Byline: Kristi Ellis

WASHINGTON — As U.S. and Pakistani officials iron out a deal on concessions for Pakistan in return for its support in the fight against terrorism, the World Trade Organization has ruled that the U.S. should rescind quotas on combed cotton yarn imports from Pakistan.
In light of the first retaliatory strikes on Afghanistan on Sunday in the wake of Sept 11., the stakes have risen for Pakistan, as well as the U.S. apparel industry, which imports $1.9 billion in goods from the central Asian nation.
As reported, the Pakistani government has asked the U.S. to temporarily suspend apparel and textile tariffs and quotas on a broad range of products. Sources said announcement of a deal could come as early as today.
Meanwhile, the WTO’s appellate body upheld a finding by the dispute settlement body that U.S. quotas on imports of combed cotton yarn from Pakistan are “inconsistent with the Agreement on Textiles & Clothing.”
The U.S. issued quotas on combed cotton yarn products in March 1999. The restraint order limited imports of Pakistani yarn in the first year to 5.26 kilograms. For 2001, that quota limit rose to 5.915 million kilograms.
But in April 1999, the WTO’s textile monitoring body ruled that the Clinton administration had not demonstrated successfully that the imports had caused serious damage to the U.S. yarn industry.
“We are very disappointed,” said Carlos Moore, executive vice president of the American Textile Manufacturers Institute. “Clearly there is damage. We’ve got yarn company members whose whole profit structure has been diminished by what Pakistan has done.”
According to the ruling, the U.S. should have included the amount of production of combed cotton yarn by vertically integrated producers for their own internal use, which Moore said “flies in the face of common sense.”
The WTO claimed that all combed cotton yarn produced in the U.S. has to be considered, which would add to the quantity of yarn being produced in the U.S and reduces the percentage of yarn that was Pakistani.
“It was a lack of understanding on the part of people who reviewed the case as to how the market works and we believe they are wrong,” said Moore.
Although he said the ATMI plans to consult with the Office of the U.S. Trade Representative about the next step, Moore conceded that any move could be difficult given the current climate and relationship with Pakistan.
Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, said this issue was most likely not a high priority for Pakistan though “it could be helpful.”
“In hindsight now, with Pakistan serving as one of our main allies in the war on terrorism, we can finally let go of this,” Hughes said, adding that she hopes the administration moves quickly to eliminate the quota on combed cotton yarn products.
Hughes called the WTO recommendation a “moral victory,” considering the quota on the yarn was set to expire in March. She noted that combed cotton imports from Pakistan had dropped by nearly 40 percent through July, with Mexico still the number one supplier.
Although the products were never embargoed, Hughes claimed the quotas did have an impact on production.
“Clearly, the quota limitation had an effect on where [importers] sourced products because they looked to countries where there was no quota,” she added.