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1. International trade in textiles and clothing is significant and sensitive to both less-advantaged countries (LACs) and industrial countries. In 1997, the sector represented approximately 9 percent of world exports of manufactured products and for LACs approximately 19 percent (and for particular LACs often much higher figures). The sensitivity stems from the competitive advantage (access to raw materials and low production costs, particularly wages) of the LACs and the impact of relatively cheap products on employment in long-established industries in developed countries.
2. The sensitivity of importing industrial countries initially manifested itself in bilateral voluntary export restraint agreements (1950's) and then the following formal arrangements:
3. None of these agreements and arrangements were in conformity with normal GATT rules. However, in 1960 the Contracting Parties recognised the situation of "market disruption" following "sharp increases in imports, over a brief period of time and in a narrow range of commodities which can have serious economic, political and social repercussions in the importing countries". Market disruption could be from:
4. The acceptance of the relevance of a particular source of supply and of a substantial price advantage, and the possibility of selective safeguard action was a fundamental departure from Article XIX of the GATT, which in turn allowed the introduction of discriminatory restraints in the two Cotton Textile Arrangements.
5. The MFA expanded the use of discriminatory restraints to a wider range of products: wool, man made fibres and certain vegetable fibres. The key objectives were:
6. The key rules of the MFA covered:
II. The Uruguay Round Negotiations (1986-1994)
8. The Agreement on Textiles and Clothing (ATC) came into effect on 1 January 1995 and provides that by 1 January 2005 all quotas will be removed and that this sector will be fully integrated into GATT 1994 rules. At this point the ATC will cease to exist.
The ATC's key provisions are:
9. The product coverage listed in the Annex to the ATC, covers all products which were subject to MFA or MFA-type quotas in at least one importing country. Therefore in the four WTO Members which maintained MFA quotas (Canada, the EU, Norway and the USA), the product coverage includes products not necessarily subject to quotas in a particular Member.
10. The products come from Section XI (Chapters 50 to 63) of the Harmonised Commodity Description and Coding System (HS) Nomenclature, plus some specific products from HS Chapters 30 to 49 and 64 to 96. The chapter headings include silk, wool, cotton, man-made fibres, carpets, knitted fabrics, apparel and clothing accessories. However, raw materials are excluded.
11. The integration process requires that all former MFA or MFA-type restraints be notified to the Textiles Monitoring Body (TMB) as they will be carried over into the ATC and continue until the products are integrated and therefore the quota eliminated. It also sets the procedure for integration.
12. The procedure covers a 10 years period.
Percent to be integrated, not less than:
13. Each importing Member decides itself which products it will integrate at each stage, with the proviso that they shall come from each of the four following groupings: tops and yarns; fabrics; made up textile products; clothing.
14. In addition to the integration process, there is a programme for liberalising the restrictions carried over from the MFA by increasing the size of the quotas. The quota annual growth rates are increased as follows:
Increase to be applied annually:
15. Therefore a 6 percent growth rate under the MFA in 1994 became 6.9 percent under the ATC in years 1995, 1996 and 1997; then 8.7 percent in years 1998, 1999, 2000 and 2001; and 11.05 percent in years 2002, 2003 and 2004. For small suppliers (those whose restrictions represent 1.2 percent or less of the total volume of the restrictions applied by an importing Member as at 31 December 1991), the above increases in growth rates are advanced by one stage. Quotas will be eliminated either when the products concerned are integrated into GATT at one of the stages or at the end of the transition on 1 January 2005.
16. Importing Members may drop restraints beyond that required by the integration and liberalisation process. This has been done by Norway in respect of most products under restraint, by Canada in respect of certain products and, in a more limited way, by the United States.
17. The ATC requires Members to notify the Textiles Monitoring Body (TMB) of all quantitative restrictions (eg. unilateral restrictions and bilateral arrangements) whether consistent with GATT or not, in addition to those under the MFA. There is also provision for reverse notification, eg. by the exporting Member. In many cases, GATT 1994 justification was claimed for a restriction, under such as Articles XVIIIB (balance of payments), XX(b) (general exceptions, health and sanitary reasons), XXIV (customs unions and free-trade areas) and individual protocols of accession. In other cases, phase-out programmes were put in place.
