ATC IMPLEMENTATION PROBLEMS FOR SINGAPORE MEET?

8:03 AM Jul 5, 1996

ATC IMPLEMENTATION PROBLEMS FOR SINGAPORE MEET?
Geneva, Jul 5 (Chakravarthi Raghavan) -- The Singapore Ministerial Conference (SMC) of the World Trade Organization (WTO), due to be held in December 1996, will be seized of the problems faced by developing countries as a result of the way the Agreement on Textiles and Clothing is being implemented by the major importing countries.

As a step towards this process, a group of developing-country exporters of textiles and clothing have asked the WTO's Council of Trade in Goods to carry out a review and evaluation of the implementation of the ATC and make appropriate recommendations to the SMC, both to ensure faithful implementation of the ATC and for an effective process of integration of the trade in this sector into normal GATT/WTO rules.

At the meeting of the Goods Council on Friday, Pakistan made a statement on behalf of a group of developing countries including the ASEAN, India, and Hong Kong.

The statement and call for review and recommendations was supported by Colombia, Peru, Egypt, Costa Rica, Bangladesh, Brazil, El Salvador, Nigeria, Australia and Argentina.

The United States and the European Communities said they needed time to react.

The Chairman of the Goods Council, Amb. S. Narayanan of India, is to hold informal consultations to decide on a course of action.

The written communication to the Goods Council by Pakistan on behalf of this group of textiles and clothing exporting countries has set out the detailed reasonings and the kind of review to be made.

The review by the Goods Council, Pakistan said, should cover the integration programme under the ATC; the use of transitional safeguards; the impact of bilateral arrangements, concluded in the context of transitional safeguards, but contrary to the basic ATC architecture; the functioning of the Textiles Monitoring Body (TMB) in order to enhance its transparency and ensuring its members function strictly on ad personam basis and impartially; ways to enhance the export possibilities of the least developed and the cotton producing countries (as provided for in the ATC); the operation of the rules of origin; and use of trade measures for non-trade purposes.

Unlike other Uruguay Round agreements, Pakistan pointed out, the ATC has no specific multilateral body to undertake a review with the participation of all WTO members. The TMB members perform their functions in their individual capacities, and thus don't reflect the concerns of WTO members. The Goods Council has been mandated by Art. IV of the WTO agreement to oversee the functioning of the Multilateral Agreements including the ATC and thus has an important role to play in the review exercise.

In view of the immense systemic importance of the integration of textiles into the WTO body of rules, and the commitment to progressive elimination of MFA restrictions for the export interests of the developing countries, the first Ministerial Conference after the conclusion of the Uruguay Round must provide the necessary political impulse for a commercially meaningful process of integration, the Communication said.

The Ministers should confirm (at Singapore) a strong policy commitment to the full implementation of the ATC and direct the WTO General Council to keep its progress under review and report to the next Ministerial Conference.

To facilitate this process, the Goods Council should present its report with appropriate recommendations in accordance with the reporting procedures for the SMC adopted by the WTO General Council, the Pakistan communication said.

The Communication to the Goods Council, has noted that Textiles and Clothing accounted for nine percent of the world's export of manufactures in 1994, and its importance for developing countries was even more significant in that it accounted for 20% of their total exports. For some especially countries, particularly the LDCs, the share, at over 60%, is much larger.

The ATC was hence hailed as one of the principal achievements of the Uruguay Round - both in the systemic significance of the phase out of the MFA restrictions for a rule-based non-discriminatory trading system and its contribution to increase in export earnings of developing countries.

The Communication also recalled that in the GATT Secretariat's "Overview of the results of Market Access in Goods and Services", put out in November 1994, even the most conservative version of the model used by the secretariat to estimate increase in exports, had projected an increase of 18% for textiles and 69% for clothing over a 10-year period -- an increase significantly higher than for most other sectors and mainly attributable to elimination of quantitative restrictions under the MFA -- and for the overall strong estimated gain of some 14% in merchandise exports of the developing and transition economies.

The Goods Council should conduct its review of the implementation of the ATC against this backdrop and in the context of the SMC, in order to evaluate the implementation of the ATC so far, and make appropriate recommendations.

The evaluation should aim to identify and assess the elements necessary for faithful implementation of the ATC and for an effective process of integration of the trade in this sector into the GATT/WTO rules. The evaluation must also consider other matters affecting the trade in textiles, especially for the export interests of developing countries.

A central feature of the ATC was progressive character of the integration process. The ATC (Art. 1:5) envisaged that to facilitate the integration process, Members should alow for continuous autonomous adjustments and increased competition in their markets.

