WORLD TRADE  
ORGANIZATION   
G/TMB/N/474 
13 May 2004 
 (04-2135) 
Textiles Monitoring Body Original:   English 
   
AGREEMENT ON TEXTILES AND CLOTHING 
 
Communication from India 
 
 
 The following communication, dated 6 May 2004, from the Delegation of India on behalf of 
several members of the International Textiles and Clothing Bureau listed in the communication, is 
being circulated to WTO Members for their information. G/TMB/N/474 
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AMBASSADOR  
 and PERMANENT REPRESENTATIVE   
 
Permanent Mission of India 
to the World Trade Organization 
Geneva 
 
Mr András Szepesi 
Chairman 
Textiles Monitoring Body 
World Trade Organization 
Geneva 
 
 
6 May 2004 
 Dear Mr Chairman,  
 Preparation of the TMB’s comprehensive report on ATC implementation 
  
 With reference to the TMB’s re quest for information in connection with the preparation of its 
comprehensive report (G/TMB/30), I am pleased to fo rward herewith some obser vations on behalf of 
the following members of the International Tex tiles and Clothing Bureau (ITCB) that are also 
Members and Observers of the WTO:  Argentina;  Bangladesh;  Brazil;  China;  Colombia;  Costa 
Rica;  DPR Korea;  Egypt;  Guatemala;  Hong Kong, China;  India;  Indonesia;  Republic of Korea; 
Macao, China;  Maldives;  Pakistan;  Paraguay;  Sri Lanka;  Thailand;  Uruguay and Vietnam. 
  With best regards,  
  Yours sincerely, 
    
  (Signed) 
  K.M. Chandrasekhar   Ambassador/PR of India to the WTO   and   Chairman, ITCB  
   
       G/TMB/N/474 
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PREPARATION OF THE TMB’S COMPREHENSIVE REPORT 
 
ATC Implementation during Stage 3 
  
1. The Agreement on Textiles and Clothing (ATC) has now been under implementation for over 
nine years.  For the purposes of this final major review, we wish to focus on certain key aspects of the Agreement that have a major bearing on its full and faithful implementation, including those in the 
remainder of the transitional period.  The follo wing observations are being submitted for the TMB’s 
consideration accordingly.  
2. We wish to recall that Article 8.11 of the Ag reement provides that the TMB’s comprehensive 
report may include any recommendation to the Council for Trade in Goods as deemed appropriate by 
the TMB.  
The integration process  
3. The ATC provided for a ten-year transitional period to accomplish the phase-out of quota 
restrictions.  This long period was intended to  facilitate a smooth and progressive process.  
4. Against the aforesaid objective and purpose of the Agreement, it would be instructive if the 
TMB could summarize how major restraining countries did actually phase out the quota restrictions.  In this connection, Table 1 is submitted for consideration of the Body.  In a nutshell: 
 Of a total of 937 quotas applied by the Unite d States on imports of textiles and clothing 
products from WTO Members under the MFA, it phased out only 103 quotas up until now.  This number includes 17 quotas applying agains t Kenya and Mauritius.  These were lifted 
only under the AGOA legislation.  The United St ates will thus abolish 834 quotas, or 89 
per cent of the total, at the end in one go. 
 The EU carried over 303 quotas;  phased out 91 as of now;  and would abolish 212, or 
70 per cent, on 1 January 2005.  The number 91 includes 13 quotas that the EU suspended in return for market access concessions  that it secured from two WTO Members. 
 Likewise, out of a total of 368 quotas carried over by Canada, it has so far phased out 76. 
Consequently, it will abolish 292, or over 79 per cent, at the end of the process. 
 Contrary to the above three, Norway had al ready abolished all 54 quotas (46 before the 
end of 1997 and the remaining eight at the beginning of 2001).  
5. Looked at from a different angle, and taking as the basis the portion of 1990 import trade that 
was actually under quota restriction, the United Stat es has thus far integrated less than 20 per cent, 
while the EU, based on 1995 imports when its me mbership increased to 15, only 32 per cent.  
Consequently, the amount of restrained trade left to be integrated by the two at the end of the process 
is 80 per cent and 68 per cent respectively (the large bulk in each case, consisting of trade in apparel).  
Unfortunately, for lack of necessary information, it has not been possible to assess similar percentages 
in respect of Canada and Turkey. 
6. For assessment of the integration process in its context and in light of the object and purpose 
of the ATC, the Body may also like to recall that at the very start of the integration process, the 
United States had declared that it "will ensure that integration of the most sensitive products will be 
deferred until the end of the ten-year period" (cf ., US Statement of Administrative Action on Uruguay 
Round Agreements Act).  Similarly the EC followed a policy in which it "considered appropriate to 
retain control over quotas with a view to keeping the possibility of using them as a bargaining chip to G/TMB/N/474 
Page 4  
 
