WORLD TRADE
ORGANIZATIONG/TMB/R/42
5 June 1998
(98-2285)
Textiles Monitoring Body
REPORT OF THE FORTY-THIRD MEETING
1. The Textiles Monitoring Body held its forty-third meeting on 20 to 22 April 1998.
2. Present at this meeting were the following members and alternates:  Messrs. Babajide;
Da Costa/Grané;  Khalil;  Kobayashi; Miss Morais;  Messrs. Rey;  Tadpitakkul/Hastjarjo;  Tagliani;
Tong; Wentzel.
3. The TMB adopted the report of its forty-second meeting (G/TMB/R/41).
Notification under Articles 2.8(a) and 2.11 of the ATC
4. The TMB started its review under Article 2.21 of the programme of integration notified
pursuant to Articles 2.8(a) and 11 by Honduras and, seeking further information and clarification,
decided to revert to its review at a subsequent meeting.
Notification under Article 6.9 of the ATC
5. The TMB reviewed, pursuant to Article 6.9, the notification by the United States of a restraint
measure agreed with Thailand on imports of yarn for sale, 85 per cent or more by weight artificial
staple fibre (US category 603) from Thailand.1  According to this notification, a limit of 550,000 kg.
(notional annual level for the period 1 October 1997 to 30 September 1998:  2,200,000 kg.) was
agreed for the period 1 October to 31 December 1997.  The rollback level envisaged in
Article 6.8 was 1,752,000 kg.  For 1998, the specific limit was set at 2,233,000 kg., at 2,366,980 kg.for 1999 and at 1,853,940 kg. for the period 1 January 2000 to 30 September 2000.  The measure was
agreed for a three-year period, i.e. until 30 September 2000.
6. While examining the specific and relevant factual information made available pursuant to
Article 6.7 by the United States to Thailand at the time it had requested consultations, the TMB
observed that considerable efforts had been made by the United States to match the data as closely as
possible to the requirements of Articles 6.2, 6.3 and 6.4.  With regard to the definition of the domestic
industry producing like and/or directly competitive products, however, the TMB observed that yarn85 per cent or more by weight artificial staple fibre was produced in the United States both by the
domestic industry producing yarn for sale and by vertically integrated firms engaged in the production
of fabric for which this yarn was an input.  In the relevant factual information it had provided pursuant
to Article 6.7, the United States had not given information on those vertically integrated firms.
7. The TMB sought additional information from the United States on the extent to which the
vertically integrated firms that produce artificial staple fibre yarn internally, for their own
consumption,  also bought or sold such yarn  on the commercial market during the period under
consideration.  The TMB also sought information on the relative sizes of the vertically integrated
sector and of the sector that produces yarn for sale.  The United States responded that since integrated
mills had tried to balance their production as closely as possible at each stage of the productionprocess, it was estimated that less than 5 per cent of the integrated sector’s yarn consumption was
purchased from the "for sale" market.  Vertica lly integrated companies produced yarn that was
                                                     
1See also G/TMB/R/39, paragraph 15.G/TMB/R/42
Page 2
consumed internally and made into fabric; the fabric, not the yarn, was what these companies sold.
As to the relative sizes of the two sectors, th e TMB noted that, according to the United States,
production of category 603 yarn for sale had amounted to 58.1 million pounds in 1996, while
integrated mills had produced and consumed 78.4 million pounds of artificial staple fibre yarn.
8. The TMB observed, on the one hand, that Article 6 gave the possibility to provide safeguard
to an industry, and not to part of an industry, producing a particular product, and that the artificial
staple yarn produced by both the "yarn for sale" producers and by the vertically integrated firms couldbe substitutable.  On the other hand, the TMB noted that the yarn produced by the vertically integrated
firms was not sold in the "yarn for sale" market in competition with the yarn produced by the "yarn
for sale" producers.  Instead, the vertically integrat ed firms produced yarn for their own use only, and
also purchased a small amount of yarn from the "for sale" market.
9. As far as the imports of products of category 603 were concerned, the TMB noted that they
were substitutable for both the artificial staple yarn produced by the "yarn for sale" producers and for
that produced by the vertically integrated firms.  The TMB further noted that the status of competition
between the imports of category 603 products and the yarns produced by the two domestic sources, in
particular the extent to which imports could affect purchases of the vertically integrated firms, could
not be accurately assessed, owing to the lack of da ta that would show trends over a period of time.
However, the TMB observed that the vertically integrated firms did not sell the yarn they produced on
the domestic market, and it could be contended that their production did not compete directly withimports on the US’ "yarn for sale" market. The TMB also noted that category 603, defined as yarn for
sale, 85 per cent or more by weight artificial staple fibre, had not been constructed specifically in the
context of this request for consultation but had been part of the United States categorization system
for many years. Based on information presented to the TMB, the Body understood that the segment of
the industry represented by the vertically integrated firms was relatively stable and independent ofdevelopments in the "yarn for sale" market.  Any evidence of serious damage caused by imports
would, therefore, reflect essentially the situation in the domestic industry producing yarn for sale,
85 per cent or more by weight artificial staple fibre.
10. The TMB observed that the volume of imports into the United States from all sources of
category 603 products had increased in 1996, and had continued to increase in the first half of 1997,albeit at a slower pace.  With respect to certain of the economic variables mentioned in Article 6.3, the
TMB observed that their evolution from 1995 to the first quarter of 1997, such as the declining United
States domestic production of artificial staple yarn for sale, the reduction in the share of the market
held by domestic manufacturers of yarn for sale, the decrease in employment and in capacity
utilization, the inventory build-up and the pressure put on domestic prices by import prices, indicatedthat the United States industry producing yarn for sale, 85 per cent or more by weight artificial staple
fibre was experiencing problems as a result of increased imports.  On the other hand, some other
economic variables, in particular the evolution of average wages per worker and the increase in
productivity could point in a different direction.  The TMB, while noting that none of these factors,
either alone or combined with other factors, co uld necessarily give decisive guidance, and that,
according to the specific and relevant factual information made available pursuant to Article 6.7 by
the United States, the damage could not be attributed to such other factors as technological changes orchanges in consumer preference, concluded that, taking into account all the elements mentioned
above, the circumstances described in Article 6.2 were observed in the United States market for
imports of yarn for sale, 85 per cent or more by weight artificial staple fibre.
11. The TMB further observed that imports of category 603 products into the United States from
Thailand had increased significantly in 1996, and had continued to increase in the first half of 1997,so that Thailand had become the second largest supplier to the United States market.  This had taken
place in the context of increased imports from severa l other sources, both restrained and unrestrained,
whose share of overall imports was smaller than that of Thailand, and of declining imports from the
main supplier to the US market, whose imports were not subject to restriction.  Thailand’s exports
were, on average, priced significantly below the US average domestic price, and below the averageG/TMB/R/42
Page 3
price of imports.  The TMB, therefore, considered that the circumstances described in Article 6.2
could be attributed, inter alia , to increased imports from Thailand.
12. The TMB noted that the total level of the agre ed restraint was substantially above the level
envisaged in Article 6.8 (the rollback level) and that the growth provided amounted to 6 per cent
per annum.
13. On the basis of the considerations mentioned above, the TMB concluded that this restraint
measure agreed between the United States and Thailand was justified in accordance with theprovisions of Article 6 of the Agreement on Textiles and Clothing (G/TMB/N/322).
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