Byline: Jim Ostroff

WASHINGTON — The World Trade Organization declared Friday that U.S. quotas on Costa Rican underwear are illegal and must be rescinded promptly.
Although the U.S. could appeal the decision, several trade analysts said this would be counterproductive, given the explicit WTO directives, and the fact the U.S. has numerous other, unrelated cases before the trade group now and would not want to breed animosity by pursuing the underwear case.
The U.S. could ask a WTO appeals board to review the decision, withdraw the quota, or leave the quota in place and negotiate with Costa Rica to pay that nation unspecified compensation.
Crucially, if Friday’s decision by the WTO’s Dispute Resolution Body is followed, underwear quotas the U.S. negotiated with the Dominican Republic, El Salvador, Honduras, Colombia and Turkey after March 1995 could also be overturned.
The U.S. Committee for the Implementation of Textile Agreements claimed cotton and man-made fiber underwear from these nations, as well as Thailand, was causing economic harm to domestic producers. But many U.S. makers protested that this was impossible, since they imported most of this underwear made in plants these firms also operated in the target nations.
The Dispute panel, comprising members from Switzerland, New Zealand and South Africa, issued a report Friday that said the U.S. “violated its obligations under [the WTO’s Agreement on Textiles and Clothing] by imposing a restriction on Costa Rican exports without having demonstrated that serious damage or actual threat thereof was caused by such imports to the U.S. domestic industry.
“The panel,” it concluded, “paid particular attention to the agreements reached by the U.S. with other countries at about the same time it decided to impose the unilateral restriction against Costa Rica.”
Charlene Barshefsky, the acting U.S. Trade Representative, on Friday issued a statement indicating the U.S. would review the panel’s findings and directives.
Anabel Gonzalez, Costa Rica’s director for international trade negotiations, said the panel’s findings vindicated that nation’s contention that the quotas were illegal. Gonzalez, in a phone interview from her office in San Jose, Costa Rica, said the U.S. quotas were imposed “to try to lock all production in the Caribbean Basin region into buying U.S. fabric,” by setting a low quota there, but offering unlimited access if U.S. made-and-cut fabrics are used.
Carlos Moore, the American Textile Manufacturers Institute’s executive vice president, said the panel’s finding and directives were “misguided and mistaken” and urged the U.S. to appeal.