8843atc presentation final

7/27/2019 8843ATC Presentation Final

1/62

1

AGREEMENT ON TEXTILES

AND CLOTHING

Presentation to Post Qualification Course in

International Trade Laws & WTO

on9thJuly 2005


2/62

2

STRUCTURE OF PRESENTATION

Part I: A Brief History of Restrictions onTextile and Clothing Trade

Part II: The Six Key Elements of the

Agreement on Textiles & Clothing.

Part III: The Product Coverage of the ATC

The Annex.

Part IV: The Integration of Textiles and

Clothing Products into GATT Rules

Part V: Implementation of the Integration

Process.


3/62

3

Contd

Part VI: Improvements in Restraint Growth Rates.

Part VII: The Application of Growth Rate Factors.

Part VIII: Removal of Quantitative Restrictions

Other Than MFA RestraintsArticle 3.Part IX: The Transitional Safeguard Mechanism

Part X: Monitoring, Surveillance and Review

Article 8

Part XI: Notification Obligations.


4/62

4

A BRIEF HISTORY OF RESTRICTIONS

ON TEXTILE & CLOTHING TRADE

Introduction

The Cotton Arrangements (1961-73)

The Multifibre Arrangements (1974-94)


5/62

5

INTRODUCTION

Special Regime for more than 40 years,outside the normal GATT Rules.

Special regimes: Short Term Arrangement Regarding

International Trade in Cotton Textiles (STA) in1961,

The Long Term Arrangement Regarding

International Trade in Cotton Textiles (LTA)from 1962 to 1973.

Multifibre Arrangement (MFA) from 1974 to1994.


6/62

6

INTRODUCTION

Included T &C sector within the scope of

Uruguay Round in 1986.

Seven years of complex negotiations.

Sector fully integrated into WTO Rules

on 31stDecember 2004.


7/62

7

SIX KEY ELEMENTS OF THE AGREEMENT

ON TEXTILES AND CLOTHING

Product Coverage.

Programme for Integration.

Progressive Liberalisation of theRestraints through Improved GrowthRates.

Treatment of Quantitative Restrictions

(other than MFA Restraints).

Transitional Safeguard Mechanism.

Textiles Monitoring Body.


8/62

8

THE PRODUCT COVERAGE OF

ATCTHE ANNEX- It encompasses Section XI (Chapters

50-63) of the Harmonized Commodity

Description and Coding System (HS)

Nomenclature.

Some specific products from HS

Chapters 30-49 and 64-96 were

included.


9/62

9

BASIS FOR PRODUCT COVERAGE

Products, which were previously subjectto MFA or MFA-type restraints.

HS lines covering raw materials werenot included.

In the case of raw natural materials (silk,

cotton, wool, vegetable fibres), the ATCcoverage began with the firstmanufacturing process.


10/62

10

THE INTEGRATION OF TEXTILE AND

CLOTHING PRODUCTS INTO GATT RULES Article 2 of the ATC.

Quantitative Restrictions in Force at the

Outset. The Integration Programmes

Four Stages.

Selection of Products for Integration Notification of the Products to be Integrated

Termination


11/62

11

ARTICLE 2 OF THE ATC

All former MFA or MFA-type restraints

must be notified to TMB.

The procedure for progressive

integration of the products covered by

the Agreement into GATT 1994 Rules

and Disciplines.


12/62

12

QUANTITATIVE RESTRICTIONS IN

FORCE AT THE OUTSET All existing restrictions on the day before

the entry into force of the WTO

agreement were to be notified in detail tothe TMB within 60 days.

No new restrictions could be introduced

except under the provisions of the ATC orrelevant GATT 1994 provisions.


13/62

13

THE INTEGRATION PROGRAMMES

Four stage programme for the

progressive integration was the second

central element of the Agreement.

Under Article 2.6 to 2.8, members carried

out a program whereby the rules and

disciplines of GATT 1994 were appliedprogressively to the T & C products.


