RESTRICTEDWORLD TRADE
ORGANIZATIONWT/MIN(03)/SR/2
23 December 2003
(03-6745)
MINISTERIAL CONFERENCE
Fifth Session
Cancún, 10 - 14 September 2003
SUMMARY RECORD OF THE SECOND MEETING
Held at the Cancún Convention Centre, Cancún, Mexico
on Wednesday, 10 September 2003, at 2.30 p.m.
Chairpersons: H.E. Mr. Youssef Boutros-Ghali (Egypt)
(for Agenda Item 1)
H.E. Mr. Luis Ernesto Derbez (Mexico)
(for Agenda Item 2)
Subjects: 1. Overview of Activities of the WTO (Agenda Item 1)
2. Items Proposed by Members for Inclusion in the Agenda – Poverty 
Reduction:  Sectoral Initiative in Favour of Cotton – Joint Proposal by Benin,
Burkina Faso, Chad and Mali (Agenda Item 2)
1. Overview of Activities of the WTO (Agenda Item 1)
The Chairman invited Ministers and other speakers wishing to make statements under this
Agenda item to do so in a single presentation.
He recalled that Rule 22 of the Rules of Procedure for Sessions of the Ministerial Conference
(WT/L/161) provided the possibility for the Chairp erson to limit the time for statements, with the
consent of the meeting.  As delegations had already been advised in an Information Note circulated on22 August (WT/MIN(03)/INF/10), and in order to provide equitable opportunity to all speakers to
express their views in the Plenary meetings, he proposed that the Ministerial Conference agree to limit
all statements to a maximum of five minutes.  De legations that so wished, could circulate longer
presentations as formal documents of the Ministerial Conference.
The Ministerial Conference so agreed.
The following statements were made:
Singapore H.E. Mr. George Yeo
Minister for Trade and IndustryWT/MIN(03)/ST/1
Switzerland H.E. Mr. Joseph Deiss
Federal Counsellor, Head of the Federal
Department of Economic AffairsWT/MIN(03)/ST/2WT/MIN(03)/SR/2
Page 2
United States H.E.Mr. Robert B. Zoellick
United States Trade Representative1
Qatar H.E. Sheikh Hama d Bin Faisal Al-Thani
Minister of Economy and CommerceWT/MIN(03)/ST/4
Commission of the
European CommunitiesMr. Pascal Lamy
Commissioner for TradeWT/MIN(03)/ST/5
Italy on behalf of the
Presidency of the
European UnionH.E. Mr. Antonio Marzano
Minister for Productive ActivitiesWT/MIN(03)/ST/6
Philippines The Honourable Manuel Roxas
Secretary of Trade and IndustryWT/MIN(03)/ST/63
France H.E. Mr. François Loos
Minister Delegate to Foreign TradeWT/MIN(03)/ST/8
Canada The Honourable Pierre S. Pettigrew
Minister for International TradeWT/MIN(03)/ST/9
India H.E. Mr. Arun Jaitley
Minister of Commerce and Industry and Law
and JusticeWT/MIN(03)/ST/7 and
Corr.1
Germany H.E. Dr. Alfred Tacke
State Secretary, Federal Minister for
Economics and LabourWT/MIN(03)/ST/10
United Kingdom Mr. Mike O'Brien
Minister for Trade, Investment and ForeignAffairsWT/MIN(03)/ST/11
China H.E. Mr. Lu Fuyuan
Minister of CommerceWT/MIN(03)/ST/12 and
Corr.1
Spain H.E. Mr. Rodrigo de Rato y Figaredo
First Vice-President and Minister of theEconomyWT/MIN(03)/ST/13 and
Corr.1
Australia The Honourable Mark Vaile, MP
Minister for TradeWT/MIN(03)/ST/14
Korea H.E. Mr. Hwang Doo-yun
Minister for TradeWT/MIN(03)/ST/15
Thailand H.E. Dr. Adisai Bodharamik
Minister of CommerceWT/MIN(03)/ST/16
Norway H.E. Mr. Jan Petersen
Minister of Foreign AffairsWT/MIN(03)/ST/17
                                                     
1 To be circulated.WT/MIN(03)/SR/2
Page 3
Pakistan H.E. Mr. Humayun Akhtar Khan
Minister for CommerceWT/MIN(03)/ST/18
New Zealand The Honourable Jim Sutton
Minister for Trade NegotiationsWT/MIN(03)/ST/19
IMF
(Observer)Ms. Anne O. Krueger
First Deputy Managing DirectorWT/MIN(03)/ST/20
World Bank
(Observer)Mr. Shengman Zhang
Managing Director2
2. Items  Proposed by Members for Inclusion in the Agenda – Poverty Reduction:  Sectoral
Initiative in Favour of Cotton – Joint Prop osal by Benin, Burkina Faso, Chad and Mali 
(Agenda Item 2)
The Chairman said that this item had been placed on the Agenda at the request of Benin on
behalf of the co-sponsors of the joint proposal on "Poverty Reduction:  Sectoral Initiative in Favour of
Cotton", which had been circulated in document WT/MIN(03)/W/2.
