NOTE

1. The Agreement on Textiles and Clothing (ATC) was negotiated in the Uruguay Round of
Trade Negotiations. It replaced the Arrangement Regarding International Trade in Textiles (MFA, or
Multi-Fibre Arrangement) of 20 December 1973. The ATC provided for all then-existing textile and
clothing trade restrictions to be notified and eliminated over a period of 10 years from the date of
entry into force of the WTO Agreement.

2. The ATC also provided that the ATC itself would be terminated at the beginning of the 12 th
year of the WTO, together with all of the remaining restrictions within its scope. As this termination
duly took place on 1 January 2005, the ATC is no longer in effect.

3. Annexed is the Chapter from the WTO Analytical Index, 3rd edition (2012) providing
information on the Agreement on Textiles and Clothing.
 Agreement on Textiles and Clothing 2

Agreement on Textiles and Clothing

NOTE .................................................................................................................................................... 1
II. GENERAL 4

III. PREAMBLE 4
A. TEXT OF THE PREAMBLE ............................................................................................................... 4
B. INTERPRETATION AND APPLICATION OF THE PREAMBLE ............................................................... 4

IV. ARTICLE 1 4
A. TEXT OF ARTICLE 1....................................................................................................................... 4
B. INTERPRETATION AND APPLICATION OF ARTICLE 1 ...................................................................... 5
1. General: Purpose and interpretation of the ATC .......................................................... 5
V. ARTICLE 2 5
A. TEXT OF ARTICLE 2....................................................................................................................... 5
B. INTERPRETATION AND APPLICATION OF ARTICLE 2 ...................................................................... 9
1. General ............................................................................................................................... 9
2. Article 2.1 ........................................................................................................................... 9
3. Article 2.4 ......................................................................................................................... 10
(a) Jurisprudence .......................................................................................................................... 10
(b) TMB statements ...................................................................................................................... 10
4. Article 2.17 ....................................................................................................................... 11
VI. ARTICLE 3 11
A. TEXT OF ARTICLE 3 .................................................................................................................... 11
B. INTERPRETATION AND APPLICATION OF ARTICLE 3 .................................................................... 12
1. General ............................................................................................................................. 12
2. Article 3.1 ......................................................................................................................... 12
(a) "restrictions" ........................................................................................................................... 12
VII. ARTICLE 4 13
A. TEXT OF ARTICLE 4..................................................................................................................... 13
B. INTERPRETATION AND APPLICATION OF ARTICLE 4 .................................................................... 13

VIII. ARTICLE 5 14
A. TEXT OF ARTICLE 5..................................................................................................................... 14
B. INTERPRETATION AND APPLICATION OF ARTICLE 5 .................................................................... 15
1. General ............................................................................................................................. 15
2. Article 5.4 ......................................................................................................................... 15
(a) "appropriate action, to the extent necessary to address the problem" ...................................... 15
(b) "Members concerned may agree on other remedies in consultation" ...................................... 16
3. Article 5.6 ......................................................................................................................... 16
IX. ARTICLE 6 16
A. TEXT OF ARTICLE 6..................................................................................................................... 16
B. INTERPRETATION AND APPLICATION OF ARTICLE 6 .................................................................... 20
1. General ............................................................................................................................. 20
(a) Elements of Article 6 .............................................................................................................. 20
(b) Notification as an element of a valid safeguard measure ........................................................ 20
(c) Scope and basis of review ....................................................................................................... 20
(i) Jurisprudence ................................................................................................................ 20
(ii) TMB statements ............................................................................................................. 22
(d) Burden of proof ....................................................................................................................... 22
(e) Specificity of data ................................................................................................................... 23
2. Article 6.2 ......................................................................................................................... 23
(a) General .................................................................................................................................... 23
(b) "a particular product is being imported" ................................................................................. 23
(c) "in such increased quantities" ................................................................................................. 24
 WTO ANALYTICAL INDEX 3

(d) "serious damage, or actual threat thereof" ............................................................................... 24

(i) Concepts of "serious damage, or actual threat thereof" ................................................ 24
(ii) Indicators of serious damage: changes in firm output ................................................... 25
(iii) Choice of investigation period ....................................................................................... 26
Length of the investigation period ................................................................................. 26
Most recent period ......................................................................................................... 26
(e) "the domestic industry producing like and/or directly competitive products" ......................... 27
(i) Product-oriented definition of domestic industry........................................................... 27
(ii) "producing" ................................................................................................................... 27
(iii) "directly competitive products"...................................................................................... 27
"Directly competitive" in the context of Article III:2 of the GATT 1994 ...................... 27
Direct competitive relationship; potential competitive relationship ............................... 28
Like products, directly competitive products, and unlike or dissimilar products ........... 29
Captive production......................................................................................................... 30
(iv) "and/or" ......................................................................................................................... 30
(v) TMB statements ............................................................................................................. 30
(f) Causation ................................................................................................................................ 31
(i) "demonstrably" .............................................................................................................. 31
(ii) Lag in investigation period ............................................................................................ 32
3. Article 6.3 ......................................................................................................................... 32
(a) List of conditions in Article 6.3 .............................................................................................. 32
4. Article 6.4 ......................................................................................................................... 33
(a) Steps preceding the attribution of serious damage to individual Members ............................. 33
(b) Attribution requirements ......................................................................................................... 34
(i) First requirement: only those Members from whom imports have shown a sharp
and substantial increase ................................................................................................ 34
"sharp" and "substantial" increase in imports ................................................................ 34
Attribution to all Members whose imports cause serious damage or threat
thereof ............................................................................................................................ 34
(ii) Second requirement: comparative analysis ................................................................... 35
Why is a comparative analysis required? ....................................................................... 35
How to conduct a comparative analysis ......................................................................... 36
5. Article 6.6 ......................................................................................................................... 38
(a) Article 6.6(d) ........................................................................................................................... 38
6. Article 6.7 ......................................................................................................................... 38
7. Article 6.10 ....................................................................................................................... 41
8. Article 6.11 ....................................................................................................................... 44
(a) "highly unusual and critical circumstances" ............................................................................ 44
9. Relationship with Article 2.4 .......................................................................................... 45
10. Relationship with other WTO Agreements................................................................... 45
(a) Article III.2 of the GATT 1994 ............................................................................................... 45
(b) Article X:2 of the GATT 1994 ................................................................................................ 45
X. ARTICLE 7 46
A. TEXT OF ARTICLE 7..................................................................................................................... 46
B. INTERPRETATION AND APPLICATION OF ARTICLE 7 .................................................................... 46

XI. ARTICLE 8 46
A. TEXT OF ARTICLE 8..................................................................................................................... 46
B. INTERPRETATION AND APPLICATION OF ARTICLE 8 .................................................................... 48
1. General ............................................................................................................................. 48
2. Role of the TMB .............................................................................................................. 48
3. Article 8.1 ......................................................................................................................... 50
(a) "The TMB shall consist of a Chairman and 10 members." ..................................................... 50
(b) TMB members "discharge […] their functions on an ad personam basis" ............................. 50
4. Article 8.2 ......................................................................................................................... 51
(a) "The TMB shall develop its own working procedures" .......................................................... 51
(b) "consensus within the TMB"................................................................................................... 51
5. Article 8.3 ......................................................................................................................... 51
(a) Standard of review .................................................................................................................. 51
6. Article 8.9 ......................................................................................................................... 53
7. Article 8.10 ....................................................................................................................... 54
8. Article 8.11 ....................................................................................................................... 54
 Agreement on Textiles and Clothing 4

(a) "a major review before the end of each stage of the integration process" ............................... 54
XII. ARTICLE 9 54
A. TEXT OF ARTICLE 9..................................................................................................................... 54
B. INTERPRETATION AND APPLICATION OF ARTICLE 9 .................................................................... 55

XIII. ANNEX 55
A. TEXT OF ANNEX .......................................................................................................................... 55
B. INTERPRETATION AND APPLICATION OF THE ANNEX................................................................... 55

II. GENERAL

4. The Agreement on Textiles and Clothing (ATC) was negotiated in the Uruguay Round of
Trade Negotiations. It replaced the Arrangement Regarding International Trade in Textiles (MFA, or
Multi-Fibre Arrangement) of 20 December 1973. The ATC provided for all then-existing textile and
clothing trade restrictions to be notified and eliminated over a period of 10 years from the date of
entry into force of the WTO Agreement. The ATC also provided that the ATC itself would be
terminated at the beginning of the 12th year of the WTO, together with all of the remaining restrictions
within its scope. As this termination duly took place on 1 January 2005, the ATC is no longer in
effect.

III. PREAMBLE

A. TEXT OF THE PREAMBLE

Members,

Recalling that Ministers agreed at Punta del Este that "negotiations in the area of textiles and
clothing shall aim to formulate modalities that would permit the eventual integration of this sector into
GATT on the basis of strengthened GATT rules and disciplines, thereby also contributing to the
objective of further liberalization of trade";

Recalling also that in the April 1989 Decision of the Trade Negotiations Committee it was
agreed that the process of integration should commence following the conclusion of the Uruguay
Round of Multilateral Trade Negotiations and should be progressive in character;

Recalling further that it was agreed that special treatment should be accorded to the least-
developed country Members;

Hereby agree as follows:

B. INTERPRETATION AND APPLICATION OF THE PREAMBLE

No jurisprudence or decision of a competent WTO body.

IV. ARTICLE 1

A. TEXT OF ARTICLE 1

Article 1

1. This Agreement sets out provisions to be applied by Members during a transition

period for the integration of the textiles and clothing sector into GATT 1994.
 WTO ANALYTICAL INDEX 5

2. Members agree to use the provisions of paragraph 18 of Article 2 and paragraph 6(b) of
Article 6 in such a way as to permit meaningful increases in access possibilities for small suppliers and
the development of commercially significant trading opportunities for new entrants in the field of
textiles and clothing trade.1

(footnote original) 1 To the extent possible, exports from a least-developed country Member may also benefit from
this provision.

3. Members shall have due regard to the situation of those Members which have not accepted the
Protocols extending the Arrangement Regarding International Trade in Textiles (referred to in this
Agreement as the "MFA") since 1986 and, to the extent possible, shall afford them special treatment in
applying the provisions of this Agreement.

4. Members agree that the particular interests of the cotton-producing exporting Members
should, in consultation with them, be reflected in the implementation of the provisions of this
Agreement.

5. In order to facilitate the integration of the textiles and clothing sector into GATT 1994,
Members should allow for continuous autonomous industrial adjustment and increased competition in
their markets.

6. Unless otherwise provided in this Agreement, its provisions shall not affect the rights and
obligations of Members under the provisions of the WTO Agreement and the Multilateral Trade
Agreements.
1
7. The textile and clothing products to which this Agreement applies are set out in the Annex.

B. INTERPRETATION AND APPLICATION OF ARTICLE 1

1. General: Purpose and interpretation of the ATC

5. The Panel in US – Underwear examined whether a transitional safeguard measure imposed by

the United States was consistent with Article 6. In so doing, the Panel referred to Article 1 in
explaining the overall purpose of the ATC:

"[T]he overall purpose of the ATC is to integrate the textiles and clothing sector into
GATT 1994. Article 1 of the ATC makes this point clear. To this effect, the ATC
requires notification of all existing quantitative restrictions (Article 2 of the ATC) and
provides that they will have to be terminated by the year 2004 (Article 9 of
the ATC)."2

6. In Turkey – Textiles, the Panel noted (in relation to the notification requirement of Article 2.1)
that "since the purpose of the ATC is to provide exceptions to the general application of Articles XI and
XIII of GATT during an integration period to be completed by 1 January 2005, these exceptions should
be interpreted narrowly".3

V. ARTICLE 2

A. TEXT OF ARTICLE 2

Article 2

1
With respect to the Annex, see Section XIII. (The list of textile and clothing products is omitted).
2
Panel Report, US – Underwear, para. 7.19.
3
Panel Report, Turkey – Textiles, para. 9.69.
 Agreement on Textiles and Clothing 6

1. All quantitative restrictions within bilateral agreements maintained under Article 4 or notified
under Article 7 or 8 of the MFA in force on the day before the entry into force of the WTO Agreement
shall, within 60 days following such entry into force, be notified in detail, including the restraint levels,
growth rates and flexibility provisions, by the Members maintaining such restrictions to the Textiles
Monitoring Body provided for in Article 8 (referred to in this Agreement as the "TMB"). Members
agree that as of the date of entry into force of the WTO Agreement, all such restrictions maintained
between GATT 1947 contracting parties, and in place on the day before such entry into force, shall be
governed by the provisions of this Agreement.

2. The TMB shall circulate these notifications to all Members for their information. It is open to
any Member to bring to the attention of the TMB, within 60 days of the circulation of the notifications,
any observations it deems appropriate with regard to such notifications. Such observations shall be
circulated to the other Members for their information. The TMB may make recommendations, as
appropriate, to the Members concerned.

3. When the 12-month period of restrictions to be notified under paragraph 1 does not coincide
with the 12-month period immediately preceding the date of entry into force of the WTO Agreement,
the Members concerned should mutually agree on arrangements to bring the period of restrictions into
line with the agreement year2, and to establish notional base levels of such restrictions in order to
implement the provisions of this Article. Concerned Members agree to enter into consultations
promptly upon request with a view to reaching such mutual agreement. Any such arrangements shall
take into account, inter alia, seasonal patterns of shipments in recent years. The results of these
consultations shall be notified to the TMB, which shall make such recommendations as it deems
appropriate to the Members concerned.

(footnote original) 2 The "agreement year" is defined to mean a 12-month period beginning from the date of entry
into force of the WTO Agreement and at the subsequent 12-month intervals.

4. The restrictions notified under paragraph 1 shall be deemed to constitute the totality of such
restrictions applied by the respective Members on the day before the entry into force of the WTO
Agreement. No new restrictions in terms of products or Members shall be introduced except under the
provisions of this Agreement or relevant GATT 1994 provisions.3 Restrictions not notified within
60 days of the date of entry into force of the WTO Agreement shall be terminated forthwith.

(footnote original) 3 The relevant GATT 1994 provisions shall not include Article XIX in respect of products not
yet integrated into GATT 1994, except as specifically provided in paragraph 3 of the Annex.

5. Any unilateral measure taken under Article 3 of the MFA prior to the date of entry into force
of the WTO Agreement may remain in effect for the duration specified therein, but not exceeding
12 months, if it has been reviewed by the Textiles Surveillance Body (referred to in this Agreement as
the "TSB") established under the MFA. Should the TSB not have had the opportunity to review any
such unilateral measure, it shall be reviewed by the TMB in accordance with the rules and procedures
governing Article 3 measures under the MFA. Any measure applied under an MFA Article 4
agreement prior to the date of entry into force of the WTO Agreement that is the subject of a dispute
which the TSB has not had the opportunity to review shall also be reviewed by the TMB in accordance
with the MFA rules and procedures applicable for such a review.

6. On the date of entry into force of the WTO Agreement, each Member shall integrate into
GATT 1994 products which accounted for not less than 16 per cent of the total volume of the
Member's 1990 imports of the products in the Annex, in terms of HS lines or categories. The products
to be integrated shall encompass products from each of the following four groups: tops and yarns,
fabrics, made-up textile products, and clothing.4

4
With respect to Article 2.6, in Marrakesh, the Ministerial Conference took the following Decision on
Notification of First Integration under Article 2.6 of the ATC:

"Ministers agree that the participants maintaining restrictions falling under paragraph 1 of Article 2 of
the Agreement on Textiles and Clothing shall notify full details of the actions to be taken pursuant to
paragraph 6 of Article 2 of that Agreement to the GATT Secretariat not later than 1 October 1994. The
 WTO ANALYTICAL INDEX 7

7. Full details of the actions to be taken pursuant to paragraph 6 shall be notified by the Members
concerned according to the following:

(a) Members maintaining restrictions falling under paragraph 1 undertake,

notwithstanding the date of entry into force of the WTO Agreement, to notify such
details to the GATT Secretariat not later than the date determined by the Ministerial
Decision of 15 April 1994. The GATT Secretariat shall promptly circulate these
notifications to the other participants for information. These notifications will be
made available to the TMB, when established, for the purposes of paragraph 21;

(b) Members which have, pursuant to paragraph 1 of Article 6, retained the right to use
the provisions of Article 6, shall notify such details to the TMB not later than 60 days
following the date of entry into force of the WTO Agreement, or, in the case of those
Members covered by paragraph 3 of Article 1, not later than at the end of the 12th
month that the WTO Agreement is in effect. The TMB shall circulate these
notifications to the other Members for information and review them as provided in
paragraph 21.

8. The remaining products, i.e. the products not integrated into GATT 1994 under paragraph 6,
shall be integrated, in terms of HS lines or categories, in three stages, as follows:

(a) on the first day of the 37th month that the WTO Agreement is in effect, products
which accounted for not less than 17 per cent of the total volume of the Member's
1990 imports of the products in the Annex. The products to be integrated by the
Members shall encompass products from each of the following four groups: tops and
yarns, fabrics, made-up textile products, and clothing;

(b) on the first day of the 85th month that the WTO Agreement is in effect, products
which accounted for not less than 18 per cent of the total volume of the Member's
1990 imports of the products in the Annex. The products to be integrated by the
Members shall encompass products from each of the following four groups: tops and
yarns, fabrics, made-up textile products, and clothing;

(c) on the first day of the 121st month that the WTO Agreement is in effect, the textiles
and clothing sector shall stand integrated into GATT 1994, all restrictions under this
Agreement having been eliminated.

9. Members which have notified, pursuant to paragraph 1 of Article 6, their intention not to
retain the right to use the provisions of Article 6 shall, for the purposes of this Agreement, be deemed
to have integrated their textiles and clothing products into GATT 1994. Such Members shall,
therefore, be exempted from complying with the provisions of paragraphs 6 to 8 and 11.

10. Nothing in this Agreement shall prevent a Member which has submitted an integration
programme pursuant to paragraph 6 or 8 from integrating products into GATT 1994 earlier than
provided for in such a programme. However, any such integration of products shall take effect at the
beginning of an agreement year, and details shall be notified to the TMB at least three months prior
thereto for circulation to all Members.

11. The respective programmes of integration, in pursuance of paragraph 8, shall be notified in

detail to the TMB at least 12 months before their coming into effect, and circulated by the TMB to all
Members.

12. The base levels of the restrictions on the remaining products, mentioned in paragraph 8, shall
be the restraint levels referred to in paragraph 1.

GATT Secretariat shall promptly circulate these notifications to the other participants for information.
These notifications will be made available to the Textiles Monitoring Body, when established, for the
purposes of paragraph 21 of Article 2 of the Agreement on Textiles and Clothing."
 Agreement on Textiles and Clothing 8

13. During Stage 1 of this Agreement (from the date of entry into force of the WTO Agreement to
the 36th month that it is in effect, inclusive) the level of each restriction under MFA bilateral
agreements in force for the 12-month period prior to the date of entry into force of the WTO
Agreement shall be increased annually by not less than the growth rate established for the respective
restrictions, increased by 16 per cent.

