WORLD TRADE
ORGANIZATIONG/TMB/13
30 January 1998
(98-0351)
Textiles Monitoring Body
FORTIETH MEETING OF THE TMB
Note by the Chairman
1. The Textiles Monitoring Body met on 19 to 22 January 1998.
2. The TMB authorized its Chairman to provid e WTO Members with the following information.
Honduras/United States:  Notification Pursuant to Articles 8.5 and 8.6 of the Agreement on Textiles
and Clothing (ATC)
3. On 7 January 1998, Honduras addressed a communication to the TMB expressing the view
that there was no justification for the United States to maintain the restraint measure previously
agreed between Honduras and the United States in respect of exports of cotton and man-made fibre
underwear (category 352/652) from Honduras.  As the continuation of the restraint was detrimental to
Honduras' interests under the ATC, and since consultations held by Honduras with the United Stateshad failed to produce a mutually satisfactory solution, Honduras requested the TMB, pursuant to
Articles 8.5 and 8.6 of the ATC, to promptly c onsider the matter and recommend that the United
States withdraw the measure forthwith.
4. In accordance with the provisions of Article 8.7, the TMB invited the participation of both
Honduras and the United States to its review.  It was informed that Honduras would participate in the
meeting, whereas the United States sent a written communication presenting its views on the matter
raised by Honduras.  Subsequently, the United States decided to send a representative, who
participated in part of the TMB's review of this issue.
5. The representative of Honduras stated that the continuation of the restraint was detrimental to
its interests for the following main reasons:
- since consultations had not produced an agreement, the United States had first
introduced a unilateral restraint against imports from Honduras with effect fromMarch 1995.  During its review of the measure, the TMB had determined that there
had been no damage to the industry from imports of underwear products of
category 352/652, but had not been able reach a consensus on the existence of actual
threat of serious damage.  The TMB recommended another round of consultations to
see if the parties could reach a mutual understanding.  Honduras proposedadministrative measures on the monitoring of trade as an appropriate response as
there had been no damage, but the United States insisted on the imposition of a
restraint;
- as a mutual understanding had not been achieved, this was reported to the TMB, but
subsequently, as part of a broader understanding, Honduras reached an agreementwith the United States and accepted a restraint on category 352/652 products;G/TMB/13
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- the agreed restraint was notified to the TMB pursuant to Article 6.9.  In taking note of
the agreement, the TMB made no reference to  its justification in accordance with the
provisions of Article 6, as required under Article 6.9;
- in the meantime, at the request of Costa Rica, the Dispute Settlement Body
established a Panel to review the restraint introduced by the United States againstimports of the same products.  The Panel and the Appellate Body ruled that the
United States had violated its obligations, inter alia , under Article 6 of the ATC and
the DSB adopted their reports which recommended the withdrawal of the restraint
against imports from Costa Rica.  The United States complied with this
recommendation in March 1997;
- since Honduras had been included in the same market statement on the basis of which
the restraint on Costa Rica was found to be in violation of the ATC, Hondurasexpected the United States to apply the recommendation adopted by the DSB to its
trade as well.  As the United States had not adopted this approach, Honduras
requested the withdrawal of the measure in October 1997.  Since no satisfactory
response was received, Honduras  renewed its request, but bilateral consultations held
in December 1997 yielded no solution;
- the maintenance of the restraint lacked legal justification. It was also detrimental to
the interests of Honduras under the ATC, as it resulted in an inequitable and
disadvantageous position vis-à-vis  unrestricted competitors and put an additional
burden on the Honduran industry, resulting in further disruption and loss of future
orders to other suppliers.
6. On the basis of the above-mentioned reasons, Honduras requested the TMB to recommend to
the United States the immediate withdrawal of the restraint.
7. The representative of the United States stated that she did not agree that the maintenance of
an agreement until its scheduled expiration on 26 March 1998 was inconsistent with the
US’ obligations under the World Trade Organization or any of its agreements.  Furthermore, theUnited States did not agree that the maintenance of the bilateral agreement was detrimental to the
interests of Honduras.  The United States therefore requested that the TMB dismiss the complaint of
Honduras.  This was for the following main reasons:
- the recommendation of the Panel contained in WT/DS24/R applied to the measures
maintained under Article 6.10 regarding imports from Costa Rica and not to imports
from other Members.  A mutually satisfactory bilateral agreement had been reached
between Honduras and the United States under the terms of Article 6.8 and,furthermore, Honduras had not requested the opportunity to be a third party in the
dispute between Costa Rica and the United States that was subject of the panel review
and recommendation.  The United States also stated that it was in compliance with
the recommendation of the Costa Rica Panel;
- the TMB had already reviewed the rest raint agreed between Honduras and the
United States and had not made a finding that the maintenance of the restraint was
improper or inconsistent with the provisions of the WTO or the ATC, nor had it
issued a recommendation concerning the agreement.  The United States expressed its
concern regarding the appropriateness of the request made by Honduras to the TMB
to review this matter again.  There was no provision in the ATC for an annual reviewof restraint measures agreed pursuant to Article 6.8.  In addition, the United StatesG/TMB/13
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was concerned about the possible consequences of a review by the TMB, outside the
context of Article 6.9, of an agreement concluded pursuant to Article 6.8;
- the final agreement period was for the term 1 January to 26 March 1998. The
United States did not agree that the implementation of the agreed restraint was
detrimental to the interests of Honduras sin ce the restraint levels had never been fully
utilized, despite the fact that imports from Honduras had grown substantially under
the agreement.
