RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/7
25 April 2001
(01-2083)
Committee on Agriculture
EXAMINATION OF POSSIBLE MEANS OF IMPROVING THE EFFECTIVENESS OF THE
IMPLEMENTATION OF THE DECISION ON MEASURES CONCERNING THE POSSIBLE
NEGATIVE EFFECTS OF THE REFORM PROGRAMME ON LEAST-DEVELOPED AND
NET FOOD-IMPORTING DEVELOPING COUNTRIES
Report by the Vice-Chairman, Minister Yoichi Suzuki, to the General Council
1. At its meeting on 15 December 2000, the Special Session of the General Council referred to
the relevant subsidiary bodies, including the Committee on Agriculture, a number of implementation
related issues.  The General Council decided, inter alia , that:
"[t]he Committee on Agriculture shall examine possible means of
improving the effectiveness of the implementation of the Decision onMeasures Concerning the Possible Negative Effects of the Reform
Programme on Least-Developed and Net Food-Importing
Developing Countries and report to the General Council at the
second regular meeting of the Council in 2001."  (WT/L/384 refers).
2. In this context, a group of sixteen WTO net food-importing developing  countries comprising
Côte d'Ivoire, Cuba, Dominican Republic, Egypt, Honduras, Jamaica, Kenya, Mauritius, Morocco,
Pakistan, Senegal, Sri Lanka, St. Lucia, Trinidad and Tobago, Tunisia and Venezuela has submitted to
the Committee on Agriculture a "Proposal to Implement the Marrakesh Ministerial Decision in favour
of LDCs and NFIDCs" (the text of the proposal is attached in Annex 2).  The proposal was the subject
of preliminary informal consultations as well as di scussions at the regular meeting of the Committee on
30 March 2001.  A detailed summary of the discussions at the regular Comm ittee meeting is attached
in Annex 1.
3. As part of the follow-up to these useful discu ssions, it has been agreed to take up in further
informal meetings the issues of access to the fi nancing facilities of the international financial
institutions;  food aid;  and technical and financial assistance.  These informal meetings will be held
for the purpose of identifying specific problems regard ing these issues.  It has been indicated that the
involvement of the relevant international organization would be appreciated and indeed necessary.
4. As agreed by the Committee on Agriculture at its meeting on 29-30 March 2001, this report is
submitted to the General Council on my responsibility as Vice-Chairman of the Committee.G/AG/7
Page 2
ANNEX  1
Examination of Possible Means of Improving the Effectiveness of the Implementation
of the Decision on Measures Concerning the Possible Negative Effects of the Reform
Programme on Least-Developed and Net Food-Importing Developing Countries –
Summary of the Discussion at the Meeting of the Committee on Agriculture on 30 March 2001
1. Pakistan introduced the "Proposal to Implement the Marrakesh Ministerial Decision in Favour
of LDCs and NFIDCs" (attached in Annex 2) on behalf of sixteen WTO net food-importing
developing countries.  The main objective of the Agreement on Agriculture was to reduce through
multilateral disciplines structural surpluses that were generated by production and trade-distorting
policies in agriculture pursued by some Members.  Such disciplines would normally result in
increased food import bills for the LDCs and the net food-importers.  Recognition that such price
effects could create difficulties for the LDCs and the NFIDCs was reflected in the MarrakeshMinisterial Decision through response mechanisms in the areas of food aid, access to financing
facilities, and technical and financial assistance to increase agricultural productivity.  Having been
concerned and disappointed with the lack of implementation of the Ministerial Decision, some
Members had raised this issue under the rubric of Implementation Concerns under paragraph 9 of the
Geneva Ministerial Declaration.  Subsequently, this Committee had been instructed to examine thepossible means of improving the effectiveness of the implementation of the Ministerial Decision
under the specific directions of the General Council.  The present proposal was aimed at helping the
Committee to take the necessary positive steps to resolve this important implementation issue at an
early date.  The sponsors of the proposal were grateful to the Vice-Chairman for encouraging them to
submit this concrete proposal on ways how the Ministerial Decision could be effectivelyimplemented, which was a legal commitment of WTO Members under Article 16 of the Agreement.
