WORLD TRADE G/L/224
19February 1998
ORGANIZATION(98-0574)
Council forTrade inGoods
MAJOR REVIEW OFTHE IMPLEMENTATION OFTHE AGREEMENT
ONTEXTILES AND CLOTHING INTHE FIRST STAGE OFTHE INTEGRATION PROCESS
Adopted bytheCouncil on16February 1998
Introduction
1. TheCouncil isresponsible foroverseeing theimplementation oftheAgreement onTextiles
andClothing (ATC) andforthispurpose isrequired byArticle 8.11to"conduct amajor review before
theendofeachstage oftheintegration process". Article 8.12states, "Inthelightofitsreview the
Council forTrade inGoods shallbyconsensus takesuchdecisions asitdeems appropriate toensure
thatthebalance ofrights andobligations embodied inthisAgreement isnotbeing impaired". Asthe
firststage, which began withtheentry intoforce oftheWTO on1January 1995, wascompleted at
theendof1997, theCouncil wasrequired toconduct itsfirstreview oftheimplementation oftheATC
before theendoftheyear. Toassist inthisreview, Article 8.11oftheATC alsorequires thata
comprehensive report beprepared bytheTextiles Monitoring Body andbetransmitted totheCouncil
forTrade inGoods atleastfivemonths before theendofthestage.
2. Accordingly, inpreparation forthecurrent review, theTMB prepared acomprehensive report
ontheimplementationoftheATCandsubmittedittotheCouncilon31July1997indocumentG/L/179.
Thiscomprehensive report addressed alloftheoperational provisions oftheATC, asrequired by
Article 8.11, withparticular emphasis onmatters relating totheintegration process, totheapplication
ofthetransitional safeguard mechanism, andtothose concerning theapplication ofGATT 1994rules
anddisciplines asdefined inArticles 2,3,6and7oftheATC, respectively. Furthermore, since the
notification ofintegration programmes forStage 2wasrequired atthelatest by31December 1996,
theTMB report alsocovered thefulfilment ofthatnotification obligation.
3. TheCouncil began thereview atitsregular meeting on6October 1997, focusing thediscussion
initially onthegeneral aspects oroverall perspectives oftheimplementation process (G/C/M/23,
pages 17-26). TheCouncil tooknoteofthecomprehensive report thathadbeenprepared bytheTMB
andconsidered thatitprovided asubstantial background forthereview. TheCouncil noted theviews
ofMembers onthegoals andobjectives ofthereview andhowitmight bestructured.
4. Itwasagreed thataseries ofCouncil meetings bearranged toanalyse thevarious issues in
depth. TheCouncil agreed toholdmeetings on16and20October and7and13November 1997 to
discuss theintegration process, thetransitional safeguard mechanism, theapplication ofGATT rules
anddisciplines asdefined inArticles 2,3,6and7oftheATC, respectively, andother relevant topics.
5. Intheirinitial exchange ofviews, Members wereinagreement thatthecomprehensive report
oftheTMB would beavaluable contribution tothereview, providing detailed factual information
onallaspects oftheimplementation process. Atthemeeting on16October 1997, theCouncil also
received apaper byHong Kong, China setting outelements forconsideration inthereview (G/C/W/95).
Therepresentative ofColombia, onbehalf oftheITCB members thatarealsoWTO Members, provided
papers withassessments andanalyses ofthetopics addressed atthesemeetings. These weresubsequentlyG/L/224
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circulated inG/C/W/99, 100,101and103.Further statements made byMembers andpapers provided
bysome ofthemwerereflected intheminutes oftherelevant Council meetings, setoutindocuments
G/C/M/24 to28while thereport ontheinitial discussions, which waspartoftheCouncil meeting
of6October, wasincluded inG/C/M/23.
6. TheAgreement onTextiles andClothing (ATC), inaccordance withArticle 1.1,setsout
provisions tobeapplied byMembers during atransitional period oftenyears fortheintegration of
thetextiles andclothing sector intoGATT 1994.
7. TheMinisterialDeclarationadoptedatthefirstMinisterialMeetingoftheWTO(December1996,
Singapore), contains thefollowing section onTextiles andClothing: "Weconfirm ourcommitment
tofullandfaithful implementation oftheprovisions oftheAgreement onTextiles andClothing (ATC).
Westress theimportance oftheintegration oftextile products, asprovided forintheATC, into
GATT 1994 under itsstrengthened rules anddisciplines because ofitssystemic significance forthe
rule-based, non-discriminatory trading system anditscontribution totheincrease inexport earnings
ofdeveloping countries. Weattach importance totheimplementation ofthisAgreement soastoensure
aneffective transition toGATT 1994 bywayofintegration which isprogressive incharacter. The
useofsafeguard measures inaccordance withATC provisions should beassparing aspossible. We
noteconcerns regarding theuseofother trade distortive measures andcircumvention. Wereiterate
theimportance offullyimplementing theprovisions oftheATCrelating tosmall suppliers, newentrants
andleast-developingcountryMembers,aswellasthoserelatingtocotton-producingexportingMembers.