The representative of Benin said that this was an issue of utmost concern to his country as
well as to several other Members of the organization.  Indeed, this  issue was one on which the
Committee on Agriculture and the Trade Negotiations Committee had been working for several
months, on the basis of a proposal submitted by Benin, Burkina Faso, Chad and Mali on 30 April
2003.  Four countries that were members of the LDC Group, among the poorest countries in the
world, had decided to act jointly and to avail themselves of the appropriate mechanisms offered by themultilateral trading system in order to find an urgent and equitable solution to a vital problem and a
situation that threatened the very survival of their already fragile economies.  What they sought, above
all, was to find objective solutions for dealing urgently with the economic and social problems caused
by the massive subsidies that governments of certain WTO Members granted to the production and
export of cotton.  The cotton sector in their countries was both sensitive and strategic – strategicbecause of its economic role and the degree of the dependency of their economies on this single
product, and sensitive because it provided sustenance for tens of millions.  Indeed, for Benin, Burkina
Faso, Chad and Mali, cotton accounted on average for ten per cent of GDP, representing over 40 per
cent of total export revenue and over 60 per cent of agricultural export revenue.  This explained the
central role that cotton played in the economic and development policies of the countries concerned,
and the extent of their distress in the face of this scourge, whose damaging consequences were
jeopardizing their entire economic structure.
As all knew, cotton was also the only export product for which the countries concerned
enjoyed an unquestionable comparative advantage.  It was produced at a highly competitive cost  – the
production cost per hectare of cotton in certain developed countries was triple that of West Africa.
Moreover, this cotton was unanimously recognized throughout the world as being of very highquality.  This economic performance had been achieved at great sacrifice.  The countries concerned
had made financial commitments which they still had to honour.  Regarding other efforts that these
countries continued to make through their structural adjustment programmes, they did not grant any
subsidies to their producers who, despite their artisanal and extremely rudimentary means of
production, were able to compete properly with producers in rich countries with highly mechanized,and indeed subsidized, agriculture.  In other words, this difficult situation derived from the inequality
of treatment between the rural communities of the developing countries, particularly the LDCs, and
the cotton producers of certain other countries.  This was a direct consequence of the distortions
                                                     
2 To be circulated.WT/MIN(03)/SR/2
Page 4
caused by the massive subsidies some governments accorded to cotton production and exports.  In
short, it was the future of this sector, on which the economic and social balance of several poor
countries depended, that was at stake.  Unless urgent and substantial action was taken, this sector
might well disappear in these countries, which would lead to the loss by producers of their entire
revenue and cast doubt on development plans, both from the point of view of industrialization policyand basic infrastructure development, health, education and habitat improvement.  This, in its turn,
would inevitably lead to social unrest, increased poverty and insecurity and greater fragility of the
economic, social and political system.  It was to avoid such disasters that these countries turned to the
WTO community again, in the hope of finding appropriate solutions to this issue.
To solve these problems, the co-sponsors of the initiative, and through them, all the other
cotton-producing African countries, asked in a joint document that in Cancún a number of decisionsbe adopted for immediate implementation.  These decisions were essentially as follows:  (i) the
immediate establishment of a mechanism to phase out support for cotton production, with a view to its
total elimination;  and (ii) transitional measures in the form of financial compensation for cotton-
producing and exporting LDCs to offset their loss of revenue until support for cotton production and
exports had been completely phased out by the industrialized countries.  The resolution of theproblem raised in the Sectoral Initiative in Favour of Cotton was one of vital importance for the four
co-sponsors –  indeed, it was a matter of survival.  The solution would only have any meaning for
them if it was reached very rapidly, in other words before the end of this Ministerial Conference.  This
was why his delegation, on behalf of the co-sponsors of the initiative, had appealed to the competent
WTO bodies with a formal request that this issue be included on the agenda of this Conference.  Thefour countries concerned and the public opinion in those countries had placed their trust in the
multilateral trading system and the organization to find an urgent and equitable solution to this
problem.  They were looking to the WTO to eliminate this scourge which was sapping a strategic
sector that formed the backbone of their economies.  They wished to be able to think of the WTO as
an efficient and competent doctor acting promptly to contain a deadly disease, and not as a forensicpathologist called in after the death of a competitive sector merely to establish the cause of death.  The
solution to this scourge could essentially be found in the proposals submitted for adoption by the
Ministerial Conference in WT/GC/W/511.  The pertinen t comments of several speakers at the opening
session of the Ministerial Conference showed how ur gent it was for the discussions to lead to a
decision.   All had a responsibility not only to preserve the credibility of the organization, but also,
and above all, to avoid aggravating poverty and exclusion.  It was immoral to deprive the weakest
Members of what was most dear to them.  This was why these countries considered that if they wereto regain hope and participate fairly in international trade, this issue would have to be solved urgently
in Cancún.  The seriousness of the situation and the specificity of the matter were reasons enough.
The suffering and the state of destitution of the victims of this situation cried out for a response.
The representative of Mali recalled that in April his delegation had submitted a joint initiative
on cotton to the WTO.  On behalf of the four co-sponsors, he wished to outline five main points.
First, the production of cotton was absolutely essent ial for these countries.  They had no alternatives.
At present they were dependent on this product.  It was their only possibility of reducing poverty and
investing in rural development – in short, of developing economically and shedding their dependence
on international aid.  Second, cotton gave them the required potential and the rare opportunity tointegrate into the world economy, and they were sparing no effort to preserve this asset by any
available means. To do so meant overcoming severe handicaps and facing serious challenges, such as
the lack of investment capital and infrastructure needed to export their cotton at more competitive
prices.  Third, the general effect of cotton subsidies was to distort international trade.  In their specific
case, such subsidies spelled disaster in that they wiped out one of the only comparative advantagesthey had.  Fourth, in the specific case of these subsidies, these countries were unable to react alone,
since they did not have the financial means to respond by granting their producers equal subsidies.
