 
 RESTRICTED  WORLD TRADE  
ORGANIZATION  G/L/683 
30 July 2004 
 (04-3284) 
  
  
 
COMPREHENSIVE REPORT OF THE TEXTILES MONITORING BODY 
TO THE COUNCIL FOR TRADE IN GOODS 
ON THE IMPLEMENTATION OF THE AGREEMENT ON TEXTILES AND CLOTHING 
DURING THE THIRD STAGE OF THE INTEGRATION PROCESS 
 
I. This comprehensive report on the implemen tation of the Agreement on Textiles and 
Clothing (ATC) during the third stage of the integration process is transmitted, pursuant to Article 8.11,  by the Textiles Monitoring Body  (TMB) to the Council for Trade in Goods to assist 
the Council in the conduct of its third major revi ew of the implementation of the ATC.  In 
compliance with the deadline defined in Article  8.11 of the ATC, the report covers the period 
1 January 2002 to 21 July 2004. 
II. Article 8.11 requires that the comprehensive report cover implementation, in particular in 
matters with regard to the integration process, the application of the transitional safeguard 
mechanism, and relating to the application of GATT 1994 rules and disciplines as defined in Articles 2, 3, 6 and 7, respectively. While Part  One of the report is a brief introduction and 
Part Two summarizes the background, Part Th ree addresses in detail the implementation of the 
ATC during the third stage of the integration pro cess.  In this context, the integration process is 
dealt with in Section I, the application of the transitional safeguard mechanism is described in 
Subsection C of Section II and the other Subsections  of Section II are devoted to the quantitative 
restrictions under Articles 2 and 3 and to related measures under Articles 4 and 5.  Section III summarizes the implementation of provisions in th e ATC related to special interests or particular 
situations of certain WTO Members, while Section IV contains information available to the TMB 
regarding some issues that could also be relevant in  the context of the implementation of Article 7.  
Section V deals with some other matters, Section VI provides a summary of issues related to ATC 
implementation addressed in higher WTO bodies,  Section VII addresses the compliance with 
notification requirements under the ATC, while Sec tion VIII gives an overview of the functions of 
the TMB and the work carried out.  
III. Part Four of the report contains elements for an overall assessment of the implementation 
of the ATC, with particular emphasis on developm ents during the third stage of the integration 
process.  It is in the context of the latter that Part  Four also summarizes some of the main elements 
included and the related observations made in Part Three. 
 
 
   G/L/683 
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 TABLE OF CONTENTS 
 
 
PART ONE:  INTRODUCTION........................................................................................................ ................... 11  
PART TWO:  THE ATC AND ITS IMPLEMENTATION DURING STAGES 1 AND 2 OF THE 
INTEGRATION PROCESS, WITH PARTICULAR EMPHASIS ON DEVELOPMENTS DURING 
THE SECOND HAL F OF 2001........................................................................................................ .................... 13  
I. THE  ATC:  AN AGREEMENT FOR A TRANSITION PERIOD OF TEN 
YEARS.......................................................................................................................... ...........13  
II. IMPLEMENTATION DURING STAGE 1 (1995-1997) OF THE 
INTEGRATION PROCESS ..................................................................................................13  
III. IMPLEMENTATION DURING STAGE 2 (1998-2001) OF THE INTEGRATION PROCESS ..................................................................................................14
 
A. MATTERS AND DEVELOPMENTS COVERED BY THE TMB 'S SECOND COMPREHENSIVE 
REPORT ............................................................................................................................... .......14  
B. FURTHER DEVELOPMENTS UNT IL THE END OF STAGE 2 OF THE INTEGRATION PROCESS ..........14  
1. Integration programmes ........................................................................................................1 5 
(a) Notifications by a ne wly acceded Member...............................................................................15  
(i) Notification received pursuant to Article 6.1............................................................................15  
(ii) Notifications received with reference to Artic les 2.6 and 2.7(b) (Stage 1), 2.8(a) 
and 2.11 (Stage 2), 2.8(b)   and 2.11 (Stage 3)..........................................................................15  
(b) Notifications under Articles 2.8(b) and 2.11:  Stage 3 integration programmes ......................15  
(c) Related matters:  the abolition of visa requirements by the United States................................16  
2. Quantitative restrictions notified under Article 2.1 and issues related to their 
implementation................................................................................................................. .......16  
(a) New notifications received with reference to Article 2.1 .........................................................16  
(b) No recourse to the provisions of Article 2.15 (elimination of restrictions without 
integration)................................................................................................................... .............17  
(c) Implementation of the provisions of Article 2.18 .....................................................................17  
3. Quantitative restrictions notified with reference to Article 3.1 ..........................................17  
4. Transitional safeguard measures...........................................................................................17  
(a) Imports into Poland of acrylic/modacrylic st aple yarn, pure or mixed with wool or 
fine animal hair (HS numbers 5509 31, 5509 32 and 5509 61) from Romania........................18  
(i) Notification under Article 6.10 ................................................................................................ .18 
(ii) Notification under Article 8.10 ................................................................................................ .20 
(iii) Implementation of the TMB's recommendation ........................................................................23  
(b) United States – Transitional Safeguard Measures on Combed Cotton Yarn from 
Pakistan:  decision by the DSB................................................................................................. 23 
5. Issues related to ATC implementation addressed in higher WTO bodies.........................24  
(a) Preparation for the Doha Ministerial Conference and the Doha Decision................................24   G/L/683 
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 (b) Second Major Review of the Implementation of the ATC by the Council for Trade in 
Goods.......................................................................................................................... ..............25  
(c) The CTG's oversight function pursuant to Article IV of the Agreement Establishing 
the WTO – Transparency regarding new rest rictions on textile a nd clothing products 
commented on by the Text iles Monitoring Body .....................................................................26  
(d) Composition of the TMB for Stage 3........................................................................................26  
PART THREE:  IMPLEMENTATION OF THE ATC DURING THE THIRD STAGE OF THE 
INTEGRATION PROCESS............................................................................................................ ...................... 27  
I. INTEGRATION.................................................................................................................... ..27 
A. IMPLEMENTATION OF INTEGRATION PROGRAMMES DURING STAGE 3 .....................................29  
1. Members referred to in Article 2.7(a) th at continue to maintain restrictions 
under the provisions of Article 2 ...........................................................................................29  
(a) Stage 3 integration programmes and their implementation ......................................................29  
(b) Implementation of integration programmes in relation to newly acceded Members................32  
(c) Issues relevant to the integration pr ogrammes implemented by the European 
Communities, following its enlargement on 1 May 2004.........................................................32  
(d) No recourse to the provisions of Article  2.10 (advanced or earlier integration).......................32  
2. Members retaining the right to u se the provisions of  Article 6 ..........................................33  
(a) Stage 3 integration programmes notified prior to 1 January 2002............................................33  
(b) Developments during the period of implementation of Stage 3 ...............................................34  
(i) Follow-up to certain notifications whose review was pending.................................................34  
(ii) New notifications received with reference  to Articles 2.8(b) and 2.11.....................................35  
(iii) Notifications received from ne wly acceded Members...............................................................35  
(iv) Observations with respect to late notifications.........................................................................36  
(v) Implementation of integration programmes during Stage 3.....................................................36  
(vi) Issues arising from the enlargement of  the European Communities, affecting 
integration programmes previously notified.............................................................................36  
B. NOTIFICATIONS PURSUANT TO ARTICLE 2.8( C) AND 2.11 ........................................................37  
C. FURTHER ASSESSMENT AND ADDITIONAL OBSERVATIONS BY THE TMB ..................................41  
1. Integration programmes implemented during Stage 3 .......................................................41  
(a) Members maintaining restricti ons falling under Article 2.1 .....................................................41  
(i) Canada......................................................................................................................... .............41  
(ii) European Communities........................................................................................................... ..47 
(iii) United States.................................................................................................................. ...........49  
(iv) Turkey ......................................................................................................................... ..............53  
(b) Integration programmes of Members which had retained the right to use the 
provisions of Article 6 ........................................................................................................ ......56  
2. Final stage of integration to be implemented on 1 January 2005.......................................56  G/L/683 
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 II.
 QUANTITATIVE RESTRICTIONS  AND RELATED MEASURES ...............................57  
A. QUANTITATIVE RESTRICT IONS NOTIFIED PURSUANT TO ARTICLE 2.1.  ISSUES RELATED 
TO THE IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 2, EXCEPT THOSE 
CONCERNING INTEGRATION ......................................................................................................57  
1. Scope of the restrictions taken over from the pre-ATC regime:  status and 
developments during the first and second stages of the integration process .....................59  
2. Developments during Stage 3 regarding the restrictions notified with reference to Article 2.1 ................................................................................................................. ...........59
 
(a) New notifications received with reference, inter alia , to Article 2.1........................................59  
(i) Notifications by Canada ........................................................................................................ ...60 
(1) Restrictions on im ports from China............................................................................................. 60 
(2) Restrictions on imports from Chinese Taipei .............................................................................. 60  
(ii) Notifications by the European Communities ............................................................................61  
(1) Restrictions on im ports from China............................................................................................. 61 
(2) Restrictions on imports from Chinese Taipei .............................................................................. 63  
(iii) Notifications by Turkey........................................................................................................ .....63  
(1) Restrictions on im ports from China............................................................................................. 63 
(2) Restrictions on imports from Chinese Taipei .............................................................................. 65  
(iv) Notifications by the United States............................................................................................. 65 
(1) Restrictions on im ports from China............................................................................................. 65 
(2) Restrictions on imports from Chinese Taipei .............................................................................. 67  
(3) Restrictions on imports from the Form er Yugoslav Repub lic of M acedonia.............................. 68  
(b) Changes in restrictions previously notif ied with reference to Article 2.1.................................68  
(i) Elimination of restrictions by way of integration .....................................................................68  
(ii) Elimination of restrictions without integr ation:  recourse to the provisions of 
Article 2.15................................................................................................................... .............68  
(iii) Elimination or non-application of restricti ons to (certain) imports from certain WTO 
Members........................................................................................................................ ............69  
(iv) Suspension of the application of restricti ons to imports from certain Members ......................71  
(v) Increase in certain restraint levels, oth er than pursuant to the provisions of 
Article 2.14(b)................................................................................................................ ...........72  
(vi) Adjustments implemented in the level of certain specific and aggregate restrictions as 
a result of integration of parts of restrictions  notified with reference to Article 2.1................72  
(c) Implementation of the growth-on-growth pr ovisions (Articles 2.13 and 2.14) during 
Stage 3 of the integration process ............................................................................................. 73 
(i) Implementation of the provisions of Article 2.14(b) .................................................................73  
(ii) Implementation of the growth-on-growth pr ovisions with respect to newly acceded 
Members........................................................................................................................ ............73  
(1) Implementation vis-à-vis  China................................................................................................... 73  
(2) Implementation vis-à-vis  Chinese Taipei .................................................................................... 81   G/L/683 
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 (3) Implementation vis-à-vis  the Former Yugoslav Re public of Macedonia .................................... 83  
(iii) The respective decision of the Doha Ministerial Conference and its follow-up .......................86  
(d) Implementation of the flexibility provisions (Article 2.16) during Stage 3 of the 
integration process ............................................................................................................ ........86  
(i) The flexibility provisions applied vi s-à-vis newly acceded Members .......................................87  
(ii) Issues related to carry forw ard for the year 2004 ....................................................................88  
(e) Administrative arrangements agreed betw een Members and notified following the 
provisions of Article 2.17 ..................................................................................................... ....89  
(i) New notifications received with reference to  Article 2.17 during Stage 3 of the 
integration process............................................................................................................ ........89  
(1) Canada – China ................................................................................................................. .......... 89  
(2) Canada – Chin ese Ta ipei........................................................................................................ ..... 90  
(3) European Commun ities – China.................................................................................................. 9 1 
(4) European Communities – Chinese Taipei ................................................................................... 94  
(5) United States  – China.......................................................................................................... ........ 95  
(6) United States – Chinese Taipei................................................................................................. ... 98 
(ii) Implementation of the administrative arrange ments during Stage 3 of the integration 
process ........................................................................................................................ ............102  
(f) Implementation of the provisions of Articl e 2.18 in relation to small suppliers as well 
as, to the extent possible, to least-developed country Members .............................................102  
(i) Implementation during Stages 1 and 2 of the integration process..........................................103  
(ii) Implementation during Stage 3...............................................................................................104  
(iii) The respective decision of the Doha Ministerial Conference and its follow-up .....................104  
3. Introduction of new restrictions during the implementation of Stage 3 of the integration process.  Compliance with the provisions of Article 2.4 ................................105
 
4. Other provisions of Article 2................................................................................................10 9 
(a) Observations brought to the attention of  the TMB, pursuant to Article 2.2 ...........................109  
(b) Arrangements to bring restrictions into line  with agreement year (Article 2.3) and 
treatment of MFA Article 3 measures (Article 2.5)................................................................110  
(c) Safeguard measures initiated under Artic le XIX of GATT 1994 in terms of 
Articles 2.19 and 2.20 of the ATC..........................................................................................110  
5. Review of the implementation of Article 2 by the TMB pursuant to Article 2.21 ..........110  
6. Views, comments and assessments of WTO Members in response to the TMB's general request for information...........................................................................................111
 
(a) ITCB members................................................................................................................... .....111  
(b) Canada ......................................................................................................................... ...........113  
(c) European Communities........................................................................................................... 113 
(d) United States .................................................................................................................. .........114  
7. Further comments and observations by the TMB .............................................................115  G/L/683 
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 B.
 RESTRICTIONS OTHER THAN THOSE TAKEN OVER FROM THE FORMER MFA REGIME .  
ISSUES RELATED TO THE IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 3 .....................117  
1. Restrictions notified pu rsuant to Article 3.1 ......................................................................118  
(a) Restrictions notified during earlier stages of  the integration process and still in force 
at the beginning of implementation of Stage 3 .......................................................................118  
(b) New notifications received with reference to Article 3.1 and reviewed by the TMB 
during Stage 3 ................................................................................................................. ........119  
(i) Notification by the European Communities............................................................................119  
(ii) Notification by Turkey......................................................................................................... ....119  
(iii) Notification by Japan.......................................................................................................... ....120  
(iv) Notification by Brazil......................................................................................................... .....120  
(v) Notification by Poland ......................................................................................................... ...120  
(vi) Notification by China.......................................................................................................... ....120  
2. Progressive phasing out of restrictions not justified or their being brought into 
conformity with GATT 1994................................................................................................122  
(a) Measures brought into conformity with GATT 1994, pursuant to Article 3.2(a)...................122  
(b) Programmes for the progressive phasing-out of restrictions within a period not exceeding the duration of the ATC, pursuant to Article 3.2(b) ..............................................122
 
(i) Continuation of  the implementation of  the respective programmes notified during 
Stage 1........................................................................................................................ .............122  
(1) Japan.......................................................................................................................... ................ 122  
(2) Slovenia....................................................................................................................... .............. 123  
(ii) New phase-out programmes notified during Stage 3..............................................................124  
(1) European Co mmunities ........................................................................................................... .. 124 
(2) Turkey ......................................................................................................................... .............. 124  
(3) Japan.......................................................................................................................... ................ 124  
(4) Brazil ......................................................................................................................... ................ 125  
(5) Poland......................................................................................................................... ............... 125  
(6) China .......................................................................................................................... ............... 125  
3. Information with respect to new restrictions  or changes in existing restrictions, 
pursuant to Ar ticle 3.3........................................................................................................ ..126  
(a) Developments during the earlier stages of the integration process that might be still 
relevant in the context of implementation of Stage 3 .............................................................126  
(i) European Communities:  consultation le vels on certain imports from Egypt ........................126  
(ii) Joint communications by the European Communities and Turkey.........................................126  
(b) Implementation during Stage 3:  Communications received with reference to 
Article 3.3 .................................................................................................................... ...........127  
4. Other provisions of Article 3................................................................................................12 8 
5. Further observations and comments by th e TMB with respect to the application 
of Article 3 during Stage 3 of the integration process........................................................128   G/L/683 
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 C. APPLICATION OF THE TRANS ITIONAL SAFEGUARD MECHANISM .  IMPLEMENTATION OF 
THE PROVISIONS OF ARTICLE  6 ...............................................................................................130  
1. Notifications under Article 6.9.............................................................................................131  
(a) Brazil/Chinese Taipei:  imports by Brazil of certain synthetic woven fabrics from 
Chinese Taipei. ................................................................................................................ .......131  
(b) Brazil/Korea:  imports by Brazil of certain  synthetic woven fabrics from Korea. .................134  
2. Follow-up to the TMB's recommendation made pursuant to Article 8.10:  
Poland/Romania –  imports of acrylic/modacrylic staple yarn, pure or mixed with wool or fine animal hair (HS numbers 5509.31, 5509.32 and 5509.61) from 
Romania........................................................................................................................ .........135
 
3. The TMB's comments with respect to the application of the transitional 
safeguard mechanism during the third stage of the integration process .........................136  
D. ISSUES RELATED TO THE ADMINISTRATIO N AND IMPLEMENTATION OF RESTRICTIONS .  
IMPLEMENTATION OF THE PROVISIONS OF ARTICLES 4 AND 5 ................................................137  
1. Implementation of the provisions of Article 4 ....................................................................137  
(a) Administration of restrictions (Article 4.1).............................................................................137  
(b) Changes in the sense of Article 4.2 in the implementation or administration of 
restrictions applied under the ATC a nd related actions under Article 4.4 ..............................137  
(c) Integration of part of a restriction (Article  4.3) and related acti ons under Article 4.4 ...........139  
(d) Ministerial Decision on Implementati on-Related Issues and Concerns .................................142  
(e) Views and comments of WTO Members in  response to the TMB's request for 
information.................................................................................................................... ..........142  
(f) Further comments and obser vations by the TMB...................................................................144  
2. Implementation of the provisions of Article 5 ....................................................................146  
(a) Issues relevant in the context of the implementation of Article 5:  examination by the 
TMB of the provisions related to circumven tion contained in certain administrative 
arrangements notified under Article 2. 17, as reported in the first and second 
comprehensive reports of the TMB ........................................................................................147  
(b) Developments during the third stag e of the integration process.............................................148  
(c) Follow-up of the TMB's examination of th e communications made by Pakistan and 
the United States regarding a Memorandum of Understanding reached between the two Members .................................................................................................................... ......148
 
(d) Conclusions adopted by the Council for Tr ade in Goods in July 2002 in its second 
major review ................................................................................................................... ........149  
(e) Further comments by the TMB...............................................................................................149  
III. IMPLEMENTATION OF PROVISIONS IN THE ATC RELATED TO 
SPECIAL INTERESTS OR PARTICULAR SITUATIONS OF CERTAIN WTO MEMBERS........................................................................................................................ ....150
 
A. LEAST -DEVELOPED COUNTRY MEMBERS ................................................................................150  
1. Implementation of the provisions related to least-developed country Members 
during Stages 1 and 2 of the integration process................................................................150  
(a) Articles 1.2 and 2.18 .......................................................................................................... .....150  G/L/683 
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 (b)
 Articles 6.6(a) and 6.6(b)..................................................................................................... ...152  
2. Developments during the third stage  of the integration process ......................................152  
(a) Articles 1.2 and 2.18 .......................................................................................................... .....152  
(b) Articles 6.6(a) and 6.6(b)..................................................................................................... ...152  
B. SMALL SUPPLIERS AND NEW ENTRANTS IN THE FIELD OF TEXTILES AND CLOTHING 
TRADE ............................................................................................................................... .......152  
C. COTTON -PRODUCING EXPORTING MEMBERS ...........................................................................153  
D. WOOL -PRODUCING EXPORTING MEMBERS ..............................................................................154  
E. MORE FAVOURABLE TREATMENT TO BE ACCORDED TO RE -IMPORTS IN APPLYING THE 
TRANSITIONAL SAFEGUARD MECHANISM ...............................................................................154  
F. SPECIAL TREATMENT AFFORDED TO ME MBERS WHICH HAVE NOT ACCEPTED THE 
MULTIFIBRE ARRANGEMENT (MFA)  EXTENSION PROTOCOL SINCE 1986................................155  
G. TREATMENT ACCORDED TO DE VELOPING COUNTRY MEMBERS ..............................................155  
1. Special provision in favour of developing country Members............................................155  
2. Other provisions which could be applied in such a way as to provide favourable 
treatment, inter alia , to developing country Members.......................................................155  
H. VIEWS , COMMENTS AND ASSESSMENTS OF WTO MEMBERS IN RESPONSE TO THE TMB 'S 
GENERAL REQUEST FOR INFORMATION ...................................................................................156  
I. FURTHER COMMENTS AND OB SERVATIONS BY THE TMB.......................................................158  
IV. ACTIONS REFERRED TO IN ARTICLE 7 WITH A VIEW TO ABIDING BY 
GATT 1994 RULES AND DISCIPLINES SO AS TO ACHIEVE IMPROVED 
ACCESS TO MARKETS AND ENSURE THE APPLICATION OF POLICIES 
RELATING TO FAIR AND EQUI TABLE TRADING CONDITIONS – 
IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 7....................................159  
A. THE PROVISIONS OF ARTICLE  7 ..............................................................................................159  
B. BACKGROUND :  SOME OF THE RELATED COMMENT S AND OBSERVATIONS MADE BY 
THE TMB IN ITS SECOND COMPREHENSIVE REPORT .................................................................159  
C. CONCLUSIONS ADOPTED BY THE COUNCIL FOR TRADE IN GOODS IN JULY 2002  IN ITS 
SECOND MAJOR REVIEW ..........................................................................................................160  
D. NOTIFICATIONS OF MEMBERS REGARDING  DEVELOPMENTS RELEVANT IN THE 
CONTEXT OF THE IMPLEMENTATION OF ARTICLE 7 DURING THE THIRD STAGE OF THE 
INTEGRATION PROCESS ...........................................................................................................161  
E. VIEWS AND COMMENTS OF WTO MEMB ERS IN RESPONSE TO THE TMB 'S GENERAL 
REQUEST FOR INFORMATION ...................................................................................................162  
F. THE TMB 'S ASSESSMENT REGARDING THE IMPLEMENTATION OF THE PROVISIONS OF 
ARTICLE 7 DURING STAGE 3 OF THE INTEGRATION PROCESS ..................................................164  
G. INFORMATION AVAILABLE TO THE TMB ;  FURTHER COMMENTS AND OBSERVATIONS 
BY THE BODY ...........................................................................................................................165  
1. Information available regarding the implementation of the provisions of 
Article 7.1(a) ................................................................................................................. .........165  
2. Information available regarding the implementation of the provisions of 
Article 7.1(b)................................................................................................................. .........169   G/L/683 
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 3. Information available regarding the implementation of the provisions of 
Article 7.1(c) ................................................................................................................. .........175  
V. OTHER MATTERS .............................................................................................................176  
A. AUTONOMOUS INDUSTRIAL ADJUSTMENT AND INCREASED COMPETITION IN 
MEMBERS ' MARKETS ...............................................................................................................176  
1. Background ..................................................................................................................... ......176  
2. Developments reported during Stage  3 of the integration process...................................179  
3. TMB's comments and observations.....................................................................................180  
B. ELIMINATION OF RESTRICTIONS ON IMPORTS FROM CERTAIN NON -WTO MEMBERS 
WHILE  MAINTAINING THEM ON WTO MEMBERS .....................................................................181  
VI. ISSUES RELATED TO ASPECTS OF ATC IMPLEMENTATION IN 
HIGHER WTO BODIES .....................................................................................................183  
A. MINISTERIAL CONFERENCE AND THE FOLLOW -UP OF ITS RESPECTIVE DECISION ..................183  
1. Background:  the Doha Ministerial Decision on Implementation-Related Issues 
and Concerns................................................................................................................... ......183  
2. Subsequent developments in the Council for Trade in Goods and the General 
Council ........................................................................................................................ ...........183  
B. GENERAL COUNCIL .................................................................................................................185  
1. Widening of EC textile quota restrictions following accession of new member 
States ......................................................................................................................... .............185  
2. Developing Members’ concern about po tential reduction in market (quota) 
access in 2004................................................................................................................. ........185  
3. Anti-dumping actions in the area of textiles and clothing – Proposal for a specific 
short-term dispensation in favour of developing Members following full integration of the sector into GATT from January 2005 ..................................................186
 
C. DISPUTE SETTLEMENT BODY..................................................................................................186  
D. COUNCIL FOR TRADE IN GOODS .............................................................................................186  
1. Conclusion of the second major review...............................................................................186  
2. Doha Ministerial Decision on Implemen tation-Related Issues and Concerns:  
request for the CTG to examine proposals contained in paragraphs 4.4 and 4.5 relating to the Agreement on Textiles and Clothing..........................................................188
 
3. The CTG's oversight function pursuant to Article IV of the Agreement Establishing the WTO – Transparency regarding new restrictions on textile and 
clothing products commented on by the Textiles Monitoring Body.................................188
 
VII. COMPLIANCE WITH NOTIFICATION REQUIREMENTS UNDER THE 
ATC............................................................................................................................ ............189  
VIII.  FUNCTIONS OF THE TMB AND WORK CARRIED OUT..........................................191  
A. DISCHARGING FUNCTIONS ON AN AD PERSONAM BASIS .........................................................191  
1. TMB working procedures ....................................................................................................191  
2. Decision of the Council for Trade in Goods .......................................................................191  
3. Code of conduct adopted by the Dispute Settlement Body ...............................................192  G/L/683 
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 B.
 NUMBER OF MEETINGS ;  ISSUES HANDLED BY THE TMB ..........................................................192  
C. CIRCULATION OF REPORTS AND NOTIFICATIONS ;  DERESTRICTION OF DOCUMENTS ..............192  
1. Circulation of reports ......................................................................................................... ..192  
2. Circulation of notifications................................................................................................... 192 
3. Derestriction .................................................................................................................. ........193  
D. TRANSPARENCY ......................................................................................................................193  
E. DECISION -TAKING ...................................................................................................................193  
F. VIEWS AND COMMENTS OF WTO MEMB ERS IN RESPONSE TO THE TMB 'S GENERAL 
REQUEST FOR INFORMATION AND COMMENTS ........................................................................194  
PART FOUR:  ELEMENTS FOR AN OVERALL AS SESSMENT OF THE IMPLEMENTATION OF 
THE ATC, WITH PARTICULAR EMPHASIS ON SUMMARIZING IMPORTANT 
DEVELOPMENTS DURING THE THIRD STAGE OF THE INTEGRATION PROCESS............................. 195  
I. INTEGRATION PROCESS.  THE SCOPE OF QUANTITATIVE 
RESTRICTIONS MAINTAINED UNDER THE ATC.....................................................195  
A. KEY FEATURES AND SOME RELATED OBSERVATIONS .............................................................195  
B. VIEWS AND COMMENTS OF WTO MEMBERS .............................................................................197  
C. SOME RELATED COMMENTS AND ADDITIONAL  OBSERVATIONS BY THE TMB .........................201  
II. ISSUES RELATED TO THE IMPLEMENTATION OF QUANTITATIVE 
RESTRICTIONS ..................................................................................................................2 02 
III. APPLICATION OF THE TRANSITIONAL SAFEGUARD MECHANISM ................205  
IV. SOME OTHER ISSUES AND ASPECTS RELATED TO THE 
IMPLEMENTATION OF THE ATC.................................................................................207  
A. IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 7.............................................................207  
B. IMPLEMENTATION OF ARTICLE 1.4 REGARDING COTTON -PRODUCING EXPORTING 
MEMBERS ............................................................................................................................... .207 
C. AUTONOMOUS INDUSTRIAL ADJUSTMENT AND INCREASED COMPETITION IN MEMBERS ' 
MARKETS ............................................................................................................................... ..208  
D. ELIMINATION OF RESTRICTIONS ON IMPORTS FROM CERTAIN NON -WTO MEMBERS 
WHILE MAINTAINING THEM ON WTO MEMBERS ......................................................................208  
V. FINAL STAGE OF INTEGRATION TO BE IMPLEMENTED ON 
1 JANUARY 2005 ................................................................................................................. 208 
  G/L/683 
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 PART ONE:  INTRODUCTION 
1. Article 8.11 of the Agreement on Textiles and Clothing (ATC)1  stipulates the following:  "In 
order to oversee the implementation of this Agreem ent, the Council for Trade in Goods shall conduct 
a major review before the end of each stage of the integration process.  To assist in this review, the 
TMB shall, at least five months before the end of each stage, transmit to the Council for Trade in 
Goods a comprehensive report on the implementa tion of this Agreement during the stage under 
review, in particular in matters with regard to  the integration process, the application of the 
transitional safeguard mechanism, and relating to the application of GATT 1994 rules and disciplines 
as defined in Articles 2, 3, 6 and 7 respectively.  The TMB's comprehensive report may include any recommendation as deemed appropriate by the TMB to the Council for Trade in Goods". 
2. The ATC defines three successive  stages for the integrati on process (1995-1997, 1998-2001, 
and 2002-2004), following which, on 1 January 2005, the textiles a nd clothing sector shall be fully 
integrated into GATT 1994.  In compliance with  the requirements of Article 8.11, the Textiles 
Monitoring Body (TMB) adopted its Comprehensiv e Report to the Council for Trade in Goods on the 
Implementation of the Agreement on Textiles and Clothing during the First Stage of the Integration Process (hereafter referred to as the first comprehe nsive report of the TMB) on 24 July 1997.  The 
report covered the period 1 January 1995 to 24 July  1997.  The major review of the Council for Trade 
in Goods (CTG) started during its meeting of 6 Oc tober 1997 and was concluded by the CTG at its 
meeting of 16 February 1998, with the adoption of a text that summarized the discussions held 
according to main subjects areas and included observa tions or conclusions by the Council relative to 
these subjects.
2   The text adopted mentions that "[t]he  Council took note of the comprehensive report 
that had been prepared by the TMB and considered  that it provided a substantial background for the 
review".  Also, in describing the different subj ect areas considered by the CTG during its major 
review, the text makes specific references to the re spective sections of the TMB's first comprehensive 
report. 
3. Following the requirements of Article 8.11, the TMB adopted its Comprehensive Report to 
the Council for Trade in Goods on the Implementa tion of the Agreement on Textiles and Clothing 
during the Second Stage of the Integration Process (hereafter referred to as the second comprehensive 
report of the TMB) on 20 July 2001.  The report c overed the period 1 January 1998 to 20 July 2001.  
The second major review of the Council started durin g its meeting of 27 Sept ember 2001.  The review 
was conducted through a number of formal  and informal meetings of the Council3 and its outcome, in 
the form of a report, was adopted on 23 July 2002.4  The report mentions that “[t]he Council noted the 
substantial information contained in the TMB's co mprehensive report and considered that it would 
make a useful contribution to the review.”  Furthe rmore, the CTG expressed  “the appreciation for  the 
comprehensive report prepared by the TMB on th e implementation of the ATC in the second stage 
and stressed the need for continued supervision by  the TMB of the implementation of the ATC during 
the third stage”.5 
4. As the third stage of the integration pr ocess under the ATC comprises the period 
1 January 2002 to 31 December 2004, the CTG is expect ed to conduct its third (and, at the same time, 
its last) major review before the end of 2004.  The present comprehensive report on the 
implementation of the ATC during the third stage of  the integration process was adopted and is being 
transmitted by the TMB pursuant to the provisions of Article 8.11. 
                                                      
1 Unless otherwise specified, all Articles mentioned refer to the ATC. 
2 See G/L/224. 
3 The minutes of the formal meetings are contained in G/C/M/51, 52 and 56. 
4 See G/L/556. 
5 See paragraphs 42 and 592 to 594 below. G/L/683 
Page 12  
 5. The report addresses all of the operational pr ovisions of the ATC.  As required by 
Article 8.11, particular emphasis has been put on ma tters with regard to the integration process, the 
application of the transitional safeguard mechanism,  as well as those relating to the application of 
GATT 1994 rules and disciplines as defined in Articles 2, 3, 6 and 7, respectively.  
6. The report is essentially based on notifications submitted by the Members to the TMB and on 
the actions taken by the TMB with respect to these notifications.  According to Article 8.3, the TMB 
"… shall rely on notifications and information suppl ied by the Members under the relevant Articles of 
this Agreement, supplemented by any additional information or necess ary details they may submit or 
it may decide to seek from them …".  Keeping also in mind this provision, in February 2004, the TMB issued a request to WTO Members, inviting them to submit notifications or information regarding the implementation of particular AT C provisions, for the purpose of facilitating the 
preparation of the TMB's comprehensive report.
6  Replies received from Members to this request and 
also to subsequent specific requests for clarifica tion and comments addressed to some Members, have 
also been taken into consideration in  the relevant sections of this report.7  Article 8.3 provides, 
furthermore, that the TMB "… may also rely on notifications to and reports from other WTO bodies and from such other sources as it may deem appropriate ".  Relevant notifications to, and reports from, 
other WTO bodies have also been considered, to the ex tent necessary, in the preparation of the report.  
7. The TMB adopted detailed reports after each of its meetings.
8  It also provided to the CTG 
annual reports9 which contained a summary of the matters referred to and/or taken up by the TMB 
during the reporting periods, together with the main  elements of the conclusions it reached and the 
related actions it took with respect to them.  The pr esent comprehensive report, in conformity with the 
mandate given to the TMB under Article 8.11, covers  the period 1 January 2002 to 21 July 2004, the 
date of its adoption.  Furthermore, the report also incorporates, to the extent necessary and as 
background information, references to issues and de velopments that took place during the first and 
second stages of the integration process, already reflected or not in the first and second comprehensive reports adopted by the Body.  In  particular, the report also provides a detailed 
overview of the developments that took place during the last few months (end of 
July-December 2001) of the implementation of the second stage of the integration process, after 
adoption by the TMB of its second comprehensive report.  
8. While in conformity with what is indicated in paragraph 6, this report relies to a large extent 
on the notifications received by the TMB and the acti ons taken by it with respect to them;  the Body 
has also provided further observations, comments, an alysis and assessment with respect to different 
topics examined, for the consideration of Members.   The concluding part of the report contains 
elements for an overall assessment of the implementation of the ATC, with particular emphasis on 
developments during the third stag e of the integration process.  
9. Bearing in mind the third major review to be conducted by the CTG, the TMB has decided to 
request the WTO Secretariat to provide to Me mbers, as a background document, statistical 
information with respect to international trade in textiles and clothing.  It is expected that this 
document will be issued and circulated to Members around the middle of September 2004.  
                                                     
 
6 See G/TMB/30. 
7 Such replies were received from the following Me mbers:  Canada, the Euro pean Communities, India 
"on behalf of the following members of the Internationa l Textiles and Clothing Bureau (ITCB) that are also 
Members and Observers of the WTO:  Argentina;  Banglad esh;  Brazil;  China;  Colombia;  Costa Rica;  DPR 
Korea;  Egypt;  Guatemala;  Hong Kong, China;  India;  Indonesia;  Republic of Korea; Macao, China;  
Maldives;  Pakistan;  Paraguay;  Sri Lanka;  Thailand ;  Uruguay and Vietnam", (hereafter referred to as the 
communication of ITCB members), Turkey and the United States. 
8 For the reports adopted since the adoption of  the TMB's second comprehensive report, see 
G/TMB/R/81 to G/TMB/R/112. 
9 See G/L/475, G/L/574 and G/L/632, G/L/650.  G/L/683 
 Page 13 
 
 PART TWO:  THE ATC AND ITS IMPLEMENTA TION DURING STAGES 1 AND 2 OF THE 
INTEGRATION PROCESS, WITH PARTICULAR EMPHASIS ON DEVELOPMENTS DURING THE SECOND HALF OF 2001 
I. THE  ATC:  AN AGREEMENT FOR A TRANSITION PERIOD OF TEN YEARS 
10. The ATC sets out provisions to be applied by Members during a ten-year transition period for 
the integration of the textiles and clothing sector into GATT 1994.  Article 9 provides that "[t]his 
Agreement and all restrictions thereunder shall stand terminated on the first day of the 121
st month 
that the WTO Agreement is in effect, on which date  the textiles and clothing sector shall be fully 
integrated into GATT 1994.  There shall be no exte nsion of this Agreement."  The WTO Agreement10, 
together with the covered Agreements, including th e ATC, entered into force on 1 January 1995.  
Thus the transition period of ten years stipulated by  the ATC will expire on 1 January 2005.  In order 
for this transition to be progressive in character , the ATC sets up successive stages for the integration 
of the products covered by the Agreement into GA TT 1994:  a first stage of the integration process 
from 1 January 1995 to 31 December 1997, a second stage from 1 January 1998 to 31 December 2001, and a third stage from 1 January  2002 to 31 December 2004.  On 1 January 2005, the ATC and all restrictions thereunder shall stand terminated, on which date the textiles and clothing 
sector shall be fully integrated into GATT 1994.   The TMB felt that, before reporting on the 
implementation of the ATC during the third stage of the integration process, it would be useful to provide a brief reminder of the first two stages of ATC implementation, essentially by referring to the respective sections of the first and second comprehe nsive reports.  In addition, developments during 
the implementation of the second stage, after adoption by the TMB of its second comprehensive 
report (i.e. between 21 July and 31 December 2001) are also detailed below.  
II. IMPLEMENTATION DURING STAGE 1 (1995-1997) OF THE INTEGRATION 
PROCESS 
11. The implementation of the first stage of the in tegration process was reported upon in detail by 
the TMB in its first comprehensive report in July 1997.
11  Furthermore, since that report contained 
information up to 24 July 1997 only, subsequent deve lopments until the end of the first stage were 
reported in the introduction to the second comprehensive report.12 
12. The TMB’s review of the first stage of integr ation programmes is deta iled in paragraphs 9 
to 38 of the first comprehensive report.  Devel opments subsequent to the issuance of the first 
comprehensive report are reported in  paragraphs 27 to 45 of the se cond comprehensive report.  As 
regards the quantitative restrictions notified u nder Article 2 and the issues related to the 
implementation of Article 2, the review by the TMB is contained in paragraphs  182 to 226 of the first 
comprehensive report.  The application of the trans itional safeguard mechanism (Article 6) is detailed 
in paragraphs 78 to 181 of the same report, while restrictions other than those maintained under the 
MFA13 and covered by the provisions of Article 2 are addressed in paragraphs 227 to 247.  Matters 
related to the administration of the restrictions refe rred to in Article 2 or notified under Article 6, as 
well as changes in practices, rules, procedures and categorization of products, are reported in 
paragraphs 248 to 265 of the first comprehensive report, those concerning the implementation of the 
provisions on circumvention being in paragraphs 266 to 273.  Issues related to the implementation of 
the provisions of Article 7 of the ATC are dealt with  in paragraphs 274 to 300 of that report, while 
particular provisions in the ATC related to special interests of certain WTO Members are detailed in 
                                                      
10 Marrakesh Agreement Establishing the World Trade Organization. 
11 See G/L/179. 
12 See G/L/459, in particular paragraphs 27 to 45. 
13 Arrangement Regarding International Trade in Te xtiles, or Multifibre Arrangement, which was in 
effect until 31 December 1994. G/L/683 
Page 14  
 paragraphs 301 to 323.  Finally, paragraphs 331 to 348 of the first comprehensive report are devoted 
to the work carried out by the TMB. 
III. IMPLEMENTATION DURING STAGE 2 (1998-2001) OF THE INTEGRATION 
PROCESS 
A. 
MATTERS AND DEVELOPMENTS COVERED BY THE TMB 'S SECOND COMPREHENSIVE REPORT  
13. The implementation of the second stage of the integration process was reported upon in detail 
by the TMB in its second comprehensive report in July 2001.14  Stage 2 integration programmes are 
addressed in detail in paragraphs 39 to 77 of  the first comprehensive report as well as in 
paragraphs 46 to 78 of the second such  report.  Also, since they had to be notified during the period of 
implementation of Stage 2, the Stage 3 integration programmes are reviewed and analysed in paragraphs 79 to 114 of the same re port.  Other matters and aspects of implementation covered by the 
second comprehensive report include: 
• the application of the transitional safe guard mechanism (paragraphs 115 to 243); 
 
• quantitative restrictions notified pursuant to  Article 2 and issues related to their 
implementation (paragraphs 244 to 339); 
 
• restrictions other than those taken over fr om the former MFA regime (paragraphs 340 
to 380); 
 
• administration of restrictions and related matters falling under the provisions of 
Article 4 (paragraphs 381 to 429); 
 
• implementation of the provisions rela ted to problems arising from potential 
circumvention of the ATC (paragraphs 430 to 481); 
 
• issues referred to or taken up by the TMB with reference to the provisions of 
Article 8 (paragraphs 482 to 530); 
 
• issues related to the implementation of  Article 7 (paragraphs 531 to 572); 
 
• implementation of provisions in the ATC re lated to special interest or particular 
situations of certain Members (paragraphs 573 to 600); 
 
• other issues such as continuous autonomous industrial adjustment in the sense of 
Article 1.5;  regional arrangements and in itiatives;  elimination of restrictions on 
imports from certain non-WTO Members;  accession of new Members to the WTO 
(paragraphs 601 to 648); 
 
• compliance with notification requirements under the ATC (paragraphs 649 to 654);  
 
• functions and work carried out by the TMB (paragraphs 655 to 672). 
 B. 
FURTHER DEVELOPMENTS UNT IL THE END OF STAGE 2 OF THE INTEGRATION PROCESS  
14. Since, in compliance with the requirements of Article 8.11, the TMB had to transmit its 
comprehensive report on the implementation of th e ATC during the second stage of the integration 
                                                      
14 See G/L/459.  G/L/683 
 Page 15 
 
 process to the Council for Trade in Goods at least five months before the end of this stage, that report 
contained information up to 20 July 2001.  Furt her developments during the second stage, after 
adoption by the TMB of its second comprehensive report, are reported below. 
1. Integration programmes 
(a) Notifications by a newly acceded Member 
(i) Notification received pursuant to Article 6.1 
15. In July 2001, Lithuania, which had become a Member of the WTO on 31 May 2001, notified 
pursuant to Article 6.1 that it wished to retain the ri ght to use the transitional safeguard provided for in 
that Article.  The TMB took note of this notification. 
(ii) Notifications received with reference to Articles 2.6 and 2.7(b) (Stage 1), 2.8(a) and 2.11 
(Stage 2), 2.8(b)  and 2.11 (Stage 3) 
16. Lithuania notified in September 2001 its integr ation programmes for the three stages.  In 
reviewing, pursuant to Article 2.21, these notif ications, the TMB noted that the volume of the 
products integrated as a percentage of the volume of imports into Lithuania in 1995 of the products 
falling under the coverage of the Agreement amo unted to 16.85 per cent for the first stage, 
17.69 per cent for the second stage and 20.20 per cent  for the  third stage.  The TMB further noted 
that, in each stage, the products integrated include d, in accordance with the applicable provisions of 
Article 2, products from each of the four groups:  tops and yarns, fabrics,  made-up textile products 
and clothing.  With respect to the fact that the cal culation of the share of the products integrated had 
been made on the basis of a different base year, ot her than 1990, the TMB took note of the statement 
by Lithuania that 1995 represented the first fully reliable statistical year based on the Harmonized System (HS) in Lithuania. 
(b) Notifications under Articles 2.8(b) and 2.11:  Stage 3 integration programmes 
17. In addition to Lithuania, noted in paragraph 16 above, Bolivia and Thailand notified their 
respective Stage 3 integration programmes pursuan t to Articles 2.8(b) and 2.11 during the period 
between the adoption by the TMB of its second co mprehensive report and the end of 2001.  Also, 
during that period the TMB received and considered the replies to the specifi c questions raised and 
clarifications sought by the TMB from, respectivel y, Cyprus, Morocco and Tunisia with respect to 
their notifications under Articles 2.8(b) and 2.11.  The Body also examined a reply of El Salvador which it had already received but had not been in a position to examine before the adoption of its 
second comprehensive report.  The TMB began its revi ew of the notification submitted by Bolivia and 
decided to seek clarification with respect to certa in elements of the notification, but could not 
complete its review before the end of 2001 since no reply had been received from Bolivia.  The TMB 
took note of the notifications by Cyprus, El Salv ador, Morocco, Tunisia and Thailand.  In all these 
five cases, the Stage 3 integration programmes met the basic requirements of Article 2.8(b).  In 
particular, the volume of the products integrated amounted to the following percentages of the total 
volume of the products falling under the coverage of  the Agreement:  Cyprus: 18.04 per cent (of the 
value of imports in 1990);  El Salvador:  18 per cent;  Morocco: 18.81 per cent;  Tunisia:  
20.42 per cent;  and Thailand:  18.59 per cent.  With regard to Cyprus, the TMB observed that the 
integration programme contained one product falling under an HS line in the Annex to the ATC for 
which only part of the line fell under the coverage of the Agreement ("ex HS line") and that the 
description of this product corresponded precisely to that  contained in the Annex.  With regard to the 
fact that the calculation of the share of the products to be integrated had been made on the basis of the 
value of 1990 imports, the TMB ensured that no better data were available and that Cyprus had 
followed the same approach as for the notifi cations it had submitted pursuant to Articles 2.6 
and 2.7(b), as well as Articles 2.8(a) and 2.11.  Wi th respect to Morocco, th e TMB noted that, given G/L/683 
Page 16  
 the structure of the notification, it was not possibl e to assess without doubt, in a limited number of 
cases, whether or not a product line had already been in tegrated in a previous stage.  It observed in 
this regard, however, that even if all the imports  of such lines were not counted in the volume of 
imports of the products to be integrated, that vol ume would still amount to not less than 18 per cent of 
the total volume of Morocco's 1990 imports of the products in the Annex, as envisaged in Article 2.8(b).  With regard to Thailand, the TM B noted that the notification, as revised, contained 
two HS lines which did not appear to fall under the cove rage of the ATC, and that three other HS lines 
had already been integrated by Thailand during the first stage.  The TM B also noted that the 
integration programme contained four HS lines falli ng under an "ex HS line" in the Annex to the 
ATC, and that with respect to two of these HS lines  Thailand had reaffirmed that the levels of 1990 
imports of those two products corresponded to th e respective product description contained in the 
Annex to the ATC.  The TMB observed in this re gard that if the imports of the non-ATC products 
were discounted, as well as those of the two "ex HS  lines" for which no specific explanation had been 
available as to the correspondence with the ATC Annex, and if the volume of imports of those products already integrated in Stag e 1 were not counted in the volume of imports of the products to be 
integrated, that volume would still amount to not less than 18 per cent of the total volume of 
Thailand's 1990 imports of the products in the Annex, as envisaged in Article 2.8(b).  With respect to 
notifications addressed to the TMB after the rele vant deadlines specified in the ATC, the TMB 
reiterated that its taking note of late notifications was without prejudice to the legal status of such 
notifications.  The examination of the notificati ons by Nicaragua and the Slovak Republic of their 
respective Stage 3 integration programmes continue d, also on the basis of new information or 
clarifications received, but could not be comple ted before the end of 20 01 since the TMB had not 
received the answers to the further clarification it had sought from those Members. 
(c) Related matters:  the abolition of visa requirements by the United States 
18. In the context of its review of the notifications  received pursuant to Articles 2.8(b) and 2.11, 
the TMB at its meeting of November 2001 recalled its earlier review of the US’ notification under 
those Articles and, in particular, the question of th e elimination of visa requirements with respect to 
the products integrated as a result of the St age 3 integration programme.  The Body had, inter alia , 
expected that it would be informed as soon as possi ble of the outcome of any follow-up consideration 
to be given to this matter by the United States.   Observing that no further communication had been 
received from the United States in this regard, the TMB decided to seek information regarding this 
matter.  In fact, the TMB expected the United Stat es to provide a reply to the confirmation sought 
earlier by the Body that no visa requirement would be  applied to any of the products integrated into 
GATT 1994 as a result of the implementation of the Stage 3 integration programme as from 
1 January 2002.  In response, on 11 December 2001 th e United States informed the TMB that the visa 
requirement for products integrated in the third stage had been eliminated.
15 
2. Quantitative restrictions notified under Article 2.1 and issues related to their 
implementation 
(a) New notifications received with reference to Article 2.1 
19. Following the accession of China to the WT O, Canada and the European Communities 
notified in December 2001 the quantitative restrictions they maintained under Article 2.1 in respect of 
imports of certain products from China.  The Body's  examination of these notifications is reported in 
Part Three, Section II of the report.16 
                                                      
15 See paragraphs 57 and 58 below. 
16 See paragraphs 147 to 149 and 152 to 156 below.  G/L/683 
 Page 17 
 
 (b) No recourse to the provisions of Article 2.15 (e limination of restrictions  without integration) 
20. From 21 July to 31 December 2001, no notification was received pursuant to Article 2.15, 
which allows the elimination of any restri ction maintained pursuant to Article 2. 
(c) Implementation of the provisions of Article 2.18  
21. At its November 2001 meeting, the TMB noted that under the provisions of Article 2.18, 
which apply to small suppliers and new entrants in the field of textiles and clothing trade, as well as, 
to the extent possible, to least-developed country  Members, "… meaningful improvement in access 
for their exports shall be provided […] for the durat ion of this Agreement [i.e. the ATC] …".  The 
TMB considered that in order to comply with the requirements of the first sentence of Article 2.21, it 
should receive the necessary information from th e Members concerned on how they intended to 
implement the provisions of Article 2.18 as from 1 January 2002.  With respect to Canada, on the 
basis of a communication received in the context of the preparation of the second comprehensive 
report, the TMB understood that Canada would incre ase the resulting annual growth rates of the levels 
of the remaining restrictions for small suppliers by 27 per  cent as from 1 January 2002.  With respect 
to the United States, the TMB observed that though it had not received any official communication from it regarding this matter, the representative of the United States had indicated in the meeting of 
the Council for Trade in Goods, on 26 October 2001,  that it was the US' intention to increase the 
annual growth rates applied for sm all suppliers during Stage 2 by 27 per  cent as from 1 January 2002.  
The TMB, therefore, sought confirmation from the Unite d States in this regard.  With regard to the 
European Communities, the TMB decided to seek information as to the methodology it would apply 
as from 1 January 2002 in order to implement the provi sions of Article 2.18 for the third stage of the 
integration process.  At the December 2001 meetin g, on the basis of the earlier communication by 
Canada referred to above and the replies received,  respectively, from the European Communities and 
the United States to the TMB's request for inform ation, the TMB noted that the three Members 
concerned would increase the annual growth rates applied during Stage 2 for WTO Members falling 
under the provisions of Article 2.18 in their respec tive regimes by 27 per cent as from 1 January 2002. 
3. Quantitative restrictions notified with reference to Article 3.1 
22. Following the accession of China to the WT O, the European Communities provided a 
notification in December 2001 on the quantitative r estrictions it maintained with reference to 
Article 3.1 on certain imports from China.  The ex amination by the TMB of this notification is 
reported in Part Three, Section II of the report.
17 
4. Transitional safeguard measures 
23. Article 6 of the ATC provides for the possibilit y of applying transitional safeguard measures 
on imports of products covered by the ATC and not yet integrated into GATT 1994 that cause serious 
damage, or actual threat thereof, to the domestic  industry producing like a nd/or directly competitive 
products.  According to Article 6.7, "the Memb er proposing to take safeguard action shall seek 
consultations with the Member or Members whic h would be affected by such action".  Such 
consultations may result, if no agre ement is reached, in a restraint measure being applied unilaterally 
by the importing Member under Article 6.10.  In  cases where a restraint measure is introduced 
unilaterally, the TMB shall, according to Article 6.10, "promptly conduct an examination of the 
matter, including the determination of serious dama ge, or actual threat thereof, and its causes, and 
make appropriate recommendations to the Members concerned within 30 days". 
24. Articles 6.2, 6.3 and 6.4 establish parameters  for taking safeguard action under the ATC. 
These parameters have to be considered by the Members concerned and by the TMB in assessing the 
                                                      
17 See paragraphs 376 and 398 below. G/L/683 
Page 18  
 conformity of an action with the ATC.  Article 6. 2 relates to the determination by a Member, and its 
demonstration to the Member or Members concerned, and eventually to the TMB, that a particular product is being imported into its territory in such  increased quantities as to cause serious damage, or 
actual threat thereof, to the domestic industry prod ucing like and/or directly competitive products.  
Serious damage or actual threat thereof must dem onstrably be caused by such  increased quantities in 
total imports of that product and not by such ot her factors as technological changes or changes in 
consumer preference.  Article 6.3 specifies that in making a determination of serious damage, or 
actual threat thereof, the Member invoking the provisions  of Article 6 has to ex amine the effect of the 
increased quantities of total imports on the state of th e particular industry, as reflected in changes in 
the economic variables listed in the same provision .  Article 6.4 outlines circumstances under which 
such serious damage, or actual threat thereof, can  be attributed to imports from certain Members. 
(a) Imports into Poland of acrylic/modacrylic staple yarn, pure or mixed with wool or fine animal 
hair (HS numbers 5509 31, 5509 32  and 5509 61) from Romania 
(i) Notification under Article 6.10 
25. On 23 April 2001, Poland requested consultations  with Romania pursuant to Article 6.7.  
Consultations were held, which did not result in a mutual understanding as to whether the situation 
called for restraint on the imports from Romania of the products in question.  The safeguard measure 
was eventually imposed by Poland on 20 July 200 1, and notified to the TMB in accordance with 
Article 6.10. 
26. The TMB examined this safeguard measure at its September 2001 meeting with the 
participation of representatives of both par ties.  During this review the TMB noted, inter alia , that the 
factual information provided by Poland pursuant to  Article 6.7 covered the period of 12 months 
between 1 January 2000 and 1 January 2001, which, as explained by Poland, was related as closely as 
possible to the reference period set out in Article 6.8.  The TMB observed that, in its presentation of 
the case before the TMB, the representative of Poland had provided some additional details, in 
particular with respect to trends in total imports  and their breakdown according to country of origin 
during the reference period, as well as regarding th e evolution of some of the economic variables 
listed in Article 6.3.  While recognizing that this  additional information could contribute, in some 
respect, to a better understanding of developments that had affected the domestic producers and the 
Polish market, the TMB reiterated its statement made on previous similar occasions that its 
examination of the respective measures had to be based essentially on the information made available 
by the importing Member in accordance with Article  6.7 at the time the request for consultation had 
been made.  The TMB also noted that in the fa ctual information provided by Poland pursuant to 
Article 6.7, data related to pr oduction, domestic sales, market sh are and exports covered the entire 
Polish industry producing the yarns in question, wh ile all the other data (inventories, employment, 
profits, productivity, capacity utilization, wages, domestic prices and investments) reflected the 
performance of the three companies which had appl ied for the introduction of the safeguard measure 
(the "petitioners").  In the same factual informa tion, Poland had explained that these three companies 
constituted, in terms of the volum e of production, roughly 70 per cent of the domestic industry during 
the reference period and, therefore, indicators d escribing their situation could be considered as 
representative of the whole domestic indus try.  According to Poland, this was all the more so  since, in 
the remaining four companies, the liquidation pr ocess was underway and, had data been available 
regarding these producers also, they would have sh own even more serious damage for the domestic 
industry.  Noting the statement of the representative of Romania that, for most economic variables 
mentioned in Article 6.3, the information presented by Poland referred "only to a selection of a 
number of companies operating in this field", the TMB also noted that, in his presentation to the 
TMB, the representative of Poland had made an effo rt to provide relevant information covering the 
domestic industry as a whole, in most respects including also the remaining 30 per cent of the domestic production represented by the companies unde r liquidation.  Reiterating its statement that 
the examination by the TMB had to be based essentia lly on the information made available by Poland  G/L/683 
 Page 19 
 
 under Article 6.7 at the time Poland had requested  consultations with Romania, the TMB also 
observed that though the additional information included in the pr esentation of the representative of 
Poland contained some important de tails, including corrections of some of the information previously 
provided, it did not significantly alter the overall picture that had emerged from the factual information provided pursuant to Article 6.7. 
27. Examining the developments in total imports into Poland of the subject yarns, the TMB noted 
that there had been an increase in the volume of to tal imports in the year 200 0, the reference period, 
compared to the previous year.  It could not be ignored, however, that the volume of imports continuously decreased in 1998 and 1999, and that  the level achieved in 2000 still remained well 
below the volume of total imports in 1996 and 1997, r espectively.  In this light, the trends indicated, 
at most, a recovery of total imports, but did not appear to substantiate the claim of a significant 
increase compared to the performance achieved in previous years.  As to the argument of Poland that 
the decrease experienced in 1998 and 1999 was onl y in absolute terms, but not relative to 
consumption, the TMB observed that the ATC do es not incorporate the concept of increased 
quantities of imports relative to other factors.  The TMB was of the view, therefore, that the 10.5 per cent increase in total imports reported for the reference period should be assessed in its 
proper context and expressed doubts that the alle ged serious damage could be caused by the 
10.5 per cent increase in total imports during the reference period.  These doubts notwithstanding, the 
TMB decided to review the state of the Polish domes tic industry and to revert  to this aspect of the 
case, if necessary, at a subsequent stage of its examination. 
28. As regards the possible effect of the increased quantities of total imports on the state of the 
particular industry, as reflected in changes in th e economic variables mentioned in Article 6.3, the 
TMB, having examined one-by-one the developmen ts in the different economic variables as reported 
by Poland, reached the fo llowing overall conclusions: 
• A number of important economic indicator s (output, productivity, investments, 
exports) revealed positive developments, while the trends in some others (inventories, 
utilization of capacity, wages) could be consid ered to be neutral.  Though the market 
share of domestic producers decreased somewhat, practically all their production 
could be sold.  Domestic prices did not show a dramatic decline, while the decrease in 
employment could be, in most part, explai ned by the effects of investments made.  
Negative profitability was an issue of c oncern, but trends indicated favourable 
changes also in this regard as well as the possibility of returning to positive profit 
rates in the forthcoming period. 
 
• It was understood that the Polish market fo r the products in question had been faced 
with serious challenges in the period 1996 to 1998.  However, in the period examined, it had started to recover and th e factual information provided by Poland 
and analysed by the TMB revealed a domestic industry in the process of 
restructuring.  Restructuring had started earlier than the reference period and in 2000 
it  seemed to enter into its final stage. 
 
• On the basis of the information available to it, and keeping in mind the above, the 
TMB concluded that the overall picture pr esented had not shown a domestic industry 
suffering serious damage in 2000. 
 
• In light of this conclusion, there was no need for the TMB to examine the possible 
causal relationship between developments in  imports and the state of the domestic 
industry, as reflected in changes in the ec onomic variables mentioned in Article 6.3. 
 G/L/683 
Page 20  
 29. The TMB, therefore, concluded that Poland had not  demonstrated that the yarns subject to its 
safeguard measure were being imported into its terr itory in the reference period in such increased 
quantities as to cause serious damage to the dom estic industry producing like and/or directly 
competitive products.  The TMB recommended that Po land rescind the transitional safeguard measure 
introduced on imports of acrylic/modacrylic staple ya rn, pure or mixed with wool or fine animal hair 
from Romania. 
(ii) Notification under Article 8.10 
30. Article 8.9 states that "Members shall endeavour  to accept in full the recommendations of the 
TMB, which shall exercise proper surveillance of the implementation of such recommendations".  
However, Article 8.10 provides the possibility to a Member which "considers itself unable to conform 
with the recommendations of the TMB", to "provide the TMB with the reasons therefor not later than 
one month after receipt of such recommendations.  Following thorough consideration of the reasons 
given, the TMB shall issue any further recommendati ons it considers appropriate forthwith.  If, after 
such further recommendations, the matter remains un resolved, either Member may bring the matter 
before the Dispute Settlement Body and invoke paragraph 2 of Article XXIII of GATT 1994 and the 
relevant provisions of the Di spute Settlement Understanding". 
31. On 17 October 2001, the TMB received a comm unication from Poland with reference to 
Article 8.10, following the examination by the TMB, described in paragraphs 26 to 29 above, of the 
transitional safeguard measure introduced by Poland on 20 July 2001, for a duration of three years, on imports from Romania of acrylic/modacrylic staple ya rn, pure or mixed with fine animal.  In this 
communication, Poland stated that it considered it self unable to conform with the recommendation the 
TMB had made for the following reasons: (i) conforming to the TMB's recommendation, i.e. 
withdrawing the safeguard measure would result in th e elimination of the acrylic yarn industry in 
Poland;  (ii) apart from the economic indicators which clearly showed a negative trend in the reference period (sales, share in the market, fi nancial losses, employment), one could observe 
opposing trends with respect to some other indica tors which had been considered by the TMB as 
being neutral (inventories, investments and capacity utilization).  On the one hand, the companies in 
liquidation were selling out their inventories and capita l equipment at low prices.  On the other, the 
three still-in-business companies suffered from growing i nventories, but neverthel ess tried to invest in 
the development and slightly increased their pr oduction capacity.  The market behaviour of the 
companies in liquidation adversely affected the rema ining companies and the difficult situation of the 
former had been caused by the competition of the low-priced imports.  In this sense, there was a 
domino effect and imports caused se rious damage to the industry, both directly and indirectly;  
(iii) Romania was the biggest exporter of the yarn  in question to the Polish market and these goods 
were being exported by Romania under conditions  of permanent undercutting of Polish domestic 
prices.  For these reasons and with a view to re scuing the still-in-business domestic producers, Poland 
requested the TMB to reconsider its recommendation on the matter. 
32. The TMB examined this communication and the reasons given by Poland for its inability to 
conform with the TMB's recommendation at its Nove mber 2001 meeting, with the participation of 
representatives of both parties.  During this examin ation,  the TMB noted that the presentation of the 
representative of Poland contained, inter alia , elements which constituted new information and 
evidence in the sense that they ha d not been included in the specific and relevant factual information 
referred to in Article 6.7 and that they had not been  raised during the examination of the matter by the 
TMB under Article 6.10 either.  The TMB, therefore,  requested clarification as to whether Poland 
expected the TMB to review the transitional safeguard measure on the basis of a new reference period 
(i.e. 1 January 1996 to 30 Sept ember 2001), different from the one that had been presented under 
Articles 6.7 and 6.10, also taking into account a new set  of data covering the en tire domestic industry.  
In reply, the representative of Poland stated that while certain data and information had not been 
available at the time the TMB had conducted its ex amination of the case under Article 6.10, the Polish 
authorities subsequently had managed to provide all the relevant information and had decided to share  G/L/683 
 Page 21 
 
 it with the TMB in order to underscore certain basi c facts regarding the extremely serious situation 
facing the domestic industry.  In his view, had th e TMB been provided with this information, the 
overall conclusion the TMB had arrived at during its examination pursuant to Article 6.10 would have 
been different.  This also implied that, on the basis of the selected and limited set of data available to 
it, the TMB had not erred in its reaching its previous  conclusions.  By providing the fullest possible 
picture under Article 8.10, Poland was not making a formal request that the TMB conduct a de novo  
review on the basis of an extended reference pe riod and of a broader industry coverage.  The 
representative of Poland also recognized that, from a strict legal standpoint, the question could arise 
whether new information could be introduced at all,  or not, in the context of the TMB's consideration 
of the case pursuant to Article 8.10.  However, the Polish authorities still held the view that the Polish 
industry producing the yarn in question had suffered serious damage as a result of increased quantities 
of total imports.  Furthermore, by rescinding the tr ansitional safeguard measur e, the survival of the 
entire domestic industry would be jeopardized. 
33. The TMB noted that Poland did not make a formal request for a de novo  review by the TMB 
on the basis of the new information and evidence presen ted.  It was also noted that the representative 
of Poland recognized that introducing new data and information in the context of an examination 
made under Article 8.10 might have legal implications.  The TMB understood that the basic objective 
of Poland in providing additional information was to  give the fullest possible picture regarding the 
state of, and developments in, the domestic industr y.  The TMB recalled that it had already stated, 
when reviewing the measure under Article 6.10, that  its examination had to be based essentially on 
the information made available by Poland under Ar ticle 6.7, at the time Poland had requested 
consultations with Romania.   It noted, furtherm ore, that the review of the Polish communication 
submitted under Article 8.10 had to be guided by the same approach.  It was also observed that though 
the new data and information provided by Poland fille d some gaps in terms of giving a fuller picture 
of the developments affecting the Polish industry, they did not contain elements which the TMB had 
been completely unaware of and that would lead  the Body to a significantly different assessment, 
compared to the one it had made under Article 6.10. 
34. Having made the preliminary comments noted above, the TMB considered one-by-one the 
reasons given by Poland for its inability to conf orm with the recommendation the TMB had made.  As 
to the developments in the Polish domestic indus try during the last five years, in essence Poland 
argued that the competition of low-priced imports  during these five years had resulted in the 
bankruptcy of five plants and forced three others to begin a liquidation process.  Since the three further remaining companies had also been facing difficulties, the withdrawal of the safeguard 
measure would have driven them out of business.  As  to the arguments related to developments in the 
Polish market and domestic industry during the last five years, i.e. during the period starting with 
1996, the TMB recognized that the ATC does not provide specific guidance as to how long the period of investigation (and, consequently, the period covere d in the specific and relevant information in the 
sense of Article 6.7) should be.  Therefore, the definition of the length of the period of investigation 
was very much left to the discretion of the authorities of the Member invoking the provisions of 
Article 6.  While the use of the present tense of the verb in Article 6.2 (i.e. "… a particular product is 
being imported …") and the reference to the inform ation "as up-to-date as possible" in Article 6.7 
appear to indicate that the information to be pr ovided should at the minimum, include developments 
of the recent past, there is no similar guidance regarding what should be the starting-point of the period covered by the factual information.  In  view of this, the TMB had proceeded to the 
examination of the matter under Article 6.10 on the basis of the information provided by Poland for 
the period of 12 months (from 1 January 2000 to 1 January 2001).  It also follows from this that 
reference to developments that occurred prior to the period covered by the factual information 
provided pursuant to Article 6.7 could hardly be considered as a valid reas on for a Member's inability 
to conform with the TMB's recommendation.  The TM B was aware, however, that in his presentation 
of the case under Article 6.10, the representative of  Poland had already provided some additional 
information, part of which had also touched upon asp ects related to developments in the period 1996 
to 1998.  Analysing these data, the TMB had already expressed the view that the trends indicated, at G/L/683 
Page 22  
 most, a recovery of total imports, but did not appear to substantiate the claim of a significant increase 
in imports compared to the performance achieved in previous years.  Furthermore, the new 
information and data provided by Poland under Ar ticle 8.10 confirmed the overall picture the TMB 
had already observed during its examination pursuant to Article 6.10.  Important changes had started 
in the middle of the 1990s, characterized by a drastic decline in consumption, a continuously shrinking domestic market and prod uction consolidating down to three companies.  However, imports 
were also fluctuating and, in any case, did not in crease in such quantities (during the reference period 
either) that would have justified recourse to the provis ions of Article 6.  The TMB, in this light, could 
not reach the conclusion that the competition of low- priced imports had caused the bankruptcy of five 
plants and led to the liquidation process of three othe r companies.  In any event, the five plants had 
gone bankrupt prior to the period for which inform ation was provided by Poland under Article 6.7.  
Furthermore, all the indications received also pointed  to the fact that the liquidation process of the 
three other companies had either begun earlier th an the reference period or in no case could the 
situation of these companies be attributed to th e increase in total imports in 2000.  The TMB, 
therefore, took the view that th e claim that the withdrawal of the safeguard measure would result in 
the elimination of the entire Polish industry produc ing the yarn in question, could best be addressed 
after having considered all the reasons given by Poland in its Article 8.10 communication. 
35. Another reason raised by Poland for its inab ility to conform with the TMB's recommendation 
could be described as an assessment different fro m the one made by the TMB with respect to 
developments in certain economic variables specified in Article 6.3.  According to Poland, apart from 
the economic indicators which clearly showed a ne gative trend in the reference period (domestic 
sales, market share, financial lo sses and employment), there were opposing trends with respect to 
some other indicators which had been considered by the TMB as being neutral (inventories, 
investments and capacity utilization).  While these latter indicators seemed to be neutral during the 
reference period at the level of the domestic indus try taken as a whole, the respective performances of 
the three companies in liquidation and of the three other companies were very much different.  Poland 
had stated in this regard that the market behaviour  of the companies in liquidation had had an adverse 
effect on the situation of the remaining plants.  The TMB examined in detail these arguments.  It 
observed, in particular, that investment had not been considered by the TMB as neutral but rather as a positive element in so far as the three plants still in  business were concerned, which appeared to have 
started to regain confidence and had made busin ess strategies for the long term.  As regards 
inventories, the TMB, inter alia , could not agree with the contention that the three petitioners had 
suffered seriously from growing inventories, as the inventory level of the three petitioners remained 
relatively low and did not in itself point to an  industry facing serious problems in selling its 
production.  As far as utilization of capacity was concerned, the TMB observed that the performance 
of the three petitioners had improved during the re ference period.  While it could be argued that 
capacity utilization could be considered not to be sa tisfactory, it could not be claimed that there was 
no improvement in terms of capacity utilization duri ng the period examined.  Furthermore, the low 
rate of utilization could also raise questions rega rding the adequacy of the adjustments implemented 
or of the forecasts made with respect to future selling possibilities.  The TMB, therefore, concluded 
that as regards the three "petitioners", investme nts implemented represented positive developments 
during the period examined;  a slight improvement in terms of capacity utilization could also be registered, while no important change  had occurred regarding the level of  the inventories.  As to the 
argument of Poland according to which, as far as inve ntories and capacity utili zation were concerned, 
the market behaviour of the companies in liqui dation adversely affected the operation of the 
remaining companies, and the difficult situation of the former had been cause d by the competition of 
low-priced imports, the TMB observed that by us ing these arguments, Poland indirectly seemed to 
recognize that factors other than increased imports  during the reference period could cause or largely 
contribute to the state of the domestic industry prod ucing like and/or directly competitive products.  If 
Poland considered that the situation of the thr ee in-business companies had not been satisfactory, 
Poland recognized at the same time that this had larg ely been attributable to the adverse effects of the 
market behaviour of the companies in liquidation and not to the increase in total imports during the reference period.  In analysing the situation at th e outset, Poland should have distinguished the serious  G/L/683 
 Page 23 
 
 damage allegedly caused by increased imports duri ng the period examined from the damaging effects 
caused by possible other factors. 
36. As to the third main reason given by Poland for its inability to conform with the TMB's 
recommendation, the fact that Romania had been the biggest exporter to the Polish market and that 
these exports had been realized under conditions of  permanent undercutting of Polish domestic prices, 
the TMB noted that before addressing issues specified in Article 6.4 (attribution of serious damage to 
imports from individual Members), it had first to be fully satisfied w ith the determination made by the 
importing Member that the product in question w as being imported in such increased quantities as to 
cause serious damage to the domestic industry.  This had not been the case when reviewing the same measure under Article 6.10 and the arguments raised by Poland with reference to Article 8.10 did not 
change the TMB's views and conclusion in this re gard.  Therefore, the TMB had to decline from 
considering issues related to the share and price le vel of imports from Romania in the Polish market. 
37. The TMB finally returned to the consideration of  the claim of Poland that the withdrawal of 
the transitional safeguard measure would result in  the elimination of the entire Polish industry 
producing acrylic/modacrylic staple yarn.  Since th e TMB's consideration of the reasons provided by 
Poland for its inability to conform with the TMB's recommendation did not lead the Body to change 
its assessment with respect to any important aspect s involved in the case and, in particular, that 
Poland had not demonstrated that the yarns subject to its safeguard measure were being imported into 
its territory in the reference period in such incr eased quantities as to cause serious damage to the 
domestic industry producing like a nd/or directly competitive products , the TMB could not agree with 
that claim.  Having given thorou gh consideration to the reasons pr esented by Poland for its inability to 
conform with the TMB's recommendation, the TMB concluded that these reasons did not lead it to 
change the conclusion and recommendation arrived at by it during the examination of the transitional 
safeguard measure in question pursuant to Article 6.10.  The TMB recommended, therefore, that 
Poland reconsider its position and that the saf eguard measure introduced on the imports from 
Romania of acrylic/modacrylic staple yarn, pure or mixed with wool or fine animal hair, be rescinded forthwith. 
(iii) Implementation of the TMB's recommendation 
38. At the TMB meeting in December 2001, bearing in mind that Article 8.9 of the ATC states 
that “ [t]he Members shall endeavour to accept in full the recommendations of the TMB, which shall 
exercise proper surveillance of the implementation of such recommendations”, and in view of the fact 
that the TMB had received no information from Poland as to the implementation of the above-
mentioned recommendation, the TMB decided to request such information from Poland.
18 
(b) United States – Transitional Safeguard Measur es on Combed Cotton Yarn from Pakistan:  
decision by the DSB 
39. On 9 July 2001, the United States had notified19 its decision to appeal to the Appellate Body 
certain issues of law covered in the report of the Panel established at the request of Pakistan, pursuant 
to Article XXIII:2 of GATT 1994, to examine the deci sion taken by the United States to maintain in 
place a restraint on imports of combed cotton yarn from Pakistan which the TMB had recommended 
the United States to rescind20.   The Appellate Body considered the issues referred to it and, inter alia , 
recommended  that the Dispute Settlement  Body  (DSB) request the United States to bring its 
measure, found in the Appellate Body Report and in the Panel Report as modified by the Report of the 
Appellate Body to be inconsistent with the  ATC,   into conformity with its obligations under that 
                                                      
18 For the follow-up information received subseque ntly from Poland, see paragraph 440 below. 
19 See G/L/459, paragraph 151. 
20 Ibid.;  paragraphs 136 to149. G/L/683 
Page 24  
 Agreement.   On 5 November 2001, the DSB adopted the Appellate Body Report
21 and the Panel 
Report as modified by the Appellate Body Report.   At the subsequent meeting of the DSB in 
November 2001,  the representative of the United States stated that on 8 November 2001 the 
Committee for the Implementation of Textile Agreem ents, chaired by the Department of Commerce, 
had directed the US Customs Service to eliminat e the limit on imports of combed cotton yarn from 
Pakistan.  This action was effective from 9 November 2001. 
5. Issues related to ATC implementati on addressed in higher WTO bodies 
(a) Preparation for the Doha Ministerial Conference and the Doha Decision 
40. In the context of the preparation for the Doha Ministerial Conference a series of formal and 
informal consultations were held in relation to the implementation of the ATC, on the basis of the 
General Council's decision of 3 May 2000 to meet in special sessions to address outstanding 
implementation issues, and to assess the existing diffi culties, identify ways n eeded to resolve them, 
and take decisions for appropriate action not la ter than the Fourth Session of the Ministerial 
Conference.  Proposals were made by certain Me mbers with respect to some aspects of ATC 
implementation.  In particular, on 28 August 2001,  the members of the South Asian Association for 
Regional Cooperation22 addressed a communication to the Chairman of the General Council which, 
inter alia , addressed the question of ATC implementation, stressing the need and proposing measures 
for a "more meaningful integration of the textile and clothing sector".23  The measures proposed 
included, inter alia , accelerated removal of quota restricti ons, implementation of increased growth 
rates for the remaining years of the ATC, exercise of restraint on unilateral modification of rules of 
origin to the detriment of developing and least developed countries, application of moratorium on 
anti-dumping, anti-subsidy and safeguard measures,  resorted to by importing countries on exports 
from developing and least developed countries until 1 January 2007.  Also, in a communication dated 
22 October 200124 the Group of 77 and China stressed the immediate need for a meaningful 
integration of the textile and clothing sector, in view of very li mited liberalization of trade, affecting 
items under specific quota restraints and for a me aningful increase in access possibilities for small 
suppliers from developing countries. Measu res in this regard were to include, inter alia , accelerated 
liberalization through removal of restrictions in  accordance with the ATC and application of a 
moratorium on anti-dumping, anti-subsidy and safegua rd measures resorted to by industrialized 
countries. 
41. On 26 September, the Chairman of the Gene ral Council and the Director-General tabled a 
draft decision on implementation-related issues and c oncerns, and revised versions of the draft were 
further tabled on 27 October and 13 November 2001.   On 14 November 2001, the Doha Ministerial 
Conference adopted a Decision on implem entation-related issues and concerns25 which included the 
following section on ATC implementation.   The Ministerial Conference: 
 "Reaffirms the commitment to full and faithfu l implementation of the Agreement on Textiles 
and Clothing, and agrees: 
 
 [-] that the provisions of the Agreement rela ting to the early integration of products and 
the elimination of quota restricti ons should be effectively utilized. 
  [-] that Members will exercise particular co nsideration before initiating investigations in 
the context of antidumping  remedies on tex tile and clothing exports from developing 
                                                     
 
21 See WT/DS192/AB/R. 
22 SAARC Member States are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. 
23 See WT/L/412. 
24 See WT/L/424.  
25 See WT/MIN(01)/17.  G/L/683 
 Page 25 
 
 countries previously subject to quantitativ e restrictions under the Agreement for a 
period of two years following full integration of this Agreement into the WTO. 
  [-] that without prejudice to their rights and obligations, Members shall notify any 
changes in their rules of origin concerning products falling under the coverage of the 
Agreement to the Committee on Rules of Orig in which may decide to examine them. 
 
 Requests the Council for Trade in Good s to examine the following proposals: 
  [-] that when calculating the quota levels fo r small suppliers for the remaining years of 
the Agreement, Members will apply the mo st favourable methodology available in 
respect of those Members under the growth-on-growth provisions from the beginning 
of the implementation period; extend the same treatment to least-developed countries; and, where possible, eliminate quota restrictions on imports of such Members;  
   [-] that Members will calculate the quota leve ls for the remaining years of the Agreement 
with respect to other restrained Members as if implementation of the growth-on-
growth provision for stage 3 had been advanced to 1 January 2000; 
  and make recommendations to the General Counc il by 31 July 2002 for appropriate action."
26 
 (b) Second Major Review of the Implementation of the ATC by the Council for Trade in Goods 
42. The CTG started its major review of the implem entation of the ATC in the second stage of the 
integration process (i.e. 1 January 1998 to 31 December 2001) at its  meeting of 27 September 2001.  
To assist in this review, the CTG had before it the comprehensive report prepared by the TMB in 
accordance with Article 8.11
27, as well as background statistical info rmation with respect to trends in 
world trade in textiles and clothing prepared by the WTO Secretariat at the request of the TMB28 and 
a submission provided by the delegation of Uruguay on behalf of International Textiles and Clothing 
Bureau (ITCB) members that are also Members or observers of the WTO.29  The CTG, inter alia , 
agreed on the structure of the review covering th e groupings and the individual topics which Members 
wished to address.  A list of topics for examin ation, comprising four subject areas (i.e. "The 
Integration Process and Other Related Issues in Arti cle 2", "The Use of the Transitional Safeguard 
Mechanism in Article 6", "Other Articles of the ATC"  and "Other Issues"), had been agreed.  At its 
meeting on 17 October 2001, the Council began its  detailed discussion of the subject areas.  
Specifically, the Council addressed, in detail, a num ber of topics under the first two subjects and 
began discussion of the third subject area.  On 26 October 2001, the Council continued its discussion 
of the six remaining topics under "Other Articles of the ATC".  It appeared from the discussion that 
there were wide gaps in the unders tandings and perceptions on some s ubjects, but that on some other 
subjects there appeared to be a possibility of r eaching some conclusions.  Therefore, the Council 
decided that its Chairman would hold informal consultations with a view to identifying which 
conclusions could be agreed upon.  At the CT G meeting on 4 December 2001, the Chairman reported 
that he had been holding further informal consulta tions to reach an understanding on the final report.  
This process was ongoing and required additional time to be completed, and it was his intention to 
continue consultations and to provide a further statement at the meeting of the General Council on 
19-20 December 2001.  Furthermore, when this pr ocess would be complete, he would submit a report 
to the Council for Trade in Goods.  The CT G Chairman informed the General Council on 
20 December  2001 that, in view of important gaps  in the understandings of the participants which 
                                                      
26 For the follow-up of the Ministerial Decision, see in particular paragraphs 586 and 587 as well as 
paragraph 595 below. 
27 See G/L/459. 
28 See G/L/474. 
29 See G/C/W/304. G/L/683 
Page 26  
 remained to be bridged, the cons ultation process would con tinue and be intensified in 2002, with a 
view to submitting a report to the Council at the earliest possible date.
30 
(c) The CTG's oversight function pursuant to Ar ticle IV of the Agreement Establishing the 
WTO – Transparency regarding new restrictions  on textile and clothing products commented 
on by the Textiles Monitoring Body 
43. At its meeting on 5 October 2001, the CTG resumed its consideration of this issue, which had 
first been raised in the CTG meeting in February 2001 during the consideration of the report of the 
TMB for the year 2000.31  The specific issue was the presence  of a bilateral restraint agreement 
between the United States and Turkey on Turkey's e xports of one category of clothing, as a part of a 
wider understanding between these two countries.  Th e concern related to the relationship of this 
bilateral restraint agreement to the ATC, and,  more generally, to the TMB's responsibility for 
supervising the implementation of the ATC and the CTG's role in overseeing this process.  Following 
the initial consideration of Februa ry 2001 and informal consultati ons, which had not been successful 
in finding an acceptable solution,  the matter, which had been included in the CTG's agenda at the 
request of Hong Kong, China on behalf of a group of  Members, had been further discussed at the 
CTG meetings of 14 March and 18 April 2001.  It had been proposed by these Members that the CTG 
would (i) request all Members to promptly provide full details of any new restrictions to the TMB 
along with the specific provisions of the ATC justif ying their introduction; (ii) invite the Members 
concerned to clarify and rectify the measures that have already been the subject of TMB review and comments; (iii) reemphasize the need, particularly  for the restraining Members, to ensure the 
conformity of all measures with their obligations under the Agreement.
32  The CTG, at its 
October 2001 meeting, agreed that its Chairman would continue consultations on how to deal with this 
issue and also hold further consultations on the substantive aspects involved.  At the CTG meeting on 
4 December 2001, it was agreed that since this i ssue was also under discussion within the framework 
of the CTG's second major review of the implementation of the ATC, and in light of the fact that the Council was considering its possible conclusions of  the major review at the same time, it seemed 
appropriate to take up this matter taking into account the outcome of the major review.
33 
(d) Composition of the TMB for Stage 3 
44. The composition of the TMB for the third stage of implementation of the ATC (2002 to 2004) 
was decided by the General Council on 20 December 2001.34  The list of TMB members, alternates, 
observers, and successive changes, are contained in the reports of the TMB. 
 
                                                      
30 For the continuation of the major review of the implementation of the ATC, see paragraphs 592 to 
594 below. 
31 See also G/L/459, paragraphs 500 to 503. 
32 See G/C/W/260/Rev.1. 
33 For the continuation of the CTG's consideration of this issue, see paragraph 596 below. 
34 See WT/L/443.  G/L/683 
 Page 27 
 
 PART THREE:  IMPLEMENTATION OF TH E ATC DURING THE THIRD STAGE OF THE 
INTEGRATION PROCESS 
I. INTEGRATION 
45. As already indicated35, the ATC provides for a transition period of ten years, during which the 
textiles and clothing sector has to be progressive ly integrated into GATT 1994.  The products 
constituting the textiles and clothing sector for the purpose of the implementation of the ATC are 
listed in the detailed Annex to the Agreement.  Th is Annex, specifying each product at the six-digit 
level of the Harmonized Commodity Description and Coding System (HS) Nomenclature, includes all 
textile and clothing products that were subject to  MFA or MFA-type restrictions in at least one 
importing Member during the period when the ATC was negotiated. 
46. In the context of the ATC, the notion of integrating a product or a group of products into 
GATT 1994 means that trade in such a product or group of products is removed from the application 
of the ATC and becomes solely governed by the general rules and disciplines embodied in GATT 1994.  In other words, once a product falling under the coverage of the ATC is integrated by a 
Member, that Member's tr ade in the given product with other WTO Members becomes subject to the 
normal GATT rules.  This implies, inter alia , that measures inconsistent  with GATT 1994 (such as 
discriminatory quantitative restrictions) that could be maintained by the Member concerned on trade 
in such a product during the pre-ATC period and, al so, could be taken over to the ATC regime, can no 
longer be applied;  they have to be eliminat ed as a result and on the date of integration. 
47. The above highlights that the integration pro cess is the main pillar of ATC implementation, 
since it provides the vehicle for bringing internationa l trade in textile and clothing products under the 
general rules and disciplines of GATT 1994.  The rules and requirements governing integration are 
defined in Articles 2.6 to 2.11.  Integration has to be formally implemented by all WTO Members, 
even if they did not apply restrictions under the pre-ATC regime and, therefore, did not carry over such restrictions to the ATC.  Integration is a progressive, staged process, unless, pursuant to the 
provisions of Article 6.1, Members specifically re nounced the right to use the transitional safeguard 
mechanism (Article 6) of the ATC, in which case they  are deemed to have already integrated, at the 
very beginning of the transitional period, all the products covered by the ATC into GATT 1994 
(Article 2.9).  For all other Members, integration takes place, as a main rule, in four stages:  on 
1 January 1995 (Stage 1), 1 January  1998 (Stage 2), 1 January 2002 (S tage 3) and 1 January 2005 (full 
integration).
36  Article 2.10 makes it clear, however, that the firm establishment of the dates of the 
four successive stages does not preclude the possibility  of integrating products earlier than provided 
for in an integration programme a pplicable to any of these stages. 
48. The choice of products to be integrated in any of the stages has been left to the Members, 
within the parameters defined by the respective pr ovisions of the ATC.  Accordingly, integration 
programmes that were implemented during the first three stages had to meet the following two basic 
requirements: 
• they had to include products which account ed for not less than a specific percentage 
(16 per cent in Stage 1;  17 per cent in Stag e 2 and 18 per cent in Stage 3) of the total 
volume of the respective Member's 1990 imports of the products covered by the 
ATC; 
 
• they also had to include, for each stage, products from each of the four main product 
groups (i.e. tops and yarns, fabrics, made-up textile products and clothing).  
 
