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WTO ANALYTICAL INDEX: TEXTILES AND CLOTHING Agreement on Textiles and Clothing |
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> Preamble |
Members,
Recalling that Ministers agreed at Punta del Este that "negotiations in the area of textiles and clothing shall aim to formulate modalities that would permit the eventual integration of this sector into GATT on the basis of strengthened GATT rules and disciplines, thereby also contributing to the objective of further liberalization of trade";
Recalling also that in the April 1989 Decision of the Trade 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;
Recalling further that it was agreed that special treatment should be accorded to the least-developed country Members;
Hereby agree as follows: No jurisprudence or decision of a competent WTO body.
II. Article 1 back to top Article 1 1. This Agreement sets out provisions to be applied by Members during a transition period for the integration of the textiles and clothing sector into GATT 1994.
2. Members agree to use the provisions of paragraph 18 of Article 2 and paragraph 6(b) of Article 6 in such a way as to permit meaningful increases in access possibilities for small suppliers and the development of commercially significant trading opportunities for new entrants in the field of textiles and clothing trade.(1)
(footnote original) 1 To the extent possible, exports from a least-developed country Member may also benefit from this provision.
3. Members shall have due regard to the situation of those Members which have not accepted the Protocols extending the Arrangement Regarding International Trade in Textiles (referred to in this Agreement as the "MFA") since 1986 and, to the extent possible, shall afford them special treatment in applying the provisions of this Agreement.
4. Members agree that the particular interests of the cotton-producing exporting Members should, in consultation with them, be reflected in the implementation of the provisions of this Agreement.
5. In order to facilitate the integration of the textiles and clothing sector into GATT 1994, Members should allow for continuous autonomous industrial adjustment and increased competition in their markets.
6. Unless otherwise provided in this Agreement, its provisions shall not affect the rights and obligations of Members under the provisions of the WTO Agreement and the Multilateral Trade Agreements.
7. The textile and clothing products to which this Agreement applies are set out in the Annex.(1) 1. The Panel on US - Underwear examined whether a certain transitional safeguard measure imposed by the United States was consistent with Article 6. In so doing, the Panel referred to Article 1 in explaining the overall purpose of the Agreement on Textiles and Clothing: "[T]he overall purpose of the ATC is to integrate the textiles and clothing sector into GATT 1994. Article 1 of the ATC makes this point clear. To this effect, the ATC requires notification of all existing quantitative restrictions (Article 2 of the ATC) and provides that they will have to be terminated by the year 2004 (Article 9 of the ATC)."(2) (a) "meaningful increases in access possibilities for small suppliers" 2. See the excerpt from the TMB comprehensive report referenced in paragraph 20 below. 3. In its comprehensive report to the Council for Trade in Goods on the implementation of the Agreement on Textiles and Clothing during the first stage of the integration process, the TMB stated: "[T]he TMB recalls the particular importance of a full and faithful implementation of the provisions of the ATC in favour of least-developed country Members, [...] and invites Members to examine the possibilities for providing, whenever possible, substantially increased market access opportunities for the textile and clothing products of the least-developed country Members. In such cases, the TMB expects that it will be notified accordingly."(3) 4. In the same report to the Council for Trade in Goods, the TMB stated, inter alia, the following: "[I]t appears to the TMB that Members have different perceptions on how the particular interests of the cotton-producing exporting Members should be - and were - reflected in the implementation of the provisions of the ATC. The TMB notes in this respect that the Members maintaining restrictions under Article 2 had stated that they were prepared to have consultations on this matter with the Members concerned. The TMB encourages interested Members to enter into consultations with a view to clarifying the issues related to the implementation of Article 1.4. The TMB also recalls in this regard that, should the need arise, the provisions of Article 8.4 are available for this purpose."(4) 5. The TMB's comprehensive report contains, inter alia, the following statement on the implementation of the integration provisions of the Agreement on Textiles and Clothing: "One preoccupation of the TMB is how the implementation of the integration provisions of the ATC has ensured the full and faithful implementation of the ATC within the time-frames established therein. In the view of the TMB, one of the conditions of such an implementation is a steady progress in terms of structural adjustment and, also, as a result of this, an increased competition in the Members' markets. This interrelation is recognized by Article 1.5"
...
[T]he TMB does not have information or empirical evidence regarding what has been the progress and accomplishment in terms of increasing the competition and implementing autonomous industrial adjustment. The TMB believes that it would be useful to have a better appreciation of the progress and trends of autonomous industrial adjustment, as foreseen in Article 1.5".(5)
III. Article 2 back to top Article 2 1. All quantitative restrictions within bilateral agreements maintained under Article 4 or notified under Article 7 or 8 of the MFA in force on the day before the entry into force of the WTO Agreement shall, within 60 days following such entry into force, be notified in detail, including the restraint levels, growth rates and flexibility provisions, by the Members maintaining such restrictions to the Textiles Monitoring Body provided for in Article 8 (referred to in this Agreement as the "TMB"). Members agree that as of the date of entry into force of the WTO Agreement, all such restrictions maintained between GATT 1947 contracting parties, and in place on the day before such entry into force, shall be governed by the provisions of this Agreement.
2. The TMB shall circulate these notifications to all Members for their information. It is open to any Member to bring to the attention of the TMB, within 60 days of the circulation of the notifications, any observations it deems appropriate with regard to such notifications. Such observations shall be circulated to the other Members for their information. The TMB may make recommendations, as appropriate, to the Members concerned.
3. When the 12-month period of restrictions to be notified under paragraph 1 does not coincide with the 12-month period immediately preceding the date of entry into force of the WTO Agreement, the Members concerned should mutually agree on arrangements to bring the period of restrictions into line with the agreement year(2), and to establish notional base levels of such restrictions in order to implement the provisions of this Article. Concerned Members agree to enter into consultations promptly upon request with a view to reaching such mutual agreement. Any such arrangements shall take into account, inter alia, seasonal patterns of shipments in recent years. The results of these consultations shall be notified to the TMB, which shall make such recommendations as it deems appropriate to the Members concerned.
