WORLD TRADE
ORGANIZATIONG/TMB/19
29 June 1999
(99-2684)
Textiles Monitoring Body
FIFTY-SIXTH MEETING OF THE TMB
Note by the Chairman
1. The Textiles Monitoring Body met on 23 and 24 June 1999.
2. The TMB authorized its Chairman to provide WTO Members with the following information.
Notification under Article 8.10 of the Agreement on Textiles and Clothing
United States/Pakistan:  imports of combed cotton yarn (US category 301)
3. On 28 May 1999, the TMB received a communication from the United States under
Article 8.10, following the examination by the TMB, on 12 to 14, 20 to 22 and 27 April 1999, of thetransitional safeguard measure introduced by the United States on imports of combed cotton yarn
(US category 301) from Pakistan.  The transitional safeguard measure had been introduced as from
17 March 1999.
4. In this communication, the United States co nveyed its inability to conform with the
recommendation the TMB had made
1 that the measure introduced by the United States on imports of
combed cotton yarn from Pakistan should be rescinded.  The United States considered that it had
presented a strong and compelling case that increased imports had caused or threatened serious
damage to domestic producers.  All economic indicators affirmed that the safeguard action had been
appropriately taken and the record showed that the case had been appropriately justified in
consultations with Pakistan and before the TMB.  Therefore, the United States requested that the
TMB reconsider its recommendation that the measure on imports of combed cotton yarn from
Pakistan be rescinded.
5. The communication of the United States set out in detail the reasons why the United States
was unable to conform with the TMB’s recommenda tion.  The main reasons identified in this
communication can be summarized as follows:
- the TMB had identified three issues which, in the Body’s view, constituted "serious
limitations" in the US' presentation of the relevant information, and had caused theTMB to be "not in a position to assess without doubt whether or not serious damage
had been caused to the US industry producing products like and/or directly
competitive with combed cotton yarn by increased imports of combed cotton yarn".
These issues were the definition of the domestic industry, the time period covered by
the information provided on the US domestic industry and some aspects concerningthe developments in, and the state of the domestic industry such as the evolution of
employment, the closure of plants, investment and the restructuring that could have
taken place in the domestic cotton yarn industry;
                                                     
1 For the TMB’s review of the transitional safeguard measure, pursuant to Article 6.10, see
G/TMB/R/53, paragraphs 5 to 34.G/TMB/19
Page 2
- the United States defined the domestic industry in question to be establishments
engaged in the production of combed cotton yarn for sale.  The TMB had questioned
whether the establishments producing combed cotton yarn for their own internal
consumption ("integrated mills") should be included in the defined industry.
According to the United States, Article 6.2 of the ATC contained the only guidanceregarding the industry to be considered for the purpose of introducing a safeguard
measure, namely,  the industry producing products "like and/or directly competitive"
with the particular product being imported.  In the view of the United States,
Article 6.2 should be read to mean that the industry which produced products which
were like and directly competitive, as well as products which were not like but were
nevertheless directly competitive, should be considered.  On the other hand, products
which were like but not directly competitive did not fit logically into the definition of
an industry for the purpose of Article 6 of the ATC.  If a domestically produced
product were not in competition with an imported product, there would be no reason
to undertake a safeguard action, even if the products were exactly alike.  The combed
cotton yarn produced by the integrated mills was a similar product, but was not
directly competing with imports except in de minimis  volumes. Therefore, the
integrated mills should not be included in the defined industry.  The United States
also pointed out that the TMB had reviewed a US safeguard measure where the
identical analysis of industry definition (yarn for sale) had been performed to
determine the existence of serious damage, or actual threat thereof, and in that
instance, the TMB had found that the measure "was justified in accordance with theprovisions of Article 6 of the ATC" (G/TMB/R/42);
- with respect to the time period covered by the information provided by the
United States on its domestic industry, the United States stated that it had presented in
its statement of serious damage at the time of the request for consultation, in
accordance with Article 6.7 of the ATC, information "as up-to-date as possible" and"related, as closely as possible, […] to the reference period set out in paragraph 8" of
Article 6.  This information reflected the first eight months of 1998.  The
