RESTRICTED
WORLD TRADE G/C/M/23
6November 1997
ORGANIZATION(97-4853)
Council forTrade inGoods
6October 1997
MINUTES OFTHE MEETING
Held intheCentre William Rappard
on6October 1997
Chairperson: Mr.T.Johannessen (Norway)
Themeeting wasconvened byWTO/AIR/687. Theproposed agenda contained indocument
G/C/W/94 wasadopted asfollows, withtheinclusion ofitems 8and9under "Other business":
Page
1. Market Access Matters .................................. 2
(A) Committee onMarket Access ......................... 2
- Periodic Report oftheCommittee (G/MA/58)
(B) Harmonized System -requests forextensions ofwaivers ........ 2
(I) Bangladesh (G/L/186, G/C/W/89) ................. 3
(II) Guatemala (G/L/185, G/C/W/88) .................. 3
(III) Nicaragua (G/L/187, G/C/W/87) .................. 3
(IV) SriLanka (G/L/188, G/C/W/90) .................. 3
(C) Zambia -Renegotiation ofSchedule LXXVIII ............... 4
- Request foranextension ofthewaiver
(G/L/189, G/C/W/91)
(D) Decision ontheintroduction ofHarmonized System Changes
intoWTO Schedules ofTariff Concessions on1January 1996 ..... 4
- Extension ofthetime-limit (G/C/W/93)
2. Rectifications andModifications toSchedules ofTariff Concessions
andtheircertification ................................... 5
- Statement bytheChairman
3. Trade Facilitation (paragraph 21oftheSingapore
Ministerial Declaration (WT/MIN(96)DEC)) ..................... 7
- Note bytheSecretariat (G/C/W/80)
- Communication from theEC(G/C/W/85)
- Communication from Switzerland (G/C/W/92)G/C/M/23
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4. Hungary -Agricultural Export Subsidies ....................... 12
- Request forawaiver (G/L/183, G/C/W/86)
5. Major review oftheimplementation oftheAgreement onTextiles
andClothing during thefirststage oftheintegration process pursuant
toparagraph 11ofArticle 8oftheAgreement onTextiles andClothing ... 17
- Comprehensive Report oftheTextiles Monitoring Body (G/L/179)
6. FreeTrade Agreement between Canada andChile .................. 26
- Communication from theParties totheAgreement
(WT/REG38/N/1 andAdd.1, WT/REG38/1)
7. FreeTrade Agreement between Romania andtheRepublic ofMoldova .... 26
- Communication from theParties totheAgreement
(WT/REG44/N/1, WT/REG44/1, WT/REG44/2)
8. Korea -USidentification ofKorea 's"barriers" toimported automobiles
asaPriority Foreign Country Practice ......................... 27
9. Dateofthenextmeeting ................................. 27
_____________
1. Market Access Matters
(A) Committee onMarket Access
- Periodic Report oftheCommittee (G/MA/58)
1.1 Mr.Tagma, Chairman oftheMarket Access Committee reported thatinaccordance withthe
procedures adopted bytheMarket Access Committee regarding thesubmission offactual information
onrequests forwaiver extensions, aperiodic report tothisCouncil hadbeencirculated asadraftin
documentG/MA/SPEC/5dated25September1997andwasexaminedbytheMarketAccessCommittee
atitsmeeting of29September 1997. Following thismeeting, thereport wasrevised taking intoaccount,
interalia,thediscussions thathadtaken place atthatmeeting. Therevised report wascirculated in
document G/MA/58 forconsideration bytheCouncil atthismeeting.
1.2 Thereport summarized theactivities oftheCommittee since thebeginning ofMay1997, and
indicatedinAnnexesIandIIthereasonswhycertainMemberswhosewaiverexpiredon31October1997
hadtorequest anextension foranewperiod ofsixmonths, i.e.until30April 1998. Inthisconnection,
heinformed theCouncil thatatthemeeting oftheMarket Access Committee, anumber ofdelegations
hadexpressed concern atthealmost automatic renewal ofthese waivers because ofreservations, of
ageneral orspecific nature, lodged withrespect tothedocumentation submitted bythese delegations.
Heencouraged thedelegations concerned tomake thenecessary efforts inorder toconclude assoon
aspossible anypending negotiations andtolimitasmuch aspossible anywaiver requests inthefuture.
1.3 TheCouncil tooknoteofthereport.
(B) Harmonized System -Requests forextensions ofwaivers
1.4 TheChairman drewattention tothecommunications fromBangladesh, Guatemala, Nicaragua
andSriLanka, containing requests forextension ofwaivers which were going toexpire onG/C/M/23
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31October 1997. These requests forwaiver extensions hadbeenmade inthecontext ofthetransposition
oftheSchedules intotheHarmonized System, andinaccordance withparagraph 1oftheUnderstanding
inrespect ofWaivers ofObligations under theGeneral Agreement onTariffs andTrade 1994.
1.5 Pursuant toArticle IXoftheWTO Agreement, these requests were before theCouncil for
itsconsideration; draftdecisions havebeencirculated toassist theCouncil initsconsideration ofthese
requests.
(I) Bangladesh (G/L/186, G/C/W/89)
1.6 TheChairman stated thattherequest forawaiver extension fromBangladesh wascirculated
indocument G/L/186, andadraftdecision indocument G/C/W/89.
1.7 TheCouncil approved theextension ofthewaiver granted toBangladesh until30April 1998,
andrecommended thatthedraftdecision contained indocument G/C/W/89 beforwarded totheGeneral
Council foradoption.
(II) Guatemala (G/L/185, G/C/W/88)
1.8 TheChairman stated thattherequest forawaiver extension from Guatemala wascirculated
indocument G/L/185, andadraftdecision indocument G/C/W/88.
1.9 Therepresentative ofGuatemala stated thatasherdelegation hadreached agreement withthe
trading partner maintaining areservation, Guatemala nolonger needed torequest awaiver extension.
1.10 TheCouncil tooknoteofthestatement.
(III) Nicaragua (G/L/187, G/C/W/87)
1.11 TheChairman stated thattherequest forawaiver extension from Nicaragua wascirculated
indocument G/L/187, andadraftdecision indocument G/C/W/87.
1.12 TheCouncil approved theextension ofthewaiver granted toNicaragua until30April 1998,
andrecommended thatthedraftdecision contained indocument G/C/W/87 beforwarded totheGeneral
Council foradoption.
(IV) SriLanka (G/L/188, G/C/W/90)
1.13 TheChairman stated thattherequest forawaiver extension from SriLanka wascirculated
indocument G/L/188 andadraftdecision indocument G/C/W/90.
1.14 Therepresentative ofNewZealand stated thathisdelegation would nothaveanyobjection
tothedraft decision going forward totheGeneral Council. However, hewished toreserve
NewZealand 'sposition onthefinaldecision forthewaiver extension forreasons wellknown to
Members.
1.15 Therepresentative ofSriLanka stated thatfollowing thecorrection made tothecontents of
thesummary tablepertaining toSriLanka inAnnex 2ofdocument G/MA/58, hisdelegation wasnow
satisfied thatthisnowcorrectly reflected therationale forSriLanka 'slatest waiver request. Asfar
asbilateral consultations under Article XXVIII ofGATT 1994wereconcerned, thelatest position was
thathisdelegation hadplaced before NewZealand andAustralia itslatest proposal on3October 1997.
Hisdelegation feltthattherehadbeenconsiderable progress made eventhough some delegations mightG/C/M/23
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nothavebeensatisfied withSriLanka 'slatest offer. Hisdelegation wastrying tofindasuitable solution
totheconcerns ofitstrading partners under verydifficult circumstances. Hewished toreiterate his
delegation 'scommitment tothemultilateral trading system andtorespecting itsUruguay Round
obligations.
1.16 TheCouncil tooknoteofthestatements, approved theextension ofthewaiver granted to
SriLankauntil30April1998,andrecommendedthatthedraftdecisioncontainedindocumentG/C/W/90
beforwarded totheGeneral Council foradoption.
(C) Zambia -Renegotiation ofSchedule LXXVIII
- Request foranextension ofthewaiver (G/L/189, G/C/W/91)
1.17 TheChairman stated thattherequest byZambia foranextension ofawaiver granted toitin
connectionwiththerenegotiationofitsschedulewascirculatedindocumentG/L/189,andadraftdecision
indocument G/C/W/91.
1.18 Therepresentative ofZambia stated thatonpage7ofdocument G/MA/58, under thecolumn
entitled "Number ofcountries withwhich Article XXVIII negotiations havebeenconcluded", with
respect toZambia itshould read"one" instead of"none".
1.19 TheCouncil tooknoteofthestatement, approved theextension ofthewaiver granted toZambia
until30April 1998, andrecommended thatthedraftdecision contained indocument G/C/W/91 be
forwarded totheGeneral Council foradoption.
(D) Decision ontheIntroduction ofHarmonized System Changes intoWTO Schedules
ofTariff Concessions on1January 1996
- Extension ofthetime-limit (G/C/W/93)
1.20 TheChairman recalled thattheGeneral Council hadadopted threedecisions thereby suspending
theapplication oftheprovisions ofArticle IIofGATT 1994 until31October 1997, forthepurpose
ofenabling Members toimplement the1996 recommended amendments totheHarmonized System
nomenclature. Hedrew attention tothedraft decision, contained indocument G/C/W/93, which
proposed toextend thistime-limit until30April 1998. Theannex tothisdraftdecision listed Members
which hadrequested thisextension aswellasMembers whohadrequested tobecovered bythiswaiver
decision. Thepurpose wastogiveMembers more timetoproceed withconsultations orpossible
Article XXVIII negotiations. Based onhisinformal discussions which tookplace on2October 1997,
heproposed aslight drafting change tothedraftdecision indocument G/C/W/93, i.e.thatthethird
paragraph thatbegan with"Considering" beended aftertheword "negotiations". Thus, thelastpart
ofthesentence would bedeleted. Thischange, inhisview, would notalterthemeaning ofthedecision,
butcould alleviate some concerns withrespect totheuseoftheword "general reservations".
1.21 TheCouncil agreed tothisproposed change. Itapproved theextension ofthewaiver until
30April 1998, andrecommended thatthedraftdecision, asamended1,would betransmitted tothe
General Council foradoption.
1.22 Itwassoagreed.
1.23 Therepresentative ofSwitzerland requested thatSwitzerland beincluded inthelistofMembers
annexed tothedecision which theCouncil haddecided totransmit totheGeneral Council foradoption.
1Subsequently issued asdocument G/C/W/93/Rev.1.G/C/M/23
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Headded thatSwitzerland would notify thisrequest, together withthereasons fortherequest, tothe
Secretariat.
1.24 TheCouncil tooknoteofthestatement.
2. Rectifications andmodifications toschedules oftariff concessions andtheircertification
- Statement bytheChairman
2.1 TheChairman stated thatsince hehadaddressed theCouncil onthissubject atitsmeeting of
21July1997, hehadcontinued toholdinformal consultations onthematter. Herecalled thathehad
separated theissueintoashort-term andlong-term approach. Toreiterate these points, theshortterm
elements were asfollows:
1. thattheverification andcertification ofHS96 documentation should proceed without
delay;
2. thatthere wasanobligation toactingood faithandabide bytheexisting rules and
procedures;
3. thatMembers should utilize theexisting tools andresources tocomplete thework;
4. thattheSecretariat would convert theexisting electronic HS96 documentation toa
standard database format;
5. thattheverification ofanumber ofschedules might havetoproceed without electronic
assistance;
6. thatinordertomonitorthesituation,periodicstatus-takingmeetingswouldbeconvened.
2.2 Healsorecalled thefollowing long-term issues thathadarisen during hisconsultations:
1. theissue ofconsolidation ofthethree Decisions (1980, 1983, and1991) which now
formed thelegalbasis forrectification andmodification ofschedules;
2. theissue ofsubmission ofconcordance tables;
3. thequestion ofaconsultative mechanism incaseofreservations tosubmissions of
documentation;
4. thequestion ofhowtodealwithmarket access liberalization initiatives ingeneral (the
1980 Decision limited modification ofschedules tocertain GATT Articles);
5. theproblem ofgeneral reservations;
6. theissue oftransparency;
7. thequestion ofhowtotakeintoaccount technological advancements anddevelopments
concerning theIntegrated DataBase(IDB).
