RESTRICTED
WORLD TRADE G/TMB/R/4
8November 1995
ORGANIZATION(95-3464)
Textiles Monitoring Body
REPORT OFTHE FIFTH MEETING
1. TheTextiles Monitoring Body helditsfifthmeeting on25-28 September 1995.
2. Thefollowing members andalternates were present: Messrs. Daly; Kumar; Lee/Tong;
Munir/Malik; Pangaribuan; doPrado; Saeki; Saint-Jacques/Rey; Tagliani; Wentzel.
3. TheTMB adopted thereport ofitsthirdandfourth meetings (G/TMB/R/3).
Notification under Article 6.10oftheAgreement onTextiles andClothing (ATC)
United States/Hong Kong: imports ofwoven wool shirts andblouses (UScategory 440)
4. TheTMB received anotification from theUnited States under paragraph 10ofArticle 6of
theAgreement ofasafeguard action ithadtaken onimports ofproducts ofcategory 440(woven wool
shirts andblouses) fromHong Kong. Therestraint hadbeenintroduced on25July1995, witheffect
asfrom 27April 1995.
5. Bilateral consultations between theparties were inconclusive, andtheTMB invited the
participationofHongKongandtheUnitedStatesatthefifthTMBmeeting.Bothpartiessentdelegations
toGeneva topresent theirrespective cases.
6. TherepresentativeofHongKongstatedthat,accordingtotheAgreement,HongKong’sexports
ofproducts ofcategory 440totheUnited States could notbesubject toasafeguard action under
Article 6,astheywere already under restraint. Hegavethefollowing main arguments:
- category 440,although notitselfsubject toaspecific limit, wasfalling within agroup
limit notified bytheUnited States totheTMB asaquantitative restriction under
paragraph 1ofArticle 2.Therefore, exports fromHong Kong ofproducts ofcategory
440werealreadyunderrestraintundertheAgreementand,accordingtothelastsentence
ofparagraph 4ofArticle 6,could notbesubjected toasafeguard measure under this
Article bytheUnited States. Thishadbeenexplained totheUnited States during
bilateral consultations;
- thislastsentence ofparagraph 4ofArticle 6could notbereadtomean thattheterms
“particular product under restraint ”referred onlytoproducts under specific limit, and
nottothose under group limits. Ifoneweretofollow thislogic, onecould argue that,
while acategory wassubject toaspecific limit, theUnited States could introduce a
restraint onparticular products constituting thiscategory, because suchparticular
products were notthemselves under restraint. Thiswasclearly nottheintention of
theAgreement;
- asthere wasnoauthoritative evidence ofthenegotiating history ofthelastsentence
ofparagraph 4ofArticle 6,thissentence should beunderstood literally. SuchliteralG/TMB/R/4
Page2
interpretation could notgobeyond theplainmeaning ofthewords. Hadtheintention
ofthedrafters beendifferent, records would havebeenleftforthatpurpose, orthe
word “specific ”would havebeenadded before theword “restraint ”;
- although under thebilateral agreement concluded between theUnited States and
Hong Kong under theMultifibre Arrangement (MFA) specific limits could be,and
were, introduced oncategories falling within group limits, thecontext oftheATCwas
different andcomprehensive bilateral agreements hadbeeneliminated.
7. Therepresentative oftheUnited States disagreed withthisinterpretation ofparagraph 4of
Article 6.Inherview, theAgreement allowed restraints tobeintroduced onuncontrolled categories
suchascategory 440which were partofagroup limit. Shegavethefollowing main arguments:
- thelastsentence ofparagraph 4ofArticle 6provided thatthetransitional safeguard
mechanism “shallnotbeapplied totheexports ofanyMember whose exports ofthe
particular product arealready under restraint under thisAgreement ”.Inthepresent
case, theparticular product wasnotunder restraint itself, ascategory 440wasfor
Hong Kong anuncontrolled category within agroup limit. Hence paragraph 4of
Article 6didnotprevent theUnited States from taking asafeguard action;
- according toprinciples ofinternational law,theordinary meaning ofaclause hadto
bereadinthecontext ofother provisions oftheAgreement andofitsdrafting history.
Itwastheclear understanding oftheUSnegotiators ofthisAgreement thatthelast
sentence ofparagraph 4ofArticle 6,asdrafted, would allow safeguard actions tobe
taken incases suchasthepresent one;
- oneoftheelements ofthecontext oftheclause wastheAgreement ’spredecessor, the
MFA, andthepractice under thatArrangement. Article 3oftheMFA contained
language similar tothelastsentence ofparagraph 4ofArticle 6oftheAgreement.
Also, thebilateral agreements concluded under Article 4oftheMFA, inparticular
theagreement between theUnited States andHong Kong which hadbeenfound to
beconsistentwiththeMFA,allowedsafeguardactionsonuncontrolledcategorieswithin
group limits. Bynotifying thelimits astheyweredesigned, theUShadintended to
continue itspractice anditsunderstanding onhowtheyweretobetreated under the
Agreement: instead oftheMFA orabilateral agreement, theAgreement andits
safeguardmechanismcouldoperatewithrespecttouncontrolledcategorieswithingroup
limits. Nothing intheAgreement onTextiles andClothing changed USpractice and
thegroup limitarrangements asnotified;
- iftheTMB weretofindthattheUScould notusethesafeguard mechanism ofArticle 6
insuchcases, itwould beendorsing theundesirable possibility thatacountry could
allocate allofitsunallocated group limit tooneuncontrolled category without any
safeguard measure toprevent serious damage oractual threat thereof. Thiswould also
prove inequitable withrespect toWTO Members withspecific limits onthesame
category;
- theobject andpurpose ofthelastsentence ofparagraph 4ofArticle 6wasnottoprevent
theintroduction ofarestraint onanuncontrolled category within agroup when a
situation ofserious damage oractual threat thereof occurred.G/TMB/R/4
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8. After having heard thepresentation bybothparties theTMB, keeping inmind therelevant
provisions oftheATC, reached thefollowing conclusions:
8.1 Inreviewing thisnotification, andhaving considered thearguments putforward bytheparties,
theTMB noted thatHong Kong exports ofproducts ofcategory 440intotheUSwerealready under
restraint under agroup limitnotified bytheUSinaccordance withparagraph 1ofArticle 2ofthe
Agreement.1
8.2 TheTMB found that,according toparagraph 4ofArticle 6,theapplication ofasafeguard
measure under thisArticle toHong Kong exports ofproducts ofcategory 440intotheUSwastherefore
notjustified, andrecommended thattheUSrescind themeasure.
Information received bytheTMB
9. TheTMBwasinformedandtooknotethattheUnitedStateshaddecidedtorescindthesafeguard
actions ithadtaken onimports ofproducts ofUScategories 603(artificial staple yarn) and670-L (man-
made fibreluggage) from Thailand, andofUScategories 444(women ’sandgirls’wool suits) and
670-L (man-made fibreluggage) from thePhilippines.
1G/TMB/N/63