This meant they had to join with their partners to find a solution together.  The WTO framework and
the ongoing negotiations had seemed the most appropriate framework for presenting and defending
their interests, as all Members legitimately did.  Fifth, these countries believed in a world tradingWT/MIN(03)/SR/2
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system based on just and equitable rules that enabled each of its Members, including the poorest
among them, to benefit from free trade.  It was on this faith that they based their hopes.  They were
ready to do what it took to find solutions.  However, the situation was urgent – without a rapid
decision by WTO Members, they could very well lose their only asset, cotton.
He wished to provide a few figures that some were probably already familiar with, but which
he believed were appropriate to put forward.  World cotton production amounted to some US$20
billion per year.  Less than a third of the cotton produced in the world was exported (approximately
US$6 billion), and cotton's share in world trade wa s minor - approximately 0.12 percent.  According
to the latest statistics of the International Cotton Advisory Committee (ICAO), during the 2002-2003
season, the West and Central African countries (WCA) free zone had ranked sixth, together with
Turkey, among world cotton producers, and second among exporters.  In other words, cotton was veryimportant for these countries, which exported approximately 95 percent of their production.  At
present, world cotton trade was affected by massive subsidies.  The total amount of the subsidies
granted to cotton by different countries could come close to the overall value of cotton exported
throughout the world.  This had certainly been the case during the 2000-2001 cotton season, when
US$5.8 billion worth of subsidies had been granted for a cotton trade whose value totaled some US$6billion.  Many agricultural products were heavily subsidized, but it was surprising that the amount of
subsidies granted for a single product should be so high that it equaled the value of all trade in that
product throughout the world.  Indeed, the subsidy machine seemed to have gone so wild that its
influence and its negative impact on the economies of the "subsidizing" countries, not to mention
other countries, might very well elude its inventors.  Cotton was of vital importance to the co-sponsors of this initiative.  In its 2002 report on LDCs, UNCTAD had highlighted the dependence of
almost all LDCs on a single commodity or on a limited number of commodities for their export
revenue.  The four co-sponsors of the cotton initiative at the WTO happened to be the four countries
whose dependence on cotton alone had been reported.  In these countries, cotton was very clearly the
product which most contributed to their export revenue.  This was why they were making such asubstantial effort to further improve their competi tiveness in the cotton sector.  They fully recognized
the need to pursue these domestic restructuring and liberalization efforts.  Indeed, the optimal use of
their comparative advantage in cotton trading and the benefits deriving from free trade should allow
them to invest even more heavily in rural devel opment and agricultural diversification.  On average,
cotton currently contributed 6.5 per cent to the GDP of these four countries, and accounted for more
than two thirds of total export revenue.  For them, cotton was a truly strategic product for
development and poverty reduction, since its impact went well beyond the cotton producersthemselves.  When the harvest and sale of cotton were good, the whole country did well.
According to a study by the International Food Policy Research Institute, when a Beninese
cotton producer spent one dollar less because his income had decreased, the impact was transmitted to
a whole chain of people affected directly and indirectly, and the result was a US$ 3.3 reduction indomestic demand.  According to the same study, in the short term, a 40 per cent decrease in the world
cotton price, as experienced over the past few year s, resulted in a 7 per cent reduction in rural income
per inhabitant and an 8 per cent increase in poverty, i.e. an increase of 334,000 in the total number of
people living below the poverty line.  It was easy to imagine the shock caused in these countries by a
drop in the world cotton price resulting from the over-production caused by massive cotton subsidies.According to the World Bank, cotton prices had dropped 66 per cent since 1995.  Adjusted for
inflation, the price of cotton was now lower than it had ever been since the Great Depression that had
affected the Western world in the 1930s.  There was little consolation for these countries in the fact
that the high quality of their hand-picked cotton and the competitiveness of their production were
recognized worldwide, since the trade distortions caused by such enormous subsidies had deprivedthem of the possibility of making use of their rare assets and deriving any benefit from them.
The overall amount spent in support of cotton was enormous.  There were several types of
subsidies.  While income and price support measures (direct assistance) accounted for most of the
government support, indirect support, such as e xport support programmes, credit assistance andWT/MIN(03)/SR/2
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subsidized inputs, was hardly negligible.  The United States accounted for close to 50 per cent of all
cotton subsidies in the world.  Three-quarters of these subsidies went to some 2,500 big US cotton
producers, or only 10 per cent of all US producers.   This meant that 2,500 big US cotton producers
each received, on average, US$1,080,000 per year in subsidies to produce cotton – an amount which
corresponded to the combined income of 3,000 small African producers living on $1 a day.  In theUnited States, this support had had the perverse effect of making cotton more profitable to cultivate
than other crops, such as soya beans.  Finally, the increasing production of cotton in the United States
had also led to an increase in American cotton exports in the world – in 2001-2002, over half of the
US production had been exported, further strengthening the country's position as the world's leading
cotton exporter.  The European Union, which did not apply export subsidies in the case of cotton,
nevertheless provided its 90,000 Greek cotton growers and 10,000 Spanish cotton producers with
direct support which was among the most generous in the world.  They received assistance whichguaranteed production revenues 1.5 to 2 times high er than the world cotton price.  According to
OXFAM, cotton produced in Greece and Spain could be imported at one-third of what the cotton
subsidies cost the European tax payer.  China, th e leading world cotton producer, for the moment still
provided domestic support and export support for its cotton, but had already committed itself to
phasing out its cotton subsidies in the framework of its accession to the WTO.  To complete thepicture, there were a few other subsidizing countries, but these were developing countries with limited
financial means, offering support that was minor in comparison to what was granted by the three
above-mentioned producers.