2.3 Withthisbackground, hebriefed theCouncil onwhatheconsidered thecurrent situation and
theprogress made. First, withrespect totheshort-term elements, during hisconsultations there was
alargemeasure ofagreement. There wereclearindications thatprogress hadbeenmade onanumberG/C/M/23
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offrontsandhopefullytheseshort-termelementscouldbebroughttoasuccessfulconclusion.Inaddition
totheprogress hehadmentioned atthemeeting of21July1997, hewaspleased tonotethatone
delegation hadstated thatitwould beinaposition tofurther specify orliftreservations onfiveor
sixmore schedules shortly. Another delegation hadnoted thatitwould belifting areservation and
thatitwasclose toconcluding consultations withrespect toanumber ofother submissions. Healso
wished tonotethesubstantial contribution made bytheSwiss delegation intheformofadraftnon-paper
onthematter which hadprovided agood input todiscussions.
2.4 Onthelong-term elements, henoted thatthere hadbeenauseful exchange ofviews onthe
issues ofconcordance tables andonwhatwasnowtermed "general reservations". While there was
stillalotofwork tobedone onboththese matters, henoted that,inthecontext ofthelongterm
elements, therewereanumber ofdelegations thatsupported theneedforcomprehensive concordance
tables inorder tobeabletofullyexamine theHS96 documentation.
2.5 Ithadbeenclearinhisinformal consultations thattheissuetermed "general reservations" had
beendifficult asnoclear consensus hademerged onthesubject. Itappeared thataclearer solution
would beavailable when thepossible consolidation ofthethreeDecisions relating torectifications and
modifications ofschedules inthelonger-term wasaddressed. However, inworking toward apractical
andpragmatic solution inthenearterm, andwithout prejudicing thediffering views ofmany ofthe
Members onthisissue, hewished topropose thefollowing statement, based oninformal consultations
which hadtaken place lastweek:
"Delegations thathaveentered unspecified reservations todocumentation submitted forthe
introduction ofHS96 changes, undertake tospecify theirreservations before 30April 1998,
byidentifying thetarifflineand/or description forwhich theyconsider thattheproposed change
alters thescope ofaconcession. Itisfurthermore agreed that,where reservations havenot
beenspecified bythatdate, theywillbedeemed tobewithdrawn."
2.6 TheCouncil tooknoteoftheChairman 'sstatement.
2.7 Therepresentative ofSwitzerland stated thathisdelegation hadsome concerns withthe
verification andthecertification process ofHS96 changes. Nevertheless, Switzerland welcomed the
efforts made bytheChairman, andsupported thecontinuation ofthese consultations withaviewto
finding asolution bothfortheshort-term andthelong-term issues. Hisdelegation wasdetermined
tocontinue toparticipate actively intheprocess, andwould inthisconnection submit acommunication
onspecific legal issues related tothecertification ofHS96 changes. Inthiscontext hisdelegation
welcomed thestatement made bytheChairman inrelation totheso-called "specification ofunspecified
reservations", withtheunderstanding thatthisstatement, asindicated bytheChairman, waswithout
prejudice toexisting rights andobligations ofWTO Members.
2.8 Therepresentative ofJapan stated thathisdelegation hadrecognized theimportance ofa
pragmatic solution, especially withrespect totheshort-term aspects ofthismatter. Inaddition tothe
significance oflegal security, which waswhyhisdelegation hadagreed tothetext,Japan strongly
hoped thatMembers concerned would make every effort tocomplete negotiations andconsultations
wellbefore 30April 1998.
2.9 Inresponse toarequest forclarification fromArgentina andBulgaria, theChairman indicated
thatthestatement which hehadproposed, andtowhich noobjection hadbeenraised, wasnotaformal
decision bytheCouncil, butastatement bytheChairman which would beentered intotherecords
ofthemeeting.G/C/M/23
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2.10 Therepresentative ofColombia stated thathisdelegation waspleased withthecompromise
reached, whereby those Members whohadadopted thepractice ofsubmitting so-called "general
reservations", would needtospecify orliftsuchreservations byacertain date.Hisdelegation hoped
thatthissolutionwouldsolveatleasttheimmediateproblem.Nevertheless,hecontinuedtobeconcerned
bythelong-term difficulty which hadprevailed intheHS96 exercise. Thepractice offormulating
reservations within the90-day period without specifying thereservation created doubts andmeant that
thesystem wasnotascredible asitshould be.Colombia would constructively participate ininformal
consultation toseekafinalsolution tothisproblem inorder toensure thatthere would benofuture
useof"general reservations".
2.11 TheChairman stated thatwhile attention hadbeenfocused ontheshort-term elements, there
wasneedtofurther consult ontheoutstanding long-term issues; heproposed thatconsultations on
alltheelements would continue. Specifically, heplanned toaddress thelong-term elements ingreater
depth inapaper hewould havecirculated bytheSecretariat. Healsonoted that,asrequested by
adelegation, heintended toformally circulate theinformal paper prepared bytheSecretariat on
26May19972paper entitled "Rectifications andModifications toSchedules ofTariff Concessions and
theirCertification".
2.12 Finally, theChairman recalled theissuehehadraised atthelastformal meeting oftheCouncil,
concerning "overriding certifications". Thisconcerned thequestion thatmostHS96 submissions were
made almost twoyears ago,buttherehadbeenlaterdevelopments inrespect ofinformation technology
products, pharmaceuticals, distilled spirits andArticle XXIV:6 negotiations. Theschedules submitted
inthese areas, which hadalready beencertified orwould becertified shortly, contained insome cases
different details thanthecorresponding entries intheHS96 schedules. Incertifying theHS96 Schedules
atalaterpoint intime, onewould havetobecareful toensure thatthese previous certifications were
notoverridden. Itwaspointed outthatasimilar situation could alsoariseinthecertification ofpre-
Uruguay schedules which were intheprocess ofbeing transposed totheHarmonized System.
2.13 Although hehadmade aproposal attheCouncil 'slastmeeting, itwasclear thatMembers
needed more timetoreflect onthematter. Also, hisinformal consultations hadindicated thatthe
problem might bemorecomplex thanoriginally envisioned, asthetexthehadproposed would probably
havetobeamended orclarified sothatallsituations could beadequately dealtwith. Therefore, he
proposed tocontinue consultations onthematter andtoincorporate theissues withrespect tothismatter
inthepaper onlong-term elements.
2.14 Therepresentative ofMexico stated thatonthematter of"overriding rights", heagreed that
theChairman should undertake consultations. However, hestressed thattheWTO wasanorganization
inwhich legalcertainty wasveryimportant andthatininformal consultations thisshould bekeptin
mind.
2.15 TheCouncil tooknoteofthestatements.
3. Trade Facilitation (paragraph 21oftheSingapore Ministerial Declaration (WT/MIN(96)DEC))
- Note bytheSecretariat (G/C/W/80)
- Communication from theEC(G/C/W/85)
- Communication from Switzerland (G/C/W/92)
3.1 TheChairman recalled thatthisitemwasontheCouncil agenda following thedirective of
Ministers atSingapore inparagraph 21oftheSingapore Ministerial Declaration to:
2Circulated asdocument G/L/190.G/C/M/23
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"undertake exploratory andanalytical work, drawing onthework ofother international
organizations, onthesimplification oftrade procedures inorder toassess thescope forWTO
rules inthisarea".
3.2 Following thediscussions onthesubject atthelastmeeting of21July1997, theCouncil had
agreed, attherequest ofseveral delegations, toinclude thismatter intheagenda ofthepresent meeting
withaviewtobuilding aconsensus onhowtheCouncil should proceed onthismatter infuture. In
themeantime, twowritten submissions hadbeen received, onefrom theEuropean Communities
(G/C/W/85) andonefrom Switzerland (G/C/W/92).
3.3 Therepresentative oftheEuropean Communities saidthatoneobjective ofthecurrent trade
facilitation initiative should betomake theinternational trade transaction process assimple asthe
domestic saleofgoods. While thiswasaveryambitious goal, itcould serve asaguideline tobeborne
inmind while assessing thescope forwork tobedoneinfuture. Hisdelegation believed intheneed
toimprove WTO provisions inthisarea. Among existing WTO obligations, hestressed thattheWTO
Agreement onRules ofOrigin would clearly facilitate trade, anditwasimportant thatitsprovisions,
e.g.onadvance ruling, werefullyimplemented byallMembers. Likewise, itwasofgreatimportance
toconsider theoutcome ofthethree-year rulesoforigin harmonization work programme intheoverall
perspective oftradefacilitation asregards theoperation oftheserules. Intheareaofimport licensing,
improvement ofmanagement procedures wasessential, andasfaraspreshipment inspection was
concerned, itwasimportant toruleoutarbitrary valuation practices. Lastly, thetriennial review of
theAgreement onTechnical Barriers toTrade would offeranopportunity tocontribute tothefacilitation
oftrade. Inaddition tothese areas where work wasalready under way,hisdelegation hadidentified
anumber ofnewareas where work bytheWTO would bebeneficial forthefacilitation oftrade. These
areas, which werefurther elaborated intheECpaper, concerned thealignment, thetransparency and
themodernization ofcustoms procedures, standardized information andelectronic transmissions. His
delegation wasaware thatthespecific needs ofdeveloping countries would needtobeidentified in
thiscontext.
3.4 OnthekeyquestionofaddedvaluethroughWTOinvolvementontradefacilitation,hisdelegation
believed thattheoverview theWTO could bring totheareacould notbematched byotherorganizations.
Thiswasreinforced bytheability oftheWTO toadopt enforceable rules. Therefore, thecreation
ofanewWTO agreement wasconsidered asapossibility byhisdelegation. Such anewagreement
wouldnotencroachontheresponsibilitiesofotherorganizations.Possibleelementstosuchanagreement
were contained intheannex todocument G/C/W/85.
3.5 With regard toprocedure, anewWorking Group could lookattheissues involved. While
hisdelegation wasnotasking toform suchaWorking Group atpresent, theoption ofestablishing
suchaWorking Group should stayopenforthefuture. Regarding theproposal intheSwiss paper
toholdabrainstorming meeting, hesuggested thatinformal consultations should becarried outon
howsuchameeting involving other international organizations might bearranged. Hisdelegation
welcomed Switzerland 'scontribution.
3.6 Therepresentative ofSwitzerland stated thattrade facilitation wasofimmediate benefit tothe
trading community anddidclearly warrant theattention ofallWTO Members. Referring tothewritten
submission byhisdelegation, hesuggested several areas oftrade facilitation inwhich theWTO could
takeaction inthefuture, suchaspre-arrival processing, customs irregularities, transit operations,
harmonization andriskassessment, aswellasstandardized information andelectronic transmissions.
Furthermore,thesubmissionbyhisdelegationindicatedhowstandardsandrecommendationsestablished
byother international organizations could bedealtwithintheWTO context. Asafirststeptoaddress
theissues mentioned above, hisdelegation proposed toholdameeting ofexperts inorder toelicitG/C/M/23
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reactions frominterested sides andtodiscuss further WTO work inthisfield. Hisdelegation would
welcome theChairman holding consultations onhowtocontinue todealwiththeissueinthenearfuture.
3.7 TherepresentativeofMalaysia,speakingonbehalfofASEANmemberstates,statedthatASEAN
shared theobjective offacilitating tradeflows andagreed thatprocedures relating toimports andexports
should notbeallowed tobecome instruments ofprotection ornon-tariff barriers totrade. Itshould
beborne inmind thatsubstantial work wasalready being undertaken bytheWTO aswellasinother
foraonthissubject. Unnecessary duplication ofwork must beavoided. While ASEAN Members
could seethemerit offacilitating cross-border movement ofgoods, Switzerland 'sproposal would need
further reflection.
3.8 Therepresentative oftheUnited States stated thattheimportance oftrade facilitation asan
areaoffocus fortheWTO could notbedenied. Trade facilitation waslinked toensuring thatmarket
access commitments were kept. However, awide range ofcritical work inthisareawasgoing on
innolessthanteninternational intergovernmental organizations andnumerous other fora. His
government wasactively involved inmostofthese efforts which alsoincluded conducting overviews
anddeveloping harmonization ofthetrade transaction process.
