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WORLD TRADE
ORGANIZATION

WT/DS33/R
6 January 1997
(97-0001)
Original: English

UNITED STATES - MEASURE
AFFECTING IMPORTS OF WOVEN WOOL
SHIRTS AND BLOUSES FROM INDIA

Report of the Panel


The report of the Panel on United States ­ Measure Affecting Imports of Woven Wool Shirts and Blouses from India is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 6 January 1997 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report, an appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel, and that there shall be no ex parte communications with the panel or Appellate Body concerning matters under consideration by the panel or Appellate Body.


TABLE OF CONTENTS
    I. INTRODUCTION
    II. CHRONOLOGY OF EVENTS
    • United States Requests Consultations Under the MFA in December 1994
    • United States Requests Consultations Under the ATC in April 1995
    • United States Imposes Restraints on Imports from India in July 1995
    • Review by the Textiles Monitoring Body
    • India Requests Review of TMB Finding in October 1995
    • India Requests the Establishment of a Panel in March 1996
    III. CLAIMS OF THE PARTIES
    • The Request of India
    • The Request of the United States
    • Comments on the Request to the Panel
    IV. THIRD PARTY SUBMISSIONS
    • Submission of Canada
    • Submission of the European Communities
    • Submission of Norway
    • Submission of Pakistan
    V. MAIN ARGUMENTS OF THE PARTIES
      A. Introduction
      B. Burden of Proof
      C. Standard of Review
        The Fur Felt Hat Case
      D. Article 6 of the ATC
      • The ATC Safeguard Mechanism
      • Legal Analyses of Serious Damage or Actual Threat Thereof Suggested by the Parties . . . . 
      • Status of the Market Statement
      • Sources of the Data Provided by the United States 22
      E. Demonstration of Serious Damage by the United States
      • India's Review of the Economic Variables
      • United States Review of the Economic Variables
      • The Industry and the Products
          (i) The Nature of the Wool Sector in the United States
          (ii) What Constitutes the Domestic Market
          (iii) Products Manufactured Domestically
      • Data on Domestic Production
      • Data on Exports
      • Data on Employment, Man-hours and Wages
      • Information on Prices
      • Information on Investment and Capacity
      F. Causal Link Between Increased Imports and the Domestic Industry Situation
      G. Attribution to India
        TMB Review of the United States Action
      H. Status of Other Relevant Information
      • Employment in "Other Relevant Information"
      • Establishments in "Other Relevant Information"
      I. Consultations and Endorsement of Actions by TMB: Additional Procedural Requirements
      J. Date of the Safeguard Action
      • Article XIII:3(b) of GATT 1994
      • Speculative Rise in Imports
      • Unusual and Critical Circumstances
      K. Article 2 of the ATC
    VI. INTERIM REVIEW
    VII. FINDINGS
      A. Introduction
      B. Claims of the Parties
      C. General Interpretative Issues
        1. Burden of Proof
        2. Standard of Review
        3. The Role of the TMB Process Versus the Role of the Dispute Settlement Mechanism of the DSU
      D. Review of the US Determination
        1. Article 6 of the ATC
        2. India's Claim Regarding the Substantive Requirements in Article 6 of the ATC
        3. Overall Assessment of the US Determination
        4. Serious Damage or Actual Threat Thereof
        5. The Obligation to Consult and the Alleged Need for TMB Endorsement 76
      E. Alleged Retroactive Application of the Safeguard
      F. India's Claim that Article 2 of the ATC was Violated
    VIII. CONCLUSIONS


I INTRODUCTION

1.1 In a communication dated 14 March 1996, India requested that a panel be established at the next meeting of the Dispute Settlement Body (DSB) pursuant to Article XXIII:2 of GATT 1994, Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and Article 8.10 and other relevant provisions of the Agreement on Textiles and Clothing (ATC) (WT/DS33/1). This arose from a restraint introduced by the United States in respect of India's exports of woven wool shirts and blouses (US category 440), under Article 6 of the ATC.