He asked if it would somehow not be unnatural if the multilateral trading system, which was
meant to guarantee free development of trade for the benefit of all its Members, turned out to be a
system which in fact excluded its poorest Members because they did not have the means needed to
exploit the shortcomings of the agreements in force, or to support their producers with subsidies
proportionate to those of their competitors.  Th e co-sponsors of the initiative did not and could not
accept such a prospect, which was why they had decided to submit to the WTO an initiative on cotton– to launch discussions and initiate a joint search for possible solutions to a problem whose urgency
might well concern them more than anybody else, but which also tested the credibility of the
multilateral trading system.  This submission was based on recognition of the importance of cotton
and its direct contribution to poverty reduction.  It also emphasized the fact that cotton was one of
these countries' only comparative advantages, which they might well lose unless urgent action was
taken by WTO Members.  The situation of rich cotton-producing countries was radically different, as
they enjoyed numerous other competitive advantages and had the means to facilitate the adjustmentsrequired, on account of their advanced stage of development.  The co-sponsors wished this to be a
simple document, as there had not been time to develop complex mechanisms, which might,
moreover, run counter to basic free-market principles.
Their submission therefore consisted of no more than the following three proposals:  First, an
early harvest decision, to be reached in Cancún, in view of the urgent situation.  The objective was
that this decision should form part of the final agreements of this negotiating round, but that its
implementation should begin without delay, as had been agreed for tropical products during the
Montreal Ministerial Conference.  Second, the progressive elimination of all cotton subsidies over a
clearly specified period, under an agreement to be negotiated.  On 18 July 2003, during the WTOnegotiations on agriculture, these countries had proposed a three-year period, extending from 2004 to
2006, for the complete elimination of all cotton subsidies.  Third, the establishment of a transitional,
degressive compensation mechanism.  The compensation, paid by the subsidizing countries in an
amount commensurate with the level of their subsidy reduction efforts, was solely intended to enable
exporting LDCs to maintain their cotton production until such time as the international marketbecame completely liberalized and they were able to  make full use of their assets.  The compensation
would therefore be paid to cotton growers, who would thus be able to continue growing their cotton,
even though the benefits of free trade could not be expected in the immediate future.  These proposals
were directly inspired by the Doha Declaration, whereby Members had undertaken to make
substantial subsidy reductions over the course of the current negotiating round.  In Doha, MembersWT/MIN(03)/SR/2
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had also decided to call this round the "Doha Development Agenda", undertaking to ensure that the
developing countries would be able to participate in the expansion of world trade.  Their hope was for
a solution acceptable to all.  Although the urgency of the situation could be cause for despair, these
countries maintained their vision of a world without cotton subsidies, a world that would allow them
to make use of their competitive advantage in cotton and to play their part in international trade.
They were asking the international community to strike a balance between national and global
interests.  It was not fair, in order to save a few thousand cotton growers in rich countries, to sacrifice
the one and only livelihood of several million small producers in LDCs.  President Compaore of
Burkina Faso had expressed this well when he had said: "We do understand that rich countries are
concerned about the havoc being wrought by terrori st violence against the Western world, but we in
turn ask you to show some interest in the terror caused by hunger and poverty, which itself is a formof terrorism generated by your subsidies."  International organizations such as the International
Monetary Fund, the World Bank and the WTO generally recognized that the elimination of subsidies,
i.e. domestic support and export subsidies, would restore free trade, generating clear benefits for
LDCs which now suffered the most from the distor tions caused by subsidies.  The LDCs were most
directly affected by unfair competition from subsidized products.  In the short term, the elimination ofcotton subsidies would lead to a fall in global production and a rise in cotton prices.  In the medium
term, cotton prices would stabilize and production would focus on competitive countries, in particular
those not subsidizing their cotton production and exports.  For them, this would bring an increase in
their farmers' incomes, which would benefit their domestic economies, and would mean that they
would be pursuing poverty reduction efforts geared towards sustainable development, which was theonly way to shed their dependency on international aid.  They would undoubtedly still need
international cooperation, which might be used to strengthen their autonomous economic
development efforts, whereas now it was often used for humanitarian purposes, in order to respond to
emergencies and catastrophes caused by growing poverty.  These countries' request was therefore a
simple one.  They were not seeking aid or charity, but to be treated in the same way as all otherMembers.  They therefore asked Members to respect the principles of free trade, not only for the
products and services of interest to wealthy and powerful nations, but also for those in spheres where
poor countries had real competitive advantages.  This was admittedly a matter of international
solidarity, but also and primarily a question of survival of the world trading system and of
acknowledging the interests of all parties, so that all were able to benefit from the world trading
system.  The WTO should be able to show, through the action of its Members, that it was capable of
adjusting its system and its rules so as to give its Members, large and small, rich and poor, a chance totake advantage of the powerful engine for development that world trade represented.  Members had
succeeded in finding a solution to contain the perverse effects of the Agreement on TRIPS and to take
account of the situation of poor countries that suffered the devastating consequences of disease
without any pharmaceutical industries of their own.  They were confident that those same Members
would succeed in finding a solution to remedy the adverse impact of agricultural policies in the cottonsphere, and to provide the one and only chance for them to take part in world trade.  He asked
Members to participate in finding a speedy solution.
