RESTRICTED
WORLD TRADE G/TMB/R/2
22September 1995
ORGANIZATION(95-2746)
Textiles Monitoring Body
REPORT OFTHE SECOND MEETING
1. TheTextiles Monitoring Body helditssecond meeting on13-15 and17-21 July1995.
2. Thefollowing members and/or alternates/second alternates werepresent: Messrs. Daly/Berz;
Kumar;Lee/Tong;Munir;Pangaribuan/Suboh;doPrado/Prado;Saeki;Saint-Jacques/Rey;Tagliani;
Wentzel/Kacar/Hovorka.
3. Thereport ofthefirstmeeting wasadopted (G/TMB/R/1).
4. Inthelightofthenumber ofrequests forconsultations made bytheUnited States under Article 6
oftheAgreement onTextiles andClothing, theTMB began anexchange ofviews ontheimplications
oftheexpression inparagraph 1ofArticle 6oftheAgreement onTextiles andClothing totheeffect
that"thetransitional safeguard should beapplied assparingly aspossible".
Notifications under Article 6.10oftheAgreement onTextiles andClothing
United States/Costa Rica, Honduras, Thailand andTurkey: imports ofcotton andman-made
fibre underwear (UScategory 352/652)
5. TheTMB received notifications from theUnited States, under paragraph 10ofArticle 6of
theAgreement, ofsafeguard actions ithadtaken onimports ofproducts ofcategory 352/652 (cotton
andman-made fibre underwear) from Costa Rica, ElSalvador, Honduras, Thailand andTurkey.
These actions hadbeenintroduced witheffect from thefollowing dates:
Costa Rica: 27March 1995
ElSalvador: 21March 1995
Honduras: 27March 1995
Thailand: 29March 1995
Turkey: 28March 1995
TheTMB hadalsoreceived notifications onthesameaction byElSalvador andTurkey under thesame
paragraphofArticle6referringtheseactionstotheTMBforreview,andbyThailandunderparagraphs5
and6ofArticle 8(seeparagraphs 28to33).
6. Bilateral consultations were heldbetween theUnited States andCosta Rica, Honduras and
Turkey, butwereinconclusive. TheTMB wasinformed prior tothemeeting thatanagreement had
beenreached under paragraph 9ofArticle 6between theUnited States andElSalvador
7. TheTMB invited theparticipation ofCosta Rica, Honduras, Thailand, Turkey andthe
United States, which sentdelegations toGeneva topresent theirrespective cases.G/TMB/R/2
Page2
8. Therepresentative oftheUnited States submitted thatherGovernment 'saction wasjustified
forthefollowing main reasons:
- serious damage, oractual threat thereof, existed withrespect totheUSdomestic
producers ofcotton andman-made fibreunderwear (category 352/652), asaresult
ofasharp andsubstantial increase ofquantities ofimports, within themeaning of
paragraph 2ofArticle 6oftheAgreement; more recent dataweresubmitted tothe
TMB inarevised market statement toconfirm this;
- thisincrease hadanadverse impact onthedomestic production ofsuchproducts, which
wastherefore declining, andresulted inalossofUSmarket share bydomestic
producers;
- further evidence ofserious damage, oractual threat thereof, wasshown intheincreasing
imports/production ratioandinthedropinemployment figures forproduction workers
intheUScotton andman-made fibreunderwear industry, declining man-hours worked,
anddeclining wages;
- asurvey ofindividual firms engaged intheproduction ofgoods falling in
category 352/652 showed evidence ofserious damage totheindustry intheform of
losses inemployment, plantclosures, salesandprofits decreasing, shifts toother lines
ofproduction thancotton andman-made fibreunderwear, anddisinvestment taking
place. Asignificant number offacilities producing goods falling incategory 352/652,
orofworkers employed insuchfacilities, hadreceived trade adjustment assistance,
asitwasfound thattheywere adversely impacted byimports.
9. Suchserious damage, oractual threat thereof, wasattributed bytheUnited States interalia
toasharp andsubstantial increase inimports from Colombia, Costa Rica, theDominican Republic,
ElSalvador, Honduras, Thailand andTurkey, atprices substantially below theUSproducers 'price.
TheUnited States had,subsequent totherequest forconsultations, reached bilateral agreements under
paragraph 9ofArticle 6oftheAgreement withColombia andtheDominican Republic, inaddition
tothatwithElSalvador asmentioned inparagraph 6.
