard action. Thesame provision existed intheMFA along with
anexpress provision onapplication ofrestraints from thedateofthecallinregular safeguard
circumstances. There wasnosubstantive change announced intheATCthatthecritical circumstances
mechanism "replaced" thefreedom toapply therestraint from thecalldate.
5.195 TheUnited States further referred toIndia'sclaim thatcritical circumstances safeguard action
under ATC Article 6.11oftheATC wasdesigned inanywaytosolve theproblem addressed by
theapplication ofarestraint fromthedateoftherequest. Article 6.11oftheATC wasnotaprovision
created forthefirsttimeunder theATC orintroduced asanewconcept under theATC toaddress
thespeculative trade issue. Itwasmerely, likesome other provisions oftheATC, acarryover from
theMFA forrealcritical circumstances safeguard cases -suchascases thattrulycould notwaitfor
theparties todecide onthedateandplace forconsultations. While Article 3oftheMFA addressed
theproblem byexpressly recognizing acountry 'sability toapply thesafeguard inthatmanner, the
MFA alsocontained Article 3.6,thepredecessor toArticle 6.11oftheATC. Therefore, evenunder
theMFA "critical circumstances" action wasnotrelevant totheissueofwhen aregular safeguard could
beapplied andtheissue ofaddressing speculative trade when consultations under regular safeguard
action tookplace.
K. Article 2oftheATC
5.196 India noted thatArticle 2.4oftheATC prohibited theintroduction ofnewrestraints except
under theprovisions ofthatAgreement orrelevant GATT 1994 provisions. Therestraints referred
tointheseprovisions werethemeasures prohibited byArticles XIandXIIIofGATT 1994. Anynew
restraint inconsistent withArticles XIorXIIIandcovered neither bytheprovisions oftheATC nor
those ofGATT 1994 were, therefore, alsoinconsistent withArticle 2.4oftheATC. Inresponse to
theargument oftheUnited States, India requested thePanel tofindthattheretroactive application
oftheUnited States safeguard action wasinconsistent withArticle XIIIoftheGATT andArticle 2
oftheATC or,ifthePanel weretoconsider Article XIIIoftheGATT nottoform partofitsterms
ofreference, thattheretroactive application wasinconsistent withArticle 2oftheATC.
5.197 TheUnited States argued thatsince thesafeguard action onimports ofwoven woolshirts and
blouses fromIndia wasfullyconsistent withArticle 6oftheATC, there wasnoviolation ofArticle 2
oftheATC.
5.198 Insum, India requested thePanel tofindthattheretroactive application oftheUnited States '
safeguard action wasinconsistent withArticle XIIIoftheGATT andArticle 2oftheATC or,iftheWT/DS33/R
Page60
Panel weretoconsider Article XIIIoftheGATT nottoform partofitsterms ofreference, thatthe
retroactive application wasinconsistent withArticle 2oftheATC.
*****
VI INTERIM REVIEW
6.1 On22November 1996, theUnited States andIndiarequested thePanel toreview, inaccordance
withArticle 15.2oftheDSU, precise aspects oftheinterim report thathadbeenissued totheparties
on12November 1996. BothIndia andtheUnited States agreed nottorequest thePanel toholda
meeting forthatpurpose. Wereviewed thearguments presented bytheparties intheir written
submissions andissue ourfinalreport accordingly.
6.2 WenotethattheUnited States stated thattherestraint, which istheobject ofthepresent dispute,
wastobewithdrawn “duetoasteady decline inimports ofwoven woolshirts andblouses fromIndia
andtheadjustment oftheindustry ”.Thiswasconfirmed inaFederal Register notice dated 4December
1996(61FR64342). Intheabsence ofanagreement between theparties toterminate theproceedings,
wethink thatitisappropriate toissue ourfinalreport regarding thematter setoutintheterms of
reference ofthisPanel inorder tocomply withourmandate, asreferred toinparagraph 1.3ofthis
report, notwithstanding thewithdrawal oftheUSrestraint. Anumber ofGATT panels havedoneso24.
6.3 Concerning theinterpretation ofArticle 6.2and6.3oftheATC, theUnited States argued that
under theMFA itwasnever required to“demonstrate ”atleastallofthefactors therein referred to;
thatIndia hadadmitted thatArticle 6.3contained anillustrative listofsuchfactors; andthatthe
interpretation bythePanel ofArticle 6.3oftheATC turned theprovision onitshead. Weareofthe
viewthattheATCisadifferent agreement fromtheMFA; thatIndiadidnotmake suchanadmission25;
andthatthewording ofArticle 6.3oftheATC isclear.
6.4 Concerning thecomments made bytheUnited States regarding theUSgovernment ’slackof
reliable export data,wereiterate thatwedonotinterpret theATC soastoimpose onWTO Members
anymethod ofcollecting databutthatitisuptoeachconcerned Member tocollect therelevant data
from relevant sources, possibly including theprivate sector.
6.5 Concerning therequirement under Article 6.2oftheATC thattheimporting Member must
positively confirm thatthestateoftheparticular industry oftheimporting Member wasnotcaused
by“suchother factors astechnological changes andchanges inconsumer preference ”,werefersimply
totheclear wording ofArticle 6.2oftheATC. Theabsence ofadequate reference totheissue of
24Seeforinstance thePanel Report on“EEC -Restrictions onImports ofDessert Apples, Complaint by
Chile ”(adopted on22June1989, BISD 36S/93), thePanel Report on“EEC-Restrictions onImports ofApples,
Complaint bytheUnited States ”(adopted on22June1989, BISD 36S/135), thePanel Report on“United States -
Prohibition ofImports ofTuna andTuna Products from Canada ”(adopted on22February 1982, BISD 29S/91)
orthePanel Report on“EEC-Measures onAnimal Feed Proteins ”(adopted on14March 1978, BISD 25S/49).
25Asnoted inparagraph 5.63ofthisreport inreferring toanexplicit allegation byIndia: “...Article 6.3
oftheATC indicates anillustrative listoffactors, onwhich datahadtobeexamined, itwould beinorder if
animporting Member alsoexamined other factors, while making adetermination. However, itwould be
inconsistent withArticle 6.7oftheATC ifallfactors mentioned inArticle 6.3were nottaken intoaccount by
theimporting Member. ...”WT/DS33/R
Page61
technological changes andchanges intheconsumer preference inadetermination necessarily implies
thattheimporting Member didnotaddress thisaspect ofthecausation requirement.
6.6 Concerning India’sargument thatArticle 11oftheDSU entitles India toafinding oneach
oftheissues itraised, wedisagree andrefertotheconsistent GATT panel practice ofjudicial economy.
India isentitled tohavethedispute overthecontested “measure ”resolved bythePanel, andifwe
judge thatthespecific matter indispute canberesolved byaddressing onlysome ofthearguments
raised bythecomplaining party, wecandoso.We,therefore, decide toaddress onlythelegalissues
wethink areneeded inorder tomake suchfindings aswillassist theDSBinmaking recommendations
oringiving rulings inrespect ofthisdispute.
6.7 Concerning India’scomment about theburden ofproof, itwasforIndia tosubmit aprima
faciecaseofviolation oftheATC, namely, thattherestriction imposed bytheUnited States didnot
respect theprovisions ofArticles 2.4and6oftheATC. ItwasthenfortheUnited States toconvince
thePanel that,atthetimeofitsdetermination, ithadrespected therequirements ofArticle 6ofthe
ATC.
6.8 Concerning India’scomments onthe“two-track approach ”inparagraphs 7.18to7.21, we
arenottaking anyposition astowhether theTMB process mustbeexhausted before apanel process
canbeinitiated. Concerning thedifferent roles oftheTMB andpanel processes, weexpand our
discussion inparagraph 7.19.
6.9 Concerning India’sargument thatitdidquestion USproduction statistics, weamend ourtext
accordingly.
6.10 India andtheUnited States alsomade other suggestions concerning language changes, which
weaccept andintroduce inourfinalreport.