(footnote original) 2 The "agreement year" is defined to mean a 12-month period beginning from the date of entry into force of the WTO Agreement and at the subsequent 12-month intervals.
4. The restrictions notified under paragraph 1 shall be deemed to constitute the totality of such restrictions applied by the respective Members on the day before the entry into force of the WTO Agreement. No new restrictions in terms of products or Members shall be introduced except under the provisions of this Agreement or relevant GATT 1994 provisions.(3) Restrictions not notified within 60 days of the date of entry into force of the WTO Agreement shall be terminated forthwith.
(footnote original) 3 The relevant GATT 1994 provisions shall not include Article XIX in respect of products not yet integrated into GATT 1994, except as specifically provided in paragraph 3 of the Annex.
5. Any unilateral measure taken under Article 3 of the MFA prior to the date of entry into force of the WTO Agreement may remain in effect for the duration specified therein, but not exceeding 12 months, if it has been reviewed by the Textiles Surveillance Body (referred to in this Agreement as the "TSB") established under the MFA. Should the TSB not have had the opportunity to review any such unilateral measure, it shall be reviewed by the TMB in accordance with the rules and procedures governing Article 3 measures under the MFA. Any measure applied under an MFA Article 4 agreement prior to the date of entry into force of the WTO Agreement that is the subject of a dispute which the TSB has not had the opportunity to review shall also be reviewed by the TMB in accordance with the MFA rules and procedures applicable for such a review.
6. On the date of entry into force of the WTO Agreement, each Member shall integrate into GATT 1994 products which accounted for not less than 16 per cent of the total volume of the Member's 1990 imports of the products in the Annex, in terms of HS lines or categories. The products to be integrated shall encompass products from each of the following four groups: tops and yarns, fabrics, made-up textile products, and clothing.(6)
7. Full details of the actions to be taken pursuant to paragraph 6 shall be notified by the Members concerned according to the following:
(a) Members maintaining restrictions falling under paragraph 1 undertake, notwithstanding the date of entry into force of the WTO Agreement, to notify such details to the GATT Secretariat not later than the date determined by the Ministerial Decision of 15 April 1994. The GATT Secretariat shall promptly circulate these notifications to the other participants for information. These notifications will be made available to the TMB, when established, for the purposes of paragraph 21;
(b) Members which have, pursuant to paragraph 1 of Article 6, retained the right to use the provisions of Article 6, shall notify such details to the TMB not later than 60 days following the date of entry into force of the WTO Agreement, or, in the case of those Members covered by paragraph 3 of Article 1, not later than at the end of the 12th month that the WTO Agreement is in effect. The TMB shall circulate these notifications to the other Members for information and review them as provided in paragraph 21.
8. The remaining products, i.e. the products not integrated into GATT 1994 under paragraph 6, shall be integrated, in terms of HS lines or categories, in three stages, as follows:
(a) on the first day of the 37th month that the WTO Agreement is in effect, products which accounted for not less than 17 per cent of the total volume of the Member's 1990 imports of the products in the Annex. The products to be integrated by the Members shall encompass products from each of the following four groups: tops and yarns, fabrics, made-up textile products, and clothing;
(b) on the first day of the 85th month that the WTO Agreement is in effect, products which accounted for not less than 18 per cent of the total volume of the Member's 1990 imports of the products in the Annex. The products to be integrated by the Members shall encompass products from each of the following four groups: tops and yarns, fabrics, made-up textile products, and clothing;
(c) on the first day of the 121st month that the WTO Agreement is in effect, the textiles and clothing sector shall stand integrated into GATT 1994, all restrictions under this Agreement having been eliminated.
9. Members which have notified, pursuant to paragraph 1 of Article 6, their intention not to retain the right to use the provisions of Article 6 shall, for the purposes of this Agreement, be deemed to have integrated their textiles and clothing products into GATT 1994. Such Members shall, therefore, be exempted from complying with the provisions of paragraphs 6 to 8 and 11.
10. Nothing in this Agreement shall prevent a Member which has submitted an integration programme pursuant to paragraph 6 or 8 from integrating products into GATT 1994 earlier than provided for in such a programme. However, any such integration of products shall take effect at the beginning of an agreement year, and details shall be notified to the TMB at least three months prior thereto for circulation to all Members.
11. The respective programmes of integration, in pursuance of paragraph 8, shall be notified in detail to the TMB at least 12 months before their coming into effect, and circulated by the TMB to all Members.
12. The base levels of the restrictions on the remaining products, mentioned in paragraph 8, shall be the restraint levels referred to in paragraph 1.
13. During Stage 1 of this Agreement (from the date of entry into force of the WTO Agreement to the 36th month that it is in effect, inclusive) the level of each restriction under MFA bilateral agreements in force for the 12-month period prior to the date of entry into force of the WTO Agreement shall be increased annually by not less than the growth rate established for the respective restrictions, increased by 16 per cent.
14. Except where the Council for Trade in Goods or the Dispute Settlement Body decides otherwise under paragraph 12 of Article 8, the level of each remaining restriction shall be increased annually during subsequent stages of this Agreement by not less than the following:
(a) for Stage 2 (from the 37th to the 84th month that the WTO Agreement is in effect, inclusive), the growth rate for the respective restrictions during Stage 1, increased by 25 per cent;
(b) for Stage 3 (from the 85th to the 120th month that the WTO Agreement is in effect, inclusive), the growth rate for the respective restrictions during Stage 2, increased by 27 per cent.
15. Nothing in this Agreement shall prevent a Member from eliminating any restriction maintained pursuant to this Article, effective at the beginning of any agreement year during the transition period, provided the exporting Member concerned and the TMB are notified at least three months prior to the elimination coming into effect. The period for prior notification may be shortened to 30 days with the agreement of the restrained Member. The TMB shall circulate such notifications to all Members. In considering the elimination of restrictions as envisaged in this paragraph, the Members concerned shall take into account the treatment of similar exports from other Members.
