World Trade
Organization
|
WT/DS34/R
31 May 1999
(99-2081)
Original: English |
Turkey - Restrictions on Imports of Textile and Clothing Products
Report of the Panel
The report of the Panel on Turkey � Restrictions on Imports of
Textile and Clothing Products is being circulated to all Members, pursuant
to the DSU. The report is being circulated as an unrestricted document
from 31 May 1999, 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. There shall be no
ex parte communications with the Panel or Appellate Body concerning
matters under consideration by the Panel or Appellate Body.
Note by the Secretariat: This Panel Report shall be adopted by
the Dispute Settlement Body (DSB) within 60 days after the date of its
circulation unless a party to the dispute decides to appeal or the DSB
decides by consensus not to adopt the report. If the Panel Report is
appealed to the Appellate Body, it shall not be considered for adoption by
the DSB until after the completion of the appeal. Information on the
current status of the Panel Report is available from the WTO Secretariat.
Table of Contents
I. Introduction
II. Factual Aspects
A. Regional Trade Agreements in the GATT/WTO
Framework
B. Turkey's Trade Relations with the
European Communities
1. Association between Turkey and
the European Communities, and the GATT/WTO process
2. Synopsis of recent developments
in Turkey-EC trade
C. Quantitative Limits in Respect of
Turkey's Imports of Certain Textile and Clothing Products
1. Historical background
2. Recent background
3. Quantitative limits imposed on
certain Turkey's imports of textile and clothing products from India
4. Statistical analysis of
Turkey's imports of textile and clothing products under restraint
(a) Imports of 61 textile and
clothing product categories under restraint
(b) Imports of the 19 textile
and clothing product categories under restraint for India
III. Preliminary Points
A. Issues
B. Precision of the Request for the
Establishment of the panel
1. Arguments by the parties
2. Arguments by third parties
C. Non-Participation of the European
Communities in the Dispute
1. Arguments by the parties
2. Arguments by third parties
D. Consultation Stage of the Dispute
Settlement Procedure with Respect to Trade in Textile and Clothing
Products
1. Arguments by the parties
2. Arguments by third parties
IV. Additional Information
V. Claims of the Parties
VI. Main Arguments by the Parties
A. Introductory Points
1. Consultations
2. Offers to settle
B. Legal Arguments
1. Burden of Proof
2. Articles XI:1 and XIII of GATT
3. Article 2 of the ATC
4. Article XXIV of GATT
(a) Relationship between Article
XXIV and other GATT provisions
(b) Article XXIV:5(a)
(c) Article XXIV:8(a)
(i) Relationship between
Article XXIV:8(a)(ii) and other Article XXIV provisions
(ii) Relationship between
Article XXIV:8(a)(ii) of GATT and Article 2.4 of the ATC
(iii) Differences between the
formation of a customs union and the enlargement of an already
existing one
(iv) Scope of harmonization of
the external trade regime in the Turkey-EC regional trade
agreement
(v) Other options available
(d) Turkey-EC regional trade
agreements in the framework of Article XXIV
(i) Compatibility with Article
XXIV provisions
(ii) Type of agreement under
Article XXIV
5. Nullification or Impairment
(a) Trade aspects
(b) Arguments
VII. Summary of Arguments Presented
by Third Parties
A. Hong Kong, China
1. General
2. Article 2 of the ATC and
Articles XI and XIII of GATT
3. Article XXIV of GATT
4. Alternative solutions and
conclusions
B. Japan
1. General
2. Arguments
C. The Philippines
1. General
2. Articles XI and XIII of GATT
and Article 2 of the ATC
3. Article XXIV of GATT
(a) Customs unions in context
(b) Article XXIV:4
(c) Article XXIV:5
(d) Article XXIV:8
4. Conclusions
D. Thailand
1. Arguments
2. Conclusions
E. United States
F. Comments by the Parties
VIII. Interim Review
IX. Findings
A. Preliminary Rulings Recalled
1. Article 6.2 of the DSU
2. Necessity of Participation of
the European Communities
3. The Need to Exhaust TMB
Procedures
4. Inadequacy of the Consultations
B. Main Claims of the Parties
C. Measures at Issue
1. Identification of the Measures
at Issue
2. Attribution to Turkey of the
Measures at Issue
3. Conclusion
D. Scope of the Dispute
E. Burden of Proof
F. Claims under Articles XI and XIII
of GATT and Article 2.4 of the ATC
1. Articles XI and XIII of GATT
2. Article 2.4 of the ATC
(a) Regulatory framework of the
ATC
(b) Quantitative restrictions
permitted under the ATC
(c) The Turkish measures under
the ATC - are these new measures?