Werecognize theimportance ofwoolproducts forsome developing country Members. Wereaffirm
thataspartoftheintegration process andwithreference tothespecific commitments undertaken by
theMembers asaresult oftheUruguay Round, allMembers shalltakesuchaction asmaybenecessary
toabide byGATT 1994rulesanddisciplines soastoachieve improved market access fortextiles and
clothing products. Weagree that,keeping inviewitsquasi-judicial nature, theTextiles Monitoring
Body (TMB) should achieve transparency inproviding rationale foritsfindings andrecommendations.
Weexpect thattheTMB shallmake findings andrecommendations whenever called upon todoso
under theAgreement. Weemphasize theresponsibility oftheGoods Council inoverseeing, in
accordance withArticle IV:5oftheWTO Agreement andArticle 8oftheATC, thefunctioning of
theATC, whose implementation isbeing supervised bytheTMB".
8. TheCouncil reiterated thecommitment byMembers tothefullandfaithful implementation
ofallprovisions oftheAgreement onTextiles andClothing. TheCouncil noted that,asspecified
inArticle 9,theATCandallrestrictions thereunder shallstandterminated on1January 2005, onwhich
datethetextiles andclothing sector shallbefullyintegrated intoGATT 1994 andthatthere shallbe
noextension oftheATC.
TheProcess ofIntegration
9. Theprocess fortheintegration oftextiles andclothing products covered bytheATC into
GATT 1994 rulesanddisciplines issetoutinArticles 2.6to2.11oftheATC. According totheATC,
integration takes place infourstages, asspecified inArticles 2.6and2.8,except forthose Members
which didnotmaintain restrictions under theMFA and,pursuant toArticle 6.1,chose nottoretain
therighttousethesafeguard provisions ofArticle 6.Such Members are,according toArticle 2.9,
deemed tohaveintegrated theirtextile andclothing products intoGATT 1994 andare,therefore,
exempted from complying withtheprovisions ofArticles 2.6to2.8and2.11. Asregards thefirst
stage, Article 2.6states that"Onthedateofentry intoforce oftheWTO Agreement, eachMember
shallintegrate intoGATT 1994 products which accounted fornotlessthan16percentofthetotal
volume oftheMember ’s1990imports oftheproducts intheAnnex, interms ofHSlinesorcategories.
Theproducts tobeintegrated shallencompass products fromeachofthefollowing fourgroups: tops
andyarns, fabrics, made-up textile products, andclothing". Thesame requirements exist fortheG/L/224
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integration ofproducts inStages 2and3except thatthevolume ofproducts tobeintegrated would
benotlessthan17percentand18percentoftheMembers '1990 imports, respectively. Attheend
ofthetransition period, on1January 2005, allremaining products would beintegrated andthe
Agreement together withallrestrictions under itwould beterminated.
10. IntheCouncil 'sdiscussion oftheintegration process, some Members stressed theimportance
ofnon-discriminatory trade intextiles andclothing totheeconomic andsocial development oftheir
countries,itbeingakeyforeignexchangeearnerandanimportantsourceofemployment.Consequently,
anopenandliberal trading system fortextiles andclothing wasofconsiderable importance. Some
Members wereoftheviewthattheintegration programmes ofthefourMembers maintaining restraints
carried overfromtheMFA wereadifferent matter fromthose oftheother Members astheyinvolved
theelimination ofquantitative restraints while theothers didnotinvolve theelimination ofquantitative
restraints. Accordingly, theydirected theircomments primarily attheintegration programmes notified
bythese fourMembers. They pointed outthat,notwithstanding thefactthattherequired percentages
ofproducts tobeintegrated hadbeenmet(with theexception ofashortfall inoneMember which was
being addressed intheTMB), theintegration programmes oftheimporting Members forStages 1and2
were notcommercially meaningful fordeveloping exporting Members: theproducts selected for
integration wereconcentrated inlessvalue-added products suchastops, yarns andfabrics, withonly
small shares ofmade-up textile products andclothing; furthermore, theshares ofintegrated products
weresubstantially lower interms ofvalue oftradethaninvolume oftradewhile more oftheintegrated
trade wasbeing accounted forbyimports fromdeveloped countries thanfromdeveloping countries.
These Members noted thattheproportion oftheintegrated tradeinrespect ofproducts thatwereunder
restraint wasintherange ofonly0-3percentof1990 imports ofproducts covered bytheATC. As
thefirstandsecond stages ofintegration would havelittleornoimpact ontherestraints, withover
96percentofrestricted trade remaining tobeintegrated evenafterseven years ofimplementation,
there would benobenefits fordeveloping countries. These Members alsoconsidered thatthis
"back-loading" ofintegration withvirtually allmeaningful integration being lefttothelastthreeyears
oftheATC, coupled withtheuseofother trade-restricting instruments, would notbeconducive to
meeting theobjectives oftradeliberalization. Theprocess ofintegration wasfarfrombeing "progressive
incharacter" asenvisioned intheATC. Another areaofconcern tothese Members wasthelackof
information ontheprocess ofautonomous industrial adjustment mentioned inArticle 1.5oftheATC
inorder tofacilitate integration. Such adjustment would beallthemore necessary withintegration
being effectively lefttothelastthree years ofthetransition.
