RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/368
24 April 2002
(02-2345)
Council for Trade in Goods Original:  English
DOHA MINISTERIAL DECISION ON IMPLEMENTATION-RELATED ISSUES
AND CONCERNS:  CTG EXAMINATION OF PROPOSALS CONTAINED
IN PARAGRAPHS 4.4 AND 4.5 RELATING TO THE
AGREEMENT ON TEXTILES AND CLOTHING
Communication from Hong Kong, China
The following communication, dated 22 April 2002, has been received from the Permanent
Mission of Hong Kong, China on behalf of members of the ITCB1 that are also Members or observers
of the WTO, for circulation to Members in advance of the CTG meeting scheduled for 2-3 May 2002.
                                                     
1 The ITCB members and observers of the WTO are:  Argentina;  Bangladesh;  Brazil;  China;
Colombia;  Costa Rica;  Egypt;  El Salvador;  Guatemala;  Honduras;  Hong Kong, China;  India;  Indonesia;Republic of Korea;  Macao, China;  Maldives;  Mexico;  Pakistan;  Paraguay;  Peru;  Sri Lanka;  Thailand;
Uruguay and Viet Nam.G/C/W/368
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Implementation Issues and Concerns
The Agreement on Textiles and Clothing
Examination of Proposals Referred to the CTG
by the Ministerial Conference
Submission
With respect to implementation-related issues and concerns regarding the Agreement on
Textiles and Clothing (ATC), the Ministerial Conference at Doha, inter alia , decided as follows:
“Requests the Council for Trade in Goods  to examine the following proposals:
4.4 that when calculating the quota levels for small suppliers for the remaining years of
the Agreement, Members will apply the most favourable methodology available in
respect of those Members under the growth -on-growth provisions from the beginning
of the implementation period; extend the same treatment to least-developed countries;
and, where possible, eliminate quota restrictions on imports of such Members;
4.5 that Members will calculate the quota levels for the remaining years of the Agreement
with respect to other restrained Members as if implementation of the growth-on-
growth provision for stage 3 had been advanced to 1 January 2000;
and make recommendations to the General Council by 31 July 2002 for appropriate action.”
(WT/MIN(01)/17, paragraph 4)
Context of Ministerial Conference decision:
2. At the outset, it is important to recall that the above proposals emanated from a long process
of the consideration of implementation-related issues and concerns. It is therefore essential that, for
any worthwhile examination of these proposals, this background is kept in view.
3. As a general context, it is also important to bear in mind the following Ministerial
commitments:
• “We attach the utmost importance to the implementation--related issues and concerns
raised by Members and are determined to find appropriate solutions to them”. (Paragraph
12 of Doha Ministerial Declaration -- WT/MIN(01)/DEC/1)
• “The Ministerial Conference [is] determined to take concrete action to address issues and
concerns that have been raised by many developing-country Members regarding theimplementation of some WTO Agreements and Decisions”. (3
rd preambular paragraph of
Decisions on Implementation-related Issues and Concerns adopted by the Ministerial
Conference at Doha -- WT/MIN(01)/17)
• “In addressing the outstanding implementation issues and concerns, the General Council
will assess the existing difficulties, identify ways needed to resolve them, and take
decisions for appropriate action”. (4th preambular paragraph of Decisions on
Implementation-related Issues and Concerns adopted by the Ministerial Conference at
Doha -- WT/MIN(01)/17)G/C/W/368
Page 3
Context of the two proposals referred to  the CTG by the Ministerial Conference:
4. In the specific context of the two proposals, it may be recalled that the implementation of few
WTO agreements gave rise to as many concerns as the implementation of the ATC. This is because of
the great importance of trade in textiles and clothing for developing countries. The sector accounts for
about 20% of their exports of manufactured products. For some developing countries, especially the
least-developed among them, its share in their export earnings is even larger. Manufacture of clothingis a labour-intensive activity. The sector is, therefore, particularly important for the creation of
employment opportunities in these economies.
5. However, the implementation of the ATC failed to come up to developing countries’
legitimate expectations, especially as 1/3
rd of the gains from expansion of world income from the
implementation of the Uruguay Round agreements was attributed to liberalization in textiles and
clothing under the ATC.
6. Therefore members of the ITCB, together with other developing WTO Members, have
consistently raised their concerns with respect to the implementation of the ATC. In fact they have
made a compelling case that, for reasons summarized below, the balance of rights due to them under
the Agreement has been seriously impaired:
(i) The implementation of the central tenet of the ATC -- the integration process -- has
remained inconsistent with the explicit obje ct and purpose of the Agreement, i.e., to
secure a gradual and progressive  phase-out of quota restrictions. The Agreement
envisioned the phase-out of restrictions “during” the transition period, not merely atthe end of it.
Thus eight years into the Agreement, few quotas have been phased out and, unless
major improvements are effected, the large bulk will remain until the end of thetransitional period on 1 January 2005: 701 out of 758 in the United States, 167 out
219 in the EU, 239 out of 295 in Canada.
