EXPORTERS COMPLAIN OVER ATC IMPLEMENTATION

8:49 AM Jul 26, 1996

EXPORTERS COMPLAIN OVER ATC IMPLEMENTATION
Geneva 26 (Chakravarthi Raghavan) -- The manner in which the Uruguay Round Agreement on Textiles and Clothing is being implemented came for sharp criticism Thursday at the meeting of the WTO's Council on Trade in Goods which has undertaken an in-depth review of the ATC as part of the preparations for the WTO's Singapore Ministerial Conference (SMC).

The Goods Council had before it a detailed communication from Pakistan, on behalf of the six ASEAN members, Hong Kong, India, Korea and Pakistan, seeking a detailed and in-depth review of the various aspects of the implementation of the ATC, and the functioning of its Textiles Monitoring Body (TMB).

Though the Pakistani communication is on behalf of 10 countries, it has the support of a very large number of developing countries, as became clear in the interventions and comments at the Goods Council.

Also before the Goods Council were communications from the United States and the European Union, countering the pressures of the developing country exporters with calls of their own for opening up their own markets to textiles and clothing imports and effective measures to prevent circumvention and other fraudulent trade practices.

The formal communication from Pakistan on behalf of the 10 members for a review of the ATC by the Goods Council was presented on 5 July, but the US and the EU had sought time for reflection. They then tried to put off any discussion, and any possible report to the SMC from the Goods Council, and wanted this to be done by the TMB. When it became clear that discussion in the Goods Council could not be prevented, they came up with calls for market access by developing countries and anti-circumvention actions.

The TMB, consisting of 10 members, in their ad personam capacities, with an independent chairman, has been established by the ATC to supervise the implementation of the Agreement, and adjudicating disputes among the exporters and importers.

But the TMB's functioning is itself one of the issues on which the developing countries want review and recommendations to the SMC.

In the Goods Council discussion Thursday, the procedural issue whether the Goods Council should take up the issue, or whether it should wait for a TMB report, was again raised -- with Canada, Japan, Switzerland and Norway insisting that they would not participate in the substantive discussions on issues raised by the communication from Pakistan.

However, the developing countries who spoke took the position that the TMB was a small body with ad personam membership, and not as representatives of countries, and that the proper forum for a review of the ATC and its implementation was the Goods Council.

Several Third World delegations later said that the whole effort of the industrial countries in wanting to put off discussions, and wanting to base any report to Singapore on the TMB report is related to the fact that within the TMB, where a consensus is required, they would be able to eliminate all references adverse to them, whereas in any report from the Goods Council, even disagreements would have to be reflected by formulations in square brackets.

The discussions at the Goods Council, participants said, went ahead on the basis of an agenda listing the various points raised in the Pakistan communication, and those raised by the US and EU on market access and anti-circumvention provisions of the ATC. These last are to be taken up at the next meeting of the Goods Council.

Norway, while refusing to participate in the substantive issues raised by the Pakistan communication, nevertheless sought to use the complaint about use of trade measures for non-trade purposes (raised in the communication) to bring in the issue of labour standards and trade.

Norway and the United States have sought to bring up this question as a 'new issue' for Singapore. They have tabled two 'non-papers' on this for the informal heads of delegation preparatory process chaired by the WTO Director-General, Renato Ruggiero.

While this effort was rejected by developing countries who said they were in no way going to accept injection of the labour standards issue into the WTO, the Norwegian intervention

One third world participant said the Norwegian intervention showed that the motivation of some of the industrial countries in bringing up the labour standards issue is related to their efforts to preserve and protect their labour-intensive industries where the comparative advantage has passed to the developing world.

In an introductory statement to the discussions, Pakistan's Amb. Munir Akram said while the paper had been presented on behalf of ten countries, it enjoyed much wider support than reflected in its cosponsorship.

The objective in seeking a comprehensive review of the implementation of the ATC, he stressed, is not to see modification of its provisions, nor to seek trade-offs against any of the spectrum of issues that had been raised in preparation for the Singapore Ministerial.

[In some of the recent informal discussions among a small group of countries, the idea has been floated that in order to get better implementation of the ATC, developing countries should agree to new issues like investment or labour standards. This has been rejected, by a number of developing countries who have said that they had already paid a price for the ATC through undertaking other obligations, and were not ready to pay an additional price for getting their 'rights]

Rather, the purpose is to undertake an evaluation of the implementation of the ATC against its various provisions and to make appropriate recommendations to the SMC.

"We believe 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 textile sector into the normal GATT/WTO rules".

The co-sponsors of the paper, Pakistan said, attached great importance to the full and faithful implementation of the ATC and "are seriously concerned because the implementation has not lived up to its promise and expectation."

