Attribution of Serious Damage to Costa Rica

7.47 We now turn to the issue of whether the March Statement adequately attributed serious damage to Costa Rica. Article 6.4 of the ATC requires the attribution of serious damage, or actual threat thereof, to a Member or Members before their imports may be restricted. This also raises an issue of causality since attribution results in a direct linkage being drawn between exports from a particular Member or Members and serious damage to the domestic industry of the importing Member. The question facing the CITA in the present case was whether Costa Rican exports contributed to serious damage in the US domestic industry. Since the US authorities have attributed serious damage in the present case to imports from Costa Rica, all of the deficiencies with respect to the analysis of serious damage and causality that are detailed in the preceding sections are relevant to the analysis under Article 6.4 of the ATC.

7.48 With respect to serious damage attributed to imports from Costa Rica, the March Statement reads as follows:

"The sharp and substantial increase of low priced imports from Costa Rica is causing serious damage to the US domestic industry producing cotton and man-made fibre underwear.


"US imports of cotton and man-made fibre underwear, Category 352/652, from Costa Rica reached 14,423,178 dozen in 1994, 22 per cent above the 11,844,331 dozen imported in 1993 and 61 per cent above its 1992 level.


"US imports of cotton and man-made fibre underwear, from Costa Rica in Category 352/652, entered the US at an average landed duty-paid value of $9.39 per dozen, 69 per cent below U.S. producers' average price for cotton and man-made fibre underwear.


"Costa Rica is the number two supplier of Category 352/652 imports with 15 per cent of total US imports of Category 352/652 in 1994. Category 352/652 imports from Costa Rica were equivalent to 8.8 per cent of US production of Category 352/652 in the year ending September 1994."

7.49 Article 6.4 of the ATC requires that the attribution of serious damage to individual Members be made on the basis of "a sharp and substantial increase in imports" and on the basis of "the level of imports compared with imports from other sources, market share and import and domestic prices ... ". While there has been a significant increase in imports of underwear from Costa Rica, we would note in overview that the position of Costa Rica in respect of each of these factors is not significantly different from that of the other five exporting Members considered in the March Statement and that the March Statement undertakes no comparative assessment of imports from Costa Rica and those five exporting Members.

7.50 In our analysis of whether the US authorities appropriately attributed serious damage to Costa Rican imports, we pay particular attention to the fact that imports into the United States from Costa Rica had reached 14,423,178 dozen in 1994, an increase of 22 per cent during the period of investigation. However, we also note the following facts: The restraint was imposed on Costa Rica on 23 June 1995; Bilateral agreements were concluded with Colombia on 27 June 1995, with the Dominican Republic on 25 June 1995 and with El Salvador on 6 July 1995; Later, agreements were concluded with Honduras on 15 September 1995 and with Turkey on 19 July 1995. The United States imposed the restraint on underwear imports from Costa Rica while, during the period that immediately ensued, it reached agreement with five other exporters on quotas of 170,305,774 dozen, an increase of 478 per cent compared to the actual exports from these countries during the period of investigation.

7.51 Thus, taking into account the US agreements with its other suppliers and the statement by the United States that goods imported under 807A are not regarded as less damaging than non-GAL 807 and other imports (paragraph 5.159), we cannot reconcile the US restriction on imports from Costa Rica with the requirements of attribution under Article 6.4 of the ATC. More specifically, in light of the purpose of Article 6, we find that the United States cannot enter into agreements permitting imports of 170,305,774 dozen units of a product (an increase of 478 per cent over then current import levels) and at the same time claim that imports of 14,423,178 dozen units (an increase of 22 per cent over then current import levels) are contributing to serious damage. In this regard, we recall the TMB's consensus conclusion that the United States had not demonstrated that imports were causing serious damage to the US underwear industry. 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 6.4 of the ATC by imposing a restriction on imports of Costa Rican underwear without making an adequate attribution of serious damage to such imports.²⁴

7.52 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.

D. ACTUAL THREAT OF SERIOUS DAMAGE

7.53 We next turn to a question related to the scope of Costa Rica's basic claim: Whether the March Statement contained a finding on actual threat of serious damage.