16. Flexibility provisions, i.e. swing, carryover and carry forward, applicable to all restrictions maintained pursuant to this Article, shall be the same as those provided for in MFA bilateral agreements for the 12-month period prior to the entry into force of the WTO Agreement. No quantitative limits shall be placed or maintained on the combined use of swing, carryover and carry forward.
17. Administrative arrangements, as deemed necessary in relation to the implementation of any provision of this Article, shall be a matter for agreement between the Members concerned. Any such arrangements shall be notified to the TMB.
18. As regards those Members whose exports are subject to restrictions on the day before the entry into force of the WTO Agreement and whose restrictions represent 1.2 per cent or less of the total volume of the restrictions applied by an importing Member as of 31 December 1991 and notified under this Article, meaningful improvement in access for their exports shall be provided, at the entry into force of the WTO Agreement and for the duration of this Agreement, through advancement by one stage of the growth rates set out in paragraphs 13 and 14, or through at least equivalent changes as may be mutually agreed with respect to a different mix of base levels, growth and flexibility provisions. Such improvements shall be notified to the TMB.
19. In any case, during the duration of this Agreement, in which a safeguard measure is initiated by a Member under Article XIX of GATT 1994 in respect of a particular product during a period of one year immediately following the integration of that product into GATT 1994 in accordance with the provisions of this Article, the provisions of Article XIX, as interpreted by the Agreement on Safeguards, will apply, save as set out in paragraph 20.
20. Where such a measure is applied using non-tariff means, the importing Member concerned shall apply the measure in a manner as set forth in paragraph 2(d) of Article XIII of GATT 1994 at the request of any exporting Member whose exports of such products were subject to restrictions under this Agreement at any time in the one-year period immediately prior to the initiation of the safeguard measure. The exporting Member concerned shall administer such a measure. The applicable level shall not reduce the relevant exports below the level of a recent representative period, which shall normally be the average of exports from the Member concerned in the last three representative years for which statistics are available. Furthermore, when the safeguard measure is applied for more than one year, the applicable level shall be progressively liberalized at regular intervals during the period of application. In such cases the exporting Member concerned shall not exercise the right of suspending substantially equivalent concessions or other obligations under paragraph 3(a) of Article XIX of GATT 1994.
21. The TMB shall keep under review the implementation of this Article. It shall, at the request of any Member, review any particular matter with reference to the implementation of the provisions of this Article. It shall make appropriate recommendations or findings within 30 days to the Member or Members concerned, after inviting the participation of such Members. 6. At its meeting in December 1999, the TMB addressed the concern expressed by a number of Members that the United States had introduced a new restraint measure on exports of certain products from Turkey. The measure was published under the United States domestic procedures, but not notified to the TMB, since, according to the United States and Turkey, it "was taken pursuant to a provision of the ATC which does not require notification to the TMB".(7) The TMB "examine[d] briefly all the provisions of the ATC with a view to identifying under which provision such a measure could have been agreed without requiring its notification to the TMB", stating as follows: "Furthermore, restrictions maintained under Article 2 had to be notified, in detail, within 60 days following the entry into force of the WTO Agreement. A measure that had not been notified at all, obviously could not fall under the provisions of Article 2. Article 2.4 for its part states, inter alia, that '[n]o new restrictions in terms of products or Members shall be introduced except under the provisions of this Agreement or relevant GATT 1994 provisions', but no provision under Article 2 provides the possibility of introducing new restrictions. The TMB noted, therefore, that the particular measure subject to its examination could not have been taken pursuant to Article 2."(8) 7. In its report of the meeting in December 1999, when examining a new restriction introduced by the United States on Turkey's exports of certain textile products, as part of a broader understanding reached between the two Members, the TMB recalled the content of Article 2.4 of the Agreement on Textiles and Clothing and concluded that the measure agreed upon by Turkey and the United States had "not been demonstrated to be in conformity with the provisions of the ATC".(9) "In concluding its examination of the measure mutually agreed between Turkey and the United States, the TMB recalled that Article 2.4 of the ATC states that "[n]o new restrictions in terms of products or Members shall be introduced except under the provisions of this Agreement or relevant GATT 1994 provisions". After having considered the new measure against the different provisions of the ATC on the basis of the information available to it [...], the TMB concluded that the measure agreed upon by Turkey and the United States, affecting imports by the United States of category 352/652 products, had not been demonstrated to be in conformity with the provisions of the ATC."(10) (a) The issue of "ex-positions" 8. At its meeting in May 1997, the TMB examined a notification by Colombia, on behalf of itself and certain other WTO Members, regarding certain aspects of the European Communities' integration programme notified under Article 2.6. With respect to the treatment of certain products for which only a respective part (defined as "ex-position" in the Harmonized System) is included in "List of Products covered by this Agreement", the TMB stated as follows: "The TMB agreed with Colombia that the integration programme of the European Community for the first stage had also included certain imports which did not qualify for integration as they did not fall under the coverage of the ATC, as defined in its Annex. The TMB observed that with respect to a number of HS ex-positions concerned this was not contested by the European Community, which in particular referred to difficulties or the impossibility of providing trade data for these products strictly conforming to the description contained in the Annex to the ATC....
Also due to the lack of reliable statistical information, the TMB was not in a position to pronounce itself on the magnitude of the discrepancies which had occurred. It appeared however possible that after necessary corrections, the EC's integration programme could account for less than 16 per cent of the EC's total volume of 1990 imports. The TMB believed that the size of the shortfall, if any, could best be assessed by the importing Member itself.
The TMB, therefore, recommended that the European Community re-examine its first stage integration programme in light of the TMB's comments and findings, [...]. The TMB expected the European Community to report on the results of this examination as rapidly as possible. The TMB agreed that it would keep this matter under review."(11) 9. On the issue of "ex-positions", at its meeting in May 1997, the TMB further stated: "During its review [...] of the notification made by Colombia, [...] alleging certain discrepancies in the programme of integration notified by the European Community under paragraph 6 of Article 2 of the ATC [...], the TMB noted the statement of the EC's representative that several other WTO Members had included in the list of products to be integrated in the first and/or second stages of implementation of the ATC products of those HS lines in the Annex for which only part of the line fell under the coverage of the ATC (indicated as 'ex' HS lines in the Annex).