The sponsors were also encouraged by the manner in which the Vice-Chairman had conducted
informal consultations on this issue and were confident that the deliberations in this Committee would
result in concrete suggestions for adoption by the General Council, which should allay the genuine
concerns of the NFIDCs and LDCs.
2. Pakistan continued that the proposal established, on the basis of factual data provided by
FAO, the causality between policy reforms under the Uruguay Round and higher food import bills for
the two groups of countries.  It contained concrete suggestions to improve the effectiveness of the
implementation of the Ministerial Decision in three areas referred to above.  Furthermore, with the
objective of ensuring that the commitments were binding and effectively monitored, the sponsors hadproposed that:
(i) all major developed exporting countries should put aside supplies, under national food
reserves, specifically earmarked to be released to the NFIDCs and LDCs under
reasonable prices during years of high world prices;
(ii) developed countries and international development and financial institutions (World
Bank, IMF, UNDP) should contribute to the financing of the two components of the
Revolving Fund which, in turn, should be managed by an inter-agency arrangementwith the full involvement of FAO;
(iii) the commitment of Members regarding volumes of food aid, volumes of physical
reserves, contributions to the two co mponents of the Revolving Fund would be
inscribed in their country schedules as binding and legally enforceable;
(iv) Members should make regular annual notifi cations in respect of these commitments to
the WTO Committee on Agriculture.G/AG/7
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The sponsors of the proposal were willing to enter into discussions with Members in good faith and
with a view to reaching effective solutions.
3. Egypt stated that the effects of agricultural trade liberalization resulting from the
implementation of the Agreement on Agriculture were felt in the LDCs and NFIDCs through higher
prices for basic foodstuffs, a decrease in food aid deliveries to NFIDCs, or a decline in agriculturalproduction combined with a lack of technical and financial assistance to improve their agricultural
productivity and infrastructure.  These effects had a significant impact on family incomes,
employment, rural development, food security as well as economic and social stability.  The increase
of the cereal import bill of LDCs and NFIDCs during the first three years of implementation was
approximately 49 per cent although admittedly a small part of this increase was due to reasons other
than the implementation of the Agreement on Agri culture.  In the case of Egypt, the result of
implementation in terms of net agricultural trade was negative.  The average value of agriculturalimports in 1995-98 was 37 per cent higher than in the period 1990-94, although Egypt had
experienced a declining trend in food imports since 1985.  There was now a history of six years to
judge whether the reform programme had caused negative effects and not just "possible negative
effects" in the future.  There was clearly a causality between liberalization and higher prices, at least
in the short and medium term.  The sixteen countries including Egypt had submitted the proposal aspart of the implementation exercise relating to the Uruguay Round commitments and the ongoing
negotiations.  It might be expected that LDCs and NFIDCs would call for a more extensive
compensation mechanism with further trade liberalization.
4. Egypt noted further that one of the major deficiencies of the Decision was the definition or
interpretation of certain terms, particularly what constituted "negative effects".  With respect to foodaid and the relationship between the Decision and the Food Aid Convention (FAC), there were
differences in the way in which the beneficiaries were categorized.  Unlike the Decision, the FAC also
assigned priority to certain groups of countries.  It was therefore doubtful whether the Convention
fully reflected the concerns of the Decision.  With respect to the issue of access to financing facilities,
Egypt noted that the IMF Compensatory Financing Facility (CFF) was limited to cereals only and theconditions in accessing it were difficult to meet  which meant that the CFF had no relevance to the
Decision's objectives and coverage.  More importantly, the Decision dealt with effects arising from
international factors, while the IMF facility addressed or required domestic policy adjustment related
mainly to balance of payments difficulties.  Of course, the modalities of the management of the
resources of the proposed Inter-Agency Revolving F und needed to be agreed.  In the view of Egypt,
there was a need to combine shared functions or actions under one mechanism.  Egypt expressed the
hope that Members would lend their support to the proposal and the sponsors stood ready to have
further discussions on the technicalities of operating the Revolving Fund.