3.9 Inside theWTO, agreat dealofwork related totrade facilitation wasyettobecompleted in
theareas ofrules oforigin, preshipment inspection, andcustoms valuation. Onemajor contribution
totrade facilitation would bemade bythetimely completion oftheongoing work bytheCommittee
onRules ofOrigin leading totheharmonization ofnon-preferential rules oforigin aswellasofthe
ongoing work bytheWorking Party onPreshipment Inspection. Lastweek, theCommittee onRules
ofOrigin hadinstructed theSecretariat toconduct asurvey ofthemethodologies bywhich Members
weremeeting certain customs-related procedural requirements intheAgreement onRules ofOrigin,
specifically theobligation toprovide binding determinations oforigin within 150daysofrequest to
persons inthetrading community. Thisobligation wasanexample ofaWTO obligation thatwas
generally considered afundamental good customs practice. Hisdelegation believed thattheresults
ofthissurvey would beofinterest tofurther discussions onthematter oftrade facilitation, andhe
suggested thatupon completion ofthesurvey, theresults should betransmitted totheCouncil.
Furthermore, theWorking Party onPSIhadheldveryfruitful discussions reviewing oftheoperation
oftheagreement. Inthiscontext, veryserious concerns thatwereimportant totrade facilitation were
atissue. Forthetrading community, oneofthemostimportant areas ofongoing work related totrade
facilitation involved theAgreement onCustoms Valuation. TheCommittee onCustoms Valuation
hadbegun tomove forward intheareaoftechnical assistance, sothatdeveloping anddeveloped country
Members would beenabled towork together inacoordinated fashion toensure timely implementation
byallMembers.
3.10 Trade facilitation should continue toremain ontheCouncil agenda. Butdevelopment ofWTO
rulesinthisareashould beundertaken onlyaftercompletion oftheongoing work, particularly inthe
areasoforigin, valuation andpreshipment inspection. Hisdelegation suggested thattheChairman should
consult withthevarious chairpersons oftheaforementioned groups sothattheCouncil could reflect
onthestateofthework under wayinthese bodies.
3.11 Therepresentative ofMorocco stressed thatintheareaoftrade facilitation, theWTO could
addvalue totheefforts undertaken elsewhere, evenifthiswasdonesolely withaviewtoimproving
instruments thatalready existed, suchastheKyoto Convention, theIstanbul Convention, orthework
ofUN/ECE. Hewelcomed thesuggestion bySwitzerland toconvene anexpert group under the
leadership oftheCouncil tolookmore carefully intothecontributions received sofarandidentify
those elements which deserve more detailed treatment. Inthisrespect, informal consultations should
beundertaken. Hisdelegation wished thattheitemoftrade facilitation would remain ontheagenda
oftheCouncil.G/C/M/23
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3.12 Therepresentative ofAustralia stated thatuniversally consistent, transparent andcoherent rules
andprocedures intrade facilitation would helptoenhance certainty forexporters, would minimize
thetransaction costs ofexports, andcould speed uptrade flows andcontribute toopenmarkets. In
thisprocess, three elements were ofparamount importance: firstly, thenumber ofparties involved
inthetransaction process aswellastheamount ofdocumentation andtheneedtominimize theentry
ofdata; secondly, more reliable knowledge ofcustoms charges andcustoms timeforclearance was
necessary toenable exporters tomake informed decisions onwhether toenter newmarkets; thirdly,
itwasimportant toexpedite customs clearances through electronic means. Thework oftheWTO on
tradefacilitation wasapparently atanearlystageanditwasnecessary toreflect carefully onhowWTO
involvement could contribute tothesubstantial efforts tosimplify tradeprocedures under wayinother
organizations. Inthisregard, thecontribution bytheEuropean Communities wasfocusing clearly
onthekeyissues ofalignment andmodernization ofcustoms procedures. Hisdelegation agreed with
theviewoftheECthatthecurrent revision oftheKyoto Convention intheWCO would gainimportance
iftheConvention would beaccepted insome waybytheWTO. Likewise, hisdelegation welcomed
Switzerland 'sproposal andagreed thatexploratory work being donecurrently would beenhanced by
anexpert meeting.
3.13 Inthiscontext, hewanted toremind theCouncil oftheambitious tradefacilitation workprogram
undertaken byAPEC. Elements ofthiswork program would comprise theharmonization oftariff
classification systems toensure acommon APEC widenomenclature bytheendof1997andtheadoption
oftheprinciples oftheKyoto Convention inallmember economies bytheendof1998. For1999,
itwasforeseentointroducecomputerizedmessagesystemsbasedonUN/EDIFACTtoreducepaperwork,
andintheyear2000, clearappeal procedures andadvance tariff classification ruling systems which
would provide certainty forexporters would beoperational. Alsoin2000, facilities forthetemporary
dutyfreeimportation ofsamples anddisplay goods would beprovided. Inaddition tothistimeframe,
itwasagreed inAPEC toaddnewelements tothecustoms work programme. Itwasdecided todevelop
common dataelements which wereprerequisites forcommon forms, andimprove upon procedures,
electronicsystemsandriskmanagementtechniquestoreducephysicalexaminationsandincreasecertainty
fortraders. Finally, APEC planned toadopt theWCO Express Consignment Guidelines toexpedite
therelease ofgoods andreduce transaction costs fortraders.
3.14 Therepresentative ofArgentina stated thatthepapers bytheEuropean Communities and
Switzerland contained asubtle distinction between thetermtrade facilitation andthemodification of
legal substantive rights. IntheECsubmission, there wasareference totheimprovement ofthe
management ofimport licensing procedures. Hepointed outthat,infact, improper management of
licences might violate three articles ofGATT 1994. Asconcerned theSwiss paper, hereferred to
thefourthsentenceinparagraph22,whichstatedthatprovisionsonharmonizationandmutualrecognition
inthecontext ofother WTO agreements "...alsoaddress theproblem ofriskassessment and
management: while acknowledging thelegitimacy ofdiffering national standards, these agreements
trytoprevent abuse ofsuchdifferences". Herecalled thattheproblems ofriskmanagement were
linked tosovereign political decisions which inturncreated problems ofinterpretation. Insome
instances, suchdivergent interpretations hadresulted inadispute settlement process.
3.15 Therepresentative ofIndia noted thattrade facilitation hadrecently attracted great interest
andmany institutions andagencies wereindependently addressing various aspects ofthesubject. She
welcomed thecomprehensive papers circulated forthismeeting which provided suggestions tofurther
address certain keyelements intrade facilitation. While thesubject oftrade facilitation hadbeenthe
focus ofwork inmany organizations, shebelieved thatitwasstillanevolving area. Herdelegation
hadnotdecidedwhethertradefacilitationmeasuresshouldonlyrelatetosimplificationandharmonization
ofprocedures andstandards oralternatively whether theyshould encompass allaspects andfunctions
relating totheconduct ofinternational trade. Both thepapers oftheEuropean Communities and
Switzerland concentrated onfacilitation ofcustoms procedures anddocumentation. ThisbyitselfwasG/C/M/23
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acomplex areaandthedeveloping countries required timetoexamine it.Herdelegation looked with
anopenmind atalltheimplications before deciding whether WTO should haveanyroleinthematter.
3.16 Thepaper oftheEuropean Communities hadidentified customs procedures anddocumentary
standards asonekeyelement ofthework being donetodate;ithadfocused onareas suchasalignment
ofcustoms procedures, transparent andmodern procedures, standardized information andelectronic
transmissionetc.Indiawasalreadyparticipatinginseveralprocessesofharmonizationandsimplification
ofcustoms procedures aswellasinthereview oftheKyoto Convention, where itwould drafttwo
annexes fortheWorking Group, namely oneonwarehouses andtheother onfreetrade zones. The
revised convention would havestandards, transitional standards andrecommended practices. India
wasalsoparticipating inUNCTAD 'swork ontrade efficiency toreduce transaction costs. Given the
review oftheKyoto Convention andthesteps being taken byIndia andother members oftheWCO,
binding rulesunder theWTO inregard tocustoms procedures would notberequired atpresent. The
issue andneedtoestablish suchrules could beconsidered aftertheKyoto Convention review was
completed.
3.17 Inanymove ontrade facilitation, theenormity ofthetasksinvolved needed tobegauged for
bothdeveloped anddeveloping countries. Technical cooperation support would becrucial todeveloping
countries inimplementing thealready existing guidelines andrecommendations ontrade facilitation.
Thesuccess oftrade facilitation measures would largely depend ontheavailability oftechnical
cooperation tothedeveloping countries andincreased market access fortheirproducts tomake additional
investment bythedeveloping countries meaningful andbeneficial.
3.18 Therepresentative ofJapan stated thattheCouncil hadthemandate toundertake exploratory
andanalytical work, anditshould seektoavoid duplication ofwork. IfaWorking Party onTrade
Facilitation wascreated, itwould benecessary tofullyexamine itsterms ofreference andtheitems
tobediscussed. Hisdelegation could support aninformal meeting ofexperts onthesubject oftrade
facilitation.
3.19 Therepresentative ofCanada believed that, onthebasis oftheSecretariat note, the
communications from theEuropean Communities andSwitzerland, andtheverbal contributions by
other Members, theCouncil nowhadagood picture ofwork done elsewhere andoftheareas for
potential progress. Sherecalled thatfullimplementation andcompliance withexisting WTO rulesand
obligations which hadatradefacilitation effect wasanecessary prerequisite toachieving further progress
inthatarea. With regard tothesuggestions forfurther action, herdelegation would look forward
toinformal consultations tomove thisprocess forward.
3.20 Therepresentative ofEgypt stated thathisdelegation would needmore timetostudy the
submissions made onthissubject, andcould agree totheChairman holding consultations.
3.21 Therepresentative ofPakistan announced thathisdelegation wasstillstudying theproposals
made andwould provide more detailed comments induecourse. Asthescope ofthesubject wasstill
notentirely clear, hisdelegation would welcome abrainstorming session toclarify ambiguities or
misconceptions.
3.22 Therepresentative ofHong Kong, China noted theimportance ofWTO Members fulfilling
existing WTO provisions. Suchcompliance would provide asolidstarting point forfurther work in
theareaoftrade facilitation. While there wascertainly room fortheWTO toaddvalue totheefforts
oftrade facilitation undertaken elsewhere, itwasimportant nottoduplicate theextensive efforts by
otherorganizations, which weresetoutintheSecretariat note(G/C/W/80). Inthiscontext, theproposal
bytheEuropeanCommunitiestocreateanewWTOagreementdealingwithareasnotcoveredbyexisting
WTO ruleswasbothveryambitious andinteresting. With regard totheSwiss paper, hisdelegationG/C/M/23
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agreed thatrulesandstandards established incompetent international bodies should notbesubstituted
byWTO rules. Likewise, theproblems involved indefining anumber ofnew, implicit disciplines
assuggestedinparagraph3oftheSwisspaper,shouldnotbeunderestimated.Specifically,hisdelegation
wasconcerned about thesuggestion toadopt international obligations suchastheKyoto Convention
anditsannexes orother standards andrecommendations asmandatory forWTO purposes.
3.23 Therepresentative ofMexico stated thatitwasbecoming increasingly clearthattradefacilitation
wasahighly complex issue. Itwastherefore important tolaythefoundations ofthework asclearly
aspossible before taking uptheanalysis ofthesubject. TheSingapore Declaration prescribed three
steps ofwork ontrade facilitation fortheCouncil, namely exploration, analysis andassessment, the
latter being thestage atwhich itwould bedecided whether ornotWTO rules should beestablished
inthisarea. Hisdelegation believed thattheCouncil waspresently stillattheexploratory stage and
thatwhile studying theissue, nowork should beduplicated andnoexisting multilateral rules should
bereplaced. Itwasimportant todetermine threeissues: firstly, where thecoverage oftradesimplification
activities began andended (i.e.exploratory phase); secondly, where theWTO 'sresponsibilities with
respect totrade efficiency began andended (i.e.analytical phase); andfinally, what would remain
tobedoneintheWTO asregarded rules (i.e.assessment phase).
3.24 Hisdelegation wasinfavour ofconvening anexpert meeting orasymposium. However, first
adecision ontheagenda andtheparticipants needed tobemade. Inthiscontext, hisdelegation stressed
theneedtotakeadvantage ofthework being donebytheEconomic Commission forEurope (ECE)
oninternational tradetransaction modelling which wasaimed atestablishing aframework foridentifying
thestages oftheforeign trade process andguiding trade facilitation action inthatprocess. TheECE
should therefore beinvited tothisCouncil oratsome other meeting topresent itstransaction model.