With regard to the programmes for the first stage of integration which had already been reviewed by the TMB, the Body noted that it had not ascertained whether the statistical information provided by Members referred to the whole HS line or only to that portion of the HS line covered by the ATC. The TMB, therefore, decided to verify with the Members concerned whether the volume of imports they had notified for the "ex HS lines" related precisely to the products described in the Annex.
With respect to the second stage of integration the review of which had not yet been completed by the TMB, the Body decided to pay due regard to these issues."(12) 10. Again, on the issue of "ex-positions", at its meeting in July 1997, the TMB added: "The TMB had a follow-up discussion on this matter which led to a conclusion according to which, in principle, all the Members which had notified integration programmes may be affected by technical problems resulting essentially from the non-availability of statistical information corresponding to the precise product descriptions contained in the Annex to the ATC, independently of whether or not they had included 'ex HS items' in their respective integration programmes for Stage 1 and/or Stage 2. This resulted from the fact that in quantifying and notifying the total volume of 1990 imports each Member concerned had to include the relevant data related to the 'ex HS lines' defined in the Annex to the ATC. Therefore, the TMB decided to request that all Members which had submitted integration programmes, including those which had not as yet included in such programmes 'ex HS items', ascertain whether the statistical data counted in calculating the total volume of the Member's 1990 imports of the products in the Annex referred to the whole HS lines, or only to that portion of those HS lines which was covered by the ATC. The TMB expected that Members would report to it on the outcome of such verification."(13) 11. In its first comprehensive report in July 1997, the TMB observed: "[T]he TMB in some instances took note of integration programmes which, in certain respects, did not fully meet the technical criteria established under Article 2.6. This concerned cases where the data were not available in volume, or for the year 1990, or where the share of integration was calculated relative to data for the textiles and clothing sector as a whole since data for the exact product coverage of the ATC were not available. Prior to taking note of such notifications, the TMB was assured that no better data could be obtained".(14) 12. As regards late notifications, at its meeting in December 1996, the TMB stated: "With respect to notifications addressed to the TMB after the respective deadlines foreseen in the ATC, the TMB reiterated that its taking note of late notifications was without prejudice to the legal status of such notifications."(15) 13. At its meeting in May 1997, in examining the notifications of a number of Members pursuant to Articles 2.8(a) and 2.11, the TMB held: "With regard to those notifications mentioned above for which the calculation of the share of the products integrated had been made on the basis of value, or of volume of imports of a different base year other than 1990, the TMB ensured that no better data were available and that the Members concerned had followed the same approach as for the notification they had made pursuant to paragraphs 6 and 7(b) of Article 2."(16) 14. With respect to the treatment of late notifications, see paragraph 12 above. (a) Implementation of the growth-on-growth provisions 15. At its meeting in July 2002, the TMB considered it necessary, in the context of the review of several notifications received pursuant to Articles 2.1 and 2.2, to address the cross-cutting issue of the manner in which the growth-on-growth provisions provided for in Articles 2.13 and 2.14 had to be implemented with respect to recently acceded Members, such as China and Chinese Taipei.(17) 16. In relation to China, the TMB concluded: "[T]hat since the relevant provisions of the legal instruments of China's accession did not provide an unambiguous guidance, it was not possible to provide a clear answer to the question of whether the restraining Members had also been required to apply the not less than 16 per cent increase in the respective growth rates, as provided for in Article 2.13, for the Stage 1 integration process. The lack of a clear answer regarding this aspect had led the TMB to consider those minimum requirements which had to be implemented by the Members concerned. These minimum requirements could be summarized in the following: as from 1 January 2002, the base levels in force on 10 December 2001 had to be increased by the respective growth rates applied for the year 2001 (prior to China's accession), increased by the full 25 per cent applicable to Stage 2 and further increased by the 27 per cent applicable to Stage 3."(18) 17. Concerning Chinese Taipei, the TMB stated: "[S]ince the relevant provisions of the legal instruments of Chinese Taipei's accession did not provide unambiguous guidance in this regard, it was not possible to give a clear answer to the question of whether restraining Members had also been required to apply the not less than 16 per cent, followed by the not less than 25 per cent increase in the respective growth rates, as provided for in Articles 2.13 and 2.14(a) for Stages 1 and 2, respectively. The lack of a clear reply regarding this aspect led the TMB to consider those minimum requirements which had to be implemented by the Members concerned. The TMB concluded that these minimum requirements implied that on 1 January 2002, the base levels in force on 31 December 2001 had to be increased by the respective growth rates applied in 2001, as further increased by 27 per cent which was applicable for Stage 3."(19) 18. Concerning a mutually agreed solution notified by Pakistan under Article 2.17 and by the United States under Article 5, which provided for, inter alia, the introduction of a new restraint (on United States imports from Pakistan on products falling under US categories 666-S and 666-P), the TMB indicated that it "did not see how the imposition of [...] new restrictions, even if mutually agreed between the two Members, could be considered to be necessary in relation to the implementation of the provisions of Article 2": "The TMB also recalled that according to Article 2.17, '[a]dministrative arrangements, as deemed necessary in relation to the implementation of any provision' of Article 2 could be agreed between the Members concerned. As the restrictions on category 666 - S and 666 - P products had not been notified pursuant to Article 2.1 and, therefore, did not fall under the scope of the provisions of Article 2, the TMB did not see how the imposition of these new restrictions, even if mutually agreed between the two Members, could be considered to be necessary in relation to the implementation of the provisions of Article 2. The TMB also observed that the administrative arrangements concluded between the United States and Pakistan ... did not provide for the introduction of new quantitative restrictions...