10. Therepresentative ofCosta Ricastated thattheUSaction wasnotjustified forthemainreasons
that,onthebasis offacts, itcould notbeargued thatthere wasacaseofserious damage orthreat
ofserious damage totheUSproducers ofcotton andman-made fibreunderwear caused byanincrease
inimports:
- indeed, thedecline inUSdomestic production ofthiscategory (which hadbeen
measured bytheUStaking apeakyearasabenchmark) wasparalleled byanincrease
inUSproduction offshore, which hadreached 30percentoftotalUSoutput, assome
USmanufacturers hadchosen toexpand production sharing interaliaintheCaribbean,
thustaking advantage ofUSlaws. Thisimportant aspect oftheissuehadbeenignored
bytheoriginal market statement submitted bytheUnited States toCosta Ricaatthe
timetherequest forconsultation hadbeenmade;
- inaddition, among allproducts ofcategory 352/652, onlymen’sandboys’undershirts,
andlittleboys’underwear hadexperienced adecline inproduction. TheUnited States
hadnotprovided anyevidence thatsuchdeclines werecaused byasharp andsubstantial
increase inimports;G/TMB/R/2
Page3
- theUnited States hadnotsubstantiated convincingly theclaim thatitsindustry was
experiencing serious damage. What washappening wasmore ofanautonomous
restructuring oftheindustry inresponse tomarket forces. Infact,anumber ofmajor
USmanufacturers ofproducts ofcategory 352/652 hadpronounced themselves against
theUSaction;
- therevised datasubmitted bytheUnited States were confusing andinsome cases
contradictory. Price datasubmitted were called intoquestion, inparticular the
USaverage producer price;
- there wasalsonoincrease inimports other thanofproducts using UScomponents,
i.e.theonlyrealincrease inimports wasduetoagrowing recourse bytheUSindustry
tooffshore production;
- inaddition, thepossible correlation between illegal transhipments anddeclining
production ofmen’sandjunior boys’undershirts should notoverlooked.
11. Therepresentative ofHonduras ,following thesame lineofargument, alsoconsidered that
theUnited States hadfailed todemonstrate, asenvisaged inparagraphs 3and4ofArticle 6ofthe
Agreement, thatthere wasserious damage orthreat thereof totheUSdomestic industry of
category 352/652, ascaused byimports ofthese products from Honduras:
- theUnited States hadignored thattheincrease inUSimports incategory 352/652 was
theresult ofanincrease ofthatportion oftradewhich isdomestic production assembled
offshore bymajor UScompanies using UScomponents;
- within thevarious categories ofproducts contained incategory 352/652, onlymen’s
andboys’undershirts, andlittle boys’underwear hadexperienced adecline in
production; andtheUnited States hadprovided noevidence thatthese declines in
production were caused byasharp andsubstantial increase inimports;
- theUnited States hadnotsubstantiated theclaim ofexistence ofserious damage to
thedomestic industry duetoimports withsufficient evidence;
- furthermore, theadditional datasubmitted totheTMB bytheUnited States werenot
available atthetimetheaction hadbeentaken, andshould therefore notbethebasis
fortheTMB’srecommendation.
12. Therepresentative ofThailand stated that,without prejudice tothequestion ofprinciple posed
byThailand, i.e.thattheUnited States could not,under theAgreement, takeasafeguard measure against
imports ofproducts ofcategory 352/652 from Thailand since suchimports were already subject to
agroup limit(seeparagraphs 28to33),considered thatthejustifications produced bytheUnited States
initsmarket statements didnotsubstantiate theclaim thatincreased imports caused, orthreatened to
cause, serious damage totheUSindustry producing likeand/or directly competitive products:
- oneofthemainreasons fortheabove wasthattheUnited States initsoriginal statement
hadfailed totakeintoaccount theparticular nature ofoffshore production, which
represented about 30percentofUSproduction ofthatcategory. Ifsuchaccount was
taken, andoutward processing trade wasdeducted fromimports, thesituation would
bedifferent, inparticular theimports/production ratiowould behalved;G/TMB/R/2
Page4
- withtheUSindustry holding adomestic market share ofabout 80percent, itcould
notbeargued thatitwassuffering serious damage, orthreat thereof, because ofimports;
- inaddition, thefactthatthereported average USproducers ’prices hadincreased since
1992 seemed tocontradict theexistence ofserious damage caused byimports;
- Thailand hadalsonoted thatinseveral bilateral agreements concluded inthesame
category, thetotallevel ofaccess agreed (which included verysignificant access
opportunities intheformofGuaranteed Access Levels1)washigher thantotalactual
imports fromallsources. Thisseemed toindicate thattheUSaction wasnotintended
toaddress damage totheUSunderwear industry butrather toprotect theUSfabric
industry.
13. Therepresentative ofTurkey stated thattheUnited States hadfailed todemonstrate thatimports
ofcategory 352/652 hadincreased insuchquantities soastocause serious damage oractual threat
thereof totheUSdomestic industry producing likeand/or directly competitive products, ashadbeen
demonstrated bytherepresentatives ofCosta Rica, Honduras andThailand:
- given thelarge amount ofoutward processing trade involved inthiscase, itseemed
thattheUSaction wasdesigned more toprotect theUSdomestic fabric industry than
theUSunderwear industry. TheAgreement allowed safeguard actions tobetaken
onlyagainst likeanddirectly competitive products experiencing serious damage, but
didnotpermit restraints onunderwear inorder toprotect fabric;
- equity considerations hadalsotobeborne inmind, andiftheUSpolicy wasto
encourage recourse tooutward processing, thisshould notbedoneattheexpense of
other countries notinvolved insuchtrade.
