Chapter

III Industrial Trade Policies

Author(s):
Naheed Kirmani, Shailendra Anjaria, and Arne Petersen
Published Date:
July 1985
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Trade Trends in Manufactured Products

World output of manufactures rose by 4 percent in 1983, in contrast to a decline of 2 percent in 1982.60 The value of world manufactured exports (in U.S. dollars) increased only marginally in 1983. Export values declined in industrial countries in every major manufacturing category except chemicals and “other semimanufactures.” In the engineering products category, however, a substantial increase was registered for office and telecommunications equipment (16 percent) and moderate increases occurred for road motor vehicles, and household appliances.

Developing countries’ exports of manufactures rose in 1983, and their share in world trade in manufactures increased to 12 percent. They increased their exports of textiles and clothing by 4 percent, and substantially expanded their exports of office machinery and telecommunications equipment (by 26 percent), general machinery (15 percent), household equipment and motor vehicles (10 percent each), and iron and steel (7 percent).

Steel

The steel sector has been under strain during much of the past decade, owing to the existence of over-capacity and sluggish demand.61 World consumption and production of steel declined sharply between 1979 and 1982. The emergence of new steel producers in some of the developing countries, including Brazil, Korea, and Mexico, increased the need for adjustment in some of the OECD countries.

In 1983, a mild recovery took place in the OECD countries as a whole, with consumption and production rising by about 2 percent each, mainly attributable to recovery in North America. Installed capacity continued to decline in the OECD countries but rose in the rest of the world. The rate of capacity utilization in the OECD countries improved marginally to 60 percent in 1983, but employment continued the decline observed since 1974. In the first three quarters of 1984, steel production in the OECD countries was about 12 percent higher than in the corresponding period of 1983. However, the year-on-year increase in the third quarter production was much more moderate, reflecting a slowdown in the growth of steel demand.

The volume of world steel exports rose by 5 percent in 1983; exports of OECD countries expanded by 4 percent, and those of developing countries rose by 14 percent. Steel prices (in U.S. dollars) generally remained weak, owing in part to increasing competition from developing countries. Prices on world export markets were some 10–20 percent lower than Japanese and European Community home market prices which, in turn, were significantly lower than U.S. list prices; in practice, however, list prices in the United States are subject to considerable discounts.

United States

The steel industry experienced very depressed conditions in 1982. Crude steel production fell by 38 percent to less than 68 million tons, the lowest level since 1946. Capacity utilization fell markedly to only 37 percent in the last quarter of 1982. Although the volume of imports declined by 16 percent, the import penetration ratio rose by nearly 3 percentage points to a record of nearly 22 percent. These conditions precipitated substantial layoffs and industry-wide operating losses of about $2.5 billion.

Reflecting the pickup in domestic demand, production rose by 13 percent in 1983 and by 18 percent in the first three quarters of 1984, although growth began to decelerate around midyear. Capacity utilization picked up but was still below 60 percent by the third quarter of 1984. Employment continued to decline and, by the end of 1983, amounted to a little over half of the 1974 level.

The faster increase in demand in the United States compared with other countries, together with the substantial appreciation of the U.S. dollar in the past several years which further weakened the competitive position of the domestic steel industry, resulted in an upsurge in imports. The volume of imports of steel mill products rose by 72 percent in the first eight months of 1984 compared with the corresponding period of 1983, and the import penetration ratio rose by over 6 percentage points to 25.8 percent (Table 19). The increase in imports derived from virtually all suppliers. Imports from the three largest suppliers—Japan, the European Community, and Canada—rose by 48–81 percent. Increases of 20–50 percent derived from Argentina, Brazil, and South Africa, 50–100 percent from Finland, Korea, and Mexico, 200–230 percent from Spain and Sweden, and over 1,000 percent from very small suppliers such as Austria, the German Democratic Republic, and Romania.

Against this background, demands for protection rose sharply in 1982–84. They were formulated both in terms of the need for traditional safeguard measures from “fair” competition and for measures to offset the effects of perceived “unfair” competition arising from alleged dumping and foreign subsidies.

Since 1981, the number of antidumping and countervailing duty petitions filed by U.S. steel producers has increased sharply. The implementation of the Tokyo Round Code on Subsidies and Countervailing Duties and enactment of the U.S. Trade Act of 1979 increased awareness of the possibilities of recourse against “unfair” import competition; at the same time, industry dissatisfaction mounted regarding the operation of the trigger price mechanism (TPM), which had been set up as an alternative mechanism to the filing of dumping and subsidy complaints in the steel sector. The TPM was abolished in January 1982.

The antidumping and countervailing duty petitions investigated during 1982–84 covered a wide variety of steel products from both industrial (mainly European) and developing (mainly Latin American and European) countries. Although several petitions were dismissed on grounds of insufficient evidence of dumping or subsidization or injury, affirmative rulings were made in a substantial number of cases. In a significant number of cases, foreign suppliers limited the volume of steel exports in return for a withdrawal of petitions by U.S. firms. This probably reflects a preference for market-sharing arrangements rather than the uncertain effects of price measures on volumes traded and the risk of new complaints being filed.

A notable example of such export restraints following positive dumping and countervailing determinations was the voluntary export restraint concluded in October 1982 between the Community and the United States, under which the Community agreed to limit, for the period November 1, 1982–December 31, 1985, exports of specified carbon steel mill products to the United States to specified shares of the U.S. market. Based on 1981 data for consumption of the various products, this agreement restricted imports from the Community to around 5½ percent of U.S. consumption of the steel products covered by the arrangement, compared with 9 percent late in 1981. At about the same time, there was a separate, less formal arrangement, through an exchange of letters, under which consultations would be triggered in the event that a market share in the United States of 5.9 percent for Community exports of pipes and tubes was exceeded. The two arrangements together covered about 90 percent of the Community’s steel exports to the United States. The Community made the arrangements conditional on the withdrawal of all antidumping and countervailing duty petitions by U.S. producers against Community suppliers and avoidance of new complaints.

In July 1983, the U.S. President imposed safeguard measures in accordance with GATT Article XIX, in the form of duty increases and global quotas on certain specialty steel products for a four-year period.62 This import relief was granted following a finding by the USITC that imports were a substantial cause of injury to the U.S. specialty steel industry. Similar protection from imports under the escape clause had been given to the specialty steel industry from June 1976 to February 1980.

A new escape clause petition (under Section 201 of the U.S. Trade Act of 1974) covering all imports of carbon and alloy steel, excluding stainless and tool steel, was filed by U.S. firms in January 1984. In June, the USITC issued an affirmative determination of injury, and, in early July, it recommended import relief for five years in the form of higher tariffs and global quotas.

On September 18, 1984, the official steel decision was announced, based on four main elements: (1) reaffirmation of the U.S. commitment to an open world trading system and a determination that protectionist relief for the steel industry under Section 201 of the U.S. Trade Act of 1974, as recommended by the USITC, was not in the national economic interest; (2) vigorous and comprehensive action against unfair trade practices by steel exporting countries; (3) negotiated “surge control” arrangements with countries whose exports had increased rapidly, excessively, and unfairly, to the detriment of the U.S. economy; and (4) a steel import stabilization framework in which comprehensive action against unfair trade practices could be expected to result in a moderate and stable import share of the U.S. steel market and provide the domestic industry time to undertake adjustment, modernization, and strengthening of its competitive position.

The specific actions under the new steel policy were based on the conviction that “unfair” trade practices were the preponderant source of the injury to the domestic steel industry. These actions included, inter alia, negotiation of bilateral arrangements with suppliers, consultations with trading partners to eliminate trade distortive practices, monitoring of efforts by the U.S. steel industry to adjust and modernize, and examination of domestic tax, regulatory, and other policies which hindered such efforts. The administration expected the return to “normal” market forces and “fair” trade represented in the new steel policy to result in a “market-determined” import penetration ratio of approximately 18½ percent, excluding semifinished steel.

In October 1984, the President was given legal authority to enforce bilateral arrangements with foreign steel suppliers as part of the steel provisions under the Trade and Tariff Act of 1984. The authority was provided for a maximum period of five years, annually renewable, on condition that the domestic steel industry reinvested profits in plant modernization and worker retraining. It was the “sense of the Congress” that implementation of the steel policy would result in a market share for steel imports in the 17–20 percent range. If the policy did not produce satisfactory results within a reasonable period, Congress would consider further legislative action.

Within three months after the steel decision, bilateral agreements, generally covering a period of five years and restricting shares in the U.S. market to specified proportions, were negotiated with seven suppliers: Australia (0.18 percent), Brazil (0.8 percent), Japan (5.8 percent), Korea (1.9 percent), Mexico (0.3 percent), South Africa (0.42 percent), and Spain (0.67 percent). Imports from other suppliers were to be monitored. The 1982 carbon steel agreement with the European Community remained intact. However, trade frictions arose on pipe and tube imports from the Community, which had risen sharply above the levels in the 1982 “understanding,” and, in late November 1984, the United States banned such imports until the end of December 1984. In early 1985, a new agreement for a period of two years was reached with the Community, under which imports of pipes and tubes would be limited to 7.6 percent of the U.S. market, compared with an estimated market share of 14.6 percent in 1984.

Outstanding antidumping and countervailing duties applying to the agreement countries were suspended. Subsequently, the U.S. industry filed 28 antidumping and countervailing duty petitions against eight non-agreement countries (Austria, Czechoslovakia, the German Democratic Republic, Hungary, Poland, Romania, Sweden, and Venezuela).

European Community

Over the five-year period ending 1983, the Community steel market was generally depressed; apparent consumption and crude steel production declined continuously, with the latter reverting to its mid-1960 level. Partly reflecting restructuring efforts, installed capacity has declined steadily since 1980. Employment has fallen markedly and, by the end of 1983, stood at about 63 percent of the 1974 employment level.

