Shirts and Blouses: United States - Measure Affecting Imports of Woven Wool Shirts and Blouses I. Factual Background The World Trade Organisation Agreement on Textiles and Clothing (the "ATC"), which entered into force in 1994 replaced the Multi-Fibre Arrangement (the "MFA") which had governed international trade in textiles and clothing for much of the post-war period. The ATC envisages the gradual integration of the sector into the GATT regime over a ten-year transition period. This requires the gradual removal of quantitative restrictions allowed under the MFA regime and a prohibition on any such new restrictions. Under the ATC, however, a country might impose a transitional safeguard in exceptional circumstances subject to certain disciplines spelt out in the ATC, which are discussed below. In July 1995, the United States imposed such a transitional safeguard measure restricting imports of woven wool shirts and blouses (category 440) from India. This measure was taken pursuant to Art 6.3 of the ATC after bilateral consultations, as required under Art 6.7 of the ATC, failed to produce a mutually acceptable solution. The United States referred the matter to the Textiles Monitoring Board (the "TMB") as required by Art 6.10 of the ATC. The TMB, after examining the matter, opined that the measure was consistent with the provisions of the ATC. India asked the TMB to review its findings as it was entitled to do under Art 8.10 of the ATC. The TMB refused to change its position. Under Art 8.10 of the ATC, India therefore brought the matter to the Dispute Settlement Body and requested the formation of a GATT Panel. The resolution of the legal issues arising in the case became moot when the United States, before the case had been concluded, announced that it would withdraw the measure due to a "steady decline in imports of woven wool shirts and blouses from India and the adjustment of the industry." At India's request, the Panel proceeded to complete its inquiry and issued a comprehensive report. The Panel disagreed with the TMB and held that the United States had failed to comply with the requirements of Art 6 of the ATC.2 Under Art 6.2 of the ATC, a safeguard measure can only be imposed when it is demonstrated that the particular product is being imported in such increased quantities (and not because of other factors like changes in technology or consumer preferences) as to cause or threaten serious damage to domestic industry producing such products. Under Art 6.3 of the ATC, the determination of serious damage or threat thereof must be based on an examination of the effect of the imports on a list of eleven relevant economic variables pertaining to the domestic industry3. The Panel pointed out that the Market Statement that the United States had issued in support of its determination that serious damage had occurred failed to adequately analyse the impact of imports in terms of these factors. Furthermore, the information relied upon was either not focused on the particular industry producing woven wool shirts and blouses or it was vague and imprecise. The panel also found that without evidence of export figures of the domestic industry, it was impossible to determine serious damage. Further, the Panel noted that the United States did not address the possibility that there might have been changes in technology or consumer preferences that resulted in such a state of affairs as it claimed existed. The Panel found that a determination that a rise in imports had caused serious harm or threatened such could not be sustained on the basis of such information as found in the US Market Statement. In the course of its findings, the Panel had occasion to opine on certain procedural and substantive questions incidental to the main substantive issue described in the previous paragraph. Despite the Panel decision in its favour, India brought an appeal on three of these issues: (1) the burden of proof in disputes pertaining to the transitional safeguard provisions in the ATC; (2) the proper application of the concept of judicial economy; and (3) the proper role of the TMB in such disputes. As previously indicated, the first issue is by far the most significant. It is therefore proposed to dispose of the latter two issues before turning to the first. 2 WT/DS33/R, adopted 23 May 1997 3 These variables are, namely, output, productivity, utilisation of capacity, inventories, market share, exports, wages, employment, domestic prices, profits and investment
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