RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/M/52
8 November 2001
(01-5531)
Council for Trade in Goods
17 October 2001
MINUTES OF THE MEETING
Held in the Centre William Rappard
on 17 October 2001
Chairman:  Ambassador I. Major (Hungary)
1. This meeting of the CTG was convened by Airgram WTO/AIR/1641 to continue the major
review of the implementation of the Agreement on Textiles and Clothing in the second stage of the
integration process, pursuant to Article 8.11 of the Agreement.
2. The Chairman recalled that the first meeting of  the Council to conduct this major review had
been held on 27 September 2001 and that the report of that meeting was available in document
G/C/M/51.  He added that, to assist in this review, two documents were available: the comprehensive
report of the Textiles Monitoring Body, in G/L/459 and a statistical background document in
G/L/474.  Furthermore, a group of developing c ountry Members, which are also members of the
ITCB, had provided a paper which was available in document G/C/W/304. He informed the meetingthat he had received as well a document from the delegation of Uruguay, on behalf of the ITCB
members, which contained tables and information on the topics under discussion, and that copies of
the document were being circulated to Members.
1
3. He also recalled that, at the last meeting, some delegations had provided initial observations
on the objectives and goals of the review and the Council had accepted his proposal for a structure forthe various topics to be addressed. This structure, which was set out in paragraph 14 of the report on
the last meeting (G/C/M/51), comprised four groups of subjects, with relevant tirets for the individual
points.
4. Before moving to the detailed examination of these four groups of subjects, the Chairman
asked if delegations had further general comments or observations which they might wish to make atthis stage.
General Comments or Observations
5. The representative of Uruguay, speaking on behalf of the ITCB members that are also
Members or observers of the WTO2, highlighted some of the ideas which he had put forward at the
last meeting.  In the view of the ITCB members, the ATC had provided for the major review to
forestall any problems during the transitional period and, where necessary, to take corrective steps to
ensure that the process of integration was on track. In fact, the ATC explicitly specified the purpose ofa major review in Article 8.12, which stated that the CTG shall take such decisions as it deems
appropriate to ensure that the balance of rights and obligations embodied in the Agreement had not
been impaired.  He believed that the CTG had to make this assessment and take appropriate decisions
to restore the balance if it found that there was a problem.  In his view, and as detailed in the ITCB
                                                     
1 These tables and information were subsequently circulated as document G/C/W/325.
2 In all cases throughout this report, statements by the representative of Uruguay are on behalf of the
ITCB members that are also Members or observers of the WTO.G/C/M/52
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members' paper, the balance of rights accruing under the Agreement to developing country Members
whose exports had long been restrained by quotas, had been seriously impaired.  Finally, he said that
it might also be useful to recall the Council's conclusions and recommendations from its first major
review and to see the extent to which these might or might not have been implemented.
6. The representative of India considered that this review was important for two reasons:  the
sector of textiles and clothing was of enormous trade interest to a number of developing countries,
including India; and the ATC provided that the CTG shall conduct a major review based on the
TMB's comprehensive report before the end of each stage of the integration process, as provided in
Article 8.  This second major review was extremely important because it came at a critical time as it
was only three years from the end of the ATC.  The Agreement and all restrictions thereunder would
stand terminated on 1 January 2005.  In this sense, it was qualitatively different from the first review
held in 1997.  It was important that the CTG, in this second major review, take stock of theimplementation of the ATC in all its relevant aspects. He added that the review process would be
assisted enormously by the comprehensive report of the TMB and endorsed the views of the ITCB
members.
7. He went on to say that, in the Uruguay Round, the developing countries had hoped to gain
significantly in the area of textiles and clothing. This was an area characterised by protectionism bythe some developed, restraining Members. It was also an area where the developing countries had
competitive advantage. Indeed, for many developing countries the painful concessions which they had
to make in other areas such as intellectual property rights or services would be justified only if
significant benefits were forthcoming in the areas of textiles and agriculture. When the Uruguay
Round was concluded, the WTO Secretariat had come up with figures on benefits that could accrue todeveloping countries from the implementation of the Uruguay Round Agreements.  It was then the
commonly held view that global income could be  boosted by US$ 200-500 billion, more than one
third of which was expected to be derived from liberalisation of textiles and clothing trade. The first
question, therefore, in this major review was whether the textiles and clothing exporting, developing
countries had benefited to the extent calculated by the Secretariat before the conclusion of the Round.The answer to that question depended on whether or not there had been commercially meaningful
integration in the ATC so far.
8. The representative of India added that if the objective of the ATC was actually to liberalise
trade in textiles and clothing through progressive integration, i.e. the elimination of quota restrictions,
then, it was difficult to see how that objective was being achieved, considering that the end date was
only three years away.  Even after the third stage integration, the number of quotas that would remain
in place were as high as 701 out of 757 in the case of the United States, 164 out of 219 in the case ofthe European Communities and 241 out of 295 in the case of Canada. Thus, progress in integration
had been meagre and had not led to the expected benefits for exporting, developing Members. They
would expect this major review to acknowledge that the integration process thus far had not been
commercially meaningful and to call on the developed, restraining Members to take concrete action
which could be justified under Articles 2.10 and 2.15 of the ATC.
9. He said that it had been argued by the developed, importing Members that even though
integration was slow and back-loaded, the growth-o n-growth provisions of the ATC provided the
necessary relief. In this respect, he noted that, first, growth-on-growth was not a substitute for
integration, a point emphasized in the TMB's comprehensive report. Second, for countries like India,
the growth in exports during the pre-ATC period had been far greater than during the ATC period sofar.  He said that the major review should recommend to the developed, restraining Members to
advance the date for growth-on-growth.
10. He pointed out that it was important that the major review, apart from focusing on integration
and related issues, must also deal with whether or not the various special and differential treatment
provisions in the ATC dealing with small suppliers, least-developed country Members and cottonG/C/M/52
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producing, exporting Members had been implemented or not. This major review must also keep in
mind what had been said in the last major review.  The concern had been expressed then that the
integration programmes of importing Members ha d not been commercially meaningful, so the
question was, were the integration programmes during the second stage any better?  Similarly, if in
the first major review Members were encouraged to have recourse to the provisions of Articles 2.15and 2.10, which related to eliminating restrictions and to early integration, the Council needed to look
into whether there had been such recourse.  It was only by doing this that the current exercise could
become meaningful and purposeful.
11. India stressed that the focus of this review should be on the developed, importing Members
which maintained quantitative restrictions as they had the obligation to eliminate them and to meet the
fundamental objectives of the ATC.  The focus was not on the other Members, whose integration
programmes were notional because they did not maintain GATT-inconsistent quantitative restrictionsin the area of textiles and clothing.
12. Another issues referred to by India that had caused concern included the action taken by a
major trading entity to eliminate restrictions on non-WTO Members while maintaining them on the
same products for WTO Members.  The ITCB members' submission considered that such action
would, at a minimum, be a violat ion of GATT/WTO obligations and had the effect of upsetting the
rights and obligations of Members.  A further issue had to do with the introduction of new restrictions
on textile products which were not justified under the ATC or under GATT 1994.  Both matters
impeded the objectives of the ATC and affected the rights of other Members of the WTO.  The
Council should give serious consideration to th ese two issues and ask the Members concerned to
revoke the measures.
13. In conclusion, the representative of India believed that the major review should develop an
overall assessment leading to clear recommendations, which would enable the developed, restraining
Members to take specific measures to fully and faithfully implement the ATC.  Thus, the benefits
which ought to have accrued to developing countri es would materialize. In his view, an objective
assessment of the situation would lead to the conclusion that the balance of rights and obligationsembodied in the ATC had been impaired to the disadvantage of developing, exporting Members.
14. The spokesman for the European Communities welcomed the major review which would rely
heavily on the comprehensive report prepared by the TMB.  This report provided an invaluable
amount of detail on matters related to the sector in the period under consideration, an important tool
for informed debate.  As regards the broader general context, he recalled that the actual trade in this
sector for the EC was far from a negative picture.  In the year 2000, the EC imported Euros 69.5
billion of textile and clothing products, an increase of 17% over the year 1999, which was an increaseof Euros 9.9 billion of which Euros 9.3 billion we re imports from developing Members. The period
1995-2000 showed an increase of 54%, an increase of Euros 24.3 billion of which Euros 23.9 billion
came from developing countries.  Imports from countries subject to quotas had increased more rapidly
than overall imports;  up 61% in the period 1995-2000, 7% points more than the total growth of
imports from all sources.
15. He also pointed out that average EC import duties in this sector were among the lowest in the
world, at 8.8%.  There were no tariff peaks and maximum duties did not exceed 12%. The EC had no
quotas with the least-developed countries and their exports were benefiting from zero duty.  A
substantial share of EC imports from developing countries benefitted from tariff reductions under the
Generalized System of Preferences.  Also, the EC had an integrated internal market, with no technicalor administrative barriers to imports of textile and clothing products.  He said that, in this light, for the
EC, this discussion related very largely to an assessment on how the ATC was performing as seen
from the different perspectives of the WTO Members.G/C/M/52
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16. The representative of Hong Kong, China endorsed the statement by Uruguay made at the
meeting on 27 September 2001.  He stated that it was important to have regard to the purpose of this
major review of the implementation of the ATC, as made clear by Articles 8.11 and 8.12.  This was,
first, to exercise the Council's responsibility for overseeing the functioning and implementation of the
ATC;  and second, to take decisions it deemed appropriate to ensure that the balance of rights andobligations embodied in the ATC was not being impaired.
17. As regards the Council's responsibility for overseeing the functioning and implementation of
the ATC, he said that the TMB was responsible in the first instance for the supervision of the
implementation of the ATC and the Council had the benefit of the TMB's comprehensive report.  In
many aspects it could be seen that the TMB had discharged its responsibility admirably, but in other
respects it had been frustrated in achieving a satisfactory resolution to problems encountered in the
implementation of the ATC.  In these latter instances, as outlined in the paper tabled on behalf of theITCB members, he expected the CTG to resolve these problems, as provided in Article 8.12 of the
ATC.
18. The representative of Hong Kong, China indica ted that many of the problems highlighted in
the ITCB members' paper were of systemic importance.  He considered that the Council should
determine whether the balance of rights and obligations embodied in the ATC had been impaired.This meant considering whether the ATC was on track to achieve its prime objective of re-integrating
the textiles and clothing sector into normal GATT rules by 2005. The balance of rights and
obligations was concerned not only with the implementation of individual provisions, but also
whether any benefit accruing to Members, directly or indirectly, under the ATC was being nullified or
impaired, or whether the attainment of any objective of the ATC was being impeded.
19. The representative of the United States said that he regarded this as the major review for the
second stage of the implementation of the ATC, a review which by definition could not deal with
events that had not yet occurred i.e. issues concerning the third stage.  Secondly, the ITCB members'
paper had raised a number of issues that could not be effectively dealt with in this forum.  The ATC
laid down a definite procedure on how textile issues  could be handled.  Consultations must be held
between interested parties and if this did not resolve the matter the issue may be brought to the TMB
for both parties to present their cases.  The TMB should then conduct an examination and issue
recommendations as appropriate.  This process was designed to generate the maximum amount of
information possible in order to allow a reasonable outcome that could be understood and supported
by all parties.  Much of what had been raised in the ITCB members' paper ignored this process
entirely.  The issues raised were complex and not easily dealt with in the Council.  If Members
genuinely felt that their interests were not being respected in the implementation of the ATC'sprovisions they should use the mechanism built into the ATC to address the problem.  He stressed that
many of the differences between the United States' position and the position of the ITCB members
could be traced to differing views of what was expected during the life of the ATC.   The US believed
that the ATC had given the US industry ten years in which to complete a transition to a quota free
environment.  He said that if one looked at the ra pid contraction of the US clothing sector since 1994,
on one hand, and the rapidly rising share of the US  market held by imported clothing on the other
hand, it was hard to reach any other conclusion but that this process of transition was proceeding at
least as rapidly as expected.
20. He noted that one issue which was frequently referred to at the start of the ATC but had
disappeared from discussion now was the so called "cliff".  A major concern of exporting countrieshad been that importing Members would not complete the final integration of all textile products into
GATT 1994 rules because of the disruption it would cause. Given the rapid pace of adjustment over
the past seven years, it would be hard to make th at argument now.  These facts strongly supported the
conclusion that the implementation of the ATC was on track. He further indicated that the ITCB
members' paper contained a number of references to provisions that benefitted individual exportingMembers by permitting importing Members to do more than was specifically mandated in the ATC.G/C/M/52
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Although the US believed that it had respected these provisions, they could not be regarded as
requiring the US to relinquish the ten year transition period.  Finally, although it believed that much of
the ATC had been implemented smoothly, there were elements where it was not fully satisfied.  The
US believed that Article 7 of the ATC contained provisions on market opening which had not been
respected. In addition, the provisions of Article 5 on circumvention had not worked well.
21. The representative of Mexico noted that the TMB's report included references to regional
arrangements and other types of regional initiatives.  He questioned if the TMB had a mandate to
consider regional arrangements and if it would con tinue to do so in the future.  He could not agree
with the recommendations in paragraph 709 of the report.  There was another mechanism in the WTO
to examine regional arrangements.  Since this was to be a report on the implementation of the ATC,
Mexico did not consider that it should include a subject on regional arrangements and initiatives, nor
should this session of the CTG deal with this issue.
22. The representative of Norway expressed her delegation's appreciation for the comprehensive
report of the TMB and support for the conclusions and recommendations put forward in Chapter XIV
of that report.  Norway had actively contributed to the liberalisation of trade in textiles, as it had
abolished its remaining quota restrictions by 1 January 2001, which was four years in advance of the
agreed deadline. In this respect, her delegation wished to emphasize the importance of ensuring andfacilitating the full integration of textiles trade into GATT 1994.