Some signs of recovery emerged in 1984, with production rising by an estimated 12 percent in the first three quarters, compared with the depressed level of the corresponding period in 1983; the decisive factor in the increase was a rise in stocks and in exports, rather than a significant upturn in domestic consumption of steel.

The Community has traditionally been a net exporter of steel. The substantial gain in net exports in 1981 was reversed in 1982, improved marginally in 1983, and is estimated to have improved markedly in 1984. Import penetration declined during 1980–81, but rose to 12.7 percent in 1982 and was maintained at this level in 1983.

Since 1980, the Community’s steel industry has been declared to be in a state of “manifest crisis,” and internal and external measures have been applied to achieve a better balance between supply and demand and to allow an orderly rationalization of production capacity.

The internal measures comprise establishment of production quotas (mandatory or voluntary) and target guide prices for a number of steel products. The quotas are determined quarterly on the basis of the current situation and prospects and take into account the objective of rationalizing capacity in the medium term. Since the inception of the system, the range of products under mandatory quotas has been broadened, its coverage has been widened to both production and deliveries, and its application has been extended to the currently agreed expiration date of December 31, 1985.

In 1983–84, the internal measures were strengthened by, inter alia, the introduction of requirements for production certificates and accompanying documents for deliveries within the Community, the introduction for some products of a system of minimum prices in addition to the target guide prices, sanctions against transactions below the minimum prices, and the introduction of the payment of a deposit which would be retained should underpricing or overproduction be ascertained. An examination of the medium-term outlook by the Commission in March 1983 indicated that, up to 1985, surplus production capacity for crude steel was expected to be on the order of 56–58 million tons, and that for finished products on the order of 48–50 million tons.

The Community also operates a code on state aids to the steel industry, which aims at progressively phasing out state aids over the medium term so that normal market conditions may be restored without recourse to distorting subsidies. The aids code, adopted in 1980 and substantially strengthened in 1981, calls for the termination (with certain exceptions) of operational aids by the end of 1984 and of general aids by the end of 1985. Aids can be granted only to enterprises engaged in restructuring programs leading to capacity reductions, and in proportion to the restructuring efforts. Further, aids had to be notified to the Commission by September 30, 1982, and authorized by July 1, 1983. The number of cases submitted to the Commission were 23, 95, and 27 in 1981, 1982, and 1983, respectively; in 1983, the Commission rejected 9 cases.

In accordance with the timetable laid down by the code, the Commission gave its final decisions on June 29, 1983 on member states’ proposals for steel aid and the corresponding restructuring plans. It determined that, in all important cases, these plans were sufficient “neither to restore the viability of the undertakings concerned by 1986 nor to achieve a general reduction of capacity of sufficient magnitude to enable the industry as a whole to recover the minimal degree of utilization capacity necessary to make it viable.”63 Consequently, the Commission made its decisions on the aids subject to further restructuring and extended the period for submission of member states’ final plans to January 31, 1984. The Commission required minimum additional capacity reductions of 8.3 million tons, bringing the total capacity reduction during 1980–85 to at least 26.7 million tons (Table 20), in line with the original objective of reducing capacity by 30–35 million tons by the end of 1985. The Commission decisions contained a number of provisions to ensure that aid was used only for its authorized purpose, and that it did not result in unwarranted distortions of competition. In view of the difficulties of some members, the deadline on operational aid was extended from end-December 1984 to end-December 1985.

Complementing the internal measures is a system of external measures aimed at maintaining traditional trade flows and import price monitoring. This takes the form of bilateral arrangements with the main foreign suppliers to regulate import volumes, or a basic import price system.

The bilateral agreements are negotiated annually, based on expected domestic consumption and in reference to 1980 import levels. Under the arrangements, import volumes were set at 12.5, 9, and 12.5 percent below the 1980 import level in 1981, 1982, and 1983, respectively. The number of bilateral agreements has been steadily increased, and totaled 15 in 1984, covering 75–80 percent of the Community’s total imports.64 The import volumes negotiated for 1984 were about the same as in the 1983 arrangements. Some of these arrangements include a “triple clause” provision dealing with staggering imports over the year, geographical distribution among the Community members, and breakdown of imports by product. Monitoring was strengthened in 1983–84 to ensure compliance with the triple clause.

The basic import price system applicable to non-agreement countries sets floor prices which, if not observed, can lead to dumping actions against the foreign supplier. In 1983–84, a system was set up to collect and transmit import data so that the Commission, the member states, and the domestic industry could assess import trends speedily and, if necessary, initiate antidumping measures. Under the bilateral arrangements, foreign suppliers may provide “discounts” (of up to 4–6 percent) on basic import prices.

Canada

Major investments and modernization of plants undertaken in the last two decades have made the Canadian steel industry highly competitive. Apparent consumption and production declined in 1982, but recovery began in 1983 and strengthened in 1984. Most Canadian steel exports are to the United States, while the latter supplies a major share of Canadian imports; thus, the North American market is highly integrated.

Canada does not maintain quantitative restrictions on steel imports. Antidumping and countervailing duty investigations increased during 1983–84. In the period October 1983–September 1984, definitive antidumping duties were imposed on carbon and alloy steel plate (Belgium, Brazil, Czechoslovakia, the Federal Republic of Germany, France, Korea, Romania, Spain, Sweden, South Africa, and the United Kingdom), steel beams (Belgium, Korea, and the Federal Republic of Germany), and carbon steel welded pipe (Korea).

Australia

In May 1982, the Government requested the Industries Assistance Commission (IAC) to investigate whether assistance should be accorded the steel industry. In August 1983, despite a negative report by the IAC, the Government announced a five-year assistance package for the industry, commencing January 1, 1984. The main element was the introduction of sliding-scale bounties on four items produced and sold in the domestic market, representing about 26 percent of domestic production for this market. The ceiling on bounty payments was initially set at A$72 million a year, with that for individual bounties being adjusted in line with domestic steel price movements. The bounties were complemented by a safety mechanism providing for a review of assistance needs if the local industry share of the domestic market in eight specified product categories fell below 80 percent or rose above 90 percent. In the first four months of 1984, four of the eight monitored product categories had fallen below 80 percent and four had exceeded 90 percent. Thus far, the only change in the scheme owing to this deviation from target levels has been the withdrawal of developing country preferential treatment for Korean exports of hot-rolled steel strip and plates. The assistance package also introduced general limits on imports of steel products from developing countries at preferential rates of duty; imports from these countries exceeding the average volume of imports during the five years ended June 30, 1983, would attract general rates of duty. Finally, the package provided for the introduction of a “fast track” dumping mechanism for steel products.

Textiles and Clothing

Recent Trade Trends

World output of textiles and clothing recovered in 1983. In the industrial countries, production of textiles rose by 2½ percent and that of clothing by 1½ percent, in contrast to the declines in 1982. In the developing countries, output of textiles rose by 2½ percent and of clothing by 7½ percent, based on the UN production index for the first nine months of 1983.

World exports of textiles (in U.S. dollars) remained virtually unchanged in 1983, compared with a decline of 7½ percent in 1982. Exports of industrial countries declined, but those of developing countries increased, and their share in world exports rose by 1 percentage point to 25 percent in 1983. Industrial countries’ share of world imports rose somewhat to 56½ percent in 1983. Imports rose strongly in the United States (15 percent) and Canada (24 percent) but declined, for the third consecutive year, in the European Community and Japan (Table 21).

World exports of clothing (in U.S. dollars) rose by 1½ percent in 1983, in contrast to a decline in 1982. Exports of industrial countries declined, and those of developing countries rose, as did their share in world exports, to 42 percent. By contrast, the share of industrial countries in world imports rose again in 1983 to 76 percent. Imports rose strongly in the United States (19 percent) and Canada (23 percent) but declined in the Community (by 4 percent) and Japan (18 percent).

Volume estimates indicate that world trade in textiles and clothing taken together increased by around 6 percent in 1983, in contrast to the stagnation in 1982. Growth in industrial countries’ import volumes accelerated from 1½ percent in 1982 to around 7 percent in 1983. U.S. import volumes, in particular, accelerated sharply from 4 percent to 21 percent in 1983. Imports into the Community, which had stagnated in 1982, increased by about 4 percent in 1983, while those into Japan declined by around 8 percent.

Multifiber Arrangement

Over the past 25 years, trade in textiles and clothing has been regulated under international agreements. Following the Short-Term Arrangement Regarding International Trade in Textiles (October 1961–September 1962), and the Long-Term Arrangement Regarding International Trade in Cotton Textiles (October 1962–73), the Multifiber Arrangement (MFA) came into existence as a “temporary” derogation from normal GATT rules. The MFA’s stated objectives are to achieve the expansion and progressive liberalization of world trade in textile products, while at the same time avoiding disruptive effects in individual markets and in individual lines of production in both importing and exporting countries. The original MFA (1974–78) was succeeded by MFA II (1978–81) and extended in December 1981 by MFA III (1982–July 1986). By mid-1984, there were 42 participants in the MFA.65

The MFA envisages essentially two types of restrictions: (1) those under Article 3, which permit bilateral or unilateral restrictions as a result of market disruption, and (2) those under Article 4, which provide for bilateral agreements to eliminate the risks of market disruption. In effect, these Articles provide for a volume growth norm of at least 6 percent annually in export categories restricted under the MFA for more than one year. The “flexibility” provisions of the MFA refer to provisions that permit switching between individual quota categories (“swing”), carryover of unutilized quota to the following year, or borrowing (“carry forward”) of next year’s quota. The December 1981 protocol of extension of the Multifiber Arrangement (commonly known as MFA III) allows, on a bilaterally agreed basis, a growth rate lower than 6 percent in “exceptional” cases, and the possibility of stricter terms of access for “dominant” suppliers and of additional safeguard action (with compensation) in the event of sharp and substantial increases in imports within the agreed quotas. In addition, there are various provisions relating to restraints on exports of small suppliers, importing countries with small markets whose “minimum viable production” may be threatened, special consideration for cotton-producing exporting countries, and problems of circumvention caused by transshipment or rerouting of exports.