                                                      
35 See paragraph 10 above. 
36 Idem . G/L/683 
Page 28  
 In addition, the respective programmes of integratio n had to be notified in detail to the TMB within 
the deadlines specified for that purpose.  Once received, the in tegration programmes were circulated 
by the TMB, without delay, to all Members and were  reviewed by the Body in conformity with the 
relevant provisions of the ATC.  49. On 1 January 2005, i.e. on the date of full integration of the entire sector, Members shall 
integrate into GATT 1994 all those products falling under the coverage of the ATC which had not yet 
been integrated by them during Stages 1, 2 and 3.  Also, Members were supposed to provide, at the 
latest by 1 January 2004, a notification to the TM B regarding their respective last stage integration 
programmes. 
50. Under the ATC, the technical requirements, in broad terms, are the same in respect of all 
Members which notified and implemented integra tion programmes for the first three stages.  
However, a distinction can be made between Members that notified restrictions with reference to the 
provisions of Article 2.1 and those Members that onl y retained the right to use the provisions of the 
transitional safeguard mechanism as specified in Articl e 6.  Such a distinction is also recognized in 
Article 2.7, whereby Members carrying over MFA or MFA-type restrictions to the ATC are referred 
to in Article 2.7(a), while other Members are refe rred to in Article 2.7(b).  The TMB has already 
observed both in its first a nd second comprehensive reports
37 that this distinction between Members is 
important from two interrelated points of view: 
• the trade regime the Members carried over to the ATC; 
 
• the implication of integrating products into GATT 1994. 
 In the case of Members that notified restrictions to be maintained under the ATC, with reference to its 
Article 2.1, the integration of a product into GA TT 1994 has essentially two consequences:  first, any 
quantitative restriction maintained on such a pro duct under the ATC is, by virtue of integration, 
eliminated;  second, if the product is not subject to a restraint, since it is removed from the application 
of the ATC, the transitional safeguard mechanism can not be invoked any more with respect to imports 
of such a product.  For all other Members that implement integration progr ammes under the ATC, the 
effect of integration is to remove, with respect to the products integrated, the possibility of having 
recourse to the transitional safeguard mechanism.  Since integration ipso facto  removes restrictions 
maintained under the ATC, the effect of having sel ected products for integration can be significantly 
different for the two groups of Members defined above.  
51. Stages 1 and 2 integration programmes and their respective implementation were dealt with in 
detail in the first and second comprehe nsive reports adopted by the TMB.
38  Similarly, since the 
notification by Members of their respective integr ation programmes to be implemented for Stage 3 
was required at the latest by 1 Ja nuary 2001, (i.e. during the period  of implementation of the second 
stage of the integration process), the TMB's sec ond comprehensive report included detailed factual 
information also on the Stage 3 integration programmes and provided an assessment of them.39  
Related further developments that still occurred during the period of implementation of the second 
stage of the integration process and subsequent to the adoption of the TMB's second comprehensive 
report, are summarized in Part Two of the present report.40 
52. Also in light of the above, in the context of the implementation of the ATC during the third 
stage of the integration process, the following i ssues need to be addressed, for the purpose of the 
present report, with respect to integration: 
                                                      
37 See G/L/179, paragraphs 66 and 67;  G/L/459, paragraph 12.  
38 See G/L/179, paragraphs 9 to 77 and G/L/459, paragraphs 10 to 78. 
39 See G/L/459, paragraphs 79 to 114 and paragraphs 675 to 681. 
40 See paragraphs 15 to 18 above.  G/L/683 
 Page 29 
 
 • implementation by Members of their resp ective Stage 3 integration programmes, 
including further developments that occurred during the period starting on 1 January 2002, as well as an updated asse ssment of these integration programmes; 
 
• in addition to Stage 3 integration, implem entation also of Stages 1 and 2 integration 
programmes during the period covered by th is report in relation to newly acceded 
Members and, if applicable, also by the new Members themselves; 
 
• the final stage of integration to be impl emented on 1 January 2005 (regarding which 
notifications by Members were due to be received at least 12 months before its 
coming into effect). 
 A. I
MPLEMENTATION OF INTEGRATION PROGRAMMES DURING STAGE 3 
1. Members referred to in Article 2.7(a) that continue to maintain restrictions under the 
provisions of Article 2 
53. It is to be recalled that the Members that had maintained restrictions under the MFA, had to 
notify, pursuant to Articles 2.6 and 2.7(a), their r espective first stage integration programmes no later 
than 1 October 1994.41   Canada, the European Communities,  Norway and the United States provided 
notifications under these provisions within the d eadline prescribed.  Subsequently, during the 
implementation of Stage 2 of the integration process and invoking the provisions of Article 2.15 
regarding the elimination of restrictions (wit hout integrating the products concerned into 
GATT 1994), Norway, eliminated in four steps (on 1 January 1996, 1 January 1998, 1 January 1999 and 1 January 2001) all the restricti ons it had maintained under Article 2.
42  Therefore, for Norway the 
potential effect of integrating products during the period starting 1 January 2001 has been the same as 
in the case of Members referred to in Article 2.7(b)  that retained the right to use the provisions of 
Article 6.  In light of this, a more detailed examin ation of the impact of the integration implemented in 
Stage 3 by Norway is not warranted.  It should be not ed that Norway reported that it had integrated in 
this Stage 21.65 per cent of the total volume of its  imports in 1990 of the products falling under the 
coverage of the ATC (of which:  tops and yarn s – 2.73 per cent;  fabrics – 6.27 per cent;  made-up 
textile products – 5.09 per cent,  clothing – 7.57 per cent.)43 
(a) Stage 3 integration programmes and their implementation 
54. During the first half of 2001, the TMB reviewed the respective integration programmes for 
Stage 3 as notified and, if applicable, subsequen tly corrected and supplemented, by Canada, the 
European Communities and the United States.  In reviewing these integration programmes, the TMB 
noted that, in accordance with th e requirements of Article 2.8(b), the volume of products to be 
integrated, as from 1 January 2002, by Canada, th e European Communities and the United States 
amounted to at least 18 per cent of the volume of th e respective Member's total imports of 1990 of the 
products falling under the coverage of the ATC.  It could also be ascertained that products from each 
of the four groups, referred to in Article 2.8(b), would be integrated by each of these Members.  Furthermore, since these programmes had to be impl emented on 1 January 2002, i.e. on the date of 
commencement of the third stage of the integration process, it seems to be appropriate to reiterate 
some of the relevant features characterizing the respective programmes as they could be established 
and noted by the TMB at the time it could complete  their review during the first half of 2001. 
                                                     
 
41This deadline was defined in the respective decision taken by Ministers in Marrakesh on 
15 April 1994. 
42 See G/L/459, paragraphs 255 and 261 to 264. 
43 Idem, paragraph 84. G/L/683 
Page 30  
 55. Canada reported that, in accordance with Ar ticle 2.8(b), the volume of imports to be 
integrated amounted to 18.16 per cent of the tota l volume of imports into Canada in 1990 of the 
products falling under the coverage of the Agreement.  Products from each of the four groups referred 
to in Article 2.8(b) would be integrated, which would represent th e following percentages of the 
volume of imports in 1990 in Canada :  tops and yarns (5.51 per cent), fabrics (1.05 per cent), made-up 
textile products (7.77 per cent) and clothing (3. 83 per cent).  The TMB noted that Canada would 
integrate products from ten Canadian categories, 16 sub-categories, as well as eight products not 
attributed by Canada to a specific category.  Th e TMB further noted that, of these, three categories 
and two sub-categories, for which Canada mainta ined restrictions under Article 2.1, would be 
integrated in full and that, therefore, restrictions affecting such categories or sub-categories would be 
eliminated.  In a number of other cases, however, such categories were part of merged categories 
and/or sub-categories subject to restraint and, in these cases, the restrictions would only be partially 
eliminated, affecting overall 20 WTO Members, si nce the non-integrated parts of the merged 
categories and/or sub-categories would remain under restraint.  In addition, products from 17 other 
categories or sub-categories would be integrated for which restrictions would be only partially 
eliminated, affecting overall 27 WTO Members.  The TMB also took note of the statement by Canada 
that when a product or a category would be integr ated that represented only part of a restrained 
category, merged category or sub-category, the level for the respective remaining restraints (category, 
merged category or sub-category) would not be re duced to reflect the removal of these products from 
the restriction.
44 
56. The European Communities reported that, in acco rdance with Article 2.8(b), the volume of 
imports to be integrated amounted to 18.08 per cent of the total volume of imports into the European 
Communities in 1990 of the produc ts falling under the coverage of the Agreement.  Products from 
each of the four groups referred to in Article 2.8( b) would be integrated, representing the following 
percentages of the volume of imports in 1990 in the European Community:  tops and yarns (3.82 per cent), fabrics (3.60 per cent), made- up textile products (4.44 per cent) and clothing 
(6.22 per cent).  The TMB noted that the Eur opean Communities would integrate 57 EC product 
categories, of which 16 of tops and yarns, 14 of fa brics, 18 of made-up textile products and nine of 
clothing.  In addition, the European Communitie s would integrate four made-up textile products 
which are not classified in any specific EC produc t category.  The TMB further noted that 11 EC 
categories, for which the European Communities main tained restrictions under Article 2.1, had been 
included in the integration programme and that, theref ore, such restrictions would be eliminated on 
1 January 2002.  Restraints on these 11  EC categories affected overall nine WTO Members.
45   
57. In its notification the United States reported th at the volume of imports to be integrated 
amounted to 18.11 per cent of the total volume of imports into the United States in 1990 of the products falling under the coverage of the Agreement.  Products from each of the four groups referred 
to in Article 2.8(b) would be integrated, and would represent the following percentages of the volume 
of imports in 1990 in the United States:  tops and yarns (3.26 per cent), fabrics (3.91 per cent), made-
up textile products (8.40 per cent) and clothing (2.5 5 per cent).  The TMB noted that the United States 
would integrate products from 41 US categories, of whic h four of tops and yarns, five of fabrics, eight 
of made-up textile products and 24 of clothing .  The TMB further noted that products from 
38 US categories, for which the United States mainta ined restrictions under Article 2.1, had been 
included in the integration programme and that, ther efore, restrictions affecting such products would 
be eliminated on 1 January 2002.  Restraints on these products affected overall 20 WTO Members.  
Some of the restraints would be fully eliminat ed because they constituted specific limits covering 
single or merged categories which would be integrated  in their entirety.  In a number of other cases, 
products included in the programme of integration fo rmed only part of product categories, therefore, 
restrictions affecting such categories would be only  partially eliminated.  In several other cases, the 
category integrated was, prior to its integration, subject to a quantitative restriction because, although 
                                                     
 
44 See G/L/459, paragraph 82. 
45 Idem, paragraph 83.  G/L/683 
 Page 31 
 
 the category itself was not under specific limit, it fell under an aggregate or group limit.  As to the 
consequences of the integration of the products lis ted as imports into the United States of products 
forming only part of a category or subject to gr oup or aggregate limits, the TMB noted the US' 
statement that the United States "[would] be in c ontact with [its] textiles agreement partners during 
the course of this year [i.e. 2001], concerning the e ffects of integration in the year 2002 on specific, 
group and aggregate limits.  Adjust ment to limits [would] be based on trade that has occurred in the 
products to be integrated, and [the United States '] agreements partners [would] be given the 
opportunity to consult with [the Unite d States] on this issue".  In this regard, the TMB recalled that, in 
conformity with the provisions of Article 4, any ch ange in the level of such restrictions shall not 
adversely affect the access available to a Member and upset the balance of rights and obligations of 
the Members concerned under the ATC.  The TMB observed that the products integrated were 
subject, prior to their integration, to visa requirements, and sought confirmation that no visa 
requirements would be applied to any of the products integrated into GATT 1994 as a result of the Stage 3 integration programme as from 1 January 2002.  The United States stated in this regard that "a 
decision [would] be made later this year [i.e. 2001]  after consultation with our bilateral textile visa 
arrangement partners, as to whether or not a visa requirement [would] be retained for goods exported 
in 2002 that were integrated in that year".  Th e TMB recalled that the respective visa arrangements 
had been notified to the TMB by the United States, pursuant to Article 2.17, as parts of administrative 
arrangements and that, under Article 2.17, admi nistrative arrangements could only be deemed 
necessary in relation to the implementation of restri ctions applied under Article 2.  The TMB further 
recalled that, in June 1998, several WTO Member s had requested the TMB to review, in accordance 
with Articles 8.1 and 2.21, the implementation of th e US' Stage 2 integration programme with respect 
to the continuation of visa requirements for products in cluded in this programme.  In that context, the 
TMB had, inter alia , taken note of a communication by the United States that, as a definitive response 
to the issues raised "without conceding its right to maintain such measures, the United States […] 
would eliminate visa requirements with respect to products integrated in Stage 2, without condition and as soon as practicable, but in any event no la ter than 31 December 1998".  It was the TMB’s 
understanding that such elimination of visa requ irements would be effected on a MFN basis.  
Subsequently, the United States had forwarded to the TMB, for its information, a US Federal Register 
Notice "eliminating the visa requirements for various textile categories, consistent with the TMB's 
decision on this matter".  Against this background, the TMB expected that it would be informed as 
soon as possible of any follow-up considerations to  be given to this matter by the United States.
46 
58. In conformity with the provisions of Article 2. 8(b), the third stage of integration had to be 
implemented on 1 January 2002.  Following the provis ions of Article 2.21, the TMB is required to 
keep under review the implementation of Article 2 which deals, inter alia , with the integration 
process.  The TMB's mandate in this regard has b een and continues to be accomplished by reviewing 
any relevant particular matter referred to it by any Member and by also relying on any relevant 
communication or information that can be brought to the TMB's attention.  Since no communication 
or information has been received regarding this matter, the TMB assumes that the respective Stage 3 
integration programmes, as notified and reviewed, were implemented on schedule by Canada, the 
European Communities and the United States.  It is impor tant to note also in this context that prior to 
the implementation of its integration programme, the United States informed the TMB (in reply to the 
request for information made by the Body47) that the United States had eliminated the visa 
requirement for products integrated in the third stage.48  As this was the only communication received 
by the TMB and the only piece of information brought to its attention regarding matters related to the 
implementation of the respective integration programmes in a broader sense, it can also be assumed that none of the Members maintaining restrictions under Article 2.1 continued to apply the provisions 
of its respective administrative arrangements agreed  with other Members pursuant to Article 2.17 with 
respect to products integrated during Stage 3.  Th is, in turn, implies that the Members concerned had 
                                                     
 
46 See G/L/459 , paragraph 85. 
47 See paragraph 57 above. 
48 See also paragraph 18 above. G/L/683 
Page 32  
 effectively implemented integrati on by removing the products included in the Stage 3 integration 
programmes from the application of any of the provisions of the ATC.  Finally, as far as the implications of the enlargement on 1 May 2004 of the European Communities on the integration 
programmes are concerned, these aspects are brie fly addressed in paragraphs 61 and 81 below. 
(b) Implementation of integration programm es in relation to newly acceded Members 
59. The accession of two new Members to the WTO took effect shortly prior to the 
implementation of Stage 3 integration or on the day of this implementation.  China became a Member 
on 11 December 2001;  the membership of Chinese Taipei took effect on 1 January 2002.  As a result of these accessions, the Stage 3 implementation programmes had to be implemented vis-à-vis  China 
and Chinese Taipei on the same day (i.e. on 1 January  2002) as in relation to any other Member.  The 
Former Yugoslav Republic of Macedonia (FYROM ) joined the WTO on 4 April 2003, hence it 
became entitled to benefit from integration on that day. 
60. As indicated earlier, once a product becomes integrated, it is taken out of the scope of 
application of the ATC and becomes subject to the general rules and disciplines of GATT 1994.  
Since trade in integrated products is not govern ed any more by the ATC (and, more specifically, 
restrictions cannot be ma intained on such products under Article 2), integration programmes that were 
implemented prior to the accession of a new Member, have to be extended to the newly acceded 
Member as well.  Therefore Stages 1, 2 and 3 integration programmes had to be implemented 
practically in one step by the Members concerne d in relation to China, Chinese Taipei and the 
FYROM, respectively.  Canada, the European Co mmunities and the United States complied with their 
respective obligations in this regard.  It is impor tant to note that the implementation by these Members 
of the integration programmes of the three successive stages vis-à-vis , respectively, China and 
Chinese Taipei, resulted in the elimination of a number of quantitative restrictions previously 
maintained.
49 
(c) Issues relevant to the integration programm es implemented by the European Communities, 
following its enlargement on 1 May 2004 
61. In a communication sent to the TMB in response to  questions put by the Body in the context 
of the examination of a communication received from several TMB members requesting the TMB to 
review the "[i]ntroduction by the European Union of  quota restrictions in the markets of ten newly 
acceding States, Members of the WTO" , the European Communities stated, inter alia , that "[a]s from 
1 May 2004, the European Union includes ten new me mber States.  The Act of Accession establishes 
in Article 6(7) that the new member States must apply the common trade policy concerning textiles and that the already existing quantitative restricti ons applied by the Community on imports of textile 
and clothing products are to be adjusted to take account of the accession of the new member States to 
the Community."
50  Also in light of this statement, it would appear that the new member States of the 
European Communities have taken over the EC's in tegration programmes impl emented during Stages 
1, 2 and 3.  It should be noted, however, that the European Communities has not provided a specific 
notification to the TMB in this regard.  
(d) No recourse to the provisions of Article  2.10 (advanced or earlier integration) 
62. Article 2.10 provides that "[n]othing in this Agreement shall prevent a Member that has 
submitted an integration programme pursuant to para graphs 6 or 8 [of Article 2] from integrating 
products into GATT 1994 earlier than provided for in su ch a programme."  It is worthwhile recalling 
that the Decision adopted by the Ministerial Conference in Doha (on 14 November 2001) states, inter 
alia, the following:  "The Ministerial Conference [... ] agrees [...] that the provisions of [the ATC] 
                                                      
49 See paragraphs 100 and 101, 106 to 108, 115 and 116, 118, 121, 122 and 124 below. 
50 See paragraph 325 below.  G/L/683 
 Page 33 
 
 relating to the early integration of prod ucts [...] should be effectively utilized."51  During the major 
review conducted by the Council for Trade in Good s on the implementation of the ATC in the second 
stage of the integration process, the exchange of  views among Members addressed issues related to 
this provision of the ATC as well.  The report adopted by the Council at the end of the review makes reference to the Decision of the Ministerial Conferen ce "containing a section which pertained to some 
of the subjects being discussed in the major review" and, in a related footnote, reproduces the full text 
of the decision dealing with the ATC (including  the language relating to  early integration).
52  It should 
also be mentioned that in its second comprehens ive report submitted to the Council for Trade in 
Goods, the TMB expressed the view that "measur es can be taken during the third stage of the 
integration process under the relevant provisions of  Article 2, resulting in increased opportunities for 
exports in products still subject to restraints.  Also  in view of [this], the TMB recommends [...] that 
the Council [...] invite the Members concerned to ha ve recourse, whenever possible, to the provisions 
of Article 2.10 (advanced integrati on) [...] during the period of implementation of the third stage of 
the integration process."53 
63. Also against the background, as above, it has to  be noted that during the implementation of 
the third stage of the integration process, the TMB has not received any notification with reference to 
Article 2.10 from any of the Members maintaining rest rictions under Article 2.1.  This means that the 
coverage of products integrated during Stage 3 by  Canada, the European Communities and the United 
Stages has not been enlarged;  it has remained the same as notified and subsequently implemented on 
1 January 2002. 
2. Members retaining the right to use the provisions of Article 6 
(a) Stage 3 integration programmes notified prior to 1 January 2002 
64. By the end of December 2001, i.e. prior to the implementation of Stage 3 of the integration 
process on 1 January 2002, of the 47 Members that ha d retained the right to use the provisions of 
Article 6 and had notified integration programmes both for Stages 1 and 2, 39 provided integration 
programmes to be implemented during Stage 3, sever al of them after the expiration of the deadline 
specified in Article 2.11.  At that time, no Stage 3 integration programmes had been received from 8 
of the 47 Members referred to above (namely fro m Bangladesh, Egypt, Honduras, Israel, Malaysia, 
Saint Kitts and Nevis, South Africa and Venezuela). 
65. Also by the end of December 2001, the TMB was in a position to conclude the review, 
pursuant to Article 2.21, of 33 notifications out of  the 39 integration programmes received.  Pakistan 
notified that it had decided to integrate its entire tex tiles sector as part of the Stage 3 integration and, 
accordingly, the whole of the textiles and clothing sector would be henceforth governed by the rules 
of GATT 1994.54  The TMB commended Pakistan for this decision.  In the case of the other 32 
notifications (Argentina, Brazil, Colombia, Costa Rica, Cyprus, Czech Republic, Dominican Republic, El Salvador, Estonia, Hungary, India, I ndonesia, Japan, Korea, Latvia, Liechtenstein, 
Lithuania, Malta, Mauritius, Morocco, Panama, Peru, the Philippines, Poland, Romania, Slovenia, Sri 
Lanka, Switzerland, Thailand, Tunisia, Turkey and Uruguay), the TMB noted that, in each case, the 
products to be integrated amounted to at least 18 per cent of the respective Member's total imports 
falling under the coverage of the ATC (in most ca ses, in volume of the 1990 imports, in some other 
cases, in value and/or with a different base year), and that, in all cases, products from each of the four groups (tops and yarns, fabrics, made-up te xtile products and clothing) would be integrated. 
                                                     
 
51 Paragraph 4.1 of the Decision adopted by the Ministerial Conference (WT/MIN(01)/17).  See also 
paragraphs 41 above and 585 below. 
52 See G/C/W/396, paragraph 30 and related footnote. 
53 See G/L/459, paragraphs 681 and 682. 
54 See G/L/459, paragraph 88. G/L/683 
Page 34  
 66. In addition, as regards Turkey, it is appropria te to recall that in December 1996, Turkey 
notified with reference to Article 2.10 that it had decided to bring forward the implementation of the 
integration of some products, which would otherwise fo rm part of the third stage of integration, to 
take effect on 1 January 1998.  These products re presented 29.07 per cent of the volume of Turkey's 
total imports in 1990.  The notification of Turkey stated, inter alia , that "by the integration of the 
products included in the notification by Turkey of the second stage of integration pursuant to 
paragraphs 8(a) and 11 of Article 2 of the Agre ement on Textiles and Clothing, together with the 
products included in this notification, Turkey a nd the European Community, which form a customs 
union, will continue to apply the same duties and other regulations of commerce to the trade of 
territories not included in the union in respect of products covered by the Agreement on Textiles and Clothing".
55  This statement also explains why the St age 3 integration programme of Turkey, while 
presented in a slightly different structure, was very  much similar to that notified by the European 
Communities. 
67. Similar to what had been done with respect to  the notifications made pursuant to Articles 2.6 
and 2.8(a), the TMB in some instances took note of integration programmes which, in certain respects, did not fully meet the technical criteria established under Article 2. 8(b).  This concerned 
cases where the data were not available in volume,  or for the year 1990, or where the share of 
integration was calculated relative to data for the te xtiles and clothing sector as a whole, since data for 
the exact product coverage of the ATC were not availa ble.  Prior to taking note of such notifications, 
the TMB was assured that no better data had been availa ble, and verified that the basis of the data for 
each Member was the same as that u sed for its first and second stages of integration.  Their respective 
stages of integration would, therefore, be implemented in a consistent manner.
56 
68. With respect to notifications addressed to th e TMB after the expira tion of the relevant 
deadline defined by Article 2.11, the TMB reiterate d that its taking note of late notifications was 
without prejudice to the legal status of such notifications. 
69. The review by the TMB of six notifications of Stage 3 integration programmes (Bolivia, 
Guatemala, Mexico, Nicaragua, Paraguay and the Slovak Republic) could not be completed by the 
end of 2001, since satisfactory replies had not yet been received from them to the specific questions 
raised and clarifications sought by the TMB. 
(b) Developments during the period of implementation of Stage 3 
70. Since 1 January 2002, i.e. the date of implemen tation of Stage 3 of the integration process, the 
TMB could complete the review of some of the integration programmes whose review was pending.  
In addition, a few new notifications have been re ceived and also reviewed.  Also, two newly acceded 
Members submitted notifications regarding their resp ective integration programmes.  The enlargement 
of the European Communities on 1 May 2004 had also affected the respective integration programmes 
notified by some of the ten new member States. 
(i) Follow-up to certain notifications whose review was pending 
71. Of the six Members listed in paragraph 69  above, the Slovak Republic and Guatemala 
provided responses (respectively, in January and February 2002) to the questions raised and 
clarifications sought by the TMB with respect to their Stage 3 integration programmes.  During its 
meeting of February 2002, the TMB, observing th at the clarifications it had sought from Bolivia, 
Mexico, Nicaragua and Paraguay with respect to th eir notifications pursuant to Articles 2.8(b) and 
2.11 had not as yet been received, decided to reitera te its requests, in view of the fact that the 
respective programmes of integration had to be implemented already as from 1 January 2002.  
                                                      
55 See G/L/459, paragraphs 71 and 72. 
56 See G/L/459, paragraphs 86 to 91 and also paragraphs 16 to 17 of the present report.  G/L/683 
 Page 35 
 
 Subsequently, additional notifications were receiv ed from Paraguay (in April 2002) and Bolivia (in 
March 2003). 
72. On the basis of the clarifications received  from the Members concerned with respect to 
different technical aspects of their respective notifi cations, the TMB could conclude the review of the 
Stage 3 integration programmes of Guatemala, Pa raguay and the Slovak Republic.  The TMB noted 
that in each of the three cases the products integrated in Stage 3 amounted to at least 18 per cent of the 
respective Member's total volume of 1990 (for the Slovak Republic:  1993) imports of the products 
covered by the ATC and, that products from each of the four groups (tops and yarns, fabrics, made-up 
textile products and clothing) had been include d in the relevant integration programmes. 
73. The additional notification received from Bolivia requested the replacement of certain tariff 
headings included in the Stage 3 integration programme  as initially notified by another tariff heading.  
Noting that this additional notification was not suffi ciently specific regarding certain technical aspects 
involved, the TMB decided to seek clarification fr om Bolivia on these matters.  Since no further 
communication has been received from Bolivia, the TM B has not been in a position to conclude the 
review of Bolivia's Stage 3 integration programme. 
(ii) New notifications received with reference to Articles 2.8(b) and 2.11 
74. During the implementation of Stage 3 of the integration process, notifications were received 
with reference to Articles 2.8(b) and 2.11 fro m Honduras (in January 2002), Egypt (in April 2002) 
and Venezuela (in April and July 2002).  In revi ewing these notifications under Article 2.21, the TMB 
noted that each of them met the basic requirements de fined in Article 2.8(b):  the products integrated 
amounted to at least 18 per cent of the respective Member's total volume of 1990 imports and included products from each of the four product groups. 
(iii) Notifications received from newly acceded Members 
75. At its meeting of January 2002, the TMB took note of the notification made by China, 
pursuant to Article 6.1, that it wished to retain the right to use the transitional safeguard mechanism 
during the transition period of the ATC.  At its meeting of February 2002, the TMB took note of the notification made by Chinese Taipei, pursuant to Article  6.1, that it wished to retain the right to use 
the transitional safeguard mechanism during the tr ansition period of the Agreement.  Since both 
notifications were addressed to the TMB during the period of implementation of Stage 3 of the 
integration process, the Members concerned had to  notify integration programmes for the respective 
three stages and had to implement them practically in one step. 
76. China provided separate notifications, with refe rence to Articles 2.6 and 2.7(b), 2.8(a) and 
2.11, as well as 2.8(b) and 2.11, whose review was started by the TMB during its meeting of 
April 2002.  On that occasion, the TMB decided to  seek clarifications from China regarding certain 
aspects of its notifications.  China submitted additi onal information in response to the questions put 
by the TMB.  Having examined the response provide d, in May 2002 the Body decided to seek further 
clarifications from the notifying Member.  The sam e decision was taken in June 2002 when the TMB 
reverted to its review of the notifications made by China, also on the basis of further additional 
information submitted by it in response to the TMB' s questions.  At its meeting of July 2002, the 
TMB could conclude the review, under Article 2.21, of  the notifications made by China regarding its 
Stages 1, 2 and 3 integration programmes.  During its review the TMB noted that, in accordance with 
Articles 2.6, 2.8(a) and 2.8(b), the products in tegrated amounted respectively to 20.79, 17.07 
and 18.10 per cent of the volume of imports in 1992 of the products falling under the coverage of the 
Agreement.  The TMB also noted that, in accordance with Articles 2.6, 2.8(a) and 2.8(b), the products 
integrated for each stage included products from each of the four groups:  tops and yarns, fabrics, 
made-up textile products and clothing.  With regard to the fact that the calculation of the share of the 
products to be integrated had been made on the b asis of imports in 1992, the TMB noted the statement G/L/683 
Page 36  
 by China that this was the first year for which data were available on the basis of the Harmonized 
System.   
77. Chinese Taipei submitted notifications pursuant to Article 2.6 and 2.7(b), 2.8(a) and 2.11, and 
2.8(b) and 2.11 in February 2002.  At its meeting of February 2002, the TMB started their review and 
decided to seek clarification from Chinese Taipei as to whether (i) some of the products included of 
the respective integration programmes fell under the cove rage of the ATC and (ii) the imports that had 
been counted in respect of products belonging to  HS lines in the Annex to the ATC for which only 
part of the respective lines fall under the covera ge of the ATC ("ex-HS lines") corresponded precisely 
to the product description contained in the ATC A nnex.  The TMB continued the review of these 
notifications during its meeting of April 2002, also  on the basis of additional information received 
from Chinese Taipei in response to the questions pu t by the Body.  Having examined the additional 
information, the TMB was of the view that certain  aspects remained unanswered and, therefore, not 
sufficiently clear.  On this basis,  the Body decided to seek further clarifications from the notifying 
Member.  Since no follow-up communication has been received from Chinese Taipei, the TMB has 
not been able to conclude the review of the in tegration programmes notified by Chinese Taipei for 
Stages 1, 2 and 3. 
(iv) Observations with respect to late notifications 
78. With respect to notifications addressed to th e TMB after the relevant deadlines, the TMB 
reiterated in each case that its taking note of late no tifications was without prejudice to the legal status 
of such notifications. 
(v) Implementation of integration programmes during Stage 3 
79. Since no communication has been received rais ing doubts in this regard, the TMB assumes 
that the Stage 3 integration programmes (or if applicable, the Stages 1, 2 and 3 integration 
programmes) notified to the Body were implemented on 1 January 2002, or, in those cases when the 
notifications had been made after 1 January 2002, at  the latest on the date of the submission of such 
notifications (or, if applicable, of their revised ve rsions on the basis of which the TMB could conclude 
the review of such notifications). 
80. As indicated earlier, one Member (Pakistan) decided to integrate its entire textiles and 
clothing sector as part of the Stage 3 integration.
57  In that sense, Pakistan relied also on the provisions 
of Article 2.10 regarding advanced or earlier integra tion.  No other Member that had retained the right 
to use the provisions of Article 6, has invoked the provisions of Article 2.10 during the implementation of the third stage of the integration process.  It is noteworthy that of these Members, 
only one has had recourse to the transitional safeg uard mechanism during the third stage of the 
integration process.
58 
(vi) Issues arising from the enlargement of the European Communities, affecting integration 
programmes previously notified 
81. As indicated in paragraph 61 above, it would appear that on 1 May 2004 the ten new member 
States of the European Communities took over the EC's integration programmes implemented during 
Stages 1, 2 and 3.  Though no specific notificati on has been addressed to the TMB regarding this 
matter either by the EC or by its new member States , it would also appear that while for some of the 
new EC member States this action has not broug ht about any changes, since their respective 
integration programmes were identical to those notified by the EC, in the case of some others this has 
not been the case.  The TMB obser ves that such changes are not contemplated in the respective 
                                                      
57 See paragraph 65 above. 
58 See paragraphs 429 to 436 below.  G/L/683 
 Page 37 
 
 provisions of Article 2 and that, furthermore, under th e ATC, products that have been integrated into 
GATT 1994 cannot be brought back again under the provisions of the Agreement. 
B. NOTIFICATIONS PURSUANT TO ARTICLE 2.8( C) AND 2.11 
82. According to the provisions of Article 2.8(c), "[t]he remaining products, i.e. the products not 
integrated into GATT 1994 [...], shall be integrated, in  terms of HS lines or categories [...], as follows:  
[...] on the first day of the 121st month that the WTO Agreement is in effect, the textiles and clothing 
sector shall stand integrated into GATT 1994, all restrictions under this Agreement having been 
eliminated."  Article 2.11 provides that "[t]he resp ective programmes of integration, in pursuance of 
paragraph 8 [of Article 2], shall be notified in de tail to the TMB at least 12 months before their 
coming into effect, and circulated by the TMB to all Members." 
83. As indicated earlier59, the first day of the 121st month that the WTO Agreement will be in 
effect is 1 January 2005.  On this day: 
• the fourth (and final) stage of integration shall be implemented ; 
 
• as a result, the entire textiles and clothing sect or shall become fully integrated into 
GATT 1994; 
 
• also, the transition period of ten years expires, and the ATC and restrictions 
thereunder shall stand terminated. 
 
84. Pursuant to the provisions of Article 2.11, notif ications by Members regarding the final stage 
of integration were due to be received at least 12 mont hs before the date of implementation, i.e. at the 
latest by 1 January 2004.  Only one Member provide d a notification within the time-frame specified in 
Article 2.11.  Japan submitted the detailed list of tex tile and clothing products to be integrated by it on 
1 January 2005.  The TMB reviewed this notifica tion at its meeting of January 2004.  During its 
review, the TMB verified that on 1 January 2005 the total volume of Japan’s 1990 imports of the 
products in the Annex to the ATC would be integr ated into GATT 1994, which confirmed the Body’s 
understanding that, in accordance with Article 2.8(c), a ll the products not yet integrated by Japan into 
GATT 1994 under Articles 2.6, 2.8(a) and 2.8(b) were included in the list of the products that would 
be integrated into GATT 1994 on 1 January 2005.  The TMB commended Japan for its timely 
notification. 
85. In the context of this review, the TMB, reca lling the provisions of Articles 2.8(c) and 2.11, 
observed that up until its January 2004 meeting onl y Japan had provided a notification pursuant to 
these provisions.  The TMB decided to remind Members of the notification requirement contained in the Articles referred to above.
60  It observed in this respect that those Members that had notified, 
pursuant to Article 6.1, their intention not to retain the right to use the provisions of Article 6 were, in 
accordance with Article 2.9, deemed  to have integrated their textiles and clothing products into 
GATT 1994 and were, therefore, exempted from comply ing with the provisions of paragraphs 6 to 8 
and 11 of Article 2.  It was also observed that, irrespective of the unambiguous commitments defined 
in Article 2.8(c) and also in Article 9 regarding the full integration on 1 January 2005 of the entire 
textiles and clothing sector into GATT 1994, complia nce with the respective notification requirement, 
in particular by Members maintaining restrictions  under the provisions of the ATC, would contribute 
to the faithful implementation of the ATC. 
86. Subsequently, notifications were received from three Members (Canada, China and the 
United States) which were examined by the TMB at its meeting of February 2004.  Canada notified 
                                                      
59 See paragraphs 10 and 47 above. 
60 See G/TMB/29. G/L/683 
Page 38  
 that “on 1 January 2005, Canada  will integrate into GATT 1994 all textile and clothing products to 
which the ATC applies, as listed in the Annex of th e ATC, that were not integrated during the first 
three stages of integration under the ATC.  On this date, Canada will eliminate all remaining 
restrictions under the ATC on such products, and Ca nada will have integrated into GATT 1994 all 
products listed in the Annex of the ATC.”  China st ated that “pursuant to Article 2.8(c) of the 
Agreement on Textiles and Clothing, China will integr ate all the remaining products not covered by 
China's first, second and third integration progr ammes into GATT 1994 on 1 January 2005.”  The 
United States for its part notified that “on 1 January 2005 the United States will integrate into 
GATT 1994 all textile and clothing pro ducts to which the ATC applies, as listed in the Annex of the 
ATC, that were not integrated during the first three stages of integration under the ATC.  On this date, the United States will eliminate all remaining rest rictions under the ATC on such products, and the 
United States will have integrated into GATT 1994 all products listed in the Annex to the ATC.” 
87. In reviewing these notifications under Article 2.21, the TMB noted that the three Members 
confirmed that on the first day of the 121st month th at the WTO Agreement would be in effect, their 
respective textiles and clothing sector would be inte grated into GATT 1994.  The TMB, noticing that 
the three Members had not provided a detailed list of th e products that would, in effect, be integrated 
on 1 January 2005, observed that, in order to inject  the necessary transparency  in the implementation 
of the ATC, it would be useful to provide such a detailed list of the products to be integrated on 
1 January 2005 and invited all Members concerned to provide such a list.  The TMB recalled, 
furthermore, that it had already reminded Member s of the notification requirements contained in 
Articles 2.8(c) and 2.11. 
88. The TMB noted, furthermore, that in their respective notifications, both Canada and the 
United States had stated specifically that on the da te of full integration, i.e. on 1 January 2005, all 
remaining restrictions under the ATC would be  eliminated.  The TMB observed that these 
reaffirmations were fully in line with the provisions of  Articles 2.8(c) and 9.  It was also recalled that 
the quantitative restrictions maintained under Artic le 2 of the ATC were being implemented through 
additional procedures, such as the administra tive arrangements agreed between Members under 
Article 2.17.  The TMB recalled that these admi nistrative arrangements could only be deemed 
necessary in relation to the implementation of restrict ions applied under the ATC.  Therefore, with the 
elimination of all quantitative restrictions under th e ATC, all related administrative procedures and 
measures, including those specified in the ad ministrative arrangements notified pursuant to 
Article 2.17, shall also stand terminated. 
89. The TMB received three further notifications  (from the European Communities, India and 
Switzerland) which were reviewed at its meeting of March 2004.  The European Communities stated 
that “on 1 January 2005, the European Community  will integrate into GATT 1994 all textile and 
clothing products to which the ATC applies, as listed in the Annex of the ATC, that were not 
integrated during the first three stages of integra tion under the ATC.  On this date, the European 
Community will eliminate all remaining restricti ons under the ATC on such products, and thus the 
European Community will have integrated into GATT 1994 all products listed in the Annex of the 
ATC”.  India notified that “pursuant to Article 2.8(c) of the Agreement on Textiles and Clothing, 
India will integrate all the remaining products of the Annex to the ATC – not covered by India's first, 
second and third stage integration programmes – in to GATT 1994 on 1 January 2005”.  Switzerland 
stated that “on 1 January 2005 Switzerland will in tegrate into GATT 1994 all the remaining products 
not covered by its first, second a nd third integration programmes”.  For the sake of clarity, a detailed 
list of the products concerned was attached to the notification. 
90. In reviewing these notifications under Article 2.21, the TMB noted that the three Members 
confirmed that on the first day of the 121
st month that the WTO Agreemen t would be in effect their 
respective textiles and clothing sector would be inte grated into GATT 1994.  The TMB reiterated its 
earlier observation that in order to inject the necess ary transparency into the implementation of the 
ATC, it would be useful to provide a detailed list of  the products to be integrated on 1 January 2005.   G/L/683 
 Page 39 
 
 Accordingly, the TMB had already invited all Members concerned to provide such a list.  With regard 
to the notification submitted by Switzerland, th e TMB verified on the basis of the detailed list 
provided that on 1 January 2005 the total volume of Switzerland's 1990 imports of the products in the 
Annex to the ATC would be integrated into GA TT 1994, which confirmed the Body’s understanding 
that, in accordance with Article 2.8(c), all the products not yet integrated by Switzerland into 
GATT 1994 under Articles 2.6, 2.8(a) and 2.8(b) were included in the list of the products that will be 
integrated into GATT 1994 on 1 January 2005.   
91. As was already the case with respect to the no tifications received from Canada and the United 
States, the TMB noted, furthermore, that in its notification, the European Communities had stated 
specifically that on the date of full integration, i. e. on 1 January 2005, it would eliminate all remaining 
restrictions under the ATC.  The TMB observed that  this reaffirmation was fully in line with the 
provisions of Articles 2.8(c) and 9.  It was also recalled that the quantitative restrictions maintained 
under Article 2 of the ATC were being implemen ted through additional procedures, such as the 
administrative arrangements agreed between Memb ers and notified under Article 2.17.  The TMB 
recalled that these administrative arrangements coul d only be deemed necessary in relation to the 
implementation of restrictions applied under the AT C.  Therefore, with the elimination of all 
quantitative restrictions under the ATC, all relate d administrative procedures and measures, including 
those specified in the administrative arrangements no tified pursuant to Article 2.17, shall also stand 
terminated. 
92. A further notification was received from Romania that was reviewed by the TMB at its 
meeting of April 2004.  Romania notified that “[p] ursuant to Article 2 of the Agreement on Textiles 
and Clothing (ATC), starting with 1 January 2005,  Romania will integrate into GATT 1994 all textile 
and clothing products to which the ATC applies, as listed in the Annex of the ATC, that were not 
integrated during the first three stages of integra tion under the ATC”.  In reviewing this notification 
under Article 2.21, the TMB noted that Romania confirmed that on the first day of the 121st month the 
WTO Agreement would be in effect, its textiles and clothing sector shall be integrated into 
GATT 1994.  The TMB reiterated its earlier observa tion that in order to inject the necessary 
transparency into the implementation of the ATC, it would be useful to provide a detailed list of the 
products to be integrated on 1 January 2005.   
93. Three further notifications were received fro m Norway, Chinese Taipei and Brazil, which 
were examined by the TMB at its meeting of May 2004.  Norway notified that “on 1 January 2005 [Norway] will integrate into GATT 1994 all textile and clothing products listed in the Annex to the 
ATC not integrated during the three earlier stages of  integration.  Thus Norway on 1 January 2005 
will have integrated into GATT 1994 all the produc ts listed in the Annex to the ATC.”  In its 
notification, Chinese Taipei stated that “[o]n 1 January 2005, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu will integrate into GATT 1994 all textile  and clothing products 
to which the ATC applies, as listed in the Annex of the ATC, that were not integrated during the first 
three stages of integration under the ATC.  On this  date, the Separate Customs Territory of Taiwan, 
Penghu, Kinmen and Matsu will eliminate all remain ing restrictions under the ATC on such products, 
and thus will have integrated into GATT 1994 all products listed in the Annex of the ATC.”  A 
detailed list of the products concerned was attached to the notification.  The notification of Brazil for 
its part stated that “[p]ursuant to Article 2 of  the Agreement on Textiles and Clothing,  […] on 1 
January 2005, Brazil will integrate into GATT 1994 all the remaining textile  and clothing products 
not covered by Brazil's first, second and third in tegration programmes.”  In reviewing these three 
notifications under Article 2.21, the TMB noted that  the three Members confirmed that on the first 
day of the 121st month that the WTO Agreement w ould be in effect their respective textiles and 
clothing sectors would be integrated into GATT 199 4.  The TMB reiterated its earlier observation that 
in order to inject the necessary tr ansparency into the implementation of the ATC, it would be useful to 
provide a detailed list of the products to be inte grated on 1 January 2005.  With regard to the 
notification submitted by Norway, the TMB recalled that Norway had already eliminated in four 
steps, pursuant to Article 2.15, all the restrictions  it had notified with reference to Article 2.1.  G/L/683 
Page 40  
 Therefore, as of 1 January 2001 Norway did not maintain any restrictions on products falling under 
the coverage of the ATC.  With regard to th e notification submitted by Chinese Taipei, the TMB 
recalled that when it had begun to review the no tifications made by Chinese Taipei pursuant to 
Articles 2.6 and 2.7(b), 2.8(a), 2.8(b) and 2.11 it ha d sought further clarifications from Chinese Taipei 
regarding its notifications (including further inform ation provided in response to a first series of 
questions put by the TMB) .  Since such further cl arifications had not been received, the TMB had not 
been in a position to conclude the review of the notifications of Chinese Taipei’s first, second and 
third stage integration programmes and to take note of them.  The TMB observed, however, that 
despite this, the fact remained that, pursuant to Artic le 9, the ATC and all restrictions thereunder shall 
stand terminated on 1 January 2005, on which date the textiles and clothing sector shall be fully 
integrated into GATT 1994.  Therefore, the ab sence of the TMB’s conclusion of the review of 
Chinese Taipei’s integration programmes for the first three stages did not prevent the TMB from 
taking note of the same Member’s notification regardi ng the final stage of integration.  The TMB also 
noted that, according to the notification, Chinese Ta ipei “will eliminate all remaining restrictions 
under the ATC on [the] products [falling under the covera ge of the Agreement].”  It observed in this 
regard that Chinese Taipei had not notified any restrictions on such products under any of the 
provisions of the ATC. 
94. Furthermore, two notifications were received  from Turkey and Costa Rica and examined by 
the TMB at its meeting of 6 and 7 July 2004.  Turk ey notified that “on 1 January 2005, Turkey will 
integrate into the GATT 1994 all textile and clothing products to which the ATC applies, as listed in 
the Annex of the ATC, that were not integrated dur ing the first three stages of integration under the 
ATC.  On this date, Turkey will eliminate all re maining restrictions under the ATC on such products, 
and thus Turkey will have integrated into th e GATT 1994 all products listed in the Annex of the 
ATC.”  In its notification, Cost a Rica stated that “on 1 January 2005, it will integrate into the 
GATT 1994 all of the textile and clothing products c overed by the ATC that were not integrated 
during the first three stages of integration.  As of that date, Costa Rica will have integrated into the 
GATT 1994 all of the products listed in the Annex to  the ATC.”  In reviewing these two notifications 
under Article 2.21, the TMB noted that the two Members confirmed that on the first day of the 121
st 
month that the WTO Agreement would be in effect  their respective textiles and clothing sectors shall 
be integrated into GATT 1994.  The TMB reiterated its earlier observation that in order to inject the 
necessary transparency into the implementation of th e ATC, it would be useful to provide a detailed 
list of the products to be integrated on 1 January 20 05.  Accordingly, the TMB had already invited all 
Members concerned to provide such a list.  The TM B noted, furthermore, that in its notification, 
Turkey had stated specifically that on the date of full integration, i.e. on 1 January 2005, it would 
eliminate all remaining restrictions under the AT C on such products, and thus Turkey will have 
integrated into the GATT 1994 all products listed in  the Annex of the ATC.  The TMB observed that 
this reaffirmation was fully in line with the provisions of Articles 2.8(c) and 9. 
95. Also, a notification was received from Korea a nd examined by the TMB at its meeting on 
21 July 2004.  Korea notified that "on 1 January 20 05, the Republic of Korea will integrate into the 
GATT 1994 all the remaining products listed in the Annex to the ATC which were not integrated 
during the first three stages of integration under the ATC."  In reviewing this notification under 
Article 2.21, the TMB noted that Korea confirmed that on the first day of the 121st month that the 
WTO Agreement would be in effect its textiles and clothing sectors shall be integrated into 
GATT 1994.  The TMB reiterated its earlier observa tion that in order to inject the necessary 
transparency into the implementation of the ATC, it would be useful to provide a detailed list of the 
products to be integrated on 1 January 2005.  A ccordingly, the TMB had already invited all Members 
concerned to provide such a list. 
96. Of the 48 WTO Members who had notified an integration programme for Stage 3, 14 
submitted a notification pursuant to the provisions of Articles 2.8(c) and 2.11.  This includes all the 
Members which notified restrictions pursuant to Article 2.1.  G/L/683 
 Page 41 
 
 C. FURTHER ASSESSMENT AND ADDITIONAL OBSERVATIONS BY THE TMB  
1. Integration programmes implemented during Stage 3 
(a) Members maintaining restric tions falling under Article 2.1 
97. The second comprehensive report adopted by the TMB provided an overview of the 
integration programmes implemented, respectively,  by Canada, the European Communities and the 
United States during Stages 1 and 261, as well as a more detailed examination, together with a number 
of observations, of the integration programmes notified by these Members for implementation in 
Stage 3.62  The basic features of these Stage 3 progra mmes, as described in the second comprehensive 
report, and also the related observations made by the TMB have remained valid, all the more so, 
since, compared to the respective initial notifi cations, none of these Me mbers has increased the 
coverage of products integrated during Stage 3.  Th is statement notwithstanding, it is appropriate to 
provide an update to the assessments included in the second comprehensive report, since these 
assessments, in particular the examination of the potential impact of the Stage 3 integration 
programmes notified were based on the information th at was available to the TMB at the time of the 
adoption (i.e. July 2001) of the report referred to above.  Since then, new Members whose exports of 
products covered by the ATC were subject to restrict ions prior to their membership, have acceded to 
the WTO.  While most of these restrictions were carried over to the ATC regime, some of them had 
been eliminated as a result of integration implemented during Stage 3 by the restraining Members.  Therefore, in order to assess properly the impact of the integration programmes implemented, respectively, by Canada, the European Communities and the United States, the examination of the 
effects of integration on imports from the newly acceded Members has to be included into the global 
analysis. 
98. As mentioned earlier
63, China became a Member on 11 December 2001;  Chinese Taipei on 
1 January 2002 and the Former Y ugoslav Republic of Macedonia (FYROM) on 4 April 2003.  In this 
light, Stages 1 and 2 integration should have been implemented vis-à-vis  China ideally 
on 11 December 2001, while Stage 3 integration on 1 January 2002.  Given the date of the accession 
of Chinese Taipei, Stages 1, 2 and 3 integr ation programmes had to be implemented vis-à-vis  it in one 
step, on 1 January 2002.  Implementation in one step applied also to the case of FYROM, the date of 
implementation being 4 April 2003. 
99. Furthermore, without prejudice to the legal justifi cation, or the lack thereof, of the restrictions 
applied by Turkey64, it is necessary to include the examination of the impact of Turkey's integration 
programmes into this updated assessment.  Though  the introduction and continued maintenance of 
restrictions by Turkey was notified under Article 3.365, the quantitative restrictions applied by Turkey 
affect the same products (product categories) in which the European Communities maintain 
restrictions notified under Article 2.1 (and, also, Artic le 3.1).  Also, the restrictions affecting imports 
from two newly acceded Members were notified by Turk ey with explicit reference to Article 2.1 (and, 
if applicable, also Article 3.1). 
(i) Canada 
100. Canada reported that it had eliminated before  11 December 2001 the quantitative restrictions 
on imports from China of the products integrated du ring the first two stages of integration.  On the 
                                                      
61 See G/L/459, paragraphs 15 to 19;  31 to 35;  37 and 38;  47 and 48;  50 and 51;  53 to 63;  74 to 78. 
62 Idem , paragraphs 81 to 83;  85;  93 to 105;  108 to 113 and 676 to 681. 
63 See paragraph 59 above. 
64 See paragraphs 420 and 421 below. 
65 See paragraphs 408 to 410 below. G/L/683 
Page 42  
 basis of analysing the respective notifications made by Canada
66, it can be established that with 
China's accession to the WTO, Canada eliminated two specific limits:  on category 44 (work gloves;  
integrated during Stage 1) and category 6 (tailored colla r shirts;  integrated in Stage 2).  In addition, 
Canada also abolished the so- called consultation levels (that could trigger the imposition of 
restrictions) pertaining to three sub-categories (5.1 – trousers, men's and boys', wool;  11.1 – sweaters, 
men's and boys';  45.1 – handbags, not coated).  It  should be noted, however, that while handbags had 
been integrated by Canada in Stag e 2, the elimination of the consu ltation levels in the other two sub-
categories did not result from the integration of th e products covered, all the less since Canada 
continues to maintain specific limits on the imports of the respective broader categories. 
101. Canada confirmed that it had eliminated on 1 January 2002 the qua ntitative restraints on 
imports from Chinese Taipei of those products that Ca nada had integrated during the first three stages 
of integration under the ATC.  Relying on the respective notifications received from Canada67, it can 
be established that the elimination of one specifi c limit (category 44 – work gloves and liners) was 
attributable to the integration of the products con cerned in Stage 1, while the abolition of three further 
specific limits (category 6 – tailored collar sh irts;  category 45 – ha ndbags and category 46 – 
tablecloths) resulted from the integration implemented in Stage 2. 
102. Canada had not maintained any r estriction on imports from FYROM. 
103. Turning to the assessment of the impact of the Stage 3 integration programme implemented 
by Canada, it is appropriate to recall once again that the TMB had provided a detailed analysis 
regarding this matter in the second comprehensive report.68  For the purpose of the present report, a 
summary of some of the observations made earlier by the TMB, together with an update reflecting 
developments subsequent to the adoption of the previous report, is provided in the following 
paragraphs. 
104. In addressing the extent to which quantitative r estrictions maintained by Canada had been 
affected by the implementation of its Stage 3 in tegration programme on 1 Ja nuary 2002, it should be 
borne in mind that the system of restraints applie d by Canada is relatively complex, whereby in a 
significant number of cases a single product categor y or sub-category does not necessarily cover all 
the products subject to a specific restraint.  This is largely due to the fact that, in a number of cases, 
the specific limits and sub-limits comprise merged product categories and sub-categories.  In such circumstances, the integration of a single product category or sub-category did not necessarily result in the elimination of an entire quantitative restricti on;  rather it led to narro wing the scope of products 
(categories or sub-categories) that continues to be subject to a specific restriction.
69 
105. In light of the above, the effect of integration can be assessed as follows: 
• in a number of cases, specific limits and sub-limits, comprising single or merged 
categories and sub-categories were fully eliminated, as a result of the implementation of the Stage 3 integration programme; 
 
• in some other cases, specific limits and sub-limits were only partially eliminated, 
resulting from the inclusion in the integration programme of parts of categories or sub-categories subject to restraints;  it being understood that a category or, at least a 
sub-category became integrated in its entirety; 
                                                     
 
66 See G/TMB/N/62;  G/TMB/N/62/Add.3 and Add. 3/Corr.1;  also G/TMB/N/2 and Corrigenda;  
G/TMB/N/214 and Corrigenda. 
67 See G/TMB/N/62;  G/TMB/N/62/Add.4 and Add/4/Corr.1;  also G/TMB/N/2 and Corrigenda;  
G/TMB/N/214 and Corrigenda. 
68 See G/L/459, paragraphs 93 to 103.  
69 See also paragraph 55 above.  G/L/683 
 Page 43 
 
  
• in several other cases, no category or sub-cat egory was integrated in its entirety, but 
specified products belonging to the respectiv e category or sub-category were included 
in the integration programme and, as a re sult, the integrated items ceased to be 
subject to the restriction that continues to apply to the respective non-integrated products. 
 
106. Table 1 lists all those specific limits and sub-lim its which were fully eliminated as a result of 
the implementation by Canada of its Stage 3 integration programme.
70 
Table 1 
 
Specific Limits and Sub-Limits, Co mprising Single or Merged Categories  
and Sub-Categories Fully Eliminated by Canada as a Result of the Implementation  
of its Stage 3 Integration Programme  
 
Category/Sub-Category/Merged 
Categories 
Subject to Restraint  
WTO Members Affected 
7.0** Chinese Taipei;  India ; Myanmar;  Pakistan 
7.0/8.1** Romania;  Sri Lanka*;  Swaziland;  Thailand*;  United Arab Emirates 
7.1, 7.2/8.1** China*;  Hong Kong, China*;  Korea* 
8.1 Chinese Taipei* 
12.0 China;  Chinese Taipei;  Hong Kong, China;  Macao, China;  Qatar;  Philippines;  Sri 
Lanka;  Swaziland;  Thailand  
14.0 Bangladesh;  Chinese Taipei;  Hong Kong, China;  Indonesia;  Korea;  Macao, China;  
Malaysia;  Philippines;  Qatar;  Singapore;  Sri Lanka;  Swaziland;  Thailand;  United 
Arab Emirates 
14.2 Chinese Taipei 
14.2 – 14.9 China 
14.3 Chinese Taipei 
14.4 Chinese Taipei 
14.5 Chinese Taipei 
14.6 Chinese Taipei;  Romania 
14.7 Chinese Taipei 
14.8 Chinese Taipei 
14.9 Chinese Taipei 
*Denotes sub-limits to be fully eliminated,  while a part of the respective broader specific limits continues to be maintained. 
**Part of the respective category/sub-categories were already  removed from restraints in relation to WTO Members on 
1 January 1998, pursuant to Article 2.15.  Source:  Table 3 of G/L/459, as updated on the basis of G/TMB/N/62/Add.3, Add.3/Corr.1, Add.4, Add.4/Corr.1;  also 
G/TMB/N/370 and its Corrigenda.
 
 
 107. In addition, Table 2 includes all those specific limits or sub-limits which were partially 
eliminated by Canada on 1 January 2002, resulting fro m the integration of entire part(s) of broader 
restrictions comprising single or merged categories and sub-categories. 
                                                     
 
70 The TMB requested the Canadian authorities to check the information contained in Tables 1 to 3.  In 
response, Canada proposed certain corrections and adjustments in the three tables, which have been taken into 
consideration by the TMB in finalizing the tables concerned. G/L/683 
Page 44  
 Table 2 
 
Specific Limits and Sub-Limits, Comprising Single or Merged Categories and  
Sub-Categories Partially Eliminated by Canada as a Result of th e Inclusion of Parts of the Respective Categories or Sub-
Categories Subject to Restraints in the Stage 3 Integration Programme  
 
Category/Sub-
Category/Merged 
Categories 
Subject to Restraint Part of the Respective 
Category/Sub-Category 
Integrated  
WTO Members Affected 
3.0/4.0 4.1** Philippines;  Sri Lanka;  Swaziland;   United Arab 
Emirates 
3.2/4.0 4.1** Malaysia;  Philippines*;  Romania;  Singapore 
3.2/4.1, 4.2 4.1** Bangladesh***;   China;  Hong Kong, China;  Pakistan 
4.0 4.1** Bulgaria;  India;  Indonesia;  Korea;  Swaziland;  Thailand 
4.1, 4.2 4.1 Chinese Taipei;  Macao, China 
7.0/8.0 7.0/8.1** Hong Kong, China;  Indonesia;  Malaysia;  Sri Lanka;  
Thailand 
7.0/8.1, 8.2, 8.3 7.0/8.1** China;  Korea;  Oman;   Qatar;   Philippines;  Singapore;  
Swaziland;  United Arab Emirates 
7.0/8.1, 8.4 7.0/8.1** Bangladesh*** 
8.0 8.1 Chinese Taipei 
8.1, 8.2, 8.3 8.1** Pakistan;  South Africa 
12.0/13.0 12.0 Korea 
8.1, 8.3, 8.4 8.1 India 
7.0/8.1 7.0/8.1 Romania;  Swaziland;  United Arab Emirates 
*Denotes sub-limit. 
**Part of the respective category/sub-category was already removed from restraints in relation to WTO Members on 
1 January 1998, pursuant to Article 2.15. 
***All the remaining restrictions on imports, for goods qualifying for the LDC initiative, from Bangladesh were subsequently removed by Canada, on 1 January 2003, as a result of the implementation of its Market Access Initiative for Least-Developed Countries.  See in particular paragraphs 182 to 183 below. 
 
Source:  Table 4 of G/L/459, as updated on the basis of G/TMB/N/62/Add.3, Add.3/Corr.1, Add.4, Add.4/Corr.1;  also G/TMB/N/370 and its Corrigenda.
 
 
108. Table 3 contains the listing of the categories and sub-categories that were subject to partial 
elimination of restrictions as a result of integrati on in Stage 3 of specified products belonging to the 
respective categories or sub-categories. 
Table 3 
 
Product Categories and Sub-Categories Subject to Partial Elimination  
of Restrictions as a Result of the Implementation by Canada of its Stage 3 Integration Programme  
 
Category/ 
Sub-Category  
Product Integrated  
WTO Members Affected 
 
2 and/or 5.4 Men's and boys', women's 
and girls', children's bib and 
brace overalls, knitted, 
crocheted, woven Bangladesh*;  Bulgaria;  China;  Chinese Taipei;  Hong 
Kong, China;  India;  Indonesia;  Korea;  Lesotho*;  
Macao, China;  Malaysia;  Mauritius;  Myanmar;  
Pakistan;  Philippines;  Qatar;  Romania;  Singapore;  Slovak Republic;  South Africa;  Sri Lanka;  Swaziland;  Thailand;  Turkey;  United Arab Emirates 
22.1 Nylon filament yarn Chinese Taipei;  Korea 
22.2 Nylon staple yarn Chinese Taipei;  Korea 
23.1 Polyester filament yarn Chinese Taipei;  Korea  G/L/683 
 Page 45 
 
 Category/ 
Sub-Category  
Product Integrated  
WTO Members Affected 
 
31.1 Combed wool fabrics Bulgaria;  Chi na;  Chinese Taipei;  Czech Republic;  
India;  Korea;  Poland;  Romania;  Slovak Republic;  Uruguay 
32.1 Unbleached cotton fabrics Chinese Taipei;  Hong Kong, China;  Korea 
32.2 Finished cotton fabrics, 
woven China;  Chinese Taipei 
32.3 Coated cotton fabrics Chinese Taipei;  Hong Kong, China;  India 
34.2 Coated fabrics from high 
tenacity yarn Chinese Taipei;  Poland;  Thailand 
35 Polyester filament fabrics, 
coated Chinese Taipei;  Korea;  Poland 
36.2 Coated poly/cotton fabrics China;  Chinese Taipei;  Hong Kong, China;  Korea  
37.1 Coated poly/rayon fabrics Chinese Taipei 
37.2 Coated fabrics from other 
artificial filament Korea 
43.2 Hosiery, for babies China;  Chinese Taipei;  Korea;  Singapore;  Thailand 
 
*The remaining restrictions on imports from Banglades h and Lesotho were subsequently removed by Canada, on 
1 January 2003, as a result of the implementation of its Market Access Initiative for Least-Developed Countries.  See in 
particular paragraphs 182 to 183 below.  Source:  Table 2 of G/L/459, as revised and also updated on the basis of G/TMB/N/62/Add.3, Add.3/Corr.1, Add.4 and 
Add.4/Corr.1.
 
 
109. To complete the picture, it should be noted, th at, in addition to the limits and categories listed 
in Tables 2 and 3, a few group or aggregate limits we re also affected by the implementation of Stage 3 
integration, in the sense that certain parts of the constituting categories or sub-categories became 
integrated.  These are the following: 
• group limits affecting, inter alia , categories 4.0, 7.0, 8.1, 8.2, 8.3 and 8.4 with respect 
to India (categories 4.1, 7.0 and 8.1 were integrated); 
 
• group level affecting sub-cat egories 4.1 and 4.2 in relation to Macao, China (sub-
category 4.1 was integrated); 
 
• group levels affecting, am ong others, categories 7.0 and 8.0 with respect to Macao, 
China (categories 7.0 and 8.1 became integrated); 
 
• an overall limit (so-called OOA) covering cat egories 1.0 to 14.0 maintained on 
imports from Qatar; 
 
• an overall group limit (categories 1.0, 14.0 and 16.0) affecting Macao, China 
(categories 12.0 and 14.0 were integrated).71 
 110. Based on the overview provided in Table 1, it would appear that with the implementation of 
its Stage 3 integration programme Canada eliminated altogether 46 specific restrictions (limits or sub-
limits) in their entirety.  In addition, as reflected  in Table 2, 42 specific limits or sub-limits were 
partially eliminated and, also, the product coverage of certain restrictions was reduced, affecting more 
than 60 restrictions (Table 3 refers) as a result of the integration of specified products belonging to the 
restrictions concerned. 
                                                     
 
71 See G/L/459, paragraph 98. G/L/683 
Page 46  
 111. As regards the impact of partial integrati on (and the resulting partial elimination of the 
respective restrictions), in one of its communications  addressed to the TMB in the first half of 2001, 
Canada indicated, inter alia , that in those categories from which certain apparel, yarns, fabric and 
made-up products would be integrated in the thir d stage, "these products would be removed from the 
coverage of quantitative restrictions under these catego ries.  In order to maximize the benefits of this 
integration to exporters, the restra int levels for these categories [would] not be reduced to reflect the 
removal of these products from the restraint coverage."
72 
112. In a subsequent communication, further clarif ication was provided by Canada regarding the 
treatment of the restraint level for those cases where on e or more categories to be integrated in Stage 3 
fall under a combined restraint level.  "For exampl e, in some of Canada's  bilateral arrangements, 
category 7.0 (and hence sub-categories 7.1, 7.2 and 7.3) is grouped or combined with category 8.0 
(and hence categories 8.1, 8.2, 8.3 and 8.4) under on e restraint level covering all these products.  As a 
result of the third stage of integration, the products under category 7.0 and category 8.1 will be 
removed from this restraint on 1 January 2002, but the remaining products under categories 8.2, 8.3 
and 8.4 will remain subject to restraint.  In all su ch instances where a category [to be integrated] [...] 
falls under a broader group or combined restraint un der a bilateral arrangement , the restraint level for 
these group or combined restraints will not be reduced  to reflect the removal from these restraint level 
of products in the categories integrated fully on 1 January 2002 under the third stage of integration, 
[…] resulting in a de facto  increase in the restraint level, and he nce access to the Canadian market, for 
the products remaining under restraint during the last  phase of the ATC's transition period.  In other 
words, the same treatment will apply in those in stances where specific products will be removed from 
restraint under a larger compilation or aggreg ate restraint level maintained by Canada".73  
Furthermore, with the accession of China and Chines e Taipei, respectively, Canada confirmed that, as 
in the case of other WTO Members, Canada had not adjusted downwards the levels of those restraints on imports from the new Members when products had been removed from the coverage of these 
restraints in the third stage of integration. 
113. The TMB had already observed in its second comprehensive report that the decision of 
Canada of not implementing any downward adjust ment in the respective restraint levels could 
provide, to a varying extent, increased access opportun ities in the products that would continue to be 
subject to restraint in the respective limits or sub-limits.
74  The TMB went on to state that it "has 
neither sufficient information at its disposal, nor the necessary analytical tools to conduct a detailed 
examination, limit-per-limit, of the potential imp act on the WTO Members affected in terms of 
increased opportunities for access to the Canadian mark et in those cases when, as a result of partial 
integration, parts of specific limits will be lifted, while restraints will conti nue to be applied on other 
products falling under the same specific limits (since these latter products will not be integrated).  It is 
important to recall in this regard the decision notif ied by Canada to keep the level of the remaining 
respective restraints unchanged and, therefore, not to reduce them with reference to the fact that their 
product coverage will be reduced.  It  would appear that the potential impact or, to put it differently, 
the potential significance to trade of partial integra tion, coupled with maintaining the same restraint 
level for the products that will continue to fall under restriction should be assessed case by case.  
However, a few observations of a more general nature can be made.  First, the relative share or 
significance of the imports of products to be integr ated from a broader specific limit seems to be of 
crucial importance:  when this share is modest, the potential significance to trade of both integration 
and keeping the restraint level unchanged, would be, in  all likelihood, also relatively modest.  In the 
opposite case (i.e. when imports of products to be in tegrated represent a relatively high share of the 
broader restraint level), the potential impact can al so be important for trade in products which will 
continue to remain under restraint.  With respect to this latter situation,  the assessment may become 
more nuanced if information on the rate of utiliza tion of the respective specific limits can also be 
                                                      
72 See G/L/459, paragraph 99. 
73 Ibid. 
74 Ibid., paragraph 100.  G/L/683 
 Page 47 
 
 brought into the picture.  The potential significance to  trade would appear to be the greatest in those 
cases when the rate of utilization of parts of limits to be integrated and also of the other part which 
would not be integrated is  relatively high, or when the restraint level corresponding to the part of limit 
to be integrated is under utilized, while the remaining part is highly utilized.  It would appear that the 
decision of Canada not to adjust downward the resp ective restraint levels could bring about a real 
increase in access opportunities in some cases, when the ability and capacity of producing and 
exporting more is assured and keeping the rest raint levels unchange d amounts to a one-time 
significant increase in access opportunities for the respective products remaining under restriction."75 
114. In the view of the TMB, its earlier observations  and assessment, as detailed in paragraph 113 
above, proved to be essentially appropriate.  In th e absence of detailed statistical information at the 
TMB's disposal, only a general impression can be gathered on the likely impact on actual trade of 
Canada's decision not to adjust downwards the respec tive levels of the remaining restrictions.  While 
it would appear that the answer should be nuanced to the question as to whet her the Members affected 
actually benefited from these increased market access opportunities, and if so, to what extent, the fact 
remains that the decision of Canada to keep th e level of the remaining respective restrictions 
unchanged opened up the possibility for an increase in  market access for those products that continue 
to be subject to restrictions under the corresponding specific limits.  
(ii) European Communities 
115. In any attempt for providing an update to the global picture of the impact of the integration 
programmes implemented by the European Communities, it should be noted that the EC provided separate notifications, respectively under Articles 2.1 and 3.1, of the quantitative restrictions 
maintained by it on imports from China.  In this appr oach, the restrictions affecting products that had 
been covered by the former MFA were notified under Article 2.1
76, while the quantitative restrictions 
"maintained under the non-MFA [bilateral] Agreement"77 with China were listed in the notification 
submitted with reference to Article 3.1.78  As regards the restrictions falling under Article 2.1, the 
European Communities reported that it had elimin ated on the day of China's accession (i.e. on 
11 December 2001) two of them (namely those aff ecting categories 19 and 76), since the products 
belonging to these categories had already been in tegrated into GATT 1994 in Stage 2 by the EC.  
Furthermore, as far as restrictions notified un der Article 3.1 are concerned, the European 
Communities indicated that on the day of China's accession it had "integrated in total 11 categories 
(ex 13, ex 24, ex 39, 123, 124, 125A, 126, 127A, 127B, 140 and 151B)".79  While some of these 
categories were in fact integrated by the European  Communities either in Stage 1 (e.g. category 126) 
or in Stage 2 (e.g. category 124), it would appear that  several others or, at least, parts of them, (such 
as categories 123, 125A, 127A, 127B, 140 and 151B) formed part of the Stage 3 integration 
programme notified by the EC and, therefore, their formal integration into GATT 1994 presumably 
took place only on 1 January 2002. 
116. Unlike in the case of China, all the restricti ons applied on imports from Chinese Taipei were 
notified by the European Communities with referen ce to Article 2.1  It would appear that the 
elimination on 1 January 2002 of five of the restrictions notified (namely those affecting 
categories 67, 74, 77, 91 and 110) is attributable to the fact that these categories had already been 
included in the Stage 2 integration programme  implemented by the EC on 1 January 1998. 
117. The European Communities had not maintained  any restrictions on imports from FYROM. 
                                                      
75 See G/L/459, paragraph 103. 
76 See paragraph 153 below. 
77 See G/TMB/N/64/Add.2/Suppl.1 
78 See paragraph 376 below. 
79 See G/TMB/N/64/Add.2/Suppl.1. G/L/683 
Page 48  
 118. Turning to the assessment of the extent to wh ich quantitative restrictions maintained by the 
European Communities had been a ffected by the implementation of the EC's Stage 3 integration 
programme, it should be recalled that the specific re straints maintained by the European Communities 
fully correspond, in most cases, to the products fa lling under the respective product categories, as 
those categories are defined by the EC.  Table 4 su mmarizes those quantitative restrictions that were 
eliminated on 1 January 2002 as a result of the im plementation of the Stage 3 integration programme 
by the European Communities.
80 
Table 4 
 
Quantitative Restrictions Affected by the Third Stage of Integration  
of the European Communities  
 
Category 
 Product Description WTO Members affected 
10 Gloves, mittens and mitts, knitted or crocheted China;  Chinese Taipei;  
Hong Kong, China;   Korea;  
Philippines;  Thailand 
18 Men's or boys' singlets and ot her vests, underpants, briefs, 
nightshirts, pyjamas, bathrobes, dressing gowns and similar 
articles, other than knitted or crocheted.  Women's or girls' singlets and other vests, slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, dressing gowns and similar articles, other than 
knitted or crocheted China;  Chinese Taipei;  Hong 
Kong, China;  Korea;  Macao, 
China;  Pakistan 
21 Parkas;  anoraks, windcheaters, waister jackets and the like, other 
than knitted or crocheted, of wool, of cotton or of man-made fibres;  
upper parts of tracksuits with lini ng, other than category 16 or 29, 
of cotton or of man-made fibres China;  Chinese Taipei;  Hong 
Kong, China;  Indonesia;  Korea; 
Macao, China;  Philippines;  
Sri Lanka;  Thailand 
24 Men's or boys' nightshirts, py jamas, bathrobes, dressing gowns 
and similar articles, knitted or crocheted. Women's or girls' nightdresses, pyjamas, negligees, dressing gowns and similar articles, other than knitted or crocheted China;  Chinese Taipei;  Hong 
Kong, China;  India;  Korea;  Macao, China;  Thailand 
27 Women's or girls' skirts, including divided skirts Chinese Taipei;  Hong Kong, 
China;  India;  Korea; Macao, China  
32 Woven pile fabrics and chenille fabrics (other than terry towelling or 
terry fabrics of cotton and narrow woven fabrics) and tufted textile surfaces, of wool, of cotton or of man-made textile fibres China;  Hong Kong, China;  Korea 
33 Woven fabrics of synthetic filament yarn obtained from strip or the 
like of polyethylene or polypropylene, less than 3m wide.  Sacks and bags, of a kind used for the packing of goods, not knitted or 
crocheted, obtained from strip or the like China;  Chinese Taipei;  
Indonesia;  Korea 
36 Woven fabrics of continuous artificial fibres, other than those for 
tyres of category 114 Korea 
37 Woven fabrics of artificial staple fi bres China;  Chinese Taipei;  Korea 
37A Of which:  other than bleached or unbleached China 
68 Babies' garments and clothing accessories, excluding babies' 
gloves, mittens and mitts of categories 10 and 87, and babies' 
stockings, socks and sockettes, other than knitted or crocheted, of 
category 88 China;  Chinese Taipei;  Hong 
Kong, China;  Korea 
73 Track suits of knitted or crocheted fabric, of wool, of cotton or of 
man-made textile fibres China;  Chinese Taipei;  Hong 
Kong, China;  Korea;  Macao, China;  Philippines;  Thailand 
                                                      
80 The TMB requested the European Communities to check the information contained in Table 4.  No 
further information was received from the EC.  G/L/683 
 Page 49 
 
 Category 
 Product Description WTO Members affected 
ex 18 Men's or boys' singlets and other vests, underpants, briefs, 
nightshirts, pyjamas, bathrobes, dressing gowns and similar 
articles, other than knitted or crocheted.  Women's or girls' singlets and other vests, slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, dressing gowns and similar articles, other than knitted or crocheted;  other than those of wool or fine animal hairs, 
cotton or synthetic or artificial textile materials China* 
120 Curtains (including drapes), in terior blinds, curtain and bed 
valances and other furnishing articles, not knitted or crocheted, of 
flax or ramie China* 
123 Woven pile fabrics and chenille fabrics;  shawls, scarves (of flax or 
ramie) China* 
125A Synthetic filament yarn China* 
127A Yarn of artificial filaments China* 
127B Monofilaments, strip (artificial straw and the like) and imitation 
catgut of artificial textile materials China* 
140 Knitted or crocheted fabric of textile material, other than wool or 
fine animal hair, cotton or man-made fibres China* 
145 Twine, cordage, ropes and cables plaited or not abaca (Manila 
hemp) or of true hemp China* 
146A Binder or baler twine for agricultural machines, of sisal or other 
fibres of the agave family China* 
146B Twine, cordage, ropes and cables of sisal or other agave family, 
other than the products of category 146A China* 
151B Carpets and other floor coverings, of jute or of other textile bast 
fibre China* 
160 Handkerchiefs of silk or silk waste China* 
161 Garments, not knitted or crocheted, other than those of categories 
1 to 123 and category 159 China* 
*The restrictions previously maintained on imports of t hese categories from China were notified by the European 
Communities under Article 3.1. Source:  Table 6 of G/L/459, as updated on the basis of G/TMB/N/60/Add.5 and Supplements, G/TMB/N/60/Add.6 and 
Supplements, G/TMB/N/64/Add.2 and Supplements, also G/TMB/N/363 and Addenda. 
 
119. Based on the information detailed in Table 4, it would appear that with the implementation of 
its Stage 3 integration programme, the European Co mmunities eliminated 56 specific restrictions (of 
which one – category 37A – represented a sub-limit) th at would fall under Article 2.1.  In addition, by 
the same move, the EC also eliminated 13 further rest rictions that had been no tified with reference to 
Article 3.1.  
(iii) United States 
120. In assessing the impact of the implementation of the integration programmes of the United 
States, it is important to recall that the complex nature  of the system of restrictions maintained by the 
United States does not facilitate the task of providi ng a relatively simple and straightforward analysis 
of the effect of integration on the restrictions applied.  Though in a number of cases the products 
covered by a category used by the United States co rrespond fully to a specific restriction that was 
previously maintained or continues to be applied, in several other cases they do not.  The main reason 
for this is that in several instan ces, a specific restraint is composed of merged categories, of which 
only one or a few were integrated, while the restric tions continue to be app lied with respect to the 
other(s).  In addition, the United States also inte grated certain parts of some single categories, 
resulting in a partial elimination of the restrictions concerned.  Furthermore, in a significant number of 
cases, although specific limits were eliminated, broa der (aggregate or group) limits continue to be 
maintained (with a reduced product coverage resulting from the exclus ion from the broader limits of G/L/683 
Page 50  
 the products that became integrated).
81  The same applies to those product categories which, prior to 
their integration, had not been subject to specifi c restraints, but formed part of a broader limit. 
121. Based on the indications given by the United States in its respective notifications82, it would 
appear that the US implemented its Stages 1, 2 and 3 integration programmes vis-à-vis  China in one 
step, on 1 January 2002.  No products or categori es subject to restraints on imports from China were 
affected by the Stage 1 integration.  The partial elimination of one specific restriction (certain 
accessories of babies' garments and clothes;  categor y 239) can be attributed to the implementation of 
the Stage 2 integration programme.  In addition, as a result of the same integration programme, some 
20 categories subject to broader (group) limits al so became integrated in to GATT 1994.  Thus, these 
categories were excluded, as from 1 January 2002, fr om the coverage of the respective group limits, 
but the size of these group limits was also reduced by an amount which was designed to correspond to 
the volume of imports effected from China in the categories integrated. 
122. The United States implemented its Stag es 1, 2 and 3 integration programmes vis-à-vis  
Chinese Taipei also in one step, on 1 January 2002.   Similarly to the case of China, the Stage 1 
integration did not affect any r estriction maintained on imports fro m Chinese Taipei.  As a result of 
the implementation of the Stage 2 integration, one  specific restriction was partially eliminated 
(category 239) and 18 product categories subject to broader (group) limits also became integrated, 
with exactly the same methodology and with the simila r effect as in the case of  China, as described in 
paragraph 121 above. 
123. Prior to the accession of FYROM to the WTO, the United States had maintained five specific 
restrictions on imports from FYROM.  None of th e product categories concerned were integrated by 
the United States in Stages 1, 2 and 3;  therefore,  the implementation of the integration programmes of 
the United States did not affect the specific restrictions maintained on imports from FYROM and 
notified under Article 2.1 
124. As regards the updated global picture of the im pact of the implementation by the United 
States of its Stage 3 integration programme and, mo re specifically, the extent to which quantitative 
restrictions maintained by the United States had been  affected by this implementation, four types of 
situations can be distinguished83: 
• in a number of cases, specific limits and sub-limits, comprising single or merged 
product categories were fully eliminated;  these are reflected in Table 5; 
 
• in several other cases, specific limits were partially lifted, as a result of the integration 
of certain categories from broader merged categories subject to restraints;  these categories are listed in Table 6; 
 
• in a few other cases, specific limits were  partially eliminated because parts of the 
respective categories, subject to restrain ts, became integrated;  these cases are 
summarized in Table 7;
84 
 
• in some cases, categories not subject to specific restraint, but forming part of a group 
limit became integrated and, as a result, these categories were excluded from the coverage of the respective broader limit. 
                                                     
 
81 See also G/L/459, paragraph 109. 
82 See in particular G/TMB/N/62/Add.12/Suppl.1. 
83 See also G/L/459, paragraph 109. 
84 The TMB requested the United States to check the information contained in Tables 5 to 7.  The 
adjustments proposed by the United States in response have been taken into consideration in finalizing those 
tables.  G/L/683 
 Page 51 
 
 Table 5 
 
Specific Limits and Sub-Limits Comprising Singl e or Merged Categories Fully Eliminated by the  
United States as a Result of the Implementation of its Stage 3 Integration Programme  
 
Category/Merged 
Categories 
Subject to Restraint  
Brief Product Description  
WTO Members Affected 
222 Knit fabric Singapore 
350 Robes and dressing gowns, cotton Brazil;  China*;  Chinese Taipei**;  Haiti;  Hong 
Kong, China*;  Korea*;  Philippines;  Romania; 
Turkey 
350/650 Robes and dressing gowns, cotton and 
MMF Chinese Taipei*;  Indonesia;  Malaysia;  Sri Lanka 
350/850 Robes and dressing gowns;  cotton and 
silk/veg. blends Macao, China 
359H Headwear Korea* 
369-D Dishtowels China*;  Brazil*;  India;  Sri Lanka;  Thailand 
369-F/P Dishtowels, cotton Pakistan 
369-H Handbags, cotton China* 
369-L Luggage, cotton China*;  Chinese Taipei** 
369-L/670-L/870 Luggage;  cotton;  MMF, silk and veg. 
blends Chinese Taipei*;  Korea* 
369-R Bar mops Pakistan 
431 Gloves Philippines 
607 Staple fibre yarn Brazil*;  China*;  Korea*;  Thailand 
622 Glass fibre fabric Chinese Taipei 
649 Bras and body support garments, MMF Chi na*;  Hong Kong, China*;  Philippines 
650 Robes and dressing gowns, MMF China*;  Chinese Taipei**;  Hong Kong, China*;  
Korea;  Philippines 
669 Polyethylene bags Brazil*;  Korea*;  Thailand 
669-P Bags, woven of MMF China*;  Chinese Taipei* 
669-T Tents Chinese Taipei* 
670-H Handbags, MMF Chinese Taipei* 
670-L Luggage, MMF China*;  Chinese Taipei** 
831 Gloves and mittens, silk and veg. blend China* 
833 Men's and boys' suit-type coats, silk and 
veg. blends China* 
834 Other men's and boys' coats and jackets, 
silk and veg. blends Hong Kong, China* 
835 Women's and girls' coats, silk and veg. 
blends China*;  Chinese Taipei*;  Hong Kong, China*; 
Korea;  Malaysia** 
836 Dresses;  silk and veg. blends China*;  Hong Kong, China* 
840 N-knit shirts and blouses, silk and veg. 
blends China*,  Hong Kong, China*;  Sri Lanka 
842 Skirts, silk and veg. blends China*,  Hong Kong, China* 
847 Trousers/breeches/shorts, silk and veg. 
blends Bangladesh; China*;   Hong Kong, China*;  
Indonesia;  Philippines;  United Arab Emirates 
870 Luggage, silk and veg. blends China;  Chinese Taipei* 
*Broader (aggregate or group) restraints continue to be applied for products not integrated from the respective aggregate or 
group limits. 
**Denotes a sub-limit. 
Source:  Table 9 of G/L/459, as updated on the basis of G/TMB/N/63/Add.12 and Supplements;  and Add. 13 and Supplements.  
 G/L/683 
Page 52  
 Table 6 
 
Specific Limits Partially Eliminated by the United States Resulting from the Integration in Stage 3  
of Certain Categories from Broader Merged Categories Subject to Restraints  
 
Category(ies) 
Subject to Specific Restraint Category(ies) Integrated WTO Members Affected 
333/833 833 Romania 
333/334/335/ 
833/834/835 833, 834, 835 Macao, China 
333/334/335/835 835 Malaysia 
335/635/835 835 Thailand;  United Arab Emirates 
335/835 835 Mauritius; Romania, Sri Lanka 
336/636/836 836 Sri Lanka 
336/836 836 Macao, China 
341/840 840 Romania 
342/642/842 842 Malaysia;  Sri Lanka 
347/348/847 847 Macao, China;  Sri Lanka;  Thailand* 
351/851 851 Macao, China 
359H/659H 359H Chinese Taipei*;  Thailand* 
443/444/643/644/ 
843/844 843, 844 Hong Kong, China* 
638/639/838 838 Macao, China;  Sri Lanka 
641/840 840 Macao, China 
642/842 842 Macao, China 
644/844 844 China* 
647/648/847 847 Mauritius 
*Also subject to aggregate or group limits. 
Source:  Table 10 of G/L/459, as updated on the basis of G/TMB/N/63/Add.12 and Supplements;  Add.13 and Supplements. 
 
