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Nearing the penultimate stage

At the end of the Uruguay Round, developing countries considered the Agreement on Textiles and Clothing (ATC), which provides for the gradual dismantling of bilateral import quotas over a ten-year period, to have been a major result in their favour. Today — nearly at the penultimate stage of ATC implementation — many developing countries are calling for the acceleration of trade liberalization in this sector to redress what they consider to be an imbalance in the implementation of the Uruguay Round results.

Developing countries look at textiles and clothing — exports of which amounted to $356 billion in 2000 representing 7.7% of world trade in manufactures — as one major manufacturing sector in which they have competitive advantage. They also believe that trade success in this area would be an important step up in the industrial development ladder.

In the former GATT, the Multifibre Arrangement (MFA) governed a large portion of the exports of textiles and clothing from developing countries, to the main developed countries. Under the MFA (1974-94), developed countries were able to establish quotas on textiles and clothing outside normal GATT rules.

The ATC requires members to liberalize trade in textiles and clothing in two ways. Members must progressively bring (“integrate”) all textiles and clothing products under normal WTO rules in four steps (16% for the first stage in 1995-97, a further 17% at the second stage for 1998-2001, a further 18% for the third stage in 2002-04 and the remaining 49% in the final stage on 1 January 2005). Members that maintain quota restrictions (Canada, the European Union, and the United States), must progressively enlarge the quotas by increasing the annual growth rates by a set percentage at each stage. When the products subject to quotas are integrated, the quotas are removed.

A special safeguard mechanism protects members from damaging surges in imports during this transitional period. A quasi-judicial body — the Textiles Monitoring Body (TMB) — supervises the implementation of the ATC, including the examination of disputes.

The Council for Trade in Goods, assisted by a report from the TMB, conducts a major review of the ATC implementation before the end of each stage of the integration process. At the review of the first stage of integration held in 1997-1998, developing-country textile exporters voiced serious concerns over what they view as lack of meaningful commercial benefits for them as the major importers had opted to integrate products of less export interest to developing countries with few quotas being removed. They have also criticized new restrictions imposed by a major importer through the use of the ATC safeguards as well as other measures taken by importing countries such as anti-dumping actions and changes in country-of-origin rules.

There is also the fear that with most of the quotas being kept for the final stage, the major importers might not be able to meet their obligations. A group of developing-country exporters (the ITCB) has suggested that to secure liberalization of the sector, major importers be required to take immediate steps to improve the quality of these implementation programmes.

The major importing members maintain that they have been observing scrupulously the requirements of the Agreement. In turn, they have criticized a lack of market-access improvements in other members in this.

The Goods Council in October 2001 conducted its second major review of ATC implementation. In a comprehensive report on the second integration stage, the TMB noted that despite a higher share of clothing products in the third stage as compared to previous stages, developing exporting countries continue to be seriously disappointed by the significant number of restrictions still in place and the overall lack of higher-value products. On the other hand, the TMB noted that the major importers—Canada, the European Union and the United States—would have complied with the ATC’s technical requirement of integrating, by 1 January 2002, at least 51% of their 1990 volume of textile imports into normal WTO rules and that their textile and clothing imports have been increasing continuously.

The TMB has also pointed to the sharp decrease in the use of transitional safeguard measures during the second integration stage. This could be explained by the realization among members of the stiff requirements for justifying such measures as laid out in the results of the dispute settlement process on the early cases.

The TMB has also commended Norway for eliminating, on a unilateral basis, all its restrictions on textiles and clothing on 1 January 2001—four years ahead of schedule.


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Agreement on Textiles and Clothing  
Operation of the integration process of Article 2
(paragraphs 6 and 8)

% of volume of 1990 imports

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