Restraints under the MFA have been applied almost exclusively to products from developing countries. Table 22 lists the 80 bilateral agreements in effect in mid-1984 under Article 4 of the MFA. Under MFA III, the number of bilateral agreements increased in relation to MFA II. Most bilateral agreements continued to be multiyear agreements, and 12 of them were valid beyond 1986.

A recent GATT review of operations so far under MFA III indicates that restraints were generally more extensive and more restrictive, compared with MFA II. The product coverage of the bilateral agreements tended to be more comprehensive, and, in a large number of agreements, growth or flexibility provisions, or both, were applied more restrictively. In particular, in all agreements concluded with major suppliers (Hong Kong and Korea), and in most agreements concluded with Eastern European suppliers, the growth and flexibility provisions were lower than in previous agreements. There was also greater recourse to unilateral measures under Article 3 of the MFA, particularly in 1983–84. In restraining imports under the MFA, most importing countries had extensive recourse to provisions relating to “exceptional circumstances,” or “minimum viable production.” It is difficult to determine conclusively whether this was attributable to a change in economic factors relevant to trade in textiles and clothing, or to a change in attitudes of governments toward the utilization of the MFA; a combination and interaction of both factors was probably at work.

The brunt of the more severe application of MFA provisions has been borne by developing countries, some of which have had their production and marketing adversely affected, even though the MFA explicitly recognizes the need for developing countries to receive special treatment. Against the background of a difficult world economic environment, MFA III may have contributed, on an aggregate basis, to the orderly development of world trade in textiles and clothing and the increased export earnings of developing countries, particularly if it is assumed that, in the absence of MFA III, more severe and uncoordinated unilateral restrictions would have been imposed by the importing countries. However, no headway has been made in the objective of achieving reduced barriers and progressive liberalization of world trade in these sectors.

GATT Study

The major GATT Secretariat study on textiles and clothing in the world economy (GATT, 1984c) notes that textile industries have played a key role in the initial industrialization process in most countries, and the pattern has been for new suppliers to successfully challenge countries further up the development ladder. The transition process has not been smooth for the textile and clothing sectors in the developed countries, owing to the lack of sufficient structural flexibility and to the fact that these industries were large employers concentrated in particular geographic regions with work forces having special characteristics, as well as because the slow growth of world consumption added to the difficulty of making room for new producers.

The GATT study observes that the concept of “market disruption” was introduced in the 1960s as a basis for controlling “low wage” imports into industrial countries. The market disruption concept in a special international trade regime for textiles and clothing sanctioned by the GATT implied that a potential (rather than actual) injurious increase in imports was sufficient to justify additional restrictions; these could be applied on a discriminatory rather than an MFN basis, and the existence (size) of a price differential could be used to determine the need for additional restrictions.

Over the past three decades, while intra-industrial country trade in textiles was liberalized, the scope of nontariff restrictions against developing countries continued to expand. In the developing countries, with certain important exceptions, tariffs on textiles and clothing remained high and unbound and quantitative restrictions continued to be applied on infant industry grounds or for balance of payments purposes.

The study observes that the adoption of labor-saving automation has helped restore comparative advantage to the developed countries in many types of textiles. Despite their relatively strong competitive positions, the synthetic fiber and textile industries in the developed countries have continued to be active supporters of the MFA. The synthetic fiber producers sell more than 80 percent of their output to domestic textile firms, which in turn sell more than 80 percent of their output in their own domestic markets; both industries are thus affected by changes in the level of imports of clothing and household furnishings. Synthetic fiber and textile producers in developed countries have argued that import restrictions in developing countries keep them reliant on domestic sales.

In designing future trade policies for textiles and clothing, the argument of the uniqueness of the competitive challenge facing textiles and clothing is less defensible than in the 1930s or the 1950s. The study suggests that the two principal criteria used in the past to justify a separate trade regime were the unequaled challenge posed by “low cost” imports, and the crucial importance of employment and production in the two industries in overall economic activity. The first point would be difficult to argue in the 1980s, as a number of developing countries have become competitive in a wide range of manufactured goods (footwear, ships, radios, televisions, other light consumer goods, steel, and other manufactures) for which special GATT rules do not exist. Moreover, several advanced developing countries are also subject to pressures from “low cost” imports. On the second criterion, the importance of the textile and clothing sectors in the developed countries has declined steadily since the 1950s. By 1980, the two sectors together contributed less than 3 percent to total employment and around 1.5 percent to output in the United States and Western Europe (Table 23).

The study concludes that trade policy officials face essentially the same general issues in dealing with textiles and clothing as they do in dealing with several other tradable goods industries, and that

[t]he fundamental issue is structural adjustment, that is, the way in which economies respond to the pressures for changes in the patterns of production and trade that are inherent in the process of economic growth. In many respects, the structural adjustment problem confronting the textiles and clothing industries in the developed countries is the prototype for structural adjustment in general. Future policy decisions regarding these two industries will be a key test of the developed countries’ approach to structural adjustment.66

United States

Clothing imports, accounting for just over three fourths of total imports of textiles and clothing, grew in 1983 (19 percent) at more than double the rate of the previous year. The marked acceleration reflected both the recovery in consumer expenditure and the continued strength of the dollar. Similarly, textile imports increased by 14½ percent, in sharp contrast to the 1982 decline of 7 percent. Textile and clothing exports continued to decline in 1983, for the third consecutive year for textiles and the second consecutive year for clothing. The combined trade deficit for textiles and clothing jumped by $2½ billion, to $10½ billion, of which $9½ billion was in clothing. In 1984, imports of textiles and clothing grew further by 32 percent. This upsurge triggered intense protectionist pressures and a number of import measures were taken.

In December 1983, to determine the existence of a threat to the market or any disruption of it, internal criteria67 were announced for reviewing imports of certain textile or apparel products from particular sources. About 120 “calls” were made on supplying countries in the following year. Although the number of actual calls was well below that implied by automatic application of the internal criteria, it represented a marked increase in recourse to calls, compared with the previous year.

Effective September 7, 1984, new rules of origin were introduced governing imports of textiles and textile products, to prevent “circumvention or frustration of multilateral and bilateral agreements” and to “facilitate efficient and equitable administration” of the U.S. Textile Import Program. These were published as “Customs Service Regulations on Textiles and Textile Products” (49 Fed. Reg. 31248, August 3, 1984). Under these rules, an article’s country of origin is determined (1) when it is wholly the growth, product, or manufacture of the concerned country, or (2) when it consists in whole or in part of materials originating from another country, but meets a double requirement: first, the manufacturing or processing in the concerned country is substantial compared with that occurring in the original country, and second, the manufacturing and processing is so substantial that the article can be considered new and different from the original. The specific (and nonexhaustive) list of manufacturing and processing activities which do not confer origin includes (a) simple combining or packaging; (b) joining together by sewing, looping, linking, or other means of attaching otherwise completed articles; (c) cutting or separating materials already marked for the purpose; and (d) processing, such as dying, printing, showerproofing, superwashing, or other finishing operations. To determine whether substantial manufacturing and processing has occurred, a comparison is made between the article before and after such manufacturing and processing. The criteria for this include the extent of material, labor, and other direct processing or manufacturing costs; the time, complexity, and skill or technology involved in the manufacturing and processing operation; and the physical change of the article at each stage. Criteria to determine whether a new or different article has been made include changes in commercial identity, essential character, and commercial use. This information must be provided in a declaration accompanying the relevant shipment, so that U.S. Customs can make a determination on origin.68

The United States maintains bilateral agreements with 19 countries under Article 4 of the MFA; 18 represent renewed agreements under MFA II, while one (Uruguay) was concluded for the first time (Table 22). An agreement was negotiated with China in mid-1983, which superseded unilateral restrictions imposed in January 1983 against imports of textiles and textile products from China. A consultation agreement is maintained with Egypt. Bilateral agreements are also maintained with two nonparticipants in the MFA (Mauritius and Taiwan*). Most of the agreements are comprehensive in nature and include all MFA categories; eight agreements have termination dates beyond 1986. In comparison with MFA II, bilateral agreements under MFA III in some cases moved away from aggregate and group limits to individual product limits. Agreements with the dominant suppliers (Hong Kong and Korea) were tightened. The provisions of other agreements were generally at or above the MFA norms, except for wool categories.

The bilateral agreements contain consultation provisions under which unrestrained products may be exported without restraint, but procedures are included under which the United States can seek restraints. Based on notifications to the GATT’s Textile Surveillance Body (TSB) under Article 4 of the MFA, over 100 consultation calls were made pursuant to the specific consultation provisions contained in these agreements in the period January 1, 1982–August 3, 1984; most of the notifications pertained to 1984. Consultations were requested with 13 exporting countries and areas; most took place with Hong Kong, Korea, and China. Of the 89 new restraint limits set, approximately half were agreed bilaterally. Separately, 12 unilateral measures were notified to the TSB in the same period under Article 3:5 of the MFA with respect to certain imports from 7 countries;69 they were replaced by bilaterally agreed solutions with 4 countries.

In 1984, U.S. firms filed countervailing duty petitions covering a wide range of textile products imported from 13 countries;70 the petitions are under investigation by the U.S. Department of Commerce.

The measures taken in 1983–84 have alarmed trading partners, especially developing countries, because they are seen as a reflection of a tightening of U.S. policy. The new rules of origin especially have generated strong protests by trading partners at the GATT, because of the increased complexity and uncertainty associated with the trade regime and the feared adverse consequences on “legitimate” trade and efficient resource allocation.