 
Table 7 
 
Specific Limits Partially Eliminated by the United States Resulting from the  
Integration in Stage 3 of Parts of Categories Subject to Restraints  
 
Category Subject  
to Restraint Integrated Part of the Respective 
Category  
(brief product description)  
WTO Members Affected 
331 Cotton gloves (only knitted) Bangladesh;   China;  Chinese Taipei;  Haiti; 
Hong Kong, China*;  Indonesia;  Jamaica;  Malaysia; Pakistan;  Philippines;  Singapore;  Sri 
Lanka; Thailand* 
359 Cotton pantyhose and tights, shawls and 
scarves Korea*;  Romania*;  Thailand* 
369 Blankets, furnishing articles, bedding Romania;  United Arab Emirates 
631 Man-made fibre gloves (only knitted) China* ;  Hong Kong, China*;  Indonesia;  Jamaica; 
Korea*;  Malaysia;  Pakistan;  Philippines; Singapore;  Sri Lanka;  Thailand* 
666 Furnishings, except bed sheets, pillow 
cases and certain linen China*;  Romania 
*Also subject to aggregate or group limits. 
Source:  Table 11 of G/L/459, as updated on the basis of G/TMB/N/63/Add.12 and Supplement, and Add.13 and Supplements. 
 
  G/L/683 
 Page 53 
 
 125. As reflected also in the detailed listing provide d in Tables 5 to 7, in a significant number of 
cases, irrespective of the full or partial elimination of the specific limits or sub-limits concerned, broader limits (group limits) conti nue to be applied by the United States to those categories that still 
remain subject to specific limits within the broade r groups and also to those which, while not being 
subject to specific limits, have not yet been integr ated into GATT 1994.  In terms of possible impact 
on trading opportunities, it is to be noted that the United States adjusted downwards the levels of the 
respective group limits by deducting from them the volume of trade effected in the categories fully or 
partially integrated.  This adjustment led, in so me cases, to a considerable decrease in market access 
opportunities for products belonging to the categories not yet integrated.
85 
126. On the basis of the overview included in Table 5, it would appear that with the 
implementation of its Stage 3 integration progra mme, the United States eliminated altogether 74 
specific limits or sub-limits.  Of these 74 cases, how ever, group limits continue to be maintained in 39 
cases with respect to the related categories and prod ucts not yet integrated.  Furthermore, the United 
States eliminated parts of 26 specific limits, as a result of the integration in Stage 3 of certain product categories from broader merged cat egories (see Table 6).  Also, parts of specific limits in five 
categories, affecting altogether 17 WTO Members, we re abolished as a result of the partial integration 
in Stage 3 of the categories concerned (Table 7 refers). 
(iv) Turkey 
127. Similar to what had been done by the Eur opean Communities, Turkey submitted separate 
notifications, respectively with reference to Artic les 2.1 and 3.1, of the quantitative restrictions 
applied by it on imports from China.  Turkey explained that its notification submitted under 
Article 2.1 contained "the required information regarding quantitative r estrictions [...] for textiles and 
clothing products covered by the MFA Agreement", wh ile the restrictions notified pursuant to Article 
3.1 were "not covered by the MFA Agreement."  It is  appropriate to observe in this regard that the 
MFA expired at the end of 1994, and Turkey had ne ver applied restrictions under the defunct MFA.  
The reason for Turkey to provide the notifications in the pattern described above stemmed, in all 
likelihood, from its earlier statement according to which "Turkey and the European Community, 
which form a customs union, will continue to apply the same duties and other regulations of 
commerce [...] in respect of products covere d by the Agreement on Textiles and Clothing".
86  In the 
notification related to the restrictions on imports from China, Turkey stated that it "was required to 
apply the quantitative restrictions as part of th e common regulation of commerce of the Turkey-EC 
Customs Union on imports of certain textile prod ucts which the EC maintained pursuant to the 
ATC."87 
128. As far as the quantitative restrictions notified w ith reference to Article 2.1 are concerned, 
Turkey reported that it had eliminated two of th em (categories 19 and 76) on the day of China's 
accession, with the implementation of Turkey's Stag e 1 and 2 integration progr ammes.  Furthermore, 
according to Turkey, of the restrictions notif ied under Article 3.1, in total 11 categories 
(categories ex 13, ex 24, ex 39, 123, 124, 125A , 126, 127B, 140 and 151B) were "integrated" on 
11 December 2001.  It would appear, however, that most of these categories formed part of the 
Stage 3 integration programme notified by Turkey and, therefore, their formal integration into 
GATT 1994 presumably took place only on 1 January 2002. 
129. All the quantitative restrictions maintained by Turkey on imports from Chinese Taipei were 
notified under Article 2.1.  It would appear that  the elimination on 1 January 2002 of five of the 
restrictions notified (namely those affecting categor ies 67, 74, 77, 91 and 110) is attributable to the 
                                                      
85 See also paragraphs 458 to 463 below. 
86 See paragraph 66 above. 
87 See G/TMB/N/422/Add.1 and G/TMB/N/423/Add.1. G/L/683 
Page 54  
 fact that these categories had already formed part  of the Stage 2 integration programme implemented 
by Turkey on 1 January 1998. 
130. Turkey had not maintained any restrictions on imports from FYROM. 
131. As to the impact of the implementation of Tu rkey's Stage 3 integration programme, Table 8 
lists all those quantitative restrictions that were eliminated on 1 January 2002 as a result of Stage 3 
integration.
88 
Table 8 
 
Quantitative Restrictions Affected by the Third Stage of Integration of Turkey  
 
Category 
 Product Description WTO Members affected 
10 Gloves, mittens and mitts, knitted or crocheted China;  Chinese Taipei;  
Hong Kong, China;  Korea;  
Philippines;  Thailand 
18 Men's or boys' singlets and ot her vests, underpants, briefs, 
nightshirts, pyjamas, bathrobes, dressing gowns and similar 
articles, other than knitted or crocheted.  Women's or girls' singlets and other vests, slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, dressing gowns and similar articles, other than 
knitted or crocheted China;  Chinese Taipei;  Hong 
Kong, China;  Korea;  Macao, 
China;  Pakistan 
21 Parkas;  anoraks, windcheaters, waister jackets and the like, other 
than knitted or crocheted, of wool, of cotton or of man-made fibres;  
upper parts of tracksuits with lini ng, other than category 16 or 29, 
of cotton or of man-made fibres China;  Chinese Taipei;  Hong 
Kong, China;  Indonesia;  Korea; 
Macao, China;  Philippines;  
Sri Lanka;  Thailand 
24 Men's or boys' nightshirts, py jamas, bathrobes, dressing gowns 
and similar articles, knitted or crocheted. 
Women's or girls' nightdresses, pyjamas, negligees, dressing gowns and similar articles, other than knitted or crocheted China;  Chinese Taipei;  Hong 
Kong, China;  India;  Korea;  
Macao, China 
27 Women's or girls' skirts, including divided skirts Chinese Taipei;  Hong Kong, 
China;  India;  Korea;  Macao, China 
32 Woven pile fabrics and chenille fabrics (other than terry towelling or 
terry fabrics of cotton and narrow woven fabrics) and tufted textile surfaces, of wool, of cotton or of man-made textile fibres China;  Hong Kong, China;  Korea 
33 Woven fabrics of synthetic filament yarn obtained from strip or the 
like of polyethylene or polypropylene, less than 3m wide.  Sacks and bags, of a kind used for the packing of goods, not knitted or 
crocheted, obtained from strip or the like China;  Chinese Taipei;  
Indonesia;  Korea 
36 Woven fabrics of continuous artificial fibres, other than those for 
tyres of category 114 Korea 
37 Woven fabrics of artificial staple fi bres China;  Chinese Taipei;  Korea 
37A Of which:  other than bleached or unbleached China 
68 Babies' garments and clothing accessories, excluding babies' 
gloves, mittens and mitts of categories 10 and 87, and babies' 
stockings, socks and sockettes, other than knitted or crocheted, of 
category 88 China;  Chinese Taipei;  Hong 
Kong, China;  Korea 
73 Track suits of knitted or crocheted fabric, of wool, of cotton or of 
man-made textile fibres China;  Chinese Taipei;  Hong 
Kong, China;  Korea;  Macao, 
China;  Philippines;  Thailand 
                                                      
88 The TMB requested Turkey to check the information contained in Table 8.  Turkey proposed no 
adjustment to the table.  G/L/683 
 Page 55 
 
 Category 
 Product Description WTO Members affected 
ex 18 Men's or boys' singlets and other vests, underpants, briefs, 
nightshirts, pyjamas, bathrobes, dressing gowns and similar 
articles, other than knitted or crocheted.  Women's or girls' singlets and other vests, slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, dressing gowns and similar articles, other than knitted or crocheted;  other than those of wool or fine animal hairs, 
cotton or synthetic or artificial textile materials China* 
120 Curtains (including drapes), in terior blinds, curtain and bed 
valances and other furnishing articles, not knitted or crocheted, of 
flax or ramie China* 
123 Woven pile fabrics and chenille fabrics;  shawls, scarves (of flax or 
ramie) China* 
125A Synthetic filament yarn China* 
127A Yarn of artificial filaments China* 
127B Monofilaments, strip (artificial straw and the like) and imitation 
catgut of artificial textile materials China* 
140 Knitted or crocheted fabric of textile material, other than wool or 
fine animal hair, cotton or man-made fibres China* 
145 Twine, cordage, ropes and cables plaited or not abaca (Manila 
hemp) or of true hemp China* 
146A Binder or baler twine for agricultural machines, of sisal or other 
fibres of the agave family China* 
146B Twine, cordage, ropes and cables of sisal or other agave family, 
other than the products of category 146A China* 
151B Carpets and other floor coverings, of jute or of other textile bast 
fibre China* 
160 Handkerchiefs of silk or silk waste China* 
161 Garments, not knitted or crocheted, other than those of categories 
1 to 123 and category 159 China*;  Sri Lanka 
*The restrictions previously maintained on imports of these catego ries from China were notified by Turkey with reference to 
Article 3.1.  
132. On the basis of the overview detailed in Table 8, it would appear that with the implementation 
of its Stage 3 integration programme, Turkey el iminated 56 specific restrictions (of which one 
category – 37A – represented a sub-limit) that would fa ll under Article 2.1.  Furthermore, Turkey also 
eliminated 13 further restrictions that had b een notified with reference to Article 3.1. 
133. It would also appear that the detailed ex amination of the impact of the integration 
programmes implemented by Turkey provides a globa l picture which is almost identical with the 
results of the analysis made with respect to the effect of the integration programmes notified by the 
European Communities.  This is in line with Turk ey's statements reproduced  in paragraph 127 above. 
134. Finally, the TMB has to reiterate that the exam ination of the impact of Turkey's integration 
programmes is without prejudice to the legal jus tification under the provisions of the ATC and/or 
GATT 1994, or the lack thereof, of the restric tions that had been introduced by Turkey on 
1 January 1996 on imports of certain textiles and clothing products from countries or separate customs 
territories that had already been Member s of the WTO at that point in time.89  
                                                      
89 See also paragraph 99 above. G/L/683 
Page 56  
 (b) Integration programmes of Members which had re tained the right to use the provisions of 
Article 6 
135. Integration programmes of Members, other th an those which took over restraints from the 
pre-ATC regime, or those, like Turkey, which aligne d their trade regime on that of a Member that 
took over such restraints, are relevant in the context of their retention of the right to have recourse to 
the provisions of the transitional safeguard mechanism of the ATC.  Even in this context, the manner 
in which the scope of the products to be incl uded in the respective integration programmes was 
defined can be of some importance.  The TMB had al ready made some observations in this regard in 
its second comprehensive report
90 and these observations remain valid also in light of the Stage 3 
integration programmes that had been notified and c ould be reviewed by the Body subsequent to its 
adoption of the second comprehensive report.  According to these observations, essentially two basic 
approaches were followed by the Members concer ned and this was done consistently for the 
consecutive stages of integration.  One approach, a dopted by a number of Members, was to include 
only very few products, corresponding to a limited num ber of HS lines in the respective programmes, 
including those related to Stage 3.  This approach  was adopted by those Members whose total imports 
in the base year (i.e. in most cases 1990) appear ed to be heavily concen trated on a few items.  
Therefore, including only one or two products for each  of the four main product groups could fully 
meet the requirements defined in Article 2.8(b), since the volume of imports in products to be 
integrated amounted to not less than the 18 per ce nt threshold requirement.  The other approach, 
followed by several Members, consisted of long and di versified lists of products to be integrated.  The 
reason for adopting this latter approach was, in all likelihood, the more disperse d nature of imports in 
the base year, resulting in the need of including many pr oducts in the respective lists of integration in 
order to ensure that the imports of the items covered added up to not less than the threshold 
requirement.  The difference between these two basic approaches, in terms of their potential impact for the period covered by the third stage of the inte gration process, has been th at, in the first case, the 
universe of products that can be subject to measur es under Article 6 still remains broad, while in the 
other case, it is much more narrowed down (though this  has to be assessed against the particular tariff 
structure of the Members concerned).  However, th e very limited and sparing use of the transitional 
safeguard mechanism by these Members would indicate that this difference in the potential impact has 
been more theoretical than real. 
2. Final stage of integration to be  implemented on 1 January 2005 
136. Following the provisions of Article 2.11, notifi cations by Members regarding the final stage 
of integration were due to be received at least 12 m onths before the date of actual implementation, i.e. 
at the latest by 1 January 2004.
91  It should be noted that such notifications were received only from 
14 Members and only one Member respected the dead line specified in Article 2.11 for providing its 
respective notification. 
137. In the view of the TMB, it is appropriate to o ffer a few comments related to this issue.  First, 
there is undeniably an explicit requirement under the ATC for Members to provide a notification 
regarding their last stage of integration.  Ther efore, it was appropriate for the TMB to remind 
Members, in particular those maintaining restric tions under the provisions of the Agreement, of the 
respective notification requirement.  Second, this re quirement notwithstanding, the relevant provisions 
of the ATC make it unequivocally clear that the tex tiles and clothing sector shall stand integrated into 
GATT 1994 on 1 January 2005 and also that the Agreemen t and all restrictions thereunder shall stand 
terminated on that date.  This is going to ha ppen, irrespective of whether WTO Members have 
submitted, or not, or are going to pr ovide, or not, notifications regard ing their respective final stage of 
integration.  Third, the statements by Canada , the European Communities, Turkey and the United 
States, respectively, indicating that they will elim inate on 1 January 2005 all remaining restrictions 
                                                      
90 See G/L/459, paragraph 114. 
91 See paragraphs 82 to 84 above.  G/L/683 
 Page 57 
 
 under the ATC and will have integrated into GATT 1994 all the products covered by the ATC, could 
be considered in the context of ATC implementa tion as a simple formality, confirming the obvious.  
However, what could be, and probably has been perceived as a simple formality in the WTO 
framework in Geneva, has apparently gained  more significance as a result of the broader 
dissemination of the information provided in these notif ications.  Seen in this light, these notifications 
conveyed an unambiguous message to the public at larg e and, in particular, to the economic operators 
concerned.  They constituted conclusive evidence that the Members concerned would abide by their 
obligations and would not seek to alter their commitment to eliminate on schedule the restrictions 
maintained under the ATC.  Fourth, in view of  the importance attached to the administrative 
arrangements under the ATC regime, the TMB believes that it has made a useful contribution by pointing out that with the elimination of all quan titative restrictions maintained under the ATC, all 
related administrative procedures, including thos e specified in the administrative arrangements 
notified pursuant to Article 2.17, shall also stand te rminated.  In fact, the process of integration in the 
sense of the ATC will only become complete if admi nistrative requirements that were related to the 
administration of the restrictions are also abolished. 
II. QUANTITATIVE RESTRICTIONS AND RELATED MEASURES  
A. 
QUANTITATIVE RESTRICTIONS NOT IFIED PURSUANT TO ARTICLE 2.1.  ISSUES RELATED TO THE 
IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 2, EXCEPT THOSE CONCERNING 
INTEGRATION  
138. The ATC, as an agreement for a transition period of ten years, has been designed to facilitate 
the progressive transition from an initial situation of a wide and complex network of restrictions on 
imports from several Members to one in which sole ly the rules and disciplines of GATT 1994 apply.  
This involves the elimination of all the restrictions maintained under the former MFA (Article 2 of the 
ATC) and also bringing into conformity with the provisions of GATT 1994, or phasing out, the other 
restrictions not justified unde r the provisions of GATT 199492 (Article 3 of the ATC).  The starting-
point of this transition process was the notification, pursuant to Article 2.1, of all MFA or MFA-type 
restrictions in place on 31 December 1994 (or, if a pplicable, on the day prior to the date of accession 
of a new Member) which the maintaining Members d ecided to roll over to the ATC.  In accordance 
with Article 2.4, the restrictions notified under Ar ticle 2.1 were deemed to constitute the totality of 
such restrictions applied by the respectiv e Members.  Article 2.4 goes on to state, inter alia , that "[n]o 
new restrictions in terms of products or Members shall be introduced except under the provisions of 
the Agreement or related GATT 1994 provisions". 
139. The ATC provides clear rules regarding the scope of the restrictions to be notified as well as 
all related matters (such as the base levels of the r estrictions taken over to the ATC regime) in relation 
to those exporters under restraint th at became Members of the WTO at the time, or close to the time, 
when the WTO Agreement entered into force.  Th ere is no guidance, however, in the ATC regarding 
in particular, the base levels and related increases to  be applied in cases of restrained exporters that 
acceded to the WTO only during Stage 2 or Stage 3 of  the integration process.  In these cases, all 
relevant aspects, such as the definition of the base le vels to which the provisions of Article 2 should 
apply, had been agreed between the WTO Members and the new Member(s) concerned as part of the 
respective negotiations on the accession to the WTO a nd these agreed terms had been included in the 
reports adopted by the respec tive accession working parties. 
140. The respective provision of the Report of the Working Party on the Accession of China reads 
as follows: 
 "Some members of the Working Party proposed  and the representative of China accepted that 
the quantitative restrictions maintained by WTO Members on imports of textiles and apparel 
                                                      
92 For these latter restrictions, see paragraphs 372, 373 and 376 to 404 below. G/L/683 
Page 58  
 products originating in China that were in fo rce on the date prior to the date of China's 
accession should be notified to the Textiles M onitoring Body ("TMB") as being the base 
levels for the purpose of application of Artic les 2 and 3 of the WTO Agreement on Textiles 
and Clothing ("ATC").  For such WTO Members,  the phrase 'day prior to the date of entry 
into force of the WTO Agreement', contained in Article 2.1 of the ATC, should be deemed to 
refer to the day prior to the date of China' s accession.  To these base levels, the increase in 
growth rates provided for in Articles 2.13 and 2.14 of the ATC should be applied, as 
appropriate, from the date of China's accessi on.  The Working Party took note of these 
commitments."
93 
141. The corresponding provision of the Report of the Working Party on the Accession of the 
Separate Customs Territory of Taiwan, Penghu, Kinmen and Mats u (Chinese Taipei) states the 
following: 
 "The representative of Chinese Taipei stated that the quantitative restrictions on imports of 
textiles and clothing products  originating in Chinese Taipei under arrangements between 
Chinese Taipei and WTO Members that were in fo rce on the date prior to the date of accession 
of Chinese Taipei to the WTO would be notifie d to the Textiles Monitoring Body (TMB) as 
being the base levels for the pur pose of application of Article 2 of the Agreement on Textiles 
and Clothing. The representative of Chinese Taip ei stated that for the purpose of Chinese 
Taipei's accession to the WTO, th e phrase 'day prior to the date of entry into force of the WTO 
Agreement' contained in Article 2.1 of th e Agreement on Textiles and Clothing would be 
deemed to refer to the day prior to the date of  accession of Chinese Taipei to the WTO.  To 
these base levels the increase in growth rate s provided for in Articles 2.13 and 2.14 of the 
Agreement on Textiles and Clothing would be applied, in stages, from the date of accession 
of Chinese Taipei to the WTO."94 
142. The Report of the Working Party on the A ccession of the Former Yugoslav Republic of 
Macedonia (FYROM) states, inter alia , that "for the purposes of FYROM’s accession to the WTO, 
the phrase 'day prior to the date of entry into for ce of the Agreement on Textiles and Clothing' shall be 
deemed to refer to the day prior to the date of a ccession of FYROM to the WTO.  To this base level 
the increase in growth rates provided for in Articles 2.14 of the Agreement on Textiles and Clothing shall be applied, as appropriate, in the Agre ement on Textiles and Clothing from the date of 
FYROM’s accession."
 95 
143. In light of the relevant provisions quoted in  paragraphs 140 to 142 above, it can be established 
that the respective legal instruments of accession contain very similar, but not fully identical 
formulations. 
144. The universe of the restrictions notified with refe rence to Article 2.1 is subject to the rules and 
procedures laid down in the other provisi ons of Article 2.  A restriction is ipso facto  removed if the 
product concerned (in terms of HS line or category)  is integrated according to the provisions of 
Articles 2.6 or 2.8, or integrated earlier than provided for in an integration programme submitted 
under those Articles, according to the provisions of Ar ticle 2.10.  It is also possible to eliminate a 
restriction at the beginning of any agreement year , pursuant to Article 2.15, without integrating the 
product concerned (and thereby reserving the right to invoke the provisions of Article 6 with respect 
to such a product).  As long as a product is subject to  a restriction notified under Article 2.1, the ATC 
provides for the gradual increase in market access opportunities in the product concerned (the growth-
on-growth provision).  This is an automatic proc ess which runs in parallel with the progressive 
integration, since as from the very beginning of each stage of integration, an increased growth rate 
                                                      
93 See WT/ACC/CHN/49, paragraph 241. 
94 See WT/ACC/TPKM/18, paragraph 167. 
95 See WT/ACC/807/27, paragraph 192.  G/L/683 
 Page 59 
 
 had to be applied to the level of the respective rest raints.  The starting-point was, once again, the base 
level of the restrictions applied on the day be fore the entry into force of the WTO Agreement 
(Article 2.12) or, in the case of newly acceded Members,  the level applied on the day prior to the date 
of their accession.  This level ha d to be increased annually during St age 1 by not less than the initial 
growth rate under the pre-ATC regime, increased by  16 per cent (Article 2.13).  For Stage 2, the 
growth rate applicable during Stage 1 had to be  increased annually by not less than 25 per cent 
(Article 2.14(a)), while for Stage 3, the growth rate applicable during St age 2 had to be further 
increased annually by not less than 27 per cent (Artic le 2.14(b)).  The respective flexibility provisions 
which are basically the same as provided for under the pr e-ATC regime, are dealt with in Article 2.16.  
Small suppliers, new entrants and, to the extent  possible, least-developed country Members benefit 
from higher or accelerated growth rates, pursuant to  the provisions of Article 2.18.  While in 
accordance with the provisions of Article 4.1, th e restrictions are administered by the exporting 
Members96, Article 2.17 authorizes the importing and exporting Members concerned to agree on 
administrative arrangements, as deemed necessary, in relation to the implementation of any provision under Article 2.  The supervisory role of the TMB, inter alia , with the task of keeping under review 
the implementation of Article 2, is defined in Article 2.21. 
1. Scope of the restrictions taken over from the pre-ATC regime:  status and developments 
during the first and second stages of the integration process 
145. Following the requirements of Articl e 2.1, quantitative restrictions within bilateral agreements 
maintained under Article 4 of the MFA or notified under Article 7 or 8 of the MFA in force on the day 
before the entry into force of the WTO Agreement ha d to be notified in detail, including the restraint 
levels, growth rates and flexibility provisions, by the Members maintaining such restrictions to the 
Textiles Monitoring Body.  All su ch restrictions maintained betw een GATT 1947 contracting parties 
and in place on 31 December 1994 are governed by  the ATC, unless the pr oducts concerned have 
already become integrated into GATT 1994.  In practice, these notif ication obligations applied to four 
WTO Members, Canada, the European Communities, Norway and the United States.  Each of these Members complied with these notification requirements.  An overview of these notifications has already 
been provided in the first comprehensive report adopted by the TMB.
97  The second comprehensive 
report also contained a summary of these notifications , together with subsequent developments that took 
place still during the implementation of  Stage 1 of the integration process.98  Also, the second 
comprehensive report provided a detailed overview of further developments that occurred during the implementation of Stage 2 of  the integration process.
99 
2. Developments during Stage 3 regarding the restrictions notified with reference to 
Article 2.1 
(a) New notifications received with reference, inter alia , to Article 2.1 
146. Following the accession of new Members (China on 11 December 2001, Chinese Taipei on 
1 January 2002 and FYROM on 4 April 2003) notifications were received, inter alia , with reference 
to Article 2.1, from Canada, the European Communiti es, Turkey and the United States.  In reviewing 
these notifications pursuant to Article 2.21, the TMB had to rely on the applicable provisions of the 
respective legal instruments of accession as well as on the respective provisions of Article 2 of the 
ATC. 
                                                      
96 See paragraph 445 below. 
97 See G/L/179, paragraphs 183 to 191. 
98 See G/L/459, paragraphs 247 to 256. 
99 See G/L/459, paragraphs 259 to 275. G/L/683 
Page 60  
 (i) Notifications by Canada 
(1) Restrictions on imports from China 
147. At its meeting of January 2002, the TMB began its examination of a notification made with 
reference to Articles 2 and 3 by Canada, following the accession of China to th e WTO.  According to 
this notification, on the day prior to China's accessi on Canada had maintained altogether 26 specific 
limits and sub-limits plus three consultation le vels (constituting a potential for triggering the 
introduction of restrictions) on imports from China.  The TMB decided to seek clarifications from 
Canada concerning some aspects of this notificatio n, including whether the quantitative restrictions 
notified fell under Article 2.1 or 3.1 of the ATC, the extent to which these restrictions had been affected by the ATC integration process and the stat us under the ATC of consu ltation levels contained 
in the notification. 
148. Subsequently, the TMB took note of Canada's st atement that all the quantitative restrictions 
on imports from China had been ma intained under Article 4 or notified under Articles 7 or 8 of the 
MFA, and, therefore, were all being notified pur suant to Article 2 of the ATC only.  Canada 
confirmed, furthermore, that the consultation levels notified (affecti ng three sub-categories) had been 
eliminated on the day of China's accession.  Chin a also made some observations, pursuant to 
Article 2.2, with respect to Canada's notificati on.  Though some of the points raised by China had 
already been raised with Canada by the TMB, Ch ina's notification was brought to the attention of 
Canada. 
149. After having received corrections and supplements  from Canada to the original notification 
and after consideration of the observations made by China on the Canadian notification, at its meeting 
of July 2002 the TMB completed its review of the notification received from Canada.  The TMB 
observed, inter alia , that the notification, as corrected and supplemented, contained details including 
the relevant restraint levels in force on the day pr ior to China's accession to the WTO, as well as the 
relevant growth rates and flexibility provisions.  It  also contained information on the effect of the 
implementation of the integration pr ogrammes on the restrictions notified
100, in particular the fact that, 
as for other WTO Members, Canada did not adjust downwards the levels of those restraints on 
imports from China when products were removed from  the coverage of these restraints during the 
third stage of integration.  The TMB also made a number of observations regarding the 
implementation by Canada of the growth-on-gr owth provisions provided for in Articles 2.13 
and 2.14.101  In taking note of the notification received fr om Canada, the TMB observed also that most 
of the observations made by China, with referenc e to Article 2.2 had been taken into account by 
Canada in the corrigendum it had provi ded to its original notification. 
(2) Restrictions on imports from Chinese Taipei 
150. In January 2002, the TMB started its examin ation of a notification received pursuant to 
Articles 2 and 3 from Canada, following the accession of Chinese Taipei to the WTO.  The notification revealed that on 31 December 2001, i.e.  on the day prior to the accession of Chinese 
Taipei, Canada had maintained 41 specific limits and sub-limits on imports from Chinese Taipei.  The 
TMB decided to seek clarification from Canada concerning some aspects of the notification, including 
whether the quantitative restrictions notified fell under Article 2.1 or 3.1 of the ATC, and the extent to 
which these restrictions had been affected by the ATC integration process.  At a subsequent stage, 
Chinese Taipei made a few observations under Article 2.2, which were brought to the attention of 
Canada.  Also as a follow-up to these observations, at  its meeting of May 2002 the TMB took note of 
                                                     
 
100 See paragraphs 100, 106 to 108 above. 
101 The implementation of the growth-on-growth prov isions by restraining Members in relation to 
imports from newly acceded Members is d ealt with in a separate subsection of  this report.  See paragraphs 201 
to 245 below.  G/L/683 
 Page 61 
 
 the explanation received from Canada, according to  which the minor differences in corresponding 
quota levels for 2001 between the information suppl ied by Canada and Chinese Taipei, respectively, 
stemmed from the accumulated impact of rounding diffe rences over time.  Accordingly, the TMB also 
took note of the statement by Canada that the volum es referred to in the submission by Chinese Taipei 
were correct and were those whic h Canada had implemented for 2001. 
151. In July 2002, the TMB completed its review of  the Canadian notification.  Having sought 
clarification and additional inform ation from Canada and having c onsidered the observations made by 
Chinese Taipei on the Canadian notification, the TMB also took note of the statement by Canada that 
"all the quantitative restraints with Chinese Taipei had been maintained under Article 4 or notified 
under Articles 7 or 8 of the MFA, and therefore, we re all being notified pursuant to Article 2 of the 
ATC only".  The TMB also observed that the notific ation, as corrected and supplemented, contained 
details including the restraint levels in force on the day prior to Chinese Taipei's accession to the 
WTO, as well as the relevant growth rates and flex ibility provisions.  It also contained information on 
the effect of the implementation of the integrati on programme for the third stage on the restrictions 
notified102, in particular the fact that, as for other WT O Members, Canada did not adjust downwards 
the levels of those restraints on imports from Chin ese Taipei when products were removed from the 
coverage of these restraints during that stage of inte gration.  In taking note of the notification received 
from Canada, the TMB also observed that the obser vations made by Chinese Taipei pursuant to 
Article 2.2 had been taken into account by Canada in the corrigendum it had provided to the original 
notification. 
(ii) Notifications by the European Communities 
(1) Restrictions on imports from China 152. At its meeting of January 2002, the TMB starte d its examination of a notification received 
pursuant to Article 2.1 from the European Co mmunities following the accession of China to the 
WTO.  It appeared to the TMB that the Eu ropean Communities had notified the quantitative 
restrictions in force on 11 December 2001 (i.e. not on the day prior to the date of entry into force of 
the WTO Agreement in respect of China, which was 10 December 2001).  The TMB decided to seek 
clarifications from the European Communities re garding some aspects of this notification, inter alia , 
on the extent to which the restrictions maintained had been affected by the ATC integration process.  
China also made several observations under Article  2.2.  The European Communities subsequently 
provided a number of supplements to its original no tification, one of them raising the need for the 
TMB to seek additional clarifications from the EC.  As a result of the requirement for such back and 
forth communications, the TMB could only complete the review of the notification of the European 
Communities at its meeting of November 2002.  The notification indicated that on the day prior to 
China's accession, the European Comm unities had maintained restrictions vis-à-vis  China on 28 
categories and sub-categories with reference to th e bilateral agreement between the EC and China, 
"on MFA products". 
153. Having sought clarifications and additional information from the European Communities and 
after considering the observations made under Article 2.2 by China vis-à-vis  this notification, the 
TMB noted the EC's statement that, pursuant to Arti cle 2.1, it had notified the restrictions taken over 
from its previous bilateral agreement with China, which had their roots "with in bilateral agreements 
maintained under Article 4 or notified under Article 7 or 8 of the MFA".  The TMB observed that the 
notification, as supplemented and corrected, contained details of the restrictions in force on the day 
prior to the date of China's acces sion to the WTO, including the respective restraint levels, together 
with their growth rates and the related flexibilit y provisions.  The notification also specified the 
restraint levels applied for 2002 a nd identified those restrictions which had been eliminated on the day 
of China's accession to the WTO as a result of the EC's implementation of the first and second stage 
                                                     
 
102 See paragraphs 101, and 106 to 108 above. G/L/683 
Page 62  
 integration programmes.
103  It was also observed that, in addition to the EC quantitative restrictions 
for direct exports by China ("direct quantitative lim its"), the notification also provided for additional 
EC quantitative levels for goods re-imported under outward pro cessing traffic ("OPT additional 
quantitative levels") for almost half of the product categories subject to restraints.  Also indicated 
were the respective annual growth rates that applied to these additional quantitative levels.  
Furthermore, the European Communities also notif ied those separate quantities which had been made 
available for the year 2001 for a number of product categories and were meant to be used exclusively 
for European fairs.  It was further noted that the flexibility provisions notified for the respective 
regular quotas affecting these product categories were  also applicable for the quantities notified for 
use for European fairs.  Moreove r, remarks attached to the listi ng of the "direct quantitative limits" 
indicated that in several product categories the r estraint levels notified for 2001 included certain 
specified quantities which were reserved for the Eu ropean industry for a defined time-period of the 
calendar year. 
154. Also keeping in mind some related observa tions made by China, the TMB recalled, inter alia , 
that the European Communities had notified the resp ective quota levels for participation in European 
fairs for 2001 as being the levels in force on the day prior to the date of entry into force of the WTO 
Agreement for China.  In light of the explana tions provided by the European Communities, it was 
assumed that such quota levels had a zero growth rate .  On the basis of this, the TMB decided to seek 
the EC's confirmation of the Body's understanding that the European fairs' quota levels notified 
for 2001 had already been made available to China in 2002, and that this would continue in 2003 
and 2004, in addition to the regular quota levels ;  it being further understood that such additional 
quotas may be used by China exclusively at European  fairs.  In reply, the European Communities 
stated the following: 
 "The quantities [for the European fairs' quotas] are granted annually on an ad hoc  basis.  In 
practice, however, they have remained unchanged over the years, and although no 
commitment can be given formally as to the future, [the European Communities is] in a 
position to inform [the TMB] that in the basic regulation of application of the textiles import 
regime under preparation for the year 2003, these quantities are being proposed reconducted 
without modification. In all probability this w ill also be the case for the year 2004, although 
no firm undertaking can be given as of now." 
155. The TMB understood that the term "basic regula tion of the application of the textiles import 
regime" was meant to refer to the EC's implementi ng regulation that is issued and published annually 
and specifies the respective restraint levels applic able in the forthcoming calendar year.  The EC's 
reply appeared to suggest that since European fa irs' quotas constitute additi onal amounts above that of 
the regular quota levels, in a strict legal sense, th e EC had no obligation con cerning the annual levels 
of these quotas, rather they were amou nts defined and granted annually on an ad hoc basis .  In this 
regard, the TMB reiterated that the quota levels for pa rticipation in European fairs applied on the day 
prior to the date of China's accession had been included in the EC's notification pursuant to 
Article 2.1.  Furthermore, the European Communiti es itself had stated that in practice the European 
fairs' quota levels had remained unchanged over years.  Thus, the le vels applied in 2001 were also 
maintained for 2002 and were being proposed to  be re-conducted without modification in the 
year 2003.  While noting the EC's reply, in partic ular the indication given for the year 2003, the TMB 
expected that the same levels would continue to be  maintained also in 2004.  Accordingly, the TMB 
requested that the European Communities inform it in  due course, at the latest in December 2003, of 
the quota levels to be formally approved for par ticipation in European fairs in the year 2004. 
156. In taking note of the notification received from the European Communities, the TMB also 
observed that China's observations, made pursuant to Article 2.2, had been taken into account by the 
                                                      
103 See paragraph 115 above.  G/L/683 
 Page 63 
 
 European Communities in the su pplementary communications it had provided to the original 
notification. 
157. Subsequently, in the context of a reply to questions put by the TMB to the European 
Communities regarding the consequences of the en largement of the European Union to the new 
member States on the quantitative r estrictions maintained by th e European Communities under the 
ATC, information was provided also on the levels  made available to China for the year 2004 for 
participation at European fairs.  Based on this in formation, it could be obser ved that these levels had 
remained unchanged since 2002.  
(2) Restrictions on imports from Chinese Taipei 158. Also in January 2002, the TMB started its exam ination of a notification received pursuant to 
Article 2.1 from the European Communities followi ng the accession of Chinese Taipei to the WTO.  
It appeared to the TMB that th e European Communities had notified the quantitative restrictions in 
force on 1 January 2002 (and not those in force on the day prior to the date of entry into force of the WTO Agreement in respect of Chinese Taipei, which was 31 December 2001).  The TMB decided to 
seek clarification from the European Communities re garding some aspects of this notification, inter 
alia, on the extent to which the restrictions main tained had been affected by the ATC integration 
process.  Subsequently, Chinese Taipei also made observations under Article 2.2, which were brought 
to the attention of the EC. 
159. The TMB completed the review of this notification at its meeting of July 2002.  The 
notification revealed that on the day prior to th e accession of Chinese Taipei, the EC had maintained 
restrictions on 41 categories and sub-categories affecting imports from Chinese Taipei.  Having sought clarification and information from the Eur opean Communities and after consideration of the 
observations made by Chinese Taipei regarding th is notification, the TMB observed that the 
notification, as supplemented, contained the quantitative restrictions on imports of textile and clothing products originating in Chinese Taipei under arra ngements between Chinese Taipei and the European 
Communities that were in force on the date prior to the date of accession of Chinese Taipei to the WTO, 
including the respective growth rates and flexib ility provisions.  Information was also provided 
regarding the effect on the restrictions notified of the implementation of the EC's integration 
programmes.
104  The notification contained, in addition, the restraint levels, respective growth rates 
and flexibility provisions implemented as of 1 Ja nuary 2002.  The TMB also observed that the 
observations by Chinese Taipei, made pursuant to Ar ticle 2.2, had been taken into account by the 
European Communities in the supplementary co mmunication it had provided to the original 
notification. 
(iii) Notifications by Turkey 
(1) Restrictions on imports from China 
160. At its meeting of February 2002, the TMB star ted its examination of a notification received 
pursuant to Article 2.1 from Turkey following the accession of China to the WTO.  According to the 
notification, on the day prior to China's accessi on, Turkey had maintained restrictions on 41 
categories and sub-categories on imports from China of  "textiles and clothing products covered by the 
MFA".  The TMB decided to seek clarification from Turkey, inter alia , regarding the reasons why it 
had considered it appropriate to notify quantitative re strictions under Article 2.1, keeping in mind the 
provisions of paragraph 241 of the Report of the Work ing Party on the Accession of China, as well as 
those of Article 2.1 of the ATC, which deal with "q uantitative restrictions within bilateral agreements 
maintained under Article 4 or notif ied under Article 7 or 8 of the MFA in force on the day before the 
entry into force of the WTO Agre ement".  The TMB also decided to  seek clarification from Turkey, 
                                                      
104 See paragraphs 116 and 118 above. G/L/683 
Page 64  
 inter alia , on the extent to which the restrictions main tained had been affected by the ATC integration 
process. 
161. China also submitted a number of observations under Article 2.2 with respect to various 
aspects of the Turkish notification.  Turkey provided  several supplements to its original notification, 
but some aspects of the notification could not be easily  clarified.  In particular, through its additional 
observations, China wanted to gain a full understa nding of the methodology applied by Turkey in 
calculating the growth rates that had been applied by  it on the level of the respective restrictions on 
the day prior to the date of China's accession to the WTO.  These and other related aspects could only 
be finally clarified at the time of the TMB's meeti ng of February 2003, when the Body could complete 
the review of the notification made by Turkey. 
162. In taking note of this notification, the TMB recalled, inter alia,  that it had sought clarification 
from Turkey on the reasons why it had considered it appropriate to notify quantitative restrictions 
under Article 2.1, keeping in mind the provisions of  paragraph 241 of the Report of the Working Party 
on the Accession of China, as well as those of Article 2. 1 of the ATC.  Turkey stated that it had "made 
its notification under the Article 2.1, in conjunc tion with its parallel impl ementation with the EU.  
Within the provisions of the Customs Union and the Decision 1/95 of the Association Council, 
Turkey was required to apply the quantitative rest rictions as part of the common regulation of 
commerce of the Turkey-EC Customs Union on impor ts of certain textile products which the EC 
maintained pursuant to the ATC.  The quantitative rest rictions that were notif ied under the Article 2.1, 
which [were] in force on the day prior to China' s accession to the WTO have been implemented as of 
1 January 1996 with the creation of Customs Union".  In response to the TMB's request for clarifications, China stated that "[o]n 1 January 1996, Turkey entered into customs union with the 
European Community.  As a result,  Turkey requested to establish quota restrictions on imports of 
textiles and clothing from China.  On 17 July 19 96, China and Turkey signed the bilateral textiles 
agreement with reference to the framework of Agreement between the European Community and the 
People’s Republic of China on Trade in Textile Products ."  Having considered these two 
communications, the TMB observed that China had not  taken issue from the fact that Turkey had 
notified the relevant quantitative r estrictions under Article 2.1. 
163. Clarification had also been sought from Turkey, inter alia , on the extent to which the 
restrictions maintained by Turkey on the im ports from China had been affected by the ATC 
integration process.  Turkey provided information w ith respect to the product categories that had been 
integrated at each of the three stages of integration.
105 
164. As regards the growth rates applied by Turk ey, the TMB observed that China had indicated 
that as a result of the process of clarification, it had no objection to the ex planations provided by 
Turkey on the methodology that Turkey had used to calculate the growth rates which were applied by 
it on 10 December 2001, i.e. taking as a basis the "agreed 1994 growth rates", presumably first applied in 1996, increased by 16 and subsequently by 25 per cent in 2001.  China also accepted that 
the differences in the calculation of the growth ra tes resulted from the fact that Turkey had "rounded 
the quota levels calculated […] mostly to the uppe r number for its application and that the Chinese 
calculations had been based on those rounded quota le vels.  Thus, in most cases, applied (published) 
quota levels [were] higher than calculated levels and this result[ed] in a difference between the 
Turkish methodology and growth rate calcula ted according to published quota level". 
165. On the basis of the above, the TMB noted, inter alia , that there was no disagreement between 
the two Members regarding the growth rates applied by  Turkey on the day prior to the date of China's 
accession.  It was understood that these growth rat es had been increased by 27 per cent in order to 
calculate the restraint levels for the year 2002.  In taking note of the notification provided by Turkey, 
the TMB also observed that China's observations, made pursuant to Article 2.2, had been fully 
                                                     
 
105 See paragraphs 128 and 131 above.  G/L/683 
 Page 65 
 
 addressed by the TMB and that they had been take n into account by Turkey in the communications it 
had provided in addition to the original notification. 
(2) Restrictions on imports from Chinese Taipei 166. In April 2002, the TMB began its examination of a notification received pursuant to 
Article 2.1 from Turkey following the accession of Chinese Taipei to the WTO.  The notification 
revealed that on the day prior to the accession of Ch inese Taipei, Turkey had maintained restrictions 
on 39 categories and sub-categories on imports fro m Chinese Taipei.  The TMB decided to seek 
clarifications from Turkey, inter alia , on the extent to which the rest rictions maintained had been 
affected by the ATC integration process.  The TMB fu rther decided to bring to the attention of Turkey 
the observations received from Chinese Taipei, purs uant to Article 2.2, regarding the Turkish 
notification. 
167. At its meeting of July 2002, the TMB took no te of this notification.  Having sought 
clarification and information from Turkey and af ter having considered the observations made by 
Chinese Taipei with regard to this notification, the TMB observed that the notification contained the 
restrictions applied by Turkey on the imports of  certain textile and clothing products taken over from 
Turkey's bilateral agreement with Chinese Taipei that was in force on the day before the accession of 
Chinese Taipei to the WTO, incl uding the respective growth rat es and flexibility provisions. The 
notification also contained, inter alia , information on the product categories integrated under 
Stages 1, 2 and 3 on 1 January 2002.
106  In taking note of the notification provided by Turkey, the 
TMB also observed that the observations made by Chinese Taipei pursuant to Article 2.2 had been 
taken into account by Turkey in the addendum it had submitted to the original notification. 
(iv) Notifications by the United States 
(1) Restrictions on imports from China 
168. In February 2002, the TMB started its examination of a notification received pursuant to 
Article 2.1 from the United States following the accession of China to the WTO.  On the basis of this 
notification, it could be established that on the day prior to China's accession, the United States had 
maintained altogether 101 specific limits and sub- limits on imports from China.  Furthermore, the 
United States had also applied four aggregate (gr oup) limits, covering all the specific limits and sub-
limits and, in addition, also a number of further categories not subject to specific limits.  The TMB decided to seek clarification from the United States, inter alia , on the extent to which the restrictions 
maintained had been affected by the ATC integr ation process.  Subsequently, China also made a 
number of observations under Article 2.2 and th e United States provided further comments in 
response to China's observations.  Some of the key elements involved, such as the interaction between 
specific limits and group limits as notified by the United States and the downward adjustment of 
quota levels for partially integrated products, were co nsidered in detail by the TMB at its meeting of 
September 2002. 
169. As regards the interaction between specific li mits and group limits, the TMB noted that China 
had stated that it had "noted that the base level fo r Group I is less than the total base level for all the 
covered 78 specific limits.  In particular, in view of  the fact that the average annual growth rate for 
those specific limits is 1.66 per cent while the Group Limit has just 1 per cent annual growth rate, the 
Group Limit will, along with the time, cut into the fu ll utilization of Specific Limits covered".  In a 
subsequent communication, China added that "[a]s China has become a WTO Member since 
11 December 2001, the issue shall be examined under WTO framework, specifically the ATC".  The 
TMB also noted that the United States had stated that under Article 2.1, "the obligation is on the 
United States to notify 'quantitative restrictions with in bilateral agreements […] in force on the day 
                                                     
 
106 See paragraphs 129 and 131 above. G/L/683 
Page 66  
 before the entry into force of the WTO Agreement […] including the restraint levels.'  The Working 
Party Report on China’s accession provides that the phrase 'd ay prior to the date of entry into force of 
the WTO Agreement contained in Article 2.1 of the AT C should be deemed to refer to the day prior to 
the date of China’s accession.'  A ccordingly, the notification for the specific limits and the Group 
limit for Group I […] refl ects the base levels in effect on 10 December 2001.  These base levels, and 
the associated growth rates and flexibility provis ions, reflect a negotiated balance of mutual 
concessions acceptable to the People’s Republic of Ch ina and the United States and will henceforth be 
governed by the provisions of the ATC".  170. Bearing these communications in mind, the TM B recalled that Article 2.1 requires Members 
to notify in detail "all quantitative restrictions with in bilateral agreements maintained under Article 4 
or notified under Article 7 or 8 of the MFA in force on the day before the entry into force of the WTO 
Agreement", and that paragraph  241  of the Report of the Working Party on the Accession of China to 
the WTO states, inter alia , the following: "Some members of the Working Party proposed and the 
representative of China accepted that the quantitative restrictions maintained by WTO Members on 
imports of textiles and apparel products  originating in China that were in force on the date prior to the 
date of China's accession should be notified to th e Textiles Monitoring Body ('TMB') as being the 
base levels for the purpose of application of Articles 2 and 3  of the WTO Agreement on Textiles and 
Clothing ('ATC').  For such WTO Members, the phrase 'd ay prior to the date of entry into force of the 
WTO Agreement', contained in Article 2.1 of the ATC,  should be deemed to refer to the day prior to 
the date of China's accession" (emphasis added).  The TMB observed that the US' notification made 
pursuant to Article 2.1 of the ATC and to paragra ph 241 of the Report of the Working Party on the 
Accession of China to the WTO contained the restrictions in place on imports from China on 
10 December 2001, together with the respective restraint levels, growth rates and flexibility 
provisions.  The TMB noted that such restrictions we re composed of group and specific limits.  It was 
observed that China did not call into question the f act that the restrictions notified and also the 
restraint levels and growth rates reported had been in force on the day prior to the date of China's 
accession.  The TMB further observed that Article 2.4 of the ATC states that "[t]he restrictions 
notified under paragraph 1 [of Article 2]  shall be deemed to constitute the totality of such restrictions 
applied by the respective Members on the day before the entry into force of the WTO Agreement.  No 
new restrictions in terms of products or Members shall be introduced except under the provisions of 
this Agreement or rele vant GATT 1994 provisions." 
 
171. While noting the concerns expressed by China regarding the potential adverse effects on 
trade, the TMB could not identify any provision in the ATC which would prohibit the group and specific limits that were in force on the day befo re the entry into force of the WTO Agreement from 
remaining in force with that of the implementati on of the growth-on-growth provisions of the ATC, 
up and until the integration of the respective produc ts the into GATT 1994.  The TMB, noting that 
China had made its observations un der Article 2.2, did not find it appropriate, in view of the 
considerations outlined above, to make r ecommendations to the Members concerned. 
 172. With respect to the downward adjustment of quot a levels for partially integrated products, the 
TMB noted that China had stated that "the base le vels for some Specific Limits and certain Group 
Limits have been substantially reduced due to part ial integration.  For example, the base level for 
Group III was reduced by 81.74 per cent.  Such m easures adversely affect China's export of non-
integrated products covered therein".  The TMB also noted that the United States had stated that "[a]s provided for in Article 4.3, the quotas that were affe cted by partial integration have been reduced to 
reflect the more limited product c overage.  As with other WTO Memb ers, the United States applied a 
standard methodology for adjusting specific and group limits to reflect partially integrated products.  
The US practice is to adjust group and specific limits  affected by partial integration by reducing them 
by the average amount of volume of trade in the integrated product for the previous two calendar years, specifically, 1999 and 2000 in this instance".  The TMB noted, in this regard, that the level of the quantitative restrictions notified had remain ed unchanged until 31 December 2001, and that the 
downward adjustments of quotas had taken place apparently on 1 January 2002 with the  G/L/683 
 Page 67 
 
 implementation of the provisions of Article 2.8( b) by the United States.  Therefore, China's 
observation was not directly related to the restra int levels taken over from the pre-ATC regime, as 
notified by the United States pursuant to Article 2.1, but rather a matter to be dealt with pursuant to 
the provisions of Article 4107. 
173. During its meeting of October 2002, the TMB revert ed to its examination of this notification, 
also on the basis of additional information received from the United States in  response to a question 
put by the TMB concerning one US product sub-category.  According to the explanations provided by 
the United States, as a result of the integration in Stage 3 of products belonging to one US sub-category, the United States had inadvertently dedu cted the average trade for these products not from 
the corresponding group limit, but from another one.  The TMB noted that on 29 August 2002 the 
United States had made an administrative correct ion and deducted the average trade for those 
products from the proper group limit, while re-cred iting the group limit from which the inappropriate 
deduction had been made. 
174. Since one important aspect related to the US  notification remained unresolved (this was 
related to the methodology applied by the United Stat es in providing the increase to the annual growth 
rates of the quotas maintained on imports from China
108), the TMB could only complete the review of 
the notification of the United States at its meeting of January 2003, together with the adoption of a 
formal recommendation to the United States regarding the implementation of the necessary adjustments in its methodology applied in pr oviding the increase in quota growth rates.
109  In taking 
note of the US notification, the TMB recalled that al l the relevant issues raised by the notification had 
been addressed by the Body, includ ing the extent to which the restrictions notified had been affected 
by the implementation of the integration programme of the United States.110 
(2) Restrictions on imports from Chinese Taipei 
175. In April 2002, the TMB began its examination of a notification received pursuant to 
Article 2.1 from the United States following th e accession of Chinese Taipei to the WTO.  The 
notification revealed that on the day prior to the accession of Chinese Taipei, the United States had 
maintained altogether 74 specific limits and sub-lim its on imports from Chinese Taipei.  In addition, 
the United States had also applied five aggregat e limits (of which three group limits and two sub-
group limits).  The TMB decided to seek clarifications from the United States, inter alia , on the extent 
to which the restrictions maintained had b een affected by the ATC integration process. 
176. The review of this notification was comp leted in September 2002.  Having sought 
clarifications and information from the United States and mindful of the fact that Chinese Taipei had 
informed the TMB that it had no comments or observati ons to make in the sense of Article 2.2, the 
TMB observed that the notification, as supplemented, contained the quantitative restrictions on imports 
of textile and clothing products originating in Ch inese Taipei under arrangements between Chinese 
Taipei and the United States that were in force on the date prior to the date of accession of Chinese 
Taipei to the WTO.   In addition to the restraint levels, the notification contained the respective growth 
rates and flexibility provisions in force on 31 Dece mber 2001.  Also, in reply to the TMB's request, 
information was provided on the quantitative restric tions eliminated on 1 January 2002 as a result of 
the integration by the United States of certain products during Stages 1, 2 or 3 of the integration process.
111   
                                                      
107 For the TMB's observations on this issue, made in  the context of Article 4, see paragraph 463 below. 
108 See in detail paragraphs 202 to 227 below. 
109 See paragraph 225 below. 
110 For this latter aspect, see paragraphs 121 and 124 above. 
111 See paragraphs 122 and 124 above. G/L/683 
Page 68  
 (3) Restrictions on imports from the Former Yugoslav Republic of Macedonia 
177. At its meeting of June 2003, the TMB began its examination of a notification received 
pursuant to Article 2.1 from the United States following the accession of the Former Yugoslav 
Republic of Macedonia (FYROM) to the WTO.  The notification indicated that on the day prior to FYROM's accession, the United States had maintained five specific limits on imports from the acceding Member.  The TMB decided to seek clarifications from the United States, inter alia , on the 
extent to which the restrictions maintained ha d been affected by the ATC integration process. 
178. In September 2003, the TMB reverted to its exam ination of this notification in light of the 
replies received from the United States to questions  submitted to it by the TMB.  According to the 
additional information provided by the United Stat es, the limits notified were those in force on 
3 April 2003, i.e. on the day before the entry in to force of the WTO Agreement for the FYROM.  
None of these restrictions had been eliminated as a result of the integration by the United States of 
certain products under Stages 1, 2 or 3 of the ATC, si nce the relevant categories were not part of the 
respective integration programmes.  The TMB took not e of these clarifications.  Subsequently, after 
having considered the issue of the implementati on of the growth provisions to the quantitative 
restrictions notified by the United States
112, the TMB took note of the notification. 
(b) Changes in restrictions previously no tified with reference to Article 2.1 
(i) Elimination of restrictions by way of integration 
179. When a product that had been subject to a restri ction notified with refe rence to Article 2.1, 
became integrated into GATT 1994 during Stage 3 of  the integration process, trade in that product 
was removed, as a result of integration, from the scope  of the provisions of the ATC.  Therefore, the 
respective restrictions previously maintained under th e ATC had to be eliminated with respect to such 
a product.  As reported in detail in S ection I of this Part of the report113, Members maintaining 
restrictions falling under Article 2.1 included a number of products previously subject to restraints in 
their respective Stage 3 integration programmes.  Also, with respect to imports from newly acceded 
Members, the implementation of restraining Member s' Stage 1 and Stage 2 integration programmes 
resulted in the elimination of a few restrictions.114 
(ii) Elimination of restrictions without integration:   recourse to the provisions of Article 2.15 
180. Article 2.15 reads as follows:   
 "Nothing in this Agreement shall prevent a Member from eliminating any restriction 
maintained pursuant to this Ar ticle, effective at the beginning of any agreement year during 
the transition period, provided the exporting Me mber concerned and the TMB are notified at 
least three months prior to the elimination coming into effect.  The period for prior 
notification may be shortened to 30 days with the agreement of the restrained Member.  The 
TMB shall circulate such notifications to all Members.  In considering the elimination of 
restrictions as envisaged in this paragraph, the Members concerned shall take into account the 
treatment of similar exports from other Members." 
 
                                                      
112 See paragraphs 235 to 245 below. 
113 See paragraphs 106 to 108, 118, 124 and 131 above. 
114 See paragraphs 100, 101, 115, 116, 121, 122 and 131 above.  G/L/683 
 Page 69 
 
 181. It should be also recalled that the Doha Ministerial Conference, in its decision on 
implementation-related issues and concerns, agreed, inter alia , that "the provisions of the Agreement 
relating to [...] the elimination of quota r estrictions should be effectively utilized".115 
182. During the period of implementation of Stag e 3 of the integration process, only one 
notification has been received by the TMB that is (a lso) relevant in the context of the implementation 
of the provisions of Article 2.15.  In April 2003, Canada brought to the TMB's attention its 
notification submitted to the WTO Committee on Trad e and Development in respect to improvements 
to the Canadian preferential scheme for leas t developed countries (LDCs), effective from 
1 January 2003.  The notification submitted to th e TMB mentions explicitly that "in relation to 
Article 2.15 of the Agreement on Textiles and Clot hing, Canada's initiative provides for quota-free 
access for all products covered by the Agreement." 
183. In light of the notifications received from Cana da pursuant to Article 2.1 and the list of the 
beneficiaries of the Canadian scheme in favour of the least developed countries, it appears that two 
WTO Members – Bangladesh and Lesotho – had been  affected by the measure implemented with 
reference to Article 2.15.  As a result, all the remaining restrictions on imports from Bangladesh and 
Lesotho had to be eliminated on 1 January 2003.  In the case of Bangladesh, this measure affected 
altogether seven specific limits or sub-limits (sub- category 1.2 – jackets, anoraks;  category 2.0 – 
winter outwear;  merged sub-categories 3.2/4.2 – me n's, boys' and children's ensembles and women's, 
girls' and children's jackets and blazers;  cate gory 5.0 – trousers, breeches and shorts;  sub-
categories 5.1/5.2 as a sub-limit;  sub-category 8.4 – athletic wear and cat egory 9.0 – underwear), 
while for Lesotho it resulted in the elimination of  two specific limits or sub-limits (category 5.0 and 
sub-categories 5.1-5.3). 
184. No measure has been taken under Article 2.15 si nce the beginning of the implementation of 
Stage 3 of the integration process by the Europ ean Communities, Turkey and the United States. 
(iii) Elimination or non-application of restrictions  to (certain) imports from certain WTO 
Members 
185. The second comprehensive report adopted by the TMB contained the following: 
 "The Trade and Development Act of 2000, adopted by the US Congress and which was 
implemented as of 1 October 2000, appears to offer, as part of the Caribbean Basin Trade Partnership Act (CBPTA), duty-free and quota -free treatment to Caribbean countries, with 
some products eligible for benefits on an unl imited basis and others subject to an annual 
regional cap.  Another portion of the Trade and Development Act of 2000 (the African 
Growth and Opportunity Act) is related to tr eatment offered to imports from 48 Sub-Saharan 
African countries which, according to indications, provides, inter alia , that certain clothing 
items produced in beneficiary countries are elig ible to enter the US market, both duty free and 
quota free, provided that certain conditions are met.  The TMB requested detailed information 
from the United States regarding the African Gr owth and Opportunity Act and the Caribbean 
Basin Trade Partnership Act, in particular on the impact of their entering into force on the 
implementation of specific provisions of the ATC, such as the application of restrictions 
notified under Article 2.1.  The United States answered, inter alia , that it would provide full 
information to the WTO at the time it w ould seek a waiver from WTO Members for the 
operation of various aspects of the Trade and De velopment Act of 2000.  According to the US 
communication, in the interim, detailed info rmation concerning the Trade and Development 
Act may be found on US Otexa's website."[Footnote omitted]
116 
 
                                                      
115 See WT/MIN(01)/17. 
116 See G/L/459, paragraphs 269 to 271. G/L/683 
Page 70  
 186. In a related footnote to the same report
117 it was observed that "[s]ince website information is 
not a substitute for official notifications and co mmunications to be addressed to appropriate WTO 
bodies, [...] the TMB preferred to wait for the of ficial communications of the United States as 
indicated in the US reply." 
187. Up until June 2004 the TMB has not received any follow-up communication or information 
from the United States.  Also, the TMB is unaware  of any related notification or communication by 
the United States addressed to any other relevant bod y of the WTO.  However, both Acts have been 
implemented for several years and it would appear that their provisions relating to textiles and clothing have been heavily relied upon.  It woul d also appear that the implementation of these 
provisions have affected the application of at l east some of the restrictions notified pursuant to 
Article 2.1. 
188. It should be mentioned in this context that at  its meeting of April 2003, the TMB had already 
"recalled that, inter alia , Article 3.3 states that '[d]uring the duration of this Agreement, Members 
shall provide to the TMB, for its information, no tifications submitted to any other WTO bodies with 
respect to any new restrictions or changes in ex isting restrictions on tex tile and clothing products, 
taken under any GATT 1994 provision, within 60 da ys of their coming into effect.'  The TMB 
stressed the importance of Members' adherence to th e notification requirements contained in the ATC.  
It was also observed that measures or actions, ot her than those falling un der the provisions of 
Article 3.3, having a bearing on the implementation of other provisions of the ATC should also be 
brought to the TMB's attention, for its information."
118  At its meeting of September 2003, the TMB 
reverted to this matter.  It observed that since th e report of its meeting of April 2003 had been issued, 
no related notification or info rmation from Members had been received.  The TMB assumed, 
however, that agreements had been reached be tween certain Members or policies adopted and 
developed by some Members, falling under the provis ions of Article 3.3 or having a bearing on the 
implementation of other provisions of the ATC, w ithout being notified to any WTO body or brought 
to the attention of the TMB.  The TMB, therefor e, urged the Members concerned to provide to the 
TMB, pursuant to Article 3.3, any relevant no tifications submitted to any other WTO bodies with 
respect to such agreements or policies and/or to  bring to the TMB's attention those measures or 
actions having a bearing on the implementation of othe r provisions of the ATC, in particular on that 
of Article 2.119 
189. In the context of the preparation of the presen t report, the TMB submitted to the United States 
that it had observed, inter alia , that the United States had adopted and begun to implement the Andean 
Trade Promotion and Drug Eradication Act (ATPD EA), containing also provisions relating, inter alia , 
to trade in textiles and clothing products and, thereby, in all likelihood having also an impact on the 
implementation of certain restricti ons notified under Article 2.1.  Si milarly, the TMB was aware that 
certain provisions of AGOA related to trade in the se ctor, such as the one enabling the beneficiaries to 
use materials other than those made in the United St ates or in the African region, will expire by the 
end of September 2004 and that steps have been unde rtaken with a view to extending and, perhaps 
also amending them. The TMB had so far received no official notification or communication 
regarding the implementation by the United States of the Caribbean Basin Trade Partnership Act 
(CBPTA), which provides duty-free and quota-free treat ment to Caribbean countries, as already noted 
by the TMB in its second comprehensive report.   Su ch implementation affects also the application of 
at least some of the restrictions notified under Article 2.1.  The TMB, therefore, asked the 
United States to provide information in this regard .  The US stated in reply that "the United States 
intends to notify these programmes to the Council for Trade in Goods [...] as soon as possible." 
                                                      
117 See G/L/459, footnote 114. 
118 See G/TMB/R/98, paragraph 29. 
119 See G/TMB/R/102, paragraph 8.  G/L/683 
 Page 71 
 
 190. Noting that the United States intends to notif y these programmes to the CTG as soon as 
possible, the TMB also observes that, at the date of adoption of the present report, the Body still has 
no official information at its disposal on the basi s of which it could offer substantive comments with 
respect to the impact of the programmes in quest ion on the implementation of the provisions of 
Article 2.  The continued lack of official notificati on and information in this regard raises concern, at 
least as far as the ability of the TMB to comply with  its mandate as defined in the ATC is concerned. 
(iv) Suspension of the application of restric tions to imports from certain Members 
191. The second comprehensive report of the TMB contained the following: 
 "In response to the TMB's request for informati on and notification made in the context of the 
preparation of the [comprehensive] report and of issues related to Article 7, the European Community stated, inter alia , that it had "entered into a Memorandum of 
Understanding with one WTO Member, Sri Lanka , concerning market access in the textiles 
and clothing sector.  This involved reduction and bindings of tariffs and commitments concerning non-tariff barriers on the side of Sri Lanka and the suspension of the application 
of the quotas on the EC side.  The quotas have not  been eliminated but their application has 
been suspended subject to ongoing compliance by Sr i Lanka with the terms of the agreement.  
Therefore, the European Community considers that its agreement with Sri Lanka is not 
covered by the requirements of Article 2(15) of the ATC."
120[footnote omitted] 
 192. In its related comments, the TMB observed the following in the same report: 
 "The TMB noted the response provided by the Eu ropean Community, [...] indicating that the 
restrictions maintained on imports from Sri Lanka had not been eliminated, but had been 
suspended and that, in the view of the Eur opean Community, its agreement with Sri Lanka 
was not covered by the requirements of Article 2.15.  In light of this indication, it would appear that these restrictions, as notified under Article 2.1, are de jure  still in place.  The 
TMB observed that Article 2 does not contai n any provision which would envisage the 
suspension of the application of restrictions notified under Article 2.1.  However, suspension 
implies a de facto  non-application of the restraints previously notified and, therefore, could 
have an effect on the implementation of speci fic measures maintained under the ATC.  In 
view of this, it would appear that, without prejudice to any provision of the ATC and to any subsequent consideration of the matter, the fact that restraints were suspended is a matter that 
should be notified or brought to the attenti on of the TMB and, through the TMB, to WTO 
Members."
121 
 
193. It should be also recalled that in the context of the preparation of the TMB's second 
comprehensive report, the European Communities stated, inter alia , that "the EC is engaged in active 
negotiation with a number of other WTO partners cr eating the potential for further agreements of a 
similar kind [to the Memorandum of Understanding concluded with Sri Lanka] and hopes thus to 
contribute to further improving market access in the sector in advance of 2005".122 [footnote omitted] 
194. Against this background and also keeping in mind the TMB's repeated requests for relevant 
notifications and information as reflected in para graph 188 above, it should be observed that up until 
June 2004 the TMB has received no further communi cation or, if appropriate, information from the 
European Communities in this regard.  Thus, no offi cial information has been brought to the Body's 
attention as to whether the European Communities has continued, or not, during the implementation 
of Stage 3, to suspend the application of the rest rictions notified under Artic le 2.1 on imports from Sri 
                                                      
120 See G/L/459, paragraph 271. 
121 See G/L/459, paragraph 336. 
122 See G/L/459, paragraph 275. G/L/683 
Page 72  
 Lanka.  Furthermore, the European Communities has not provided any information on the outcome of 
the "active negotiation with a number of other WTO partners", as referred to in paragraph 193 above, 
potentially resulting in agreements similar to the one reached earlier with Sri Lanka and, thereby, 
possibly leading to the suspension of the applicati on of restrictions notified under Article 2.1.   
195. In the context of the preparation of the present report, the TMB decided to raise this question 
with the European Communities.  Recalling the stat ement made by the European Communities in this 
regard, as mentioned in paragraph 193 above, and submitting the observations made by the TMB in 
paragraph 194 above, the TMB asked the European Co mmunities to provide any relevant information.  
In its reply, the European Communities stated that "[r]eferring to the observation by the TMB about suspension of restrictions on imports from Sri Lanka,  it is confirmed that this is the case equally 
during 2004 and that this also applies to imports from Brazil." 
196. In noting the EC's reply, the TMB reiterated its observation that Article 2 does not contain 
any provision which would envisage the suspension or de facto  non-application (as opposed to de jure  
elimination) of restrictions notified under Article 2.  Furthermore, the TMB expressed its concern that, 
prior to the TMB's specific request for inform ation, the European Communities did not find it 
appropriate to provide informati on on the treatment granted as from 1 January 2002 to imports from 
Sri Lanka, as well as on the fact that the same treatment had been extended to imports from Brazil. 
(v) Increase in certain restraint levels, other than pu rsuant to the provisions of Article 2.14(b) 
197. During the implementation of Stage 3 of the integration process, the TMB has not received 
any information from Members maintaining restric tions with reference to  Article 2.1 regarding 
possible increases, other than those pursuant to the provisions of Article 2.14(b), that could be implemented in relation to some restraint levels affecting certain Members.  In light of certain 
indications available in press reports, it would appe ar, however, that in a few instances such increases 
were presumably implemented. 
198. Also, following the enlargement of the European Communities on 1 May 2004, in parallel 
with extending the restrictions applied by th e EC on the imports by the ten new member States
123, the 
European Communities increased the levels of its rest rictions, with a view to reflecting "traditional" 
trade flows (i.e. using a formula consisting of the aver age of the last three years' imports into the ten 
new member States originating in rest rained third countries, adjusted pro rata  temporis ). 
(vi) Adjustments implemented in the level of certai n specific and aggregate restrictions as a result 
of integration of parts of restrictions  notified with reference to Article 2.1 
199. As already indicated in Section I of this Part of the report, Canada decided not to reduce the 
restraint levels of those restrictions, part s of which became integrated during Stage 3.124  The United 
States, on the other hand, had apparently implemen ted downward adjustments in the levels of the 
respective specific and aggregate limits, with a vi ew to reflecting the reduced product coverage of 
these limits resulting from partial integration of so me of the products that belonged to the limits 
concerned.125  Since Article 4.3 deals specifically with situations in which a product constituting only 
part of a restriction is being integrated following th e provisions of Article 2, this matter is also dealt 
with in the Section of the report regarding th e implementation of the provisions of Article 4.126 
                                                      
123 See in particular paragraph 325 below. 
124 See in particular paragraphs 121 to 124 above. 
125 See also paragraphs 125 and 172 above. 
126 See paragraphs 462 and 463 below.  G/L/683 
 Page 73 
 
 (c) Implementation of the growth-on-growth provis ions (Articles 2.13 and 2.14) during Stage 3 
of the integration process 
(i) Implementation of the provisions of Article 2.14(b) 
200. Pursuant to the provisions of Article 2.14(b), the growth rates of the respective restrictions 
carried over from the pre-ATC regime and alread y increased, first, by not less than 16 per cent 
annually during Stage 1 and, second, by a further not less than 25 per cent annually during Stage 2, 
had to be further increased by not less than 27 pe r cent annually during the implementation of Stage 3 
of the integration process.  Article 2 does not require  that Members maintaining restrictions under that 
Article provide notifications regarding their co mpliance with the growth-on-growth provisions.  
However, under Article 2.21, any particular matter re lated to the implementation of any provision of 
Article 2 can be referred to the TMB by any Member.  With the exception of China127, no other 
Members have brought to the attention of the TMB any communication or information that would be 
relevant in the context of the implementation of  the growth-on-growth provisions in general or 
Article 2.14(b) in particular.  It is assumed, therefor e, that the requirements defined in Article 2.14(b) 
have been met by the Members maintaining restricti ons with reference to Article 2 in relation to all 
those restrained suppliers that had become Memb ers of the WTO at the latest in the year 2000. 
(ii) Implementation of the growth-on-growth provis ions with respect to newly acceded Members 
201. Since none of the notifications received with reference to Article 2.1 had contained any 
information in this regard, in each case the TM B had to seek clarification from the restraining 
Members on the manner in which the growth-on-grow th provisions had been implemented by them 
with respect to newly acceded Me mbers, such as China, Chinese Ta ipei and the Former Yugoslav 
Republic of Macedonia (FYROM).  Of the three new Members, China also made a number of 
comments and observations under Article 2.2 with rega rd to this matter.  Recalling that the ATC does 
not contain any disposition that provides guidance on how these provi sions should be implemented in 
relation to Members acceding to the WTO several years after the entering into force of the WTO 
Agreement, the TMB noted that (i) these matter s had been agreed during the accession negotiations 
for the purpose of application of the respective provisi ons of the ATC, including its Article 2;  (ii) the 
language regarding the growth-on-growth provisions in the respective working party reports contained 
explicit references to the application of the relevant articles of the ATC;  (iii) pursuant to Article 2.21, 
the TMB was mandated to keep under review the implem entation of Article 2.  Therefore, in order to 
discharge its responsibilities, the TMB was also requi red to examine and to reach an understanding on  
the modalities agreed and guidance provided by Me mbers in the respective legal instruments of 
accession vis-à-vis  the implementation of the growth-on-grow th provisions of the ATC.  To achieve 
this goal, the TMB considered thoroughly and one by one, the issue of implementation of such 
provisions in relation to the newly acceded Members. 
(1) Implementation vis-à-vis  China 
202. In examining this matter in detail at its mee ting of July 2002, the TMB recalled that according 
to the provisions of the report of the Working Party on the Accession of China, "to these base levels 
[i.e. to the levels of the restrictions that were  in force on the day prior to the date of China's 
accession], the increase in growth rates provided fo r in Articles 2.13 and 2.14 of the ATC should be 
applied, as appropriate, from the date of China's accession". 
203. Furthermore, the TMB also recalled that the in formation provided by the restraining Members 
on how they had implemented these obliga tions could be summarized as follows: 
                                                      
127 See paragraph 205 below. G/L/683 
Page 74  
 • Canada reported that it had "increased the growth rate on the remaining restraint 
levels with China by 25 per cent and then by 27 per cent on 1 January 2002". 
 
• The European Communities stated that it had "increased the growth rate on the 
remaining restraint levels with China by  25 per cent and then by 27 per cent on 
1 January 2002". 
 
• Turkey had initially reported that it had in creased the growth rate on the remaining 
restraint levels on 1 January 2002 in the same manner as indicated both by Canada 
and the European Communities.  However, in a subsequent communication, Turkey 
stated that it had "increased the growth ra tes on the remaining restraint levels with 
China by 16 per cent, 25 per cent and then 27 per cent in order to calculate the quota 
levels of 2002". 
 
• The United States stated that:  "Pursuant to  the Working Party Report, which requires 
that the provisions of the ATC regarding growth rates 'be applied, as appropriate, 
from the date of accession,' it was determined to be appropriate to apply an accelerated growth rate of 25 per cent pro-rated for that period of time (11-31 December 2001) when China was a Member of the WTO in Stage 2.  Thus, adjusted quotas for Stage 2 were calculated using the pro-rated Stage 2 growth rate.  
In order to determine China’s quota growth rate for the years 2002-2004, we 
increased the pro-rated Stage 2 growth rate  used to determine China’s notional 2001 
quotas by 27 per cent, which is what is required for Stage 3 under the ATC.  […]".  It was also implicit in the information provid ed by the United States that these increases 
had been implemented on 1 January 2002. 
 
204. On the basis of the indications at the TMB's di sposal, it could be established, therefore, that 
the four Members maintaining restrictions with re ference to Article 2.1 had implemented the growth-
on-growth provisions vis-à-vis  China on the same date, i.e. on 1 January 2002.  However, of the four 
Members, only Turkey had increased the growth ra tes applicable to the base restraint levels by 
16 per cent, which was the growth factor provided for in  Stage 1 of the integration process and 
foreseen in Article 2.13.  For their part, Cana da and the European Communities had adopted an 
identical approach by providing the 25 per cent incre ase in the respective growth rates in its entirety 
and then applied the additional 27 per cent growth factor which was due for Stage 3.  The United 
States had followed a more restrictive approach by prorating the 25 per cent increase in the respective 
growth rates for the period of time (21 days) wh en China became a Member during the second stage 
of the ATC and had applied a further 27 per cent in crease on the respective restraint levels already 
increased by this methodology of prorating.  This ap proach had, obviously, an effect on the level of 
restraints established for the year 2002. 
205. The TMB also recalled that in some of the notif ications made pursuant to Article 2.2, China 
had offered comments and observations with respect to the implementation of the growth-on-growth 
provisions by the restraining Members concerned: 
• With regard to Canada, China had stated that: 
 
 "The growth rates of 16 per cent, 25 per cent and 27 per cent shall apply to 
China in turn at appropriate date s as specified in accordance with 
paragraph 241 of the Report of the Work ing Party on the Accession of China, 
or at least a growth rate of 25 per cent shall apply to China on 
11 December 2001, which shall be increased by another 27 per cent on 
1 January 2002."  G/L/683 
 Page 75 
 
 • Concerning Turkey, the notification by China contained the following: 
 
 "Paragraph 241 of the Report of the Working Party on the Accession of 
China reads as follows:  'For such WT O Members, the phrase 'day prior to 
the date of entry into force of the WTO Agreement', contained in Article 2.1 of the ATC, should be deemed to refer to the day prior to the date of China's 
accession.'  Therefore Turkey should treat  China as if China joined the WTO 
on 1 January 1995 and the trade benefits under the ATC shall apply to China equally." 
• With regard to the United States, the firs t set of observations received from China 
contained the same formulations as those submitted in relation to Turkey.  In a 
subsequent notification offering observa tions on the methodology adopted by the 
United States, China stated as follows: 
 
 "With respect to the application of the second and third stage growth factors, 
China maintains that the 25 per cent a nd 27 per cent growth factors shall be 
fully applied with the following calculation methodology: 
 
2002 Quota Level = 2001 Quota Level x [1 + original annual growth rate x (1+25%)] 
x [1 + original annual growth rate x (1+25%) x (1+27%)]. 
 China urges that the United States appl y the growth factors in this way." 
206. It was also noted that China had not ma de any observations on how the European 
Communities had implemented the growth-on-growth  provisions, though the European Communities 
had applied the same methodology as Canada.   
207. In view of the above, the TMB understood that in order to reach a common understanding on 
all aspects of the requirements related to the impl ementation of the growth-on-growth provisions, it 
was necessary to consider three distin ct issues, which were the following: 
• whether the restraining Members were also required pursuant to the terms of the 
accession instruments, to apply the not less than 16 per cent increase in the original 
growth rates as provided for Stage 1 in Article 2.13; 
 
• what was the methodology required for provi ding the increase in the respective 
growth rates for Stage 2 (Article 2.14(a)); 
 
• on which date the growth-on-growth provi sions had to be actually implemented by 
the restraining Members. 
 