*****
VII FINDINGS
A. Introduction
7.1 Theprincipal factsthatledtothepresent dispute arethefollowing: On18April 1995, the
United States requested consultations withIndia pursuant toArticle 6.7oftheATC regarding the
proposed safeguard action onimports ofwoven wool shirts andblouses, category 440. Therequest
forconsultations consisted ofaDiplomatic Noteandadocument entitled “Statement ofSerious Damage:
Category 440”,dated 18April 1995(hereinafter referred toastheMarket Statement). TheDiplomatic
Notestated thatthesharp andsubstantial increase inimports fromIndiaoftheproducts inthecategory
440was“causing serious damage oractual threat thereof totheUSindustry producing wool woven
shirts andblouses ”;theaccompanying Market Statement stated that“thesharp andsubstantial increase
inimports ofwoven woolshirts andblouses, Category 440,iscausing serious damage totheUSindustry
producing woven wool shirts andblouses ”.On23May1995, theUnited States published anotice
intheUSFederal Register stating that“thesharp andsubstantial increase inimports ofwoven wool
shirts andblouses, Category 440,iscausing serious damage totheUSindustry producing woven wool
shirts andblouses ”,andthat
“ifnosolution isagreed upon inconsultations withtheGovernment ofIndia ...,the
Committee fortheImplementation ofTextiles Agreements maylaterestablish alimit
fortheentry andwithdrawal fromwarehouse forconsumption ofwooltextile productsWT/DS33/R
Page62
inCategory440...andexportedduringthetwelvemonthperiodApril18,1995through
April 17,1996, atalevelofnotlessthan76,698 dozen ...”.
7.2 Theparties heldbilateral consultations inGeneva on19April 1995, andinWashington D.C.
on14-16 June1995. Theconsultations didnotresult inamutually agreed solution andon14July
1995, theUnited States implemented arestraint onimports ofwoven woolshirts andblouses (category
440)fromIndia, withtherestraint being effective asof18April 1995foroneyear. Atthesame time,
theUnited States referred thematter totheTMB inaccordance withArticle 6.10oftheATC. The
USrestraint waslaterextended through 17April 1997.
7.3 Asrequired under Article 6.10oftheATC, theTMB examined thematter atitsthirdandfourth
meetings on28August -1September 1995and12-15 September 1995andconcluded that,regarding
thesafeguard action taken bytheUnited States against imports ofcategory 440from India, “...the
actual threat ofserious damage hadbeendemonstrated, andthat,pursuant toparagraph 4ofArticle
6,thisactual threat could beattributed tothesharp andsubstantial increase inimports fromIndia”26.
Pursuant toArticle 8.10oftheATC, India requested theTMB toreview itsdecision concerning the
USsafeguard action against imports ofcategory 440from India. TheTMB reviewed thismatter on
13-17 November 1995 andconcluded thatit“could notmake anyrecommendation inaddition tothe
conclusions ithadreached atitsmeeting on12-15 September 1995....TheTMB therefore considered
itsreview ofthematter completed ”27.On14March 1996, pursuant toArticle 8.10oftheATC and
Article 6oftheDSU, Indiarequested theDSBtoestablish apanel onthematter indispute. Thepresent
Panel wasestablished on17April 1996.
B. Claims oftheParties
7.4 India’smain claim isthattheUSsafeguard action against imports ofwoven wool shirts and
blouses wasimposed inviolation oftherequirements ofArticles 6,8and2oftheATC. Indiarequests
thatthePanel suggest thattheUnited States withdraw themeasure inquestion.
7.5 TheUnited States claims thatitrespected itsobligations under theATC when applying and
maintaining therestraint onimports ofwoven woolshirts andblouses fromIndia. Consequently, the
United States requests thatthePanel dismiss India’sclaim.
7.6 Inparticular, India’sclaim isthattheUnited States didnotcomply withtheprocedural and
substantive requirements ofArticle 6oftheATCwhen itimposed thesafeguard measure. Indiaargued
thattheconditions forapplication ofArticle 6.2,6.3,6.7and6.10arethree-fold: first, there isa
substantiverequirementthattheimportingMemberdemonstratethatanincreaseofimportsofaparticular
product iscausing serious damage oractual threat thereof tothedomestic industry producing likeor
directly competitive products. According toIndia, theUnited States failed todemonstrate thisinits
MarketStatementsince,onitsface,thedatacontainedintheUSMarketStatementwereflawed.Second,
India asserted thatthere were alsoprocedural requirements regarding thenature, quality andextent
oftheconsultations. India argued thattheUnited States failed toconsult onthespecific proposed
safeguard action forwhich therequest forconsultations wasmade andthatintheconsultations with
India, theUnited States failed todemonstrate, withrelevant andspecific information, thatimports of
woven wool shirts andblouses werecausing serious damage tothedomestic industry producing like
ordirectly competitive products. Third, India argued thatinorder toimpose andmaintain asafeguard
26G/TMB/R/3 paragraph 26.
27G/TMB/R/6 paragraph 14.WT/DS33/R
Page63
action, theUnited States hadtoobtain theendorsement oftheTMB. India labelled these lasttwo
procedural requirements asa“two-tier obligation ”.
7.7 Inaddition, India claims thattheapplication ofthesafeguard action bytheUnited States, from
thedate oftherequest forconsultations, isinconsistent with Article 2oftheATC and
Article XIIIofGATT 1994.
7.8 TheUnited States claims thatitdidcomply withtherequirements ofArticle 6oftheATC
inthatCITA diddemonstrate thattheparticular product wasbeing imported intotheUnited States
insuchincreased quantities astocause serious damage oractual threat thereof tothedomestic US
industryproducinglikeand/ordirectlycompetitiveproducts.Althoughnotinagreementwiththetwo-tier
approach ofIndia, theUnited States argued thattheTMB’sconclusions confirmed thattheUnited States
wasfaced withanactual threat ofserious damage. TheUnited States alsoargued thatthedateof
application oftherestraint isconsistent withtheATCandthatIndia’sclaim under Article XIIIofGATT
1994doesnotfallwithin theterms ofreference ofthisPanel. TheUnited States, inanycase, claims
thatArticle XIIIisonlyrelevant fornon-discriminatory measures whereas Article 6restraints must
beapplied onaMember-by-Member basis.
C. General Interpretative Issues
7.9 Before turning toIndia’smain claim thattheUSdetermination ofserious damage oractual
threatthereofisflawedanddoesnotcomplywiththesubstantiveandproceduralrequirementsofArticle6
oftheATC, weexamine theissues oftheburden ofproof oftheparties, thestandard ofreview of
thisPanelandtherespectiverolesoftheTMBprocessandthedisputesettlementmechanismoftheDSU.
1. Burden ofProof
7.10 India’smainclaim isthattheUnited States failed todemonstrate theexistence ofserious damage
totheUSindustry, asrequired byArticle 6.2and6.3oftheATC. India argued thattheUnited States
boretheburden ofproving thatithadcomplied withtherequirements ofArticle 6oftheATC. For
India, since safeguard actions areexceptional, theyaretobeinterpreted narrowly anditwasforthe
United States toprove thatithadrespected alltheconditions ofapplication mentioned inArticle 6
oftheATC.
7.11 Ontheissue ofburden ofproof, theUnited States responded that,traditionally, inGATT
practice, itwasforthecomplaining party topresent aprima facie caseofviolation before apanel.
Thus, theUnited States argued, itwasforIndia toadvance factswhich provided convincing evidence
thatitwasunreasonable forCITA, onthebasisoftheavailable evidence, todetermine thattheadverse
effects ontheUSdomestic industry ofincreased woven wool shirtandblouse imports amounted to
“serious damage oractual threat thereof ”.28
7.12 Theparties seem tohaveaddressed twodifferent aspects ofwhatonemight callthe“burden
ofproof”issue. Webelieve thatadistinction should bemade. First, weconsider thequestion of
which party bears theburden ofproof before thePanel. Since Indiaistheparty thatinitiated thedispute
settlement proceedings, weconsider thatitisforIndia toputforward factual andlegalarguments in
order toestablish thattheUSrestriction wasinconsistent withArticle 2oftheATC andthattheUS
28Wenotethat, forinstance, Article 6.2oftheATC refers totheexpression “serious damage, oractual
threat thereof ”withacomma, aswellastotheexpression “serious damage oractual threat thereof ”without
acomma. Wedecide tousetheexpression “serious damage oractual threat thereof ”without seeking tobe
dispositive oftheissue raised byIndia andfurther discussed hereinafter inparagraphs 7.31 and7.53.WT/DS33/R
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determination forasafeguard action wasinconsistent withtheprovisions ofArticle 6oftheATC.