11. Some other Members, noting thattheobjective oftheATC wastheintegration ofthetextiles
andclothing sector intoGATT 1994rulesanddisciplines by1January 2005, responded thattheATC,
including theprovisions relating tointegration, applied toallMembers andnotjusttofourMembers.
Theywereoftheviewthattheintegration process could onlybeexamined withreference tothespecific
provisions oftheATC. Inresponse tothepoints raised byother Members, theystressed thatnothing
intheATC stated thatacertain percentage ofproducts under quota would berequired tobeintegrated
ateachstage andthatitwastherightofeachMember tochoose theproducts fromtheAnnex tothe
ATC forintegration. Inthiscontext theMembers maintaining restrictions notified under Article 2
stressed thattheyhadmetalloftheirobligations inrespect ofbothStages 1and2;further, they
confirmed theircommitment toachieve fullintegration by2005. They noted thattheirintegration
programmes included some restrained products forthesecond stage. They alsoobserved thatnotall
benefits tobeachieved through theintegration process could bemetattheoutset oratanyparticular
stage. These Members further observed thatthepattern ofintegration ofproducts seemed tobea
universal phenomenon followed bymostMembers withintegration programmes. OneMember noted
that,initsparticular case,over50percentoftheproducts itintegrated weretextile made-up products.
Ithadalsoannounced theremoval ofanumber ofquotas ononeproduct, using Article 2.15. Another
Member hadundertaken toeliminate restrictions, applying Article 2.15oftheATC, sothatbythe
endof1998, 94percentofitsquotas would beremoved. With respect toautonomous industrialG/L/224
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adjustment interms ofArticle 1.5,another Member noted thatthere hadbeensubstantial adjustment
under theMFA anditwascontinuing atthepresent time. Some Members hadprovided information
inthisregard totheTMB, which wasnoted initsreport.
12. Thecomprehensive report oftheTMB provides information ontheintegration process in
Section IIwithanoverall assessment being contained inSub-Section E.
13. TheCouncil noted that,subject tocertain corrections, thelegalrequirements forintegration
oftextile andclothing products intoGATT 1994inthefirsttwostages hadbeenfulfilled. TheCouncil
noted, however, thattheintegration programmes ofthemajor importing Members during thefirststage,
andasannounced forthesecond stage, included onlyasmall number ofproducts which hadactually
beenunder quota restrictions, therefore, leaving alargenumber ofproducts forwhich quota restrictions
would needtobeeliminated during theremainder ofthetransition period.
14. TheCouncil recalled theimportance attached byMinisters intheirDeclaration atthefirst
Ministerial Conference inSingapore totheimplementation oftheATC soastoensure aneffective
transition toGATT 1994 bywayofintegration, which isprogressive incharacter. Italsowelcomed
thattwoMembers hadapplied theprovisions ofArticle 2.15fortheearly elimination ofquantitative
restraints andencouraged Members tocontinue tohaverecourse, where appropriate, totheprovisions
ofArticle 2.15, andtoArticle 2.10onadvanced integration.
15. TheCouncilrecalledthatMembersshouldallowforcontinuousautonomousindustrialadjustment
andincreased competition intheirmarkets inorder tofacilitate theintegration ofthetextiles andclothing
sector intoGATT 1994. TheCouncil noted thatfurther information inthisregard would facilitate
thereview ofprogress.
TheApplication oftheGrowth RateFactors
16. TheATC alsorequires thatthegrowth ratesapplicable totherestraints carried overfromthe
former MFA shallbeincreased byafactor ateachstage. Article 2.13requires thatduring Stage 1
oftheAgreement, thegrowth ratescarried overfromtheformer MFA would beincreased bynotless
than16percent. Article 2.14requires thatthegrowth ratesbeincreased bynotlessthan25percent
during thesecond stageandbynotlessthan27percentduring thethirdstage, except where theCouncil
forTrade inGoods ortheDispute Settlement Body decides otherwise.
17. Some Members were oftheviewthattheATC hadanticipated twopaths totheprogressive
liberalization oftextile andclothing trade; onewasintegration andtheother wastheapplication of
growth ratefactors. Thetwopaths were notsubstitutes; rather, theintention wasthattheywould
proceed inparallel. Incalculating theeffects oftheincreased growth ratestheyconsidered thatthe
increase inthequota levels inthefirststage bytheapplication ofgrowth ratefactors wasmisleading.
Anumber ofMembers feltthattheapplication ofthegrowth ratefactors would notsignificantly increase
market access. Anyassessment oftheeconomic effect ofthegrowth rateincreases would haveto
takeintoaccount thefactthatquotas withlowratesofutilization tended tohavehigher growth rates.
