Decisions of the Appellate Body of the World Trade Organization United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear 2. Facts The ATC, entered into as part of the Uruguay Round, was designed to integrate textiles and clothing back into the disciplines of GATT (the General Agreement on Tariffs and Trade) and the World Trade Organization over a 10-year transition period, ending in 2005. During the 1950's and 1960's, a series of voluntary export restraints was forged into the multilateral Multifiber Arrangement ("MFA"), which came into force in 1974. The ATC proceeds by either (i) fully integrating particular groups of products over four phases, or (ii) simply expanding applicable quotas progressively, each during the 10-year transition period. For groups of products not yet fully integrated, article 6 of the ATC makes available a transitional safeguard mechanism. This safeguard is available if the importing state determines that a product is being imported in such increased quantities as to cause serious damage, or threat of serious damage, to the domestic industry. The serious damage or threat thereof must "demonstrably be caused by such increased quantities in total imports of [the] product and not by such other factors as technological changes or changes in consumer preferences."3 The determination by the importing state must examine the effect of those imports on the condition of the particular industry. Any transitional safeguard may only be applied on a "member-by-member" basis, meaning that the determinations called for by article 6 must be made with respect to each exporting state, not cumulatively among exporting states. Any member state proposing to take safeguard action under article 6 must seek consultations with the exporting state. The United States did so in this case on 27 March 1995. The request for consultations must be accompanied by specific factual information with respect to the specific parameters showing serious damage or threat thereof, as well as the specific increase in exports from the exporting state. The member state proposing to take action must also indicate the specific level at which imports are proposed to be restrained. After unsuccessful consultations, the U.S. invoked article 6.10 of the ATC on 23 June 1995, introducing a transitional safeguard measure in respect of underwear imports from Costa Rica. At the same time, as required by article 6.10, the U.S. referred the matter to the Textiles Monitoring Body ("TMB"), a body established under the ATC. The transitional safeguard measure was applied by the U.S. retroactively to 27 March 1995, the date the U.S. began consultations. The TMB found that the U.S. had failed to demonstrate serious damage, but the TMB did not reach consensus on the existence of a threat of serious damage. Its failure to reach consensus left the U.S. free to act.4 On 22 December 1995, Costa Rica invoked the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"). 3 ATC, art. 6.2. 4 Interestingly, article 8.2 of the ATC specifies that consensus is not destroyed by the failure of assent or concurrence of members involved in an unresolved issue under review. Thus, the U.S. was not able to block consensus. Decisions of the TMB are not strictly binding. Even so, article 8.9 specifies only that members "shall endeavour to accept in full the recommendations of the TMB." However, under article 8.10, a member that does not conform its actions to the recommendations of the TMB must provide reasons to the TMB, and the TMB shall issue further recommendations.
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