Second, weconsider thequestion ofwhattheimporting Member mustdemonstrate atthetimeofits
determination. Concerning thesubstantive obligations under Article 6oftheATC, itisclear from
thewording ofArticle 6.2and6.3oftheATC that,initsdetermination oftheneedfortheproposed
restraint, theUnited States hadtheobligation todemonstrate thatithadcomplied withtherelevant
conditions ofapplication ofArticle 6.2and6.3oftheATC.
2. Standard ofReview
7.13 India argued thatthetaskofthisPanel, established pursuant toArticle 8.10oftheATC and
Article 6oftheDSU, istodetermine whether theUnited States hadobserved therequirements of
Article 6ingood faith, notwhether ithadacted reasonably. India referred thePanel tothe
Transformers29andCanadian Corn30cases, ananti-dumping caseandacountervailing dutycase,
respectively,where,accordingtoIndia,thepanelsreviewedtheimportingcountries’actionsandimposed
onthem thedutytoestablish allfactsonwhich theyhadbased theiractions. Inresponse, theUnited
States argued thatthetaskofthePanel istoconsider whether theUSauthorities could reasonably and
ingoodfaithhavedetermined thatserious damage oractual threat thereof existed, notwhether serious
damage oractual threat thereof existed, assuch. TheUnited States referred thePanel totheFurFelt
HatWorking Party report31which, according totheUnited States, provides authoritative guidance from
GATT 1947 practice andprocedures concerning thestandard ofreview tobeapplied inthepresent
case. IntheFurFeltHatcase,theWorking Party concluded that,inreviewing aUSsafeguard measure
applied against Czechoslovak imports pursuant toArticle XIXofGATT 1947, theUnited States “were
entitled tothebenefit ofreasonable doubt ”andtheWorking Party rejected theCzechoslovak claim.
7.14 Inresponse toIndia’sarguments, theUnited States argued thatthestandard ofreview used
inanti-dumping andcountervailing dutycases aswellastherelevant provision contained inthe
Agreement onImplementation ofArticle VIofGATT 1994 (Article 17.6) werenotapplicable tothe
present dispute. India rejected therelevance oftheFurFeltHatcasewhich setoutcriteria forthe
reviewofsafeguardmeasuresunderArticleXIXofGATT1947,sincethemechanismunderArticleXIX
waslegally different from thatunder Article 6oftheATC where, forinstance, there wasno
compensation provided totheexporting Member.
7.15 Wedonotconsider thatthereports cited bytheparties arerelevant tothepresent dispute.
First, wenotethattheAppellate Body hasmade clearintheJapan Taxes report thatpastGATT panel
reportsdonotconstitutebinding“subsequentpractice”referredtoinArticle31oftheViennaConvention
ontheLawofTreaties (Vienna Convention). TheAppellate Body alsoconcluded that“...adopted
panel reports inthemselves [donot]constitute ‘other decisions oftheCONTRACTING PARTIES to
GATT 1947’forthepurpose ofparagraph 1(b)(iv) ofthelanguage ofAnnex 1Aincorporating the
29Panel Report on“New Zealand -Imports ofElectrical Transformers from Finland ”,adopted on18July
1985, BISD 32S/55.
30Panel Report on“Canada -Countervailing Duties onImports ofGrain Corn”,adopted on26March 1992,
BISD 39S/411.
31Working Party Report on“TheWithdrawal bytheUnited States ofaTariff Concession under Article XIX
oftheGATT ”GATT Document CP/106, adopted on22October 1951, (C.P.6/SR.19), version published by
theSecretariat inNovember 1951, preface byMr.E.Wyndham-White.WT/DS33/R
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GATT 1994intotheWTO Agreement ”32.Weare,therefore, notbound bypastGATT reports, although
wemayfollow theirreasoning totheextent relevant. Secondly, thereports citedbytheparties were
adopted many years ago(more than40inonecase)andtheyinterpreted different agreements indifferent
contexts. Thirdly, theATChasinstituted anewregime fortextile products andtheDSUhasinstituted
newrules forpanels.
7.16 WenotethattheATC doesnotestablish astandard ofreview forpanels.33However, although
theDSU doesnotcontain anyspecific reference tostandards ofreview, weconsider thatArticle 11
oftheDSU which describes theparameters ofthefunction ofpanels, isrelevant here:
“Thefunction ofpanels istoassist theDSBindischarging itsresponsibilities under
thisUnderstanding andthecovered agreements. Accordingly, apanel should make
anobjective assessment ofthematter before it,including anobjective assessment of
thefactsofthecaseandtheapplicability ofandconformity withtherelevant covered
agreements, andmake such other findings aswillassist theDSB inmaking the
recommendations oringiving therulings provided forinthecovered agreements.
Panels should consult regularly withtheparties tothedispute andgivethemadequate
opportunity todevelop amutually satisfactory solution. ”(emphasis added)
7.17 Pursuant toArticle 11oftheDSU, wemustdetermine whatis“thematter before [thePanel] ”.
ThisPanel wasestablished pursuant toArticle 8.10oftheATCandArticle 6oftheDSU. Article 8.10
oftheATC provides thataMember maybring anunresolved matter before theDSB:
“...Following thorough consideration ofthereasons given, theTMB shallissueany
further recommendations itconsiders appropriate forthwith. If,aftersuchfurther
recommendations, thematter remains unresolved, either Member maybring thematter
before theDispute Settlement Body andinvoke paragraph 2ofArticle XXIII ofGATT
1994andtherelevant provisions oftheDispute Settlement Understanding. ”(emphasis
added)
The“unresolved matter ”would appear tobethecontested right oftheimporting Member toapply
theproposed restraint, asprovided forinArticle 6.10oftheATC:
“If,however, aftertheexpiry oftheperiod of60daysfrom thedateonwhich the
request forconsultations wasreceived, there hasbeen noagreement between the
Members, theMember which proposed totakesafeguard action mayapply therestraint
bydateofimport ordateofexport, inaccordance withtheprovisions ofthisArticle,
within 30daysfollowing the60-day period forconsultations, andatthesame time
referthematter totheTMB. ...”.(emphasis added)
Theonlyrestraint discussed under Article 6oftheATC istheproposed restraint bytheimporting
Member. Therefore, pursuant toArticle 11oftheDSU, thefunction ofthisPanel, established pursuant
toArticle 8.10oftheATC andArticle 6oftheDSU, islimited tomaking anobjective assessment
ofthefactssurrounding theapplication ofthespecific restraint bytheUnited States (andcontested
byIndia) andoftheconformity ofsuchrestraint withtherelevant WTO agreements.
32Report on“Japan -Taxes onAlcoholic Beverages ”;Appellate Body Report adopted on29October 1996,
atpage 14(WT/DS8/AB/R, WT/10/AB/R, WT/DS11/AB/R).
33Wenotethatbothparties agreed thattheprovision onstandard ofreview foranti-dumping cases wasnot
applicable tothepresent case.WT/DS33/R
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3. TheRoleoftheTMB Process Versus theRoleoftheDispute Settlement Mechanism
oftheDSU
7.18 Inthiscontext, wethink itisuseful todrawanimportant distinction between theroleofpanels
under theDSU andtheroleoftheTMB under theATC asregards safeguard actions. Wenotethat
thepreamble oftheATCrefers totheprocess ofprogressive integration oftextiles andclothing products
intoGATT 1994 disciplines overaperiod oftenyears. TheroleoftheTMB, inlightoftheobject
andpurposeoftheATC,maybeunderstoodbetteriftheapplicationoftheATCisdescribedasproviding
twotracks: aTMB track andaDSU track.