14/62

14

WHAT DOES INTEGRATION MEAN ?

Imports of the product integrated wereno longer subject to the ATC, including

the possibility of bilateral restraints. After integration, if a safeguard measure

was considered necessary, the GATTsnon-discriminatory global rules (ArticleXIX) would apply.

There was no possibility to bring it backinto the coverage of ATC.


15/62

15

FOUR STAGES

On 1st January 1995, Members were required tointegrate products from the list in the Annex whichrepresented not less than 16% of the total volumeof their imports of all those products in 1990.

At stage 2, on 1st January 1998, not less than afurther 17% was integrated;

At stage 3, on 1st January 2002, not less than afurther 18% was integrated;

Finally at the end of the transition period, on 31stDecember 2004, all remaining products (whichcould amount to 49% as a maximum) wasautomatically stand integrated and the ATC was

terminated.


16/62

16

SELECTION OF PRODUCTS FOR

INTEGRATION Each importing member decided itself to

reach the required percentage thresholds.

The only requirement was that the list of

products submitted at each stage must

include products from each of the four

groupings: tops and yarns, fabrics, made-up textile products and clothing (Articles

2.6 and 2.8).


17/62

17

TERMINATION

The Agreement was terminated after the

10 year transition, on 31st December

2004.

Article 9 of the Agreement provided

There shall be no extension of this

Agreement.


18/62

18

IMPLEMENTATION OF THE

INTEGRATION PROCESS

Review by the Council for Trade in

Goods The Report by TMB.


19/62

19

REVIEW BY THE COUNCIL FOR TRADE IN

GOODS

CTG was responsible for overseeing theimplementation of the ATC and for this

purpose was required by Article 8.11 toconduct a major review before the end ofeach stage of the integration process.

The TMB was required by the same Article

to provide the Council with acomprehensive report on theimplementation of this agreement during thestage under review..


20/62

20

REVIEW BY THE COUNCIL FOR TRADE IN

GOODS.

The CTGs first major review of the firststage was held in OctoberNovember 1997.For this TMB submitted a comprehensivereport in July 1997.

The major review of implementation ofATC in the second stage of the integrationprocess (1998-2002) was held by CTG in

September- October 2001. The third and final major review by CTG of

the third stage integration (2002-2004) was

held in December 2004.


21/62

21

IMPROVEMENTS IN RESTRAINT

GROWTH RATES Liberalization of Existing Restrictions

Notification of Restraints in Place

Increased Growth Rate

Growth Rate Increases Automatically

Termination of Restraints

Early Elimination of Restraints

Treatment of Small Suppliers.


22/62

22

LIBERALIZING EXISTING

RESTRICTIONS The Agreement also provided a programme for

liberalizing existing restraints through

progressive, automatic increase in the rate ofannual growth (Article 2.13/2.14).

No new restrictions in terms of products or

members could be introduced and restrictions

not notified within 60 days of the date of theentry into force of the WTO Agreement shall be

terminated forthwith (Article 2.1 and 2.4).


23/62

23

NOTIFICATION OF RESTRAINTS IN PLACE

INCREASED GROWTH RATES

The notification by importing countries

to TMB at the beginning of the ATC

represented the starting point automaticliberalization process.

The annual growth rates were increased

by a factor of 16% for the first stage ofthe Agreement.


24/62

24



The first stage growth rates were further

increased by a factor of 25% for the

second stage (i.e. on 1stJanuary 1998). The second stage growth rates were

increased by a factor of 27% for the third

stage (i.e. on 1st January 2002).(Article2.13 and 2.14).


25/62

25



To illustrate this process, a 6% growth

rate under the MFA in 1994 became

6.96% on 1st January 1995 (i.e.6% x1.16%) and was applied for each year

1995/96/97; then it was increased to

8.70% (i.e. 6.96% x 1.25%) for each year1998/99/2000/01; and then to 11.05% (i.e.