14. During thereview, theTMB wasinformed thattheUnited States andTurkey hadarrived at
amutually agreeable resolution oftheissue under paragraph 9ofArticle 6.
15. While starting theexamination oftherequest submitted byThailand inthecontext ofthe
safeguard action introduced bytheUnited States onimports ofcategory 352/652 fromThailand (see
paragraphs 28to33),theTMB wasinformed thattheUnited States haddecided torescind thissafeguard
measure against Thailand.
16. During itsreview under paragraphs 2and3ofArticle 6ofthesafeguard action taken bythe
United States against imports ofcategory 352/652 from Costa RicaandHonduras, theTMB found
thatserious damage, asenvisaged inthese provisions, hadnotbeendemonstrated. TheTMB could
not,however, reach consensus ontheexistence ofactual threat ofserious damage. TheTMB
recommended thatfurther consultations beheldbetween theUnited States andtheparties concerned,
withaviewtoarriving atamutual understanding, bearing inmindtheabove, andwithdueconsideration
totheparticular features ofthiscase, aswellasequity considerations.
17. These consultations shallbeheldconsistent withtheAgreement onTextiles andClothing, in
particular withArticles 6and4,andbeconcluded within 30days. Parties shallreport totheTMB
ontheoutcome ofsuchconsultations nolaterthanattheendofthatperiod.
1Guaranteed Access Levels (GALs) arequantities ofproducts ofacategory thatacountry canexport tothe
United States without being subject toquantitative limitation, provided theactual product shipped qualifies for
such treatment, inter aliabybeing made of"UScomponents".G/TMB/R/2
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18. TheTMB noted that,withrespect totheintroduction ofasafeguard measure, theAgreement
onTextiles andClothing does notprovide anyindication with respect totheeffective dateof
implementation ofthatmeasure.
19. Inreaching itsrecommendation, theTMB examined alltheinformation provided bytheparties,
including theroleplayed byoutward processing trade. Onthatbasis, andkeeping alsoinmind the
particular nature ofthistrade flow, theTMB wasoftheviewthatanumber ofimportant indicators,
interaliathedropinUSdomestic production ofcotton andman-made fibreunderwear, theparallel
increase inimports ofthese products, andthestatus ofthisindustry, were notsuchastowarrant a
claim ofserious damage being caused totheUSindustry byimports. However, theTMB could not
agree, onthebasis ofalltheinformation provided, whether ornotthere existed athreat ofserious
damage caused totheUSindustry byimports ofproducts ofcategory 352/652.
United States/Honduras: imports ofcotton andman-made fibre pyjamas andother nightwear
(UScategory 351/651)
20. TheTMB received anotification fromtheUnited States, under paragraph 10ofArticle 6of
theAgreement, ofasafeguard action ithadtaken onimports ofproducts ofcategory 351/651 (cotton
andman-made fibrepyjamas andother nightwear) from ElSalvador andHonduras. These actions
hadbeenintroduced witheffect from 27March 1995.
21. Bilateral consultations wereheldbetween theUnited States andElSalvador, andbetween the
United States andHonduras, those withHonduras being inconclusive. TheTMB wasinformed prior
tothemeeting thatanagreement hadbeen reached under paragraph 9ofArticle 6between the
United States andElSalvador.
22. TheTMB invited theparticipation ofHonduras andtheUnited States, which sentdelegations
toGeneva topresent theirrespective cases.
23. Therepresentative oftheUnited States explained thattheincrease inimports ofcotton and
man-made fibrepyjamas andother nightwear wascausing serious damage, oractual threat thereof,
totheUSindustry producing these products forthefollowing main reasons:
- adecrease indomestic production, alossofthemarket share heldbyUSdomestic
manufacturers, increased import penetration, reaching veryhighlevels, adecline in
employment, average man-hours worked, totalannual production andworkers 'wages;
- asignificant number offacilities producing goods falling incategory 351/651, orof
workers employed insuchfacilities, hadreceived trade adjustment assistance, asit
wasfound thattheywere adversely impacted byimports;
- imports were entering theUnited States atprices which were below theaverage
USdomestic price, andtheinability ofUSproducers tocompete withimport prices
were citedasthemain factor responsible forthedeclines indomestic operations.