obtain better market access in third countries" (c f., EC Commission web site, Trade in Goods, the 
textile sector, November 2000).  
7. It is suggested that the TMB report bring out th ese facts in order to shed light on the pace and 
progressivity of the process of phase-out of quota restrictions, and underscore the desirability of the restraining Members taking steps to avoid any rush  to alternate methods of protection by their 
domestic industries following the abolition of the large bulk of quota restrictions  only at the end of the 
phase-out process. 
The administrative arrangements – Article 2.17 
8. The three major restraining countries have recently notified their final integration 
programmes to the TMB.  In these notifications, it h as been indicated that with the integration of 
remaining ATC products they will also eliminate all remaining quota restrictions.  It is noted, 
however, that these notifications are silent with respect to the administrative arrangements and 
procedures that have been in place for the implem entation and administration of quota restrictions.  
9. That notwithstanding, we note that, when re viewing these notifications, the TMB provided 
the following clarification: 
"… [TMB] also recalled that the quantitative restrictions maintained under Article 2 
of the ATC were being implemented thr ough additional procedures, such as the 
administrative arrangements agreed between Members and notified under Article 2.17.  The TMB recalled that the se administrative arrangements could only be 
deemed necessary in relation to the implem entation of restrictions applied under the 
ATC.  Therefore, with the elimination of  all quantitative restrictions under the ATC, 
all related administrative procedures and me asures, including those specified in the 
administrative arrangements notified pursuant to Article 2.17, shall also stand terminated." (G/TMB/R/106, paragra ph 13, and G/TMB/R/107, paragraph 7) 
It is suggested that, in its report to the Council fo r Trade in Goods, the TMB may reiterate its findings 
with respect to the issue of administrative arrangements. 
Extension of EU quotas to new member States’ markets  
10. The EU is being enlarged with the accession of ten new member States from May 2004 
(namely, the Czech Republic, Cyprus, Estonia, Hunga ry, Latvia, Lithuania, Malta, Poland, the Slovak 
Republic and Slovenia).  In accordance w ith Council Regulation (EC) No 487/2004 of 
11 March 2004, the EC has announced the extension of  its quotas on textiles and clothing to include 
these newly acceding States, and determined the levels of these quota limits unilaterally. 
11. We note that these are new restrictions as they were not notified either by the EC or any of the 
acceding States pursuant to Article 2.1 of the ATC. 
12. It is felt that the imposition of these new quotas is  not compatible with Article 2.4 of the ATC 
according to which "no new restrictions in terms of  products or Members shall be introduced except 
under the provisions of [the ATC] or  relevant GATT 1994 provisions".  
13. In this connection, the TMB may wish to recall that similar restrictions imposed by Turkey 
following its customs union with the EC were found vi olative of Article 2.4 of the ATC by a dispute 
panel and the Appellate Body, and it was ruled that  neither were they justified by reference to 
GATT Article XXIV.  The following finding by the Panel is especially noteworthy:  G/TMB/N/474 
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"The prohibition on 'new restrictions' must  be interpreted taking into account the 
preceding sentence [in Article 2.4 of the ATC]:  'The restrictions notified under paragraph 1 shall be de emed to constitute the totality of such restrictions  
applied by the respective Members on the da y before the entry into force of the 
WTO Agreement'.  The ordinary meaning of the words indicates that WTO 
Members intended that as of 1 January 1995, the incidence of restrictions under 
the ATC could only be reduced.  We are of the view that any legal fiction whereby an existing restriction could simply be increased and not constitute a 'new restriction', would defeat the clear purpose of the ATC which is to reduce the scope of such restrictions, starting from 1 January 1995 ... .  Thus, we 
consider that, setting aside the possibilit y of exceptions and justifications 
mentioned in Article 2.4 of the ATC, any increase of an ATC compatible quantitative restriction notified under Article  2.1 of the ATC, constitutes a 'new' 
restriction. 
On 28 February 1995 (therefore within the 60-day period of Article 2.1 of the 
ATC), the European Communities notified its previous restrictions maintained 
under the MFA.  This notificat ion referred to restricti ons applicable only to EC 
territory.  After the period of 60 days (u nder Article 2 of the ATC) the European 
Communities is prohibited from notifying any new restrictions or changes to 
existing and notified restrictions, except if adopted in compliance with the ATC 
or any other provisions of GATT 1994.  Apart from these special cases the 
European Communities is not entitled to  notify any increase of its MFA-derived 
restrictions …".
1 
14. The TMB may wish to comment on the introduction of EC restrictions under reference and its 
bearing on the balance of rights and obligations under the ATC. 
Carry-forward quotas in 2004 
15. The overarching purpose and objective of the AT C (as also that of the WTO Agreement, of 
which the ATC is an integral part) is to incr ease market access opportunities.   Yet the restraining 
Members are denying the use of carry-forward faci lity in 2004, due to which access opportunities 
amounting to some 5-6 per cent are being curtailed.  
16. The TMB may wish to bring this issue in its report, including, inter alia , with reference to 
Article 1.5 of the ATC which required Members to allow for continuous autonomous adjustment and 
increased competition in their markets. 
Strengthening of GATT rules and disciplines 
17. During the Stage under progress, anti-dumping activity in the EU has continued, especially 
involving the import of bed linen in one form or the other, turning it into an ongoing problem for exporters and the exporting countries concerned.  Besides hampering the full utilization of quota 
access and thereby increasing the restrictiveness of re levant restrictions, these actions are in sharp 
contrast to the commitment under Article 7 of the ATC that "Members shall ta ke such actions as may 
be necessary to abide by GATT rules an disciplines so as to ensure the application of policies relating 
to fair and equitable trading c onditions as regards textiles and clothing in such areas as anti-dumping 
rules and procedures …".  
                                                      