European Community

During 1981–83, the textile and clothing sectors faced generally depressed domestic demand conditions, and output declined continuously. Imports of both textiles and clothing continued to plummet in this period (Table 21). Exports also declined, albeit at a slower rate. As a result, the trade deficit for clothing was reduced by $0.62 billion to $3.74 billion in 1983, while the trade surplus in textiles improved marginally to $1.58 billion.

During discussions on MFA III, the Community was concerned, inter alia, with two aspects—the market access enjoyed by the “dominant suppliers,” and the need for an “antisurge procedure” to prevent sharp and substantial increases in imports within quotas. While these concerns were reflected in the provisions of MFA III, the Community made its acceptance of the 1981 Protocol of Extension conditional on the negotiation of satisfactory bilateral agreements. Such negotiations took place through most of 1982, and agreements under the 1977 Protocol of Extension remained operative in this period. During 1981–82, modifications were made to 13 bilateral agreements operative under the 1977 protocol, generally involving new restraints on clothing imports into individual Community member countries.71

The Community maintains 23 bilateral agreements under the MFA, in addition to agreements with Bulgaria, Haiti, and China (Table 22).72 Agreements are maintained with eight other countries73 in the context of preferential arrangements. The Community took several safeguard measures against imports of certain textile products from Turkey in 1982–83, some of which were applicable only to imports of some Community members. Some members maintain quantitative restrictions on imports from those state-trading countries with which the Community has no bilateral textile agreements.

Bilateral agreements under MFA III are all effective January 1, 1983 through December 31, 1986. With the exception of the agreement with Egypt (which covers cotton products except yarn), all MFA products are covered by these agreements. The pattern of the restraints varies considerably in the different agreements; some products have been liberalized in several agreements, and new restrictions have been imposed on others. Agreements with dominant suppliers (Hong Kong, Korea, and Macao) have been tightened. In other agreements, growth rates for most restrained products, particularly “sensitive” categories, are lower than 6 percent, and also lower than in the previous agreements; in several cases, however, increases in base levels, together with the growth rates, provide compounded growth higher than 6 percent. Flexibility provisions are generally the same as in the previous agreements, except that their cumulative use is set at lower levels than in previous agreements for the three dominant suppliers. Acute and exceptional circumstances in the Community’s market have been cited as the reasons for providing less than 6 percent growth rates and less than 7 percent swing.

Categories not subject to specific restraints are subject to the consultation procedure and are said to be “in the basket.” A “call” for consultation may be made if imports of a particular product from the relevant country exceed a specified percentage.74 The bilateral agreements also specify the duration of the consultation period (typically two months) and the level at which exports may be suspended during consultations (typically 25 percent of the previous year’s imports for three months). In the absence of mutual agreement, the new restraint level may be set at the minimum level specified in the agreement (typically 1980 imports, or 106 percent of the previous year’s imports). Growth in subsequent years is subject to consultation, but may not be lower than the highest rate given to third MFA countries with a comparable level of trade. Under the consultation procedure, 28 new restraints (all bilaterally agreed) involving nine suppliers75 were notified to the Textile Surveillance Body in the period January 1, 1983–August 3, 1984. With two exceptions, restraints were set at the member state level for imports into the United Kingdom (10), France (10), Ireland (4), and Italy (2).

Other provisions in the bilateral agreements include adjustments for the sensitive categories in the event of rapid increases in imports of underutilized quotas (the anti-surge mechanism); supplementary quotas on reimports of products after processing (“outward processing traffic”); price clauses (contained only in agreements with Czechoslovakia, Hungary, Poland, and Romania); and adjustment of quotas where circumvention has been established.

Other Countries

Canada maintains 16 bilateral agreements under MFA III (Table 22) and an agreement with Bulgaria. In January 1983, unilateral restrictions were imposed on imports of tailored collar shirts from Indonesia for one year; this measure was superseded by a bilateral agreement between the two countries. New bilateral agreements were negotiated in 1984 with Mauritius and Sri Lanka.

Under MFA III, a bilateral agreement with Japan was not renewed, while agreements were concluded for the first time with three suppliers (Czechoslovakia, Hungary, and Uruguay). Quotas on certain products were liberalized in several agreements, but, in the case of Hong Kong, some liberalized products were subsequently placed under restraint at levels lower than previous restraint levels. In three agreements, some quotas were reduced, while base levels for other products were raised by more than 6 percent. In all agreements except those with Hong Kong, Korea, Poland, and Romania, increases in base levels, together with growth rates, provided for annual increases in access for products under restraint at 6 percent or above. While growth and flexibility provisions were generally set in accordance with MFA norms and were more liberal than those available under MFA II, limitations on the combined use of flexibility were set in several agreements. Two agreements were subsequently amended by introducing restraints on certain products.

Since the implementation of MFA III, based on notifications to the Textile Surveillance Body, consultation provisions have been applied in nine cases, two of which resulted in restraints on trousers and jackets from Thailand, and the remainder in restraints on textile products from Hong Kong.

The Australian textile and clothing industry has experienced sustained import pressure since 1973. Subsequently, extensive restrictions were introduced under GATT Article XIX and now cover most textile and clothing products. Tariff quotas are the principal form of restriction. From 1975 to 1980, domestic clothing production protected by quota rose from about 40 percent to 90 percent of the total, and the proportion of textile production subject to quotas rose from 20 percent in 1974 to 30 percent in 1979.

In April 1980, the Australian Industries Assistance Commission (IAC) concluded that, since the existing level of assistance in the textile and clothing sector was delaying adjustment, its continuation could not be justified in the long run, and reductions in assistance were recommended.

In January 1982, the Government commenced a new seven-year program aimed at permitting a modest amount of trade liberalization. Broadly, the 1980 quota arrangements were maintained, but they allowed for greater flexibility and a controlled increase in imports. Quota increases in each period were determined by applying a quota expansion factor of about 2 percent a year of existing imports and a market growth factor based on advice received from the Textiles, Clothing, and Footwear Advisory Committee. Tariff quotas were applied to a broader range of clothing and household textile products, while import quotas for most yarns and most fabrics were replaced by domestic subsidies. A new preference scheme for developing countries also applied to textiles and clothing, thus giving developing countries the opportunity to raise their share in the Australian market.

In October 1984, the Government asked the IAC to recommend assistance arrangements applicable from December 31, 1988, to examine the suitability of tariff and nontariff protection, taking account of the Government’s desire to encourage restructuring by gradually reducing protection while maintaining specific positive adjustment measures.

Automobiles

Recent Trade Trends

World automobile production experienced a turnaround in 1983. Output rose by nearly 10 percent, in contrast to the recession-induced contraction in the previous four-year period. Industrial countries account for about 85 percent of world automobile production. In 1983, production rose sharply in the United States (32 percent) and Canada (22 percent), and moderately in the European Community (5 percent) and Japan (3½ percent) (Table 24).

In volume terms, industrial countries’ exports of automobiles increased by 6 percent in 1983, with strong growth in the United States (44 percent), Canada (17 percent), and Spain (25 percent). European Community exports rose moderately (3 percent), while Italy experienced a strong increase (17 percent) and the Federal Republic of Germany a decline. Affected by trade restrictions abroad, Japan’s export volume rose by only 1 percent in 1983. Japan remained the world’s largest single exporter, but its share in total industrial country exports in 1983 was 38 percent, compared with 41 percent in 1980.

In value terms, industrial countries’ exports of automobiles and parts rose by 4½ percent to $131.8 billion in 1983 (Table 25). Developing country exports to the industrial countries, consisting mainly of parts exported by Mexico and Brazil, increased by 28 percent to an estimated $2.1 billion. Japan’s passenger car exports rose considerably faster in value (8 percent) than in volume; a contributing factor was that voluntary export restraints induced Japanese industries to shift toward higher-valued products and enabled them to extract “economic rent” by raising export prices.

A prominent development in the world automobile industry in the past several years has been the strong expansion of international investment by Japanese motor companies, especially in North America, and also in a number of developing countries. Protectionism against Japanese exports has played a role in stimulating such investments.

United States

Since March 1981, discriminatory trade restrictions have existed in the automobile sector in the form of “voluntary” restraints by Japan on exports of passenger cars to the United States. The restraints limited exports of Japanese passenger cars to the United States to 1.68 million units in the year ended March 1982 (about 8 percent below their 1980 level). This limit was maintained in the subsequent two years. The restraints were extended for a fourth year (April 1984–March 1985), with a 10 percent increase in the ceiling to 1.85 million units.76

The restraints were introduced against the background of severe difficulties faced by the U.S. automobile industry. Between 1978 and 1980, domestic car sales in the U.S. market fell by 28 percent, U.S. producers shifted from a profit of $5.6 billion to a loss of $4.2 billion, and production and employment were curtailed sharply. Imports from Japan continued to rise rapidly and captured 21 percent of the domestic market in 1980, compared with less than 10 percent five years earlier.

In response to a petition for import relief under the escape clause filed by the U.S. industry in June 1980, the USITC ruled that, while imports were a contributing factor, the “substantial” causes of the industry’s difficulties were a general decline in the demand for automobiles and a switch by consumers toward more fuel-efficient vehicles. The USITC recommended that no restrictive import action be taken. Following the USITC findings, Congress introduced legislation to restrict imports of passenger cars from Japan. The Japanese Government responded by agreeing to restrain exports to the United States.

Consumer demand remained depressed during 1981–82, and U.S. auto sales continued to decline. Meanwhile, the Japanese share of the U.S. market increased further to 22.6 percent in 1982, despite a drop in Japanese car sales. In 1983–84, however, a substantial turnaround occurred and U.S. automobile production, domestic sales, and profits expanded sharply against the background of a marked pickup in consumer demand and continued restraints on Japanese exports. U.S. production rebounded from 5.1 million units in 1982 to 7.8 million units in 1984, and capacity utilization rose from 68 percent in 1981 to 87 percent in 1984. Overall capacity in 1984 remained below the 1979 level, principally because of the permanent closings of many older, inefficient assembly plants, and temporary shutdowns to facilitate retooling and renovation. Employment in the industry also rebounded, though there were some 200,000 fewer employees in 1984 compared with the peak 1979 employment level (930,000 employees). Following four years of losses, profits of the U.S. auto industry on U.S. operations amounted to $5.3 billion in 1983 and an estimated $10 billion in 1984.