23. The representative of Canada considered the TMB's report valuable, as it set out the facts
needed for the major review.  The ATC and its implementation were important for all Members as
was this review of the second stage of integration.  He stressed that, in conducting the review, the
Council needed to be clear as to what the ATC said and what it did not say. The ultimate purpose ofthe ATC was the full integration of the textiles and clothing sector into GATT 1994 rules and
disciplines by 1 January 2005, with the consequential elimination of all GATT inconsistent
restrictions by that date. Canada fully supported the implementation of the Agreement and the
effective realisation of its objective of full integration.
24. He noted that the ATC recognized that a transition period was required to allow industries to
adjust to the full integration of the textiles and clothing sector.  The ATC clearly specified a 10-year
transition period, and he identified two main el ements that worked in tandem in defining the
integration process in the course of that period.  The first was the three stages of integration during the
transition period with the minimum thresholds of volumes of imports that must be integrated on three
specific dates.  The ATC also specified clearly that the products integrated during each stage must
include products from the four groups identified in Article 2.  But, otherwise, the ATC left the choice
entirely to the importing Member as to which textile and clothing products, restrained or notrestrained, were to be integrated at any given stage during the transition period, or left to be integrated
at the end of the transition period.  He further noted that the second key element was the growth-on-
growth provisions for those products remaining under restraint during the transition period. These
provisions clearly specified the increases in growth rates over those which had prevailed in the pre-
ATC era, to facilitate the opening of domestic markets.  In conducting their review, it would becritically important for Members to remember the central and integral role that these two elements
were playing in the overall integration process when assessing the implementation of the ATC.
25. The representative of Canada added that ther e were other important provisions that would
need to be covered by this review, including provisions for small suppliers, cotton producers,
safeguards, circumvention, and market access under Article 7.  He also highlighted a number ofgeneral points regarding Canada's implementation.  Fi rst, Canada remained committed to the full and
faithful implementation of the ATC.   Second, Canada was meeting its obligations under the transition
periods of the Agreement.  Indeed, it had gone beyond the strict terms of the ATC in a number of
areas.  It had made technical corrections where ne cessary, and not just by doing the minimum but also
by going beyond what was strictly required.  Third, Canada's implementation of the Agreement andG/C/M/52
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the consequential domestic industrial adjustment were fully on track.  This was a result of a
combination of integration process and growth-on- growth provisions.  While total imports since 1994
had increased by 41%, imports from developing  countries had grown by 79% during the 1995-2000
period.  This despite the fact that the Canadian market had grown by 11% during the same six-year
period.  Developing countries now occupied 47% of the Canadian market up from 31% in 1994.  Oneimmediate result had been the need of the Canadian textiles and clothing industry to adjust
significantly. In the mid 1970's, the Canadian market was essentially supplied by the domestic
producers and the domestic industry employed over 350,000 workers.  Now the sector employed
under 150,000 workers, maintained less than 50% of its own domestic market and had become
increasingly reliant on export markets.  These facts provided the appropriate context for viewing what
was happening under the Agreement.
26. The representative of Guatemala endorsed the remarks and the paper provided by Uruguay on
behalf of the ITCB members.  For Guatemala, the second major review was an excellent opportunity
to evaluate Members' experiences in the implementation of the Agreement and to consider progress
made in relation to its objectives.  The textiles and clothing industries in Guatemala had become
among the most important sectors and they continued to advance.  These sectors in Guatemala had
approximately 100,000 workers distributed over 250 industries which were producing goods and
services related to the textiles and clothing sector.  These sectors were dependant on the opening of
other markets, without the existence of any restrictio ns, particularly in North America.  The growth of
this sector was being affected by increasing restrictions, among them were quotas, the complicated
systems of rules of origin, the excessive customs and administrative procedures, and unjustified
safeguard measures.  It was considered that the objective of the ATC was a gradual and orderlyliberalisation of the textiles and clothing sector through the integration into normal GATT rules.  It
was important to respect fair trade and the principles of market access and non-discrimination
expressed in Article 7 of the ATC, which promoted the enhancement of market access for textile and
clothing products by such measures as the reduction and binding of tariffs, the reduction or
elimination of non-tariff measures and the easing of Customs administrative procedures.  This Articlealso aimed at guaranteeing the implementation of fair trade policies in relation to anti-dumping
procedures, subsidies and countervailing measures a nd the protection of intellectual property rights.  It
was confident that the Council would carry out a fair review of the balance of rights and obligations
under the ATC, as reflected in Article 8.12, according to which the CTG would take, by consensus,
the necessary decisions with a view to ensuring that the balance of rights and obligations as contained
in the ATC was not impaired.  It was important that the CTG conducts the review in a pragmatic and
simple way, in order to allow the participation of all Members and the adoption of concreteconclusions.  He also stressed the point raised by Mexico, that he did not know under which mandate
the TMB could make reference to regional initiatives and arrangements, as stated in paragraph 708 of
its report.  The ATC did not contain any provision to deal with regional initiatives and arrangements
as these were covered by the provisions of the WTO Agreement and other corresponding multilateral
trade agreements.  He also noted his concern about paragraph 709 wherein the TMB maderecommendations to the Council which should not be taken into account in the major review.
27. The representative of the Philippines, speaking on behalf of the ASEAN Members of the
WTO, expressed appreciation for the TMB's comprehensive report, and to the ITCB members for the
documentation.  He noted that there had been several areas of implementation wherein either the
obligations had not been properly complied with or the implementation of particular elements of theAgreement had given rise to adverse effects on the access rights of exporting countries.  Therefore, it
was essential that the CTG adopt an appropriate decision to redress imbalances and facilitate the
smooth integration in the final stage of this sector.
28. He offered some preliminary comments on the matter of integration.  It was apparent that few
quotas of prime interest to exporting Members had been phased out.  The products selected forintegration had been either on the less value-added range of products or those which were not under
quota restrictions.  He noted that the TMB had also remarked that although the Stage 3 integrationG/C/M/52
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programs consisted of a relatively higher share of clothing compared to the earlier stages, it would
appear that this would not bring about any qualitative changes overall and that in all probability the
products integrated during Stage 3, in value terms, would account for less than 51% of 1990 imports.
Notwithstanding the argument about whether, in technical terms, the obligations under the ATC had
been fulfilled, the fact remained that the process had not been progressive, raising genuine concernsabout the attainment of the advantages that had been expected by the developing Members.
29. The representative of the Philippines considered that the implementation of the ATC had not
lived up to developing countries' expectations.  In several instances, the restraining countries had
failed to carry out their obligations under the Agreement.  In some others, the implementation had not
been in accordance with the purpose and objectives of the Agreement.  In still others, the access due
under the Agreement had been disrupted or otherwise impeded.  Thus, he felt that it was essential that
the CTG take necessary decisions to ensure that the balance of rights and obligations under theAgreement was restored and that no further impairment was caused to the rights of the exporting
countries.
30. The representative of Japan also appreciated the comprehensive report of the TMB.  He
regarded the major review as an important point in the course of implementation of the ATC when
Members should reaffirm their commitment to th e full and faithful implementation of the ATC.
31. The representative of Bangladesh said that the textiles and clothing sector had emerged as an
important component in his country's economy over th e last two decades.  It now occupied a central
position in terms of employment generation, efforts to eradicate poverty, promoting gender equity and
empowering women.  In fact, this sector occupied a central position in Bangladesh's drive to use trade
as an engine of growth and development, and of he lping Bangladesh to integr ate into the multilateral
trading regime.  The textiles and clothing sector had emerged as the single most important contributor
to its exports, more than 75% of its total export earnings.  The fact that it was using imported raw
materials meant that their imports had also risen correspondingly with its exports.  The developed
country Members, which remained the destination for most of Bangladesh's textile and clothing
exports, played a crucial role in the performance of its export sector.
32. He observed that the second major review provided an opportunity to monitor the proper and
timely implementation of the ATC.  He accepted that  the integration process in the first two stages
had been carried out more or less in accordance with the agreed criteria set out in Articles 2.6 and
2.8(a) of the ATC.  In this regard he stressed that, while the letter of the law might have been
followed, Members should be asking themselves if its intent had been achieved. Many countries, like
Bangladesh, felt strongly that integration could have been done in a manner so as to ensure the
progressive phasing out of the MFA quotas.  Had that been done, it would have facilitated theintegration of the textiles sector with the needs of the global marketplace.  He commented that
through the dark clouds, it also noticed some silver linings. In this respect, he noted with satisfaction
Canada's third stage of integration, withdrawing a number of restrictions imposed on imports from
Members, including Bangladesh.
33. In addition to the integration process, the representative of Bangladesh said that the ATC
contained important provisions for small suppliers and least-developed countries. These provisions
required the advancement of one stage in the gr owth rates for small suppliers and, to the extent
possible, for least-developed countries. He observed that these provisions in favour of small suppliers
had not been implemented in the full spirit of the relevant provisions of the ATC.  The facilities to be
extended to the least-developed countries had been totally ignored by quota maintaining countries.Many might regard these as best endeavour clauses, but Bangladesh had hoped that these provisions
in the Agreement would have been given due consideration and would have been applied. The
confidence of countries, such as his, was b ecoming weakened when they found that the ATC
provisions, whether legally binding or best endeavour, were not applied. Consequently, theseG/C/M/52
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provisions had become meaningless for them, and had a negative bearing on the equity of the
Agreement, when viewed from the perspectives of the least-developed countries.
34. He also commented on the practice of imposing anti-dumping duties on items already under
quota.  This had a negative effect on market access.  For example, in a particular case, it was found
that exports from Bangladesh to the market that had applied the anti-dumping duty had been seriouslyaffected.  In some cases, the quota utilisation had declined sharply.  It hoped the CTG would take into
account such negative impact of anti-dumping duties in its review.  It also hoped that the second
major review of the implementation of the ATC would take into account the non-application of
certain provisions in favour of least-developed countries. Bangladesh hoped that the Council would
take appropriate measures to help countries like his, which were contributing such a small share to
total world trade.
The Integration Process and Other Related Issues (Article 2)
35. The Chairman then proposed that the Counci l turn to the first group of subjects, the
integration process and other related issues.  This group of subjects related to the implementation of
the provisions of Article 2 of the ATC.  On the basis of the informal discussions, it had been agreed
that there were 7 major items under this subject-matter.  Accordingly, he invited comments on the
first tiret:  Integration Programmes of Members.   As set out in Article 2.8(a) of the ATC, Memberswere required at the beginning of Stage 2 to integrate not less than 17% of the volume of their 1990
imports of the products in the Annex, encompassing  products from four groups:  tops and yarns,
fabrics, made-up textile products and clothing.
(i) Integration Programmes of Members
36. The representative of Uruguay recalled a comment by another delegation that the ATC was
aimed at integration and, as a consequence of that, by the end of the 10-year transition, the
quantitative restrictions would disappear.  For developing countries, however, the main point of the
ATC was actually the elimination of the quotas, which were the main tools that they considered to be
in violation of the GATT, though accepted under the MFA.  Undoubtedly, integration was one of the
central points of the whole implementation process and the report of the TMB showed that, because it
dedicated 52 pages to this question.  In the ITCB members' document, the members had presented an
analysis of the integration programmes of the restraining countries, in paragraphs 18 to 28.  Like the
ITCB members, the TMB also concluded, in paragraph 677 of the report, that over the entire 10-year
transitional period the restraining Members were phasing out only a few quota restrictions and the
large bulk would still remain in place.  In this co ntext, looking at the tables provided to the Council,
the first one showed how this process had advanced and it was clear that the quotas left to be
liberalized at the end of the process were, in fact, the large majority of them.
37. He said that little progress could be shown by the restraining Members towards the attainment
of what ITCB members considered the central objective of the ATC, the phasing out of the quota
restrictions.  It had been argued that, technically, the requirements for integration had been met.  This
may be true, but the question remained if the integration process could be reduced to a mere
technicality.  The Appellate Body had, in a series of dispute settlement cases, shown that, inaccordance with the Vienna Convention on the Law of Treaties, a treaty must be interpreted in good
faith and in accordance with the ordinary meaning of the terms of the treaty in their context.  Also, the
treaty should be interpreted in the light of its object and purpose.  Therefore, relegating the ATC's
concept of integration to a technical approach seemed  rather limited.  It was essential to review the
implementation of the integration programmes in the context of the terms used in the ATC, as well as
in light of the object and purpose of the ATC.  According to the Vienna Convention, the context of a
treaty included its Preamble in addition to its text.  Therefore, in connection with the context of
integration under the ATC, reference should be made to the second preambular paragraph of the
Agreement, which stated as follows:  "Recalling  also that in the April 1999 Decision of the TradeG/C/M/52
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Negotiations Committee it was agreed that the process of integration should commence following the
conclusion of the Uruguay Round of Multilateral Trade Negotiations and should be progressive in
character;".  The relevant language in the April 1989 Decision was that:  "Modalities for the process
of integration into GATT should, inter alia , cover the phasing out of restrictions under the Multi-Fibre
Arrangement and other restrictions on textiles and clothing non consistent with GATT rules anddisciplines …".  It was clear, therefore, that the context of integration under the ATC was the prior
existence of restrictions under the MFA and any other restrictions on textile and clothing products that
were not consistent with GATT rules and disciplines.
38. The representative of Uruguay went on to say that it was also obvious that the object of
integration was the elimination of those restrictions and the purpose was their progressive phasing out.
Looking at the process of integration merely in technical terms or only with reference to the
mechanics of integration, he believed, was not valid.  Consequently, the review of the integrationprocess should focus on whether there had been credible and visible progress towards the meaningful
phasing out of the MFA quotas.  Also, as pointed out in the ITCB members' paper, Article 1.5 of the
ATC provided that, in order to facilitate the integration of the sector into GATT, Members should
allow for continuous industrial adjustment and incr eased competition in their markets.  At the very
least, it meant that the integration process should not be hampered or impeded in any manner.
39. He observed that, reviewing the integration programmes of the restraining Members, it was
evident that little progress could be shown.  As pointed out earlier, the large bulk of quotas still
remained in place.  Looking at the integration programmes from a different perspective, only 20% to
21% of the products that had been specifically restrained by quotas would be integrated, which was
rather less than the 51% shown from a purely technica l point of view.  There were calculations in that
sense in Table 2 of the ITCB members' paper.  Looking at it from another angle, the spread of
integration programmes showed that the restraining Members had concentrated these programmes in
low value-added yarns, fabrics and made-ups, very few clothing items, and that was clear in Table 3.