Thepoint being made wasthatwithout meaningful integration andwiththeincreases inthequotas
being minimal, theseprocesses could notbecounted upontoproduce asmooth andeffective integration
ofthissector intoWTO rules.
18. Some other Members considered thattheprovisions forenhanced growth ratescontained in
Articles 2.13and2.14oftheATC would operate togivesubstantial increases inthevolumes ofthe
restrictions concerned. Theapplication ofthegrowth ratefactors wascumulative andexponential,
providing avaluable partoftheintegration process. They alsoconsidered thattheaccelerated growth
rateswould cause quotas toincrease from theirpresent levels tolevels where theywould nolongerG/L/224
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operate asalimitation wellbefore theten-year transition wascompleted. Theimportant point was
theeffect ofquota growth ontherestraint, particularly inviewoftheslower growth rateinthedomestic
markets. Over theten-year time-span, formany orallofthequotas thatwerecurrently being filled,
thequota growth would cause them tonolonger betruerestraints.
Application oftheTransitional Safeguard Mechanism
19. Article 6oftheATC recognizes thatduring thetransition period itmaybenecessary toapply
thetransitional safeguard mechanism onimports ofproducts covered bytheATCandnotyetintegrated
intoGATT 1994thatcause serious damage, oractual threat thereof, tothedomestic industry producing
likeand/or directly competitive products. Article 6.1specifies thatthetransitional safeguard should
beapplied assparingly aspossible, consistently withtheprovisions ofArticle 6andtheeffective
implementation oftheintegration process under theATC.
20. Inthereview oftheapplication ofthesafeguard mechanism inthefirststage ofthe
implementation oftheATC, some Members considered thattheintroduction ofanexceptionally large
number ofsafeguard measures inthefirstyearoftheAgreement could notbeconsidered assparing
useofthesafeguard, particularly when, inmostcases, therecourse hadbeenfound tobeunjustified.
Assuchthere hadbeenamanifestation ofprotectionism which resulted inaserious negative impact
ontheimplementation oftheATC. Thishadcaused great concern forsome Members withrespect
tothemanner inwhich theobligations oftheATC were being applied and,inmore general terms,
withrespect toliberalization inthissector. Itwas,however, notonlythenumber ofsafeguard measures
which caused concern tothese Members butalsothetrade distortive implications ofsuchactions.
Incaseswhere recourse toArticle 6hadbeenfound tobeunjustified, legitimate export tradehadsuffered
unwarranted harassment. Requests forconsultations onasafeguard action hadoften ledtoarange
ofpotentiallyadverseimplications,causingdisruptiveeffectsforexistingexportsandcreatinguncertainty
inthemarketplace withveryserious impact onthewell-being oftheexporting Member 'sindustry and
economy. There was,ineffect, amultiplier effect totheuseofthesafeguard, notonlyontheproducer
oftheproduct inquestion butonexport earnings, employment andoverall prosperity associated with
trade liberalization. Some Members feltthattheuseoftransitional safeguards hadnotbeensparing;
additional restrictions imposed asaresult oftheapplication oftransitional safeguards severely offset
andhindered theprogress towards achieving anyeffective implementation oftheintegration process.
These Members considered thatoneparticular Member hadfailed tocomply withtherequirements
forinvoking Article 6.These Members alsoconsidered thatthishadbeenconfirmed bytheTMB.
None oftheactions ofthisMember challenged before theTMB and/or thedispute settlement panels
were found tobejustified.
21. Some other Members considered itwastherightofthose Members which hadfullycomplied
withtheirrelevant notification obligations toapply thesafeguard mechanism inaccordance withthe
ATC. Inpractice, onlytwoMembers hadsofarchosen toapply safeguards andtherewasanoticeable
decreasing trend intheapplication ofsuchmeasures intherecent period. These Members stated that
thesafeguard mechanism hadbeenapplied infullconformity withtheprovisions oftheATC. Ofthe
34safeguard actions thathadbeentaken, mostwereinthefirstsixmonths oftheATC. Some Members
considered thatthesignificant change intheuseofthesafeguard from thefirstsixmonths in1995
should benoted byallMembers. Inaddition tothequantitative change inthesafeguard actions taken,
theTMB anddispute settlement panels 'findings hadprovided important clarifications regarding the
application oftheprovisions ofArticle 6.Itwasalsostated that,inthecaseofaMember thathad
chosen toretain therighttouseArticle 6,recourse tothetransitional safeguard wasanindication of
changes intrade patterns. Noting thatthepurpose ofArticle 6oftheATC wastoaddress serious
damage oractual threat thereof todomestic textile producers during atransition period, theymade
thepoint thatifimports weretoincrease totheextent thattheycaused orthreatened tocause serious
damage, anyMember could exercise itsrights under Article 6.G/L/224
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22. Thecomprehensive report oftheTMB provides information ontheapplication ofthetransitional
safeguard mechanism inSection III,withcomments andobservations being provided inSub-Section G.
