Byline: Jim Ostroff

WASHINGTON--A World Trade Organization panel this week again must confront a thorny dispute over underwear, following the failure of the U.S. to come to terms with two Caribbean nations.
Negotiators for the U.S. and Costa Rica last Friday failed to even get to proposals on controlling underwear imports, after two days of on-and-off talks. A week earlier, the U.S. and Honduras bandied about some quota proposals, but the negotiations reached an impasse.
These parleys were held at the direction of the WTO's Textile Monitoring Body. The TMB on July 21 ruled unanimously that the U.S.--which has unilaterally imposed quota on underwear imports from Costa Rica and Honduras--failed to show the two countries' shipments caused serious damage to U.S. makers. However, there was a split vote on whether these imports might threaten domestic manufacturers in the future. Since WTO panels are supposed to reach unanimity on all decisions, the TMB directed the three nations to seek a resolution of the dispute and report back to the Geneva-based panel by Aug. 21.
The TMB did find unanimously that the U.S. failed to show damage from nightwear imports from these two nations and directed the U.S. to withdraw these calls. The Clinton administration had not done so as of Monday and reportedly told Costa Rican and Honduran negotiators it might not comply with the TMB directive.
It could not be learned whether any response had been filed by those nations by Monday's deadline.
Trade analysts familiar with WTO operations said Monday that with the continuing stalemate on underwear imports, the two Caribbean nations, together or individually, could ask the TMB to again review the matter and persuade the U.S. to withdraw the quota. Alternately, the U.S. could ask the TMB to sanction at least the underwear action, claiming Costa Rica and Honduras did not bargain in good faith. Of course, these two nations could make the same claim against the U.S.
Another option, according to trade analysts, is for the matter to be sent by the TMB immediately to a WTO Dispute Settlement Body, a three-member, ad hoc panel created to hear major controversies. Since the WTO came into existence Jan. 1, there have been no DSB deliberations. Sources here said such a move could be appealing to these nations since the DSB can actually order the U.S. to rescind actions. On the downside, analysts speculate a DSB decision could take nine to 12 months.
Neither Caroyl Miller, the acting chief U.S. textile negotiator, who led the talks with Costa Rica and Honduras, nor Rita Hayes, a Commerce deputy assistant secretary for textiles and apparel and chairman of the Committee for the Implementation of Textile Agreements, returned telephone calls seeking comment on the trade impasse.

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