1 Panel Report, Turkey – Restrictions on Imports of Textiles and Clothing Products , WT/DS34/R, adopted on 
19 November 1999, paragraphs 9.71 and 9.72 G/TMB/N/474 
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Elimination of quotas on non-WTO member s while maintaining them on WTO Members  
18. Article 1.6 of the ATC prescribed that "unless otherwise provided in [the ATC], its provisions 
shall not affect the rights and obligations of Members under the provisions of the WTO Agreement 
and [other] Multilateral Trade Agreements".  In ot her words, all GATT rights remain unaffected, save 
to the extent provided in the ATC. 
19. Contrarily, however, there have been several  instances in which all EU quotas previously 
applying to non-WTO Members (Bosnia, Russia, Ukra ine and Uzbekistan) have been abolished while, 
keeping them in place on WTO-Members;  this in di sregard of the fundamental MFN requirement that 
any advantage or privilege granted to any countr y must immediately and unconditionally be extended 
to all WTO Members.   
Changes in product classification and rules of origin (Article 4) 
20. As the TMB is aware, the US rules of origin relating to textile and clothing products were 
substantially changed. These changes led to significant effects on trade. 
21. In affecting these changes, the Unites States enlarged the covera ge of certain cotton made-up 
products. Thus, it is now specified that these products would be deemed to be that of cotton even if 
they contained as little as 16 per cent of cotton by  weight. (Prior to this, these products were 
considered to be that of cotton if they  contained cotton as their chief weight). 
22. Notwithstanding that a dispute panel ruled that the complainant in that case did not succeed in 
establishing that the changes had been effected in violation of obligations under the Agreement on 
Rules of Origin, it is submitted that the change in classification of cotton products enlarged the scope 
and incidence of restrictions on these products to the disadvantage of the exporting Members 
concerned. 
23. Similarly there have been instances of transfer of particular products from relatively 
unimportant categories (in which quota utilizati on rates were low) to high-demand tight-quota 
categories, thereby increasing the restrictiveness of relevant quotas.  The TMB may wish to invite the 
restraining Members for information on such changes so as to enable it to include an assessment of 
their effect on the utilization of access opportunities during the stage under review.  
Special categories of suppliers  
24. As in previous stages of implementation, full regard has not been given by the restraining 
Members in Stage 3 to ATC provisions that envisaged  special considerations for specific categories of 
suppliers, namely, the small suppliers, the least developed countries, the cotton-producing exporting 
countries;  this despite reaffirmation, by the Co uncil for Trade in Goods, of the importance of full 
implementation of those provisions in its report on the ‘major review of ATC implementation during 
second stage of the implementation process’ (c f. G/L/556, paragraph 22, indent 4).  
25. Thus Canada and the United States did not implement the growth-on-growth for small 
suppliers and least developed countries in accordan ce with the object and purpose of Articles 1.2 and 
2.18 of the ATC. They continued to apply a different methodology than the one used by the EU in 
implementing the same provisions. 
26. It deserves to be recognized, however, that  Canada notified (G/TMB/N/459 read with 
WT/COMTD/N/15/Add.1) the grant of duty- an d quota-free treatment to imports from least 
developed countries under Article 2.15 of the ATC provided they met the necessary rules of origin 
criteria – although only from 1 January 2003 (t he ninth year of ATC implementation).  G/TMB/N/474 
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27. For cotton-producing exporting countries, on the other hand, none of the restraining countries 
extended any specific treatment under Article 1.4 of  the ATC, nor has any notification been made 
concerning any consultations with any of the cotton-producing countries concerned within the 
meaning of this provision.  
28. In a nutshell, the relevant provisions of the Ag reement have essentially  gone un-implemented, 
rendering them to inutility. 
Functioning of the TMB – Article 8 
29. We recognize that the TMB findings and reports  during the Stage under review have been 
well reasoned and added to the transparency of the implementation process. The Body may like to 
highlight, however, that in some cases the rest raining Member concerned did not conform to its 
recommendations.  
 G/TMB/N/474 
Page 8  
 