3.25 TheChairman stated thatwhile thecontributions bydelegations hadmade thediscussion useful,
itwaspremature todraw operational conclusions atthisstage. Heproposed toholdinformal
consultations which would alsoaddress theissue ofabrainstorming meeting. Theknowledge and
expertiseofthedifferentCommitteesundertheCouncilshouldalsobemobilized.WhateverthisCouncil
would agree todointhefuture onthesubject oftrade facilitation, thealready established WTO rules
andprocedures needed tobetaken intoaccount.
3.26 TheCounciltooknoteofthestatementsmade,andagreedthattheChairmanundertakeinformal
consultations.
4. Hungary- Agricultural Export Subsidies
- Request forawaiver (G/L/183, G/C/W/86)
4.1 TheChairman drewtheCouncil 'sattention todocument G/L/183 which contained Hungary 's
request forawaiver from itsobligations under paragraph 3ofArticle 3,under Article 8,andunder
paragraph 2ofArticle 9oftheAgreement onAgriculture foraperiod ending on31December 2001.
Pursuant toArticle IXoftheWTO Agreement, thiswaiver request wasbefore theCouncil forits
consideration, andadraftdecision granting thiswaiver wascirculated indocument G/C/W/86 toassist
theCouncil initsconsideration ofthisrequest.
4.2 Therepresentative ofHungary stated thatshortly aftertheentryintoforceoftheUruguay Round
Agreements aconsiderable discrepancy between export subsidization intheperiod of1986-1990 that
constituted thebaselevelforthereduction ofexport subsidies andthewaytheywerereflected inSection
IIofPartIVoftheHungarian Schedule became evident. Thelatter contained only16narrowly-defined
products withanaggregate baseoutlay levelofUS$423million, against therealfigures ofsome 720
subsidized products andUS$1billion asanannual average intheUruguay Round baseperiod. The
reasons behind thissituation were explained inthewaiver request.G/C/M/23
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4.3 Asthissituation inpractical terms would have meant acomplete elimination ofexport
subsidization inHungary from oneyeartoanother, immediate compliance withthecontent ofthe
erroneous Schedule waspolitically andeconomically notfeasible, andtheHungarian government had
tofindanother solution tothematter. Inexploring thevarious alternatives, Hungary wasguided by
twoconsiderations: firstly, thattheintegrity ofthemultilateral system should besafeguarded and
secondly, thattheagricultural sector inHungary should receive sufficient timetoadjust sothatserious
disturbances inthemacroeconomic situation ofthecountry could beavoided. Itwasinthisspirit that
Hungary hadentered intoinformal consultations heldunder theauspices oftheWTO Committee on
Agriculture andparticipated thereafter intheformal process ofdispute settlement.
4.4 InlinewithArticle 3.7oftheDispute Settlement Understanding (DSU), Hungary andthe
complaining countries hadreached amutually acceptable solution tothedispute intheform of
provisionally waiving certain obligations ofHungary withrespect toexport subsidization untiltheend
of2001. Thismeant thatafterlonganddifficult consultations andnegotiations, Hungary hadaccepted
thatasof1January 2002, itwould come backintofullconformity withitsSchedule, thuseffectively
eliminating agricultural export subsidization. Hisdelegation wasconvinced thatthesolution metthe
double objectives justdescribed. Astotheterms andconditions ofthedraftwaiver from thepoint
ofviewofHungarian agriculture, firstly, thewaiver would bebased onthesubstantial autonomous
reductions which hadbeencarried outsince1990interms ofbudgetary outlays andproduct coverage.
Itmight beworth noting thatthisprocess resulted inthereduction oftheamount ofexport subsidies
byalmost 66percentandofthenumber ofproducts benefiting fromexport subsidies by50percent
compared totheperiod of1986-90. Secondly, though thewaiver would expire on1January 2002,
foranimportant partoftheproduct groups thecommitment levels wereidentical tothose featuring
intheSchedule, thustheperiod allowed fortheadjustment ofagricultural policies would effectively
lastuntil1January 2000 which wastwoyears from now. Thislatter effect wasfurther reinforced
bytheabsence ofaninflationary adjustment, which given thepresent andforecasted inflation atarate
between 15-20 percent, ledtotherapid erosion oftherealvalue ofoutlay commitments specified
inthewaiver. Inaddition, restrictive volume ceilings hadbeen setforindividual products and
agricultural exports benefiting fromexport subsidies wereprohibited fromentering newmarkets. In
respect ofsuchmarkets, itwashisdelegation 'sunderstanding thatthetermNorth andSouth America
asusedinAnnex Dofthewaiver request covered thewhole western hemisphere.
4.5 Inview oftheexceptional circumstances presented inthewaiver request andtheextremely
heavy price thatHungarian agricultural sector hadaccepted topay, Hungary hadrequested that
Members approve itsapplication forawaiver inorder toreceive averylimited timeperiod forthe
fundamental readjustment ofitsagricultural policies.
4.6 Therepresentative oftheUnited States strongly supported theproposed waiver until
31December 2001 ofHungary 'sobligations under itsSchedule withrespect toexport subsidies on
agricultural products asspecified inthedraftwaiver decision contained indocument G/C/W/86. His
delegation supported thewaiver because itrequired Hungary tocome intocompliance withitsUruguay
Round commitments nolaterthan31December 2001 through asharp reduction inexport subsidies
fromcurrent levels overtheperiod ofthewaiver. Thedraftwaiver decision represented amutually
agreedsolutionofthedisputebetweenthedelegationofHungaryandthedelegationsoftheUnitedStates,
Argentina, Australia andNewZealand, anditwould notaffect therights ofother Members withrespect
toHungary 'sagricultural export subsidies under provisions oftheWTO other thanthose listed inthe
waiver. Hisdelegation, forthisreason, urged Members tosupport thewaiver.
4.7 TherepresentativeofNewZealandstatedthatNewZealandwasapartytothedisputesettlement
action taken ontheissue ofHungary 'suseofexport subsidies beyond itsscheduled commitments.
Hisdelegation waspleased thatafteralongandarduous discussion process alltheparties involved
were abletocome toanagreement which wascontained inthetextofthedraftwaiver decision. InG/C/M/23
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thefinalanalysis,thissolutionwasfacilitatedbyHungary'scommitmenttocomplyfullywithitsUruguay
Round commitments. Hisdelegation urged allMembers tosupport thiswaiver request.
4.8 Therepresentative ofAustralia stated thathisdelegation attached overwhelming importance
tofullcompliance withtheterms oftheagricultural agreement andother WTO obligations. Inthat
context,AustraliasupportedHungary'srequestforawaiver.Henotedthatco-complainantsandHungary
wereinvolved inlengthy anddifficult discussions totrytofindamutually agreeable solution which
would beconsistent withthecovered agreements asprovided inArticle 3oftheDSU. Hisdelegation
welcomedHungary'sclearcommitmenttobringitsagriculturalexportsubsidiesbackintofullcompliance
withtheagricultural agreement anditsscheduled commitments. Thefactthatthedetailed commitments
intheAnnexes toHungary 'swaiver request would place important limits onitssubsidies practices
would provide thebasis forensuring thatHungary progressively moved towards returning fullyto
itsscheduled commitments andthatHungary would achieve thisby1January 2002.
4.9 Therepresentative ofArgentina shared theviews expressed bythethree previous speakers.
4.10 Therepresentative ofKorea expressed concern onthepossible adverse impact thatthegranting
ofawaiver onanysensitive itemunder theWTO Agreement might bring onthedelicate balance of
rights andobligations reached among participating countries intheUruguay Round negotiations, and
onthesmooth operation andtheintegrity oftheWTO system perse.Hisdelegation wasparticularly
concerned thattherequest forawaiver wasrelated toafoodexporting country 'sobligations toreduce
export subsidies, while foodimporting countries suchasKorea were carrying outtheirobligations
under thatAgreement notwithstanding theirdomestic difficulties. Under theassumption thatHungary '
request forawaiver onthisissue wasindeed based upon a"critical error", Korea would notstand
inthewayofconsensus-building. Hisdelegation, however, regarded thiscaseasanisolated one,and
noprecedence wastobeconstituted from thiscase.
4.11 Therepresentative ofHong Kong, China stated thatthere should notbeanydoubt that
commitments contained inMembers 'schedules wereveryserious undertakings andwereanintegral
partofoverall WTO obligations. Hisdelegation, however, recalled thatunder Article IXofthe
Marrakesh Agreement, WTO Members in"exceptional circumstances" might grant awaiver. After
carefulconsiderationofHungary'srequestaswellasthebackgroundleadingtothatrequest,HongKong,
China hadcome totheviewthatthespecial circumstances ofthecasemerited sympathetic considerations
anditwould notobject totherequest andtheDraft Decision.
4.12 Therepresentative ofIndia fullysupported thesubstance ofthewaiver request. Infact,in
thiscasewhere itwasclearly acritical error arising fromcertain special circumstances prevailing in
Hungary atthattime,hewould havepreferred theGeneral Council topermit Hungary tomake necessary
corrections without going through thepresent process. Thatwould havebeentheappropriate gesture
toacountry which hadgonethrough difficult political andeconomic circumstances which hadresulted
incertain errors creeping intoitsschedule. Thisviewmight notbeshared bymany others, therefore
heunderstood whyinterested Members hadnegotiated awaiver decision withHungary. Nevertheless,
hehadsome concern about thetextofthewaiver decision. Thedraftdecision wasinaverysignificant
waydifferent fromprevious waiver decisions. Inthisconnection, hehadsome points tomake: firstly,
paragraph 4(a)ofthedraftdecision stated that"This waiver doesnotaffect Members 'rights under
thedispute settlement provisions ofthecovered agreements, including Article 19oftheAgreement
onAgriculture, aselaborated andapplied bytheUnderstanding onRules andProcedures Governing
theSettlement ofDisputes". Itwasnotcleartohimwhythisparticular paragraph hadbeenincorporated
intothedecision. Tothebestofhisknowledge, inprevious waiver decisions there hadbeennosuch
provision. Healsoquestioned theneed forparagraph 4(a), because aswaspointed outbythe
representative ofHong Kong, paragraph 3ofArticle IXoftheWTO Agreement stated that"In
exceptional circumstances, theMinisterial Conference maydecide towaive anobligation imposed onG/C/M/23
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aMember bythisAgreement oranyoftheMultilateral Trade Agreements." Tostateinparagraph 4(a)
thatalldispute settlement rights were preserved, wasinhisview, notinconsonance withthebasic
objective ofthewaiver which wasoutlined inArticle IX:3oftheWTO Agreement andwhich was
alsoquoted inthedraftdecision. Additionally, hehadcompared paragraphs 4(b)and4(c)ofthe
draftdecision withsome important waiver decisions taken earlier. Forinstance inthecaseofCaribbean
Basin Economic Recovery Act3,itwasstated that"This Decision doesnotaffect Members 'rights as
setforth intheUnderstanding inRespect ofWaivers ofObligations under theGATT 1994". This
decision clearly stated thatifaMember failed tocomply withtheconditions ofthewaiver, disputes
could beraised. Italsostated thattheapplication ofameasure consistent withtheterms ofthewaiver
decision which affected therightornullified orimpaired thebenefits ofaMember would enable that
Member toraise adispute. These twosentences, which were alsopresent inparagraph 3ofthe
Understanding inRespect ofWaivers ofObligations under theGATT 1994, were reproduced in
paragraphs 4(b)and4(c)ofthecurrent waiver decision. What wasunclear tohimwaswhythesecond
andthird sentences inparagraph 4(b)were there; theyclearly went against theDSU. These two
sentences clearly stated thatintheevent ofadispute thewhole process period would behalved. It
alsostated thatintheevent ofadispute Hungary should accept inthefirstinstance therequest for
anestablishment ofaPanel. Itwasnotappropriate inamultilateral decision tohaveprovisions which
wereclearly abridging therights of,inthiscase,Hungary. Ifitwereaplurilateral orbilateral agreement
outsidethemultilateralframework,itwouldbeadifferentissue.Additionally,therewasaninconsistency
between paragraph 4(a)andthese twosentences ofparagraph 4(b).Inparagraph 4(a)thedispute
settlement rights ofallMembers werebeing preserved. Atthesame timeinparagraph 4(b)thesesame
rights were being abridged forHungary.