When reviewed in its context, the programmes of  the restraining Members seemed, not to have been
consistent with the object and purpose of integration.  Indeed, by having followed a declared policy ofleaving the integration of sensitive products until the end of the 10-year period and keeping quotas as
a bargaining chip for additional market access in third countries, the importing countries had tended to
impede the realization of the objective of the gradual and progressive phasing out of quotas.
40. He commented that, even in a formalistic or technical sense, Canada and the EC, had not
fulfilled the minimum requirements.  This was ap parent, from paragraphs 78 and 82 of the TMB's
report, in the case of Canada, and paragraph 35 of the report in the case of the EC.  It was also
pertinent to recall that both at the Singapore Ministerial Conference and in the conclusions of the firstmajor review of the implementation of the ATC, it had been stressed that the implementation process
should ensure effective transition to GATT 1994 by way of integration, which was, at the same time,
progressive in character.  To conclude, he said that the integration programmes should not be
reviewed in the abstract, but in accordance with the context of the term "integration".  The integration
programmes should also be evaluated in light of the object and purpose of the ATC, including itsrequirement that the process be gradual and progressive.  Reviewing the process in accordance with
the above, one could not escape the conclusion that the restraining Members had failed to fulfil their
obligations completely, denying developing, exporting Members the benefits they had expected under
the ATC.
41. The representative of India strongly endorsed the views expressed by Uruguay on behalf of
the ITCB members.  He said that he would like to address what this major review should really
recommend.  In the past, developing countries had argued that the integration programmes of the
developed countries had not been commercially meaningful;  that message did not seem to have had
any effect.  This time they would argue facts, figures and tables taken from import statistics, which
could not be disputed.  Using the tables in the ITCB members' document, it would be easy to come tothe conclusion that, for example, commercially meaningful products had not been included, not evenG/C/M/52
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in Stage 3.  The situation for the US was that out of 757 quotas, 701 remained.  From the tables, the
facts and figures showed that many quotas were in place, and that was the indictment of the
integration process to date.
42. He then referred to Articles 2.10 and 2.15, wherein Members were encouraged to use these
provisions.  Taking stock of how many Members ha d applied these provisions, he asked if the Council
was going to repeat the same word "encourage" in the present review.  It was not possible to continue
to say throughout seven years that Members were encouraged to take recourse to Articles 2.10 and
2.15, if no Member had really responded to this encouragement.  Going one step further, it would be
necessary to draft some language that was much stronger than just encouraging Members to have
recourse to Articles 2.10 and 2.15.  In this regard, the TMB's report could be of assistance;  the
Council must refine the language, make it stronger and negotiate it if some trading partners had some
concerns.  He referred to paragraph 682 and the TMB's recommendation which said that in futurenotifications, pursuant to Article 2.15, relevant info rmation should be provided;  however, in his view,
the Council should negotiate some language making it obligatory that in future notifications, the
Members making notifications under Article 2.15 should indicate what consideration had been given
to the treatment of exports of the same products from other Members.
43. The representative of India also referred to Canada's decision to keep the level of the
remaining restraints unchanged in cases of partial integration.  He urged the US and the EC to do
likewise.  He referred to the provision in Article 4, which said that if a product which constituted only
part of a restriction were to be notified for integration, any adjustment in the level of respective
restrictions should not upset the balance of the rights and obligations between the Members
concerned.  The report of the major review should take note of what the US, the EC and Canada hadsaid, that was, they were fully committed to the full and timely implementation of the ATC.  This was
an important and welcome statement.  Also, the report needed to include something from the first
major review concerning the lack of commercially meaningful integration and that it had remained
unchanged.  In sum, the fact remained that the objective of eliminating quota restrictions in a
progressive manner, from the developing countries view, had remained largely unfulfilled.  This issueneeded to be addressed.  He stressed that the ATC was not just about meeting technical requirements;
there was a Preamble, an objective, a balance of rights and obligations and there was a package of
agreements, with the benefits that the ATC was supposed to grant, justifying other agreements that
developing countries had accepted.  He also emphasized that there was a difference between
developed, restraining Members which maintain quantitative restrictions (US, EC and Canada) and
some others for which integration remained notional.  Hence, the report on the major review could not
just be a descriptive one but must have recommendations.
44. The representative of Hong Kong, China noted that the TMB's report had devoted
considerable coverage to reviewing and analysing Members' integration programmes, which reflected
the importance of integration to the full and faithful implementation of the ATC.  Now, well into the
seventh year of the ATC implementation, and knowing the Stage 3 implementation's programmes
notified earlier, the Council had a more or less complete picture of the integration for the entire 10-year transitional period.  He drew attention to the ITCB members' analysis of the integration
programmes of the restraining Members in their paper.  The TMB had also included an analysis in
paragraph 677 of its report.  Focusing on facts and figures, two paths clearly emerged over the entire
10-year transitional period.  First, restraining Members were phasing out only a very small portion of
their quota restrictions.  This was illustrated in the figures in Table 1 of the ITCB members'document.  In the case of the US, 701 quotas out of a total of 757 still remained;  in the case of the
EC, 167 out of a total of 218 and in the case of Canada, 239 out of a total of 295.  In terms of volume,
only about 21% of trade that had actually been under quota restriction had been integrated in the cases
of the US and the EC.  With these figures, it was clear that the discussions on backloading remain
valid.G/C/M/52
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45. He also noted that, of potential significance to trade, the products selected for integration
were concentrated in the less value-added range of products.  Thus, as noted by the TMB, the share of
clothing products integrated during the three successive  integration stages was below 7% of the
volume of total imports in 1990, in the case of Canada, around 6% in the case of the EC, and roughly
6.5% for the United States.  These figures also implied that in all probability, the products integratedduring the three stages would account for less in value terms than when expressed in volume.  To put
the discussion in perspective, he said that the Council should recall the essential objective of the ATC,
which was further liberalization of trade.  The ATC stipulated that the process by which this
liberalization was to be achieved should be progressive.  However, little progress had been achieved
by the restraining Members towards the attainment of the essential objective of the ATC, that was, the
progressive phasing out of quota restrictions.
46. The representative of Hong Kong, China also noted that a further aspect to integration was the
process of industrial adjustment and increased competition in markets, as required under Article 1.5.
The exporting Members had legitimate expectations to be able to see the restraining Members' market
progressively adjusting during this transitional period to ensure the achievement of full integration by
the year 2005.  At the present stage of the ATC implementation, with barely three years to go until
full integration, it would be reasonable for a considerable degree of progressive adjustment to havebeen taken already.  The actual situation, as reflected in the TMB's report was, however, far from
satisfactory.
47. The representative of Korea referred to the assessment provided in the TMB's report on the
performance of the restraining Members.  This highlighted the actions taken by those Members which
had achieved the technical requirements for the in tegration into GATT 1994 for the first two stages of
the transitional period.  He welcomed the TMB's assessment and appreciated the integration
programmes adopted by restraining Members to accomplish the objectives of the ATC.  Looking
more closely, however, he found that most of the integration programmes of the restraining Members
had concentrated in low-valued and non-sensitive items, whereas very few clothing items had been
included in these programmes.  This led him to ask whether the progress achieved in the integrationprocess thus far was commercially meaningful, as had been expected.
48. The representative of Macao, China associated her delegation with the statement by Uruguay,
on behalf of the ITCB Members.  She stressed that the central objective of the ATC was to phase out
the quota restrictions carried over from the former Multifibre Arrangement in a progressive manner
and, thereby, to contribute to the liberalisation of textile and clothing trade. However, seven years of
the implementation period of the ATC had already elapsed and, although the major importing
Members had claimed that they had fulfilled the technical requirements of the ATC, that is, they hadintegrated the required percentages of products in strict legal terms, it was quite clear that the spirit or
the central objective of the Agreement had not yet been achieved.  Bearing in mind the great
significance of textiles and clothing in the world trade, which accounted for about 8% of total world
exports in manufactured products in the year 2000, and the economic benefits that could accrue to
both importing and exporting countries by a gradual liberalisation of this sector, it was regretted thatthis “progressive” requirement had not been observed by the restraining countries.  Thus, the
integration process had contributed little towards realising the fundamental objective of the ATC.
49. She cited some figures from Macao, China’s trade in this sector. The textiles and clothing
industry had long played an important role in the economy, representing over 80% of exports.
Nevertheless, during the first two stages, only seven quotas affecting Macao, China had beeneliminated, which accounted for less than 5% of the items actually under restraint, and, as the
integration had been concentrated in low value-added products, the goods, on which quotas had been
eliminated, represented only 6.8% of textile exports in value terms.  She also noted that it was evident
from the programmes for the third stage of integration that the Members concerned would leave a
substantial number of quota restrictions in place until 2005.  In order to facilitate the objective of theintegration of the textile and clothing sector into GATT 1994, she called on the Members concernedG/C/M/52
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to seriously consider making use of existing ATC provisions, such as Article 2.10 (advanced
integration) and 2.15 (early elimination of quantitative restrictions), during the implementation of the
third stage of the integration process.
50. The representative of Indonesia expressed appreciation for the report of the TMB and for the
documents provided by the ITCB members.  He commented that, after seven years of implementation,
it was only natural to expect that substantive progress would have been achieved in relation to its
objective, which was to gradually phase out the quota restrictions.  The integration process was a
central pillar of the ATC.  In assessing progress in the integration process, it was important to keep in
view the purpose of integration under the Agreement, which was to secure the phasing out of quota
restriction in a progressive manner.  This followed from the Preamble of the Agreement, as well as
from Article 1.5.  Looking at the actual experience, however, it was apparent that very few quotas had
been phased out.  The products selected for integration had been either a less value-added range orthose which were not under quota restrictions.  The TMB had also remarked that, although the Stage 3
integration programmes consisted of a relatively higher share of clothing, compared to the earlier
stages, it would appear that this would not bring about any major qualitative changes overall.
Notwithstanding the argument about whether the obligations under the ATC had been fulfilled in
technical terms, the fact remained that the process had not been progressive, raising genuine concernsabout the advantages that had been expected by the developing country Members had not
materialized.  For these reasons, he believed that the implementation of the ATC had not lived up to
developing countries' expectations.  In several instances, the restricting countries had failed to carry
out their obligations under the Agreement.  In some others, the implementation had not been in
accordance with the purpose and objective of the Agreement.  In still others, the quota access dueunder the Agreement had been disrupted or otherwise impeded.  Thus, he felt that it was essential that
the CTG take necessary decisions to ensure that the balance of the Agreement was restored and that
no further impairment was caused to the rights of exporting countries.
51. The representative of Canada considered a positive note that all of the quantitative restrictions
that were not legal under normal GATT rules would be eliminated by 1 January 2005, which should
be reflected in the CTG's report.  That was a commitment by all Members.  The differences of view
concerned the transition period.  For the exporters, the requirement was the elimination, as fast as
possible, of quantitative restrictions.  For Canada, the transition was a 10-year period, to allow the
industry to adjust.  That involved two inter-linke d parts, first, integration whereby products came
under GATT 1994 rules, and as part of that, there could be some quota elimination and secondly, the
growth-on-growth rates.  That, in the view of Ca nada, was what the transition period was about.  It
was to allow for industry to adjust.  Concerning Article 2.15, as paragraph 266 of the TMB's reportshowed, Canada did take some actions under Article 2.15 on 1 January 1998.  He agreed that not all
of the concerned quotas had been fully eliminated but that some products had been removed from
quotas.  Canada had also used Article 2.15 to eliminate quotas on tailored-collar shirts in mid-1997.
He said that Canada would also be eliminating more quotas on 1 January 2002 under the third stage of
integration and where quotas had been partially eliminated, the quota levels would not be reducedeven though this was allowed under Article 2 of the ATC.  He said that his delegation would not
dispute the fact that there were going to be a number of quotas left until the end of the transition.
However, it had been indicated right from the beginning, that Canada was going to follow the
transition process as dictated by the Agreement with regard to the combination of integration and
growth-on-growth.  It would be im portant to link these two together in the process of opening the
market.  The growth-on-growth provisions did, cumulatively, over time, result in increases in the
market access of those products under quotas.  He said that Members had to bear in mind what was
happening in the import markets.  Imports from developing countries had gone up by 79%, despite the
fact that the Canadian market had only grown by 11% since 1994.  Imports under restraint had gone
up four times the growth of the domestic market.  Imports from developing countries currentlyoccupied 47% of the market whereas domestic producers held less than 31%.  He stressed that it was
important that the report reflect that things had been happening.  As regards industrial adjustment,
there were a lot less people working in Canada in the textiles and clothing sector and a lot fewerG/C/M/52
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firms, thus, the industry had adjusted in the transition period, making the necessary adjustments in
order to be ready for the full integration of this sector by 1 January 2005.
52. The representative of the United States referred to the ITCB members' paper and considered
that it proceeded from an incorrect premise when it  quoted the use of the term "integration" in Article
1 in relation to its use in Article 2.  The word "in tegration" first appeared in the ATC in the first
preambular paragraph but this clearly had no relation to "integration" in the sense used in Article 2.
The use of the word "integration" in the second preambular paragraph and in Article 1.5, was in the
same sense as in the first preambular paragraph, not as in the sense of Article 2.  The provisions of
Article 2 are quite specific and self-contained and it was these provisions that the US had met in their
entirety.
53. He also said that the ITCB members had raised the issue of continuous autonomous industrial
adjustment in the context of the integration programmes.  The US had allowed for continuousadjustment and increased competition in its market, as demonstrated by the shrinking clothing sector
and rapidly increasing imports.  The fact that the US had announced in 1995 the composition of the
integration programme for the life of the ATC should have been seen as a useful element of
transparency.  He noted that the only specific requirement about notification of integration
programmes was contained in paragraph 2.11, which stated that the notifications should be made atlast 12 months in advance of implementation.  There was no restriction on notifying even further in
advance than this.