23. TheCouncil observed thatrecourse tosafeguard actions under theAgreement hadbeenmade
bytwoMembers. Itnoted theconcerns expressed byexporting Members andthepanel decisions with
respect totwoofthese safeguard actions byoneMember, andtheguidance thatthese decisions give
when taking suchactions. Recognizing therightofMembers tousethesafeguard provisions ofthe
ATC, theCouncil recalled theMinisterial Declaration atSingapore thatsuchuse,inaccordance with
ATC provisions, should beassparing aspossible.
Application ofGATT 1994 Rules asDefined inArticles 2,3,6and7oftheATC, Respectively
24. Underthisheading,theCouncilexchangedviewsonothermeasuresinrespectoftradeintextiles
andclothing, including thechanges made inrules oforigin byoneMember, aswellasitsproposal
tomaintain export visarequirements forthese products afterthequotas hadbeenremoved. Italso
discussed theapplication ofanti-dumping measures ontextile andclothing products byanother Member
andissues related tocircumvention, customs formalities andmarket access.
25. Asregards thechanges inrulesoforigin relating totextiles andclothing byoneMember, some
Membersconsideredthatthesechangeswerehavingadisruptiveeffectandwerecausingseriousproblems
intheadministration ofquotas. Administrative regulations suchasrules oforigin wereaspowerful
atoolforprotectionism asthequota system andtheoverall effect ofthenewrulesoforigin hadbeen
tomake access tothatmarket more difficult forexporters. Anumber ofMembers expressed their
concern overtheunilateral imposition ofthese rulesandtheapparent inconsistency ofthisaction with
theAgreement onRules ofOrigin, theATC andArticle IofGATT 1994. Consequently, there had
beenanegative contribution toprogressive liberalization, further upsetting thebalance ofrights and
obligations. Insum, thechanges inrules oforigin hadupset thebalance ofrights andobligations,
adversely affected access, impeded fullutilization ofquotas andhaddisrupted trade intextiles and
clothing from exporting Members.
26. TheMember concerned explained thattherulesoforigin hadbeenimplemented quitesmoothly
asthere hadbeenmore thanadequate timeforexporters toprepare fortheimplementation ofthese
rules. There hadbeennoviolation oftheMFN principle, theprovisions wereuniversal andapplied
toallMembers. TheATCcontained specific provisions onconsultation procedures andtheconcerned
Member remained ready toconsult withanyMember thatfeltithadaproblem withtherulesoforigin
changes.
27. Thecomprehensive report oftheTMB provides information onchanges inrules oforigin,
including comments bytheTMB inSection VI,paragraphs 254to264.
28. TheCouncil noted theconcerns ofsome Members onissues involving rules oforigin under
Article 4oftheATC. Itcalled onMembers tousethemechanisms available intheWTO, including
thoseunder theATCproviding forconsultations, withaviewtoreaching amutually satisfactory solution
regarding appropriate andequitable adjustments when addressing matters onrules oforigin, sothat
thebalance ofrights andobligations between theMembers concerned isnotupset.
29. Inthediscussion, some Members alsomentioned other administrative requisites which they
considered tobeinconsistent withtheobjective oftrade liberalization inthissector. Among these
werebondrequirements being enforced byaMember forshipments fromcompanies suspected ofbeing
involved inthetransshipment ofgoods. Customs hadalsoincreased theminimum bond amounts for
alltextile andclothing importers forgoods imported from allsources which, inturn, increased the
costofimports. Theincrease inpaperwork andcostforimporters fromsuchadministrative measuresG/L/224
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would adversely affect buyers 'decisions forsourcing products fromvarious suppliers. Reference was
alsomade topossible cutbacks being made byaMember incertain quotas and/or group limits inlieu
oftrade accounted forbyproducts which were tobeintegrated atthebeginning ofthesecond stage
inJanuary 1998. Anyreduction inquota levels asaresult oftheadjustment could adversely affect
thepossibilities fordevelopment ofexports inthenon-integrated portions ofcategories aswellasfor
theutilization offlexibilities bytheexporting Member. Anydecision tocarry outadjustments without
prior consultations withtheMembers concerned would becontrary totheprinciple andprocedures
contemplated inArticles 4.3and4.4oftheATC.
30. Inresponse tothelatter point, theMember concerned confirmed thatsuchproposals hadbeen
made totheMembers onwhich theintegration wasgoing tohaveaneffect oneither group limits or
partcategories thathadbeenintegrated. Itwasconsidered thattheproposals theMember concerned
hadputforward were reasonable andconsistent withArticle 4oftheATC.
31. Thecomprehensive report oftheTMB provides information ontheadministration ofrestrictions
inSection VI.
32. TheprovisionsconcerningmarketaccessinArticle7.1statethataspartoftheintegrationprocess
andwithreference tothespecific commitments undertaken bytheMembers asaresult ofthe
Uruguay Round totakesuchactions asmaybenecessary toabide byGATT 1994rulesanddisciplines
soasto,interalia,achieve improved market access fortextile andclothing products, ensure the
application ofpolicies relating tofairandequitable trading conditions asregards textiles andclothing,
andavoid discrimination against imports inthetextiles andclothing sector when taking measures for
general trade policy reasons.