8. In conducting, pursuant to the provisions of Article 8, its review of the matter brought to it by
Honduras, the TMB considered the elements, views and arguments put forward by both Honduras and
the United States, as summarized above.
9. The TMB recalled that the measure referred to it by Honduras had been agreed with the
United States for a period of three years ending on 26 March 1998, and had been notified pursuant toArticle 6.9.  The TMB also noted that when it had reviewed this agreed restraint measure in
December 1995
1 it had, inter alia,  recalled that at its second meeting, when reviewing the action taken
by the United States pursuant to Article 6.10 against imports of category 352/652 from Costa Rica and
Honduras under Articles 6.2 and 6.3 it had found that serious damage, as envisaged in these
provisions, had not been demonstrated.  The TMB had not, however, reached consensus on theexistence of actual threat of serious damage.
2  The TMB was aware of the fact that, during this
review, it had not pronounced itself on the justification of this agreed restraint measure in accordance
with the provisions of Article 6.  The TMB had also noted in December 1995 that the total level of the
agreed restraint, as well as that portion of the restraint which was available unconditionally to
Honduras (i.e. the specific limit) were both substantially above the rollback level as defined inArticle 6.8.
10. The TMB further noted that Honduras considered that the continuation of the measure was
detrimental to its interests because (i) when the TM B had reviewed the agreed restraint measure it had
not determined whether this agreement was justified in accordance with the provisions of Article 6;
(ii)  a WTO panel, reviewing subsequently the market statement on the basis of which theUnited States had made requests for consultations pursuant to Article 6.7 of the ATC on
category 352/652 vis-à-vis  a number of WTO Members including Honduras, had concluded that the
United States violated its obligations under Article 6 of the ATC by imposing restrictions on imports
from Costa Rica and that, therefore, in the view of Honduras, there was no legal basis for the
United States to maintain the measure;  (iii)  imports from Honduras of products of category 352/652
continued to be restrained at the levels set in th e bilateral agreement despite the fact that restraint
measures applied by the United States under Article 6 on imports of the same products from someother sources had ceased to exist, thereby adversely affecting business opportunities.
11. The TMB also noted that the United States did not agree that the continuation of the measure
was detrimental to Honduras’ interests, in particular  in view of the fact that the restraint had never
been fully utilized by Honduras.  The United States emphasised that this measure had been bilaterally
agreed with Honduras.  It also stated that Hondur as had not been a party in the consideration of the
matter raised by Costa Rica in the DSB.
                                                     
1 G/TMB/R/8, paragraphs 9 to 12.
2 G/TMB/R/2, paragraph 16.G/TMB/13
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12. The TMB was aware of the conclusions of the report of the Panel, as modified by the
Appellate Body report, adopted by the DSB in February 1997, referred to by Honduras.3  The TMB
also noted the explanation by the United States that the measure at issue with Costa Rica had expired
on 28 March 1997 without being extended.  The TMB further noted that, according to Honduras, the
United States had provided on request in the recent past substantial increases in the restraint measureapplied on the same product to another WTO Member.
13. The TMB observed that the agreed restraint measure had been introduced for a three-year
period. It understood, as confirmed by the United States, that the measure would end at latest on
26 March 1998.  The TMB further observed that, in accordance with Article 6.12, this measure could
not be extended.
14. The TMB, bearing in mind its December 1995 review of the agreed measure as described in
paragraph 9, the evolution of imports from Honduras into the United States of products ofcategory 352/652 and the corresponding level of the restraint, the fact that the restraint was due to
expire at latest on 26 March 1998, and the statement and arguments by Honduras that its maintenance
was detrimental to Honduras’ interests, invited the United States to reconsider the necessity to
maintain the restraint in force until its scheduled expiration date.
15. The TMB noted that until the expiration of the measure positive consideration can be given
by the United States to any possible concern that would be brought to its attention by Honduras, so as
to avoid future exports of this product to the United States from Honduras being adversely affected.
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16. The forty-first meeting of the TMB is scheduled for 16 to 17 February 1998.
17. The full report of the fortieth meeting will be circulated at a later stage.
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3 WT/DS24/R and WT/DS24/AB/R