RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/260/Rev.1
11 May 2001
(01-2426)
Council for Trade in Goods Original:  English
CTG’S OVERSIGHT FUNCTION PURSUANT TO ARTICLE IV OF
THE AGREEMENT ESTABLISHING THE WTO – TRANSPARENCY REGARDING
NEW RESTRICTIONS ON TEXTILE AND CLOTHING PRODUCTS
COMMENTED UPON BY THE TEXTILES MONITORING BODY
Communication from Costa Rica, India,
Indonesia, Pakistan, Peru and Hong Kong, China
Revision
The following communication, dated 6 April 2001, has been received from the Permanent
Mission of Hong Kong, China on behalf of the delegations of Costa Rica, India, Indonesia, Pakistan,
Peru and Hong Kong, China.
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This paper is being circulated in accordance with Rule 4 of the Rules of Procedure for
Meetings of the Council for Trade in Goods, and is intended to facilitate the CTG’s task in carrying
out its oversight function pursuant to the following.
• Article IV:5 of the Marrakesh Agreement Establishing the World Trade Organization
providing that:  “The Counc il for Trade in Goods shall oversee the functioning  of the
Multilateral Trade Agreements in Annex 1A.”
• The Singapore Ministerial Declaration in which Ministers declared, inter alia , that “We
emphasize the responsibility of the Goods Council in overseeing , in accordance with
Article IV:5 of the WTO Agreement… the functioning of the ATC…”
(WT/MIN(96)/DEC)
• The CTG decision after the first major review of the implementation of the Agreement on
Textiles and Clothing in which it “Emphasized the importance of its overseeing  and of
regularly evaluating the progress , in accordance with Article IV:5 of the WTO
Agreement…of the functioning of the ATC…” (G/C/M/29 and G/C/W/105)
Trade in textiles and clothing has long been subjected to unilateral measures and pressures by
developed importing countries.  Starting as a voluntary restraint arrangement (VRA) by a single
exporting country in the 1950s, the sector has been subjected to an institutionalized derogation from
the basic principles of the GATT.  Later, such VRAs developed a tendency to spill over into other
sectors of trade.
A significant part of the Uruguay Round had therefore to be devoted to re-establishing
multilateral control over such arrangements and measures.  In the same vein, the Agreement on
Textiles and Clothing (ATC) was concluded to reintegrate the sector into the normal rules and
disciplines of the GATT over a transitional period.  For the interim, the ATC established strengthenedG/C/W/260/Rev.1
Page 2
multilateral disciplines.  Significantly, it provided that “No new restrictions in terms of [textile and
clothing] products or [WTO] Members shall be introduced except under the provisions of [the ATC]”.
(Article 2:4 of the ATC).
Since the coming into effect of the WTO, the implementation of some WTO agreements has
given rise to serious concerns, especially among developing country Members.  And few agreements
have given rise to as many concerns as the Agreement on Textiles and Clothing.  It is in recognition
of such concerns that the Singapore Ministerial Declaration emphasized the responsibility of the
Goods Council to oversee the implementation of the ATC, as mentioned above. Ministers also
confirmed their commitment “to full and faithful implementation” of the ATC. In their declaration
after the second Ministerial Conference in Geneva, too, Ministers reiterated that “full and faithful
implementation of the WTO Agreement and Ministerial Decisions is imperative for the credibility ofthe multilateral trading system”.
In light of the above, it is important that measures taken on textile and clothing products
covered by the ATC are carefully monitored and scrutinized.
Despite the unambiguous provision of the ATC that no new restrictions shall be introduced on
textile and clothing products except under the provisions of the Agreement, there have been instances
of new restrictions outside its disciplines.
In this connection a specific reference was also included in the report of the Textiles
Monitoring Body to the CTG for the year 2000 (G/L/398 paragraph 20).  A copy of relevant extracts
from the TMB is annexed to this paper.  In a nutshell, the TMB reported that the introduction of a new
restriction on imports of cotton and man-made fibr e underwear was inconsistent with the provisions
of the ATC.   A brief background with respect to this restraint is as follows:
• In May 1998, the US Federal Register carried a notice announcing the establishment of a
new restriction on imports of cotton and man-made fibre underwear from a WTOMember for a period of 4 years and 7 months.  The measure lacked any apparent basis or
justification under the ATC.  However neither Member notified it to the TMB under the
ATC, or to the WTO pursuant to general notification obligations under the Decision on
Notification Procedures for Quantitative Restrictions adopted by the Council for Trade inGoods in document G/L/59.
• Following persistent calls, the TMB reviewed the restraint measure on its own initiative,
pursuant to its mandate under Article 8 of the ATC.  It decided to seek clarification from
the Members concerned as to whether this measure was being applied pursuant to the
ATC and that, if this was the case, under which provision of the ATC.
• After several months, both Members advised the TMB that “This measure, which was
part of a broader agreement contributing to the objective of further liberalizing trade, wasmutually agreed between our governments, was consistent with our rights under the ATC,
and was  taken  pursuant to a provision  of the ATC which does not require notification to
the TMB”.  No specific provision justifying the action under the ATC was however
mentioned.