(d) Jurisdiction of the TMB
versus that of the Panel
3. Conclusions on India's claims
under Articles XI and XIII of GATT, and Article 2.4 of the ATC
G. Turkey's Defense Based on Article
XXIV of GATT
1. General Interpretative
Principles
(a) Vienna Convention on the Law
of Treaties
(b) WTO rules on conflicts
(c) Principle of effective
interpretation
2. Overview of Article XXIV of
GATT
3. Article XXIV:5(a)
(a) Arguments of the parties
(b) Analysis of Article
XXIV:5(a)
(i) Ordinary meaning of the
terms of Article XXIV:5(a)
(ii) The immediate context of
Article XXIV:5(a)
(iii) Conclusion based on the
ordinary meaning of the terms and their immediate context
4. Article XXIV:8
(a) Arguments of the parties
(b) Analysis of Article
XXIV:8(a)
(i) The terms of paragraph
8(a)
(ii) Immediate context
(iii) Conclusion
(c) The wider context of Article
XXIV:5 and 8 and the object and purpose of the agreements
(d) GATT/WTO practice
(e) Temporary nature of the
Turkish quantitative restrictions
(f) The absence of
recommendations pursuant to Article XXIV:7 of GATT
(g) Offer to negotiate
(h) The requirements of the
Turkey-EC Customs Union Agreement itself
(i) Further considerations
5. Conclusion
H. The Absence of Nullification and
Impairment
I. Our Main Findings Recalled
X. Conclusions
Annex
I. Introduction
- On 21 March 1996, India requested consultations with Turkey pursuant
to Article 4.4 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes ("DSU") and Article XXIII:1 of the
General Agreement on Tariffs and Trade 1994 ("GATT") regarding
the unilateral imposition of quantitative restrictions ("QRs")
by Turkey on imports of a broad range of textile and clothing products
from India as from 1 January 1996 (WT/DS34/1).
- India and Turkey did not enter into consultations, due to disagreement
on the appropriateness of participation of the European Communities in
such consultations, and consequently the dispute could not be resolved
at that stage. The Dispute Settlement Body ("DSB") was
informed accordingly on 24 April 1996.1
- In a communication dated 2 February 1998, India requested the DSB to
establish a panel to examine the matter in the light of GATT and the
Agreement on Textiles and Clothing ("ATC"), in accordance with
Article 6.2 of the DSU (WT/DS34/2). In its communication, India claimed
that the restrictions imposed by Turkey were inconsistent with
Turkey�s obligations under Articles XI and XIII of GATT and were not
justified by Article XXIV of GATT, which did not authorize the
imposition of discriminatory QRs, and that the restrictions were
inconsistent with Turkey�s obligations under Article 2 of the ATC.
India also claimed that the restrictions appeared to nullify or impair
benefits accruing to it directly or indirectly under GATT and the ATC.
- On 13 March 1998, the DSB established a panel pursuant to the request
of India, with the following standard terms of reference (Article 7.1 of
the DSU):2
"To examine, in the light of the relevant provisions of the
covered agreements cited by India in document WT/DS34/2, the matter
referred to the DSB by India in that document and to make such
findings as will assist the DSB in making recommendations or in giving
the rulings provided for in those agreements."
- On 11 June 1998, the parties to the dispute agreed on the following
composition of the Panel (WT/DS34/3):
Chairman: |
Ambassador Wade Armstrong |
Members: |
Dr. Luzius Wasescha |
|
Prof. Robert Hudec |
- Following the resignation of Prof. Robert Hudec, the parties to the
dispute agreed to appoint a new member to the Panel, on 21 July 1998.
Accordingly, the composition of the Panel was as follows (WT/DS34/4):
Chairman: |
Ambassador Wade Armstrong |
Members: |
Dr. Luzius Wasescha |
|
Mr. Johannes Human |
- Hong Kong, China; Japan; the Philippines; Thailand; and the United
States reserved their third-party rights in accordance with Article 10
of the DSU.