54. The representative of the United States then referred to the statement of Uruguay concerning
the objective and purpose of the ATC which he considered to be a fairly legalistic interpretation of the
kind used in a dispute settlement process.  This was not a very instructive way to proceed.  Rather, amore useful approach would be to consider what Members had expected at the time the negotiation of
this Agreement was completed and what they did not get.  On this basis, actions would need to be
taken in order to correct this failure to meet legitimate expectations, which was a more political
approach and was more the province of this kind of review.  He disagreed with the interpretation that
India had put forward, having a different recollection of the negotiating history.  He recalled threeheavily negotiated variables in this Agreement, which had to be solved in order to strike an overall
balance. There was the question of what would be the rates of accelerated growth, that would be
applied for the life of the Agreement.  On the te rms of the Agreement, the US had taken the position
that the phasing out should occur over a period of 15 years.  The third heavily negotiated element was
the question of what was to be the size of the Annex to the Agreement, i.e. what was the universe of
products that would be subject to the integration process in Article 2.  A deal was struck with respect
to these three elements. The US accepted a shorter agreement term of 10 years plus faster growth ratesand in return, that the Annex should not be restricted to simply restrained products, but unrestrained
products as well.  Because this Agreement was so heavily negotiated and discussed, everyone had
understood the implications of what the size of the Annex would be.
55. He considered that the provisions of Article 2 of the ATC were very clear, very mechanical
and the idea that in addition to this extremely clear set of responsibilities with respect to integration,that there was a further set of responsibilities with respect to integration that had been accepted by the
importing countries, he did not believe to be borne out by what had been agreed at the time.  While
some Members might have concerns with the situation, and argue that further elimination of quotas
would result in further increases of trade before the expiry of the ATC, that was not what had been
agreed and, based on the negotiating history, a serious argument could not be put forward that thiswas not understood at the time.
56. The representative of Canada recalled the reference in the ITCB members' paper to a
technical correction made by Canada.  He agreed that a technical error had been made, which it had
not realized.  However, once Canada had realized that a technical error had been made, it had quickly
acted to resolve it.  The ITCB members' paper left the impression that Canada had made adjustmentsG/C/M/52
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solely by shifting products from the first stage of integration;  however, this was wrong.  As notified
to the TMB, Canada had corrected the error by, first, adding new products to the third stage of
integration.  Second, it shifted certain other products from Stage 3 to Stage 2.  Those shifted products,
plus the additions made for the third stage, meant that Canada had met the minimum levels required
for both the second and third stages.  The shift from the first stage to the second stage had been madebecause of the approach that Canada was not simply doing the minimum that was required, but had
restored what it actually had integrated in terms of the levels of integration in the first two stages.  In
the second stage, Canada had integrated products significantly above the required level, while in the
first stage, it had integrated only slightly over the required level.  He concluded that the ITCB
members' paper was wrong in suggesting that all Canada did was to shift to one stage from another.
57. The spokesman for the European Communities said that he did not agree that the ITCB
members' view of integration in a restrictive manner was either correct or the only way of looking at
the Agreement;  the ATC made it clear this was not the case.  He noted that Article 7 was also part of
the integration process, which led back to the first indent in this subject group which referred to the
eventual integration of this sector into GAT T on the basis of strengthened GATT rules and
disciplines, thereby also contributing to the objectiv e of further liberalization of trade.  The report of
the TMB was quite clear, the requirements had been met, and he considered that integration was ontrack.  Concerning the ITCB members' comments  that the EC's own integration schedules had not
fulfilled its obligations concerning the first stage of integration, he recalled that the ITCB members
had raised a complaint in the TMB, which had ex amined this situation in full, and the EC had
complied with what the TMB had recommended.  Thereafter, the TMB had concluded that the EC
was in full legal compliance with its obligations.  This was reflected in the TMB report, where it says"whenever problems were encountered in ensuring that the volume of imports integrated
corresponded fully to the products description in the Annex to the ATC, the necessary technical
corrections were made and implemented by the EC".  The TMB had also confirmed that the
requirements for the 2
nd and 3rd stages had been met.  As the TMB had made clear, the choice of
products was left entirely to Members and for the 3rd stage of integration, the EC had included 37
quotas with existing WTO Members and these included clothing categories such as anoraks, pyjamas,
night dresses, women's skirts, baby clothes and truck suits.  In addition, a considerable number of
these quotas were quite heavily used by the EC's exporting partners.  In response to comments about
partial integration, the EC had integrated full categories of products in a completely transparent way,
as indicated in paragraph 104 of the TMB report.  Also, growth-on-growth would apply during the 3rd
stage with considerably larger year-on-year amounts.  Overall, the EC's integration programme was
not devoid of economic content and only related to low-value products.   As repeatedly confirmed, theEC had fulfilled its obligations in terms of integration and was committed to further liberalization;  it
had extended an offer in terms of discussions to go beyond those obligations if possible, though this
was not in any way making integration conditional on concessions in any form.
58. The representative of Australia noted that it had fully integrated their textiles and clothing
trade into GATT 1994.  He sought clarification on a point raised earlier.  He had heard the suggestion
from some Members that the Council should focus its attention on what the review should do,
recommend or decide, such as the suggestion with respect to future notifications, that additional
information should be obligatory.  Other speakers had commented on differences in the interpretation
of the Agreement, both in terms of letter and spirit, while some others had recalled previous
negotiation of aims, outcomes and expectations which were different from other Members. Also,reference had been made to the requirements of the Vienna Convention on the Law of Treaties in the
interpretation of the Agreement.  With all this in mind, he asked if Members expected, as a result of
this review, that the Council would come to an agreed interpretation of the requirements of the
Agreement or that it would review the actions undertaken with respect to the Agreement and report
thereon.
59. The representative of India offered an opinion on this question, stating that the actions taken
by the developed countries had to be evaluated against a backdrop.  Some of this had to do with theG/C/M/52
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collective interpretation of the Agreement where there might be a difference of views.  One aspect
was that nobody had disputed the facts and figures that had been put forward;  this had nothing to do
with interpretation.  No matter what the interpretatio n of the specific provisions of the ATC was, the
bulk of quotas remained in place, and products which had actual trade value were yet to be integrated;
these facts could not be disputed.
60. The representative of Pakistan stressed the importance of the major review for most
developing countries, particularly those with an interest in textile and clothing exports.  The central
element of the ATC was the mechanism through which Members would secure the integration of this
sector into GATT rules.  Furthermore, the preambular language of the ATC spoke explicitly of the
progressive character of the integration.  The context of this integration process was the quantitative
restrictions maintained prior to the ATC and the removal of those quantitative restrictions in a
progressive manner so as to bring the sector into the normal GATT 1994 rules.  The progressivenature of the implementation of the integration process had not been evident from the integration
programmes submitted by the restraining countries and as shown in the TMB's report.  Even after the
implementation of stage three, 701 quotas out of a total of 757 in the case of a major trading partner
would still remain, as would around 164 out of a total of 219 in the case of another major trading
partner. In the view of Pakistan, the implementation of the integration programmes had been only of apro forma nature, just to fulfil the technical requirements of the ATC.  In this regard, he insisted that,
while conducting this comprehensive review, the CTG should look at the objective of the ATC and
the integration programmes should be analysed in the context of this objective which, from his point
of view, had not been met by the integration programmes.  The actual implementation of these
programmes had not come up to the requirements of the ATC, though it might have met the technicalrequirements.  The CTG should make an assessment and pronounce accordingly on this issue.
(ii) Increases in the Rates of Quota Growth
61. The Chairman proposed that the Council take up the second tiret, namely, increases in the
rates of quota growth.  He recalled that, under Article 2.14, Members were required in the
second stage to increase the rates of annual growth of the remaining restrictions by a factor of 25%.
62. The representative of  Uruguay noted that the TMB report, in paragraph 244, recognized that
"the ATC is intended to permit a progressive transition from an initial situation of a wide network of
trade restrictions to one in which solely the rules and disciplines of GATT 1994 apply.  This involves
the elimination of all restrictions maintained under the MFA …".  Therefore, although the ATC had
provided for increases in the growth rates of quotas during the transitional period, such increases
could not substitute for the integration of relevant products.  In the first major review, the importing
countries had asserted that, as a result of quota growth rates under the ATC, quotas would no longerremain true restraints.  The actual experience with implementation of the ATC had, however, proved
otherwise.  For one thing, the qu ota growth rates had not provided significant increases in access,
certainly not in line with the growth in demand or Members' expectations.  This was evidenced by the
fact that the number of quotas in which actual trade had exceeded the quota ceilings had not declined
very significantly.  He said that Table 7 in document G/C/W/325 covered that issue.  As to thearguments that quota growth rates had increased the access for developing countries substantially, the
ITCB members believed that, on the basis of average pre-ATC growth rates, the average addition in
access during the first two stages of the ATC implementation had amounted to only 0.73% per year in
the EC, 1.03% in the US, and 1.22% in Canada – this was covered in Table 5 of the above document.
This had been so because the average pre-ATC growth rates were far less than 6%, contrary to whathad been claimed by the restraining countries.  Even  including the growth rates of 6% or higher, the
fact was that the average pre-ATC rates were 3.44% in the EC, 4.61% in the US and 5.26% in
Canada;  hence, the small yearly additions in overall access.  As the TMB had stated in its report,
increases in access could not be viewed as a substitute for full and effective integration of the products
concerned.  It was also evident that the quotas still continued to have an impact.G/C/M/52
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63. The representative of Canada agreed with the comment of Uruguay that the growth rates were
not a substitute for integration – the transition period under the ATC had two components that worked
hand-in-hand.  One component was integration and through this process quotas were eliminated either
fully or partially and there had been increased market access.  The second component was the increase
in growth rates.  He said that there were growth  rates under the MFA prior to the introduction of the
ATC and, therefore, it would not be appropriate to claim that the present growth rates were the result
of the ATC.  Under the ATC, however, those grow th rates had been augmented, expanding the market
access possibilities.  He recalled that, during the first review, the exporting Members had pointed to
the fact that the increases in the quota levels associated with the growth provisions were "marginal" or
"minuscule".  He repeated the point made at that time, that what mattered was the cumulative effect
over time.  Even with a 6% growth rate, which was the case of Canada for most of its growth rates,
and even if the weighted average of 5.26% were correct, it had to be recognized that, in some cases,countries had been given large amounts "up front" in return for lower growth rates.  In Canada,
however, the most common growth rate was 6%.
64. He further noted that, in terms of the cumulative effect, without the ATC, starting with a
quota of 1,000 units in 1994 and applying 6% growth through the entire period, the level for 2002
would be 1,594, a 59% increase.  With the growth -on-growth, that quota would be 1,898 units,
effectively about a 19% higher quota level and this increases would continue through the end of the
transitional period.  It was because of this fact that Canada, in an earlier intervention, had focused on
the fact that imports from developing countries , including those under restraint were growing
significantly;  and this, against the context of a slowly growing market.  Market growth in Canada for
the last five years had averaged less than 1.5% per year – overall about 11% since of the beginning ofthe ATC.  He concluded that growth rate increases had been an integral part of the adjustment process
and had contributed to adjustment in the Canadian market, an element of the overall transitional
process of the ATC.  In sum, it was necessary to see growth-on-growth in the context of all other
aspects of the ATC, including industrial adjustment.  Regarding the comment that quotas continued to
bite, he said that the object of the quotas was to limit the level of imports.  Therefore, to say that thegrowth-on-growth provisions had not worked because certain quotas continued to bite, was not a
logical argument.  What the growth-on-growth provisions did was to raise the level before which the
quotas started to bite, and to allow increases in imports over and above what had been permissible
beforehand.
65. The representative of India observed that it was true that if there were problems with any
major trading partner, the concerned Members could take them to dispute settlement.  It was
available, but he considered that the point the ITCB members were trying to make was that there wasa fundamental obligation to oversee the implementation of this Agreement, and in the light of the
review the CTG was authorized by Article 8.12 of the ATC to take such decisions as it deems
appropriate, to ensure that the balance of rights and obligations embodied in this Agreement was not
being impaired.  His contention was that the balance of rights and obligations had been impaired and
the ITCB members were requesting the CTG to take the decisions that they thought it should betaking under the various agenda items.  This was in response to an earlier comment by the US.  He did
not believe that it was helpful to talk of the negotiating history.  He did agree with other people who
had said that there might be different interpretations of the same agreement.  This was not necessarily
confined to the ATC.  He did not consider that the aim of the exercise was to arrive at a common
agreed interpretation.  But the main point of concern was that Members could not avoid theresponsibility that the CTG had to take decisions as it deemed appropriate, to ensure that the balance
of rights and obligations was not being impaired.  And when a group of countries say the balance was
being impaired, at the very least the other side had to rebut that notion.
66. The representative of India supported the statement of Uruguay and stressed that quota
growth was not a substitute for integration.  He also  pointed to the fact, as shown in Table 7 of the
ITCB members' paper, that quotas continued to bite.  He illustrated this with India's experience in the
US market.  Between 1990 and 1994, the pre-ATC period, the growth rate in value terms hadG/C/M/52
Page 17
been 17.67%.  In the period 1994 to 2000, the post-ATC period, the annual growth rate was 10.32%.
In effect, India's annual growth rate had actua lly slowed as compared to the pre-ATC period.
Similarly, for the EC, the figures were worse, which might have to do with other factors, but from
1990 to 1994, India's exports to the EC in value terms had grown at 11% annually.  For the period
1995 to 2000, there had been a reduction by –0.8% annually.  These figures spoke for themselvesregarding the growth-on-growth provisions of the AT C.  They belied the expectations that developing
countries had from this Agreement.  What developing countries were expecting was real benefits from
the annual growth rates.