• TMB requests for further clarification and specificity remained un-answered. It therefore
undertook to screen “... all the provisions of the ATC with a view to identifying underwhich provision such a measure could have been agreed without requiring its notification
to the TMB”.  As a result of this process, the TMB concluded that the measure “had notbeen demonstrated to be in conformity with the provisions of the ATC”.
• Despite the TMB’s findings, neither Member has notified the basis for the measure in
question. And the restriction remains in place.G/C/W/260/Rev.1
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The fact is that, as found by the TMB, the restriction in question is not justified under any provision of
the ATC.  And it is not the only instance of m easures introduced by major developed restraining
Members inconsistently with the ATC.
Such measures have significant systemic implications for the functioning of the ATC. They
undermine confidence in the multilateral trading syst em and impair the TMB’s role in carrying out its
mandate ‘to supervise the implementation of the ATC and to examine the conformity of all measures
taken under it’.  If they are not clarified and rectified promptly, the commitment to full and faithful
implementation of the Agreement can be hampered, because further pressures for unilateral measures
and bilateral deals in textiles and clothing cannot be ruled out.  In this regard, it is pertinent to recall
that a single supposedly temporary bilateral arrangement led to the virtual institutionalization of
GATT-inconsistent regimes that governed trade in the sector for 40 years.
As repeatedly emphasized by Ministers, all WTO Members have a shared responsibility to
ensure full and effective implementation of WTO agreem ents.  It is essential for the credibility of the
multilateral system.  It is important for avoiding the erosion of its disciplines. It is also necessary to
prevent over-burdening of the dispute settlement system by avoidable recourse to its procedures.
Above all, it is needed to ensure certainty for businesses.
In this regard, as brought out earlier, the Council for Trade in Goods has a specific oversight
responsibility in the area of trade in goods including with respect to the Agreement on Textiles and
Clothing.
It is accordingly proposed that the CTG –● Request all Members to promptly provide full details of any new restrictions to the
TMB along with the specific provisions of the ATC justifying their introduction.
● Invite the Members concerned to clarify and rectify the measures that have already
been the subject of TMB review and comments.
● Reemphasize the need, particularly for th e restraining Members, to ensure the
conformity of all measures with their obligations under the Agreement.G/C/W/260/Rev.1
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ANNEX
Extract from
Report (2000) of the Textiles Monitoring Body to the CTG
(G/L/398, paragraph 20)
VI. OTHER MATTERS EXAMINED BY THE TMB
United States/Turkey: Introduction of a new restriction
At previous meetings of the TMB in 1999 (see G/L/318, paragraph 15), the Body had sought
clarification from both Turkey and the United States as to whether or not a new restriction applied on
Turkey’s exports of certain products by the United States, part of a broader understanding reached
between the two Members, was being applied pursuant  to the ATC and, if this was the case, under
which provision of the ATC this restriction had been introduced.  Following interim replies receivedfrom the United States, Turkey and the United States stated in a joint communication,  inter alia , that
"this measure [affecting Turkey's exports of products of US category 352/652], which was part of a
broader agreement contributing to the objective of  further liberalizing trade, was mutually agreed
between our [two] governments, was consistent with our rights under the ATC, and was taken
pursuant to a provision of the ATC which does not require notification to the TMB".  The TMBdecided to seek further information from Turkey and the United States on the measure itself and on
the particular provisions of the ATC under which the measure had been agreed.  It also decided,
pursuant to Article 8.1, to examine the measure in question.  Since, as of mid-December 1999, no
further information had been received from Turkey and/or from the United States, and there was no
indication that a further communication from the two Members would be forthcoming, the TMBexamined the measure in question, pursuant to Article 8.1, on the basis of the limited information
available to it.  In view of the fact that no informa tion had been provided as to the particular provision
of the ATC under which the measure had been agreed, the Body examined briefly all the provisions of
the ATC with a view to identifying the provision under which such a measure could have been agreed
without it requiring notification to the TMB.  In its concluding remarks (which are noted in the report
of the respective meeting), the TMB regretted that, despite its repeated requests and given that almost
seven months had lapsed since it had first requested information on the measure, the parties had notprovided the information the Body had sought from them on the measure itself, or on the particular
provision of the ATC under which it had been agreed.  It recalled in this regard that full cooperation
from the Members was indispensable in facilitating the Body’s task of examining, in accordance with
Article 8.1, the measures taken under the ATC and their conformity therewith and, that failure by
Members to provide information hampered the TMB's ability to discharge its functions in accordancewith the requirements of the ATC.  In concluding its examination of the measure, the TMB recalled
that Article 2.4 of the ATC states that "[n]o new re strictions in terms of products or Members  shall be
introduced except under the provisions of this Agr eement or relevant GATT 1994 provisions".  After
having considered the new measure against the different provisions of the ATC, on the basis of the
information available to it, the TMB concluded that the measure agreed upon by Turkey and theUnited States, affecting imports by the United States of category 352/652 products, had not been
demonstrated to be in conformity with the provis ions of the ATC (G/TMB/R/60, paragraphs 26 to 33).
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