7.19 Thewording oftheATCandtheDSUconfirms thattheroleandfunction ofDSUpanels differ
substantially from thatoftheTMB. Forinstance, theTMB isnotlimited toanyspecific terms of
reference asDSU panels are(Article 7oftheDSU). Thefunction oftheTMB istosupervise the
implementation oftheATC generally andtoexamine measures taken, agreements reached andany
other matters referred toit.Thenature ofthese broad functions confirms thespecial andmultifaceted
roleoftheTMB. Thisisalsoreflected intheTMB’srules ofprocedure, itsdecision-making rule
anditscomposition. TheTMB members areappointed byWTO Members designated bytheCouncil
forTrade inGoods butdischarge theirfunction onanadpersonam basis. Pursuant toaGeneral Council
Decision, theTMB’smembership iscomposed ofconstituencies, inmostcases ofseveral Members,
where most members alsoappoint alternates. Furthermore, aTMB member appointed byaWTO
Member involved inadispute before theTMB, participates intheTMB’sdeliberations, although such
TMB member cannot block aconsensus (Article 8.2oftheATC). Onthecontrary, panelists under
theDSUarenotselected onthebasisofconstituencies andthecitizens ofanyparty toadispute under
theDSU cannot participate aspanelists, absent agreement oftheparties (Article 8.3oftheDSU).
Inaddition, apanelist mayissue adissenting opinion under theDSU, while theTMB canonlyact
byconsensus. Moreover, Article 8.3oftheATC isclearastothewideinvestigative authority ofthe
TMB:
“3. TheTMB shallbeconsidered asastanding bodyandshallmeetasnecessary
tocarry outthefunctions required ofitunder thisAgreement. Itshall relyon
notifications andinformation supplied bytheMembers under therelevant Articles of
thisAgreement, supplemented byanyadditional information ornecessary details they
maysubmit oritmaydecide toseekfromthem. Itmayalsorelyonnotifications to
andreports from other WTO bodies andfrom suchother sources asitmaydeem
appropriate. ”(emphasis added)
Wenotealsothat,according toArticle 8.10oftheATC, when theTMB process hasbeencompleted,
aMember which remains unsatisfied withtheTMB recommendations canrequest theestablishment
ofapanel without having torequest consultations under Article 4oftheDSU. Thisistosaythatthe
TMB process canreplace theconsultation phase inthedispute settlement process under theDSU and
isdistinct from theformal adjudication process bypanels34.
7.20 Therefore when differences arise, theATC requires parties firsttoseekconsultations witha
view toreaching amutually satisfactory solution totheproblem, within thespecific parameters or
34Article 8.10oftheATC: “IfaMember considers itself unable toconform withtherecommendations of
theTMB, itshall provide theTMB withthereasons therefor notlater thanonemonth after receipt ofsuch
recommendations. Following thorough consideration ofthereasons given, theTMB shall issue anyfurther
recommendations itconsiders appropriate forthwith. If,aftersuchfurther recommendations, thematter remains
unresolved, either Member maybring thematter before theDispute Settlement Body andinvoke paragraph 2
ofArticle XXIII ofGATT 1994 andtherelevant provisions oftheDispute Settlement Understanding. ”WT/DS33/R
Page67
considerations setoutintherelevant provision(s) oftheATC. Ifamutually satisfactory solution is
notreached intheconsultations, thematter maybeorshallbe,depending ontheapplicable provision,
referred totheTMB forreview andrecommendations. Inthecaseofrecourse toArticle 6oftheATC,
theobject oftheconsultations istoseewhether there isamutual understanding thatthesituation calls
forrestraint ontheexports oftheparticular product ornot.Ifthere issuchamutual understanding,
detailsoftheagreedrestraintmeasureshallbecommunicatedtotheTMBwhichhastodeterminewhether
theagreement isjustified inaccordance withtheprovisions ofArticle 6oftheATC. Ifthere isno
agreement between theparties concerned andthesafeguard action istaken, thematter alsohastobe
referred totheTMB. According toArticle 6.10oftheATC, inorder toconduct suchanexamination,
“...theTMB shallhaveavailable toitthefactual dataprovided totheChairman oftheTMB, referred
toinparagraph 7[ofArticle 6],aswellasanyother relevant information provided bytheMembers
concerned ”.During thereview process, theTMB isnotlimited totheinitial information submitted
bytheimporting Member asparties maysubmit additional andother information insupport oftheir
positions, which, weunderstand, mayrelate tosubsequent events. Moreover, theTMB mayhear
witnesses onthese factsandperform agenuine factfinding andevidence-building exercise onthe
continuing situation oftheparties concerned withthesafeguard action, inorder tosettle thedispute.
TMB members deliberate onthebasisofalltheinformation presented todecide whether thesafeguard
action taken bytheimporting Member isjustified andwhether serious damage oractual threat thereof
tothedomestic industry oftheimporting Member andcausation exist.
7.21 Thesecond track istheDSU. If,afterrecourse toArticles 6.10and8.10oftheATC, the
exporting Member isnotsatisfied withtherecommendation oftheTMB, suchexporting Member can
challenge thesafeguard action andbring ittotheformal dispute settlement process under theDSU.
Unlike theTMB, aDSU panel isnotcalled upon, under itsterms ofreference, toreinvestigate the
market situation. When assessing theWTO compatibility ofthedecision toimpose national trade
remedies,DSUpanelsdonotreinvestigatethemarketsituationbutratherlimitthemselvestotheevidence
usedbytheimporting Member inmaking itsdetermination toimpose themeasure. Inaddition, such
DSUpanels, contrary totheTMB, donotconsider developments subsequent totheinitial determination.
Inrespect oftheUSdetermination atissue inthepresent case, weconsider, therefore, thatthisPanel
isrequested tomake anobjective assessment astowhether theUnited States respected therequirements
ofArticle 6.2and6.3oftheATC atthetimeofthedetermination.
D. Review oftheUSDetermination
1. Article 6oftheATC
7.22 Before reviewing theUSMarket Statement, wemust determine whataretheconditions for
application ofasafeguard action pursuant toArticle 6oftheATC. IntheGasoline35andJapan Taxes36
cases,theAppellateBodystressedthatpursuanttoArticle3.2oftheDSU,interpretationandclarification
oftheWTO Agreement needed tobeachieved byreference tothefundamental ruleoftreaty
interpretation setoutinArticle 31oftheVienna Convention. Article 31oftheVienna Convention
provides thatatreaty shallbeinterpreted “ingood faithinaccordance withtheordinary meaning to
begiven totheterms ofthetreaty intheircontext andinthelightofitsobject andpurpose ”.We
35Reporton“UnitedStates-StandardsforReformulatedandConventionalGasoline”;PanelReportcirculated
on29January 1996 (WT/DS2/R), Appellate Body report circulated on20May 1996 (WT/DS2/AB/R); both
reports were adopted bytheDSB on6June 1996.
36Report on“Japan -Taxes onAlcoholic Beverages ”;Panel Report circulated on11July1996 (WT/DS8/R,
WT/10/R, WT/DS11/R), Appellate Body Report circulated on4October 1996 (WT/DS8/AB/R, WT/10/AB/R,
WT/DS11/AB/R); bothreports were adopted bytheDSB on29October 1996.WT/DS33/R
Page68
must,therefore,whencalledupontointerpretandapplytheprovisionsoftheWTOAgreement,including
those oftheATC, endeavour togiveeffect tothem intheirnatural andordinary meaning andinthe
context inwhich theyoccur37.