8.70% x 1.27%) for years 2002/3/4.


26/62

26

GROWTH RATE INCREASES APPLIED

AUTOMATICALLY

Growth-on-growth and the increase to the

restraints levels which they entail were

automatic. The increases in the growth rates,

however, were minimums and members

could apply higher rates.


27/62

27

TERMINATION OF RESTRAINTS

When a product which was subject to a

restraint under ATC was integrated into

GATT (Part V), the restraint on thatproduct cannot be continued and must be

terminated.


28/62

28

EARLY ELIMINATION OF

RESTRAINTS

Importing members had the possibility of

dropping restraints during the transition,

beyond that required as a result of theintegration process (Article 2.15).


29/62

29

TREATMENT OF SMALL SUPPLIERS

For a small suppliers, that was the

members whose restraints represented

1.2% or less of the total restraintsapplied by an importing member at the

end of 1991, the growth rate factor

applied on existing restraints wasrequired to be advanced by one stage

(Article 2.18).


30/62

30

THE APPLICATION OF GROWTH RATE

FACTORS.

Some developing members were of the

view that the ATC had anticipated two

paths for the progressive liberalization. One was the integration of products and

the other was application of growth rate

factors. The two paths were not substitutes.


31/62

31


FACTORS

The developing members considered that the

increase in the restraint levels by the

application of stage 1 growth rate factor of

16% to the existing growth rates as carriedover from the former MFA was misleading.

Without meaningful integration and with

the increase in the restraints being minimal,these processes could not be counted upon to

produce a smooth and effective integration.


32/62

32


FACTORS

The developed country members, however,

considered that the provisions of enhanced

growth rates would operate to give substantialincrease in the volume of the restraints

concerned.

The application of growth rate factors was

cumulative and exponential, providing avaluable part of the integration process.


33/62

33

THE APPLICATION OF GROWTH

RATE FACTORS

The developed members were also of the view that

the accelerated growth rates would no longer

operate as a limitation well before the ten year

transition period was completed.

The effect of growth on the restraints, particularly

in view of the slower growth rate in their domestic

markets.

For many or all of the restraints that werecurrently being filled, the restraint growth would

cause them to no longer be true restraints.


34/62

34

REMOVAL OF QUANTITATIVE RESTRICTIONS

OTHER THAN MFA RESTRAINTSARTICLE 3

Notification Requirement

Restrictions May Be Maintained or Must

Be Phase Out

Reverse Notification


35/62

35

NOTIFICATION REQUIREMENT

All restrictions maintained by members on

Textile and Clothing products whether they

were consistent with GATT 1994 or not were tobe notified under Article 3.

This did not apply to restrictions formerly

maintained under the MFA, which were

covered by the provisions of Article 2.


36/62

36

RESTRICTIONS MAY BE

MAINTAINED OR MUST BE PHASED

OUT Those restrictions notified, which were justified

under a provision of GATT 1994 could bemaintained.

All restrictions which could not be justifiedunder a GATT 1994 provision had to be eitherbrought into conformity with GATT 1994 withinone year following the entry into force of the

ATC if this was possible, or if not, it had to bephased out progressively within the ten yeartransition period according to a program to bepresented to the TMB not later than 6 months

after the entry into force of the ATC.


37/62

37

REVERSE NOTIFICATION

Specific provision was also made for

reverse notification to the TMB by any

member which considered that anothermember had not made a notification

required by Article 3.


38/62

38

THE TRANSITIONAL SAFEGUARD

MECHANISM General

Two-step Approach for Application of

the Safeguard

Consultation and Application of

Measures

Unilateral Action

TMB Review


39/62

39

GENERAL

A key aspect of ATC was the provision inArticle 6 for a special transitional Safeguard

Mechanism, separate and distinct from the

normal GATT safeguard in Article XIX. This was intended to protect members

against damaging surges in imports during

the ATC period. This safeguard permitted measures against

imports of specific products from a

particular source or sources.


