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See also: One-page summary of key findings of this dispute
Consultations
Complaint by Pakistan.
On 3 April 2000, Pakistan
requested consultations with the US in respect of a transitional safeguard
measure applied by the United States, as of 17 March 1999, on combed
cotton yarn (United States category 301) from Pakistan (see US Federal
Register of 12 March 1999, document 99-6098). In accordance with Article
6.10 of the Agreement on Textiles and Clothing (ATC), the United States
had notified the TMB on 5 March 1999 that it had decided to unilaterally
impose a restraint, after consultations as to whether the situation called
for a restraint had failed to produce a mutually satisfactory solution. In
April 1999, the TMB examined the US restraint pursuant to Article 6.10 of
the ATC and recommended that the US restraint should be rescinded. On 28
May 1999, in accordance with Article 8.10 of the ATC, the United States
notified the TMB that it considered itself unable to conform to the
recommendations issued by the TMB. Despite a further recommendation of the
TMB pursuant to Article 8.10 of the ATC that the United States reconsider
its position, the United States continued to maintain its unilateral
restraint and thus the matter remained unresolved.
Pakistan claimed as follows:
- the transitional safeguards applied by the United
States are inconsistent with the United States’ obligations under Articles
2.4 of the ATC and not justified by Article 6 of the ATC;
- the US restraint does not meet the requirements for
transitional safeguards set out in paragraphs 2, 3, 4 and 7 of Article 6
of the ATC.
On 3 April 2000, Pakistan requested the establishment
of a panel. At its meeting on 18 May 2000, the DSB deferred the
establishment of a panel.
Panel and Appellate Body proceedings
Further to a second request to establish a panel
by Pakistan, the DSB established a panel at its meeting on 19 June 2000.
India and the EC reserved their third-party rights. On 30 August 2000, the
Panel was composed.
The panel circulated its report on 31 May 2001. The
Panel concluded that the transitional safeguard measure (quantitative
restriction) imposed by the US on imports of combed cotton yarn from
Pakistan as of 17 March 1999, and extended as of 17 March 2000 for a
further year is inconsistent with the provisions of Article 6 of the ATC.
Specifically, the Panel found that:
- Inconsistently with its obligations under 6.2, the US
excluded the production of combed cotton yarn by vertically integrated
producers for their own use from the scope of the “domestic industry
producing like and/or directly competitive products” with imported
combed cotton yarn;
- Inconsistently with its obligations under Article 6.4,
the US did not examine the effect of imports from Mexico (and possibly
other appropriate Members) individually;
- Inconsistently with its obligations under Articles 6.2
and 6.4, the US did not demonstrate that the subject imports caused an “actual threat” of serious damage to the domestic industry.
With respect to the other claims, the Panel found that
Pakistan did not establish that the measure at issue was inconsistent with
the US obligations under Article 6 of the ATC. Specifically, the Panel
found that: (a) Pakistan did not establish that the US determination of
serious damage was not justified based on the data used by the US
investigating authority; (b) Pakistan did not establish that the US
determination of serious damage was not justified regarding the evaluation
by the US investigating authority of establishments that ceased producing
combed cotton yarn; (c) Pakistan did not establish that the US
determinations of serious damage and causation thereof were not justified
based upon an inappropriately chosen period of investigation and period of
incidence of serious damage and causation thereof.
The Panel recommended that the DSB request that the US
bring the measure at issue into conformity with its obligations under the
ATC, and suggested that this can best be achieved by prompt removal of the
import restriction.
On 9 July 2001, the US notified its decision to appeal
to the Appellate Body certain issues of law covered in the Panel Report
and certain legal interpretations developed by the Panel. On 5 September
2001, the Appellate Body informed the DSB that it would not be able to
circulate its report within the 7 September deadline. The Report was
circulated to Members on 8 October 2001. The Appellate Body upheld the
Panel’s overall conclusion that the transitional safeguard measure taken
by the United States with respect to imports of combed cotton yarn from
Pakistan was inconsistent with the ATC. In particular, the Appellate Body
upheld the Panel’s findings that, in taking safeguard action with respect
to imports of yarn from Pakistan, the US: (a) failed to define properly
the relevant “domestic industry” producing yarn; and (b) failed
to examine the effect of imports of yarn from other major suppliers
individually when attributing serious damage to imports from Pakistan.
Furthermore, the Appellate Body concluded that the Panel should not have
considered data which were not in existence at the time when the US
determined that serious damage had been caused to the domestic industry.
It declined to rule on the broader issue of whether an importing Member
must attribute serious damage to all Members whose exports contributed to
that damage and concluded therefore that the Panel’s interpretation of
this broader issue was of no legal effect.
The DSB adopted the Appellate Body Report and the Panel
Report, as modified by the Appellate Body Report, on 5 November 2001.
Implementation of adopted reports
At the DSB meeting on 21 November 2001, the US stated that it had
implemented the DSB’s recommendations and rulings. Specifically, on 8
November 2001, the Committee for the Implementation of Textile Agreements,
chaired by the Department of Commerce, had directed the US Customs Service
to eliminate the limit on imports of combed cotton yarn from Pakistan.
The US indicated that, through this action, effective from 9
November 2001, it had implemented the DSB’s recommendations.
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