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07 October 2004

Goods Council starts final review of textiles accord

The WTO Council for Trade in Goods, on 1 October, started its third and final review of the implementation of the Agreement on Textiles and Clothing (ATC), under which all remaining quota arrangements in the sector would be removed on 1 January 2005.

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The Chairman of the WTO Textiles Monitoring Body (TMB), Mr. András Szepesi, presented the main document of the major review: a 200-page report of the Textiles Monitoring Body on the implementation of the ATC since 1 January 2002 (during the third stage of implementation). Quoting part of the report, he pointed out the TMB's view that the “timely and full implementation of the ATC should also be regarded as a renewed manifestation of WTO members to their commitments undertaken in the framework of the multilateral trading system, thereby also strengthening the credibility of this system”. Members expressed their appreciation for the serious work carried out by the TMB in presenting its report.

India presented the submission of a group of developing country textile exporters (the International Textiles and Clothing Bureau: Argentina; Bangladesh; Brazil; China; Colombia; Costa Rica; Egypt; Guatemala; Hong Kong, China; India; Indonesia; Republic of Korea; Macao, China; Maldives; Pakistan; Paraguay; Peru; Sri Lanka; Thailand; Uruguay; and Vietnam). It said that the ATC had been hailed as a major achievement of the Uruguay Round, and was estimated to contribute as much as one-third of the entire gains from negotiations. India pointed to the welfare gains that would follow ATC, which it stressed was part of the Round's “single undertaking”.

The submission, according to India, contained specific proposals regarding possible conclusions of the review, including the following: that the Goods Council should take note of the TMB report; express regret over certain measures by the European Communities, Turkey and the United States; express disappointment over the denial of carry forward quotas in 2004; recall the Doha Ministerial Decision that Members should exercise care before initiating anti-dumping investigations on textile and clothing products previously under quota; and exercise close oversight of process until full and faithful implementation of the ATC. These countries also strongly welcomed the statement by Norway expressing the hope that the abolition of quotas would not be replaced by other forms of restrictions.

Turkey and Tunisia intervened to signal their interest for the agenda item that would follow on adjustment-related issues. Their initial response was to underline the socio-economic importance of the sector for income generation, employment and poverty reduction. They noted that there were “different perceptions of experience among WTO Members in the last stage of integration”. They expressed concern over the "sustainability of economic and social development after ATC expiry", adding while generating opportunities and challenges, the quota phasout would result with a few enjoying the opportunities, and most coping with the challenges. Tunisia and the European Communities mentioned Article 7 (on improved market access for textiles and clothing) of the ATC and the need for an equitable trading environment in the textiles and clothing sector.

The United States said that the past year has been trying times for the US textile industry, but that it would fully abide by its commitments. The EC expressed satisfaction with the contents of the TMB report, adding that different perceptions were inevitable.

In the light of statements made, the Chairman (Amb. Alfredo Chiaradia of Argentina) proposed and the Council agreed to hold dedicated sessions for the review. The Chairman announced an indicative list of issues for these sessions: 

  • The ATC integration process (implementation of the third stage of integration; overview of ATC integration; accessions and integration; and the final stage of integration);

  • EU enlargement;  
  • Use of transitional safeguard mechanism;  
  • Carry forward; and, 
  • Administrative arrangements for quota administration and implementation.

It was understood that this list would not preclude Members from adding other issues. The EC indicated that it would add an issue drawn from ATC Article 7 on improvements in market access for fair and equitable trading conditions. The first dedicated meeting is scheduled for 18 October 2004.

Under another agenda item, on “post-ATC adjustment-related issues”, Mauritius presented a proposal on behalf of co-sponsors Bangladesh, Dominican Republic, Fiji, Madagascar, Sri Lanka and Uganda for the WTO Secretariat to carry out a study aiming at identifying the adjustment-related issues and costs that may arise with the phase-out of the ATC, including recommendations on measures to address such issues; and for the Goods Council to establish a Work Programme with a view to finding solutions to the problems identified in the paper. Jamaica and Nepal joined as co-sponsors at the meeting.

Mauritius and the other co-sponsors stressed that the textiles and clothing sector was critical for them as a source of employment, particularly for women, income generation and poverty reduction. They expressed concern that the ATC expiry would result in industry losses and revenue shortfalls, create zero sum outcomes with few winners and many losers, and have an impact on global sectoral trade flows.

Some delegations, like the Dominican Republic, said that the back-loading of implementation has led to the impending problem of sharp adjustment shocks.

Mauritius and other co-sponsors stressed the need for solutions to the adjustment costs and other challenges that would follow ATC expiry, and urged that this be made part of future Council agenda. They were supported by a number of countries, including Tunisia, Haiti, Lesotho, Jordan, Romania, Turkey, El Salvador, Nicaragua, Israel, Mexico, Kenya, Nigeria, Chinese Taipei, Morocco, Panama, Namibia, Rwanda.

Many delegations expressed understanding for the concerns expressed by the co-sponsors and a pre-disposition to having these issues addressed but there was a wide range of reactions and suggestions on how these should be tackled in the WTO.

A number of delegations, including China, Chinese Taipei, India, Thailand, Brazil and Cuba, said that adjustment costs and challenges were inseparable from trade reform, including in commitments undertaken in WTO Agreements. They said they themselves have undertaken adjustment, and stressed that in addressing adjustment costs and challenges, the foundations of the rules-based system must not be undermined.

Several delegations, like China, Brazil and Chinese Taipei, felt that the issues raised could only be meaningfully addressed on a systemic and cross-cutting basis.

China and India also urged a more active role by the IMF and the World Bank.

Brazil suggested an exchange of national experiences in responding to adjustment challenges. It said that while the textiles and clothing sector is important, its adjustment considerations were not different from those in other sectors. Thailand stressed that whatever solution was considered should be one that would enable comparative advantage to work.

Several delegations, including India and Cuba, said that Members should examine closely the possible implications of the proposal.

The World Bank and the IMF identified opportunities and mechanisms existing in their institutions for dealing with adjustment considerations. The IMF drew attention to its outreach activities with the WTO to address adjustment issues in the textiles and clothing sector.

The Chairman noted the important issues raised in the discussions. He proposed, and the Council agreed, to hold open-ended informal consultations in an expeditious manner on this item.

The Goods Council also:

  • Agreed to extend the deadline for withdrawal of concessions under Article XXVIII:3 for six months as set out in an EC communication and to refer the matter to the General Council for adoption. This item — “EC Enlargement: Procedures under Article XXVIII:3 of GATT 1994” — was added to the agenda at the request of Argentina, Australia, Brazil, India, Malaysia and Thailand.

  • Forwarded for examination to the Committee on Regional Trade Agreements the following: Armenia's free trade agreements with Ukraine, Kazakhstan, Moldova, the Russian Federation and Turkmenistan; and the Protocol on Trade in the Southern African Development Community (SADC).
  • Approved and forwarded to the General Council waiver requests in connection with the introduction of Harmonized System 2002 changes by Argentina and Israel.
  • Agreed that the Chairman will conduct informal consultations on a joint proposal by Brazil and India for a study on the trade and investment effects of TRIMs and of their elimination.

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