- On 14 August 1998, Turkey requested preliminary rulings by the Panel
on a number of issues. On 28 August 1998, the Panel invited India, as
well as the third parties, to present their views on the points raised
by Turkey. India submitted written comments on the issues; Japan, the
Philippines and the United States, as third parties, also submitted
written communications. The Panel met on 19 September 1998 with Turkey
and India on this matter, and issued its ruling on 25 September 1998.
- The Panel received the first written submissions from the parties on
21 August 1998 (India) and on 18 September 1998 (Turkey). Written
submissions were also received from Hong Kong, China; Japan; the
Philippines; and Thailand, as third parties.
- The first substantive meeting of the Panel with the parties took place
on 5-6 October 1998 and the Panel met with third parties on 6 October
1998.
- On 28 October 1998, the Panel addressed a letter to the European
Communities, seeking certain relevant factual and legal information
under Article 13.2 of the DSU. The European Communities answered in
writing the specific questions raised by the Panel on 13 November 1998.
- On 19 November 1998, the Panel received the second written submissions
from the parties, with whom it met again on 25 November 1998.
- In a communication dated 20 January 1999, the Chairman of the Panel
informed the DSB that the Panel would not be able to issue its report
within six months. The reasons for that delay are stated in document
WT/DS34/5.
- The Panel issued its interim report to the parties on 3 March 1999. On
12 March 1999, both parties submitted written requests for the Panel to
review precise aspects of the interim report; no further meeting with
the Panel was requested.
- The Panel submitted its final report to the parties on 26 March 1999.
II. Factual Aspects
This section addresses the factual aspects of the dispute in a
sequential order, in which the QRs at issue are described in paragraphs
2.39 to 2.41 below. In view of the nature of the dispute, this section
outlines first the factual context in which the dispute is addressed.
A. Regional Trade Agreements in the GATT/WTO
Framework
- The relationship between the most-favoured-nation ("MFN")
principle and Article XXIV of the GATT, which deals with free-trade
areas and customs unions, has not always been harmonious. In 1947,
their coexistence in the framework of international trade relations
had been viewed as ultimately positive, reflecting the perception that
genuine customs unions and free-trade areas were congruent with the
MFN principle and directed towards the same objective, i.e.
multilaterally-agreed trade liberalization.
3
- As a matter of fact, trade liberalization under the GATT paralleled
a process of increasing economic integration among contracting
parties: from 1948 to end-1994, 107 regional trade agreements
("RTAs") were notified to the GATT under Article XXIV.4
- Before 1957, the GATT contracting parties dealt with only three such
agreements, covering a small fraction of their aggregate trade (see
Figure II.1), on which compatibility with Article XXIV was temporarily
waived and which were maintained under surveillance. 5
Article XXIV provisions confronted their first real applicability test
with the notification of the Treaty of Rome in 1957, which concerned
the integration of major players in the international scene. From then
on, the examination of RTAs notified to the GATT did not lead to
clear-cut assessments of full consistency with the rules, except in
one instance. 6 Frictions
between GATT contracting parties arising in the context of the
formation of customs unions or free-trade areas were dealt with
pragmatically. 7
- The perception that RTAs could contribute to the expansion of world
trade was reiterated during the Uruguay Round, when negotiators
re-visited certain aspects of Article XXIV, in an endeavour to clarify
some of its provisions. 8
Figure II.1 � Number of RTAs notified to the GATT/WTO under
Article XXIV
- During the course of the Uruguay Round, there was an increase in the
number of new RTAs notified to the GATT. The conclusion of the Round
and the establishment of the WTO did not put to rest the appeal of
regional integration. Since 1 January 1995, a further 60 new RTAs have
been notified under Article XXIV of GATT, most of which are presently
in force. 9
- The WTO General Council established, on 6 February 1996, the
Committee on Regional Trade Agreements ("CRTA"), 10
with the mandate of, inter alia, examining all RTAs notified to the
Council for Trade in Goods ("CTG") under Article XXIV. 11
The CRTA is likewise entrusted with the examination of those RTAs
notified under the 1979 Decision on Differential and More Favourable
Treatment, Reciprocity and Fuller Participation of Developing
Countries and under Article V of the General Agreement on Trade in
Services ("GATS"), 12
and referred to it by the Committee on Trade and Development
("CTD") and the Council for Trade in Services