United States had chosen to provide that information instead of providing information
on a twelve-month basis (either using estimates for the remainder of 1998, or
providing data on a year-ending August 1998 basis) in view of the observations made
by the TMB in its review of Colombia’s notification regarding imports of plain
polyester filaments from Korea and Thailand (see G/TMB/R/49, paragraph 21);
- the United States stated that it was unsure as to how it should interpret the statement
by the TMB that the presentation of information on an eight-month basis "in itself
hampered the Body’s task of assessing whether or not serious damage, or actual
threat thereof, had been demonstrated, particularly in view of the fact that a longer
period might better reflect all the factors that could have had an effect on theevolution of the data" (G/TMB/R/53, paragraph 33).  If the TMB had meant that the
United States should have presented data for the additional months of 1998, the
United States believed that it was unreasonable to expect that an investigation,
supporting a request for consultations made in December 1998, could have provided
data more current than August 1998.  Alternatively, if the TMB had meant that thedata should have been presented on a 12-month, year-ending basis, this appeared to
contradict the Body’s own statement made in its review of Colombia’s notification
regarding imports of plain polyester filaments from Korea and Thailand
(G/TMB/R/49, paragraph 21).  Moreover, if the TMB had wished information to be
presented in this manner it could have made such request to the US delegation in thecourse of its meetings on 12 to 14, and 20 to 22 April, which it did not;G/TMB/19
Page 3
- with respect to the developments in, and state of the domestic industry, the
United States believed that any lack of clarity perceived by the TMB was the result of
the Body’s erroneous consideration of matters outside the scope of the combed cotton
yarn for sale industry.  This was borne out by the TMB’s use of the term "domestic
cotton yarn industry".  There was, in the view of the United States, no "cotton yarnindustry" within the meaning of industry appropriately defined in the context of
Article 6 of the ATC.  The fact that Pakistan had repeatedly introduced allegations
having no bearing at all on, or only partially relevant to, the condition of the
US combed cotton yarn for sale industry, and the TMB’s failure to dismiss such
information as irrelevant, was the primary cause of the TMB’s uncertainties.  As
regards the evolution of employment, the fact was that jobs had been lost as workers
had exited the combed cotton yarn for sale industry even if, possibly, some of theseworkers might have been fortunate enough to find other jobs in the textile industry.
Also, while it might be true that only one of the three establishments hitherto
producing combed cotton yarn for sale which had been reported by the United States
as having closed during 1997 and 1998 had effectively closed, and while the other
two establishments had remained productive in another capacity, these threeestablishments had exited the combed cotton yarn for sale industry, with the resultant
loss of 340 production worker jobs in the combed cotton yarn for sale industry.
Finally, though the United States recognized that investment and restructuring were
taking place in the US textile industry, it pointed out that the main reason for the
restructuring was the impact of imports.  The relocation of production capacityoutside the United States, in particular in Mexico, alleged by Pakistan, was taking
place in industries other that the combed cotton yarn for sale industry and was,
therefore, not relevant to that industry.  Similarly, the ongoing restructuring of the
US industry, vertically integrated firms becoming more common, also alleged by
Pakistan, was  outside the scope of the US’ investigation, since the mills purchased inthat process did not produce, or had ceased production of combed cotton yarn;
- finally, the United States stated that it was deeply concerned that the TMB had raised
the level of requirements of information that must be provided by the Member acting
under Article 6 of the ATC.  While the United States had provided information on all
eleven variables cited in Article 6.3 pertaining to the domestic combed cotton yarn
for sale industry, and also on two additional economic variables, the TMB had
indicated that it did not have sufficient information to assess whether or not seriousdamage had been caused to the US combed cotton yarn industry.  Moreover, these
additional requirements were applied in a non-transparent and arbitrary manner, such
that it was impossible to determine the sta ndard that the TMB was using in reviewing
safeguard actions.  The United States further stated that it was particularly concerned
that the TMB was apparently requiring Members taking action under Article 6 to putit "in a position to assess without doubt whether or not serious damage had been
caused …" (G/TMB/R/53, paragraph 34).  This "without doubt" standard was clearly
beyond the TMB’s mandate under the ATC and was an almost impossible burden to
meet.