14. Except where the Council for Trade in Goods or the Dispute Settlement Body decides
otherwise under paragraph 12 of Article 8, the level of each remaining restriction shall be increased
annually during subsequent stages of this Agreement by not less than the following:

(a) for Stage 2 (from the 37th to the 84th month that the WTO Agreement is in effect,
inclusive), the growth rate for the respective restrictions during Stage 1, increased by
25 per cent;

(b) for Stage 3 (from the 85th to the 120th month that the WTO Agreement is in effect,
inclusive), the growth rate for the respective restrictions during Stage 2, increased by
27 per cent.

15. Nothing in this Agreement shall prevent a Member from eliminating any restriction
maintained pursuant to this Article, effective at the beginning of any agreement year during the
transition period, provided the exporting Member concerned and the TMB are notified at least three
months prior to the elimination coming into effect. The period for prior notification may be shortened
to 30 days with the agreement of the restrained Member. The TMB shall circulate such notifications to
all Members. In considering the elimination of restrictions as envisaged in this paragraph, the
Members concerned shall take into account the treatment of similar exports from other Members.

16. Flexibility provisions, i.e. swing, carryover and carry forward, applicable to all restrictions
maintained pursuant to this Article, shall be the same as those provided for in MFA bilateral
agreements for the 12-month period prior to the entry into force of the WTO Agreement. No
quantitative limits shall be placed or maintained on the combined use of swing, carryover and carry
forward.

17. Administrative arrangements, as deemed necessary in relation to the implementation of any

provision of this Article, shall be a matter for agreement between the Members concerned. Any such
arrangements shall be notified to the TMB.

18. As regards those Members whose exports are subject to restrictions on the day before the
entry into force of the WTO Agreement and whose restrictions represent 1.2 per cent or less of the total
volume of the restrictions applied by an importing Member as of 31 December 1991 and notified under
this Article, meaningful improvement in access for their exports shall be provided, at the entry into
force of the WTO Agreement and for the duration of this Agreement, through advancement by one
stage of the growth rates set out in paragraphs 13 and 14, or through at least equivalent changes as may
be mutually agreed with respect to a different mix of base levels, growth and flexibility provisions.
Such improvements shall be notified to the TMB.

19. In any case, during the duration of this Agreement, in which a safeguard measure is initiated
by a Member under Article XIX of GATT 1994 in respect of a particular product during a period of
one year immediately following the integration of that product into GATT 1994 in accordance with the
provisions of this Article, the provisions of Article XIX, as interpreted by the Agreement on
Safeguards, will apply, save as set out in paragraph 20.

20. Where such a measure is applied using non-tariff means, the importing Member concerned
shall apply the measure in a manner as set forth in paragraph 2(d) of Article XIII of GATT 1994 at the
request of any exporting Member whose exports of such products were subject to restrictions under this
Agreement at any time in the one-year period immediately prior to the initiation of the safeguard
measure. The exporting Member concerned shall administer such a measure. The applicable level
shall not reduce the relevant exports below the level of a recent representative period, which shall
normally be the average of exports from the Member concerned in the last three representative years
 WTO ANALYTICAL INDEX 9

for which statistics are available. Furthermore, when the safeguard measure is applied for more than
one year, the applicable level shall be progressively liberalized at regular intervals during the period of
application. In such cases the exporting Member concerned shall not exercise the right of suspending
substantially equivalent concessions or other obligations under paragraph 3(a) of Article XIX of GATT
1994.

21. The TMB shall keep under review the implementation of this Article. It shall, at the request
of any Member, review any particular matter with reference to the implementation of the provisions of
this Article. It shall make appropriate recommendations or findings within 30 days to the Member or
Members concerned, after inviting the participation of such Members.

B. INTERPRETATION AND APPLICATION OF ARTICLE 2

1. General

7. Article 2 provided for (1) notification of all restrictions imposed under the MFA as of the day
before the date of entry into force of the WTO Agreement; (2) a ban on introduction or maintenance
of restrictions except as provided by Article 2(4); (3) elimination of all the notified restrictions, in four
stages, supervised by the TMB; and (4) provisions regarding application of Article XIX of the GATT
1994 to products covered by the ATC, during the duration of the ATC.

8. ATC Articles 2 and 3 both required notifications thereunder to be submitted within 60 days
following the date of entry into force of the WTO Agreement. Most such notifications were received
in the 60 days following 1 January 1995. However, where the terms of an accession protocol provide
that "those obligations in the Multilateral Trade Agreements annexed to the WTO Agreement that are
to be implemented over a period of time starting with the entry into force of that Agreement shall be
implemented by [the acceding Member] as if it had accepted that Agreement on the date of its entry
into force", the 60-day window started on the date of accession. Accordingly, notifications under
Article 2 and 3 were also received by and in respect of newly acceded Members, until termination of
the ATC on 1 January 2005.

9. At its meeting in December 1999, the TMB addressed the concern expressed by a number of
Members that the United States had introduced a new restraint measure on exports of certain products
from Turkey. The measure had been published under the United States domestic procedures, but not
notified to the TMB, since, according to the United States and Turkey, it "was taken pursuant to a
provision of the ATC which does not require notification to the TMB". 5 The TMB "examine[d]
briefly all the provisions of the ATC with a view to identifying under which provision such a measure
could have been agreed without requiring its notification to the TMB", stating as follows:

"[R]estrictions maintained under Article 2 had to be notified, in detail, within 60 days

following the entry into force of the WTO Agreement. A measure that had not been
notified at all, obviously could not fall under the provisions of Article 2. . . . [N]o
provision under Article 2 provides the possibility of introducing new restrictions.
The TMB noted, therefore, that the particular measure subject to its examination
could not have been taken pursuant to Article 2."6

2. Article 2.1

10. In Turkey – Textiles, the Panel found that Article 2.1 established a mandatory requirement to
notify all MFA restrictions within a 60-day time window after entry into force of the WTO
Agreement. The Panel noted that all Members that could notify such MFA-derived restrictions had
done so, and no others could be notified later:

5
G/TMB/R/60, para. 29.
6
G/TMB/R/60, para. 30.
 Agreement on Textiles and Clothing 10

"The lists of restrictions notified pursuant to Article 2.1 set the starting point for the
treatment of the restraints carried over from the former MFA regime. Four
WTO Members notified the TMB pursuant to Article 2.1 of the ATC: Canada,
the European Communities, Norway and the United States. We consider that the
notification requirement of 60 days referred to in Article 2.1 of the ATC is mandatory
both for formal and substantive reasons. The wording of Article 2.1 is unequivocal with
the use of the term 'shall'. Moreover, since the purpose of the ATC is to provide
exceptions to the general application of Articles XI and XIII of GATT during an
integration period to be completed by 1 January 2005, these exceptions should be
interpreted narrowly. Stemming from this provision, only the four Members above had
the right to and did notify measures which allowed them to maintain MFA-derived
quantitative restrictions for a maximum period of 10 years during which import quotas
must increase annually until the products they cover are integrated into GATT. In the
absence of an exception under the ATC or a justification under GATT, no new
quantitative restrictions introduced by a Member can benefit from the exceptions
provided for in Article 2.1 of the ATC after this 60 day period."7

3. Article 2.4

(a) Jurisprudence

11. In Turkey – Textiles, the Panel held that any increase of an existing restriction was a 'new
measure' and hence a violation of Article 2.4:

"The prohibition on 'new restrictions' must be interpreted taking into account the
preceding sentence: 'The restrictions notified under paragraph 1 shall be deemed to
constitutes the totality of such restrictions applied by the respective Members on the
day before the entry into force of the WTO Agreement'. The ordinary meaning of the
words indicates that WTO Members intended that as of 1 January 1995, the incidence
of restrictions under the ATC could only be reduced. We are of the view that any
legal fiction whereby an existing restriction could simply be increased and not
constitute a 'new restriction', would defeat the clear purpose of the ATC which is to
reduce the scope of such restrictions, starting from 1 January 1995 (but for the
exceptional situations referred to in Article 2.4 of the ATC). Thus, we consider that,
setting aside the possibility of exceptions and justifications mentioned in Article 2.4
of the ATC, any increase of an ATC compatible quantitative restriction notified under
Article 2.1 of the ATC, constitutes a 'new' restriction."8

(b) TMB statements

12. In its report of the meeting in December 1999, when examining a new restriction introduced
by the United States on Turkey's exports of certain textile products, as part of a broader understanding
reached between the two Members, the TMB stated:

"In concluding its examination of the measure mutually agreed between Turkey and
the United States, the TMB recalled that Article 2.4 of the ATC states that '[n]o new
restrictions in terms of products or Members shall be introduced except under the
provisions of this Agreement or relevant GATT 1994 provisions'. After having
considered the new measure against the different provisions of the ATC on the basis
of the information available to it […], the TMB concluded that the measure agreed
upon by Turkey and the United States, affecting imports by the United States of

7
Panel Report, Turkey – Textiles, para. 9.69.
8
Panel Report, Textiles – Turkey, para. 9.71.
 WTO ANALYTICAL INDEX 11

category 352/652 products, had not been demonstrated to be in conformity with the
provisions of the ATC."9

4. Article 2.17

13. Concerning a mutually agreed solution notified by Pakistan under Article 2.17 and by the
United States under Article 5, which provided for, inter alia, the introduction of a new restraint (on
United States imports from Pakistan on products falling under US categories 666-S and 666-P), the
TMB noted that the restrictions in question "had not been notified pursuant to Article 2.1 and,
therefore, did not fall under the scope of the provisions of Article 2" and that "there appeared to be no
justification to apply new quantitative restrictions under Article 2.17."10

VI. ARTICLE 3

A. TEXT OF ARTICLE 3

Article 3

1. Within 60 days following the date of entry into force of the WTO Agreement, Members
maintaining restrictions4 on textile and clothing products (other than restrictions maintained under the
MFA and covered by the provisions of Article 2), whether consistent with GATT 1994 or not, shall (a)
notify them in detail to the TMB, or (b) provide to the TMB notifications with respect to them which
have been submitted to any other WTO body. The notifications should, wherever applicable, provide
information with respect to any GATT 1994 justification for the restrictions, including GATT 1994
provisions on which they are based.

(footnote original) 4 Restrictions denote all unilateral quantitative restrictions, bilateral arrangements and other
measures having a similar effect.

2. Members maintaining restrictions falling under paragraph 1, except those justified under a
GATT 1994 provision, shall either:

(a) bring them into conformity with GATT 1994 within one year following the entry into
force of the WTO Agreement, and notify this action to the TMB for its information;
or

(b) phase them out progressively according to a programme to be presented to the TMB
by the Member maintaining the restrictions not later than six months after the date of
entry into force of the WTO Agreement. This programme shall provide for all
restrictions to be phased out within a period not exceeding the duration of this
Agreement. The TMB may make recommendations to the Member concerned with
respect to such a programme.

3. During the duration of this Agreement, Members shall provide to the TMB, for its
information, notifications submitted to any other WTO bodies with respect to any new restrictions or
changes in existing restrictions on textile and clothing products, taken under any GATT 1994
provision, within 60 days of their coming into effect.

4. It shall be open to any Member to make reverse notifications to the TMB, for its information,
in regard to the GATT 1994 justification, or in regard to any restrictions that may not have been
notified under the provisions of this Article. Actions with respect to such notifications may be pursued
by any Member under relevant GATT 1994 provisions or procedures in the appropriate WTO body.

5. The TMB shall circulate the notifications made pursuant to this Article to all Members for
their information.

9
G/TMB/R/60, para. 33.
10
G/TMB/R/45, paras. 27-28.
 Agreement on Textiles and Clothing 12

B. INTERPRETATION AND APPLICATION OF ARTICLE 3

1. General

14. With respect to the measure concerning the United States and Turkey, the TMB confirmed
that all restrictive measures that touch upon the subject matter of the ATC, even if adopted on a non-
ATC basis, had to be notified to the TMB:

"Article 3.3 does not exclude the possibility, inter alia, of introducing new
restrictions on textile and clothing products. However, it contains not only the
requirement of 'double' notification (i.e. to the appropriate WTO body and also to the
TMB, for its information), but also limits the possibility of applying, inter alia, new
restrictions to those cases where the measures were taken under any GATT 1994
provision."11

2. Article 3.1

(a) "restrictions"

15. At its meeting in November 2002, while reviewing an Article 3.1 notification by China
following its accession to the WTO,12 the TMB considered, inter alia, whether Article 3 also applied
to export restrictions. The TMB noted:

"[A]rticle 3.1 uses the word 'restrictions' without any additional qualifications and
that the footnote to this provision related to the same term states the following:
'Restrictions denote all unilateral quantitative restrictions, bilateral arrangements and
other measures having a similar effect.'13 The language of Article 3 does not limit the
application of this provision to any specific type of restriction. The export quotas
maintained by China affecting silk yarn and woven fabrics of silk are, undoubtedly,
unilateral quantitative restrictions, corresponding to the definition provided in the
footnote referred to above. Therefore, also in view of the lack of any further precision
in the respective provision of the ATC, export restrictions are not a priori excluded
from the scope of application of Article 3. This conclusion is also in line with past
practice in the TMB, whereby the notification under Article 3 of certain measures
affecting exports of some textile products was not questioned.

The TMB noted, furthermore, that the additional notification by China referred to
'restrictions on certain textile products which fall under the coverage of ATC and are
subject to Article 3 of [that] Agreement'. This reference presumably indicated that, in
the view of China, the measures in question should be considered under the
applicable provisions of the ATC. It was observed that the notification of these export
restrictions under Articles 3.1 and 3.2(b) did not appear to be in contradiction with
the relevant portion of the Report of the Working Party on the
Accession of China.14"15

11
G/TMB/R/60, para. 30.
12
G/TMB/N/426 and Add.1.

15
G/TMB/R/93, paras. 19-20.
 WTO ANALYTICAL INDEX 13

VII. ARTICLE 4

A. TEXT OF ARTICLE 4

Article 4

1. Restrictions referred to in Article 2, and those applied under Article 6, shall be administered
by the exporting Members. Importing Members shall not be obliged to accept shipments in excess of
the restrictions notified under Article 2, or of restrictions applied pursuant to Article 6.

2. Members agree that the introduction of changes, such as changes in practices, rules,
procedures and categorization of textile and clothing products, including those changes relating to the
Harmonized System, in the implementation or administration of those restrictions notified or applied
under this Agreement should not: upset the balance of rights and obligations between the Members
concerned under this Agreement; adversely affect the access available to a Member; impede the full
utilization of such access; or disrupt trade under this Agreement.

3. If a product which constitutes only part of a restriction is notified for integration pursuant to
the provisions of Article 2, Members agree that any change in the level of that restriction shall not
upset the balance of rights and obligations between the Members concerned under this Agreement.

4. When changes mentioned in paragraphs 2 and 3 are necessary, however, Members agree that
the Member initiating such changes shall inform and, wherever possible, initiate consultations with the
affected Member or Members prior to the implementation of such changes, with a view to reaching a
mutually acceptable solution regarding appropriate and equitable adjustment. Members further agree
that where consultation prior to implementation is not feasible, the Member initiating such changes
will, at the request of the affected Member, consult, within 60 days if possible, with the Members
concerned with a view to reaching a mutually satisfactory solution regarding appropriate and equitable
adjustments. If a mutually satisfactory solution is not reached, any Member involved may refer the
matter to the TMB for recommendations as provided in Article 8. Should the TSB not have had the
opportunity to review a dispute concerning such changes introduced prior to the entry into force of the
WTO Agreement, it shall be reviewed by the TMB in accordance with the rules and procedures of the
MFA applicable for such a review.

B. INTERPRETATION AND APPLICATION OF ARTICLE 4

16. In the context of examining the measure introduced by the United States on exports of certain
products from Turkey, the TMB held that the provisions of Article 4 have to be read in conjunction
with the other provisions of the Agreement:

"[A]rticle 4.1 deals with the administration of 'restrictions referred to in Article 2, and
those applied under Article 6'. Article 4.2 states that 'Members agree that the
introduction of changes, such as changes in practices, rules, procedures and
categorization of textile and clothing products including those changes relating to the
Harmonized System, in the implementation or administration of those restrictions
notified or applied under this Agreement should not: upset the balance of rights and
obligations between Members concerned under this Agreement; adversely affect the
access available to a Member; impede the full utilization of such access; or disrupt
trade under this Agreement.' Article 4.4 provides, inter alia, the possibility to reach a
'mutually acceptable solution regarding appropriate and equitable adjustment'
between Members when necessary changes, in the sense of Article 4.2, are introduced
in the implementation or administration of existing restrictions. The TMB noted that,
according to Article 4.4, such mutually acceptable solutions did not have to be
notified to the TMB. The TMB recalled its findings that the new restriction could not
have been agreed pursuant to the provisions of Articles 2 and 6. It was also observed
that Article 4.4 does not provide explicit guidance regarding the scope of the
 Agreement on Textiles and Clothing 14

adjustment that can be agreed between the Members concerned in the framework of
the mutually acceptable solution. A reading according to which the introduction of a
new restriction, in the sense of Article 2.4, can be agreed upon pursuant to Article 4.4
as an adjustment to balance possible improvements in the implementation or
administration of restrictions maintained pursuant to Article 2 was, however, in the
view of the TMB not consistent with the intention of the drafters of the ATC, since
Article 4 relates to the implementation or administration of the restrictions referred to
in Article 2, or applied under Article 6. Also, the construction of Article 4 and its
language seem to suggest that when changes, in the sense of Article 4.2 are
introduced, the appropriate and equitable adjustment referred to in Article 4.4 can
only involve and affect the restrictions that have already been in place and notified
pursuant to Article 2 or Article 6."16

VIII. ARTICLE 5

A. TEXT OF ARTICLE 5

Article 5

1. Members agree that circumvention by transshipment, re-routing, false declaration concerning

country or place of origin, and falsification of official documents, frustrates the implementation of this
Agreement to integrate the textiles and clothing sector into GATT 1994. Accordingly, Members
should establish the necessary legal provisions and/or administrative procedures to address and take
action against such circumvention. Members further agree that, consistent with their domestic laws
and procedures, they will cooperate fully to address problems arising from circumvention.

2. Should any Member believe that this Agreement is being circumvented by transshipment, re-
routing, false declaration concerning country or place of origin, or falsification of official documents,
and that no, or inadequate, measures are being applied to address and/or to take action against such
circumvention, that Member should consult with the Member or Members concerned with a view to
seeking a mutually satisfactory solution. Such consultations should be held promptly, and within
30 days when possible. If a mutually satisfactory solution is not reached, the matter may be referred by
any Member involved to the TMB for recommendations.

3. Members agree to take necessary action, consistent with their domestic laws and procedures,
to prevent, to investigate and, where appropriate, to take legal and/or administrative action against
circumvention practices within their territory. Members agree to cooperate fully, consistent with their
domestic laws and procedures, in instances of circumvention or alleged circumvention of this
Agreement, to establish the relevant facts in the places of import, export and, where applicable,
transshipment. It is agreed that such cooperation, consistent with domestic laws and procedures, will
include: investigation of circumvention practices which increase restrained exports to the Member
maintaining such restraints; exchange of documents, correspondence, reports and other relevant
information to the extent available; and facilitation of plant visits and contacts, upon request and on a
case-by-case basis. Members should endeavour to clarify the circumstances of any such instances of
circumvention or alleged circumvention, including the respective roles of the exporters or importers
involved.