67. The spokesman for the European Communities noted that the provisions for growth-on-
growth were an inherent part of the process leading to full integration of the sector into GATT 1994
on 1 January 2005.  He concurred that the growth rate increases were not a substitute for integration,
the two being mutually exclusive.  However, sin ce the Agreement foresaw that up to nearly 50% of
products would be integrated only at the end, they were clearly part of a process designed to facilitate
a smooth transition.  Concerning the tables provided by the ITCB members, he noted from Table 7
that the number of quotas in which imports exceeded quota ceilings appeared to have declined from
41 to 32 over a one-year period.  He questioned, therefore, if this indicated that growth-on-growth was
operating or not as it was the reverse for the other WTO Member in Table 7.  Referring to the ITCBmembers' contention that these provisions had not reduced the restrictive effects of the quotas, he
observed that the value of the share of goods imported into the EC market under quota had increased
in the context of an overall growing market.  Also, looking at the table in paragraph 330 of the TMB's
report, a growth rate of 3% at the outset of the Agreement would be 5.52% in the third stage, which
was a cumulative year-on-year increase of an additional 2.52%.  Overall, it was the view of the ECthat the growth-on-growth provisions were contributing positively to the transition process.
68. The representative of the United States commented on the paper provided by the ITCB
members pointing to its statement that the average growth rate for US textile quotas was in the order
of 4.5%.  He said that this figure obscured the fact that Members could basically be grouped into
categories.  Some of these had very large quotas;  they were the relatively high income exportingcountries where basically it had been agreed in the bilateral agreements to have relatively large quotas
in exchange for relatively low growth rates.  That  reduces the overall average.  For the great majority
of countries under restraint in the US, the growth rate for categories was 6% or more, so if the
accelerated growth were to be calculated on these relatively higher rates for most countries, there
would be a substantially greater effect.  Therefore, the average figure alone obscures the experience
that most countries under restraint have had, at least with respect to the US.  He also considered that
there was a continuing effort to show that the growth-on-growth figures were basically meaningless.He emphasized that it was never expected at the time the Agreement was being negotiated that the
growth-on-growth provisions, themselves, would accomplish the objective of the ATC, namely the
smooth reintegration of textiles into GATT 1994 by the end of 2004.  The original growth rates that
were used as the base, on top of which the growth-on-growth factors were added, were an important
element.  The United States' expectation, when th is Agreement was negotiated, was that over a ten-
year period, the process would reach a point at the end of the ten years that this reintegration could
occur in a smooth fashion and the growth rates pl us growth-on-growth factors were the mechanisms
that, for the most part, was designed to accomplish that.
(iii) Article 2.1 – Notifying Quantitative Restrictions
Article 2.4 – No New Restrictions Except under the ATC or GATT 1994
69. The Chairman raised the next subject, Article 2.1 - Notifying Quantitative Restrictions.  He
noted that Article 2.1 required that, as the starting-point for the transitional process, Members
maintaining MFA quantitative restrictions shall notify all such measures in place the day before the
ATC came into effect.  There was no discussion on this provision.  He then moved to the next subject,Article 2.4, which provided that no new restrictions shall be introduced except under the provisions of
the ATC or GATT 1994.G/C/M/52
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70. The representative of Uruguay stated that there had been two cases in which ITCB members
believed that the obligations under Article 2.4 had not been lived up to.  In one case, in the context of
implementing a customs union with the EC, Turkey had imposed restrictions on textile and clothing
products from all those countries on whom the EC applied quotas.  There was an account of this in the
TMB's comprehensive report, in paragraphs 365, 367 to 369 and 376 to 380.  He stated that theserestrictions had not been notified to the TMB, either by Turkey or the EC.  India had brought a dispute
settlement action against this and both the Panel and the Appellate Body had ruled that Turkey's
restrictions were in violation of Article 2.4 of the ATC and that they were not justified by
Article XXIV of GATT 1994.  Turkey implem ented the Panel recommendations and reached a
mutually satisfactory solution with India, while maintaining its restrictions on other countries.  These
restrictions were also in violation of Article 2.4 of the ATC.  The other instance involved the
restriction imposed by the US on Turkey's exports of cotton and man-made fibre underwear.  Nojustification under the ATC had been provided by either the US or Turkey with respect to this
restriction.  The members of the ITCB had drawn this to the attention of the TMB, which had
reviewed the matter and found that there was no provision in the ATC that justified this restriction.
Despite that fact, the restriction continued to be in place.  He stressed that this measure, which had
been analysed and found to be inconsistent or at le ast have no justification, remained in place.  This
undermined the integrity of the Agreement on the one hand and the lack of notification undermined
the possibilities of the TMB to fully carry out its mandate.  It could also be considered that the
situation impeded the attainment of the objectives of the Agreement within the meaning of
Article XXIII of GATT 1994.  He highlighted this si tuation as a problem and considered that the CTG
should conclude that these restrictions had to be abolished.
71. The representative of Hong Kong, China recalled that Article 2.4 of the ATC stipulated that
no new restriction on ATC products could be applied outside of the Agreement.  In this regard, he
referred to one matter with which it had serious systemic concerns involving the violation of
Members' obligations under Article 2.4.  The case concerned a restraint introduced by the US on
imports of cotton and man-made fibre underwear from Turkey, for the period 1 June 1998 to31 December 2002.  Hong Kong, China, together with five other WTO Members, had raised this issue
at the past meetings of the CTG;  the detailed background and arguments were in document
G/C/W/260/Rev.1.  When this was raised at the CTG , the two Members concerned had taken the
view that the CTG should address the issue only as part of this major review.  Hong Kong, China did
not agree that the CTG should wait until now, but at this point in the major review, it was a case of
better than never.  The facts were simple.  There had been a restraint in place for over three years, as
acknowledged by the two parties.  The restraint was claimed to have been taken pursuant to a
provision of the ATC which did not require notifi cation to the TMB;  however, neither party was
prepared to give the TMB any further information.  The TMB, after detailed examination, had
concluded that this restriction could not be justifie d under any provisions of the ATC.  So far, the two
parties involved had not been able to explain under which provision of the ATC the restraint had been
introduced.  The measure had significant systemic implications for the functioning of the ATC;  itwould set precedents for a proliferation of new bilaterally agreed restraints outside the ATC's
transitional safeguard.  It would be a de facto  return to the worst aspects of the Multifibre
Arrangement, undermining the disciplines of the multi lateral trading system.  Moreover, the effective
functioning of the TMB had been hampered by the failure of the parties concerned to notify the Body
properly and to provide essential information for its review.  He recalled that under Article 8.1, TMBwas mandated to supervise the implementation of the Agreement, to examine all measures taken
under it and their conformity, and to take the actions specifically required of it by the Agreement.  He
looked forward to hearing detailed justifications  for this measure from the two Members concerned
and if this were not done, it remained for the CTG to take appropriate remedial action, on a measure
which the TMB had already found to be inconsistent with the ATC.
72. The representative of India endorsed the statements made by Uruguay and Hong Kong,
China.  He stressed that it was of deep concern that new restrictions had been introduced, in addition
to the restrictions that this Agreement sanctioned, which had not been justified under the ATC orG/C/M/52
Page 19
under GATT 1994.  He drew the attention of Members to Article2.4 which stated that the restrictions
notified under Article 2.1 shall be deemed to constitute the totality of such restrictions.  There was no
scope for any other restriction, except under the ATC or the relevant GATT 1994 provisions.  He had
very serious concerns about this action, which was effectively a return to the MFA practices where
two Members could do what they pleased.  Explai ning what India had expected from the major
review, he said that, at the end of the day there had to be a report, with recommendations, and with
decisions, if this review were  not to deteriorate into a meaningless exercise.  The least that the major
review could do would be to take note of the vari ous concerns which had been expressed.  As had
been suggested by Hong Kong, China, since the TMB had found that this measure was not in
conformity, therefore, it would be logical for the CTG to say that it had no business to be in place.
Also, in view of the systemic concerns expressed by Members, the Council needed to say very clearly
that recurrence of such measures would not be acceptable.  It was important to send the signal onthese aspects of the measures which were the subject of discussion.
73. The representative of the United States said that, with respect to the US restriction on
Turkey's exports of products in category 352/652, it was his government's contention that this
restriction was consistent with Article 4 of the ATC.  Article 4.2 allowed changes to be made to
restrictions applied under the ATC and that these changes should not upset the balance of rights andobligations under the Agreement.  Changes, in the form of improved access, had been made to
restrictions applied on Turkey's exports of textile products to the US.  In order to maintain the balance
of rights and obligations, a restriction on Turkey's exports of category 352/652 had been mutually
agreed, pursuant to Article 4.4.  Unlike other provisions of the ATC that specifically require
notification of mutually agreed solutions to the TMB, Article 4 did not contain such a notificationprovision.
74. The spokesman for the European Communities, not ing that reference had been made to the
customs union between the EC and Turkey, recalled that the proceedings which had been mentioned,
between India and Turkey, were not proceedings in which the EC had been a party, but where a
mutually satisfactory result had been achieved.
75. The representative of India thanked the US for its explanation concerning the justification
under Article 4 but asked why this had not been made before the TMB.  This information should have
been provided to the TMB before putting it to the CTG;  not putting it in front of the TMB was a lack
of transparency and respect for the TMB.  The TMB repeatedly requested more information, and this
was not forthcoming.  He considered this is a serious matter that WTO Members and the major review
should take note of.
76. The representative of Turkey also referred to the Turkey/US restraint arrangement concerning
textile items and said that it had been the intent of both parties to have a mutually satisfactory
agreement, as had been clearly explained by the US delegation.  Turkey agreed with this and
considered that the CTG should not go into detail on this matter, but should note the results and take
this into consideration.   He also explained that the Turkey/EC Customs Union covered all trade
policy aspects and required a common trade policy.  Th erefore, this restriction was only part of this
general agreement.  There were other trade policy measures as well, such as a drastic reduction in
tariffs which, after this Customs Union Agreement, deceased up to 7%.  This decrease had caused an
enormous increase of exports from many textile producing countries to Turkey.  This aspect was
appreciated by many delegations and all positive and negative aspects of this customs union had been
taken into consideration, and they fully appreciated the general benefits accruing to them from thisunion.  Accordingly, they did not enter into a DSU or other processes.  However, in certain cases,
only some aspects of this customs union were considered without looking at the other benefits
accruing to them.  This could mislead the CTG, and, therefore, he asked Members to evaluate both the
benefit side and the quota side of the package.G/C/M/52
Page 20
77. The representative of India referred to paragraph 493 of the TMB's report which had clearly
ruled out Article 4 as a possible justification, as claimed by the US in the matter of the US/Turkey
restriction.  He said that the TMB's report had made it abundantly clear in paragraph 493 that "a
reading that the introduction of a new restriction in the sense of Article 2.4 could be agreed upon,
pursuant to Article 4.4 as an adjustment to balance possible improvements in the implementation oradministration of restrictions maintained pursuant to Article 2 was, however, in the view of the TMB,
not consistent with the intention of the drafters of the ATC, since Article 4 related to the
implementation or administration of the restrictions referred to in Article 2 or applied under
Article 6".
78. The representative of Uruguay concluded the discussion by highlighting the fact that in a
minimum of two instances, measures taken had been found to be inconsistent or at least not justified
under the ATC and they had continued to exist.  They had been officially found by the disputesettlement process or by the TMB process not to be consistent, and they had continued to exist and
this was what the ITCB members would like to see the CTG recommending to cease.
(iv) Article 2.10 – Advanced Integration
79. The Chairman then introduced the fifth tiret, Article 2.10, which concerned the advanced
integration of products.  This Article stated th at nothing shall prevent Members from integrating
products earlier than the time provided by the Members' integration programme.
80. The representative of Uruguay considered that Article 2.10 was designed to encourage
Members to integrate more than the minimum mandated percentages and it had been incorporated into
the Agreement because the product coverage of the ATC had been expanded by including a large
number of products that had never been under quota restriction.  He understood that, in the case of theEC, these products accounted for some 42% of its to tal imports;  in the US, a comparable figure was
about 40%.  Those products included man-made fibr e filaments, staple fibres, waddings, carpets,
sacks and bags, products of jute and other vegetable fibres, and a host of products not covered by any
of the textile and clothing chapters under Section XI of the Harmonized System of classification.  He
recalled that, in the first major review of ATC implementation, the CTG had encouraged Members tohave recourse to the advanced integration provis ion of Article 2.10.  The CTG had also emphasized
the importance of its own overseeing and regularly evaluating the progress of the functioning of the
ATC.  Against these facts, he noted with concern that in paragraph 78 of the report of the TMB, it said
that since the beginning of the implementation of the second stage of the integration process, there
had been no notifications under Article 2.10.  It was obvious that the restraining members had not
seen fit to heed the encouragement provided before ;  rather, they had persisted in approaching the
implementation of the integration process in terms of merely fulfilling the minimum technicalrequirements. He recalled that he had already stressed, in connection with the discussion on
integration programmes, that such a technical approach could not be consistent with the object and
purpose of the ATC, which was to progressively phase out the quotas.
81. The representative of India agreed with the comments by Uruguay and commented that
Article 2.10 had remained a dead letter even tough the report on the first major review, in February
1998, had encouraged WTO Members to apply it.  Nobody had used this Article and then the TMB
report invited Members to do so.  He suggested that the report on the second major review should use
a much stronger term.  He believed that this provision had been put into the ATC with the intention
that it be used by the restraining Members, otherwise by the theory of redundancy it would have no
meaning and there would have been no need for the drafters to have put it in this provision.  Hestressed the need for the developed, restraining Members to have recourse to Article 2.10 and he
would work with others to find some language which could be reflected in the report.  This was an
important provision, an enabling provision, but it needed to be used by developed, restraining
Members to bring a certain element of balance.G/C/M/52
Page 21
82. The representative of Canada considered that appropriate language for the report could be
found to reflect the situation, but the language would ne ed to reflect the fact that this was an enabling
clause, a voluntary clause.  As such, this was not a mandatory clause and that it was up to the various
Members, not just certain Members, to use it as they believed appropriate in their circumstances.
