WORLD TRADE
ORGANIZATIONG/TMB/N/403
8 August 2001
(01-3926)
Textiles Monitoring Body Original:  English
AGREEMENT ON TEXTILES AND CLOTHING
Communication from Uruguay
The Textiles Monitoring Body has received a communication from Uruguay, on behalf of
members of the ITCB that are also Members or observers of the WTO, in reply to its request for
additional information in the context of the preparation of the Body's Comprehensive Report on the
implementation of the ATC during its second stage, in accordance with Article 8.11.
The TMB is circulating this communication to WTO Members for their information.G/TMB/N/403
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Permanent Delegation of Uruguay
Geneva
11 April 2001
Mr. András Szepesi
Chairman
Textiles Monitoring Body
World Trade Organization
Centre William RappardRue de Lausanne 154
CH-1212 Genéve 21
Dear Mr. Szepesi,
In response to the TMB's invitation to Members for comments in connection with the
preparation of its comprehensive report on implementation of the ATC during the second stage
(G/TMB/24), I am pleased to attach herewith so me comments on behalf of the 23 members of the
ITCB that are also Members or observers of the WTO.
As you know, the members of the ITCB are:  Argentina;  Bangladesh;  Brazil;  China;
Colombia;  Costa Rica;  DPR Korea;  Egypt;  El Salvador;  Guatemala;  Honduras;  Hong Kong,
China;  India;  Indonesia;  Republic of Korea;  Macau, China;  Maldives;  Mexico;  Pakistan;
Paraguay;  Peru;  Sri Lanka;  Thailand and Uruguay.
We trust that these comments will be useful to the TMB in its task.
Sincerely yours,
(Signed)
William Ehlers
Minister Counsellor
Permanent Mission of Uruguay to the WTO
and
Acting Chairman, International Textiles and Clothing BureauG/TMB/N/403
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Preparation of TMB’s Comprehensive Report on
ATC Implementation during Stage 2
Comments by ITCB members
The Agreement on Textiles and Clothing (ATC) expressly provides that the purpose of the
TMB’s comprehensive report is to assist the C ouncil for Trade in Goods (CTG) in its review of
implementation of the ATC. It also provides that the report may include any recommendations as
deemed appropriate (Article 8:11).
Therefore we believe that, to be of practical utility to the CTG in its review, the report should
not be merely factual. It ought to contain the TMB’s assessment, in particular with respect to the
realization of the objective of the Agreement.
We wish to emphasize that the TMB’s own mandate is to supervise the implementation of the
ATC and to examine all measures and their conformity with its provisions. It also bears mentioning
that the ATC is an integral part of the WTO Agreement. Various dispute Panels and the Appellate
Body have clarified this in a number of instances. We expect the TMB to apply the same standard in
its analysis and assessment. In this context, the Ag reement provides sufficient latitude to the TMB to
secure information from Members and other sources as it deems appropriate (Article 8:3, last
sentence).
Central Objective of the ATC:
As a preliminary matter, we suggest that the report bring out the fundamental objective of the
ATC, which is to secure the integration of the sector into normal rules and disciplines of the GATT
through progressive dismantling of GATT-inconsistent quota restrictions and requirements. It should
particularly focus on evaluating progress towards the elimination of these restrictions and
requirements.
Article 2 - Integration Process:
Article 2 of the Agreement provided the main mechanism for realization of the integration of
the sector into the normal rules and disciplines of the GATT. It is therefore central to assessing
progress in the implementation process.
We wish to point out that the meaning of the term "integration" must not be determined in
isolation or in the abstract. It should take place in the context of the Agreement (including its
preamble in particular paragraph 2 thereof) and in light of the object and purpose of the ATC. It is
also important to recall the circumstances of the conclusion of the ATC and the background in which
it was negotiated, which undoubtedly was the existen ce of GATT-inconsistent quota restrictions with
all their attendant requirements, and the agreement to eliminate them in a progressive manner.