208. With regard to the first issue, the TMB anal ysed in detail the language of the respective 
provision of the Working Party report.128  It observed, inter alia , that the term "as appropriate" could 
inject an element of flexibility into the senten ce (and hence into the legal commitments reflected 
therein).  This notion of possible flexibility could not  be defined with more precision;  it seemed to be 
designed to respond to the particular occasion or th e prevailing circumstances.   In any event, the 
inclusion of the term "as appropriate" into th e language could also imply that not necessarily 
everything provided for in this sentence should be im plemented in the way, or within the time-frame, 
it should have been implemented, without having this term or qualification attached thereto.  By using 
the term "as appropriate", the drafters had not onl y injected the possibility for some flexibility and 
                                                      
128 See paragraph 202 above. G/L/683 
Page 76  
 adjustments to be made in the actual implementa tion but had also left an important element of 
ambiguity in the respective language. 
209. The TMB came to the view that, since the relevant provision of the Working Party report did 
not provide an unambiguous guidance, it was not possible to reach a clear and unquestionable 
conclusion on the issue of whether the restraining Members were also required to apply the not less 
than 16 per cent increase provided for in Article 2.13, to the growth rates taken over from the pre-
ATC regime.  The TMB noted that arguments could be presented in favour of a reading of the 
relevant provision that this increase should be implem ented, as it had been done by Turkey.  However, 
the TMB also noted that arguments could also be found  in support of a reading to the contrary which corresponded to the position taken by Canada, th e European Communities and the United States, 
respectively.  The TMB expressed its concern that Members had left an important element of 
ambiguity in the language of the respective provi sion of the Report of the Working Party on the 
Accession of China, which did not enable the Body to take a firmer position regarding the 
methodology to be applied. 
210. Turning to the second issue, i.e. the methodolog y to be applied in providing the increase in 
the respective growth rates for Stage 2, pursuant to  Article 2.14(a), the TMB recalled that irrespective 
of the positions taken in respect of Article 2.13, each of the four Members maintaining restrictions 
with reference to Article 2.1 had reported that they  had provided an increase in the respective growth 
rates applicable for Stage 2.  However, this increa se had not been implemented in the same manner:  
while Canada, the European Communities and Turkey  had increased the respective growth rates by 
the "full" 25 per cent stipulated in Article 2.14(a) , the United States prorated this 25 per cent for the 
period (altogether 21 days) during which China had been a Member in the second stage integration 
process under the ATC.  Since this prorating had r esulted in much lower in creases in the respective 
growth rates and the corresponding restraint levels, the way in which the United States had applied the 
provisions of Article 2.14(a) had ha d an important impact on the restraint levels calculated for Stage 3 
of the ATC implementation. 
211. The TMB decided to consider whether the appli cable provisions of the legal instruments of 
China's accession and those of the ATC had entitled the United States to adopt the methodology 
described above.  The TMB observed in this regard, inter alia , the following: 
• In considering whether the term "as appropr iate" included in the Working Party report 
could provide a justification for an implementation that had significantly altered the modality prescribed in Article 2.14(a), the TMB recalled that it did not have sufficient information at its disposal to reach a defi nitive conclusion with regard to the meaning 
of the notion "as appropriate".  However, th e TMB was of the view that the notion "as 
appropriate" was relate d to one or to both of the follo wing two matters:  (i) which of 
the ATC Articles enumerated should apply in the given circumstances;  (ii)  what should be the date of their actual implementa tion or application.  However, nothing in 
this reading suggested that it would also provide an authorization not to implement in full any of the Articles listed, once its app lication had been found to be "appropriate" 
for the purpose of application of the ATC.  In other words, once the United States 
concluded that since China had become a Member during Stage 2 of the ATC, it had been appropriate to apply the provisions of Article 2.14(a) to China;  these provisions 
should have been implemented in full (i.e. for the entire year of China's accession) 
and the language did not seem to imply or allow for any further flexibility in this 
regard.  Therefore, in the view of the TMB,  to "determine to be appropriate to apply 
an accelerated growth rate of 25 per cent pro-rated" for the period of 21 days, as reported by the United States, did not appear  to be substantiated by the relevant 
provisions of the Working Party report. 
  G/L/683 
 Page 77 
 
 • This conclusion was also supported by the clear language included into 
Article 2.14(a), which does not provide for any flexibility or discretion including that of prorating, in terms of its implementation.  
• Canada, the European Communities and Turkey had extended the benefit of the full 
25 per cent increase in the respective growth  rates to China.  More importantly, no 
other Member, the United States included, had ever in the past used prorated increase 
in the respective growth rates in re lation to any other WTO Member.  The 
United States had not applied this prorat ed methodology in 1995 or early 1996 with 
respect to exporters that had become Members only months after the date of the entering into force of the WTO Agreement, nor had it relied on such an approach even in relation to those suppliers that  had joined during the second stage of the 
integration process (in some cases with prov isions similar to those included in the 
Report of the Working Party of China).   
212. In light of the foregoing, the TMB reached the conclusion that it had not been justified under 
the relevant provisions of the accession instrument s and the ATC to prorate the 25 per cent increase 
for the short period of China's actual membership dur ing Stage 2 and observed also that this approach 
had not been in conformity either with the estab lished practice of ATC implementation by the United 
States. 
213. Taking up, finally, the third issue, i.e. the da te on which the growth-on-growth provisions had 
to be actually implemented by the restraining Me mbers, the TMB recalled that though the date of 
China's accession had been 11 December 2001, the f our Members maintaining restrictions on imports 
from China with reference to Article 2.1 had impl emented the growth-on-growth provisions only on 
1 January 2002.  The TMB noted that the increase in  the respective growth rates, as far as, when 
applicable, Stage 1 and in any event, Stage 2 were  concerned, should have been ideally implemented 
on 11 December 2001.  At the same time, in any po ssible reading of the relevant provision of the 
Working Party report, the term "as appropriate" could (also)  be related to the very last part of the 
sentence which indicated that th e respective commitments should be applied "as from the date of 
China's accession".  Based on this flexibility inhere nt in the formulation, practical considerations 
could also be raised in support of why an actual implementation starting on 1 January 2002 could be 
found to be appropriate.  Since the time differe nce between China's accessi on and the start of the 
implementation of the new annual restraint levels fo r the year 2002 did not exceed three weeks, this 
delayed actual implementation could  be explained by practical administrative considerations and the 
time-lag could  not be cons idered to be too excessive. 
214. In light of the above considerations, the TMB concluded that though some of the measures in 
question could have already been implemente d as from 11 December 2001, they had to be 
implemented at latest by 1 January 2002, and th is had been done by Canada, the European 
Communities, Turkey and the United States.   
215. After having carefully considered all the aspec ts involved, the TMB came to the conclusion 
that since the relevant provisions of the legal in struments of China's accession did not provide an 
unambiguous guidance, it was not possible to provide a clear answer to the question of whether the 
restraining Members had also been required to apply the not less than 16 per cent increase in the 
respective growth rates, as provided for in Article 2.13 for the Stage 1 integration process.  The lack 
of a clear answer regarding this aspect had led the TMB to consider those minimum requirements which had to be implemented by the Members c oncerned.  These minimum requirements could be 
summarized in the following:  as from 1 January 2002, the base levels in force on 10 December 2001 
had to be increased by the respective growth ra tes applied for the year 2001 (prior to China's 
accession), increased by the full 25 per cent applicable  to Stage 2 and further increased by the 27 per 
cent applicable to Stage 3. G/L/683 
Page 78  
 216. Since the United States had reported an impl ementation which did not meet the minimum 
requirements, as defined in para graph 215 above, the TMB decided to  invite it to reconsider its 
respective position in light of the TMB's comments,  observations and conclusion and to implement 
the necessary adjustments in its respective methodology applied. 
217. The TMB also noted that during its detailed discussion it had addressed the relevant aspects 
of the respective notifications received from China pu rsuant to Article 2.2 and had reflected on  them 
to the extent possible.  Therefore, the Body consid ered that the examination of these particular aspects 
of the Article 2.2 notifications which touched upo n the methodology of implementation of the growth-
on-growth provisions had been concluded. 
218. The United States replied only with an important delay to the TMB's invitation to reconsider 
its position with respect to the implementation of th e appropriate increase to the annual growth rates 
of the quotas maintained on imports from China and to implement the necessary adjustments to its 
methodology applied.  Therefore, this response could only be examined by the Body at its meeting of 
January 2003.  In its communication, the United Stat es stated that it "ha[d] carefully examined the 
TMB's report analysing the application of the growth-on-growth provisions of the ATC and concluded that the methodology used by the United States as reported [earlier] [was] in line with the 
obligations of the United States as provided for in  the Working Party Report of the Accession of 
China to the WTO.  The US reasoning on this matte r, as expressed in [its previous communications], 
remain[ed] unchanged.  In light of this conclusion, the US [was] of the view that it would not be appropriate to make any adjustment to the methodology applied". 
219. The TMB observed that no specific arguments had been provided by the United States to 
substantiate the reasons why it had concluded that  the methodology used by the United States was in 
line with its obligations, as provide d for in the Working Party Report  of the Accession of China to the 
WTO.  Rather, the United States had merely stat ed that its reasoning on this matter remained 
unchanged and that, therefore, it was of the view that it would not be a ppropriate to make any 
adjustment to the methodology applied.  On its pa rt, the TMB reiterated its conclusion that it had not 
been justified under the relevant provisions of the accession instruments and the ATC to prorate the 
25 per cent increase applicable to Stage 2 for the short period of China's actual membership during 
that stage.  It was recalled in this regard that  this conclusion had been reached by the TMB after 
careful consideration of the releva nt provision of the Report of the Working Party on the Accession of 
China and of the language of Article 2.14(a) of th e ATC and that it was further supported by the fact 
that no WTO Member, not even the United States, ha d ever in the past used prorated increase in the 
respective growth rates in relation to any other Memb er.  Therefore, the TMB continued to be of the 
view that, as regards the implementation of th e growth-on-growth provisions provided for in 
Articles 2.13 and 2.14 with respect to China, the minimum requirements that had to be implemented, 
inter alia , by the United States were, that as from 1 January 2002, the base levels in force on 10 
December 2001 had to be increased by the respective gr owth rates applied for the year 2001 (prior to 
China's accession), increased by the full 25 per cent a pplicable to Stage 2, and further increased by the 
27 per cent applicable to Stage 3. 
220. The TMB recalled that in two of its notificati ons made pursuant to Article 2.2, China had 
made observations with respect to the implementa tion of the growth-on-growth provisions by the 
United States.  These observations had also been addressed by the TMB during its discussion of the implementation of the growth-on-growth provisions .  The TMB noted that according to Article 2.2, 
the Body, inter alia , "may make recommendations, as appropriate, to the Members concerned".  
Noting that both China and the United States had had ample opportunities to make their observations 
and respective arguments known and also that the TMB's conclusion had been reached with full knowledge of the observations and arguments presented in the resp ective notifications of the two 
Members concerned, the TMB decided to recommend  to the United States to  implement the necessary 
adjustments in its respective methodology applied, w ith a view to bringing it in line with the TMB's 
conclusion regarding the minimum re quirements that had to be met.  G/L/683 
 Page 79 
 
 221. At the end of March 2003, the TMB received a communication from the United States, with 
reference to the provisions of Article 8.10, follo wing the recommendation of the TMB reflected in 
paragraph 220 above.  In its communication, the United States s ubmitted the following with respect to 
the recommendation made by the TMB: 
"In assessing whether WTO Members have complie d with their obligations to China under 
the ATC, due consideration has to be given to the applicable provisions of the Report of the 
Working Party on the Accession of China to th e WTO.  While appreciating the challenge 
facing the TMB in this regard, it has to be r ecalled that the TMB also recognized that 'the 
relevant provisions of the legal instruments of China's accession, in particular the term "as appropriate" in the third sentence of paragraph 24 1 of the Report of the Working  Party on the 
Accession of China, had not provided unambi guous guidance regarding some of the aspects 
involved'.  In the view of the United States, this paragraph of the Working Party report not 
only makes it clear that the increase in growth ra tes should be applied from the date of China's 
accession, but the inclusion of the phrase 'as appr opriate' also implies that this obligation 
should be implemented in a manner that corres ponds to the length of time of China's actual 
WTO membership during the given stage of the ATC integration process.  This is why the 
United States believes it is appropriate to appl y an accelerated growth rate of 25 per cent pro-
rated for the period of time when China was a Member of the WTO in Stage 2. 
 In view of the above, the United States continu es to be of the view that the methodology used 
is consistent with paragraph 24 1 of the Working Party report and that, therefore, it would not 
be appropriate to make any adjust ment to the methodology applied. 
On this basis, the United States considers it self unable to conform with the recommendation 
[of the TMB] and requests that the TMB reconsider its recommendation." 
222. At its meeting of April 2003, the TMB consider ed thoroughly the reasons given by the United 
States for its inability to conform with the Body 's recommendation.  After having summarized the 
background of the matter referred to it, the TMB stated, inter alia , that it agreed with the United 
States that the implementation of the provisions of Article 2.14(a) vis-à-vis  China could only be 
assessed by giving due consideration to the applicable  provisions (i.e. paragraph 241) of the Report of 
the Working Party on the Accession of this Member to the WTO.  In fact, the methodology to be 
applied could only be defined if the respective provisions of the ATC and those of the Working Party 
report were read in conjunction.  The TMB emph asized that it had sought to reach an understanding 
on the modalities agreed and guidance provided by  Members in the accession instruments regarding 
this matter.  Reaching an unders tanding within the TMB concerning the likely intention of the 
Members in this regard was, of course, not tantam ount to providing an interpretation of the respective 
language, which is the exclusive authority of the Members. 
223. The TMB also noted that the US communication referred to the fact that the TMB had also 
recognized the following:  "the relevant provisions of  the legal instruments of China's accession, in 
particular, the term 'as appropriate' in the thir d sentence of paragraph 241 of the Report of the 
Working Party on the Accession of China, had not provided unambiguous guidance regarding some of 
the aspects involved".  It was observed that the Un ited States quoted this statement from the report of 
the respective meeting of the TMB (during which the recommendation addressed to the United States had been adopted) and that the United States di d not quote the entire sentence in question which 
continued as follows:  "[the TMB, however,] had b een able to reach a conclusion on those minimum 
requirements which, in its view, had to be implem ented by the Members concerned".  Furthermore, 
while it was true that the TMB could not reach a definitive conclusion on the meaning of the notion 
"appropriate", the Body had found it unlikely that th is notion could also be related to the manner in 
which the provisions of Article 2.14(a) had to  be implemented by the restraining Members.
129  It was 
                                                      
129 See paragraph 211 above. G/L/683 
Page 80  
 this common understanding reached by the TMB th at led to the adoption of the recommendation 
addressed to the United States.   
224. The TMB noted that the only new substantive argument given by the United States in support 
of its methodology was the following:  "In the view of the United States, […] paragraph [241] of the 
Working Party report not only makes it clear that the increase in growth rates should be applied from 
the date of China's accession, but the inclusion of  the phrase 'as appropriate' also implies that this 
obligation should be implemented in a manner that co rresponds to the length of time of China's actual 
WTO membership during the given stage of the ATC integration process".  In examining this 
argument, the TMB made, inter alia , the following observations: 
• As regards the reference to the length of  time of China's actual WTO membership 
during Stage 2, the TMB did not disagree with the United States that this was an aspect to be considered.  It could be argu ed that, in a sense, the condition defined by 
the United States had been satisfied, irrespective of the methodology applied for 
providing the increase in the respective gr owth rates for 2001, since China became 
entitled to enjoy the benefits of ATC implementation only as from 11 December 2001.  An implementation th at started from the date of China's 
membership in the WTO provided also a reasonable meaning to the term "as 
appropriate":  once China became a Member, it was appropriate to increase the 
growth rates taken over from the pre-ATC regime. 
 
• At the same time, there was no justification, in the view of the TMB, to give such a 
far-reaching reading to the relevant provisions  of the Working Party report that would 
have entitled the restraining Members to  apply the 25 per cent increase in the 
respective growth rates prorated to the le ngth of time of China's actual membership 
during Stage 2.  In examining the relevant provisions of the ATC and the Working 
Party report together, the TMB could not find any element or argument that would have supported the United States' position.  It was a clear obligation under the provisions of the Working Party report that , "[t]o [the] base levels [applied on the 
date prior to China's accession], the in crease in growth rates provided for in 
Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of 
China's accession."  Nothing in this langua ge, including the te rm "as appropriate" 
suggested that the implementation of the obligations of Article 2.14, according to 
which "the level of each restriction shall be increased annually
 […]" (emphasis 
added) could be altered. 
 
• Therefore, the TMB continued to be of the view that the provisions of the Working 
Party report did not provide an authorization not to implement in full for the year 2001 the annual increase foreseen in Artic le 2.14(a).  Once the United States 
concluded that since China had become a Member during Stage 2 of the integration process under the ATC, it had been appropriate to apply the provisions of Article 2.14(a) to China;  these provisions  should have been implemented in their 
entirety instead of prorating the 25 per cent annual increase for the period of 21 days. 
 
• In light of the above, the TMB confirmed its view that for the year 2001 China had 
been entitled to benefit from the "full" 25 per cent increase in the respective growth 
rates. 
 
225. Having given thorough consideration to the r easons presented by the United States for its 
inability to conform with the TMB's recommendation,  the TMB concluded that these reasons did not 
lead it to change its recommendation adopted earlie r.  The TMB recommended, therefore, that the 
United States reconsider its position and implem ent forthwith the necessary adjustments in its  G/L/683 
 Page 81 
 
 respective methodology applied, with a view to  bringing it in line with the TMB's conclusion 
regarding the minimum requirements that had to be met. 
226. At its meeting of June 2003, the TMB cons idered another communication received from the 
United States with reference to the recommendati on of the TMB, as reproduced in paragraph 225 
above.  In this communication, the United States stat ed that it had given full consideration to the 
TMB’s recommendation and that "the US position continues to be that the methodology used by the 
United States is consistent with our WTO obliga tions, including paragraph 241 of the Working Party 
report [on the Accession of China to the WTO].  Consequently, the United States does not intend to 
amend its methodology to conform to the TMB’s recommendation". 
227. In view of the fact that this matter had b een examined by the TMB on several occasions and 
over a particularly long period of time, the TMB expressed regret that the matter remained 
unresolved.  In taking note of the United States ' communication, the TMB observed that, following 
the recommendation it had made under Article 8.10, it was neither required nor mandated to address 
the substance of the communication received from the United States, and recalled that, under that 
Article, "[i]f, after such further recommendations, the matter remains unresolved, either Member may 
bring the matter before the Dispute Settlement B ody and invoke paragraph 2 of Article XXIII of 
GATT 1994 and the relevant provisions of the Dispute Settlement Understanding." 
(2) Implementation vis-à-vis  Chinese Taipei 
228. In examining this issue in detail at its mee ting of July 2002, the TMB recalled that according 
to the respective provision of the report of the Wo rking Party on the Accession of Chinese Taipei, 
"[t]o these base levels [i.e. to the levels of the rest rictions that were in force on the day prior to the 
accession of Chinese Taipei], the increase in growth rates provided for in Articles 2.13 and 2.14 of the 
Agreement on Textiles and Clothing would be applied, in stages, from the date of accession of 
Chinese Taipei to the WTO." 
229. Furthermore, The TMB recalled that the info rmation provided by the Members maintaining 
restrictions with reference to Article 2.1 on impor ts from Chinese Taipei regarding the way they had 
implemented the growth-on-growth provisi ons could be summarized as the following: 
• Canada reported that: "With respect to the quota 'growth-on-growth' provisions 
stipulated in paragraphs 13 and 14 of Artic le 2 of the ATC, Canada increased the 
growth rate on the remaining restraints  with Chinese Taipei by 27 per cent on 
1 January 2002."  In a subsequent communi cation, Canada stated the following: "As 
regards Canada’s application of th e growth-on-growth provisions, […..] 
paragraph 167 of the Report of the Working Party stipulates that 'the increase in growth rates provided for in Articles 2.13 a nd 2.14 of the ATC would be applied, in 
stages, from the date of accession of Ch inese Taipei.'  Since Chinese Taipei only 
became a Member of the WTO on 1 January 2002, the relevant stage is the third stage of integration under the ATC.  Therefore Canada applied the third stage growth-on-growth provision and increased the growth rates of the remaining 
restraints on imports from Chinese Taipei by 27 per cent on 1 January 2002." 
 
• The European Communities st ated that: "With respect to the quota 'growth-on-
growth' provisions stipulated in  paragraphs 13 and 14 of Ar ticle 2 of the ATC, the EU 
increased the growth rate on the remaining r estraint levels with the Separate Customs 
Territory of Taiwan, Penghu, Kinmen and Ma tsu, by 27 per cent on 1 January 2002."  
Furthermore, in a subsequent communica tion, the European Communities provided 
the same word-for-word explanation as that  which had been provided by Canada. 
 G/L/683 
Page 82  
 • Turkey explained that:  "With respect to the quota 'growth-on-growth' provisions 
stipulated in paragraphs 13 and 14 of Article 2 of the ATC, Turkey increased the growth rate on the remaining restraint leve ls with Chinese Taipei by 16 per cent, 
25 per cent and then by 27 per cent on 1 January 2002." 
 
• The information provided by the United States contained the following:  "The 
Working Party report on the accession of Ch inese Taipei provides that the increase in 
growth rates provided for in Articles 2.13 and 2.14 of the ATC are to be applied from 
the date of accession, as appropriate.  Chinese Taipei acceded to the WTO on 
1 January 2002.  Accordingly, the growth rates were increased by 27 per cent."   
 230. The TMB recalled that the notifications provided by Chinese Taipei pursuant to Article 2.2 
had not contained any observation with respect to th e implementation of the provisions of growth-on-
growth.  The TMB also recalled that Chinese Taipei  had become a WTO Member on 1 January 2002.  
Therefore, on the basis of the notifications provided by the restraining Members, it could be established that, in conformity with paragraph 167  of the Working Party report, each of the four 
Members concerned had notified the restrictions in place on 31 December 2001, i.e. the date prior to 
the date of Chinese Taipei's accession.   Moreover, it  was also noted that the restraint levels applied 
on 31 December 2001 had constituted the respective b ase levels for the purpose of the application of 
Article 2 of the ATC, including that of implemen tation of the growth-on-growth provisions.  The 
TMB further noted that Canada, the European Communities, Turkey and the United States had 
implemented these provisions on the same day, i.e. on 1 January 2002, and that they were in line with 
the respective language of the Working Party repo rt ("as from the date of accession of Chinese 
Taipei").  Nevertheless, it was observed that wh ile Canada, the European Communities and the United 
States had increased the growth-rates taken over from the pre-ATC regime by only 27 per cent 
provided for Stage 3 under Article 2.14(b), Turkey had increased the respective growth rates first by 
16 per cent, then by 25 per cent (as provided for in Articles 2.13 and  2.14(a), respectively), and by a further 27 per cent applicable for Stage 3. 
231. On the basis of the information at its disposal, the TMB was of the view that in order to reach 
a common understanding on the matter considered, it ha d to address the issue of whether restraining 
Members were also required, according to the term s of the legal instruments of Chinese Taipei's 
accession, to apply the not less than 16 percent follo wed by the not less than 25 per cent increase in 
the respective growth rates as provided for Stages 1 and 2 of the integration process in Articles 2.13 
and 2.14(a). 
232. In examining in detail the language of the r espective provision of the Working Party report, 
the TMB recognized this language could be read in  a manner that would require restraining Members 
to implement the increase in the resp ective growth rates for all three stages at the same time, as had 
been done by Turkey.  Such a reading could be supp orted by the fact that Articles 2.13 and 2.14 are 
explicitly mentioned in the text.  Since the term  "in stages" appears to refer to the respective 
integration stages, the use of this term in plural could be designed to indicate that the increase in the 
growth rates has to be implemented for all the releva nt stages.  Also, one  meaning of the term "stage" 
refers to a process that consists of a series of st eps in which one step is built above the other.  
Furthermore, it was also noted that even if it could be argued that these provisions required the 
implementation of each of the subsequent increases sp ecified in Articles 2.13 , 2.14(a) and 2.14(b),  
the language remained unclear as to whether this had to  be done in one step, at the same time, or in 
successive steps ("stages") which could be distinct from each other regarding their respective timing 
(and if this applied, what should be the duration of  each step).  Reflecting further on this particular 
aspect, the TMB considered it unlikely that the inte ntion was to extend only the benefits of the not 
less than 16 per cent increase applicable for Stage 1 for an unspecified period of time, following 
which, first, the not less than 25 per cent and sec ond, the not less than 27 per cent increases should be 
provided again for unspecified time-periods.  G/L/683 
 Page 83 
 
 233. Notwithstanding the considerations above, the TMB recognized that there could also be a 
completely different reading of the same provision where the respective increases had to be applied 
only for that stage or those stages (of the integr ation process) when Chinese Taipei was actually a 
Member of the WTO.  Following this reasoning, integration and all related measures under the ATC 
had to be implemented "in stages" according to a clearly defined time-frame, irrespective of whether Chinese Taipei was already a Member or not.  Ch inese Taipei was entitled to receive the respective 
benefits only from the date of its accession and only t hose benefits that were applicable to the "stage" 
when it became a Member.  Since Chinese Taipei  became a Member on the first day of the 
implementation of Stage 3 of the integration process,  the respective growth rates had to be increased 
by not less than the 27 per cent applicable to that stage pursuant to Article 2.14(b), as done by 
Canada, the European Communities and the United States.   It was inherent in this reasoning that had 
Chinese Taipei become a Member earlier, i.e. dur ing the implementation of the second stage, it would 
have benefited from the application of the provisions of Articles 2.14(a) and 2.14(b) "in stages":  from 
the application of the Stage 2 growth factor as fro m the date of its accession, while the increase 
applicable for Stage 3 was only due from 1 January 2002.  On the other hand, Chinese Taipei could 
not claim the benefits that had been extended prior to its accession, since it had not assumed the 
obligations arising from the implementation of the ATC prior to the date of its accession.  
234. After careful consideration of the matter, the TMB came to the conclusion that, since the 
relevant provisions of the legal instrument s of Chinese Taipei's accession did not provide 
unambiguous guidance in this regard, it was not possi ble to give a clear answer to the question of 
whether restraining Members had also been require d to apply the not less than 16 per cent, followed 
by the not less than 25 per cent in crease in the respective growth rates, as provided for in Articles 2.13 
and 2.14(a) for Stages 1 and 2, respectively.  The la ck of a clear reply regarding this aspect led the 
TMB to consider those minimum requirements wh ich had to be implemented by the Members 
concerned.  The TMB concluded that these minimu m requirements implied that on 1 January 2002, 
the base levels in force on 31 December 2001 had to  be increased by the respective growth rates 
applied in 2001,  as further increased by 27 per cent which was applicable for Stage 3.  The TMB 
noted that the manner in which Canada, the Europ ean Communities, Turkey and the United States had 
implemented the respective provisions met these minimum requirements. 
(3) Implementation vis-à-vis  the Former Yugoslav Republic of Macedonia 
235. It should be recalled that only one Member, i.e.  the United States had notified restrictions 
maintained on certain imports from FYROM.  In  response to the TMB's question regarding the 
implementation of the growth-on-growth provision s of the ATC to the quantitative restrictions 
notified, the United States explained that the "annual growth rate for 2004 quotas [would] be 2.54 per 
cent' and that, for the 2003 limits, the effective annual growth rate had been increased by prorating the 
growth rate of 2.54 per cent to reflect the number of days in 2003 that FYROM would be a Member 
of the WTO, 'resulting in a prorated growth rate for 2003 of 2.40241096 per cent." 
236. In examining this matter in detail at its me eting of October 2003, the TMB recalled that 
FYROM became a Member of the WTO on 4 April 2003 and, pursuant to the provisions of the legal 
instrument of accession, to the base level of the re strictions notified under Article 2.1, "… the increase 
in growth rates provided for in Article 2.14 of the Agreement on Textiles and Clothing shall be 
applied, as appropriate, in the Agreement on Te xtiles and Clothing from the date of FYROM’s 
accession".  It was noted that Article 2.14 provid es for the annual increase in the respective growth 
rates taken over from the pre-ATC regime for both Stages 2 and 3 of the ATC integration process, 
while FYROM became a Member during the second year  of the implementation of the third stage of 
the integration process (i.e. during the 100
th month of ATC implementation).  The TMB also observed 
that, unlike in the case of China, a nd also Chinese Taipei, the relevant provision of the Report of the 
Working Party on the Accession of FYROM makes no mention of Article 2.13 at all.  Therefore, it could be established that the terms of accession agreed between the WTO Members and FYROM do G/L/683 
Page 84  
 not provide for the application of the 16 per cent growth factor stipulated in Article 2.13 and 
applicable for Stage 1 of the integration process under the ATC. 
237. The same provision refers, however, to the app lication of Article 2.14, without being more 
specific or providing any further guidance.  In li ght of this, the issues to be addressed by the TMB 
were the following: 
• Whether the United States was required, pursuant to the terms of the accession 
instruments, to apply the no t less than 25 per cent increase in the growth rates taken 
over from the pre-ATC regime, as provided fo r in Article 2.14, subparagraph (a), for 
Stage 2, when FYROM had not been a Member of the WTO; 
 
• whether the United States was required under the same terms to apply the not less 
than 27 per cent increase in the respec tive growth rates as provided for in 
Article 2.14, subparagraph (b) for Stage 3,  also for 2002, which had been the first 
year of the implementation of the third stage of the integration process, though 
FYROM had not, as yet, become a Member; 
 
• what was the methodology required for provi ding the increase in the respective 
growth rates for the year 2003,  when FYROM joined the WTO. 
 
238. In considering the first issue, the TMB analy sed the language of the respective provision of 
the Working Party report.  Bearing also in mind, mutatis mutandis , the considerations the Body had 
made in its review of the implementation of the gr owth-on-growth provisions in relation to China, the 
TMB arrived at the view that this language in it self provided neither a clear answer nor unambiguous 
guidance as to whether the restraining Member, i.e. the United States, was also required to apply the 
not less than 25 per cent increase in the original grow th rates as provided for in Article 2.14(a) of the 
ATC.  By using the term "as appropriate", the drafters had not only introduced the possibility for some flexibility and adjustments to be made in the actual implementation but had also left an important element of ambiguity in the respective la nguage.  Therefore, the TMB could not, in these 
circumstances, reach a clear conclusion on the i ssue of whether the United States was required to 
apply the not less than 25 per cent increase provided for in Article 2.14(a) to the growth rates taken 
over from the pre-ATC regime in the case of FYROM. 
239. Turning to the second question, the TMB observe d that though there is no clear response as to 
the applicability of subparagraph (a) of Article 2.14, subparagraph (b) of that same Article, by 
definition, applies, since FYROM had become a Member of the WTO during Stage 3.  However, 
arguments and counter-arguments ca n be equally used regarding the question as to whether there was 
a commitment to apply the 27 per cent increase in th e growth rates also for 2002, given that FYROM 
had not yet become a Member of the WTO during that year.  Therefore, since both readings can be made given the flexibility brought about by the notion "as appropriate", there was no clear and 
unambiguous answer to this question either.  This lack of clear guidance made it difficult for the TMB 
to take a firmer position on this matter, and it co uld not, therefore, reach a clear conclusion on the 
issue as to whether the United States was require d to apply for 2002 the not less than 27 per cent 
increase in the respective growth rates, as pr ovided for in Article 2.14, subparagraph (b). 
240. With respect to the last issue and also in li ght of the uncertainties related to the first two 
matters addressed, the TMB considered the questi on of the minimum requirements which, in any 
event, had to be met by the United States.  Therefor e, it had to be considered whether the provisions 
of the Report of the Working Party on the Accession of FYROM and Article 2.14 of the ATC entitled 
the United States to use the methodology of proratin g for 2003.  In considering this aspect, the TMB 
had in mind, in particular, the observations it had made when examining the issue of the 
implementation of the growth-on-growth provisi ons of the ATC with respect to newly acceded 
Members, in particular China.  Following a similar line of arguments, mutatis mutandis
, as in the case  G/L/683 
 Page 85 
 
 of China, the TMB was of the view that since FY ROM had become a Member in 2003, during Stage 3 
of the ATC and, therefore, it had been appropriate to apply the provisions of Article 2.14(b) to it, 
these provisions should have been implemented in their entirety (i.e. for the entire year of FYROM's accession) and that the language of the Working Part y report and that of Article 2.14(b) did not seem 
to allow for any further flexibility in this rega rd.  Thus, in the view of the TMB, once the 
United States had concluded that it had been appropria te to apply the provisions of Article 2.14(b) to 
FYROM for 2003, the 27 per cent increase in the respective growth rates should have been 
implemented in full for the year 2003, instead of  prorating it for the period of FYROM's actual 
membership during that year. 
241. The TMB, therefore, invited the United States to  reconsider its position and to implement the 
full 27 per cent increase in the respective growth rates applicable to Stage 3 also for the year 2003.  
The TMB expected that the United States would report back to it on the results of this re-examination 
as soon as possible. 
242. The United States reacted with some delay and, th erefore, its answer could only be considered 
by the TMB at its meeting of February 2004.  In its communication, the United States stated the 
following with respect to the c onclusions reached by the TMB: 
“The US has carefully reviewed the TMB's findi ng on this matter and has concluded that it 
cannot agree with the TMB's reasoning.  The US used the same methodology for FYROM as 
was used to calculate accelerated growth  for China after its WTO accession.  [The 
United States] continues to believe that this is the most appropriate methodology to use.” 
243. In examining this communication, the TMB observe d that in support of the conclusion that it 
could not agree with the TMB's reasoning, the United States stated that it had used the same 
methodology for FYROM as was used to calculate  accelerated growth for China after its WTO 
accession and the United States continued to believe that this was the most appropriate methodology 
to use.  Since this was the only argument specifi cally mentioned in the communication received from 
the United States, the TMB observed that the United States had not provided any reason or consideration that had not already been raised by  it earlier or would have been ignored by the TMB 
during previous stages of its examination of the same matter either in relation to FYROM or to China. 
244. In light of the above, and in particular, the reference made by the United States to the 
methodology it had used in relation to China, the TMB noted that the detailed examination and analysis it had made with respect to the methodology applied by the United States vis-à-vis  China 
applied, mutatis mutandis , to the present case.  The TMB reiterated, inter alia,  its view that nothing in 
the language of the respective provisions of the Report of the Working Party on the Accession of 
FYROM, including the term “as appropriate”, sugge sted that the implementation of the increase in 
growth rates provided for in Article 2.14, according to which “the level of each restriction shall be 
increased annually
 […]” (emphasis added) could be altered.  Therefore, in the view of the TMB, the 
provisions of the Working Party report did not provide  an authorization not to implement in full for 
the year 2003 the annual increase stipulated in Article 2.14(b). 
245. The TMB expressed its concern that the United States had not implemented for the year 2003 
the full 27 per cent increase in the respective growth rates applicable  to Stage 3.  Recalling that 
pursuant to the provisions of Article 8.1, the TM B was established "[i]n order to supervise the 
implementation of this Agreement, to examine all measures taken under this Agreement and their 
conformity therewith, and to take the actions specifi cally required by it by this Agreement [...]", it was 
noted that in addressing the methodology used by the United States, the TMB had to rely on the 
applicable provisions of the ATC and the related pr ovisions of the Report of the Working Party on the 
Accession of FYROM.  The TMB had examined the re levant aspects of this matter, including the 
issue of conformity.  It was also recalled that t hough the matter had been brought to the attention of 
FYROM, no communication had been received from it.   Hence the Body confined itself to the G/L/683 
Page 86  
 mandate specified in the first sentence of Artic le 2.21 under which the specific action required from 
the TMB is to keep under review the implem entation of the provisions of Article 2.  
(iii) The respective decision of the Doha Ministerial Conference and its follow-up 
246. The Decision by Ministers on Implementati on-Related Issues and Concerns adopted on 
14 November 2001, requested the Council for Trade in Goods to examine, inter alia , the proposal 
"[...] that Members will calculate the quota levels  for the remaining years of the Agreement [on 
Textiles and Clothing] with respect to other restra ined Members as if implementation of the growth-
on-growth provision for Stage 3 had been advanced to 1 January 2000."
130  The decision requested the 
CTG to make recommendations (also with respec t to this matter) to the General Council by 
31 July 2002 for appropriate action.131   
247. While the follow-up that was given to this deci sion is summarized in another Section of this 
report132, it should be noted that the implementation of  the growth-on-growth provision for Stage 3 
had not been advanced and, therefore, begun only on 1 January 2002, as foreseen in Article 2.14(b). 
(d) Implementation of the flexibility provisions (Ar ticle 2.16) during Stage 3 of the integration 
process 
248. Article 2.16 reads as follows: 
 "Flexibility provisions, i.e. swing, carryover and carry forward, applicable to all restrictions 
maintained pursuant to this Article, shall be the same as those provided for in MFA bilateral 
agreements for the 12-month period prior to the entry into force of the WTO Agreement.  No 
quantitative limits shall be placed or maintained on the combined use of swing, carryover and 
carry forward." 
 
249. In addition, Article 2.1 requires, inter alia , that the respective quantitative restrictions "[...] be 
notified in detail, including [...] flexibility provisi ons, by the Members maintaining such restrictions 
[...]."  Restraining Members complied  with their respective obligations to notify to the TMB, among 
other matters, the flexibility provisions either provi ded for in the former MFA bilateral agreements or, 
in the case of newly acceded Members, those in force on the day prior to the date of accession to the 
WTO. 
250. No issue has been specifically referred to the TMB during Stage 3 with respect to the 
implementation of the provisions of  Article 2.16 by Members that had become Members either at the 
time the WTO Agreement had entered into force or during Stage 1 as well as the first three years of 
the implementation of Stage 2 of the integration pro cess.  It would appear that flexibility provisions, 
in particular, carryover and carry forward have  been widely relied upon by the Members whose 
exports continue to be subject to restrictions. 
251. During the implementation of Stage 3 of the in tegration process, two distinct issues have 
arisen in relation to the implementation of the flexibility provisions: 
• certain aspects of their implementation vis-à-vis  newly acceded Members;  and 
 
• issues related to carry forward for the year 2004. 
 
                                                      
130 See WT/MIN(01)/17. 
131 Ibid. 
132 See paragraphs 586 and 587 below.  G/L/683 
 Page 87 
 
 (i) The flexibility provisions applied vis-à-vis newly acceded Members 
252. The notifications of Members maintaining restrictions on imports, respectively, from China, 
Chinese Taipei and FYROM were supposed to reflect, inter alia , the flexibility provisions that had 
been in force on the day prior to the accession of the new Member(s).  Thus, the notifications received 
from Canada contained information on the applicab le provisions relating to swing, carryover and 
carry forward, as well as to "combined flexibility" .  The notifications made, respectively, by the 
European Communities and Turkey included indica tions on advance utilization (carry forward), 
carryover, transfers between categories (swing) and on the "maximum increase in any category".  The US' notifications provided indications on swing, carryover, carry forward and on the limit of the use 
of carryover and carry forward.  In examini ng these notifications one by one, the TMB sought 
clarification from the notifying Members concerne d, among other matters, on whether or not a limit 
continued to apply on the cumulative use of th e flexibility provisions.  Canada, the European 
Communities and Turkey replied that in each case the limitations on the combined use of flexibility 
had been eliminated on the day of accession of the new Member concerned.  The United States indicated that: 
 "[a]s required by Article 2.16, all the flexib ility provisions that were in effect under the 
[respective] bilateral textile agreement w ill remain in effect under the ATC, and the 
restriction on the specific caps on the combined  use of carryover and carry forward [...] will 
be retained, however, there is no quantitative li mit on the combined use of swing, carryover 
and carry forward." 
 253. In a related communication, made under Article 2.2, China observed, inter alia , the 
following: 
 "The United States still maintains specific cap s on the combined use of carryover and carry 
forward.  In China’s view, the original intention of [Article 2.16] is that quantitative limits 
shall be imposed neither on the combined use of  all the three of swing, carryover and carry 
forward, nor on the combined use of any two."
133   
 
254. The TMB considered the observations made by China at its meeting of September 2002.  It 
noted China's statement in this regard and recalled that it had decided to seek further clarifications 
from China, in particular regarding elements wh ich supported China's view concerning the "original 
intention" of the ATC.  It was noted that no reply had been provided by China to this request.  The TMB also noted the respective st atement made by the United States.
134  The TMB recalled that 
Article 2.16 states that "[n]o quantitative limits shall be placed or maintained on the combined use of 
swing, carryover and carry forward."  In the view of the TMB, a plain reading of the sentence indicated that no quantitative limit should be placed or maintained on the combined use of swing, 
carryover and carry forward, at the same time.  However, it was not clear whether the language of 
Article 2.16 allowed the use of a cap on the combined  use of carryover and carry forward.  It was 
observed that arguments could be found in support of either reading.  Regarding the original intention 
of Article 2.16, as referred to by China, no reliable indications were at the TMB's disposal regarding 
the drafting history of this provision of the ATC.  Therefore the TMB could not express a view on this 
argument.  The TMB considered that it could revert  to this matter in the light of possible additional 
elements and arguments that could be  provided by the Members concerned. 
 
255. Since then, no further communication has been received by the TMB regarding this matter 
from either of the Members concerned. 
                                                     
 
133 See G/TMB/N/445/Add.1. 
134 See paragraph 252 above. G/L/683 
Page 88  
 (ii) Issues related to carry forward for the year 2004 
256. As also detailed in another Sec tion of this Part of the report
135, a communication was 
submitted in July 2003 to the Ge neral Council on behalf of several exporting Members, expressing 
developing Members' concern about potential re duction in market (quota) access in 2004.  The 
problem identified in this communication stems from the fact that "the restraining importing Members 
contend that as all quotas will be eliminated at th e end of 2004, there will be no carry forward 
available from 2005."136  The communication describes the contex t of this matter, the significance of 
quota carry forward and the problems arising from the non-availability of this flexibility in 2004.  As 
to the way forward, it requests that "the Genera l Council consider the matter and recommend that 
developed Members take steps to ensure that th ere is no diminution of quota access for developing 
Members on account of quota carry forward in 2004."137  So far, the General Council has provided no 
positive resolution to this request. 
257. The TMB notes that the issue iden tified in the communication referred to above could indeed 
create a paradox situation whereby possibilities for acces s to the markets would be adversely affected 
during the last year of the ATC implementation.  Th e Body is aware of the concerns that the economic 
impact of possible reductions in market access opportunities would be significant for the exporting 
Members concerned.  Also, the absence of carry forward could generate upward pressure on prices in 
2004 which, inter alia , would not facilitate the process of adjustment and preparation for the post-
ATC period.  In that sense, it could have an adver se effect on efforts that could be undertaken with a 
view to allowing for continuous autonomous indus trial adjustment and increased competition in 
Members' markets, as foreseen in Article 1.5.  The TMB is equally aware of the argument that 
reduction in market access can only occur if the quantitative limits concerned are being fully utilized 
and, that even in these cases, other flexibility pr ovisions, such as carryover and swing, remain 
available.  Furthermore, the level of the respective restrictions has already b een increased for the year 
2004 by the applicable growth rates and, thus, an  absolute decline of the access opportunities is 
unlikely to happen.   
258. The TMB observes that the ATC remains silent regarding the issue of whether carry forward 
should be provided, or not, during the last year of  the implementation of the Agreement.  The very 
general formulation of the language  of Article 2.16 does not give any guidance in this regard.  
259. There could be arguments, on the one hand, that in the absence of an explicit requirement to 
that effect, carry forward would not be availabl e in cases where there was no quota to borrow from.  
Such an argument would be supported by the fact  that most of the administrative arrangements 
notified by the United States with reference to Artic le 2.17 contain a provision stating that "no carry 
forward shall be available for application in the final agreement year/period."  The administrative 
arrangements notified by Canada and the European  Communities do not contain a similar provision.  
Most of the administrative arrangements notified by Canada define carry forward as "a quantity 
advanced from the corresponding restraint limit for th e following annual restraint period."  Some of 
the administrative arrangements notified by the European Communities state that the amounts in 
question shall be deducted from the corresponding li mits for the following year.  In these cases, it 
could be argued that since 2004 is the last annual restraint period, in a technical sense no quantity can be borrowed from 2005.  
260. On the other hand, it could be also argued that while the ATC does not contain any explicit 
disposition concerning this matter, the denial of this  flexibility would run counter to the basic concept 
of progressive liberalization embodied in the ATC.  In  fact, it would be absurd if a more restrictive 
application of the flexibility provisions had been foreseen for the last year of ATC implementation, 
                                                     
 
135 See paragraph 589 below. 
136 See WT/GC/W/503. 
137 Ibid.  G/L/683 
 Page 89 
 
 compared to the preceding years.  In addition, wh at would justify such an approach in economic 
terms, since all the restrictions will have to be eliminated on 1 January 2005?  With respect to the 
administrative arrangements, it could be argued that it had never been the intention, not even during 
the former MFA regime, not to grant the possibility of carry forward for any given year, since with 
the expiration of an agreement under the MFA, a new bilateral agreement entered into force, thereby 
also ensuring the availability of carry forward during the last year of implementation of the agreement 
which was due to expire.  This argument is all th e more relevant since most of the administrative 
arrangements notified under Article 2.17 were constituted of provis ions which had been drawn from 
previous bilateral agreemen ts concluded under the MFA. 
261. To sum up, while it could be argued that the ATC does not explicitly require Members 
maintaining restrictions under Article 2 to allow ca rry forward in 2004, it coul d be equally argued that 
this type of flexibility should be available also in  this last year of ATC implementation.  The TMB 
expresses its hope that appropriate solutions to this matter, addressing the concern about potential 
reduction in market access opportunities in 2004, will  be found and adopted by the General Council in 
the near future. 
(e) Administrative arrangements agreed between Members and notified following the provisions 
of Article 2.17 
262. Article 2.17 states that "[a]dministrative arrangements as deemed necessary in relation to the 
implementation of any provision of [Article 2], sh all be a matter for agreement between the Members 
concerned.  Any such arrangements shall be notifie d to the TMB."  Such administrative arrangements, 
since they are closely related to the implementation of the restrictions falling under the provisions of 
Article 2, had been agreed between the Memb ers concerned during the early part of ATC 
implementation, and had been notified to the TMB wh ich reviewed them pursuant to the provisions of 
Article 2.21.  Therefore, these arrangements were al ready dealt with in the TMB's first comprehensive 
report.138  The second comprehensive report also provi ded an overview of them, together with 
subsequent developments that occurred during Stage 2 of the implementation of the integration 
process.139 
263. All the administrative arrangements previously notified have remained in force during the 
third stage of the integration process and have been relied on by the Members concerned with respect to matters covered by the respective arrangements.   Also, with the accession to the WTO of new 
Members, new notifications were received with re ference to Article 2.17 from Canada, the European 
Communities and the United States.  It is noteworthy that Turkey, which also notified restrictions falling under Article 2, has not notified any administ rative arrangement to the TMB.  It is assumed 
that Turkey and the Members concerned did not deem  it necessary to agree on such arrangements.  It 
should be also noted that the United States, while  maintaining restrictions on certain imports from 
FYROM, has not notified any administrative arrange ment that would be in place between the two 
Members concerned. 
(i) New notifications received with reference to Article  2.17 during Stage 3 of the integration 
process 
(1) Canada – China 
264. At its meeting of April 2002, the TMB began its review of the notification made by Canada of 
administrative arrangements agreed between Canada and China.  It decided, inter alia , to seek 
clarifications from both Members regarding certain elements of the notification, including on how the 
provision of statistics on exports or imports of produc ts not contained in the Article 2.1 notification of 
                                                     
 
138 See G/L/179, paragraphs 214 to 222. 
139 See G/L/459, paragraphs 297 to 309. G/L/683 
Page 90  
 Canada's quantitative restrictions on imports from China is deemed necessary in relation to the 
implementation of any provision of Article 2 of the ATC. 
265. At its meeting of June 2002, the TMB completed the review, pursuant to Article 2.21, of this 
notification.  It noted that in accordance with Artic le 2.17, the administrative arrangements notified by 
Canada had been bilaterally agreed between Ca nada and China.  The TMB observed that the 
arrangements contained, inter alia , provisions regarding an export control system operated by China, 
the implementation of the flexibility provisions re lated to swing, carryover and carry forward, 
exchange of statistics, the treatment of re-exports a nd consultations.  In reply to the TMB's request for 
clarification, Canada explained that the provision of statistics was intended, inter alia , to address 
issues concerning circumvention and transshipment.  In this context, Canada noted that Article 5.1 of 
the ATC explicitly acknowledges the importance of this issue, indicating that "Members should 
establish the necessary legal provisions and/or administrative procedures to address and take action 
against such circumvention", and calls on all Memb ers to cooperate fully to address these problems.  
China stated that this provision was "included in the notification mainly for the purpose of addressing and taking action against circumvention and transshipment."  As regards the possible credit by Canada to the appropriate restraint limit of qua ntities covered by export licences for which the 
corresponding goods had not been shipped, Canada e xplained that in such situations, China would 
inform Canada through an electronic verification sy stem that the relevant export licence had been 
cancelled and then it would re-credit automatically its quota so that it may re-allocate the amount to 
another shipment.  China observed that, in view of the daily exchanges of licensing information 
relating to textile and clothing products between Canada and Chin a, it was unnecessary for China to 
make additional notifications to Canada in the ev ent that any quantity covered by an export licence 
had not been shipped.  In practice, China had neve r received any such request from the Canadian side. 
266. As regards the exchange of additional statis tics, the TMB noted that both Members had 
provided very similar reasoning and explanations.  The same applied to their respective assessment of 
the impact of the electronic verification system.  The TMB also observed that while the Annexes to 
Canada's notification contained information on the rest raint levels and related provisions to be applied 
in 2002, these Annexes did not form part of th e administrative arrangements notified pursuant to 
Article 2.17. 
(2) Canada – Chinese Taipei 267. At its meeting of November 2002, the TMB bega n its review of the notification made by 
Canada of administrative arrangements agreed be tween Canada and Chinese Taipei.  It decided, inter 
alia, to seek clarification from the Members concerne d on certain elements of this notification, 
including how the provision of statistics relating to th e exports or imports of products not contained in 
the Article 2.1 notification of Canada's quantitativ e restrictions on imports from Chinese Taipei were 
deemed necessary in relation to the implementati on of any provision of Article 2 of the ATC. 
268. In concluding the review, pursuant to Article 2.21, of this notification at its meeting of 
December 2002, the TMB observe d that the administrative arrangements contained detailed 
provisions regarding the operation by Chinese Taipei  of an export control system, the implementation 
of the flexibility provisions notified by Canada pursu ant to Article 2.1, exchange of statistics, the 
treatment of re-exports and consultations with resp ect to any matter arising from the implementation 
or operation of the ATC or of the administrative arrangements or any matter germane thereto.  The 
TMB also noted that most of the provisions of administrative arrangements agreed between Canada and Chinese Taipei were designed to ensure the implementation of measures notified by Canada 
under Article 2 and the arrangements notified by Cana da had been bilaterally agreed between the two 
Members concerned.   G/L/683 
 Page 91 
 
 269. In reply to the TMB's questions, Canada stated, inter alia , that "[p]aragraph 13 of the 
Administrative Arrangements, which reserves the right  of both parties to seek additional statistics 
from the other, including statistics for non-restrain ed products, is common to all of Canada’s 
administrative arrangements pertaining to appare l and textile restraints.  It is intended, inter alia , to 
address issues concerning circumvention and tran shipment."  Chinese Taipei stated that 
"[p]aragraph 13 [of the administrative arrangements] is  derived from the bilateral arrangement prior to 
[Chinese Taipei's] accession to the WTO.  For th e purpose of facilitating textiles trade between both 
parties, we have agreed to keep this paragraph in  the Arrangement and for th is reason we consider it 
appropriate not to modify the Arrangement in this regard".  As to the TMB's question concerning the 
provision of the administrative arrangements which st ates that "Canada will, so  far as possible, inform 
Chinese Taipei when imports into Canada of restra ined textile products ar e subsequently re-exported 
from Canada", so that Chinese Taipei could cred it back the quantity involved to the appropriate 
quantitative limits, Canada replied that "[s]uch situations occur regularly, for example when Chinese 
Taipei cancels an export licence for a shipment which is subsequently not exported to Canada.  In this 
case, Chinese Taipei would inform Canada through our electronic verification system that the relevant 
export licence had been cancelled and then would re -credit automatically its quota so that it may re-
allocate the amount to another shipment. However, no  credit would be authorized in a situation where 
Chinese Taipei were seeking to cancel an export li cense against which a shipment had already been 
entered into Canada.  This is exceedingly rare in the case of Chinese Taipei given the aforementioned 
electronic verification system". 
270. On the basis of the clarifications as a bove, the TMB took note of the administrative 
arrangements agreed between Canada and Chinese Taipei. 
(3) European Communities – China  
271. At its meeting of April 2002, the TMB began its  review of the notification of administrative 
arrangements agreed between the European  Communities and China.  It decided, inter alia , to seek 
clarifications regarding certain elements of the notification.  It sought clarification from both 
Members on the functioning of a "reserve" available ex clusively to the EC's industry, for a defined 
time-period, before the relevant quantitative restrict ion can be fully utilized, and from the European 
Communities on how, in its view, the provisions related to circumvention contained in the 
administrative arrangements are deemed necessary in relation to the implementation of any provision of  Article 2 of the ATC. 
272. Since the process of receiving the clarifications sought by the Body required some time, the 
TMB could only conclude the review of this notifica tion at its meeting of October 2002.  It was noted 
that the administrative arrangements had been bila terally agreed and that they had been jointly 
notified by the two Members concerned.  The TM B observed that the administrative arrangements 
contained detailed provisions re garding product classification, rules of origin, a double-checking 
system, comprising the issuance of export licences and the corresponding import authorization, the 
operation of a "reserve" available exclusively to  the EC's industry for a defined time-period, 
additional amounts reserved for use at European fairs, outward processing and imports to the 
European Communities for re-export after processing, products exempt from quantitative restrictions 
under certain conditions (cottage i ndustry, handloom and folklore produc ts), exchange of statistical 
information, circumvention, "regional concentr ation", consultation procedures and administrative 
cooperation.  The TMB noted in this regard th at most of the provisions of administrative 
arrangements were designed to ensure the implem entation of measures notified by the European 
Communities under Article 2.  It was observed, however, that not all the provisions of these 
administrative arrangements were fully or directly related to the implementa tion of provisions of 
Article 2, but that they also dealt with matters that  were addressed in some other Articles of the ATC.  
In this context, the TMB noted that with the agreem ent of the parties, the administrative arrangements 
also applied  mutatis mutandis  to the quantitative limits notifie d by the European Communities under 
Article 3 of the ATC.   G/L/683 
Page 92  
 273. The TMB considered that detailed rules and pr ocedures concerning classification of products, 
determination of their origin as well as export an d import control were necessary for ensuring the 
proper administration of the restrictions notified and maintained under the ATC.  In this context it was 
noted, inter alia , that the application of the special consultation procedures included into the 
administrative arrangements was explicitly mentione d in the text in relation to amendments to 
classification, with the stated objective of "agreei ng [on] necessary adjustments to the appropriate 
quantitative limits established under Article 2 of th e ATC and mitigating any disruptive effects which 
might arise from such a Community decision".  The TMB recalled that Article 4.4 provides for 
consultations in such cases.  It was observed that provisions of the administrative arrangements agreed 
pursuant to Article 2.17 could not affect or alter Members' respective rights and obligations arising 
from any provision of the ATC, including their right to refer matters to the TMB with reference to a 
specific provision of the ATC.  It was noted that  the special consultation clause included in the 
administrative arrangements between the European Co mmunities and China is of a procedural nature 
and does not prevent any of the Members concerne d from referring any specific matter to the TMB 
under the applicable provisions of the ATC. 
274. A particular feature of the administrative arrangements agreed between the European 
Communities and China was the provision related to the operation in certain specific product 
categories of a "reserve" available exclusively to the EC's industry for a defined time-period.  The 
TMB noted that the application of such an ar rangement, together with the respective amounts 
allocated for this purpose in 2001, had already been part of the notification provided by the European 
Communities under Article 2.1.  In reply to the re quest for clarifications, the European Communities 
indicated that "the industry reserv e quotas are increase d each year according to the same growth rates as 
in the respective main category, si nce the amounts constitute a percentage of the main category.  [...] 
The quotas remain a priority for industry during a ce rtain amount of time (180 days) from the beginning 
of the year. The EC Member States have to submit to the European Commission their applications for industry reserve quotas each year be fore the 31 December. Then, Chines e exporters [...] are entitled to 
apply for the industry reserve quotas  to the relevant Chinese foreig n trade administra tive bodies, after 
signing sales contracts with EC indus try users. After the sales contra cts have been submitted to the 
respective administrative bodies w ithin the time limit the industry reserve quotas are reserved, China 
then allocates the quotas to the respective operat ors according to its planning. If the total quantity 
applied for in a certain category is less than the rema ining quantity of industry reserves for that category, 
all the applications are satisfied. On the contrary, if the total quantity applied for exceeds the remaining 
quantity available, the allocation is made on a pro rata  basis".  In its comm unication, China stated, inter 
alia, that "[i]n cases where the industry reserve is fu lly utilized within the time limit, no quota will be 
allocated to further application; only where the indus try reserve is not fully utilized will it be credited 
to normal quota and utilized by Chinese exporters." 
275. In light of these explanations, the TMB observe d that aspects related to the elements involved 
in the operation of this system had been clarifie d and there appeared to be no disagreement between 
the two Members regarding its functioning.  It was also recalled that the European industry "reserve" 
system had already been in place on the day prio r to the date of China's accession and had been 
notified pursuant to Article 2.1.  Also, tho ugh its proper implementation required appropriate 
cooperation between the authorities of the two par ties, the allocation and administration of the 
respective reserve levels will be left  with China, in accordance with the requirements of Article 4.1.  
The TMB observed, furthermore, that the availa bility of such reserve levels was time-bound;  
consequently the quantities reserved are either full y used up during the respective time-frame, or any 
unused portion can be allocated for exports to ot her potential EC buyers after expiration of the 
respective deadlines.  Therefore, keep ing also in view :  (i) that in all cases, at least half of a year 
remained available for the purpose of filling up  any unused portion of the respective "reserve" 
restraint levels with exports to buyers other than th ose of the EC's industry;  and (ii)  that in six 
product categories affected the levels to be "reserve d" were below 7 per cent of the respective annual 
quota levels, while in two other categories the reser ve applied up to 50 per cent of the related quota 
levels, it was considered unlikely that the overall im pact of the operation of this system would hinder  G/L/683 
 Page 93 
 
 the ability of the exporting Member to fully u tilize the export possibilities available under the 
respective annual restraint levels. 
276. The administrative arrangements contain provisi ons relating to circumvention which state, 
inter alia , that the two Members "agree to cooperate fu lly in preventing the circumvention of these 
administrative arrangements by transshipment, re-rou ting or whatever other means in accordance with 
Article 5 of the ATC".  The TMB sought clarificat ion from the European Co mmunities as to how, in 
the EC's view, such provisions were deemed necessar y in relation to the implementation of Article 2.  
Furthermore, since the arrangements also state that  "[f]ollowing China's accession to the WTO, cases 
of circumvention taking place before the accessi on will also be dealt with according to [the 
circumvention provisions of the administrative arra ngements]", the TMB requested information as to 
whether this specific provision had been invoked.  The European Communities replied as follows:  
"As to the question whether provision s about circumvention have been invoked the answer is that this 
has not been the case after China's accession to the WTO.  However, since Article 5 of the ATC explicitly deals with this question, information abou t this possibility is not irrelevant from the point of 
view of transparency." 
277. The EC's reply, as above, had not been sufficie ntly clear in providing answers to the issues 
raised.  It was observed, however, that in relation to another administrative arrangement reviewed a few 
months earlier by the TMB, in reply to similar que stions posed by the Body, the European Communities 
had stated that "the provisions concerning circumvention were considered as complementary information for the functioning of Article 2 of the ATC.  For transparency reasons, the parties had 
agreed to include these provisions as they might affect the manner in which quantitative restrictions 
were implemented.  Similar dispositions existed in most of the administrative arrangements that the 
European Communities had notified to the TMB under Article 2.17".  The TMB assumed that the 
European Communities had also intended to provide the same or similar argume nts in the present case. 
278. The TMB noted that the circumvention provisi ons notified contained explicit reference to 
Article 5.  The provisions of the administrative arrangements, however, seemed to focus on one 
particular remedy or appropriate action in the sense of Article 5, i.e. on the adjustment of charges to 
restraint levels ("deduction of the relevant quantitativ e limits") to reflect the true country or place of 
origin.  The TMB recalled that Article 5.4 speaks of "appropriate action, to the extent necessary to address the problem", but the adjustment of charges to restraint levels is only one of the possible 
actions that has been identified.  Moreover, Artic le 5.4 lays down strict procedural requirements, 
including the need to notify any action agreed in th e bilateral consultations, w ith full justification to 
the TMB.  Also, if a mutually satisfactory soluti on is not reached, any Member concerned may refer 
the matter to the TMB for prompt review and r ecommendation.  Recalling that the language of the 
administrative arrangements makes explicit referen ce to Article 5, the TMB expected that the 
circumvention provisions agreed and notified pursu ant to Article 2.17 would be implemented by both 
Members in full compliance with Article 5. 
279. A special clause of the administrative arra ngements deals with the issue of "regional 
concentration".  In essence, while the quantitative limits notified under Article 2.1 are not broken 
down by the European Communities into regional shares,  in case of "a sudden and prejudicial change 
in traditional trade flows", the European Communitie s may request consultations with China in order 
to find a satisfactory solution to such problems.  Furthermore, "if the Parties are unable to reach a 
satisfactory solution during the consultations, the Peopl e's Republic of China will, if so requested by 
the Community, respect temporary export limits fo r one or more regions of the Community".  
Explanation was requested as to how, in the view of  the European Communities, this provision of the 
administrative arrangements would fit with Article 2. 4.  The European Communities replied that this 
provision "[…] underlines the advantage derived from th e establishment of the in ternal market within 
the European Union, by which regional restrictions we re abolished. In return this provision aims at 
avoiding excessive concentration of exports to speci fic regions implying radical changes in traditional 
trade patterns".  Subsequently, the Euro pean Communities notified the following: G/L/683 
Page 94  
  "Concerning the regional concentration clause  of the administrative arrangement between 
China and the Community it is naturally not in the intention of the Community to deviate from the pertinent provisions of the ATC. C onsequently, [the Community] can confirm […] 
that the implementation of the administrative a rrangement and its provisions are not meant to 
constitute a derogation from the provisions of the ATC." 
280. The TMB recalled in this regard that the notif ications provided by the European Communities 
pursuant to Article 2.1 (and also 3.1) contained quan titative restrictions applicable at the level of the 
European Communities, as a single entity and that  they had not included any reference to the 
possibility of introducing temporary limitations that  could apply to "one or more regions" of the 
European Communities.  It was noted that the Eu ropean Communities had never had recourse in the 
past to the provisions of the "regional concen tration clause".  Notwithstanding this, one could 
conceive circumstances in which the application of this provision would run against obligations 
undertaken by the European Communities under the ATC.  The TMB recalled in this regard the 
provisions included in Article 2.4 as well as in the last sentence of Article 6.4.  Therefore, it was important to note the statement of the European Communities that it was not the EC's intention to 
deviate from the pertinent provisions of the ATC.   The TMB observed that this statement should 
provide guidance in assessing possible future rec ourse, if any, to the clause in question. 
281. The TMB also noted the confirmation of the Eu ropean Communities that "the implementation 
of the administrative arrangements and its provision s are not meant to constitute a derogation from the 
provisions of the ATC".  In light of this, in taking note of the arrangements agreed between the European Communities and China, the TMB expect ed that the provisions of the administrative 
arrangements would be implemente d by the Members concerned in full compliance with the relevant 
provisions of the ATC. 
(4) European Communities – Chinese Taipei 282. At its meeting of April 2002, the TMB began its review of the notification made by the 
European Communities of administrative arrange ments agreed between the European Communities 
and Chinese Taipei.  The TMB decided, inter alia , to seek clarifications from the European 
Communities regarding certain elements of the notifi cation, including (i) the obligation to adapt the 
definition of quantitative limits and of the categor ies of products to which they apply where this 
proves necessary to ensure that any subsequent am endment to the Combined Nomenclature or a 
decision amending the classification of such pr oducts does not result in a reduction of such 
quantitative limits and (ii) how, in the view of th e European Communities, the provisions related to 
circumvention contained in the administrative arrangements are deemed necessary in relation to the 
implementation of any provision of  Article 2 of the ATC.  
283. The TMB completed its review, pursuant to Article 2.21, of this notification at its meeting of 
June 2002.  TMB noted that the administrative arrangements notified by the European Communities had been bilaterally agreed between the European  Communities and Chinese Taipei.  It was observed 
that the arrangements contained, inter alia , provisions regarding the classi fication of products, export 
certification and import control, rules of origin, circumvention and transshipment, outward processing 
and products exempt fro m quantitative limits.   
284. In response to the clarification sought by the TMB, the European  Communities confirmed 
that the adaptation of the definition of quantitativ e limits following amendments of the Combined 
Nomenclature would be implemente d in conformity with Articles 4.2 and 4.4 of the ATC and stated 
that the provisions concerning circumvention were considered as complementary information for the 
functioning of Article 2 of the ATC.  Furthermore, the European Communities confirmed that, 
regarding the consultations foreseen  for such cases in the administrative arrangements, if a mutually 
satisfactory solution is found between the two parti es, this solution would be also subject to the 
provisions of Article 5 of the ATC.  The TMB noted that, though the opportunity was provided to it,  G/L/683 
 Page 95 
 
 Chinese Taipei had not made any observation with respect to the notification submitted by the 
European Communities.  It was also observed that the implementation of the circumvention 
provisions of the administrative arrangements would be  fully subjected to the relevant provisions of 
Article 5 of the ATC. 
(5) United States – China 285. At its meeting of June 2002, the TMB began its  review of the notification made by the 
United States of administrative arrangements with China.  The TMB decided to seek clarifications 
from both Members with respect to certain aspects of  the notification, including the products covered 
by the arrangements, the relevance for the implemen tation of any provision of Article 2 of the ATC 
and the operation of the provisions regarding coope ration in the prevention of circumvention, the 
ATC relevance of a provision enabling the United States to impose, in particular circumstances, triple 
charges on quotas, the possibility for the United Stat es to introduce a restraint on such products in 
certain specific circumstances where a product would be  transshipped through China, and the scope of 
application of visa requirements.   
286. The TMB concluded the review, pursuant to Article 2.21, of this notification at its meeting of 
October 2002.  It observed that the introductory paragraph of the notification stated that "the 
provisions [notified] are drawn from the United States – China bilateral textile and apparel 
Memorandum of Understanding of 1 Fe bruary 1997 and have been agreed […] to be necessary for the 
proper implementation of restrictions notified to th e Textiles Monitoring Body under Article 2.1 of 
the Agreement on Textiles and Clothing".  The TMB recalled that all the administrative arrangements previously notified by the United States had also b een characterized by the approach of keeping in 
force certain provisions of former bilateral agreemen ts with a view to constituting the provisions of 
the administrative arrangements in the sense of Arti cle 2.17.  The TMB had already observed in this 
regard that such an approach "resulted in some resp ects in texts which are not easily understood and, 
also in some instances, appear to give the impressi on that some of the provisions of the administrative 
arrangements are not fully consistent with the others ".  In the case of the administrative arrangements 
with China, some elements included in the notifi cation had already become obsolete independent of 
China's accession to the WTO, whereas several others  did not reflect developments that had occurred 
as a result of China's membership.  This explai ns why the United States had found it necessary to 
offer the following introductory co mments in its responses to the TM B regarding the questions raised 
in relation to different elements in its notification:  "The TMB may wish to bear in mind first, that the 
administrative provisions were drawn from an existi ng bilateral agreement, ra ther than being drafted 
anew and were not prospectively adjusted to account for changes that would occur upon China's 
accession to the WTO.  Second, at the time the Memorandum of Understa nding was concluded, 
neither Member anticipated the delay to China' s eventual accession the WTO late in 2001."   
287. The administrative arrangements contained deta iled provisions regardi ng product coverage 
and related issues of classification and categorization,  the structure of the restrictions applied (group 
limits and specific limits), flexibility adjustments, cooperation in the prevention of circumvention, the 
application of a visa system, commercial samples and personal shipments.  In addition, annexes to the 
arrangements included a detailed description of the US  textile and apparel cat egory system (together 
with the conversion factors applied), an "exe mpt certification arrangement for Chinese floor 
coverings" and the full text of the visa arrangement agreed between the two Members.  The TMB noted in this regard that most of the provisions  of the administrative arrangements notified were 
related to the implementation of restrictions falling under Article 2.1.  It was observed, however, that 
not all the provisions of the arrangements were full y or directly related to the implementation of 
provisions of Article 2, but that they also dealt with  matters that were addre ssed in some other articles 
of the ATC.  This applied, in particular, to the provisions related to coopera tion in the prevention of 
circumvention. G/L/683 
Page 96  
 288. As regards the product coverage, the respective provision states that "the textiles and textile 
products covered [by the arrangements] are thos e summarized in Annex A [of the notification 
provided under Article 2.17]".  Since this Annex provides a full description of the entire US textiles 
and apparel category system, the TMB sought conf irmation of its understanding from both Members 
that the products covered by the administrative a rrangements were limited to those covered by the 
ATC and not yet integrated into GATT 1994 as a resu lt of the implementation of the provisions of 
Articles 2.6, 2.8(a) and 2.8(b).  In response, the United States stated that the TMB's understanding 
was correct, whereas China noted that some of the products listed in the Annex in question had 
already been integrated as a result of the implemen tation of the relevant Articles of the ATC.  China 
also provided a list of product categories that had alr eady been integrated or partially integrated.  On 
the basis of these replies, it could be established th at, in conformity with Article 2.17, the products 
covered by the arrangements were limited to those ATC products that had not been integrated as yet 
and were still subject to import restrictions notified by the United States under Article 2.1.  
289. The administrative arrangements keep in force th e previous visa system and the full text of 
the visa arrangements was notified as an attachment.  This system requires China to issue a visa for 
each shipment of textiles or textile articles and this visa has to be presented to the US Customs 
Service before entry, or withdrawal from warehouse fo r consumption, into the customs territory of the 
United States.  The visa arrangement specifies all the related requirements and procedures.  Since, in the sense of Article 2.17, administrative arrangement s are related to the implementation of provisions 
of Article 2, the TMB sought confirmation from the United States that no visa requirements would be applied to the imports from China for any of  the products integrated into GATT 1994 by the 
United States as a result of the im plementation of its Stages 1 to 3 in tegration programmes.  In reply, 
the United States confirmed the TMB' s understanding of this matter. 
290. In light of the TMB's overview, inter alia , with respect to the issues reflected in 
paragraphs 288 and 289 above, it co uld be ascertained that the provisions of the administrative 
arrangements related to pr oduct coverage, flexibility provisions and the application of the visa system 
enable the exporting Member to admi nister the restrictions referred to in Article 2.  The TMB noted 
that this was in line with the requirements of Article 4.1. 
291. The most detailed and elaborated provisions of the administrative arrangements dealt with the 
issue of cooperation in the prevention of circum vention.  In reply to the TMB's request for 
explanation and clarification, the United States stated the following: 
 "Article 5.1 of the ATC states that circumvention by transshipment and other means 
'frustrates the implementation of this Agreemen t to integrate the textiles and clothing sector 
into GATT 1994' and calls on Members to co operate fully to address this problem. 
Furthermore, Article 5.2 makes clear that transshipment and other practices can circumvent the ATC.  Thus, Article 5 expresses the understanding of the WTO Members that transshipment and other practices that result in  circumvention of the quantitative restrictions 
notified under Article 2 undermine these restric tions and frustrate the integration process set 
out in Article 2.  Accordingly, the United Stat es and China have agreed that the provisions of 
paragraph 13 [of the administrative arrangements], which address circumvention, are necessary in relation to the implementation of Article 2 of the ATC.  
 Paragraph 13(E) [related to possible triple charges on quotas] is part of an administrative 
arrangement that the United States and Chin a agreed was necessary in relation to the 
implementation of Article 2 of the ATC for the reasons set forth in response to the previous 
question. We do not believe that each provisi on of such an arrangement requires separate 
justification, as Paragraph 13 as a whole is clear ly an administrative arrangement within the 
scope of Article 2.17.  The United States will implement this administrative arrangement in 
conformity with all relevant provisions of  the ATC.  The United States notified similar 
provisions in agreed administrative arra ngements with the following WTO Members:    G/L/683 
 Page 97 
 
 Bangladesh; Brazil; Colombia; Costa Rica; Do minican Republic; Egypt; Guatemala; Haiti; 
Hungary; India; Indonesia; Jamaica; Korea;  Macao, China; Malaysia; Mauritius; Oman; 
Pakistan; Philippines; Poland; Qatar; Romani a; Sri Lanka; Chinese Taipei; Thailand; Turkey; 
Uruguay and United Arab Emirates." 
292. In assessing these provisions of the administrative arrangements along with the US' reply 
above, the TMB recalled that Article 5 of the AT C contains detailed rule s and procedures to be 
followed in order to enhance cooperation between Me mbers in the prevention of circumvention.  The 
TMB noted that the arrangements notified incorporat e, almost word-for-word, certain parts of the 
language of Article 5.  At the same time, both in te rms of certain substantive elements and procedural 
aspects, the provisions of the administrative arrangeme nts appear to go beyond what is stipulated in 
the text of Article 5.  While addressing such aspects, the TMB found it necessary to note that the 
respective provisions of the arrangements did not only refer to Article 5 of the ATC, but that they also 
clearly spelt out the following:  "The Parties re cognize that, after China becomes a Member of the 
WTO and the United States applies the Agreement Esta blishing the WTO to China, in the event of a 
conflict between [the circumvention provisions of the administrative arrangements] and Article 5 of 
the ATC that impairs the operation of the ATC, the ATC shall prevail". 
293. Keeping also in mind the above, the TMB made the following observations:  
• As reflected in the structure and language of Article 5, the central objective of its 
provisions is to prevent, to investigate and,  if necessary, to take appropriate actions 
against circumvention practices by establishing the necessary legal and administrative procedures by the Members and relying on the cooperation, consistent with their domestic laws and procedures, between the Members concerned.  While the 
respective provisions of the administra tive arrangements provide for necessary 
consultations between China and the Unite d States, the operational rules seem to 
focus on the situations where the two pa rties are unable to reach a mutually 
satisfactory solution to the matter subject to these consultations. 
• According to the arrangements notified, should the parties be unable to reach a 
satisfactory solution during consultati ons related to cases referred to under 
Articles 5.4 and 5.6, the United States may deduct from the respective quantitative 
limits amounts equivalent to the amount of products transshipped or subject to false 
declaration or classification, and any such action shall be notified to the TMB with full justification.  It was recalled in this regard that Article 5.4 speaks of "appropriate 
action, to the extent necessary to address th e problem" but the adjustment of charges 
to restraint levels is only one of the possi ble actions that has been specified by the 
ATC.  Moreover, Article 5.4 lays down strict procedural requirements, including the 
obligation to notify any action agreed in the bilateral consultations, with full 
justification to the TMB.  Also, if a mutu ally satisfactory solution is not reached, any 
Member concerned may refer the matter to the TMB for prompt review and recommendations.  As concerns Article 5.6, its language does not specify the possible 
remedial actions.  It simply states that appr opriate measures, consistent with domestic 
laws and regulations, should be taken agai nst the exporters or importers involved and 
when no or inadequate administrative measures are applied, the Members concerned should consult promptly with a view to seeking a mutually satisfactory solution. If 
such a solution is not reached, the ma tter may be referred to the TMB for 
recommendations by any Member involved.   
• It flows also from the above, that Article 5.4 appears to provide some flexibility in 
terms of remedies or agreed actions that could be foreseen in cases where circumvention has occurred.  This is also  supported by the sentence in Article 5.4 
which states that "[t]he Members concerned may agree on other remedies [i.e. on G/L/683 
Page 98  
 remedies other than those specifically lis ted in that Article] in consultation".  
However, Article 5 contains no reference to the possibility for the importing Member 
to impose triple charges on quotas as a deterre nt to circumvention as foreseen in the 
administrative arrangements.  While no ting that according to the respective 
provisions "… any such action shall be notifie d to the TMB with full justification", it 
was also recalled that in its reply c oncerning this particular aspect of the 
arrangements, the United States had stated that it would "implement this 
administrative arrangement in conformity w ith all relevant provisions of the ATC".  
Furthermore, the language of the arrange ments also states, in no ambiguous terms 
that in the event of a conflict between th e respective provision of the administrative 
arrangement and Article 5, the latter shall prevail.  The TMB took note of the US' 
statement as well as the respective commi tment included in the arrangements. 
294. In addition, the TMB recalled that when it had examined the administrative arrangements 
concluded by the United States with several WTO Members, in June 1997, the United States had 
provided written replies to the TMB’s request for clarif ication.  In light of these replies, as regards the 
correct understanding of the product coverage of these administrative arrangements, the TMB "took 
note of the precision provided by the United States according to which only products subject to 
restraints under paragraph 1 of Article 2 were  subject to the administrative arrangements". 
Furthermore, "the United States had stated that when provisions of the administrative arrangements were inconsistent with the ATC, the provisions of the ATC would apply.  The TMB understood that 
this statement applied to each and every provision of the arrangements notified.  The TMB expected, 
therefore, that all the provisions of these admini strative arrangements would be implemented by the 
respective Members in conformity with the rele vant provisions of the ATC".  Against this 
background, confirmation was requested if the a bove statement made by the United States also 
applied to the administrative arrangements conc luded between the United States and China.  In 
response, the United States replied  that "[t]he TMB's understanding is confirmed". 
295. Therefore, in taking note of the notification received pursuant to Article 2.17, the TMB 
expected that all the provisions of the administ rative arrangements with China would be implemented 
by the Members concerned in full compliance with the relevant provisions of the ATC. 
(6) United States – Chinese Taipei 296. At its meeting of June 2002, the TMB began its  review of the notification made by the 
United States of administrative arrangements agreed between the United States and Chinese Taipei. The TMB decided to seek clarifications from both Members with respect to certain aspects of the 
notification, including the products covered by the arrangements, the relevance for the 
implementation of any provision of Article 2 of th e ATC and the operation of the provisions regarding 
cooperation in the prevention of circumvention, the applicability of Article 4 of the ATC in cases where changes in the implementation and interpreta tion of the administrative arrangements would be 
implemented, the scope of application of the visa certification system, the ATC relevance of a 
provision enabling the United States to impose, in pa rticular circumstances, triple charges on quotas, 
the possibility for the United States to introduce a restraint on such products in certain specific 
circumstances where a product would be transshipped through Chinese Taipei.   
297. The TMB concluded the review, pursuant to Article  2.21, of the notification at its meeting of 
October 2002.  The TMB observed that the introductory  paragraph of the notification stated that the 
"provisions [notified] are drawn from the Agre ement Between The Taipei Economic and Cultural 
Representative Office and The American Institute in  Taiwan Concerning Trade in Textile and Apparel 
Products dated 10 December 1997, and have been agr eed by the United States and Chinese Taipei to 
be necessary in relation to the implementation of rest rictions notified to the Textiles Monitoring Body 
under Article 2.1 of the Agreement on Textiles and Clothing".  The TMB recalled that all the administrative arrangements previously notified by the United States had also been characterized by  G/L/683 
 Page 99 
 
 the approach of keeping in force certain provisions of former bilateral agreements with a view to 
constituting the provisions of the administrative arrange ments in the sense of Article 2.17.  In the case 
of the administrative arrangements with Chinese Taip ei, some elements included in the notification 
had become obsolete, either before Chinese Taip ei's accession to the WTO and independent of it, 
while several other did not reflect the developmen ts that had taken place as a result of Chinese 
Taipei's membership.  In this re gard, the United States stated that "[t]he TMB may wish to bear in 
mind first, that the administrative provisions were drawn from an existing bilateral agreement, rather 
than being drafted anew and were not prospectively adjusted to account for changes that would occur 
upon Chinese Taipei’s accession to the WTO.  Sec ond, at the time the bilateral agreement was 
concluded, neither Member anticipated the delay to Chinese Taipei’s even tual accession to the WTO 
on 1 January 2002". 
298. The TMB noted that the administrative arrange ments contained detaile d provisions regarding 
product coverage and related issues of classificat ion and categorization, the structure of the 
restrictions applied (group limits and specific li mits), flexibility adjustments, implementation and 
administration of the arrangements, visa system, exchange of information, cooperation in the 
prevention of circumvention and consultation.  In addition, annexes to the administrative 
arrangements included a detailed description of the US  textile and apparel cat egory system (together 
with the conversion factors applied), a list of "e xempt products requiring exempt certification", and 
the full text of the visa arrangement concluded be tween the two Members.  The TMB noted that most 
of the provisions of the administrative arrangement s notified were related to the implementation of 
restrictions falling under Article 2.1.  It was obser ved, however, that not all the provisions of these 
arrangements were fully or directly related to the implementation of provisions of Article 2 but that 
they also dealt with matters that were addressed in some other articles of the ATC.  This applied in 
particular to the provisions related to coope ration in the prevention of circumvention. 
299. As regards the product coverage, the administ rative arrangements provided a description of 
the products covered, referring to the annexed listing of the entire US textile and apparel category 
system.  In this regard, the TMB sought confirma tion from both Members of its understanding that the 
products covered by the administrative arrangements were limited to those covered by the ATC and 
not yet integrated as a result of the implementation of  the provisions of Articles 2.6, 2.8(a) and 2.8(b) 
of the ATC.  In response the United States stated  that the TMB's understanding was correct, while 
Chinese Taipei stated that it "confirm[ed] that the sc ope of textile and appare l products covered in the 
Administrative Arrangement are in conformity with th e coverage of the products in the Annex of the 
ATC, and that they are products which have not been integrated into GATT 1994 as stipulated in 
Article 2.6, 2.8(a) and 2.8(b) of the ATC.  The products listed in the notification [made pursuant to 
Article 2.1], which have already been integrated into GATT 1994 under the provisions of Article 2.6, 
2.8(a) and 2.8(b) of the ATC, are not covered by the Administrative Arrangement".  On that basis, it 
could be established that, in conformity with Artic le 2.17, the products covered by the arrangements 
were limited to those ATC products that had not yet been integrated and were subject to import 
restrictions notified by the United States under Article 2.1.   
300. The administrative arrangements keep in force th e previously agreed visa system between the 
two parties and the full text of the visa arrangement was notified as an attachment.  This system requires Chinese Taipei to issue a vi sa for each shipment of textiles or textile articles and this visa has 
to be presented to the US Customs Service befo re entry, or withdrawal from warehouse for 
consumption, into the customs territory of the Un ited States. The visa arrangement specifies all the 
related requirements and procedures.  Since, in th e sense of Article 2.17, administrative arrangements 
are related to the implementation of provisions of Article 2, the TMB sought confirmation from the 
United States of its understanding that no visa requi rements would be applied to the imports from 
Chinese Taipei of any of the products integrated in to GATT 1994 by the United States as a result of 
the Stages 1 to 3 integration programmes.  In its reply the United States confirmed the TMB's 
understanding of this matter. G/L/683 
Page 100  
 301. The TMB observed that the administrative a rrangements contained provisions regarding 
possible changes in the implementation and admini stration, addressing issues such as those mentioned 
in Article 4 of the ATC.  It sought confirmation of  its understanding that in cases where changes such 
as those mentioned in those provisions of the administrative arrangements would take place, the provisions of Article 4 of the ATC would preva il.  The United States replied that the "TMB’s 
assumption that paragraph 11 (a) [related to 'changes in the implementation and interpretation' of the 
administrative arrangements] has been superseded by ATC Article 4 is correct", and Chinese Taipei 
stated that "[p]aragraph 11(a) is complementary info rmation to the implementation of Article 2 of the 
ATC.  Chinese Taipei confirms that in a case wh ere changes such as mentioned in paragraph 11(a) 
occur and affect the implementation and manageme nt of the ATC, any action taken will be in 
accordance with the provisions of Article 4 of the ATC". 
302. In light of the TMB's overview as reflected, in  particular, in paragr aphs 299 to 301 above, it 
could be ascertained that the provisions of th e administrative arrangements related to product 
coverage, flexibility provisions and the applicati on of the visa system enabled the exporting Member 
to administer the restrictions referred to in Article  2.  The TMB noted that this was in line with the 
requirements of Article 4.1. 
303. The administrative arrangements also containe d very detailed provisions on the issue of 
cooperation in the prevention of circumvention.  The TMB requested the United States to provide an 
explanation as to how, in its view, such provisi ons were deemed necessary in relation to the 
implementation of any provision of Article 2. Furt hermore, the arrangements contained a provision 
(paragraph 18 (E)) enabling the importing Member to impose, in particular circumstances, triple 
charges on quotas, though Article 5 of the ATC does not mention such a possibility.  The TMB also 
requested explanations in this rega rd.  In its reply, the United States stated the following: "Article 5.1 
of the ATC states that circumvention by transshipme nt and other means 'frustrates the implementation 
of this Agreement to integrate the textiles and clothing sector into GATT 1994' and calls on Members 
to cooperate fully to address this problem. Furtherm ore, Article 5.2 makes clear that transshipment 
and other practices can circumvent the ATC.  T hus, Article 5 expresses the understanding of the WTO 
Members that transshipment and other practices that result in circumvention of the quantitative 
restrictions notified under Article 2 undermine these r estrictions and frustrate the integration process 
set out in Article 2.  Accordingly, the United States and Chinese Taipei have agreed that the 
provisions of paragraph 18 [of the administrative arrangements], which address circumvention, are 
necessary in relation to the implementation of Article 2 of the ATC.  Paragraph 18(E) is part of an 
administrative arrangement that the United States and Chinese Taipei agreed was necessary in relation 
to the implementation of Article 2 of the ATC for th e reasons set forth [above]. We do not believe that 
each provision of such an arrangement requires separate justification, as Paragraph 18 as a whole is clearly an administrative arrangement within the scope of Article 2.17.  The United States will 
implement this administrative arra ngement in conformity with all re levant provisions of the ATC.  
The United States notified similar provisions in agreed administrative arrangements with the 
following WTO Members:  Bangladesh; Brazil; Chin a; Colombia; Costa Rica; Dominican Republic; 
Egypt; Guatemala; Haiti; Hungary; India; Indonesi a; Jamaica; Korea; M acao, China; Malaysia; 
Mauritius; Oman; Pakistan; Philippines; Poland; Qatar; Romania; Sri Lanka; Thailand; Turkey; 
Uruguay and United Arab Emirates".  For its part , Chinese Taipei stated that the provision on 
cooperation in the prevention of circumvention w as a supplement to the former bilateral textile 
agreement between the two parties.  It "[was] fo llowing the precedents of agreements contracted 
between the U.S. and other countries, which Chin ese Taipei and the United States consulted upon the 
renewal of Bilateral Textile Agreem ent in 1995.  For transparency reasons and considering that the 
similar provisions also exist in the administrative arrangements concluded betw een the U.S. and other 
WTO members, Chinese Taipei agrees to include this  paragraph in the Administrative Arrangement". 
304. In assessing these provisions of the administrative arrangements, also in light of the replies 
reflected above, the TMB recalled that Article 5 of the ATC contains detailed rules and procedures to 
be followed with a view to enhancing coope ration between Members in the prevention of  G/L/683 
 Page 101 
 
 circumvention.  The TMB noted that the arrangeme nts notified incorporated a few elements of the 
language of Article 5.  At the same time, in te rms of both some substantive elements and some 
procedural aspects, the provisions of the administra tive arrangements appeared to go beyond what is 
stipulated in the text of Article 5.  In th is regard, the TMB made the following observations: 
• As reflected in the structure and language of Article 5, the central objective of its 
provisions is to prevent, to investigate and,  if necessary, to take appropriate actions 
against circumvention practices by establishing the necessary legal and administrative 
procedures by the Members and relying on the cooperation, consistent with their domestic laws and procedures, between, the Members concerned.  While the specific provisions of the administrative arrangements provide for the necessary consultations between Chinese Taipei and the United States,  the operational rules seemed to focus 
on those situations when the two parties ar e unable to reach a mutually satisfactory 
solution to the matter subject to those consultations. 
• According to the arrangements notified, should the parties be unable to reach a 
satisfactory solution during consultati ons regarding cases referred to under 
Articles 5.4 and 5.6, the United States may deduct from the respective quantitative limit amounts at least equivalent to the am ount of products transshipped or subject to 
false declaration or classification, and any such action shall be notified to the TMB.  
It was recalled in this regard that Artic le 5.4 speaks of "appropriate action, to the 
extent necessary to address the problem", th e adjustments of charges to restraint 
levels being only one of the possible actions  that has been specified by the ATC.  
Moreover, Article 5.4 lays down strict procedural requirements, including the obligation to notify any action agreed in the bilateral consultations, with full 
justification to the TMB.  Also, if a mutu ally satisfactory solution is not reached, any 
Member concerned may refer the matter to the TMB for prompt review and 
recommendation.  As concerns Article 5.6, its language does not specify the possible remedial actions.  It simply states that appr opriate measures, consistent with domestic 
laws and regulations, should be  taken against the exporters or importers involved and, 
in cases when no or inadequate administrative measures are being applied, the 
Members concerned should consult promptly with a view to seeking a mutually 
satisfactory solution.  If such a solution is  not reached, the matter may be referred by 
any Member involved to the TMB for recommendations. 
• It flows also from the above that Article 5.4 appears to provide some flexibility in 
terms of remedies or agreed actions that could be foreseen in cases when circumvention has occurred.  This is also supported by the sentence included in 
Article 5.4 stating that "[t]he Members c oncerned may agree on other remedies [i.e. 
other remedies than those specifically liste d in that Article] in consultation."  
However, Article 5 contains no reference to the possibility for the importing Member 
to impose triple charges on quotas, as a de terrent to circumvention foreseen in the 
administrative arrangements.  While noting that according to the respective provision "[a]ny action taken under this paragraph sha ll be notified to the Textiles Monitoring 
Body", it was also recalled that in its repl y related to this particular aspect of the 
arrangements notified, the United States had stated that it would "implement this 
administrative arrangement in conformity w ith all relevant provisions of the ATC".  
The TMB took note of the US' statement. 
305. In addition, the TMB recalled that when it had examined the administrative arrangements 
concluded by the United States with several WTO Members, in June 1997, the United States had 
provided written replies to the TMB’s request for clarif ication.  In light of these replies, as regards the 
correct understanding of the product coverage of these administrative arrangements, the TMB "took 
note of the precision provided by the United States according to which only products subject to G/L/683 
Page 102  
 restraints under paragraph 1 of Article 2 were  subject to the administrative arrangements".  
Furthermore, "the United States had stated that when provisions of the administrative arrangements were inconsistent with the ATC, the provisions of the ATC would apply.  The TMB understood that 
this statement applied to each and every provision of the arrangements notified.  The TMB expected, 
therefore, that all the provisions of these admini strative arrangements would be implemented by the 
respective Members in conformity with the rele vant provisions of the ATC".  Against this 
background, the TMB requested confirmation that th e above statement made by the United States also 
applied to the administrative arrangements with Ch inese Taipei.  In its reply the United States stated 
that "[t]he TMB’s understanding is confirmed".  
306. Therefore, in taking note of the notificati on received pursuant to Article 2.17, the TMB 
expected that all the provisions of the administ rative arrangements between the United States and 
Chinese Taipei would be implemented by the two Members concerned in full compliance with the 
relevant provisions of the ATC. 
(ii) Implementation of the administrative arrangement s during Stage 3 of the integration process 
307. As indicated earlier
140, since administrative arrangements agreed in the sense of Article 2.17 
were deemed necessary in relation to the implemen tation of any provision of Article 2, all the 
arrangements notified have remain ed operational during Stage 3 of the integration process.  No 
specific issue whatsoever related to the implementation of such arrangements has been brought to the 
attention of the TMB. 
308. As regards the European Communities, how ever, the TMB noted that the latter had 
confirmed, in a response to questions put by the Body regarding the consequences of the enlargement 
of the European Union141, that since, as from 1 May 2004, th e European Union includes ten new 
member States, and that, consequently, the new member States must apply the common trade policy 
concerning textiles and the already existing quantita tive restrictions applied by the Community on 
imports of textile and clothing pr oducts were adjusted to take account of the accession of these new 
member States.  In this light, it can also be assumed that with the enlargement of the European 
Communities on 1 May 2004, the scope of applicatio n of the administrative arrangements notified by 
the EC has also been exte nded to the new member States.  It should be noted, however, that the TMB 
has received no specific communication or inform ation from the European Communities in this 
regard.   
(f) Implementation of the provisions of Article 2. 18 in relation to small suppliers as well as, to 
the extent possible, to least-developed country Members 
309. Article 2.18 states that, with respect to th e Members whose exports were subject to 
restrictions on 31 December 1994 and whose restricti ons represented 1.2 per cent or less of the total 
volume of the restrictions applied by an impor ting Member as of 31 December 1991 and notified 
under Article 2, meaningful improvement in access for their exports shall be provided at the entry into 
force of the WTO Agreement and for the duration of  the ATC through advancement by one stage of 
the growth rates set out in Articles 2.13 and 2.14, or  through at least equivalent changes as may be 
mutually agreed with respect to a different mix of base levels, growth and fl exibility provisions.  This 
provision should be read in conjunction with the language of Article 1.2 which states the following: 
 "Members agree to use the provisions of paragr aph 18 of Article 2 […] in such a way as to 
permit meaningful increases in acc ess possibilities for small suppliers and the development of 
commercially significant trading opportunities for new entrants in the fields of textile and 
clothing trade." 
                                                      