4.13 Therepresentative ofEgypt stated thatHungary 'swaiver request ifgranted might affect fair
competition foritems ofexport interest forEgypt likevegetables andfruits, tomarkets suchasthe
European Communities, andCentral andEastern Europe. Therefore, hisdelegation wished tohold
further consultations withHungary before taking adecision atthismeeting.
4.14 Therepresentative ofJapan stated thathisdelegation could support thiswaiver. However,
Japan'sunderstandingwasthatthiswaiverwouldbeprovidedexceptionallytakingintoaccountHungary's
special situation, andthatitwould notprevent eachMember from taking action against Hungary 's
export subsidies inaccordance withtheWTO Agreements.
4.15 TherepresentativeofMoroccostatedthathisdelegationcouldsupportHungary'swaiverrequest.
Thiswasacompromise which safeguarded theinterest ofHungary, andthemultilateral trade system
since whatwasofconcern toMorocco wasthatHungary would attheendoftheyear2001 respect
itsUruguay Round commitments. Atthesame time, heshared theviews expressed bytheIndian
representative concerning paragraph 4(b)tothewaiver decision, because itintroduced twonewmajor
aspects incomparison totheDSU. Firstofall,deadlines under thedispute settlement process had
beenhalved, andsecondly, Hungary would havetoaccept arequest forestablishment ofaPanel at
thefirstmeeting rather thanthesecond meeting oftheDispute Settlement Body (DSB). Although,
these elements might havebeenintroduced toaddoverall balance tothedraftdecision, itappeared
tohimthattheycould havebeenavoided.
4.16 Therepresentative oftheUnited States pointed outthatfirstly through thiswaiver Hungary
would besharply reducing itscurrent levelofexport subsidization intothemarkets where Egypt was
apparently concerned about competition. Without thewaiver there wasnoforeseen reduction in
Hungary 'scurrent levelofexport subsidization. SoEgypt stood togainfromtheapproval ofthewaiver.
Secondly, ifEgypt hadbeenconcerned about Hungary 'sexport subsidization, itshould havejoined
3WT/L/104.G/C/M/23
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thecomplaining parties intheArticle XXII consultations which were heldoveraverylongperiod
withHungary.
4.17 Inreference toIndia'sintervention, hewasoftheviewthatfirstsuchconcerns should have
beenvoiced sooner thanatthismeeting oftheCouncil. Secondly, there were specific reasons asto
whyparagraphs 4(a)and(b)ofthedraftwaiver decision wereworded thewaytheywereinthisparticular
case. Hungary anditstrading partners whowerethecomplainants hadconsulted under Article XXII
ofGATT 1994 onthisproblem foraverylongperiod oftime; much longer thanwasnormally the
caseforArticle XXII consultations. Inlightofthefactthatthewaiver wasonlyforarather short
period oftime, theparties hadwanted toensure thatifsomething wentwrong withthewaiver, the
remaining timeforeseen inthewaiver should notbeusedupinapanel process, sotheprocedures
hadtobeshortened. Thiswasaspecific provision foraspecific situation, anditsetnoprecedent for
anyother waiver which might begranted inthefuture.
4.18 Therepresentative ofSwitzerland stated thathisdelegation could agree totransmit thewaiver
request totheGeneral Council foradoption. Inreference totheapproach taken inparagraph 4ofthe
draftdecision, Switzerland wished tostatethatthespecial solution found mustbe,initsapplication,
without prejudice totherights andobligations ofMembers, inparticular theapproach taken should
notinfringe onthirdparty rights.
4.19 Therepresentative ofNewZealand agreed withtherepresentative ofSwitzerland thatthiswaiver
decision should notaffect third country rights andobligations. Thisdecision wastobeviewed as
Hungary 'scommitment toreceive requests fordispute settlement should itfailtoliveuptotheterms
ofthewaiver decision. Itwasnotanattempt totryandaffect therights andobligations ofanyMember.
Heshared theconcerns voiced bytherepresentative oftheUnited States about Egypt 'sintervention.
Hewondered whether anacceptable solution would betoforward thewaiver tothenextmeeting of
theGeneral Council andintheintervening period Egypt could consult withHungary inorder toaddress
suchconcerns. Heagreed thatastheUSrepresentative hadstated, ifthisHungarian export subsidization
situation continued without thewaiver, thelevels ofexport subsidization andthedistortion ofmarkets
would bemuch greater thanifthiswaiver decision wasimplemented assoonaspossible.
4.20 Therepresentative ofAustralia hoped thatEgypt would beabletoreconsider theobjection
ithadraised. Hestrongly supported theproposal byNewZealand, which seemed asensible wayof
goingforward.TheUSrepresentativehadexplainedclearlythatunderthetermsofthiswaiver,Hungary
would infactbesubstantially andsharply reducing itsexport subsidies tothemarkets ofconcern to
Egypt. Hedrew theattention oftheEgyptian delegation totheadditional safeguard, intheform of
ceiling volumes forspecific products, which wereanintegral partoftheterms ofthewaiver. Ifthe
Egyptian delegation hadexamined thisdetail carefully, itwould seethatHungary would infactbe
considerably constrained interms ofitssubsidization insectors ofconcern toEgypt. Healsopointed
outthat,foraslongasMembers didnottakeadecision onthisissue, thissituation would seriously
weaken thedisciplines oftheWTO, asHungary would remain inbreach ofitsUruguay Round export
subsidycommitments.ThebestthingthatMemberscoulddowastoprovidelegalcoverforthatsituation
andtoensure asthewaiver did,thatHungary would return toconformity with itsscheduled
commitments. Responding tothepoints made bytherepresentative ofIndiaonwhether allthesentences
ofthefourth paragraph ofthewaiver decision werenecessary, hestated thatasadelegation thathad
beeninvolved inthenegotiation ofthedecision, hecould assure therepresentative ofIndia thatevery
word wasnecessary.
4.21 Therepresentative ofArgentina stated thatthere wasaconsensus toadopt thedraftdecision
withtheexception ofEgypt anddespite theconcerns expressed bysome delegations, whohadnotas
Argentina hadbeen, involved foralmost three years inthediscussion ofthewaiver. Hesupported
theproposal made bytherepresentative ofNewZealand, thatthedecision beaccepted withtheG/C/M/23
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reservation thatEgypt would undertake bilateral consultations withHungary. Bydefinition thiswaiver
would notchange basicWTO rights andobligations, ordisciplines. Paragraph fourofthedraftwaiver
decision contained obligations thatwereassumed byHungary because oftheexceptional nature ofthe
caseinvolved. Great carehadbeentaken indrafting thewaiver decision, andthetreatment foreseen
inthatdecision could notbeapplied toother waivers suchasthose thathadbeendiscussed earlier.
Inother words, nothing wasbeing created thatwould bemisused inthefuture. Heurged Egypt to
jointheconsensus subject tothebilateral consultations thatitmight wishtoholdwithHungary.
4.22 Therepresentative ofEgypt stated thathisdelegation could accept theproposal ofNewZealand.
Herequested consultations withHungary andatthesame timereserved therighttocome backtothis
issue attheGeneral Council meeting.
4.23 Therepresentative ofIndia stated thattheremarks made bytherepresentatives ofthe
United States, New Zealand, Australia andArgentina totheeffect thatthedraftwaiver decision had
notbeendrafted withtheintention ofchanging therights andobligations ofotherMembers hadalleviated
tosome extent theconcerns ofhisdelegation.
4.24 Therepresentative ofEcuador stated thatthepoint raised byrepresentative ofIndiaconcerning
thebreach ofHungary 'srights wasofsome concern. Inthisregard, thefollowing textofthedraft
decision: "Hungary shallconsent totheestablishment ofapanel attheDispute Settlement Body meeting
atwhich therequest firstappears asanitemontheDispute Settlement Body'sagenda", should be
amended toreflect theideathatHungary renounced thepossibility ofdealing withsucharequest at
thesecond meeting oftheDSB. Otherwise, itwould appear likeanimposition byMembers andwould
make itpossible toamend rules inthisway.
4.25 TheCouncil tooknoteofthestatements andagreed toforward thedraftdecision contained
indocument G/C/W/86 totheGeneral Council foradoption subject toconsultations being heldbetween
Egypt andHungary.
5. Major review oftheimplementation oftheAgreement onTextiles andClothing during the
firststage oftheintegration process pursuant toparagraph 11ofArticle 8oftheAgreement
onTextiles andClothing
- Comprehensive report oftheTextiles Monitoring Body (G/L/179)
5.1 TheChairman recalled theprovisions ofArticle 8.11oftheAgreement onTextiles andClothing
(ATC) that"Inorder tooversee theimplementation ofthisAgreement, theCouncil forTrade inGoods
shallconduct amajor review before theendofeachstage oftheintegration process." Henoted that
thefirststageoftheAgreement comprised three years, 1995-97 and,hence, theneedtoholdthisinitial
review atthistime. Article 8.11wentontostipulate that"Toassist inthisreview, theTMB4shall,
atleastfivemonths before theendofeachstage, transmit totheCouncil forTrade inGoods a
comprehensive report ontheimplementation ofthisAgreement during thestage under review, in
particular inmatters withregard totheintegration process, theapplication ofthetransitional safeguard
mechanism, andrelating totheapplication ofGATT 1994rulesanddisciplines asdefined inArticles 2,
3,6and7respectively. TheTMB'scomprehensive report mayinclude anyrecommendation asdeemed
appropriate bytheTMB totheCouncil forTrade inGoods." Thiscomprehensive report hadbeen
prepared bytheTMB andcirculated indocument G/L/179 on31July1997. TheSecretariat hadalso
circulated acompilation oftextiles andclothing trade statistics indocument G/L/184, setting out
information onrecent trends inworld trade ofthese products, prepared attherequest oftheTMB,
asabackground paper.
4Textiles Monitoring BodyG/C/M/23
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5.2 TheChairman proposed that,astheCouncil began itsmajor review ofallaspects ofthe
implementation oftheATC, withthereport oftheTMB asanimportant input, thefocus ofthediscussion
initially should beonthegeneral aspects oroverall perspectives oftheimplementation process. He
noted thattheTMB report covered, inaverydetailed manner, abroad range ofissues related tothe
implementation oftheATC, andincluded information onallmatters reviewed bytheTMB asaresult
ofnotifications byMembers aswellasother actions taken elsewhere intheWTO having abearing
ontheimplementation oftheATC. Hethen called upon theChairman oftheTMB,
Ambassador András Szepesi, tointroduce theTMB report.
5.3 TheChairman oftheTMB, introducing thereport onbehalf oftheTMB, stated thattheBody's
comprehensive report hadbeenprepared inaccordance withArticle 8.11oftheATC inorder toassist
theCouncil initsmajor review oftheimplementation oftheATCduring thefirststageoftheintegration
process. TheTMB hadmade every effort tocomply withtheterms ofreference forthereport asdefined
inArticle 8.11. Heoutlined thereport, stating thatitwascomprehensive inthesense thatitincorporated
allATC andATC-related developments thathadtaken place during theperiod covered andthathad
beenbrought totheknowledge oftheTMB. Thereport alsocovered theinformation provided on
theintegration programmes forstage 2which hadbeenrequired tobenotified by31December 1996.
Asreflected inthestructure ofthereport, particular emphasis hadbeenplaced onthematters identified
inArticle 8.11oftheATC. Thereport contained comments, observations andassessments bythe
TMB withrespect toparticular elements oftheimplementation oftheATC. Ithadbeenadopted by
theTMB on25July1997 andcovered theperiod 1January 1995 to24July1997. Ithadbeen
transmitted totheCouncil on31July. Henoted thatthereport discussed some issues which hadnot
beenfinalized atthattimeandonwhich work wascontinuing expeditiously. Thenecessary conclusions
ofthese particular issues would beincluded inthereports ofsubsequent TMB meetings.
5.4 TheChairman oftheTMB further noted thatthecomprehensive report wasessentially based
onthenotifications submitted byMembers totheTMB andontheactions taken bytheTMB inrespect
ofthese notifications. Ithadalsotaken intoconsideration replies received from some Members to
therequest made toallWTO Members, inaccordance withArticle 8.3oftheATC andinpreparation
ofthecomprehensive report, tosubmit notifications orinformation regarding theimplementation of
particular ATC provisions. Heexpressed appreciation totheMembers which hadresponded tothis
request forinformation. Alsoinaccordance withArticle 8.3oftheATC, relevant notifications to,
andreports from other WTO bodies hadbeenconsidered bytheTMB totheextent necessary inthe
preparation ofthereport. Inthisregard, hesaidthat,though theTMB hadacted withtheutmost care,
itwaspossible thatithadinadvertently included initsreport issues which didnotrelate toproducts
covered bytheATC. Ifthiswere tohappen, ashadbeenbrought tohisattention inthecaseofa
mentioninthereportofaninvestigationinitiatedbyArgentinaunderGATTArticleXIX,suchatechnical
mistake would bedulycorrected sothatnoreference tosuchaction would bemade inthereport.
