WAY CLEAR TO INVOKE DSB ON US TEXTILE RESTRAINTS

6:06 AM Nov 21, 1995

WAY CLEAR TO INVOKE DSB ON US TEXTILE RESTRAINTS
Geneva 20 Nov (Chakravarthi Raghavan) -- An opportunity to seek a WTO ruling on the transitionary safeguard provisions of the Agreement on Textiles and Clothing (ATC) and the responsibilities of the Textile Monitoring Body has been opened up after the unsuccessful attempt of India to get the TMB to clarify its earlier 'decisions' and make specific recommendations on US restraints on Indian exports some categories of clothing products.

The TMB last week appears to have merely reiterated its September 'decisions' -- including a non-decision in one case because of lack of consensus -- thus once again demonstrating its inability to make specific recommendations against the US.

Whether in fact India would now take the case to WTO's dispute settlement mechanism and get a binding ruling which would atleast force the TMB to act according to the ATC provisions, appears to depend on New Delhi.

India's initiation of the review process would make sense only if it was willing to go down the entire route. Any failure trade ministry in New Delhi to pursue the matter will have political repercussions inside the country where the opposition to the asymmetric WTO system is vocal and active, and a major argument used to signing the Marrakesh accords has been the "rule-based" WTO system and its dispute settlement processes.

The Indian delegation to the WTO at Geneva would make no comment either on a possible invocation of the dispute settlement process by New Delhi or even on the TMB decision itself.

In all the cases so far, the TMB -- consisting of an independent chairman and ten members acting on an ad personam basis -- which functions in an even more non-transparent manner than any other WTO body, has not made public any of its decisions and the reasoning behind it, but has been merely circulating to the WTO members very brief minutes of the outcome of its hearings.

Early this year, within weeks of the entry into force of the WTO on 1 January, the US issued "calls", under the transitionary safeguards provisions of the ATC, to a number of Third World exporting countries asking them to 'consult' and agree to restrain their exports.

Many 'calls' were in fact, same or similar to those the US had issued under the old Multifibre Agreement in the weeks before the WTO/ATC entry into force, but for restraining exports in the period after such entry.

While the ATC is a carry-over of the old MFA regime, unlike the MFA's "market disruption" approach, it has some salutary provisions. Under the ATC the importing country, before initiating any actions towards 'transitionary safeguards' has to demonstrate that a particular product was being imported into its territory in such increased quantities was causing serious damage, or actual threat thereof, to its domestic industry.

The criteria to be used for demonstrating serious damage or actual threat is also set out: "effect of imports on the state of the particular industry, as reflected in changes 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". The serious damage or actual threat thereof attributed to imports from a particular Member or Members, the ATC stipulates, "shall be determined on the basis of a sharp and substantial increase in imports, actual or imminent," from such a Member or Members individually, and on the basis of level of imports compared with other sources, market share, and import and domestic prices, but with none of these factors, either alone or combined with other factors, can necessarily give decisive guidance.

A footnote to the ATC text makes clear that even the claim of an 'imminent increase' in imports which will create an actual threat of injury to domestic producers "shall be a measurable one and shall not be determined to exist on the basis of allegation, conjecture or merely possibility arising, for example, from the existence of production capacity in the exporting Members."

And when seeking consultations for transitionary safeguards actions, the importing Member concerned has to provide simultaneously to the TMB Chairman copy of the request and "all the relevant data" on the basis of which the serious damage or actual threat has been determined.

When the US could not get its way into persuading the countries concerned in bilateral consultations to restrain their exports, it went ahead any way and imposed them unilaterally. These restraints were notified to the TMB, which is required suo moto to examine the matter promptly and make appropriate recommendations.

The cases involving US quotas imposed on India came up before the TMB in August this year, when the TMB suggested that the two sides should again consult each other and reach agreement -- a process by which the TMB avoids having to decide and puts the exporter at a disadvantage.

The three cases related to what in trade circles is known as product No 434 (men's woollen jackets and coats), No 435 (women's woollen jackets and coats) No. 440 (women's wool shirts and blouses).

In some of the cases, the US appears to have attempted to use data subsequent to its determination of serious damage or actual threat thereof -- something that India is known to have questioned. But with the TMB not giving a reasoned judgement, it is not known whether or not TMB members gave weight to the subsequent data produced by the United States.

In all the three cases, the TMB came to the conclusion that there was no "demonstrated serious injury".

It found no actual threat either in respect of imports from India of No 434 (men's woollen jackets and blouses) and asked the US to rescind the restraint orders. On No. 440 (women's woollen jackets and blouses), it found an imminent actual threat and accepted the US restraint.

On item 435, women's woollen jackets and coats, there was no consensus and thus no decision. But TMB suggested that in deciding their actions, the parties should keep in mind that the ATC was silent on whether the unilateral restraints imposed could continue in the absence of a consensus ruling by the TMB.

India came back to the TMB for review, on items 440 and 435, in terms of Art. 8.6, 8.8 and 8.10 of the ATC.

Art 8.6 requires the TMB, at the instance of any Member, to review promptly any particular matter which the Member finds detrimental to its interests where the consultations between it and another Member has failed to produce a mutually satisfactory solution; Art 8.8 requires the TMB whenever it is called upon "to make a recommendation" to do so within 30 days and communicate it directly to the Members concerned, and also to the Council on Trade in Goods.

Art 8.10 provides that any Member unable to conform to the TMB recommendations, should communicate it to the TMB with the reasons for its inability to conform to the recommendation, and the TMB is required, after thorough consideration, to issue further recommendations.

But the TMB has apparently merely decided to reiterate its earlier "decision not to make any recommendation". But it is not clear whether any reasoning, or even a finding on the reasons put forward by India in seeking the review under Art 8.6 and 8.8 has been provided to the two parties.

If the matter still remains unresolved, Art 8.10 adds, the Member concerned may bring the matter before the WTO's Dispute Settlement Body and invoke Art XXIII:2 and the DSU -- both of which provide for establishment of a regular panel and ruling.