WORLD TRADE
ORGANIZATIONWT/MIN(03)/W/2∗
15 August 2003
(03-4245)
MINISTERIAL CONFERENCE
Fifth Session
Cancún, 10-14 September 2003Original:  French
POVERTY REDUCTION:  SECTORAL INITIATIVE
IN FAVOUR OF COTTON
Joint Proposal by Benin, Burkina Faso, Chad and Mali
The following communication, dated 28 July 2003, has been received by the Director-General
from the Permanent Mission of Benin also on behalf of Burkina Faso, Chad and Mali.
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In my letter of 30 April 2003 I submitted to you, on behalf of four countries - Benin, Burkina
Faso, Chad and Mali - the Sectoral Initiative in Favour of Cotton.
The President of Burkina Faso, H.E. Blaise Compaoré, presented this initiative to the WTO
Trade Negotiations Committee on 10 June 2003.
Also, the Special Session of the Committee on Agriculture examined the initiative
(TN/AG/GEN/4) at its meetings of 1 and 18 July 2003.
In view of the importance of this matter for the co-sponsors of the initiative and the need to
find an urgent solution to the very worrying economic and social problems facing the above countries,
all of them cotton-producing LDCs, as a result of the subsidization of cotton production and exports
by certain WTO Members, I would be grateful if y ou would include this item in the agenda of the
Fifth WTO Ministerial Conference as follows:  "Poverty Reduction:  Sectoral Initiative in Favour ofCotton – Joint Proposal by Benin, Burkina Faso, Chad and Mali".
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PROPOSED IMPLEMENTATION MODALITIES
CONTEXT
In connection with the search for lasting solutions to the damage they are suffering as a result
of the agricultural subsidies accorded by certain cotton-producing developed countries, on
31 April 2003 Benin, Burkina Faso, Chad and Mali submitted to the WTO the document entitled
Poverty Reduction:  Sectoral Initiative in Favour of Cotton (TN/AG/GEN/4).
                                                     
∗ The text of the proposed implementation modalities below was also circulated as document
TN/AG/GEN/6.WT/MIN(03)/W/2
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As the objective of the Doha Development Age nda is to develop a fair and market-oriented
trading system, including the reforms to correct and prevent distortions in world agricultural markets,
the African countries most affected by these subsidies, all LDCs, have submitted the sectoral initiative
to the competent WTO bodies with a view to seek ing, with the parties involved and with WTO
Members as a whole, fair and appropriate solutions to the problem.
PROPOSED SOLUTION
As a solution to the above problem, the co-sponsors of the initiative call for the adoption, by
Cancún at the latest, of the following decisions for immediate implementation:
- In Cancún, the establishment of a mechanism to phase out support for cotton
production with a view to its total elimination "early harvest";
- transitional measures in the form of financial compensation for cotton-producing
LDCs to offset their loss of revenue, until support for cotton production has been
completely phased out.
Proposed implementation modalities
Complete elimination of cotton subsidies
The complete elimination of support for cotton production and exportation is unquestionably
the only measure that would enable cotton to fully develop its potential and, in particular, to enhanceits essential contribution to poverty reduction in the countries concerned.
The co-sponsors of the sectoral initiative are aware of the fact that the countries that heavily
subsidize their cotton production, of which there are few, cannot withdraw all of their support
overnight:  they must prepare their producers and promote the necessary domestic adjustments.
The studies that have been conducted indicate that these adjustments should be possible
without too much "suffering", within a reasonable period of time.
This is why the co-sponsors of the initiative advocate the total elimination of all cotton
subsidies over a relatively short period of three years, from 2004-2006.  It could take the form of a
gradual decrease, in equal annual portions, i.e. a reduction by one third (33.3 per cent) per year of allof the cotton support measures.
Thus, by the end of the three-year period, i.e. by 31 December 2006, the cotton subsidies will
have been completely eliminated and the free market for international trade in cotton restored.
In the long-term, in a market economy, these adjustments will be beneficial not only to the
cotton-producing countries of West and Central Africa, which will be able to profit fully from their
comparative advantages in the cotton trade, but also to the countries which have reduced or
abandoned their "uneconomical" production of cotton for other products and sectors where they have
comparative advantages and where they are competitive without having to resort to subsidies.
Transitional compensation mechanism
The proposed compensation mechanism reflects the need to act immediately in what is an
emergency situation for the co-sponsors of the initiative.  Transitional compensation will be linkedand limited to the subsidy reduction period – in other words, the longer the period, the greater the
overall amount of compensation to be paid.WT/MIN(03)/W/2
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The mechanism will serve to compensate cotton producers for the losses suffered as a result
of the subsidies as long as the subsidies exist.  It is in fact only a stop-gap solution in relation to the
benefits that will result from the restoration of the free market.
However, it is a transitional measure that makes sense:  it will enable cotton producers in the
countries affected to maintain their production and it will encourage them to make the necessary
investments to adapt to the evolution of the market and improve their competitiveness.
The beneficiary LDCs will undertake to ensure that the compensation received is effectively
handed over to the local cotton producers' associations which will themselves be responsible for
monitoring the utilization of the funds and ensuring transparency.
More than anyone else, it is the cotton producers or the village groupings in the cotton
growing areas that are in a position to decide how  best to use the funds in order to ensure the
preservation of their asset, cotton, until such time as they can truly benefit from their full participation
in the free international cotton market.
By assuming this responsibility and participating directly in the implementation of the
compensatory mechanism, the local associations will also be given the possibility of building up their
capacity and broadening their experience in self-management.
Calculation and distribution of the compensation
Simple principles are proposed both for the "paying countries" (the countries that subsidize
cotton) and the beneficiary countries (cotton-producing and exporting LDCs suffering losses in export
revenue as a result of the cotton subsidies granted by other countries).
The four following principles are proposed:- First, the annual amount of compensation to be paid must correspond to the estimated
losses suffered, calculated on the basis of a reference period covering three years of
cotton production:  1999-2000, 2000-2001 and 2001-2002.  A recent study, already
mentioned the submission on cotton, estimated the average annual loss in exportrevenue by the countries of West and Central Africa at about 250 million dollars.
This figure corresponds more or less to direct losses.  If indirect losses were included,
i.e. losses suffered by persons living indirectly on cotton production and exports, the
figure would apparently be multiplied by four, bringing the total amount of losses to
approximately 1 billion dollars.
- Second, the above-mentioned amount of the overall compensation would be directly
linked to simultaneous efforts on the part of the countries called upon to contribute to
the compensation fund to reduce their subsidies.  In a nutshell, the decrease in
subsidies, at a rate of about 33 per cent per year according to our proposal, would
lead to an equivalent decrease in the amount of the annual contribution to be paid tothe compensation fund.
- Third, the contribution (percentage) of the countries that subsidize their cotton and
are hence called upon to contribute to the transitional compensation fund would be
calculated on the basis of their respective shares in the total amount of subsidies
granted to cotton worldwide, as published in  the annual statistics of the International
Cotton Advisory Committee (ICAC).  According to the above principle, theWT/MIN(03)/W/2
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contributions of the "paying countries" would decrease in proportion to their effective
efforts to reduce their cotton subsidies.
- Fourth, the share to be allocated to each beneficiary LDC would be calculated on the
basis of its respective share in total cotton production by that group of countries, as
published in the ICAC annual statistics.
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