("CTS"), respectively. The mandate of the CRTA also includes
the consideration of "the systemic implications of [RTAs] and
regional initiatives for the multilateral trading system and the
relationship between them".13
- Later in 1996, the WTO Membership expressed its views on RTAs and
the role of the CRTA in paragraph 7 of the Singapore Ministerial
Declaration, as follows:
"We note that trade relations of WTO Members are being
increasingly influenced by regional trade agreements, which have
expanded vastly in number, scope and coverage. Such initiatives can
promote further liberalization and may assist least-developed,
developing and transition economies in integrating into the
international trading system. In this context, we note the
importance of existing regional arrangements involving developing
and least-developed countries. The expansion and extent of regional
trade agreements make it important to analyse whether the system of
WTO rights and obligations as it relates to regional trade
agreements needs to be further clarified. We reaffirm the primacy of
the multilateral trading system, which includes a framework for the
development of regional trade agreements, and we renew our
commitment to ensure that regional trade agreements are
complementary to it and consistent with its rules. In this regard,
we welcome the establishment and endorse the work of the new
Committee on Regional Trade Agreements. We shall continue to work
through progressive liberalization in the WTO as we are committed in
the WTO Agreement and Decisions adopted at Marrakesh, and in so
doing facilitate mutually supportive processes of global and
regional trade liberalization." 14
- The CRTA 1998 Report to the General Council is self-explanatory on
the results so far achieved in its work. 15
Paragraph 6 of the Report, with respect to the examination of the
agreements, reads:
"In 1998, the Committee endeavoured to accelerate the
examination of agreements which had already commenced, as well as to
handle new agreements referred to it. The Committee has currently
under its purview a total of 62 RTAs. To date, the examination of 54
RTAs have been referred to the Committee by the CTG, seven by the
CTS and one by the CTD. Draft reports on the examination of 28
agreements are currently under consideration; for 13 other
agreements, reports are being drafted or factual examinations are
well engaged, while the first round of examination for the remaining
21 RTAs is scheduled for either the Committee's twentieth session or
early in 1999 � Thus far, no report has been adopted."
As concluding remarks, paragraph 15 of the CRTA 1998 Report states
as follows:
"� Despite its heavy workload and delays in the submission
of certain relevant material, the Committee also made progress in
examining RTAs. The need to move forward in the process of
examination pursuant to WTO rules was recognized; however, progress
in this regard was slowed, inter alia, by a lack of consensus
on the interpretation of certain elements of those rules relating to
RTAs. On systemic issues, the Committee held discussions on some
important topics and identified different approaches to these
subjects; the need to move forward in the discussion of systemic
issues was also recognized."
To continue with Turkey's Trade Relations with
the European Communities
1 WT/DSB/M/15, pp. 3-5.
2 WT/DSB/M/43, p. 6.
3 Customs unions and
free-trade areas were viewed as trade-creating instruments (susceptible to
expand trade both among the parties and between these and third parties),
but there were also concerns about their possible trade-distorting
effects.
4 Of these, only 36 remain
today in force, reflecting in most cases the evolution over time of the
RTAs themselves, as they were superseded by more modern agreements between
the same signatories (usually going deeper in integration), or by their
consolidation into wider groupings.
5 See in this respect: Report
on the Customs Union between South Africa and Southern Rhodesia (BISD
II/176) and corresponding Decisions (BISD II/29, and 3S/47); Decision
on the Free-Trade Area Treaty between Nicaragua and El Salvador (BISD
II/30); and Decision on Participation of Nicaragua in Central American
Free-Trade Area (BISD 5S/29).
6 This was the case of the
Customs Union between the Czech Republic and the Slovak Republic (see Working
Party Report, GATT document L/7501, dated 4 October 1994).
7 See, for example, BISD
7S, p. 69 et seq..
8 The result of such
negotiations is embodied in the Understanding on the Interpretation of
Article XXIV of GATT 1994.
9 The negotiation of RTAs
among countries geographically distant has also become an increasingly
frequent feature in the 1990s.
10 WT/L/127.
11 The CRTA is in charge
of the examinations which were previously performed by separate working
groups, one per agreement.
12 These provisions also
govern regional integration within the WTO.
13 WT/L/127, para.1(d).
14 WT/MIN(96)/DEC, para.
7.
15 WT/REG/7.
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