6. In light of the arguments set out in paragraph 5 above, the United States requested the TMB
to reconsider its recommendation that the measure on imports of combed cotton yarn from Pakistan be
rescinded.
7. At the invitation of the TMB, pursuant to Article 8.7, Pakistan sent a delegation to participate
in the TMB’s review of the matter, whereas the United States chose not to be represented.G/TMB/19
Page 4
8. In response to the communication submitted by the United States, the representative of
Pakistan stated, inter alia , that:
- the US Government had carved a definition of the industry producing products like and/or
directly competitive with imports of combed co tton yarn that corresponded to its cause.  The
safeguard measure applied by the United States itself did not make a distinction between thecombed cotton yarn imported for sale and the combed cotton yarn imported by integrated
firms; it was, therefore, a misnomer to say that the imported product subject to quota was
combed cotton yarn for sale.  Furthermore, there was, statistically speaking, no separation
between the yarn produced by "integrated" units and that produced by "for sale" units.  There
was no legal barrier that would prevent the integrated mills from buying yarn from the "for
sale" market, or importing it, or selling yarn to the "for sale" market.  Given the small number
of units producing yarn for sale, the restructuring by one unit (such as the conversion into anintegrated unit or a change in production) was likely to result in a substantial drop in the yarn
for sale production.  Also, the yarn for sale and the yarn produced by integrated units were
directly competitive, since if yarn for sale (domestically produced or imported) were to be
available at lower prices than the yarn produced internally by the integrated units it would
make commercial sense for them to purchase yarn on the "for sale" market;
- with respect to the time period covered by the data provided by the United States in pursuance
of Article 6.7, Pakistan’s view was that a period of eight months was too short to demonstrate
serious damage.  This point was emphasized by the fact that at the time the request for
consultations had been made, on 28 December 1998, as well as during consultations in
February 1999, imports from Pakistan of combed cotton yarn had gone down substantially ascompared to the eight-month period January-August 1998;
- during consultations, as well as during the review of the safeguard measure by the TMB, the
United States had not been fully forthcoming in answering several of the questions put by
Pakistan;
- as regards the developments in, and state of the domestic industry, Pakistan had revealed,
during the TMB’s review, the inaccuracies contained in the US’ statements.  Pakistan
challenged the US’ claim of job losses.  No data on investment by the combed cotton yarn
industry had been provided by the United States, but a general statement had been made
instead.  The facts pointed to a definite trend in investment to increase capacity or to
introduce technological changes to produce specialized products, as well as to increasing
investment in Mexico by US companies;
- therefore, in the view of Pakistan, the comments made by the TMB that "some aspects
concerning the developments in, and state of its domestic industry had remained unclear (such
as the evolution of employment, the closure of  plants, investment and the restructuring that
could have taken place in the domestic cotton yarn industry)" were valid because the
US Government had failed to demonstrate its claims in accordance with the provisions of
the ATC.
9. In starting its examination of the matter referred to it the TMB recalled that, in accordance
with Article 8.10, "[f]ollowing thorough consideratio n of the reasons given, the TMB shall issue any
further recommendations it considers appropriate forthwith".
10. The TMB noted that the United States had identified three issues which the TMB had, in the
US’ view, identified as constituting "serious limitations" in the US' presentation and had caused theTMB to be "not in a position to assess without doubt whether or not serious damage had been caused
to the US industry producing products like and/or directly competitive with combed cotton yarn byG/TMB/19
Page 5
increased imports of combed cotton yarn" (see paragraph 5 above, first indent).  As the United States
had addressed these issues one-by-one the TMB decided to follow the same approach.