7.54 The United States argued before the Panel that the March Statement supports a finding on actual threat. We note that the March Statement contains no reference to actual threat; the findings included related exclusively to serious damage. We recall, however, that the parties to the dispute agreed that the Diplomatic Note that was handed to Costa Rica along with the March Statement made reference to actual threat of serious damage.

7.55 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.²⁵ The March Statement contains no elements of such a prospective analysis.²⁶ 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.

E. OTHER CLAIMS

Article 6.6(d) of the ATC

7.56 Costa Rica claims that the United States violated Article 6.6(d) of the ATC by not granting a more favourable treatment to Costa Rican imports under "807 trade". Article 6.6(d) of the ATC reads as follows:

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


(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".

7.57 The United States accepted before the Panel that "807 trade" should be considered a re-import according to US laws. In our view, the legal issue before us is the interpretation of the term "more favourable treatment". 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.

7.58 Costa Rica specifically argues in this respect that the United States was obliged to grant to Costa Rican imports a quantitatively more favourable treatment. Costa Rica argues that the United States was obliged to grant Costa Rica a quota larger than that under Article 6.8 of the ATC, which provides that a quota cannot be fixed at a level:

"lower than the actual level of exports or imports from the Member concerned during the 12-month period terminating two months preceding that month in which the request for consultation was made".

We cannot fully share the approach advocated by Costa Rica. 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.

7.59 However, in our view, under Article 6.10 of the ATC, the level of Costa Rican imports required to be admitted to the United States under an Article 6 of the ATC restraint was 14,423,178 dozen, which equals the minimum level under Article 6.8. We reach this conclusion because of the following two reasons: First, in the absence of a mutual agreement under Article 6.8, Article 6.10 authorizes the application of "the" restraint. In our view, this reference points to Article 6.8. Second, the absence of a minimum restraint level under Article 6.10, set at the level specified in Article 6.8, would fundamentally undermine the balance of rights and obligations between exporting and importing Members and any interest they might have to enter into negotiations. The restriction imposed on Costa Rican imports under the implementing order of the March Statement was 14,423,178 dozen, i.e., identical to the level required under Article 6.8 of the ATC, and did not make allowance for re-imports in a quantitative way.²⁷ Nor does the implementing order make allowance for re-imports in any other way. We, consequently, conclude that the United States has violated its obligations under Article 6.6(d) of the ATC.

Obligation to consult

7.60 We next examine Costa Rica's claim that the United States violated Article 6.7 of the ATC by failing to hold consultations on the basis of actual threat of serious damage following the TMB's conclusion that the existence of serious damage was not demonstrated, since all the bilateral consultations were based on the March Statement which explicitly based its findings on the existence of serious damage. We note that the United States maintains that the reference to "serious damage" in the March statement was an abbreviated expression for "serious damage, or actual threat thereof" and the Diplomatic Note to Costa Rica making the actual request for consultations in fact referred to "serious damage, or actual threat thereof".

7.61 Since consultations under Article 6.7 are essentially a bilateral process and no official records are kept, a panel generally is not in a position to know exactly what has been discussed during the consultations. However, in our view, it is unnecessary to decide whether the basis of the consultations in the present case was "serious damage" or "actual threat thereof", because we have already found that the issue of actual threat did not dispose of this particular dispute. Both Costa Rica and the United States agree that the March Statement should be the sole basis for the Panel to examine the legality of the US action, and as noted above, in our view, the March Statement was not predicated on and did not demonstrate the existence of actual threat.

Date of Application of the Restriction

7.62 Costa Rica argues that the United States retroactively applied the restriction in violation of Article 6.10 of the ATC. The restriction was introduced on 23 June 1995 for a period of 12 months starting on 27 March 1995, which was the date of the request for consultations under Article 6.7 of the ATC. Although Article 6.10 of the ATC allows the importing country to "apply the restraint, ... within 30 days following the 60-day period for consultations", it is silent about the initial date from which the restraint period should be calculated. In contrast, Article 3.5(i) of the Multifibre Arrangement (MFA) stated that the restraint could be instituted "for the twelve-month period beginning on the day when the request was received by the participating exporting country or countries". Thus, the question before the Panel is whether the silence of the ATC in this regard should be interpreted as prohibition of a practice which was explicitly recognized under the MFA, and if so, what should be the appropriate date from which the restraint period is to be calculated under the ATC.

