COSTA RICA COMPLAINS OVER US TEXTILE RESTRICTIONS

1:27 PM Jan 31, 1996

COSTA RICA COMPLAINS OVER US TEXTILE RESTRICTIONS
Geneva 31 Jan (Chakravarthi Raghavan) -- The Dispute Settlement Body (DSB) of the World Trade Organization was advised by Costa Rica Wednesday that it was seeking 'consultations' with the United States over its quantitative restrictions on Costa Rican exports (to the US market) of cotton and man-made fibre underwear -- described in trade literature as category 352/652.

The US restrictions, one of several it imposed unilaterally early last year purporting to act under the WTO Agreement on Textiles and Clothing (ATC), had been brought up before the Textiles Monitoring Body (TMB) which did not uphold the US case that the imports were causing serious damage to US producers.

But taking advantage of the TMB's failure to reach a decision (by consensus) on whether there was a serious threat, the US has continued with its restrictions.

The US has been doing this not only in respect of Costa Rica, but several others with a view to pressing the exporting countries to reach bilateral accords of restraint on their exports and/or agreements with the US for 'outward processing agreements', under which US cut fabrics would be imported and stitched and re-exported through sub-contracting arrangements to the benefit of the US producers.

The TMB, whose members are supposed to act independently in their individual capacities, has over one year of its existence been virtually paralysed by the members from importing countries acting in concert to deny consensus for a finding that no serious threat to its producers, justifying the 'safeguards action' had been demonstrated by the United States.

In raising the issue as a dispute under the Dispute Settlement Understanding (DSU), Costa Rica did not explain why it was seeking a fresh round of consultations with the US, and was not straightaway seeking the establishment of a panel for a binding ruling, as it was entitled to.

But Indian Ambassador, Mr. S. Narayanan, however intervened briefly to make the point that under the ATC and the TMB's rules as well as the DSU provisions, any party could take a case straight from the TMB to the DSB for the establishment of a panel.

India, which has similar cases like that of Costa Rica, where a TMB consensus decision has been blocked and the US is still continuing the restrictions contrary to the ATC, is reported to be weighing bringing the case up before the DSB for a panel to rule on the case.

Hong Kong, which also intervened in the proceedings, made the point that even though the TMB could not establish any threat of serious injury (to justify restraint under the ATC), the restraint continues to be imposed by the US on the Costa Rican exports causing serious injury to the industry in Costa Rica. Without judging who was right or wrong in the dispute, Hong Kong stressed the need for urgent solutions.

Earlier, Costa Rica said that the US action was causing unemployment in Costa Rica and was threatening to divert investments from Costa Rica to other countries in the region.

In its written communication, Costa Rica noted that the US had sought consultations with Costa Rica on 27 March for restraints on the items, and when consultations broke down without an agreement, had imposed the restrictions unilaterally by notification in its Federal Register of 23 June. The TMB had reviewed the matter on 21 July and found that serious damage, as envisaged in paras two and three of Art 6 of the ATC had not been demonstrated. The TMB could not reach a consensus on the existence of actual threat of serious damage, but recommended that "... further consultations be held between the United States and the parties concerned, with a view to arriving at a mutual understanding" bearing in mind the TMB findings and with due consideration to the particulars features of the case as well as equity considerations.

After further consultations, 16-17 August, between the two parties failed to resolve the issue, the TMB discussed the case further on 19 October, reaffirmed its previous conclusions (including its lack of decision on the serious threat issue) and "considered its review of the matter completed".

Costa Rica complained that the TMB process had been concluded without the issue being resolved, but that the US was still continuing its unilateral restrictions even though it has been unable to prove the existence of an actual threat of serious damage.

Earlier, Philippines agreed to take off the agenda a request by it for establishment of a panel over Brazilian measures relating to desiccated coconut. This was as a result of prior consultations. If no solution is found in further consultations, the issue would come up at the next meeting of the DSB on 21 February.