(a) Definition of the domestic industry producing like and/or directly competitive products
11. In its communication the United States recalled that it had defined the domestic industry to be
establishments engaged in the production of combed cotton yarn for sale.  According to theUnited States, "the TMB questioned whether combed cotton yarn produced by establishments for their
own internal consumption ('integrated mills') should be included in the defined industry".  With a
view to clarifying the position taken by the TMB, th e Body recalled what had been stated in its report
(G/TMB/R/53):
"12. … the TMB recalled that, according to Article 6.2, '[s]afeguard action may be taken
under this Article when, on the basis of a determination by a Member, it is demonstrated that
a particular product is being imported into its territory in such increased quantities as to causeserious damage, or actual threat thereof, to the domestic industry producing like and/or
directly competitive products.  Serious damage or actual threat thereof must demonstrably be
caused by such increased quantities in total imports of that product and not by such other
factors as technological changes or changes in consumer preference'.  It followed from this
that the factual information referred to in Arti cle 6.7 had to be provided with respect to the
domestic industry producing like and/or directly competitive products.
13. The TMB noted that the particular product subject to the safeguard measure
introduced by the United States was combed cotton yarn identified as US category 301.  The
TMB observed, furthermore, that in terms of its characteristics any combed cotton yarn was
identical, i.e. alike in all respects, including common end-uses, with respect to the particular
product subject to the safeguard measure in question. ( emphasis added )
14. The TMB noted that the United States had defined the domestic industry producing
products like and/or directly competitive with imports of combed cotton yarn (category 301)
as the US industry segment that produced spun yarn for sale, chief weight combed cotton
defined as category 301, sold to other firms for use in the manufacture of fabric and finishedtextile products.  It followed from this that the United States had provided information
regarding all the economic variables referred to in Article 6.3 with respect to that segment of
the industry.  As regards the other segment of the US industry producing cotton spun yarn,
chief weight combed cotton, the United States had explained that this segment had been
composed of vertically integrated firms whose yarn did not ordinarily enter normal channels
of trade and did not compete with yarn produced for sale in the open market.
[…]16. The TMB noted that the United States had provided arguments why, in its view, the
combed cotton yarn production of the vertically integrated mills should be excluded from the
scope of the investigation and, by extension, why it had not provided data pursuant to
Article 6.3 with respect to this segment of production.  The TMB observed that it would
ordinarily be up to the Body, on the basis of the detailed information provided pursuant to
Article 6.7, to determine whether it was justified to exclude a particular segment of
production.  Therefore the TMB would have expected to receive, to the extent practicable,
sufficient information to allow it to do so." ( emphasis added )
12. Furthermore, in the concluding part of its report (G/TMB/R/53, paragraph 32), the TMB had
reiterated that:G/TMB/19
Page 6
"the United States had chosen to exclude from its definition of the domestic industry
producing products like and/or directly competitive with combed cotton yarn (category 301) a
segment of its domestic industry producing such yarn essentially for its own internal
consumption.  This segment represented about one third of the total US production of combed
cotton yarn.  As a consequence, the United States had provided information pursuant toArticle 6.3 only with respect to that particular segment of the industry which produced
combed cotton yarn for sale, excluding information that pertained to the evolution of that part
of the industry that produced combed cotton yarn  essentially for its own consumption.  The
TMB was not, in the present case, in a position to assess whether or not, on the basis of the
information provided, the domestic industry producing like and/or directly competitive
products had been correctly identified by the United States." ( emphasis added )
13. The TMB was of the view that the above quoted excerpts highlighted the basic differences
between the approach adopted by the United States and that adopted by the TMB.  The United States
had claimed, in view of the lack of "direct competi tiveness" between the two segments of the industry,
that the vertically integrated segment should be excluded from the definition of the domestic industry
and, therefore, from the investigation conducted under Article 6 without the necessity to provide
specific information on the economic variables, pursuant to Article 6.7, regarding the verticallyintegrated firms.  The TMB, on the other hand, guided by the fact that the domestic industry
producing combed cotton yarn encompassed two segmen ts (i.e. that of the "for sale" companies as
well as that of the vertically integrated firms), had held the view that:
- information reflecting the status of the vertically integrated firms should also have
been provided by the United States, to the extent practicable, regarding the economicvariables defined in Article 6.3;  and
- on the basis of this information the TMB could have determined whether for the
purpose of the particular investigation it was justified, or not, to exclude this segment
of the production from the scope of the domestic industry producing like and/or
directly competitive products for which serious damage, or actual threat thereof, as aresult of increased imports, had been claimed.