Accordingly, hewould propose totheTMB atitsnextmeeting thatacorrigendum toparagraph 223
ofthereport beissued.
5.5 TheChairman oftheTMB thenoutlined themainchapters around which thereport hadbeen
structured. Chapter IIrelated totheimplementation oftheintegration process during stage 1andthe
relevant notifications forstage 2.TheTMB'scontribution toanoverall assessment wasprovided in
paragraphs 65to77.Chapter IIIcovered theapplication ofthetransitional safeguard mechanism of
Article 6.General comments andobservations bytheTMB werecontained inparagraphs 173to181.
Chapter IVdealtwiththequantitative restrictions notified under Article 2oftheATC andother issues
related totheimplementation ofthatArticle. Some comments ontheimplementation oftheprovisions
ofArticle2.15(eliminationofrestrictionsnotifiedunderArticle2.1)weretobefoundinparagraphs203
and204,while theTMB'scomments regarding theimplementation ofArticle 2.18(small suppliers)
were contained inparagraphs 210, 212and213. Similarly, observations orcomments onthe
implementation bysome Members oftheprovisions ofArticle 2.17(administrative arrangements) wereG/C/M/23
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provided inparagraphs 214,217,220and221.Chapter Vcovered restrictions otherthanthose notified
pursuant toArticle 2.Some observations withrespect totheapplication ofArticle 3oftheATC were
contained inparagraphs 245and247. Chapter VIrelated toArticle 4oftheATC andconcerned the
administration ofrestrictions, changes inpractices, rules, procedures andcategorization ofproducts.
Comments bytheTMB werecontained inparagraph 264. Chapter VIIcovered theimplementation
oftheprovisions oncircumvention, andcomments could befound inparagraph 273,while Chapter VIII
referred totheimplementation ofArticle 7forwhich comments were inparagraphs 297to300.
Chapter IXdealtwiththeimplementation ofparticular provisions oftheATC thatwererelated tothe
special interests ofcertain WTO Members, suchasleast-developed country Members (theTMB had
made observations inparagraph 308), small suppliers andnewentrants, cotton-producing exporting
Members(forthislatterissueobservationsweretobefoundinparagraph316),wool-producingexporting
Members anddeveloping country Members (forwhich some observations were contained in
paragraph 323). Chapters XandXIwere related respectively tothecompliance ofMembers with
thenotification requirements oftheATC andsome suggestions werecontained inparagraph 330,and
tothework carried outbytheTMB.
5.6 Hecommented thatthecomprehensive report waslargely factual innature anditwashoped
thattheCouncil would findituseful inconducting themajor review. Inconclusion, heexpressed some
personal thoughts regarding theimportance ofthereview tobeconducted bytheCouncil. Heobserved
that,inexercising itsoverseeing role,theCouncil would review theimplementation oftheATCduring
thefirststage oftheintegration process which wasashort period inabsolute terms. Itwas,however,
arelatively long period interms oftheoverall duration oftheATC, attheendofwhich on
1January 2005, thetextiles andclothing sector would befullyintegrated intoGATT 1994. Itwas
alsoimportant since, being thefirststage ofimplementation oftheAgreement, itconditioned what
would happen intheremaining stages. Moreover, since themain parameters ofthesecond stage of
integration wereavailable, theCouncil hadbefore itarather clear, though incomplete, picture ofhow
integration would proceed formore thantwo-thirds oftheATC'speriod ofimplementation. This,
therefore, provided anexcellent andtimely opportunity foracollective assessment oftheimplementation
oftheAgreement.
5.7 Therepresentative ofColombia, alsospeaking onbehalf ofthe23members oftheInternational
Textiles andClothing Bureau (ITCB), stated thathewould bemaking general andintroductory remarks
related tothereview oftheimplementation oftheATCwhich would notpreempt therightoftheITCB
member countries toexpress theirindividual views. Henoted thattheimportance ofthetextiles and
clothing sector forthedeveloping countries anditscontribution totheirexport earnings waswellknown
toallMembers. Thatwaswhytheevolution fromthesystem ofquantitative restrictions institutionalized
intheMultifibre Agreement anditspredecessors tothecurrent ATC hadbeenpraised asamajor
achievement oftheUruguay Round, bothinterms ofthesystemic significance ofthephase-out ofMFA
restrictions forarule-based, non-discriminatory trading system, andtheforeseen contribution tothe
increase ofexport earnings fordeveloping countries. Itwasanessential function oftheWTO to
supervise andfacilitate theimplementation, administration andoperation oftheMultilateral Trade
Agreements andthisCouncil hadbeenassigned theresponsibility ofoverseeing thefunctioning ofthe
agreements intheareaofgoods. InthecaseoftheATC, itsArticle 8.11mandated theCouncil to
"conduct amajor review before theendofeachstage oftheintegration process".
5.8 Itwasconsidered that,inconducting thisfirstmajor review, theCouncil would beableto
takestock oftheimplementation oftheAgreement sofarandtoestablish towhat degree thegoals
ofliberalization ofthetextiles andclothing sector hadbeenattained. Moreover, asthiswasthefirst
major review being undertaken bytheCouncil, ithadtheresponsibility ofdoing soinaserious,
comprehensive andopen manner. Inthiscontext, themembers oftheITCB were approaching the
review withfullawareness ofitsimportance andsignificance. Asprescribed intheATC, theTMB
hadtransmitted totheCouncil itsreport ontheimplementation oftheAgreement during thestageunderG/C/M/23
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review andthisreport would beaveryvaluable document thatfullycomplied withtheguidelines
provided byArticle 8.11. Itwould constitute oneoftheelements tobetaken asareference forthe
purpose ofthemajor review oftheATC. Therepresentative ofColombia further considered that,
inorder toconduct thisreview inamethodical manner itwould beappropriate toidentify themain
issuesandtoestablishaframeworkinlinewiththeprescriptionsofArticles8.11,8.12andotherrelevant
articles oftheATC. Indoing so,itwould benecessary todiscuss thenature andpurpose ofthereview;
tomake afullassessment oftheintegration process; toexamine theuseoftransitional safeguards;
toanalyse thetreatment ofleast-developed countries, small suppliers andcotton andwool exporting
countries; andtolookatother matters related totheapplication ofGATT disciplines.
5.9 Therepresentative ofHong Kong, China stressed thatthiswasamajor review oftheATC
astheAgreement hadaduration ofonlytenyears, during which period theCouncil hadbeencharged
withconducting threesuchmajor reviews. Thelastofthesereviews would beconducted shortly before
thefinal, complete andirrevocable integration ofthetextiles andclothing sector intoGATT 1994.
Inorder topreempt anyproblems thatmight otherwise ariseatthatlaststage, theCouncil would need
toensure thatinthetwointermediate major reviews, theATC progress waswellontrack. Thefirst
major review oftheATC wasoneofonlytwooccasions when theCouncil would beablenotonly
tocheck theprogress butalso, ifnecessary, totakecorrective action ingood timetofacilitate the
complete integration thatwould beeffected inseven years time. Thepurpose ofthemajor review
wastwofold. Firstly, theCouncil wasresponsible foroverseeing thefunctioning andimplementation
oftheATC. Themajor review represented animportant component ofthisresponsibility andincarrying
thisout,theCouncil hadtheassistance ofthecomprehensive report from theTMB. Secondly, the
Council wasrequired, inthelightofthemajor review, totakesuchdecisions asitdeemed appropriate
toensure thatthebalance ofrights andobligations embodied intheATC wasnotbeing impaired.
Itfollowed thatthemajor review must bebroad enough toenable theCouncil todetermine whether
there hadbeenanyserious damage tothebalance ofrights andobligations embodied intheATC, or
actual threat thereof.
5.10 Henoted thatHong Kong, China hadoutlined inanon-paper5anumber ofelements important
tothemajor review, containing, among other things, views ontheTMB'scomprehensive report and
theissues dealtwiththerein. Referring totheelements considered necessary tobeaddressed inthe
major review, hesawtheimportance ofafocus firmly onintegration, namely, theextent towhich
integrationprogrammeswerecontributingtoprogressiveliberalizationoftrade.Italsoexpectedintensive
deliberations ontheeffects oftransitional safeguard measures andother protectionist actions onoverall
liberalization. Suchdeliberations should goalongside discussions ontheextent ofincreased competition
andautonomous industrial adjustment andonother issues arising outofATC implementation. Such
anoverall assessment wasnecessary before theCouncil could reach aconclusion whether theATC
wasontrackornotandwhatdecisions itshould taketoensure thatthebalance ofrights andobligations
embodied intheATC wasnotimpaired. Onesuchdecision might betoestablish amore structured
andcontinuous process intheCouncil forcarrying outitsoversight ofATC implementation. He
observed thattheATC hadreached animportant stage; ithadbeeninforce longenough toassess
whether itwasfulfilling itsfunctions. There wereclearindications thatitwasfalling shortofitsoverall
objective andifthatwasindeed thecase, nowwasthetimeforaction. There wasobviously much
work fortheCouncil todoandhelooked forward toanearly opportunity toengage indetailed work
onthemajor review. Itwassuggested thatthefirststepshould betoschedule aspecial session of
theCouncil dedicated tothistaskatanearly dateandpreferably before theendofthismonth.
5.11 Therepresentative ofEgypt expressed appreciation fortheTMB report which would beof
assistance inthereview oftheimplementation oftheATC. Hestressed thattextiles andclothing trade
wasasubject ofmajor interest forallWTO Members. Asregards hiscountry, herecalled thatduring
5Circulated asdocument G/C/W/95.G/C/M/23
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theUruguay Round negotiations, Egypt andother developing countries hadbeenconvinced toaccept
commitments incertain agreements suchasGATS andTRIPs which weretobebalanced bythebenefits
supposed tobegained inotherareas, especially textiles andclothing. Consequently, Egypt hadaccepted
theresults oftheUruguay Round asasingle package. Today, andaftermore thantwoandahalf
years ofimplementation oftheATC, Egypt considered thatitwasnotreceiving anytangible benefits,
notbecause ofdeficiencies intheAgreement itself, butbecause ofthewayitwasbeing implemented
andduetothemisuse ofGATT disciplines, especially intheareaofanti-dumping. Hehadthetechnical
datatosupport thispoint ofviewandhoped tohavetheopportunity topresent itthrough theprocess
ofreview. Heurged theCouncil todevote enough timeforthereview andtoadopt anappropriate
framework forthework. Thiswould enable theCouncil todevise adequate measures inorder tomake
anynecessaryadjustmentstotheexistingsituationwhichwouldhelptostrengthenthemultilateraltrading
system.
5.12 Therepresentative ofJapan appreciated thereport oftheTMB which would contribute tothe
improved transparency ofthework inthatBody asrequired bytheSingapore Ministerial Declaration.
Itwasalsonoted thatthereport hadcovered inabalanced manner awide range ofaspects ofthe
operation oftheATC which should beconsidered during themajor review. Thereport hadalsofully
considered theobligation ofMembers toachieve fullcompliance withtheprovisions oftheATC.
Allofthese points should bekeptinmind during thereview oftheimplementation oftheATC. He
alsosupported astructured approach tothereview through special sessions oftheCouncil atanearly
date.
5.13 Therepresentative ofMalaysia speaking onbehalf oftheASEAN members thanked theTMB
foritscomprehensive report. Heemphasized thatoneoftheessential functions oftheWTO wasto
facilitatetheimplementation,administrationandoperationofthemultilateraltradeagreements,including
theATC. HesaidthatASEAN attached greatimportance totheexercise uponwhich theCouncil was
embarking. Thisfirstmajor review, conducted pursuant toArticle 8.11oftheATC, would setthe
stage andserve asaninstitutional standard forother successive reviews incoming years. Equally
important, Article 8.12oftheATCprovided thattheCouncil shalltakeappropriate decisions, inlight
ofthemajor review, inorder "toensure thatthebalance ofrights andobligations embodied inthe
Agreement isnotbeing impaired". Heconsidered thatthemanner andattitude withwhich Members
chose toapproach theissuebefore themwould haveanimmense impact onthecredibility andintegrity
ofthemultilateral trading system inthefuture.