The TMB, therefore, concluded that there appeared to be no justification to apply new quantitative restrictions under Article 2.17."(20) 19. With respect to the same subject-matter examined under Article 5, see also the excerpts from the reports of the TMB referenced in paragraphs 28-35 below. 20. In examining the notifications provided by some Members on the improvements in access provided to those Members whose exports had been subject to restrictions on 31 December 1994 and whose restrictions represented 1.2 per cent or less of the total volume of the importing Members' restrictions on 31 December 1991, the TMB stated as follows: "The TMB observed that the implementation of this provision of the ATC had been made by the Members concerned using different methodologies and no Member used the option of equivalent changes with respect to a different mix of base levels, growth and flexibility provisions. It was observed that Article 2.18 does not provide precise guidance as to how to implement the advancement by one stage of the growth rates set out in Articles 2.13 and 2.14, or how to apply 'at least equivalent changes as may be mutually agreed with respect to a different mix of base levels, growth and flexibility provisions'. However, it was noted that the result in terms of market access in the first stage would have been improved if the methodology chosen for the advancement by one stage of the growth rates included the growth factor of the first stage, as done by one Member."(21) 21. See the excerpts from the reports of the TMB referenced in paragraphs 8-13 above.
IV. Article 3 back to top Article 3 1. Within 60 days following the date of entry into force of the WTO Agreement, Members maintaining restrictions(4) on textile and clothing products (other than restrictions maintained under the MFA and covered by the provisions of Article 2), whether consistent with GATT 1994 or not, shall (a) notify them in detail to the TMB, or (b) provide to the TMB notifications with respect to them which have been submitted to any other WTO body. The notifications should, wherever applicable, provide information with respect to any GATT 1994 justification for the restrictions, including GATT 1994 provisions on which they are based.
(footnote original) 4 Restrictions denote all unilateral quantitative restrictions, bilateral arrangements and other measures having a similar effect.
2. Members maintaining restrictions falling under paragraph 1, except those justified under a GATT 1994 provision, shall either:
(a) bring them into conformity with GATT 1994 within one year following the entry into force of the WTO Agreement, and notify this action to the TMB for its information; or
(b) phase them out progressively according to a programme to be presented to the TMB by the Member maintaining the restrictions not later than six months after the date of entry into force of the WTO Agreement. This programme shall provide for all restrictions to be phased out within a period not exceeding the duration of this Agreement. The TMB may make recommendations to the Member concerned with respect to such a programme.
3. During the duration of this Agreement, Members shall provide to the TMB, for its information, notifications submitted to any other WTO bodies with respect to any new restrictions or changes in existing restrictions on textile and clothing products, taken under any GATT 1994 provision, within 60 days of their coming into effect.
4. It shall be open to any Member to make reverse notifications to the TMB, for its information, in regard to the GATT 1994 justification, or in regard to any restrictions that may not have been notified under the provisions of this Article. Actions with respect to such notifications may be pursued by any Member under relevant GATT 1994 provisions or procedures in the appropriate WTO body.
5. The TMB shall circulate the notifications made pursuant to this Article to all Members for their information. 22. With respect to the measure concerning the United States and Turkey, referred to in paragraphs 6 and 7 above, the TMB held: "Since restrictions other than those covered by the provisions of Article 2 also had to be notified within 60 days following the date of entry into force of the WTO Agreement, the TMB observed that the restraint could not have been agreed between Turkey and the United States under the provisions of Article 3.1 either. Article 3.3 does not exclude the possibility, inter alia, of introducing new restrictions on textile and clothing products. However, it contains not only the requirement of 'double' notification (i.e. to the appropriate WTO body and also to the TMB, for its information), but also limits the possibility of applying, inter alia, new restrictions to those cases where the measures were taken under any GATT 1994 provision. As to the restraint agreed between Turkey and the United States, the TMB noted that, according to the joint communication submitted by the two Members concerned, this measure had not been introduced under a GATT 1994 provision, but that it had been taken pursuant to a provision of the ATC. On this basis the TMB observed that the new restraint in question could not have been introduced pursuant to the provisions of Article 3."(22) 23. In reviewing, at its meeting in November 2002, an Article 3.1 notification received from China, following its accession to the WTO, the TMB considered, inter alia, the scope of the application of Article 3, i.e. whether it also applies to export restrictions. The TMB noted: "[T]hat Article 3.1 uses the word 'restrictions' without any additional qualifications and that the footnote to this provision related to the same term states the following: 'Restrictions denote all unilateral quantitative restrictions, bilateral arrangements and other measures having a similar effect.'(23) The language of Article 3 does not limit the application of this provision to any specific type of restriction. The export quotas maintained by China affecting silk yarn and woven fabrics of silk are, undoubtedly, unilateral quantitative restrictions, corresponding to the definition provided in the footnote referred to above. Therefore, also in view of the lack of any further precision in the respective provision of the ATC, export restrictions are not a priori excluded from the scope of application of Article 3. This conclusion is also in line with past practice in the TMB, whereby the notification under Article 3 of certain measures affecting exports of some textile products was not questioned.(24)
The TMB noted, furthermore, that the additional notification by China referred to 'restrictions on certain textile products which fall under the coverage of ATC and are subject to Article 3 of [that] Agreement'. This reference presumably indicated that, in the view of China, the measures in question should be considered under the applicable provisions of the ATC. It was observed that the notification of these export restrictions under Articles 3.1 and 3.2(b) did not appear to be in contradiction with the relevant portion of the Report of the Working Party on the Accession of China.(25)"(26) 24. At its meeting in February 1996, the TMB considered a notification by Hungary of the phase-out programme to be applied to the restrictions maintained by that Member under Article 3.1. In taking note of this programme, the TMB: "[O]bserved that, in view of the general nature of this programme, it expected that the details of its implementation in the respective stages would be notified to the Body prior to their implementation, for the Body's consideration".(27) 25. At its meeting in March 1996, "the TMB reverted to its consideration of a notification made by Japan, under Article 3.2(b), of the phase out of the measures notified under Article 3.1. In taking note of this phase-out programme the TMB expressed the expectation that its implementation, in conformity with paragraph 2(b) of Article 3, would be such as to provide appropriate progressive increases to the level of restrictions on imports of silk yarn and silk fabric from Korea."(28)
V. Article 4 back to top Article 4 1. Restrictions referred to in Article 2, and those applied under Article 6, shall be administered by the exporting Members. Importing Members shall not be obliged to accept shipments in excess of the restrictions notified under Article 2, or of restrictions applied pursuant to Article 6.