1.2 India noted that the matter had remained unresolved in spite of bilateral consultations between India and the United States held under Article 6.7 of the ATC in April and June 1995; the examination of the matter by the Textiles Monitoring Body (TMB) under Article 6.10 of the ATC in August and September 1995; the communication sent to the TMB under Article 8.10 of the ATC, within one month of the TMB recommendation under Article 6.10 of the ATC, explaining the reasons for India's inability to conform to the TMB recommendations; and the review of the matter by the TMB under Article 8.10 of the ATC in November 1995. Consequently, India considered that it had met all requirements in Article 8.10 of the ATC for direct recourse to Article XXIII:2 of GATT 1994. At its meeting held on 17 April 1996, the DSB established a panel pursuant to the request of India, with standard terms of reference, in accordance with Article 6 of the DSU (WT/DSB/M/14).

1.3 On 27 June 1996, the DSB informed Members that the terms of reference and the composition of the panel (WT/DS33/2) were as follows:

    Terms of Reference

    "To examine, in the light of the relevant provisions of the covered agreements cited by India in document WT/DS/33/1, the matter referred to the DSB by India in that document and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."

Composition

Chairman: Mr. Jacques Bourgeois
Panelists: Mr. Robert Arnott
Mr. Wilhelm Meier

Five Members reserved their rights to participate in the Panel proceedings as third parties; namely Canada, the European Communities, Norway, Pakistan and Turkey.

1.4 The Panel met with the parties to the dispute on 9 and 10 September and on 4 October 1996.  The Panel submitted its complete findings and conclusions to the parties to the dispute on 12 November 1996.

* * * * *

II CHRONOLOGY OF EVENTS

United States Requests Consultations under the MFA1 in December 1994

2.1 Since the inception of the MFA in 1974, exports of textile and clothing products from India to the United States had been regulated by bilateral textile agreements under Article 4 of the MFA. The last bilateral textile agreement between India and the United States expired on 31 December 1994 and, effective from 1 January 1995, trade in textiles and clothing between the two Members has been governed by the ATC.

2.2 In the last bilateral textiles agreement between India and the United States, India's exports of several cotton and man-made fibre product categories had been subject to specific quota limits (Group I) and those product categories that were not so designated, plus all silk-blended garments and vegetable fibre garments, were subject to a group limit (Group II). Wool products (Group III) were not subject to specific or group limits, but were subject to the consultation mechanism in the bilateral agreement.

2.3 On 30 December 1994, the United States issued a request for consultations with India under paragraphs 19 and 20 of the bilateral agreement for the purpose of establishing restraints on India's exports to the United States of woven wool shirts and blouses (category 440 in Group III).2 The request for consultations, accompanied by a statement entitled "Market Statement, Wool Woven Shirts and Blouses: Category 440", stated that the United States had concluded that the level of imports from India in this category was creating a real risk of disruption in the United States' domestic industry.

2.4 Consultations between India and the United States were held in Geneva on 18 April 1995 pursuant to the request issued in December 1994. India considered that the request for consultations, issued one day before the expiry of the MFA and the bilateral textiles agreement, was no longer valid in April 1995; from 1 January 1995 the framework for international trade in textiles was provided by the ATC and the other WTO agreements.

United States Requests Consultations Under the ATC in April 1995

2.5 On the same day, 18 April 1995, the United States requested new consultations with India on, inter alia, category 440 under the transitional safeguard mechanism in Article 6 of the ATC. The United States withdrew its previous consultation request issued on 30 December 1994 as India considered that the request was no longer valid due to the entry into force of the ATC. The consultation request in the form of a diplomatic note stated that the United States had concluded that the sharp and substantial increase in imports from India in this category "is causing serious damage, or actual threat thereof to the United States industry", and was accompanied by a "Statement of Serious Damage" (hereinafter referred to as the Market Statement) which claimed that a "sharp and substantial increase in imports of woven wool shirts and blouses, Category 440, is causing serious damage to the US industry producing woven wool shirts and blouses. The United States proposed a quota limit for exports of category 440 of 76,698 dozen. The request for consultations was officially published in the US Federal Register on 23 May 1995 (60 Fed. Reg. 27274).

2.6 Further discussions were held between the two delegations in Geneva on 19 April 1995 at the request of the United States. However, as the request for consultations had been issued only on the previous day, India had not had time to complete its review of the Market Statement and, therefore, considered these consultations to be preliminary. In the course of these consultations, India sought clarification from the United States on a number of technical points raised by the Market Statement. Further consultations were held in Washington on 14-16 June 1995 which did not result in a mutual settlement of the matter.