14. Furthermore, the TMB observed that the central argument provided by the United States for
its inability to conform with the Body’s recomm endation could be summarized as follows: had the
TMB accepted, in the particular case, the definition of the domestic industry producing like and/or
directly competitive products as provided by the United States in the information submitted pursuant
to Article 6.7, the TMB would not have been faced with the "serious limitations" that had not enabled
it to assess whether or not serious damage had been caused to the US industry by increased imports.
15. Keeping also in mind the above, the TMB next examined the arguments raised by the
United States in its communication in order to justif y that the vertically integrated firms should be
excluded from the definition of the domestic industry producing like and/or directly competitive
products.  In essence, the United States stated that this exclusion had been justified:
- on the grounds of interpreting the relevant provisions of the ATC;- on the basis of the facts involved in the case;
- since the United States had provided info rmation regarding the integrated mills which
was relevant to the TMB’s understanding of such mills and the distinction between
the yarn for sale industry and the integrated mills;
- as the US textile category system established in 1974 – which had never previously
been challenged – "was designed to reflect industry definitions".G/TMB/19
Page 7
The United States also observed that in a previous case an identical analysis of industry definition had
been performed to determine the existence of serious damage, or actual threat thereof, and the TMB
had found that the measure was justified in accordance with the provisions of Article 6.
(i) Legal arguments
16. According to the US communication "[t]he only guidance regarding industry definition
provided by the Agreement on Textiles and Clothing is that an industry produces products 'like and/or
directly competitive' with the particular product being imported.  This means that an industry can
encompass products which are like and directly competitive or it can encompass products which are
not like but which are nevertheless directly competitive with the imported product.  Products which
are like but not directly competitive do not fit logically into the definition of an industry for the
purposes of the ATC.  If a domestic product is not in competition with an imported product, there
would be no reason to undertake a safeguard action even if the products are exactly alike."
17. Noting how the United States had interpreted the notion of "like and/or directly competitive
products", the TMB observed that the ATC did not provide a definition of what constitutes the
domestic industry producing like and/or directly competitive products.
18. The TMB considered that it had no authority to provide legal interpretations on the language
used by the ATC or to take position on such interpretations offered by a Member.  It could beobserved, however, that whether or not combed cotton yarn was sold or further processed within a
vertically integrated company did not affect the product characteristics of such combed cotton yarn.
Indeed, combed cotton yarn produced by vertically integrated plants bore the same physical
characteristics as combed cotton yarn produced for sale, therefore, in the view of the TMB, the two
products can be considered as "like" products.  The fact that the United States acknowledged that asmall proportion of the combed cotton yarn produced by vertically integrated mills was actually sold
confirmed that the further use of combed cotton yarn did not affect the nature of the product as such.
Also, the US communication did not seem to question the factors determining the "likeness" of
products in general and that combed cotton yarn produced by vertically integrated firms was in
particular, "like" combed cotton yarn produced by the "for sale" producers.  Instead, theUS' arguments were focussed on the "directly competitive" nature of the products.
19. The statement made by the TMB in paragraph 32 of G/TMB/R/53 had not, therefore,
involved an interpretation of the definition of what constitutes the "domestic industry producing like
and/or directly competitive products".  Instead, it had summarized the Body’s view that on the basis
of the information provided by the United States the Body could not assess whether or not the
domestic industry producing like and/or directly competitive products had been correctly identified by
the United States.  This implied, therefore, that the TMB was not in a position to assess whether or notthe US industry producing products like and/or dire ctly competitive with imports of combed cotton
yarn was experiencing serious damage or actual threat thereof.  In the view of the TMB, this statement
continued to be valid, independently of the arguments raised by the United States in its
communication pursuant to Article 8.10.