4. Where, as a result of investigation, there is sufficient evidence that circumvention has

occurred (e.g. where evidence is available concerning the country or place of true origin, and the
circumstances of such circumvention), Members agree that appropriate action, to the extent necessary
to address the problem, should be taken. Such action may include the denial of entry of goods or,
where goods have entered, having due regard to the actual circumstances and the involvement of the
country or place of true origin, the adjustment of charges to restraint levels to reflect the true country or
place of origin. Also, where there is evidence of the involvement of the territories of the Members
through which the goods have been transshipped, such action may include the introduction of restraints

16
G/TMB/R/60, para. 31.
 WTO ANALYTICAL INDEX 15

with respect to such Members. Any such actions, together with their timing and scope, may be taken
after consultations held with a view to arriving at a mutually satisfactory solution between the
concerned Members and shall be notified to the TMB with full justification. The Members concerned
may agree on other remedies in consultation. Any such agreement shall also be notified to the TMB,
and the TMB may make such recommendations to the Members concerned as it deems appropriate. If
a mutually satisfactory solution is not reached, any Member concerned may refer the matter to the
TMB for prompt review and recommendations.

5. Members note that some cases of circumvention may involve shipments transiting through
countries or places with no changes or alterations made to the goods contained in such shipments in the
places of transit. They note that it may not be generally practicable for such places of transit to
exercise control over such shipments.

6. Members agree that false declaration concerning fibre content, quantities, description or
classification of merchandise also frustrates the objective of this Agreement. Where there is evidence
that any such false declaration has been made for purposes of circumvention, Members agree that
appropriate measures, consistent with domestic laws and procedures, should be taken against the
exporters or importers involved. Should any Member believe that this Agreement is being
circumvented by such false declaration and that no, or inadequate, administrative measures are being
applied to address and/or to take action against such circumvention, that Member should consult
promptly with the Member involved with a view to seeking a mutually satisfactory solution. If such a
solution is not reached, the matter may be referred by any Member involved to the TMB for
recommendations. This provision is not intended to prevent Members from making technical
adjustments when inadvertent errors in declarations have been made.

B. INTERPRETATION AND APPLICATION OF ARTICLE 5

1. General

17. In the context of examining a US restraint on exports of certain products from Turkey,
referred to in paragraphs 8 and 11 above, the TMB stated that:

"[A]ny action taken pursuant to Article 5.4 has to be notified to the TMB. In case of
evidence that the ATC is being circumvented by false declaration concerning fibre
content, quantities, description or classification of merchandise, Article 5.6 allows the
Members concerned to consult with a view to seeking a mutually satisfactory solution
and the same Article does not require the notification of such mutually agreed
solutions to the TMB."17

2. Article 5.4

(a) "appropriate action, to the extent necessary to address the problem"

18. In reviewing a number of administrative arrangements agreed between the United States and
several other Members under which triple charges could be imposed on quotas to counter
circumventions, the TMB "noted, inter alia, that paragraph 4 of Article 5 of the ATC seemed to
provide some flexibility in terms of remedies or agreed actions that could be foreseen in cases when
circumvention has occurred. It observed, however, that Article 5 contained no mention of the
possibility for the importing Member to impose triple charges on quotas, as a deterrent to
circumvention."18

17
G/TMB/R/60, para. 30.
18
G/TMB/R/31, paras. 20-21.
 Agreement on Textiles and Clothing 16

(b) "Members concerned may agree on other remedies in consultation"

19. Concerning a mutually agreed solution notified by Pakistan under Article 2.17 and by the
United States under Article 5, referenced in paragraph 13 above, which provided, inter alia, for the
introduction of a new restraint, the TMB "observed that, apart from the third sentence of Article 5.4,
the introduction of a new restriction, even if mutually agreed between the Members concerned, was
not mentioned in Article 5.4 as an 'appropriate action, to the extent necessary to address the problem'
when circumvention as defined in Article 5.1 had occurred. Furthermore, the TMB understood that
the introduction of restrictions, set out in the third sentence of Article 5.4, related only to the true
country or place of origin in case there had been evidence of its involvement in the transshipment.
This provision, therefore, could not per se allow the introduction of new restrictions on imports from
Pakistan in the particular case when circumvention had occurred."19

20. While examining the measure referred to in paragraph 19 above, the TMB noted with respect
to the fifth sentence of Article 5.4 that "the Agreement did not specify what, in the context of this
paragraph, could or could not constitute the 'other remedies' ". It also held that Article 5.4 was
sufficiently clear that an objective interpretation of 'other remedies' could not be asserted as to grant
Members the right to adopt new quantitative restrictions:

"It could be argued that the 'other remedies' referred to in Article 5.4 did not include
the permission to introduce new quantitative restrictions, since Article 5.4 in itself as
well as the broader context as determined by the ATC provided sufficient guidance...
The second sentence ... seemed to imply that the action taken should affect the
product that was subject to circumvention. Since only the exports of products that had
already been subject to restrictions could be circumvented, the remedy for such
circumvention could not affect products other than those with respect to which
circumvention had been claimed. ... the two Members could have agreed on
adjustments of charges to the restraint level established for the [products already
subject to restriction] or on 'other remedies' affecting the same products, but not on
'other remedies' affecting other products."20

21. With respect to the treatment of the measure at issue under Article 2.17, see the excerpts from
the reports of the TMB referenced in paragraph 13 above. Also, with respect to the same issue under
Article 5.6, see the excerpt from the report of the TMB referenced in paragraph 22 below.

3. Article 5.6

22. Concerning the same agreement, the TMB held that "it could be argued that the introduction
of the new restraints, even if mutually agreed between the two Members, could not be justified in the
context of Article 5.6".21

IX. ARTICLE 6

A. TEXT OF ARTICLE 6

Article 6

1. Members recognize that during the transition period it may be necessary to apply a specific
transitional safeguard mechanism (referred to in this Agreement as "transitional safeguard"). The
transitional safeguard may be applied by any Member to products covered by the Annex, except those
integrated into GATT 1994 under the provisions of Article 2. Members not maintaining restrictions

19
G/TMB/R/45, paras. 33-34.
20
G/TMB/R/45, paras. 36-37.
21
G/TMB/R/45, paras. 47-48.
 WTO ANALYTICAL INDEX 17

falling under Article 2 shall notify the TMB within 60 days following the date of entry into force of the
WTO Agreement, as to whether or not they wish to retain the right to use the provisions of this Article.
Members which have not accepted the Protocols extending the MFA since 1986 shall make such
notification within 6 months following the entry into force of the WTO Agreement. The transitional
safeguard should be applied as sparingly as possible, consistently with the provisions of this Article
and the effective implementation of the integration process under this Agreement.

2. Safeguard action may be taken under this Article when, on the basis of a determination by a
Member5, 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. 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.

(footnote original) 5 A customs union may apply a safeguard measure as a single unit or on behalf of a member
State. When a customs union applies a safeguard measure as a single unit, all the requirements for the
determination of serious damage or actual threat thereof under this Agreement shall be based on the conditions
existing in the customs union as a whole. When a safeguard measure is applied on behalf of a member State, all
the requirements for the determination of serious damage, or actual threat thereof, shall be based on the conditions
existing in that member State and the measure shall be limited to that member State.

3. In making a determination of serious damage, or actual threat thereof, as referred to in

paragraph 2, the Member shall examine the effect of those 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.

4. Any measure invoked pursuant to the provisions of this Article shall be applied on a Member-
by-Member basis. The Member or Members to whom serious damage, or actual threat thereof, referred
to in paragraphs 2 and 3, is attributed, shall be determined on the basis of a sharp and substantial
increase in imports, actual or imminent6, from such a Member or Members individually, and on the
basis of the level of imports as compared with imports from other sources, market share, and import
and domestic prices at a comparable stage of commercial transaction; none of these factors, either
alone or combined with other factors, can necessarily give decisive guidance. Such safeguard measure
shall not be applied to the exports of any Member whose exports of the particular product are already
under restraint under this Agreement.

(footnote original) 6 Such an imminent increase shall be a measurable one and shall not be determined to exist on
the basis of allegation, conjecture or mere possibility arising, for example, from the existence of production
capacity in the exporting Members.

5. The period of validity of a determination of serious damage or actual threat thereof for the
purpose of invoking safeguard action shall not exceed 90 days from the date of initial notification as set
forth in paragraph 7.

6. In the application of the transitional safeguard, particular account shall be taken of the
interests of exporting Members as set out below:

(a) least-developed country Members shall be accorded treatment significantly more

favourable than that provided to the other groups of Members referred to in this paragraph,
preferably in all its elements but, at least, on overall terms;

(b) Members whose total volume of textile and clothing exports is small in comparison
with the total volume of exports of other Members and who account for only a small
percentage of total imports of that product into the importing Member shall be accorded
differential and more favourable treatment in the fixing of the economic terms provided in
paragraphs 8, 13 and 14. For those suppliers, due account will be taken, pursuant to
paragraphs 2 and 3 of Article 1, of the future possibilities for the development of their trade
and the need to allow commercial quantities of imports from them;
 Agreement on Textiles and Clothing 18

(c) with respect to wool products from wool-producing developing country Members
whose economy and textiles and clothing trade are dependent on the wool sector, whose total
textile and clothing exports consist almost exclusively of wool products, and whose volume of
textiles and clothing trade is comparatively small in the markets of the importing Members,
special consideration shall be given to the export needs of such Members when considering
quota levels, growth rates and flexibility;

(d) more favourable treatment shall be accorded to re-imports by a Member of textile

and clothing products which that Member has exported to another Member for processing and
subsequent reimportation, as defined by the laws and practices of the importing Member, and
subject to satisfactory control and certification procedures, when these products are imported
from a Member for which this type of trade represents a significant proportion of its total
exports of textiles and clothing.

7. The Member proposing to take safeguard action shall seek consultations with the Member or
Members which would be affected by such action. The request for consultations shall be accompanied
by specific and relevant factual information, as up-to-date as possible, particularly in regard to: (a) the
factors, referred to in paragraph 3, on which the Member invoking the action has based its
determination of the existence of serious damage or actual threat thereof; and (b) the factors, referred
to in paragraph 4, on the basis of which it proposes to invoke the safeguard action with respect to the
Member or Members concerned. In respect of requests made under this paragraph, the information
shall be related, as closely as possible, to identifiable segments of production and to the reference
period set out in paragraph 8. The Member invoking the action shall also indicate the specific level at
which imports of the product in question from the Member or Members concerned are proposed to be
restrained; such level shall not be lower than the level referred to in paragraph 8. The Member seeking
consultations shall, at the same time, communicate to the Chairman of the TMB the request for
consultations, including all the relevant factual data outlined in paragraphs 3 and 4, together with the
proposed restraint level. The Chairman shall inform the members of the TMB of the request for
consultations, indicating the requesting Member, the product in question and the Member having
received the request. The Member or Members concerned shall respond to this request promptly and
the consultations shall be held without delay and normally be completed within 60 days of the date on
which the request was received.

8. If, in the consultations, there is mutual understanding that the situation calls for restraint on
the exports of the particular product from the Member or Members concerned, the level of such
restraint shall be fixed at a level not lower than the actual level of exports or imports from the Member
concerned during the 12-month period terminating two months preceding the month in which the
request for consultation was made.

9. Details of the agreed restraint measure shall be communicated to the TMB within 60 days
from the date of conclusion of the agreement. The TMB shall determine whether the agreement is
justified in accordance with the provisions of this Article. In order to make its determination, the TMB
shall have available to it the factual data provided to the Chairman of the TMB, referred to in
paragraph 7, as well as any other relevant information provided by the Members concerned. The TMB
may make such recommendations as it deems appropriate to the Members concerned.

10. If, however, after the expiry of the period of 60 days from the date on which the request for
consultations was received, there has been no agreement between the Members, the Member which
proposed to take safeguard action may apply the restraint by date of import or date of export, in
accordance with the provisions of this Article, within 30 days following the 60-day period for
consultations, and at the same time refer the matter to the TMB. It shall be open to either Member to
refer the matter to the TMB before the expiry of the period of 60 days. In either case, the TMB shall
promptly conduct an examination of the matter, including the determination of serious damage, or
actual threat thereof, and its causes, and make appropriate recommendations to the Members concerned
within 30 days. In order to conduct such examination, the TMB shall have available to it the factual
data provided to the Chairman of the TMB, referred to in paragraph 7, as well as any other relevant
information provided by the Members concerned.
 WTO ANALYTICAL INDEX 19

11. In highly unusual and critical circumstances, where delay would cause damage which would
be difficult to repair, action under paragraph 10 may be taken provisionally on the condition that the
request for consultations and notification to the TMB shall be effected within no more than five
working days after taking the action. In the case that consultations do not produce agreement, the TMB
shall be notified at the conclusion of consultations, but in any case no later than 60 days from the date
of the implementation of the action. The TMB shall promptly conduct an examination of the matter,
and make appropriate recommendations to the Members concerned within 30 days. In the case that
consultations do produce agreement, Members shall notify the TMB upon conclusion but, in any case,
no later than 90 days from the date of the implementation of the action. The TMB may make such
recommendations as it deems appropriate to the Members concerned.

12. A Member may maintain measures invoked pursuant to the provisions of this Article: (a) for
up to three years without extension, or (b) until the product is integrated into GATT 1994, whichever
comes first.

13. Should the restraint measure remain in force for a period exceeding one year, the level for
subsequent years shall be the level specified for the first year increased by a growth rate of not less than
6 per cent per annum, unless otherwise justified to the TMB. The restraint level for the product
concerned may be exceeded in either year of any two subsequent years by carry forward and/or
carryover of 10 per cent of which carry forward shall not represent more than 5 per cent. No
quantitative limits shall be placed on the combined use of carryover, carry forward and the provision of
paragraph 14.

14. When more than one product from another Member is placed under restraint under this Article
by a Member, the level of restraint agreed, pursuant to the provisions of this Article, for each of these
products may be exceeded by 7 per cent, provided that the total exports subject to restraint do not
exceed the total of the levels for all products so restrained under this Article, on the basis of agreed
common units. Where the periods of application of restraints of these products do not coincide with
each other, this provision shall be applied to any overlapping period on a pro rata basis.

15. If a safeguard action is applied under this Article to a product for which a restraint was
previously in place under the MFA during the 12-month period prior to the entry into force of the WTO
Agreement, or pursuant to the provisions of Article 2 or 6, the level of the new restraint shall be the
level provided for in paragraph 8 unless the new restraint comes into force within one year of:

(a) the date of notification referred to in paragraph 15 of Article 2 for the elimination of
the previous restraint; or

(b) the date of removal of the previous restraint put in place pursuant to the provisions of
this Article or of the MFA

in which case the level shall not be less than the higher of (i) the level of restraint for the last 12-month
period during which the product was under restraint, or (ii) the level of restraint provided for in
paragraph 8.

16. When a Member which is not maintaining a restraint under Article 2 decides to apply a
restraint pursuant to the provisions of this Article, it shall establish appropriate arrangements which:
(a) take full account of such factors as established tariff classification and quantitative units based on
normal commercial practices in export and import transactions, both as regards fibre composition and
in terms of competing for the same segment of its domestic market, and (b) avoid over-categorization.
The request for consultations referred to in paragraphs 7 or 11 shall include full information on such
arrangements.
 Agreement on Textiles and Clothing 20

B. INTERPRETATION AND APPLICATION OF ARTICLE 6

1. General

(a) Elements of Article 6

23. In US – Cotton Yarn, the Appellate Body held that in applying Article 6:

"[W]e have to distinguish three different, but interrelated, elements under Article 6:
first, causation of serious damage or actual threat thereof by increased imports 22;
second, attribution of that serious damage to the Member(s) the imports from whom
contributed to that damage; and third, application of transitional safeguard measures
to such Member(s).23 "24

(b) Notification as an element of a valid safeguard measure

24. In examining a new restriction imposed by the United States on Turkey's exports of certain
textile products as part of a broader bilateral agreement, the TMB held that failure to notify
demonstrated that this restraint had not been taken under Article 6:

"Article 6 specifically provides in its paragraph 1 the possibility of introducing

'transitional safeguard' which, as stipulated in other provisions of the same Article,
takes the form of restraint measures. However, the restraint measure or measures
taken under this Article have to be notified to the TMB, whether agreed or applied
unilaterally, as clearly set out in Articles 6.9, 6.10 and 6.11, so as to enable the TMB
to examine the measure(s) in question, as required by the provisions of Article 6.
Therefore, the measure agreed between Turkey and the United States could not have
been taken under Article 6 since that Article requires notification and since both
Members had stated to the TMB that the measure had been taken 'pursuant to a
provision of the ATC which does not require notification to the TMB'."25

(c) Scope and basis of review

(i) Jurisprudence

25. In US – Underwear, the United States provided the Panel with a market statement by the
United States authorities of 23 March 1995 (the "March Statement"), which was the basis for the
transitional safeguard measure at issue, and another statement provided during TMB review proceedings
(the "July Statement"). The Panel limited its review to an examination of the March Statement, noting
as follows:

"We believe that statements subsequent to the March Statement should not be viewed
as a legally independent basis for establishing serious damage or actual threat thereof
in the present case. A restriction may be imposed, in a manner consistent with

22
(footnote original) The element of causation of serious damage is referred to in paragraph 2 of
Article 6 of the ATC. The second sentence of paragraph 2 provides that serious damage "must demonstrably be
caused by such increased quantities in total imports of that product" and not by "other factors" such as
technological changes or changes in consumer preferences.
23
(footnote original) The element of application of transitional safeguard measures to exporting
Member(s) is dealt with in the first and the last sentences of paragraph 4 of Article 6 of the ATC. It is also dealt
with in various places in paragraphs 6 through 16 of that Article. The first sentence of Article 6.4 provides that
transitional safeguard measures "shall be applied on a Member-by-Member basis".
24
Appellate Body Report, US – Cotton Yarn, para. 109.
25
G/TMB/R/60, para. 30.
 WTO ANALYTICAL INDEX 21

Article 6 of the ATC, when based on a determination made in accordance with the
procedure embodied in Article 6.2 and 6.4 of the ATC. This is precisely the role that
the March Statement is called upon to play. Consequently, to review the alleged
inconsistency of the US action with the ATC, we must focus our legal analysis on
the March Statement as the relevant legal basis for the safeguard action taken by
the United States."26

26. While it declined to consider the July Statement, the Panel held that it could "legitimately take
the July Statement into account as evidence submitted by the United States in our assessment of the
overall accuracy of the March Statement":

"The March Statement included under the heading 'Market Situation' one sub-heading
entitled 'Serious Damage to the Domestic Industry' (sub-heading A), which contained
general information about the effect of underwear imports in Category 352/652, and a
second sub-heading 'Industry Statements' (sub-heading B), which summarized
statements to the US authorities by individual US companies. To some extent, there
was an overlap between the information contained under the two sub-headings.
The same categories of information were equally discussed in a statement submitted
to the TMB by the United States in July 1995 (the 'July Statement'). While we have
concluded that the July Statement should not be viewed as a legally independent basis
for establishing serious damage or actual threat thereof, we feel that we can
legitimately take the July Statement into account as evidence submitted by
the United States in our assessment of the overall accuracy of the March Statement.
Consequently, we will use the July Statement for this limited purpose only. By doing
so, we do not share the concerns expressed by the United States that such use of
the July Statement would impair proceedings in the TMB in the future. We consider
that a reluctance to submit updated information would normally adversely affect
Members concerned. The interest to cooperate as required by Articles 6.7 and 6.9 of
the ATC would prevail."27

27. In US – Cotton Yarn, the US determination under Article 6.2 had been based on
contemporaneous industry data regarding the market situation; in the Panel proceeding, Pakistan
presented later official data concerning the same facts, in order to demonstrate that the industry data
were flawed. The Panel considered those data. On appeal, the Appellate Body found that this action
exceeded the Panel’s mandate under Article 11 of the DSU:

"[A] panel reviewing the due diligence exercised by a Member in making its
determination under Article 6 of the ATC has to put itself in the place of that Member
at the time it makes its determination. Consequently, a panel must not consider
evidence which did not exist at that point in time. A Member cannot, of course, be
faulted for not having taken into account what it could not have known when making
its determination. If a panel were to examine such evidence, the panel would, in
effect, be conducting a de novo review and ... making its projections with the benefit
of hindsight and would, in effect, be reinvestigating the market situation and
substituting its own judgment for that of the Member.