33. Some Members noted thatincertain Members littlehadbeendonetoimprove access conditions
andinsome cases therehadbeentariffincreases, theintroduction ofspecific duties, minimum import
pricing regimes, labelling andcertification requirements andthemaintenance ofbalance ofpayments
provisions affecting textiles andclothing. Itwasimportant thatimproved access beachieved inreal
terms. Concerns existed that,while thestages ofintegration to1January 2005 willresult inthe
disappearance ofallrestraints, certain Members willhavedonelittletoimprove access totheirown
markets.
34. Other Members noted thatsuchmarket access could notbeconsidered asapre-requisite for
theremoval oftheMFA restrictions, andthatnoproblem regarding non-fulfilment ofspecific
commitments undertaken bytheMembers during theUruguay Round hadbeenraised intheappropriate
WTO bodies. They feltthatthese issues should bedealt withunder therelevant provisions of
GATT 1994intheappropriate WTO bodies. Some Members feltthatthereciprocal approach advanced
byoneMember atoffering more meaningful integration inexchange forgreater market access in
exporting developing countries wasnotjustified.
35. Thecomprehensive report oftheTMB provides information onthetopic ofmarket access in
Section VIII, Sub-Sections DandE.
36. Aspartoftheintegration process andwithreference tothespecific commitments undertaken
bytheMembers asaresult oftheUruguay Round, theCouncil recalled theprovisions ofArticle 7.1
oftheATCandcalled onallMembers totakesuchactions asmaybenecessary toabide byGATT 1994
rules anddisciplines soasto,interalia,achieve improved market access tomarkets fortextile and
clothing products orthrough suchmeasures astariffreductions andbindings, reduction orelimination
ofnon-tariff barriers, andfacilitation ofcustoms, administrative andlicensing formalities.G/L/224
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37. Withreference toanti-dumping actions, some Members wereconcerned inparticular thatthe
largest number ofactions taken byoneMember hadbeentargeted attextile products andofteninvolved
products which weresubject toquantitative restrictions under theATC. Those Members expressed
concern about thewayandthepattern inwhich anti-dumping measures were initiated inrespect of
textiles andclothing. Inpractice double protection wasbeing exercised through thistypeofaction.
Theuseofanti-dumping action against products under quota andrepeated actions against thesame
products touched theveryessence oftheobjective oftrade liberalization which theATC wasmeant
tobring about andcould beconsidered astantamount totrade harassment. Theapplication of
anti-dumping actions, while continuing toinvoke theprovisions oftheATC, would appear tobeuncalled
forandanegative contribution toprogressive liberalization, further upsetting thebalance ofrights
andobligations embodied intheATC.
38. OneMember stated inreply thatitapplied itsanti-dumping legislation, which wasfullyin
conformity withWTO rules, inatransparent andnon-discriminatory manner across allsectors. No
special provisions existed forthetextiles sector andthere wasnopattern inrespect ofthissector or
Members. TheMember concerned noted thatimports affected byanti-dumping duties represented
0.32percentoftotalimports inthissector in1996. Ananti-dumping orsubsidy investigation must
beopened upon receipt ofacomplaint containing prima facieevidence ofdumping orsubsidization
andresulting injury. TheMember concerned, noting thattheATC didnotcondone dumping, invited
anyMember toavail itself ofconsultations under therelevant WTO Agreement. Some Members
indicated thatanyMember hadtherightunder theWTO touseanti-dumping measures whenever the
circumstances called forit,whether forproducts covered bytheATC orforanyother product.
39. Thecomprehensive report oftheTMB provides information onanti-dumping measures in
Section VIII, paragraphs 287and299.
40. Recalling theconcerns ofsome Members regarding theuseoftrade measures inrespect of
textile andclothing products, including those which werealready under restraint, theCouncil called
onMembers toobserve therelevant WTO provisions soastoensure theapplication ofpolicies relating
tofairandequitable trading conditions regarding textile andclothing products inareas including,
interalia,dumping andanti-dumping rules andprocedures.
41. Several Members brought before theCouncil theproposal ofaMember tomaintain visa
requirements ontextiles andclothing products which would beintegrated intoGATT. They saidthat
suchameasure would beagainst theletter andspirit oftheATC. They considered thatanessential
consequence oftheintegration ofrestricted products wastheelimination ofthespecific requirements
applied inconnection withtheimport orexport ofthese products duetotheexistence ofquotas. Such
requirements included those related totheissuances ofvisas byexporting Members. While export
visasinrespect ofproducts restrained under theATCcould bejustified asadministrative arrangements
under Article 2.17oftheATC, oncesuchproducts wereintegrated intoGATT 1994, theATCceased
tobeapplicable andthenormal disciplines ofGATT 1994should apply tosuchproducts. Thismeasure
wouldalsogiverisetoimportantissuesinconnectionwiththeapplicationofnon-discriminatorytreatment
under theGATT (Article I),feesandformalities (Article VIII) andpublication andadministration of
trade regulations (Article X),andwould haveimplications fortheintegration process.