140 See paragraph 263 above. 
141 See in particular paragraph 325 below.  G/L/683 
 Page 103 
 
  
A footnote to Article 1.2 specifies that "[t]o the extent possible, exports from a least-developed country Member may also benefit from this provision".  310. It can be observed that while the provisions of  Articles 1.2 and 2.18 are closely linked to each 
other, the definition of the small suppliers and new entrants as the potential beneficiaries is provided 
in Article 2.18, namely in relation to their respect ive share in the total volume of the restrictions 
applied by the restraining Members concerned as of 31 December 1991. 
(i) Implementation during Stages 1 and 2 of the integration process 
311. Since as far as the implementation of these provi sions is concerned, th e methodology adopted 
during Stage 1 by the Members maintaining restric tions under Article 2 had an impact on the market 
access opportunities provided with reference to Article 2.18 also for Stages 2 and 3, it is appropriate 
to offer a brief reminder in this regard. 
312. As reported by Canada in 1995, 16 Members were qualified for improved access under this 
provision:  Costa Rica;  Cuba;  Czech Republic;  Do minican Republic;  Hungary;  Jamaica;  Lesotho; 
Macao, China;  Mauritius;  Myanmar;  Poland;  Slovak Republic;  South Africa;  Sri Lanka;  
Swaziland and Uruguay.  In addition,  Canada applied this provision to the restraints applied on 
imports from Bulgaria when Bulgaria joined the WT O, as it met the criteria of Article 2.18.  This 
improvement in access was ef fected by the increase in the annual gr owth rates for the restrictions in 
force on 31 December 1994 by 25 per cent, in lieu of  16 per cent.  Canada included in this list not 
only the Members qualified on 31 December 1991 but also those qualified on 31 December 1994, the 
two groups of Members representing altogether over  9 per cent of the volume of Canada's total 
restraints.
142 
313. The United States listed 22 Members qualified under this Article for improved access:  
Bahrain;  Colombia;  Costa Rica;  Czech Republic;  Dominican Republic;  Egypt;  El Salvador;  Fiji;  
Guatemala;  Haiti;  Hungary;  Jamaica;  Kenya;  Kuwa it;  Macao, China;  Mauritius;  Poland;  Qatar; 
Romania;  Slovak Republic;  United Arab Emirates and Uruguay.  For these Members, the annual 
growth rates applicable to the restraints were a dvanced by one stage by increasing them by 25 per cent 
for the first stage, in lieu of 16 per cent.143 
314. The European Community notified that two Me mbers were qualified under this Article for 
improved access:  Peru and Sri Lanka.  For these Memb ers, the annual growth rates applicable to the 
restraints were advanced by one stage by the increase in the annual growth rates applied to the 
restraints for the first stage first by 16 per cent and second by 25 per cent, in lieu of 16 per cent.144 
315. In reviewing the notifications above, the TMB observed, inter alia , that the implementation of 
this provision of the ATC had been made by the Members concerned using different methodologies 
and that no Member had used the option of equivalent  changes with respect to a different mix of base 
levels, growth and flexibility provisions.  It wa s observed that Article 2.18 does not provide precise 
guidance as to how to implement the advancement by one stage of the growth rates set out in 
Articles 2.13 and 2.14, or how to a pply "at least equivalent changes as may be mutually agreed with 
respect to a different mix of base levels, growth and flexibility provisions".  However, it was noted 
that the result in terms of market access in th e first stage would have been improved if the 
                                                      
142 See G/L/459, paragraph 285. 
143 Idem , paragraph 286. 
144 Idem , paragraph 287. G/L/683 
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 methodology chosen for the advancement by one stag e of the growth rates had included the growth 
factor of the first stage, as done by one Member.
145 
316. For the purpose of implementation of the provisions of Article 2.18 during Stage 2, the 
growth rate of the restrictions in effect on 31 December 1997 had been increased by 27 per cent by 
Canada, the European Communities and the United Stat es, respectively.  The beneficiaries remained 
the same as in Stage 1, with the exception that the United States extended this treatment also to 
Bulgaria after the latter became a Member of the WTO.146 
317. In its second comprehensive report the TMB ob served in this regard that the methodology 
chosen by the respective Members for the implemen tation of the provisions of Article 2.18 during 
Stage 1 predetermined the possible impact of the implementation of the same provisions during Stage 2.  Though, unlike during the first stage, th e methodology used for the second stage by the three 
Members concerned was the same (i.e. the growth rate normally applicable for Stage 3 (27 per cent) 
was applied instead of the 25 per cent defined in Artic les 2.14(a)), the effect was different in the case 
of the European Community, on the one hand, and Canada and the United States, on the other.  The cumulative approach adopted by the Europ ean Communities during Stage 1, whereby the 
advancement by one stage of the growth rate incl uded the growth factors of both the first and second 
stages, also resulted in higher growth for Stage 2, when compared to the advancement, referred to in 
Article 2.18, as implemented by Cana da and the United States.  It is also noteworthy that, following 
the pattern that characterized the implementati on during the first stage, no Member used the 
possibility of agreeing on equivalent  changes with respect to a different mix of base levels, growth 
and flexibility provisions during the second stage either.
147 
(ii) Implementation during Stage 3 
318. As reported in Part Two of the present report148, in November 2001 the TMB noted on the 
basis of the respective communications received that Canada, the European Communities and the 
United States would increase the annual growth rates applied during Stage 2 for WTO Members falling under the provisions of Article 2.18 in their respective regimes by 27 per cent as from 1 January 2002.  Subsequently, the only related de velopment that was brought to the TMB's attention 
concerned Canada's implementati on, as from 1 January 2003, of improvements to its preferential 
scheme for least developed countries
149, providing inter alia  for quota-free access for all products 
covered by the ATC.  As also noted already by  the TMB, two WTO Members, namely, Bangladesh 
and Lesotho could benefit under this measure from th e elimination of restrictions maintained under 
Article 2.1 
319. Furthermore, in view of the fact that the Eu ropean Communities has continued to suspend the 
application, during Stage 3, of the restrictions notified on imports from Sri Lanka150, in practice one 
Member (Peru) would be affected by the EC's implementation of the provisions of Article 2.18. 
(iii) The respective decision of the Doha Ministerial Conference and its follow-up 
320. The Decision by Ministers on Implementati on-Related Issues and Concerns adopted on 
14 November 2001, requested the Council for Trade in Goods to examine, inter alia , the proposal 
"[...] that when calculating the quota levels for small suppliers for the remaining years of the 
Agreement, Members will apply the most favourab le methodology available in respect of those 
                                                      
145 G/L/459, paragraph 288. 
146 Idem , paragraph 289. 
147 See G/L/459, paragraph 337. 
148 See paragraph 21 above. 
149 See paragraphs 182 and 183 above. 
150 See paragraph 195 above.  G/L/683 
 Page 105 
 
 Members under the growth-on-growth provisions from  the beginning of the implementation period;  
extend the same treatment to least-developed countries;  and, where possible, eliminate quota restrictions on imports of such Members."
151  The decision requested the CTG to make 
recommendations (also with respect to this matte r) to the General Council by 31 July 2002 for 
appropriate action.152 
321. Although the follow-up given to this decision is summarized in another Section of this 
report153, it should be mentioned that the Council for Trade in Goods was not in a position to make 
recommendations to the General Council with respect  to this subject-matter.  Therefore, the 
provisions of Article 2.18 were implemented during Stage 3 in the manner summarized in 
paragraphs 318 and 319 above. 
3. Introduction of new restrictions during the implementation of Stage 3 of the integration 
process.  Compliance with the provisions of Article 2.4 
322. Article 2.4 states that "[t]he restrictions notif ied under paragraph 1 [of Article 2] shall be 
deemed to constitute the totality of such restric tions applied by the respective Members on the day 
before the entry into force of the WTO Agreement.   No new restrictions in terms of products or 
Members shall be introduced except under the provi sions of this Agreement or relevant GATT 1994 
provisions [footnote omitted] …". 
323. The second comprehensive report of the TMB provi ded an overview of those cases regarding 
which, during the implementation of Stage 2 of the in tegration process, either the inconsistency of the 
measures in question, inter alia , with the provisions of Article 2.4 had been established by the Dispute 
Settlement Body or the breach of these provisions was claimed by certain Members concerned.154  It is 
of particular relevance in the context of ATC implementation during Stage 3 that while the DSB 
found that the imposition of quantitati ve restrictions by Turkey on imports of certain textile and 
clothing products from India had been inconsistent, inter alia , with the provisions of Article 2.4155, 
Turkey has continued to apply such restrictions on imports from several Members (including India156) 
during Stage 3 of the integration process. 
324. During the implementation of Stage 3 of the inte gration process, one specific issue was raised 
in the TMB that could also be rele vant, in the context of compliance, inter alia , with the provisions of 
Article 2.4.  Following the enlargement of the European Communities on 1 May 2004, while none of the ten new member States had previously notifie d restrictions maintained under Article 2, the 
European Communities extended the application of it s restrictions falling under Article 2.1 (and, if 
applicable, also Article 3.1) to include imports by the new member States as well. 
325. A communication regarding this issue made by a number of TMB members pursuant to 
paragraph 3 of the TMB’s working procedures
157, and requesting the TMB to review, pursuant to 
Article 2.21, the "[i]ntroduction by the European Un ion of quota restrictions in the markets of ten 
newly acceding States, Members of the WTO", was exam ined by the TMB at its meetings in May and 
June 2004.  In order for the TMB to discharge its functions pursuant to Article 2.21 and also with a 
                                                      
151 See WT/MIN(01)/17. 
152 Ibid. 
153 See paragraphs 586, 587 and 595  below. 
154 See G/L/459, paragraphs 312 to 318 and their respective footnotes. 
155 Idem , paragraph 377. 
156 Presumably this was in line with  the terms of the mutually satisf actory solution reached between the 
two Members regarding the implementation by Turkey of the conclusions and recommendations adopted by the 
DSB. 
157 Paragraph 3 of the working procedures provide, inter alia , that “[i]t shall be open to any WTO 
Member and to any member of the TMB to suggest items for inclusion in the proposed agenda up to, and not 
including, the day on which the convening notice is to be issued.” G/L/683 
Page 106  
 view to providing a useful contribution in the cont ext of the preparation of the present comprehensive 
report, the TMB requested the European Communiti es to provide any related notification and, as 
appropriate, information in respect of the restri ctions introduced by the European Communities on 
1 May 2004.  In its response, the European Comm unities stated the following:  "Referring to your 
letter [...] concerning the deliberations of the TMB during its meeting on 17-18 May about EU enlargement as of 1 May, I would like to inform you of the following: 
• As from 1 May 2004, the European Union includes ten new member States.  The Act 
of Accession establishes in Article 6(7) that the new member States must apply the common trade policy concerning textiles and that the already existing quantitative restrictions applied by the Community on im ports of textile and clothing products are 
to be adjusted to take account of the accession of the new member States to the Community.  These quantitative restrictions, already notified to the TMB, applicable 
to imports of certain textile products from third countries into the enlarged 
Community have consequently been adjusted so as to cover equally imports into the 
ten new member States, and the Council Regulation (EEC) No. 3030/93 on common rules for imports of certain textile prod ucts from third countries has been amended 
accordingly.  The new Council Regul ation amending Council Regulation 
(EC) No. 3030/93 has been published under Council Regulation No. 487/04 in the 
Official Journal of the European Union, No. L79 on 17 March 2004. […] 
   
• It is pointed out that the Community does not consider this extension of the 
geographical application of existing restricti ons to constitute new restrictions in the 
sense of Article 2.4 of the ATC.  This extension was necessary to realize the enlargement process whilst ensuring the main tenance and unhampered functioning of 
the expanded internal EU market in the in terest of all economic operators, including 
exporters.  The option of maintaining the im port regime into the new member States 
unchanged but without allowing free circul ation within the Community was not 
considered to be in the general interest of  neither exporters, Community operators nor 
consumers.  On overall terms, the genera l incidence of enlargement has to be 
considered in the longer term and can as such  not be considered more restrictive than 
the situation prior to 1 May.  The Community's notification to the TMB of 17 March about elimination of restrictions on schedule as foreseen by the ATC by the end of 2004 remains valid also for the en larged Community of 25 members. 
 
• When adjusting and increasing the quantiti es from EU 15 to EU 25 the European 
Communities have used a methodology which takes into account the traditional imports into the new member States, using a formula consisting of the average of the 
last three years’ imports into the ten new member States originating in third countries, 
adjusted pro rata temporis." 
 326. In beginning its consideration of this matter, the TMB noted that the issue in question had 
already been raised in other WTO bodies and, to the best of TMB's knowledge, no substantive 
information had been provided there by the Europe an Communities.  It was noted, furthermore, that 
the response of the European Co mmunities does not refer to any other relevant notification or 
communication addressed to other WTO bodies on the same subject-matter and also that the TMB 
was unaware of any such possible notification or comm unication.  It was noted that the review was to 
be conducted not "at the request of any [WTO ] Member" and that, therefore, "inviting the 
participation of such Members" was not warranted .  Thus the review had to be essentially governed 
by the provisions of the first sentence of Article 2.21.  In the view of the TMB, the communication 
from the European Communities did not constitute, in a formal sense, a notification made with 
specific reference to an applicable provision of th e ATC.  It could be observed, however, that the 
communication spoke of "the extension of the geogra phical application of existing restrictions" that  G/L/683 
 Page 107 
 
 "[had been] already notified to the TMB" and that the ATC was the only multilateral trade agreement 
included in Annex 1A of the WTO Agreement th at was specifically mentioned in the EC's 
communication.  It could be established, therefore,  that the European Comm unities considered that 
the restrictions in question were falling under the provisions of the ATC under which they had been 
previously notified by the EC and that the European Communities did not invoke any other provision of the WTO Agreement, including GATT 1994, as a possible justification for the restrictions. 
327. Recalling the mandate entrusted to it in Article 2. 21 and also that, pursuant to Article 8.1, the 
Body has to examine all measures taken under th e ATC and their conformity therewith, the TMB 
proceeded to the examination one by one of the main arguments and explanations provided by the 
European Communities.  The TMB first observe d that the European Communities considered, inter 
alia, that the action taken by it on 1 May 2004 did not  constitute the introduction of new restrictions 
in the sense of Article 2.4 of the ATC, but that this was merely an extension of the geographical 
application of existing restrictions.  These existing restrictions had already been notified to the TMB 
and had been adjusted as from 1 May 2004 to take  into account equally imports of the ten new 
member States.  The TMB observed in this regard that the European Communities had notified to the 
TMB "existing restrictions" pursuant to the provisions of Article 2.1.  The TMB noted that, in 
essence, the European Communities used  the argument that at the level of the EC the totality of the 
restrictions applied had affected the same WTO Members and the same products as notified earlier.  
On this basis the European Communities held th e view that the "extension of the geographical 
application of existing restrictions" could not be considered to constitute new restrictions in the sense 
of Article 2.4.  It was noted that, on the one hand, the language of the ATC does not contain an explicit prohibition of implementing changes in th e geographical application of the restrictions 
previously notified and that the EC might have assume d that this lack of explicit prohibition could be 
claimed as a legal justification for the measures in qu estion.  It was also noted that, on the other hand, 
the lack of such an explicit prohibition does not  necessarily confer the right of implementing any 
action that is not specifically prohibited.  The AT C (like most of the multilateral trade agreements) 
lays down the basic rules and disciplines to be applie d, but does not address particular situations, such 
as the impact of the enlargement of the European Communities.  The TMB noted  in this regard that 
the restrictions in question as notified previously  had been applied by the European Communities 
composed of 15 member States, while the ten new me mber States had not previously maintained any 
restrictions under Article 2.1.  Seen in this light , there was no doubt that access to the markets of the 
ten new member States has become subject to r estrictions as from 1 May 2004, resulting from the 
application of the restrictions notified by th e European Communities in 1995 which had encompassed, 
at this point in time, 15 and not 25 member States.  Therefore, for the ten new member States, also 
Members of the WTO prior to the enlargement of  the European Communities and having already 
undertaken well defined obligations vis-à-vis  other WTO Members, inter alia , under the ATC, the 
measure taken by the EC amounted to the introducti on of "new restrictions in terms of products or 
Members ", as referred to in Article 2.4. 
328. Keeping also in mind the above, the TMB returned to the argument of the EC that, at the level 
of the European Communities, the action taken could not be considered to c onstitute new restrictions 
in the sense of Article 2.4.  The TMB recalled that Article 2.4 states, inter alia , that “[t]he restrictions 
notified under paragraph 1 [of Article 2] shall be deemed to constitute the totality of such restrictions 
applied by the respective Members on the day before the entry into force of the WTO Agreement.  No 
new restrictions in terms of products or Members shall be introduced except under the provisions of 
this Agreement or relevant GATT 1994 provisions.”  As regards the im plementation of this provision, 
the TMB observed that, in its report, the Panel on Turkey – Restrictions on Imports of Textile and 
Clothing Products had, inter alia , examined the question of how to interpret the prohibition of new 
restrictions as contained in Article 2.4.  The Panel ha d stated in this regard  that: "[t]he prohibition on 
'new restrictions' must be interpreted taking into account the preceding sentence:  'The restrictions 
notified under paragraph 1 sh all be deemed to constitute the totality  of such restrictions applied by the 
respective Members on the day before the entry into  force of the WTO Agreement'.  The ordinary 
meaning of the words indicates that WTO Members in tended that as of 1 January 1995, the incidence G/L/683 
Page 108  
 of restrictions under the ATC could only be reduced .  We are of the view that any legal fiction 
whereby an existing restriction could simply be in creased and not constitute a 'new restriction', would 
defeat the clear purpose of the ATC which is to reduce the scope of such restrictions, starting from 1 January 1995 (but for the exceptional situations re ferred to in Article 2.4 of the ATC).  Thus, we 
consider that, setting aside the possibility of exceptions  and justifications mentioned in Article 2.4 of 
the ATC, any increase of an ATC compatible quantita tive restriction notified under Article 2.1 of the 
ATC, constitutes a 'new' restriction."
 158  The TMB was aware that the consideration of the Panel 
mentioned above coul d not be applied, mutatis mutandis , in the present case.  It noted, however, that 
the Panel's consideration was made in response to Tu rkey's claim, according to which the restrictions 
applied by it were not new, since the European Communities had similar restrictions in place when Turkey and the European Communities formed their customs union.   Therefore, without prejudice to 
other possible legal considerations  regarding similarities or differences between the case examined by 
the Panel and the one reviewed the TMB, this aspect  of the Panel's consideration appeared to be 
relevant to the present review in the sense that the Panel provided a helpful contribution to a better 
and fuller understanding of Member's rights and obliga tions arising from the provisions of Article 2.4. 
329. In light of the above, and recalling that, accordi ng to Article 2.4 "[n]o new restrictions in 
terms of products or Members shall be introduced except under the provisions of this Agreement or 
relevant GATT 1994 provisions [footnote omitted]" the TMB, while noting that, in the view of the 
EC, the European Communities had acted in confor mity with its respective obligations under the 
ATC, was of the view that the extension of the ge ographical application of the existing restrictions 
constituted new restrictions in the sense of Article 2.4.  Accordingly, these new restrictions could not 
find a justification under the ATC. 
330. The TMB observed, furthermore, that the Eu ropean Communities had also notified to the 
TMB in the past restrictions pursuant to Article 3.1 of the ATC, and provided for the progressive 
phase out of such restrictions.  According to th e information provided by the European Communities 
in response to the TMB, the geographical coverage of these restrictions had also been extended to 
include the ten new member States.  The Body observe d in this regard that Article 3 does not provide 
for the possibility of introducing new restrictions or changes in existing restrictions on the products 
covered by the ATC, except under relevant GATT 1994 provisions.  According to Article 3.3, 
notifications submitted to any other WTO bodies with respect to such actions had to be provided to 
the TMB, for its information, within 60 days of their coming into effect.  No such notification had 
been received by the TMB from the European Communities.  The Body was of the view, therefore, 
that these restrictions as extended to cover the te n new member States of the European Communities 
could not find justification under the ATC. 
331. The TMB also recalled that, as indicated in  the response received from the European 
Communities, according to the Act of Accession "the  ten new member States must apply the [EC's] 
common trade policy concerning textiles".  This imp lied that the new member States had to take over 
the trade regime of the European Communities in this  area.  Such a takeover could raise, in the view 
of the TMB, further related issues in the context of the implementation of the ATC, such as those 
related to the implementation of inte gration programmes under the Agreement. 
332. The European Communities also stated that "[ t]his extension was necessary to realize the 
enlargement process whilst ensuring the maintena nce and unhampered functioning of the expanded 
internal EU market in the interest of all ec onomic operators, including exporters. The option of 
maintaining the import regime into the new me mber States unchanged but  without allowing free 
circulation within the Community was not considered to  be in the general intere st of neither exporters, 
Community operators nor consumers."  The TM B noted that the European Communities itself 
recognized that it could have had recourse to options  other than "the extension of the geographical 
application of existing restrictions."  It was point ed out in this regard that practically the same 
                                                     
 
158 See WT/DS34/R, paragraph 9.71.  G/L/683 
 Page 109 
 
 objective could have been fulfilled through alternativ es to the imposition of quantitative restrictions.  
The TMB also observed that the enlargement pro cess had taken place only ei ght months before the 
full elimination of all existing quota restrictions resulting from the full integration of the textiles and clothing sector into GATT 1994, and that the European Communities had confirmed in the communication that the notification to the TMB of 17  March 2004 about elimin ation of restrictions on 
schedule as foreseen by the ATC by the end of 2004 remained valid also for the enlarged Community 
of 25 members.  The TMB noted, furthermore, that  the European Communities stated that "[w]hen 
adjusting and increasing the quantities from EU 15 to  EU 25 the European Communities [had] used a 
methodology which takes into account the traditional imports into the new member States, using a 
formula consisting of the average of the last thr ee years’ imports into the ten new member States 
originating in third countries, adjusted pro rata temporis."  Without prejudice to the conclusions 
reached as reflected in paragraphs 329 and 330 a bove, the TMB observed in this regard that it 
appeared that in so doing the Eu ropean Communities had not taken into account the growth provisions 
embodied in the ATC to calculate the amount by  which the level of the respective quantitative 
restrictions had already been increased by the EC. 
333. Another argument put forward by the European  Communities was that, on overall terms, the 
general incidence of enlargement had to be consider ed in the longer term and could, as such, not be 
considered more restrictive than the situation prio r to 1 May 2004.  The TMB recalled in this regard 
that, according to Article 8.1, its mandate was to s upervise the implementation of this Agreement, to 
examine all measures taken under this Agreement a nd their conformity therewith, and to take the 
actions specifically required of it by this Agreemen t.  The TMB could not, therefore, take into 
consideration the possible – and allegedly positiv e – incidence of measures taken under the ATC 
outside the ATC framework and beyond the duration of  the ATC.  In this respect the TMB observed 
that under the ATC the extension of the geographical  application of existing restrictions to Members 
which until then had not applied such restrictions c ontributed to creating a situation more restrictive 
after 1 May 2004 than before. 
334. In view of all the reasons outlined in paragr aphs 326 to 333 above, the TMB found that the 
action by the European Communities could not find justification under the provisions of the ATC. 
4. Other provisions of Article 2 
(a) Observations brought to the attention of the TMB, pursuant to Article 2.2 
335. According to Article 2.2, "… [i]t is open to an y Member to bring to the attention of the TMB, 
within 60 days of the circulation of the notificati ons [made pursuant to Article 2.1], any observations 
it deems appropriate with regard to such notifications.  Such notifica tions shall be circulated to the 
other Members for their information.  The TMB may make recommendations, as appropriate, to the 
Members concerned."  As also reflected in the 60-day deadline specified, this provision was 
particularly relevant at the beginning of the impl ementation period of the ATC, when most of the 
notifications, pursuant to Article 2.1, were made.  Nevertheless, with the accession of new Members, the TMB has received a number of observations, pursua nt to Article 2.2, also during the period of 
implementation of Stage 3 of the integration process.  All these observations are referred to in this 
section of the report in the context of the review by the TMB of th e relevant notifications received 
with reference to Article 2.1 and they had been fully  taken into account by the Body in its review of 
the respective notifications under Article 2.21.  Al so, in one specific case, the TMB made a formal 
recommendation with reference, inter alia , to Article 2.2.
159 
                                                      
159 See paragraph 220 above. G/L/683 
Page 110  
 (b) Arrangements to bring restrictions into line with  agreement year (Article 2.3) and treatment of 
MFA Article 3 measures (Article 2.5) 
336. Articles 2.3 and 2.5 were designed to provide a "bridge" between the former MFA regime and 
the entry into force of the ATC.  Article 2.3 pr ovides a means for bringing into line any period of 
restriction having a 12-month time-frame which is different from the calendar year envisaged in the 
ATC.  Members could set a notional level for the 12-month period ending 31 December 1994.  While 
no notifications were made under th is provision during the first stag e of the integration process, the 
TMB understood that, in certain cases, some adjust ments had been made and incorporated into the 
notifications of restraint levels under Article 2.1.   These latter notifications were made during the 
early part of the ATC implementation.  No notifica tion was made with reference to Article 2.3 during 
the implementation of Stage 3. 
337. Article 2.5 was intended to provide for the treat ment of MFA Article 3 actions taken before 
1 January 1995, whereby they would be permitted to re main in effect for up to 12 months with review 
of their consistency either by the Textiles Surve illance Body (TSB) up to 31 December 1994 or by the 
TMB thereafter, but under MFA rules.  Further provision was made for the handling of disputes in respect of MFA Article 4 agreements, initiated be fore 1 January 1995, wh ereby they could be 
reviewed later by the TMB, applying MFA rules.  No notifications were made citing these provisions 
during the first stage of the implementation.  The same applies to Stage 2 and Stage 3, all the more 
since Article 2.5 is a transitory provision that c ould be invoked only during a relatively limited period 
of time, after which the provision itself became de facto  inapplicable. 
(c) Safeguard measures initiated under Article XI X of GATT 1994 in terms of Articles 2.19 
and 2.20 of the ATC 
338. Articles 2.19 and 2.20 refer to safeguard me asures applied under Article XIX of GATT 1994 
during the duration of ATC implementation but duri ng a period of one year immediately following 
integration of the products concerned pursuant to  Article 2 of the ATC.  Article 2.20 sets out 
provisions which can be applied if the GATT Artic le XIX safeguard measure  is applied using non-
tariff means.  To the knowledge of the TMB, no safeguard measures have been taken during Stage 3 
that would have fallen under the provisions of Articles 2.19 and 2.20. 
5. Review of the implementation of Article 2 by the TMB pursuant to Article 2.21 
339. Article 2.21 requires the TMB to keep the impl ementation of Article 2 under review.  During 
the third stage of the integrati on process, the TMB reviewed notifications made by Members pursuant 
to Articles 2.1, 2.2, 2.6 and 2.7(b), 2.8(a) and 2.11, 2.8(b) and 2.11, 2.8(c) and 2.11, 2.15 and 2.17.  All these reviews are reported in detail in this sec tion of the report.  It is also in compliance, inter alia , 
with this requirement that the TMB has sought sev eral clarifications from Members concerned with 
respect to different aspects of their respective notif ications and, in case of need, urged Members to 
provide their replies to the questions posed.  Simila rly, the same requirement has been germane to the 
TMB's reminder to Members regarding the notification requirements concerning the final stage integration programmes. 
340. The TMB  received a communication from a number of its members, pursuant to paragraph 3 
of the TMB’s working procedures, requesting the TMB to review, pursuant to Article 2.21, the 
“[i]ntroduction by the European Union of quota restrictions in the markets of ten newly acceding States, Members of the WTO.”  The TMB review ed this matter at its meetings of May and 
June 2004.
160 
                                                      
160 The examination by the TMB of this communication is reported in detail in paragraphs 325 to 334 
above.  G/L/683 
 Page 111 
 
 341. Further, according to Article 2.21, the TMB "sha ll, at the request of any Member, review any 
particular matter with reference to the implementation of the provisions of [Article 2]".  In such cases, 
the TMB "shall make appropriate recommendations or  findings within 30 days to the Member or 
Members concerned, after inviting the participation of such Members".  During Stage 3, the TMB has 
not received any such request from any WTO Member with reference to Article 2.21. 
6. Views, comments and assessments of WTO Members in response to the TMB's general 
request for information 
(a) ITCB members 
342. In their response to the TMB's request for information and co mments in the context of the 
preparation of the present report, in their communication ITCB members raised a number of issues that are (also) relevant in relation to the implemen tation of the provisions of Article 2.  These issues 
were related to the following: 
• the pace of the phasing out of the quantitativ e restrictions, as a key consideration in 
assessing the overall implementation of the integration process under the ATC; 
 
• elimination of restrictions on non-WTO me mbers while maintaining them on imports 
of the same products from WTO Members; 
 
• treatment granted to special categories of suppliers such as, inter alia , small suppliers 
and least-developed country Members; 
 
• administrative arrangements notified under Article 2.17; 
 
• extension of the restrictions of the Eu ropean Communities to new member States' 
markets; 
 
• carry forward quotas in 2004. 
 343. The first three issues listed above, together with  the details of the respective points raised by 
ITCB members, are addressed in other sections of this report.
161 
344. With respect to the administrative arrang ements, ITCB members stated as follows: 
"The three major restraining countries have  recently notified their final integration 
programmes to the TMB.  In these notifications, it has been indicated that with the integration 
of remaining ATC products they will also elimin ate all remaining quota restrictions.  It is 
noted, however, that these notifications are silent with respect to the administrative 
arrangements and procedures that have been in place for the implementation and administration of quota restrictions.   
That notwithstanding, we note that, when re viewing these notifications, the TMB provided 
the following clarification: 
' … [The TMB] also recalled that the quantitative restrictions maintained under 
Article 2 of the ATC were being implemen ted through additional procedures, such as 
the administrative arrangements agre ed between Members and notified under 
Article 2.17.  The TMB recalled that the se administrative arrangements could only be 
deemed necessary in relation to the implem entation of restrictions applied under the 
                                                     
 
161 See in particular paragraphs 630 to 631, 580 and 517 below, respectively. G/L/683 
Page 112  
 ATC.  Therefore, with the elimination of  all quantitative restrictions under the ATC, 
all related administrative procedures and me asures, including those specified in the 
administrative arrangements notified pursuant to Article 2.17, shall also stand terminated.' (G/TMB/R/106, paragra ph 13, and G/TMB/R/107, paragraph 7). 
 It is suggested that, in its report to the C ouncil for Trade in Goods, the TMB may reiterate its 
findings with respect to the issue of administrative arrangements." 
345. Regarding the application of the EC's quota rest rictions to new member States' markets, in 
their contribution ITCB members made the following comments: 
 "The EU is being enlarged with the acce ssion of ten new member States from May 2004 
(namely, the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the 
Slovak Republic and Slovenia).  In accordan ce with Council Regulation (EC) No 487/2004 of 
11 March 2004, the EC has announced the extens ion of its quotas on textiles and clothing to 
include these newly acceding States, and determined the levels of these quota limits unilaterally. 
 
We note that these are new restrictions as they were not notified either by the EC or any of the 
acceding States pursuant to Article 2.1 of the ATC. 
 
 It is felt that the imposition of these new quotas is  not compatible with Article 2.4 of the ATC 
according to which 'no new restrictions in term s of products or Members shall be introduced 
except under the provisions of [the ATC]  or relevant GATT 1994 provisions'.  
 
 In this connection, the TMB may wish to recal l that similar restrictions imposed by Turkey 
following its customs union with the EC were f ound violative of Article 2.4 of the ATC by a 
dispute panel and the Appellate Body, and it was ruled that neither were they justified by 
reference to GATT Article XXIV.  The follo wing finding by the Panel is especially 
noteworthy: 
 
'The prohibition on "new restrictions " must be interpreted taking into 
account the preceding sentence [in Article 2.4 of the ATC]:  "The restrictions notified under paragraph 1 shall be deemed to constitute the 
totality of such restrictions  applied by the respective Members on the day 
before the entry into force of the WT O Agreement".  The ordinary meaning 
of the words indicates that WTO Members intended that as of 1 January 
1995, the incidence of restrictions under the ATC could only be reduced.  We are of the view that any legal fiction whereby an existing restriction could simply be increased and not co nstitute a "new restriction", would 
defeat the clear purpose of the ATC which is to reduce the scope of such 
restrictions, starting from 1 January 1995 ... .  Thus, we consider that, 
setting aside the possibility of exceptions  and justifications mentioned in 
Article 2.4 of the ATC, any increase of an ATC compatible quantitative restriction notified under Article 2.1 of the ATC, constitutes a "new" restriction. 
 On 28 February 1995 (therefore within the 60-day period of Article 2.1 of the 
ATC), the European Communities no tified its previous restrictions 
maintained under the MFA.  This notification referred to restrictions applicable only to EC territ ory.  After the period of 60 days (under Article 2 
of the ATC) the European Communities  is prohibited from notifying any new 
restrictions or changes to existing and notified restrictions, except if adopted 
in compliance with the ATC or any other provisions of GATT 1994.  Apart  G/L/683 
 Page 113 
 
 from these special cases the European Co mmunities is not entitled to notify 
any increase of its MFA-derived re strictions …'.  [footnote omitted]  
 The TMB may wish to comment on the introductio n of EC restrictions under reference and its 
bearing on the balance of rights and obligations under the ATC." 
 346. Finally, concerning the issue of carry forwar d in 2004, ITCB members stated the following: 
 "The overarching purpose and objective of the ATC (as also that of the WTO Agreement, of 
which the ATC is an integral part) is to increase market access opportunities.  Yet the 
restraining Members are denying the use of carry-forward facility in 2004, due to which access opportunities amounting to some 5-6 per cent are being curtailed.  
 
The TMB may wish to bring this issue in its report, including, inter alia , with reference to 
Article 1.5 of the ATC which required Members to allow for continuous autonomous adjustment and increased competition in their markets."  
(b) Canada 
347. The communication received from Canada, providi ng information in response to the general 
request for information of the TMB included elements that are (also) relevant in the context of the 
implementation of the provisions of Article 2.  These elements covered issues such as the "liberalization schedule", improved access for imports  from least developed countries and the impact 
of the implementation of the provisions related to small suppliers.  These issues are addressed in other 
sections of the report.
162 
348. In addition, under the heading of "Accelerated growth rates of quota limits", the 
communication from Canada stated the following: 
"The growth of Canada’s domestic apparel ma rket, according to Canada’s Department of 
Industry, has been 1.5 per cent annually for the past  five years.  By comparison, with very few 
exceptions, the average growth rate for apparel quotas into Canada is in excess of 8 per cent a 
year.  
  Imports have been growing significantly also because under the ATC growth-on-growth 
provisions, our annual quotas are now growing at a fast clip.  In terms of major suppliers, for 
example, India benefits from an annual com pound growth rate of almost 11.5 per cent per 
annum;  and Pakistan’s growth rates are e xpanding by 11.5-14.7 per cent per annum."  
 
349. In the same submission, Canada pointed out that  it "has not requested any consultations under 
Article 6 of the special safeguards provision.  This in itself assures meaningful steps towards the full 
integration of textiles and clothing under the ATC." 
350. Canada also stated, with respect to the ad ministrative arrangements undertaken pursuant to 
Article 2.17, that they were "used to administer the provisions of the ATC and will expire along with 
the ATC on 31 December 2004." 
(c) European Communities 
351. The communication received from the Europ ean Communities in response to the TMB's 
request for information, clarifications or comment s in the context of the preparation of the present 
                                                     
 
162 See, in particular, paragraphs 632 and 518 below. G/L/683 
Page 114  
 report contained a number of points relevant, inter alia , to the implementation of the provisions of 
Article 2.  These were related to the following: 
• the implementation of the integration programmes; 
 
• the elimination of quotas vis-à-vis  non-WTO countries; 
 
• carry-forward facilities in 2004; 
 
• administrative arrangements  notified under Article 2.17. 
 352. The first two issues are addressed in another section of the present report.
163 
353. With respect to the non-availability of carry  forward in 2004, the European Communities 
stated as follows: 
• "The issue of carry-forward facilities in 2004  has already been ex amined or discussed 
on several occasions without any conclusions being reached, lastly by the WTO 
General Council of July of last year.  The Community continues to be of the opinion 
that this is not foreseen by the provisions of the ATC.  On the other hand, the last 
year of restraint is to be followed by lib eralization upon expiry of the ATC, as already 
notified to the TMB by the Community  on 17 March of this year." 
 354. As to the administrative arrangements notified under Article 2.17, the European Communities 
stated: 
• "With reference to administrative arrangements and procedures for the management 
of restrictions [...], attention should be draw n to the fact that, as concerns respect for 
annual restrictions, the date of shipment , and not the date of import, is the 
determining factor for imposition against quot a.  Consequently, goods shipped before 
the end of 2004 but arriving early 2005 will therefore have to be set off against the 
quota for 2004." 
 (d) United States 
355. The communication received from the United States in response to the TMB's request for 
information, clarifications or comments in the context of the preparation of the present report 
contained a number of points relevant, inter alia , to the implementation of the provisions of Article 2.  
These were related to the following: 
• compliance with the integration programme set forth in Article 2; 
 
• the treatment granted to special categories of suppliers such as small suppliers, least 
developed Members, cotton-producing exporting Members; 
 
• the non-availability of carry forward in 2004; 
 
• administrative arrangements notified under Article 2.17. 
 
                                                     
 
163 See, in particular, paragraphs 633 and 581 below.  G/L/683 
 Page 115 
 
 356. The first two issues are addressed in other sections of this report.164 
357. As regards the fate of the administrative arra ngements notified pursuant to Article 2.17 after 
the expiry of the ATC, the Unites States stated: 
"Article 2.17 of the ATC, along with the ot her provisions of the ATC, will terminate on 
1 January 2005.  Thus, this pa ragraph would not justify any restrictions on trade that are 
inconsistent with the WTO Agreements, includi ng GATT 1994, after that date.  However, to 
the extent agreed administrativ e arrangements are consistent w ith other obligations under the 
WTO Agreements, including GATT 1994, the United States does not believe that the termination of the ATC requires their terminati on.  Nothing in the ATC requires Members to 
remove measures that are consistent with the WTO Agreements."  
358. As to the question of the non-availability of carry forward in 2004, the United States stated: 
"Carry forward, which is the borrowing of qu ota from the subsequent agreement year for use 
in the current year, is obviously unavailable in the final agreement year.  Countries which 
chose to borrow from future quotas all recognized  that, ultimately, that capability would cease 
in the final year, and that they had already obtained the benefit in access through their initial 
borrowing.  Most of our bilateral agreements st ate specifically that there is no carry forward 
in the final year, just as they say that there is no carryover in the first year."   
7. Further comments and observations by the TMB 
359. As detailed in the overview presented in this section of the report, following the accession of 
new Members to the WTO, during the third stage of the integration process the TMB was compelled 
to review, pursuant to Article 2.21, several new no tifications received with reference to Article 2.1 
and the respective provisions of the legal instruments of accession concerned.  Most of these notifications were technically co mplex and very often not sufficiently clear or lacking precision 
regarding certain important aspects involved.  Th erefore, their review was time-consuming, in 
particular with respect to elements regarding which the need of obtaining necessary clarifications had 
arisen.  The TMB has done its utmost with a view  to establishing the proper facts and examining all 
the related maters, in accordance with the requirement s of Article 2.21.  It is also appropriate to 
reiterate in this context that in reviewing th ese notifications, the related observations received 
pursuant to the provisions of Article 2.2, had been fully taken into account.  
360. Following the accession of new Members toward s the end of Stage 2 of the integration 
process and at the beginning of implementation of St age 3, the total number of restrictions taken over 
to the ATC regime and continuing to be maintain ed under it has increased quite significantly, the 
restrictions applied on imports from these new Memb ers of the products not yet integrated being 
governed by the provisions of the ATC as from the da te of their membership.  As a result and also 
illustrating the choice of products selected for in tegration, although inte gration programmes for 
Stages 1 to 3 have been implemented, the total numbe r of specific restrictions maintained at present, 
respectively, by Canada, the European Communities and the United States is higher than the number 
of restrictions applied by them under the ATC duri ng the implementation of Stage 1 of the integration 
process. 
361. Apart from the application by the European Communities, as of 1 May 2004, of its 
restrictions to the markets of its ten new member States, no other matter has been referred to the TMB 
or brought to its attention during the implementation of Stage 3 that could also raise issues relevant in 
the context of Members' compliance with the pr ovisions of Article 2.4.  Noting the concerns 
expressed by ITCB members that "the imposition of these new quotas is not compatible with 
                                                     
 
164 See, in particular, paragraphs 634 and 519. G/L/683 
Page 116  
 Article 2.4 of the ATC [...]", the TMB also notes,  not without some concern, that the European 
Communities did not find it appropriate to provide  the relevant information and communication 
regarding this measure prior to its implementation, in spite of the fact that several exporting Members 
had raised this matter long before in a higher WTO body. 
362. The TMB also notes in this regard that its exam ination of this matter, at the request of a 
number of its members, prompted the European Co mmunities to provide information on the measures 
taken by the European Communities including, inter alia , a reference to the relevant EC Council 
Regulation.  Noting that this does not substitute fo r the proper notification of the measures in question 
by  the European Communities, the TMB observes,  however, that the information received enabled 
the TMB to have a better understanding of this  matter on the basis of which the Body could 
pronounce itself on the justification (or lack thereo f) of the measures in question under the provisions 
of the ATC.
165  
363. The TMB has to reiterate its concerns that th e applicable provisions of the respective legal 
instruments of accession to the WTO do not provid e unambiguous guidance regarding the appropriate 
methodology to be applied in implementing the grow th-on-growth provisions (Articles 2.13 and 2.14) 
in relation to the level of restrictions maintained on imports from newly acceded Members.  The TMB 
considers that it has devoted the necessary time and e fforts to the examination of all aspects of this 
matter and has gone as far as it was possible in its  review.  In the absence of clear guidance from 
Members, the Body has taken a careful and reasonable approach in identifying those minimum requirements that should have been met, in any even t, by the Members maintaining restrictions with 
reference to Article 2.1.  It is regrettable that  the United States, though using its rights under the ATC, 
did not find it appropriate to implement the adju stments to its respective methodology applied as 
advocated by the TMB on two occasions. 
364. With regard to the impact of the implemen tation of the growth-on-growth provisions the 
TMB recalls that for the preparation of its second co mprehensive report, in response to its request for 
information and comments, the members of th e ITCB provided some comments regarding the 
implementation of these provisions of Article 2.
166  The TMB notes, furthermore, the statement of 
Canada, according to which "[i] imports have been growing significantly also because under the ATC 
growth-on-growth provisions, [Can ada's] annual quotas are now growing at a fast clip."  It can be 
observed that achieving an accelerated increase of the levels of the remaining restrictions has been 
exactly the function of the growth-on-growth provisio ns defined in Article 2.  A general reference to 
an annual compound growth rate cannot be considered , however, as a fully reliable indication, since it 
can disguise potentially significant differences in the growth rates applied to the particular specific 
limits.   
365. As far as the issue of carry forward for 2004 is concerned, the TMB notes that the related 
concerns were already raised by a number of e xporting Members at the level of the General Council 
in mid-2003.  Reiterating its hope that appropriate solu tions to this matter, acceptable to all Members, 
will be found and adopted by the General Council in the near future , the TMB observes also that in 
paragraphs 257 to 260 above, it has made an a ttempt of summarizing those possible legal and 
economic arguments that could be re levant in this context.  Also, appropriate solutions to avoiding 
potential reduction in market access opportunities in 2004 can be sought by relying on a number of different mechanisms or a combination thereof. 
366. With respect to the administrative arrangeme nts notified, pursuant to Article 2.17, and 
reviewed by the TMB during Stage 3 of the integration process, it has to be observed that in particular 
those submitted, respectively, by the European Communities and the United States, because of the 
approach taken of drawing from previously existing bilateral agreements, resulted in some respects in 
                                                     
 
165 See paragraphs 325 to 334 above for the detailed examination of this matter by the TMB. 
166 See G/L/459, paragraphs 278.   G/L/683 
 Page 117 
 
 texts which are not easily understood and, also in so me instances, appear to give the impression that 
some of the provisions of the administrative arrangements are not fully consistent with the others.  In the view of the TMB, the very careful review of  these arrangements has been of primary importance 
with a view to obtaining some legal certainty that  the administrative arrangements concerned would 
be implemented in full compliance with the relevant provisions of the ATC. 
367. The TMB notes the statement of ITCB memb ers according to which the notifications, 
respectively, by Canada, the European Communities a nd the United States regarding their final stage 
of integration to be implemented on 1 January 2005 "[...] are silent with respect to the administrative 
arrangements and procedures that have been in place for the implementation and administration of 
quota restrictions."  With respect to the suggesti on that "in its report, [the] TMB may reiterate its 
findings with respect to the issue of administrative arrangements", attention is  drawn to the relevant 
portions of this report.
167 
368. The TMB notes the statement by Canada accordi ng to which the administrative arrangements 
undertaken pursuant to Article 2.17 were used to  administer the provisions of the ATC and will 
expire, along with the ATC, on 31 December 2004. 
369. With respect to the comments made by the European Communities regarding the 
"administrative arrangements and procedures for the management of restrictions", the TMB recalls 
that, pursuant to the provisions of Article 4.1, "[r]es trictions referred to in Ar ticle 2, and those applied 
under Article 6, shall be administered by the expo rting Members.  Importing Members shall not be 
obliged to accept shipments in excess of the restrictions notified under Article 2, or of restrictions 
applied pursuant to Article 6."  The TMB also re calls, however, that all restrictions under the ATC 
shall stand terminated on 1 January 2 005, as clearly provided in Article 9. 
370. As far as the statement included in the US' co mmunication is concerned, the TMB is of the 
view that Article 2.17 per se  does not justify any restriction under the ATC either, rather, it is 
intended to provide appropriate arrangements with a view to implementing restrictions notified 
pursuant to Article 2.1.  Regarding comments made with respect to the period following the 
termination of the ATC, the TMB observes that with  the expiry of the ATC on 1 January 2005, all the 
provisions of the Agreement will expire and the measures notified pursuant to those provisions will 
have to cease to be applied, unless justified under other applicable provisions of the WTO Agreement, 
including GATT 1994. 
B. RESTRICTIONS OTHER THAN THOSE TAKEN OVER FROM THE FORMER MFA REGIME .  ISSUES 
RELATED TO THE IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 3 
371. The ATC contains provisions with respect to a ll restrictions affecti ng imports of products 
falling under its coverage, as defined in the Annex to the Agreement.  While the restrictions carried 
over from the former MFA regime (i.e. all MFA or MFA-type restrictions) are covered by the provisions of Article 2
168, all other restrictions, whether jus tified or not under GATT 1994, are dealt 
with in Article 3.  The footnote to Article 3.1 specifies that "[r]estrictions denote all unilateral 
quantitative restrictions, bilateral arrangements and other measures having a similar effect."  All such 
restrictions had to be notified to the TMB, w ithin a specified time-frame together, whenever 
applicable, with information related to their jus tification under GATT 1994.  If and as long as they are 
justified, they are covered by the applicable provisions of GATT 1994, and can continue to be 
maintained.  Restrictions not justified under GA TT 1994 had to be either brought into conformity 
with GATT 1994 within one year or have to be ph ased out during the duration of the ATC, according 
to the procedures laid down in Article 3.  In add ition, Members have the obligation to provide to the 
                                                      
167 See, in particular, paragraph 137 above. 
168 See Section II, Subsection A of Pa rt Three of the present report. G/L/683 
Page 118  
 TMB, for its information, notifications submitted to any other WTO bodies with respect to any new 
restrictions or changes in existing restric tions taken under any GATT 1994 provision.   
1. Restrictions notified pursuant to Article 3.1 
372. Article 3.1 provides for the notification, within 60 days following the entry into force of the 
WTO Agreement, of all restrictions on textile a nd clothing products, other than those maintained 
under the MFA and covered by Article 2 of the AT C, whether consistent with GATT 1994 or not.  
The notifications were to indicate,  where applicable, the GATT 1994 justification for the restrictions.  
It follows from the deadline specifi ed in Article 3.1 that most of such notifications were received 
during the early part of the implementation of the ATC and have been covered in detail by the first 
comprehensive report adopted by the TMB.
169  The measures notified were also summarized in the 
second comprehensive report, together with developm ents that occurred during the implementation of 
Stage 2 of the integration process.170  With the accession to the WTO of new Members for which the 
WTO Agreement entered into force on the day of thei r accession, a number of new notifications were 
also received during Stage 3. 
(a) Restrictions notified during earlier stages of the integration process and still in force at the 
beginning of implementation of Stage 3 
373. It would appear that in addition to the restrictions notified by Japan and Slovenia, subject to a 
progressive phase-out programme under the provisions of Article 3.2(b)171, of the other restrictions 
notified under Article 3.1 during the early period of  ATC implementation, those notified, respectively, 
by Malaysia, Malta, Mexico, Morocco, Peru, Thai land and Venezuela were still in force at the 
beginning of the implementation of Stage 3, and,  in all likelihood, these measures continued to be 
applied during this stage.  Th is assumption is based on the fact  that none of these Members has 
provided information to the TMB, pursuant to Article  3.3, with respect to changes in the respective 
restrictions previously notified.   
374. In light of the above, it would appear that Malaysia continued to apply a non-automatic 
import licensing procedure on batik sarongs which, acco rding to the notification made in 1995, was 
justified under GATT Article XVIII:C and had been notified under GATT 1947 in  July 1984.  Malta 
reported in 1995 quantitative restrictions on the im portation of hand-made lace, which, according to 
the notification, had been justified under the terms of GATT Article XX(f).  The TMB has not 
received any information regarding whether Malta h as eliminated these measures, or not, following its 
accession to the European Communities.  Accordi ng to its notification made in 1995, Mexico 
maintained a ban on imports of used clothing, which found its "basis and justifi cation in the Protocol of 
Accession of Mexico to GATT 1947, which forms an integral part of GATT 1994 in accordance with 
Annex 1A, paragraph 1(b)(ii) of the Final Act of the Uruguay Round".  In reviewing this notification 
during Stage 1 of the integration process, the TM B sought additional information from Mexico with 
respect to the particular provision of the Protocol  of Accession under which this  import prohibition fell.  
In the absence of additional information from Mexico , despite further reminders, the TMB decided to 
conclude the consideration of this notification, noting that Mexico had not provided the additional 
information which had been reques ted.  Morocco, Peru and Venezuela reported in 1995 that they 
maintained restrictions on the im portation of used or worn clothi ng, citing the provisions of GATT 
Article XX(b).  Thailand notified in 1995 that it maintained non-automa tic import licensing under 
GATT Article XVIII:C on silk yarn and jute bags, app licable to all sources.  During Stage 1, the TMB 
sought more detailed informati on from Thailand on this non-automatic import licensing system, 
including whether it had been notified to the GATT or to the WTO.  In the absence of additional 
                                                      
169 See G/L/179, paragraphs 228 to 236. 
170 See G/L/459, paragraphs 342 to 352. 
171 See paragraphs 393 to 397 below.  G/L/683 
 Page 119 
 
 information, despite further reminders, the TMB d ecided to conclude the consideration of this 
notification, noting that Thailand had no t provided the additional information. 
(b) New notifications received with reference to Article 3.1 and reviewed by the TMB during 
Stage 3 
375. The respective provision of the Report of the Wo rking Party on the Accession of China spells 
out the possibility for WTO Members to notify certain  quantitative restrictions that "were in force on 
the date prior to the date of China's accession [ ...] as being the base levels for the purpose of 
application of [...] Article 3 of the WTO Agreement on Textiles and Clothing ("ATC").172  Three such 
notifications affecting certain imports from China were received pursuant to Article 3.1, respectively 
from the European Communities, Turkey and Japan .  Also, China submitted a notification on 
restrictions it applies on the export of certain product s with reference to Article 3.1.  Furthermore, 
notifications were provided by Brazil and Poland on certain restrictions applied on imports from 
Chinese Taipei.  Finally, the restrictions previ ously notified by the European Communities under 
Article 3.1 had also been affected as a result of the EC's enlargement. 
(i) Notification by the European Communities 
376. Following the accession of China, a notifica tion received from the European Communities 
indicated that the restrictions notified under this  provision of the ATC had been taken over from the 
EC's previous bilateral agreement with China an d these restrictions had been "maintained under the 
non-MFA Agreement" between the two Parties.  The no tification revealed that on the day prior to the 
date of China's accession, the European Communities had maintained altogether 30 specific restraints 
(of which 25 affecting entire categor ies and five parts of categories)  falling under the provisions of 
Article 3.1.  Since all these restrictions are subject to a progressive phase-out programme, the 
respective information is provided in the cont ext of the implementation of Article 3.2(b).173 
377. As a separate matter, in the context of its examination of a communication received from a 
number of its members regarding the “[i]ntroduction by the European Union of quota restrictions in 
the markets of ten newly acceding States, Member s of the WTO”, the TMB observed that according 
to the information provided by the European Comm unities in response to the TMB, the geographical 
coverage of the restrictions previously notified by the European Communiti es pursuant to Article 3.1 
had also been extended to include the ten new member  States.  The Body observed in this regard that 
Article 3 does not provide for the possibility of intr oducing new restrictions or changes in existing 
restrictions on the products covered by the ATC, except under relevant GATT 1994 provisions.  
According to Article 3.3, notifications submitte d to any other WTO bodies with respect to such 
actions had to be provided to the TMB, for its inform ation, within 60 days of their coming into effect.  
No such notification had been received by the TM B from the European Commu nities.  The Body was 
of the view, therefore, that these restrictions as extended to cover the ten new member States of the 
European Communities could not find justification under the ATC.174 
(ii) Notification by Turkey 
378. Turkey notified under Article 3.1 "the required in formation regarding quan titative restrictions 
[on imports from China] not covered by the MFA Agre ement".  Subsequently, Turkey specified that 
its notification contained "the quantitative restricti ons taken over from its prev ious bilateral agreement 
with China [...] maintained under the non-MFA Agre ement [...]" between the two Parties.  The 
number of the restrictions notified corresponded to th at of the notification received from the European 
Communities and they affected the same product categories and parts of categories as in the case of 
                                                      
172 See WT/ACC/CHN/49, paragraph 241. 
173 See paragraph 398 below. 
174 See also paragraph 330 above. G/L/683 
Page 120  
 the EC.  As to the progressive phase-out programme of these restrictions, please refer to the 
information provided in the context of  implementation of Article 3.2(b).
175 
(iii) Notification by Japan 
379. Japan provided a notification with reference to Article 3.1 indicating that it has been 
maintaining quantitative restrictions (in the form of an import approval system) on imports of silk 
yarn and silk fabric from China.  In reply to the TMB's request for clarifications, Japan explained in a 
further communication that since 1976, the Government  of Japan and the Government of China have 
held consultations every fiscal year to determine quot a level of silk yarn and silk fabric imported from 
China.  Through these consultations, both Members have  determined the quota levels of silk yarn and 
silk fabric, based on the level of the preceding fi scal year, considering supply-demand of silk products 
in the Japanese market as well as Japanese economic s ituation.  The quota levels were administered 
by the importing Member, based on an import approval  system pursuant to the Foreign Exchange and 
Foreign Trade Law of Japan.  This additional communication from Japan included information on the 
respective restraint levels established for the fi scal year 2001.  The progressive phase-out programme 
of these restrictions is detailed in the contex t of the overview of the implementation of 
Article 3.2(b).176 
(iv) Notification by Brazil 
380. Following the accession of Chinese Taipei to th e WTO, the TMB considered a notification 
made under Article 3.1 by Brazil.  According to this notification, Brazil maintained a quantitative 
restriction on imports from Chinese Taipei of certain  man-made knitted or crocheted fabrics.  Brazil 
stated that the programme of phase-out of the restriction would be notified to the TMB according to the terms laid down in Article 3.2(b).
177 
(v) Notification by Poland 
381. A notification was made under Article 3.1 also by Poland, following Chinese Taipei's 
accession to the WTO.  According to this notifi cation, Poland maintained  a safeguard measure on 
imports of synthetic fabrics originating in Chinese Taipei.  At the same time, Poland informed the 
TMB that the measure would be withdrawn on 15 September 2002.178 
(vi) Notification by China 
382. In February 2002, China provided a notification pursuant to Article 3.1.  The notification 
indicated that China maintains quan titative export restrictions on silk yarn and woven fabrics of silk 
and provided information on the respective restraint levels defined for the year 2001.  According to 
the notification, "[t]he programme to phase out the restrictions will be notified to the TMB no later 
than 10 June 2002." 
383. In starting its examination of the notificati on received from China, the TMB decided to seek 
clarification, inter alia , on whether the export restrictions were applied on a global basis or to selected 
WTO Members and how they operated in practical term s.  With respect to the statement of China that 
"the programme to phase-out the restrictions will be  notified to the TMB no later than 10 June  2002", 
the TMB, referring to paragraph 1.3 of Part I of the Protocol of Accession of China to the WTO and 
to Article 3.2(b) of the ATC, expressed its expectation that this phase-out programme would be 
provided in the near future.  Furthermore, the TMB observed that China, though it had notified that it 
                                                      
175 See paragraph 399 below. 
176 See paragraphs 400 and 401 below. 
177 See paragraph 402 below. 
178 See paragraph 403 below.  G/L/683 
 Page 121 
 
 wished to retain the right to use the transitiona l safeguard mechanism during the transition period of 
the Agreement, at the time of  the notification made under Article 3.1 had not yet notified the 
programmes of integration referred to in Articles 2. 6, 2.8(a) and 2.8(b) of the ATC.  The TMB, 
therefore, sought clarification regarding the extent (i f any) to which the export restrictions notified by 
China were being affected by these programmes of integration. 
384. In its response to the TMB, China specified that  the export quotas notified, affecting silk yarn 
and woven fabrics of silk, were a pplied on a global basis.  In practice, the Ministry of Foreign Trade 
and Economic Cooperation (MOFTEC) allocated quot as to provinces based on past performances.  
Provincial offices of MOFTEC further allocated quotas to different enterprises, taking into 
consideration past performances, enterprise capaci ties and market situation.  A quota-holding 
enterprise could then make applications to the pr ovincial office of MOFTEC for export licence within 
its quota limit.   
385. In resuming its examination of this notification,  also on the basis of additional information 
submitted by China, the TMB considered differe nt aspects involved, such as the scope of the 
application of Article 3 (i.e. whether it also appli es to export restrictions);  how the recourse to the 
provisions of Article 3 fits with provisions of th e Report of the Working Party on the Accession of 
China dealing with export restrictions;  the manage ment  and administration of the restrictions in 
question and their system of allocation, including the availability of information, or the lack thereof, 
on the possible breakdown of export quotas according to destinations. 
386. The TMB noted, inter alia , that Article 3.1 uses the word "restrictions" without any additional 
qualifications and that the footnote to this provi sion related to the same term states the following: 
"Restrictions denote all unilateral quantitative restri ctions, bilateral arrangeme nts and other measures 
having a similar effect."  The language of Article 3 does not limit the application of this provision to 
any specific type of restriction.  The export quotas maintained by China affecting silk yarn and woven 
fabrics of silk are, undoubtedly, unilateral quan titative restrictions, corresponding to the definition 
provided in the footnote referred to above.  Therefore, also in view of the lack of any further precision 
in the respective provision of the ATC, export restrictions are not a priori  excluded from the scope of 
application of Article 3.  This conclusion is also in line with past practice in the TMB, whereby the 
notification under Article 3 of certain measures af fecting exports of some textile products was not 
questioned.179 
387. The TMB noted, furthermore, that the additional not ification by China referred to "restrictions 
on certain textile products which fall under the coverage of ATC and are subject to Article 3 of [that] 
Agreement".  This reference presumably indicated that , in the view of China, the measures in question 
should be considered under the applicable provi sions of the ATC.  It was observed that the 
notification of these export restrictions under Artic les 3.1 and 3.2(b) did not appear to be in 
contradiction with the relevant portion of the Repor t of  the Working Party on the Accession of China. 
388. The TMB also recalled that in response to the TMB's queries, China had provided 
information regarding the management and administ ration of the export restrictions, including their 
system of allocation.  Though issues had been raised  regarding the possibility of getting indications or 
statistical information on the possible allocation of export quotas according to destinations, it was 
understood that the quotas were applied on a global  basis and that allocation by the Ministry of 
Foreign Trade and Economic Coopera tion (MOFTEC), also through its provincial offices, was limited 
to the designation of those Chinese domestic ente rprises that could apply for export licences within 
their allocated quota limits. 
                                                      
179 In 1995, Japan notified the application of an export  approval system affecting certain products with 
certain specified destinations (United States, European Communities). G/L/683 
Page 122  
 389. The TMB considered also the progressive ph ase-out programme provided by China in the 
sense of Article 3.2(b).
180  In doing so, it could be also established that the products subject to the 
restrictions had not been included by China in its Stage 1 to 3 integration programmes. 
2. Progressive phasing out of restrictions not justified or their being brought into 
conformity with GATT 1994 
390. Article 3.2 provides that "Members maintaini ng restrictions falling under paragraph 1 [of 
Article 3], except those justified under GATT 1994 provision, shall either:  
 (a) bring them into conformity with GATT 1994 within one year following the entry into 
force of the WTO Agreement, and notify this  action to the TMB for its information;  
or 
 
 (b) phase them out progressively according to a programme to be presented to the TMB 
by the Member maintaining the restrictions not later than six months after the date of entry into force of the WTO Agreement.  This programme shall provide for all 
restrictions to be phased out within a period not exceeding the duration of this Agreement.  The TMB may make recommendations to the Member concerned with 
respect to such a programme". 
 (a) Measures brought into conformity with GATT 1994, pursuant to Article 3.2(a) 
391. During the period of implementation of Stage 3 of the integration process, no notification has 
been received by the TMB with explicit reference to Article 3.2(a).  It can be established, therefore, 
that none of the Members which notified restrictions  with reference to Article 3.1 during Stage 3 of 
the integration process invoked specifically the provis ions of Article 3.2(a).  It should be noted, 
however, that the elimination by Poland of the r estrictions maintained on certain imports from 
Chinese Taipei after less than nine months of  Chinese Taipei's WTO membership can also be 
considered as a measure falling under Article 3.2(a).
181   
(b) Programmes for the progressive phasing-out of restrictions within a period not exceeding the 
duration of the ATC, pursuant to Article 3.2(b) 
392. During the implementation of Stage 1, three Members provided progressive phase-out 
programmes of restrictions notified under Article 3.1, namely Hungary, Japan and Slovenia.  While 
Hungary eliminated all its restrictions vis-à-vis  all WTO Members on 1 January 1998182,  Japan and 
Slovenia continued to maintain restrictions a nd implement their respective programmes falling under 
Article 3.2(b) also during Stage 3 of the integration process.  Furthermore, during the same stage, the 
TMB also reviewed the respective phase-out progra mmes applicable to restrictions notified under 
Article 3.1 at the early part of implementation of Stage 3. 
(i) Continuation of  the implementation of th e respective programmes notified during Stage 1 
(1) Japan 
393. During Stage 1, Japan reported that the removal of its restrictions relating to the importation 
of silk yarns and fabrics from Korea would be achi eved within the parameters of Article 3.2(b) 
i.e. "within ten years after the date of the enteri ng into force of the WTO Agreement".  However, the 
specific programme was to be linked to the import sy stem for raw silk which would not be finalized 
                                                      
180 See paragraph 404 below. 
181 See paragraphs 381 above and 403 below. 
182 See G/L/459, paragraph 358.  G/L/683 
 Page 123 
 
 until the last year of the implementation of the Ag reement on Agriculture.  Hence, according to the 
notification, the final terms of the phase out of th e restrictions for fabrics and yarns could only be 
provided by 31 March 2001, when Japan would re view the necessity of further maintaining the 
measures in question.  The TMB expressed the expectation that the implementation of the 
programme, in conformity with Article 3.2(b), wo uld be such as to provide, as from the beginning, 
appropriate progressive increases to the level of restri ctions on imports of silk yarn and silk fabric 
from Korea.  Subsequently, Japan provided information to the TMB on the consultations held with 
Korea, as a result of which the two governments "c ame to share the recognition" of specified trade 
levels in the two products concer ned for the Japanese fiscal year 1996.  The TMB observed that the 
restraint levels agreed provided some increases compar ed to the previous period.  At the same time, 
the TMB accepted, in accordance with its working pr ocedures, the request made by one of the parties 
that the relevant information on the spec ific levels should be kept confidential.183 
394. During the implementation of Stage 2, Japan ke pt the TMB informed on the respective trade 
levels applied to imports of silk yarn and silk fa brics  for the fiscal years 1998, 1999 and 2000 which 
were the result of consultations held with Korea.   It was observed that small increases in the 
respective levels had been achieved.  In a sub sequent communication, dated April 2001, Japan 
provided information on "the continuation of the measu res on importation of silk yarn and silk fabric 
from the Republic of Korea after April 2001".  According to the communication, based on the 
Uruguay Round Agreement on Agriculture, import restrictions applied to imports of raw silk, from which silk yarn and silk fabric are made, were conve rted into ordinary customs duties in April 1995.  
According to this tariff system, the tariff equivale nt imposed on the imported raw silk was 6,978 yen 
per kilogramme for the Japanese Fiscal Year 2000.  "Consequently, the Japanese domestic silk 
industry is still unable to obtain raw silk at the inte rnational market price.  This tariff equivalent 
would be maintained until the WTO agricultural ne gotiation is concluded.  Since the negotiation is 
still underway, the situation surrounding Japan's impor t of silk will not change from April [2001].  
Therefore, the Government is not in the position to review the necessity to maintain the measures.  
Thus the Government has decided to postpone the review and maintain the present measures".  In 
taking note of Japan's communication, the TMB recalle d that, pursuant to Article 3.2(b) and to the 
related commitment undertaken by Japan, these meas ures had to be completely phased out over the 
duration of the ATC.  Furthermore, the TMB reitera ted its expectation that the implementation of the 
continued phase-out programme, in conformity with  Article 3.2(b), would be such as to provide 
appropriate progressive increases to the level of restri ctions on imports of silk yarn and silk fabric 
from Korea.
184 
395. Subsequently, Japan provided information to th e TMB on the respective trade levels applied 
to imports of the two products for the fiscal year s 2001 and 2002.  These levels  were established in 
consultation with Korea and represented an increase compared to the corresponding previous levels 
(an increase of 3 per cent with respect to both prod ucts in fiscal year 2001 and a further increase, 
respectively, of 3.8 and 4.8 per cent in fiscal y ear 2002).  The TMB has not received information 
regarding the annual levels applie d to fiscal years 2003 and 2004. 
 (2) Slovenia 396. Slovenia notified a three-phase programme to rem ove quantitative restrictions on an extensive 
list of textile and clothing products, identifyi ng the specific products for liberalization on 
1 January 1997, 1 January 2001 and 1 January 2005.  In addition, the quota levels for 1996 had been 
increased by 7 per cent.  Slovenia subsequently conf irmed that restrictions had been abolished on 
1 January 1997, as scheduled, for 95 of the total of  140 products.  In January 2001, the TMB sought 
information from Slovenia on the implementation of the second phase of its progressive phase-out 
programme.  In reply, Slovenia confirmed that the quantitative restrictions which were to be 
                                                     
 
183 See G/L/459, paragraph 356 and related footnote. 
184 See G/L/459, paragraphs 360 and 361 G/L/683 
Page 124  
 eliminated on 1 January 2001, according to the ph ase-out programme presented, had actually been 
eliminated.
185 
397. No communication has been received either from the European Communities or from 
Slovenia regarding the possible impact of Slovenia's EU accession on the phasing-out of the remaining restrictions.  It would appear, however , that by taking over the EC's respective trade 
regimes Slovenia was supposed to eliminate the remaining restricti ons it had notified under Article 3. 
(ii) New phase-out programmes notified during Stage 3 
(1) European Communities 
398. In examining the notification received, pur suant to Article 3.1, from the European 
Communities,  of the restrictions main tained on certain imports from China
186, the TMB noted, inter 
alia, the confirmation of the EC according to which the annual growth rates that had been applied 
under the bilateral agreement in force between the European Communities and China prior to the date 
of China's accession to the WTO would continue to  apply in 2002, 2003 and 2004.  As regards the 
details regarding a phase-out programme in the sense of  Article 3.2(b) of the restrictions notified, the 
European Communities provided a list of the r estrictions that had been eliminated on 
11 December 2001 as a result of the integration programmes of the European Communities for 
Stages 1 and 2, as well as a list of the restrictions eliminated as of 1 January 2002 as a result of the 
implementation of the third stage of the inte gration programme of the European Communities187.  
Furthermore, the European Commun ities stated that "according to A nnex I to the bilateral agreement 
[between the European Communities and China] the Commission intends to phase out the 'restrictions 
on all remaining products no later than 1 January 2005', depending on China's progress in removing 
state trading in silk products.  In addition, both parties can at any time request consultations in this 
regard".  The TMB understood that, in any event, a ll remaining restrictions under Article 3.1 would be 
increased annually by the application of the respectiv e growth rates notified a nd would be eliminated, 
at the latest, on 1 January 2005.  On that basis, the TMB took note of the notification. 
(2) Turkey 399. As regards the details regarding a phase-out programme in the sense of Article 3.2(b) of the 
restrictions notified pursuant to Article 3. 1 and applied on certain imports from China
188, Turkey 
provided a list of the restrictions that had been  eliminated on the day of accession of China to the 
WTO, as well as a list of the restrictions eliminated as of 1 January 2002.189  Furthermore, Turkey 
stated that it "intends to 'phase-out' the restrictions  on all remaining products no later than 1.1.2005".  
Also, Turkey confirmed that the growth rates noted in Annex to the notification made under 
Article 3.1 applied to the remaining quantitative rest rictions in the years 2002-2004.  On that basis, 
the TMB took note of the notification. 
(3) Japan 400. With respect to what constituted a phase-out pr ogramme in the sense of Article 3.2(b) of the 
restrictions maintained by Japan on certain imports from China
190, the TMB noted, inter alia , that, 
according to Japan's notification, the quota levels  would be increased annually and the measures 
would be removed no later than 1 January 2005.  The TMB observed that in Japan's response to 
                                                      
185 See G/L/459, paragraphs 357 and 362. 
186 See paragraph 376 above. 
187 See paragraph 115 above. 
188 See paragraph 378 above. 
189 See paragraph 128 above. 
190 See paragraph 379 above.  G/L/683 
 Page 125 
 
 questions posed by the TMB, though the quota leve ls for the Japanese fiscal year 2001 had been 
provided and the functioning of the phase-out pr ogramme explained, no information had been 
provided on the quota levels for the fiscal year 2002,  nor had information been made available as to 
when the annual consultations between Japan and Ch ina with a view to determining those levels 
would take place.  The TMB further observed that in order to allow for predictability, trade levels for 
the coming year should normally be known sufficientl y in advance, so that exporters and importers 
could plan their business accordingly.  The TMB was thus particularly concerned that the Japanese 
fiscal year 2002 had started without the levels for silk yarn and silk fabric for that year being agreed.  
The TMB, therefore, expected to be informed by Japan as soon as possible of the timing of the annual 
consultations between Japan and China, as well as on the trade levels to be determined for both silk 
yarn and silk fabric for the Japanese fiscal year 2002. 
401. In a follow-up communication, Japan stated th at the quantitative restrictions maintained on 
imports from China of silk yarn and silk fabric  would be increased for each  of the Japanese fiscal 
years 2002, 2003 and 2004, by 3.8 per cent for silk yarn and 4.8 per cent for silk fabrics.  In addition, 
the measures will be eliminated on 1 January 2005.  On this basis, the TMB took note of the phase-out 
programme presented by Japan.  
(4) Brazil 
402. At its meeting of July 2002, the TMB consider ed a notification made under Article 3.2(b) by 
Brazil of the phase-out programme of the quantitativ e restriction maintained by Brazil on imports 
from Chinese Taipei of certain man-made knitted or crocheted fabrics.191  According to the 
notification, the quantitative restriction will be dismantled on 14 September 2003.  Additionally, for 
the quota year beginning on 15 September 2002 and r unning until 14 September 2003, the quota level 
would be increased by 6 per cent.  Subsequently, at its meeting of March 2003, the TMB observed 
that the notification made by Brazil under Article 6.9 of a restraint measure  agreed with Chinese 
Taipei, contained, in addition, a bilateral agreem ent between the two Members with reference to the 
phase-out programme notified by Brazil pursuant to Ar ticle 3.2(b), of the quantitative restrictions in 
question.  According to this agreement, the restraint level for the last quota year 
(i.e. 15 September 2002 to 14 September 2003) was in creased by 43.75 per cent and the termination 
of the restriction was brought forward to 30 June  2003.  The TMB took note of these notifications. 
(5) Poland 403. According to its notification submitted in June  2002, Poland maintained a safeguard measure 
on imports of synthetic fabrics originating in Chinese Taipei.
192  At the same time, Poland informed 
the TMB that the measure would be withdrawn on  15 September 2002.  The TMB observed that 
although the measure had been notified more than 60 days after the accession of Chinese Taipei to the 
WTO, its withdrawal on 15 September 2002 fulfilled the requirements of Article 3.2.  The TMB took 
note of this notification. 
(6) China 404. As reported earlier, China notified the export rest rictions applied by it on silk yarn and silk 
fabric with reference to th e provisions of Article 3.1.
193  With regard to the elements of the respective 
notification which constitute a phase-out programme in  the sense of Article 3.2(b), the TMB noted the 
reaffirmation by China that the two export quotas w ould be eliminated no later than 1 January 2005.  
Furthermore, the respective levels of both quotas fo r silk yarn and woven fabrics of silk had been 
increased by 10 per cent for the year 2002, compared  to the levels in 2001.  In addition, China 
                                                      
191 See paragraph 380 above. 
192 See paragraph 381 above. 
193 See paragraphs 382 to 389 above. G/L/683 
Page 126  
 indicated that, in both cases, the quota levels for 2003 and 2004 would be determined by applying 
respectively an increase of 10 per cent over the levels of the previous year.  On this basis, the TMB 
took note of the phase-out programme presented by China. 
3. Information with respect to new restrictions or changes in existing restrictions, pursuant 
to Article 3.3 
405. Article 3.3 requires that Members provide to the TMB, for its information, notifications 
submitted to any other WTO body with respect to any new restrictions or changes in existing 
restrictions on textile and clothing products, take n under any GATT 1994 provision, within 60 days of 
their coming into effect. 
(a) Developments during the earlier stages of the in tegration process that might be still relevant 
in the context of implementation of Stage 3 
(i) European Communities:  consultation levels on certain imports from Egypt 
406. During Stage 1, the European Communities notifie d with reference to Article 3.3 that it had 
maintained consultation levels in relation to certain imports, inter alia , from Egypt.  Subsequently, the 
European Communities provided information regard ing the increase implemented during Stage 1 in 
the consultation levels affec ting imports from this Member.
194 
407. In January 1998, the European Communities inform ed the TMB, pursuant to Article 3.3, that, 
with effect from 1 January 1998, it no longer maintained any consultation levels on imports from 
Malta, Morocco and Tunisia.  In another comm unication, the European Communities provided 
information on agreed changes to th e consultation levels it maintained vis-à-vis  certain imports from 
Egypt.  According to this notification, these c onsultations levels, establis hed for 1998 and 1999, had 
been introduced in the context of a preferential tr ade agreement with Egypt and were being notified 
under Article XXIV of the GATT.  Subsequently, in January 2000, the TMB considered another 
notification received from the European Communities under Article 3.3, for the Body's information, of agreed changes to the consultation levels ma intained in respect of two product categories vis-à-vis  
Egypt.  According to this notification, since su ch consultation levels had been introduced in the 
context of a preferential trade agreement with Egyp t, the agreed changes affecting the consultation 
levels for 2000 and 2001 would be notified under Ar ticle XXIV of the GATT.  The TMB took note of 
these notifications.
195 
(ii) Joint communications by the European Communities and Turkey 
408. In November 1997, the TMB received a joint communication from the European 
Communities and Turkey under Article 3.3.  This communication consisted of  a copy, for the TMB’s 
information, of the notification made to the Chairman of the Committee on Regional Trade 
Agreements concerning the customs union between th e two parties, as well as of the details of new 
quantitative limits introduced by Turkey with effect  from 1 January 1996, in respect of imports of 
certain textile and clothing products from certain WT O Members which, according to the notification, 
were necessary to give effect to the customs union in accordance with Article XXIV of GATT 1994.  
The TMB took note of this information.  The TMB recalled that notifications  under Article 3.3 have 
to be provided to the TMB within 60 days of any ne w restrictions or changes in existing restrictions 
on textile and clothing produc ts, taken under any GATT 1994 provision, coming into effect.  
409. In May 1998, the European Communities and Turkey addressed another joint communication 
to the TMB, referring to Article 3.3.  It contained a copy, for the TMB's information, of a joint 
                                                      
194 See G/L/459, paragraph 364. 
195 See G/L/459, paragraphs 370 and 371.  G/L/683 
 Page 127 
 
 communication from the parties to the European Co mmunities/Turkey Customs Union to the Chairman 
of the Committee on Regional Trade Agreements, "conc erning details of changes, effective as from 
1 January 1998, in respect of the quan titative limits applied by Turkey on impo rts of certai n textiles and 
clothing products from certain WTO Members in conf ormity with its commitments arising out of the 
customs union and with the provisions of Article XXIV of GATT 1994".  The communication listed in 
detail the restrictions applied on imports from the fo llowing WTO Members:  Argentina;  Brazil;  Egypt;  
Hong Kong, China;  India;  Indon esia;  Korea, Macao;  Malaysia;  Pakistan;  Peru;  Philippines; 
Singapore;  Sri Lanka and Thailand.  The TMB took not e of this information.  The TMB recalled that 
notifications under Article  3.3 have to be provided to the TMB within 60 days of any new restrictions 
or changes in existing restrictions on textile and clothing products, taken under any GATT 1994 
provision, coming into effect.   
410. In a further joint communication, dated  Ap ril 2000, the European Communities and Turkey 
provided a copy, for the TMB's information, pursuant to Article 3.3, of a joint communication from the parties to the European Co mmunities/Turkey Customs Union to  the Chairman of the Committee 
on Regional Trade Agreements, "concerning details of changes for the year 2000 in respect of the quantitative limits applied by Turkey on its imports of certain textiles and clothing products from 
certain WTO Members in conformity with its commitments arising out of the customs union and with 
the provisions of Article XXIV of GATT 1994".  The TMB took note of this information with the observation that this taking note was without prejudi ce to the rights and obligations of Members under 
the WTO.
196 
(b) Implementation during Stage 3:  Communications received with reference to Article 3.3 
411. In February 2002, the TMB received a communication from the European Communities, with 
reference to Article 3.3, of agreed changes made to  the consultation levels the EC maintained vis-à-vis 
Egypt for 2002 and 2003.  Accordi ng to this notification, these cons ultation levels (affecting imports 
of products belonging to two EC categories) had been introduced in the context of preferential trade agreements with Egypt and were notified by th e European Communities under Article XXIV of the 
GATT. 
412. No information has been received so far regard ing the consultation levels established for the 
year 2004 or, if applicable, about the elimina tion of the consultation levels in question. 
413. Against the background described in paragraphs 408 to 410 above, it should be noted that no 
communication has been received by the TMB, for its  information, regardin g changes for the years 
2002, 2003 and 2 004, of the quantitative limits applied by  Turkey on its imports of textiles and 
clothing products from several WTO Members.  In its reply to the TMB's general request for 
notifications or information in the context of the preparation of the present report, Turkey provided, 
inter alia , a list indicating the quantitative restricti ons eliminated and also the WTO Members 
affected, as a result of the implementation of its Stage 3 integration programme.  Turkey stated furthermore that"[w]ith the accession of the Peopl e's Republic of China an d Chinese Taipei, these 
Members have also been included in the implementati on of the third stage of integration.  This issue 
had been notified to the TMB [...].  Regarding Artic le 3.3 of the ATC, there has not been any other 
change within the third stage."  It is assumed that  the last sentence of this statement was intended to 
indicate that apart from the elimination of certain restrictions as a result of Turkey's implementation 
of its Stage 3 integration programme, all other re strictions listed in the last joint communication 
received from the European Communities and Turkey
197 continued to be maintained during the period 
of implementation of Stage 3 of the integration process.  However, the TMB had no indication that 
Turkey had not continued to increase the respective r estraint levels annually, by applying the growth 
rates previously established. 
                                                      