Moreover, if a Member that has exercised due diligence in complying with its
obligations of investigation, evaluation and explanation, were held responsible before
a panel for what it could not have known at the time it made its determination, this
would undermine the right afforded to importing Members under Article 6 to take

26
Panel Report, US – Underwear, para. 7.26.
27
Panel Report, US – Underwear, para. 7.29.
 Agreement on Textiles and Clothing 22

transitional safeguard action when the determination demonstrates the fulfilment of

the specific conditions provided for in this Article."28

28. In the same context, the Panel in US – Underwear held with respect to offers made in the
course of bilateral negotiation between the parties:

"In our view, the wording of Article 4.6 of the DSU makes it clear that offers made in
the context of consultations are, in case a mutually agreed solution is not reached, of
no legal consequence to the later stages of dispute settlement, as far as the rights of
the parties to the dispute are concerned. Consequently, we will not base our findings
on such information."29

(ii) TMB statements

29. At its meeting in November 1998, in examining a safeguard measure introduced by Colombia
against imports of certain products from Korea and Thailand, the TMB observed:

"[T]he TMB was of the view that its review of the measures introduced by Colombia
had to be based essentially on the information made available by Colombia in
accordance with Article 6.7 at the time the request for consultations had been
made."30

(d) Burden of proof

30. In US – Wool Shirts and Blouses, on the issue of the burden of proof regarding whether a
certain transitional safeguard measure complied with the requirements in Article 6, the
Appellate Body held that it was for India to demonstrate that the United States measure had been
imposed in violation of Article 6. In so doing, the Appellate Body also indirectly reversed a statement
by the Panel in US – Underwear, which had held that the burden of proof under Article 6 fell upon the
Member imposing the safeguard measure. In US – Wool Shirts and Blouses, the Appellate Body found
that Article 6 embodied "a fundamental part of the rights and obligations of WTO Members
concerning non-integrated textile and clothing products covered by the ATC during the transitional
period":

"We agree with the Panel that it was up to India to present evidence and argument
sufficient to establish a presumption that the transitional safeguard determination
made by the United States was inconsistent with its obligations under Article 6 of the
ATC. With this presumption thus established, it was then up to the United States to
bring evidence and argument to rebut the presumption.

The transitional safeguard mechanism provided in Article 6 of the ATC is a

fundamental part of the rights and obligations of WTO Members concerning non-
integrated textile and clothing products covered by the ATC during the transitional
period. Consequently, a party claiming a violation of a provision of the
WTO Agreement by another Member must assert and prove its claim. In this case,
India claimed a violation by the United States of Article 6 of the ATC. We agree with
the Panel that it, therefore, was up to India to put forward evidence and legal

28
Appellate Body Report, US – Cotton Yarn, paras. 78-79.
29
Panel Report, US – Underwear, para. 7.27.
30
G/TMB/R/49, para. 25. The TMB repeated this statement on several occasions (G/TMB/R/51,
para. 32; G/TMB/R/81, paras. 15, 17; G/TMB/R/83, para. 26).
 WTO ANALYTICAL INDEX 23

argument sufficient to demonstrate that the transitional safeguard action by

the United States was inconsistent with the obligations assumed by the United States
under Articles 2 and 6 of the ATC. India did so in this case. And, with India having
done so, the onus then shifted to the United States to bring forward evidence and
argument to disprove the claim. This, the United States was not able to do and,
therefore, the Panel found that the transitional safeguard action by the United States
'violated the provisions of Articles 2 and 6 of the ATC'."31

(e) Specificity of data

31. At its meeting in March 1997, in examining a transitional safeguard measure taken by Brazil,
with respect to the desired nature of information underpinning such measures, the TMB stated:

"[I]n case of recourse to Article 6, it was important to provide as much factual

information and data as possible that was specific to the product category itself, as
product-specific information and data should have a major impact on the overall
assessment whether serious damage or actual threat thereof could be demonstrated."32

32. On the same issue as referenced in paragraph 31 above, the TMB continued:

"[T]he Body agreed with Hong Kong's main contention according to which a
determination of serious damage could not be made almost entirely by reference to,
and therefore by inferences drawn from, data relating to much broader industries in
respect of which damage is claimed."33

2. Article 6.2

(a) General

33. In US – Cotton Yarn, the Appellate Body explained that Article 6.2 provided for three
analytical steps which preceded the attribution exercise demanded by Article 6.4:

"Attribution is preceded by three analytical steps which are set forth in

Article 6.2: (i) an assessment of whether the domestic industry is suffering serious
damage (or actual threat thereof) according to Articles 6.2 and 6.3; (ii) an
examination of whether there is a surge in imports as envisaged by
Article6.2; and, (iii) an establishment of a causal link between the surge in imports
and the serious damage (or actual threat thereof); according to the last sentence of
Article 6.2, '[s]erious damage … must demonstrably be caused by such increased
quantities in total imports of that product and not by … other factors'. (emphasis
added)"34

(b) "a particular product is being imported"

34. At its fourth meeting in July 1998, in examining a transitional safeguard measure introduced
by Colombia on imports of certain products from Brazil and India, the TMB held that the causal link
in the phrase "is being imported […] in such increased quantities as to cause serious damage, or actual
threat thereof, to the domestic industry" "seemed to indicate that the serious damage had to occur in a

31
Appellate Body Report, US – Wool Shirts and Blouses, pp. 13, 16 and 17.
32
G/TMB/R/26, para. 25.
33
G/TMB/R/26, para. 28.
34
Appellate Body Report, US – Cotton Yarn, para. 112.
 Agreement on Textiles and Clothing 24

period close to the time at which the request for consultation was made. It followed that the
information provided to demonstrate the serious damage had to be recent."35

(c) "in such increased quantities"

35. At its meeting in January 2000, the TMB considered a safeguard measure imposed by
Argentina on certain imports from Brazil. The TMB pointed to the decline in imports and held that
"the conditions defined in Article 6.2 did not allow for the application of transitional safeguard
measures in cases where imports were declining, even though their share in the apparent market were
increasing."36

36. At its meeting in September 2001, the TMB examined a safeguard measure imposed by
Poland on imports of certain textile products from Romania. The TMB, observing the trend of imports
over a five-year period, held that the reference period should be seen in its proper context, taking into
account the continuous and significant decrease of imports of the relevant product in the years prior to
the reference period:

"In analysing the above information, the TMB noted that there had been an increase
in the volume of total imports in the year 2000, the reference period, compared to the
previous year. It could not be ignored, however, that the volume of imports
continuously decreased in 1998 and 1999, and that the level achieved in 2000 still
remained well below the volume of total imports in 1996 and 1997, respectively.
In this light, the trends indicated, at most, a recovery of total imports, but did not
appear to substantiate the claim of a significant increase compared to the performance
achieved in previous years. As to the argument of Poland that the decrease
experienced in 1998 and 1999 was only in absolute terms, but not relative to
consumption, the TMB observed that the ATC does not incorporate the concept of
increased quantities of imports relative to other factors.

In light of the trends described above, the TMB was of the view that the 10.5 per cent
increase in total imports reported for the reference period should be assessed in its
proper context. Noting the argument by Romania that it had serious doubts as to
whether an increase of total imports of this magnitude could constitute a sufficient
demonstration in the meaning of Article 6.2, which requires the demonstration 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 (emphasis added)', the TMB also expressed
its doubts that the alleged serious damage could be caused by the 10.5 per cent
increase in total imports during the reference period. These doubts notwithstanding,
the TMB decided to review the state of the Polish domestic industry and to revert to
this aspect of the case, if necessary, at a subsequent stage of its examination."37

(d) "serious damage, or actual threat thereof"

(i) Concepts of "serious damage, or actual threat thereof"

37. In US – Underwear, the Panel noted that, contrary to the determination of "serious damage", a
determination of an "actual threat thereof" required the competent authorities to carry out a
prospective analysis in order that they can objectively conclude that unless action is taken, damage
will surely occur in the near future:

35
G/TMB/R/46, para. 13.
36
G/TMB/R/60, para. 13.
37
G/TMB/R/81, para. 21-22.
 WTO ANALYTICAL INDEX 25

"Article 6.2 and 6.4 of the ATC make reference to 'serious damage, or actual threat
thereof'. The word 'thereof', in our view, clearly refers to 'serious damage'. The word
'or' distinguishes between 'serious damage' and 'actual threat thereof'. In our view,
'serious damage' refers to a situation that has already occurred, whereas 'actual threat
of serious damage' refers to a situation existing at present which might lead to serious
damage in the future. Consequently, in our view, a finding on 'serious damage'
requires the party that takes action to demonstrate that damage has already occurred,
whereas a finding on 'actual threat of serious damage' requires the same party to
demonstrate that, unless action is taken, damage will most likely occur in the near
future.38 The March Statement contains no elements of such a prospective analysis.
In our view, even if the mention of 'actual threat' in the Diplomatic Note
accompanying the March Statement were to be considered, the fact that the March
Statement made no reference to actual threat and contained no elements of such a
prospective analysis was dispositive per se. Consequently, we do not agree with
the US argument that the March Statement supports a finding on actual threat of
serious damage."39

38. In US – Cotton Yarn, the Panel quoted the above-mentioned paragraph in US – Underwear as
support for its finding that when there were domestic findings of both current serious damage and
actual threat of serious damage, the finding of actual threat was redundant unless it were supported by
an independent prospective analysis. The Panel held:

"In our view, the US finding on actual threat of serious damage contained in the 1998
Market Statement is essentially a finding that the existing 'serious damage' to the
domestic industry would continue if imports were to continue as before. It would
seem a reasonable inference to assume that if the trend in imports were to continue,
the trend in domestic sales would continue, and consequently, the existing 'serious
damage' would continue. Under the terms of Article 6.4, there seems to be no basis
for demanding any further 'prospective analysis' than taking into consideration the
prospect that the price-undercutting of imports from Pakistan would likely continue,
in contrast to Pakistan's argument.

However, this US finding of 'actual threat of serious damage' in the 1998 Market
Statement is totally dependent on the finding of serious damage. It is based on a
finding that there is current serious damage and extrapolates to a conclusion that there
is an actual threat of the serious damage continuing. This means that it does not serve
as an independent (or alternative) determination of actual threat of serious damage.
It is a redundant exercise and that means that if there is a fatal flaw in the serious
damage determination, the actual threat determination necessarily falls, too. If
the United States were to make an independent finding of actual threat of serious
damage, further analysis would need to be done to substantiate the finding. In other
words, a prospective analysis is required if an independent finding of actual threat is
to be made rather than a redundant and dependant one as was effectively made by
the United States in the 1998 Market Statement."40

(ii) Indicators of serious damage: changes in firm output

39. In US – Cotton Yarn, Pakistan had argued that the United States should not have treated as
indicators of damage to its domestic industry the fact that establishments producing combed cotton
yarn had been retooled to produce carded cotton yarn or any other products. The Panel, in a statement

39
Panel Report, US – Underwear, para. 7.55.
40
Panel Report, US – Cotton Yarn, paras. 7.138-7.139.
 Agreement on Textiles and Clothing 26

not addressed by the Appellate Body, considered that this issue related to the interpretation of
"damage" under Article 6.2 and concluded "the fact that an establishment changed its products to
those which are neither like nor directly competitive products should be treated as an indicator of
'serious damage' to a subject domestic industry":

"In the Panel's view, this issue concerns the interpretation of the term 'damage' under
Article 6.2. Transitional safeguard measures are permitted to protect the domestic
industry producing – rather than individual companies which are producers of – 'like
and/or directly competitive products' from import competition. Pakistan itself argues
that the scope of the domestic industry is determined not by producers but by
products. Otherwise, changes in ownership of domestic enterprises producing 'like
and/or directly competitive products' could be deemed as an indicator of 'serious
damage' to the 'domestic industry'.

In this connection, we recall that Pakistan argued that 'if a plant produces carded
instead of combed yarn, thrives in its new capacity and retains its workforce, the
increase in imports obviously did not cause grave injury that impaired its value or
usefulness.' However, we disagree with this argument. Assume that, in reaction to
import surge, domestic producers of certain textile products merged into companies
in another industry; and the establishments of the acquired producers, after retooling
to produce totally different products, achieved the same level of production, sales,
profit, employment, etc. In this situation, indeed, the 'value' of the retooled
establishments may not have been impaired in some overall sense, but it would be
obviously unreasonable that no transitional safeguard measure would be permitted
since the 'domestic industry' producing the textile products was driven out by the
import surge. In our view, the fact that an establishment changed its products to those
which are neither like nor directly competitive products should be treated as an
indicator of 'serious damage' to a subject domestic industry."41

(iii) Choice of investigation period

Length of the investigation period

40. In US – Cotton Yarn, Pakistan had argued that the eight-month investigation period chosen by
the United States authorities for determining serious damage and causation was not long enough.
The Panel "deem[ed] it inappropriate to set out a general guideline on the length of the period during
which damage or causation occurs, when there is no specific treaty language in the ATC."42
The Panel further considered that the question of whether an eight-month period was sufficiently long
for finding serious damage and causation should be done on a "case-by-case determination"43 and that
whether or not the chosen period is justifiably long would depend on, at least partly, the extent of the
damage suffered by a subject domestic industry during that period. Thus, the Panel deemed it
"inappropriate to set out a general guideline on the length of the period during which damage or
causation occurs, when there is no specific treaty language in the ATC."44

Most recent period

41. At its meeting in October 1999, the TMB examined transitional safeguard measures by
Argentina on imports from Brazil. With respect to the choice of the investigation period, the TMB
stated that:

41
Panel Report, US – Cotton Yarn, para. 7.104.
42
Panel Report, US –Cotton Yarn, para. 7.115.
43
Panel Report, US –Cotton Yarn, para. 7.120.
44
Panel Report, US – Cotton Yarn, paras. 7.113-7.115.
 WTO ANALYTICAL INDEX 27

"[I]n examining and assessing the determination of serious damage, or actual threat
thereof, caused to the domestic industry producing like and/or directly competitive
products by increased quantities of imports, decisive guidance had to be provided by
the developments which had occurred in the most recent period, while data related to
the longer time-period provided supplementary information that could support the
justification of the determination made. The evidence that developments in the most
recent period should have a decisive role in such a determination was, in the view of
the TMB, supported by the time-frame referred to in Articles 6.7 and 6.8, by the
requirements defined in Article 6.2 that in a determination it has to be demonstrated
that a particular product 'is being imported' in increased quantities, and by the period
of validity of a determination of serious damage or actual threat thereof for the
purpose of invoking safeguard as stated in Article 6.5. […] a determination of serious
damage, in the sense of Article 6, could not be based on developments that had
affected the domestic industry years before the actual determination was being
made."45

(e) "the domestic industry producing like and/or directly competitive products"

(i) Product-oriented definition of domestic industry

42. In US – Cotton Yarn, which concerned a safeguard measure of the United States on imports of
cotton yarn from Pakistan (see paragraph 52 below), the Panel found that the United States violated
Article 6.2 by excluding from the scope of the "domestic industry" the vertically integrated fabric
producers that produced yarn for their own internal use. The Appellate Body upheld the Panel's
finding46, inter alia because the definition of domestic industry is "product-oriented and not
producer-oriented, and […] the definition must be based on the products produced by the domestic
industry which are to be compared with the imported product in terms of their being like or directly
competitive."47

(ii) "producing"

43. In US – Cotton Yarn, the Appellate Body interpreted the term "producing" in Article 6.2:

"[T]he term 'producing' in Article 6.2 means producing for commercial purposes and
[…]it cannot be interpreted, in itself, to be limited to or qualified as producing for
sale on the merchant or any other segment of the market. The definition of the
domestic industry, in terms of Article 6.2, is determined by what the industry
produces, that is, like and/or directly competitive products. In our view, the term
"producing", in itself, cannot be given a different or a qualified meaning on the basis
of what a domestic producer chooses to do with its product."48

(iii) "directly competitive products"

"Directly competitive" in the context of Article III:2 of the GATT 1994

44. In US – Cotton Yarn, the United States had claimed that its exclusion of yarn produced by
vertically integrated fabric producers from the "domestic industry" was justified because they were

45
G/TMB/R/58, para. 14.
46
Panel Report, US – Cotton Yarn, paras. 7.90 and 8.1(a). Appellate Body Report, US – Cotton Yarn,
para. 105.
47
Appellate Body Report, US – Cotton Yarn, para. 86.
48
Appellate Body Report, US – Cotton Yarn, para. 87.
 Agreement on Textiles and Clothing 28

not producing a directly competitive product.49 The Appellate Body started its analysis by setting it
into the context of its earlier interpretations of "directly competitive" products in the context of the
Interpretative Note Ad Article III:2 of the GATT 1994. The Appellate Body summed up the key
points regarding "directly competitive" as:

"(a) The word 'competitive' means 'characterised by competition'. The context of

the competitive relationship is necessarily the marketplace, since that is the forum
where consumers choose different products that offer alternative ways of satisfying a
particular need or taste. As competition in the marketplace is a dynamic and evolving
process, the competitive relationship between products is not to be analyzed
exclusively by current consumer preferences50; the competitive relationship extends
as well to potential competition. 51

(b) According to the ordinary meaning of the term 'directly competitive',

products are competitive or substitutable when they are interchangeable or if they
offer alternative ways of satisfying a particular need or taste. 52

(c) In the context of Article III:2, second sentence, the qualifying word 'directly'
in the Ad Article suggests a degree of proximity in the competitive relationship
between the domestic and imported products. The word 'directly' does not, however,
prevent a consideration of both latent and extant demand. 53

(d) 'Like' products are a subset of directly competitive or substitutable

products: all like products are, by definition, directly competitive or substitutable
products, whereas not all 'directly competitive or substitutable' products are 'like'.54"55

45. At the same time, the Appellate Body in US – Cotton Yarn dismissed the United States'
argument that the above elements could not be applied to a definition of "directly competitive
products" under Article 6.2 of the ATC, because they have been developed to define not only "directly
competitive" products but also "directly substitutable" products pursuant to Article III:2 of the
GATT 1994. In the Appellate Body's view, "the mere absence of the word 'substitutable' in
Article 6.2 of the ATC" does not "[render] our interpretation of the term 'directly competitive' under
Article III:2 of the GATT 1994 irrelevant in terms of its contextual significance for the interpretation
of that term under Article 6.2 of the ATC."56

Direct competitive relationship; potential competitive relationship

46. The Appellate Body in US – Cotton Yarn emphasized the importance of direct competition
between domestic and imported products, in relation to the requirements of ATC Article 6.2:

"We must bear in mind that Article 6.2 permits a safeguard action to be taken in order
to protect a domestic industry from serious damage (or actual threat thereof) caused
by a surge in imports, provided the domestic industry is identified as the industry

49
The Appellate Body noted that it did not need to consider the concept of like product in the context
of Article 6.2 because both parties agreed that the yarn imported from Pakistan and yarn produced by the
producers of the United States, regardless of whether they are vertically integrated fabric producers or
independent yarn producers, were like products. Appellate Body Report, US – Cotton Yarn, para. 89.

