TMB ADJOURNS HEARINGS ON US TEXTILE CALLS ON INDIA

8:13 AM Sep 4, 1995

TMB ADJOURNS HEARINGS ON US TEXTILE CALLS ON INDIA
Geneva 4 Sep (Chakravarthi Raghavan) -- The World Trade Organization's Textile Monitoring Body (TMB) at its next meeting on 12 September will resume its consideration of the US unilateral actions in restraining imports of three textile and clothing products from India, following disagreement between the two over the US "calls" to restraint exports of these categories.

The TMB, which monitors the implementation of the WTO's Agreement on Textiles and Clothing (ATC) and reviews suo motto such restrictions and safeguard actions under Art.6 of the ATC, has been hearing last week the presentations of the United States in justifying its actions and the response of India.

In July, the TMB heard and disposed off cases relating to some of the Central American and Caribbean countries. On 28 August, it took up the US actions against India.

Both sides had delegations from capitals to present their cases.

The TMB which reportedly is deadlocked (between members coming from the importing and exporting countries) is to resume its consideration on 12 September.

According to press reports in India, three categories of woollen garment products are involved.

Early this year, soon after the WTO came into force, the US issued the calls on India, seeking restraint on export of these products, on the grounds that these imports were causing or threatening to cause "market disruption". At the Cartegena meeting of the International Textiles and Clothing Bureau earlier this year, several of the exporting countries had bitterly complained that the US in issuing its "calls", had done so indiscriminately after the WTO entered into force (often reinstating, within weeks of WTO entry into force, calls made under the old MFA and its looser disciplines).

The US-India talks failed and the US went ahead and restrained the imports, by fixing quotas, and notified the WTO and these have now come up before the TMB -- which consists of ten members in their ad personum capacities and a neutral chairman.

According to trade delegations, the dispute involves several important issues of facts and law, but the TMB (expected to be an adjudicatory body) with its constitution of nominees in their personal capacities, virtually five importing and five exporting countries with a neutral chairman, is showing its inability to decide (as adjudicatory panels can).

The ATC enables transitory safeguard actions to be taken by the importing countries during the 10-year period for phasing out the old MFA restrictions. It calls for such transitory actions being used "sparingly", and only on the basis of a determination by the importing country it is "demonstrated" that a particular product is being imported into its territory in such increased quantities as to cause "serious damage, or actual threat thereof," to the domestic industry producing like and/or directly competitive products. ATC requires that this serious damage or actual threat thereof must demonstrably be caused by such increased quantities in total imports of that product and not by such other factors as technological changes or changes in consumer preference.

The ATC further requires that the importing country authorities, in making such determination "shall examine" effects of the imports on the state of the particular industry, as reflected in such relevant economic variables as output, productivity, utilization of capacity, inventories, market share, exports, wages, employment, domestic prices, profits and investment; none of which, either alone or combined with other factors, can necessarily give decisive guidance.

Textile exporting countries have been taking the position that the ATC, in using the words "demonstrated", unlike the earlier MFA, has circumscribed the importing countries taking actions based on their subjective views or demands of their industry.

Unless there is positive, and demonstrable or proven effect, through facts and evidence adduced to the TMB, relating to the actual imports, the developing country exporters have been arguing, no safeguard actions can be taken and any unilaterally imposed should be withdrawn.

While the ATC enables such actions in the event of serious damage or actual threat thereof, an issue is whether importing countries can take an either or approach to 'serious damage' or 'actual threat thereof' -- throwing both into the argument and hoping one or the other would be accepted. If it is a question of "demonstrable" effect, there cannot be both "serious damage" claim as well as an "actual threat".

Other questions coming up in the US calls, include the nature of the evidence that either an importing or exporting country could present before the TMB: should it confined to facts given by the importing country to the exporter at the time of the consultations, or subsequent "facts" used to claim justification.

In one of the cases of "serious damage or threat thereof" to the US domestic industry, during the same period that the US industry claims imports and loss of market in the US for itself, the industry has also expanded greatly its exports to other markets -- hardly a sign of the industry suffering serious damage or threat thereof.

According to other trade sources, even the facts and evidence sought to be adduced by the US appear to have been challenged by India - with independent trade data.

While for convenience all the three cases of US actions on individual products lines have been heard together, India and other exporting countries are insisting on determination of individual actions, and not the TMB trying to combine them together as if it is a negotiating body, and trying to find compromises by favouring the US in one case, favouring India in the other, and remitting the third for renewed consultations.

Some observers argue that if the WTO is gain credence as a rule-based system with an independent adjudicating machinery, the TMB must either decide yes or no, enabling either party then to invoke the dispute settlement mechanism and ensure a clear ruling on facts and law.

Otherwise, the WTO will prove itself to be no different from the earlier GATT 1947 system, with its free-wheeling procedures and decision-making processes favouring the big players.