7.23 Article 6.2and6.3oftheATC provides asfollows:
“2. Safeguard action maybetaken under thisArticle when, onthebasis ofa
determination byaMember, itisdemonstrated thataparticular product isbeing
imported intoitsterritory insuchincreased quantities astocause serious damage, or
actual threat thereof, tothedomestic industry producing likeand/or directly competitive
products. Serious damage oractual threat thereof must demonstrably becaused by
suchincreased quantities intotalimports ofthatproduct andnotbysuchother factors
astechnological changes orchanges inconsumer preference. ”(emphasis added)
“3. Inmakingadeterminationofseriousdamage,oractualthreatthereof,asreferred
toinparagraph 2,theMember shallexamine theeffect ofthose imports onthestate
oftheparticular industry, asreflected inchanges insuchrelevant economic variables as
output, productivity, utilization ofcapacity, inventories, market share, exports, wages,
employment, domestic prices, profits andinvestment; noneofwhich, either alone or
combined withotherfactors, cannecessarily givedecisive guidance. ”(emphasis added)
7.24 Thewording ofArticle 6.2oftheATC confirms twopropositions. First, WTO Members
havearighttotakesafeguard actions; second, thedecision toimpose asafeguard action mustbebased
onademonstration bytheimporting Member, before thesafeguard action istaken, thattheincreased
quantities ofimports arecausing serious damage oractual threat thereof.
7.25 Inourview, thewording ofArticle 6.2and6.3oftheATC makes itclear thatallrelevant
economic factors, namely, allthose factors listed inArticle 6.3oftheATC, hadtobeaddressed by
CITA, whether subsequently discarded ornot,withanappropriate explanation. Thewording of
paragraph 3,which reads
“...theMember shallexamine theeffect ofthose imports onthestateoftheparticular
industry, asreflected inchanges insuch relevant economic variables asoutput,
productivity, utilization ofcapacity, inventories, market share, exports, wages,
employment, domestic prices, profits andinvestment. ”,(emphasis added)
implies tworequirements. First, therelevant economic variables mustbeexamined. Second, output,
productivity, utilization ofcapacity, etc....arerelevant economic variables. Thewording ofArticle 6.3
oftheATC “...theMember shallexamine theeffects ...onthestateoftheparticular industry, as
reflected inchanges insuchrelevant economic variables asoutput, productivity, etc....”makes clear
37SeetheAppellate Body Report on“Japan -Taxes onAlcoholic Beverages ”,op.cit., onpage 12:“The
provisions ofthetreaty aretobegiven theirordinary meaning intheir context. Theobject andpurpose ofthe
treaty arealsotobetaken intoaccount indetermining themeaning ofitsprovisions. Infootnote 19,atpage 12,
theAppellate Body cited Competence oftheGeneral Assembly fortheAdmission ofaState totheUnited Nations
(Second Admissions Case)(1950), I.C.J. Reports, p.4at8,inwhich theInternational Court ofJustice stated:
“TheCourt considers itnecessary tosaythatthefirstdutyofatribunal which iscalled upon tointerpret and
apply theprovisions ofatreaty, istoendeavour togiveeffect tothem intheir natural andordinary meaning
andinthecontext inwhich theyoccur ”.TheAppellate Body alsostated, infootnote 20,that“..thetreaty ’s
‘object andpurpose ’istobereferred toindetermining themeaning ofthe‘terms ofthetreaty ’andnotasan
independent basis forinterpretation ”andcited further references.WT/DS33/R
Page69
thateachofthelisted factors isnotonlyrelevant butmustbeexamined. Effectively, thelisted economic
variables areexamples ofrelevant economic variables, theyarepresumed tobe“relevant economic
variables ”andmust beexamined bytheimporting country initsdetermination.
7.26 Thewording ofthefirstsentence ofArticle 6.3oftheATCimposes ontheimporting Member
theobligation toexamine, atthetimeofitsdetermination, atleastallofthefactors listed inthat
paragraph. Theimporting Member maydecide --initsassessment ofwhether ornotserious damage
oractual threat thereof hasbeencaused tothedomestic industry --thatsome ofthese factors carry
more orlessweight. Ataminimum, theimporting Member mustbeabletodemonstrate thatithas
considered therelevance orotherwise ofeachofthefactors listed inArticle 6.3oftheATC.38
7.27 ThelastpartofArticle 6.3oftheATC, which states that“none ofwhich, either alone or
combined withotherfactors, cannecessarily givedecisive guidance ”,confirms thatsome consideration
andarelevant andadequate explanation havetobeprovided ofhowthefactsasawhole support the
conclusion thatthedetermination isconsistent withtherequirements oftheATC.
7.28 Article 6.2oftheATC requires thatserious damage oractual threat thereof tothedomestic
industry must nothavebeen caused bysuchother factors astechnological changes orchanges in
consumer preferences. Theexplicit reference tospecific factors imposes anadditional requirement
ontheimporting Member toaddress thequestion ofwhether theserious damage oractual threat thereof
wasnotcaused bysuchother factors astechnological changes orchanges inconsumer preference.
7.29 Wewillnowproceed tothereview oftheUSMarket Statement inrespect ofwhich Indiaclaims
thattheUSdetermination isnotconsistent withtheprovisions ofArticle 6oftheATC.
2. India’sClaim Regarding theSubstantive Requirements ofArticle 6oftheATC
7.30 Indiaclaims thattheATCrequires ademonstration thattheincrease inimports iscausing serious
damage oractual threat thereof andthat,inthepresent case,theactual dataandthemethod ofcollecting
andanalysing thedataonthestateofindustry weresoseriously flawed thattheycould notpossibly
form thebasis ofademonstration onthestateofindustry. India alsoclaims thattheUnited States
failed and,infact,didnotevenattempt, todemonstrate anycausal linkbetween rising imports and
declining production. TheUnited States argued thattheATC does notprescribe anyspecific
methodology forcollecting dataandthatthedemonstration byCITA wasreasonable bothwithrespect
tocausation andserious damage oractual threat thereof.
7.31 India alsorequests asupplementary finding bythePanel that:
“According totheATC, notably Article 6,theonusofdemonstrating serious damage
oritsactual threat isontheUnited States, astheimporting country. Ithastochoose
atthebeginning oftheprocess whether itwillclaim theexistence of"serious damage"
or"actual threat". These arenotinterchangeable because thedatarequirement would
varywiththechosen situation. Itwould notbevalidtotransfer atransitional safeguard
toasituation ofactual threat when theclaim ofserious damage hasfailed togain
acceptance. ”
38There maybecases where alackofinformation ononeormore factors would notpreclude afinding of
serious damage oractual threat thereof.WT/DS33/R
Page70
Weareoftheviewthatthisclaim would normally beconsidered asapreliminary issue which could
haveabearing onouranalysis ofthissection ofthepanel report. However, inviewofourconclusion
ontheUSdetermination, weaddress thisclaim ofIndia inparagraph 7.53.
7.32 Wewillproceed inthefollowing way:wewillfirstmake general comments ontheUSMarket
Statement. Then, wewillcomment onsome ofthefactors mentioned bytheUnited States intheMarket
Statement; wewillalsodealwiththefactthatcertain factors werenotaddressed byCITA. Subsequently,
wewilladdress theissue ofcausation. Thereafter, wewillmake anoverall assessment oftheUS
determination, taking intoaccount thespecific requirements mentioned inArticle 6.2and6.3ofthe
ATC.
7.33 Wecommence withtwogeneral remarks. First, theUSMarket Statement, which according
totheUnited States constitutes thetotality oftheinformation usedbyCITA inmaking itsdetermination,
defines specially theproduct category onwhich thesafeguard action wastobeapplied: woven wool
shirts andblouses, category 440.However, much ofthedataarenotrelated tothat“particular industry ”
ortothatspecific segment ofproduction, asrequired byArticle 6.3oftheATC. Thefollowing Section,
entitled “Industry Profile ”,states thattheentire woven shirtandblouse sector includes approximately
748establishments. Inalaterstatement which itsubmitted tothisPanel inanannex toitsfirst
submission asrelevant evidence forthiscase, theUnited States informed thePanel thatthespecific
woven woolshirtandblouse industry wascomposed ofsome 15firms andthattheproduction oftwo
ofthese firms represented atleast 60percent ofthetotaldomestic production ofthatindustry.