The industry has dramatically reduced many of its fixed and variable costs since 1979, thus reducing its break-even level. Labor costs were reduced by cutting both the salaried and hourly work force and increasing productivity. Further, the industry lowered inventory-carrying costs, reorganized major divisions, increased their use of components from outside sources, and made significant gains in quality control. Despite these improvements, there continues to be a production cost advantage in favor of Japanese producers; the estimates of the advantage range from $200 to $2,000 a unit. Based on a comparison of the Ohio-built Honda and a similar Honda built in Japan, the cost advantage of Japanese production is probably between $1,000 and $1,500 an auto. The cost advantage is generally attributed to lower wages and higher productivity of Japanese workers, better management, and exchange rate factors.

European Community

For many years, imports of automobiles from Japan have been subject to formal or informal restrictions, or equivalent measures, at the Community level or the individual member level, or both. Since 1956, Italy has imposed an annual quantitative limit of 2,200 units on imports of Japanese passenger cars. France maintains a de facto stabilization of Japanese automobile sales on the domestic market at about 3 percent of total sales. Japanese import penetration in the United Kingdom has been maintained below 11 percent on the basis of understandings existing since 1980 between the industries of the two countries. Japan has periodically provided the Benelux countries with assurances of moderation in the growth of car exports and, for 1983, provided a “forecast” of such exports to Belgium.

Since early 1981, the Community has exercised surveillance on imports of certain motor vehicles originating in Japan. Automobiles are among the ten products included in the three-year voluntary export restraints agreement reached in 1983 between the Community and Japan; the agreement calls for moderation in the growth of Japanese automobile exports to the Community, without a specific limit.

In 1981, the Commission observed that, while the economic recession following the second oil shock had aggravated the problems of the Community’s auto industry, the fundamental source of its difficulties was its slow response to technological change. The Commission proposed that a Community policy and strategy be pursued in the auto sector with a view to effectively supporting the industry’s restructuring efforts. Its guidelines placed priority on strengthening the internal market and coordinating and promoting research and development. At the same time, cooperation would be sought with Japan to reduce the trade imbalance.

With regard to strengthening the internal market, measures are being taken or formulated to (i) reduce the wide divergence in prices charged in different member states,77 and establish conditions to be fulfilled by selective distribution systems under Community competition law; (ii) harmonize technical and safety standards for cars; and (iii) abolish barriers and restrictions on the free movement of vehicles within the Community.

Canada

Since 1981, imports of passenger cars from Japan have been restricted by “voluntary” export restraints by Japan, similar to the Japan-U.S. arrangement. These restrictions were motivated by difficulties facing the automobile industry as a result of the economic recession and the rapid growth of Japanese imports, and by fears that the Japan-U.S. restraint arrangement could divert exports to Canada.

In June 1981, Japan announced that exports of passenger vehicles to the Canadian market from April 1, 1981 to March 31, 1982 were “forecast” to be 5.8 percent below the previous year’s level, implying a limit of 174,213 units. Difficulties in negotiating restraints for the second year prompted a tightening of border checks and clearance delays for Japanese exports at Canadian customs. In response, Japan announced that its exports would not exceed 79,000 units in the period January 1, 1983–June 30, 1983. A limitation to 202,600 units for the period January 1, 1983–March 31, 1984 was subsequently announced. For the period April 1, 1983–March 31, 1984, such exports were limited to 153,000 units. For the period April 1, 1984–March 31, 1985, the ceiling on Japanese automobile exports was increased by 11 percent to 170,400 units.

In 1983, the Canadian Government commissioned a committee of eight representatives of Canadian manufacturers and the Auto Workers Union to report on the future of the automotive industry. The committee’s report recommended, inter alia, adoption of local content rules with a view to reaching a ratio of 60 percent by 1987 for foreign cars whose sales exceeded a specified number; change in the purchase tax structure, which was considered to currently benefit imported models; and duties on imported cars from developing countries enjoying duty-free privileges. The committee also recommended the negotiation of an automotive pact with Japan, similar to the U.S.-Canada Automotive Agreement of 1965.

Demands for local content rules have not been implemented but are being kept under review. The Canadian Government has encouraged Japanese investment in Canada’s automotive sector, and some Japanese firms are believed to be considering establishment of automotive assembly plants in Canada. The Japanese Government has resisted linking the issue of its export restraints with the issue of investment.

Shipbuilding

Recent Trade Trends

The shipbuilding sector continues to face severe problems of excess capacity. Owing to government subsidies and aid programs, capacity in traditional producing areas has been unable to adjust sufficiently to a dramatic shift in comparative advantage to Japan and newly emerging producers. The outlook for a recovery in demand in the short term is not bright.

Production data are presented in Table 26. The share of Community producers fell from over one fifth in the late 1970s to below 15 percent during 1980–83. Conversely, Japan’s share increased from one third in the late 1970s to about one half in the early 1980s, reflecting a rapid restructuring of its shipyards. There is an informal understanding that Japanese shipyards will limit their share of total production to 50 percent in terms of compensated gross tons. The share of the rest of the world has increased considerably, reflecting in particular the rapid rise of Korea as a major producer. The shifts in competitive positions are even more marked in terms of new orders (Table 27).

Industrial countries are coordinating their efforts to modernize the shipbuilding industry and reduce installed capacity under the auspices of the OECD Working Party on Shipbuilding. The OECD General Guidelines for Government Policies in the Shipbuilding Industry and the General Arrangement for the Progressive Removal of Obstacles to Normal Competitive Conditions in the Shipbuilding Industry were revised early in 1983 and aim to gradually reduce assistance measures that distort trade and discourage capacity adjustment, such as national aids, subsidized export credits, and discriminatory government procurement practices. The OECD Working Party’s 1981 understanding on export credits for ships remains unchanged.

European Community

The Fifth Directive on shipbuilding, adopted in 1981, establishes a Community discipline for the granting of direct or indirect state aids to prevent distortions of competition which may result from uncontrolled state intervention and to ensure that public aid provides support for the necessary restructuring. The reduction in capacity and the phasing out of aid are to be achieved according to a varying timetable for each member state in the light of individual circumstances. The application of the Directive has been extended from the end of 1984 to the end of 1986.

In its 1983 review,78 the Commission considered that the Fifth Directive had worked reasonably well with regard to rationalization and the degression of aids, but that the initial emphasis on quantitative aspects needed to be redirected to the qualitative aspects of improving competitiveness and viability. The Directive has been less effective regarding indirect aid (e.g., aid to shipowners) and stronger disciplines are needed in this area. The implementation of the Directive has enabled Community shipyards to maintain a minimum work load. Restructuring has differed among members both in the quantity and the nature of capacity reduction. In some cases, this has been achieved by shorter working hours rather than manpower cuts; in others, production capacity has been mothballed rather than dismantled. Not all member states have put into effect overall restructuring plans to eliminate the least viable shipyards. Generally speaking, restructuring has been insufficient, particularly in qualitative terms, and the competitiveness of the Community shipyards has not been substantially improved. Some member states consider that a threshold has been reached regarding capacity reduction, which cannot be readily crossed in view of social objectives, particularly employment.

On February 23, 1983, the Commission adopted a communication on the policy guidelines for restructuring the shipbuilding industry, which stressed that the prolonged crisis in the industry called for renewed efforts to revive its efficiency. It recommended that measures focus on (i) modernization, rationalization, and optimum use of the work force; (ii) technological improvements and product innovation; and (iii) further standardization, research and development, and greater cooperation with Community shipowners.

In examining the competitiveness of the shipbuilding industry, the Commission considered that, compared with principal foreign competitors, the Community industry was less flexible in adapting to technological change; overmanning in the shipyards also added to costs. Regarding material inputs, the Community industry enjoyed less upstream integration and component standardization, resulting in higher component prices. Hourly labor costs differed substantially between member states; average basic wage scales were not much higher than in Japan, but social security charges were much higher. Although difficult to quantify, the impact of this difference on ship prices may be around 5–10 percent.

Japan

Under the Basic Stabilization Plan for the shipbuilding industry, capacity was reduced by 35 percent from 9.8 million compensated gross register tons (CGRT) in fiscal year 1979 to 6.2 million tons in 1982, and has subsequently remained at that level. In response to a temporary revival of demand, the cartel established to allocate new ship orders between participating ship-yards (the Designated Shipbuilding Enterprises Stabilization Association) was abolished in April 1982. At the same time, the Japanese Government also discontinued interest rate differential subsidies for new shipbuilding projects. With a renewed decline in demand, a yard operations adjustment program was introduced with effect from fiscal year 1983. Under this program, the Minister of Transport—in accordance with the recommendations made by the Council for Rationalization of Shipping and Shipbuilding Industries—establishes guidance ceilings for yard operations of the nation’s 33 major shipbuilders on a launching basis. The overall ceiling, set at 4.4 million CGRT in fiscal year 1983, was reduced to 4.1 million CGRT for fiscal year 1984, equivalent to 68 percent of capacity.79 The ceilings were set so as to broadly maintain a share of 50 percent in total world shipbuilding construction. The yard operations adjustment program is likely to be extended in fiscal year 1985.

According to official forecasts, demand for Japanese production of ships will remain weak in fiscal year 1985 but will increase gradually thereafter. The Japanese authorities therefore do not expect any further cuts in production capacity. In view of the considerable rationalization and investment in new technology, they expect Japan to be able to maintain its 50 percent share of the world market, despite the increased exports of Korea and other developing countries.