55
Appellate Body Report, US – Cotton Yarn, para. 91.
56
Appellate Body Report, US – Cotton Yarn, para. 94.
 WTO ANALYTICAL INDEX 29

producing 'like and/or directly competitive products' in comparison with the imported
product. The criteria of 'like' and 'directly competitive' are characteristics attached to
the domestic product in order to ensure that the domestic industry is the appropriate
industry in relation to the imported product. The degree of proximity between the
imported and domestic products in their competitive relationship is thus critical to
underpin the reasonableness of a safeguard action against an imported product.57

According to the ordinary meaning of the term 'competitive', two products are in a
competitive relationship if they are commercially interchangeable, or if they offer
alternative ways of satisfying the same consumer demand in the marketplace.
'Competitive' is a characteristic attached to a product and denotes the capacity of a
product to compete both in a current or a future situation. The word 'competitive'
must be distinguished from the words 'competing' or 'being in actual competition'. It
has a wider connotation than 'actually competing' and includes also the notion of a
potential to compete. It is not necessary that two products be competing, or that they
be in actual competition with each other, in the marketplace at a given moment in
order for those products to be regarded as competitive. Indeed, products which are
competitive may not be actually competing with each other in the marketplace at a
given moment for a variety of reasons, such as regulatory restrictions or producers'
decisions. Thus, a static view is incorrect, for it leads to the same products being
regarded as competitive at one moment in time, and not so the next, depending upon
whether or not they are in the marketplace."58

Like products, directly competitive products, and unlike or dissimilar products

47. The Appellate Body in US – Cotton Yarn also noted:

"It is significant that the word 'competitive' is qualified by the word 'directly', which
emphasizes the degree of proximity that must obtain in the competitive relationship
between the products under comparison. As noted earlier, a safeguard action under
the ATC is permitted in order to protect the domestic industry against competition
from an imported product. To ensure that such protection is reasonable, it is expressly
provided that the domestic industry must be producing 'like' and/or 'directly
competitive products'. Like products are, necessarily, in the highest degree of
competitive relationship in the marketplace. In permitting a safeguard action, the first
consideration is, therefore, whether the domestic industry is producing a like product
as compared with the imported product in question. If this is so, there can be no
doubt as to the reasonableness of the safeguard action against the imported product.

When, however, the product produced by the domestic industry is not a 'like product'
as compared with the imported product, the question arises how close should be the
competitive relationship between the imported product and the 'unlike' domestic
product. It is common knowledge that unlike or dissimilar products compete or can
compete in the marketplace to varying degrees, ranging from direct or close
competition to remote or indirect competition. The more unlike or dissimilar two
products are, the more remote or indirect their competitive relationship will be in the
marketplace. The term 'competitive' has, therefore, purposely been qualified and
limited by the word 'directly' to signify the degree of proximity that must obtain in the
competitive relationship when the products in question are unlike. Under this
definition of 'directly', a safeguard action will not extend to protecting a domestic

57
Appellate Body Report, US – Cotton Yarn, para. 95.
58
Appellate Body Report, US – Cotton Yarn, para. 96.
 Agreement on Textiles and Clothing 30

industry that produces unlike products which have only a remote or tenuous
competitive relationship with the imported product."59

Captive production

48. In US – Cotton Yarn, the United States had excluded from the scope of its definition of
domestic industry those vertically integrated United States' fabric manufacturers producing yarn for
their own captive consumption. The United States had argued that such yarn was not directly
competitive with imported yarn (in spite of being like products) because it was not offered for sale on
the market (except when the captive production was "out of balance", and even then only in
de minimis quantities). The United States also argued that vertically integrated fabric producers were
not dependent on the merchant market for meeting any of their requirements of yarn except to a
de minimis extent. The Appellate Body rejected these arguments as a "static view rendering the
competitive relationship between yarn sold on the merchant market and yarn used for internal
consumption by vertically integrated producers dependent on what they choose to do at a particular
point in time."60 The Appellate Body concluded that a proper analysis of the competitive relationship
between the two products would clearly show that they were "directly competitive" within the
meaning of Article 6.2. 61 The Appellate Body also noted that in the US – Hot-Rolled Steel case, cited
by the United States, "[o]ur observation that captive steel production was 'shielded from direct
competition' did not mean that steel produced in the captive market segment is not directly
competitive with imported steel destined for the merchant market."62

(iv) "and/or"

49. In US – Cotton Yarn, the parties disagreed on the interpretation of the connectors "and/or" in
Article 6.2. According to Pakistan, a subject domestic industry consisted of producers of: (i) like
products; or (ii) directly competitive products; or (iii) both like products and directly competitive
products. In contrast, the United States argued that Members are permitted to identify a "domestic
industry" as an industry producing a product that is: (i) like but not directly competitive; or (ii) unlike
but directly competitive; or (iii) both like and directly competitive.63

50. The Panel analysed these possibilities and rejected the US argument, on the basis that (i)
imports of a textile product cannot damage producers of "like but not directly competitive products"
through market competition, and "in this case the need for safeguard action would not arise [and] the
case could not be made because causation could not be demonstrated. Thus, the treaty would give a
meaningless right." Moreover, (ii) permitting Members to impose transitional safeguard measures for
domestic producers of "unlike but directly competitive products" would also be problematic, because
"serious damage" would be found based upon these producers' situation , "without taking into
consideration the situation of producers of 'like and directly competitive products', which are core
products competing with subject imports.64 The Appellate Body exercised judicial economy with
respect to this finding.65

(v) TMB statements

51. At its meeting in November 1998, in examining Colombia's transitional safeguards on

imports from Korea and Thailand, the TMB noted that the lack of a definition of "domestic industry"
in the ATC leaves a level of discretion to Members. Colombia did not need to provide data on 100 per
59
Appellate Body Report, US – Cotton Yarn, paras. 97-98.
60
Appellate Body Report, US – Cotton Yarn, paras. 99-100.
61
Appellate Body Report, US – Cotton Yarn, para. 101.
62
Appellate Body Report, US – Cotton Yarn, para. 102.
63
Panel Report, US – Cotton Yarn, para. 7.81.
64
Panel Report, US – Cotton Yarn, paras. 7.87 and 7.89; footnote in original omitted.
65
Appellate Body Report, US – Cotton Yarn, para. 104
 WTO ANALYTICAL INDEX 31

cent of the industry, but Colombia's action counting one company (with only 62 per cent of domestic
production), as the entire domestic industry meant that there was important missing information on
the rest of the industry, impeding the TMB's work assessing the domestic industry's situation and
Colombia's determination.66 Because this information was missing, the TMB could not determine
whether the large domestic producer's difficulties were due to increased imports, or to increased
competition between domestic producers.67

52. In April 1999, when the TMB examined the US cotton yarn safeguard that was the subject of
the US – Cotton Yarn dispute, it discussed the US exclusion of captive production discussed above.
The TMB noted that in terms of characteristics, all combed cotton yarn was identical; the US had
provided information on the industry segment producing such yarn for the merchant market, but not
on the segment whose identical yarn was produced for consumption by vertically integrated mills.
The TMB "observed that it would ordinarily be up to the Body, on the basis of the detailed
information provided pursuant to Article 6.7, to determine whether it was justified to exclude a
particular segment of production. Therefore the TMB would have expected to receive, to the extent
practicable, sufficient information to allow it to do so."68 In June 1999, the TMB confirmed that
"information reflecting the status of the vertically integrated firms should also have been provided by
the United States" and on this basis, "the TMB could have determined" whether or not that segment's
exclusion from the "domestic industry" was justified."69

(f) Causation

(i) "demonstrably"

53. The Panel in US – Underwear, referring to Article 6.2, second sentence, emphasized the word
"demonstrably" and found that when determining whether imports have caused serious damage to the
domestic industry, merely making a mechanical causal link between the increase in imports and the
alleged serious damage was not enough:

"Nowhere in the March Statement [on which the United States proposed the subject
transitional safeguard measure] could we find a discussion or demonstration of
causality as required under this provision, beyond the mere statement that the imports
were responsible for the damage. […] While such trade may certainly cause damage
to the domestic industry, the nature of the trade is such that it may benefit the
domestic firms that participate in it (see paragraph 7.44). Thus, in a discussion of
whether such trade has caused serious damage, it is necessary to look at this trade to
determine its effects on the industry. Because of the nature of the trade it is not
possible in these circumstances to conclude from the simple fact that there has been a
fall in production that there has also been serious damage. The March Statement
undertakes no such discussion. Moreover, the March Statement suggests other
possible causes of serious damage, such as rising cotton prices (see paragraph 7.44),
but does not consider their role as a cause of such damage. Thus, it cannot be said that
the March Statement 'demonstrably' shows that serious damage was caused by
increased levels of imports. We find, therefore, that an objective assessment of the
March Statement leads to the conclusion that the United States failed to comply with
its obligations under Article 6.2 of the ATC by imposing a restriction on imports of

66
G/TMB/R/49, para. 18.
67
G/TMB/R/51, para. 21.
68
G/TMB/R/53, paras. 13-14, and 16. Emphases added.
69
G/TMB/R/55, para. 14.
 Agreement on Textiles and Clothing 32

Costa Rican underwear without adequately demonstrating that increased imports had
caused serious damage."70

54. In US – Wool Shirts and Blouses, with respect to the term "demonstrably", the Panel found
that a Member imposing a textile safeguard measure must demonstrate that the serious damage or
actual threat thereof was not due to consumer preferences or technological changes:

"[T]he clear wording of Article 6.2 of the ATC ' ... Serious damage or actual threat
thereof must demonstrably be caused by ... and not by such other factors as
technological changes or changes in consumer preference' imposes on the importing
Member at least an explicit obligation to address the question whether serious
damage or actual threat thereof to the particular domestic industry was caused by
changes in consumer preferences or technological changes. The importing Member
remains free to choose the method of assessing whether the state of its particular
domestic industry was caused by such other factors as technological changes or
changes in consumer preferences, but it must demonstrate that it has addressed the
issue."71

(ii) Lag in investigation period

55. At its meeting in April 2000, the TMB reviewed transitional safeguard measures by Argentina
on textile products from Korea. Korea claimed that since there was a five-month gap between the end
of the period investigated and the application of the safeguard measures, Argentina had failed to
establish a substantial increase in imports under Article 6.2 and had violated Article 6.7, which
stipulates that "the information shall be related, as closely as possible, to … the reference period set
out in paragraph 8" of Article 6. The TMB responded:

"[T]he TMB recognized that the formulation of Article 6.7 (i.e. that the information
shall be related as closely as possible to the reference period) permitted certain
flexibility in providing information on the different economic variables listed in
Article 6.3, depending on the availability of the relevant data and information.
However, the safeguard measures in question had been applied by Argentina pursuant
to the provisions of Article 6.11, which required the existence of 'highly unusual and
critical circumstances, where delay would cause damage which would be difficult to
repair'. The TMB was of the view that the existence of such circumstances could only
be proven if information was provided regarding developments which occurred in the
very recent period, i.e. during or very close to the reference period."72

3. Article 6.3

(a) List of conditions in Article 6.3

56. In US – Underwear, the Panel held that the criteria in inter alia Article 6.3 had to be fulfilled in
order for transitional safeguard measures to be consistent with the ATC. Further on in the report, the
Panel stated that despite its observation that the United States had failed to analyze all of the listed
economic factors of Article 6.3 it could not be concluded that the finding of serious damage was
inconsistent with that provision, because "Article 6.3 of the ATC contains an indicative list of economic
variables that can be taken into account in order to assess the serious damage or actual threat thereof." 73

70
Panel Report, US – Underwear, para. 7.46.
71
Panel Report, US – Wool Shirts and Blouses, para. 7.50.
72
G/TMB/R/64, paras. 23-24.
73
Panel Report, US – Underwear, para. 7.22.
 WTO ANALYTICAL INDEX 33

57. In US – Wool Shirts and Blouses, months after US – Underwear, the Panel followed a
different approach:

"In our view, the wording of Article 6.2 and 6.3 of the ATC makes it clear that all
relevant economic factors, namely, all those factors listed in Article 6.3 of the ATC,
had to be addressed by CITA, whether subsequently discarded or not, with an
appropriate explanation. The wording of paragraph 3, which reads

'… the Member shall examine the effect of those 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.', (emphasis added)

implies two requirements. First, the relevant economic variables must be examined.
Second, output, productivity, utilization of capacity, etc. ... are relevant economic
variables. The wording of Article 6.3 of the ATC '... the Member shall examine the
effects ... on the state of the particular industry, as reflected in changes in such
relevant economic variables as output, productivity, etc. ...' makes clear that each of
the listed factors is not only relevant but must be examined. Effectively, the listed
economic variables are examples of relevant economic variables, they are presumed
to be 'relevant economic variables' and must be examined by the importing country in
its determination.

The wording of the first sentence of Article 6.3 of the ATC imposes on the importing
Member the obligation to examine, at the time of its determination, at least all of the
factors listed in that paragraph. The importing Member may decide -- in its
assessment of whether or not serious damage or actual threat thereof has been caused
to the domestic industry -- that some of these factors carry more or less weight. At a
minimum, the importing Member must be able to demonstrate that it has considered
the relevance or otherwise of each of the factors listed in Article 6.3 of the ATC.

The last part of Article 6.3 of the ATC, which states that 'none of which, either alone
or combined with other factors, can necessarily give decisive guidance', confirms that
some consideration and a relevant and adequate explanation have to be provided of
how the facts as a whole support the conclusion that the determination is consistent
with the requirements of the ATC."74

58. The conclusions of panels and the Appellate Body on the interpretation of a similarly worded
provision can be found in Article 4.2(a) of the Chapter on the Agreement on Safeguards; in Article 3.4
of the Chapter on the Anti-Dumping Agreement; and Article 15.4 of the Chapter on the
SCM Agreement.

4. Article 6.4

(a) Steps preceding the attribution of serious damage to individual Members

59. In US – Cotton Yarn, the Appellate Body explained that before carrying out the attribution
exercise demanded by Article 6.4, the three analytical steps set forth in Article 6.2 must be applied:

"Attribution is preceded by three analytical steps which are set forth in

Article 6.2: (i) an assessment of whether the domestic industry is suffering serious

74
Panel Report, US – Wool Shirts and Blouses, paras. 7.25-7.27.
 Agreement on Textiles and Clothing 34

damage (or actual threat thereof) according to Articles 6.2 and 6.3; (ii) an
examination of whether there is a surge in imports as envisaged by
Article 6.2; and, (iii) an establishment of a causal link between the surge in imports
and the serious damage (or actual threat thereof); according to the last sentence of
Article 6.2, "[s]erious damage … must demonstrably be caused by such increased
quantities in total imports of that product and not by … other factors". (emphasis
added)"75

(b) Attribution requirements

60. In US – Cotton Yarn, the Appellate Body noted the prerequisites for a finding under
Article 6.4 that attributes serious damage to imports from individual Members. 76 The first requirement
is that "the attribution be confined to only those Members from whom imports have shown a sharp
and substantial increase".77 The second requirement is "a comparative analysis, in the event that there
is more than one Member from whom imports have shown a sharp and substantial increase in its
imports."78

(i) First requirement: only those Members from whom imports have shown a sharp and
substantial increase

"sharp" and "substantial" increase in imports

61. The Panel in US – Cotton Yarn interpreted the terms "sharp" and "substantial". These
interpretations were adopted without appeal.79 The Panel interpreted the "term 'sharp' to refer to the
percentage increase and the term 'substantial' to refer to the absolute increase."80

Attribution to all Members whose imports cause serious damage or threat thereof

62. In US – Cotton Yarn, the Panel had found that the United States had acted inconsistently with
Article 6.4 by not examining the effect of imports from Mexico (and possibly other appropriate
Members) individually when attributing serious damage to Pakistan.81 The Panel also ruled that
Article 6.4 requires attribution to all Members whose imports cause serious damage or actual threat
thereof.82 The Appellate Body, further to upholding the Panel's first finding regarding US
inconsistency with Article 6.483, considered that its findings on that first issue 84 resolved the dispute
as defined by Pakistan's claims before the Panel. The Appellate Body therefore declined to rule on the
issue of whether Article 6.4 requires attribution to all Members whose imports are causing serious
damage or actual threat thereof and indicated that "[i]n these circumstances, the Panel's interpretation
on this question is of no legal effect."85

75
Appellate Body Report, US – Cotton Yarn, para. 112.
76
Appellate Body Report, US – Cotton Yarn, para. 113.
77
Appellate Body Report, US – Cotton Yarn, para. 114.
78
Appellate Body Report, US – Cotton Yarn, para. 115.
79
Appellate Body Report, US – Cotton Yarn, para. 114.
80
Panel Report, US – Cotton Yarn, para. 7.130.
81
Panel Report, US – Cotton Yarn, para. 8.1(b).
82
Panel Report, US – Cotton Yarn, paras. 7.126-7.127. The Panel had found that "unlike other
safeguard investigations, and resulting applications of measures, which are done on an MFN basis, …[t]he
Member imposing a safeguard under the ATC must then do a further attribution analysis and narrow the
causation down to only those Members whose exports are causing the serious damage."
83
The Appellate Body upheld the Panel's finding in para. 8.1(b) of its Report "albeit for reasons partly
different from those given by the panel". Appellate Body Report, US – Cotton Yarn, para. 126.
84
Appellate Body Report, US – Cotton Yarn, paras. 119 and 125-126.
85
Appellate Body Report, US – Cotton Yarn, para. 128.
 WTO ANALYTICAL INDEX 35

(ii) Second requirement: comparative analysis

63. In US – Cotton Yarn, the Appellate Body referred to the second attribution requirement:

"The second requirement of Article 6.4, second sentence, is a comparative analysis, in

the event that there is more than one Member from whom imports have shown a
sharp and substantial increase in its imports. The conduct of the comparative analysis
is governed by the latter part of the second sentence of Article 6.4, which requires the
analysis to address certain specific factors, namely: (i) the level of imports as
compared with imports from other sources; (ii) market share; and (iii) import and
domestic prices at a comparable stage of commercial transaction. Article 6.4 further
specifies that none of these factors, either alone or combined with other factors, can
necessarily give decisive guidance."86

Why is a comparative analysis required?