Therefore the TMB report should devote particular attention to assessing the integration
process. In this regard, it must distinguish between the programmes notified by WTO Members that
maintained quota restrictions from the programmes of those that did not. It needs to be recalled thatthe integration programmes of the latter group are not relevant to the elimination of pre-existing quota
restrictions which, as mentioned above, is the central purpose of Article 2. They are relevant only in
the narrow context of retention, by those Members, of a right to safeguards during the transitionalG/TMB/N/403
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period. Therefore, the emphasis should be on the programmes of the former. In the following
paragraphs, these Members are referred to as "restraining Members".
Since the last comprehensive report of the TMB, the restraining Members implemented their
integration programmes with respect to Stage 2 of the integration process. They have also sincenotified the programmes for Stage 3. It would be appropriate and useful for the TMB to provide its
assessment on the basis of programmes notified so far.
The analysis of those programmes would reveal that Norway deserves to be commended for
its elimination of all quota restrictions. However, we believe that the report should bring out that:
(i) Taken in isolation, the integration programmes of the other three restraining Members
(USA, EU and Canada) might fulfill the threshold requirement of integrating products
accounting for the minimum of 51 per cent of their respective 1990 imports covered
by the ATC. Yet very few products that were specifically restrained by quotas would
be liberalized or integrated:
(ii) By the start of Stage 3, the US would have eliminated only 56 quotas out of 757; EU
only 52 out of 219; and Canada only 54 out of 295.
(iii) And, in sharp contrast to the integration percentages of 51 per cent, barely 20 per cent
of imports under specific quota restrictions would have been liberalized by the USand 21 per cent by the EU. (A comparable percentage for Canada cannot be worked
out because it does not provide detailed data).
The report should also bring out that:
(i) Three restraining Members, namely Norway, Canada and the US, notified their
elimination of certain quota restrictions pursuant to Article 2:15 of the ATC. But
while Norway and Canada acted on MFN basi s, the US did so only with respect to
restrictions on a single Member. It did not eliminate quotas on the same products
from other Members. Nor did it provide any information regarding any consideration
that might have been given to the treatment of exports of these products from such
other Members. This obviously was not the case.
(ii) Inconsistently with Article 2:4 of the ATC, new restrictions were imposed on non-
integrated products in a number of cases, and at least in one instance this had not been
notified to the TMB or WTO. We believe that, in this regard, the report should detail
all new restrictions that were found to be unjustified under Article 6, other articles ofthe ATC, or any other provision of the GATT because all such restrictions are also,
ipso facto , inconsistent with Article 2:4.
(iii) The US accepted to eliminate its  visa requirement with respect to products integrated
in stage 2 only after some exporting Members requested the TMB to review itsconformity with the ATC. Despite that, the US has failed to confirm to the TMB that
such requirement with respect to products that have been notified for integration from
1 January 2002 will likewise be withdrawn.
We are cognizant of the increases in growth factors pursuant to the relevant provisions of
Article 2. However, we wish to stress that an augmentation of access should not be viewed as a
substitute for the integration of relevant products by means of complete elimination of quota
restrictions. Nor can it detract from the failur e of the restraining Members in attaining the
fundamental purpose of the Agreement (integration of the textile and clothing sector into GATT) in aG/TMB/N/403
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progressive manner. In this regard, we also wish the TMB to note that, notwithstanding the
increments in growth rates, the restrictive nature of quota restrictions has not lessened when seen in
the light of actual trade.
An objective assessment of the above facts should lead the TMB to conclude that the
realization of the central objective of integrating textiles and clothing into GATT by way of the
elimination of quota restrictions in a progressive manner has remained largely unfulfilled. It should
also conclude that this has had significant adverse implication for the balance of rights of restrained
Members, and suggest to the CTG that the restraining Members take immediate steps to restore the
balance.
Article 1- Basic Principles:
We wish to draw the  TMB’s attention to certain basic principles contained in Article 1  of the
Agreement for observance in the integration process.  Far from being seen as merely optional, these
principles should occupy an important place in guiding the TMB in reviewing and assessing the
implementation of various provisions of the Agreement.