United States Imposes Restraints on Imports from India in July 1995

2.7 On 14 July 1995, as no mutual settlement was reached within the 60-day consultation period provided in the ATC, India was informed by the United States that a restraint would be applied on imports from India of the products covered by US category 440, effective from 18 April 1995 and extending through 17 April 1996. The level of the restraint was set at 76,698 dozen for the first 12­month period.

Review by the Textiles Monitoring Body

2.8 Pursuant to Article 6.10 of the ATC, the United States notified the TMB of the restraint. The TMB examined the matter at its sessions from 28 August to 1 September and 12-15 September 1995 and heard presentations from the United States and India.3 With respect to category 440, the United States submitted to the TMB a document entitled "Other Relevant Information", containing information on the situation of the United States industry producing woven wool shirts and blouses.

2.9 With respect to category 440, the TMB found:

    "During its review under paragraphs 2 and 3 of Article 6, of the safeguard action taken by the United States against imports of category 440 from India, the TMB found that the actual threat of serious damage had been demonstrated, and that, pursuant to paragraph 4 of Article 6, this actual threat could be attributed to the sharp and substantial increase in imports from India." (G/TMB/R/3)

India Requests Review of TMB Finding in October 1995

2.10 India sent a communication on 16 October 1995 to the TMB informing that Body of its inability to conform with its recommendations and explaining the reasons therefor, as provided in Article 8.10 of the ATC. India requested the TMB to give a thorough consideration to the reasons it had given and to recommend that the United States rescind the restraint on India's exports in category 440.

2.11 The TMB reviewed the matter raised by India at its meeting on 13-17 November 1995, and made the following statement in its report:

    "The TMB reviewed the matter referred to it by India under Article 8.10 in its letter dated 16 October 1995. The TMB heard the presentation made by India and considered the elements put forward. The Body could not make any recommendation in addition to the conclusions it had reached at its meeting on 12-15 September 1995 (G/TMB/R/3, paragraph 26). The TMB therefore considered its review of the matter completed". (G/TMB/R/6)


India Requests the Establishment of a Panel in March 1996

2.12 Since the matter relating to category 440 remained unresolved, India brought the matter before the DSB. India filed a request with the DSB on 14 March 1996 for the establishment of a panel on the restraint, pursuant to Article XXIII:2 of GATT 1994, Article 6 of the DSU and Article 8.10 and other relevant provisions of the ATC. India requested that the panel be established with standard terms of reference as set out in Article 7 of the DSU (WT/DS33/1). At the meeting held on 17 April 1996, the DSB agreed to establish the panel in respect of category 440 with standard terms of reference as requested by India (WT/DS33/2).

2.13 On 18 April 1996, the United States announced the continuation of the restraint on category 440 until 17 April 1997.

2.14 On 24 June 1996, the present Panel was constituted. (WT/DS33/2 dated 27 June 1996.)

* * * * *

III CLAIMS OF THE PARTIES

The Request of India

3.1 In its request for the establishment of a panel (WT/DS33/1), India requested that the Panel consider and find that:

    (i) The restraint introduced by the United States on 14 July 1995 on imports of category 440 (woven wool shirts and blouses) from India effective from 18 April 1995 was inconsistent with Articles 6, 8 and 2 of the ATC.

    (ii) The action of the United States in imposing the restraint on imports of category 440 from India nullified or impaired the benefits accruing to India under the WTO Agreement and under GATT 1994 and the ATC in particular.

    (iii) The Government of the United States should have brought the measure into conformity with the ATC by withdrawing the restraint imposed by it on imports of category 440 from India.

3.2 India also requested a supplementary finding by the Panel that:

    (i) According to the ATC, notably Article 6, the onus of demonstrating serious damage or its actual threat was on the United States, as the importing Member. It had to choose at the beginning of the process whether it would claim the existence of "serious damage" or "actual threat". These were not interchangeable because the data requirement would vary with the chosen situation. It would not be valid to transfer a transitional safeguard to a situation of actual threat when the claim of serious damage had failed to gain acceptance.

    (ii) There was no provision in the ATC under which the United States, as the importing Member, could have imposed a restraint with retrospective effect.