The representative of Chad said that it was an honour and a pleasure for him to represent his
country at the Fifth Ministerial Conference in Cancún.  He wished to thank the Mexican authorities
for the warm welcome his delegation had received since its arrival, and to congratulate Mr. Derbez on
his appointment as Chairman of this august assembly .  He also congratulated the Director-General, his
Secretariat and all those who had made considerable efforts to make this Conference a success.  As a
mid-term review of the Doha Round of multilateral  trade negotiations, this Conference was a crucial
stage in the process to ensure that account was taken of the legitimate concerns of the least-developedcountries.  Chad therefore attached the utmost importance to the outcome of these proceedings, which
should lead to concrete results if the organization was to maintain its credibility in everyone's eyes,
and especially those of the weakest.  His country endorsed and supported the African Group's position
on agricultural issues, namely:  (i) broader international market access for African products;  (ii)
elimination of all measures leading to market distortions – primarily subsidies granted by wealthierWT/MIN(03)/SR/2
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countries to their farmers and exporters;  and (iii)  recognition that cotton was a special and strategic
product on account of its economic importance for their countries and its contribution to poverty
reduction.  If there was one economic sector which was open to international competition and in
which Africa had a distinct competitive advantage, it was the cotton sector.  The countries of West
and Central Africa (WCA) had invested considerable effort in making this a competitive sector interms of cost, and the quality of their cotton was recognized as outstanding by the spinning industry
worldwide.  Cotton played a central role in West and Central African economies, accounting for more
than 60 per cent of these countries' export revenue.  More than 15 million people derived the majority
of their income from cotton growing.  The present difficulties experienced by this sector had
immeasurable repercussions on these countries' economic and social environment.  Despite its
competitiveness and economic importance in WCA countries, the cotton sector of West and Central
Africa was unquestionably in jeopardy, for it was suffering the impact of the export subsidies anddomestic support granted by various Members to their producers, contrary to certain provisions of the
Doha Declaration.  In this regard, Chad – as one of the co-sponsors of the cotton initiative – requested
that a fair and equitable solution be found during this Conference.  Chad was convinced that it was
here in Cancún that the international community would find an answer to the crucial problem of
cotton subsidies.  His delegation accordingly reiterated its support for the demands set forth indocument WT/MIN(03)/W/2.
Regarding other, no less vital, issues Chad urged Members, and particularly the developed
countries, to translate into action the political will so frequently expressed in the various proceedings.
The special and differential treatment provisions should thus become mandatory and binding.  Hisdelegation also urged fulfilment of the commitments  contained in the Doha Declaration on TRIPS and
Public Health, so as to allow countries to take effective action to combat diseases such as HIV/AIDS,
malaria, tuberculosis and other infectious diseases.  It welcomed the strengthening of capacity
building and technical assistance in the sphere of the Singapore issues.  It also attached considerable
importance to the Integrated Framework for Trade-Related Technical Assistance, and accordinglyrequested additional financing so as to enhance the IF's capacity to offer the goods and services
needed for Chad's development.
The representative of the United States said that her delegation had listened closely to the
contributions of other Members, and appreciated this opportunity to share the views of the United
States on this topic.  The United States had reviewed the sectoral initiative advanced by Benin,
Burkina Faso, Chad and Mali.  It recognized the unique development challenges facing these fourcountries, the great significance of cotton to their economies, and its important role in their ongoing
progress.  It had discussed the initiative with representatives of these countries on a number of
occasions in Geneva, in Benin, and most recently in Cancún.  The US Trade Representative and the
Agriculture Secretary had met with Trade Ministers from the four countries earlier that week.  This
initiative highlighted the importance of ambitious results for all agriculture.  The United States hadproposed to slash subsidies and tariffs on farm products and to eliminate tariffs and non-tariff barriers
on manufactured goods, and supported sectoral initiatives in both the agriculture and goods
negotiations.  It was also important to note that the problems affecting cotton extended far beyond the
issue of subsidies.  An analysis by Mr. Goreux, formerly with the IMF and the World Bank,
concluded that the price fall had been due to a combination of factors:  competition from syntheticfibres, the slow-down in world economic activity, and higher yields due to favourable weather
conditions.  In order to effectively address the concerns raised, the United States felt it was important
to look at the range of critical factors affecting the price of cotton.
Cotton was a key input in an integrated global manufacturing chain stretching from fibre to
textiles to clothing.  Therefore, if Members were to respond effectively, it was vital to boost demand
not only for cotton, but also for cotton-related products.  Currently, cotton and cotton products faced a
vast array of often overlapping barriers that limited market opportunities and distorted trade.  Trade-
distorting domestic support – as permitted under current WTO rules – was applied by a number of
cotton-producing Members, including the United States, the European Union, China and someWT/MIN(03)/SR/2
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developing countries.  The global average allowed tariff for cotton under WTO rules was 56 per cent,
and high tariffs sometimes exceeded 100 per cent.  The global average allowed tariff for textiles and
clothing under WTO rules was 38 per cent.  Non-tariff barriers affecting textiles and clothing included
lengthy and non-transparent customs procedures, reference pricing, difficult and costly marking and
labelling requirements, and burdensome testing methods.  Industrial policies, particularly those relatedto the development of man-made fibres, could distort the market and displace sales of cotton and
cotton products.  The same was true of practices of some cotton exporters, including state ownership
and government monopolization, special tax advantages and export requirements.  Members should
look toward immediate solutions, including harnes sing US, World Bank and other donor assistance to
help with the special trade capacity challenges these countries faced in agriculture and industry,
including for cotton and cotton-related products.  The United States felt it was important that WTO
Members also supported measures that moved all collectively toward more open markets in thesesectors.  The United States believed that together, Members could find ways to customize a solution
to address this particular problem and to connect the energy of globalization to a widening network of
development.