However, the first stage of integration undertaken by the MFA restraining Members have not included any items under restraint -- except for one item by one member.

The review exercise must consider the impact of this for the later stages of the integration process.

The assessment of the integration process should be made in the context of contributing to the smooth transition of trade in this sector to the GATT disciplines, and cover elements of the integration programmes of the MFA restraining members for the second stage of integration. This should be done bearing in mind that the progressive liberalisation of restrictions is in the interest of both the restraining and exporting members.

In asking for a review of the way the transitional safeguards provisions of the ATC have been utilised, Pakistan's communication noted that the ATC has provided these provisions to be "used as sparingly as possible" and "consistently with the provisions (i.e. disciplines) of this Article and the effective implementation of the integration process" (Art. 6:1).

The review should consider the invocation of a large number of safeguard measures against the export interests of developing countries and assess its implications for the effective implementation of the integration process during the remainder of the transition period.

Referring to the bilateral agreed arrangements, Pakistan noted that a fundamental concept of the ATC was to strengthen the multilateral disciplines in the field of textiles trade so as to insure the final integration of the sector into the normal rules of the GATT/WTO.

Hence, the MFA's accent on bilateral arrangements were excluded from the basic architecture of the ATC. In the limited context in which bilateral arrangements were possible, multilateral disciplines were strengthened including through stricter oversight by the TMB.

However, a number of bilateral arrangements have been concluded, including in the context of invocation of safeguard measures, and some of these arrangements were not subsequently confirmed by the TMB.

The review in this area should hence examine the impact of bilateral arrangements for the integrity of the multilateral rules and disciplines.

On the issue of the review of the functioning of the TMB, Pakistan noted that the ATC requires the TMB to supervise the implementation of the ATC, examine all the measures taken under the ATC and their conformity with the ATC, and take other actions specifically required of the TMB by Art 8:1.

The TMB was thus given the important job of adjudicating among Members.

The review of the TMB functioning should consider ways to improve the working of the TMB, inter alia, through enhancing the transparency of its process and by ensuring participation of its members strictly on an ad personum basis so as to ensure impartiality, Pakistan said.

Since the TMB began functioning from 1 Jan 1995, there have been complaints among the members over the lack of transparency of its process, with no detailed reports and arguments about its decisions.

Information to the media through the normal WTO press office channels have been sparser than about other activities at the WTO which even normally are non-transparent.

But in the case of the TMB, its non-transparency has been a complaint even of the WTO members. The TMB members of the major importing countries have also been accused of functioning as representatives of countries rather than ad personum basis as required.

As for the LDCs, the special provisions and improvements in the integration and liberalisation process, called for by the ATC, have not been extended to the LDCs whose exports are under restraint. Similarly, while the ATC requires that the particular interests of the cotton-producing countries should be reflected in the implementation of the ATC, and this should be done in consultation with them, no such consultation had been notified.

The review should look into the impact of the situation for the export possibilities of the LDCs under restraint as well the implications of the way ATC has been implemented for the cotton-producing countries.

About the rules of origin, the ATC envisaged that changes in practices, rules, procedures etc should not upset the balance of rights and obligations between Members, adverse affect the access available to a Member, impede full utilisation of such access, or disrupt trade under the ATC. Also, the WTO Agreement on Rules of Origin provided that pending completion of the work programme for harmonization of Rules of Origin, Members "shall ensure," inter alia, that their "rules of origin are not used as instrument to pursue trade objectives, directly or indirectly."

However one restraining Member (the United States) "has implemented changes in its Rules of Origin relating to imports of textiles and clothing products as an instrument of trade policy, and these changes have introduced great uncertainty and unpredictability for the full utilization of quota access."

The review exercise should hence consider the situation with a view to proposing corrective measures.

While a fundamental principle of the GATT/WTO is the elimination of discriminatory treatment in international commerce, special regimes are continually being extended to provide for better access to certain Members or countries, Pakistan complained in reference to the socalled OPT (outward processing trade), special regimes (such as with east Europe or some of the developing exporting countries).

"The review exercise should ensure that such special privileges do not undermine the access rights of restrained Members," the Communication by Pakistan on behalf of the group of members said.

The communication also called for a review of the implications of an expanding coverage of restrictions in the context of regionalism, especially for the export prospects of developing countries.

Recently, there have also been growing pressures for trade measures in pursuit of realization of non-trade objectives and purposes, particularly on textile products and these have a protectionist bias. Since such trade measures for non-trade purposes are based on criteria outside the WTO framework of disciplines, and produce serious disruptive efforts for trade interests and prospects of developing country Members, the review should consider ways to ensure strict compliance with rules and disciplines of the multilateral trading system.