INTRODUCTION

The United States appeals from certain issues of law and legal interpretations in the Panel Report, United States - Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan (the “Panel Report”). The Panel was established on 19 June 2000 to consider a complaint by Pakistan with respect to a transitional safeguard measure imposed by the United States under Article 6.2 of the Agreement on Textiles and Clothing (the “ATC ”) on Category 301 imports of combed cotton yarn (“yarn”) from Pakistan.

On 24 December 1998, the United States filed a request for bilateral consultations with Pakistan, pursuant to Article 6.7 of the ATC, on the proposed safeguard measure. The United States attached to this request its Report of Investigation and Statement of Serious Damage or Actual Threat Thereof: Combed Cotton Yarn for Sale: Category 301 (December 1998) (the “Market Statement”), which formed the basis for the proposed safeguard measure. This Market Statement set out the results of the investigation of the conditions prevailing in the United States’ market for yarn. It defined the domestic industry to be investigated and concluded that increased imports had caused serious damage, and actual threat thereof, to the domestic industry, and that this damage and threat were attributable to Pakistan.

The United States held bilateral consultations with Pakistan in February 1999, which did not result in a mutually agreed solution. Consequently, the United States imposed the transitional safeguard measure at issue in this dispute in the form of a quantitative restriction on Category 301 imports of yarn from Pakistan. The safeguard measure was made effective for one year as of 17 March 1999 and was extended twice, each time for one further year, effective 17 March 2000 and 17 March 2001, respectively.

The Textiles Monitoring Body (the “TMB”) reviewed the matter, pursuant to Articles 6.10 and 8.10 of the ATC, in April and in June 1999. The TMB concluded on both occasions that the United States had not demonstrated successfully that yarn was being imported into its territory in such increased quantities as to cause serious damage, or actual threat thereof, to its domestic industry producing like and/or directly competitive products. Accordingly, the TMB recommended that the safeguard measure introduced by the United States on imports of yarn from Pakistan be rescinded.