Other Countries

Production at Korean shipyards has increased rapidly from a very low level in the late 1970s to 1.5 million CGRT in 1983 (10 percent of world production). Korea captured an even larger share of new orders (19 percent in 1983). A further increase in Korean production may be expected over the medium term. Korea has a significant price advantage in shipbuilding, owing in part to its competitive production of steel and its labor cost advantage. Korea is not a member of domestic nonrubber footwear during January–May 1983 was $12.82, about 125 percent higher than the imported f.a.s. (free alongside ship) price.

Footwear

United States

In 1983, the economic recovery led to a surge in consumer spending and a sharp increase in retail sales of nonrubber footwear. Following a decline of 8 percent in 1982, domestic production of nonrubber footwear stagnated in 1983. U.S. exports dropped substantially in 1982–83, while imports rose sharply (Table 28). Taiwan* and Korea are the two largest suppliers, and their share in total imports rose to over 60 percent in 1983. Other important suppliers are Italy, Brazil, and Spain. The gap between the cost of imported and domestic footwear is large. The average factory price of domestic nonrubber footwear during January–May 1983 was $12.82, about 125 percent higher than the imported f.a.s. (free alongside ship) price.

Pressures for protection have intensified in the past two years. The vulnerability of the domestic industry has increased, owing to both the appreciation of the dollar and the removal of protection granted in the past. While orderly marketing agreements (OMAs) with Korea and Taiwan* were in effect from June 1977 to June 1981, U.S. imports of footwear as a proportion of apparent consumption stabilized at around 50 percent. With the expiration of the OMAs, import penetration climbed to 64 percent by 1983. The ratio of imports to domestic production rose from 95 percent to 170 percent between 1980 and 1983. In May 1983, countervailing duty orders were revoked on imports of certain nonrubber footwear from Brazil, India, and Spain, following a determination by the USITC that such an action would not cause material injury to the U.S. industry.

In June 1983, the footwear industry filed a petition for import relief with the U.S. Trade Representative under Section 301 of the Trade Act of 1974, claiming that the industry was being hurt because world footwear exports were being diverted to the U.S. market owing to unfair trading practices abroad. In August 1983, the U.S. Trade Representative rejected the petition. In January 1984, the industry filed a petition for import relief under the escape clause (Section 201) of the Trade Act of 1974. In July 1984, the USITC determined that imports were not a substantial cause of serious injury and did not recommend import relief. The President accepted this recommendation.

In the leather sector, the United States reached a three-year agreement with Japan in 1979 to allow U.S. tanners greater access to the Japanese market. Following unsuccessful negotiations for a new agreement, the United States filed a complaint with the GATT in April 1983. It argued that Japan’s import quotas were inconsistent with the GATT prohibition on quantitative restrictions and that Japan’s failure to publish administrative rulings concerning the quotas was inconsistent with GATT regulations. Following a report by a GATT panel, in May 1984 Japan agreed to make efforts to progressively liberalize import restrictions on leather, with a view to eventual conformity with GATT rules.

European Community

Production of footwear recovered in 1981–82 but declined in 1983 (Table 29). Imports rose by 11 percent in 1983, after two years of relative stagnation. With apparent consumption stagnating, import penetration rose to 32 percent in 1983, against 28.6 percent in the previous year.

The Community maintains a lower tariff (8 percent on leather shoes and 10–12 percent on nonleather shoes) than the United States and Japan. There are no formal quantitative import restrictions at the Community level. Since 1978, the Community has maintained import surveillance, for statistical purposes, on imports of footwear from major developing country suppliers (Hong Kong, Korea, China, Taiwan,* Brazil). While there are no formal restraint agreements, the Community has maintained close contacts with these suppliers, which serve to prevent export levels disruptive to the Community’s market.

Separately, certain Community members maintain informal bilateral agreements with certain suppliers. Ireland80 negotiated bilateral export restraints with Korea in the 1979–83 period. Restrictions are maintained by France and Ireland on imports from Taiwan.*

Pressures for protection have intensified in recent years in some member countries, and industry demands for an arrangement on shoes similar to the MFA have been increasingly voiced; the Community has so far not succumbed to such pressures.

Canada

Since 1977, Canada has maintained restrictions on imports of certain footwear. A global import quota was introduced on footwear, excluding canvas footwear, in 1977. The quota on leather footwear was discontinued in December 1981, but that on nonleather footwear (this time including canvas footwear) was continued for an announced period of three years. The quota provided an annual growth of imports of 3 percent in relation to the base period April 1980–March 1981.

Following a surge in imports in the early part of 1982, the Government reintroduced in July a global quota on leather footwear. In February 1983, tariff reductions were implemented on a number of products to compensate the Community for the imposition of quotas on leather footwear. Import quotas on leather and nonleather footwear were extended, from the original expiry date of November 30, 1984, for an additional 16 months, until March 31, 1986. The extension was intended to allow the Anti-Dumping Tribunal time to complete a new, comprehensive inquiry into the footwear sector.

The annual quotas to November 1985 were to be increased by 3 percent from the previous year; in addition, with effect from December 1984, the price points above which leather footwear was exempt from quotas were lowered to Can$40 a pair for shoes and sandals and Can$67 a pair for boots. In November 1984, the quota extension was reduced to 12 months from the original 16 (the extension would therefore be in effect through November 30, 1985), so the Government could more expeditiously implement any changes in footwear policy arising out of the Tribunal inquiry, which is due in June 1985.

Australia

In 1974, in response to intense import competition, Australia introduced an import licensing scheme under GATT Article XIX for most footwear products. In August 1980, in conjunction with the import liberalization program for the textiles and clothing sector, the import licensing scheme for the footwear industry was replaced by tariff quotas. A seven-year assistance program was introduced with effect from January 1, 1982, in conjunction with the assistance program for the textiles and clothing sector. The program aimed at allowing a modest amount of trade liberalization by broadly maintaining the 1980 quota arrangement, but providing for a controlled increase in imports. The extent of the annual increase will be determined on the basis of a quota expansion factor of 2 percent in addition to an estimated market expansion factor. In October 1984, the Government asked the Industries Assistance Commission to report on what assistance arrangements should apply in the textile, clothing, and footwear industries from December 31, 1988.

Electronics

Following a short period of stagnation in 1982, the electronics industry resumed its impressive output growth to the point of straining existing capacities and promoting strong investment activity in certain areas. The industry mainly benefited from the rapid pace of innovative activity and strong increased demand for computers and consumer electronics. The recovery was mainly concentrated in Japan and North America, while growth in Western Europe remained much lower.

The industrial countries’ exports of electronic products increased by 13 percent to $83.9 billion in 1983 (Table 30). At this level, they constituted about 10 percent of their total exports of manufactures. Exports from the Community and the United States grew by 9½ and 8 percent, respectively, while Japan’s exports expanded by 25 percent.

The industrial countries’ imports of electronic products rose by 12 percent in 1983. Of these imports, the Community accounts for about one half, the United States for about a third, and Japan for about 4 percent. The Community’s share is large because its imports are concentrated in automatic data processing equipment—a rapidly growing import—whereas those of the United States and Japan are diversified. Industrial countries’ imports from the developing countries surged by 28 percent and are dominated by trade between the United States and various Southeast Asian countries. These shipments are mostly electronic parts and consumer electronics.

Protectionist measures affecting electronics have been on the rise and include voluntary export restraints (mainly affecting trade in consumer electronics), restrictive procurement policies (particularly in telecommunications), and government subsidies (to computer industries). Nevertheless, world trade in electronic products expanded substantially in 1983, while trade in manufactured goods (excluding electronics) stagnated.

United States

Orderly marketing arrangements on exports to the United States of color television receivers from Japan, Korea, and Taiwan* expired in 1982. Antidumping duties ranging from 7 to 15 percent were imposed recently on imports of color television sets from Korea. The United States does not maintain quantitative restrictions on imports of consumer electronics.

The U.S. machine tool industry has increased its demands for protection, mainly from Japanese imports. In April 1983, the U.S. Government denied import relief requested by a U.S. manufacturer of numerically controlled machining centers and punching machines.

The 1980 agreement with Japan’s Nippon Telegraph and Telephone Company (NTT), aimed at opening Japan’s telecommunications market to U.S. exporters, was extended for three years from January 1984. In 1983, the two governments accepted the recommendations of the U.S.-Japan Work Group on High Technology, aimed at ensuring mutual access to trade and investment opportunities in high-technology industries, including the elimination of the 4.2 percent tariff on semiconductor imports maintained by the two countries. The United States maintains, for national security, certain restrictions on the exportation and transfer of high technology to certain destinations.

European Community

In February 1983, the European Community concluded a three-year voluntary export restraint agreement with Japan covering ten products (videotape recorders, color television tubes, color television sets, numerically controlled lathes and machining centers, passenger cars, light commercial vehicles, forklift trucks, motorcycles, audio equipment, and quartz watches). Specific quantitative limits are involved only on videotape recorders and color television tubes; Japan has agreed to exercise moderation in exports of the other products to the Community. The agreement on videotape recorders contains both a quantitative limit and a minimum price undertaking; in the first year (1983), such exports were limited to 4.55 million units, including 600,000 knocked-down kits for final assembly in Europe. A ceiling of 900,000 units was set for exports of large-diameter color television tubes. In November 1983, agreement was reached to limit 1984 exports of videotape recorders from Japan to 5.05 million units; the ceiling for kits was raised to 1.1 million units, but remained unchanged at 3.95 million units for finished units. In December 1984, agreement was reached to reduce finished exports of videotape recorders to the Community to 2.25 million units in 1985. The minimum price for videotape recorders was lowered for 1985 to take account of exchange rate changes. Japanese exports of machine tools to the Community have been subject to a floor price system since 1981; the floor price was raised in 1983. The recent evolution of Japan’s exports of the ten products to the Community is shown in Table 31.