42. Inresponse, theconcerned Member stated thatthere were nogrounds forconcern among
exporting Members onthisissue. Ithadbeenproposed thatexporting Members voluntarily retain
theuseofexport visasforintegrated products butthiswasnotamandatory requirement. Either party
could terminate thevisaarrangement inwhole orinpart. Theconcerned Member remained available
toanyMember withconcerns inthisareaandexpected thatitwould bepossible toreach mutually
satisfactory arrangements.G/L/224
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43. TheCouncil noted theconcern ofexporting Members inrelation totheproposal ofaMember
tomaintain visarequirements ontextile andclothing products which would beintegrated into
GATT 1994.
Other Issues Relating totheImplementation oftheATC
44. Anumber ofMembers referred toArticle 1.2oftheATCwhich provided thatMembers would
useArticles 2.18and6.6(b) oftheATC insuchawayastopermit meaningful increases inaccess
possibilities forsmall suppliers andthedevelopment ofcommercially significant trading opportunities
fornewentrants inthefieldoftextiles andclothing trade. Afootnote tothisprovision stated thatto
theextentpossible,exportsfromaleast-developedcountryMembermayalsobenefitfromthisprovision.
However, theynoted thatintheimplementation ofArticle 2.18, themethodologies usedbyonlyone
oftheMembers maintaining restraints ofincreasing therespective growth ratesfirstby16percent
andthenby25percenthadfulfilled therequirements ofArticle 1.2.They noted thattwoMembers
maintaining restraints hadapplied onlya25percentincrease. These Members made reference to
theobservation thattheresults interms ofmarket access inthefirststage would havebeenimproved
ifthemethodology chosen fortheadvancement byonestageofthegrowth rateshadincluded thegrowth
factors ofthefirststage, asdone byoneMember (refer toparagraph 47below). They considered
thattheterm"advancement byonestage" inArticle 2.18didnotmean substitution ofthesecond stage
growth factor forthefirststage growth factor. Thestages hadcumulative effect anditwasincidental
thatthegrowth enhancement factors forlaterstages werehigher thaninearlier stages, therefore, the
growth factor forStage 2wastobeapplied inaddition totheStage 1growth factor. Aside fromthis
technical aspect, Article 2.18should beimplemented bothwithin thecontext andgeneral meaning of
theATC which wasliberalization oftrade andthepurpose ofthespecial provisions regarding small
suppliers, thatistoprovide significant increases inaccess tothem interms ofadvancement byone
stage ofthegrowth rateswithaviewtocontribute tothefuture possibilities ofdeveloping theirtrade.
Some Members alsonoted that,intheapplication ofsafeguard measures byaMember, involving
Members considered tobesmall suppliers, account hadnotbeentaken ofthespecific requirement in
Article 6.6(b) toprovide differential andmore favourable treatment.
45. Inresponse tothese points, other Members considered thattheyhadmettheirobligations and
hadimplemented theprovisions ofArticle 2.18faithfully. OneMember confirmed thatithadincreased
thegrowth ratesfirstby16percentandthenby25percent. Some other Members considered that
these matters, ingeneral, hadnotbeenthesubject ofconsultations andconcern wasexpressed that
some Members were bypassing theprovisions andprocedures intheATC andbringing thematters
directly totheCouncil. Asregards theapplication ofArticle 2.18, theintent ofthelanguage ofthis
Article wasthat"advancement" should mean substitution ofthesecond stage growth rateforthefirst
stagegrowth rate,notcumulation ofthefirstandsecond stagegrowth rates. Inthisway,small suppliers
would receive ameaningful increase intheirmarket access by"front-loading" theseconsiderably faster
growth rates. Inaddition oneMember hadextended Article 2.18tosixadditional Members byapplying
thisprovision onthebasis of1991 and1994 imports, whereas Article 2.18refers onlytoapplying
thisprovision onthebasis of1991 imports.
46. Inresponse tothecomment thatcertain Members were bypassing theATC provisions and
procedures andwerebringing matters totheCouncil directly, itwaspointed outbysome Members
thattheCouncil 'srolewasnottoduplicate thework oftheTMB butthatthemandate tooversee
ATC implementation required theCouncil toensure thatthestipulated objectives oftheAgreement
would befulfilled, namely, anintegration process progressive incharacter andliberalization oftrade.
Furthermore, multilateral rules constrained whatmight beagreed bilaterally. Where ameasure was
notchallenged bilaterally, orevenwhere ameasure wasendorsed inabilateral agreement, itdidnot
byanymeans follow thatthemeasure inquestion wasconsistent withmultilateral disciplines.G/L/224
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47. Thecomprehensive report oftheTMB provides information ontheimplementation ofthe
provisions ofArticles 2.18and6.6(b) inSection IV,Sub-Section DandSection IX,Sub-Section B.