83. The representative of the United States said th at the phrase "nothing in this Agreement shall
prevent" could not be interpreted as an obligation.  Any attempt to turn it into an obligation would be
rewriting the Agreement which was not the function of this review.  In the case of the US, there was
legislation in place that simply would not allow this, so it was not possible to agree to a formulation
that would turn this Article into an obligation.
84. The spokesman for the EC concurred with the US' view, stating that this provision was clearly
an option and it could not be turned into an obligation.
(v) Article 2.15 – Removal of Restrictions
85. The Chairman proposed that the Council address the sixth tiret, which related to the
elimination of restrictions under the provisions of Article 2.15.  That Article stated that nothing in the
ATC prevents a member from eliminating any restrictions maintained pursuant to Article 2, subject to
certain notification requirements.
86. The representative of Uruguay recalled the second sentence of Article 2.15 which provided
that "In considering the elimination of restrictions as envisaged in this paragraph, Members concerned
shall take into account the treatment of similar exports from other Members".  This provision was
intended to provide equity in the treatment of all restrained Members.  Norway had used Article 2.15
to eliminate all its restrictions.  Canada had also eliminated a few of its restrictions with effect from
July 1997 and both had used Article 2.15 to eliminate the relevant restrictions on all restrainedMembers.  The US had eliminated several restrictions on Romania.  However, it had not done so with
respect to restrictions on the same products in other WTO Members.  Neither had the US provided
any information as to whether it had taken into account the treatment of those exports from other
Members, as was mandated by Article 2.15.  The TMB in its report had stated that the last sentence of
Article 2.15 contained an unambiguous obligation.  This was in paragraphs 331 and 332 of the TMBreport and he believed that the CTG should include this in its report.
87. The representative of the United States commented that the language of Article 2.15 clearly
stated that any restriction maintained under this Ar ticle may be eliminated.  It did not, however, insist
that this had to be done on an MFN basis.  The maintenance of quota restraints was, by definition a
non-MFN activity.  The US did not maintain global restraints with respect to textile categories;  it
maintained them country-by-country.  Article 2.15 further provided that similar exports from other
Members should be taken into account when using this paragraph.  The US had considered theinterests of other Members when this action was taken.  The restrictions eliminated were so small and
under-utilized that the US believed that there was no possibility that other Members could be
adversely affected.  He did not consider that the exporting Members had made a case.  If an analysis
of the eliminated restrictions had been performed and this analysis had indicated how their
elimination adversely affected other Members, then there would have been something to discuss.  In
the absence of this analysis, the assertion that this action could have had an adverse affect on the
interest of other exporting Members had to be viewed as unfounded.
88. The representative of Hong Kong, China concurred with the statement made by Uruguay
regarding its understanding of the last sentence of Article 2.15 and agreed that Article 2.15 was also
an enabling provision.  Without this provision and similar provisions, such as Article 2.10, the ATCwould have been too rigid and too mechanical.  Such provisions as Article 2.15 demonstrated that the
drafters of the ATC, when they stipulated the minimum requirement for each stage of integration, had
appreciated that these minima might not, by themselves, meet the object and purposes of the ATCG/C/M/52
Page 22
which was progressive integration.  Integrati on under the ATC as presently notified had been
insufficiently progressive;  therefore, the CTG should urge greater use of enabling provisions such as
Articles 2.10 and 2.15 to make integration more progressive and more meaningful.
89. The representative of Canada stressed that Article 2.15 was optional;  nevertheless, Canada
had applied this option more than once.  It was used on 1 January 1998 when restrictions in some
quota categories were partially eliminated, and with the exception of two countries, the quota levels
were not lowered.  In terms of the overall provisions in this Article, including the last sentence, he
agreed that in order to assert that interests had not been taken into account, it would be necessary to
do an analysis to show that interests were adversely affected.
90. The representative of India reiterated Uruguay's comments, namely, that the TMB's report,
last sentence of paragraph 332, pointed out that Article 2.15 contained an unambiguous obligation
that, in considering actions that may be taken under Article 2.15, the Member concerned shall takeinto account the treatment of similar exports.  To  hear both the US and Canada say that the onus was
on Members to prove that the Member concerned had applied the requirement to take into account the
interests or the treatment of similar exports from other Members was perverse.  Even if this was an
enabling provision, in this case the Members concerned had to be the Member which was eliminating
the restriction and the Member which benefited.  No other interpretation was conceivable.  It could besaid in an enabling provision and it was an obligation to do it.  If it was not done, the obligation would
not have been met.
91. The spokesman for Brazil said that the focus of the discussion, as reported by the TMB,
should be on how to make operational an unambiguous obligation and not an option in this case to
take into account the treatment from similar exports from other Members.  He agreed with India thatthe burden to determine that this provision had really been complied with was on the restraining
country.
92. The spokesman for the European Communities considered that Article 2.15 was an option and
he noted that the TMB had considered this provision to be an exception to MFN, while not operating
as a positive encouragement to be selective.  The TMB had concentrated on the question of procedure.Recalling that the last sentence of Article 2.15 stated that Members concerned shall take into account
the treatment of similar exports from other Members, he understood that the TMB's main
preoccupation had been that there was no notification requirement;  however, the TMB had made a
recommendation that Members should provide a few details that could be looked at by the Body.
Overall, however, this provision was clearly an op tion and it should operate within these parameters.
It had been said that it was a question of equity and in this regard he recalled the ITCB's book, "The
Drafting History of the Agreement on Textiles and Clothing".  He pointed to a discussion of this
subject where the concluding sentence read that th e authors did not believe that the concept of equity
could be extended to defending the view that if a restriction on one product was eliminated, the
restraining Member should also eliminate all restrictions on the same product, regardless of the
circumstances.  In this situation, the discussion in the TMB's report seemed to have been more on the
question of how best to consider this provision in terms of transparency.
93. The representative of Canada agreed with the EC in terms of the meaning of the TMB's
report.  He said, with regard to the action taken by Canada, and noting  the US point that it had taken
into account the fact that the quota levels were small and were being under-utilized, that there was no
impact;  if other Members wanted to argue against that, they would then have to do the analysis.
(vi) Articles 2.11 and 2.17 – Administrative Arrangements
94. The Chairman then opened discussion on the last tiret on the subject of integration which
referred to Articles 2.11 and 2.17.  He noted that Article 2.11 concerned the requirement to notify the
programmes of integration twelve months before they were to come into effect, while Article 2.17G/C/M/52
Page 23
concerned administrative arrangements agreed between Members in relation to the implementation of
Article 2.
95. The representative of Uruguay stated that, under this heading, the ITCB members had raised
concerns about failure of the US to notify the elimination of visa arrangements in respect of products
to be integrated in Stage 3;  notifications regarding Stage 3 had been required by the end of last year.He noted that the US had notified its programme;  however, it had not simultaneously notify that it
would abolish the visa requirements with respect to those products.  He believed that this was a
violation of the ATC, in particular Article 2.11.  It would also seem to be inconsistent with the
requirement for full and faithful integration of products under the ATC.  He said that, under
Article 2.11, the respective integration programmes were to be notified "in detail".  In fact,
Article 2.11 mirrored Article 2.7 which pertained to the notification of integration programmes for
Stage 1.  Article 2.7 provided that "Full details of the actions to be taken pursuant to [the integrationprogrammes] shall be notified by the Members concerned …".  Now, in spite of this the restraining
countries had not spelled out that when products were integrated, the administrative arrangements
relating to them would also be eliminated.  In its examination of the integration programmes, the
TMB seemed to overlook this very important detail.
96. He also argued, with reference to paragraph 77 of the ITCB members' submission to the CTG,
that the visa requirement was contrary to normal GATT rules and disciplines.  Visas were a
requirement additional to normal shipping documents.  They were devised by the US as an
administrative arrangement to help control and monitor exports or imports of textiles and clothing
products with a view to keeping them within the applicable quantitative limits.  Visas were not
required from all exporting countries, only from those on whom quotas had been applied.  They were,therefore, discriminatory, and hence contrary to the fundamental GATT principle of MFN.  Issuance
of visas added to the cost of doing business;  it increased expenses on processing export shipments
and transactions.  In paragraph 85 of its comprehensive report, the TMB had pointed out that the
respective visa arrangements had been notified as part of the administrative arrangements under
Article 2.17.  He recalled that Article 2.17 provided for administrative arrangements, as deemednecessary in relation to the implementation of any provision of Article 2, i.e. the implementation of
quota restrictions.  It followed that with the elimination of quota restrictions, these administrative
arrangements also became redundant.  In paragraph 85 of its report, the TMB had further pointed out
that the visa arrangements could only be deemed necessary in relation to the implementation of quota
restrictions applied under the ATC.  It did not, however, go on to say that, to be consistent with the
obligation to fully integrate the relevant products, the visa requirements also needed to be abolished.
In fact, the visa requirement was necessary only to implement the quota restrictions.  With theelimination of quotas, the visas became irrelevant and therefore should also have to be abolished.
Unless this was done, integration could not be considered to be full and faithful.
97. The representative of Uruguay considered that, more than being only a procedural matter, the
issue involved the full restoration of the fundamental principle of non-discriminatory treatment to
trade in the sector.  When the US had implemented its integration programme for Stage 2, it had noteliminated the visa requirement for those products.  It had announced that it would continue to require
visas for the concerned exporting countries.  The members of the ITCB had challenged the US action
and it was only then that the US had agreed to eliminate the visa requirement.  The ITCB members
had expected, therefore, that in relation to the products to be integrated in Stage 3, the US also would
have announced the abolition of visas;  this had not yet happened.  Unless the US withdrew the visa
arrangements with respect to integrated products, it  could not be deemed to be in compliance with its
obligation to fully and faithfully integrate the relevant products.  In sum, the US had not notified the
elimination of the visa requirement with respect to products to be integrated in Stage 3, which was an
essential detail required under Article 2.11 and their continuation was not in compliance with full and
faithful integration of the relevant products.G/C/M/52
Page 24
98. The representative of the United States said that he did not believe that prior notification of
the elimination of the visa requirement was required under the provisions of the ATC.  In fact, the US
was in the process of consulting with Members that were affected by the third stage integration
programme and this matter was an element of their consultations.  The US would be reporting the
results of those consultations to the TMB when they were completed, before 1 January 2002.
99. The spokesman for the European Communities said that it did not see any need to notify the
TMB that its administrative arrangements did not continue to apply because, under Article 2.17,
administrative arrangements as deemed necessar y shall be a matter for agreement between the
Members concerned, in relation to the implementation of any provision of this Article.  The
assumption was that integrated products fell outside the quota system because quotas were going to be
terminated, which meant that the administrative arrangements in respect of the quotas were not going
to exist either.  He noted that the administrative arrangements concerning the EC's quota regime hadnot attracted comments and there was a very simple quota management regime by way of export and
import licences that were tracked largely by computers.
100. The representative of India raised an additional point, beyond the legal arguments, namely,
the issue of security and predictability to trade.  It was insufficient to just say that some Members
were in consultations.  The issue of security and predictability were also important aspects of theATC.  He suggested that while noting the concerns expressed, the recommendation to be made as part
of the CTG review should be that, at the very least, the US should be urged to withdraw the visa
arrangements as early as possible.  That kind of  recommendation would be helpful and it would send
the right signals as well.
101. The representative of Canada stated that it had taken the same approach as the EC.  In fact, as
a courtesy, it had informed Members that the export programmes associated with the quotas were also
being eliminated, so that everybody would know th at those elements would go along with the quotas.
Use of the Transitional Safeguard Mechanism (Article 6)
102. Having completed the discussion of the tirets and the subject of integration programmes of
Members, the Chairman then raised the second su bject area, the transitional safeguard mechanism as
set out in Article 6.  He noted that there were no separate tirets under this subject so the Council
would take up all the aspects of these provisions together.
103. The representative of Uruguay commented that during the second stage of the implementation
process, there had been a noticeable decline in the number of safeguard actions, in particular by the
US, the only restraining country that had invoked Article 6 of the ATC.  He then considered that the
issue at this juncture was to examine whether the safeguard actions had been in accord with the
essential object and purpose of the ATC, that is, the integration of the sector into GATT, including theneed to facilitate the process as visualised by Article 1.5.  He referred to Table 8 of the ITCB
members' submission, which showed that the US actions had affected over $ 1 billion of exports from
developing countries.  The large majority of US actions had been found not to be in compliance with
its ATC obligations.  None of the US actions whic h had been formally challenged before the TMB
and/or the dispute settlement panels had been found to be justified.  Also, the US actions reflected apattern of providing protection to the domestic industry by using the long process of the TMB, the
Dispute Settlement Body and the Appellate Body.
104. He said that under the ATC, a safeguard action could be taken for a maximum of three years.
The process of the TMB, the dispute panel and the Appellate Body unavoidable took about two years
to complete and during that period, the industry benefited from unfair protection, especially when themeasures were found to be invalid.  In the cases involving restrictions on Costa Rican underwear and
Indian wool shirts and blouses, the process had taken two years each to finalize.  In the latest case
involving cotton yarn from Pakistan, the US had persisted in using the long processes by goingG/C/M/52
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through the Appellate Body.  Even after the Appe llate Body had confirmed that the action was a
violation of its obligation, the US had not rescinded the measure promptly.
105. The representative of Uruguay also said that it was also important to recall that, besides the
substantive and procedural requirements, Article 6 prescribed two essential conditions for transitional
safeguards.  It provided that "the transitional safeguard should be applied as sparingly as possible,[and] consistently with the provisions of this Article and the effective implementation of the
integration process under this Agreement".  "Consistently with the effective implementation of the
integration process" required that the integration process should not be hampered by improper
recourse to safeguards.  It would be apparent, however, that the application of safeguards by the US
had not been in compliance with this requirement, especially as practically all its actions had been
found to be unjustified.  Safeguard actions caused serious disruptive effects;  legitimate exports
suffered unwarranted harassment.  Uncertainty created in the marketplace had produced adverseimpact on the exporting Members' exports, employment and investment.  Unjustified actions had
hindered progress towards achieving effective implementation of the integration process.