2. Members agree that the introduction of changes, such as changes in practices, rules, procedures and categorization of textile and clothing products, including those changes relating to the Harmonized System, in the implementation or administration of those restrictions notified or applied under this Agreement should not: upset the balance of rights and obligations between the Members concerned under this Agreement; adversely affect the access available to a Member; impede the full utilization of such access; or disrupt trade under this Agreement.
3. If a product which constitutes only part of a restriction is notified for integration pursuant to the provisions of Article 2, Members agree that any change in the level of that restriction shall not upset the balance of rights and obligations between the Members concerned under this Agreement.
4. When changes mentioned in paragraphs 2 and 3 are necessary, however, Members agree that the Member initiating such changes shall inform and, wherever possible, initiate consultations with the affected Member or Members prior to the implementation of such changes, with a view to reaching a mutually acceptable solution regarding appropriate and equitable adjustment. Members further agree that where consultation prior to implementation is not feasible, the Member initiating such changes will, at the request of the affected Member, consult, within 60 days if possible, with the Members concerned with a view to reaching a mutually satisfactory solution regarding appropriate and equitable adjustments. If a mutually satisfactory solution is not reached, any Member involved may refer the matter to the TMB for recommendations as provided in Article 8. Should the TSB not have had the opportunity to review a dispute concerning such changes introduced prior to the entry into force of the WTO Agreement, it shall be reviewed by the TMB in accordance with the rules and procedures of the MFA applicable for such a review. 26. In the context of examining the measure introduced by the United States on exports of certain products from Turkey, referred to in paragraphs 6 and 7 above, the TMB held with respect to Article 4: "[T]hat Article 4.1 deals with the administration of 'restrictions referred to in Article 2, and those applied under Article 6'. Article 4.2 states that 'Members agree that the introduction of changes, such as changes in practices, rules, procedures and categorization of textile and clothing products including those changes relating to the Harmonized System, in the implementation or administration of those restrictions notified or applied under this Agreement should not: upset the balance of rights and obligations between Members concerned under this Agreement; adversely affect the access available to a Member; impede the full utilization of such access; or disrupt trade under this Agreement.' Article 4.4 provides, inter alia, the possibility to reach a 'mutually acceptable solution regarding appropriate and equitable adjustment' between Members when necessary changes, in the sense of Article 4.2, are introduced in the implementation or administration of existing restrictions. The TMB noted that, according to Article 4.4, such mutually acceptable solutions did not have to be notified to the TMB. The TMB recalled its findings that the new restriction could not have been agreed pursuant to the provisions of Articles 2 and 6. It was also observed that Article 4.4 does not provide explicit guidance regarding the scope of the adjustment that can be agreed between the Members concerned in the framework of the mutually acceptable solution. A reading according to which the introduction of a new restriction, in the sense of Article 2.4, can be agreed upon pursuant to Article 4.4 as an adjustment to balance possible improvements in the implementation or administration 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 relates to the implementation or administration of the restrictions referred to in Article 2, or applied under Article 6. Also, the construction of Article 4 and its language seem to suggest that when changes, in the sense of Article 4.2 are introduced, the appropriate and equitable adjustment referred to in Article 4.4 can only involve and affect the restrictions that have already been in place and notified pursuant to Article 2 or Article 6."(29)
VI. Article 5 back to top Article 5 1. Members agree that circumvention by transshipment, re-routing, false declaration concerning country or place of origin, and falsification of official documents, frustrates the implementation of this Agreement to integrate the textiles and clothing sector into GATT 1994. Accordingly, Members should establish the necessary legal provisions and/or administrative procedures to address and take action against such circumvention. Members further agree that, consistent with their domestic laws and procedures, they will cooperate fully to address problems arising from circumvention.
2. Should any Member believe that this Agreement is being circumvented by transshipment, re-routing, false declaration concerning country or place of origin, or falsification of official documents, and that no, or inadequate, measures are being applied to address and/or to take action against such circumvention, that Member should consult with the Member or Members concerned with a view to seeking a mutually satisfactory solution. Such consultations should be held promptly, and within 30 days when possible. If a mutually satisfactory solution is not reached, the matter may be referred by any Member involved to the TMB for recommendations.
3. Members agree to take necessary action, consistent with their domestic laws and procedures, to prevent, to investigate and, where appropriate, to take legal and/or administrative action against circumvention practices within their territory. Members agree to cooperate fully, consistent with their domestic laws and procedures, in instances of circumvention or alleged circumvention of this Agreement, to establish the relevant facts in the places of import, export and, where applicable, transshipment. It is agreed that such cooperation, consistent with domestic laws and procedures, will include: investigation of circumvention practices which increase restrained exports to the Member maintaining such restraints; exchange of documents, correspondence, reports and other relevant information to the extent available; and facilitation of plant visits and contacts, upon request and on a case-by-case basis. Members should endeavour to clarify the circumstances of any such instances of circumvention or alleged circumvention, including the respective roles of the exporters or importers involved.
4. Where, as a result of investigation, there is sufficient evidence that circumvention has occurred (e.g. where evidence is available concerning the country or place of true origin, and the circumstances of such circumvention), Members agree that appropriate action, to the extent necessary to address the problem, should be taken. Such action may include the denial of entry of goods or, where goods have entered, having due regard to the actual circumstances and the involvement of the country or place of true origin, the adjustment of charges to restraint levels to reflect the true country or place of origin. Also, where there is evidence of the involvement of the territories of the Members through which the goods have been transshipped, such action may include the introduction of restraints with respect to such Members. Any such actions, together with their timing and scope, may be taken after consultations held with a view to arriving at a mutually satisfactory solution between the concerned Members and shall be notified to the TMB with full justification. The Members concerned may agree on other remedies in consultation. Any such agreement shall also be notified to the TMB, and the TMB may make such recommendations to the Members concerned as it deems appropriate. If a mutually satisfactory solution is not reached, any Member concerned may refer the matter to the TMB for prompt review and recommendations.