Nonetheless, initsdiscussion ofserious damage totheUSindustry, inSection III:A ofitsMarket
Statement, theUnited States provided employment, man-hour andwage information forthewoven
shirtandblouse industry butnotforthewoven wool shirtandblouse industry. Similarly, allofthe
information inSection III:BoftheMarket Statement wasbased onstatements provided byfirms making
woven shirts andblouses generally. While itwasasserted that“[i]ngeneral, thisinformation applies ”
tothewoven woolshirtandblouse industry, itisnotcleartowhatextent thereferences to“several ”,
“some”,“most”,etc.companies inthewoven shirtandblouse industry would apply tothewoven
woolshirtandblouse industry which represents suchasmall portion ofthelarger industry. These vague
industry statements could havebeenmade more precise since theUnited States didsoafewmonths
after, asevidenced inalaterstatement which itsubmitted tothisPanel inanannex toitsfirstsubmission
asrelevant evidence forthiscase. Forinstance, itshould havebeenpossible toprovide information
onsalesandprofits for1994or1993. Second, initsMarket Statement, theUnited States didnotmake
anyreference toseveral factors listed inArticle 6.3oftheATC. TheUnited States didnotmention
anything about thefactor of“productivity ”or“inventories ”or“exports ”,allofwhich could have
hadsome bearing ontheoverall determination bytheUnited States.
7.34 Wenowturntoanexamination ofthespecific elements oftheUSMarket Statement. The
MarketStatementcontainssixheadingsunderSectionIII:A“SeriousDamagetotheDomesticIndustry”:
(1)USProduction, (2)Market Share Loss, (3)Import Penetration, (4)Employment, (5)Man-Hours,
(6)Total Annual Wages. Then, therearealsosixheadings under Section III:B, “Industry Statements ”:
(1)Employment, (2)Sales, (3)Profits, (4)Investment, (5)Capacity and(6)Prices. Wenoteinthis
regard thatoftheeleven economic variables mentioned inArticle 6.3oftheATC noinformation or
comment isprovided inrespect ofproductivity, inventories andexports.WT/DS33/R
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7.35 “A. Serious Damage totheDomestic Industry ”
“1. USProduction ”
“USproduction ofwoven woolshirts andblouses, Category 440,declined during the
firstninemonths of1994, falling to61,000dozen, 8percent below the66,000dozen
produced during January-September 1993. (Table II)”
Although theaccuracy oftheUSproduction statistics wasquestioned byIndia ingeneral, India did
notraiseanyspecific questions about these statistics.
7.36 “2. Market Share Loss”
“Theshare oftheUSwoven woolshirtandblouse market heldbydomestic manufacturers fell
from53percent in1993 to40percent during thefirstninemonths of1994. (Table II)”
India submitted USstatistics showing thatin1993 and1994 mostoftheproduction wasexported39.
When requested bythePanel toprovide pertinent data, theUnited States stated thatUSexport data
were notreliable because exporters didnothaveanincentive toreport suchexports. Initsrebuttal
submission, theUnited States estimated thatpossibly some 10percent oftheUSproduction wasbeing
exported butduetothenon-reliability ofexport data,CITA didnotprovide anyexport datainitsMarket
Statement.
7.37 Theabsence ofexport datameans thattheUSstatistics donotprovide reliable indications of
changesinmarketshare,i.e.shareofapparentdomesticconsumption.Theunavailabilityorquestionable
accuracy ofgovernment-compiled datacannot constitute avalidreason fornotmaking some assessment
oftheimpact ofexports. Inalaterstatement which itsubmitted tothisPanel inanannex toitsfirst
submission asrelevant evidence forthiscase,theUnited States declared that“Theassessment isbased
ondiscussion withandinformation provided bytrade associations, labour unions, anddirect surveys
ofindividual companies ”.TheUnited States should havebeenabletoobtain more accurate datafor
itsMarket Statement fromthesesources orevendirectly fromthefifteen orsoproducers inthissector.
7.38 “3. Import Penetration ”
“Theratio ofimports todomestic production increased from88percent in1993 to
151percent during January-September 1994. (Table II)”
These datawere notchallenged byIndia.
7.39 “4. Employment ”
“Employment intheindustry producing woven shirts andblouses including shirts and
blouses made fromwooldeclined to31,929production workers in1994, sixpercent
below the1993 levelandalossof2,125jobs. (Table III)”
39India stated thatin1993 theUSproduction was82000 dozen andexports were 85000 dozen andin1994
production andexports were 76000 dozen andreferred toapublication bytheUSDepartment ofCommerce,
USImports, Production, Markets, Imports Production ratios andDomestic Market Shares forTextile andApparel
Product Categories, various Editions.WT/DS33/R
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Thisinformation isnottheinformation required byArticle 6.3oftheATC asitisnotspecific tothe
particular industry producing products ofcategory 440,i.e.woven woolshirts andblouses. Inalater
statement which itsubmitted tothisPanel inanannex toitsfirstsubmission asrelevant evidence for
thiscase, theUnited States wasmore specific andputforward thenumber ofjobslostas15between
1993 and1994 (and12between June1994 andJune1995 andnineforthefirsthalfof1995) inthe
specific sector under examination. ThetextoftheIndustry Statement onemployment wasnotrelated
specifically totheparticular industry forwhich therestraint wasimposed: “Several companies reported
declines intheiremployment, some ofwhich werespecifically attributed totheimpact ofcompetitive
imported goods ...”.
7.40 “5. Man-Hours ”
“Theaverage annual man-hours worked dropped from62.5million man-hours in1993
to58.9million man-hours in1994, asixpercent decline. (Table III)”
AsTable IIImakes clear, these statistics werefortheentire woven shirtandblouse industry andno
datawhatsoever were submitted forthewoven wool shirtandblouse industry. Inalaterstatement
which itsubmitted tothisPanel inanannex toitsfirstsubmission asrelevant evidence forthiscase,
theUnited States wasmore specific andstated thattherewasadropfrom433,000 man-hours in1992
to382,000 man-hours in1994, an11.8percent decline inthespecific sector under examination.
7.41 “6. Total Annual Wages ”
“Thetotal annual production worker wages fellfrom $423.1 million in1993 to
$411.2 million in1994, athree percent decline. (Table III)”
These statistics didnotrelate tothewoven woolshirtandblouse industry butcovered theentire woven
shirtandblouse industry. Inalaterstatement which itsubmitted tothisPanel inanannex toitsfirst
submission asrelevant evidence forthiscase, theUnited States wasabletosubmit relevant datafor
thespecific segment oftheindustry from 1992 toJune1995.
7.42 “B. Industry Statements ”
Under Section III:B oftheMarket Statement, theUnited States provided statements onthe
industry which, itpointed out,were“based oninformation supplied byindividual USfirms domestically
producing shirts andblouses ...Ingeneral, thisinformation applies tocompanies producing men’s
andwomen ’swoven wool shirts andblouses ”.40Thisreference made bytheUnited States that“In
general, thisinformation applies tothe[relevant industry] ...”doesnotmeet therequirements of
Article 6.3oftheATCthattheinformation mustrelate totheparticular industry object ofthesafeguard
action, i.e.theindustry producing woven wool shirts andblouses.
7.43 “1. Employment ”
“Several companies reported declines intheir employment, some ofwhich were
specifically attributed totheimpact ofcompetitive imported goods. Some employment
declines wereintherange of25-30 percent ”
40WenotethatforPartAoftheMarket Statement theinformation relates often towoven shirts andblouses
while forPartBoftheMarket Statement, theinformation isprovided fortheeven wider sector of“shirts and
blouses ”.TheUnited States addsthat“Ingeneral, thisinformation applies tocompanies producing men’sand
women ’swoven wool shirts andblouses ”.WT/DS33/R
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Werefertoourcomments made inparagraph 7.39. There isnoinformation specific totheparticular
industry intheMarket Statement.
7.44 “2. Sales”
“Most companies reported sales declines astheylostmarket share tolower priced
imports. Some companies experienced salesdeclines of20percent ormore. ”(emphasis
added)
Nodetails orfactual evidence wassubmitted. Inaddition, there isnoinformation specific tothe
particular industry intheMarket Statement. Wenotethatinalaterstatement which itsubmitted to
thisPanel inanannex toitsfirstsubmission asrelevant evidence forthiscase, theUnited States said:
“Thetwolargest USmanufacturers ofwoven wool shirts andblouses, representing
over50%ofdomestic production, havereported stagnant sales during thelasthalf
of1994 andthefirsthalfof1995. ”
There appears tobeacontradiction between thetwostatements.