106. He considered that the CTG should make appropriate recommendation to avoid the
recurrence of the pattern witnessed in the US actions so far.  This was necessary because if this
practice continued then the disciplines of Article 6 could effectively be made unenforceable duringthe remaining three years of the ATC.  Even the dispute settlement procedures could be turned into a
mechanism to escape WTO obligations, because the length of the process was two or three years and
there were only three years remaining for the completion of the ten-year transitional period.
107.  The representative of Costa Rica referred to the application of safeguards as mentioned in
paragraphs 115 to 243 in the report of the TMB.  It was important to recall that the ATC prescribed
moderation in the use of these measures with the objective of ending the use of quotas.  Safeguards,
however, had not been used moderately at the beginning of the implementation of the Agreement.  In
the first years of the ATC, there had been 28 cases of  safeguards, a trend which ceased as a result of
the findings in the DSB which had reached important conclusions as far as proof of serious damage or
actual threat thereof under Article 6 of the ATC and even on the interpretation of the TMB had givento the procedural aspects.  It was important to state that most of the 28 cases of safeguards had not
been justified,  nor were they in conformity with th e ATC, affecting the trade of textiles in more than
$ 1 billion.  Later, it had been determined that only three of these safeguards were, in fact, in
compliance with the Agreement.  Other cases were found to be unjustified or in violation of
provisions of the Agreement.  In a few cases there had been agreements at the end of the three-year
period established as a maximum period allowed for these measures.  The market of the products
whose access was restricted was also affected, thus creating a negative atmosphere and a brake totrade development.  She noted that the safeguard had been used with a greater degree of moderation in
the second stage, although it had been necessary to record its concern with respect to the previous
abusive use of safeguards to emphasize that due moderation must be respected in the future.
108. The representative of Hong Kong, China said that the TMB had indicated that there had been
a substantial decline in the use of Article 6 as from the beginning of the year 2000;  hopefully this was
not a premature observation.  As was mentioned by Uruguay, safeguard actions had caused serious
disruptive effects to trade;  legitimate exports had suffered unwarranted harassment.  In addition,
uncertainty in the marketplace had produced a serious impact on the exporting Members' exports,
employment and investment.  Unjustified actions had hindered progress towards achieving effective
implementation of the integration process.  In view of these factors, it was, therefore, not surprisingthat Article 6 had stipulated that the transitional safeguard should be applied as sparingly as possible,
given that the overall purpose of the ATC was integration into GATT 1994, that the integration should
be progressive, and that full integration was only three years away.  It followed that any use of
Article 6 should be even more sparing during the re maining years of the ATC, otherwise, recourse to
Article 6 would run counter to the overall purpose of the ATC.G/C/M/52
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109. He recalled that in a number of past cases the use of Article 6 had led to the matters being
taken up under the dispute settlement procedures with results that had clearly demonstrated that
Article 6 had been abused.  However, due to the time required in the dispute settlement process,
measures inconsistent with Article 6 had remained in place for the full three years allowed under the
ATC.  The situation now was that the ATC had only three years to run and any safeguard actionstaken at the present time could be terminating at the same time as the ATC, which would not be
consistent with the overall objective of progressive integration.  Furthermore, even is such safeguard
actions were totally unjustified, experience had demonstrated that the dispute settlement process could
be dragged out so that it would be the best part of three years before such unjustified safeguard action
needed to be terminated.  The drafters of the ATC had not addressed the questions of the duration of
safeguard actions when close to the termination date for the ATC.  It, thus, fell to the CTG, as part of
this major review, to consider how best to handle safeguard actions in the final years of the ATC.
110. The representative of Korea supported the statement made by Uruguay.  He expressed
concern about the frequent invocation of transitional safeguards, as this mechanism should only be
applied in full and strict conformity with the relevant provisions of the ATC.  In particular, recourse to
Article 6.11 needed to be limited in scope in order to prevent damage to exporting countries that
would occur if this Article was abused.  He commented that Korea had, in recent years, seen astrengthened role for the TMB in handling measures under the transitional safeguard mechanism.  He
believed that such a role had contributed to enhancing the credibility of the TMB as an efficient and
effective dispute settlement forum.  He considered that this intensifying of the TMB's review of
market situations could encourage more prudent use of transitional safeguards.
111. The representative of Guatemala also raised the problem of the unjustified use of the
transitional safeguard measure. Safeguards had often been used for protectionist ends and as a non-
tariff barrier to trade for exports from developing countries.  In many cases, this had had negative
impact on small suppliers.  He considered that Article 6 should only be applied, as provided in Article
6.1, as sparingly as possible, and consistently with the provisions of this Article for the effective
implementation of the integration process.  As experience and history had shown many times, aprotectionist measure had serious consequences and trade distorting effects that create uncertainty in
the market with serious repercussions on the well-being of the industry and the economy of the
exporting country, especially when it was a small supplier or a least-developed country.  The
application of safeguard measures had a compounding effect on the exporter, including the total
export revenues, employment, prosperity and the process of liberalization in this sector.  During the
life of the ATC, Guatemala had been called upon to restrict exports through a transitional safeguard
measure, although the measure had expired when the time-limit was reached.
112. The representative of the United States referred to the tables provided by the ITCB members,
including one which dealt with the US safeguard actions taken under Article 6.  Noting that there
were no dates on the table, he recalled that only two of the actions were actually taken during the
second stage of the ATC.  So, although he did no t agree with the ITCB members' statements in this
connection, he did not consider that it was necessary to refute them in detail;  rather, he referred tostatements made on this subject in the first stage review with respect to the safeguard actions that had
been taken in Stage 1 of the ATC.  He then referred specifically to one Article 6 action which had
taken place in the second stage and commented that the ITCB members seemed to conclude that the
US was wrong to pursue its dispute settlement rights concerning a novel interpretation made by the
TMB on the basis of which it had recommended that the US rescind this restraint.  The US could notagree, particularly given that the use of the disp ute settlement mechanism was explicitly envisaged by
the ATC, that this one case constituted an abuse.  Concerning the comments made with respect to the
question of invocation of Article 6 in the third stage of the ATC, he stated that there was absolutely
nothing in the ATC that made a differentiation between the use of Article 6 at any point in the 10-year
transition period.  He could not agree to any propos als that would put further restrictions on the use of
Article 6 in the third stage.G/C/M/52
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113. The spokesman for the European Communities noted that it had not had recourse to Article 6,
in either stage.  He recalled that the description of what happened in the second stage was set out in
paragraph 236 of the TMB's report.  He agreed with Korea and considered that the TMB's comments
in paragraph 240 of the report were highly pertinent.  The TMB had developed a strict methodology
and comprehensively reasoned recommendations in the safeguard cases that had come before it. Thishad undoubtedly contributed to greater understanding among WTO Members as to appropriateness of
the use of these provisions.
114. The representative of India said that he shared the concerns of the developing country
representatives who had spoken about the disruption to trade and the fact that safeguard actions
affected security and predictability as well.  There was one further point which was that the impact
also depended on which Member took the safegu ard action and against which Member.  In a huge
import  market, when a big developed restraining Member took a safeguard action, it was bound tocause far more disruption and more adverse impact on trade than when another Member might take
the action.  In a legal sense, the rights were all the same, but the effect need not be the same.
Similarly, as Guatemala had pointed out, if the Member against whom action was being taken was a
small supplier, which had a very small proportion of the market to begin with, then the disruption
caused to the trade of that particular Member in its overall context was much more negative than itwould be for a Member whose trade might be more diversified.  This particular impact on trade was
also an important aspect to be raised when examining this issue.
115. The representative of Canada observed that the point, as made by the TMB, was that there
had been a decline in the use of this instrument.  Canada had never used it.  The TMB had played an
important role as had the DSB rulings early in the Agreement, during the first stage of integration,which instructed Members on how the provision was to be applied.  Everybody  now appreciated
more clearly what was required in taking a decision to even make a call.  He considered that this was
clearly one area where there had been progress.
Other Articles of the ATC
(i) Article 5 – Circumve ntion of Restrictions
116. The Chairman then turned to the third group of  subjects, which were entitled "Other Articles
of the ATC ".  There were 8 tirets under this heading to be taken up in the order set out in the list in
paragraph 14 of the report of the last meeting (G/C/M/51), namely, Articles 5, 7, special and
differential treatment, Articles 1.5, 1.6, 3, 4 and 8.   To begin the discussion of this group of subjects,
he invited comments on Article 5 which sets out the rules applicable in case of circumvention of the
ATC by such practices as transshipments, re-routings, false declaration or falsification of documents.
117. The representative of the United States said that the US had made a detailed submission
concerning circumvention issues, which had been reflected in the TMB's report to the CTG.  Not
wishing to quote extensively from this submission, he requested that the section of the TMB's report
dealing with this issue be considered part of the record of this review.  He believed that this was a
serious, continuing problem and he disagreed with the ITCB members' assertion that the facts did not
support a conclusion that this was, in fact, a major issue.  Investigations by the US had consistentlyshown a high rate of circumvention activity in several economies used by China as transshipment
points.  He believed that failure to deal effectivel y with this problem was contrary to the letter and
spirit of the ATC and had had a negative impact on the US industry.
118. The representative of Uruguay agreed that circumvention was a problem and that it should be
dealt with.  The ITCB members had found, however, that the problem was not as large as it was
purported to be.  As the TMB's report had brough t out, the developing countries, not only did not
condone circumvention of restrictions, but had extended cooperation in identifying and preventing
circumvention and in taking the necessary action consistent with the ATC requirements.  Also, asG/C/M/52
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indicated in the TMB's report, there had been only one instance where a specific matter had come
before the TMB.  In this particular case, the US had alleged circumvention as a basis for introducing a
new restriction on exports from the country concerned.  The TMB had not found this particular
restriction to be in compliance with the requirements of the ATC.  It was also important to note the
TMB's comment, in paragraph 694, that the perceived problem of circumvention would not go awayuntil the full elimination of restrictions had been achieved under the ATC.  As recognized in
paragraph 476 of the TMB report, "the question of circumvention was essentially one of fact and does
not depend on the guilt or innocence of the country or place from which the goods have been exported
…".
119. The representative of Uruguay observed, from the TMB's report in paragraph 475 that,
according to Canada, it had not encountered widespread circumvention.  In the case of the US, which
had encountered this problem, the shipments seized as transshipped, including those detained assuspected transshipments, in the last few years amounted to a small percentage of its imports,
according to US Customs data.  Looking at the years 1997-99, as a percentage of total imports, the
shipments seized as transshipments and those described as suspected, amounted to 0.125% of the
imports in 1997;  to 0.105% in 1998 and to 0.068% in 1999.  He, therefore, concluded that the levels
were not only small, but they were also declining, which probably meant that the measures taken werehaving a positive effect.  He also stressed that these figures included suspected transshipments, not
necessarily found to be a transshipment which accounted for over 80% of the total each year.
120. He said that, in the view of the ITCB members, the measures put in place by the US involved
excessive documentation requirements from exporters, including:  factory production records
demonstrating that the raw materials had been obtained by the factory and were available forproduction;  bills of lading and Customs clearance records, if raw materials or parts were moved
between countries;  mill certificates;  cutting records for products assembled from cut components;
assembly or production records maintained on the factory floor by production manager;  lists of
number and types of machinery available for production;  time records and salary records to show that
employees identified were actually working during the same period;  electricity bills;  anddocumentation from the subcontractor in the case of outward processing assembly work and
subcontracting.  Unfortunately the TMB had not gone into an examination of whether these measures
were proportionate to the extent of the problem, especially when, according to the relevant US
Regulation, dated August 1999, the shipments would be denied entry where the factory, producer or
manufacturer named in the entry documents had been unable to produce records to verify production.
He noted that it had been emphasized by the Appellate Body on a number of occasions that any
countermeasures must be commensurate with the problem and he believed that the measuresmentioned, in fact, impeded the full utilization of quota access by the exporters concerned.
121. The representative of Korea took note of the concern regarding transshipment of goods and
that taking measures against circumvention were legitimate.  He argued, however, that these should
not be designed so as to restrict imports.  In responding to the problem, Members had to be cautious
not to undercut the objectives of the ATC.  If this were borne in mind, unnecessary additional burdenson exporting countries could be avoided.  He further believed that greater efforts were called for to
address burdens resulting from visa requirements and excessive rules of origin currently in place.
122. The spokesman for the European Communities agreed that the ATC's Article 5 contained
detailed provisions which reflected the fact that circumvention was a factor and that Members should
cooperate. The key in Article 5 was the need for cooperation and the EC broadly endorsed the TMB'sapproach on this issue which was to recommend and encourage WTO Members to cooperate with a
view to ensuring that the required checks and controls were in place to prevent circumvention.
123. The representative of India concurred with the EC's view, stating that international
cooperation was one way to move forward.  However, he also underlined Uruguay's point about the
requirements being more burdensome than necessary.  Circumvention certainly was a problem, butG/C/M/52
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the extent of the problem remained a matter of debate.  What the developing country exporters were
saying was that the measures that were required from them should be proportionate to the problem at
hand.
(ii) Article 7 – Abiding by GATT 1994 Rules and Disciplines
124. The Chairman invited discussion of the next tiret, Article 7.  This Article referred to the
commitments undertaken by Members as a result of the Uruguay Round and the actions which
Members must take to abide by GATT 1994 rules and disciplines to achieve improved market access
for textile and clothing products;  to ensure the application of policies relating to fair and equitable
trading conditions;  and to avoid discrimination of textile and clothing products when taking measures
for general trade policy measures.