The Request of the United States

3.3 The United States requested the Panel to find that:

    (i) the United States' application and maintenance of a safeguard restraint on woven wool shirts and blouses from India was consistent with Article 6 of the ATC;

    (ii) the restraint was not inconsistent with Article 2 or any other provision of the ATC;  and

    (iii) the measure did not nullify and impair benefits accruing to India under the ATC or GATT 1994.

Comments on the Request to the Panel

3.4 The United States referred to India's request to the Panel which appeared to be seeking a specific remedy in this dispute and expressed the opinion that such a remedy fell outside the scope of the Panel's mandate as provided in the DSU. India had requested that the Panel interpret Article 19.1 of the DSU to require removal of a restraint to bring the action "in conformity" with the relevant agreement. The United States had taken issue with India's assertion that bringing a safeguard action into conformity with the ATC or, allegedly, with GATT 1994, to the extent it was relevant, required withdrawing the restraint. What was clear was that the DSU gave WTO panels explicit instructions with respect to the one and only recommendation that properly may be offered if the measures of a Member were found to be inconsistent with its obligations: to bring the measures into conformity with its obligations. The avoidance of granting specific remedies, such as the withdrawal or modification of a measure, was a well­established practice under GATT 1947 and had been codified in Article 19.1 of the DSU, which provided: "Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement," rather than that the Member "withdraw" the measure.

3.5 India noted the US views in the preceding paragraph with concern and asked the United States which legal options it wished to preserve by presenting them. India stressed that it had not asked the Panel to make a recommendation on the issue of implementation in accordance with Article 19.1, first sentence, of the DSU, but to exercise the discretion that the second sentence of Article 19.1 conferred upon it, namely, that it could, in addition to its recommendations, "suggest ways in which the Member concerned could implement the recommendations". In the view of India, there were no alternatives as to how a safeguard action taken inconsistently with Article 6 of the ATC could be brought into conformity and the United States had not been able to indicate any such alternatives. The rationale of the second sentence of Article 19.1 of the DSU was procedural economy; it was designed to reduce the likelihood of a second proceeding about the implementation of the results of the first. It would thus be perfectly consistent not only with the wording but also the spirit of that provision if the Panel were to find that there were no alternatives to withdrawal in the present case and to suggest, therefore, that the United States implement the Panel's recommendation by withdrawing the measure.

* * * * *

IV THIRD PARTY SUBMISSIONS

4.1 At the first substantive meeting of the Panel on 10 September 1996, four Members (Canada, EC, Norway and Pakistan) which had indicated their interests in this matter as third parties at the DSU meeting on 17 April 1996 (DS33/2, paragraph 4) made submissions. Turkey had also indicated its third party interests and attended the Panel meeting but did not provide a submission.

Submission of Canada

4.2 Canada pointed out that it had a substantial interest in several issues relating to the interpretation of the ATC raised by the parties to the dispute; namely, (i) the question of the ability of a Member to maintain a restraint in the absence of an "endorsement" by the TMB; (ii) the appropriate effective date for the application of a restraint measure; (iii) the type of information a Member had to submit to the TMB to justify a request for consultations and the treatment given to additional information provided to the TMB; and (iv) whether the Member making the request had to specify from the outset the basis for the request.

4.3 Canada noted that India had requested, inter alia, a supplementary finding by the Panel that because the TMB had not specifically upheld the safeguard action taken by the United States, this implied that the TMB had not found the safeguard action to be justified and, therefore, the United States had a legal obligation to withdraw the restraint. It was Canada's view that such an interpretation was too narrow and would unduly circumscribe the ability of Members to take safeguard actions as provided for in the ATC. While the TMB had a significant role to play in the review of the safeguard actions, there was no requirement in the ATC that the TMB had to "endorse" a safeguard action in order for it to be maintained. On the contrary, during the Uruguay Round negotiations leading to the ATC, several participants had made proposals to require a positive decision of the multilateral reviewing body (now the TMB) in order for a restraint measure to remain in place. Canada noted that none of these proposals had been incorporated into the ATC which reflected an implicit rejection of the approach now advocated by India.

4.4 In the view of Canada, if the TMB was required to specifically approve every safeguard action taken, it would rarely be possible for any Member to avail itself of the ATC safeguard clause because a single TMB member could block a consensus. Such a result would clearly be at odds with the intention of the ATC, which explicitly provided to the Members the authority to make the determination of whether a safeguard action was required.