These numbers look equally bad after quotas on China and Chinese Taipei are also
taken into account. These two have joined the WTO only recently. The number of
quotas now remaining in place is: 851 out of 932 in the United States, 222 out of 303in the EU, and 292 out of 368 in Canada.
In terms of trade, barely 20% of imports that were under specific quota restriction
have been liberalized. Although 51% of trade in the sector has been shown as
“integrated” in a narrow technical sense, this comprises mainly imports of products
which were not under quota restriction.
(ii) Canada and the US have implemented the growth-on-growth for small suppliers
inconsistently with the letter and spirit of the relevant provisions of the ATC (Article1:2 and 2:18). They chose a different methodology than the EU to implement these
provisions to the disadvantage of small suppliers.
(iii) The provisions of the Agreement in favour of least-developed countries and cotton-
producing exporting countries have been completely ignored, rendering them to
complete inutility. (The former by Canada and the US, the latter by all threerestraining Members).
(iv) The EU removed quota restrictions on certain non-WTO Members, while maintaining
them on developing economies Members of the WTO; this in obvious disregard of
the fundamental principle of MFN treatment a nd inconsistently with Article 1:6 of the
ATC.G/C/W/368
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(v) The US substantially changed its rules of origin with respect to textile and clothing
products from July 1996 with the obvious purpose of pursuing trade objectives.
When challenged by the EU under the disput e settlement procedures of the WTO, the
US partly modified these rules; but only in a manner that took into account the
particular export interests of the EU.
Worse still, in doing so, it enlarged the coverage of certain cotton made-up products.
Thus, it has now been specified that these products should be deemed to be that of
cotton even if they contain as little as 16 percent of cotton by weight. (Prior to this,
these products were considered to be that of cotton only if they contained cotton as
their chief weight).
The changes in rules of origin led to widespread disruptive effects for trade.
(vi) In a number of instances, new restrictions have been introduced without justification
under the ATC, thus violating Article 2:4 of Agreement.
(vii) In addition, a number of unjustified anti-dumping actions particularly targeting
products that were already under quota restrictions, and unduly cumbersome customs
and administrative procedures, have also had the effect of impairing access under the
Agreement.
7. In light of the above, ITCB members developed some practical suggestions for redressing the
problems identified. These suggestions included the two that have been referred to the CTG by the
Ministerial Conference for examination and recommendation for appropriate action.
Examining the two proposals:
8. In examining the two specific proposals referr ed to the CTG by the Ministerial Conference, it
is essential, first, to recall that Article 1:5 of th e ATC explicitly provided that “In order to facilitate
the integration of textile and clothing sector into GATT 1994, Members should allow for continuous
industrial adjustment and increased competition in their markets”. Contrary to this, however, one
major restraining Member has followed a declared policy to “ensure that integration of the most
sensitive products will be deferred until the end of the ten year period”. Another has “considered
appropriate to retain control over quotas with a vi ew to keeping the possibility of using them as a
bargaining chip to obtain better market access in third countries”. Thus they have, in effect, hindered
rather than “allowed for” the process of autonomous adjustment in their markets. The adoption of the
two proposals would go some way in rectifying the situation, facilitating increased competition and,
thereby, the integration process.
9. Second, the proposal with respect to small suppliers and least-developed country Members is
in line with the letter and spirit of the relevant provisions of the ATC (Article 1:2 and 2:18). Its
adoption will bring the implementation of these provisions by Canada and the US at par with that ofthe EU.
10. In this context, it is important to recall the relevant provisions of the ATC.
Article 1:2:
"Members agree to use the provisions of paragraph 18 of Article 2 and paragraph 6(b)
of Article 6 in such a way as to permit meaningful increases in access possibilities forsmall suppliers…"G/C/W/368
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Article 2:18:
"As regards those Members whose exports are subject to restrictions on the day
before the entry into force of the WTO Agreement and whose restrictions represent
1.2 percent or less of the total volume of the restrictions applied by an importing
Member as of 31 December 1991 and notified under this Article, meaningful
improvement in access for their exports sha ll be provided, at the entry into force of
the WTO Agreement and for the duration of this Agreement, through advancement by
one stage of the growth rates set out in paragraphs 13 and 14, or through at least
equivalent changes as may be mutually agreed with respect to a different mix of base
levels, growth and flexibility provisions.  Such improvements shall be notified to the
TMB".
It may be noted from the above provisions that the implementation of Article 2:18 had to be guided by
the principle laid down in Article 1:2.