125. The representative of the United States considered that this Article had not been implemented
effectively.  The provisions of Article 7.1(a) which stated that Members shall achieve improved
market access for textiles and clothing had not produced a noticeable result.  Markets in many
exporting countries remained closed to US exports of textile products.  He said that this was a heavily
negotiated provision of the ATC and if the position of the exporting Members was that this provision
contained no new obligations and, therefore, was essentially meaningless, he would note this with
regret.  This was not the understanding of the US when the ATC was negotiated;  rather, it wasunderstood that this provision reflected a recognition which was also laid out in the preambular
section of the ATC, that trade in textile products had become severely distorted by quota restraints on
the part of importing countries and high tariffs and non-tariff measures on the part of exporting
countries.  The benefits of trade, in terms of increased competition and lower prices, would be reaped
by all, but only if these distortions were removed.  He recalled an analysis by the WTO Secretariat,made after the Uruguay Round, which made it clear that the biggest benefits of the Uruguay Round
would accrue to those Members that removed these restrictions.  Also, recalling that much had been
said about the spirit of the ATC, as opposed to strict legal obligations, and the comment contained in
the ITCB members' paper, i.e. "there has been no non-compliance of specific commitments
undertaken in the Uruguay Round with respect to market access", he said that he would drawconclusions about the implementation of other provisions of the ATC where specific commitments
may or may not exist.
126. The spokesman for the European Communities shared the same concerns on this issue as the
US.  He pointed out that the EC should not be seen on ly as an importer of textiles and clothing, in fact
the EC was the largest exporter in this sector in the WTO;  second in the world after China, at a level
of $ 40.5 billion exports in the year 2000.  Recalling the provisions of Article 7, it was clear that it
was part of the integration process. It meant that the primary obligation was to achieve improvedaccess 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 licencing formalities.  It was regrettable that other Members did not share the EC's interpretation
and that some Members regarded the Agreement as entirely limited to quotas.  The ITCB members'
paper highlighted this very clearly:  integrat ion, market access, continuous autonomous adjustment
and other provisions which seemed to refer to all Members.  In fact, however, in their understanding,
none of them apply to WTO Members that did not maintain quotas.  The EC was concerned that,
come 2005, it would have a totally open market with very low tariffs, no non-tariff barriers and no
quotas;  whereas the EC's legitimate expectations arising from Article 7 would have gone unfulfilled
with no action in respect of this provision.  He sh ared the concern that the implementation of Article 7
in respect of market access, was not operating correctly.  For these reasons, when the EC had decided
its third stage's integration and fulfilled its obligations, it also made itself available for bilateral
negotiations designed to improve market access in the sector.  Such bilateral negotiations in no way
made the EC's integration programme dependent on concessions, and taking note of the statement of
the EC in this regard, the TMB had concluded that the third stage obligations had been fulfilled.  TheG/C/M/52
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EC saw this as one important way of taking forward the process of liberalization, the main purpose of
the Agreement.
127. The representative of Uruguay agreed with one aspect of what had been said both by the US
and the EC, that was, that the articles of the Agreement applied to all Members equally.  He referred
to paragraph 555 of the TMB's report, which stated that no non-compliance with any specific market-access commitments undertaken as a result of the Uruguay Round had been notified.  If there had
been a problem, it would have been logical to make a notification, but this had not been done.
Therefore, he concluded that there really was not as much of a problem as has been presented.  WTO
Members, developed and developing alike, had generally been implementing their specific
commitments in accordance with their respective schedules of concessions.  Indeed, as pointed out in
paragraph 548 of the TMB report, even according to the EC in the specific context of Article 7, most
WTO Members were generally complying with thei r specific commitments and with the relevant
GATT 1994 rules and disciplines.  Moreover, a number of developing countries had, in fact, adopted
autonomous liberalization measures in their markets.  Against this background, the complaints would
seem to be rather less unjustified.  What was of concern, as the EC had mentioned, was that it had
been following a policy that implied at least a defe rring of the integration of sensitive products, with a
declared objective of using quotas as a bargaining chip for negotiating increased market access fromdeveloping countries.  This concern remained, in spite of the EC's response to the TMB, that it did not
make integration of textiles and clothing products conditional on the fulfilment of demands for
additional market access.  There was also the fact that the quotas imposed by Canada, the EC and US
on imports of textiles and clothing from developing countries had never been GATT-consistent.
Equating them with GATT-consistent trade policy measures by developing countries, includingtariffs, would seem to be unjustified and unwarranted.  He also mentioned that, from their
submissions to the TMB, it was evident that Canada, EC and the US had themselves not provided
additional market access to their own markets, i.e., in addition to their schedules of tariff concessions.
Under these circumstances, complaints that developing countries did not consider their obligation
under Article 7 seemed to be a little one-sided.
128. The representative of Switzerland supported strongly the statements made by the US and the
EC regarding the issue of Article 7.  This Article clearly gave the opportunity to achieve improved
access to markets for textile and clothing products by such measures as tariff reductions, bindings, and
reduction or elimination of non-tariff barriers.  Switzerland did not apply quotas on textiles and
clothing and had low tariffs.  This had required a strong industrial adjustment at home as the industry
had lost more than 30% of its workers between 1993 and 1999/2000;  exports had also been dropping.
Therefore, Switzerland supported Article 7 because of the difficulties experienced in entering foreignmarkets, and in particular, markets of developing countries.  He considered that countries which had a
competitive advantage in textiles and clothing should also have trade regimes that reflected those
competitive advantages.
129. The representative of India strongly rejected the notion that in Article 7 the developed
restraining Members saw an element of reciprocal concessions within the ATC for developing country
markets.  His interpretation was that this Agreement was about the elimination of quota restrictions in
the area of textiles. Further, the improved market access that was mentioned in Article 7.1(a) referred
primarily to the developed restraining Members.  In fact, details about tariff reductions undertaken by
the US, the EC and Canada, since the coming into force of the ATC should be requested.  In the area
of quantitative restrictions, he could confirm th at countries like India had done away with even
GATT-consistent quantitative restrictions.  India had done some things, but, he asked, what had been
done under Article 7 by the US, Canada and the EC?  Since all Members had an obligation, what had
been done by the restraining Members under improved access?
130. He said that he could share the US view that this Article was being implemented
unsatisfactorily.  India had complaints starting from anti-dumping actions which had been initiated onan item already under quota restrictions which made economic nonsense and amounted to doubleG/C/M/52
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jeopardy.  There was reference in the TMB's report to the anti-dumping proceedings initiated, in
particular, by the EC during the period of the ATC.  The EC had not taken Article 6 safeguard actions
but the same was not the case for anti-dumping actions.  This had not only been unjustified from an
economic point of view, but the dispute settlemen t mechanism had ruled that their actions were
inconsistent.
131. He also referred to Table 9 in the ITCB members' paper, which demonstrated the serious
adverse effects of the EC's action on exports from the countries concerned, particularly the serious
drop in the share in EC imports as a direct result of anti-dumping actions.  He stressed that the
commitment given for market access for developing countries, through integration and growth rates,
was being taken away because of anti-dumping actions.  He considered that there had been an
impairment of the balance of rights and obligations because the modest market access that had been
made available to developing country exporters through integration and through growth rates, thoughinadequate, were being taken away through anti-dumping actions in this area.  This amounted to a
violation of Article 7.  He also considered that Article 7 enjoined all WTO Members to avoid
discrimination against textiles in general trade policy areas.  In this regard, India had a serious
concern with regard to an action taken by the US in singling out this sector for changes in rules of
origin.  He accepted that there may be different interpretations of the obligations under Article 7;nevertheless, there were some actions which had been taken by developing countries, such as the
removal of quantitative restrictions by India, which had initially been GATT-consistent.  However, he
questioned if any single measure which had been taken by developed, restraining Members would fall
under the rubric of Article 7.
132. The representative of Costa Rica commented that the recurring use of anti-dumping measures
by developed countries with protectionist aims was a subject of concern to many Members and, in
particular, to developing countries, for whom this use was a contradiction of the fundamental
principles of the WTO.  He said that such actions impeded the enjoyment of comparative advantages
of markets in the production of goods.
133. The representative of Malaysia, speaking on behalf of the ASEAN Members of the WTO,
said that some of the ASEAN members' exports had been subjected to anti-dumping investigation on
a number of items that included synthetic fabrics and bed linen.  Although in certain cases no final
duties had been imposed by the Members invoking the actions, the fact remained that the initiation of
such investigations had caused uncertainties for exporters and disrupted access.  While Members did
have the right to take anti-dumping action, he felt that some of the actions had been unfair and had
damaged ASEAN members' interests and rights under the WTO.  He had particular concern with the
repeated recourse to anti-dumping investigations against certain products which suggested abuse ofthe trade remedy and constituted trade harassment.
134. The representative of Bangladesh said that the practice of imposing anti-dumping duties on
items already under quota had a negative bearing on access under the ATC.  He referred to the
preambular part of the ATC, where there was mention that special treatment should be accorded to the
least-developed countries.  In some cases, manufacturers could not resort to any legal advice becauseof the costs involved in this process.  One country had determined the level of dumping based on their
own calculations and had imposed anti-dumping duties in 1992.  This country should have recourse to
the ATC and should have extended special treatment to LDCs;  however, that had not happened.
While Bangladesh was grateful that import market access, in terms of growth rate increases, had been
accorded to it, when anti-dumping duties were applied to its manufacturers, the exporters could notutilize the market access which was provided under the ATC.  He considered that Bangladesh's rights
were impeded by the imposition of the anti-dumping duty.
135. The representative of Switzerland considered that  this review was not only for the restraining
countries but also was of interest to other countries, because there were many systemic and policy
issues involved.  He stated that Switzerland had recently taken a decision to accelerate theG/C/M/52
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implementation of its Uruguay Round duty reductions for some clothing items.  Therefore, the final
duty rates to be implemented in one or two year s from now, was going to be implemented as of
1 January 2002.  This was a measure which could be considered to fall under Article 7.  He also noted
that some ITCB members which were most interested in quota removal and were competitive
producers and exporters also kept some important trade barriers.  These countries would need toconsider these policies and the extent they would be warranted by the year 2005, when markets would
open up fully with the elimination of all quotas on textiles and clothing.
136. The spokesman for the European Communities reiterated that it applied anti-dumping
legislation in a fully transparent manner in compliance with their obligations.  He referred to Table 15
in the report of the TMB showing proceedings initiated where, during the period in question, the EC
had initiated full proceedings against eight WTO Members, but three WTO Members had initiated
four proceedings against either the EC or some of its Member states.  Returning to the question ofmarket access, he considered the assessment was lacking a qualitative assessment of what access
really was.  He stressed that, at the end of the transitional period, in 2005, the EC would have no
quotas;  would have very low tariffs and that did not even take into account the zero duty and
generalized system of preferences;  and would have no non-tariff barriers.  However, at the end of the
transitional period there would be very little actual improvement in market access in importantMembers and in those circumstances this qualitative aspect was important.  In this regard, the term
"all Members" did not mean only restraining Members.  In terms of market access improvements
under its Uruguay Round commitments, the EC had brought down duties on clothing at the very start,
as opposed to taking them through stages to 2005.  The question of compliance with individual
commitments, that was one aspect, but he stressed that achieving real improved market access wasalso important.  It was specifically made part of the integration process and in those circumstances the
EC considered that this was an important Article which needed to be examined.
137. The representative of Uruguay agreed that market-access commitments were applicable to
everybody.  However, there seemed to be an implication that respecting the schedules was one matter
but some were supposed to give access in addition to what was in their schedules.  Here he woulddisagree, if that additional access had to be in exchange for others complying with their commitments.
Concerning anti-dumping, he noted that the TMB had, in paragraphs 701 and 570, acknowledged that
protracted or repeated investigations into alleged dumping, even if they had not resulted in the
imposition of provisional or final anti-dumping duties created uncertainties for the exporters of the
products in question.  The problem of protracted and repeated investigation for the market, and the
exporters in particular, was devastating and that was the problem they were aiming at.  The other
point was the question of discrimination against textiles in general trade policy.  The ITCB membershad brought some concerns before the TMB and that was reflected in paragraphs 541, 571 and 572 of
the TMB's report.  In those matters, the TMB had contested the ITCB members' view with respect to
two of the issues, but it seemed to agree with th e ITCB members in respect of the third issue.  That
was the question of the changes in rules of origin only for textiles by the US.  The TMB had implied
that it amounted to discrimination against imports in the sector.  He also noted from paragraph 572 ofthe report that, according to the TMB, the firs t two issues raised would hardly amount to a
discriminatory singling out of ATC products for general trade policy reasons.  That meant that in the
third one, the TMB had accepted that it had amounted to discrimination against the sector.
138. The representative of the United States commented, with respect to Article 7, that it was
important to distinguish between the means that this Article foresaw and the end that was supposed to
be arrived at, namely, improved market access. The means were tariff reductions, reductions or
elimination of non-tariff barriers and so forth.  Article 7 was an "end-oriented" Article;  it was not
simply enough to cite the means that had been adopted, if the end was not achieved.  In the case of the
US, the end of this Article had been achieved in that imports over the period of the first seven years of
the ATC had almost doubled to $ 70 billion.  On the other hand, India had cited the means that it hadimplemented perhaps with a view to achieving the goal of this Article, but in fact, based on the latest
trade statistics, India's market for textile products essentially remained closed.  Members should eitherG/C/M/52
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show that they had achieved the end of this Article or perhaps what measures they intended to take to
achieve it.
139. The representative of India asked Members if they were referring to the specific commitments
undertaken by Members as a result of the Uruguay Round, which was the chapeau of Article 7.1 and
he could agree, it applied to all Members.  He had mentioned that quantitative restrictions for Indiapreviously maintained under GATT for BOP reasons had disappeared for textile items.  This was over
and above the commitment undertaken by India.  In these circumstances, he was surprised that a
Member was saying that India's market was still cl osed.  It was the US which had brought the dispute
against India, which succeeded in having the quantitative restrictions for textiles for BOP reasons
eliminated.  He stressed that Article 7 was about specific commitments that WTO Members had taken
as part of the Uruguay Round and he was willing to discuss whether India had met the obligations that
applied to all Members.  If, as some have claimed, it was not about the Uruguay Round commitmentsbut was something over and above that, then he would ask the developed restraining Members what
they had done in order to warrant making that claim on others.
Chairman's Closing Comments
140. At the close of the meeting, the Chairman noted that six topics remained to be examined from
the list adopted at the Council's meeting on 27 September 2001.  These would be taken up at the
Council's next meeting, to continue the major review, to be held on 26 October 2001.
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