4.5 Canada recalled that India had submitted that the United States was incorrect in imposing the restraint measure from the date of the request for consultations with India under Article 6 of the ATC. In this regard Canada noted that the ATC was silent with respect to the appropriate effective date of implementation of a safeguard action. In the absence of any specific prohibition, it was open to an importing Member to apply the safeguard action from the date of the request. It was more appropriate to implement the restraint as close as possible to the date of the request so as to avoid the possibility of having the domestic market flooded with imports after the request, but before the consultations were completed. A further element was that the calculation of the restraint level, pursuant to Article 6.8 of the ATC, was based on the MFA formula of the first 12 of the last 14 months preceding the month in which the request for consultations was made. The rationale for this calculation was to avoid including in the base level what was usually the most severe part of the import surge that had led to the request for consultations. The calculation of this formula supported the argument that it was more appropriate to implement any restraint as close as possible to the date of the request for consultations.

4.6 Canada also referred to India's submission that the review by the TMB should have been conducted only on the basis of the information provided to India at the time of the consultation request, rather than on supplementary information provided by the United States to the TMB at the time of its review. In this regard, Article 6.10 of the ATC stated that in examining a safeguard action, the TMB shall have at its disposal the factual data accompanying a request for consultations as provided to the Chairman of the TMB at the time of the request, pursuant to Article 6.7 of the ATC, "as well as any other relevant information provided by the Members concerned". The plain meaning of Article 6.10 of the ATC was that the TMB, in conducting its examination, may consider not only the information that was provided to it pursuant to Article 6.7 of the ATC, but also any additional submissions of a Member concerned. As a practical matter, this allowed the TMB to consider the most up-to-date data in its examination of the safeguard action, including data that were not available at the time of the request for consultations.

4.7 With reference to India's view that the onus of demonstrating serious damage or actual threat was on the importing Member which must choose at the outset whether it would claim the existence of "serious damage" or of "actual threat thereof" and that these two categories were not interchangeable because each category required different supporting data, Canada noted that no distinction was made between the definition of "serious damage" or "actual threat thereof" in Article 6 of the ATC, nor in the list of factors to be considered by a Member in making a determination under Article 6.2 of the ATC. Accordingly, the practice under the ATC had been for the Member taking such safeguard action to allege "serious damage or actual threat thereof" as a whole and to permit the TMB in its review under Article 6.10 of the ATC to determine whether either element, or both elements of the standard had been satisfied. Canada considered that, when reviewing an allegation of "serious damage or actual threat thereof" the TMB must base its recommendations on the evidence before it. It may find that the evidence supports a determination of "serious damage" alone, of "actual threat" alone, of both, or of neither. However, it did not follow that an importing Member should be required to choose which component of the standard to allege at the commencement of the Article 6 process. To impose such a requirement on an importing Member would unreasonably restrict the scope of its case, and would infringe upon the discretion of the TMB to conduct its examination and base its recommendations on all the evidence before it.

4.8 In a subsequent submission, India disagreed with the point in the first sentence of paragraph 4.3, recalling that, under the MFA, the exporting country had the right to refuse to accept a discriminatory restraint while under the ATC, the exporting Members had lost that right. The counterpart to that loss was the requirement of a TMB examination and recommendation. The recourse available to importing Members under the ATC was, therefore, not significantly different from the recourse available to them under the MFA: the consent of the exporting country was required under the MFA while under the ATC, it was a TMB examination and recommendation that was required.

4.9 On the above point, the United States disagreed with India's assertion as the MFA required TSB examination of unilateral restraints and that the TSB make recommendations, just as required of the TMB.

Submission of the European Communities

4.10 The European Communities expressed the opinion that a restraint could be justified for either a case of imports having caused serious damage or for a case of imports actually threatening to cause serious damage pursuant to Article 6.2 of the ATC. Nowhere in the ATC was there any obligation on the importing Member to choose at the beginning of the process whether it would claim "serious damage" or "actual threat". This was because any such obligation would create consequences which were clearly not intended by the ATC negotiators, namely: (i) that an importing Member claiming "serious damage" might be persuaded by the exporting Member during their consultations that the situation was really one of "actual threat" but that no restraint could be established simply because the importing Member had initially claimed only "serious damage"; (ii) that importing Members would, therefore, have simultaneously to request two parallel sets of consultations, the first to discuss a restraint based on "serious damage" and the second to discuss one based on "actual threat". Clearly such situations did not follow from the actual wording of the ATC and neither were they intended by the negotiators. At another level, if the consultations resulted in agreement under Article 6.9 of the ATC then presumable the two parties were satisfied on this point. On the other hand, if the consultations did not reach agreement then it would be up to the TMB to "promptly conduct an examination of the matter, including the determination of serious damage, or actual threat thereof pursuant to Article 6.10 of the ATC". In this case it would be the TMB's determination which would matter and the option "chosen" by the importing Member would be irrelevant.