64. In US – Cotton Yarn, the Appellate Body faced the question of why a comparative analysis is
needed under Article 6.4 as the means to respond to another question, namely how to conduct a
comparative analysis since Article 6.4 does not directly address this issue. 87 The Appellate Body
concluded that attributing damage actually caused to the domestic industry by imports from a Member
to a different Member imports amounted to a "mis-attribution" of damage and would be inconsistent
with the interpretation in good faith of the terms of Article 6.4 ":

"Article 6.4 provides, in relevant part, that '[t]he Member or Members to whom
serious damage … is attributed, shall be determined on the basis of a sharp and
substantial increase in imports … from such a Member or Members'. (emphasis
added) The clear inference from this phrase is that the sharp and substantial increase
of imports from such a Member determines not only the basis, but also the scope of
attribution of serious damage to that Member.

In consequence, where imports from more than one Member contribute to serious
damage, it is only that part of the total damage which is actually caused by imports
from such a Member that can be attributed to that Member under Article 6.4, second
sentence. Damage that is actually caused to the domestic industry by imports from
one Member cannot, in our view, be attributed to a different Member imports from
whom were not the cause of that part of the damage. This would amount to a
'mis-attribution' of damage and would be inconsistent with the interpretation in good
faith of the terms of Article 6.4. Therefore, the part of the total serious damage
attributed to an exporting Member must be proportionate to the damage caused by the
imports from that Member. Contrary to the view of the United States, we believe that
Article 6.4, second sentence, does not permit the attribution of the totality of serious
damage to one Member, unless the imports from that Member alone have caused all
the serious damage."88

65. As support for its conclusions on the reasons why a comparative analysis is needed, the
Appellate Body in US – Cotton Yarn referred to the rules of general international law on State
responsibility and Article 22.4 of the DSU (suspension of concessions):

"Our view is supported further by the rules of general international law on state
responsibility, which require that countermeasures in response to breaches by states

86
Appellate Body Report, US – Cotton Yarn, para. 115.
87
Appellate Body Report, US – Cotton Yarn, para. 117.
88
Appellate Body Report, US – Cotton Yarn, paras. 118-119.
 Agreement on Textiles and Clothing 36

of their international obligations be commensurate with the injury suffered. In the

same vein, we note that Article 22.4 of the DSU stipulates that the suspension of
concessions shall be equivalent to the level of nullification or impairment. This
provision of the DSU has been interpreted consistently as not justifying punitive
damages. These two examples illustrate the consequences of breaches by states of
their international obligations, whereas a safeguard action is merely a remedy to
WTO-consistent 'fair trade' activity. 89 It would be absurd if the breach of an
international obligation were sanctioned by proportionate countermeasures, while, in
the absence of such breach, a WTO Member would be subject to a disproportionate
and, hence, 'punitive', attribution of serious damage not wholly caused by its exports.
In our view, such an exorbitant derogation from the principle of proportionality in
respect of the attribution of serious damage could be justified only if the drafters of
the ATC had expressly provided for it, which is not the case."90

66. Also in support for its conclusions on the reasons why a comparative analysis is needed, the
Appellate Body pointed out:

"Finally, and most significantly, if the totality of serious damage could be attributed
to only one of those Members the imports from whom have contributed to it, there
would be no need to undertake a comparative analysis of the effects of imports from
that one Member, once the imports from that Member have been found to have
increased sharply and substantially; such an interpretation would reduce a whole
segment of Article 6.4 to inutility."91

How to conduct a comparative analysis

67. Further to responding to the question why a comparative analysis is needed,

the Appellate Body in US – Cotton Yarn focussed on the question how to conduct a comparative
analysis since this is not expressly stated in the wording of Article 6.4, second sentence. 92 In this
regard, the Appellate Body considered that such an analysis "is to be seen in the light of the principle
of proportionality as the means of determining the scope or assessing the part of the total serious
damage that can be attributed to an exporting Member." The Appellate Body further concluded that
"an assessment of the share of total serious damage, which is proportionate to the damage actually
caused by imports from a particular Member, requires a comparison according to the factors
envisaged in Article 6.4 with all other Members (from whom imports have also increased sharply and
substantially) taken individually":

"We now turn to the question of how to conduct the comparative analysis required by
Article 6.4. This analysis is to be seen in the light of the principle of proportionality
as the means of determining the scope or assessing the part of the total serious
damage that can be attributed to an exporting Member. We recall that Article 6.4
enjoins the importing Member to conduct this comparative analysis on a multi-factor
basis including "levels of imports", "market share" and "prices", while specifying that
none of these factors alone or in combination with other factors can necessarily give
decisive guidance. The comparison is to take place between the effects of imports
from the Member in question, on the one hand, and those of imports from other
sources, on the other. The comparison must thus be based on a variety of factors, each
of which has a different significance and weight, and is to be measured on a different
scale.

.
90
Appellate Body Report, US – Cotton Yarn, para. 120.
91
Appellate Body Report, US – Cotton Yarn, para. 121.
92
Appellate Body Report, US – Cotton Yarn, para. 117.
 WTO ANALYTICAL INDEX 37

It is of course possible to compare the level of imports of one Member with the level
of imports from other sources taken together. Likewise, it is possible to establish the
market share of one Member in comparison with all other imports and the output of
the domestic industry. However, the full effects of the level of imports from, and the
market share of, one Member can only be assessed if this level and this share are
compared individually with the level of imports from, and the market share of, the
other Members from whom imports have also increased sharply and substantially.
This conclusion is even more obvious for the comparison of import and domestic
prices. The price of imports from one Member can be compared with the average
price of imports from other sources and with domestic prices. However, prices of
imports from the other Members may vary widely from one another. A fair
assessment of the effects of the price of imports from one Member will therefore
require a comparison with the price of imports from other Members taken
individually. Moreover, these different factors interact in different ways, producing
different effects, under different circumstances, not to mention the possible existence
of other relevant factors (and their effects) that must be taken into account in the
comparison according to the proviso at the end of Article 6.4, second sentence.

An assessment of the share of total serious damage, which is proportionate to the

damage actually caused by imports from a particular Member, requires, therefore, a
comparison according to the factors envisaged in Article 6.4 with all other Members
(from whom imports have also increased sharply and substantially) taken
individually."93

68. In US – Underwear, the Panel considered on a comparative basis whether the attribution of
serious damage in the United States' domestic industry to Costa Rican imports was consistent with the
requirements under Article 6.4. In this context the Panel analysed the five bilateral agreements that
the United States had concluded with five different exporting States which represented a substantial
portion of all United States' imports. In these agreements the United States agreed to ensure
unrestricted imports to the United States' territory of more than 170 million "dozen units of a product
(an increase of 478 per cent over then current import levels)."94 The Panel concluded that the attribution
of serious damage to Costa Rican imports was inconsistent with the requirements of Article 6.4 as
follows:

"In light of (i) the fact that restrictions under Article 6 of the ATC are to be applied only
sparingly, (ii) the fact that the United States has the burden of proving that it has
complied with the requirements of Article 6 of the ATC, (iii) the deficiencies detailed
above in respect of the evidence on the existence of serious damage, which raise serious
questions in our view as to whether there was serious damage shown under Article 6.2
at all, (iv) the fact that the United States failed to demonstrate adequately that the cause
of serious damage was imports, and (v) the fact that the United States voluntarily
agreed to accept import limits from other countries exporting underwear to the
United States that permitted increases over their current export levels that were far in
excess of Costa Rica's export levels to the United States, we conclude that the
United States failed to demonstrate adequately in the March Statement that its
domestic industry suffered serious damage that could be attributed to Costa Rican
imports and thus, by imposing import restrictions on imports of Costa Rican
underwear, the United States failed to comply with its obligations under Article 6.2
and 6.4 of the ATC."95

93
Appellate Body Report, US – Cotton Yarn, paras. 122-124.
94
Panel Report, US – Underwear, para. 7.51.
95
Panel Report, US – Underwear, para. 7.52.
 Agreement on Textiles and Clothing 38

5. Article 6.6

(a) Article 6.6(d)

69. The Panel in US – Underwear examined whether the United States, in its application of the
transitional safeguard measure at issue, accorded more favourable treatment to re-imports into its
territory in accordance with Article 6.6(d). Specifically, the Panel held that the United States could
not have complied with Article 6.6(d) merely by offering Costa Rica enhanced access for its textile
exports under certain other programmes:

"The 'chapeau' to Article 6.6(d) of the ATC makes it clear that the more favourable
treatment must be granted 'in the application of the transitional safeguard' (emphasis
added). This means, in our view, that Members availing themselves of the Article 6
transitional safeguard are obliged to grant more favourable treatment to re-imports,
independently of whether such treatment has been previously rejected by the affected
Member during the bilateral consultations or whether other privileges were envisaged
to be accorded to such a Member in negotiations based upon the implemented
safeguard measure. The term 'more favourable treatment' is not further qualified in
the ATC. We, therefore, reject the United States argument (paragraph 5.157) that they
had complied with Article 6.6(d) of the ATC by offering Costa Rica enhanced access
under GAL programmes during the course of the consultations."96

70. In response to the Costa Rican claim for quotas larger than those required under Article 6.8,
the Panel in US – Underwear rejected the notion that more favourable treatment within the meaning
of Article 6.6(d) necessarily implies the availability of larger quotas:

"We agree with Costa Rica that quantitatively more favourable treatment for the full
three-year period is one of the options available to Members in order to comply with
the requirements of Article 6.6(d) of the ATC. We do not consider it, however, to be
the only option. In our view, a Member could, for example, comply with the
requirements under Article 6.6(d) of the ATC by imposing a restriction for a period
shorter than three years."97

6. Article 6.7

71. At its meeting in July 1998, the TMB examined a transitional safeguard measure taken by
Colombia on imports of denim from Brazil and India. The TMB stated that while Article 6.7 "allowed
for some flexibility, in particular in view of the availability of most recent data", this "did not provide
for the possibility of taking a safeguard measure on the basis of economic variables describing the
status of the industry almost two years before the time at which the request for consultation had been
made":

"[T]he TMB addressed the time-lag of about fifteen months that had taken place
between the investigation concluded by INCOMEX and the time at which Colombia
had requested consultations with, inter alia, Brazil and India. The TMB recalled in
this respect that, according to Article 6.7, the information referred to in Articles 6.3
and 6.4 shall be related, as closely as possible, to the reference period set out in
Article 6.8, i.e. the 12-month period terminating two months preceding the month in
which the request for consultation was made […]. The TMB recognised that this
formulation allowed for some flexibility, in particular in view of the availability of
most recent data. In the view of the TMB, however, this did not provide for the

96
Panel Report, US – Underwear, para. 7.57.
97
Panel Report, US – Underwear, para. 7.58.
 WTO ANALYTICAL INDEX 39

possibility of taking a safeguard measure on the basis of economic variables

describing the status of the industry almost two years before the time at which the
request for consultation had been made."98

72. At its meeting in November 1998, examining a transitional safeguard measure taken by
Colombia on imports from Korea and Thailand, the TMB stated as follows:

"The TMB […] decided to make an examination, on the basis of the information
available, of the possible effects of the increased quantities in total imports of plain
polyester filaments on the state of the particular industry, as specified in Article 6.3.
The TMB noted in this respect that it could not base its assessment on estimates
provided by Colombia for the year 1998; and that the monthly averages provided by
Colombia could not be considered in most cases as providing reliable indications."99

73. At its meeting in January 1999, the TMB provided a clarification on its statement referenced
in paragraph 72 above. The TMB agreed that Article 6 did not "lay down a single methodology for
the presentation of the information in question". Furthermore, the TMB emphasized that in its
statement referenced in paragraph 72 above, it had not made a finding on "how information regarding
imports or the variables used for determining serious damage to the domestic industry should be
presented under Article 6", but rather "had expressed a view on the difficulties it was facing because
of the problems in comparing certain data provided by Colombia in the present case":

"[T]he TMB agreed with Colombia that Article 6 does not lay down a single
methodology for the presentation of the information in question. The TMB had
recalled what were the time periods covered by the information presented by
Colombia pursuant to Article 6.7. '[T]he technical report prepared by INCOMEX
contained data regarding the performance of total imports for the 12-month periods
June to May of 1995-1996, 1996-1997 and 1997-1998, the reference period referred
to in Article 6.8. The data and information incorporated into the report regarding the
economic variables set out in Article 6.3 referred to calendar years; for 1998, it
incorporated actual data for the period January to May and provided estimates for the
full calendar year. In addition, the report provided monthly averages regarding each
variable for 1995, 1996, 1997 and January to May 1998' (G/TMB/R/49,
paragraph 11). The TMB could not agree with the contention of Colombia that the
TMB had omitted to observe that information had been presented in three different
forms. The TMB had not qualified whether these forms were mutually supportive, as
claimed by Colombia, since the Body had not found that certain such forms were
convincing. This had been reflected in the report adopted by the TMB: '[t]he TMB
noted […] that it could not base its assessment on estimates provided by Colombia
for the year 1998; and that the monthly averages provided by Colombia could not be
considered in most cases as providing reliable indications.' (G/TMB/R/49,
paragraph 21, emphasis added). Therefore, the TMB had added that '[f]or data to be
meaningful Colombia would have had in the present case to have provided
comparisons either on a January/May basis or on a year-ending May basis' (same
paragraph, emphasis added). In the view of the TMB, the above excerpts of its report
made it clear that (i) the report faithfully reflected the forms of information provided,
including the respective time-frames; (ii) the TMB had not provided any
interpretation, but had expressed the view that in the present case the presentation
was such that it did not allow a reliable comparison of the developments or changes
in the relevant economic variables referred to in Article 6.3. The reference of the
TMB to the January/May comparisons was not an interpretation and was not contrary

98
G/TMB/R/46, para. 12.
99
G/TMB/R/49, para. 21.
 Agreement on Textiles and Clothing 40

to any provision of Article 6, since the Body had not suggested that this information
should have been provided in lieu of the information submitted, but in addition to
what had been made available. Without such additional information it was not
possible for the TMB to assess whether developments during the first five months of
1998 could be an indication of serious damage caused by imports or whether they
constituted a seasonal phenomenon which had characterised the domestic industry in
the same period of the preceding years as well. The TMB recognized that Colombia
had explained that the product subject to safeguard measures was not subject to
seasonal factors. This statement, however, had not been substantiated by the
information presented pursuant to Article 6.7.

The TMB reiterated that it had not provided any interpretation regarding how
information regarding imports or the variables used for determining serious damage
to the domestic industry should be presented under Article 6. Instead, it had expressed
a view on the difficulties it was facing because of the problems in comparing certain
data provided by Colombia in the present case."100

74. At its meeting in October 1999, concerning the choice of periods for comparison, the TMB
held that two data series for overlapping periods were insufficient for the purposes of Article 6.7.
In the specific case, there had been an overlap of eight months. The TMB emphasized that "[r]eliable
indications cannot be obtained but by comparing data for identical time-periods":

"The TMB recalled that the relevant provisions of the ATC (Article 6.7) required,
inter alia, that '[i]n respect of requests [for consultations] made under this paragraph,
the information shall be related, as closely as possible, to identifiable segments of
production and to the reference period set out in paragraph 8' of Article 6. In the
particular cases referred to the TMB and subject to the present review, this reference
period, in accordance with Article 6.8, corresponded to the period
May 1998/April 1999, for which category-specific information had been provided by
Argentina. It had to be observed, however, that in the factual information given by
Argentina developments of this most recent period could not be compared to the state
of the domestic industry as reflected in the different variables during a preceding
corresponding period, i.e. during May 1997/April 1998, since all other data had been
provided on a calendar-year basis. Though Argentina gave indications (expressed in
terms of percentages) regarding 'changes over 12 months', these indications could not
be considered to provide a reliable basis, as they compared data relating to
May 1998/April 1999 to those reported for January/December 1998. Therefore,
between the two data series compared there had been an overlap of eight months.
Reliable indications cannot be obtained but by comparing data for identical time-
periods. Though Argentina had explained that there had not been indications referring
to the existence of seasonal factors, the TMB was of the view that the availability of
data for the calendar-year 1998 and for the period May 1998/April 1999 could give
an indication for comparing trends between January-April 1998 and the same period
in 1999, but did not allow for more far-reaching comparisons."101

75. At its meeting in November 2001, the TMB examined a notification by Poland which
considered itself unable to conform with the recommendation the TMB had made regarding a
transitional safeguard measure introduced by Poland on imports of certain products from Romania.
The TMB found that "developments that occurred prior to the period covered by the factual
information provided pursuant to Article 6.7 can hardly be considered as a valid reason for a
Member's inability to conform with the TMB's recommendation":

100
G/TMB/R/51, paras. 26-27.
101
G/TMB/R/58, para. 13.
 WTO ANALYTICAL INDEX 41

"[T]he TMB recognized that the ATC does not provide specific guidance as to how
long the period of investigation (and, consequently, the period covered in the specific
and relevant information in the sense of Article 6.7) should be. Therefore, the
definition of the length of the period of investigation is very much left to the
discretion of the authorities of the Member invoking the provisions of Article 6.
While the use of the present tense of the verb in Article 6.2 (i.e. '… a particular
product is being imported …') and the reference to the information 'as up-to-date as
possible' in Article 6.7 appear to indicate that the information to be provided should at
the minimum, include developments of the recent past, there is no similar guidance
regarding what should be the starting-point of the period covered by the factual
information. In view of this, the TMB had proceeded to the examination of the matter
under Article 6.10 on the basis of the information provided by Poland for the period
of 12 months (from 1 January 2000 to 1 January 2001);

It follows from the above that reference to developments that occurred prior to the
period covered by the factual information provided pursuant to Article 6.7 can hardly
be considered as a valid reason for a Member's inability to conform with the TMB's
recommendation[.]"102

7. Article 6.10

76. In US – Underwear, the Appellate Body examined the Panel's finding that a transitional
safeguard measure imposed by the United States was inconsistent with Article 6. The Panel had held
that the wording of Article 6.10 did not provide any guidance on whether backdating a transitional
safeguard measure was permissible. Proceeding to the provisions of the GATT 1994, the Panel then
took Article X:2 thereof as its applicable and controlling text.103 The Appellate Body disagreed with
these findings of the Panel. As to whether Article 6 permits the retroactive application of transitional
safeguard measures, referring to Article 6.10, the Appellate Body held that there was a "presumption
[in the] very text of Article 6.10 that such a measure may be applied only prospectively":