18. A particularly important provision of the ATC is the special transitional safeguard mechanism, which allows selective safeguard action to be taken, as distinct from the non-selective provision in Article XIX of GATT 1994. This is to protect Members during the transition period against damaging surges in imports of products which have not yet been integrated into GATT and which are not already under quota.
19. The mechanism requires the importing Member to determine that total imports of a specific product are causing serious damage, or actual threat thereof, to its domestic industry and to which exporting Members this serious damage can be attributed. There are provisions for consultations, including time frames, notification to the TMB and growth rates.
20. When this transitional safeguard mechanism is invoked, more favourable treatment must be given to least-developed countries, small suppliers, new entrants and to re-imports from outward processing. Wool producing developing countries also must be given special consideration.
21. The ATC provides procedures concerning any circumvention of quotas by transhipment, re-routing, false declaration of origin or falsification of official documents. These procedures cover legal and administrative procedures, consultation and notification to the TMB.
22. As under MFA, the administration of restrictions (essentially the allocation of quotas) will be by the exporting Members. However, Members are not obliged to accept shipments in excess of the restriction levels. The ATC also provides that changes in rules and practices "should not upset the balance of rights and obligations between the Members concerned " Again there is provision for referral to the TMB.
23. There are overall obligations under the Uruguay Round to achieve improved access for textile and clothing products through such as tariff reductions and bindings, reduction and elimination of non-tariff barriers and the facilitation of customs, administrative and licensing formalities; to ensure fair and equitable trading conditions as regards textiles and clothing in such as dumping and anti-dumping rules and procedures, subsidies and countervailing measures and the protection of intellectual property rights; and to avoid discrimination against imports of textiles and clothing when taking measures for general trade policy reasons. Where it is thought that the balance of rights and obligations has been upset, there is provision for referral to the relevant WTO body and the TMB.
24. The Textiles Monitoring Body, established under the ATC, is required to supervise the implementation of the Agreement to ensure conformity with the rules. It is a quasi-judicial standing body which consists of a Chairman and ten Members, discharging their function on an ad personam basis and taking decisions by consensus. The ten members are appointed by WTO Members according to agreed constituencies.
25. The TMB reports annually to the WTO Council for Trade in Goods. A specific ATC requirement is that the implementation of the Agreement will be reviewed by the Goods Council before the end of each stage of the integration process, which should in part be based on the TMB report.
26. At the first Ministerial Meeting following the completion of the Uruguay Round, Ministers, inter alia, confirmed their commitment to the "full and faithful implementation of the provisions of the ATC", stressing the importance of integrating trade in textile products in GATT 1994's strengthened rules and disciplines because of its "systemic significance for the rule-based, non-discriminatory trading system and its contribution to the increase in export earnings of developing countries". The Ministerial Declaration also noted that:
27. The Second Ministerial Meeting "recognised the need for the system to make its own contribution in response to the particular trade interests and development needs of developing country Members". It was also recognised that there was an urgent need to address the marginalisation of least-developed countries and certain small economies. The Ministerial Declaration also noted that:
28. As at the end of 1998, the ATC had been operational for four years (1995, 1996, 1997 and 1998) and two of the four stages are in place (covering the years 1999, 2000 and 2001). Points arising from the current position include:
29. The International Textiles and Clothing Bureau (ITCB) came into existence in 1984 with the general objectives of:
30. The ITCB is an international organisation with his headquarters in Geneva. It consists exclusively of developing countries and is managed and financed solely by them. There are currently 23 Members (note 1) and three observer countries (note 2); international organisations, such as UNCTAD, the WTO and ITC are also Observers.
31. The ITCB participated in the Uruguay Round and contributed to the ATC. Currently its main function is to oversee the implementation of the Agreement in particular to help evolve common positions among developing countries and to provide technical assistance.
32. Some comment from the LAC point of view:
Note 1 : Argentina, Bangladesh, Brazil, China, Colombia, Costa Rica, Egypt, El Salvador, Honduras, Hong Kong-China, India, Indonesia, Jamaica, Korea, Macau, Maldives, Mexico, Pakistan, Paraguay, Peru, Sri Lanka, Thailand, Uruguay. (return to text)
Note 2 : Cuba, Mauritius and Singapore. (return to text)