5. Sri Lanka recalled that at the November 2000 meeting of the Committee Sri Lanka had stated
its views on why the Marrakesh Decision had not been implemented.  The reasons included ambiguity
with respect to timing and mechanisms to operationalize the Decision.  There was also a lack of
clarity with respect to the meaning of "negative effects", "reasonable terms and conditions","sufficient level of food aid" and "normal level of  imports", and with respect to assigning precise
rights and responsibilities to the relevant agencies.  Furthermore, there were no binding WTO
commitments on the main three elements of the decision, namely food aid, technical and financial
assistance, and access to all basic foodstuffs and necessary concessional financing facilities.
According to FAO data, these two groups of countr ies were facing higher cereal import bills than
before.  The NFIDCs should have access to basic foodstuffs when stocks were low and prices were
high on the international market.  Therefore, there was a linkage between access to food and the
availability of finance to purchase food.  The proposal envisaged establishment of a Revolving Fund
with a view to ensuring access for LDCs and NFIDCs to concessionary financing when world prices
were high with a link to a food reserve to ensure that these countries could purchase food atreasonable prices in the international market.  Sri Lanka agreed that the main objective of theG/AG/7
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Agreement was to create a fair and market-oriented agricultural trading system by removing trade-
distorting policies which in the past had led to structural surpluses.  If the fundamental objective ofelimination or gradual reduction in export subsidies and reduction in domestic support was successful
and structural surpluses were decreased there would be an increase in the cost of food imports of the
LDCs and NFIDCs.  In this connection, Sri Lanka recognised Japan's proposal at the Special Session
for the establishment of an international food reserve.
6. In the view of Sri Lanka there were further reasons that justified the establishment of a
Revolving Fund.  The IMF compensatory financing facility (CFF) had not been used by many
NFIDCs and LDCs due to its conditionality; the CFF covered only the cereal cost of food and did not
cover all basic foodstuffs as envisaged in the Decision, and it was subject to standard interest rates.
Furthermore, the IMF was in the process of reviewing the CFF in the context of an overall reform of
the financial architecture with emphasis on the Poverty Reduction and Growth Facility.  The IMF was
not looking at cereal import bills separately but rather in the context of the balance of payment
situation and other adjustment conditionalities.  Moreover, the availability of financing under the CFFwould be reduced as its operation was reviewed.  Under the second window of the Revolving Fund,
technical and financial assistance would be made available to improve agricultural productivity and
related infrastructure so as to enable the LDCs and NFIDCs to increase their food production and be
less dependent on food imports.  On food aid, the philosophy of the Food Aid Convention had
changed with the intention to encourage commercial purchases, decrease the availability of food aidand provide finance to purchase food on a commercial basis.  There was an emphasis on encouraging
commercial buying, hence the importance of a Revolving Fund.  Sri Lanka also believed that there
was a need for donor countries to commit greater commodity volumes under the Food Aid
Convention and to make food aid available in fully grant form.
7. Sri Lanka expressed the hope that the proposal would receive positive consideration by
developed country Members and donor countries as the reform process envisaged in Article 20 of
Agreement on Agriculture should also take into account possible negative effects arising from the
reforms.  On this condition, these two groups of countries would be able to make further
commitments in the reform process since this would impose additional burden of adjustment on these
two groups of countries.