7.45 “3. Profits ”
“Profit margins havebeeneroded across theboard inthewoolshirtindustry asraw
materialcostincreasedwhilecompanieswereunabletoraisepricesbecauseoflow-price
import competition. ”
Thisstatement isvague andimprecise. Itisunclear what“erosion ”ofprofit margin means inconcrete
terms, asithasnotbeenquantified.
7.46 “4. Investment ”
“Investment levels arestagnant across much oftheindustry. ”(emphasis added)
However, inthechapeau ofSection III:A, theUnited States stated that“...surging imports, ...have
resulted inlossof...investment ”.Both statements arevague andimprecise andappear tobe
inconsistent.
7.47 “5. Capacity ”
“Several companies reported adecline incapacity. Onecompany reported ending
alloutside contracting production (formerly about 25percent ofitsmanufacturing),
representing theequivalent ofclosing fourplants. Thecompany ’sownmanufacturing
plants arenowrunning atonly70percent ofcapacity. Furthermore, thiscompany
alsooperatesseveralwoolenfabricmillswhichsupplytheapparelmanufacturingplants,
andthese apparel manufacturing plants, andthese millsarenowrunning atabout 65
percent ofcapacity. ”
Itisunclear towhatextent these statements areapplicable tothespecific woven woolshirtandblouse
industry. Itissaidthatonecompany was“running atonly70percent ofcapacity ”,butnofurther
explanation isgiven. Thequestion thusarises whether thiscapacity utilization islower orgreater than
thepreceding year. Thereference tothefabric mills istoadifferent industry.WT/DS33/R
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7.48 “6. Prices ”
“Prices ofdomestic products, manufactured mainly from US-made fabric, are
substantially higher thanimport competition. ”
Based onTable IV,submitted under PartIVoftheMarket Statement on“Attribution ”,itappears that
theworld average price was$187.23, theUSaverage price was$525-550 andIndia’saverage price
was$133.85. Thisdifference inprices initself indicates nothing about thestateoftheparticular US
industry.
Causation
7.49 WenotethattheUnitedStatesreferredexplicitlytothe“causation”issueinitsindustrystatement
concerning employment, salesandprofits. TheUnited States alsostated inthechapeau ofSection
III:AofitsMarket Statement: “Thecombination ofhighimports levels, surging imports, andlowpriced
goods from these countries have resulted inlossofdomestic output, market share, investment,
employment, man-hours worked, andtotalannual wages. ”However, wenotethat,asfarasthealleged
effects ofimports areconcerned, theUnited States referred toaseries offactors (inSection IIIAand
BofitsMarket Statement) which donotcontain anyspecific dataconcerning theindustry producing
woven wool shirts andblouses alleged tohave suffered serious damage oractual threat thereof.
Moreover, while thechapeau ofSection III:Amentions alossininvestment, paragraph 4oftheIndustry
Statement section states thatinvestment levels werestagnant. Wealsonotethatconcerning theloss
ofprofits (Industry Statement), theUnited States ’allegation concerning un-quantified costincreases
weakens thecausation analysis because theUnited States states thatfactors otherthanincreased imports,
suchasincreases inprices ofrawmaterial, were contributing todamaging thewool shirtindustry.
Concerning thecausation referred tointhesub-section onlostsales(Industry Statement), theUnited
States stated thatsome companies lostsalesastheylostmarket share tolower priced imports; however,
withoutanyexportdata,marketshareswouldnothavebeenadequatelydetermined.Theallegeddeclines
inemployment (Industry Statement) weresaidtobespecifically attributed totheimpact ofcompetitive
imported goods, butthedeclines werenotspecific totheparticular industry ofwoven woolshirts and
blouses. Concerning thealleged decline intheutilization ofcapacity, theabsence ofexport dataaffects
theinformation onutilization ofcapacity, andbrings doubts astowhether thereduction ofutilization
wasduetoareduction inexports. Inaddition totheabove specific deficiencies, theUnited States
didnotexplain howimports mayhaveincreased bysome 80,000 dozen inthefirstninemonths of
1993, while domestic production decreased byonly5000 dozen.
7.50 Finally, butnottheleast, theclearwording ofArticle 6.2oftheATC “...Serious damage
oractual threat thereof mustdemonstrably becaused by...andnotbysuchotherfactors astechnological
changes orchanges inconsumer preference ”imposes ontheimporting Member atleastanexplicit
obligation toaddress thequestion whether serious damage oractual threat thereof totheparticular
domestic industry wascaused bychanges inconsumer preferences ortechnological changes. The
importing Member remains freetochoose themethod ofassessing whether thestateofitsparticular
domestic industry wascaused bysuchother factors astechnological changes orchanges inconsumer
preferences, butitmustdemonstrate thatithasaddressed theissue. TheUnited States made nomention
ofthisissue initsMarket Statement.
3. Overall Assessment oftheUSDetermination
7.51 Inassessing theUSdetermination inrelation totheprovisions ofArticle 6.2and6.3ofthe
ATC,wereachthefollowingconclusion.Asdiscussedinparagraphs7.25to7.28includingfootnote38,
Article 6.3oftheATC listseleven economic factors which mustbe“considered ”or“examined ”byWT/DS33/R
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theimporting Member inmaking itsdetermination, fortheparticular industry forwhich themeasure
isimposed, which inthepresent caseisthewoven woolshirts andblouses, category 440.Those factors
are:output,productivity,utilizationofcapacity,inventories,marketshare,exports,wages,employment,
domestic prices, profits andinvestment. WefindthattheUnited States didnotexamine eightofthese
factors, i.e.productivity, utilization ofcapacity, inventories, exports, wages, employment, profits and
investment, inthecontext oftheparticular industry, i.e.thewoven wool shirtandblouse industry,
andtheUnited States gavenoexplanation fornotdoing so.Forfiveofthese factors (utilization of
capacity, wages, employment, profits andinvestment) some information wasprovided onlyforthe
broader shirtandblouse orwoven shirtandblouse sectors without being adequately related tothe
particular USindustry. Theabsence ofanydataonexports alsovitiates thestatements onmarket shares,
salesandutilization ofcapacity forthepurpose ofdemonstrating serious damage oractual threat thereof
aswellascausation. Inaddition, theinformation provided isoften vague andimprecise bothinthe
Section III:AandB.Since theUnited States didnotinclude anyspecific information fortheparticular
industry concerned, it,therefore, could notmake anyconvincing analysis astothecausation ofserious
damage oractual threat thereof tothatparticular industry ofwoven woolshirts andblouses. TheUnited
States didassert inthechapeau ofSection III:A oftheMarket Statement thatimports hadresulted in
various losses (domestic output, market share, investment, employment, man-hours worked, andtotal
annual wages) forUSindustry, buttheUnited States failed totietheeffects ofimports onthose economic
variables totheparticular industry alleged tohavebeendamaged bysuchimports. Moreover, the
United States didnotaddress theissueofwhether thealleged stateoftheparticular industry wascaused
bytechnological changes orchanges inconsumer preferences. Finally, theUnited States didnotinclude
anyexplanation astowhyitwasnotabletocollect specific ormoreprecise information fortheparticular
industry when making itsdetermination, while itwasabletodevelop suchdataafewmonths after
(asevidenced inalaterstatement which theUnited states submitted tothisPanel inanannex toits
firstsubmission asrelevant evidence forthiscase).
7.52 Forallthese reasons, andrecognizing thattherightofimporting Members totakesafeguard
restraints must beexercised within theparameters laiddown inArticle 6oftheATC, wereach the
conclusion that,onitsface, theUSdetermination didnotrespect therequirements ofArticle 6of
theATC. ThisisnottosaythatthePanel interprets theATC asimposing ontheimporting Member
anyspecific method either forcollecting dataorforconsidering andweighing alltherelevant economic
factors uponwhich theimporting Member willdecide whether there isneedforasafeguard restraint.