"It is essential to note that, under the express terms of Article 6.10, ATC, the restraint
measure may be 'applied' only 'after the expiry of the period of 60 days' for
consultations, without success, and only within the 'window' of 30 days immediately
following the 60-day period. Accordingly, we believe that, in the absence of an
express authorization in Article 6.10, ATC, to backdate the effectivity of a safeguard
restraint measure, a presumption arises from the very text of Article 6.10 that such a
measure may be applied only prospectively. This presumption appears to us entirely
appropriate in respect of measures which are limitative or deprivational in character
or tenor and impact upon Member countries and their rights or privileges and upon
private persons and their acts."104

77. Further, the Appellate Body considered that the context of Article 6.10, "includ[ing], of
course, the whole of Article 6", supported its finding referenced in paragraph 76 above:

"Article 6.1 directs that transitional safeguard measures be applied 'as sparingly as
possible' on the one hand and, on the other, applied 'consistently with the provisions
of [Article 6] and the effective implementation of the integration process under [the
ATC]'. It appears to the Appellate Body that to inject into Article 6.10 an
authorization for backdating the effectivity of a restraint measure will encourage
return to the practice of backdating restraint measures which appears to have been

102
G/TMB/R/83, para. 29.
103
Panel Report, US – Underwear, paras. 7.63-7.64.
104
Appellate Body Report, US – Underwear, p. 14.
 Agreement on Textiles and Clothing 42

widespread under the regime of the MFA, a regime which has now ended, as
discussed below, with the advent of the ATC. Such an introjection would moreover
loosen up the carefully negotiated language of Article 6.10, which reflects an equally
carefully drawn balance of rights and obligations of Members, by allowing the
importing Member an enhanced ability to restrict the entry into its territory of goods
in the exportation of which no unfair trade practice such as dumping or fraud or
deception as to origin, is alleged or proven. For retroactive application of a restraint
measure effectively enables the importing Member to exclude more goods by
enforcing the quota measure earlier rather than later."105

78. Finally, the Appellate Body also held that backdating measures imposed pursuant to
Article 6.10 would "diminish the utility and significance of prior consultations with the identified
exporting Member or Members":

"It further appears to us that to read Article 6.10 as somehow authorizing the
backdating, as a matter of course, of the effectivity or operation of a restraint
measure, will tend to diminish the utility and significance of prior consultations with
the identified exporting Member or Members. Article 6.7 of the ATC provides for
those consultations in very substantial detail. Thus, Article 6.7 requires that the
request for consultations be accompanied by specific, relevant and up-to-date
information on the factors which led the importing Member to make a determination
of 'serious damage' (listed in Article 6.3) and the factors which led to the unilateral
attribution of such damage to an identified exporting Member or Members (referred
to in Article 6.4). One clear objective of requiring a 60-day period for consultations is
to give such Member or Members a real and fair, not merely pro forma, opportunity
to rebut or moderate those factors. The requirement of consultations is thus grounded
on, among other things, due process considerations; that requirement should be
protected from erosion or attenuation by a treaty interpreter. It is, again, noteworthy
that Article 6.7 refers repeatedly to the Member 'proposing to take safeguard action',
or who 'proposes to invoke the safeguard action' and to the level at which imports of
the goods specified 'are proposed to be restrained'. The common, day-to-day,
implication which arises from this language is clear to us: the restraint is to be
applied in the future, after the consultations, should these prove fruitless and the
proposed measure not withdrawn. The principle of effectiveness in treaty
interpretation106 sustains this implication."107

79. In addition to its reasoning referenced in paragraphs 76-78 above, the Appellate Body in US –
Underwear also addressed "the prior existence and demise, as it were, of the MFA" and pointed out
that one particular provision of the MFA expressly permitted backdating:

"Article 3(5)(i) of the MFA expressly permitted backdating of the effectivity of a

restraint measure to the date of the importing Member's call for consultations.
The above underscored clause of Article 3(5)(i), MFA, however, disappeared with the
supersession of the MFA by the new ATC; no comparable clause was carried over
into Article 6.10 of the ATC. The Panel did not draw any operable inference from the
disappearance of the MFA clause. Appellant Costa Rica urges that the absence of an
equivalent clause in Article 6.10 of the ATC means that backdating of a restraint
measure may no longer be resorted to under Article 6.10, ATC. Appellee

105
Appellate Body Report, US – Underwear, p. 15.
107
Appellate Body Report, US – Underwear, pp. 15-16.
 WTO ANALYTICAL INDEX 43

United States, in contrast, insists that such backdating is nevertheless available under
the regime of the ATC."108

80. With respect to the fact that a provision of the MFA expressly provided for the possibility to
backdate preliminary safeguard measures, the Appellate Body held that the disappearance in the ATC
of this provision "strongly reinforces the presumption that such retroactive application is no longer
permissible":

"We believe the disappearance in the ATC of the earlier MFA express provision for
backdating the operative effect of a restraint measure, strongly reinforces the
presumption that such retroactive application is no longer permissible. This is the
commonplace inference that is properly drawn from such disappearance. We are not
entitled to assume that that disappearance was merely accidental or an inadvertent
oversight on the part of either harassed negotiators or inattentive draftsmen. That no
official record may exist of discussions or statements of delegations on this particular
point is, of course, no basis for making such an assumption. At the oral hearing, the
United States stated that since 1974, for over 20 years, all importing countries had
'counted' imports in the textile area against quotas imposed by restraints from the date
of the request for consultations. While that may well have been the practice of many
importing countries, it was, of course, the practice under the MFA. Two
considerations bear upon this matter. Firstly, assuming, arguendo only, that the WTO
Members had wanted to keep that practice, it is very difficult to understand why the
treaty basis for such practice was not maintained but was instead wiped out.
Secondly, it has not been suggested that such a widely followed practice has arisen
under Article 6.10 of the ATC notwithstanding the absence of the MFA backdating
clause. At any rate, it is much too early for practice to have arisen under the ATC
regime which commenced only on 1 January 1995."109

81. Further, in response to the United States claim that the retroactive application of transitional
safeguard measures was needed to deal with flood of imports after an announcement of a request for
consultations under the ATC, the Appellate Body stated:

"When and to the extent that a speculative 'flood of imports' turns out, in a particular
situation, to be a real and serious problem engaging the legitimate interests of the
Member proposing a safeguard measure, we consider that recourse may be had to
Article 6.11 of the ATC. Article 6.11 authorizes the importing Member, 'in highly
unusual and critical circumstances, where delay would cause damage which would be
difficult to repair', to impose and apply immediately, albeit provisionally, the restraint
measure authorized under Article 6.10. The request for consultations and the
notification to the Textile Monitoring Board must, however, be issued within five
working days after the taking of provisional action. In other words, the requirements
of Article 6.10 must nevertheless be observed. Action under Article 6.11 of the ATC
is not in lieu of, and does not supersede, action taken or begun under Article 6.10,
ATC. Provisional action under Article 6.11 is folded into action under Article 6.10.
Considering that Article 6.11 permits the provisional imposition of a restraint
measure even before consultations, a fortiori it would permit such imposition after
consultations have in fact begun, so long as the requisites of both Articles 6.10
and 6.11 are met or continue to be met.

108
Appellate Body Report, US – Underwear, pp. 16-17.
109
Appellate Body Report, US – Underwear, p. 17.
 Agreement on Textiles and Clothing 44

The conclusion we have arrived at, in respect of the issue of permissibility of

backdating, is that the giving of retroactive effect to a safeguard restraint measure is
no longer permissible under the regime of Article 6 of the ATC and is in fact
prohibited under Article 6.10 of that Agreement. The presumption of prospective
effect only, has not been overturned; it is a proposition not simply presumptively
correct but one requiring our assent. We believe, accordingly, and so hold, that
the Panel erred in ruling that Article 6.10 of the ATC had nothing to say on the issue
of backdating and that such backdating to 21 April 1995, the date of publication of
the call for consultations, was permissible under Article X:2 of
the General Agreement. The importing Member is, however, not defenceless against
a speculative 'flood of imports' where it is confronted with the circumstances
contemplated in Article 6.11. Its appropriate recourse is, in other words, to action
under Article 6.11 of the ATC, complying in the process with the requirements of
Article 6.10 and Article 6.11."110

82. In this connection, the Appellate Body held therefore with respect to the finding of the Panel
on the permissibility of backdating, referenced in paragraph 76 above, that "[o]ur finding, therefore,
that the safeguard restraint measure here involved is properly regarded as 'a measure of general
application' under Article X:2 does not conflict with, and does not affect our conclusion under the first
issue above that backdating the effectivity of a restraint measure is prohibited by Article 6.10 of
the ATC."111

8. Article 6.11

(a) "highly unusual and critical circumstances"

83. The TMB minutes for the meeting of November 1996 include the following agreed statement
in connection with transitional safeguard measures taken by Brazil under Article 6.11:

"The TMB was of the view that in cases where the provisions of paragraph 11 of
Article 6 were invoked, the expectation was that the elements envisaged in
paragraphs 2, 3 and 4 of Article 6 would indicate as unambiguously as possible the
highly unusual and critical character of the circumstances. The TMB was also of the
view that, unless such circumstances were met, any action taken under Article 6
should be preceded by consultations between the parties."112

84. At its meeting in January 2000, in examining certain transitional safeguard measures by
Argentina on imports of certain products from Pakistan, the TMB summarized the substantive
elements of Article 6.11:

"[T]he TMB noted that Article 6.11 involves procedural and substantive elements. …
[T]he substantive elements … can be summarized as follows:

– it has to be demonstrated that a particular product is being imported into a

Member's 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. …Article 6 defines only one set of criteria for
demonstrating serious damage and, therefore, they were the same whether
Article 6.10 or 6.11 is invoked;

110
Appellate Body Report, US – Underwear, pp. 18-19.
111
Appellate Body Report, US – Underwear, p. 21.
112
G/TMB/R/20, para. 24. The TMB reiterated this view on several occasions. See G/TMB/R/27,
para. 37 and G/TMB/R/58, para. 44.
 WTO ANALYTICAL INDEX 45

– in addition, the invoking Member has to provide explanations that would

convince the Member affected by the measure, as well as the TMB, regarding
the existence of highly unusual and critical circumstances where delay in
taking action would cause damage which would be difficult to repair."113

85. With respect to the relationship with Article 6.10, see the excerpt from the Appellate Body
Report on US – Underwear, referenced in paragraph 81 above.

9. Relationship with Article 2.4

86. In US – Underwear, the Panel examined whether certain transitional safeguard measures
imposed by the United States on imports from Costa Rica were inconsistent with Article 6. The Panel
stated with respect to the relationship between Articles 2.4 and 6 that "one of the central elements of
the ATC is the prohibition, in principle, for Members to have recourse to any new restrictions beyond
those notified under Article 2.1 of the ATC." Based on this reasoning, the Panel in US – Underwear
concluded that "Article 6 of the ATC is an exception to the rule of Article 2.4 of the ATC."114
The Appellate Body did not address these findings upon review. However, in its report in US – Wool
Shirts and Blouses, the Appellate Body held that Article 6 was an integral part of the balance of rights
and obligations under the ATC, that Article 6 did not have exceptional character and that the burden of
proof in this context fell upon the complaining party. See paragraph 30 above.

87. In US – Wool Shirts and Blouses, the Panel examined whether a certain United States
transitional safeguard measure was consistent with Article 6. With respect to the relationship between
Articles 2.4 and 6, the Panel indicated as follows:

"Since we conclude that the safeguard action taken by the United States violated the
provisions of Article 6 of the ATC, it is our view that the United States applied a
restraint not authorized under the ATC, which, therefore, constitutes also a violation
of Article 2.4 of the ATC."115

10. Relationship with other WTO Agreements

(a) Article III.2 of the GATT 1994

88. As regards the relationship between Article 6.2 and Article III.2 and the concept of "directly
competitive" products, see paragraph 44 above.

(b) Article X:2 of the GATT 1994

89. In US – Underwear, the Appellate Body addressed the Panel's finding on Article X:2 of
the GATT 1994 and its applicability to transitional safeguard measures within the meaning of
Article 6 of the ATC. The Panel reviewed the measure at issue in the light of Article X:2 of the GATT
1994 because it had found that Article 6.10 of the ATC did not provide guidance on the issue of
whether backdating a transitional safeguard measure was permissible; see paragraph 76 above. While
the Appellate Body disagreed with the Panel's reading of Article 6.10 of the ATC116, it agreed that the
safeguard restraint measure was a measure of general application within the meaning of Article X:2:

"The Panel found that the safeguard restraint measure imposed by the United States is
'a measure of general application' within the contemplation of Article X:2. We agree
113
G/TMB/R/61, para. 53.
114
Panel Report, US – Underwear, paras. 7.15-7.16.
115
Panel Report, US – Wool Shirts and Blouses, para. 7.59. For same conclusion see Panel Report, US
– Underwear, paras. 7.70-7.71
116
Appellate Body Report, US – Underwear, p. 14.
 Agreement on Textiles and Clothing 46

with this finding. While the restraint measure was addressed to particular, i.e. named
exporting Members, including Appellant Costa Rica, as contemplated by Article 6.4,
ATC, we note that the measure did not try to become specific as to the individual
persons or entities engaged in exporting the specified textile or clothing items to the
importing Member and hence affected by the proposed restraint."117

X. ARTICLE 7

A. TEXT OF ARTICLE 7

Article 7

1. As part of the integration process and with reference to the specific commitments undertaken
by the Members as a result of the Uruguay Round, all Members shall take such actions as may be
necessary to abide by GATT 1994 rules and disciplines so as to:

(a) achieve improved access to markets for textile and clothing products through such
measures as tariff reductions and bindings, reduction or elimination of non-tariff
barriers, and facilitation of customs, administrative and licensing formalities;

(b) ensure the application of policies relating to fair and equitable trading conditions as
regards textiles and clothing in such areas as dumping and anti-dumping rules and
procedures, subsidies and countervailing measures, and protection of intellectual
property rights; and

(c) avoid discrimination against imports in the textiles and clothing sector when taking
measures for general trade policy reasons.

Such actions shall be without prejudice to the rights and obligations of Members under GATT 1994.

2. Members shall notify to the TMB the actions referred to in paragraph 1 which have a bearing
on the implementation of this Agreement. To the extent that these have been notified to other WTO
bodies, a summary, with reference to the original notification, shall be sufficient to fulfil the
requirements under this paragraph. It shall be open to any Member to make reverse notifications to the
TMB.

3. Where any Member considers that another Member has not taken the actions referred to in
paragraph 1, and that the balance of rights and obligations under this Agreement has been upset, that
Member may bring the matter before the relevant WTO bodies and inform the TMB. Any subsequent
findings or conclusions by the WTO bodies concerned shall form a part of the TMB's comprehensive
report.

B. INTERPRETATION AND APPLICATION OF ARTICLE 7

No jurisprudence or decision of a competent WTO body.

XI. ARTICLE 8

A. TEXT OF ARTICLE 8

Article 8

1. In order to supervise the implementation of this Agreement, to examine all measures taken
under this Agreement and their conformity therewith, and to take the actions specifically required of it
by this Agreement, the Textiles Monitoring Body ("TMB") is hereby established. The TMB shall

117
Appellate Body Report, US – Underwear, pp. 21-22.
 WTO ANALYTICAL INDEX 47

consist of a Chairman and 10 members. Its membership shall be balanced and broadly representative
of the Members and shall provide for rotation of its members at appropriate intervals. The members
shall be appointed by Members designated by the Council for Trade in Goods to serve on the TMB,
discharging their function on an ad personam basis.

2. The TMB shall develop its own working procedures. It is understood, however, that
consensus within the TMB does not require the assent or concurrence of members appointed by
Members involved in an unresolved issue under review by the TMB.

3. The TMB shall be considered as a standing body and shall meet as necessary to carry out the
functions required of it under this Agreement. It shall rely on notifications and information supplied by
the Members under the relevant Articles of this Agreement, supplemented by any additional
information or necessary details they may submit or it may decide to seek from them. It may also rely
on notifications to and reports from other WTO bodies and from such other sources as it may deem
appropriate.

4. Members shall afford to each other adequate opportunity for consultations with respect to any
matters affecting the operation of this Agreement.

5. In the absence of any mutually agreed solution in the bilateral consultations provided for in
this Agreement, the TMB shall, at the request of either Member, and following a thorough and prompt
consideration of the matter, make recommendations to the Members concerned.

6. At the request of any Member, the TMB shall review promptly any particular matter which
that Member considers to be detrimental to its interests under this Agreement and where consultations
between it and the Member or Members concerned have failed to produce a mutually satisfactory
solution. On such matters, the TMB may make such observations as it deems appropriate to the
Members concerned and for the purposes of the review provided for in paragraph 11.

7. Before formulating its recommendations or observations, the TMB shall invite participation of
such Members as may be directly affected by the matter in question.

8. Whenever the TMB is called upon to make recommendations or findings, it shall do so,
preferably within a period of 30 days, unless a different time period is specified in this Agreement. All
such recommendations or findings shall be communicated to the Members directly concerned. All
such recommendations or findings shall also be communicated to the Council for Trade in Goods for
its information.

9. The Members shall endeavour to accept in full the recommendations of the TMB, which shall
exercise proper surveillance of the implementation of such recommendations.

10. If a Member considers itself unable to conform with the recommendations of the TMB, it shall
provide the TMB with the reasons therefor not later than one month after receipt of such
recommendations. Following thorough consideration of the reasons given, the TMB shall issue any
further recommendations it considers appropriate forthwith. If, after such further recommendations,
the matter remains unresolved, either Member may bring the matter before the Dispute Settlement
Body and invoke paragraph 2 of Article XXIII of GATT 1994 and the relevant provisions of the
Dispute Settlement Understanding.

11. In order to oversee the implementation of this Agreement, the Council for Trade in Goods
shall conduct a major review before the end of each stage of the integration process. To assist in this
review, the TMB shall, at least five months before the end of each stage, transmit to the Council for
Trade in Goods a comprehensive report on the implementation of this Agreement during the stage
under review, in particular in matters with regard to the integration process, the application of the
transitional safeguard mechanism, and relating to the application of GATT 1994 rules and disciplines
as defined in Articles 2, 3, 6 and 7 respectively. The TMB's comprehensive report may include any
recommendation as deemed appropriate by the TMB to the Council for Trade in Goods.
 Agreement on Textiles and Clothing 48

12. In the light of its review the Council for Trade in Goods shall by consensus take such
decisions as it deems appropriate to ensure that the balance of rights and obligations embodied in this
Agreement is not being impaired. For the resolution of any disputes that may arise with respect to
matters referred to in Article 7, the Dispute Settlement Body may authorize, without prejudice to the
final date set out under Article 9, an adjustment to paragraph 14 of Article 2, for the stage subsequent
to the review, with respect to any Member found not to be complying with its obligations under this
Agreement.