8. Honduras, on behalf of Cuba
 and the Dominican Republic , stated that after six years of
implementation of the Agreement, there were no concrete measures in favour of the LDCs and
NFIDCs.  As the proposal indicated, the situation of the net food-importers had deteriorated as a result
of the Uruguay Round.  The Marrakesh Decision was only one of the many Uruguay Round benefits
which developing countries were supposed to have received but which had not materialized.  It wastherefore difficult for these Members to consider the launching of a new round of negotiations since
they were still waiting to obtain the benefits from the past round.  These Members hoped that this
proposal would be well received by Members and that it would result in concrete decisions to be
adopted by the General Council in the implementation process before the fourth Ministerial
Conference which would contribute to the process of strengthening confidence in the multilateral
trading system.
9. Senegal stated that as one of the sponsors of the proposal it fully supported the specific ideas
that had been put forward.  Senegal considered that the proposal constituted an important step towards
finding a solution to this priority issue.  In Senegal food imports constituted approximately 45 per cent
of total imports and this issue was therefore of utmost importance since it was directly linked to food
security.  Senegal called on Members to give the proposal their highest attention so as to make
progress on this issue.
10. India supported the proposal made by the gr oup of sixteen net food-importing developing
countries.  India noted with concern that food aid wa s lower when world market prices were high.  If
Members were serious about implementing the Marrakesh Decision in good faith, food aid shouldG/AG/7
Page 5
increase when it was most needed, that is when world market prices were high.  India also supported
steps for capacity enhancing in the long term so that dependence on food aid was reduced.  Foodproduction could be boosted in many of the current food-importing developing countries if trade-
distorting support to agriculture provided in several other countries was meaningfully reduced.
11. Indonesia recognized the importance of the proposal submitted by the sixteen WTO net food-
importing developing countries.  Indonesia looked forward to constructive results in the consultations
undertaken by the Vice-Chairman with a view to finding appropriate mechanisms to implement the
NFIDC Decision.
12. New Zealand noted that it was one of those Me mbers which had supported  the decision in the
General Council to bring this issue before the Co mmittee on Agriculture with a view to finding ways
of more effectively implementing the Marrakesh Ministerial Decision.  New Zealand commended the
proponents of the proposal for tabling this thoughtful paper.  New Zealand already provided all of its
food aid in fully grant form and would encourage others to do so as well.  New Zealand agreed that
donor countries should commit greater commodity  volumes under the Food Aid Convention as the
need dictated.  New Zealand also agreed that it was essential that additional and more targeted
technical and financial assistance be provided to NFIDCs and LDCs to increase their agricultural
productivity and infrastructure.  There were many other interesting suggestions in the proposal,
including the inter-agency Revolving Fund concept, which New Zealand would need more time to
reflect upon.  New Zealand looked forward to take forward the discussion in a substantive manner andsupported ongoing informal consultations by the Chair on the subject.
13. Thailand welcomed the constructive proposals by the sixteen developing countries.  It could
support the proposal that food aid should be provided in fully grant form.  In addition, Thailand
suggested that the purchase of food stocks for food aid should be made from developing countries
only.
14. Australia welcomed the proposal for revising existing WTO provisions under the NFIDC
Decision and the establishment of mechanisms to improve the implementation of that Decision.
Australia was interested in further technical elaboration of the proposals in the paper.  Australia noted
that at a preliminary discussion between the sponsors of the proposal and donors, which was
convened by the Vice-Chairman, it was agreed that as a first step it would be helpful if the IMF, theWorld Bank, the International Grains Council and the FAO could inform Members on their actions
relevant to the proposals on access to financing facilities, food aid, and technical and financial
assistance.  Australia would welcome this approach.
15. Canada thanked the proponents for their efforts in preparing the proposal.  Canada shared the
interest in ensuring that the Decision was effectively implemented.  While the submission alluded to a
clear causality between Uruguay Round policy refo rms and higher food import bills experienced by
LDCs and NFIDCs, Canada was not convinced that the paper clearly established this causal link.  In
fact, the Table attached to the proposal seemed to show food import bills rising in 1995/96 and falling
since.  Per unit import costs had done likewise, and based on the further decline in prices for
1999/2000, it could be expected that they would decline still further when more recent data became
available.  This suggested there might be many other reasons for the changes in food import bills of
the LDCs and NFIDCs than a link with the reform programme.  The issue of causality was veryimportant in the discussion of the implementation of a decision dealing with the effects of the reform.