4.11 The European Communities considered the question of the standard of review to be of great importance. The EC reminded the Panel that one of the most thorough discussions of the problems relating to the standard of review in cases involving the legal appreciation of facts in the light of evidentiary requirements laid down in the Tokyo Round Subsidies Code4, took place before the panel on the US countervailing duties imposed on lead and bismuth steel originating in France, the UK and Germany. Although that panel report was never adopted, it contained valuable insights into the difference between the issues to which the normal rules of treaty interpretation were to be applied and the issues involving legal appreciation of the facts in the light of evidentiary requirements laid down in the relevant agreement (paragraphs 368 and 369).

4.12 The European Communities also considered it important for the Panel to take account of the fact that the test of reasonableness proposed by the US, even though it was taken from the Fur Felt Hat case carried for the US connotations of extreme deference to the judgement of the national government. It should be noted that the panel in Lead and Bismuth Steel said that:

    "... the criteria for a review by a panel of factual assessments by domestic investigating authorities of signatories against the requirements of the agreement could not be based on a simple transposition of standards applied in domestic administrative law of signatories."

The European Communities attached great importance to an approach in these issues in the spirit of the panel report on Lead and Bismuth Steel. It should be clear that in the case of factual assessments by national investigating authorities of Members in the light of the requirements of the agreement (as interpreted in accordance with the customary rules of interpretation of international law), a margin of discretion should be left to these authorities, but the Panel could not borrow from one particular legal system in circumscribing this margin of discretion. In this case the Panel must be inspired by the administrative law systems of the Members.

Submission of Norway

4.13 Norway stated that its concern in this case was primarily of a systemic nature and noted that the Panel was considering a dispute which twice, and with consensus recommendations, had been dealt with by the TMB. It was concerned that the effect of the case might not only be the positive resolution of a dispute, but the undermining of future TMB recommendations and thus the TMB's efficiency. The result of this efficiency so far had been that quotas had been dismantled considerably faster than what would have been possible by way of panels. Norway questioned India's asking the panel to address the issues of "TMB endorsement" and of "serious damage" as opposed to "actual threat of serious damage". On the question of retroactive implementation, it accepted India's request for clarification.

4.14 It was the view of Norway that both the TMB and India were wrong in claiming, with respect to the introduction of a safeguard action, that the ATC did not provide any indication with respect to the effective date of implementation of a measure, although India was right in saying that there was no "explicit authorization in the ATC's transitional safeguard clause to impose the additional burden of retroactive application". Norway was of the opinion that there were sufficient indications to be found and that it was unnecessary as well as unjustifiable to resort to Article XIII:3(b) of GATT 1994. Article 6.10 of the ATC suggested that the term "apply" was distinct from the term "implement". Saying that a Member "... may apply the restraint by date of import or date of export ..." could not be read to mean the same as if the sentence had substituted the word "implement" for "apply". The term "apply" was concerned more with the manner of implementation than with its effective timing. It was perfectly reasonable to require that a measure be applied only after certain procedures had been completed and then to allow discretion to implement the same measure in such a way as to give it effect from a different date. This was also indirectly supported by the fact that a measure may be applied "within 30 days following the 60­day period for consultations". In the view of Norway it was, therefore, legitimate to question whether one was, in fact, dealing with a case of retroactive implementation. Another argument, if one were indeed dealing with a retroactive measure, was the fact that there was provision for it in the predecessor agreement, suggesting that an explicit provision to the contrary would have been included in the ATC if negotiators were concerned with making a clean break with the past in this respect.