In other comments, India said the developing countries looked upon the ATC as a mechanism to integrate the textiles and clothing trade into the multilateral disciplines of the WTO system and the ATC as a harbinger of a rule-based system, rather than a power-based system.

However, when one looked at the details of the ATC implementation, "we find that instead of the rule of law, both in letter and spirit, old attitudes of restrictive, unilateralist MFA system continue to prevail."

In the case of the transitional safeguards, Art 6 of the ATC requires that this should be used "as sparingly as possible" and that too "consistently with the provisions" of the Article and "the effective implementation of the integration process under this Agreement."

The transitional safeguards was conceived as an exceptional measure for application during transition period on products yet to be integrated into the GATT. It was viewed as an exceptional measure, and since the old discriminatory restrictions under MFA were to be continued until integration of the particular products into the GATT, it was considered desirable to prevent additions to the mass of such restrictions unless the circumstances really justified the use.

In the first year of the ATC, only one WTO member had invoked the transition safeguards. But that member (the USA) had initiated 24 such actions within a space of a few months against 14 WTO members, all of whom were developing countries.

All these were reviewed by the TMB. In seven cases which came up as disputes before the TMB, three actions were rescinded after the TMB found no justification for them. Three actions have been brought up before the WTO's Dispute Settlement Body, where two are pending before panels. In the third (involving India), the transition safeguard actions were rescinded before the panel could take up the dispute.

The Indian delegate, Ashok Mukherjee commented: "This is an alarming track record for the transitional safeguard provisions which have been used in such a wholesale manner".

In seven cases, calls were made and rescinded even before the TMB could take action, showing the "casual manner" in which the transitional safeguards had been invoked.

The transitional safeguards had also been invoked without taking into consideration whether the measure was meant to prevent serious damage or actual threat of serious damage to the domestic industry. The ATC -- in Art. 6 paragraphs 2,3, and 4 -- clearly envisages a distinction between these two situations by using the word 'or'. The relevance of the economic variables and factual information could not be the same in the two different situations, and there is even a footnote to Art. 6 para 4, spelling out the specific requirements for making a determination of threat.

But in invoking the transitional safeguards, the member concerned had considered the two situations as interchangeable. And in reviewing the actions, the TMB had not pointed out this inconsistency.

Art 6 of the ATC also called for "specific and relevant factual information" to be used to make a determination for invoking transitional safeguards and issuing a consultation. This could not be altered by additional data from a period subsequent to the beginning of the review of the consultation. But this provision has been undermined by the Member concerned using new data to justify its own determination, and this method of using "additional relevant information" had not been rejected by the TMB.

Referring to the continued recourse to bilaterally agreed restraints, the ATC consciously had sought to exclude these MFA arrangements and required the TMB to examine bilateral arrangements and determine whether they were "justified" in accordance with the provisions of Art.6

The TMB reviews of such reviews show that restraint levels agreed upon are considerably higher than the rollback levels which were alleged to be cause of serious damage and for invoking transitional safeguards. If a member invoking transition safeguards can absorb higher levels of imports from the sources with which it has entered into bilateral arrangements, then the initial determination of serious damage is faulty. This is discernible in eight of the cases involving use of Art. 6 of the ATC.

Also, in some of these agreements, there is justification for use of double restraints, contrary to provisions of Art.6 paragraph 4 of the ATC.

"The rampant use of provisions of the transitional safeguard mechanisms contained in Art 6 of the ATC has been violative of the commitment to implement this important provision of the agreement. Such actions have been initiated without careful consideration of facts and proper assessment of the serious damage to domestic industry. In effect these actions have continued the protectionist legacy of the MFA regime, and is directly against the 'objective of further liberalisation of trade' so eloquently promised in the preamble to the ATC."

Hong Kong linked and compared the integration achieved and the use of transition safeguards. Canada was the only importing country that had integrated one specific restrained item -- work gloves. Except for this item, no other restrained product had been integrated into the ATC on 1 January 1995. The total value of such products imported into Canada were valued at approximately $18 million.

But since January 1995, Art 6 safeguard actions had been invoked by one major importing country (the USA) 25 times. New quantitative restrains were imposed in 11 of these 25 cases through bilateral settlements. The end result was the new restraints accounted for a total trade value of $1.7 billion.

Thus, the value of trade liberated through integration since 1 January 1995, as compared to the level of newly restricted trade was almost 100 fold. While the comparison could be called by some as simplistic, the figures do not lend any credibility to the claim that the ATC has been faithfully implemented.

While the Canadian integration of the 'work glove' is described as the start of an integration process, based on the information already available about the next stages of integration, as for as Hong Kong was concerned, some 80% of the currently restricted items would remain under restraint till year 2005. And in the case of the US, the assessment was that upto 89% of currently restricted exports from Hong Kong would remain under restraint until year 2005.