40/62

40

GENERAL

Article 6 applied to goods which caused or

threaten to cause serious damage to the industry

in another member simply because of theincreased levels of exports of these products.

If, for instance, damage was being caused by a

product which benefited from export subsidies

or was dumped, then the GATT/WTO subsidyand anti-dumping rules would apply.


41/62

41

TWO-STEP APPROACH FOR APPLICATION

OF THE SAFEGUARD

Should be applied as sparingly as possible (Article

6.1). It was based on a two-tier approach.

A particular product was being imported in suchincreased quantities from all sources so as to

cause serious damage or actual threat thereof, to

its domestic industry.

The member must also demonstrate that theserious damage or threat to the industry was the

result of the increase in total imports.


42/62

42

TWO-STEP APPROACH FOR APPLICATION

OF THE SAFEGUARD

In the second step (Article 6.4) the

member must proceed to determine to

which exporting member or membersthis damage was attributable.

There must be a sharp and substantial

increase in imports, actual or imminent,from such a member or members

individually.


43/62

43

CONSULTATION AND APPLICATION OF

MEASURES

The importing member must then consult withthe specific member(s) to which serious damageor threat was attributed.

If the consultations lead to an agreed solution,i.e. to a mutual understanding that the situationcalled for a restraint, the restraint level may notbe lower than the actual level of imports fromthat exporting member during a recent 12-month period (Article 6.8), and the action takenmay remain in place for up to three years(Article 6.12).


44/62

44

UNILATERAL ACTION

If a mutual solution was not found throughthe consultation process within 60 days

unilateral action may be taken by the

importing member, but at the same time thematter must be referred to the TMB (Part

XI) for prompt review (Article 6.10).


45/62

45

UNILATERAL ACTION

In very specific cases, described in theAgreement as highly unusual and criticalcircumstances where delay would cause

damage which would be difficult to repair(Article 6.11), it was possible to impose arestraint provisionally without priorconsultation, on certain conditions, e.g. the

request for consultations and notification to theTMB must be made within five working days ofsuch an action.


46/62

46

TMB REVIEW

Agreed restraints were subject to TMBreview to determine whether they werejustified within the provisions of thisArticle (Article 6.9).

Where agreement was not reached (Article6.10) or where a restraint was imposedprovisionally (Article 6.11) the TMB was

required to promptly conduct anexamination and make appropriaterecommendations.


47/62

47

MONITORING, SURVEILLANCE AND

REVIEWARTICLE 8 -

Textiles Monitoring Body

Principal Functions of the TMB

Composition of the TMB

Alternates

The WTO Council for Trade in Goods


48/62

48

TEXTILES MONITORING

BODY The ATC established Textiles Monitoring Body

(TMB) as a standing body which consisted of aChairman and ten members.

The ATC required that the membership of theTMB shall be balanced and broadlyrepresentative of the WTO members, and shallprovide for rotation at appropriate intervals.

TMB members appointed by WTO members,were required to discharge their function on anad personam basis.


49/62

49

TEXTILES MONITORING BODY

The TMB took all of its decisions by consensus;

however, consensus within the body did not

require assent or concurrence of TMB

members appointed by WTO members

involved in an unresolved issue under review.

These characteristics made the TMB a unique

institution within the WTO framework. TheTMB had also developed its own working

procedures.


50/62

50

PRINCIPAL FUNCTIONS OF THE TMB

The principal function of the TMB was tosupervise the implementation of the ATC andin so doing to examine all measures taken

under its provisions and their conformity, andto take various actions specifically required ofit by the ATC. These included the review of:

Notifications submitted by members of

restraints in place at the beginning of thetransition period and members observationsthereon;


51/62

51


Members programmes for the integration ofproducts into GATT 1994;

Members notifications with respect to non-MFArestrictions and their programmes for phasing outrestrictions not justified under a provision ofGATT 1994;

Bilaterally-agreed restraint measures under Article6 to ensure they were in accordance with theprovisions of the Agreements;

Unilaterally introduced restraints where anagreement was not reached through bilateralconsultation and to make recommendations asappropriate;


52/62

52


The implementation of the Agreement at leastfive months before the end of each stage of theintegration process and to provide a

comprehensive report on this to the Council forTrade in Goods.