48. Withrespect tothetreatment oftheleast-developed country Members, some Members pointed
outthatcertain least-developed countries hadbenefitted fromtheprovisions ofArticle 2.18while one
Member hadnot.Thiswasdiscriminatory asbetween least-developed countries andinconsistent with
theobjectives oftheATC. TheMember stressed theimportance oftaking intoaccount thespecial
concerns oftheleast-developed Members inorder toensure improved market access fortheirproducts.
49. OneMember maintaining restraints indicated thatitmaintained norestrictions inrespect of
least-developed countries, theexports ofwhich normally benefitted fromazerodutyrateunder theGSP
orother preferential arrangements. With respect totwoother Members maintaining restraints, they
indicatedthattheytookthisobligationseriouslyandhadimplementedit.Inparticular,theyhadprovided
considerably higher growth ratesfortheleast-developed Member referred toinparagraph 48above.
Inaddition oneMember hadrecently removed therestraints ononeofthemost important export
categories fortheoneleast-developed Member thatdidnotqualify under thespecific provisions of
Article 2.18.
50. ThecomprehensivereportoftheTMBprovidesinformationontheimplementationofprovisions
relating toleast-developed country Members inSection IX,Sub-Section A.
51. TheCouncil noted theinitiatives announced byMembers topositively address theconcerns
expressedbyleast-developedcountryMembersattheHighLevelMeetingonLeast-DevelopedCountries
heldinGeneva inOctober 1997.
52. SomeMembersmadereferencetoArticle1.4oftheATCwhichstatesthattheparticularinterests
ofcotton-producing exporting Members should, inconsultation with them, bereflected inthe
implementationoftheprovisionsoftheAgreement.TheseMembersnotedthattheMembersmaintaining
restraints hadnotallowed special concessions tocotton-producing, exporting countries which would
havebeeninconformity withtheletter andspirit oftheATC.
53. Inresponse, withrespect tothecaseofcotton-producing Members, twoMembers maintaining
restraints considered thattheywereinfullcompliance withtheATC having heldconsultations with
these exporters. InthecaseofthethirdMember maintaining restraints, italsoconsidered thatithad
actedfullyincompliance withthisprovision. No-one hadapproached itonthematter, possibly because
onlyafewofitsrestraints were based onfibre content; nevertheless, itremained ready toenter
consultations ifanyother Member sowished.
54. Thecomprehensive report oftheTMB provides information oncotton-producing, exporting
Members inSection IX:C.
55. TheCouncil recalled theprovisions oftheATC infavour ofsmall suppliers, newentrants,
least-developedcountryMembersandcotton-producingexportingMembers,andreiteratedtheimportance
ofthefullimplementation ofthese provisions.
56. Some Members stated thatthere wasacontinuing problem withcircumvention thatshowed
nosignofdiminishing overtime. OneMember pointed outthatthere hadbeenasteady increase in
thenumber ofcourtcasesinthatcountry where exporters hadsystematically circumvented therestraints
ontextile imports. These Members considered thattheexporting countries involved hadaresponsibility
toincrease theirvigilance incombatting thisproblem.G/L/224
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57. Thecomprehensive report oftheTMB provides information ontheprovisions oftheATC
relating tocircumvention inSection VII.
58. TheCouncil noted theconcern ofsomeMembers withregard toissues relating tocircumvention
andreiterated theimportance offullobservance oftheprovisions ofthisAgreement.
59. Reference wasalsomade totheimportance ofallMembers fullymeeting theirnotification
obligations inatimely manner. Notifications wereimportant fortransparency butalsohadelements
oflegalrights andobligations. Inrespect ofnewrestrictions introduced subsequent totheATCcoming
intoeffect, some Members expressed concern thatthese hadnotbeennotified indetail either tothe
TMB ortoanyother WTO body. TheMember concerned recalled thatthismatter wasunder
examination inamoregeneral context intheCommittee onRegional Trade Agreements andnotification
requirements were being complied with.
60. Thecomprehensive report oftheTMB provides information oncompliance withnotification
obligations inSection X.
61. Toensure maximum transparency intheimplementation oftheATC andtofacilitate thework
oftheTextiles Monitoring Body, theCouncil called uponMembers tocomply, inacomplete andtimely
manner, withallnotification obligations oftheATC.
62. Some Members considered thattheprocess ofoverseeing theimplementation oftheATCwould
befacilitated iftheCouncil weretoestablish amore structured andcontinuous process. They raised
thepossibility ofaninterim review under thesame terms asprovided forinArticle 8.11. Some other
Members considered thatnochange wasrequired since theATC already provided aclearandproper
framework fortheoversight function oftheATC. They alsonoted thatMembers already havethe
righttoraisetextiles issues intheCouncil atanypoint considered necessary.
63. TheCouncilemphasizedtheimportanceofitsoverseeingandofregularlyevaluatingtheprogress,
inaccordance withArticle IV:5oftheWTO Agreement andArticle 8oftheATC, ofthefunctioning
oftheATC, whose implementation isbeing supervised bytheTMB.
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