Table 1 
 
PACE OF QUOTA ABOLITION 
  
  
US  
EU  
Canada  
Norway 
 Total number of quotas at start of ATC
a  
937 
303 
368 54
 Of which phased out:
b 
 
(i) Stage 1 (from 1995): 
 By integration under Article 2.6 
 By early elimination under Article 2.15  
0  
0  
8 
 0
46
(ii) Stage 2 (from 1998):  By integration under Article 2.8(a) 
 By Article 2.8(a) and Article 4  By early elimination under Article 2.15  
3 
2 
10
c 
21 
  
26 
  0
8
(iii) Stage 3 (from 2002): 
 By integration under Article 2.8(b)  By Article 2.8(b) and Article 4  
 Under bilateral agreements   
 Under AGOA   
69 
2 
 
 
17  
57 
  
13  
42 
  
 
 0
 
Total number of quotas abolished as of March 2004   
 
103 
 
91 
 
76 54
 Quotas to be abolished on 1 January 2005  834 212 
292 0
 
a.  Including specific limits and sub-limits notified under Article 2 of the ATC. 
b.  Numbers do not include product categories on which quotas have been eliminated only partially. 
c.  Eliminated only for Romania, not for any other restrained Member.  
 
An observation:  
It may be noted that the large bulk of quotas have be en kept to be abolished only on the last day of the 
Agreement. So much about the progressivity of the process, contrary to what was envisioned in the 
Agreement! 
__________