5. Members note that some cases of circumvention may involve shipments transiting through countries or places with no changes or alterations made to the goods contained in such shipments in the places of transit. They note that it may not be generally practicable for such places of transit to exercise control over such shipments.
6. Members agree that false declaration concerning fibre content, quantities, description or classification of merchandise also frustrates the objective of this Agreement. Where there is evidence that any such false declaration has been made for purposes of circumvention, Members agree that appropriate measures, consistent with domestic laws and procedures, should be taken against the exporters or importers involved. Should any Member believe that this Agreement is being circumvented by such false declaration and that no, or inadequate, administrative measures are being applied to address and/or to take action against such circumvention, that Member should consult promptly with the Member involved with a view to seeking a mutually satisfactory solution. If such a solution is not reached, the matter may be referred by any Member involved to the TMB for recommendations. This provision is not intended to prevent Members from making technical adjustments when inadvertent errors in declarations have been made. 27. In the context of examining the measure introduced by the United States on exports of certain products from Turkey, referred to in paragraphs 6 and 7 above, the TMB held with respect to Article 5: "[T]hat it provides, inter alia, the possibility of taking certain actions, after consultations had been held between the Members concerned with a view to arriving at a mutually satisfactory solution between them. Article 5.4 stipulates, inter alia, that '... where there is evidence of the involvement of territories of the Members through which the goods have been transshipped, such action may include the introduction of restraints with respect to such Members.' Article 5.4 also states that '[t]he Members concerned may agree on other remedies in consultation'. However, any action taken pursuant to Article 5.4 has to be notified to the TMB. In case of evidence that the ATC is being circumvented by false declaration concerning fibre content, quantities, description or classification of merchandise, Article 5.6 allows the Members concerned to consult with a view to seeking a mutually satisfactory solution and the same Article does not require the notification of such mutually agreed solutions to the TMB. At the same time, the TMB observed that Article 5 refers to situations of 'circumvention by transshipment, re-routing, false declaration concerning country or place of origin, and falsification of official documents', and that neither Turkey nor the United States had invoked or reported such a situation. Without prejudice as to whether in particular circumstances a new restriction can be introduced, or not, pursuant to the provisions of Article 5, the TMB, on the basis of the information available to it, concluded that the provision of the ATC referred to by both Turkey and the United States could not be Article 5."(30) (a) "appropriate action, to the extent necessary to address the problem" 28. In reviewing a number of administrative arrangements agreed between the United States and several other Members whereunder triple charges may be imposed on quotas to counter circumventions, the TMB stated: "[T]hat Article 5 of the ATC contained detailed descriptions of the rules and procedures to be followed. It appeared to the TMB that some aspects of the related provisions included in the administrative arrangements could go beyond what was specified in Article 5. The TMB noted, inter alia, that paragraph 4 of Article 5 of the ATC seemed to provide some flexibility in terms of remedies or agreed actions that could be foreseen in cases when circumvention has occurred. It observed, however, that Article 5 contained no mention of the possibility for the importing Member to impose triple charges on quotas, as a deterrent to circumvention. The TMB noted in this regard that this provision had not been utilized by the United States.
The TMB recalled that the United States had stated that when provisions of the administrative arrangements were inconsistent with the ATC, the provisions of the ATC would apply. The TMB understood that this statement applied to each and every provision of the arrangements notified. The TMB expected, therefore, that all the provisions of these administrative arrangements would be implemented by the respective Members in conformity with the relevant provisions of the ATC."(31) (b) "Members concerned may agree on other remedies in consultation" 29. Concerning a mutually agreed solution notified by Pakistan under Article 2.17 and by the United States under Article 5, referenced in paragraph 18 above, which provided, inter alia, for the introduction of a new restraint (on United States imports from Pakistan on products falling under United States categories 666-S and 666-P), the TMB examined whether Article 5.4 permits the introduction of new quantitative restrictions, and began by noting that the introduction of a new restriction was not an "appropriate action" within the meaning of Article 5.4: "The TMB observed that, apart from the third sentence of Article 5.4, the introduction of a new restriction, even if mutually agreed between the Members concerned, was not mentioned in Article 5.4 as an 'appropriate action, to the extent necessary to address the problem' when circumvention as defined in Article 5.1 had occurred. Furthermore, the TMB understood that the introduction of restrictions, set out in the third sentence of Article 5.4, related only to the true country or place of origin in case there had been evidence of its involvement in the transshipment. This provision, therefore, could not per se allow the introduction of new restrictions on imports from Pakistan in the particular case when circumvention had occurred.
The TMB also observed that while the second and third sentences of Article 5.4 specified possible actions that could be taken when circumvention had occurred, they did not provide an exhaustive list for such actions. This was made clear by the language of the second sentence as well as by the fifth sentence of Article 5.4, the latter providing that '[t]he Members concerned may agree on other remedies in consultation'."(32) 30. While examining the measure referred to in paragraph 29 above, the TMB noted with respect to the fifth sentence of Article 5.4 that "the Agreement did not specify what, in the context of this paragraph, could or could not constitute the 'other remedies'" and continued: "It could be argued that the 'other remedies' referred to in Article 5.4 did not include the permission to introduce new quantitative restrictions, since Article 5.4 in itself as well as the broader context as determined by the ATC provided sufficient guidance to the Members concerned to develop a correct understanding on what could or could not constitute such 'other remedies' in the sense of Article 5.4. It could be contended that Article 5.4 was sufficiently specific in defining what type of actions can be taken in response to well defined circumstances. The second sentence of this Article, in addressing the issue of what kind of action could be taken in the relationship between the importing Member (the United States) and the Member constituting the true place of origin (Pakistan) of the goods allegedly circumvented (cotton bedsheets), specified that '[s]uch action may include ..., where goods have entered, having due regard to the actual circumstances and the involvement of the country or place of true origin, the adjustment of charges to restraint levels to reflect the true country or place of origin'. This formulation seemed to imply that the action taken should affect the product that was subject to circumvention. Since only the exports of products that had already been subject to restrictions could be circumvented, the remedy for such circumvention could not affect products other than those with respect to which circumvention had been claimed. Reading the second sentence of Article 5.4 in conjunction with the fifth sentence, it appeared, therefore, that the two Members could have agreed on adjustments of charges to the restraint level established for the category 361 products or on 'other remedies' affecting the same products, but not on 'other remedies' affecting other products, like category 666 - S and 666 - P products.