7.63 In our view, this is not a question of retroactive application of a treaty to events that took place before the entry into force of the treaty, as envisaged in Article 28 of the Vienna Convention on the Law of Treaties (VCLT). Rather, it is a technical question regarding the opening date of a quota period.

7.64 Since the ATC is silent on this question, we will first examine how the matter is treated under the provisions of the GATT 1994, which is an integral part of the WTO Agreement along with the ATC. Article 1.6 of the ATC states that "[u]nless 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". Members assume under the WTO certain transparency obligations when they implement trade-restrictive measures. Article X:2 of GATT 1994 is the relevant provision, which reads:

"No measure of general application taken by any [Member] effecting an advance in a rate of duty or other charge on imports under an established and uniform practice, or imposing a new or more burdensome requirement, restriction or prohibition of imports, or on the transfer of payments therefor, shall be enforced before such measure has been officially published".

7.65  We note that Article X:1 of GATT 1994, which also uses the language "of general application", includes "administrative rulings" in its scope. The mere fact that the restraint at issue was an administrative order does not prevent us from concluding that the restraint was a measure of general application. Nor does the fact that it was a country-specific measure exclude the possibility of it being a measure of general application. If, for instance, the restraint was addressed to a specific company or applied to a specific shipment, it would not have qualified as a measure of general application. However, to the extent that the restraint affects an unidentified number of economic operators, including domestic and foreign producers, we find it to be a measure of general application.

7.66 In the absence of a provision comparable to Article 3.5(i) of the MFA in the ATC, a Member's obligation under this provision applies in the application of transitional safeguard measures for textiles. If a Member sets the initial date of a restraint period as the date of the request for consultations, without having officially published the content of the request for consultations, the Member is acting in violation of Article X:2 of GATT 1994. Conversely, if the Member has published that information, specifying the proposed restraint level and restraint period, it can, when implementing the restraint at a later time, set the initial date as the date of the publication of the information, which could be the date of the request for consultation if the information were published on the same day.

7.67 In this context, we note that the Panel report on the "Chilean Apples" case stated that "the allocation of back-dated quotas, that is, quotas declared to have been filled at the time of their announcement, did not conform to the requirements of Article XIII:3(b) and Article XIII:3 (c)" of the GATT.²⁸ While we agree with this conclusion, we note that the facts are different in the present case. After having made the request for consultations on 27 March 1995, the United States published the proposed restraint period and the restraint level in the Federal Register on 21 April 1995. The United States therefore did not "back-date" the restraint period in the way which was found to be inconsistent in the report on "Chilean Apples" since here it was made public well before the measure was imposed on 23 June 1995.

7.68 Finally, we note the US argument that if the safeguard measure could only be applied starting at some time later than the date of the request for consultations, there would be a flood of imports in anticipation of the eventual restriction, which might defeat the whole purpose of the transitional safeguard measure. We find this argument to be persuasive from a practical point of view. In order to avoid such a consequence, in our view, all that is needed on the part of the importing country is to publish the content of the request for consultations immediately.

7.69 In light of the foregoing, we conclude that the prevalent practice under the MFA of setting the initial date of a restraint period as the date of request for consultations cannot be maintained under the ATC. However, we note that if the importing country publishes the proposed restraint period and restraint level after the request for consultations, it can later set the initial date of the restraint period as the date of the publication of the proposed restraint. In the present case, the United States violated its obligations under Article X:2 of GATT 1994 and consequently under Article 6.10 of the ATC by setting the restraint period for 12 months starting on 27 March 1995. However, had it set the restraint period starting on 21 April 1995, which was the date of the publication of the information about the request for consultations, it would not have acted inconsistently with GATT 1994 or the ATC in respect of the restraint period. The United States argues that it did not "enforce" the restraint until 23 June 1995. We note the US argument. However, in so far as the restraint was applied to exports from Costa Rica which had taken place prior to the publication, it was implemented and therefore enforced within the meaning of Article X:2 of GATT 1994.²⁹

Article 2.4 of the ATC

7.70 In our view, a finding that the United States violated Article 2.4 of the ATC would depend on a previous finding that the United States violated Article 6 of the ATC; conversely, a finding by the Panel that the United States acted consistently with its obligations under Article 6 of the ATC would automatically mean that Article 2.4 of the ATC was not violated.