(ii) Factual arguments
20. The TMB noted that in terms of factual arguments the United States had, in essence,
summarised the information provided and the arguments made by it for the purpose of the
examination of the measure by the TMB pursuant to Article 6.10.  The United States continued to be
of the view that, as integrated mills "as a general practice" consumed the yarn they produced in their
own subsequent production of fabric, and since they did not produce, except in de minimis  volumes,
combed cotton yarn for sale, the US authorities were  right in determining that the integrated mills
were not producers of directly competitive products and did not consider them to be part of the
defined industry.G/TMB/19
Page 8
21. With respect to the above, the TMB made the following observations:
- these factual arguments did not provide additional information compared to what had
already been made available by the United States pursuant to Article 6.7. The
presentation this time had been structured in such a way as to provide factual support
to the legal arguments made by the United States;
- the fact that the United States recognized that the vertically integrated firms sold a
limited amount of their combed cotton yarn production on the "for sale" market and
bought also a small share of their yarn consumption from that same market confirmed
to the TMB that the two segments of the industry were not fully independent from
one another; there was an interaction and a form of "direct competitiveness" between
the two.
(iii) Information provided by the United States regarding the integrated mills
22. According to the US communication, the United States provided information regarding
integrated mills which was relevant to the TMB’s understanding of such mills and to the distinction
between the yarn for sale industry and integrated mills.  The TMB recalled that the actual data
provided by the United States in the sense of Article 6.3 regarding integrated mills had been limited to
the volume of combed cotton yarn produced by them in 1996 and 1997.  The TMB observed that nodata on output had been provided for these firms related to the period of January-August 1998, which
was the period during which, as claimed by the United States, the alleged serious damage or actual
threat thereof had occurred to the domestic industry.  Therefore, even with respect to this only
economic variable regarding which some information had been provided, the TMB had not been
placed in a position to check what the developments had been during the first eight months of 1998, aperiod that had been decisive in the US' determination of serious damage or actual threat thereof.
Furthermore, no information had been presented regarding the ten other economic variables listed in
Article 6.3 with respect to the integrated mills.
23. The TMB also observed that, as reflected in its report, the United States had, in fact, focused
its arguments on why the production of integrated mills should be distinguished from that of the yarnfor sale industry.  The TMB reiterated that on the basis of the information provided it had not been in
a position to assess whether or not it was justified to exclude the integrated mills’ production of
combed cotton yarn from the scope of the investigation.
(iv) The US textile category system
24. According to the US communication "[t]he US safeguard action was applied to all products in
textile Category 301";  "[t]he US category system was established in 1974.  This system was designed
to reflect industry definitions.  All requests for consultation since 1974, whether made under theMultifiber Arrangement or under the Agreement on Textiles and Clothing, have been based on this
category system.  The congruence of the US cate gory system with industry definition has never
previously been challenged by either the TMB or its predecessor, the TSB."
25. The TMB was of the view that the reference to the US textile category system did not seem to
have much relevance in the context of the examination of the measure at hand.  The stated congruenceof the US category system with industry definitions had, indeed, never been challenged by the TMB.
It had never previously been argued either by the United States that its category system was designed
to reflect industry definitions.  In this context, the TMB considered that the US categories as notified
under the ATC related to products defined by HS lines and not to industries as such.G/TMB/19
Page 9
(v) The TMB's review of a previous US safeguard measure where an identical analysis of
industry definition was performed
26. The United States made reference to the review by the TMB of a restraint measure agreed
between the United States and Thailand on imports of yarn for sale, 85 per cent or more by weight
artificial staple fibre (category 603), where an identical analysis of industry definition had been done;in that instance the TMB had found that the measure was "justified in accordance with the provisions
of Article 6" (G/TMB/R/42).
27. The TMB observed that the circumstances in which the examination of the US/Thailand and
the US/Pakistan cases had been conducted were different, having also an impact on the TMB's
consideration of the particular issues.  While Thailand had not brought to the TMB's attention any
possible problem related to the definition of domestic industry provided by the 
United States , the Body,
on its own initiative, had taken the decision to seek clarifications from the United States in this regard.The TMB had had to reach a conclusion, pursuant to Article 6.9, on the basis of the limited additional
information received from the United States.  The TMB's report regarding the US/Thailand case
reflected the uneasiness with which the TMB had considered this particular aspect of the case,
stemming, inter alia , from the fact that the United States had not provided information, pursuant to
Article 6.7, on the vertically integrated firms.  On the other hand, in the US/Pakistan case, the
definition of the domestic industry and the related requirements in terms of information to be
provided, pursuant to Article 6.7, had already become a core issue during the bilateral consultations
held pursuant to Article 6.7, and this was subsequently confirmed during the examination conducted
by the TMB pursuant to Article 6.10.  The detailed arguments made by the two Members, their
respective positions regarding the justification under the ATC, or the lack thereof, to exclude asegment of the domestic industry producing like and/or directly competitive products from the scope
of the investigation as well as a number of additional factual information offered by the two parties
relevant to this aspect of the particular case, led the TMB to identify this aspect as one of the most
important issues to be addressed during its consideration.
(b) Time-period covered by the information provided by the United States
28. The TMB recalled that the issues raised by the Un ited States in this regard were related to the
data representing about two-thirds of the total US production of combed cotton yarn.  As to the
statement made by the TMB that the presentation of information on an eight-month basis "in itself
hampered the Body's task of assessing whether or not serious damage, or actual threat thereof, had
been demonstrated, particularly in view of the fact that a longer period might better reflect all the
factors that could have had an effect on the evolution of data" ( emphasis added ), the TMB provided
the following clarifications:
- the United States had provided data for the calendar year 1996 and 1997, as well as
for the period January-August 1997 and 1998.  Since in 1997 (the final 12-month
period for which data had been presented) a number of economic variables referred to
in Article 6.3 showed improvements or relatively satisfactory trends (output increased
by 1.6 per cent compared to 1996, exports by 2.8 per cent, wages by 4 per cent, man-hours by 1.2 per cent and productivity by 0.4 per cent), while some others reflected
only relatively little deterioration, it was apparent that the unfavourable developments
claimed by the United States had essentially occurred  in the course of 1998;
- though it was the view of the United States that it would be unreasonable to expect
the collection of data to be more up-to-date than August 1998, the TMB observed thatconsultations had been requested with Pakistan at the end of December 1998 and that,
therefore, the reference period referred to in Article 6.8 would normally include
September 1998.  Furthermore, data prov ided on a year-ending August 1998 basisG/TMB/19
Page 10
could have perhaps shed additional light on developments affecting the industry in
question.
(c) Developments in and the state of the domestic industry
29. With respect to the US statement that "any lack of clarity perceived by the TMB was the
result of the Body's erroneous consideration of matters outside the scope of the combed cotton yarnfor sale industry", the TMB believed that its consider ation had been limited to the matter referred to it,
pursuant to Article 6.10 of the ATC, on the basis of the information and arguments provided by the
two Members concerned.  All the arguments raised by the United States under this heading were
closely related to the manner in which it had defined the domestic industry affected.  Pakistan,
however, also provided information going beyond that definition.  While the United States based itself
on the narrow definition it had provided, the TMB continued to be of the view that on the basis of the
information provided by the United States, it was not in a position to assess whether or not thedomestic industry producing like and/or directly competitive products had been correctly identified by
the United States.  As a result, some aspects co ncerning developments in, and the state of the
US domestic industry had been unclear when conducting the examination of the measure pursuant to
Article 6.10.
 (i)  The evolution of employment
30. The TMB took note of the reaffirmation of the United States that there had been a loss of 340
jobs associated with the production of combed cotton yarn for sale, since these workers had "exited"
the industry, as defined by the United States.  It had to be observed, however, that this information in
itself did not provide sufficient basis to assess whether or not these workers had become unemployed
or had continued to be employed by the same establishments.
