by Chakravarthi Raghavan

Geneva, 12 Oct 99 -- Importing developed countries, maintaining restrictions on imports of textiles and clothing products from the developing world should ensure that at least 50% of the volume of their 1990 imports are liberalized and integrated into the GATT rules and disciplines by 1 January 2002.

This is one of the suggestions for actions at the WTO's Seattle Ministerial meeting, under the implementation issues in para 9 (a) (i) of the Geneva Ministerial Declaration, that has been put forward by Hong Kong China Tuesday at the informal heads of delegation meeting of the General Council preparing the Ministerial Declaration.

The Hong Kong China (HKC) proposal has been put forward on behalf of the 23 members of the International Textiles and Clothing Bureau (ITCB), the textiles and clothing exporting developing countries. The 23 are members of the WTO, except for China which is an observer negotiating its accession.

The HKC paper stresses that the various suggestions in the proposal have been presented "without any intention to effecting changes in the Agreement on Textiles and Clothing (ATC)." But their implementation by the developed countries maintaining the (old MFA) restraints would contribute to realizing the objectives of the ATC, and responding to the particular trade interests and development needs of the developing countries, in particular the least developed countries (LDCs).

The proposals in the text on behalf of the ITCB countries cover the areas/issues of integration process, quota access, transitional safeguard actions, anti-dumping actions, administrative procedures, rules of origin and multilateral surveillance of implementation.

Integration process: The ATC, the ITCB proposal presented by HKC, was expected to be a principal area of benefit for developing countries from the Uruguay Round and, according to the WTO's annual report 1998, at that time it was expected that "more than one-third of the total benefits from the Round are expected to derive from liberalization of textiles and clothing."

The central objective of the ATC was to phase out the restrictions under the MFA in a phased manner. It allowed for members allowing a continuous industrial adjustment and increased competition in their markets. But contrary to this, the restraining countries have chosen to implement integration in a manner that despite the integration of 33 percent of products, only 4-6 percent of imports actually under restraint have been liberalised. "Few quotas have been eliminated."

The process has contributed little towards realizing the ATC objectives of progressive phase out of quota restrictions, and the percentage of integration at each stage has been minimal.

"As a manifestation of their commitment to objectives of liberalization of trade in this sector, the restraining WTO members should take steps to improve the quality of their ATC implementation."

"To this end, they should ensure that at least 50% of the volume of 1990 imports of products that were under specific quota limits shall have been liberalized by the start of the next stage of implementation, 1 January 2002."

Quota access: In terms of the Geneva Ministerial Declaration, the developed countries are committed to ensure that the benefits of the multilateral trading system (MTS) are extended as widely as possible, and on the need for the system to make its own contribution to the particular trade interests and development needs of developing countries. But the growth-on-growth allowed under their quotas has not led to lessening the restrictive nature of the quotas, nor have there been an increase in access for small suppliers and LDCs, measured up to the standard of "meaningful" increase in access. The limitations on quota access have contributed to retard developing country opportunities to benefit from strong consumer demand. Like the integration percentages, growth-on-growth has been the minimal necessary under the agreement. The restraining countries can autonomously increase these quotas as has been done by Canada.

Also, to contribute to the trade interests of developing countries, the import restraining countries should adopt the methodology used by the EU in implementing the growth-on-growth for small suppliers and extend the same treatment to LDCs. The implementation of the growth-on-growth for stage should be advanced by two years to 1 January 2000.

Any resulting growth rates lower than six percent should be increased to that percentage.

Transitional safeguards: During the 4-1/2 years of the ATC, a number of safeguard actions were invoked by restraining WTO members. Subsequent examination of these by the Textiles Monitoring Body (TMB), and in some cases by dispute panels, led to the conclusion that in most cases the actions were not justified.

Nevertheless, these actions affected $1 billion worth of trade and caused disruptive effects for exporting countries and businesses.

To ensure that transitional safeguards are used sparingly and to discourage unsubstantiated recourse to safeguard mechanisms, the HKC/ITCB proposal has called for Members who have long maintained restrictions under the MFA and thus have had sufficient experience in assessing validity of their proposed actions, should promptly remove the measure and "compensate for loss of trade in cases in which the recourse to safeguard action is subsequently found by the TMB/Panel to be unjustified."

Anti-dumping actions: During the course of ATC implementation, a major restraining member (a reference to the EC) has had recourse to a number of anti-dumping actions/investigations involving products already under quota restrictions. The level of restrictions on these products had been agreed to avoid the damage on account of lower prices of imports from the restrained exporting countries. In other words, the risk of damage has already been discounted. Recourse to anti-dumping actions have had adverse effects for exporting countries.

"In order to avoid double jeopardy to the exporting countries concerned, the restraining Members should agree not to initiate anti-dumping actions against products under quota restrictions."

"And to lend certainty to the trade, they should not take such actions during a period of two years after the elimination of quotas."

Administrative Procedures: These, established purportedly under Art 4 or 5 of the ATC, have added to the cost of doing business and extra documentation for countries under restraint. Although implemented as measures under the ATC, they have not been notified to the TMB.

To ensure that such administrative procedures do not operate as disguised protection, the TMB may be invited to examine these measures.

Rules of Origin: The changes in rules of origin effected by the US have had a bearing on the rights under the ATC, including the full utilization of quotas. In view of the inconsistency of these changes with obligations under the WTO, the US has recently agreed to partially reinstate the pre-existing rules.

Wtih a view to ensuring the restoration of the balance of rights and obligations embodied in the ATC, the TMB and the Committee on Trade in Goods should examine the impact of the changes in rules of origin by the restraining members on the rights of exporting countries and make recommendations for multilateral consideration.

Multilateral Surveillance: Given the importance of multilateral surveillance of implementation and prevention of disputes, and the need to establish multilateral control so as to avoid emergence of grey area measures in products covered by the ATC, "The restraining Members should notify each measure, together with its justification to the TMB within 30 days from the date it is adapted."

The ITCB members of the WTO are: Argentina, Bangladesh, Brazil, China (observer), Colombia, Costa Rica, Egypt, El Salvador, Guatemala, Honduras, Hong Kong China, India, Indonesia, Korea, Macao, Maldives, Mexico, Pakistan, Paraguay, Peru, Sri Lanka, Thailand and Uruguay. (SUNS4529)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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