Canada recognised the legitimate concerns of the sponsors of the proposal regarding instability in
food import bills and wanted to see the Decision work effectively.  Canada also agreed with India that
reduced distortions and a better functioning agricultural trading system would contribute to improved
food security in NFIDCs and LDCs.  On food aid, Canada supported the call for all food aid to beprovided in fully grant form.  On the question of larger volume commitments under the Food Aid
Convention, Canada had increased its volume commitments under the Food Aid Convention in 1999,
and had consistently exceeded its Food Aid Convention commitment threshold.  With regard to theG/AG/7
Page 6
idea of carrying forward and back food aid commitments, Canada wondered if this would run counter
to the principle of providing assurances of the availability of minimum levels of food aid.  Inconsidering this proposal, Canada believed that the appropriate forum to consider food aid volume
commitments was the Food Aid Convention and not the WTO.  On the proposed new financing
facilities, Canada would like to learn more about the reasons for the under-utilisation of existing
facilities.  Canada would encourage a detailed and specific discussion of what problems existed within
existing mechanisms, and how they might be resolv ed, before considering the establishment of a new
mechanism.  Regarding technical and financial assistance, Canada was interested in examining how
this assistance could be targeted more effectively.  Canada had doubts, however, about whether the
WTO was an appropriate forum for countries to make commitments on the level and direction of their
development assistance activities.
16. The EC stated that it was fully committed to the Food Aid Convention and strongly supported
the proposal that food aid should be provided in fully grant form.  The EC also had noted that food aid
had been lower when market prices were higher, and vice-versa.  This illustrated another importantissue, namely the abuse of food aid to enhance market penetration.  With respect to increases on food
aid, the EC believed that food aid should be given to those in need and when needed.  Food aid should
not create dependence, nor jeopardise local production of food.  With respect to financial facilities,
the EC's view at this stage was that they should be dealt with by the IMF and the World Bank.
17. The United States thanked the sponsors of the paper for their contribution to the discussion.
The United States felt that the debate on whether or not the modest Uruguay Round reform process
had a negative effect on the LDCs and NFIDCs had probably gone on long enough.  Nonetheless,
some countries might feel that their reliance on food  imports left them vulnerable to the uncertainties
of the market place and these concerns must be addressed if these countries were to participate in and
benefit from further reform.  While there were a number of points in the proposal with which theUnited States agreed, on some issues the United States had different views.  In the view of the United
States, the negotiations on food aid should remain with the Food Aid Convention and not be taken up
by the WTO.  The United States were thus reluctant to make binding commitments on food aid within
the WTO schedule of commitments.  The United States as the largest donor of food aid provided more
than 85 per cent  of food aid in grant form.  The United States considered that there was an importantrole to play for concessional loan based food aid.  The United States were also reluctant to commit to
a new financing facility without first exploring the deficiencies of the current arrangements.
Furthermore, a new financing mechanism could not be established quickly and a great deal of
technical work would be required.  In any event,  the United States took the proposal seriously and
were committed to working with interested members on the matter.  The United States encouraged the
Vice-Chairman to continue the informal technical discussions.