196 See G/L/459, paragraphs 367 to 369. 
197 See paragraph 410 above. G/L/683 
Page 128  
 4. Other provisions of Article 3 
414. Article 3.4 allows any Member to make reve rse notifications to the TMB for information 
purposes, in regard to the GATT 1994 justification for measures maintained, or in regard to any 
restrictions that may not have been notified under the provisions of Article 3.  Actions with respect to 
such notifications may be pursued under rele vant GATT 1994 provisions or procedures in the 
appropriate WTO body.  No notification has been received with reference to Article 3.4 during the 
implementation of Stage 3 of the integration process.  It should be noted that the same applied also to 
Stages 1 and 2. 
415. Article 3.5 requires the TMB to circulate the notifications made pursuant to any of the 
provisions of Article 3 to all Members for their inform ation.  This requirement has been fully met, in a 
timely manner, also during the implementation of Stage 3. 
5. Further observations and comments by the TMB with respect to the application of 
Article 3 during Stage 3 of the integration process 
416. With the accession of new Members to the WTO, a number of new notifications were 
received during Stage 3 with reference to Article 3.1.  The TMB reviewed each of them, in accordance with the applicable provi sions of the ATC.  In particular, the TMB put special emphasis 
on the review of the respective ph ase-out programmes falling under the provisions of Article 3.2(b).  
Before taking note of such programmes, the TMB ascertained that each of them meets the basic 
criteria established in Article 3.2(b), i.e. that the r estrictions concerned will be eliminated at the latest 
on 1 January 2005 (in other words, "within a period not exceeding the duration of this Agreement," as 
specified in the same Article) and their phasing out  is progressive in the sense that the levels of the 
respective restrictions are gradually increased during the period of their application. 
417. In its second comprehensive report, the TMB stated, inter alia , the following: 
 "In the view of the TMB, compliance with the provisions of Article 3.3 has also not been 
fully satisfactory during the second stage of the inte gration process.  While it is true that the 
measures referred to in Article 3.3 are not take n under the ATC, rather under the provisions of 
GATT 1994, it is also appropriate to re-emphasi ze the importance, for transparency purposes, 
of providing to the TMB (and through the TMB, pursuant to Article 3.5, to all WTO 
Members) timely information on any new restriction, or on changes in existing restrictions, taken under any GATT 1994 provision.  Furthermor e, any change to a measure that can result 
from a ruling of the Dispute Settlement Body by the Members concerned, giving rise to 
changes in existing restrictions and notified to any other WTO body should also be provided to the TMB, under Article 3.3, for its information.  Likewise, disinvocation of an applicable 
GATT 1994 provision by the Members concerned can also lead to changes in existing 
restrictions in the sense of Article 3.3 and, therefore, should be provided to the TMB under 
this provision, for its information."
198[footnote omitted] 
 418. The TMB is of the view that its statement regarding the compliance with the provisions of 
Article 3.3 and reflected above applies also to the period of implementation of Stage 3 of the 
integration process.  This is why the TMB made an appeal to Members, on two occasions (in April 
and September 2003), to provide to the Body notifi cations or information that are relevant in 
particular in the context of implementa tion of the provisions of Article 3.3.
199 
                                                      
198 See G/L/459, paragraphs 376. 
199 See paragraph 188 above.  G/L/683 
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 419. With regard to issues raised during earlier stag es by the Members concerned in the context of 
Article 3 or matters which might be relevant in this regard, the TMB makes the observations as 
follows. 
420. With respect to the quantitative restrictions  introduced by Turkey in 1996, the second 
comprehensive report of the TMB provided an over view of the main conclusions and the respective 
recommendation adopted by the Dispute Settlement Bo dy in response to the claims presented by 
India.200  It is appropriate to recall, in particular, th at according to the Report of the Appellate Body in 
this case, "[...] Article XXIV may justify a measure which is  inconsistent with certain other GATT 
provisions .  However, in a case involving the formation of  a customs union, this "defence" is available 
only when two conditions are fulfilled.  First, the party claiming the benefit of this defence must 
demonstrate that the measure at issue is introduced upon the formation of a customs union that fully 
meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV.  And, second , that party 
must demonstrate that the formation of that customs union would be prevented if it were not allowed 
to introduce the measure at issue .  Again, both these conditions must be met to have the benefit of the 
defence under Article XXIV".201  Furthermore, the Appellate Body reached the conclusion that 
Turkey was not obliged, when concluding its customs union with the EC, to adopt a WTO-
inconsistent measure, that is, to  impose quantitative restrictions inc onsistent with Article XI of GATT 
and 2.4 of the ATC, since a WTO-consistent alterna tive could have been used instead.  The Appellate 
Body stated, inter alia , that "...[a] system of certificates of origin, would have been a reasonable 
alternative ..."202 and, for this reason, concluded that "[... ] Turkey was not, in fact, required to apply 
the quantitative restrictions at issue in this appeal  in order to form a customs union with the European 
Communities.  Therefore, Turkey has not fulfille d the second of the two necessary conditions that 
must be fulfilled to be entitled to the benefit of  the defence under Article XXIV.  Turkey has not 
demonstrated that the formation of a customs uni on between Turkey and the European Communities 
would be prevented if it were not allowed to adop t these quantitative restrictions.  Thus, the defence 
afforded by Article XXIV under certain conditions is not available to Turkey in this case, and 
Article XXIV does not justify the adoption by  Turkey of these quantitative restrictions."203 
421. While the TMB is aware that the findings, c onclusions and recommendations adopted by the 
DSB are directly applicable only to the parties involved in the dispute and, therefore, to the quantitative restrictions imposed by Turkey on the import of certain products from India, it can be 
observed that Turkey has continued to maintain such restrictions on imports from several Members 
also during the implementation of Stage 3.
204 
422. As indicated also in the TMB's second comprehensive report205, Pakistan had maintained 
import restrictions affecting mostly textile and clot hing products, with reference to Article XVIII:B of 
GATT 1994.  In the framework of consultations held  on this matter in the Committee on Balance-of 
Payments Restrictions, Pakistan had committed itsel f to removing all these restrictions by the fiscal 
year 2001 (i.e. until June 2002).  In December 2001, Pakistan submitted a notification to the 
Committee indicating that it had removed the restri ctions applied on imports of woven fabrics of 
cotton;  woven fabrics of synthetic staple fibres and artificial staple fibres;  special woven fabrics;  
and bed linen, toilet linen and kitchen linen.  The not ification stated that Pakistan had "implemented 
its phase-out plan in full, in advance of the timeframe agreed by the Committee on Balance-of-
Payments Restrictions."206  It can be established, therefore, th at during the implementation of Stage 3 
of the integration process, Pakistan has not mainta ined restrictions any more with reference to 
                                                      
200 See G/L/459, paragraph 377. 
201 See WT/DS34/AB/R, paragraph 58. 
202 Ibid., paragraph 62. 
203 Ibid., paragraph 64. 
204 See also paragraph 413 above. 
205 See G/L/459, paragraph 377. 
206 See WT/BOP/N/509. G/L/683 
Page 130  
 Article XVIII:B of GATT1994.  In noting these devel opments and the completion by Pakistan of its 
phase-out plan ahead of schedule, the TMB obser ves that in 1995 and 1996 Pakistan submitted 
notifications, pursuant to Article 3.1, on its impor t restrictions maintained on account of balance-of-
payments reasons.  Also in this light, Pakistan s hould have provided information also to the TMB, 
under the provisions of Article 3.3, of the elimination of the restrictions in question. 
423. The second comprehensive report noted also that in December 2000, Bangladesh provided a 
notification to the Committee on Balance-of-Payment s Restrictions listing all the items restricted 
under Article XVIII:B, including several products falli ng under the coverage of the ATC.  This same 
notification included a phase-out plan for all these r estrictions, a few affecti ng textile and clothing 
products to be eliminated on 1 January 2003, followe d by the lifting of a few other restrictions one 
year later, while the remaining restric tions will be abolis hed on 1 January 2005.
207  While it would 
appear on the basis of reports of the Committee on Balance-of-Payments Restrictions208 that 
Bangladesh had already begun the removal of these r estrictions under the agreed timetable, the TMB 
observes that it has not received any information in  this regard from Bangladesh under the provisions 
of Article 3.3. 
C. APPLICATION OF THE TRAN SITIONAL SAFEGUARD MECHANISM .  IMPLEMENTATION OF THE 
PROVISIONS OF ARTICLE  6 
424. This Section describes the developments whic h followed the requests for consultation made 
by Members pursuant to Article 6 of the ATC during the period of implementation of Stage 3 of the integration process.  A follow-up to actions pursuant to Article 8, which might have followed Article 
6 actions, is also included in the overview provided below. 
425. Article 6 of the ATC provides for the possibilit y of applying transitional safeguard measures 
on imports of products covered by the ATC and not yet integrated into GATT 1994 that cause serious 
damage, or actual threat thereof, to the domestic  industry producing like a nd/or directly competitive 
products.  Article 6.1 specifies that the transitio nal safeguard should be applied as sparingly as 
possible, consistently with the provisions of Ar ticle 6 and the effective implementation of the 
integration process under the ATC.  According to Ar ticle 6.7, "[t]he Memb er proposing to take 
safeguard action shall seek consultations with the Member or Members which would be affected by 
such action."  Such consultations may result, if no agreement is reached, in a restraint measure being 
applied unilaterally by the importing Member under Article 6.10, or in a restraint measure being 
agreed between the parties and notified under Article 6.9.  Also, as a result of such consultations, the 
importing Members may decide not to introduce th e safeguard measure envisaged.  In cases where a 
restraint measure is introduced unilaterally, the TM B shall, according to Article 6.10, "promptly 
conduct an examination of the matter, including the determination of serious damage, or actual threat 
thereof, and its causes, and make appropriate r ecommendations to the Members concerned within 30 
days".  In cases where a measure is agreed between the Members, Article 6.9 states that "[t]he TMB 
shall determine whether the agreement is justified in  accordance with the provisions of this Article. 
[...]  The TMB may make such recommendations as it  deems appropriate to th e Members concerned."  
In addition, Article 6.11 provides that "[i]n highly unusual and critical circumstances, where delay 
would cause damage which would be difficult to repair, action under paragr aph 10 may be taken 
provisionally on the condition that the request for c onsultations and notification to the TMB shall be 
effected within no more than five working days after taking the action."  In such cases, if consultations do not produce agreement, the TMB sh all promptly conduct an examination of the 
matter, and make appropriate recommendations to  the Members concerned within 30 days of the 
notification of the conclusion of consultations.  If consultations do produce agreement, such 
agreement shall be notified to the TMB by the Members concerned, to which the TMB may make 
such recommendations as it deems appropriate. 
                                                     
 
207 See G/L/459, paragraph 377. 
208 See WT/BOP/R/60 and 67.  G/L/683 
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 426. Articles 6.2, 6.3 and 6.4 establish parameters for taking safeguard action under the ATC.  
These parameters have to be considered by the Members and by the TMB in assessing the conformity of an action with the ATC.  Article 6.2 rela tes to the determination by a Member, and its 
demonstration to the Member or Members concerned, and eventually to the TMB, that a particular product is being imported into its territory in such  increased quantities as to cause serious damage, or 
actual threat thereof, to the domestic industry prod ucing like and/or directly competitive products.  
Serious damage or actual threat thereof must dem onstrably be caused by such  increased quantities in 
total imports of that product and not by such ot her factors as technological changes or changes in 
consumer preference.  Article 6.3 specifies that in making a determination of serious damage, or 
actual threat thereof, the Member invoking the provisions  of Article 6 has to ex amine the effect of the 
increased quantities of total imports on the state of th e particular industry, as reflected in changes in 
the economic variables listed in the same provision .  Article 6.4 outlines circumstances under which 
such serious damage, or actual threat thereof, can  be attributed to imports from certain Members. 
427. Article 8.9 states that "Members shall endeavour  to accept in full the recommendations of the 
TMB, which shall exercise proper surveillance of the implementation of such recommendations".  
However, Article 8.10 provides the possibility to a Member which "considers itself unable to conform 
with the recommendations of the TMB", to "provide the TMB with the reasons therefor not later than 
one month after receipt of such recommendations.  Following thorough consideration of the reasons 
given, the TMB shall issue any further recommendati ons it considers appropria te forthwith. If, after 
such further recommendations, the matter remains un resolved, either Member may bring the matter 
before the Dispute Settlement Body and invoke paragraph 2 of Article XXIII of GATT 1994 and the 
relevant provisions of the Di spute Settlement Understanding". 
428. During the third stage of the implementation of the integration process, two restraint measures 
agreed between Members pursuant to Article 6.9, as a result of requests for consultations made in October 2002 were referred to th e TMB which reviewed them in accordance with the applicable 
provisions of Article 6.  Also, the TMB exerci sed surveillance of the implementation of its 
recommendation made pursuant to Article 8.10 in No vember 2001, i.e. still during the implementation 
of Stage 2 of the integration process.
209 
1. Notifications under Article 6.9 
(a) Brazil/Chinese Taipei:  imports by Brazil of certain synthetic woven fabrics from Chinese 
Taipei.   
429. At the end of October 2002 Brazil requested c onsultations with Chinese Taipei pursuant to 
Article 6.7.  Consultations produced agreement th at the situation called for a restraint, for two 
consecutive quota periods, from 27 January 2003 to 31 December 2004, on imports of other woven 
fabrics, containing 85 per cent or more by weight of textured polyester filaments, dyed, without 
rubber filaments (HS/NCM Code 5407.5210)210 and of other woven fabrics, containing 85 per cent or 
more by weight of non-textured polyester filaments (HS/NCM Code 5407.6100).  The agreed restraint 
was notified by Brazil pursuant to Article 6.9, and re viewed by the TMB at its meetings in February 
and March 2003 since, in the course of its review , the TMB, in order to be well-placed to assess 
whether the products in question were being importe d in such increased quantiti es as to cause serious 
damage to the Brazilian industry producing like and/ or directly competitive products, had decided to 
seek additional information from Brazil and to revert to its review at its subsequent meeting.  The 
TMB observed, inter alia , that the specific and relevant fact ual information provided by Brazil in 
accordance with Article 6.7 contained data with resp ect to developments in total imports as well as 
several economic variables, including production,  production capacity and capacity utilization, 
exports and prices, for three subsequent twel ve-months periods, up to the period September 2000–
                                                      
209 See paragraph 38 above. 
210 NCM:  Mercosul Common Tariff ("Nomenclature Comun do Mercosul"). G/L/683 
Page 132  
 August 2001.  Furthermore, Brazil provide d information for the period August 2001 to 
September 2002 (the period referred to in Article 6.8) on imports, as well as 2002 data for several 
other economic variables (share of imports in the apparent consumption, pr oduction, domestic sales, 
exports, import and domestic prices, as well as prel iminary indications regarding profitability).  The 
TMB recalled that, pursuant to Article 6.9, in orde r to determine whether the agreement was justified 
in accordance with the provisions of Article 6, it sh all have available to it the factual data provided in 
accordance with Article 6.7, as well as any other re levant information provided by the Members 
concerned.  The TMB also observed that both pr oducts subject to the agreement fell under the 
coverage of the ATC and that neither the prod ucts of HS/NCM Code 5407.5210 nor those of 
HS/NCM Code 5407.6100 had been integrated by Brazil in any of its three integration stages. 
430. Examining developments in total imports of Br azil of the two products in question, the TMB 
established that such imports had increased more than  twelvefold during a period of slightly less than 
four years, by any standard a significant develo pment that warranted a close examination of the 
possible impact of such increased imports on the state of the Brazilian domestic industry producing 
like and/or directly competitive products.  Before an alysing the effect of this increase of total imports 
on the state of the domestic industry of  Brazil, as  reflected in changes in the relevant economic 
variables set out in Article 6.3, the TMB firs t addressed some issues arising from the methodology 
followed by Brazil in collecting data and providing factual information in support of its case.  First, 
the TMB observed that the information provided by Brazil regarding the evolution of production 
appeared ambiguous as to whether the volume repor ted for the period September 1998 to August 2001 
amounted to 65 per cent of the domestic production of all types of synthetic woven fabrics or of only 
that of the two specific products subject to the r estraint agreed between Brazil and Chinese Taipei.  
After careful examination, the TMB assumed that while the domestic industry producing the products 
subject to the agreed restraint corresponded to the broader industrial segment producing different types of synthetic woven fabrics, the volume of 65 per cent reported had to be related to the output of 
the two specific products for which serious damage  had been claimed.  Second, the TMB observed 
that questions could also be raised regarding the ex tent to which the situation in the domestic industry 
producing like and/or directly competitive products had been captured by the factual information 
submitted by Brazil.  A careful reading of the deta iled factual information led the TMB to conclude 
that the entire domestic industry consisted of a nd was limited to the 64 companies represented by 
SINDITEC (i.e. the regional industry association which had initiated the investigation and the 
resulting measure).  Thirty-two of the 64 compani es "that answered the questionnaire" initiating the 
process of investigation produced around 65 per cent of the total domestic production and the other 32 
companies apparently had not provided specific inform ation for the purpose of the investigation.  The 
TMB recalled the observations it had already made on previous occasions that although the ATC does not provide a definition of what constitutes the domestic industry producing like and/or directly 
competitive products, the failure to provide informati on on a significant part of such an industry could 
bring about important uncertainties and could, therefore, hamper the ability of both the importing 
Member and the TMB to assess the situation of the dom estic industry in question.  In this particular 
case, the TMB noted and appreciated the fact that Br azil seemed to have shared similar concerns and 
that it had made efforts to remedy this situation by trying to provide information which was supposed 
to cover the entire domestic industry.  This had essentially been achieved by extrapolating the data 
received from the 32 companies whose producti on volume in the period September 1998 to 
August 2001 was reported to correspond to 65 pe r cent of the total domestic production, on the 
assumption that the share in the total production volum e of the companies that had not answered the 
questionnaire had remained stable, representing 35  per cent, throughout the three-year period 
considered, in order to arrive at data for those co mpanies.  While making certain observations in this 
regard, the TMB accepted that Brazil had sought to provide factual information covering the entire 
domestic industry producing like and/ or directly competitive products. 
431. 
Furthermore, regarding the specificity of the factual information provided by Brazil the TMB 
recalled that it had already emphasized on previous occasions that in case of recourse to Article 6, it 
was important to provide as much factual information and data as possible that was specific to the  G/L/683 
 Page 133 
 
 products subject to the transitional safeguard me asure, as product-specific information and data 
should have a major impact on the overall assessment whether serious damage or actual threat thereof 
could be demonstrated.  It was also understood that  there could be a situation where it had not been 
possible for the importing Member to provide produc t-specific information and data with respect to 
each and every economic variable envisaged in Artic le 6.3.  The TMB had also expressed the view 
that in such a case and in respect of such variables,  factual information and da ta that related as closely 
as possible to the products in question should be ex amined and submitted.  Bearing this in mind, the 
TMB also noted that Brazil had provided factual information on each of the economic variables listed in Article 6.3.  In addition, the information had covered domestic sales, which is not explicitly 
mentioned in the same Article.  Furthermore, th e factual information provided by Brazil was specific 
to the products subject to the safeguard measures in  relation to output, inventories, market share, 
exports, capacity utilization, domestic prices and pr oductivity, whereas, data regarding employment, 
wages, profits and investments were related to a so mewhat broader segment of the industry.  Taking 
all the above into consideration, the TMB noted  that Brazil had essentially complied with the 
requirements of providing specific and relevant fa ctual information for the  period covered by its 
investigation in  order to substantiate its case. 
432. In order to analyse the possible effects of incr eased total imports on the state of the Brazilian 
industry, the TMB examined one by one the chang es in the relevant economic variables (domestic 
output, utilization of production capacity, inventories,  domestic sales, exports , evolution of average 
domestic prices, employment, productivity, wages, pr ofitability, investments and market share) as 
reported by Brazil.
211  Furthermore, recalling that pursuant to Article 6.2, serious damage must 
demonstrably be caused by increased quantities in total imports of the products in question and not by 
such other factors as technological changes or cha nges in consumer preference, the TMB noted the 
view expressed by Brazil (which seemed to be suppor ted by the information that nearly all investment 
in plant modernization had been targeted toward s acquiring equipment that contained technological 
innovation more suitable for working with syntheti c weave) that the Brazilian textile industrial 
equipment was on par with competitors in other deve loping countries.  Also, the TMB had no reasons 
and no grounds to question Brazil's statement that  woven fabrics produced by its domestic industry 
"contain superior quality which pleases both domestic a nd foreign consumers".  In light of the above, 
the Body accepted the view that the difficulties e xperienced by the Brazilian domestic industry could  
not result from technological changes or chang es in consumer preferences.  The TMB, having 
considered the changes reported by Brazil in each of  the relevant economic variables, concluded that 
the significant increase of the volume of total impor ts of the two products, coupled with their low 
price level, had caused serious damage to the Braz ilian domestic industry, as reflected, in particular, 
in the significant drop in output and domestic sales,  the significant loss of market share and the 
decline and subsequent negative profitability of the companies concerned.  This conclusion was also 
supported, to a certain extent, by the decrease in  the employment level and by the trends observed 
regarding the investments made.  The TMB observed, furthermore, that the evolution of exports was 
largely irrelevant given the insignificant quantitie s involved, while information regarding other 
economic variables such as capacity utilization, inventories, productivity and wages did not provide meaningful guidance in assessing the overall state of the domestic industry as affected by the 
significant increase in total imports.  Accordi ngly, the TMB found that Brazil had successfully 
demonstrated, pursuant to the provisions of Articles 6.2 and 6.3, that the two products subject to the 
agreed restraint were being imported into its terr itory in such increased quantities as to cause serious 
damage to its domestic indus try producing like and/or directly competitive products. 
433. As to the attribution of the serious damage to imports from Chinese Taipei, the TMB recalled 
that according to Article 6.4 "[…] [t]he Member or Members to whom serious damage, or actual threat thereof, referred to in paragraphs 2 and 3 [of Article 6], is attributed, shall be determined on the 
basis of a sharp and substantial increase in imports, actual or imminent, from such a Member or 
Members individually, and on the basis of the level of imports as compared with imports from other 
                                                     
 
211 For details, see G/TMB/R/97, paragraphs 19 to 30. G/L/683 
Page 134  
 sources, market share, and import and domestic prices at a comparable stage of commercial 
transaction;  none of these factors, either alone or combined with other factors, can necessarily give 
decisive guidance. [...]". [footnote omitted]  It w as noted that imports from Chinese Taipei showed a 
sharp and substantial increase during the period an alysed and had continued to increase during the 
reference period established pursuant to Article 6.8.  During that period, Chinese Taipei became the 
major foreign supplier to the Brazilian market, ca pturing a significant portion of it.  Also, the 
evolution of the average price level of the produc ts imported from Chinese Taipei relative to the 
average price level of the Brazilian domestic produ ction was a clear indication that the domestic 
producers had not been able to compete with the significantly lower-priced imports originating from 
Chinese Taipei.  The TMB, having considered all th e relevant facts, agreed with Brazil that the 
serious damage caused to its domes tic industry could be attributed, inter alia , to imports from Chinese 
Taipei.  The TMB reviewed the main elements of  the agreement reached between Brazil and Chinese 
Taipei and found that the agreed restraint woul d be implemented fully in accordance with the 
requirements of Article 6.13.  As to the ad ministrative procedures to be applied for the 
implementation and control of the restraint, the TMB, inter alia , noted that they corresponded largely 
to the provisions of administrative arrangements refe rred to in Article 2.17.  The TMB, bearing in 
mind the conclusions outlined above determined that the agreement reach ed between Brazil and 
Chinese Taipei was justified in accordan ce with the provisions of Article 6. 
(b) Brazil/Korea:  imports by Brazil of certain  synthetic woven fabrics from Korea.   
434. At the end of October 2002 Brazil requested consu ltations with Korea pursuant to Article 6.7.  
Consultations produced agreement that the situati on called for a restraint, for two consecutive quota 
periods, from 27 January 2003 to 31 December 2004, on imports of other woven fabrics, containing 
85 per cent or more by weight of textured poly ester filaments, dyed, without rubber filaments 
(HS/NCM Code 5407.5210)  and of other woven fabri cs, containing 85 per cent or more by weight of 
non-textured polyester filaments (HS/NCM Code 5407. 6100).  The agreed restraint was notified by 
Brazil pursuant to Article 6.9, and reviewed by th e TMB at its meetings in February and March 2003 
since, in the course of its review, the TMB, in or der to be well-placed to assess whether the products 
in question were being imported in such incr eased quantities as to cause serious damage to the 
Brazilian industry producing like and/or directly competitive products, had decided to seek additional 
information from Brazil and to revert to its review at its subsequent meeting. 
435. The TMB observed that the request for consultations pursuant to Article 6.7 had been 
addressed by Brazil to Korea on the same date as a similar request addressed to Chinese Taipei, and 
that it covered the same two products.  Moreover, the TMB observed that the specific and relevant 
factual information provided to Korea together w ith the request for consultations pursuant to 
Article 6.7, concerning developments in total imports  and the factors referred to in Article 6.3, on 
which Brazil had based the determination of the ex istence of serious damage, was the same as that 
provided to Chinese Taipei.
212  Therefore, the TMB considered that  its examination of the information 
provided in that case and its finding that Braz il had successfully demonstrated, pursuant to the 
provisions of Articles 6.2 and 6.3, that the two pr oducts subject to the agreed restraint were being 
imported into its territory in such increased qua ntities as to cause serious damage to its domestic 
industry producing like and/or directly competitive pr oducts applied also to the case of the restraint 
agreed between Brazil and Korea. 
436. As to the attribution of the serious damage to imports from Korea, the TMB noted that 
imports from Korea showed a sharp and substantial increase during the period analysed, Korea 
becoming the second main foreign supplier to the Braz ilian market with more th an one third of overall 
imports, holding during the last period considered a significant portion of the Brazilian market.  The 
ratio of the average price level of products importe d from Korea to the average price level of domestic 
production, examined at a comparable stage of commercial transaction, and its evolution from 
                                                      
212 See paragraphs 429 to 433 above.  G/L/683 
 Page 135 
 
 September 1998 to August 2001, was a clear indicati on that the domestic producers had been unable 
to compete with the significantly lower-priced impo rts originating from Korea.  The TMB, having 
considered all the relevant facts, agreed with Br azil that the serious damage caused to its domestic 
industry could be attributed, inter alia , to imports from Korea.  The TMB reviewed the main elements 
of the agreement reached between Brazil and Kor ea and found that the agreed restraint would be 
implemented fully in accordance with the requireme nts of Article 6.13.  As to the administrative 
procedures to be applied for the implementati on and control of the restraint, the TMB, inter alia , 
noted that they corresponded largely to the provis ions of administrative arrangements referred to in 
Article 2.17.  The TMB, bearing in mind the c onclusions outlined above determined that the 
agreement reached between Brazil and Korea was ju stified in accordance with the provisions of 
Article 6. 
2. Follow-up to the TMB's recommendation made pursuant to Article 8.10:  
Poland/Romania –  imports of acrylic/modacry lic staple yarn, pure or mixed with wool 
or fine animal hair (HS numbers 5509. 31, 5509.32 and 5509.61) from Romania 
437. As already reported in detail213, at its meeting of September 2001 the TMB examined the 
safeguard measure introduced by Poland pursuant to  Article 6.10 on imports from Romania.  As a 
result of its detailed examination, the TMB conclude d that Poland had not demonstrated that the yarns 
subject to its safeguard measure were being imported into its territory in the reference period in such 
increased quantities as to cause serious damage to th e domestic industry producing like and/or directly 
competitive products.  It recommended, therefore, that Poland rescind the transitional safeguard 
measure introduced on imports of acrylic/modacrylic staple yarn, pure or mixed with wool or fine 
animal hair from Romania. 
438. Subsequently, Poland stated with reference to Article 8.10 that it considered itself unable to 
conform with the recommendation made by the TMB and provided the reasons for it.  The TMB examined this communication at its meeting in November 2001.
214  Having given thorough 
consideration to the reasons presented by Poland  for its inability to conform with the TMB's 
recommendation, the TMB concluded that these reasons  did not lead it to change the conclusion and 
recommendation arrived at by it during the examina tion of the transitional safeguard measure in 
question pursuant to Article 6.10.  The TMB reco mmended, therefore, that Poland reconsider its 
position and that the safeguard measure in troduced on the imports from Romania of 
acrylic/modacrylic staple yarn, pure or mixed with wool or fine animal hair, be rescinded forthwith. 
439. At its December 2001 meeting, the TMB, bearing in mind that Article 8.9 of the ATC states 
that “ [t]he Members shall endeavour to accept in full the recommendations of the TMB, which shall 
exercise proper surveillance of the implementation of such recommendations”, and in view of the fact 
that the TMB had received no information from Poland as to the implementation of this recommendation, decided to request such information from Poland.
215 
440. At its subsequent meeting in January 2002,  the TMB considered a communication received 
from Poland following this request for information.   This communication stated that, following the 
recommendation by the TMB, "Poland is intendi ng to implement [the] TMB recommendation […] 
relating to [the] transitional safeguard measure in troduced by Poland on imports of staple yarn from 
Romania.  This measure will be rescinded on 1 Ma rch 2002".  The TMB recalled that it had examined 
this safeguard measure in Septem ber 2001 pursuant to Article 6.10  and, that subsequently, in 
November 2001, it had considered the reasons gi ven by Poland for considering itself unable to 
conform with the recommendation the TMB had made.  Detailed information, together with the 
TMB's recommendation had been provided to WTO Memb ers with regard to the latter examination on 
                                                      
213 See paragraphs 26 to 29 above. 
214 See paragraphs 32 to 37 above. 
215 See also paragraph 38 above. G/L/683 
Page 136  
 23 November 2001.  In taking note of the communication of Poland, the TMB observed that, though 
Article 8 contained no specific deadline for the im plementation by the Member(s) concerned of the 
TMB's recommendations, the measure would have been in place for more than seven months. 
3. The TMB's comments with respect to the a pplication of the transitional safeguard 
mechanism during the third stage of the integration process 
441. In order to assess the use of the provisions of the transitional safeguard mechanism during the 
third stage of the integration process, the facts that  characterized developments in this area during the 
first two stages should be briefly recalled, as a back ground.  During the first stage (1 January 1995 to 
31 December 1997), two Members invoked the provisi ons of Article 6, involving 34 cases in total: 
United States (27 cases) (of which 24 in 1995);  and Brazil (seven cases).  During the second stage of 
the integration process, recourse to the provisions of Article 6 was made in 29 cases.  Four Members 
invoked these provisions:  Argentina (17 cases), Co lombia (9 cases), Poland (2 cases) and the 
United States (1 case).  In the second compre hensive report, the TMB had observed that 
"developments during Stage 2 and, in particular, the s ubstantial decline in the use of the provisions of 
Article 6 as from the beginning of 2000, would corr espond to the requirement defined in Article 6.1, 
according to which the transitional safeguard sh ould be applied as sparingly as possible".
216  In the 
report of its major review of the implementation of the Agreement on Textiles and Clothing during 
the second stage of the integration process, the Council for Trade in Goods noted "the declining trend  
with respect to the application of the transitiona l safeguard mechanism during the second stage;  while 
recognizing that Members may resort to the safeguard provisions of the ATC during its final years, [the Council] called upon all Members to appl y it as sparingly as possible, consistently  with the 
provisions of Article 6 and the effective impl ementation of the integration process under the 
Agreement." 
442. During the third stage of the integration process,  as described in paragraphs 429 to 436 above, 
only two recourses to the provisions of Article 6 ha ve been made, both by Brazil in 2002.  In these 
two instances, the respective restraint measures we re agreed between the Members concerned and 
Brazil and the TMB, after its review, determined th at, in both cases, the agreements were justified in 
accordance with the provisions of Article 6.  The fact that only two recourses to the provisions of 
Article 6 were made in 2002, none in 2003 and, so  far, in 2004, confirmed the trend already observed 
by the TMB of a substantial decline in the use of  the transitional safeguard mechanism as from the 
beginning of the year 2000 as well as the noticeable deceleration of the recourse to the provisions of 
Article 6 started during the second stage of the implementation process.
217  As to the possible reasons 
and explanations for this trend, the TMB was of th e view that the reasons put forward in its second 
comprehensive report, i.e., inter alia,  the disciplines embodied in and the control exercised by the 
WTO system, the jurisprudence set by the respect ive panel and Appellate  Body reports, which 
provided detailed guidelines to Members and establis hed appropriate standards on which the TMB has 
been able to rely in improving the efficiency and transparency of TMB proceedings and reports, 
remained valid.218  The TMB also observed that the devel opments with respect to the recourse by 
Members to the provisions of Article 6 during Stage 3 corresponded to a large extent to the call to 
Members made by the CTG in July 2002, referred to in paragraph 441 above. 
443. It should also be observed that the TMB conti nued to make the utmost efforts to exercise 
proper surveillance of the implementation of its r ecommendations, as was the c ase with respect to the 
recommendations made by the TMB to Poland at the end of Stage 2.219 
                                                      
216 See G/L/459, paragraph 687. 
217 See G/L/459, paragraph 238. 
218 Ibid., paragraphs 239 and 240. 
219 See paragraphs 439 and 440 above.  G/L/683 
 Page 137 
 
 444. In conclusion, the TMB observes that the fact th at the recourse to the provisions of Article 6 
has decreased substantially and that, in the past tw o years, Article 6 has not been invoked at all, 
should facilitate the full integration of the textiles and clothing sector into GATT 1994 as stipulated in 
Article 9 of the ATC. 
D. ISSUES RELATED TO THE ADMINISTRATI ON AND IMPLEMENTATION OF RESTRICTIONS .  
IMPLEMENTATION OF THE PROVISIONS OF ARTICLES 4 AND 5 
1. Implementation of the provisions of Article 4 
(a) Administration of restrictions (Article 4.1) 
445. Article 4.1 states that "restrictions referred to in Article 2, and those applied under Article 6, 
shall be administered by the exporting Members.  Importing Members shall not be obliged to accept shipments in excess of the restrictions notified under Ar ticle 2, or of restricti ons applied pursuant to 
Article 6". 
446. Canada, the European Communities and the Un ited States had notified during the first and 
second stages of the integration process administra tive arrangements with reference to Article 2.17 
which, inter alia , entrust the exporting Members with the administration of restrictions.  The TMB 
had noted that some of the arrangements conc luded by one importing Member (United States) 
provided that Member with the possibility of making ad justments to the levels of existing restrictions.  
The TMB expected in this respect that all the pr ovisions of these administrative arrangements would 
be implemented by the respective Members in confor mity with the relevant provisions of the ATC, 
including Article 4.1.
220  
447. During the third stage of the integration process, the TMB received and examined the 
notifications of administrative arrangements conc luded between Canada, the European Communities 
and the United States, and China and Chinese Taipei, respectively.221  Under these administrative 
arrangements the right of the exporting Members concer ned to administer the restrictions still in place 
is fully preserved.  Apart from the notification of these new administrative arrangements, the TMB has not received any specific notification or communication directly related to the implementation of the provisions of Article 4.1. 
(b) Changes in the sense of Article 4.2 in the implementation or administration of restrictions 
applied under the ATC and rela ted actions under Article 4.4 
448. According to Article 4.2, "... the introduction of changes, such as changes in practices, rules, 
procedures and categorization of textile and clothing  products, including those changes related to the 
Harmonized System, in the implementation or administ ration of those restrictions notified or applied 
under this Agreement should not:  upset the balanc e of rights and obligations between the Members 
concerned under this Agreement;  adversely affect th e access available to a Member;  impede the full 
utilization of such access;  or disrupt trade under this Agreement". 
449. As previously noted by the TMB
222, the administrative arrangements agreed during the first 
stage of the integration process between the European Communities and the respective exporting 
Members included certain provisions related to su bject matters covered by Article 4.2.  These 
provisions confirm that any amendment to the ru les of origin, to the tariff and statistical 
nomenclatures in force in the European Communiti es or any decision resulting in a modification of 
classification of products shall not have the effe ct of reducing any quantitative limit (maintained 
                                                      
220 See G/L/459, paragraphs 382 and 383. 
221 See paragraphs 264 to 306  above. 
222 See G/L/459, paragraph 385. G/L/683 
Page 138  
 under the ATC).  The administrative arrangements agreed between the Eu ropean Communities and 
China and Chinese Taipei, respectively, notified durin g the third stage of the implementation process, 
also contain similar provisions.  The administra tive arrangements conclude d by Canada and the 
United States during the previous stages of integration did not contain such provisions.  This is also true for the administrative arrangements agreed  between these two Members and China and Chinese 
Taipei, respectively.  The absence of such exp licit dispositions in the administrative arrangements 
notwithstanding, in case of changes, as specified in Article 4.2, the provisions of Articles 4.2 and 4.4 
apply. 
450. Article 4.4 provides that where changes menti oned in Article 4.2 are necessary, the Members 
initiating such changes inform and, wherever possible,  initiate consultations with the affected Member 
or Members with a view to reaching a mutually  acceptable solution regarding appropriate and 
equitable adjustments.  Consultations, wherever possi ble, shall be held prior to the implementation of 
the changes.  If this is not feasible, consultations at the request of the Member(s) concerned must be held, if possible, within a period of 60 days.  If a mutually satisfactory soluti on is not reached, any of 
the Members involved may refer the matter to the TMB for recommendations as provided for in Article 8 of the ATC.   
451. The administrative arrangements conclude d by the European Communities foresee 
consultations with the exporting Members with a view to honouring the obligations detailed in 
paragraph 450 above.  The administrative arrangeme nts concluded by Canada and the United States 
do not contain specific consultation provisions for si milar types of cases.  This also applies to the 
administrative arrangements concluded by th ese Members with China and Chinese Taipei, 
respectively. 
452. Developments regarding the implementation of Articles 4.2 and 4.4 during the period covered 
by the first and second comprehensive reports, in par ticular as far as changes in the rules of origin 
applied by the United States are concerned, ar e summarized in the second comprehensive report.
223  
During the third stage of the implementation process,  no specific matter has been notified to the TMB 
with reference to the implementation of the provisions of Article 4.2. 
453. Although this issue was not referred to the TMB,  the Body is aware that on 11 January 2002, 
India requested consultations with the United Stat es pursuant to Article 4 of the Understanding on 
Rules and Procedures Governing the Settlement of Disputes, Article XXII:1 of the General 
Agreement on Tariffs and Trade 1994 and Article 7 of the Agreement on Rules of Origin regarding 
the rules of origin for textiles and apparel products set out in Section 334 of the Uruguay Round Agreements Act, Section 405 of the Trade and De velopment Act of 2000 and the customs regulations 
implementing these provisions.  Section 334 of the Uruguay Round Agreements Act changed the rules 
of origin applicable to textile a nd apparel products as from 1 July 1 996 and, according to the claims of 
India, the main objective of these changes was to  protect the United States' textiles and clothing 
industry against import competition.  India recalled that the European Communities had considered the above changes to be inconsistent with the United States' obligations under the Agreement on 
Rules of Origin and other WTO agreements, and ha d initiated dispute settlement proceedings against 
the United States.  The European Communities had subsequently withdrawn the complaint when the 
United States had agreed to introduce legislation re storing the previous rules in respect of certain 
products.  However, the legislation actually introduced  did not satisfy the EC, and it therefore initiated 
new dispute settlement proceedings.  This dispute was settled through a procès-verbal  according to 
which the United States agreed to introduce legisla tion modifying the Section 334 rules of origin for 
certain products.  Section 405 of the Trade and Development Act of 2000 gave effect to this procès-
verbal.
224  The changes introduced in 1996 and 2000 resulte d, according to India, in extraordinarily 
complex rules under which the criteria that conf er origin vary between similar products and 
                                                      
223 See G/L/459, paragraphs 388 to 406. 
224 See also G/L/459, paragraphs 400 to 402.  G/L/683 
 Page 139 
 
 processing operations.  The structure of the chang es, the circumstances under which they were 
adopted and their effect on the conditions of comp etition for textiles and apparel products suggested, 
according to India, that they serve trade policy pur poses.  India therefore questioned the compatibility 
of these changes with paragraphs (b), (c), (d) an d (e) of Article 2 of the Agreement on Rules of 
Origin, according to which rules of origin shall not be used as inst ruments to pursue trade objectives; 
shall not pose unduly strict requirements;  shall not themselves create restrictive, distorting or 
disruptive effects on international trade;  shall not be  discriminatory;  and shall be administered in a 
consistent, uniform, impart ial and reasonable manner. 
454. In communications dated January  2002 addressed to the Dispute Settlement Body and to the 
two Members concerned, the European Communities a nd Bangladesh notified that they wished to join 
in these consultations. 
455. Consultations were held but failed to settle th e dispute.  India, therefore, requested the 
establishment of a panel on 7 May 2002.  A revised request was communicated by India to the Dispute Settlement Body on 3 June 2002.  The pane l was established by the Dispute Settlement Body 
on 24 June 2002.  Bangladesh, China, the Eur opean Communities, Pakistan and the Philippines 
reserved their third party rights to participate in th e panel's proceedings.  The panel issued its report 
on 20 June 2003.  It concluded that India had fa iled to establish that (a) Section 334 of the Uruguay 
Round Agreements Act of the United States is inconsiste nt with Articles 2(b) or 2(c) of the Rules of 
Origin Agreement;  (b) Section 405 of the Trad e and Development Act of the United States is 
inconsistent with Articles 2(b), 2( c) or 2(d) of the Rules of Or igin Agreement;  and (c) the US 
customs regulations in question are inconsistent with Articles 2(b), 2(c) or 2(d) of the Rules of Origin 
Agreement.  In the light of its conclusions, th e panel made no recommendati ons under Article 19.1 of 
the DSU.
225  The panel report was adopted by the Disput e Settlement Body on 21 July 2003, which at 
the same time took note of the statements made on this occasion on the report by China, India, the Philippines and the United States.
226  
456. In his statement in the Dispute Settlement Body,  the representative of the United States stated, 
inter alia , that his country welcomed the panel's findings that the US rules of origin at issue in the 
dispute were not inconsistent with its obligations  under the Agreement on Rules of Origin.  As the 
United States maintained from the out set, the US rules were not discriminatory and did not distort or 
disrupt international trade.  The representative of India said, inter alia , that his country was 
disappointed with the panel report which India found to be fundamentally flawed for several reasons.  
First, it had adopted an interpretation of Article  2 of the Agreement on Rules of Origin which 
acknowledged exclusively the discretion of a Member to determine the use of its rules of origin, 
without drawing the line at an abuse of rules of origin.  Second, the panel had adopted an 
interpretation of the non-discrimination provision of Article 2(d) of the Agreement on Rules of Origin 
that narrowed the scope of this provision as compared  to other non-discrimination provisions in the 
WTO Agreement, in particular Article 1 of GA TT 1994.  Third, it had avoided making clear legal 
interpretations by couchi ng its interpretations in arguendo and then making findings of fact based on 
these interpretations.  Finally, the panel had fa iled to seek the information from India that it 
considered so necessary for the proper evaluation of th is dispute.  Given the failure of the panel to 
accomplish these tasks, it did not appear to India that  the panel report formed the proper basis for an 
appeal.    
(c) Integration of part of a restriction (Artic le 4.3) and related ac tions under Article 4.4 
457. Article 4.3 provides that "[i]f a product which c onstitutes only part of a restriction is notified 
for integration pursuant to the provis ions of Article 2, Members agree that any change in the level of 
that restriction shall not upset the balance of ri ghts and obligations between the Members concerned 
                                                      
225 See WT/DS243/R. 
226 See WT/DSB/M/153, paragraphs 82 to 98.  G/L/683 
Page 140  
 under this Agreement."  When changes mentioned in this Article are necessary, the provisions of 
Article 4.4 apply.
227 
458. During the first stage of the integration process, no part of a restriction was integrated  and, 
therefore, the provisions of Article 4.3 were not in voked.  As a result of the Stage 2 implementation, 
in certain cases, parts of restrictions became integr ated and corresponding changes in the levels of the 
respective remaining restrictions were implemented.  This was the case, in particular, with the United 
States, which integrated a part of a category subject  to specific restraint and also a number of other 
categories which had been falling under group or aggregate limits.  In all these cases, the United 
States implemented downward adjustments in the levels  of the respective restraints or limits.  Canada 
made similar adjustments in two cases.  It should be noted, however, that no matter was referred to the 
TMB with specific reference to the provisions of Articles 4.3 and 4.4 during the second stage of the 
integration process. 
459. It should be recalled that in a communication addressed to the TMB in the context of its 
preparation of the second comprehensive report, ITCB members requested the TMB to comment on 
the methodology employed by the restraining Members in  adjusting the levels of restraints as a result 
of partial integration during Stage 2 and also on the outlook for Stage 3 in this regard.228 
460. In its related comments, the Body stated, inter alia , that in its reading Article 4.3 allows for 
such adjustments (i.e. downward adjustments) t hough these are not mandatory.  However, if such 
adjustments are made, "any change in the level of th at restriction shall not upset the balance of rights 
and obligations between the Members concerned under [the ATC]".  In implementing such changes, 
the provisions of Article 4.4 shall also apply.  Th erefore, if a Member considers that appropriate 
information has not been received and no consultations ha ve taken place prior or immediately after 
the implementation of the changes, or that such c onsultations did not result in a mutually satisfactory 
solution, any Member involved may refer the ma tter to the TMB for recommendations.  The TMB 
recalled that no such matter had been referred to it by any Member.229 
461. Also, in its second comprehensive report, th e TMB recommended to the CTG that the 
Council "recall that if a product which constitutes only part of a restriction were to be notified for 
integration during Stage 3, any adjustment to be implemented in the level of the respective 
restrictions, shall not upset the balance of right s and obligations between the Members concerned 
under the ATC, in compliance with the provisions of Article 4.3".230 
462. As a result of the implementation of the third stage of the integration process, in several 
instances a part or parts of a category (or of merged categories) subject to specific restraint and also a 
number of other categories falling under group or aggr egate limits were integrated.  This applied to 
Canada and the United States, while the European Co mmunities did not integrate parts of restrictions.  
In the case of Canada, the TMB took note of a statem ent by Canada that when a product or a category 
would be integrated that represented only part of  a restrained category, merged category or sub-
category, the level for the respective remaining restra ints (category, merged category or sub-category) 
would not be reduced to reflect the removal of these products from the restriction.231  In the case of 
the United States, the TMB noted the US' statement that  the United States "will be in contact with [its] 
textiles agreement partners during the course of th is year [i.e. 2001], concerning the effects of 
integration in the year 2002 on specific, group an d aggregate limits.  Adjustment to limits will be 
based on trade that has occurred in the products to be  integrated, and [the United States'] agreements 
partners will be given the opportunity to consult with [the United States] on this issue".  In this regard, 
                                                      
227 See paragraph 450 above. 
228 See G/L/459, paragraphs 410 and 422. 
229 Idem , paragraph 425. 
230 See G/L/459, paragraph 682. 
231 See G/L/459, paragraph 82.  G/L/683 
 Page 141 
 
 the TMB recalled that, in conformity with the provisions  of Article 4, any change in the level of such 
restrictions shall not adversely affect the access available to a Member and upset the balance of rights and obligations of the Members concerned under the ATC.
232  In reiterating this statement in the 
second comprehensive report, the TMB expressed the expectation that the Members concerned will 
make full use of their consultations in conformity w ith the provisions of Articles 4.3 and 4.4.  In the 
view of the TMB, prior to its implementation, any such adjustment should be mutually agreed 
between the United States and its trading partners in  the framework of the consultations envisaged in 
Article 4.4.233  Subsequent to this statement, no notification has been made to the TMB pursuant to 
Article 4.4 with reference to the implementati on by the United States of such adjustments.  
463. In the context of its examination of the notif ication received pursuant to Article 2.1 from the 
United States following the accession of China to the WTO, including observations made by China 
pursuant to Article 2.2 on this notification, the TMB examined, inter alia , the question of the 
downward adjustment of quota levels for partially integrated products.234  It noted in this respect that 
China had stated that "the base levels for some Specific Limits and certain Group Limits have been substantially reduced due to partia l integration.  For example, the base level for Group III was reduced 
by 81.74 per cent.  Such measures adversely affect  China's export of non-integrated products covered 
therein".   The TMB also noted that the United States  had stated that "[a]s provided for in Article 4.3, 
the quotas that were affected by partial integra tion have been reduced to  reflect the more limited 
product coverage.  As with other WTO Members, the United States applied a standard methodology 
for adjusting specific and group limits to reflect partia lly integrated products.  The US practice is to 
adjust group and specific limits affected by par tial integration by reducing them by the average 
amount of volume of trade in the integrated product for the previous two calendar years, specifically, 
1999 and 2000 in this instance."  The TMB noted, in this regard, that the level of the quantitative 
restrictions notified had remained unchanged un til 31 December 2001, and that the downward 
adjustments of quotas had taken place apparently on 1 January 2002 with the implementation of the 
provisions of Article 2.8(b) by the United States.  Therefore, China's observation was not directly related to the restraint levels taken over from th e pre-ATC regime, as notified by the United States 
pursuant to Article 2.1, but rather a matter to be de alt with pursuant to the provisions of Article 4.  
The TMB noted in this regard that Article 4.3 stat es that "[i]f a product which constitutes only part of 
a restriction is notified for integration pursuant to the provisions of Article 2, Members agree that any 
change in the level of that restriction shall not up set the balance of rights and obligations between the 
Members concerned under this Agreement."  Th erefore, the ATC allowed for the downward 
adjustment of quotas as a result of  the partial integration of products, provided such adjustments did 
not upset the balance of rights and obligations be tween the Members concerned under the ATC.  For 
such cases, Article 4.4 states that "[…] Members ag ree that the Member initia ting such changes shall 
inform and, wherever possible, initiate consultations  with the affected Member or Members prior to 
the implementation of such changes, with a view to reaching a mutually acceptable solution regarding 
appropriate and equitable adjustment.  Members further agree that where consultation prior to 
implementation is not feasible, the Member initiating su ch changes will, at the request of the affected 
Member, consult, within 60 days if possible, with the Members concerned with a view to reaching a mutually satisfactory solution regarding appropri ate and equitable adjustments.  If a mutually 
satisfactory solution is not reached, any Member involved may refer the matter to the TMB for recommendations as provided in Article 8 […]".  Th e TMB observed in this regard that China had 
raised this issue in a general way, by referring to  "some specific limits" and "certain group limits" and 
that the example provided by it could not be assessed further in view of the lack of further relevant 
information.  The TMB had not received sufficient specific information from China, nor indications 
on the possible consultations between the Members c oncerned referred to in Article 4.4, that would 
have enabled it to examine, in case of lack of a mutually satisfactory solution in the consultations 
regarding specific cases, whether or not the balan ce of rights and obligations between the Members 
                                                     
 
232 See G/L/459, paragraph 85. 
233 See G/L/459, paragraph 429. 
234 See paragraph 172 above. G/L/683 
Page 142  
 concerned under this Agreement had been upset and,  if so, whether the adjustments implemented had 
been appropriate and equitable;  nor had China re ferred any related specific matter to the TMB for 
recommendation as provided in Article 8. 
464. As was the case during the second stage, no ma tter has been referred to the TMB with 
specific reference to the provisions of Articles 4.3 and 4.4 during the third stage of the integration 
process. 
(d) Ministerial Decision on Implementati on-Related Issues and Concerns 
465. The Decision adopted by the Ministerial Conference in Doha states, inter alia , the following:  
"The Ministerial Conference [...] agrees [...] that  without prejudice to their rights and obligations, 
Members shall notify any changes in their rules of origin concerning products falling under the 
coverage of the [ATC] to the Committee on Rules of Origin which may decide to examine them."
235 
466. The TMB is not aware of any relevant subsequent notification addressed to the Committee on 
Rules of Origin. 
(e) Views and comments of WTO Members in res ponse to the TMB's request for information 
467. In their response to the TMB's request for in formation or comments in the context of the 
preparation of the present report, ITCB members stated, inter alia , that "the US rules of origin relating 
to textile and clothing products we re substantially changed.  These changes led to significant effects 
on trade.  In effecting these changes, the United St ates enlarged the coverage of certain cotton made-
up products. Thus, it is now specified that these products  would be deemed to be that of cotton even if 
they contained as little as 16 percent of cotton by  weight. (Prior to this, these products were 
considered to be that of cotton if they contained cotton as their chief weight).  Notwithstanding that a 
dispute panel ruled that the complainant in that  case did not succeed in establishing that the changes 
had been effected in violation of obligations unde r the Agreement on Rules of Origin, it is submitted 
that the change in classification of cotton products enlarged the scope and incidence of restrictions on 
these products to the disadvantage of  the exporting Members concerned." 
468. The same submission went on to state that "[s]imila rly there have been instances of transfer of 
particular products from relatively unimportant cate gories (in which quota utilization rates were low) 
to high-demand tight-quota categories, thereby in creasing the restrictiveness of relevant quotas. The 
TMB may wish to invite the restraining Members for information on such changes so as to enable it to 
include an assessment of their effect on the ut ilisation of access opportunities during the stage under 
review." 
469. In its submission to the TMB in response to th e Body's request for information or comments 
in the context of the preparation of the present report, Turkey stated that "[w]ith regard to Article 4 of 
the ATC, the Turkish Council of Ministers has take n the necessary measures and issued the required 
regulations (Council of Ministers Decision No. 95/681 5) to protect the interest of the supplier 
countries within the context of the ch anges in the categorization of tex tile and clothing products."  In a 
subsequent communication, Turkey indicated that "as a result of the obligations stemming from the 
customs union with the EU, Turkey implemented, in very few instances, minor changes in the 
categorization of textile and clothing products in parallel with the EU.  However, according to the 
statistics available to Turkey, these measures have ha d no effect whatsoever on any of the Members in 
terms of market access to Turkey.  These measures were taken according to Article 4 of the ATC." 
470. In response to the TMB's request for inform ation or comments in the context of the 
preparation of the present report, the European Communities stated that with respect to "India's 
                                                      
235 Paragraph 4.3 of the Decision adopted by the Ministerial Conference.  See WT/MIN(01)/17.  G/L/683 
 Page 143 
 
 submission on behalf of the ITCB and concerning product classification236 [footnote added], implying 
transfer to more sensitive categories and therefore increasing the level of restriction does not seem to 
concern the Community's quota management.  If that is not the case, [the EC] would kindly ask for some concrete examples or evidence of such practices." 
471. In its submission to the TMB in response to th e Body's request for information or comments 
in the context of the preparation of the present report,  the United States stated in  response to the issues 
raised by the ITCB members
237, that "[t]he United States is surprised that India would again raise the 
changes to US rules of origin made in 1995.  Firs t, despite years of complaining about this issue, 
when India had the opportunity to fully explain its position before a WTO dispute settlement panel, it 
was unable to demonstrate that these changes had any restrictive, distorting, or disruptive effect on 
trade.  Second, these changes were made in 1995, yet India and the other ITCB members continue to 
complain about them in 2004, even after a dispute settlement panel confirmed their consistency with 
WTO requirements. The United States declines to justif y these changes yet again.  However, to clarify 
one point made by India, we note that the changes to US rules of origin, codified in section 102.21 of the US Customs regulations, do not govern the cl assification of products. Classification is made 
according to the Harmonized System and certain ad ministrative arrangements notified pursuant to 
Article 2.17 and is independent from any origin determination." 
472. In a further submission, ITCB members stated, inter alia , as follows: 
• "[A]s to widening of the scope of certain cotton made-up products pursuant to rules 
of origin changes:  It may be recalled that on the occasion of the second major review, we offered a detailed account of ch anges introduced by the United States in 
its origin rules pertaining to textile and cl othing products, especially those pursuant to 
Section 405 of its Trade and Developm ent Act of 2000 enacted on 18 May 2000.  
Reference in this regard is inv ited to Annexes 6 and 7 of document 
G/TMB/N/403/Add.1, which reproduced the el aboration of our submission relating to 
rules of origin changes.  [...] 
 
• We wish to reiterate that no doubt a dis pute panel ruled on the basis of a narrow legal 
consideration that the complainant had not  succeeded in establishi ng that the changes 
violated the US's obligations under the Agre ement on Rules of Origin.  However, the 
issue that we seek to bring to the TMB’ s attention in connection with its present 
major review is specifically the one relating to the widening of the coverage of some 
cotton products in the context of the ATC.  
 
• In this connection, it may be noted that th e US rules of origin changes altered the 
definition of some made-up products so that these are now deemed to be that of cotton even if they contain as little as  16 per cent of cotton as their component by 
weight.  Prior to this change, these same products could be considered as those of 
cotton only if they contained cotton as their chief weight.  Indeed this was the disposition under the pre-ATC bilateral agreements which were the basis of 
restrictions carried over from the MFA and no tified to the TMB under Article 2 of the 
ATC.  
 
• It is apparent that the above change in the definition of these products led to more 
exports being classified and counted as those of cotton than was the case previously.  
Thus, for example, products which were  exported under US Category 666 (Other 
man-made fibre furnishings) now came to  be classified and counted under Categories 
360, 361, 362 (cotton pillowcases, sheets and bedspreads respectively), etc., in which 
                                                     
 
236 See paragraph 468 above. 
237 See paragraphs 467 and 468 above. G/L/683 
Page 144  
 a number of exporting Members had high rat es of quota utilization. Thus, the change 
resulted in effective diminution of access (or,  to put it differently, in enlarging the 
scope and incidence of relevant restrictions ) in violation of Article 2.4 of the ATC, 
and causing disruption to established trade and upsetting the balance of rights and obligations in the sense of Article 4.2." 
 
473. Also, as regards the question of the changes in the classification of cer tain product categories, 
ITCB members stated the following: 
• "[T]here have been instances of changes in the classification of certain product 
categories.  In some cases, these changes involved transfer of particular products from one category to another and/or from non-category to category products.  These changes have generally been effected unila terally, without any consultation with or 
information to the affected exporting Me mbers within the meaning of, and as 
required, under Article 4 of the ATC.  
 
• Aside from the above, the changes firstly created disruptive effects on trade, upsetting 
individual business plans and proper admini stration and utilization of quota access.  
Secondly, in instances in which products  were reclassified to high-demand tight-
quota categories, these led to increasing th e restrictiveness of relevant quotas. 
 
• We appreciate that the TMB has requested information from the restraining Members 
about changes in classifications.  We are confident that comprehensive information 
by these Members will facilitate the TMB’s consideration of the issue and establish the point that we seek to bring to its attention. 
 
• In this connection, the Body may also lik e to recall that in our submission on the 
occasion of the second major review, [the ITCB members] provided information with respect to changes effected by one restrain ing Member.  Reference in this regard is 
invited to Annex 8 in doc ument G/TMB/N/403/Add.1 quoted [...] above. [...]  
 
• In addition, some further instances of ch anges by one Member, the United States, 
since the year 2002 coming to our notice are presented in a table attached to this 
letter
238.  It may be noted that in several case s particular products were transferred 
from Categories 352, 359 and 459 (Underwear and other apparel) to some other 
categories.  Included in the categories to wh ich products were thus shifted were tight-
quota Categories 341 (Women and girls’ shir ts and blouses), 634 (Men’s and boys’ 
coats), etc.  What is more, some products that were not previously treated as 
belonging to any ATC category have now been  classified to ATC categories.  Thus, 
MMF carrying cases, polyester curtain tie -backs have now been included in 
Categories 670 and 666 respectively."  
 (f) Further comments and observations by the TMB 
474. The TMB recalls that in its second comprehe nsive report, commenting on the implementation 
by the United States of changes in the rules of or igin it applied to imports of textiles and clothing 
products, and having noted, inter alia , the serious concerns expressed by the ITCB members 
indicating that several Members continued to percei ve the changes implemented in the US rules of 
origin as having an adverse effect on their trading in terests and their rights unde r the ATC, stated that 
"it would be appropriate for Members not to implem ent important changes in their respective rules of 
                                                     
 
238 See G/TMB/N/474/Add.1.   G/L/683 
 Page 145 
 
 origin during the remaining period of ATC implementation."239  The Body observes in  this regard that 
during the third stage of the integration process no further changes have been implemented by a Member to its applied non-preferential rules of or igin in the textiles and clothing sector.  The TMB 
also observes that whilst the panel set up at the re quest of India to examine the US changes concluded 
that India had failed to establish its case a nd, consequently, made no recommendation under 
Article 19.1 of the DSU, it appeared from the statements made by several Members
240 that they 
continued to perceive that the changes implemented in  the US rules of origin had an adverse effect on 
their trading interests and their rights under the ATC.   This assessment is reflected again in the views 
expressed by ITCB members, reproduced in paragra ph 467 above.  The concerns raised this time 
focused on the impact of changes in the rules of or igin on the resulting changes in the classification of 
cotton products, with the effect that in the cont ext of ATC implementation the coverage of some 
cotton products has been widened and more exports  have been classified and counted as those of 
cotton than was the case prior to the changes in the US rules of origin. 
475. The TMB also observes that in its response the United States, apart from "declin[ing] to 
justify [the rules of origin] changes", wished to clarif y that "the changes to US rules of origin [...] do 
not govern the classification of products.  Classifica tion is made according to the Harmonized System 
and certain administrative arrangements no tified pursuant to Article 2.17 [...]." 
476. Concerning the issues raised by ITCB member s regarding changes in product classification 
other than those attributed by the same members to the effect of ch anges in the rules of origin, in 
some cases involving transfer of particular produc ts from one category to another and/or from "non-
category" to category products, the TMB notes th at, as also suggested by ITCB members, it has 
requested specific information also in this regard from the Members maintaining such restrictions.  It 
is noted that, in response, the European Commun ities stated that such possible measures "[do] not 
seem to concern the Community's quota manageme nt."  However, it appears from the response 
provided by Turkey that "Turkey implemented in ve ry few instances, minor changes in categorization 
of textiles and clothing products in parallel with th e EU", though, according to Turkey, such measures 
have not affected market access opportunities to the Tu rkish market.  In light of this information, the 
TMB assumes that the minor changes implemented by Tu rkey were effected as a result of adjustments 
made necessary by the implementation of the Customs Union Agreement with the European 
Communities.  It should be also noted that th e examples provided by ITCB members in their 
communication do not concern the European Communities or Turkey.  Furthermore, it is assumed that 
the response of the United States as reflected in  paragraph 475 above also applies to the cases 
involving transfer from one category to another and similar measures. 
477. The TMB notes the concerns raised and deta iled explanations provided by ITCB members 
with respect to certain changes implemented in produc t classification.  It is argued that some of these 
changes could adversely affect the access available to the Members concerned.  The TMB has neither 
sufficient information at its disposal, nor the necess ary technical experience, that would enable it to 
take a position on the issue of whether some of the ch anges reported can be attributed, or not, to the 
effect of the changes in the US rules of origin.  The TMB observes, however, that the introduction of 
changes in the rules of origin and also in the cate gorization of textile and cl othing products should be 
governed by the same provisions of the ATC, i.e. Artic les 4.2 and 4.4.  This applies also to the impact 
of changes related to the Harmonized System.  An y such changes should conform to the requirements 
specified in Article 4.2, i.e. they "should not:  up set the balance of rights and obligations between the 
Members concerned under this Agreement;  adversely affect the access available to a Member;  
impede the full utilization of such access;  or disrupt trade under this Agreement". 
478. In light of the above, while noting the concer ns expressed in this regard, the TMB observes 
that none of the Members has referred any such sp ecific matter to the TMB with reference to the 
                                                      
239 See G/L/459, paragraphs 415 to 418.  
240 See WT/DSB/M/153, paragraphs 84 to 97.  G/L/683 
Page 146  
 provisions of Article 4.4, which clearly stipulate that "[i]f a mutually satisfactory solution is not 
reached [in the consultations foreseen in Article 4.4], any Member involved may refer the matter to 
the TMB for recommendations as provided in Article 8. "  Also, in some cases, as referred to by the 
United States, the Members concerned could have had recourse to the respective procedures laid down in the administrative arrangements notified under Ar ticle 2.17 to the extent that such procedures 
were designed to facilitate the implementation of the provisions of Articles 4.2 and 4.4. 
479. As regards the question of the downward adjustme nt of quota levels for partially integrated 
products made by the United States, the TMB recalls once again that in its second comprehensive report, adopted five months prio r to the implementation of possible adjustments resulting from the 
third stage of the integration process, it expressed, inter alia,  the expectation that "the Members 
concerned will make full use of their consultations in  conformity with the provisions of Articles 4.3 
and 4.4.  In the view of the TMB, prior to its im plementation, any such adjustment should be mutually 
agreed between the United States and its trading pa rtners in the framework of the consultations 
envisaged in Article 4.4."
241  The TMB observes in this respect that no Member, including those 
Members which acceded to the WTO since the TMB had adopted its comprehensive report on the 
implementation of the ATC during the second stage of the integration process, has referred such 
matter to the TMB with a view to indicating that no  mutually satisfactory solution could be reached in 
the consultations envisaged in Article 4.4 and,  therefore, referring the issue to the TMB for 
recommendation as provided for in Article 8. 
2. Implementation of the provisions of Article 5 
480. Article 5 provides detailed rules and procedures for addressing problems arising from the 
potential circumvention of the ATC by transhipment, re-routing, false declaration concerning country 
or place of origin, fibre content, quantities, description or classification of merchandise and 
falsification of official documents.  In essence, these provisions are based on a combination of the following elements: 
• establishing the necessary legal provisions and/or administrative procedures to 
address and take action against circumven tion by transhipment, re-routing, false 
declaration concerning country or place of origin, fibre content, quantities, 
description or classification of merchandise a nd falsification of official documents;  
  
• agreeing to take necessary action, consistent with Members' domestic laws and 
procedures, to prevent, to investigate, a nd, where appropriate, to take legal and/or 
administrative action against circumvention practices within their territory; 
 
• committing to cooperate fully, consistent  with Members' domestic laws and 
procedures, to establish the relevant facts in instances of circumvention or alleged circumvention; 
 
• should a Member believe that the ATC is being circumvented, it should consult with 
the Member(s) concerned with a view to seeking a mutually satisfactory solution;  if such a solution is not reached, the ma tter may be referred to the TMB for 
recommendations by any of the Members involved; 
 
• where, as a result of investigation, there is  sufficient evidence that circumvention has 
occurred, appropriate action may be taken afte r consultations with a view to arriving 
at a mutually satisfactory solution between the Members concerned;  any such action 
shall be notified to the TMB with full ju stification and the TMB may make such 
recommendations to the Members concerned as it deems appropriate;  if a mutually 
                                                     
 
241 See G/L/459, paragraph 429.  G/L/683 
 Page 147 
 
 satisfactory solution is not reached, any Member may refer the matter to the TMB for 
prompt review and recommendations. 
(a) Issues relevant in the context of the implementa tion of Article 5:  examination by the TMB of 
the provisions related to circumvention cont ained in certain administrative arrangements 
notified under Article 2.17, as reported in the first and second comprehensive reports of the 
TMB 
481. As noted in the first two comprehensive reports of the TMB242, the administrative 
arrangements concluded respectively by the Eu ropean Communities and the United States with 
several Members include provisions related to circumve ntion.  In the context of its review of such 
arrangements, in light of the explanations recei ved, the TMB noted that the European Communities 
and the Members concerned had deemed it necessary to  include provisions of the previous bilateral 
agreements in the administrative arrangements, in cluding provisions on circumvention, which could 
have a potential effect on the implementation and ad ministration of quantitative restrictions notified 
by the European Communities pursuant to Article 2.1.   Also, the attention of the TMB was drawn to 
the provisions of the EC's implementing legisla tion on the common import regime for textile and 
clothing products, which clarified that the implemen tation of provisions such as those included in the 
administrative arrangements was not intended to  constitute a derogation from the applicable 
provisions of the ATC.  In light of this and as an overall conclusion of its revi ew of the administrative 
arrangements notified by the European Communities,  the TMB expected that these arrangements, 
including the provisions on circumvention, would be implemented by the respective Members in conformity with the relevant provisions of the ATC. 
482. With respect to the provisions on circumventi on contained in the administrative arrangements 
concluded and notified by the United States, the TMB sought information as to how such provisions 
were deemed necessary in relation to the implementati on of any provision of Article 2 of the ATC.  It 
also asked for explanations as to how these provi sions, in particular that enabling the importing 
Member to impose, in particular circumstances,  triple charges on quotas, would fit within the 
provisions of the ATC.  In reply, the United St ates stated that circumvention often damaged a 
country's legitimate trade by making it impossible to administer effectively its Article 2.1 quotas.  The 
United States and the Members concerned had deemed  the circumvention provisions to be necessary 
for the implementation of these quotas.  Triple ch arging, which was agreed upon in most of the 
administrative arrangements, had also been deem ed by the United States and the respective Members 
to be a necessary deterrent to circumvention.  Sin ce its application would affect the restraint levels 
contained in the US' Article 2.1 notifications, these particular provisions were, in the view of the 
United States, appropriately included in the administrative arrangements. 
483. Noting that all the provisions of the administrative arrangements, including those related to 
cooperation in the prevention of ci rcumvention, had been agreed be tween the Members concerned, the 
TMB observed that Article 5 contained detailed d escriptions of the rules and procedures to be 
followed.  The TMB noted, inter alia , that Article 5.4 seemed to provide some flexibility in terms of 
remedies or agreed actions that could be for eseen in cases when circumvention has occurred.  It 
observed, however, that Article 5 contained no reference to the po ssibility for the importing Member 
to impose triple charges on quotas, as a deterrent to  circumvention.  The TMB noted in this regard 
that this provision had not been utilized by the United States.  The TMB recalled that the United 
States had stated that when provisions of the admi nistrative arrangements were  inconsistent with the 
ATC, the provisions of the ATC would apply.  Th e TMB understood that this statement applied to 
each and every provision of the arrangements notifie d.  The TMB expected, therefore, that all the 
provisions of these administrative arrangements, incl uding those related to circumvention, would be 
implemented by the respective Members in conform ity with the relevant provisions of the ATC. 
                                                     
 
242 See G/L/179, paragraphs 215 to 221 and G/L/459, paragraphs 298 to 304 and 307 to 309. G/L/683 
Page 148  
 (b) Developments during the third st age of the integration process 
484. During the third stage of the integration process,  no issue has been referred to the TMB with 
specific reference to the provisions of Article 5.  During that Stage, however, the TMB has reviewed six administrative arrangements concluded betw een Canada, the European Communities and the 
United States and, respectively, China and Chinese Taipei which contain, inter alia , provisions 
dealing with circumvention either explicitly (Eur opean Communities, United States) or indirectly 
(Canada).  These provisions and their examination by the TMB are reported in detail in Part Three, 
Section II of the present report
243.  It is noteworthy that the respective provisions of the administrative 
arrangements concluded between the European Co mmunities and, respectively, China and Chinese 
Taipei contain, inter alia , explicit references to the provisions of  Article 5.  The same applies to the 
administrative arrangements agreed between China a nd the United States, which also clearly spell out 
that "[...] in the event of a conflict between [t he circumvention provisions of the administrative 
arrangements ] and Article 5 of the ATC that im pairs the operation of the ATC, the ATC shall 
prevail".  The administrative arrangements between Chinese Taipei and the United States also incorporate a few elements of the language of Article 5.  In taking note of the respective 
administrative arrangements notified, the TMB expressed  its expectation that all the provisions of 
these arrangements (including those related to circumvention) would be implemented by the Members 
concerned in full compliance with the relevant provisions of the ATC.  
(c) Follow-up of the TMB's examination of the communications made by Pakistan and the 
United States regarding a Memorandum of U nderstanding reached between the two Members 
485. As reported in the second comprehensive report of the TMB
244, the Body had considered at 
the end of Stage 1 and during Stage 2, two communi cations made by Pakistan and the United States, 
respectively, of a Memorandum of Understanding  (MOU) reached between the two Members in 
March 1996.  The MOU notified was intended to provid e a mutually satisfactory solution to a dispute 
between the two parties concerning the debits made  by the United States in 1995 to Pakistan's quota 
for US category 361 products (bedsheets) on account of alleged circumvention by Pakistani companies.  These communications, though they referre d to the same mutually satisfactory solution, 
had been made under two different articles of th e ATC:  Pakistan had made its submission under 
Article 2.17 and the United States under Article 5.  The TMB examined in detail the three main 
elements of the MOU reached, i.e. (i) a reduction of the debit made by the United States to Pakistan’s 
category 361 quota;  (ii) the introduction of restric tions on man-made fibre bedsheets and pillowcases;  
and (iii) the resolution of matters concerning US rul es of origin changes with respect to imports of 
bedsheets and pillowcases from Pakistan into the Unite d States.  As a result of this examination, the 
TMB had, inter alia , recommended that the two parties re-examine one important aspect of the 
measures in question (i.e. the introduction of new re strictions on imports of man-made fibre bedsheets 
and pillowcases from Pakistan), in the light of the Body's detailed comments and considerations as 
reflected in its respective report.  With a view to  exercising proper surveillance of the implementation 
of its recommendation, the Body expected that the two parties would report back to it on the outcome 
of this re-examination, in a way that would enab le the TMB to make a definitive statement on the 
justification and conformity of the actions w ith the relevant provisions of the ATC.   
486. After a long process (the Members concerned first could not reach a common understanding) 
another mutually agreed solution was eventually  reached between the two Members, which was 
jointly notified to the TMB in September 2000.  Th e TMB made a detailed examination of the new 
MOU.  It noted, inter alia , that this new mutually agreed solution referred to Articles 4 and 5 of the 
ATC, but the specific provisions of these Articles, wh ich the parties considered to be relevant in the 
context of the introduction of new restrictions, ha d not been identified in the joint communication 
received.  The TMB expressed its concern that it ha d not been in a position to determine, as required, 
                                                     
 
243 See paragraphs 265, 269, 276 to 278, 283 to 284, 291 to 294, 303 to 305 above. 
244 See G/L/459, paragraphs 434 to 464.  G/L/683 
 Page 149 
 
 the conformity, or lack thereof, of the measures agreed between Pakistan and the United States with 
the ATC.  In particular, with reference to Article  8.3, it noted that full cooperation from the Members 
concerned was indispensable in facilitating the TMB’ s task of examining the measures referred to it 
under the ATC and of determining their conformity  therewith.  Continued failure to provide the 
requested information could seriously hamper th e TMB’s ability to discharge its functions in 
accordance with the requirements of the ATC.  Th erefore, the Body urged both parties to provide 
replies to the specific questions, as set out in the report of its examination without delay.  In the 
context of the preparation of its second compre hensive report, the TMB decided to seek further 
clarifications or elaboration on a number of specific issues from certain Members.  In this framework, the TMB had called the attention of Pakistan a nd the United States to its repeated requests for 
information and clarifications as above.  Despite these reminders, no further communications were 
provided by either of the two Members on this  matter.  Under these circumstances, the TMB 
reiterated its serious concerns.  Since then and dur ing the third stage of the integration process, no 
further communication has been received from either  Pakistan or the United States regarding this 
matter. 
(d) Conclusions adopted by the Council for Trade in Goods in July 2002 in its second major 
review 
487. In the conclusions adopted by the CTG rega rding the implementation of the ATC in the 
second stage of the integration process, the following was reflected: 
 "On the circumvention of restrictions in term s of ATC Article 5, a developed, restraining 
Member considered that this was a serious, continuing problem and was a major issue.  
Investigations had consistently shown a high rate of circumvention activity in several 
Members which had been used as transshipment point s.  Failure to deal effectively with this 
problem was contrary to the letter and spirit of  the ATC and had had a negative impact on its 
industry.  The ITCB Members stated that they  did not condone circumvention of restrictions 
and had extended cooperation c onsistent with the ATC requirements.  Citing figures from 
investigations by the Customs authorities of th e Member concerned, they pointed out that 
claims about widespread circumvention were  not supported by facts and were greatly 
exaggerated.  On the contrary, the measures that the importing Member had put in place to address the perceived problem were disproporti onate.  By prescribing additional documentary 
requirements, these measures impeded the utili zation of access available to restrained 
Members under the ATC."
245 
 
(e) Further comments by the TMB 
488. The TMB recalls that, in terms of summarizing its assessment of the situation in the context 
of its comprehensive report for the second stage of the integration process, it stated the following: "On 
the basis of the comments provided by Members, it would appear that Members have invested 
substantial efforts with a view to addressing probl ems arising from the potential circumvention of the 
ATC, despite the sensitive and controversial nature of this subject.  The fact that only one specific 
matter which would fall under the provisions of Artic le 5 has been referred to the Body since the 
entering into force of the ATC, is a clear mani festation of these efforts.  The TMB encourages 
Members to further strengthen their cooperation in th is regard in a balanced manner which would, one 
the one hand, reconcile the requirements of e fficiency while not causing unnecessary additional 
burden for the respective authorities and economic operators involved, on the other."246   
489. The TMB observes in this regard that, during the third stage of the integration process, no 
specific matter which would fall under the provisions  of Article 5 has been referred to the Body. 
                                                      
245 See G/L/556, paragraph 19. 
246 See G/L/459, paragraph 481. G/L/683 
Page 150  
 Although there could be instances in which Member s were confronted with problems such as those 
identified in Article 5, the particular matters c ould apparently be addressed and solved in the 
framework of the strengthened coopera tion between the Members concerned. 
III. IMPLEMENTATION OF PROVISIONS IN THE ATC RELATED TO SPECIAL 
INTERESTS OR PARTICULAR SITUATIONS OF CERTAIN WTO MEMBERS 
490. The ATC contains specific provisions related to least-developed c ountry Members, small 
suppliers, cotton-producing exporting Members and w ool-producing exporting Members.  Also, some 
other provisions of the Agreement could be applie d in such a way as to provide favourable treatment, 
inter alia , to developing Members.  Though certain i ssues, for instance the implementation of 
Article 2.18 related to small supp liers, are addressed in detail in other sections of the report, an 
overview of these provisions, together with developm ents in their implementation during Stage 3 of 
the integration process, is provided below. 
A. 
LEAST -DEVELOPED COUNTRY MEMBERS  
491. The provisions of the ATC explicitly menti oning the least-developed country Members can 
be summarized, as follows:  
• the third preambular paragraph recalls that "it was agreed that special treatment 
should be accorded to least-developed country Members"; 
 
• a footnote to Article 1.2 specifies that "to the extent possible, exports from 
least-developed country Members may also benefit from this provision."  (According to Article 1.2, the provisions of Article 2.18 [improved access for small suppliers] and 6.6(b) [differential and more favourable  treatment in the fixing of the economic 
terms of transitional safeguard measures taken pursuant to Article 6] shall be used in 
such a manner as to permit meaningful  increases in access possibilities for small 
suppliers and the development of commerc ially significant trading opportunities for 
new entrants in the field of textiles and clothing trade); 
 
• Article 6.6(a) provides that in the a pplication of the transitional safeguard, 
least-developed country Members shall be accorded treatment significantly more 
favourable than that provided to the other groups of Members referred to in the same 
Article, preferably in all its elements, but at least, on overall terms. 
 