4.15 Norway also pointed out that Article 6.10 of the ATC should be read in conjunction with Article 6.11. If one were to accept India's arguments, it would in all likelihood undermine the valuable consultation procedure in Article 6.10 of the ATC and encourage importers to introduce quotas without prior consultation, under Article 6.11 of the ATC. Norway also agreed with the US argument that India's position would encourage an exporter to flood the importing market with imports after the request and before consultations were completed. Norway supported India to the extent that the matter needed clarification; however, it disagreed with India's interpretation of the ATC on several points and respectfully asked the Panel to give favourable consideration to the interpretations and arguments it put forward.

Submission of Pakistan

4.16 Pakistan pointed out that the ATC represented a balance of rights and obligations between the exporting Members and the importing Members. The ATC was an improvement over the MFA and even during the transitional period the progress made in the negotiation of the ATC could not be nullified. Pakistan urged the Panel to consider the systemic implications of the present case from this perspective and to reach a decision which did not in any way retard the progress already made or impair the benefits accruing to the exporting Members. Pakistan considered that the Panel should look into the element of good faith on the part of authorities initiating a safeguard action, including (a) whether the authorities had based their decision on all available data; (b) whether the analysis of available data was in accordance with normal and generally recognized principles and procedures; (c) whether there was an element of arbitrariness; and (d) whether any action was taken on unsubstantiated presumptions. In examining the different stages of the case it would be important to examine whether the authorities had adopted a consistent position throughout the different stages or whether they had changed their position or introduced new elements at different stages of the process. Good faith could not and should not co­exist with ex­post justifications.

4.17 Pakistan considered that the Panel was required to pronounce on the distinction between "serious damage" and "actual threat of serious damage". While Article 6.2 and 6.3 of the ATC listed the same economic variables to be considered in both cases, it was also true that different analysis and information in respect of the same economic variables would be required to prove either serious damage or actual threat of serious damage, as the case may be. In a case of serious damage, the analysis should clearly demonstrate the damage that had already occurred, while in case of a claim for actual threat of serious damage, the analysis should include the reasons which may lead to serious damage. The Panel should also determine what effect the introduction of new information by parties could have on the legality of the whole proceeding. An important step in the ATC was the consultations, which must be based on the "specific and relevant" information provided by the importing Member to the exporting Member under Article 6.7 of the ATC. Any new information supplied at the TMB's review of the safeguard action would put the exporting Member at a great disadvantage. According to Article 6.10 of the ATC, the TMB may have "any other relevant information provided by the Member concerned", but this could not be interpreted to mean new information. Whenever any new information was introduced, the legal process should start afresh. New information introduced at the time of the TMB's review could be: (i) information pertaining to the period after the request for consultations was issued and should not be relevant to the case in question; (ii) information available earlier but not used, which demonstrated a lack of serious effort which would not support the contention of good faith; or (iii) information pertaining to the period before the request for consultations was issued but not available at the time of the request. This would also be an ex­post justification and would put the exporting Member at a disadvantage which could be rectified only by issuing a fresh request for consultations.

* * * * *

TO CONTINUE WITH USA - MEASURE AFFECTING IMPORTS OF WOVEN WOOL SHIRTS AND BLOUSES FROM INDIA


1 Arrangement Regarding International Trade in Textiles (the "Multifibre Arrangement" or "MFA").

2 The action by the United States also covered two other product categories, wool coats etc. for men and boys (category 434 of Group III) and wool coats etc. for women and girls (category 435 of Group III) which are not part of this matter.

3 Restraints were also applied on categories 434 and 435, and at its session on 28 August to 1 September 1995, the TMB examined all three actions. For category 434, the TMB found that "serious damage, or actual threat thereof, had not been demonstrated and recommended that the United States rescind the measure". The United States rescinded the measure. For category 435, the TMB found that serious damage had not been demonstrated, but could not reach consensus on the existence of actual threat of serious damage. The TMB again reviewed the matter relating to category 435 which had been referred to it by India under Article 8.6 of the ATC during its meeting on 13-17 November 1995. However, the Body could not make any recommendations in addition to the conclusions it had reached during its earlier meeting. Since the matter relating to category 435 remained unresolved by the TMB, India brought the matter before the Dispute Settlement Body (DSB). On 23 April 1996, India was informed that the United States had removed the restraints on category 435 through a notification in the Federal Register on 23 April 1996. In the light of this, India terminated further action under the DSU without prejudice to its stand on the inconsistency of the US measure or on the various factual and legal issues outlined by India in its request for establishment of a panel.

4 Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade.