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Goods Council asked to review US textiles accord implementation

by Chakravarthi Raghavan

Geneva, 17 Apr 2001 - - A group of developing countries have asked the Council for Trade in Goods at its meeting Wednesday to review the United States implementation of its commitment to liberalize textiles quotas.

The group - Hong Kong China, India, Indonesia, Pakistan, Costa Rica and Peru - have asked the Good Council to examine the US failure to comply with its obligations and abolish a quota it has maintained since 1998, on imports of cotton and man-made fibre underwear from Turkey.

The action of these countries to raising the issue before the CTG is a significant departure from the quiet acquiescence of developing countries in these matters.

The US has maintained the restrictions despite a finding of the Textiles Monitoring Body (TMB) that in imposing the quotas and maintaining them, the US has violated its obligations under the ATC.

The TMB is charged by the Article 8 of the WTO Agreement on Textiles and Clothing (ATC) to supervise the implementation of the agreement. In this function, the TMB hears complaints brought by members, as well as undertake suo motto the functions of supervision.

The developing countries have been complaining of unsatisfactory implementation of the WTO agreements of benefit to them, and have accused the major industrialized countries of insincerity and for dragging their feet. They have voiced their grievances in the run-up to Seattle, and formulated proposals on the so-called ‘implementation issues’ before the WTO.

One of the major causes for the collapse of the Seattle Ministerial meeting of 1999 December was this dissatisfaction of developing countries; the non-transparent ways of the WTO’s functioning and decision-making and the attempts of the majors to agree on what is to be done and try to force them on other WTO members, was the other major cause - with each feeding on the other.

Dissatisfied with the way their grievances on implementation in this area are being dealt with, the group of developing countries have now asked the CTG to step in and ensure full implementation.

The US put in place the quota restraints against Turkey, through a notification in the US Federal Register in May 1998. The restriction was to be in place for a period of 4 years and seven months.

But Turkey (an important US NATO ally, and looking for US support in other areas, including the IMF and World Bank) under US pressure and in return perhaps for ‘other’ (unspecified) benefits from the US, did not challenge, but acquiesced in the illegal order.

According to the developing countries, the US quotas were unjustifiable in terms of the ATC. So much so, the US did not in any event notify the WTO and the TMB, as it was legally bound to do.

But other developing countries raised the issue and asked the TMB to take it up in its oversight function.

As reported subsequently by the TMB, in para 20 of its report (2000) to the CTG, in 1999, the TMB asked clarifications from Turkey and the US on whether or not a new restriction had been applied by the US against Turkey, whether it was part of a broader understanding between the two and being applied under the ATC and , if this was the case, under which provision of the ATC this restriction had been introduced.

After some interim replies from the US, in a joint communication, Turkey and the US, notified the TMB that the measure affecting Turkey’s exports of the products was “part of a broader agreement contributing to the objective of further liberalising trade and was mutually agreed upon.”

But the other members were not satisfied, and as a result the TMB sought further clarifications from Turkey and the US on the measure itself and on the particular provisions of the ATC under which there had been the mutual agreement. The TMB also decided to examine the measure in question.

As of mid-December 1999, no information was however received from Turkey or the USA, nor was there any indication from either that a further communication would be forthcoming.

Thereupon the TMB undertook an examination of the measure, on the information available, and examined all the provisions of the ATC under which restraints can be imposed or agreed upon, without its requiring a notification to the TMB. The TMB found no provision could enable such an arrangement.

In recording this, the TMB regretted that despite its repeated requests, and after the lapse of almost seven months since its first request for information, the two parties had not provided the information. The TMB also recalled that “full cooperation” from the Members was “indispensable” in facilitating the TMB’s task of examining, in accordance with Art. 8.1, the measures taken under the ATC and their conformity with the ATC, and failure of members to provide information “hampered” the TMB’s ability to discharge its functions.

The TMB also recalled, in concluding its examination of the measure, that Art.2.4 of the ATC stipulated that “no new restrictions” in terms of products or Members shall be introduced except under the provisions of the ATC or the relevant GATT 1994 provision.

The TMB, according to its report to the CTG, concluded that the measure agreed upon by Turkey and the US, affecting imports by the US, “had not been demonstrated to be in conformity” with the provisions of the ATC But despite this finding and ruling, the US has declined to remove the restriction.

In raising the issue, and bringing it to the CTG, the developing countries have recalled that similar US pressures led to the virtual institutionalization of restrictions on their exports of textiles and apparel under the Multifibre Arrangement.

In their joint letter/document for the CTG meeting, the group of developing countries have recalled that trade in textiles and clothing had long been subjected to unilateral measures and pressures by developed countries. Starting as a voluntary restraint arrangement (VRA) by a single exporting country (the USA against Japan) in the 1950s, the trade in the sector has been subjected to “an institutionalized derogation” from the basic principles of the GATT. Later, such VRAs tended to spill over into other sectors of trade.

“A significant part of the Uruguay Round had therefore to be devoted to re-establishing multilateral control over such arrangements and measures,” the signatories recall.

In the same vein, the ATC was concluded to reintegrate, over a (10-year) transition period, the trade in the textiles and clothing sector into normal GATT rules and disciplines, establishing in the interim strengthened multilateral disciplines.

Since the entry into force of the WTO, the implementation of some WTO agreements have given rise to serious concerns, especially among developing country members.  And few arrangements have given rise to as many concerns as the ATC, leading the Singapore Ministerial Conference to emphasize the role of the CTG to oversee the implementation of the ATC, and with Ministers reiterating their call for “full and faithful implementation” of the WTO agreements and ministerial decisions as “imperative for the credibility of the multilateral trading system.”

The developing countries see the issue, and the way the CTG handles it, as a test case of the willingness of the industrialized nations to faithfully fulfil their promise to abolish quota restrictions on the exports of developing countries. They also see it as a challenge for the WTO to address their concerns without their having to resort to costly dispute settlement procedures. -SUNS4877

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

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