The TMBs recommendations and findings werecommunicated to the Members directly

concerned and were also communicated to theCouncil for Trade in Goods for its information.


53/62

53

COMPOSITION OF TMBPeriod: 1stJanuary 02 to 31stDecember 04

Ten constituencies as follows:

The ASEAN Member countries;

Canada and Norway;

China and Pakistan (this constituency will appointMacao, China as a second alternate; it will notrotate with the member or with the first alternate)

The European Communities;

India and Egypt/Morocco/Tunisia (India toalternate with one of the three);

Japan;

Korea and Hong Kong, China;


54/62

54

COMPOSITION OF TMB

Latin American and Carribean Member Countries(this constituency will appoint two alternates)

Turkey, Switzerland and Bulgaria/ Croatia/ Czech

Republic/ Hungary/ Lithuania/ Poland/ Romania/

Slovak Republic/ Slovenia (this constituency willappoint two alternates);

The United States

The ten persons serving on the TMB were appointedby the WTO members designated from the above

constituencies. TMB members may appoint their

respective alternates.


55/62

55

COMPOSITION OF TMB

There would be second alternate from a least

developed textile exporting member in

constituency which would not rotate with the

member or with the first alternate.

Two non-participating observers would be

appointed by members not already represented

in the TMB, one each being designated fromAfrica and Asia.


56/62

56

NOTIFICATION OBLIGATIONS

Notification Obligations

Notifying the starting point and the

integration stages

Elimination of Non-MFA QRs

Safeguard Notifications

Other Notifications


57/62

57

NOTIFICATION OBLIGATIONS

ATC required the notification of the actions

which must be taken at each stage in the

integration process, to document them both for

review purposes by the TMB and to inform all

WTO members, for information and

transparency.

In total, the ATC contained 37 references tonotifications by WTO members, most of which

were to the TMB.


58/62

58

NOTIFYING THE STARTING POINT AND

THE INTEGRATION STAGES

A number of notifications were required in1995 to set the starting points for thetransition.

Further, notifications of the second andthird integration stages were required ofmembers by the end of 1996 and 1999.

Notification was also required of any actions

taken in relation to this process, such asearly integration of products or theelimination of restraints.


59/62

59

ELIMINATION OF NON-MFA QRs

A second important goal of the ATC was theelimination of all quantitative restrictions (QRs) ontextiles and clothing outside the MFA which werenot consistent with GATT rules.

This required notification in 1995 of the initialsituation in each member, that was, the listing of allQRs maintained by WTO members, whetherGATT-consistent or not, followed by notification of

programmes created to deal with any of these QRswhich were not GATT-consistent.

These provisions were contained in Article 3.


60/62

60

SAFEGUARD NOTIFICATIONS

The third main area was the special safeguardmechanism in Article 6 which had up to eightnotification requirements when recourse was

had to this Article. The notification requirements of the various

steps in the safeguard process ensured that thecarefully negotiated criteria for taking such

action would be met and full transparencyprovided.

The TMB was, of course, called upon to reviewevery aspect of safeguard actions.


61/62

61

OTHER NOTIFICATIONS

Other Articles also required notification ofvirtually every action taken and in many casesprovided for recourse to the TMB by affectedmembers if they felt their rights were beinginfringed by the actions of others.

In the CTGsmajor reviews, references were alsomade to the importance of all members fullymeeting their notification obligations in a timelymanner.

It was noted that notifications were important notonly for transparency but also had elements oflegal rights and obligations.


62/62

THANK YOU

8843atc presentation final

Documents