In addition, the third sentence of Article 5.4 explicitly allowed the introduction of new restrictions, but did so only in cases where there was evidence of the involvement of the territories of (third) Members through which the goods had been transhipped [...]. If this provision were read together with the fifth sentence of Article 5.4, it appeared that remedies other than the introduction of restrictions on imports of category 361 products could also have been foreseen, but these actions had to be limited to the products transshipped and to the Member through which the transshipment was effected. The TMB understood that no restrictions had been introduced by the United States against imports of category 361 products from the Member through which the products of Pakistani origin had allegedly been transhipped. Also, the TMB was not aware of any other action taken by the United States vis-à-vis imports of the transshipped products from the Member involved in this transshipment. In any case, this sentence did not provide authorization for the introduction of new restrictions on imports from Pakistan."(33) 31. In further support of the proposition that the quantitative restriction at issue was not permitted under Article 5.4, the TMB referred to "the broader context" of the Agreement on Textiles and Clothing so as "to ensure the full integration of trade in the covered products into the GATT 1994 rules and disciplines" and that therefore "the ATC carefully circumscribed the possibilities for maintaining or introducing quantitative restrictions": "It could be contended that the broader context as defined by the ATC also confirmed the statements included in [the] paragraphs [cited in paragraph 29 above]. It could be argued that, since the Agreement sets out provisions to be applied by Members during a transition period for the integration of the textiles and clothing sector into GATT 1994 and thus the ultimate objective of the Agreement was to ensure the full integration of trade in the covered products into the GATT 1994 rules and disciplines, the ATC carefully circumscribed the possibilities for maintaining or introducing quantitative restrictions; (apart from the third sentence of Article 5.4) the relevant provisions were contained in Articles 2, 3 and 6. As indicated earlier, the provisions of Articles 2 and 3 were not applicable to the particular case in question. While Article 6 allowed for the introduction of new restrictions for a limited duration, if the conditions specified in that Article were fully met, it was observed, however, that neither of the two Members had invoked the provisions of Article 6 as a justification for the introduction of the new restrictions. Keeping in mind also the provisions of Article 2.4, it could be concluded on the basis of the arguments presented above that the introduction of the new restrictions on imports of category 666 products from Pakistan, even if mutually agreed between the two Members, could not be justified under the ATC."(34) 32. With a view to giving due consideration to possible readings to the fifth sentence of Article 5.4 other than its interpretation referenced in paragraphs 29-31 above, the TMB also noted: "It could also appear, however, that the language of the fifth sentence of Article 5.4 was vague and permissive, not setting any limitation on the kind of actions that would constitute possible 'other remedies'. It could, therefore, be argued that this formulation provided broad discretion to the Members concerned in reaching an agreement, in consultation, on what they consider in a particular case to be appropriate remedies (other than those defined in the preceding sentences of the same Article). On the basis of such a reasoning, one could not exclude an argument that the introduction of restrictions on products previously not subject to such restrictions could be considered as a possibility for providing 'other remedies'."(35) 33. With respect to the treatment of the measure at issue under Article 2.17, see the excerpts from the reports of the TMB referenced in paragraph 18 above. Also, with respect to the same issue under Article 5.6, see the excerpt from the report of the TMB referenced in paragraph 34 below. 34. Concerning a mutually agreed solution notified by Pakistan under Article 2.17 and by the United States under Article 5, which provided, inter alia, for the introduction of a new restraint (on United States imports from Pakistan on products falling under United States categories 666-S and 666-P), the TMB examined, with respect to the measure referenced in paragraphs 18 and 29 above, whether the introduction of new quantitative import restrictions was permitted under Article 5.6, and held that "it could be argued that the introduction of the new restraints, even if mutually agreed between the two Members, could not be justified in the context of Article 5.6": "It could be argued that Article 5.6 did not allow for taking such measures as the introduction of new quantitative restrictions. The second sentence of Article 5.6 envisaged that appropriate measures, consistent with domestic laws and procedures, should be taken against the exporters or importers involved. Therefore, it appeared that a mutually satisfactory solution reached pursuant to this provision would encompass appropriate measures against the firms involved (exporters and/or importers), as opposed to those against governments. In addition, while Article 5.6 was not precise in providing Members with modalities for taking 'appropriate measures' in cases where false declarations had been made for purposes of circumvention, it could be contended that the loose disciplines attached to this provision (e.g. there was no requirement to notify the appropriate measures agreed to the TMB), compared to other provisions concerning the taking of measures having a restrictive effect embodied in the ATC, raised doubts as to whether the introduction of new restrictions could be contemplated under this particular provision. Based on these considerations as well as on the analysis regarding the broader context defined by the ATC, ... it could be argued that the introduction of the new restraints, even if mutually agreed between the two Members, could not be justified in the context of Article 5.6.
It could also be argued, that if one accepted that (i) incorrect marking of cotton bedsheets had been, at least in part, the root of the problem identified and that (ii) this practice amounted to a false declaration as defined in Article 5.6, the language of this Article authorized the Members concerned to agree, in case when no, or inadequate, administrative measures were being applied to address and/or to take action against such circumvention, on any kind of mutually satisfactory solution, possibly including the introduction of new restraints. Such a conclusion would rely, inter alia, on the lack in this language of any explicit indication regarding the possible nature of the measures that could be agreed between the Members as a mutually satisfactory solution. The TMB declined to take a definitive position at this stage regarding the applicability of this provision, as well as on the conformity of the actions taken with Article 5.6."(36) 35. With respect to the treatment of the measure at issue under Article 2.17, see excerpts from the reports of the TMB referenced in the section dealing with Article 2.17, paragraph 18 above.
Footnotes: 1. With
respect to the Annex, see Section XI. (The list of textile and clothing
products is omitted). back to text |
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