11. Contrarily, however, Canada and the US im plemented the above provisions for special
treatment for small suppliers differently than the EU . The EU calculated the increases in growth rates
for Stage 1 by increasing them first by 16% and second by 25%, i.e., cumulatively. However, Canada
and the US did not do so.  They simply "substituted" Stage 2 increases for Stage 1, increasing the pre-
ATC growth rates by 25% only omitting to add the 16% as well. Thus the implementation of theprovisions has differed as highlighted below: 
EU
Canada/US
Stage 1: Pre-ATC growth rate increased by: 16% + 25% 25%
Stage 2: Stage 1 growth rate increased by further: 27% 27%
Stage 3: Stage 2 growth rate increased by another: 27% 27%
It is apparent that the difference in the methodology employed by Canada and the US resulted in
significantly lower access to small suppliers than was due to them under ATC.
12. As noted above, the guiding principle was to us e the provision of Article 2:18 "in such a way
as to permit meaningful increases in access possibilities".  The term "advancement by one stage" inArticle 2:18 did not mean simply "substituting" the second stage growth factor for the first stage
growth factor.  The stages in the ATC growth rates had to have cumulative effect. It was only logical
that, in determining the growth rates for Stage 1, th e growth factor for Stage 2 had to be applied in
addition to the Stage 1 growth factor.  The further increases in the following stages had also to
incorporate the cumulative effect. Had the drafters of the ATC intended the growth factors for later
stages to merely substitute for the earlier stag e growth factors, they would have used the term
"substitution" (instead of advancement by one stage) and constructed the provision accordingly.
13. In light of the above, it is apparent that the interpretation placed by Canada and the US on the
term "advancement by one stage" and the methodology employed by them has not been consistent
with the provisions of the ATC in favour of small suppliers. The adoption of the proposal will bring
their implementation at par with that of the EU.
14. Third, the 3rd preambular paragraph of the ATC envisaged that special treatment be accorded
to least-developed country Members.  A footnote to Article 1:2 further provided that, to the extent
possible, these Members may also benefit from meaningful improvements in access possibilities as
for small suppliers. Likewise, the Ministerial Decision on Measures in Favour of Least-developed
Countries adopted at the conclusion of the Urugua y Round also provided that the various agreements
and instruments should be applied in a flexible and supportive manner for the least-developedG/C/W/368
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countries and that, “to this effect, sympathetic consideration shall be given to specific and motivated
concerns raised by the least developed countries in the appropriate Councils and Committees”.
15. While the EU did not apply any quota restrictions on least-developed country Members,
Canada and the US failed to give any meaning to the provisions in favour of these Members. They
ignored their implementation altogether, rendering those provisions to total inutility.
16. Fourth, the second proposal (envisaging the advancement of growth-on-growth provision for
stage 3) has been necessitated because, overall, the balance of benefits due to developing countries
under the Agreement has remained unfulfilled. As brought out earlier, the manner in which the
restraining countries have implemented the integration programmes leaves the large bulk of quotas in
place until virtually the end of the transitional period.
17. Moreover, while only a few quota restrictions have been eliminated, the access accruing to
developing countries under the Agreement has been seriously impaired by new restrictions in
violation of the provisions of the ATC, unjustified anti-dumping actions on products already underquota restrictions, and other customs/ administrative formalities including changes in rules of origin.
18. The approval and implementation of the two proposals would partly redress the balance.
Indeed, the CTG has a specific mandate to take appropriate decisions to ensure that the balance of
rights embodied in the Agreement is not being impaired (Article 8:12 of the ATC).
19. Fifth, the approval of the two proposals will enhance market access opportunities for
developing countries, in particular the least-developed among them, and contribute to the
operationalization of the Ministers’ desire expressed in their Declaration in Doha as follows:
“International trade can play a major role in the promotion of economic development and the
alleviation of poverty... The majority of WTO Members are developing countries. We seek to place
their needs and interests at the heart of the [WTO] Work Programme... We shall continue to makepositive efforts designed to ensure that developing countries, and especially the least-developed
among them, secure a share in the growth of wo rld trade commensurate with the needs of their
economic development. In this context, enhanced market access… [has an] important role to play”
(paragraph 2 of Doha Ministerial Declaration).
20. Sixth, it may be emphasized that the two proposa ls fall within the existing provisions of the
ATC. Their adoption does not require any modification in the Agreement or the domestic legislation
of the restraining countries.
Closing remarks:
21. In examining the proposals referred to the CTG by the Ministerial Conference, it is essential
to recall the context in which these have been under consideration over the long process of discussion
on implementation-related issues and concerns. They resulted from widespread concerns raised by
developing-country Members regarding the implementation of the Agreement on Textiles andClothing. Their adoption and approval will go some way towards completing the unfinished business
relating to implementation issues and concerns, and operationalizing Ministers’ decision “to take
concrete action to address issues and concerns that have been raised by many developing-country
Members regarding the implementation of some WTO Agreements and Decisions.”
22. We urge the CTG to take immediate action to recommend the approval of the two proposals
by the General Council, which would reinforce developing countries’ confidence in the multilateral
trading system and advance the WTO work programme in general.
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