5.14 Herecalled thatthecentral feature oftheATC wastheprogressive character oftheintegration
process, whereby elimination ofquantitative restrictions inherited fromtheMFA could contribute to
theobjective offurther liberalization oftrade. Akeyquestion washowtheimplementation process
sofarhadcontributed totheliberalization oftrade inthetextiles andclothing sector. Only through
aproper andthorough examination, based ontheinformation sought andprovided, could theCouncil
understand thetruepicture oftheprogress sofarachieved. Inthisrespect, itwassuggested thatthe
review should beconducted asaprofessional exercise with transparency, inacomplete and
comprehensive manner. From preliminary observations, thecomprehensive report presented bythe
TMB contained awealth ofinformation ontheimplementation experience under eachoftheoperational
provisions oftheATC, together withtheTMB'sownobservations inanumber ofinstances. Itwas
noted thatthereport alsoincorporated themain elements ofdifferent Members 'views inthecontext
oftheexamination which underlined anumber ofconcerns aswellasdissatisfaction, particularly from
theexporting Members, withtheimplementation oftheATC. Accordingly, theTMB report generally
reflected abalance ofdifferent views. However, there wasstillroom forfurther improvements as
thereport didnotoffer anyrecommendations forpossible decisions tobetaken bytheCouncil "to
ensure thatthebalance ofrights andobligations embodied intheAgreement isnotbeing impaired".
Healsobelieved thatinorder fortheCouncil toundertake thereview inapractical andefficient manner,
there should beageneral framework fortheexercise. Such framework should, inessence, consistG/C/M/23
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ofelements which wereinstrumental totradeliberalization asprovided intheATCandwhich included,
among others, theintegration process, useoftransitional safeguards andother matters relating tothe
application ofstrengthened GATT rulesanddisciplines. Heconsidered thatitshould beemphasized
atthisearlystagethattheprimary objective oftheexercise wasnotabout thereview oftheTMB report,
butrather theroleoftheCouncil tooversee theimplementation oftheAgreement itself. Itmustensure
thattheimplementation hadbeenfaithful andthatitmustinspire confidence andprovide asense of
assurance among allMembers concerned. Hesaidthat,incarrying outthisresponsibility, theCouncil
would needtodevote therequired timeinastructured manner.
5.15 Therepresentative ofElSalvador stressed theimportance ofthecurrent review ofthe
implementation oftheATC forhiscountry. Therelevant aspects forexamination should firstbe
identified andthenaframework adopted fortheiranalysis. TheCouncil must beabletoarrive, at
theendoftheprocess, ataclear view astowhether ornottheapplication oftheATC hadmetits
basic objectives orwhether Members might needtomake some finetuning inthesucceeding stages.
Heconsidered thattheTMB report would bemostvaluable foranalysis andtogether withotherreference
material would assist theCouncil incarrying outthisresponsibility. Heurged Members nottolose
sight ofthefinalgoalofthefullintegration ofthetextiles andclothing sector intotherules and
disciplines ofGATT 1994. Hestressed, inparticular, theimportance ofcarefully reviewing the
application ofprovisions relating tosmall suppliers andnewexporters aswellastotheuseofthe
safeguard mechanism during thefirststage oftheintegration process.
5.16 Therepresentative oftheEuropean Communities welcomed theopportunity forthedebate on
theimplementation oftheATC inthefirststage, asrequired byitsArticle 8.11. Hestressed thatit
wasamajor review andshould betreated assuch. Healsowelcomed theTMB report, averyfull
report, which would promote awell-informed andconstructive debate. Hesaid thatthe
European Communities werefullycommitted tofullintegration ofthetextiles andclothing sector into
GATT 1994rulesanddisciplines on1January 2005andwould keepthisprocess under review, together
withtheexporting Members, during thenextstage ofintegration. Hestated thattheyapproached the
current debate fromtheaspect oftheworld 'slargest importer oftextiles andclothing which hadreached
US$61 billion in1996. Thetrade regime oftheEuropean Communities wascharacterized bylow
tariffs andamarket access penetration rateof48percent. They alsohadinterests asamajor exporter,
atalevelofUS$39 billion in1996. Asanexporter theyhadaparticular concern inrelation toimproved
market access intheirWTO trading partners. Other areas ofconcern would beexplained during the
review process.
5.17 TherepresentativeofPakistanstressedtheimportanceoftextilesandclothingtradefordeveloping
countries andunderlined thattheATC represented acrucial element intheoverall balance ofrights
andobligations undertaken byWTO Members under theUruguay Round Agreements. The
implementation ofthisAgreement, therefore, hadasystemic importance much beyond thesectoral
importance tothedeveloping countries. Thereviews, conducted inaccordance withArticle 8.11of
theATC, weretobecarried outbefore theendofeachstageintheintegration process, however, there
would beonlyoneother suchfunctional review, attheendofthesecond stage because thethirdstage
would bethefinalandcomplete integration. Therefore, heemphasized thatthiswasamajor review
tobetreated withtheseriousness andpurpose itdeserved. Heappreciated thereport submitted by
theTMB which would formanimportant basis fortheconclusions andrecommendations thatwould
flowfrom thereview.
5.18 Hesaidthattherewasdisappointment inanumber ofdeveloping countries, exporters oftextiles
andclothing, atthefactthatthreeyears afterthestartoftheimplementation nomeaningful liberalization
intrade hadbeenachieved. Onthecontrary, other trade policy instruments, suchasanti-dumping,
rules oforigin, aswellassafeguard actions hadcontinued tobeusedtolimitthemarket access of
thetextile exporting countries. Thepurpose ofthisreview wasspelled outinArticle 8.12oftheATCG/C/M/23
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which provides "Inthelightofitsreview theCouncil forTrade inGoods shallbyconsensus takesuch
decisions asitdeems appropriate toensure thatthebalance ofrights andobligations embodied inthis
Agreement isnotbeing impaired." Thequestion tobeanswered waswhether thebalance ofrights
andobligations intheATCwasbeing observed, andiftheconclusion wasthatitwasnotbeing observed,
thentheCouncil would needtoseekanagreement onthenecessary actions toensure thattheprogramme
forliberalization oftextiles andclothing wassuchthatthefullintegration ofthissector wasassured
bythetimetable intheATC. ItwashishopethattheCouncil, inorder toaddress adequately thevarious
important issues involved would haveastructured discussion atitsfuture meetings oftheentire gamut
ofissues. Hewasopentosuggestion astowhether suchmeetings should beofaspecial nature or
whether theyshould benormal meetings oftheCouncil convened anddevoted toconsideration ofthe
implementation oftheATC.
5.19 Therepresentative ofPakistan alsorecalled arecent statement oftheDirector-General inwhich
hehadspokenofprogress,throughthestagesoftradeexpansionandglobalization,towardstheborderless
global economy. Ithadbeenacknowledged, however, thatcertain areas stillremained intheera
preceding the50-year process ofliberalization which theWTO haswitnessed andtheDirector-General
hadmentioned textiles asoneofthese prominent exceptions. Therepresentative ofPakistan believed
thatuntilandunless textiles andclothing trade wasfullyintegrated intotheworld trading system and
fullyliberalized, therewould continue tobeastructure ofworld tradethatwasheavily weighted against
thedeveloping countries andwhich didnotprovide them withthepreconditions tomake themarch
through theprocess ofindustrialization, through tradeexpansion, tothegoaloftheborderless economy.
5.20 Therepresentative ofPeruwelcomed theTMB report andstressed theimportance ofthefirst
review oftheimplementation oftheATCbeing acomplete andsystematic examination bytheCouncil.
Healsostated thattheanalysis ofthetreatment extended tocertain groups ofcountries forwhich special
provisions hadbeenprovided intheAgreement, suchassmall suppliers, should becarefully undertaken.
5.21 Therepresentative ofTurkey expressed thehopethattheexpectations oftheexporting country
Members hadbeenmetbythefirstandsecond stages oftheintegration process. Inthisregard, he
drew attention totheSingapore Ministerial Declaration wherein alinkhadbeendrawn between the
fullandfaithful implementation oftheprovisions oftheATCandtheATC'scontribution totheincrease
inexport earnings ofthedeveloping countries. Heexpressed appreciation fortheTMB report and
noted anobservation made therein onthewideuseofthetransitional safeguard mechanism. Heurged
Members topayutmost attention tothesafeguard provisions oftheATC before considering the
application ofthismechanism.
5.22 Therepresentative ofNorway referred tothecomprehensive report oftheTMB andnoted that
ithadachieved increased transparency inproviding amorethorough examination oftherationale behind
itsconclusions andrecommendations, inkeeping withtherecommendations oftheSingapore Ministerial
Declaration. Great importance hadbeenattached tothegoodfunctioning oftheTMB, being acrucial
body toensure thecompliance byMembers withtherights andobligations under theATC. Itwas
alsoabody thatensured arapid conclusion ofdisputes between WTO Members overtheapplication
oftheATCprovisions. Hefurther noted thatallMembers maintaining therighttoapply thesafeguard
mechanism hadspecific obligations inrespect oftheintegration process, whether theymaintain
restrictions ornot. However, from acommercial point ofview, itwasrecognized thatparticular
importance could beputontheapplication oftheintegration provisions andtheneedforliberalization
bytherestraining countries. Inthisregard, hepointed outthatNorway hadtaken advantage of
Article 2.15oftheATCandthepossibility itprovided fortheearlyelimination ofquotas. Hereferred
toarecent notification totheWTO inthisregard, dated 19September, which, heunderstood, would
becirculated inthenearfuture inaccordance withestablished procedures. Hesaidthatthecountries
concerned hadbeeninformed directly asrequired bytheATC. Essentially, thenotification explained
thatbytheendof1997Norway would haveabolished 85percentofthe54quotas thatwereinforceG/C/M/23
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atthetimeoftheestablishment oftheWTO. Bytheendof1998thatpercentage would haveincreased
to94percent. Quotas would onlyremain forthemost sensitive products, suchasthree restraints
forfishing nets,which wereabsolutely crucial fortheNorwegian industry. Norway looked forward
tothecontinuation ofaconstructive debate ontheimplementation ofthefirststage oftheintegration
process under theATC andwould comment onspecific matters attheappropriate moment.
5.23 Therepresentative ofArgentina commented thataframework forthereview wascircumscribed
inArticles 8.11and8.12oftheATC. Thefirstofthese defined thenature ofthereview tobecarried
outattheendofeachstage ofintegration. Thiswasageneral exercise based on,among other things,
thereport oftheTMB andwould approach topics including theintegration process, application ofthe
safeguard mechanism andother aspects relating totherulesanddisciplines ofGATT 1994. Asthis
would beawideranging andcomplex exercise, itwould benecessary togivethetimeneeded toensure
afullanalysis ofallmatters bytheCouncil. Thesecond, Article 8.12, laiddown thepremise which
should serve asguidance fortheprocess andforthedecisions which theCouncil might takeinthis
regard; namely, thatitensured thatthebalance ofrights andobligations embodied intheAgreement
werenotimpaired. Hepointed outthat,incarrying outanevaluation oftheATC asawhole onthe
basisofthispremise, thereview mustgofarbeyond theprocess ofintegration andmusttakeintoaccount
thecontributions tomarket opening made bydeveloping countries. Argentina hadmade aspecific
contribution tomarket access asimports hadgrown significantly inthe1990-1996 period, rising more
than800percent,from$100 million to$841 million. Other developing countries hadalsocontributed
through market opening totheintegration ofthetextiles andclothing sector intotheWTO disciplines.
Thiswentbeyond theletter oftheATCtotheveryspirit. Hewasconfident thattrading partners would
approach thereview withthesame spirit.