Therelative importance ofparticular factors including those listed inArticle 6.3oftheATC isfor
eachMember toassess inthelightofthecircumstances ofeachcase. Theimporting Member must,
however, comply initsdetermination withtherequirements that(i)atleastalleconomic factors listed
inArticle 6.3oftheATC are“considered ”,asindicated inparagraphs 7.25and7.26above, and(ii)
theimporting Member meettheexplicit requirement toconfirm thattheincrease inimports isthecause
oftheserious damage oractual threat thereof totheparticular domestic industry andthatthestateof
thatindustry isnotcaused bysuchother factors astechnological changes orchanges inconsumer
preferences.
4. Serious Damage orActual Threat Thereof
7.53 Asdiscussed inparagraph 7.31, Indiarequested asupplementary finding ontheissueofserious
damage oractual threat thereof. WenotethattheDiplomatic Note didrefer toserious damage or
actual threat thereof, while theUSMarket Statement andthenotification on23May1995intheFederal
Register werelimited toanallegation ofserious damage. Wedonotconsider, however, thatweneed
todecide whether serious damage oractual threat thereof isasingle concept; whether serious damage
isashorthand fortheexpression “serious damage oractual threat thereof ”;whether actual threat of
serious damage isbutalower levelofserious damage; whether thetwoexpressions refertodifferent
types ofmarket situation intheimporting market; orevenwhether theDiplomatic NoteandtheMarketWT/DS33/R
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Statement together formasingle request forconsultation withserious damage being usedasashorthand
expression forserious damage oractual threat thereof. Whether theUnited States wanted todemonstrate
“serious damage ”or,assuming theyaredistinct standards, “actual threat thereof ”or“serious damage
oractual threat thereof ”,itwould havehadtodemonstrate theeffects ofimports ontheparticular
domestic industry withreference toatleasttheeleven factors listed inArticle 6.3oftheATC.
Therefore, inviewofourconclusions intheprevious paragraphs concerning thesefactors, weconsider
thattheUSdemonstration, contained intheMarket Statement which isthetotality oftheinformation
usedbyCITA foritsdetermination, doesnotsupport adetermination ofserious damage oractual threat
thereof, asasingle orastwoseparate concepts. Similarly, thedeficiencies wefound intheanalysis
ofcausation intheUSMarket Statement would apply whether theincreased quantities ofimports were
alleged tohavecaused serious damage oractual threat thereof asasingle orastwoseparate concepts.
5. TheObligation toConsult andtheAlleged Need forTMB Endorsement
7.54 India alsoclaims that, onitsface, theUSmeasure isinconsistent with theprocedural
requirements ofArticle 6oftheATC. India argued thattheprocedural requirements ofArticle 6of
theATCarethefollowing: a)theMember proposing totakesafeguard action shallseekconsultations;
b)therequest shallbeaccompanied byspecific factual information; c)ifconsultations failandanaction
istaken, theTMB shallpromptly conduct anexamination; d)following thatexamination, theTMB
shallmake theappropriate recommendations. ForIndia, thereference totheword “shall”means that
alltheseprocedural requirements mustbefulfilled forasafeguard action tobeconsistent withtheATC.
India, therefore, claims thattheUnited States could notjustify itsrestraint asaresponse toanactual
threat ofserious damage because theUSMarket Statement dealt onlywiththeexistence ofserious
damage.
7.55 India alsoclaims thattheUSmeasure isinconsistent withArticle 6because themandatory
prior consultations were notheldonthemeasure forwhich theUnited States obtained TMB
“endorsement ”.According toIndia, theUSmeasure wasnever endorsed bytheTMB because the
TMB endorsed ameasure different fromtheonewhich formed thebasisoftheUSdecision toimpose
asafeguard action anddifferent from theoneonwhich India andtheUnited States hadconsulted.
India claims thattheTMB endorsed ameasure tocompensate foranincrease ofimports which were
causing athreat ofserious damage, while theUnited States imposed, andIndia andtheUnited States
consulted on,asafeguard action tocompensate foranincrease ofimports which wascausing serious
damage tothedomestic industry.
7.56 With respect toIndia’sclaim thattheUnited States consulted on,andreferred totheTMB,
ameasure tocompensate forserious damage andnotameasure tocompensate foractual threat ofserious
damage41,weconsider thatsince wehaveconcluded thattheUSdetermination didnotrespect the
requirements ofArticle 6oftheATC, irrespective ofwhether serious damage oractual threat thereof
isasingle ortwoseparate concepts, itisnotnecessary forustoruleontheissue ofwhether the
consultations wereproperly held,orontheissueofwhether theTMB made arecommendation inrespect
ofthemeasure onwhich theUnited States hadconsulted withIndia.
41Werecall thattheUSDiplomatic Note requested consultations inrespect ofsharp andsubstantial increase
inimportsfromIndiaoftheproductsincategory440whichwerecausing“seriousdamageoractualthreatthereof”
tothedomestic industry, theUSMarket Statement wasentitled “Statement ofSerious Damage: Category 440”
andthenotification on23May1995 intheUSFederal Register stated that“thesharp andsubstantial increase
inimportsofwovenwoolshirtsandblouses,Category440,iscausingseriousdamagetotheUSindustryproducing
woven wool shirts andblouses ”.WT/DS33/R
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7.57 Concerning India’sclaim thattheUSrestraint isinvalid because theTMB didnotendorse
themeasure which theUnited States attempted tojustify intheMarket Statement andonwhich
consultations wereheld, wenotethatunder Article 6.10oftheATC, theUnited States, should itbe
entitled toimpose arestraint, could dosowithout TMB authorization, although itwould berequired
toreferthematter totheTMB forappropriate recommendations. Article 8.9oftheATC confirms
thattherecommendations oftheTMB arenotbinding:
“TheMembers shallendeavour toaccept infulltherecommendations oftheTMB,
which shall exercise proper surveillance oftheimplementation ofsuch
recommendations. ”(emphasis added)
We,therefore, reject India’sclaim thatunder theATC asafeguard action canbemaintained onlyif
adequately endorsed bytheTMB.
E. Alleged Retroactive Application oftheSafeguard
7.58 India alsoclaims thatthedecision oftheUnited States tosettheperiod ofapplication ofthe
safeguard action starting from thedateoftherequest forconsultations violates theprovisions ofthe
ATC, inparticular Articles 1.6and2,aswellasArticle XIIIofGATT 1994 because thesafeguard
action should beapplied andmade effective onlyaftertheexpiry ofthe60-day consultation period.
TheUnited States objected totherightofIndia toinvoke aviolation ofArticle XIIIofGATT 1994
insupport ofitsclaim andurges therejection ofthisclaim. Inviewofourconclusion thattheUS
determination didnotrespect therequirements ofArticle 6.2and6.3oftheATC andthat,therefore,
theUSmeasure violated theATC, weneednotconsider whether thedateofapplication ofthatmeasure
wasconsistent withWTO rules.
F. India’sClaim thatArticle 2oftheATC wasViolated
7.59 Since weconclude thatthesafeguard action taken bytheUnited States violated theprovisions
ofArticle 6oftheATC, itisourviewthattheUnited States applied arestraint notauthorized under
theATC, which, therefore, constitutes alsoaviolation ofArticle 2.4oftheATC.
*****
VIII CONCLUSIONS
8.1 Weconclude thattheUSrestraint applied asof18April 1995onimports ofwoven woolshirts
andblouses, category 440,from India anditsextensions violated theprovisions ofArticles 2and6
oftheATC. Since Article 3.8oftheDSU provides that“Incases where there isaninfringement of
theobligations assumed under acovered agreement, theaction isconsidered prima facietoconstitute
acaseofnullification andimpairment ”,weconclude thatthesaidUSmeasure nullified andimpaired
thebenefits ofIndiaunder theWTO Agreement, inparticular under theATC. ThePanel recommends
thattheDispute Settlement Body make sucharuling.