B. INTERPRETATION AND APPLICATION OF ARTICLE 8

1. General

90. The 1996 Singapore Ministerial Declaration included the following statement on the role of
the TMB:

"We agree that, keeping in view its quasi-judicial nature, the Textiles
Monitoring Body (TMB) should achieve transparency in providing rationale for its
findings and recommendations. We expect that the TMB shall make findings and
recommendations whenever called upon to do so under the Agreement. We
emphasize the responsibility of the Goods Council in overseeing, in accordance with
Article IV:5 of the WTO Agreement and Article 8 of the ATC, the functioning of the
ATC, whose implementation is being supervised by the TMB."118

91. The TMB held its final meeting on 9 December 2004.119

2. Role of the TMB

92. The Panel in US – Wool Shirts and Blouses described its understanding of the difference
between the role and the function of dispute settlement panels on the one hand and the role and
function of the TMB on the other. The Panel pointed out, inter alia, the lack of specific terms of
reference for the TMB and the generally more "multifaceted role" of the TMB, in particular its
investigative powers:

"The wording of the ATC and the DSU confirms that the role and function of DSU
panels differ substantially from that of the TMB. For instance, the TMB is not limited
to any specific terms of reference as DSU panels are (Article 7 of the DSU). The
function of the TMB is to supervise the implementation of the ATC generally and to
examine measures taken, agreements reached and any other matters referred to it.
The nature of these broad functions confirms the special and multifaceted role of the
TMB. This is also reflected in the TMB's rules of procedure, its decision-making rule
and its composition. The TMB members are appointed by WTO Members designated
by the Council for Trade in Goods but discharge their function on an ad personam
basis. Pursuant to a General Council Decision, the TMB's membership is composed
of constituencies, in most cases of several Members, where most members also
appoint alternates. Furthermore, a TMB member appointed by a WTO Member
involved in a dispute before the TMB, participates in the TMB's deliberations,
although such TMB member cannot block a consensus (Article 8.2 of the ATC).
On the contrary, panelists under the DSU are not selected on the basis of
constituencies and the citizens of any party to a dispute under the DSU cannot
participate as panelists, absent agreement of the parties (Article 8.3 of the DSU).
In addition, a panelist may issue a dissenting opinion under the DSU, while the TMB

118
The Singapore Ministerial Declaration, para. 15.
119
G/TMB/R/116.
 WTO ANALYTICAL INDEX 49

can only act by consensus. Moreover, Article 8.3 of the ATC is clear as to the wide
investigative authority of the TMB:

'3. The TMB shall be considered as a standing body and shall

meet as necessary to carry out the functions required of it under this
Agreement. It shall rely on notifications and information supplied by
the Members under the relevant Articles of this Agreement,
supplemented by any additional information or necessary details they
may submit or it may decide to seek from them. It may also rely on
notifications to and reports from other WTO bodies and from such
other sources as it may deem appropriate.'"

We note also that, according to Article 8.10 of the ATC, when the TMB process has
been completed, a Member which remains unsatisfied with the TMB
recommendations can request the establishment of a panel without having to request
consultations under Article 4 of the DSU. This is to say that the TMB process can
replace the consultation phase in the dispute settlement process under the DSU and is
distinct from the formal adjudication process by panels."120

93. The Panel also described the relationship between the TMB process and the dispute
settlement process under the DSU:

"We note also that, according to Article 8.10 of the ATC, when the TMB process has
been completed, a Member which remains unsatisfied with the TMB
recommendations can request the establishment of a panel without having to request
consultations under Article 4 of the DSU. This is to say that the TMB process can
replace the consultation phase in the dispute settlement process under the DSU and is
distinct from the formal adjudication process by panels.

Therefore when differences arise, the ATC requires parties first to seek consultations
with a view to reaching a mutually satisfactory solution to the problem, within the
specific parameters or considerations set out in the relevant provision(s) of the ATC.
If a mutually satisfactory solution is not reached in the consultations, the matter may
be or shall be, depending on the applicable provision, referred to the TMB for review
and recommendations. In the case of recourse to Article 6 of the ATC, the object of
the consultations is to see whether there is a mutual understanding that the situation
calls for restraint on the exports of the particular product or not. If there is such a
mutual understanding, details of the agreed restraint measure shall be communicated
to the TMB which has to determine whether the agreement is justified in accordance
with the provisions of Article 6 of the ATC. If there is no agreement between the
parties concerned and the safeguard action is taken, the matter also has to be referred
to the TMB. According to Article 6.10 of the ATC, in order to conduct such an
examination, '... the TMB shall have available to it the factual data provided to the
Chairman of the TMB, referred to in paragraph 7 [of Article 6], as well as any other
relevant information provided by the Members concerned'. During the review
process, the TMB is not limited to the initial information submitted by the importing
Member as parties may submit additional and other information in support of their
positions, which, we understand, may relate to subsequent events. Moreover, the
TMB may hear witnesses on these facts and perform a genuine fact finding and
evidence-building exercise on the continuing situation of the parties concerned with
the safeguard action, in order to settle the dispute. TMB members deliberate on the
basis of all the information presented to decide whether the safeguard action taken by

120
Panel Report, US – Wool Shirts and Blouses, para. 7.19.
 Agreement on Textiles and Clothing 50

the importing Member is justified and whether serious damage or actual threat thereof
to the domestic industry of the importing Member and causation exist.

The second track is the DSU. If, after recourse to Articles 6.10 and 8.10 of the ATC,
the exporting Member is not satisfied with the recommendation of the TMB, such
exporting Member can challenge the safeguard action and bring it to the formal
dispute settlement process under the DSU. Unlike the TMB, a DSU panel is not
called upon, under its terms of reference, to reinvestigate the market situation. When
assessing the WTO compatibility of the decision to impose national trade remedies,
DSU panels do not reinvestigate the market situation but rather limit themselves to
the evidence used by the importing Member in making its determination to impose
the measure. In addition, such DSU panels, contrary to the TMB, do not consider
developments subsequent to the initial determination. In respect of the US
determination at issue in the present case, we consider, therefore, that this Panel is
requested to make an objective assessment as to whether the United States respected
the requirements of Article 6.2 and 6.3 of the ATC at the time of the
determination."121

3. Article 8.1

(a) "The TMB shall consist of a Chairman and 10 members."

94. The composition of the TMB was decided by the General Council on 31 January 1995,122
10 December 1997123 and 20 December 2001.124

(b) TMB members "discharge […] their functions on an ad personam basis"

95. The Working Procedures adopted by the TMB state the following:

"In discharging their functions […], TMB members and alternates undertake not to
solicit, accept or act upon instructions from governments, nor to be influenced by any
other organisations or undue extraneous factors. They shall disclose to the Chairman
any information that they may consider likely to impede their capacity to discharge
their functions on an ad personam basis. Should serious doubts arise during the
deliberations of the TMB regarding the ability of a TMB member to act on an
ad personam basis, they shall be communicated to the Chairman. The Chairman shall
deal with the particular matter as necessary."125

96. The Council for Trade in Goods adopted a Decision on the Ad Personam Status of TMB
Members on 27 January 1997:

"WTO Members which, pursuant to the decision of the General Council of

31 January 1995, appoint TMB members under Article 8.1 of the Agreement on
Textiles and Clothing accept that TMB members discharge their function on an
ad personam basis and not as government representatives. Consequently, they shall

121
Panel Report, US – Wool Shirts and Blouses, paras. 7.19-7.21. The Appellate Body characterized
the statement that "the TMB is not limited to the initial information submitted" as "purely a descriptive and
gratuitous comment providing background concerning the Panel's understanding of how the TMB functions"
and "not a legal finding." Appellate Body Report, US - Wool Shirts and Blouses, p. 17.
122
WT/GC/M/1, section 5; text of adopted decision, WT/L/26 and Add.1.
123
WT/L/253.
124
WT/L/443.
125
G/TMB/R/1, para. 1.4 of the Annex.
 WTO ANALYTICAL INDEX 51

not give TMB members instructions, nor seek to influence them, with regard to
matters before the TMB. The same applies to alternates."126

4. Article 8.2

(a) "The TMB shall develop its own working procedures"

97. At its first meeting, in March to July 1995, the TMB adopted its working procedures.127

98. At its meeting in December 1996, in relation to working procedures, the TMB took note of
the decision of the DSB on 3 December 1996 to adopt rules of conduct for the DSU128, "in view of the
fact that such Rules apply, inter alia, to the Chairman of the TMB and other members of the TMB
secretariat called upon to assist the TMB in formulating recommendations, findings or observations
pursuant to the ATC, as well as, to the extent prescribed in the relevant Section of the Rules, to
members of the TMB."129

(b) "consensus within the TMB"

99. The 1995 General Council decision on the composition of the TMB provides that "[t]he
Textiles Monitoring Body will take all decisions by consensus" and states: "As provided for in
Article 8.2 of the Agreement on Textiles and Clothing, in case of an unresolved issue under review by
the TMB, it is understood that consensus within the TMB does not require the assent or concurrence
of members appointed by members involved in such unresolved issue."130

100. The Working Procedures adopted by the TMB stated:

"Consensus within the TMB does not require the assent or concurrence of TMB
members appointed by WTO Members involved in an unresolved issue under review
by the TMB.131 However, at least seven TMB members shall be present when
deciding on such unresolved issues, except in cases where one or two TMB members
have been appointed by WTO Members involved in an unresolved issue, where eight
TMB members shall be present. For the purpose of this paragraph the term 'TMB
members' covers the respective alternates in case a TMB member is absent."132

5. Article 8.3

(a) Standard of review

101. The Panel in US – Underwear examined the standard of review to be applied in cases
involving the Agreement on Textiles and Clothing and noted that Article 11 of the DSU is the relevant
provision. The Panel held that "the task of the Panel is to examine the consistency of the US action
with the international obligations of the United States, and not the consistency of the US action with
the US domestic statute implementing the international obligations of the United States." The Panel
went on to state:

"[A] policy of total deference to the findings of the national authorities could not
ensure an 'objective assessment' as foreseen by Article 11 of the DSU.

126
G/L/141.
127
G/TMB/R/1, para. 5. The text of the adopted working procedures is found in Annex to G/TMB/R/1.
128
WT/DSB/RC/1.
129
G/TMB/R/22, para. 17.
130
WT/L/26.
132
G/TMB/R/1, para. 7.2.
 Agreement on Textiles and Clothing 52

[T]he Panel's function should be to assess objectively the review conducted by the
national investigating authority, in this case the CITA. We draw particular attention
to the fact that a series of panel reports in the anti-dumping and
subsidies/countervailing duties context have made it clear that it is not the role of
panels to engage in a de novo review. In our view, the same is true for panels
operating in the context of the ATC, since they would be called upon, as in the
context of cases dealing with anti-dumping and/or subsidies/countervailing duties, to
review the consistency of a determination by a national investigating authority
imposing a restriction under the relevant provisions of the relevant WTO legal
instruments, in this case the ATC. In our view, the task of the Panel is to examine the
consistency of the US action with the international obligations of the United States,
and not the consistency of the US action with the US domestic statute implementing
the international obligations of the United States. Consequently, the ATC constitutes,
in our view, the relevant legal framework in this matter.

We have therefore decided, in accordance with Article 11 of the DSU, to make an

objective assessment of the Statement issued by the US authorities on 23 March 1995
(the 'March Statement) which, as the parties to the dispute agreed, constitutes the
scope of the matter properly before the Panel without, however, engaging in a
de novo review. In our view, an objective assessment would entail an examination of
whether the CITA had examined all relevant facts before it (including facts which
might detract from an affirmative determination in accordance with the second
sentence of Article 6.2 of the ATC), whether adequate explanation had been provided
of how the facts as a whole supported the determination made, and, consequently,
whether the determination made was consistent with the international obligations of
the United States."133

102. In US – Wool Shirts and Blouses, the Panel examined whether a transitional safeguard
measure imposed by the United States was consistent with Article 6 of the Agreement on Textiles and
Clothing. India, the complainant, claimed that the Panel should examine whether the United States
had acted reasonably, while the United States argued that it should be "entitled to the benefit of
reasonable doubt", as it had been so entitled in a certain GATT case. The Panel responded as follows:

"[A]lthough the DSU does not contain any specific reference to standards of review,
we consider that Article 11 of the DSU … is relevant here[.]

Pursuant to Article 11 of the DSU, we must determine what is 'the matter before [the
Panel]'. This Panel was established pursuant to Article 8.10 of the ATC and Article 6
of the DSU.

The only restraint discussed under Article 6 of the ATC is the proposed restraint by
the importing Member. Therefore, pursuant to Article 11 of the DSU, the function of
this Panel, established pursuant to Article 8.10 of the ATC and Article 6 of the DSU,
is limited to making an objective assessment of the facts surrounding the application
of the specific restraint by the United States (and contested by India) and of the
conformity of such restraint with the relevant WTO agreements."134

103. In US – Cotton Yarn, the Appellate Body considered a panel's standard of review under
Article 11 in a dispute under the Agreement on Textiles and Clothing. The Appellate Body

133
Panel Report, US – Underwear, paras. 7.10 and 7.12-7.13.
134
Panel Report, US – Wool Shirts and Blouses, paras. 7.16-7.17.
 WTO ANALYTICAL INDEX 53

considered that the Panel had exceeded its mandate under Article 11 of the DSU by considering
certain evidence that could not possibly have been examined by the United States when it made the
determination. In this regard, the Appellate Body considered:

"Unlike Article 3 of the Agreement on Safeguards, which provides explicitly for an

investigation by competent authorities of a Member, Article 6 of the ATC does not
specify either the organ or the procedure through which a Member makes its
'determination'. Nevertheless, the … principles concerning the standard of review
under Article 11 of the DSU with respect to the Agreement on Safeguards apply
equally, in our view, to a panel's review of a Member's determination under Article 6
of the ATC. We note that Article 6 does not require the participation of all interested
parties in the process leading to the determination. We consider, therefore, that the
exercise of due diligence by a Member is all the more important in reaching a
determination under Article 6 of the ATC.

In our view, a panel reviewing the due diligence exercised by a Member in making
its determination under Article 6 of the ATC has to put itself in the place of that
Member at the time it makes its determination. Consequently, a panel must not
consider evidence which did not exist at that point in time. A Member cannot, of
course, be faulted for not having taken into account what it could not have known
when making its determination. If a panel were to examine such evidence, the panel
would, in effect, be conducting a de novo review and it would be doing so without
having had the benefit of the views of the interested parties. The panel would be
assessing the due diligence of a Member in reaching its conclusions and making its
projections with the benefit of hindsight and would, in effect, be reinvestigating the
market situation and substituting its own judgement for that of the Member. In our
view, this would be inconsistent with the standard of a panel's review under
Article 11 of the DSU."135

6. Article 8.9

104. The Panel in US – Wool Shirts and Blouses addressed the issue of the legal force of the
TMB's recommendations and found that the recommendations of the TMB are not binding:

"Concerning India's claim that the US restraint is invalid because the TMB did not
endorse the measure which the United States attempted to justify in the Market
Statement and on which consultations were held, we note that under Article 6.10 of
the ATC, the United States, should it be entitled to impose a restraint, could do so
without TMB authorization, although it would be required to refer the matter to the
TMB for appropriate recommendations. Article 8.9 of the ATC confirms that the
recommendations of the TMB are not binding:

'The Members shall endeavour to accept in full the recommendations

of the TMB, which shall exercise proper surveillance of the
implementation of such recommendations.' (emphasis added)

We, therefore, reject India's claim that under the ATC a safeguard action can be
maintained only if adequately endorsed by the TMB."136

135
Appellate Body Report, US – Cotton Yarn, paras. 76 and 78.
136
Panel Report, US – Wool Shirts and Blouses, para. 7.57.
 Agreement on Textiles and Clothing 54

7. Article 8.10

105. Regarding the deadline for making notifications pursuant to Article 8.10, in November 2001,
the TMB stated:

"[T]he TMB took the view that the one-month period started on the date when the
report containing the TMB's examination, together with the conclusions reached and
recommendations adopted, had been officially communicated to the Member
concerned. In this particular case, this had been done …when the TMB's report on
the examination of the safeguard measure had been circulated to all
WTO Members137 and the Chairman of the TMB had provided a separate official
communication to [the Member taking the safeguard] in this regard."138

8. Article 8.11

(a) "a major review before the end of each stage of the integration process"

106. The Council for Trade in Goods conducted major reviews of the first stage139, second stage140
and third stage141 of the integration process. These reviews were based on three comprehensive reports
prepared by the TMB on the implementation of the ATC during the three stages of the
implementation process.142 In its third comprehensive report143, the TMB observed:

"[I]n the respective official notifications repeated assurances have been recently
provided regarding the timely and full implementation of the ATC. The Agreement
will be fully implemented as scheduled and provided for in Article 9. Thus the ATC
and all restrictions thereunder shall stand terminated on 1 January 2005, on which
date the textiles and clothing sector shall be fully integrated into GATT 1994, thereby
putting an end to a special and discriminatory regime that has been in application for
more than four decades."144

XII. ARTICLE 9

A. TEXT OF ARTICLE 9

Article 9

This Agreement and all restrictions thereunder shall stand terminated on the first day of the
121st month that the WTO Agreement is in effect, on which date the textiles and clothing sector shall
be fully integrated into GATT 1994. There shall be no extension of this Agreement.

137
(footnote original) See G/TMB/25.
138
G/TMB/R/83, para. 25.
139
Outcome of review: G/L/224, adopted 16 February 1998. Minutes of discussions: G/C/M/23,
G/C/M/26-30.
140
Outcome of review: G/L/556, adopted on 23 July 2002. Minutes of discussions: G/C/M/51,
G/C/M/59-62, G/C/M/64.
141
Outcome of review: G/L/725, dated 10 December 2004. Minutes of discussions: G/C/M/75/Add.1,
G/C/M/76, G/C/M/78 and Add.1
142
G/L/179 and Corr.1 (31 July and 16 October 1997), G/L/459 (31 July 2001), G/L/683 (30 July
2004) with G/L/692 (20 September 2004).
143
See G/L/683, paras. 663-666.
144
G/L/683, para. 664.
 WTO ANALYTICAL INDEX 55

B. INTERPRETATION AND APPLICATION OF ARTICLE 9

107. This Agreement was terminated as scheduled on 1 January 2005, together with all the
remaining restrictions maintained thereunder.

XIII. ANNEX

A. TEXT OF ANNEX

ANNEX

LIST OF PRODUCTS COVERED BY THIS AGREEMENT

1. This Annex lists textile and clothing products defined by Harmonized Commodity Description
and Coding System (HS) codes at the six-digit level.

2. Actions under the safeguard provisions in Article 6 will be taken with respect to particular
textile and clothing products and not on the basis of the HS lines per se.

3. Actions under the safeguard provisions in Article 6 of this Agreement shall not apply to:

(a) developing country Members' exports of handloom fabrics of the cottage industry, or hand-
made cottage industry products made of such handloom fabrics, or traditional folklore
handicraft textile and clothing products, provided that such products are properly certified
under arrangements established between the Members concerned;

(b) historically traded textile products which were internationally traded in commercially
significant quantities prior to 1982, such as bags, sacks, carpetbacking, cordage, luggage,
mats, mattings and carpets typically made from fibres such as jute, coir, sisal, abaca, maguey
and henequen;

(c) products made of pure silk.

For such products, the provisions of Article XIX of GATT 1994, as interpreted by the Agreement on
Safeguards, shall be applicable.

[The list of products is omitted here. The items are generally at the six-digit level, with a few particular products
listed as sub-positions ("ex-positions").]

B. INTERPRETATION AND APPLICATION OF THE ANNEX

No jurisprudence or decision of a competent WTO body.

______