7.71 We note our previous conclusion that the United States imposed the restriction in a manner inconsistent with its obligations under Articles 6.2, 6.4 and 6.6(d) of the ATC. In our view, the United States by violating its obligations under Article 6 of the ATC has ipso facto violated its obligations under Article 2.4 of the ATC as well.

Article 8 of the ATC

7.72 Finally, we turn to Costa Rica's claim that the United States violated Article 8 of the ATC by refusing to follow the recommendations made by the TMB and by failing to submit a report explaining its inability to conform with the recommendations.

7.73 We have examined the contents of recommendations made by the TMB in the present case. In the relevant part of its report, the TMB made the following recommendations after the review conducted between 13 and 21 July 1995:

"During its review under paragraphs 2 and 3 of Article 6 of the safeguard action taken by the United States against imports of category 352/652 from Costa Rica and Honduras, the TMB found that serious damage, as envisaged in these provisions, had not been demonstrated. The TMB could not, however, reach consensus on the existence of actual threat of serious damage. The TMB recommended that further consultations be held between the United States and the parties concerned, with a view to arriving at a mutual understanding, bearing in mind the above, and with due consideration to the particular features of this case, as well as equity considerations.

"These consultations shall be held consistent with the Agreement on Textiles and Clothing, in particular with Articles 6 and 4, and be concluded within 30 days. Parties shall report to the TMB on the outcome of such consultations no later than at the end of that period."³⁰

7.74 We note that the only obligation the United States assumed under these recommendations was to hold consultations with Costa Rica regarding the safeguard action in question. The United States and Costa Rica in fact held consultations on 16-17 August 1995. Therefore, we conclude that the United States did not act inconsistently with its obligations under Article 8 of the ATC.

VIII RECOMMENDATION

8.1 Costa Rica requests the Panel to recommend if it reached the conclusion that the US restriction was imposed in a manner inconsistent with the obligations of the United States under the ATC that the United States withdraw the illegal act. The United States essentially argues that Article 19.1 of the DSU prohibits panels from recommending such a remedy.

Article 19.1 of the DSU reads as follows:

"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. In addition to its recommendations, the panel or Appellate Body may suggest ways in which the member concerned could implement the recommendations".

8.2 Under the second sentence of Article 19.1 of the DSU, panels can, in addition to their recommendations, "suggest ways in which the Member concerned could implement the recommendations".

8.3 We recall our conclusions that the United States violated its obligations under Article 6.2 and 6.4 of the ATC by imposing a restriction on Costa Rican exports without having demonstrated that serious damage or actual threat thereof was caused by such imports to the US domestic industry and under Article 6.6(d) of the ATC by not granting treatment more favourable to Costa Rican re-imports. We further recall our conclusion that the United States violated its obligations under Article 2.4 of the ATC by imposing a restriction in a manner inconsistent with its obligations under Article 6 of the ATC. We also recall our conclusion that the United States violated its obligations under Article 6.10 of the ATC by setting the restraint period starting on the date of the request for consultations, rather than the date of publication of that information. We, consequently, recommend that the Dispute Settlement Body request the United States to bring the measure challenged by Costa Rica into compliance with US obligations under the ATC. We find that such compliance can best be achieved and further nullification and impairment of benefits accruing to Costa Rica under the ATC best be avoided by prompt removal of the measure inconsistent with the obligations of the United States. We further suggest that the United States bring the measure challenged by Costa Rica into compliance with US obligations under the ATC by immediately withdrawing the restriction imposed by the measure.