Here in Cancún, the United States had discussed with the four countries the idea of proposing
a separate comprehensive sectoral initiative that targeted distortions in the entire value chain of
production affecting cotton prices.  This would start with raw cotton, and include man-made fibre,
textile and clothing trade.  Such an initiative would need to address four major areas:  (i) government
subsidies for cotton and man-made fibre;  (ii) tariffs and other charges in fibre, and textiles and
clothing, to help boost sales of raw cotton and cotton materials;  (iii) non-tariff barriers;  and (iv)other barriers, such as state monopolies, special tax advantages, and export requirements.  A
comprehensive initiative that tackled trade barriers and trade-distorting practices along the
manufacturing chain could improve economic prospects for farmers in Africa and elsewhere by
opening export opportunities, and growing local and regional markets.  It could also encourage the
development of value-added production, thereby decreasing the reliance on commodities – a criticalpriority for many developing countries.  In addition, it underscored the vital interplay between
agriculture and industrial market access that was so crucial for Africa's economic growth.  In keeping
with the spirit and vision of the Doha Development Agenda, the United States looked forward to
working with Benin, Burkina Faso, Chad and Mali and other Members to explore ways to meet
immediate needs, while ensuring a continued focus on opening global markets across the board.  Only
this way could Members expand a virtuous circle of trade and economic growth for developing and
developed economies that could strengthen all.
The representative of Canada said that Canada supported the West and Central African
countries in their demand for an immediate decision to stop trade-distorting domestic support and
export subsidies in cotton as quickly as possible.  The hardships suffered by the West and Central
African producers were a compelling example of the damage created by trade-distorting subsidies.Canada and other donors were working with these countries to help their agricultural sectors.  At the
same time, high levels of trade-distorting subsidies in a few countries were actively undermining this
work and threatening the livelihoods of 10 million people.  The problem had gotten worse since the
Doha Ministerial Conference.  Seventy-three per cent of world cotton production had benefited from
direct income or price support programmes in 200 1/2002 compared to 55 per cent in 2000/2001.  That
was why Members needed ambition in the agriculture negotiations.  This meant eliminating export
subsidies, and substantially reducing or eliminating trade-distorting support, including through the
capping of overall levels of domestic support.  A high level of ambition in agriculture, as Ministers
had agreed in Doha, would help address these anomalies and deliver better development results.  The
need for ambition also went further than the agriculture negotiations.  Members had to go beyondproviding a fair deal for primary producers and create the conditions for increasing value-added
exports by developing countries.  This entailed high levels of ambition in non-agricultural market
access negotiations, especially sectors of interest to developing countries.  In Doha, Ministers had
agreed that this should be a Development Round.  Addressing the cotton issue would demonstrate
their commitment.WT/MIN(03)/SR/2
Page 10
The representative of Australia said that as a major agricultural producer who continued to
campaign vigorously over the years with its other CAIRNS Group colleagues for reform of
international trade, Australia strongly supported the call by the four African countries to eliminate
cotton subsidies.  Australia was a major producer and exporter of fibres, including cotton and wool,and thus knew from first-hand experience the disastrous impact of subsidies on international trade.
Australian cotton producers, like their African counterparts, received no subsidies from their
Government.  In his message to the Conference th at morning, the UN Secretary-General had implored
all to say "no" to trade policies that aggravated poverty and "no" to trade practices that undermined
aid.  There was no more egregious example of the damage done by subsidies in rich countries than the
case of cotton.  It was not the only example – it applied equally in many other commodity sectors of
interest to developing countries – but it was certainly one of the worst.  The four co-sponsors of thisinitiative had painted a graphic and tragic picture of the economic, social and humanitarian impact
caused by the domestic support and export practices of rich developed countries.  All Members had
been moved by the appeal from these countries for action to eliminate the subsidies that kept their
farmers in poverty and misery.  Australia stood ready to engage in any constructive way to find a
solution which would improve the plight of cotton producers in Africa and other countries.  Australiabelieved that a solution could and should be found in the context of the agriculture negotiations.
The representative of Burkina Faso expressed appreciation for all the goodwill and individual
and collective initiatives that had led to the cotton initiative being placed on the agenda of the WTO
Committee on Agriculture, thus enabling Members to discuss the matter at the present meeting.Special thanks were due to the Chairman of the General Council, the Director-General and his team,
as well as the Chairman of the Committee on Agriculture for their support and understanding.  He
also commended all those who had worked to ensure that the commitments undertaken in Doha were
acted upon.  Burkina Faso welcomed the fact that, in Doha, Members had clearly stated their will that
the organization should be marked by two main features – its inclusiveness and hence its universality,and its drive towards development.  This was what prompted his country to make a more extensive
contribution, and to hope and trust that Burkina Faso would achieve its integration into global trade on
fair and equitable terms.  His country had submitted this initiative for consideration by Ministers,
together with three other cotton-producing countries.
Burkina Faso was a poor country with an economy largely based on agriculture, and
especially the cotton sector.  This sector was now dying, not for lack of competitiveness, but becauseof the subsidies enjoyed by cotton producers in some of the world's most developed countries.  This
had contributed to a dramatic fall in global prices and thus had ruined the profitability of a crop for
which Burkina Faso had among the lowest production costs in the world.  He earnestly requested each
and every Member to see to it that the demands put forward by the co-sponsors were examined and
adopted, in other words:  (i) that a decision be taken on the modalities for phasing out market-distorting cotton subsidies;  (ii) pending the impl ementation of such a decision, that a compensation
mechanism be established to avoid the collapse of the cotton sector in these countries;  and (iii) that
cotton be recognized as a specific product for these economies.  Burkina Faso was not seeking
benefits but merely the implementation of the letter and spirit of the WTO rules.  Some might respond
that if its cotton sector was in difficulty, his country could look towards other productionopportunities.  But while developed countries could re-direct and diversify their agricultural
production in the short term, unfortunately the same was not true of the developing countries, which
were constrained by climatic and development factors.  The urgency of the situation was such that
Burkina Faso could not leave this Conference without a solution, because a collapse of the cotton
sector would spell disaster for it.  It also required duty-free access to developed-country markets forits cotton exports.  Should Ministers not succeed in finding a favourable solution to this issue, the
development objective of the Doha Round would b ecome a dead letter.  It would not be in his
country's interest to enter into an agreement th at would practically exclude it from action on the
international trade scene, turning it into a victim and a mere observer.  The sponsors of the initiative
had presented a special case and their demands were simple.  They believed that dialogue could helpWT/MIN(03)/SR/2
Page 11
find an answer acceptable to everyone.  Their initiative was not directed against any country or group
of countries.  They were merely seeking, through an exchange of views, to reach a solution favourable
to all.  They believed that this was possible, and they stood ready to pursue discussions on this issue,
taking into account the constraints facing the vari ous parties.  Lastly, he wished to inform the
Chairman that before he had left Burkina Faso for Cancún, his country's cotton producers had handedhim a petition signed by 71,000 producers, asking him to convey that petition to the Chairman.