 (ii) The closure of plants
31. Noting that three of the 22 establishments producing combed cotton yarn for sale had ceased
the production of the subject yarn during 1997 and January-August 1998 and that therefore they had
"exited the defined industry", the TMB observed that the information provided by the United States,
pursuant to Article 6.7, had not always been precise.  While the earlier information provided by theUnited States stated that the three establishments had closed, the present communication stated that
one of the establishments had closed and that the two others had "remained productive in another
capacity".  Furthermore, on the basis of the information available to the TMB, it could not be
established whether or not there had been a causal relationship between the "closure" and "exit from
the production" of the establishments in question and the volume of increased imports.
(iii) Investment and restructuring that could have taken place in the US domestic cotton
yarn industry
32. The TMB recalled that one of the aspects which, in its view, had remained unclear was
related to the investment and restructuring that could have taken place in the domestic cotton yarn
industry (G/TMB/R/53, paragraph 33).  In its communication the United States:
- on the one hand, disagreed with the use of the term "domestic cotton yarn industry" as
there was no such industry within the meaning of industry appropriately defined inthe context of Article 6;
- on the other hand, recognized that investment and restructuring were taking place in
the US "textile industry", but that the main  reason for the restructuring was the impact
of imports.G/TMB/19
Page 11
33. The TMB observed in this regard that in addressi ng issues related to restructuring, and in this
context investment, it had not been inappropriate to use the broader term "cotton yarn industry" as
opposed to the "combed cotton yarn for sale" industry, because restructuring usually affected an
industry that is broader than the one defined for the purpose of taking a measure pursuant to Article 6.
The TMB also noted the statement of Pakistan according to which in some cases restructuring in theUS cotton yarn industry brought about investment in modernization and technological changes, and
the introduction of specialized products which might indicate a process of autonomous industrial
adjustment.
(d) Review conducted by the TMB
34. The TMB was aware that the United States had provided information on all the economic
variables listed in Article 6.3 together with two othe r additional variables, but only  pertaining to the
domestic industry as defined by it.  The fact that the TMB had not been able to assess, on the basis ofthe information so provided, whether or not serious damage had been caused to the US industry
producing products like and/or directly competitive with combed cotton yarn, did not mean that the
TMB had raised the level of requirements regarding the information to be provided.  Nor did it mean
that "these additional requirements had been applied in a non-transparent and arbitrary manner."  The
TMB held the view that it was not an additional requirement, nor an increase in the level ofrequirements, that on the basis of the information pr ovided pursuant to Article 6.7 the Body  had to be
placed in a position whereby it would be able to determine whether the measure referred to it was
justified, or not, under the provisions of Article 6.  In examining the measure referred to it pursuant to
Article 6.10 the TMB had found, in particular, that only limited information in the sense of Article 6.3
had been provided by the United States regarding a segment of the domestic industry representingabout one-third of the total domestic production of combed cotton yarn as observed in paragraph  22
above.  The fact that the TMB was faced with these limitations on the information which would have
enabled it to decide whether or not the domestic industry producing like and/or directly competitive
products had been correctly identified by the United States, was instrumental in leading the Body to
conclude that it had not been in a position to assess whether or not the US measure was justified inaccordance with Article 6.
35. In respect of the contention of the United States that the TMB had introduced a "without
doubt" standard going beyond its mandate under the ATC, the Body wanted to make it clear what its
conclusions actually meant: the reference to "without doubt" arose from the serious limitations
stemming from the information provided, as a result of which the TMB had not been in a position to
make a finding as to whether the determination on the existence of serious damage or actual threat
thereof made by the United States was justified, or not, under the provisions of the ATC.
Conclusion
36. Having given thorough consideration to the reasons presented by the United States for its
inability to conform to the TMB's recommendation, the TMB concluded that these reasons did not
lead it to change the conclusions and recommendation arrived at by the TMB during its examination
of the measure pursuant to Article 6.10.  The TMB recommended, therefore, that the United Statesreconsider its position and that the measure introduced by the United States on the imports of
category 301 products from Pakistan should be rescinded forthwith.
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37. The fifty-seventh meeting of the TMB is scheduled for 19 to 21 July 1999.
38. The full report of the fifty-sixth meeting will be circulated at a later stage.
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