5.24 Therepresentative ofIndiarecalled thatanumber ofconcerns withrespect totheimplementation
oftheATChadbeenraisedattheCouncil'smeetingsin1996inpreparationfortheSingaporeMinisterial
Conference. Itwasunfortunate thatthepoints raised byseveral textile exporting developing countries,
hadbeenlostsightofwhen thatConference devoted itsattention tonewissues. Thecurrent review
oftheATCbytheCouncil should beutilized tolocate theproblem areas intheimplementation process
andtoexplore thepossibility offinding meaningful solutions totheproblems. Hecommended the
TMB forproviding detailed information onthevarious aspects related totheimplementation ofthe
ATC during thefirststage andnoted thatthereport oftheTMB would behelpful fortheCouncil 's
review. However, hereiterated thatsince there wasnoother WTO body where theviews ofthe
Members could beheard ontheimplementation oftheATC, theTMB inputcould, atbest,beconsidered
astheconsolidated views ofindividual members acting intheiradpersonam capacity. Under theterms
ofArticle 8.11oftheATC, itwould befortheCouncil itself, toconduct thismajor review. He
requested theChairman toallocate timeatseveral formal meetings oftheCouncil toenable Members
toconduct thereview withtheattention andcaremandated bytheATC.
5.25 While hewould come backtospecific concerns atlatermeetings, therepresentative ofIndia
outlinedthemainissues.Itwouldbenecessarytoexamineandanalysetheimplementationoftheconcept
ofprogressive integration bylooking atthedetails oftheintegration programmes ofthemajor importing
Members asnotified totheTMB. Inhisview, these didnotreflect anymajor movement towards the
objective. Also, following thecoming intoforce oftheATC, nonewquantitative restrictions were
tobeintroduced intextiles andclothing tradeexcept under theprovisions ofthetransitional safeguard
mechanism. However, thequantitative restrictions introduced byoneWTO Member witheffect from
1January 1996afterthecoming intoforceofacustoms union ofwhich itwasamember, wasaviolation
oftheprovisions oftheATCandraised important systemic concerns. TheCouncil needed toconsider
theimpact ofchanges inrules oforigin intheoverall context thatsuchchanges should notalterthe
rights andobligations between Members oradversely affect theaccess available toMembers under
theATC. Byamending rules oforigin atatimewhen theWTO wasengaged informulating a
comprehensive setofguidelines onthismatter, theconcerned Member appeared tobeviolating itsG/C/M/23
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obligations. These measures hadtheeffect ofrestricting market access oftheexporting Member
countries totheimporting Member concerned. Itwasalsonoted thatimporting countries were
increasingly resorting toprotectionist measures suchasanti-dumping proceedings. Inthepastfew
years atleastseven suchactions hadbeeninitiated byoneMember inrespect oftextile imports from
India byoneMember. Anti-dumping levies werefarmore important thanquota restraints astheyhad
thepotential torestrict salesanderode thecompetitive edgeinviewofthedirect impact ontheprice
oftheproducts. Also, theCouncil mustexamine whysomany safeguard measures hadbeeninitiated
during thefirstfewmonths oftheopening yearoftheATC, particularly inviewofthefactthatmany
ofthese hadnotwithstood thescrutiny oftheTMB andtwocases which ultimately reached dispute
settlement panels hadbeendecided against theconcerned importing Member. Theissues involved
inthereview were complex andwould require anappropriate period oftimetobeallocated bythe
Council forathorough andcomprehensive discussion. Thiswould callforseveral formal meetings
oftheCouncil toundertake thisreview inkeeping withthestructure laiddown intheATC.
5.26 Therepresentative ofUruguay underscored theimportance ofthereview process bothinterms
ofthespecific provisions oftheATCbutalsointerms oftheoverall reviews ofagreements tobecarried
outintheWTO. Inthisregard, itwasimportant tohaveaclearstructure forthereview ofallaspects
oftheimplementation oftheAgreement. Heconsidered thattheTMB report would beauseful input
tothisprocess.
5.27 Therepresentative oftheUnited States saidthattheyhadbegun theirexamination ofallaspects
oftheimplementation process andwould beready togointoadetailed discussion atfuture meetings.
Hewelcomed theTMB report andobserved thatitmight, infact,betoocomprehensive inthatithad
often placed toomuch emphasis onobservations related tonon-ATC matters andlessemphasis on
questions relating directly totheimplementation ofATC commitments.
5.28 Therepresentative ofCanada stressed theimportance ofthismajor review which must be
undertaken inacomprehensive manner. Noting thatsome speakers hadexpressed concern about the
finalachievement offullintegration, hestated thatCanada remained fullycommitted tothecomplete
integrationofthissectorintothegeneralWTOdisciplines.HeconsideredtheTMBreporttobethorough
andanexcellent basis forconducting themajor review.
5.29 Therepresentative ofBrazil considered theTMB report tobeagood basis fordiscussions,
being comprehensive anddetailed andwithbalance intheviews presented. Henoted thathiscountry
wasnotamajor exporter orimporter oftextiles, however, textile exports weresubject toquotas while
imports constituted amajor factor inthedomestic economy. Accordingly, hisdelegation would be
actively participating inthereview process.
5.30 Therepresentative ofSwitzerland stressed theimportance ofthecurrent review process asa
small textiles andclothing trading country andasaWTO Member which placed great emphasis on
therule-based system fordefending theinterests ofcountries likehisown. Hestated thattheTMB
report could guide future discussion.
5.31 Inconcluding themeeting, theChairman thanked thedelegations fortheiropening orgeneral
statements. Henoted thatallspeakers hadcategorically stated thatthemajor review wasanimportant
process andthatthedebate should beconstructive soastoresult inameaningful review ofthe
implementation inthefirststage. Further, whathadbeencarried outatthismeeting wastheinitiation
ofthereview process andaconsiderable amount oftimewould berequired tolookintothevarious
aspects. Healsonoted thatalldelegations werehighly appreciative ofthecontribution made tothis
process bytheTMB through itscomprehensive report. Accordingly, theChairman proposed thatthe
Council takenoteofallthestatements made andthataseries ofmeetings bearranged togivethe
opportunity toanalyse various issues indepth. Heconsidered thattheTMB report hadbeenstructuredG/C/M/23
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insuchawayastopromote anorderly andmeaningful discussion ofalltheissues arising outofthe
implementation oftheATC. Hesuggested thatfuture meetings beheldonThursday 16October (p.m.)
atwhich thesubject oftheintegration process could bediscussed. Henoted thatthistopic wasdealt
withinSection 2oftheTMB report. Then, afurther meeting could beheldon20October when the
transitional safeguard mechanism might beconsidered. Thistopic wasdealtwithinSection 3ofthe
TMB report. Athird meeting could beheldon7November todealwiththeapplication ofGATT
rulesanddisciplines asdefined inATC Articles 2,3,6and7.TheTMB report dealtwiththesetopics
insections 4,5,6,7and8.Afourth meeting, atadatetobedetermined, butbefore themeeting
oftheCouncil on19November, could consider other topics asconsidered necessary. Henoted that
sections 9,10and11might berelevant. Itwasalsopointed outthattheChairman would beholding
informal meetings andconsultations between theformal meetings onthebasis ofrequests andwhen
considered desirable, tofacilitate theoverall objective ofthisreview.
5.32 TheCouncil soagreed.
6. FreeTrade Agreement between Canada andChile
- Communication from theparties totheAgreement (WT/REG38/N/1 andAdd.1,
WT/REG38/1)
6.1 TheChairman drew attention tothenotification from theparties totheAgreement contained
indocument WT/REG38/N/1 anditsaddendum. ThetextoftheAgreement hadbeencirculated in
document WT/REG38/1.
6.2 Therepresentative ofCanada, speaking alsoonbehalf ofChile, informed theCouncil ofthe
entry intoforce ofafreetrade agreement between thetwocountries. Inrecent years, Canada-Chile
trade hadbeengrowing veryrapidly andtheAgreement reflected astrong desire toprovide new
opportunities fortrade creation. ThisAgreement wasinfullconformity withWTO provisions. The
fulltextoftheAgreement aswellasasummary hadbeenprovided toMembers andtheparties were
ready toproceed withtheexamination ofthisAgreement inaccordance withArticle XXIV.
6.3 TheCouncil tooknoteofthestatement andagreed thattheCommittee onRegional Trade
Agreements carry outtheexamination ofthisAgreement inaccordance withthefollowing terms of
reference:
"toexamine, inlightoftherelevant provisions oftheGATT 1994, theFreeTrade Agreement
between Canada andChile andtosubmit areport totheCouncil forTrade inGoods".
6.4 Itwasunderstood thattheunderstanding readoutbytheChairman oftheCouncil forTrade
inGoods under item 7oftheAgenda ofthemeeting oftheCouncil forTrade inGoods on
20February 1995, ascontained indocument WT/REG3/1, would apply mutatis mutandis tothis
examination. Itwasalsounderstood that,during theexamination, dueaccount would betaken ofthe
intrinsic differences between customs unions andfree-trade areas.
7. FreeTrade Agreement between Romania andtheRepublic ofMoldova
- Communication fromtheparties totheAgreement (WT/REG44/N/1, WT/REG44/1,
WT/REG44/2)
7.1 TheChairman drew attention tothenotification fromtheparties totheAgreement contained
indocumentWT/REG44/N/1.ThetextofthisAgreementhadbeencirculatedindocumentWT/REG44/1
andsome additional information ontheAgreement indocument WT/REG44/2.G/C/M/23
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7.2 Therepresentative ofRomania, speaking alsoonbehalf oftheRepublic ofMoldova, stated
thatthisAgreement wassigned on15February 1994 atBucharest, andthatithadentered intoforce
on1January 1995 afterratification bytherespective Parliaments.
7.3 TheAgreementcreatedafreetradezone,intermsofArticleXXIV:8ofGATT1994andcovered
trade inagricultural andindustrial products. Thenotification bytheparties totheAgreement
(WT/REG44/N/1) wasaccompanied bythetextoftheAgreement (WT/REG44/1) aswellasrelevant
information onthecontents ofthisAgreement (WT/REG44/2). Members would findinthelatter
document, details about theAgreement including statistics ontherecent trade between theparties to
theAgreement.
7.4 TheCouncil tooknoteofthestatement andagreed thattheCommittee onRegional Trade
Agreements carry outtheexamination ofthisAgreement inaccordance withthefollowing terms of
reference:
"toexamine, inlightoftherelevant provisions oftheGATT 1994, theFreeTrade Agreement
between Romania andtheRepublic ofMoldova andtosubmit areport totheCouncil forTrade
inGoods".
7.5 Itwasunderstood thattheunderstanding readoutbytheChairman oftheCouncil forTrade
inGoods under item 7oftheAgenda ofthemeeting oftheCouncil forTrade inGoods on
20February 1995, ascontained indocument WT/REG3/1, would apply mutatis mutandis tothis
examination. Itwasalsounderstood that,during theexamination, dueaccount would betaken ofthe
intrinsic differences between customs unions andfree-trade areas.
8. Korea -USidentification ofKorea 's"barriers" toimported automobiles asaPriority Foreign
Country Practice
8.1 Therepresentative ofKorea stated under "other business" thatrecently, officials ofthe
Governments oftheRepublic ofKorea andtheUnited States hadbeenengaged inaseries ofbilateral
consultations overthequestion offoreign access totheKorean automobile market. On1October 1997,
however,theUSGovernmentdecidedtoidentifyKorea's"barriers"toimportedautomobilesasaPriority
Foreign Country Practice under theso-called "super 301" procedures.
8.2 TheKorean Government wasoftheviewthatthecurrent automobile market practice inKorea
wasinconformity withKorea 'sWTO obligations. Nonetheless, theKorean Government hadmade
efforts toresolve theissue through consultations withtheUnited States. Ittherefore considered it
regrettable, thattheUSGovernment haddecided toresort toitsunilateral procedures atthisstage.
8.3 Hisgovernment wasoftheposition thatsuchanaction taken bytheUnited States which
pressurized itstrading partners through unilateral domestic procedures, rancounter tothespirit and
principle oftheWTO Agreements. TheKorean Government reserved itsrights under theWTO
Agreements inthisconnection. Inparticular, iftheprocedures initiated bytheUSGovernment resulted
innullifying orimpairing Korea 'slegitimate interests onitsexport ofgoods andservices tothe
United States, Korea would take,without delay, appropriate responding measures inaccordance with
therelevant provisions oftheWTO Agreements andthrough other legitimate means.
8.4 TheCouncil tooknoteofthestatement.
9.1 Dateofthenextmeeting
9.1 TheCouncil tooknotethatitsnextregular meeting wasscheduled for19November 1997,
andthattheagenda forthatmeeting would close by6November 1997.