The representative of Cameroon joined previous speakers in expressing his delegation's
gratitude to the Government and people of Mexico for their warm reception and for the perfect
organization of this Conference.  Cameroon associated itself with and fully supported the joint
proposal by Benin, Burkina Faso, Chad and Mali concerning the Sectoral Initiative in Favour of
Cotton.  Cameroon was all the more in favour of this initiative since, as a cotton producer andexporter itself, it had sought to implement WTO rules by abolishing all agricultural support and
reforming agricultural subsectors, particularly within the framework of structural adjustment
programmes.  His delegation welcomed the interest expressed by several countries as well as the
goodwill expressed by others, in seeking a solution to this problem.  Moreover, Cameroon hoped that
similar attention would be paid to the trade policy re view of other products, such as bananas, of which
his country was the main ACP exporter.   Bananas were an essential element in Cameroon's poverty
reduction strategy, and an essential factor in political and social stability.  In view of the forthcoming
enlargement of the European Union and the relevant negotiations, Cameroon urged that the rules of
transparency and fairness, as well as the principle of cooperation, be respected, and that the views of
ACP countries be taken into account.
The representative of Guinea associated her delegation with previous speakers who had in
congratulated the Chairman on his election to the Chairmanship of the Conference.  Her delegation
welcomed the inclusion in the agenda of the cotton issue, which was of vital importance to millions of
poor farmers engaged in a bitter daily struggle for survival.  Indeed, it was not only the four co-sponsors of this initiative, but all of the cotton producers throughout the African region and elsewhere
that were concerned by this issue.  Thus, it should come as no surprise that Guinea, itself a cotton
producing country, should associate itself so closely with the initiative and should ask that the friendly
words that had been heard be backed by concrete action aimed at finding a viable solution.  It was
with this in mind that Guinea advocated the effective granting to these countries of sufficient
compensation to repair the damage suffered over the past few years in connection with the loss of
revenue that had followed the fall in the price of cotton on the international market, as a result of thesubsidies granted by developed countries to their cotton producers.  To put an end to this highly
sensitive problem once and for all, Guinea requested the total and rapid elimination of all forms of
subsidies which had a negative impact on the cotton sector.  To that end, her delegation appealed to
all Members concerned by this issue to act in a spirit of openness and goodwill to ensure that the work
in Cancún would rekindle the hope of the populations in the countries concerned.
The representative of South Africa thanked the group of West and Central African countries
for their proposal and commended the WTO Secretariat for putting the matter on the agenda for
discussion at this important meeting.  While the proposal focused on the particular concerns of
LDCs, her delegation believed the issue also had wider systemic implications.  South Africa alsonoted that this was not the only product of interest to developing countries that remained highly
distorted and limited their income prospects.  For South Africa, the issue of sugar was one such
case in point.  South Africa strongly agreed with the view that cotton was a strategic agricultural
commodity.  In the spirit of moving towards free trade, South Africa had deregulated its agricultural
sector as far back as 1997, and this included cotton production.  In the face of this, the sector hadexperienced a dramatic reduction in domestic cotton production over the past few years.  One of the
reasons for this decrease was the low international price for cotton and the linked role that subsidies
in developed countries played.  These had been well documented in the proposal under discussion.
South Africa had recently developed a long-term strategy for its cotton sector that had the objective
of addressing broadened participation, global co mpetitiveness, food security and sustainability.WT/MIN(03)/SR/2
Page 12
These were the four key pillars of its agricultural policy, and were aimed at poverty reduction.
South Africa also saw the cotton industry as an important vehicle for its development, and one that
had particular potential for broadening economic access to agriculture and thus the process of black
economic empowerment in the country.  As Members were aware, South Africa still had the
challenge of duality in its agricultural sector, as a result of the apartheid system.
Her delegation believed the proposal before Members was a valuable contribution to the
Doha Development Agenda and the implementation of the New Partnership for Africa's
Development (NEPAD).  It was also consistent with its position in favour of substantial reduction
of trade- and production-distorting domestic support and export subsidies of all kinds.  This
proposal, on the one hand, starkly highlighted the distortions that existed in the trade of this
commodity and, on the other hand, represented a strong plea for leveling the playing field in a productof great interest and potential for Africa.  The proposal was an example of the nature of fundamental
reforms in agricultural production and trade that were required in the world and that South Africa had
argued in favour of in this forum.  The difficulti es raised in this proposal deserved attention and
serious reflection by all Members.  The concrete proposals put before Members represented the kind
of decisions that Members needed to be making in order to move from the undesirable current state ofaffairs in global trade, to where Members wanted to be – in a fair trading system.  She believed that
this offered all an opportunity to do what was righ t in order to prevent calamities in the future.  The
cotton initiative further reflected the requirement for sequenced and complementary actions by all, in
order to level the playing field.  In Doha, Members had committed to addressing the marginalization
of least-developed countries in international trade and to improving their effective participation in themultilateral trading system.  South Africa therefore welcomed the proposed "Sectoral Initiative in
Favour of Cotton" and in particular supported the earliest phasing down and elimination of all
production- and trade-distorting subsidies.  This Ministerial Conference should support the
establishment of a mechanism to phase out support for cotton production with a view to its total
elimination, and the implementation of transitional measures for LDCs until such time that cotton
subsidy measures had been completely eliminated.  She trusted that all would look at the this proposal
with the merit it deserved.