Article 1:2 provided for implementation of the growth-on-growth provision of Article 2 in
such a way as to permit meaningful increases in access possibilities for small suppliers. It also
provided that the same treatment be extended to least developed Members.
The US and Canada failed to implement this provision consistently with its object and
purpose. In particular, the methodology employed by them in implementing the growth
factors of the Agreement fell short of providing meaningful increases in access possibilities
for small suppliers. The report should also emphasize that, with respect to least developed
country Members, they failed to give any mean ing to the provision. We wish to point out that
the TMB also seemed to overlook the importance of full and faithful application of the
principle embodied in this provision in its review of the implementation of Article 2.
Article 1:4 provided that the  particular interests of cotton-producing exporting Members
should be reflected in the implementation of various provisions of the Agreement.
No specific information has been notified by  the restraining Members as to the manner in
which this principle might have been reflected in their implementation; in, for example, the
choice of products for integration or invocation of safeguard actions. Given the fact that
cotton products have long been targeted for quota restrictions, the report should bring out that
the application of Article 1:4 has been altogether ignored.
Article 1:5 provided that in order to facilitate the integration process, Members should allow
for continuous autonomous industrial adjustment and increased competition in their markets. Based
on available information, and taking into account the implementation of Articles 1 and 2 in particular,
the TMB report should include an assessment of th e extent to which regard has been given to the
observance of this principle by restraining Members who have so far demonstrated little concreteefforts in the integration of commercially meaningful restrained products before the end of the
transitional period.
Article 1:6 provided that the rights and obligations of Members under the WTO were not
affected, save to the extent provided in the ATC.
There are numerous instances in which quota restrictions on non-WTO Members have been
eliminated while keeping them in place for WTO Members. Thus, restrictions on Russia and aG/TMB/N/403
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host of other countries have been withdrawn. The TMB may detail full information with
respect to such instances and assess their consistency with the ATC.
We believe that in light of above facts, the TMB report ought to conclude that the restraining
Members failed to give full meaning to these basic principles of Article 1 of the ATC. It shouldsuggest that the CTG recommend to the restrain ing Members to take necessary steps to do so.
Article 4 - Administration of Restrictions:
Significantly, Article 4 provided that introduction of changes in rules and procedures should
not upset the rights and obligations of Members under the ATC, or disrupt trade under the Agreement.
In this regard, the  TMB should detail further changes made by the US in its rules of origin for
selected products following a bilateral deal with the EU. The report should bring out that these
changes failed to restore the pre-ATC situation with respect to a number of other products that are of
substantial export interest to restrained Members. It should also bring out that, contrary to the
principle of Article 1:6, the US failed to provide non-discriminatory treatment with respect to singlevisas for multiple shipments, that was extended to imports of products from the member states of the
EU.
The report should detail the downward adjustment of quotas as a result of partial integration
of certain categories in Stage 2, and comment on the result of the methodology employed by therestraining Members and the outlook for Stage 3.
Finally the report should bring transparency on changes in classification of
products/categories, and in technical requirements effected during the implementation process.
In bringing out the implementation of the above measures relevant to Article 4, we hope that
the report will also provide an assessment of the effect of these changes and measures on the rights of
restrained Members particularly in light of the object and purpose of the ATC and the meager results
towards the attainment of its objective.
Article 5 - Circumvention:
Restraining Members, particularly the US, have continued to allege widespread
circumvention of quota restrictions. They have established a variety of procedures and requirements
with the ostensible purpose of preventing circumvention. Thus for example, in 1999, the  US Customs
issued a regulation providing that textile products will be denied entry where the manufacturer named
in the entry document is, inter alia, “unable to produce records to verify production”. Thisrequirement established a presumption of circumvention causing adverse consequences for exporters
and importers. Pursuant to these requirements, imports from companies from a number of restrained
Members are denied entry and are placed on the so-called convicted list.
We wish to emphasize that we do not condone any circumvention of quotas. But it appears
that the extent of the problem is greatly exaggerated. According to the  US Customs’ own report,
actual shipments seized as transshipped or detain ed as suspected transshipment in 1999 amounted to
only 0.068 per cent of its total imports in that year. What is of particular concern is the fact that while
investigations into instances of alleged circumven tion are made unilaterally in a summary manner, the
burden of proving innocence is placed entirely on the exporters concerned. By tarnishing the image ofthese exporters, the utilization of restrained Members’ access is adversely affected.