Table of Contents

I. Product Description
II. Industry Profile
III. Market Situation
A. Serious Damage to the Domestic Industry
1. US Production
2. Market Share Loss
3. Import Penetration
4. Employment
5. Man­hours
B. Industry Statements
IV. Countries Contributing to Serious Damage
A. Dominican Republic
B. Costa Rica
C. Honduras
D. Thailand
E. Turkey
F. El Salvador³¹
G. Colombia¹
Table I. US Imports From Selected Suppliers
Table II. US Production, Imports, Market, Import/Production Ratio and Domestic Market Share
Table III. US Employment
Table IV. Average Landed Duty­paid Value of Imports
Table V. Selected Suppliers Share of Imports and Production
Table VI. Suppliers Report.

I. Product Description

Category 352/652 covers men's and boys', and women's and girls' underwear. The term "underwear" refers to garments which are worn under other garments and are not exposed to view when the wearer is conventionally dressed. Men's and boys' and women's and girls' knit underwear is provided for in Harmonized Tariff Schedule (HTS) headings 6107, 6108 and 6109. Woven underwear is provided for in HTS headings 6207 and 6208.

II. Industry Profile

There are approximately 395 establishments in the US that manufacture cotton and man­made fibre underwear, Category 352/652. The establishments are located mainly in the Atlantic seaboard states, especially New York, Pennsylvania, North Carolina, and Georgia. This industry employs close to 6 per cent of the total apparel workers in the US, and the annual shipments from these establishments at $3.2 billion account for approximately 5 per cent of the total annual apparel industry shipments.

The concentration of firms in this industry is higher in the men's and boys' underwear than in the women's and girls'. In the men's and boys' segment, four firms account for over 60 per cent of the shipments. The production of women's and girls' underwear is more diversified, largely because women's underwear is subject to more fashion changes. As a result production is less standardized, requiring different types of knitting machines and a greater number of workers employed. There is, however, a large number of smaller producers which generally do not have integrated operations but usually purchase fabric and then cut and sew it.

III. Market Situation

A. Serious Damage to the Domestic Industry

The sharp and substantial increase in imports of cotton and man­made fibre underwear, Category 352/652, is causing serious damage to the US industry producing cotton and man­made fibre underwear.

Category 352/652 imports surged from 65,507,000 dozen in 1992 to 79,962,000 dozen in 1993, a 22 per cent increase. Cotton and man­made fibre underwear, Category 352/652, imports continued to increase in 1994, reaching 97,375,000 dozen, 22 per cent above the 1993 level and 49 per cent above the level imported in 1992 (see Table I).

Serious damage to the domestic industry resulting from the sharp and substantial increase in imports of cotton and man­made fibre underwear is attributed to imports from the Dominican Republic, Costa Rica, Honduras, Thailand and Turkey.³² The combination of high import levels, surging imports, and low­priced goods from these countries have resulted in loss of domestic output, market share, investment, employment and man­hours worked.

1. US Production

US production of cotton and man­made fibre underwear, Category 352/652, declined from 175,542,000 dozen in 1992 to 168,802,000 dozen in 1993, a decline of 4 per cent. Production continued to decline in 1994, falling to 126,962,000 dozen during the first nine months of 1994, 4 per cent below January­September 1993 production level (Table II).

2. Market Share Loss

The share of this market held by domestic manufacturers fell from 73 per cent in 1992 to 68 per cent in 1993, a decline of five percentage points. The domestic market share dropped to 65 per cent during the first nine months of 1994 (Table II).

3. Import Penetration

The ratio of imports to domestic production increased from 37 per cent in 1992 to 47 per cent in 1993, and reached 54 per cent during January­September 1994 (Table II).

4. Employment

Employment in the US cotton and man­made fibre underwear industry dropped from 46,377 production workers in 1992 to 44,056 workers in 1994, a 5 per cent decline and a loss of 2,321 employees (Table III).


5. Man-hours

Average annual man­hours worked dropped from 86.2 million in 1992 to 81.5 million in 1994, a 5 per cent decline (Table III).

B. Industry Statements

Based on a survey of individual firms producing cotton and man­made fibre underwear the following conditions were reported. The observations are concentrated in the mens' underwear sector but also include the even more heavily import­impacted ladies underwear sector.

1. Employment

There have been layoffs in the sector and one company reported that employees were also being transferred to production of other types of garments. Employment losses have also occurred because of import­related plant closings. A company that has already closed two plants employing 165 workers is anticipating two additional closures in 1995 representing total employment of about 400.