The representative of Bangladesh, speaking on behalf of the LDCs
, said that the four LDC co-
sponsors had jointly outlined the plight of their cotton growers.  This was a grave problem that
demanded urgent attention from the WTO member ship.  Agriculture was the backbone of LDCs'
economies.  For many of them, particularly in Africa, agricultural products constituted the mostimportant sources of export earnings.  For some countries, one-third of total export earnings was
dependent on cotton.  Millions of farmers and their families survived on the production and export of
cotton.  One could not over-emphasize the importance of cotton in these countries.  Research and
empirical analysis had firmly established that domestic support and export subsidies to the cotton
sector were distorting global trade in this product.  The farmers in these four countries could notcompete effectively in a highly distorted market, even though they might be efficient producers.  The
presence of the Head of State of Burkina Faso in a WTO meeting emphasized the seriousness of the
problem, and the need to urgently address it.  In a sense, the distortion in cotton trade was severely
undermining the basic objectives of the WTO.  The appeal of the four African countries was
consistent with the basic objective of the Doha  Development Agenda.  The Doha Declaration was
committed to putting the needs and interests of the weakest countries at the forefront of this Round.
Members had a collective responsibility to correct the prevailing distortions, and to establish a fair
and market-oriented trading system.  The solution that the four countries were seeking should not be
difficult to accommodate.  Cotton growing played a minor role in the economic activities of
industrialized countries.  As underlined in the statement of the UN Secretary-General at the openingsession of the Conference, a small effort on the part of the industrialized countries could help millions
among the poorest farmers in Africa.  Members should work to ensure that the multilateral trading
system benefited all.  As the weakest Members, LDCs like Benin, Burkina Faso, Mali, and Chad,
needed to be supported by all Members to trade their way out of poverty.  The LDCs hoped that thisWT/MIN(03)/SR/2
Page 13
Round would deliver on its promise of promoting deve lopment, and help the cotton growing countries
among the LDCs.
The representative of Senegal said that in presenting the joint proposal on the Sectoral
Initiative in Favour of Cotton, the four co-sponsors had raised a problem which, it was true, affected
them more than any other Members, because of their heavy dependence on cotton.  At the same time,
however, they had been expressing the concerns of many African farmers who were suffering from
the serious distortions caused by unfair trade practices in the cotton sector.  This was why Senegal
strongly supported this initiative, in the firm belief that a settlement of the cotton issue would bring
relief to millions of farmers that were unable to cope with the disastrous situation caused by unfair
rules that enabled the well-off countries to grant massive subsidies to their farmers.  Prior to the
Cancún Ministerial Conference, Senegal had collected 240,000 signatures from its civil society tosupport the initiative of these four cotton-producing countries.  Senegal had also collected from the
120 representatives in its Congress, a motion in support of these co-sponsoring countries after the
very important support pledged by President Wade of Senegal at the G-8 Summit in Evian.
Therefore, there could not be the slightest doubt that in finding a concrete and immediate solution to
the problem through the elimination of distorting subsidies and the establishment of a financialcompensation mechanism, the developed countries, through the WTO, would make a useful
contribution by enabling the countries affected to continue to believe in the virtues of the multilateral
trading system.  She expressed her full optimism at the prospects of finding a solution to the problem
along the lines proposed by the four co-sponsors.
The representative of India welcomed the pr oposal by Benin, Burkina Faso, Chad and Mali
on cotton subsidies, and fully supported the proposed time-bound elimination of export subsidies and
domestic support on cotton.  India too had roug hly nine million hectares of land under cotton
cultivation with total annual production ranging between 10 to 14 million tons.  Therefore, India fully
shared the concerns expressed in the proposal that certain Members continued to apply supportmeasures on agricultural products, which distorted prices in the international market.  As a result,
much lower returns accrued to producers in the developing countries.  It was also evident from the
case before Members that what was at stake was the survival of the farmers in the countries of the
proponents.  Cotton was not the only product where poor farmers in developing countries had been
victims of such policies.  Sugar, dairy products, cereals and oil seeds were other glaring examples.
The proposal by the proponents on cotton subsidies dr ew attention to the urgent need to do something
now.  The UNDP's Human Development Report 2003 made it evident that unless distortions inagriculture caused by heavy subsidization of a few farmers in developed countries were meaningfully
addressed in the reform of the agriculture sector that had been launched by Ministers earlier, rich-
country farmers would remain the sole true beneficiaries of subsidies, with a multitude of losers
among the poor and the poorest farmers across the globe.  India once again emphasized that it could
not disregard product-specific reduction of domesti c support and elimination of export subsidies
across all products which distorted world agricultural markets.  A commitment to eliminate undue
support on cotton, as proposed, would be an important first step in that direction.
The Ministerial Conference took note of the statements and also took note
 that this matter
would be taken up in the informal consultative process and that Members would have an opportunity
to review progress on this issue in the course of the Heads-of-Delegations meetings.
The meeting adjourned at 8.10 p.m.
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