1. Implementation of the provisions related to least-developed country Members during 
Stages 1 and 2 of the integration process 
(a) Articles 1.2 and 2.18 
492. Of the Members maintaining restrictions unde r Article 2.1, the European Communities had 
not applied any restriction on imports from least-d eveloped country Members.  On the other hand, 
Canada and the United States had notified such restrictions vis-à-vis  least-developed country 
Members, as follows:  
• Canada had notified restrictions on imports  from Bangladesh; Lesotho and Myanmar.  
Improvement in access in the sense of Article 2.18 was provided with respect to exports from Lesotho and Myanmar through the advancement by one stage, both 
during Stages 1 and 2, of the growth rates set out in Articles 2.13 and 2.14(a); 
  G/L/683 
 Page 151 
 
 • the United States had notified restrictions on imports from Bangladesh; Haiti and 
Myanmar.  Improvement in access in the sense of Article 2.18 was provided with respect to exports from Haiti through the advancement by one stage, both during Stages 1 and 2, of the growth rates set out in Articles 2.13 and 2.14(a).  
 493. In reply to the TMB's request  for information and comments made in the context of the 
preparation of the second comprehensive report, the ITCB members had stated, inter alia , that 
"Article 1.2 provided for implementation of the grow th-on-growth provision of Article 2 in such a 
way as to permit meaningful increases in access possibiliti es 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. […] The report [of the TMB] should also 
emphasise that, with respect to least developed coun try Members, they failed to give any meaning to 
the provision".  The ITCB members also "wish[ed] 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".
247 
494. Canada, in its reply to the TMB's request for information and comments in the context of the 
preparation of the second comprehensive report, had stated, inter alia ,  that "in compliance with the 
requirement to advance the growth rate for small s uppliers as stipulated by ATC Article 2.18, Canada 
increased the growth rate for these exporters by 25 per cent on 1 January 1995 and again by 
27 per cent on  1 January 1998.  As a result, the annual growth rates on restraints remaining for most small suppliers and least developed countries now exceed 9 per cent and will increase to over 
12.0 per cent on 1 January  2002 as a result of the 27 per cent increase in growth rates at the start of 
the third stage required by the ATC. [...]  In add ition, 17 small suppliers a nd least developed counties 
benefited directly when Canada increased unilate rally its restraint level on winter outerwear by 
10 per cent on 1 January 1998.  Sm all suppliers and least developed countries have also benefited 
from the removal of quantitative restraints into the Canadian market.  Ten small suppliers and least 
developed countries benefited in the case of the elim ination of restraints on tailor collared shirts on 
1 July  1997 (Bangladesh, Bulgaria, Cuba [its onl y restraint], Macao, Mauritius, Myanmar, Poland, 
South Africa, Sri Lanka and Swaziland), while 9 of these Members benefited from the removal of 
various apparel items from restraints on 1 Ja nuary 1998 under ATC Article 2.15 (Bangladesh, 
Bulgaria, Hungary, Macao, Myanmar, Poland, South Africa, Sri Lanka and Swaziland).  In the latter 
case, Canada provided further market opportunities for these Members by not reducing the restraint 
levels on the products remaining unde r restraint in the affected categor ies.  Thirteen small suppliers 
and least developed countries will also benefit directly as a result of the elimination of restraints and 
the removal of products from restraint on 1 January 2002 as a result of the third stage of integration.  
As in the earlier case, Canada will not be adjusting th e restraint levels where restraints are partially 
liberalized, further expanding market opportunities for the affected Members".
248 
495. The European Communities, in its reply to th e TMB's request for information and comments 
for the purpose of drawing up the second comprehensive report, had stated, that "in so far as least-
developed country Members are concerned, th e European Communities does not maintain any 
restrictions on products co vered by the ATC.  In addition, whether as a result of the Lomé Convention 
or the General System of Preferences (GSP), most imports to the Communities from LDCs benefit from zero duty provisions concerning tariffs. Th is includes large garment suppliers such as 
Bangladesh, who became in 2000 the EU's seventh  supplier of textiles and clothing products".
249 
496. Japan, in its reply to the TMB's request for in formation and comments in the same context, 
had stated that "in accordance with the commitme nt of the Uruguay Round negotiation, Japan is 
implementing tariff reductions on textile and clothi ng products in ten years, from Fiscal Year 
                                                      
247 See G/L/459, paragraph 577. 
248 Ibid., paragraph 578. 
249 Ibid., paragraph 579. G/L/683 
Page 152  
 (FY) 1995 to FY 2004 (average ra te of tariff will be reduced from 11.5 per cent in FY 1994 to 
7.8 per cent in FY 2004).  About 340 items of the textile and clothing produc ts, which have formerly 
been exemptions to GSP system, are duty free a nd quota free for LDCs.  By this measure, all the 
textile and clothing products from LDCs are duty free and quota free from 1 April 2001.  All 48 LDCs 
are able to benefit from this system, while so far the coverage was 42 LDCs".
250 
(b) Articles 6.6(a) and 6.6(b) 
497. During Stages 1 and 2 of the integration pro cess, no safeguard measure was introduced on 
imports from any least-developed country Member.  Consequently, these provisions were not invoked. 
2. Developments during the third stage of the integration process 
(a) Articles 1.2 and 2.18 
498. As indicated in a previous section of this report
251, Canada and the United States increased for 
Stage 3 the annual growth rates applied during Stage 2 for WTO Members falling under the provisions of Article 2.18 in their respective regime s by 27 per cent.  Of the least-developed country 
Members, the increase of the growth rates implemented by Canada affected the level of the restraints 
on imports from Bangladesh, Lesotho and Myanmar,  while the US measure affected the restraint 
levels applied to imports  from Haiti.  It should be noted that the European Communities continued not 
to apply any restrictions to imports from least-d eveloped country Members and the same applies to 
Turkey which essentially aligned its import regime on that of the EC. 
499. As also reported earlier
252, effective from 1 January 2003, Canada implemented 
improvements to its preferential scheme for least deve loped countries and, in this framework, it began 
to grant quota-free access for all products covered by the ATC.  Based on the respective notifications 
received from Canada, it appears that two WTO Members, namely Bangladesh and Lesotho were 
affected by the elimination of the quantitative restrictions previously maintained by Canada. 
(b) Articles 6.6(a) and 6.6(b) 
500. Since no safeguard measure has been taken by any Member on imports from any least-
developed country Member during the period under  review, no recourse has been made to the 
provisions of Articles 6.6(a) and 6.6(b). 
B. SMALL SUPPLIERS AND NEW ENTRANTS IN TH E FIELD OF TEXTILES AND CLOTHING TRADE  
501. Article 2.18 provides for meaningful improveme nt in access for the exports of Members 
whose restrictions represent 1.2 per cent or less of th e total volume of the restrictions applied by an 
importing Member as of 31 December 1991 and notifie d under Article 2.  The implementation of the 
provisions of Article 2.18 is reported in detail in a previous section of the report.253 
502. Article 6.6(b) provides that, if a safeguard measure is introduced on imports from Members 
whose total volume of textile and clothing exports is small in comparison with the total volume of 
exports of other Members and who account for only a small percenta ge of total imports of that 
product into the importing Member, differential and mo re favourable treatment shall be accorded in 
fixing the level of the restraint, its growth rate and the applicable flexibility provisions.  The Members 
                                                      
250 See G/L/459, paragraph 580. 
251 See paragraph 21 and 318 above. 
252 See paragraph 318 above. 
253 See paragraphs 311 to 319 above.  G/L/683 
 Page 153 
 
 corresponding to this definition are not necess arily the same as the Members envisaged in 
Article 2.18.  The only safeguard measures take n during the implementation of Stage 3 of the 
integration process (restraints agreed, pursuant to Article 6.9, between Brazil and, respectively, 
Chinese Taipei and Korea254) did not qualify for differential and more favourable treatment under the 
criteria established by Article 6.6(b). 
C. COTTON -PRODUCING EXPORTING MEMBERS  
503. Article 1.4 provides that "the particular inte rests of the cotton-producing exporting Members 
should, in consultation with them , be reflected in the implementation of the provisions of this 
Agreement".   In its comprehensive report on the im plementation of the ATC during its first stage, the 
TMB had observed, inter alia , that on the basis of the information and statements provided by some 
Members, and following a discussion that had taken place in the Council for Trade in Goods on issues 
related to the implementation of the ATC "it a ppears to the TMB that Members have different 
perceptions on how the particular interests of th e cotton-producing exporting Members should be – 
and were – reflected in the implementation of the provisions of the ATC.  The TMB notes in this respect that the Members maintaining restrictions unde r Article 2 had stated that they were prepared 
to have consultations on this matter with the Members concerned.  The TMB encourages interested 
Members to enter into consultations with a view to  clarifying the issues related to the implementation 
of Article 1.4.  The TMB also recalls in this re gard that, should the need arise, the provisions of 
Article 8.4 are available for this purpose".
255 
504. In their reply to the TMB's request for informa tion and notification made in the context of the 
preparation of the second comprehensive report, the ITCB members had stated that "no specific 
information has been notified by the restraining Members as to the manner in which this principle 
might have been reflected in their implementati on; in, for example, the choice of products for 
integration or invocation of safegua rd actions.  Given the fact that cotton products have long been 
targeted for quota restrictions, the report should brin g out that the application of Article 1.4 has been 
altogether ignored".256 
505. Canada, in its reply to the TMB's request for information and comments in the same context, 
had stated that "Canada held consultations w ith exporting countries, including cotton-producing 
exporting countries, during the period immediately preced ing the start of the ATC and, as a result of 
these consultations, made a number of improvement s to Canada's restraints to accommodate the 
cotton-producing exporting Members' requests.  Since these consultations, no cotton-producing 
exporting Member has approached Canada with specif ic concerns of access for cotton products.  As a 
general comment, the structure of Canada's appare l categories does not differentiate between products 
according to fibre type.  Cotton-producing exporti ng Members have benef ited directly from the 
removal of restraints on apparel products with high cotton-content, including tailor-collared shirts in 
1997 and various women's, girls' and children's cl othing items (e.g., blouses and shirts) in 1998.  
These exporters will further benefit from the elim ination of restraints on cotton products under 
Canada's third stage of integration".257 
506. The European Communities, in its reply to th e TMB's request for information and comments 
for the purpose of preparation of the second comprehe nsive report, had stated that "as to the cotton-
producing exporting Members, the EC has consulted such members at earlier  stages of the ATC's 
integration process and afforded full scope for co nsultation prior to establishing its third stage of 
                                                      
254 See paragraphs 429 to 436 above. 
255 See G/L/179, paragraphs 313 to 316. 
256 See G/L/459, paragraph 585. 
257 Ibid., paragraph 586. G/L/683 
Page 154  
 integration, by specifically offering consultations with all exporting WTO Members against which it 
maintained restrictions."
258 
507. The United States, in its reply to the TMB's request for information and comments in the 
same context, had stated that "the United States consulted with cotton producing countries before the 
entry into force of the ATC and reached agreements that were done with the provisions of Article 1.4 
in mind.  We have subsequently engaged in consul tations with cotton producing countries to resolve 
issues raised by them.  These consultations were al so conducted with an eye to Article 1.4 and have 
been considered successful by all participants".259 
508. In its comments and observations related to th is matter in the second comprehensive report, 
the TMB, inter alia , noted the statements reflected in para graphs 504 to 507 above and stated the 
following: 
"Furthermore, the TMB observes that in its first comprehensive report, it had, inter alia , 
encouraged interested Members to enter into cons ultations with a view to clarifying the issues 
related to the implementation of Article 1.4.  In this regard, the TMB recalled that, should the 
need arise, the provisions of Article 8.4 are ava ilable for this purpose.  In this respect the 
TMB notes that no WTO Member referred to it any specific issue with respect to the 
implementation of Article 1.4, and that it is not aware that the provisions of Article 8.4 have 
been used by any cotton-producing exporting Memb ers or by any restraining Member for this 
purpose.  In these circumstances, the TMB re iterates its encouragement to interested 
Members to enter into consultations with a vi ew to clarifying the issues related to the 
implementation of Article 1.4 and recalls in th is regard that, should the need arise, the 
provisions of Article 8.4 are available for this purpose.  In addition, Members should consider 
the possibility that in notifying measures ta ken under different provisions of the ATC it 
should be also indicated, if possible and appli cable, how the provisions of Article 1.4 have 
been reflected in the implementa tion of the measures in question."260 
 509. Against this background, it should be noted that no communication whatsoever has been 
received from any Member by the TMB during the implementation of Stage 3 of the integration 
process with specific reference to the provisions of Article 1.4. 
D. 
WOOL -PRODUCING EXPORTING MEMBERS  
510. The only explicit provision in the ATC refe rring to wool-producing developing country 
Members is Article 6.6(c), which provides that "w ith respect to wool products from wool-producing 
developing country Members whose economy and te xtiles and clothing trade are dependent on the 
wool sector, whose total textile and clothing exports consist almost exclusivel y of wool products, and 
whose volume of textiles and clothing trade is co mparatively small in the markets of the importing 
Members, special consideration shall be given to the export needs of such Members when considering 
quota levels, growth rates and flexibility".  No  safeguard action was taken under Article 6 during 
Stage 3, as had been the case during the previous two st ages, affecting exports of wool products.  This 
provision has, therefore, not been applied. 
E. MORE FAVOURABLE TREATMENT TO BE ACCORDED TO RE -IMPORTS IN APPLYING THE 
TRANSITIONAL SAFEGUARD MECHANISM  
511. Article 6.6(d) states that "more favourable treat ment shall be accorded to re-imports by a 
Member of textile and clothing products which th at Member has exported to another Member for 
                                                      
258 G/L/459, paragraph 587. 
259 Ibid., paragraph 588. 
260 Ibid., paragraphs 599 and 600.  G/L/683 
 Page 155 
 
 processing and subsequent reimportation, as define d by the laws and practices of the importing 
Member, and subject to satisfactory control and certification procedures, when these products are 
imported from a Member for which this type of tr ade represents a significant proportion of its total 
exports of textiles and clothing".  Contrary to what had been the case during Stage 1261, none of the 
restraints introduced pursuant to the provisions of Article 6 during Stage 2 provided more favourable 
treatment to the products envisaged in paragraph 6. 6(d), since this type of trade did not represent a 
significant proportion of the total exports of the Members affected.  The same applies to the 
transitional safeguard measures taken during the third stage of the integration process.  This provision 
has, therefore, not been applied with respect to  the transitional safeguard  measures taken during 
Stage 2 and Stage 3. 
F. SPECIAL TREATMENT AFFORDED TO MEMBERS WHICH HAVE NOT ACCEPTED THE MULTIFIBRE 
ARRANGEMENT (MFA)  EXTENSION PROTOCOL SINCE 1986. 
512. Article 1.3 states that "Members shall have due  regard to the situation of those Members 
which have not accepted the Protocols extending [...] the MFA since 1986 and, to the extent possible, 
shall afford them special treatment in applying th e provisions of this Agreement".  As had been the 
case for the previous stages of the integration pro cess, the TMB has not received any information on 
the extent (if any) to which recourse was made to this provision during the implementation of Stage 3. 
G. TREATMENT ACCORDED TO DE VELOPING COUNTRY MEMBERS  
513. The ATC contains a specific provision granting special treatment to imports of certain 
categories of products imported from developing c ountry Members.  In addition, some other 
provisions of the ATC could be applied in su ch a way as to provide favourable treatment, inter alia , to 
imports from such Members. 
1. Special provision in favour of developing country Members 
514. Paragraph 3(a) of the Annex to the ATC provid es that actions under the transitional safeguard 
provisions in Article 6 of the ATC shall not a pply to developing country Members' exports of 
handloom fabrics of the cottage industry, or hand- made cottage industry products made of such 
handloom fabrics, or traditional folklore handicraft textile and clothing products, provided that such 
products are properly certified under arrangements established between the Members concerned.  
Consistent with this provision, no safeguard acti on under Article 6 was introduced on such products 
during any Stage of the integration process.  
2. Other provisions which could be applied in such a way as to provide favourable 
treatment, inter alia , to developing country Members 
515. Some of the provisions of the ATC provide favour able treatment to a  particular category of 
Members.  Apart from the provisions related exp licitly to the least-developed country Members 
(i.e the footnote to Article 1.2 and Article 6.6(a)),  Members qualifying for the status of small suppliers 
and new entrants (Article 2.18) are mostly developing countries or customs territories. 
516. In its first comprehensive report, the TMB had reiterated that "in addition to the provisions 
specifically designed to provide favourable treatment to exports of textile and clothing products from 
developing country and/or least-developed country Members, and in addition to the Articles already 
mentioned in this [Section of the report], there are several other provisions in the ATC which, although not specifically applicable only to such Me mbers, could be applied in such a way as to 
provide favourable treatment, or to be beneficial, inter alia , to them.  Such provisions include, among 
others, those related to the integration process (Artic les 2.6, 2.7. 2.8 and 2.10), provisions regarding 
                                                     
 
261 See G/L/179, paragraphs 319 and 320. G/L/683 
Page 156  
 growth rates (Articles 2.13 and 2.14), elimination of quantitative restrictions (Article 2.15), phasing 
out of non-MFA restrictions (Article 3.2), ch anges (i.e. reductions) in existing restrictions 
(Article 3.3), improved access to markets and the app lication of policies relating to fair and equitable 
trading conditions (Article 7.1)".
262  This statement was also re produced in the TMB's second 
comprehensive report.263 
H. VIEWS , COMMENTS AND ASSESSMENTS OF WTO MEMBERS IN RESPONSE TO THE TMB 'S 
GENERAL REQUEST FOR INFORMATION  
517. In their response to the TMB's request for information and co mments in the context of the 
preparation of the present report, ITCB members st ated the following under the heading of "special 
categories of suppliers": 
 "As in previous stages of implementation, full regard has not been given by the restraining 
Members in Stage 3 to ATC provisions that e nvisaged special considerations for specific 
categories of suppliers, namely, the small supp liers, the least developed countries, the cotton-
producing exporting countries;  this despite rea ffirmation, by the Council for Trade in Goods, 
of the importance of full implementation of tho se provisions in its report on the ‘major review 
of ATC implementation during second stage of the implementation process’ (cf. G/L/556, 
paragraph 22, indent 4).  
 
Thus Canada and the United States did not implement the growth-on-growth for small 
suppliers and least developed countries in  accordance with the object and purpose of 
Articles 1.2 and 2.18 of the ATC.  They continued to apply a different methodology than the one used by the EU in implementing the same provisions. 
 
It deserves to be recognized, however, that  Canada notified (G/TMB/N/459 read with 
WT/COMTD/N/15/Add.1) the grant of duty- a nd quota-free treatment to imports from least 
developed countries under Article 2.15 of the AT C provided they met the necessary rules of 
origin criteria – although only from 1 January 2003 (the ninth year of ATC implementation). 
 
 For cotton-producing exporting countries, on the other hand, none of the restraining countries 
extended any specific treatment under Article 1.4 of the ATC, nor has any notification been made concerning any consultations with any of the cotton-producing countries concerned 
within the meaning of this provision.  
 
In a nutshell, the relevant provisions of the Ag reement have essentially  gone un-implemented, 
rendering them to inutility." 
 518. The communication received from Canada contai ned the following elements, relevant to the 
consideration of the issues taken up in this section of the report: 
 "LDCs
 
 
Canada has implemented measures to improve access for imports from least developed countries (LDCs).  The measures eliminate ta riffs on most products except for certain 
agricultural products e.g., over-quota tariff items  for dairy, poultry and egg products, and 
introduce new rules of origin requirements for textile and apparel produc ts.  Under these rules 
of origin, apparel products e xported from LDCs will be eligible for duty-free treatment 
provided they are cut, or knit to shape, and sewn or assembled from inputs from any of the 48 eligible LDCs.  Inputs from General Preferentia l Tariff (GPT) beneficiary countries may also 
                                                     
 
262 See G/L/179, paragraph 323. 
263 See G/L/479, paragraph 594.  G/L/683 
 Page 157 
 
 be used provided at least 25 per cent of the c ontent of the apparel goods originates in the LDC 
exporting country.  The rules of origin for fabrics and yarn allow for full accumulation of originating inputs from LDCs or GPT beneficiary co untries.  Any materials used in the textile 
or apparel products that originate from Canada ar e deemed to have originated in the LDC.   
  Small suppliers 
 
 
 The small exporters’ growth-on-growth provi sions provide for meaningful and significant 
increases in quota levels for products under restraint from these suppliers. 
  Small supplier growth rates will, in fact, doubl e by phase three of the ATC.  Some examples 
are:  Sri Lanka's and Mauritius' quotas are bot h expanding by 12.1 per cent per annum.   
  Moreover, in implementing the small supp liers’ growth-on-growth provisions, Canada 
adopted a methodology for calculating a small supplier such that the advanced formula applied to 16 exporting developing countries, five  more than strictly required by the ATC.  
 
 Cotton-producing exporting Members
 
  Over the past nine years, cotton-producing expor ting countries have never raised the matter of 
the particular interests that they might have in the export of cotton products.  In this respect, it 
should be noted that the structure of Canada's  textile restraint category system, with few 
exceptions mainly for fabrics, does not differen tiate products according to fibre type.  This 
allows exporting Members a wider latitude to dive rsify their exports according to the needs of 
the market.  
  Canadian authorities, naturally, have always b een prepared to consult with cotton-producing 
exporting Members with respect to their particular interests.  In this respect, it should be noted 
that modification of Canada's category structur e to benefit cotton products would result in an 
increase in the number of categories which would limit artificially, compared to the current 
situation, the ability of Members to maximize the rents from these quotas." 
 519. The communication from the United States contained the following elements, relevant to the 
consideration of the issues taken up in this section of the report: 
"Article 2.18 of the ATC provides that small suppliers shall receive specified advances in 
growth rates throughout the term of the ATC.  The United States complied with the provisions of Article 2.18 and, in Stage 3, si nce there were no more stages by which small 
suppliers' growth rates could be advanced, the growth rates of all suppliers were increased by 
an additional 27 per cent.  We note that since the base levels of those suppliers had been 
increased at accelerated rates during the first tw o stages, they continued to benefit from the 
advanced staging received during Stages 1 and 2.  Also we note that the United States has not implemented any textile safegua rd actions on small suppliers  under Article 6 of the ATC 
since 1995.  The United States firmly believes it has implemented Article 2.18 in a manner 
consistent with its terms, as  well as its object and purpose.  
  
The ITCB also raises the US treatment of least developed countries.  Virtually all LDCs are  small suppliers not subject to quotas.  Furthe rmore, the United States has already extended 
significant preferences to least developed Members through regional trade preference programmes benefiting sub-Saharan African c ountries and Caribbean countries.  The latter 
two programmes provide benefits for the textile sector as well as other products.  
  With regard to cotton-produc ing exporting countries, we note that the base level quotas which 
formed the basis for the implementation sche dule of the ATC were negotiated within the G/L/683 
Page 158  
 parameters appropriate for cotton-producing c ountries, least-developed exporting countries, 
wool-producing countries, small suppliers, etc.  With respect to further consultations, we note 
that cotton-producing countries did not seek to  consult with the United States under this 
provision, and that some of the most vocal of those countries have maintained high tariffs, non-transparent customs procedures, and other mech anisms to restrain imports of textiles and 
apparel into their own markets."  
 
I. 
FURTHER COMMENTS AND OB SERVATIONS BY THE TMB 
520. As also reflected in the respective comm unications received from Members, the only 
important development during Stage 3 of the integr ation process affecting matters covered by this 
section of the report was the implementation by Ca nada, as from 1 January 2003, of improvements to 
its preferential scheme for least developed countri es, providing duty-free and quota-free treatment if 
the respective rules of origin criteria are met.  It should be also recalled that the European 
Communities and Turkey do not maintain restric tions under the ATC on imports from least-developed 
country Members.  Noting the statement of the Unit ed States that "[v]irtually all LDCs are small 
suppliers not subject to quotas", it should be noted  that there is at least one important exception 
(Bangladesh) whose imports into the United States c ontinue to be subject to restrictions under the 
ATC.  Furthermore, the reference by the United States to significant preferences granted to LDCs 
"through regional trade preference programmes" is duly noted.  However, these programmes have not 
yet been notified to the WTO;  therefore, the TMB has no basis to assess their possible impact. 
521. Regarding the implementation of the provisions of Article 2.18 in favour  of small suppliers 
and new entrants, the TMB recalls that the me thodology chosen by the respective restraining 
Members for the implementation during Stage 1 predetermined the possible impact of the 
implementation of the same provisions during the succes sive integration stages.  The TMB notes with 
regret that, as a follow-up to the Doha Ministeria l Decision, the Council for Trade in Goods was not 
in a position to make any recommendation to the Genera l Council in this matter.  It is also observed 
that, despite the TMB's respective comments ma de in the previous comprehensive reports264, 
Members apparently have made no attempt to im plement Article 2.18 by implementing "at least 
equivalent changes as may be mutually agreed with respect to a different mix of base levels, growth 
and flexibility provisions." 
522. Finally, with respect to the implementation of  the provisions of Article 1.4 in favour of 
cotton-producing exporting Members, no change in the respective Members' perception and attitude 
can be observed.  The TMB notes the concerns e xpressed by ITCB members in their communication.  
It also notes, however, that its earlier and repeated  encouragements to interested Members to enter 
into consultations with each other 265 have not been followed.  Furthermore, while noting the 
statement of the United States acco rding to which some consideration had been given in establishing 
"the base level quotas [...] [to] parameters appropriate [ inter alia ] for cotton-producing countries", it 
should be observed that (i) there is no explanation regarding what were "the  parameters appropriate" 
to these Members and that (ii) Article 1.4 appears to  address the particular interests of such Members 
throughout the period of ATC implementation and is not limited to the process of establishing the 
base levels (prior to the beginning of the im plementation of the ten-year transition period). 
                                                      
264 See G/L/459, paragraph 704. 
265 See G/L/179, paragraph 316 and G/L/459, paragraph 705.  G/L/683 
 Page 159 
 
 IV. ACTIONS REFERRED TO IN ARTICLE 7 WITH A VIEW TO ABIDING BY 
GATT 1994 RULES AND DISCIPLINES SO AS TO ACHIEVE IMPROVED ACCESS 
TO MARKETS AND ENSURE THE APPLICATION OF POLICIES RELATING TO FAIR AND EQUITABLE TRADING CONDI TIONS – IMPLEMENTATION OF THE 
PROVISIONS OF ARTICLE 7 
A. T
HE PROVISIONS OF ARTICLE  7 
523. Article 7 reads as follows: 
 "1. As part of the integration process and with reference to the specific commitments 
undertaken by the Members as a result of the Uruguay Round, all Members shall take such actions as may be necessary to abide by GATT 1994 rules and disciplines so as to: 
 
 (a) achieve improved access to markets for textile and clothing products through such 
measures as tariff reductions and bindings , reduction or elimination of non-tariff 
barriers, and facilitation of customs, administrative and licensing formalities; 
  (b) ensure the application of policies relati ng to fair and equitable trading conditions as 
regards textiles and clothing in such areas as dumping and anti-dumping rules and 
procedures, subsidies and countervailing me asures, and protection of intellectual 
property rights;  and 
  (c) avoid discrimination against imports in the textiles and clothing sector when taking 
measures for general trade policy reasons. 
 
Such actions shall be without prejudice to  the rights and obligations of Members under 
GATT 1994. 
  2. Members shall notify to the TMB the acti ons referred to in para graph 1 which have a 
bearing on the implementation of this Agreement.  To the extent that these have been notified 
to other WTO bodies, a summary, with reference to the original notification, shall be sufficient to fulfil the requirements under this para graph.  It shall be open to any Member to 
make reverse notifications to the TMB. 
  3. Where any Member considers that another Member has not taken the actions referred 
to in paragraph 1, and that the balance of rights and obligations under this Agreement has 
been upset, that Member may bring the matter  before the relevant WTO bodies and inform 
the TMB.  Any subsequent findings or conclu sions by the WTO bodies concerned shall form 
a part of the TMB's comprehensive report." 
 
B. 
BACKGROUND :  SOME OF THE RELATED COMMENTS AND OBSERVATIONS MADE BY THE TMB 
IN ITS SECOND COMPREHENSIVE REPORT  
524. In the second comprehensive report, the TMB noted, inter alia , that no notifications or 
reverse notifications had been addressed to it with specific reference to the provisions of Article 7.2 
since the beginning of the implementation of the second stage of the integration process.  The TMB added that actually, no such notifications had b een received since the adoption of the TMB's first 
comprehensive report, nor had such notifications b een addressed to the Body during the first stage of 
the integration process.
266 
                                                      
266 See G/L/459, paragraph 534 and related footnote. G/L/683 
Page 160  
 525. In the context of the preparation of the sec ond comprehensive report, the TMB had invited 
Members to submit notifications or information, as appropriate, in relation to  the implementation of, 
among others, Article 7.1, with special regard to the notification requirements specified in Article 7.2.  
In response to this request, six contributions were received from Members touching upon aspects 
relevant to the consideration of the implementation of Article 7.  These contributions were submitted 
by Canada, the European Communities, ITCB members,  Japan, Turkey and the United States and they 
were incorporated by the TMB into its second comprehensive report.
267  In its related remarks, the 
TMB observed, inter alia , that: 
• "providing notifications to the TMB regardi ng the actions referred to in Article 7.1 
which have a bearing on the implementati on of the ATC, is a positive obligation, 
applicable to all Members pursuant to Article 7.2; 
 
• the same Article 7.2 also provides the possi bility of making reverse notifications to 
the TMB; 
 
• on the one hand, Members hardly made any formal notification to the TMB under the 
provisions of Article 7; 
 
• on the other hand, several of them decided to include a number of serious concerns 
regarding the implementation of Article 7 by some other Members, when providing 
information and comments in response to the TMB's request."268 
 526. Though the TMB was of the view that "it is neither required under the ATC, not is it a 
reasonable expectation to take up and address, in s ubstance, each and every comment included in the 
responses received from Members"
269, it decided to offer some comments and observations270, in 
order to contribute to Members' future discussi ons and assessments regarding the implementation of 
the ATC in general and of the provisions of Ar ticle 7 in particular.  Furthermore, the TMB 
recommended to the Council for Trade in Goods that the Council, inter alia , recall that the provisions 
of Article 7, like any other provisions of the ATC, have to be complied with by Members and, also, invite Members to notify to the TMB, pursuant to Ar ticle 7.2, the actions referred to in Article 7.1, 
which have a bearing on the implementation of the ATC. 
C. 
CONCLUSIONS ADOPTED BY  THE COUNCIL FOR TRAD E IN GOODS IN JULY 2002  IN ITS SECOND 
MAJOR REVIEW  
527. In the report adopted by the CTG regarding the implementation of the ATC in the second 
stage of the integration pro cess, the following was reflected: 
• "The developed, restraining Members re ferred to Article 7.1(a) of the ATC on 
improved market access for textile and clot hing products and considered that this 
provision had not produced a noticeable resu lt. While it required that improved access 
to markets should be achieved through such measures as tariff reductions and 
bindings, reductions or elimination of non- tariff barriers and facilitation of Customs, 
administrative and licensing formalities, the markets in many developing Members required greater access for the exports of textile and clothing products. The ITCB 
Members and some other developing Members considered that all Members, 
developed and developing, had been implementing their specific Uruguay Round 
commitments in accordance with their sche dules of concessions. They referred to the 
                                                     
 
267 G/L/459, paragraphs 539 to 549. 
268 Ibid., paragraph 551. 
269 Ibid., paragraph 552. 
270 Ibid., paragraphs 554 to 572.  G/L/683 
 Page 161 
 
 report by the TMB which stated that there had been no notifications of non-
compliance with any specific market-acce ss commitments undertaken as a result of 
the Uruguay Round.  Therefore, there did not appear to be a problem and, in fact, a 
number of developing Members had adopt ed autonomous market liberalization 
measures. They emphasized that any additional reductions in tariffs or bindings was a matter for future negotiations. 
 
  [...]  
• Based on the discussions, which are set out in detail in the reports on the meetings, 
the Council noted a number of considerations  and arrived at certain conclusions, as 
follows: 
 
   [ . . . ]    the views expressed recalled the provisions of Article 7 and called on all 
Members, as part of the integration process and with reference to the specific commitments undertaken as a result of the Uruguay Round, to take actions to 
abide by GATT 1994 rules and disciplines so as to achieve, inter alia , 
improved market access. 
   [ . . . ]   
• On a number of other topics examined by the Council, the understandings and 
positions held by groups of Members diffe red substantially and, thus, it was not 
possible to arrive at agreed conclusions. The detailed views are set out in [the relevant 
minutes of the Council's respective meet ings] and are summarized hereunder. 
 
[...]  
• Reference was also made by ITCB Members and some other developing Members to 
the use of anti-dumping investigations and measures on restrained products, which 
had had serious adverse effects on the expor ts of some developing countries. There 
had been an impairment of the balance of  rights and obligations as the market access 
made available through integration and grow th rates, though inadequate, were being 
taken away through anti-dumping actions in this area. According to these Members, by disrupting the utilization of access, these actions had impeded the realization of 
the objectives of the ATC. They pointed out that several aspects of the methodology 
used by the Member concerned in dumping determinations had since been faulted by 
a WTO dispute settlement panel and the Appe llate Body. In response, the concerned 
restraining Member reiterated that it a pplied anti-dumping legislation in a fully 
transparent manner in complia nce with WTO obligations."
271 
 
D. NOTIFICATIONS OF MEMBERS REGARDING DEV ELOPMENTS RELEVANT IN  THE CONTEXT OF 
THE IMPLEMENTATION OF ARTICLE 7 DURING THE THIRD STAGE OF THE INTEGRATION 
PROCESS  
528. Against the background summarized in paragraphs  524 to 527 above, it should be noted that 
during the period of implementation of Stage 3 of the integration process no notification has been 
received by the TMB from any WTO Member with specific reference to any of the provisions of 
Article 7.  Thus, despite the unambiguous obligations specified in the relevant provisions of the ATC, 
none of the Members has found it appropriate to notify to the TMB, pursuant to Article 7.2, any action 
referred to in Article 7.1 which c ould have a bearing on the implementation of the ATC.  Likewise, no 
                                                      
271 See G/L/556, paragraphs 20, 22, 23 and 29. G/L/683 
Page 162  
 summary with reference to the respective original notification(s) that could be addressed to other 
WTO bodies, has been provided to the TMB.  Al so, no reverse notifications, as specified in 
Article 7.2, have been received.  Similarly, the TMB has not received any information from any 
Member regarding possible cases where any Member considered that another Member had not taken the actions referred to in Article 7.1, and that th e balance of rights and obligations under the ATC had 
been upset and, therefore, the Member concerned decided to bring the matter before the relevant 
WTO bodies, as provided for in Article 7.3.  The TMB noted that, in the absence of such information 
that should have been provided by Members, the Body did not have to comply with the requirements defined in the last sentence of Article 7.3, acco rding to which "[a]ny subsequent findings or 
conclusions by the WTO bodies concerned shall fo rm a part of the TMB's comprehensive report." 
E. 
VIEWS AND COMMENTS OF WTO MEMB ERS IN RESPONSE TO THE TMB 'S GENERAL REQUEST FOR 
INFORMATION  
529. In their communication, ITCB members stat ed the following under the heading of 
"Strengthening of GATT rules and disciplines": 
 "During the Stage under progress, anti-dumping activity in the EU has continued, especially 
involving the import of bed linen in one form or  the other, turning it into an ongoing problem 
for exporters and the exporting countries concerne d.  Besides hampering the full utilization of 
quota access and thereby increasing the restrictiven ess of relevant restrictions, these actions 
are in sharp contrast to the commitment under Ar ticle 7 of the ATC that 'Members shall take 
such actions as may be necessary to abide by GA TT rules an disciplines so  as to ensure the 
application of policies relating to fair and e quitable trading conditions as regards textiles and 
clothing in such areas as anti-dumping rules and procedures …'".  
 
530. In its response to the TMB's request for clarif ications and comments made in the context of 
the preparation of this report and related to diffe rent specific aspects of ATC implementation, the 
European Communities commented upon, inter alia , the statement made by ITCB members, included 
in paragraph 529 above.  The EC stated in this regard the following:   
 "[T]he Communities is of the view, that contrary to the allegation made by ITCB as 
mentioned [in the ITCB members' communicati on, reproduced in paragraph 529], the ATC 
does not prescribe an all out prohibition agai nst recourse to anti-dumping procedures but, 
rather, it contains an invitation to moderation,  which, however, must be judged on the merits 
of individual cases and circumstances.  This rule applies obviously to all Members and such 
moderation of use of anti-dumping remedies is to be expected from all countries some of 
which are now frequently invoking this remedy." 
 531. The communication received from Turkey contained the following: 
 "In relation to Article 7.1, with special refere nce to Article 7.2, since 1996 with the formation 
of the Turkey-EU Industrial Customs Union, Turk ey started to implement a very low level of 
tariffs much below its legal and bound tariffs obligations. 
  Turkey has also been implementing its an ti-dumping and countervailing duty policies in 
accordance with GATT 1994 rules and Article 7.1(b) of the ATC.  The [attached] Table [reproduced in full in this report as Table 9] depicts the current implementation of anti-
dumping measures regarding tex tiles and clothing products." 
  G/L/683 
 Page 163 
 
  
Table 9 
 
PRODUCTS SUBJECT TO ANTI-D UMPING DUTIES IN TURKEY 
(as communicated by Turkey to the TMB)  
 
 
CN Code Commodity Country/territory Communiqué 
No. Final measure 
date/No. of official Anti-dumping duty 
5503.20.00.00.00 Polyester synthetic 
staple fibres (not 
processed) Belarus (Review)* 
Korea, Rep. of 
Indonesia 98/3 
 
2000/2  29.05.1998/23356 
13.03.2000/23992 19% 
%11.9 - %24.6 
%6.2 - %37.4 
5402.43 Polyester flat yarns  
Korea, Rep. of   
99/7
  
30.11.1999/23892m  
0% - 21.2% 
5402.33 Polyester textured yarn India 
Chinese Taipei Korea, Rep. of 2000/7
 
2000/7  27.06.2000/24092 
28.06.2000/24093 %6.8 - %20.3 
%9.9 - %28.6 33.70% 
55.13 55.14 55.15 
55.16 Woven fabrics of 
synthetic and artificial staple fibres  
 China  
 
2001/2
  
 15.02.2001/24319  
 87% 
5407.** Woven fabrics of 
synthetic filament yarn China 
Chinese Taipei 
Korea, Rep. of Malaysia Thailand  
 
 
2002/2
  
 
 13.02.2002/24670 %70.44 
%13.91 - %30.84 
%3.51 - %40 %63.23 - %15.93 
%8.67 - %30.93 
6301.40 
6301.90 Acrylic mink blanket  
China 
  
2002/14   
08.12.2002/24957  
4 $/kg. 
5806.32.90.00.00 Hook&Loop China 
Chinese Taipei  
2002/15   
13.12.2002/24962 3.86 $/kg. 
1.83 $/kg. 
5503.20 Polyester synthetic 
staple fibres India 
Chinese Taipei 
Thailand  
2003/14   
29.07.2003/25183 %16.5 - %23.9 
%6.4 - %20.1 
%15.8 - %22.0 
*    Expiry Review **  Detailed CN Codes are listed in the relevant Communiqué. 
 
  G/L/683 
Page 164  
 532. In its communication, while providing comments with respect to different specific points 
raised by ITCB members in their communication (whi ch were related to the implementation of ATC 
provisions other than those specified in Article 7), the United States stated, inter alia , the following: 
 "[T]he United States notes that several ITCB me mbers have maintained policies and practices 
that have effectively limited access to market s in this sector, despite the obligation in 
Article 7 of the ATC to 'achieve improved access to markets for textiles and clothing through 
such measures as tariff reductions and bindin gs, reduction or elimination of non-tariff 
barriers, and facilitation of customs, administ rative and licensing formalities'.   While the 
United States has been opening its market, ITCB members have been keeping theirs shut to US exports.  Under such cond itions, it is impossible for the United States to justify early 
integration, as requested by the ITCB.  More over, the United States hopes and expects as part 
of its review of the implementation of the ATC that the TMB will review whether ITCB 
members have adhered to their obligations under Article 7 of the ATC.  US import statistics 
clearly demonstrate that the United States has lived  up to its obligations under Article 7, with 
imports of textile and apparel products up by  150 per cent since 1994, increasing from 17.3 
Billion Square Metres Equivalent (BSME) in  1994 to 43.2 BSME for the year ending 
March 2004.  We question whether ITCB members can say the same." 
 F. 
THE TMB 'S ASSESSMENT REGARDING THE IMPLEMENTA TION OF THE PROVISIONS OF ARTICLE 7 
DURING STAGE 3 OF THE INTEGRATION PROCESS  
533. Keeping in mind its earlier observation accordin g to which providing notifications to the 
TMB regarding the actions referred to in Article 7. 1 which have a bearing on the implementation of 
the ATC, is a positive obligation, applicable to all Members pursuant to Article 7.2272 and recalling 
also its respective recommendation made to the Council for Trade in Goods273, the TMB is bound to 
reiterate that during the period of implementation of Stage 3 of the integration process it has not received any notification from any Member with sp ecific reference to any of the provisions of 
Article 7.  Therefore, in a strict sense, for the purpose of the present report, it would be sufficient for 
the TMB simply to note this fact.  Indeed, nothing in the language of Article 7, nor in that of any other 
provision of the ATC requires the TMB, not even in the context of drawing up its comprehensive 
report, to give a detailed account of those (otherwi se possibly relevant) issues that have never been 
referred to it or brought to its attention in accordan ce with the requirements of the provisions of the 
ATC.  In particular, an attempt by the TMB to provi de an illustrative list of matters that can be of 
relevance (also) in the context of the implementati on of Article 7 cannot substitute the notifications or 
information that should have been addressed to the Body by the Members concerned.  In the same 
vein, communications received from Members in  response to the TMB's general request for 
information made in the context of the preparation of this report cannot be considered as a substitute 
to complying with the procedural requirements laid down in the provisions of Article 7.  
534. Notwithstanding the validity of its statements as above, the TMB has decided to provide, for 
the sake of the comprehensiveness of this report and strictly as background information, a summary of 
some of the issues that can be relevant in this c ontext and could be identified on the basis of official 
WTO documents (notifications and communications to and reports of other WTO bodies).  Also, the 
Body offers some further comments and observations, in particular in light of some of the comments 
made by certain Members in their respective commu nications addressed to the TMB in the context of 
the preparation of this report. 
                                                     
 
272 See paragraph 525 above. 
273 See paragraph 526 above.  G/L/683 
 Page 165 
 
 G. INFORMATION AVAILABLE TO THE TMB ;  FURTHER COMMENTS AND OBSERVATIONS BY THE 
BODY  
1. Information available regarding the implementation of the provisions of Article 7.1(a) 
535. Following the language of Article 7.1(a), "[a]s part of the integration process and with 
reference to the specific commitments undertaken by the Members as a result of the Uruguay Round, 
all Members shall take such actions as may be n ecessary to abide by GATT 1994 rules and disciplines 
so as to [...] achieve improved access to markets for textile and clothing products through such 
measures as tariff reductions a nd bindings, reduction or elimination of non-tariff barriers, and 
facilitation of customs, administrative and licensing formalities." 
536. The TMB does not have sufficient information at its disposal that would enable it to offer a 
well considered assessment on the extent to whic h Members have complied with the substantive 
obligations defined in Article 7.1(a).  To the extent  that no notifications have been addressed to it 
indicating the contrary and that no such notifica tions made to other WTO bodies have been brought 
by Members to the TMB's attention, it can be assu med that Members continued to implement, as 
scheduled, the respective specific market-access commitments undertaken by them as a result of the 
Uruguay Round.  Also, the TMB assumes that the Committee on Market Access, in supervising the 
implementation of concessions made in the Uruguay  Round with respect to tariffs and non-tariff 
measures, has continued to rely on cross- or reve rse notifications in identifying potential problems 
that might arise out of the implementation of such concessions.  The TMB notes that no particular problems related to the implementation of concessi ons affecting products covered by the ATC have 
been brought to its attention.  
537. It also happened that Members submitted notifications to the Committee on Market Access 
containing further improvements in the concessions undertaken in the Uruguay Round affecting (also) 
products covered by the ATC.  While, obviously, so me of such notifications could escape the TMB's 
attention, the Body is aware that, for instance, Pakistan circulated in July 2003 a communication 
regarding modification to the country's schedule of commitments, affecting textiles and clothing 
products.
274  In continuation of this communication, in a further communication circulated on 
29 June 2004, "the Government of  Pakistan convey[ed] further modifications to the said schedule for 
Chapter headings 60.03 to 60.06 wh ich will be bound at a tariff rate of 25 per cent with immediate 
effect."275 
538. It can be also noted, however, that in  December 2003, the United States requested 
consultations with Egypt "pursuant to Articles 1 a nd 4 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes ("DSU"), Ar ticle XXII:1 of the General Agreement on Tariffs 
and Trade 1994 ("GATT 1994"), and Article 7 of th e Agreement on Textiles and Clothing ("ATC") 
regarding the tariffs applied to textile and apparel products and th e Decree of the President of the 
Arab Republic of Egypt No. 469 of the year 2001 ("Decree No. 469") and any amendments, related 
regulations or other implementing measures."276  It should be emphasized that though in its 
communication addressed to the DSB the United States explicitly referred to, inter alia , Article 7 of 
the ATC, no information or communication whatsoev er has been transmitted to the TMB regarding 
this matter. 
539. The request for consultations mentions that "[ i]n the Uruguay Round, Egypt agreed to remove 
a general prohibition on the importation of apparel a nd made-up textile products  by 1 January 2002.  
It also agreed to bind its duties under HS Chapters  61 (articles of apparel and clothing, knitted and 
crocheted) and 62 (articles of  apparel and clothing, not knitted or crocheted) at an ad valorem  rate of 
                                                      
274 See G/MA/TAR/RS/94. 
275 See G/MA/TAR/RS/94/Add.1. 
276 See WT/DS305/1 and G/L/667.  G/L/683 
Page 166  
 46 per cent in 2003, 43 per cent in 2004 and 40 per cent thereafter.  Moreover, it agreed to bind its 
duties under HS Chapter 63 (other made up textile  articles;  sets;  worn clothing) at an ad valorem  rate 
of 41 per cent in 2003, 38 per cent in 2004, and 35 per cent thereafter.  The United States understands that, on 31 December 2001, just before the import pr ohibition was set to expire, [...] Decree No. 469 
was issued amending the customs duties applicable to a number of imported articles, including articles that enter under HS Chapters 61, 62 and 63.  The am ended duties were specific [...], rather than 
ad valorem .  It appears that the specific duties applied by Egypt greatly exceed Egypt's bound rates of 
duty.  Specifically, it appears that the ad valorem  equivalent of these duties range from a low of 
141 per cent to a high of 51,296 per cent – all well above the bound rates. 
The United States therefore believes that these tari ffs, Decree No. 469 and any related measures are 
inconsistent with the obligations of Egypt unde r Article II of the GATT 1994 and Article 7 of the 
ATC."
277 
 540. Subsequently, in mid-January 2004, the Europ ean Communities officially requested to be 
joined in the consultations requested by the United States.
278  The EC referred, inter alia , to the fact 
that it has a substantial trade interest in the matter.   In response, the delegation of Egypt informed the 
DSB that it had accepted the request of the Eur opean Communities to join the consultations.279  Since 
then, no further communication has been circ ulated to WTO Members regarding possible 
developments with respect to this issue. 
541. As regards other measures referred to in Artic le 7.1(a), some developing country Members 
have requested or have been granted a reservati on to maintain a system of minimum values, often 
affecting also imports of certain textile and cl othing products, for a limited period of time under 
paragraph 2, Annex III of the Agreement on Im plementation of Article VII of the GATT 1994 
(Customs Valuation Agreement).280  The TMB is also aware that a number of Members submitted 
notifications to the Committee on Import Licensing  of their respective licensing procedures which 
covered also certain textile and clothing products.  It can be mentioned in this regard that a 
notification provided by Indonesia in April 2003 , submitting a Decree "regarding procedures for 
importing textile"281, led a few Members, such as Australia and the United States to raise certain 
questions and also to express certain concerns .  The United States, in particular, stated, inter alia,  that 
"[i]t [...] is particularly concerned with Indonesia' s decision to grant licences only to textile producers 
with a local production capacity, and to bar the transfer of imported textiles to other private parties.  It 
appears to the United States that this system is i nherently trade-distortive, and requests that Indonesia 
explain to the Committee how this system is c onsistent with the Agreement on Import Licensing 
Procedures ."282 
542. In its reply, Indonesia explained, inter alia , that the relevant Decree "aims at only providing 
administrative import procedures, with the main purpose to combat smuggling activities that cause: 
• anti-competitive behaviour 
 
• unfair trade in the domestic market 
 
                                                      
277 See WT/DS305/1 and G/L/667. 
278 See WT/DS305/2. 
279 See WT/DS305/3. 
280 See G/VAL/2/Rev.18. 
281 See G/LIC/N/2/IDN/1. 
282 See G/LIC/Q/IDN/5.  G/L/683 
 Page 167 
 
 • an adverse impact on domestic market 
 
• loss of government revenue 
 
• an adverse impact on investment and labour." 
 Furthermore, "[t]he smuggling activities in Indonesia have indeed been a serious problem since these 
activities have significantly increased since 2000 [...].   Indonesia has a grave concern as the bulk of 
illegal textiles products in the domestic market h as created a multi-adverse effect on various business 
activities as well as employment and government re venue.  Indonesia is of the view that these 
problems have to be resolved by all means, including  import licensing.  [...]  Of various administrative 
procedures, [Indonesia] still believe[s] that licen sing procedures are the only effective means to 
administer all textiles imports and all kinds of imported pr oducts as contained in the Decree.  By this 
policy, the Government will very easily identify and combat illegal textiles products."
283 
 
543. In the same vein, "[r]egarding the question of  whether the Decree is trade-restricting 
according to Article 3.2 of the Agreement on Impor t Licensing Procedures, Indonesia is of the view 
that the Decree is not in breach of the said provision since: 
• no person, firm or institution will be refused an import licence as far as they fully 
comply with all requirements as contained in the Decree (Article 2.2(a)(i) of the 
Agreement);  [...]  
 
• Article 4 of the Decree states that the approval or rejection of the application for a 
licence shall be issued in no less than ten working days.  The period for processing 
the application as contained in the Decree is  much less than provided for in Article 
3.5(f) of the Agreement on Import Licensing Procedures which requires 30 working 
days to be approved.  Therefore no burden for companies to apply for a licence; 
 
• the Decree does not limit the number of comp anies, institutions or  persons to have 
import licences as far as they fully comply with all requirements and no limitation as to the volume to be imported by each company.  There have been as many as 315 importers which have had import licences and import licences are still open to other 
companies that would like to be in volved in textiles import activities."
284 
 544. During Stage 3 of the integration process, a number of notifications summarizing measures 
that were intended to be put into effect, were no tified to the Committee on Technical Barriers to Trade 
covering (also) textiles and clothing products.  An illustrative list of such notifications, drawn up on 
the basis of the notifications circulated, is contained in Table 10. 
                                                     
 
283See G/LIC/Q/IDN/5. 
284 Ibid. G/L/683 
Page 168  
 Table 10 
 
NOTIFICATIONS SUBMITTED TO THE COMMITT EE ON TECHNICAL BARRIERS TO TRADE 
COVERING (ALSO) TEXTILES AND CLOTHING PRODUCTS 
 
 
NOTIFYING MEMBER DATE OF 
CIRCULATION PRODUCTS 
AFFECTED/MEASURESTATED OBJECTIVE 
OF THE MEASURE 
Korea 23.01.2002 Among others:  
lifejackets for 
recreational purposes;  
protective helmets, etc. Quality management 
promotion and 
consumer product 
safety 
Philippines 08.03.2002 Safety belt for road 
vehicles Safety belt users' 
protection 
Peru 31.05.2002 Among others:  
footwear, uppers of 
textile materials Consumer information 
Venezuela 31.07.2002 Textile clothing Human health, 
prevention of practices 
which might mislead 
users 
Brazil 13.08.2002 Among others:  threads 
of cotton, linen, wool, 
silk, viscose, polyamide, polyester Consumer's safety 
Brazil 12.08.2002 Textile products  
(HS Section XI) Consumer's safety 
Brazil 04.11.2002 Textile products  
(HS Chapters 61, 62 
and 63) Labelling requirements 
and consumer's 
protection 
Brazil 30.01.2003 Among others:  crepe 
bandages, etc.  
(HS 30.05) Labelling requirements, 
consumer's safety;  
prevention of deceptive 
practices 
China 19.06.2003 Yarns, fabrics and 
other made-up 
products To protect human 
health and safety 
El Salvador 19.06.2003 Textile products, 
articles of apparel and 
clothing accessories Establish commercial 
information that must 
be affixed to the 
products 
Canada 29.08.2003 Lifejackets Protection of human 
safety 
Peru 03.09.2003 Among others:  motor 
vehicle safety belts End-users' safety 
Mexico 08.10.2003 Textile products, 
articles of apparel and clothing accessories Update the labelling 
requirements, consumer information, 
prevention of deceptive 
practices 
Chinese Taipei 11.11.2003 Full body  harness Consumer protection 
  G/L/683 
 Page 169 
 
 NOTIFYING MEMBER DATE OF 
CIRCULATION PRODUCTS 
AFFECTED/MEASURESTATED OBJECTIVE 
OF THE MEASURE 
European Communities 12.12.2003 Certain textile products 
(HS Chapters 50-63), if labelling is required 
under the respective 
directive and the 
product contains 
polylactide fibre To better inform 
consumers 
Guayana  29.01.2004 Garments and te xtiles Protection of fraud;  
prevention of misleading labelling 
and advertising 
 
Source:  G/TBT/GEN/N/series 
 
545. Finally, recalling that in its communication, the United States stated, inter alia , that it "hopes 
and expects [that] as part of its review of th e implementation of the ATC, the TMB will review 
whether ITCB members have adhered to their oblig ations under Article 7 of the ATC", the TMB 
observes the following: 
• in the overview reflected in paragraph 52 8 as well as in paragraphs 535 to 544 above, 
the Body addressed issues relevant in the c ontext of implementation of Article 7.1(a) 
by all  Members; 
 
• as clearly indicated in paragraph 528, no no tification whatsoever has been received 
by the TMB from any WTO Member (the United States included) with specific 
reference to any of the provisions of Article 7; 
 
• as also stated in paragraph 536 above, it would appear that Members continued to 
implement their specific commitments undertaken as a result of the Uruguay Round and no particular problem related to such implementation, affec ting products covered 
by the ATC have been brought to the attention of the TMB by any WTO Member; 
 
• a general statement claiming that certain Members have been keeping their markets 
shut to exports from another Member, without identifying whether specific 
commitments undertaken as a result of th e Uruguay Round have been adhered to, or 
not, does not constitute sufficient basis for offering further comments. 
 
2. Information available regarding the implementati on of the provisions of Article 7.1(b) 
546. Following the language of Article 7.1(b), "[a] s part of the integration process and with 
reference to the specific commitments undertaken by the Members as a result of the Uruguay Round, 
all Members shall take such actions as may be n ecessary to abide by GATT 1994 rules and disciplines 
so as to [...] ensure the applica tion of policies relating to fair a nd equitable trading conditions as 
regards textiles and clothing in such areas as du mping and anti-dumping rules and procedures, 
subsidies and countervailing measures, and pr otection of intellectual property rights." 
547. As noted earlier, during the period of implementation of Stage 3 of the integration process the 
TMB has not received any notification or information from Members, pursuant to either Article 7.2 or Article 7.3 that would have been related to the implementation of the provisions of Article 7.1(b). G/L/683 
Page 170  
 548. The TMB notes that in their communication provi ded in response to the general request for 
information in the context of the preparati on of the present report, ITCB members stated, inter alia , 
that "[d]uring the Stage under progress, anti-dumpi ng activity in the EU has continued, especially 
involving the import of bed linen in one form or another, turning it into an ongoing problem for exporters and the exporting countries concerned."  The TMB is aware that in March 2002, India 
requested consultations with the European Co mmunities pursuant to Articles 4 and 21.5 of the 
Dispute Settlement Understanding, Article XXIII of  the GATT and Article 17 of the Anti-Dumping 
Agreement concerning, inter alia , the EC's alleged non-complian ce with the DSB rulings and 
recommendations in the dispute "European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India."
285  (The original dispute, as also reported by the TMB in its 
second comprehensive report286, was related to the imposition by the European Communities of 
provisional anti-dumping duties in 1997, followed by the imposition of final duties at the end of the 
same year.  The respective panel report, as modified  by the report of the Appellate Body, was adopted 
by the DSB in March 2001).  Since the consultations held failed to settle the dispute, India requested 
the DSB to establish a panel.287 
549. At the meeting of the DSB on 22 May 2002, the representative of India stated, inter alia , that 
the panel and Appellate Body reports, as adopted in March 2001, "had concluded that the EC's 
imposition of definitive anti-dumping duties on impor ts of cotton-type bed linen from India was 
inconsistent with the requirements of the Anti- Dumping Agreement.  In accordance with these 
Reports, the DSB had recommended that the EC bring its  measure into conformity  with its obligations 
under the Anti-Dumping Agreement.  On 7 August 2001 the Council of the EC had adopted Regulation 1644/2001 amending the original definiti ve anti-dumping duties on bed linen from India, 
while simultaneously suspending its application.  At that time, India had strongly disagreed that this 
're-determination' complied with the recommendations of the Panel and the  Appellate Body.  That 're-
determination' also provided for the expiry of th e amended measures within six months after entry 
into force of the amended Regulation, unless a re view had been initiated before that date.  
Unfortunately, on 13 February 2002, the EC had initia ted a so-called 'partial interim review' against 
India, thereby compounding the problems by basing an  illegal review on a flawed redetermination.  
On 8 March 2002 India had requested the EC to enter into consultations in order to try and solve the 
problems caused by the re-determination and the pa rtial interim review.  On 25 and 26 March 2002 
these consultations had been held in Geneva.  They had allowed a better understanding of the 
respective positions, but had failed to settle the dispute.  This left India no choice but to seek recourse 
to Article 21.5 of the DSU, since 'there is disag reement as to the existence or consistency with a 
covered agreement of measures taken to comply with the recommendations and rulings'.  In particular, 
India considered that in implementing the recomme ndations and rulings of the DSB in this dispute 
through its re-determination and fu rther action and by initiating a partial interim review the EC:  
(i) continued to miscalculate and overstate the dumping margins;  (ii) resorted to unwarranted 
cumulation by combining India's imports with a country that did not dump;  (iii) overstated the 
volume of dumped imports from India;  (iv) sought to evaluate all relevant economic injury factors 
even in the absence of adequate data;  (v) had not demonstrated that the dumped imports caused 
injury;  (vi) had initiated a review that is im permissible under the Anti-Dumping Agreement;  and 
(vii) had failed to respect India's status as a deve loping country.  For these reasons India considered 
that the EC had failed to comply with the recomme ndations of the Panel and the Appellate Body and 
thus had failed to comply with the DSB's recomme ndations and rulings.  For these reasons, India was 
requesting that a panel be established under Article 21.5 of the DSU to determine whether the EC had 
complied with the DSB's recommendations and ruli ngs by the due date and whether the EC's 
re-determination and its further action were consistent with the covered Agreements."
288 
                                                      
285 See WT/DS141/12.  
286 See G/L/459, paragraph 566. 
287 See WT/DS141/13/Rev.1. 
288 See WT/DSB/M/124, paragraph 53.  G/L/683 
 Page 171 
 
 550. The representative of the European Communities said, inter alia , that the EC was confident 
that it had fully and faithfully implemented in all respects the DSB's recommendations and rulings in 
this case.  On each occasion, th e European Communities had provided to India all clarifications 
requested and showed that all relevant DSB's rulings and recommendations had been scrupulously 
observed.  In the light of the above and taking into account the fact that no anti-dumping duties 
effectively apply to the relevant Indian exports, the European Communities did not see any reason 
behind India's request for an implementation panel.  Despite this, if India insisted on its request, the 
European Communities was ready to accep t the establishment of the panel.289  The DSB agreed, 
pursuant to Article 21.5 of the DSU, to refer to the original panel, if possible, the matter raised by 
India.   
551. At its meeting on 24 April 2003, the Dispute Settle ment Body considered the Appellate Body 
report290 and the panel report291 pertaining to this matter.  While the panel found that the EC's 
definitive anti-dumping measure on imports of bed linen from India (EC Regulation 1644/2001) was 
not inconsistent with the Anti-Dumping Agreemen t or the Dispute Settlement Understanding, the 
Appellate Body reversed two findings of the panel, namely that: 
• the method for calculating amounts for admini strative selling and general costs and 
profits provided for in Article 2.2.2(ii) of the Anti-Dumping Agreement  may be 
applied where there is data on administrativ e, selling and general costs and profits for 
only one other exporter or producer;  and 
 
• in calculating the amount for profits under Article 2.2.2(ii) of the Anti-Dumping 
Agreement, a Member may exclude sales by other exporters or producers that are not 
made in the ordinary course of trade. 
 
As a consequence, the Appellate Body conclude d that the European Communities, in calculating 
amounts for administrative, selling and general costs and profits in the anti-dumping investigation at 
issue in this dispute, acted inconsistently with Ar ticle 2.2.2(ii) of the Anti-Dumping Agreement.  The 
Appellate Body recommended that the DSB request that the European Communities bring its measure 
found to be inconsistent with the Anti-Dumping Agre ement into conformity with its obligations under 
that Agreement.  The DSB adopted the Appellate Bo dy report and the panel report, as modified by the 
Appellate Body report.  552. Following the above, in January 2004 the European Communities notified anti-dumping 
actions taken, inter alia , with respect to imports of cotton-type bed linen from India. 
553. In light of the developments summarized in pa ragraphs 548 to 552 above, it would appear that 
during Stages 2 and 3 of the integration process, as put by ITCB members, "anti-dumping activity in 
the EU has continued, especially involving the import of  bed linen in one form or the other [...]".  The 
TMB, of course, has neither the mandate, nor the necessary factual knowledge to pronounce itself on the merits of the specific cases involved.  However,  it can offer a few comments in relation to the 
statements contained in the contributions received in this regard from ITCB members
292 and the 
European Communities293, respectively.  These comments are the following: 
• In the view of the TMB, ITCB members did not allege that the ATC would "provide 
an all out prohibition against recourse to anti-dumping procedures";  as claimed by 
the submission received from the European Communities. 
                                                      
289 WT/DSB/M/124, paragraph 54. 
290 See WT/DS/141/AB/RW. 
291 See WT/DS/141/RW. 
292 See paragraph 529 above. 
293 See paragraph 530 above. G/L/683 
Page 172  
  
• As recognized also by the European Communities, recourse to anti-dumping 
procedures "must be judged on the merits of the individual cases and circumstances".  Due consideration should be given,  in this regard, also to th e fact that the products in 
question have been and continue to be s ubject to restrictions maintained under the 
ATC.  Repeated anti-dumping procedures affecting these products could, indeed, 
create an ongoing problem for the exporting Member(s) concerned as raised by ITCB 
members in their communication. 
 
• Having said the above, the TMB cannot take a view on whether "these actions are in 
sharp contrast to the commitment under Article 7[1(b)]", as claimed by ITCB 
members, or not. 
 
• The TMB believes that its earlier observations , included in the second comprehensive 
report should be recalled once again, since they remained valid and apply to the 
situation at present as well.  In its remarks,  "[t]he TMB observed that the right of any 
Member to initiate anti-dumping proceedings and to take the necessary actions as a 
result of such investigation was not bei ng contested.  [...]  [T]he TMB noted the 
concerns of the ITCB members that the targeting of restrained products had had the 
effect of causing double jeopardy to the exporting countries concerned and of 
impairing their rights to utilize access under the ATC.  In the view of the TMB, protracted or repeated investigations, even if they do not result in the imposition of 
provisional or final anti-dumping duties, can cause serious uncertainties to the exporters of the products in question.  K eeping in mind the concerns, as above, the 
Members concerned should act with extr eme care when having recourse to anti-
dumping proceedings and also in deciding to take actions as a result of such investigations."
294 
 554. Recalling that in its communication, the European Communities stated, inter alia , that "... 
moderation of use of anti-dumping remedies is to be  expected from all countries some of which are 
now frequently invoking this remedy", the TMB notes that during Stage 3 of the integration process a 
number of WTO Members have introduced prelimin ary and/or definitive anti-dumping measures on 
textile and clothing products.  A list of such measures is contained in Table 11. 
Table 11 
 
PRELIMINARY AND DEFINITIVE ANTI-DUMPING MEASURES APPLIED ON  
TEXTILE AND CLOTHING PRODUCTS IN THE PERIOD 2002-JUNE 2004 
 
 
REPORTING 
MEMBER  PRODUCT  COUNTRY OR 
CUSTOMS 
TERRITORY 
AFFECTED  DATE OF THE 
NOTIFICATION 
European Communities Polyester yarn India September 2002 
 
European Communities Cellulose yarn Lithuania; 
United States October 2002 
India Acrylic fibre 
Yarns MMF Italy 
Korea;  Turkey October 2002 
South Africa Indigo blue fabric China; 
Hong Kong, China October 2002 
United States Polyester fibre Korea October 2002 
                                                      
294 See G/L/459, paragraph 570.  G/L/683 
 Page 173 
 
 REPORTING 
MEMBER  PRODUCT  COUNTRY OR 
CUSTOMS 
TERRITORY 
AFFECTED  DATE OF THE 
NOTIFICATION 
China Polyester fibre Korea October 2002 
 
European Communities Sacks and bags MMF 
 Footwear w/textile 
uppers 
Twine MMF Twine polypropylene 
 
Polyester yarn China;  India; 
Indonesia;  Thailand China 
 
China;  Indonesia Czech Republic; 
Hungary;  Poland 
India October 2002 
Turkey Polyester fibre Chinese Taipei;  India; 
Thailand April 2003 
United States Polyester fibre Korea May-June 2003 
 
European Communities Synthetic fibre ropes India July 2003 
 
India Acrylic fibre 
  
Polyester fibres Brazil;  Bulgaria; 
Germany; United Kingdom 
Chinese Taipei; 
Korea;  Malaysia, Thailand August 2003 
Turkey Polyester fibre Chinese Taipei; 
India;  Thailand September 2003 
European Communities Polyester yarn China;  Chinese Taipei; 
Indonesia;  Malaysia; 
Thailand October 2003 
United States Polyester fibre Korea October 2003 
 
European Communities Cotton bed-linen 
Polyester fibre Chinese Taipei;  India;  
China;  Korea January 2004 
European Communities Polyester yarn Chinese Taipei;  Korea 
 February 2004 
South Africa Bed linen Malawi February 2004 
 
United States Polyester yarn Korea February 2004 
 
European Communities Sacks and bags MMF China;  India; 
Indonesia;  Thailand March 2004 
European Communities Cotton-type bed linen Pakistan April 2004 
 
 Sources:  G/ADP/N monthly series 
 
 
555. The Ministerial Decision on Implementation-Related Issues and Concerns, adopted in Doha, 
states, inter alia , that "Members will exercise particular cons ideration before initiating investigations 
in the context of antidumping re medies on textile and clothing e xports from developing countries 
previously subject to quantitative restrictions unde r the Agreement for a period of two years following 
full integration of this Agreement into the WTO."295 
                                                      
295 See WT/MIN(01)17. G/L/683 
Page 174  
 556. In July 2003, a group of developing Members
296 submitted a communication to the General 
Council with the following title:  "Anti-dumping actions  in the area of textiles and clothing.  Proposal 
for a specific short-term dispensation in favour of  developing Members following full integration of 
the sector into GATT from January 2005."297  The communication summarizes the experience gained 
with anti-dumping actions in this area and the imp lications from the legacy of quota restrictions.  
After having provided this overview, the communication states, inter alia , that "[i]t is widely 
acknowledged that the very initiation of investiga tions into alleged dumping cause considerable 
adverse effects on exporters and businesses concerne d.  As witnessed from experience with the spate 
of investigations in the field of textiles and clothi ng [...] these investigations are often prompted by 
interested parties to preserve their corner of the ma rket.  In the event, it is in the interest of both 
exporting and importing Members as well as the efficiency of the multilateral trading system that an 
appropriate period of time is provided for business opera tors to compete in the market in a meaningful 
way and to allow trading conditions to adjust to the normal business environment.  It is also important 
that developing countries are protected against un-warra nted recourse to trade remedy actions, so that 
market access so painstakingly secured is not undermined."  The communication goes on to propose 
the following: 
 "In light of: 
 
• the considerations brought out in [the communication];  
 
• the lack of progressivity in phasing out quota restrictions by the restraining Members; 
 
• various Ministerial decisions and declarati ons referred to in [the communication];  
and 
 
• the need to take into account the interest s of developing Members especially with 
regard to providing them with the security  of market access and protection against 
wrongful recourse to trade remedy actions;  
 it is proposed that the General Council recommend to  the [Cancún] Ministerial Conference to decide 
that: 
 
 'With a view to allowing trade in textiles and clothing to adjust to normal trading conditions 
free of the influence of the long-standing quota regime following the full integration of the  
sector into the WTO in accordance with the Agreement on Textiles and Clothing, developed 
Members shall implement a grace period of two years during which no investigations in the 
context of anti-dumping remedies on imports of  textile and clothing products from developing 
countries shall be initiated.'" 
 557. In the discussion of this proposal in the Genera l Council, some delegations indicated that they 
supported it, while others stated that they could no t go along with it.  As a result, the General Council 
could not take any decision on the proposal. 
558. With regard to another area of measures, namely subsidies and countervailing measures 
specifically mentioned in the language of Article 7.1(b), the TMB is aware that, in a few cases, 
preliminary or final actions have been taken dur ing Stage 3 of the integr ation process, affecting 
products covered by the ATC.  A list of these cases is provided in Table 12. 
 
                                                     
 
296 Costa Rica;  Guatemala;  Hong Kong, China;  India;  Indonesi a;  Macao, China;  Maldives;  
Pakistan;  People's Republic of China;  Thailand and Vietnam (this latter being an observer to the WTO). 
297 See WT/GC/W/502.  G/L/683 
 Page 175 
 
 Table 12 
 
PRELIMINARY AND FINAL ACTIONS ON COUNTERVAILING DUTIES APPLIED ON  
TEXTILE AND CLOTHING PRODUCTS IN THE PERIOD 2002-JUNE 2004 
 
 
REPORTING 
MEMBER  PRODUCT  COUNTRY OR 
CUSTOMS 
TERRITORY 
AFFECTED  DATE OF THE 
NOTIFICATION 
European Communities Polyester yarn India October 2002 
 
European Communities Polyester yarn 
 India;  Indonesia 
 Nov-Dec 2002 
 
European Communities Cotton bed-linen India January 2003 
 
European Communities Cotton bed-linen India February 2004 
 
 Sources:  G/SCM/N monthly series. 
 
559. While the TMB is not only not expected, but also, lacking the necessary technical knowledge, 
is unable to comment on substantive aspects of this matter, it is worth noting that in parallel with 
certain actions taken by the European Communiti es on imports of cotton bed-linen from India under 
the Anti-Dumping Agreement298, or almost immediately following them, the EC had also recourse to 
provisions of the Agreement on Subsidies and Count ervailing Measures in relation to practically the 
same product and the same exporting Member.  
560. The TMB is aware that with reference to the Agreement on Subsidies and Countervailing 
Measures, the United States requested the WTO Secr etariat to perform an export competitiveness 
calculation with respect to India's textile and clothing sector.299  The Secretariat performed these 
calculations300 and in May 2003, the United States informed the Committee on Subsidies and 
Countervailing Measures that the United States expected  to enter into bilateral discussions with India 
with respect to the calculations performed. 
561. Finally, no information has been brought to the TMB's attention with re gard to issues related 
to "the application of policies relating to fair  and equitable trading conditions as regards [...] 
protection of intellectual property rights." 
3. Information available regarding the implementati on of the provisions of Article 7.1(c) 
562. Following the language of Article 7.1(c), "[a]s part of the integration process and with 
reference to the specific commitm ents undertaken by the Members as a result of the Uruguay Round, 
all Members shall take such actions as may be n ecessary to abide by GATT 1994 rules and disciplines 
so as to [...] avoid discrimination against imports  in the textiles and clothing sector when taking 
measures for general trade policy reasons." 
563. As already noted, during the period of implementation of Stage 3 of the integration process, 
the TMB has not received any notification or in formation from Members, pursuant to either 
Article 7.2 or Article 7.3 that would have been related to the implementa tion of the provisions of 
Article 7.1(c).  Also, no information has been br ought to the TMB's attention regarding measures 
                                                      
298 See paragraphs 549, 551 and 552 above, as well as Table 11. 
299 See G/SCM/M/46 and G/SCM/103. 
300 See G/SCM/103/Add.1. G/L/683 
Page 176  
 taken during Stage 3 for general trade policy r easons which would have constituted a breach of 
obligations specified in Article 7.1(c). 
V. OTHER MATTERS 
564. This section of the report addresses the following matters: 
• continuous autonomous industrial adjustme nt and increased competition in Members' 
markets in the sense of Article 1.5; 
 
• elimination of restrictions on imports from certain non-WTO Members, while 
keeping them in place vis-à-vis  WTO Members. 
 A. A
UTONOMOUS INDUSTRIAL ADJUSTMENT AND INCREASED COMPETITION IN MEMBERS ' 
MARKETS  
565. Article 1.5 provides that "[i]n order to facilitate  the integration of the textiles and clothing 
sector into GATT 1994, Members should allow for c ontinuous autonomous indus trial adjustment and 
increased competition in their markets." 
1. Background 
566. In its first comprehensive report, the TMB had stated the following: 
 "One  preoccupation of the TMB is how the im plementation of the integration provisions of 
the ATC has ensured the full and faithful implem entation of the ATC within the time-frames 
established therein.  In the view of the TMB, one of the conditions of such an implementation 
is a steady progress in terms of structural adjustme nt and, also, as a result of this, an increased 
competition in the Members’ markets.  This interre lation is recognized by Article 1.5.  [...]  In 
its request for information addressed to WTO Members the TMB sought information, 
inter alia,  on the implementation of Article 1.5.  Only two Members [Colombia and the 
European Communities] provided replies to this  specific issue.  Apart from the indications 
[given by the two Members], the TMB does not  have information or empirical evidence 
regarding what has been the progress a nd accomplishment in terms of increasing the 
competition and implementing autonomous industria l adjustment.  The TM B believes that it 
would be useful to have a better apprecia tion of the progress and trends of autonomous 
industrial adjustment, as foreseen in Article 1.5."301 
 567. In the conclusions of its first major review adopted by the CTG, in February 1998, it was 
reflected, inter alia , that in the Council's discussion of the integration process, "[an] area of concern to 
some Members was the lack of information on the process of autonomous industrial adjustment 
mentioned in Article 1.5 of the ATC in order to fac ilitate integration.  Such adjustment would be all 
the more necessary with integration bei ng effectively left to the last three years of the transition".  [...]  
"With respect to autonomous industrial adjustment in  terms of Article 1.5, another Member noted that 
there had been substantial adjust ment under the MFA and it was conti nuing at the present time.  Some 
Members had provided information in this regard to th e TMB, which was noted in its report."  [...]  "The 
Council recalled that Members s hould allow for continuous autonomo us industrial adjustment and 
increased competition in their markets in order to f acilitate the integration of the textiles and clothing 
sector into GATT 1994.  The Council noted that furthe r information in this re gard would facilitate the 
review of progress."
302 
                                                      
301 See G/L/179, paragraphs 74 to 77 
302 See G/L/224, paragraphs 10, 11 and 15.  G/L/683 
 Page 177 
 
 568. In the context of the preparation of its sec ond comprehensive report, the TMB had invited 
Members to provide information, inter alia , in relation to developments in allowing for continuous 
autonomous industrial adjustment and increased compe tition in their markets.  Five contributions had 
been received (respectively, from Canada, the Eur opean Communities, Japan, Turkey and the United 
States) and the communication received from ITCB members also commented upon this topic.  All these communications were reproduced in full in the second comprehensive report.
303  In its related 
additional comments and observations, the TMB had stated, inter alia , the following:   
• [...] 
   "[S]ome of the replies received were more detailed than others;  certain included 
aspects which were not included in others ;  some focused more on the internal 
adjustment efforts, while others paid, at least, similar attention to bring out facts 
which were designed to demonstrate that competition had significantly increased in 
their respective markets.  It appeared  from the reply received from the ITCB 
members that they considered Article 1.5 as applicable, in essence, by the restraining 
Members in order to facilitate the integra tion of the textiles and clothing sector into 
GATT 1994, whereas some other Members may consider that this Article was of 
more general application."   
   [...]  
• "It would appear that the replies and in formation provided by the three Members 
maintaining restrictions under Article 2.1 c ontained some elements which were more 
or less common and were included in each contribution such as: 
- in particular, during the period of ATC implementation, imports have 
increased significantly [...]; 
 
- employment has continuously decreased in the sector, and it would appear 
that this could be attributed only in part to new investments made and more 
modern technology applied; 
- the closing of a number of textile and clothing plants as a result of problems 
encountered in terms of efficiency and competitiveness combined with the 
effects of increased competition resulting from imports; 
 
- these trends notwithstanding, the tex tiles and clothing sector improved its 
competitivity at an international level as a result of its specialization in the 
high added value end of the sector a nd an active export strategy;  the 
remaining primary textile firms have b een relatively successful in increasing 
their competitiveness, in part through exporting, in capital intensive sectors and the clothing industry has also adjusted by shifting its production to export 
markets, also having a favourable effect on employment."   
• "It is interesting to note that neither of these communications made any reference to 
the trend of increasing recourse to important offshore assembly operations, in particular to nearby countries, which phenomenon in itself can be a manifestation of ongoing adjustment and may have different implications on different branches or 
production segments (for instance, to promot e the textiles industry as opposed to the 
clothing industry).  It is equally noteworthy that, in reply to the request for 
information formulated in very general term s, the information provided remained also 
                                                     
 
303 See G/L/459, paragraphs 607 to 612. G/L/683 
Page 178  
 at a general, aggregate level and did not offe r more insight into trends experienced by 
or affecting the different branches of the textiles and clothing sector." 
 
• "It would also appear that several other Members could also have reported some 
developments in the area of structural ad justment and/or lifting certain barriers to 
potentially increased competition in their ma rkets.  For the sake of examples, one 
could refer to press reports according to which several Members have worked out or 
are working on specific industry, production and marketing strategies to prepare their 
respective industries for the period succeeding the ATC." 
 
• "All in all, apart from the observations refl ected in the previous paragraphs, the TMB 
does not have sufficient information at its di sposal to make a more thorough analysis 
and assessment on the extent to which autonomous industrial adjustment and 
increased competition in Members' markets, in the sense of Article 1.5, has been 
achieved, though it appeared from the information provided that increased competition seemed to have taken place in  Canada, the European Communities and 
the United States.  [...]"
304 
 
569. In the second comprehensive report, the TMB recommended to the Council for Trade in 
Goods that the Council: 
• "draw, once again, the attention of Members to the provisions of Article 1.5; 
 
• re-emphasize the need for continued aut onomous industrial adjustment and increased 
competition in Members' markets in order to  facilitate integration and to ensure the 
smooth transition to the sole application of the GATT 1994 rules and disciplines; 
 
• encourage Members to provide, from time to time, information to the TMB on 
progress achieved in this area."305 
 570. The conclusions of the second major review conducted by the Council for Trade in Goods 
contain, inter alia , the following: 
 "[...] ITCB members and some other devel oping Members [...] emphasized that, whereas 
Article 1.5 of the ATC required Members to allow for continuous autonomous adjustment and 
increased competition in their markets to facilita te the integration process, the restraining 
Members had, in fact, impeded this." 
  [...] 
 
 "With respect to autonomous industrial adju stment, the developed, restraining Members 
considered that this process was proceeding we ll in order to ensure the smooth, final re-
integration steps.  This was witnessed by d ecreases in employment, increases in imports and 
in the market share held by developing Member s and changes in production and in products.  
It was also noted that the obligations in Artic le 1.5 applied to both developed and developing 
Members, though in different ways." 
  [...]  
                                                     
 
304 G/L/459, paragraphs 614 to 617. 
305 Ibid., paragraph 707.  G/L/683 
 Page 179 
 
  "Based on the discussions, which are set out in detail in the reports on the meetings, the 
Council noted a number of considerations and arrived at certain conclusions, as follows: 
   [...]  
• that Members should allow for continuous autonomous industrial adjustment and 
increased competition in their markets in order to facilitate the integration of the 
textiles and clothing sector into GATT 1994 and encouraged Members to provide information to the TMB, from time to time,  on relevant developments in this area."
306 
 
2. Developments reported during Stage 3 of the integration process 
571. Though, as indicated above, the CTG, inter alia , "[...] encouraged Members to provide 
information to the TMB, from time to time, on rele vant developments in this area", the TMB has not 
received any information from any of the Members regarding this matter during the implementation 
of Stage 3.  Against this background, in the cont ext of the preparation of the present report, the TMB 
"invite[d] Members to submit notifications or inform ation, as appropriate, in particular regarding the 
implementation by Members during the third stage [of the integration process] of the provisions of the 
ATC [ inter alia ] in relation to [...] developments in a llowing for continuous autonomous industrial 
adjustment and increased competition in the Members' markets. [...]"307 
572. Four communications received in response fro m Members touched upon aspects related to the 
implementation of the provisions of Article 1.5. 
573. The communication from Canada contained the following:  
 "[...] 
 
 As a backdrop, opening the Canadian market to  imports has required the Canadian textile and 
apparel industry to adjust, and to adjust si gnificantly. In the mid seventies, the Canadian 
market was essentially supplied by domestic pr oducers.  At that time, Canada had over 
350,000 textile and apparel workers.  Today th e sector employs 148,000 workers, producing 
to a considerable extent for the export market  while maintaining less than a 50 per cent share 
of the domestic market.  Apparel took the hardest hit:  it lost 15 per cent of employment since 
1990, the ATC base year, in a time period where overall employment in the economy increased 14 per cent.  This transition has been difficult for both Canadian industry and 
labour.  We expect this transition to continue a nd to continue to be difficult, but the path has 
been set out." 
 
 [...]   "On the textile front, Canada has traditionally maintained quotas on only few of its imports.  
Restrained imports of yarns and made-up textil es added up to less than 5 per cent in 1990.  
Over 85 per cent of fabrics were imported free of quota that year.  Still, our industry has been 
adapting and developing markets for its products, to  prepare for the new trading environment.  
In addition, this industry is adapting to in tensified competition arising from regional and 
bilateral trade initiatives.  Canada has also in stituted a process for indu stry to petition on an 
ongoing basis for tariff relief on imported fabrics and yarns based on domestic availability.  
This process has led to significant duty re ductions on imported fabr ic, further opening up 
Canada’s market to all suppliers.  [...]" 
 
                                                     
 
306 See G/L/556. 
307 See G/TMB/30. G/L/683 
Page 180  
 574. Turkey provided information, as follows; 
 "Regarding developments in allowing for con tinuous autonomous industrial adjustment and 
increased competition in the Member's market (A rticle 1.5), Turkish textile and clothing 
producers have come under intense imports pressure for the items liberalized in the third stage 
of integration under the ATC.  In 2002, especially knitwear, preparation and spinning of textile fibres, leather, fur, yarn, woven and the clothing industry as a whole have been 
negatively affected by the drastically increased  imports as a result of the third stage of 
integration under the ATC." 
 575. The communication received from ITCB members stated, inter alia , that "[t]he TMB may 
wish to bring out [the] issue [that the restrain ing Members are denying the use of carry-forward 
facility in 2004] in its report, including, inter alia , with reference to Article 1.5 of the ATC which 
required Members to allow for continuous auto nomous industrial adjustment and increased 
competition in their markets." 
576. In its communication providing comments with r espect to different specific issues raised in 
the communication from ITCB members, the United States stated, inter alia , the following: 
"The United States announced its integration schedule on 13 October 1994 for Phase 1, and 
1 May 1995 for Phases 2, 3 and 4.  It has abided by this schedule, and in tends to continue to 
do so.  ITCB members have frequently complained  that the United States has not liberalized 
its system more quickly than is called for under the ATC.  The US textile and apparel industry 
is being forced to undergo a major restructur ing as a result of the commitments the United 
States made in the Uruguay Round, and a million j obs have been lost in the United States.  
While the United States intends to honour its commitments, it will not accelerate the 
integration schedule in the face of the se rious conditions facing the US industry." 
 
3. TMB's comments and observations 
577. It has to be reiterated
308 that despite the encouragement of  the Council for Trade in Goods for 
Members to provide information, from time to time , to the TMB on relevant developments in this 
area, no information has been addressed in this rega rd by any of the Member s to the Body during the 
period of implementation of Stage 3 of the integratio n process.  It was only at the request of the TMB 
for appropriate information in the context of the preparation of the present report that some 
communications were received that also touched upon certain aspects relevant in the context of 
Article 1.5.  It should be noted that in terms of providing information on developments regarding 
autonomous industrial adjustment and increase d competition in Members' markets, these 
communications were very brief, remained at the level of generalities and, without any doubt, 
contained fewer specific elements, if any, than the respective information prov ided to the Body when 
it had prepared the second comprehensive report.  Ther efore, on the basis of the information at its 
disposal, the TMB is simply not in a position to  express any view regarding the implementation of 
Article 1.5 during the third stage of the integration process.  One would assume, however, that 
adjustment in the sense of Article 1.5 has conti nued, as also reflected in the general statements 
received.  This assumption notwithstanding, there is no basis for the TMB to assess whether such 
adjustment has been adequate, or not, in term s of preparing the respective industries for the 
competitive environment of the post-ATC regime. 
578. In the second comprehensive report, the TMB had observed, inter alia , that "[it] would also 
appear that several [...] Members could [...] have re ported some developments in the area of structural 
adjustment and/or lifting certain barriers to potentia lly increased competition in their markets.  For the 
sake of examples, one could refer to press reports according to which several Members have worked 
                                                      
308 See paragraph 571 above.  G/L/683 
 Page 181 
 
 out or are working on specific industry, production and marketing strategies to prepare their 
respective industries for the period succeeding the ATC."309  In the view of the TMB, this observation 
is even more valid at present when  roughly five  months remain before the expiry of the ATC. 
579. With regard to some of the points raised by Members in their respective communications, the 
TMB believes that it is appropriate to offer a few related comments, as follows. 
• Canada's statement according to which its "industry is adapting to intensified 
competition arising from regional and bilate ral trade initiatives", is duly noted.  It 
would also appear that the initiatives in question have also brought about increased business opportunities for certain segments of the Canadian industry. 
 
• In the view of the TMB, Turkey was right in drawing attention to the linkage between 
the implementation of integration progra mmes under the ATC and developments in 
allowing for continuous autonomous industr ial adjustment and increased competition 
in the market.  This linkage is clearly established in the language of Article 1.5, 
though not entirely in the way in which Turkey  presented its relevant information.  In 
essence, Turkey stated that its industry had "come under intense import pressure" and, "as a whole [had] been negatively affected  by the drastically increased imports as a 
result of the third stage of integration under the ATC".  In the TMB's reading of the 
provisions of Article 1.5, increased competition in Members' markets should not only 
result from the liberalization implemented in any integration stage, but also from the continuous process of autonomous industrial adjustment that should go on "[i]n order 
to facilitate the integration of the text iles and clothing sector into GATT 1994", as 
stated in Article 1.5. 
 
• Furthermore, Turkey mentioned several producers that experienced "intense import 
pressure", including some who do not app ear to produce products falling under the 
coverage of the ATC, such as leather and fur, but whose products are, according to 
Turkey, linked to products covered by the ATC. 
 