2. Sales

Sales have slowed, and one company reported that their sales were down about 17 per cent in 1994.


3. Profits


Profits were down 18 per cent at one firm, and there is pressure on the bottom line throughout the industry due to rising costs and stiff import competition.


4. Investment


Because of the impact of imports and the uncertainty they have caused in the market, US companies generally have been postponing investment in this industry. Some companies have closed plants permanently or shifted production offshore, and additional disinvestment of this nature is being contemplated by underwear manufacturing firms.


5. Capacity


Because of the import competition, firms report shifting production capacity to other product lines including outerwear.


6. Prices


Import prices in these sectors have been very low which has placed considerable pressure on domestic producers:


(a) Raw cotton costs in the US have increased substantially, seriously eroding US underwear producers' margins. These cost increases have not been recouped because prices cannot be raised without becoming uncompetitive with imports.


(b) Competing imports enjoy a price edge over domestically produced goods because the imports are produced with lower priced foreign fabric which often reflects a subsidized cotton price. As a result of the increased import market share in underwear, average retail prices of underwear in the United States have generally declined during the past two years at a time when US manufacturers' costs, particularly for raw cotton, have increased substantially. This development has seriously eroded the profitability of US underwear manufacturing.

Serious damage, or actual threat thereof, to US producers of cotton and man­made fibre underwear, Category 352/652, is attributed to the sharp and substantial increase in imports from the Dominican Republic, Costa Rica, Honduras, Thailand and Turkey. ³³

Total imports from the five countries listed above increased from 22,675,508 dozen in 1992 to 40,293,259 dozen in 1994, a sharp and substantial increase of 78 per cent. As a group their imports were up 32 per cent in 1994 over their 1993 level. Together their 1992 imports were 35 per cent of total Category 352/652 imports. Their share of total category imports increased to 41 per cent in 1994.

A. Dominican Republic

The sharp and substantial increase of low­priced imports from the Dominican Republic is causing serious damage to the US domestic industry producing cotton and man­made fibre underwear.

US imports of cotton and man­made fibre underwear, Category 352/652, from the Dominican Republic reached 16,442,148 dozen in 1994, 20 per cent above the 13,691,280 dozen imported in 1993 and 60 per cent above its 1992 level.

US imports of cotton and man­made fibre underwear, from the Dominican Republic in Category 352/652, entered the US at an average landed duty-paid value of $10.10 per dozen, 66 per cent below US producers' average price for cotton and man­made fibre underwear.

The Dominican Republic is the number one supplier of Category 352/652 imports with 17 per cent of total US imports of Category 352/652 in 1994. Category 352/652 imports from the Dominican Republic in 1994 were equivalent to 10 per cent of US production of Category 352/652 in the year ending September 1994.

B. Costa Rica

The sharp and substantial increase of low­priced imports from Costa Rica is causing serious damage to the US domestic industry producing cotton and man­made fibre underwear.

US imports of cotton and man­made fibre underwear, Category 352/652, from Costa Rica reached 14,423,178 dozen in 1994, 22 per cent above the 11,844,331 dozen imported in 1993 and 61 per cent above its 1992 level.

US imports of cotton and man­made fibre underwear, from Costa Rica in Category 352/652, entered the US at an average landed duty-paid value of $9.39 per dozen, 69 per cent below US producers' average price for cotton and man­made fibre underwear.

Costa Rica is the number two supplier of Category 352/652 imports with 15 per cent of total US imports of Category 352/652 in 1994. Category 352/652 imports from Costa Rica were equivalent to 8.8 per cent of US production of Category 352/652 in the year ending September 1994.

C. Honduras

The sharp and substantial increase of low­priced imports from Honduras is causing serious damage to the US domestic industry producing cotton and man­made fibre underwear.

US imports of cotton and man­made fibre underwear, Category 352/652, from Honduras reached 6,550,810 dozen in 1994, 108 per cent above the 3,153,608 dozen imported in 1993 and 182 per cent above its 1992 level.

US imports of cotton and man­made fibre underwear, from Honduras in Category 352/652, entered the US at an average landed duty-paid value of $11.39 per dozen, 62 per cent below US producers' average price for cotton and man­made fibre underwear.