In 1982, Hong Kong complained to the GATT about unilateral restrictions by France on imports from Hong Kong of ten products, including in particular quartz watches. In 1984, the Community, on behalf of France, took safeguard measures under GATT Article XIX on quartz watch imports; the measure limits such imports into France to 6.8 million units, of which 4.4 million units is the limit for Hong Kong. The Community raised tariffs on certain high-technology products (compact discs), raising concerns in Japan about protection of “new” industries.81 Pressures for protection in the high-technology area remain high.

To promote the high-technology sector, the Community is placing increased emphasis on research and development. In 1979, a limited research program was begun in information technology, concentrating on microelectronics. This was bolstered at the end of 1982 by the pilot stage of Esprit (European Strategic Program for Research and Development in Information Technology), which involved a nucleus of 15 projects linking 200 research ideas and 638 businesses and universities in the 10 member states. A larger scale, ten-year Esprit program was launched in 1984 with a budget of ECU 1,500 million in the first five years, half of which will be provided by the Community and the rest by European industries. The program aims to lay the foundations for a fully competitive European industry in the next decade. Its priorities are (i) advanced microelectronics (the Community consumes one fifth of world production of integrated circuits but only manufactures 6 percent; the aim is to develop a unified concept of production and quality control of circuits with a very high degree of integration); (ii) advanced information processing; (iii) software technology; (iv) office automation; and (v) computer control in manufacturing.

Costs of Protection

The scope of protection in industrial sectors in the OECD countries has widened since the early 1970s. The OECD (1985) found that between 1968 and 1983 the absolute number of nontariff barriers in OECD countries had quadrupled in the main protected sectors (steel, automobiles, motorcycles, consumer electronics, and textiles and clothing combined). During the past decade, the share of OECD trade affected by discriminatory restrictions rose from 1 to 50 percent for automobiles, from 31 to 73 percent for steel, and from 53 to 61 percent for textiles and clothing.

Several recent studies have investigated the effects of protection in individual industrial sectors, but as noted by the OECD study, existing empirical research concentrates on North America and Australia. In continental Europe, in particular, there has been relatively less interest in promoting analysis of the costs and benefits of trade and trade-distorting domestic measures.

Automobiles

There have been several recent studies on the effects of the voluntary export restraint agreement on passenger cars between Japan and the United States. A 1984 estimate by the Fund staff indicates that the consumer price index for new cars in the United States was 4½ percent higher in 1983 than it would have been in the absence of Japanese restraints. In addition to this pure price increase, the quota induced a shift in car purchases toward larger cars and the installation of additional optional equipment. As a result, the average transaction price of a new car in 1983 was estimated to be 13½ percent higher than it would otherwise have been. The higher basic prices of given models resulting from the restraints are estimated to have cost consumers over $4 billion in 1983. If the quota-induced shift in the mix of new car purchases and the installation of extra equipment are also taken into account, the voluntary export restraint is estimated to have cost buyers a total of almost $12 billion. The study suggests that export restraints have cost U.S. car buyers nearly $24 billion since 1980.

A study by the USITC (1985) on the same voluntary export restraint estimated that the transaction price of a Japanese automobile sold in the United States in 1984 averaged $1,300 more per auto as a result of the restraint than it would otherwise have been. Transaction prices of domestically produced new autos may have increased by $660 on average in 1984 owing to the restraint. The voluntary export restraint cost U.S. consumers an estimated $8½ billion in 1984 and a combined total of close to $16 billion during 1981–84. In the absence of the restraint, Japan’s share of the U.S. market would likely have been 28 percent, compared with the actual 18 percent in 1984; consumers would have purchased an estimated one million more Japanese autos in 1984 in the absence of restraints. The arrangement resulted in an additional 44,000 jobs in the U.S. automobile industry in 1984; the employment gains would be significantly higher if the voluntary export restraint’s effects on gains in employment in the steel industry and in other supplier industries were taken into account. The estimated increase in retail sales of U.S. automobiles brought about by the voluntary export restraint was approximately 620,000 units in 1984, or about 8 percent higher than the level which would have prevailed in the absence of the restraints. Finally, in the absence of the voluntary export restraint, the U.S. trade deficit with Japan in automobiles would have been nearly $2 billion and $4 billion higher in 1983 and 1984, respectively.

Krijger and Mennes (1984) analyzed the consumer effects of trade restrictions in the Community’s automobile sector. Eliminating the Community customs duty of 10.4 percent on non-Community, non-EFTA car imports in 1985 would result in a gain for consumers (assuming they had borne the full costs of the tariff) of about $1 billion in 1982 prices. These gains would derive mainly from a redistribution in their favor from domestic producers and from the government, leaving net welfare gains of $42 million (in 1982 prices). Abolishing quantitative restrictions on imports of Japanese cars in France, the United Kingdom, and Italy would have far greater benefits. In 1982 prices, the increase in the consumer surplus for the three countries together was estimated at $3.7 billion, while the net welfare gains would be more than $1.5 billion.

Textiles and Clothing

The OECD (1985) carried out simulations of import behavior in 1982 and 1983, based on estimated import demand and supply equations for textiles and clothing in the United States and the Community. Comparisons of observed with predicted magnitudes provided estimates of the effects of the implementation of MFA III. The study warns, however, that, because of the long-standing nature of restrictions in these sectors, there is really no benchmark against which to assess the impact of protection accurately. The study concludes that compression of imports from non-OECD sources in 1982 and 1983 was around 10 percent in volume terms. Moreover, after the implementation of MFA I, OECD imports of textiles and clothing became almost totally unresponsive to price signals; at the same time, markups on import prices increased. Deviations from market equilibrium appeared stronger in the United States relative to the Community, and in clothing relative to textiles.

In a study of the U.K. textile and clothing industries, Silberston (1984) suggests that, as a result of relaxing or abolishing the MFA, U.K. landed prices would fall by 5–10 percent. He reports the results of a simulation by Cambridge Econometrics of the effect of such a price drop on the U.K. textile and clothing industries and the economy in general. Abandoning the MFA by 1987 would lead to a 10 percent drop in the price of imports and a 5 percent drop in the price of domestic output. Projections are compared for the years 1983 to 1997 under this scenario and under a base-run assumption of unchanged policies. By 1992, the author concludes that abandoning the MFA would raise imports of textiles and clothing by 7 percent and 5 percent, respectively. By 1992, domestic output of textiles and clothing could be 4 percent and 1–2 percent lower, respectively, than the base-run figures. The effects of liberalization on unemployment were estimated to be minor. For example, employment in the clothing industry in 1992 is expected to be 5,000 less than in the base case (but employment in the base case itself is expected to be nearly 100,000 less in 1992 compared with 1983). Based on 1982 consumption, gains in consumer surplus are estimated to range from £455 million to £950 million for falls in retail prices of 5 percent and 10 percent, respectively, depending on the price elasticity of demand.

Several studies quantify the extent of protection in the textile and clothing industries by examining the value of quota rights in such low-cost suppliers as Korea, Taiwan,* and Hong Kong. Jenkins (1980) measures protection given to the Canadian textile and clothing industries under the MFA by calculating quota charges on 16 products imported from these countries. He finds that the tariff equivalents ranged from 24 to 74 percent, with an average of 40 percent. With regard to welfare and distribution effects of protection on consumers and producers, he finds that in 1979 consumers paid approximately Can$470 million to protect the textile industry, and the net loss to the Canadian economy was approximately Can$107.5 million. The incremental net loss due to the bilateral quotas was Can$86 million.

Using a similar method, Cable (1983) estimates the tariff and quota premium as a percent of total landed price for several clothing categories exported from Hong Kong to selected Community countries in 1981. These range from 29 percent for parkas exported to the Federal Republic of Germany to 68 percent for knitted jerseys exported to the same country. Hamilton (1984) estimates that the average ad valorem tariff equivalent of the MFA restrictions in several European countries is 18 percent, which is similar to the average tariff rate. The combined trade barriers average around 38 percent. The tariff equivalent of the MFA varies markedly between importing countries; Sweden has the highest (31 percent) and Italy the lowest (7 percent).

Steel

As noted in a recent OECD study,82 the complexity of Community policies for the steel industry makes it difficult to assess their impact; although the implications of the Community crisis regime for competition have been discussed intensively, no quantitative analysis of the policy’s overall impact is available. In contrast, the focus of U.S. policy on border protection has made its impact easier to model.

Estimates of the effects of trade restrictions in the U.S. steel sector vary widely because of the different assumptions and methods used in the various studies. A notable study by Crandall (1981) examines the effects of the U.S. voluntary restraint arrangement of the early 1970s and the trigger price mechanism of the late 1970s. He concludes that the voluntary restraint arrangement reduced imports by 15–23 percent and the trigger price mechanism cut them by 40 percent. Average import price increases were estimated at 6–8 percent for the voluntary restraint arrangement in 1971/72, and 9–12 percent as a result of the trigger price mechanism in 1979. The output effects were relatively small (about 3 million tons for both types of measures), suggesting that trade measures were unable to generate additional demand for steel, compared with a macroeconomic stimulus working through higher investment or higher consumer sales. The trigger price mechanism maintained 8,800–12,400 steelworkers’ jobs (2–3 percent of industry employment) that would otherwise have been lost.

U.S. steel companies and their foreign rivals have been the main beneficiaries of protection. Crandall estimates that steel producers received $370–640 million a year extra in rents on existing assets as a result of the trigger price mechanism in 1979; of these rents, 43–56 percent accrued to foreign producers. This highlights the implicit compensation for foreign producers built into certain forms of restrictions. The OECD (1985) study comments that, paradoxically, U.S. protection may have strengthened foreign rivals, notably Japan, but also Europe; protection has probably increased the profit margin on Japanese steel sales in the U.S. market by at least 10 percent, or about $200 million a year, equivalent to half of Japan’s annual expenditure (the world’s highest) on steel research and development.