We expect the TMB to find that allegation of widespread circumvention are not  corroborated
by facts, especially as no cases were brought to the attention of the TMB during the stage underG/TMB/N/403
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review. It should detail the additional requirements and assess whether these are proportionate to the
factual situation.
Article 7 -Strengthened GATT Rules and Disciplines:
On the basis of available information, no non-compliance with any specific market access
commitments undertaken by WTO Members as a result of the Uruguay Round has been notified. We
expect the TMB to bring out this important fact.
We also expect the TMB to bring out that demands for additional market access commitments
from restrained Members as a condition for full and faithful implementation of the integration process
are not justified under the ATC.
On the other hand, we wish to stress that Article 7:1(c) provided that Members avoid
discrimination against imports in the textile and cl othing sector when taking measures for general
trade policy reasons. Yet there have been several instances of singling out the sector (particularly for
imports from restrained Members) in violation of this principle. In this regard, we wish to draw theTMB’s attention to the following:
(i) The  EU’s declared policy to “keep the possibility of using existing quotas as a
bargaining chip to obtain better market access in third [restrained] countries”.
(ii) The US action to defer the integration of so-called most sensitive products until the
end of the transition period.
(iii) US changes in its rules of origin involving only textile and clothing products.
We also wish the TMB to note the anti-dumping actions on imports of textile and clothing
products from countries whose exports of these products were already under severe quota restriction.
While we recognize the right to anti-dumping actions, we wish to emphasize that the targeting of
restrained products has had  the effect of causing double jeopardy to the exporting countries concerned
and of impairing their right to utilize access under the Agreement.
In this regard, the TMB might already be aware of three anti-dumping measures by the EU
involving bed linen, one of which, adopted on similar basis, has since been found to be illegal by the
Appellate Body. In addition, although withdrawn without imposition of definitive duties, EU
measures involving cotton fabrics also nevertheless caused substantial impairment of benefits
accruing to the restrained exporting countries concerned. Finally the TMB report should note the anti-
dumping and countervailing duty measures which the US decided to maintain on cotton shop towelsfrom three exporting countries.
In substance, the discriminatory singling out of textile and clothing products for general trade
policy reasons, together with anti-dumping a nd countervailing duty measures, has had obvious
negative bearing on the balance of rights of restrained countries on the one hand and theimplementation of the ATC on the other. We hope the TMB report would  incorporate this in its
assessment.
Article 6 - Safeguard Actions:
The TMB may note the deceleration of safeguard actions by restraining Members. However,
we hope that the report brings out the fact that a restraining Member refused to accept a TMB
recommendation to withdraw the measure. While the exporting Member concerned requested aG/TMB/N/403
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dispute panel to rule on the conformity of the measure, the restriction remains in place damaging its
access opportunities.
It is also our strong expectation that the TMB emphasize the importance of following the
guidelines emanating from dispute settlement panels and the Appellate Body.
Article 8 - Functioning of the TMB:
We recognize the improvement in the transparency of TMB findings during the second stage,
particularly as concerns the review of safeguard actions. It needs, however, to be pointed out  that its
findings and reports have not always been consistent. Thus, for example, while it found certain
actions to be inconsistent with restraining Member’s obligations, another action taken on the samebasis was declared to be justified. And the TMB neglected to rectify the error. Similarly although a
restraint measure had been found by a dispute panel to be inconsistent with the ATC, the TMB
refused to declare another measure on the same product adopted on the basis of the  same market
statement to be inconsistent. In the process, the TMB failed to observe the standard of review
established by the panel process.
We also wish to remind the TMB of its mandate to keep the integration process under review
(Article 2:21) as it is essential to ensuring effective application of the basic principles of Article 1 as
well as the implementation of the integration proces s in general. We hope that the TMB also follow
on its findings and recommendations.