24. Serious damage, oractual threat thereof, wasattributed bytheUnited States interaliato
asharp andsubstantial increase oflowpriced imports fromElSalvador, Honduras andJamaica. The
United States had,subsequent totherequest forconsultations, reached bilateral agreement under
paragraph 9ofArticle 6oftheAgreement withJamaica, inaddition totheagreement withElSalvador
mentioned inparagraph 21.G/TMB/R/2
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25. Therepresentative ofHonduras stated thattheUnited States hadnotpresented credible evidence
ofdamage totheUSindustry. Henoted that:
- theUShadnotshown thatanypossible serious damage wascaused byasharp and
substantial riseinimports oflikeand/or directly competitive products atprices below
those prevailing forsimilar goods ofcomparable quality intheUSmarket;
- thetwomarket statements supplied bytheUnited States contained someinconsistencies,
inparticular withrespect toUSproducers 'prices, employment andman-hours. These
called intoquestion thevalidity ofthedetermination ofserious damage oractual threat
thereof made bytheUnited States. Therepresentative ofHonduras objected tousing
information which hadnotbeenprovided atthetimetherestraint hadbeenintroduced
asabasis fortheTMB’srecommendation;
- theUnited States hadnottaken intoaccount intheirassessment ofthesituation the
particular nature andimportance ofoutward processing trade inthiscategory, in
particular inimports from Honduras. Inthisrespect, there could benoconclusion
ofserious damage toanindustry thatdepended onthisco-production forupto
30percentofitsoutput;
- inthebilateral agreements recently concluded withtwoother countries following the
same determination ofserious damage bytheUnited States onthiscategory, thetotal
access levelagreed wassubstantially above thelevelofimports from Honduras.
26. TheTMB reviewed thesafeguard measure taken bytheUnited States against imports of
category 351/651 from Honduras under paragraphs 2and3ofArticle 6.
27. TheTMB, having examined alltheinformation provided bytheparties, found thatserious
damage, oractual threat thereof, hadnotbeendemonstrated andrecommended thattheUSrescind
themeasure.
Notification under Articles 8.5and8.6oftheAgreement onTextiles andClothing
United States/Thailand: imports ofcotton andman-made fibreunderwear (UScategory 352/652)
28. Inthecontext ofthesafeguard action introduced bytheUnited States onimports ofcotton
andman-made fibreunderwear (seeparagraphs 5to19),theTMB received anotification fromThailand
under paragraphs 5and6ofArticle 8oftheAgreement. According tothisnotification, since
paragraph 4ofArticle 6oftheAgreement provided thatnosafeguard measure shallbeapplied tothe
exports ofanymember whose exports oftheparticular products were already under restraint under
theAgreement, theUnited States hadnoright tointroduce asafeguard measure onimports of
category 352/652 from Thailand, asthatcategory wasalready subject toagroup limit.
29. Therepresentative ofThailand confirmed that,irrespective oftheUSdecision torescind the
safeguard measure against imports from Thailand (seeparagraph 15),Thailand wanted theTMB to
review thequestion ofprinciple raised.
30. TheTMB invited bothparties topresent theirrespective views.
31. TherepresentativeofThailandarguedthatthesafeguardactionwasnotconsistentwithArticle6
oftheAgreement, requiring initsparagraph 1thatthetransitional safeguard should beapplied as
sparingly aspossible, consistently withtheprovisions ofthisArticle andtheeffective implementation
oftheintegration process under thisAgreement, andinitsparagraph 4thatsuchsafeguard measureG/TMB/R/2
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shallnotbeapplied totheexports ofanyMember whose exports oftheparticular product arealready
under restraint under thisAgreement. Since imports fromThailand ofcategory 352/652 werealready
subject toagroup limit, which theUnited States hadchosen tomaintain under theAgreement pursuant
toArticle 2,suchimports could notbesubject toanArticle 6action. Thailand therefore asked the
TMB forafinding thattheUSrequest forconsultations concerning imports ofproducts of
category 352/652 from Thailand under Article 6oftheAgreement wasinvalid.
32. Therepresentative oftheUnited States explained that,despite theUSrequest forconsultation
addressed toThailand under Article 6oftheAgreement, andrepeated efforts onthepartofthe
United States, ithadnotbeenpossible toarrange ameeting withThailand. Thailand hadargued
subsequently thatparagraph 4ofArticle 6oftheAgreement didnotauthorise theUnited States torequest
consultations inthiscase,since category 352/652 wasalready under agroup limit. TheUnited States
believed thattheThaiposition waswithout merit. Furthermore, ifThailand wanted theTMB toexamine
thequestion ofprinciple, therequest should besubmitted independently from thespecific casenow
before theTMB. Notwithstanding, Article 8required consultations tobeheldbetween parties before
amatter could bereviewed bytheTMB. Therefore, theUnited States believed thattheTMB should
notreview thismatter untilsuchconsultations were held.
33. After having heard thepresentation oftheparties theTMB decided toresume thediscussion
ofthisissue atasubsequent meeting.