The U.S. Congressional Budget Office (Schorsch, 1984) studied the effects of a five-year, 15 percent global quota on steel imports proposed in the U.S. Congress (H.R. 5081 and S.2380). The model estimated that the average price of steel consumed in the United States would rise by 10 percent, steel consumption would decrease by 4–5 percent, domestic steel shipments would rise by 4–5 percent, and industry employment would fall by 6–8 percent. The quota would transfer $1.7–4.5 billion to the domestic steel industry in pre-tax profits, and $1.9–2.3 billion to foreign steel producers (assuming the U.S. Government did not try to capture this sum by auctioning off import licenses). The resulting losses in employment and output and the rise in prices in steel-consuming industries, however, would offset the benefits to the steel industry. The effects of the quota would be particularly injurious to steel-consuming export industries, especially as U.S. steel prices were already 20 percent above world prices. If foreign suppliers retaliated by restricting a similar value of U.S. exports, the net effect on U.S. employment and output would be negative and substantial. Finally, the quota would entail efficiency losses of $0.9 billion a year. It would cost consumers (outside the steel sector) $4.3–5.9 billion a year (in 1983 dollars). The study concluded that there was little prospect that the proposed quota would reverse the secular decline in the steel industry, since it did not address the underlying factors that conditioned this decline.

Following announcement of the actual steel decision, the Congressional Budget Office estimated that the expectation of a limit of steel imports to 18½ percent (20 percent including semifinished steel) of the U.S. market would raise domestic steel prices by 7 percent.

Electronics

A recent econometric analysis by the OECD Secretariat of U.S. restrictions on imports of color television receivers from Japan, Korea, and Taiwan* indicates that the 1977 orderly marketing agreement with Japan had no significant effect on the U.S. import demand or supply for this product, mainly because of the strong expansion of imports from nonrestricted sources. The pattern of imports, however, was affected. Japan’s share of U.S. imports fell from 90 to 50 percent during 1976–78, while those of Korea and Taiwan* increased from 15 to 50 percent between the third quarter of 1977 and the fourth quarter of 1978.83

The extension of the orderly marketing agreement to Korea and Taiwan* in 1979 affected both import volumes and prices. First, U.S. import unit values were, on average, 4–8 percent higher in 1979 than they would have been in the absence of restrictions. The restrictions allowed a sharp increase in the markup in U.S. import prices over wholesale prices in the exporting countries, with Japanese producers, in particular, gaining high rents. Although Japanese domestic prices for color television receivers continued to decline, the Japanese export price index for this product rose by 17 percent in the first nine months of 1979, compared with a 1 percent increase in 1978 and a 10 percent decline in 1977. Second, U.S. wholesale prices for color receivers were, on average, 4–5 percent higher in 1979 than they would have been in the absence of restrictions; this increase appears to have been fully passed on to U.S. consumers. Third, the U.S. import volume in the first three quarters of 1979 was 45 percent lower than predicted by the OECD model. Finally, there would have been 1,000–1,500 fewer jobs in the U.S. television industry in 1979 in the absence of restrictions. “Saving” each of these jobs cost U.S. consumers over $60,000 a year. A considerable part of the employment “gain” was due to the creation of job opportunities by Japanese firms in areas where color televisions had not been assembled previously, while employment at existing plants continued to decline.

The OECD study notes that, owing to the lifting of import restrictions in 1982, the color television industry is one of few that have benefited from genuinely temporary protection in recent years. U.S. firms sought to reduce costs by accelerating the transfer of labor-intensive operations to low-wage countries, and the larger firms diversified their activities and sought new growth areas in the electronics industry, mainly in the sale of computer terminals and microcomputers. At the same time, heavy investment in the United States by Japanese firms (the major gainers from protection) made the restrictions largely irrelevant.

Comparing the U.S. restrictions with the Community’s voluntary export restraint on Japanese videotape recorders, the study notes that the U.S. orderly marketing agreement left the increase in prices to the vagaries of the market, while the Community agreement explicitly stipulated (in addition to quantities) minimum prices; the Community measures may be equivalent to the price effect of a 130 percent ad valorem tariff. The study conjectures that the Community restrictions could induce Japanese producers of videotape recorders to use the “rents” accruing to them to invest in “products of the future,” such as digital and high-resolution televisions, further undermining, over the medium to long run, those producers whom the restrictions were intended to protect.

The regional and commodity compositions of world trade in manufactures are presented in Appendix II, Tables 14 and 15.

Information on steel production, capacity, and trade is presented in Appendix II, Tables 16 through 18.

An additional 10 percent ad valorem tariff was imposed on stainless steel sheet and strip in the first year, declining by 2 percentage points in each succeeding year. Stainless steel plate is subject to an additional 8 percent tariff in the first year, declining to 6, 5, and 4 percent in the next three years. Imports of stainless steel rod are limited to 19,100 tons in the first year, 19,700 tons in the second, 20,300 tons in the third, and 20,900 tons in the fourth. Alloy tool steel is subject to a quota of 22,400 tons in the first year, rising by 700 tons in each of the following three years. The U.S. Special Trade Representative was authorized to negotiate orderly marketing arrangements with supplier countries. Agreements were reached with Argentina, Austria, Canada, Japan, Poland, Spain, and Sweden. In response to this action, following failure to reach agreement on appropriate compensation, effective March 1984, the Community took measures to suspend “substantially equivalent” concessions under GATT provisions, by imposing tariff increases and quotas on imports from the United States of methanol, vinyl acetate, burglar and fire alarm systems, and certain sporting goods. Canada also took retaliatory measures in response to the tariff component of the U.S. action, but subsequently suspended the measures following bilateral agreement with the United States.

In 1984. the Community maintained bilateral agreements with Australia, Austria, Brazil (pig iron only), Bulgaria, Czechoslovakia, Finland, Hungary, Japan, Korea, Norway, Poland, Romania. South Africa, Spain, and Sweden. Regulation of imports in the arrangements with the four European Free Trade Association (EFTA) countries is less specific than in the other arrangements. The arrangement with Japan has a special nature.

The actual dates of the successive Multifiber Arrangements are:

MFA I —January 1, 1974–December 31, 1977;

MFA II —January 1, 1978–December 31, 1981;

MFA III—January 1, 1982–July 31, 1986.

Under the criteria, imports would be reviewed when (a) total growth in imports in the particular product/category was more than 30 percent in the most recent year, or the ratio of total imports to domestic production in the product/category was 20 percent or more; and (b) imports from a particular foreign country equaled 1 percent or more of the total U.S. production of that product/category. For countries with which Export Authorization Arrangements had been concluded, calls on each supplier would be made on any product/category when export authorizations in that particular product/category reached 65 percent of the specified maximum formula level (MFL) or, in the opinion of the Chairman of the Committee for the Implementation of Textile Agreements, would exceed the MFL level in the absence of such a call, or if the product was in a category with an import-to-production ratio of 20 percent or more, or in categories with an increase of 30 percent or more.

In March 1985, the rules of origin were modified allowing substantial assembly by sewing or tailoring, or both, of all cut pieces into a garment to confer origin. Imports will be counted against the quota of the country where the textiles last underwent a substantial transformation.

Dominican Republic, Haiti, Indonesia, Korea, Maldives, Peru, and Turkey.

Argentina, Colombia, Indonesia, Malaysia, Mexico, Panama, Peru, the Philippines, Portugal, Singapore, Sri Lanka, Thailand, and Turkey.

See note on p. viii.

The modifications notified to the Textile Surveillance Body concerned new limits on specified imports from Brazil, Egypt (France, Ireland), India (Ireland), Indonesia, Korea (France, Benelux, the United Kingdom, Ireland), Macao (France, Benelux, the United Kingdom, Ireland), Malaysia (Italy), the Philippines (Italy, the United Kingdom, the Federal Republic of Germany), Poland (Benelux, Ireland), Romania (Benelux), Singapore (the United Kingdom, Ireland), Sri Lanka (Benelux, France, the United Kingdom), and Thailand (Benelux, Denmark, France, the United Kingdom).

China became a member of the MFA on January 18, 1984.

Cyprus, Malta, Morocco, Tunisia, Turkey, Portugal, Spain, and Yugoslavia.

In the majority of agreements, the percentages are 0.5, 2.5, and 5 percent of the previous year’s extra-Community imports of Groups I, II, and III, respectively. For the dominant suppliers (Korea, Macao, and Hong Kong), they are lower: 0.2, 1.0, and 3 percent, respectively. For Korea, all categories in Group I are under specific restraint. This procedure is also applicable at the individual Community member level.

Czechoslovakia (1), Indonesia (4), Korea (3). Macao (8), Peru (2), the Philippines (1), Poland (1), Romania (4), and Thailand (4).

In March 1985, the United States announced that it would not seek a further extension of the “voluntary” restraints on Japanese exports of passenger cars to the United States. Subsequently, the Japanese Government announced that, for fiscal year 1985, it would limit exports to 2.3 million units—an increase of about 24 percent over the ceiling for fiscal year 1984.

For example, the untaxed price of a car in Denmark is about half that of the same car in the United Kingdom.

Commission of the European Communities, “Policy Guidelines for Restructuring the Shipbuilding Industry.” COM(83)65 final (Brussels, March 24, 1983).

The data in Tables 26 and 27 are in gross register tons (GRT) rather than in CGRT, as data for new orders were only available for the world as a whole in GRT. Production of ships in Japan in calendar year 1984 amounted to CGRT 6.9 million.

The United Kingdom and Korea have maintained industry-to-industry restraint arrangements since 1979. Ireland and the United Kingdom maintain restraint agreements with Poland.

The increase in duty was carried out in accordance with the provisions of GATT Article XXVIII and will be progressively phased out over three years.

Ibid.

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