• The reference by the United States in its co mmunication to the US textile and apparel 
industry undergoing a major restructuring is duly noted. 
 
• Finally, in response to the observati on made by ITCB members in their 
communication, it should be recalled that issu es related to the carry-forward facility 
in 2004 are addressed in another section of this report.
310 
 B. 
ELIMINATION OF RESTRICTIONS ON  IMPORTS FROM CERTAIN NON -WTO MEMBERS WHILE 
 MAINTAINING THEM ON WTO MEMBERS  
580. The communication from ITCB members contained the following: 
 "Article 1.6 of the ATC prescribed that 'unless otherwise provided in [the ATC], its 
provisions shall not affect the rights and obligations of Members under the provisions of the WTO Agreement and [other] Multilateral Trade Agreements'.  In other words, all GATT 
rights remain unaffected, save to the extent provi ded in the ATC.  Contrarily, however, there 
have been several instances in which a ll EU quotas previously applying to non-WTO 
Members (Bosnia, Russia, Ukraine and Uzbekist an) have been abolished while, keeping them 
in place on WTO-Members;  this in disregard of the fundamental MFN requirement that any 
                                                     
 
309 See G/L/459, paragraph 616. 
310 See paragraphs 256 to 261 above. G/L/683 
Page 182  
 advantage or privilege granted to any count ry must immediately and unconditionally be 
extended to all WTO Members." 
 581. In its response to the TMB's request for cl arifications and comments, the European 
Communities stated as follows: 
 "As regards the elimination of quotas vis-à-vis  non-WTO countries, it is noted that the ATC 
itself constitutes a derogation from the MFN as, by definition, the existence of different 
quotas imply a different treatment.  It is also pointed out that the ATC does not contain any 
provision that would prevent restraining countries from adjusting the quotas applied vis-à-vis  
non-WTO countries, or, if that were the case, this would mean that over the period of validity of the ATC the quotas applied vis-à-vis non-WTO countries would have to remain frozen.  In 
the absence of any clear criteri a for interpretation as to what adjustments of such quotas may 
or may not be envisaged, the EU considers that it has a very wide margin of appreciation in 
conducting such adjustments, including their possible elimination, without any need to extend such benefits to other countries, all the more since the EU has been granting such benefits to 
countries which have entered into market acc ess commitments that go far beyond what most 
restrained countries have bound through tariffs in WTO." 
 582. The report adopted by the Council for Trad e in Goods on the major review of the 
implementation of the ATC during the second stage of the integration process included, inter alia , the 
following with respect to this matter: 
 "On a number of [...] topics examined by the Co uncil, the understandings and positions held 
by groups of Members differed s ubstantially and, thus, it was not possible to arrive at agreed 
conclusions. [...] In respect of Article 1. 6, ITCB Members and some other developing 
Members referred to instances during the second stage of the ATC implementation process in which a restraining Member had eliminated quota restrictions on certain non-WTO Member 
countries with respect to textile and clothing  products, while contin uing to apply such 
restrictions on WTO Members.  This was incons istent with that Member's obligation under 
GATT 1994, especially Articles I and XIII, and therefore, impaired the rights of WTO Members whose exports to that Memb er had been restrained by quotas.   They pointed out that 
Article 1.6 of the ATC provided that 'Unless otherwise provided in this Agreement, its 
provisions shall not affect the rights and obligations of Members under the provisions of the WTO Agreement and the Multilateral Trade Agreem ents';  therefore, the rules of GATT 1994 
applied unless the ATC contained a different ru le, which in this instance was not the case.  
The developed,  restraining Members noted that the AT C was clearly an exception to the MFN 
principle;  it allowed for the discriminatory elimination of restrictions on WTO Members.  
Therefore, one could not make an argument that  such a procedure would not be possible in 
cases involving non-Members.  Also, there was no requirement under the ATC to provide 
similar treatment to WTO Members and to non-WTO Members."
311 
 583. It should also be recalled that ITCB member s had already raised the same matter and 
concerns in their communication addressed to the TM B in the context of its preparation of the second 
comprehensive report.
312  In its related observations, the TMB had stated, inter alia , the following: 
 "Turning to the central issue raised, i.e. to  the legal arguments made and the possible legal 
implications of such measures, the TMB rec ognized that the issue raised questions as to 
whether rights and obligations of WTO Me mbers had been affected under the WTO 
Agreement, in particular under GATT 1994.  The argument made by the ITCB members claimed breach of obligations under GATT 1994 and linked them to the provisions of 
                                                     
 
311 See G/L/556, paragraphs 23 and 24. 
312 See G/L/459, paragraphs 641 to 643.  G/L/683 
 Page 183 
 
 Article 1.6 (of the ATC).  The TMB observed in th is regard that none of the provisions of the 
ATC, including its Article 1.6, authorized the TMB to consider and to pronounce itself on whether rights and obligations of Members had b een affected, or not, under the provisions of 
GATT 1994. [...]"
313 
 584. Reflecting further on this issue in the context of the preparation of the present report, the 
TMB observed that, as a result of the elimination of restrictions on imports from non-WTO Members 
of products covered by the ATC, WTO Memb ers were, in fact, put at a disadvantage vis-à-vis  certain 
non-WTO Members, whereas it could have been exp ected that, being Members of the WTO, this 
would at the minimum not have been the case. At the same time the TMB ob served that it could not 
find a provision in the ATC which would allow it to pronounce itself or draw conclusions on the 
rights and obligations of WTO Members under the provisions of GATT 1994. 
VI. ISSUES RELATED TO ASPECTS OF ATC IMPLEMENTATION IN HIGHER WTO 
BODIES 
A. M
INISTERIAL CONFERENCE AND THE FOLLOW -UP OF ITS RESPECTIVE DECISION  
1. Background:  the Doha Ministerial Decisi on on Implementation-Related Issues and 
Concerns 
585. On 14 November 2001, the Doha Ministerial Conference adopted a Decision on 
Implementation-Related Issues and Concerns314 which included a section on ATC implementation.315  
In that Decision, Ministers reaffirmed "the comm itment to full and faithful implementation of the 
Agreement on Textiles and Clothing," and agreed:  "( 1) that the provisions of the Agreement relating 
to the early integration of products and the elimin ation of quota restrictions should be effectively 
utilized;  (2) that Members will exercise particular consideration before initiati ng investigations in the 
context of antidumping remedies on textile and clot hing exports from developing countries previously 
subject to quantitative restrictions under the Ag reement for a period of two years following full 
integration of this Agreement into the WTO;  [a nd] (3) that without prejudice to their rights and 
obligations, Members shall notify any changes in th eir rules of origin concerning products falling 
under the coverage of the Agreement to the Comm ittee on Rules of Origin which may decide to 
examine them."  The Decision also requested the Council for Trade in Goods to examine two 
proposals as follows:  "[(1)] that when calculati ng the quota levels for small suppliers for the 
remaining years of the Agreement, Members will a pply the most favourable methodology available in 
respect of those Members under the growth-on-gr owth provisions from the beginning of the 
implementation period;  extend the same treatment to least developed countries;  and, where possible, 
eliminate quota restrictions on imports of such Memb ers;  [and (2)] that Members will calculate the 
quota levels for the remaining years of the Agreement with respect to other r estrained Members as if 
implementation of the growth-on-growth provision for Stage 3 had been advanced to 1 January 2000."  
The Decision also requested the Council for Trade in Goods to make recommendations to the General 
Council by 31 July 2002 for appropriate action.   
2. Subsequent developments in the Council fo r Trade in Goods and the General Council 
586. At the meeting of the Council for Trade in Goods on 22-27 March 2002316, the Council 
Chairman proposed, inter alia , that, in order to fulfil the mandate given by Ministers, as mentioned 
above, this be put as an item on the agenda of the next CTG meeting to be held on 2 and 3 May 2002 
as well as subsequent meetings, as required.  At that May 2002 meeting of the CTG, the Chairman 
                                                      
313 G/L/459, paragraph 646. 
314 See WT/MIN(01)/17. 
315 See also paragraph 41 above. 
316 See G/C/M/59. G/L/683 
Page 184  
 reported that he had conducted info rmal consultations in order to pr epare for the examination of the 
proposals contained in the Decision.  During those informal consultations, inter alia , the United States 
had requested that a bibliography of articles, books and papers related to trade and industrial 
development as well as policies affecting textiles and cl othing be prepared by the Secretariat.  In 
addition, a communication had been provided by Hong Kong, China on behalf of the ITCB members 
that are also Members or observers of the WT O.  The representative of Hong Kong, China also 
recalled that he had made a request for further statis tical data relating to textile and clothing imports 
into the United States, the European Communitie s and Canada from unrestrained WTO Members.  
The Chairman proposed a programme of five one-day meetings for informal consultations in order to 
further examine these issues as well as other topics rela ted to the ATC.  After an initial discussion of 
the two proposals, the Council took note of th e statements made and accepted the Chairman's 
programme of informal consultations.   At subse quent meetings of the CTG in May and June 2002 the 
Chairman made progress reports of the informal discussions which had taken place, and Members continued their examination of the various aspects of the proposals, also on the basis of further 
submissions made by certain Members.  At the 22, 23 and 30 July 2002 meeting of the CTG, the 
Chairman reported that this item had been on the ag enda of four formal sessions, in May, June and 
July, and had been discussed at eight informal cons ultations over this period.  A great deal of 
documentation had been provided in support of the argumentation made in the meetings, both in the 
form of statistics on trade developments during the ATC period, as well as detailed submissions 
setting out the position of the different Members.  It had become clear from the outset that there were fundamental differences in the views and understandings  of the restraining Members and those of the 
developing, exporting Members on both the contents  of the report and on recommendations.  A great 
deal of effort went into trying to present these views in a factual and balanced manner in a draft 
report.  However, discussion of the draft  text led to repeated demands for further points to be 
included which, in turn, resulted in demands for balancing texts.  The draft report was rewritten 
repeatedly to accommodate these requests, however , the required consensus on the report and on 
recommendations did not take shape.  In view of a ll of this, the Chairman saw no alternative but to 
conclude the  exercise without results.  Consequently , he was not in a position to put before the CTG a 
draft report with recommendations to the General Council.  This would be his statement to the 
General Council at its next meeti ng and he proposed that delegati ons reserve their views on this 
matter for the General Council meeting.   The CTG so agreed. 
587. On 31 July 2002, the Chairman of the CTG reported to the General Council, inter alia , that 
the required consensus on the report and on the reco mmendations had not been reached.  In view of 
this, there had been no alternative but to conclude the exercise without results and, consequently, he 
was not in a position to present a report with recomm endations to the General Council.  The Members 
had a further exchange of views on the proposals and the possible need for their being implemented.  
However, the General Council Chairman said it w as clear from the discussion that although, in 
accordance with the mandate received, this matter had been examined in the CTG, it had not been 
possible to formulate any recommendations for the General Council by 31 July 2002.  Second, it was 
clear that the matter continued to be of great c oncern to a substantial number of delegations, from 
both importing and exporting countries.  Third, it was apparent that there were still fundamental differences between the views and understandings of the importing countries and of the exporting 
developing countries with respect to the mandate and possible recommendations.  Fourth, delegations 
had expressed very differing views on how best to deal  with this issue, and Members had clearly not 
reached a consensus on how to reso lve it.  In view of this situation and having examined various 
possible options, he proposed that the General Counc il take note of the statement by the Chairman of 
the CTG and of those by delegations, on the unders tanding that this would not prejudice the various 
positions held by Members, which would be duly reflected in the minutes of the meeting.
317  T h e  
General Council so agreed.  As of the adoption of the present report, no further debate had been held, 
however, in relation to the two proposals. 
                                                      
317 See WT/GC/M/75 and WT/GC/M/75/Corr.2.  G/L/683 
 Page 185 
 
 B. GENERAL COUNCIL  
1. Widening of EC textile quota restrictions following accession of new member States 
588. At the General Council meeting on 21 October 2003, the representative of India, on behalf of 
members of the International Textiles and Clothing Bu reau that are also Members or observers of the 
WTO, drew attention to an Act published in the Official Journal of the European Union, dated 
23 September 2003, entitled "Act concerning the co nditions of accession of the Czech Republic, the 
Republic of Estonia, the Republic of Cyprus, the Re public of Latvia, the Republic of Lithuania, the 
Republic of Hungary, the Republic of  Malta, the Republic of Poland, th e Republic of Slovenia and the 
Slovak Republic and the adjustments to the Trea ties on which the European Union is founded".  
Paragraph 7 of Article 6 of this Act stipulated that "[a]s from the date of accession, the new Member 
States shall apply the bilateral textile agreements and arrangements concluded by the Community with 
third countries.  The quantitative restrictions app lied by the Community on imports of textile and 
clothing products shall be adjusted to take into account the accession of the new Member States to the 
Community.  To that effect, amendments to the bilateral agreements and arrangements referred to 
above may be negotiated by the Community with th e third countries concerned prior to the date of 
accession.  Should the amendments to the bilateral ag reements and arrangements not have entered into 
force by the date of accession, the Community shal l make necessary adjustments to its rules for the 
import of textile and clothing products from third countries to take into account the accession of the 
new Member States to the Community."  According to  the representative of India, this matter was of 
great importance, both because of its systemic implic ations for the multilateral trading system, and the 
economic and practical considerations  related to it.  In this regard, he noted that this Act was to 
become effective as from 1 May 2004, i.e. just eight  months before the scheduled elimination of all 
quantitative restrictions on 1 January 2005 pursu ant to the ATC.  His delegation would be 
appreciative if the Community could inform the General Council of its plans and provide further 
details.  The representative of the European Comm unities said that his delegation had noted India's 
questions, which would be conveyed to Brussels and answered in due course.  The representative of 
India recalled its request under other business at the December 2004 meeting of the General Council.  
The representative of the European  Communities answered that he was not in a position to provide 
further details on this matter at this time, explaining that only the EU Council could take a decision on 
this matter, and that such decision w as only expected in the coming weeks.318 
2. Developing Members’ concern about pote ntial reduction in market (quota) access 
in 2004 
589. At the July 2003 meeting of the General Counc il, a number of developing-country Members  
brought to the General Council's notice what they perceived as an important market access problem in 
the textiles and clothing sector, which would adversely impact developing countries in 2004, i.e. a loss of market access on account of the inability to use "carry forward" in 2004.  The co-sponsors of 
this proposal recommended that developed-country Members take measures to ensure that there 
would be no narrowing of quota access to the textil es and clothing exports in 2004.  Following the 
discussion that took place among Members, the Chairman of the Council concluded that the 
divergences of views expressed meant that the Ge neral Council was not in a position to take a 
decision as had been requested by the co-sponsors.  He therefore suggested, and the Council agreed, 
that note would be taken of the statements, and that  the Chairman would hold consultations as to the 
best way to deal with this matter.  At the December 2003 meeting of the General Council, the 
Chairman informed Members that he had held consulta tions with the interested parties with the aim of 
exploring this matter further, as well as possible means to meet the concerns raised.  Further 
statements were made by various Members during the meeting.  However the Chairman concluded by 
stating that it was clear that no agreement existe d among Members on this issue, and there was thus 
                                                     
 
318 Subsequently this matter was raised by several members of the TMB in a communication sent to the 
Body in May 2004.  See paragraphs 325 to 334 above. G/L/683 
Page 186  
 no basis for a General Council decision on it.  He  encouraged the proponents and the restraining 
Members to continue their dialogue to see if there were other possibilities for addressing these 
concerns.
319 
3. Anti-dumping actions in the area of textiles and clothing – Proposal for a specific short-
term dispensation in favour of developing  Members following full integration of the 
sector into GATT from January 2005 
590. At the July 2003 meeting of the General C ouncil, a number of developing-country Members 
jointly made a submission with a view to bringing out the trend and impact of investigations into 
allegations of dumping in textiles and clothing on developing-country Members' exports.  The co-
sponsors of the paper, therefore, proposed that th e General Council recommend to Ministers that they 
decide as follows:  "With a view to allowing trade in textiles and clothing to adjust to normal trading 
conditions free of the influence of the long-standing quota regime following the full integration of the 
sector into the WTO in accordance with the Agreement on Textiles and Clothing, developed Members 
shall implement a grace period of two years during which no investigations in the context of anti-
dumping remedies on imports of textiles and clothi ng products from developing countries shall be 
initiated."  After an exchange of view by Member s, the Chairman concluded by stating that it 
appeared that some delegations had indicated that they could support the proposal, while others had 
said they could not go along with it.  As a result, it did not seem that the General Council could take a 
decision on this proposal at the July 2003 meeting.  The General Council, therefore, took note of all 
the statements on this matter. 
C. DISPUTE SETTLEMENT BODY 
591. During the third stage of the integration process,  no dispute has been referred to the Dispute 
Settlement Body in relation to the implementation of provisions of the ATC.  The DSB considered, 
however, two disputes which concerned measures a ffecting certain products  covered by the ATC 
(European Communities – Anti-Dumping Duties on Impor ts of Cotton-Type Bed Linen from India320;  
and United States – Rules of Origin for Textiles and Apparel Products.321  In addition, the systemic 
importance and potential impact on market access conditions of, inter alia , textile and clothing 
products of another dispute ( European Communities – Conditions for the Granting of Tariff 
Preferences to Developing Countries322) should be also noted. 
D. COUNCIL FOR TRADE IN GOODS  
1. Conclusion of the second major review 
592. The CTG started its major review of the implementation of the ATC during the second stage 
of the integration process at its meeting of 27 Septem ber 2001 but, in view of the fact that important 
gaps in the understandings of the participants remain ed to be bridged, could not finalize it before the 
end of 2001, the deadline specified in Article 8.11 of  the ATC.  The review, therefore, continued in 
2002.323  At the meeting of the Council for Trade in Goods on 22 and 27 March 2002, the CTG 
Chairman informed the Council that the consulta tions with a view to preparing a report for 
consideration by the CTG had resumed.  Discussions  had been intensive, focusing mainly on the 
subject areas where it might have been  possible to reach certain conclusions but, in spite of a great 
deal of effort on all sides, it had not been possible to bridge the gaps on some of the key issues.  He recommended, however, that consultations should c ontinue to arrive at a consensus report for the 
                                                     
 
319 For the TMB's comments regarding this matter, see paragraphs 256 to 261 above. 
320 See paragraphs 549 to 551 above. 
321 See paragraphs 453 to 456 above. 
322 See WT/DS246/R and WT/DS246/AB/R. 
323 See also paragraph 42 above.   G/L/683 
 Page 187 
 
 Council to consider.  The Council agreed to this  proposal.  Consultations continued and proved 
difficult, the CTG Chairman making interim reports on his consultations at the Council meetings on 2 
and 7 May, 23 and 24 May and 31 June 2002.  At the CTG meeting on 22, 23 and 30 July 2002, the CTG Chairman  presented a draft report on the major review of the implementation of the ATC during the second stage of the implementation process for c onsideration by the Council.  The Council took 
note of the statements made and adopted the report.
324   
593. In this report, the Council noted a number of considerations and arrived at certain 
conclusions, as follows: 
• the reaffirmation by all  Members of their commitment to achieve the full and faithful 
implementation of the ATC  by 1 January 2005; 
 
• the importance of the full integration of th is sector into WTO rules and disciplines by 
1 January 2005 in view of the significance of tr ade in textile and clothing products  as 
an important source of employment and export earnings for the economies of many 
Members, in particular, for  developing and least-developed country Members; 
 
• the declining trend  with respect to the application of the transitional safeguard 
mechanism during the second stage;  while recognizing that Members may resort to 
the safeguard provisions of the ATC during its final years, called upon all Members 
to apply it as sparingly as possible, consistently with the provisions of Article 6 and 
the effective implementation of the integration process under the Agreement; 
 
• the views expressed by Members with regard to the implementation of ATC 
provisions in favour of small suppliers, new entrants, cotton-producing exporting 
Members and least-developed country Members and reaffirmed the importance of full 
implementation of those provisions; 
 
• the views expressed by Members with respect to problems relating to circumvention 
of the ATC;  reiterated the importance of full cooperation in addressing these problems consistent with the provisions of Article 5 and emphasized the need for any remedies to be proportionate to the problem; 
 
• the views expressed recalled the provisions of Article 7 and called on all Members, as 
part of the integration process and with reference to the specific commitments undertaken as a result of the Uruguay Round, to take actions to abide by GATT 1994 rules and disciplines so as to achieve, inter alia , improved market access; 
 
• the appreciation for the comprehensive report prepared by the TMB on the 
implementation of the ATC in the second st age and stressed the need for continued 
supervision by the TMB of the implementation of the ATC during the third stage; 
 
• the importance of maintaining full transpar ency in all aspects of the implementation 
process and of facilitating the examination by the TMB of all measures taken under this Agreement, and called upon all Member s to comply with all ATC notification 
requirements in a complete and timely manner; 
 
• the importance of the Council overseeing an d regularly evaluating the progress, in 
accordance with Article IV.5 of the WTO Agre ement and Article 8 of the ATC, of the 
functioning of the ATC, whose implementation is being supervised by the TMB; 
                                                     
 
324 See G/L/556. G/L/683 
Page 188  
  
• that Members should allow for continuous autonomous industrial adjustment and 
increased competition in their markets in order to facilitate the integration of the textiles and clothing sector into GATT 1994 and encouraged Members to provide information to the TMB, from time to time,  on relevant developments in this area.  
 
594. On a number of other topics examined by th e Council the understandings and positions held 
by groups of Members differed substantially and,  thus, it was not possible to arrive at agreed 
conclusions.  With respect to Article 1.6, the qu estion of the elimination of quota restrictions on 
certain non-WTO Member countries with respect to te xtile and clothing products, while continuing to 
apply such restrictions on WTO Members was raised.  In relation to Article 2.4, the introduction of 
new restrictions on imports of textile and clothing products from a number of countries, in the context 
of implementing a customs union, was questioned, as well as the imposition of a restriction by a 
developed, restraining Member on another Memb er's exports of cotton and man-made fibre 
underwear.  Also, reference was made and concerns rai sed with respect to the failure of a restraining 
Member to notify the elimination of visa arrangement s in respect of products to be integrated in 
Stage 3, as well as to situations involving the impair ment of access due to changes in rules of origin 
and to certain related administrative formalities an d to the use of anti-dumping investigations and 
measures on restrained products. 
2. Doha Ministerial Decision on Implementation -Related Issues and Concerns:  request for 
the CTG to examine proposals contained in paragraphs 4.4 and 4.5 relating to the Agreement on Textiles and Clothing 
595. The Council for Trade in Goods examined the proposals made by Ministers in Doha, 
contained in paragraphs 4.4 and 4.5 of the D oha Ministerial Decision on Implementation-Related 
Issues and Concerns at its meetings on  22 and 27 March 2002, 2 and 7 May 2002 and 22, 23 and 
30 July 2002.  In addition, the Chairman held a seri es of informal consultations on this issue and made 
progress reports, in addition, at the CTG meetings  on 22 and 24 May and 13  June 2002.  For more 
details, see paragraph 586 above. 
3. The CTG's oversight function pursuant to Arti cle IV of the Agreement Establishing the 
WTO – Transparency regarding new restrictions on textile and clothing products commented on by the Textiles Monitoring Body 
596. The presence of a bilateral restraint agreem ent between the United States and Turkey on 
Turkey's exports of one category of clothing, as a part of a wider understanding between these two 
countries, was first raised as an issue and put on th e agenda of the CTG at the request of Hong Kong, 
China on behalf of a group of Members at the meet ing of the CTG in February 2001.  The concern 
related to the relationship of this bilateral restraint agreement to the ATC, and, more generally, to the 
TMB's responsibility for supervising the implementa tion of the ATC and the CTG's role in overseeing 
this process.  This matter was considered by the CT G at several meetings in 2001 and, since this issue 
was also under discussion within the framework of the CTG's second major review of the 
implementation of the ATC and in light of the fa ct that the Council was considering its possible 
conclusions of the major review at the same time, it was agreed that at the CTG meeting on 4 December 2001 that it seemed appropriate to take up this matter taking into account the outcome of 
the major review.
325  This matter was further discussed or reported upon in the meetings of the CTG 
on 22 and 27 March, 2 and 7 May, 23 and 24 Ma y, 13 June and 22, 23 and 30 July 2002.  Some 
debate took place as to whether the issue should be c onsidered only in the context of the major review 
or as a regular business item of the CTG and, in the latter case, that the Members concerned should be 
asked to rectify the measure which allegedly was in  violation of another Me mber's obligations under 
the ATC or any WTO agreement.  Consensus could not  be reached however, on that issue.  At the 
                                                      
325 See paragraph 43 above.  G/L/683 
 Page 189 
 
 meeting of the CTG on 22, 23 and 30 July 2002, the Chairman reported that he had conducted 
consultations on this issue and had discussed it with  the interested parties.  These discussions had 
resulted in a greater understanding on both sides on so me of the issues involved.  Consequently, he 
considered that it was not necessary to further pur sue these consultations.  The Council took note of 
the Chairman's report. 
VII. COMPLIANCE WITH NOTIFICATION REQUIREMENTS UNDER THE ATC 
597. The ATC contains a broad range of notifica tion requirements to be complied with by 
Members.  Most of these notification obligations are time-bound (such as the submission of integration programmes), while some others are ad  hoc in nature and apply to cases when Members 
decide to have recourse to or to take actions  under applicable provisions of the Agreement. 
598. The TMB had suggested in its first comprehe nsive report that "the Council for Trade in 
Goods recall to Members the particular importance,  both legally and for transparency purposes, of 
strict compliance with the notification requirements of the ATC".
326  In the conclusions adopted by the 
CTG in February 1998, as a result of the major review of the implementation of the ATC during the first stage of the integration process, in order "to ensure maximum transparency in the implementation 
of the ATC and to facilitate the work of th e Textiles Monitoring Body, the Council called upon 
Members to comply, in a complete and timely manner, with all notification obligations of the 
ATC".
327 
599. In its second comprehensive report, the TMB had noted, inter alia , that Members' compliance 
with time-bound notification obligations under the ATC had not improved, rather it had further 
deteriorated over time.  As a result, an in creasing number of Members had not provided any 
notification when such notifications were due and th ere had also been an increase in the number of 
late notifications.  The TMB had noted that such non-compliance with basic no tification requirements, 
including the deadlines, may have legal implications  on Members' rights and obligations arising from 
the ATC.  Indeed, in a number of specific cases,  despite the TMB's requests for clarifications and 
additional information from the Members concerned,  no reply had been provided.  Against this 
background, the TMB had emphasized that its efficient functioning and compliance with its 
supervisory role under the ATC was also dependent on the cooperation of Members.328  The TMB had 
recommended to the CTG that the Council: 
• "invite Members to fully comply with thei r respective notification obligations during 
the remaining period of ATC implementation; 
 
• recall to Members the importance of coopera ting with the TMB, in particular in 
providing it with the information th at it had decided to seek from them; 
 
• invite Members to submit timely notificati ons or information, as appropriate, to the 
TMB on all measures taken under the provisions  of the ATC and also on actions that 
can affect ATC implementation and the rights and obligations arising from the 
Agreement; 
 
• invite Members to refer to the TMB, if a nd when the need arises, the matters which 
can adversely affect their rights or they cons ider to be detrimental to their interests 
under the ATC."329 
 
                                                      
326 See G/L/179, paragraph 330. 
327 See G/L/224, paragraph 61. 
328 See G/L/459, paragraphs 714, 715 and 718. 
329 Ibid., paragraph 719. G/L/683 
Page 190  
 600. In response, in its report of the second major review, the CTG reaffirmed "the importance of 
maintaining full transparency in all aspects of the implementation process and of facilitating the 
examination by the TMB of all measures taken under this Agreement, and called upon all Members to 
comply with all ATC notification requirements in a complete and timely manner."
330 
601. Regarding developments in this area during the implementation of Stage 3 of the integration 
process, in the view of the TMB, though the globa l picture is a somewhat mixed one, overall it does 
not reveal significant improvements in Members'  compliance with notification requirements, 
compared to previous stages of integration.  This applies, in particular to the time-bound notification 
obligations, such as those relating to the final stage of integration.  While it cannot be called into 
question that the entire textile and clothing sector shall stand integrated into GATT 1994 on 1 January 2005 irrespective of whether WTO Members have provided, or not, notifications regarding 
their respective final stage of integration, ev en such an unambiguous and irrevocable legal 
commitment cannot exempt Memb ers from the obligation of providing notifications explicitly 
required under Articles 2.8(c) and 2.11.  It is a telli ng indication in this regard that only one Member 
complied with this notification obligation w ithin the time-frame sp ecified by the ATC. 
602. The TMB noted some positive changes in Members'  attitude in providing  clarifications and 
additional information, if specifically requested by  the TMB, with respect to different aspects of 
notifications or communications already submitted to the Body.  Such answers and clarifications were 
provided, in most cases, in a timely manner and the intention of seeking to address, to the extent 
possible, the specific issues raised by the TMB, coul d also be perceived.  On the other hand, as also 
reflected in the relevant sections of the present repor t, Members have hardly provided notifications or 
information on certain measures or actions which either fall under a clearly defined notification 
obligation in the respective ATC provisions or have a bearing on the implementation of certain 
provisions of the Agreement.  As an illustration of su ch measures, attention is drawn to the fact that  
at its meeting of April 2003, the TMB "recalled that, inter alia , Article 3.3 states that '[d]uring the 
duration of this Agreement, Members shall provide to the TMB, for its information, notifications 
submitted to any other WTO bodies with respect to any new restrictions or changes in existing 
restrictions on textile and clot hing products, taken under any GATT 1994 provision, within 60 days of 
their coming into effect.'  The TMB stressed the importance of the Members' adherence to the 
notification requirements contained in the ATC.  It  was also observed that measures or actions, other 
than those falling under the provisions of Article 3. 3, having a bearing on the implementation of other 
provisions of the ATC should also be brought to the TMB's attention, for its information."  At its meeting of September 2003, the TMB reverted to this matter.  It observed that since the report of its 
meeting of April 2003 had been issued, no related notification or information from Members had been 
received.  The TMB assumed, however, that agreem ents had been reached between certain Members 
or policies adopted and developed by some Member s, falling under the provisions of Article 3.3 or 
having a bearing on the implementation of other provi sions of the ATC, without being notified to any 
WTO body or brought to the attention of the TMB.  The TMB, therefore, urged the Members 
concerned to provide to the TMB, pursuant to Article  3.3, any relevant notif ications submitted to any 
other WTO bodies with respect to such agreements or  policies and/or to bring to the TMB's attention 
those measures or actions having a bearing on the impl ementation of other provisions of the ATC, in 
particular on that of Article 2.
331  It should be noted that in spite of the TMB's repeated reminder, no 
follow-up notification or communication has been a ddressed to the Body.  Some related information 
has been subsequently received, but only after the TMB, in the context of the preparation of this 
report, addressed specific requests with respect to certain measures to the Members directly 
concerned. 
603. As was already the case with the second comprehe nsive report, some of the information and 
observations provided by Members, in reply to th e TMB's general request, in the context of the 
                                                      
330 See G/L/556, paragraph 22. 
331 See also paragraph 188 above.  G/L/683 
 Page 191 
 
 preparation of the present report, revealed certain con cerns, or were related to matters, that could have 
been formally referred to the TMB by the Member s concerned under the applicable provisions of the 
ATC.  The TMB cannot but repeat in this re gard, what it had already stated in the second 
comprehensive report:  while it appreciates all the contributions received and has decided to reflect 
them as fully as possible in the relevant sections of  this report, it observes that providing such views 
and comments is not a substitute for, and does not am ount to, a formal proceeding that can be initiated 
under the respective provisions of the ATC.332 
VIII.  FUNCTIONS OF THE TMB AND WORK CARRIED OUT 
604. As defined in Article 8.1, the TMB was establis hed in order to supervise the implementation 
of the ATC, to examine all measures taken under its provisions and their conformity therewith, and to 
take the actions specifically required of it by the ATC. 
605. Article 8.1 also specifies that "[t]he TMB shall consist of a Chairman and ten members.  Its 
membership shall be balanced and broadly repr esentative of the Members and shall provide for 
rotation of its members at appropriate intervals.   The members shall be appointed by Members 
designated by the Council for Trade in Goods to serve on the TMB [...]."  The composition of the TMB for the third stage of the implementati on process (2002-2004) was decided by the General 
Council on 20 December 2001.
333  Mr András Szepesi was reappointed Chairman of the TMB by the 
General Council for a period of four years (2001-2004) on 15 December 2000.334  The list of TMB 
members, alternates and non-participating observers as well as successive changes, are reflected in the 
reports of the TMB. 
A. DISCHARGING FUNCTIONS ON AN AD PERSONAM BASIS  
1. TMB working procedures 
606. Article 8.1 of the ATC states, furthermore, that TMB members discharge their function on an 
ad personam  basis.  The working procedures adopted by the TMB specify that "[i]n discharging their 
functions, TMB members and alternat es undertake not to solicit, acce pt or act upon instructions from 
governments, nor to be influenced by any other orga nizations or undue extraneous factors.  They shall 
disclose to the Chairman any information that they  may consider likely to impede their capacity to 
discharge their functions on an ad personam  basis.  Should serious doubts arise during the deliberations 
of the TMB regarding the ability of a TMB member to act on an ad personam  basis, they shall be 
communicated to the Chairman.  Th e Chairman shall deal with the particular matter as necessary."335 
2. Decision of the Council for Trade in Goods 
607. Following the proposal made by the TMB, the Council for Trade in Goods adopted, on 
12 February 1997, a decision on the ad personam  status of TMB members, as follows: 
 "WTO Members which, pursuant to the decisi on of the General Council of 31 January 1995, 
appoint TMB members under Article 8.1 of the Agreement on Textiles and Clothing accept that TMB members discharge their function on an ad personam  basis and not as government 
representatives.  Consequently, they shall not give TMB members instructions, nor seek to 
influence them, with regard to matters before  the TMB.  The same applies to alternates."
336 
 
                                                      
332 See G/L/459, paragraph 717. 
333 See WT/L/443. 
334 See WT/GC/M/61. 
335 See G/TMB/R/1, Annex. 
336 See G/C/W/20/Rev.1. G/L/683 
Page 192  
 3. Code of conduct adopted by the Dispute Settlement Body 
608. In December 1996, the TMB t ook note of the decision of th e Dispute Settlement Body
337 on 
3 December 1996 to adopt the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes
338, in view of the fact that such Rules apply, inter alia , to the 
Chairman of the TMB and other members of the TMB secretariat called upon to assist the TMB in formulating recommendations, finding s or observations pursuant to the ATC, as well as, to the extent 
prescribed in the relevant Section of  the Rules, to members of the TMB. 
B. 
NUMBER OF MEETINGS ;  ISSUES HANDLED BY THE TMB  
609. During the period 1 January 2002 to 21 July 2004, the TMB held 28 meetings, nine of which 
lasted for more than one day.  The issues refe rred to the TMB as well as the TMB's actions with 
respect to them are addressed in detail in this comprehensive report.  During the period under review, 
the TMB, inter alia , completed its review of the Stage 3 in tegration programmes notified by Members 
as well as all the notifications received regarding the final stage of integration, to be implemented on 
1 January 2005.  Particular attention has been paid by the TMB during the same period to the 
consideration and review of all the notificati ons addressed to it following the accession of new 
Members to the WTO (notifications under Article 2.1 and 2.2, 3.1 and 3.2(b), 2.17 etc).  Two 
transitional safeguard measures agreed between the Me mbers concerned, pursuant to Article 6.9, were 
also subject of a detailed review by the TMB, in  accordance with the requir ements of applicable 
provisions of Article 6.  The TMB's recent review, with reference to Article 2.21, of the introduction 
by the European Communities of quantitative restrictions in the markets of the newly acceded 
Member States, deserves to be mentioned too.  A lot of time and energy has been also devoted to 
drawing up the present comprehensive report.  It should be mentioned in this regard that, in 
accordance with the TMB's own established practice in  drafting the previous comprehensive reports 
and keeping in mind that producing such a repor t required the fullest possible participation and 
contribution of all participants, not only members, bu t also alternates were afforded the opportunity to 
participate in full in the TMB's discussion l eading to the adoption of the present report. 
C. CIRCULATION OF REPORTS AND NOTIFICATIONS ;  DERESTRICTION OF DOCUMENTS  
1. Circulation of reports 
610. During the period considered, the TMB continued to adopt reports of each of its meetings, 
which were circulated to WTO Members for their information339.  The TMB adopts such reports at the 
subsequent meeting at the latest, on the basis of a draft proposed by the TMB secretariat incorporating 
the text of any recommendation, finding and observation by the TMB.  The TMB’s reports are, therefore, normally circulated to WTO Members about a month after each meeting of the TMB.   
611. The TMB continued to submit reports annually pursuant to the decision adopted by the 
General Council on 15 November 1995 on the proc edures for an annual overview of WTO activities 
and for reporting under the WTO (WT/L/105).
340 
2. Circulation of notifications 
612. In conformity with its working procedures, notifications received by the TMB pursuant to 
Articles 2.1, 2.2, 2.7(a) and (b), 2.8(a) and (b), 2.10, 2.11, 2.15, 3.1, 3.3, 3.4, 6.1 and 7.2 of the 
Agreement have been circulated to WTO Member s without delay, it being understood that the TMB 
                                                      
337 See G/TMB/R/22, paragraph 17. 
338 See WT/DSB/RC/1. 
339 See G/TMB/R/85 to G/TMB/R/112. 
340 See G/L/475, G/L/574 and G/L/632, G/L/650.  G/L/683 
 Page 193 
 
 may examine or review these notifications at a late r stage.  Notifications addressed to the TMB for 
review other than those above were, at the latest af ter such review, also circulated to WTO Members. 
3. Derestriction 
613. Following the decision adopted by the General Council at its meeting on 18 July 1996, the 
TMB had considered the question of the derestric tion of its working documents at its September 1996 
meeting.  The TMB had recalled that in adoptin g its own working procedures on 13 July 1995 it had 
agreed that it would " ... decide on the implemen tation of the decision of the General Council on 
derestriction of documents when the General Counc il has adopted its decision on this matter".  The 
TMB had taken note of the General Council’s deci sion and decided that it would act in full 
compliance with it. 
614. Since the General Council adopted, on 14 Ma y 2002, another decision regarding the 
procedures for the circulation and derestriction of WTO documents, the TMB considered, during its 
meeting of May 2002, the implications of this d ecision on its working procedures.  Noting that the 
decision of the General Council brought about important changes, the TMB fully examined it, took note of it and decided to act in full compliance with  it, which it has done consistently since then. 
D. 
TRANSPARENCY  
615. Also during the period of implementation of Stage 3 of the integration process, the TMB has 
consistently pursued its efforts to ensure the highe st possible degree of transparency relating to its 
proceedings.  Apart from circulating most of th e notifications received to WTO Members without 
delay341, the TMB has paid particular attention and done  its utmost to provide as much information as 
possible in its reports regarding all the matters exam ined by it, describing the main elements of its 
considerations and providi ng full details of the reasons for its conclusions, including the rationale for 
its findings and, if applicable, recommendations. 
616. The TMB recalls that in the Singapore Minist erial Declaration adopted in December 1996, 
Ministers “agree[d] that, keeping in view its qu asi-judicial nature, the Te xtiles Monitoring Body 
(TMB) should achieve transparency in providing rati onale for its findings and recommendations".  In 
particular since this Ministerial Conference, th e TMB has endeavoured continuously to improve the 
quality of the explanations it provi ded in terms of the rationale fo r its findings and recommendations.  
The Body is of the view that its performan ce in this regard deserves to be recognized. 
E. DECISION -TAKING  
617. In conformity with the relevant decision of the General Council342, the TMB takes all its 
decisions by consensus.  Followi ng the provisions of Article 8.2, consensus does not require the 
assent or concurrence of members appointed by Members involved in an unresolved issue under 
review by the TMB. 
618. This rule of decision-taking implies that practi cally in all instances, including the taking note 
of notifications and the adoption of its reports, the TMB has to proceed by consensus.  It should be 
noted, in this regard, that the TMB succeeded duri ng the period under review, in reaching conclusions 
by consensus with respect to all the matters it considered and to make appropriate findings, 
observations and, if applicable, recommendations. 
                                                      
341 See paragraph 612 above. 
342 See WT/L/26, paragraph 6. G/L/683 
Page 194  
 F. 
VIEWS AND COMMENTS OF WTO MEMB ERS IN RESPONSE TO THE TMB 'S GENERAL REQUEST FOR 
INFORMATION AND COMMENTS  
619. The communication received from ITCB members contained the following under the heading 
of "Functioning of the TMB – Article 8":  "We re cognize that the TMB findings and reports during 
the Stage under review have been well reasoned and added to the transparency of the implementation 
process. The Body may like to highlight, however , that in some cases the restraining Member 
concerned did not conform to its recommendations."  
620. No other communication addressed to the TMB in response to its request for information and 
comments has provided comments or observations re lated to the Body's work and functioning. 
621. With respect to the comments made by ITCB me mbers that "in some cases the restraining 
Member concerned did not conform to [the TMB' s] recommendations", the TMB observes that all 
such issues are clearly brought out in th e respective sections of this report. 
  G/L/683 
 Page 195 
 
 PART FOUR:  ELEMENTS FOR AN OVERALL  ASSESSMENT OF THE IMPLEMENTATION 
OF THE ATC, WITH PARTICULAR EMPHASIS ON SUMMARIZING IMPORTANT DEVELOPMENTS DURING THE THIRD STAGE OF THE INTEGRATION PROCESS 
622. In accordance with the requirements defined in Article 8.11, this report provides, in the 
different sections of Part Three, a comprehens ive overview of developm ents relating to the 
implementation of the provisions of the ATC during the third stage of the integration process.  In 
describing developments concerning the implementa tion of specific ATC provisions during Stage 3, 
in those cases when the TMB found it necessary or appropriate, references to developments that had 
occurred during previous integration stages were  also included, as background information. 
623. At the date of the adoption of the present comprehensive report by the TMB, slightly more 
than five months remain from the implementation of  the ten-year transition period specified by the 
ATC, following which, on 1 January 2005, the AT C and all restrictions thereunder shall stand 
terminated and the textiles and clothing sector sha ll be fully integrated into GATT 1994.  Some 
Members, in providing responses to the TMB's requ est for information and comments in the context 
of the preparation of this report, included in th eir respective communications certain elements which 
can also be considered as part of their overall ass essment of ATC implementation, not limited to the 
Stage subject to the present report.  All such el ements of Members' contributions are reproduced 
below, together with some additional related comments by the TMB.  Also, the TMB makes an 
attempt in the following to summarize some other important developments of ATC implementation, 
with particular emphasis on developments during the third stage of the integration process.  This 
summary is, by definition, limited to some of th e most important matters and aspects and does not 
include all the issues detailed in the preceding Parts of the report.  The purpose of such a summary is 
to draw, once again, Members' attention to some of  the key features of the implementation of the ATC 
and, thereby, to assist the Council for Trade in Goods to make its own overall assessment in the 
framework of its third major review of the implementation of the ATC.   
I. INTEGRATION PROCESS.  THE SCOPE OF QUANTITATIVE RESTRICTIONS 
MAINTAINED UNDER THE ATC 
A. 
KEY FEATURES AND SOME RELATED OBSERVATIONS  
624. Following certain corrections and adjustments, if applicable, the technical requirements for 
integration of textile and clothing products into GATT 1994, respectively for Stages 1, 2 and 3 of the 
integration process, have been met by those Member s which have provided notifications of which the 
TMB could take note.  For the three successive st ages combined, the requirement was to integrate 
products into GATT 1994 which account for not less  than 51 per cent of the total volume of the 
respective Members' 1990 imports of the products falling under the coverage of the ATC.  In addition, 
for each stage, the respect ive integration programmes had to include products from each of the four 
main product groups (i.e. tops and yarns, fabri cs, made-up textile products and clothing).   
625. Of the Members still maintaining restrictions falling under the provisions of Article 2, with 
the implementation of the respective Stage 3 in tegration programmes on 1 January 2002, Canada 
integrated altogether 53.21 per cent, the European  Communities 51.30 per cent, Turkey 78.42 per cent 
and the United States 51.35 per cent of their respective volume of 1990 imports of the products covered by the ATC.  There has been no change in terms of the coverage of products integrated since 
the implementation of Stage 3 integration progra mmes, as none of the Members concerned has had 
recourse to the provisions of Article 2.10 (advan ced or earlier integration).  Thus, the detailed 
assessment of the impact of integration programmes implemented so far, as contained in the 
respective previous section
343, remains also valid at the date of  the adoption of this comprehensive 
                                                      
343 See paragraphs 97 to 134 above. G/L/683 
Page 196  
 report;  the most important implication being that the bulk of the restrictions maintained under the 
ATC will only be eliminated on 1 January 2005. 
626. It should be also noted that following the accession of new Members towards the end of 
Stage 2 of the integration process and at the beginni ng of implementation of Stage 3, the total number 
of restrictions taken over to the ATC regime and continuing to be maintained under it has increased 
quite significantly, the restrictions applied on im ports from these new Members of the products not 
yet integrated being governed by the provisions of the ATC as from the date of their membership.  As 
a result, and also illustrating the choice of produc ts selected for integration, although integration 
programmes for Stages 1 to 3 have been implemen ted, the total number of specific restrictions 
maintained at present respectively, by Canada, the European Communities and the United States is 
higher than the number of restrictions applied by  them under the ATC during the implementation of 
Stage 1 of the integration process. 
627. Another important development in this regard during the period of implementation of Stage 3 
of the integration process has been the impact of the enlargement of the European Communities.  As 
reported by the European Communities in its comm unication made in response to the TMB's request 
for any related notification and, as appropriate, in formation, "[a]s from 1 May 2004, the European 
Union includes ten new member States.  The Act of  Accession establishes [...] that the new member 
States must apply the common trade policy conc erning textiles and that the already existing 
quantitative restrictions applied by the Community on imports of textile and clothing products are to 
be adjusted to take account of the accession of the new member States to the Community.  These 
quantitative restrictions, already notified to the TMB, applicable to imports of certain textile products 
from third countries into the enlarged Community ha ve consequently been adjusted so as to cover 
equally the imports into the ten new member States.  [...]  It is pointed out that the Community does 
not consider this extension of the geographical appl ication of existing restrictions to constitute new 
restrictions in the sense of Article 2.4 of the ATC.  This extension was necessary to realize the enlargement process whilst ensuring the maintena nce and unhampered functioning of the expanded 
internal EU market in the interest of all economic operators, includi ng exporters.  [...]" 
628. In reviewing this issue, pursuant to Article 2.21, the TMB observed, inter alia , that the 
European Communities considered th at the restrictions in question fell under the provisions of the 
ATC under which they had been previously notified by the EC and that the European Communities 
did not invoke any other provision of the WTO Agreement, including GATT 1994, as a possible justification for the restrictions.  The TMB noted  that the restrictions in question as notified 
previously had been applied by the European Co mmunities composed of 15 member States, while the 
ten new member States had not previously maintained any restrictions under Article 2
.1.  Seen in this 
light, the access to the markets of the ten new member  States has become subject to restrictions as 
from 1 May 2004, resulting from the application of  the restrictions notified by the European 
Communities in 1995 which had encompassed, at this point in time, 15 and not 25 member States.  Therefore, for the ten new member States, also Me mbers of the WTO prior to  the enlargement of the 
European Communities and having already undertaken well-defined obligations vis-à-vis  other WTO 
Members, inter alia , under the ATC, the measure taken by the EC amounted to the introduction of 
"new restrictions in terms of pr oducts or Members", as referred to in  Article 2.4.  In light of its 
detailed consideration of the matter, while notin g that in the view of the EC, the European 
Communities had acted in conformity with its resp ective obligations under the ATC, the TMB was of 
the view that the extension of the geographical app lication of the existing restrictions constituted new 
restrictions in the sense of Article 2.4.  Acco rdingly, these new restrictions could not find a 
justification under the ATC.
344 
                                                      
344 For the TMB's detailed review, see paragraphs 325 to 334 above.  G/L/683 
 Page 197 
 
 629. Other developments relevant in taking stock of the scope of r estrictions notified and applied 
under the ATC can be summarized as follows: 
• Canada brought to the TMB's attention that "in relation to Article 2.15 [of the ATC], 
Canada's initiative [in respect to improveme nts to its preferential scheme for least 
developed countries, effective from 1 Ja nuary 2003] provides for quota-free access 
for all products covered by the Agreement".  It appears that imports from two WTO 
Members (Bangladesh and Lesotho) were a ffected by the measure implemented with 
reference to Article 2.15.345 
 
• The European Communities, in respon se to the TMB's specific request for 
information, reported that it has suspended, as from 1 January 2002, the application of restrictions to imports from Sri Lanka  and, in the course of 2003, the same 
treatment has been extended to imports from Brazil.
346 
 
• The United States, in its communication to the TMB, stated, inter alia , that the US 
"has already extended significant trade preferences to least developed Members through regional trade preference progr ammes benefiting sub-Saharan African 
countries and Caribbean countries."
347  
 
B. VIEWS AND COMMENTS OF WTO MEMBERS  
630. In their communication addressed to the TMB, ITCB members stated, under the heading "The 
integration process" the following: 
• "The ATC provided for a ten-year transitional period to accomplish the phase-out of 
quota restrictions.  This long period was intended to facilitate a smooth and 
progressive process.  
 
• Against the aforesaid objective and purpose of the Agreement, it would be instructive 
if the TMB could summarize how major restraining countries did actually phase out the quota restrictions.  In this connection, [a] Table
348 [...] is submitted for 
consideration of the Body.  In a nutshell: 
 
- Of a total of 937 quotas applied by the United States on imports of textiles 
and clothing products from WTO Members under the MFA, it phased out 
only 103 quotas up until now.  This number includes 17 quotas applying against Kenya and Mauritius.  Th ese were lifted only under the AGOA 
legislation.  The United States will thus  abolish 834 quotas, or 89 per cent of 
the total, at the end in one go. 
 
- The EU carried over 303 quotas;  phased out 91 as of now;  and would 
abolish 212, or 70 per cent, on 1 January 2005.  The number 91 includes 13 quotas that the EU suspended in return for market access concessions that it 
secured from two WTO Members. 
 
                                                     
 
345 See paragraphs 182 and 183 above. 
346 See paragraphs 194 and 195 above. 
347 See paragraph 519 above. 
348 Reproduced in its integrity as Table 13 of this report. G/L/683 
Page 198  
 - Likewise, out of a total of 368 quotas carried over by Canada, it has so far 
phased out 76.  Consequently, it will abolish 292, or over 79 per cent, at the end of the process. 
 
- Contrary to the above three, Norway had already abolished all 54 quotas (46 
before the end of 1997 and the remaining eight at the beginning of 2001). 
 
• Looked at from a different angle, and taking as the basis the portion of 1990 import 
trade that was actually under quota restriction, the United States has thus far integrated less than 20 per cent, while the EU, based on 1995 imports when its membership increased to 15, only 32 pe r cent.  Consequently, the amount of 
restrained trade left to be integrated by the two at the end of the process is 80 per cent 
and 68 per cent respectively (the large bul k in each case, consisting of trade in 
apparel).  Unfortunately, for lack of necessar y information, it has not been possible to 
assess similar percentages in respect of Canada and Turkey. 
 
• For assessment of the integration process in its context and in light of the object and 
purpose of the ATC, the Body may also like to recall that at the very start of the 
integration process, the United States had decl ared that it 'will ensure that integration 
of the most sensitive products will be defe rred until the end of the ten-year period' 
(cf., US Statement of Administrative Action on Uruguay Round Agreements Act).  Similarly the EC followed a policy in whic h it 'considered appropriate to retain 
control over quotas with a view to keeping the possibility of using them as a bargaining chip to obtain better market acces s in third countries' (cf., EC Commission 
web site, Trade in Goods, the te xtile sector, November 2000).  
 
• It is suggested that the TMB report bring out  these facts in order to shed light on the 
pace and progressivity of the process of phase-out of quota restrictions, and underscore the desirability of the restraini ng Members taking steps to avoid any rush 
to alternate methods of protection by th eir domestic industries following the abolition 
of the large bulk of quota restrictions only at the end of the phase-out process." 
  
Table 13 
 
PACE OF QUOTA ABOLITION 
(as contained in the communication from ITCB members) 
 
 
  
US  
EU  
Canada  
Norway 
 Total number of quotas at start of ATC
a  
937 
303 
368 54
 Of which phased out:
b 
 
(i) Stage 1 (from 1995): 
 By integration under Article 2.6 
 By early elimination under Article 2.15  
0  
0  
8 
 0
46 G/L/683 
 Page 199 
 
   
US  
EU  
Canada  
Norway 
(ii) Stage 2 (from 1998): 
 By integration under Article 2.8(a) 
 By Article 2.8(a) and Article 4  By early elimination under Article 2.15  
3 
2 
10
c 
21 
  
26 
  0
8
(iii) Stage 3 (from 2002): 
 By integration under Article 2.8(b)  By Article 2.8(b) and Article 4  
 Under bilateral agreements   
 Under AGOA  
69 
2 
 
 
17 
57 
  
13 
42 
 0
Total number of quotas abolished as of 
March 2004 
  
103 
91 
76 54
 
Quotas to be abolished on 1 January 2005  834 212 
292 0
 
a.  Including specific limits and sub-limits notified under Article 2 of the ATC. 
b.  Numbers do not include product categories on which quotas have been eliminated only partially. 
c.  Eliminated only for Romania, not for any other restrained Member.  
 
631. ITCB members added the following observation to the information included in Table 13: 
 "It may be noted that the large bulk of quotas ha ve been kept to be abolished only on the last 
day of the Agreement.  So much about the progressivity of the process, contrary to what was envisioned in the Agreement!" 
632. In two communications addressed to the TMB, Canada stated, inter alia , as follows: 
• "Canada wishes to reaffirm its continuing co mmitment to the full implementation of 
the ATC.  Canada has fully complied w ith the ATC obligations set out in the 
transition provisions.  As Canada indicat ed in its communication of 13 May 2004 to 
the TMB, all textile and apparel products not integrated during the first three stages of 
integration into GATT 1994 will be integrat ed by 1 January 2005 and the quantitative 
restrictions on these products will be eliminated by that date. 
 
• Canada has significantly and meaningfully  liberalized its restraint regime by 
removing quotas on products of direct interest to exporting countries.  In the first two phases, we removed from quota the following commercially-significant products:  tailor collared shirts, rainwear, women’s & girls’ ensembles, women/girls knitted 
blouses, children’s blouses and baby outerwear.  In addition, in 1998 we increased by 
10 per cent the restraint levels for winter outerwear, over and above what the required 
growth rates specified in the ATC.  
 
• For the third phase of the ATC, Canada inte grated a wide range of apparel products 
including women’s/girl’s/child ren’s suits and ensembles, all knitted and woven shirts, 
blouses and tops, swimwear, all babywear, a nd thermal and standard  overalls.  Quotas 
were removed from apparel products, irrespectiv e of the material they are made of.  
None of the partially liberalized quotas, and none of the combined quotas, were 
readjusted, which resulted in a further de facto  increase in access to our market. G/L/683 
Page 200  
  
• On the textile front, Canada has traditionally maintained quotas on only few of its 
imports.  Restrained imports of yarns and made-up textiles added up to less than 5 per 
cent in 1990.  Over 85 per cent of fabrics we re imported free of quota that year.  Still, 
our industry has been adapting and developing markets for its products, to prepare for the new trading environment.  In addition, this industry is adapting to intensified 
competition arising from regional and bilateral trade initiatives. 
 
  [...] 
 
• Canada has not requested any consultations under Article 6 of the special safeguards 
provision." 
 
633. In its communication, providing observations, inter alia , on ITCB members' assessment of 
the integration programmes implemented by the EC  so far, the European Communities stated the 
following: 
 "As to the observations [of ITCB members]  concerning implementation of integration 
programmes, the Community is on record to have fully complied with the provisions of the 
ATC.  This finding was duly made against allega tions against restraining countries of back-
loading liberalization under the ATC.  The refere nce to the Commission's web site made by 
ITCB Members should duly be seen in this co nnection, since it is manifest that the 
Community consistently has held the possibility open to exporting countries to engage in talks 
of reciprocally increased market access." 
 
634. In its communication, essentially responding to  the submission received from ITCB members, 
the United States stated, inter alia , the following: 
 "[ It should be] point[ed] out, first and foremost, that the United States has fully complied with 
its obligations under the ATC, including with respect to the integration programme set forth 
in Article 2.  The United States announced its  integration schedule on 13 October 1994 for 
Phase 1, and 1 May 1995 for Phases 2, 3 and 4.  It has abided by this sch edule, and intends to 
continue to do so.  ITCB members have frequen tly complained that the United States has not 
liberalized its system more quickly than is called for under the ATC.  The US textile and 
apparel industry is being forced to undergo a major restructuring as a result of the commitments the United States made in the Ur uguay Round, and a million jobs have been 
lost in the United States.  While the United St ates intends to honour its commitments, it will 
not accelerate the integration schedule in the face of the serious conditions facing the US 
industry. 
 
Moreover, the United States notes that several ITCB members have maintained policies and 
practices that have effectively limited access to ma rkets in this sector, despite the obligation 
in Article 7 of the ATC to "achieve improve d access to markets for textiles and clothing 
through such measures as tariff reductions and bindings, reduction or elimination of non-tariff 
barriers, and facilitation of customs, administ rative and licensing formalities".   While the 
United States has been opening its market, ITCB members have been keeping theirs shut to US exports.  Under such cond itions, it is impossible for the United States to justify early 
integration, as requested by the ITCB.  More over, the United States hopes and expects as part 
of its review of the implementation of the ATC that the TMB will review whether ITCB 
members have adhered to their obligations under Article 7 of the ATC.  US import statistics 
clearly demonstrate that the United States has lived  up to its obligations under Article 7, with 
imports of textile and appa rel products up by 150 per cent since 1994, increasing from  G/L/683 
 Page 201 
 
 17.3 Billion Square Metres Equivalent (BSME) in 1994 to 43.2 BSME for the year ending 
March 2004.  We question whether ITCB members can say the same. 
 
[...] 
  The numbers indicated by the ITCB [members' submission, as reflected in Table 13 of the 
present report] appear to be largely accurate.  As the ITCB has pointed out, the United States 
has made clear from the very start of the integration process that it intended to integrate the most sensitive products at the end of the ten-year integration period.  This  is consistent with 
ATC requirements, and the United States can assu re the TMB that it has fully lived up to its 
commitments under the formulas to which all Me mbers agreed and which were incorporated 
into the ATC." 
 C. 
SOME RELATED COMMENTS AND ADDITIONAL  OBSERVATIONS BY THE TMB  
635. The TMB has always considered that the inte gration process is a central element of ATC 
implementation since it provides the vehicle for bringing international trade in textiles and clothing 
products under the general rules and principles of GATT 1994.  The detailed assessments made by 
ITCB members, as reflected in paragraph 630 abov e, on the one hand and the related statements 
made, in particular, by the European Communities and the United States (cf. paragraphs 633 and 634 
above) on the other, highlight, once again, the wi de divergences in Members' views and judgement 
regarding ATC implementation in general a nd the integration process in particular. 
636. The TMB has to reiterate and also update some of  the related observations it made in the first 
and second comprehensive reports.  It has already pointed out that the ATC includes a number of 
particular features which should be taken into consideration in provid ing an overall assessment of the 
integration process.  It is impor tant to note in this regard: 
• the broad product coverage of the Annex; 
 
• the use of 1990 as a base year for providing statistical information; 
 
• the fact that integration is implemented on the basis of total volume of imports as 
opposed to the respective value; 
 
• that Members are free to c hoose products/categories for integration provided that 
their selection meets the essential technical requirements;  and 
 
• that, in conformity with the ATC, products which accounted for 49 per cent of the 
total volume of the Members' 1990 imports of the products covered by the ATC may 
remain to be integrated after the implemen tation of Stage 3 integration programmes;  
this during a period of only 36 months;   
 
• that the large majority of the products subject to restrictions under the ATC (in 
particular under Article 2.1 thereof) will have  to be integrated during the same period. 
 
It was on the basis of these considerations that  the TMB recommended, in its second comprehensive 
report, that the Council for Trade in Goods invite the Members concerned to have recourse, whenever 
possible, to the provisions of Articles 2.10 (advanc ed integration) and 2.15 (early elimination of 
quantitative restrictions) during the implementation of the third stage of the integration process. 
 G/L/683 
Page 202  
 637. It is in light of the aforesaid that the TMB notes: 
• The statement of Canada that "[it] has fu lly complied with the ATC obligations set 
out in the transition provisions"; 
 
• the statement of the European Communities that  "the [EC] is on record to have fully 
complied with the provisions of the ATC"; 
 
• the statement of the United States that "[it ] has fully complied with its obligations 
under the ATC, including with respect to the integration programme set forth in Article 2". 
 638. Furthermore, it should be noted with appreciation that as a result of successive measures 
implemented with reference to Ar ticle 2.15, Norway no longer maintains any restrictions under the 
ATC as from 1 January 2001. 
639. The TMB has some difficulties in understandi ng the reference to "allegations against 
restraining countries of backloading liberalization under the ATC", since IT CB members' assessment 
regarding the number of restrictions to be abo lished on 1 January 2005 has not been contested and 
also, because the notion of backloading the integrati on of most of the products subject to restrictions 
can appropriately characterize the impact of the integration programmes implemented so far, even 
though they met the technical requirements define d by the ATC.  Moreover, one of the major 
restraining Members clearly reiterated, once again, that  "it [had] made clear from the very start of the 
integration process that it [had] intended to integrate the most sensitive products at the end of the ten-
year integration period." 
640. Furthermore, it is also in light of the observa tions contained in paragraph 636 above that the 
TMB notes the assessments and comments of ITCB me mbers regarding the pace of elimination of 
restrictions notified and maintained under the ATC.   The TMB observes that in terms of the total 
number of specific restrictions applied by restraini ng Members, the information at the Body's disposal 
is either identical with or very close to the pictur e presented by ITCB members in Table 13.  It is also 
noted in this regard that the United States stated  that "[t]hat the numbers indicated by the ITCB 
[members' communication] appear to be largely accur ate".  Though, in this light, roughly 80 per cent 
of the total number of specific restrictions applie d under the ATC will only be eliminated on the date 
of the implementation of the final stage of integra tion, i.e. on 1 January 2005, it should be recalled 
that the Members maintaining such restrictions have explicitly reaffirmed their commitment to 
eliminate all those restrictions on schedule. 
II. ISSUES RELATED TO THE IMP LEMENTATION OF QUANTITATIVE 
RESTRICTIONS 
641. During Stage 3 of the integration process, the TMB reviewed several new notifications 
received with reference to Article 2.1 and the pr ovisions of the respective legal instruments of 
accession of China, Chinese Taipei and the Form er Yugoslav Republic of Macedonia (FYROM).  
These notifications listed the quantitative restricti ons maintained on imports of certain textile and 
clothing products from these newly acceded Members.  In reviewing the notifications concerned, the 
TMB has done its utmost with a view to establis hing the proper facts and examining all the related 
matters, in accordance with the requirements of Article 2.21.
349  The same applies to the review of all 
the related administrative arrangement s notified pursuant to Article 2.17.350 
                                                      
349 For the detailed review of these notifications, see paragraphs 146 to 178 above. 
350 For the review of these arrangements  , see paragraphs 264 to 306 above.  G/L/683 
 Page 203 
 
 642. In accordance with the provisions of Article 2. 14(b), for the period 2002-2004 the level of the 
remaining restrictions had to be increased annually by the importing Members by the growth rate for 
the respective restrictions during Stage 2 of the inte gration process, increased by 27 per cent.  While 
no particular matter or problem h as been brought to the TMB's attention regarding the implementation 
of the provisions of Article 2.14(b) as such, the TMB has devoted a great deal of time and attention to 
reviewing the implementation of the growth-on-gr owth provisions (as contained in Articles 2.13, 
2.14(a) and 2.14(b)) in relation to the level of restrictions maintained on imports from newly acceded 
Members.351  The TMB reiterates its concerns that the applicable provisions of the respective legal 
instruments of accession to the WTO do not provid e unambiguous guidance regarding the appropriate 
methodology to be applied in implementing these provisions vis-à-vis  these newly acceded Members. 
643. Exporting Members continued to rely on the use of the flexibility provisions foreseen in 
Article 2.16 also during Stage 3 of the integration process.  A number of exporting Members raised, 
however, in mid-July 2003, at the level of the General Council their concern about potential reduction 
in market (quota) access in 2004.  The problem iden tified by these Members stems from the fact that 
"the restraining importing Members contend that as all quotas will be eliminated at the end of 2004, 
there will be no carry forward available from 2005. "  As to the way forward, exporting Members 
requested that "the General Counc il consider the matter and recomme nd that developed Members take 
steps to ensure that there is no diminution of  quota access for developing Members on account of 
quota carry forward in 2004."  So far, the Genera l Council has provided no positive resolution to this 
request.  The TMB reiterates in this regard its hope that appropriate solutions to this matter, 
acceptable to all Members, will be found and adopted by the General Council in the near future.  The 
TMB believes that appropriate solutions to avoiding potential reduction in market access 
opportunities in 2004 can be sought by relying on a nu mber of different mechanisms or a combination 
thereof.352 
644. As far as the treatment accorded to small suppliers  in the sense of Article 2.18 is concerned, 
Canada, the European Communities and the United St ates increased the annual growth rates applied 
during Stage 2 for WTO Members falling under the pr ovisions of Article 2.18 in their respective 
regimes by 27 per cent as from 1 January 2002.  The TMB recalls in this regard that the methodology 
chosen by the respective restraining Members for the implementation of these provisions during Stage 1 (when the European Communities increased th e growth rates applicable for the first stage, 
first, by 16 per cent and, second, by 25 per cent in  lieu of 16 per cent;  while Canada and the United 
States increased them by 25 per cent instead of 16 per cent) predetermined the possible impact of the 
implementation of the same provisions during the successive integration stages.
353  It should be also 
mentioned that following the Doha Ministerial Decision on Implementation-Related Issues and 
Concerns, the Council for Trade in Goods was unable to make recommendation to the General 
Council, inter alia , with respect to this subject-matter.354 
645. Following the accession of China and Chinese Ta ipei to the WTO, the TMB received a 
number of new notifications also regarding restric tions falling under the provisions of Article 3.1.  
Subsequently, progressive phase-out programmes in the sense of Article 3.2(b) were provided to the 
TMB which examined them.  It can be estab lished that all these programmes as well as those 
programmes falling under Article 3.2(b)  that had been notified during earlier integration stages clearly 
commit the Members concerned to eliminate fully the respective restrictions at the latest on 
1 January 2005. 
                                                      
351 For the detailed review of the TMB, see paragraphs 201 to 245 above. 
352 See also paragraphs 256 to 261 above. 
353 For more details, see in particular paragraphs 311 to 317 above. 
354 See paragraphs 586 and 587. G/L/683 
Page 204  
 646. In accordance with the provisions of Article 4.1,  also during the implementation of Stage 3, 
the exporting Members continued to administer the restrictions referred to in Article 2 and those 
applied under Article 6. 
647. The TMB notes that in their response to the TMB's request for information and comments, 
ITCB members reiterated their concerns regarding the effects of the changes implemented in 1996 by 
the United States in its rules of origin affecting textiles and clothing products.  The concerns raised 
this time focused, inter alia , on the fact that in effecting these ch anges, the United States enlarged the 
coverage of certain cotton made-up products, as a r esult of which products were deemed to be of 
cotton, even if they contained only 16 per cent of cotton by weight.  ITCB members expressed the 
view that "[n]otwithstanding that a dispute panel ruled that the complainant in that case did not 
succeed in establishing that the changes had been effected in violation of obligations under the 
Agreement on Rules of Origin, [...] the change in classification of cotton products enlarged the scope 
and incidence of restrictions on these products to the disadvantage of the exporting Members 
concerned." 
648. In the same communication, ITCB members stat ed also that there had been instances of 
transfer of particular products from relatively uni mportant categories (in which quota utilization rates 
were low) to high-demand, tight-quota categories,  thereby increasing the restrictiveness of the quotas 
concerned.  To support this statement, a list of such cases was brought, subsequently, to the TMB's 
attention;  several such cases having been related to the period of implementation of Stage 3 of the 
integration process.
355 
649. Recalling that the introduction of changes such as those indicated in paragraphs 647 and 648 
above are governed by the provisions of Article 4. 2 and also that, pursuant to Article 4.4, "[i]f a 
mutually satisfactory solution is not reached [in consultations between the Members concerned], any 
Member involved may refer the matter to the TMB for recommendations as provided in Article 8 [of 
the ATC]", the TMB observes, inter alia , that during the third stage of the integration process no 
further changes have been implemented by any Memb er to its applied non-preferential rules of origin 
in this sector.  It is also observed, however, that  several Members continue to perceive that the 
changes implemented in the US rules of origin have  had an adverse effect on their trading interests 
and their rights under the ATC, inter alia  because of resulting changes in  the classification of cotton 
products. 
650. The TMB also notes the concerns raised with respect to certain changes implemented in 
product classification other than those attributed to the effect of changes in the rules of origin.  While 
such changes should conform to the requirements of Article 4.2, it is argued that some of the reported 
changes could adversely affect the access availabl e to the Members concerned.  It is observed, 
however, that none of the Members has referred any such specific matter to the TMB with reference 
to the provisions of Article 4.4. 
651. As a result of the implementation of Stage 3 integration programmes, in several instances a 
part of a category (or of merged categories) subject  to restraint and also a number of categories falling 
under group or aggregate limits were integrated, respectively, by Canada and the United States.  
While Canada decided not to reduce the level of th e respective remaining restraints, the United States 
apparently implemented downward ad justments of quota levels for partially integrated products.  The 
TMB recalls in this regard that in its second comp rehensive report, adopted five months prior to the 
implementation of possible adjustments resulting fro m the third stage of the integration process, it 
expressed, inter alia , the expectation that "the Members concerned will make full use of their 
consultations in conformity with the provisions of Ar ticles 4.3 and 4.4.  In the view of the TMB, prior 
to its implementation, any such adjustment should be mutually agreed between the United States and 
                                                      
355 For more details, see paragraphs 467 to 468 and 472 to 473 above.  G/L/683 
 Page 205 
 
 its trading partners in the framework of th e consultations envisaged in Article 4.4."356  The TMB 
observes in this respect that no Member, includi ng those Members which acceded to the WTO since 
the TMB had adopted its comprehensive report on the implementation of the ATC during the second 
stage of the integration process, has referred such ma tter to the TMB with a view to indicating that no 
mutually satisfactory solution could be reached in the consultations envisaged in Article 4.4 and, 
therefore, referring the issue to the TMB fo r recommendation as provided for in Article 8. 
652. During Stage 3, no issue has been referred to  the TMB with specific reference to the 
provisions of Article 5 concerning potential circumven tion of the ATC.  Also, unlike in the case of the 
TMB's preparation of its second comprehensive repor t, none of the communications received from 
major importing and exporting Members in the context of the preparation of this report raised any 
such matter at all.  The TMB recalls that it has st ated already the following:  "it would appear that 
Members have invested substantial efforts with a view to addressing problems arising from the 
potential circumvention of the ATC, despite the sensitive and controversial nature of  this subject.  [...]  
The TMB encourages Members to strengthen further th eir cooperation in this regard in a balanced 
manner which would, on the one hand, reconcile th e requirements of efficiency while not causing 
unnecessary additional burden for th e respective authorities and economic operators involved, on the 
other".357 
653. The TMB also recalls in this regard that during the entire transition period of ATC 
implementation only one specific matter which would fall under the provisions of Article 5 has been 
referred to the Body.  In light of this it would a ppear that although there could be other instances in 
which Members were confronted with problems such as those identified in Article 5, the particular 
matters could be apparently addressed and solved in  the framework of the strengthened cooperation 
between the Members concerned. 
III. APPLICATION OF THE TRANSITIONAL SAFEGUARD MECHANISM 
654. During the period of implementation of Stage 3 of the integration process, there have only 
been two recourses to the provisions of Article 6, both by Brazil in 2002.  In these two cases, restraint 
measures were agreed between the Members concerne d (Chinese Taipei and Korea) and Brazil.  The 
TMB reviewed these measures in detail and determ ined that, in both cases, the agreements were 
justified in accordance with the provisions of Article 6. 
655. In order to assess developments related to the u se of the transitional safeguard mechanism, it 
is appropriate to summarize briefly all those cases  in which Members invoked the provisions of 
Article 6 during the entire transition period of AT C implementation.  Table 14 summarizes, in an 
annual breakdown, all the requests made by Members for consultations, pursuant to Article 6.7 or, if 
applicable, Article 6.11.  Members had recourse to  these provisions altogether in 65 cases, of which 
34 cases during Stage 1;  29 cases during Stage 2;  and two cases during Stage 3 of the integration process.  The United States invoked provisions of Ar ticle 6 in 28 cases, Argentina in 17 cases, Brazil 
and Colombia each in nine cases and Poland in two case s.  The most telling indication in this overall 
picture is that of the 28 cases when the United St ates invoked these provisions, 24 were concentrated 
in the first half of 1995, i.e. in the first six mont hs of the implementation of the ten-year transition 
period.  The concentration in terms of timing of su ch a large number of cases, and, in particular, the 
perceived shortcomings in the supporting eviden ce presented by the United States caused serious 
concerns to several exporting Members during th e early period of ATC implementation.  The 
examination of the requests by the United States fo r consultations and of the resulting measures made 
by the TMB, and, in three cases, subsequently, by DSB panels led to the conclusion that in most of 
these cases, the United States had not complied w ith important obligations under Article 6. 
                                                     
 
356 See G/L/459, paragraph 429. 
357 Ibid., paragraph 481. G/L/683 
Page 206  
 656. The fact that only two recourses to the provisi ons of Article 6 were made in 2002, none in 
2003 and, so far, in 2004, confirmed the trend alrea dy observed by the TMB of a substantial decline in 
the use of the transitional safe guard mechanism from the beginning of the year 2000.  As to the 
possible reasons and explanations for this trend, th e TMB is of the view that the reasons put forward 
in its second comprehensive report, i.e., inter alia,  the disciplines embodied in and the control 
exercised by the WTO system, the jurisprudence set  by the respective panel and Appellate Body 
reports, which provided detailed guidelines to Me mbers and established appropriate standards on 
which the TMB has been able to rely in impr oving the efficiency and transparency of TMB 
proceedings and reports, have remained valid.  Al so, the sparing use of the transitional safeguard 
mechanism should facilitate the full integration of  the textile and clothing sector into GATT 1994 
within the time-frame specified in Article 9.   
 
 
Table 14 
 
REQUESTS FOR CONSULTATIONS IN TH E CONTEXT OF RECOURSE TO THE 
PROVISIONS OF THE TRANSITIONAL SAFEGUARD MECHANISM 
  
YEAR MEMBERS REQUESTING 
CONSULTATIONS NUMBER OF REQUESTS 
1995 United States 24 
1996 United States 
Brazil 1 
7 
1997 United States 2 
1998 Colombia 
United States 9 
1 
1999 Argentina 
Poland 17 
1 
2000 None None 
2001 Poland 1 
2002 Brazil 2 
2003 None None 
2004 None None 
TOTAL  65 
 
  G/L/683 
 Page 207 
 
 IV. SOME OTHER ISSUES AND ASPECTS RELATED TO THE IMPLEMENTATION 
OF THE ATC 
A. IMPLEMENTATION OF THE PROVISIONS OF ARTICLE 7 
657. Though communications received from Members, in particular in the context of the 
preparation of the TMB's second comprehensive report,  but to some extent also of the present report, 
raised specific concerns regarding the implementati on of the provisions of Article 7 related, with 
reference to the specific commitments undertaken by Members as a result of the Uruguay Round, to 
achieving improved access to markets and ensuring th e application of policies relating to fair and 
equitable trading conditions in such areas as dumping and anti-dumping rules, subsidies and 
countervailing measures, protection of intell ectual property rights, during the period of 
implementation of Stage 3 of the integration pr ocess no notification has been received by the TMB 
from any WTO Member with specific reference to any of the provisions of Article 7.  Thus, despite 
the unambiguous obligations specified in the releva nt provisions of the ATC, none of the Members 
has found it appropriate to notify to the TMB, purs uant to Article 7.2, any action referred to in 
Article 7.1 which could have a bearing on the im plementation of the ATC.  Likewise, no summary 
with reference to the respective or iginal notification(s) that could be addressed to other WTO bodies, 
has been provided to the TMB.  Also, no reverse no tifications, as specified in Article 7.2, have been 
received.  Similarly, the TMB has not received an y information  from any Member regarding possible 
cases where any Member considered that another Me mber had not taken the actions referred to in 
Article 7.1, and that the balance of rights and obligations under the ATC had been upset and, 
therefore, the Member concerned had decided to br ing the matter before the relevant WTO bodies, as 
provided for in Article 7.3.  The TMB noted that, in the absence of such information that should have 
been provided by Members, the Body did not have to  comply with the requirements defined in the last 
sentence of Article 7.3, according to which "[a]ny subsequent findings or conclusions by the WTO 
bodies concerned shall form a part of the TMB's co mprehensive report."  It was also ob served that 
information made in the context of the preparation of this report cannot be considered as a substitute 
to complying with the procedural requirements laid down in the provisions of Article 7.  
658. Notwithstanding the above, for the sake of comprehensiveness and strictly as background 
information, the TMB has included in the comprehensive report a summary of some of the issues that could be relevant in this cont ext and could be identified on the basis of official WTO documents 
(notifications and communications to  and reports of other WTO bodies)
358. 
B. IMPLEMENTATION OF ARTICLE 1.4 REGARDING COTTON -PRODUCING EXPORTING MEMBERS  
659. During the entire transition period of ATC implementation Members have had different 
perceptions on how the particular interests of the cotton-producing exporting Members as envisaged 
in Article 1.4 were and should ha ve been reflected in the implem entation of the provisions of the 
ATC.  Already in its first comprehensive report the TMB had, inter alia , encouraged interested 
Members to enter into consultations with a view to  clarifying the issues related to the implementation 
of Article 1.4.  In this regard, the TMB had reca lled that, should the need arise, the provisions of 
Article 8.4 are available for this purpose.  In th e second comprehensive report the TMB reiterated this 
encouragement.  
660. Against this background, it should be noted that no communication whatsoever has been 
received from any Member by the TMB during the implementation of Stage 3 of the integration 
process with specific reference to the provisions of Article 1.4.  In fact no such specific 
communication has been addressed to the TMB since the entry into force of the ATC. 
                                                      
358 See paragraphs 535 to 563 above. G/L/683 
Page 208  
 C. 
AUTONOMOUS INDUSTRIAL ADJUSTMENT AND INCREASED COMPETITION IN MEMBERS ' 
MARKETS  
661. It has been a preoccupation of the TMB thr oughout the ten-year transition period how the 
implementation of the integration provisions of the ATC has ensure d the full and faithful 
implementation of the ATC within the time-frames es tablished therein.  The TMB observed already in 
its first comprehensive report that one of the c onditions of such an implementation is a steady 
progress in terms of structural adjustment and, al so, as a result of this, an increased competition in 
Members’ markets.  This interrelation is clea rly recognized by Article 1.5.  Despite the 
encouragement of the Council for Trade in Goods fo r Members to provide information, from time to 
time, to the TMB on relevant developments in this  area, no information has been addressed in this 
regard by any of the Members to the Body during the period of implementation of Stage 3 of the 
integration process.  It was only at the request of the TMB for appropriate information in the context 
of the preparation of the present report that some  communications were received that also touched 
upon certain aspects relevant in the context of Article 1.5.  It should be noted, however, that in terms 
of providing information on developments regardin g autonomous industrial adjustment and increased 
competition in Members' markets, these communications  were very brief, remained at the level of 
generalities and, without any doubt, contained fewer specific elements , if any, than the respective 
information provided to the Body as it prepared the second comprehensive report.  Therefore, on the basis of the information at its disposal, the TMB is simply not in a position to express any view regarding the implementation of Article 1.5 during the third stage of the integration process.  One would assume, however, that adjustment in the sense of  Article 1.5 has continued, as also reflected in 
the general statements received.  This assumption notwithstanding, there is no basis for the TMB to 
assess whether such adjustment has been adequate , or not, in terms of preparing the respective 
industries for the competitive environment of the post-ATC regime. 
D. 
ELIMINATION OF RESTRICTIONS ON  IMPORTS FROM CERTAIN NON -WTO MEMBERS WHILE 
MAINTAINING THEM ON WTO MEMBERS  
662. In their communication addressed to the TMB in th e context of the preparation of the present 
report, ITCB members raised their concern that the European Communities had abolished all quotas 
on imports from certain non-WTO members, while keeping them in place on WTO Members.  ITCB members expressed the view that this is contrary to the provisions of Article 1.6, as it represents a 
disregard of the fundamental MFN requirement as  defined in GATT 1994.  Recognizing that this 
issue raised questions as to whether rights and obl igations of WTO Members had been affected under 
the WTO Agreement, in particular under GATT 1994, the TMB observed that, as a result of the 
elimination of restrictions on imports from non- WTO Members of products covered by the ATC, 
WTO Members were, in fact, placed at a disadvantage vis-à-vis  certain non-WTO Members, whereas 
it could have been expected that, being Members of  the WTO, this would at minimum not have been 
the case. At the same time the TMB observed that  it could not find a provision in the ATC which 
would allow it to pronounce itself or draw conc lusions on the rights and obligations of WTO 
Members under the provisions of GATT 1994. 
V. FINAL STAGE OF INTEGRATION TO BE IMPLEMENTED ON  1 JANUARY 2005 
663. Also as part of a broader assessment, it should be borne in mind that the ATC, as one of the 
multilateral agreements on trade in goods included in the Annexes of the WTO Agreement, is an 
integral part of the results of the negotiations c onducted in the framework of the Uruguay Round.  It 
had been presented and also perceived as one of th e most important elements of the Uruguay Round 
results for several Members, in particular exporti ng developing countries and territories, both in terms 
of potential short and longer term economic benefits and also in te rms of systemic importance.  
During the ten-year transition period for the inte gration of the textiles and clothing sector into 
GATT 1994, Members have had very divergen t assessments regardi ng the quality of ATC  G/L/683 
 Page 209 
 
 implementation, a continuous source of real or pot ential problems and, very often, hardly veiled 
frustrations. 
664. Against this background it is a welcome fact th at in the respective official notifications 
repeated assurances have been recently provided re garding the timely and full implementation of the 
ATC.  The Agreement will be fully implemented as sc heduled and provided for in  Article 9.  Thus the 
ATC and all restrictions thereunder shall stand terminated on 1 January 2005, on which date the 
textiles and clothing sector shall be fully integr ated into GATT 1994, thereby putting an end to a 
special and discriminatory regime that has been in application for more than four decades.   
665. The TMB believes that it has made a useful c ontribution by reminding Members that they 
should comply with their respective obligations of pr oviding notifications regarding the final stage of 
integration to be implemented on 1 January 2005.  The notifications received, respectively, from 
Canada, the European Communities, Turkey and the Un ited States stated explicitly that on the date of 
full integration (i.e. on 1 January 2005) all remaini ng restrictions under the ATC would be eliminated.  
While observing that these reaffirmations were fully in line with the provisions of Articles 2.8(c) 
and 9, the TMB also notes that these statements conveyed an appropriate and timely message not only to other WTO Members, but also, through the wide di ssemination of this information, to all economic 
operators involved.  With regard to those Members th at have not yet provided notifications that were 
due pursuant to the provisions of Article 2.8(c) and 2.11, the TMB reiterates that the ATC and all 
restrictions shall stand terminated on 1 January 2005, irrespective of whether WTO Members have 
submitted, or not, or are going to provide, or not , notifications regarding their final stage of 
integration. 
666. The timely and full implementation of the ATC will bring about, without any doubt, 
important trading opportunities and also challenges WTO Members will have to meet.  This timely 
and full implementation of the ATC should be also  regarded as a renewe d manifestation of WTO 
Members to their commitments unde rtaken in the framework of the multilateral trading system, 
thereby also strengthening the credibility of this system. 
__________  
 
 