Imports from Honduras were 6.7 per cent of total US imports of Category 352/652 in 1994, and were equivalent to 4 per cent of US production of Category 352/652 in the year ending September 1994.

D. Thailand

The sharp and substantial increase of low­priced imports from Thailand is causing serious damage to the US domestic industry producing cotton and man­made fibre underwear.

US imports of cotton and man­made fibre underwear, Category 352/652, from Thailand reached 1,586,005 dozen in 1994, 20 per cent above the 1,323,116 dozen imported in 1993 and nearly double its 1992 level.

US imports of cotton and man­made fibre underwear, from Thailand in Category 352/652, entered the US at an average landed duty-paid value of $18.58 per dozen, 38 per cent below US producers' average price for cotton and man­made fibre underwear.

Imports from Thailand were 1.6 per cent of total US imports of Category 352/652 in 1994, and were equivalent to nearly 1 per cent of US production of Category 352/652 in the year ending September 1994.

E. Turkey

The sharp and substantial increase of low­priced imports from Turkey is causing serious damage to the US domestic industry producing cotton and man­made fibre underwear.

US imports of cotton and man­made fibre underwear, Category 352/652, from Turkey reached 1,291,118 dozen in 1994, 133 per cent above the 553,442 dozen imported in 1993 and two and a half times its 1992 level.

US imports of cotton and man­made fibre underwear, from Turkey in Category 352/652, entered the US at an average landed duty-paid value of $10.43 per dozen, 65 per cent below US producers' average price for cotton and man­made fibre underwear.

Imports from Turkey were 1.3 per cent of total US imports of Category 352/652 in 1994, and were equivalent to 0.8 per cent of US production of Category 352/652 in the year ending September 1994.

TO CONTINUE WITH USA - RESTRICTIONS ON IMPORTS OF COTTON AND MAN­MADE FIBRE UNDERWEAR

²⁴ We note that by the same reasoning we could have concluded that the United States failed to demonstrate the existence of serious damage in the March Statement as required by Article 6.2 of the ATC. The fact that the US underwear industry was able to accept and withstand such a huge inroad of products from the five other exporting Members suggests that there was no serious damage to the industry in the first place. However, we felt that the inadequacy of the US measure was more acutely represented in the attribution under Article 6.4, which requires a source-specific or Member-by-Member analysis, as opposed to the analysis of total imports under Article 6.2. See also our discussion in paragraph 7.45 above.

²⁵ See the panel reports on "United States - Measures Affecting Imports of Softwood Lumber from Canada", adopted on 27 October 1993, BISD 40S/358, paras. 402, 408; "New Zealand - Imports of Electrical Transformers from Finland", op. cit., para. 4.8; and "Korea - Antidumping Duties on Imports of Polyacetal Resins from the United States", op. cit., paras. 253, 272, 278.

²⁶ We note that the only elements that could be used in a prospective analysis were the following: in sub-heading B ("Industry Statements") under "Employment", the March Statement reads: "A company ... is anticipating two additional closures in 1995 representing total employment of about 400". In the same sub-heading, under "Investment", the March Statement reads: "... additional disinvestment of this nature is being contemplated by underwear manufacturing firms". We note that both elements were used in the March Statement to support a finding on serious damage. Even if, however, these elements were used to support a finding on actual threat, they could hardly constitute adequate evidence of actual threat of serious damage.

²⁷ See the Implementing Order published in 60 Federal Register 32653, No. 121, 23 June 1995.

²⁸ "European Economic Community - Restrictions on Imports of Dessert Apples", Complaint by Chile, op. cit., at para. 12.26.

²⁹ A similar conclusion was reached by the panel on "European Economic Community - Restrictions on Imports of Apples", Complaint by the United States, adopted on 22 June 1989, BISD 36S/135, at para. 5.23.

³⁰ Textiles Monitoring Body, Report of the Second Meeting (G/TMB/R/2), paras. 16 and 17.

³¹ Called under domestic legal authority. Not a WTO Member.

³² El Salvador and Colombia called under domestic legal authority not WTO.

³³ El Salvador and Colombia called under domestic legal authority not WTO.