18. Japan welcomed the proposal by the sixteen developing countries.  This proposal sought to
address the problems which NFIDCs and LD Cs were facing during the Uruguay Round
implementation period.  Japan supported the efforts to consider what should be done to solve these
problems and to make the Marrakesh Decision effective.  In the view of Japan, the specifics of the
proposal should be examined carefully.  Japan s upported that FAO play an important role as a
competent agency on food security issues in developing countries.  Members should draw on FAO'sexpertise to examine the implementation experience of the Agreement on Agriculture, approaches
towards food security, technical problems on food stockholding schemes and other issues.  Japan felt
that it could also be useful to have discussions among relevant international organizations, including
FAO.  Regarding food aid, Japan believed that the possibility to provide food aid on a loan basis
should be maintained, taking into account the needs of recipient countries and financial conditions ofdonor countries in the case when large-scale food shortages occurred.  Regarding the proposal on
stockholding, Japan had also proposed an international food stockholding system in its negotiating
proposal.  Japan would like to examine with the developing countries concerned what measures were
effective for establishing such an international food stockholding scheme.G/AG/7
Page 7
19. Uruguay welcomed the concrete proposals made by the sixteen Members. Uruguay supported
a number of suggestions, in particular that food aid should be provided in fully grant form and be
available when most needed.  The proposals should be carefully studied and given priority attention.
While Uruguay shared the doubts expressed by Canada concerning the causal link between the reform
process and the problems faced by these countries, it agreed that work should be undertaken to
identify problems within the framework of existi ng mechanisms before recommending new solutions.
Uruguay supported the idea of seeking additional information from the relevant internationalorganisations.
20. Argentina welcomed the proposal and was prepar ed to support it.  Although Argentina had
concerns regarding the justification of the proposal, Argentina considered the proposal to be a step in
the right direction by suggesting aid for imports rather than subsidies for exports of agricultural
products.  Another merit of the proposal was to draw attention to the importance of technical
assistance as a means to increase production in the countries concerned.  Argentina noted that it might
be complicated and possibly beyond the Committee's mandate to establish a new fund.  Nevertheless,Argentina supported the suggestion of Australia to first proceed to an examination of the existing
mechanisms and facilities, in the light of which the Committee could then make recommendations, as
appropriate.  Argentina considered, on the other hand, that the suggested causality between the
Uruguay Round commitments and higher food impor t bills was far from clear since many factors
were at play, including the financial crisis, natural disasters and civil wars.  Argentina also consideredthat applications to be included on the WTO list of net food-importing developing countries
(G/AG/5/Rev.4) should be considered with good wi ll but cautioned against diluting the list if the
Marrakesh Decision was to be implemented effectively.
21. Pakistan thanked Members for having positively engaged in these discussions.  Their ideas
and suggestions would be helpful in refining the proposal.  With respect to the argument by certain
Members that the causality between the reform progamme and international food prices was not
established or rather weak, Pakistan observed that in the first two years of implementation, world
market prices for food had increased as domestic support and other trade-distorting support was
reduced;  in subsequent years, prices had decreased since trade-distorting support to agriculture had
been increased to levels of the base period.  In the view of the sponsors of the proposal, there was thus
a clear causal link between the "reform policies" and international food prices.  In any event, the
sponsors were willing to elaborate their proposal which reflected genuine concerns and difficulties.
22. Argentina took issue with Pakistan's statement concerning the issue of causality.  In the view
of Argentina, the situation was as follows:  in itially, when the commitments on domestic support and
export subsidies were not constraining, international commodity prices had increased;  subsequently,when the commitments became more constraining, world prices had declined – and not the other way
round as might be expected.  In other words, there could be a linkage between the WTO commitments
in agriculture and world prices but the suggested causality was far from clear.  For this and other
reasons, Argentina would be concerned about statements to the effect that the results of the Uruguay
Round were prejudicial to the interests of the NFIDCs and LDCs.
23. In summarizing the discussion, the Vice-Chairman noted that Members had held an
interesting debate on the issue of causality betw een the Uruguay Round results in agriculture and
world food prices and although different views had been expressed, there was a common view that it
was important to ensure stable food supplies for LDCs and NFIDCs.  There had also been different
views on the question of which institutions should deal with the various elements of the Marrakesh
Decision.  It would be his suggestion to continue the informal discussions with participation of
experts from the relevant international organizations, with a view to identifying the specific problems
in implementing the Decision.  In such informal m eetings, it would be his intention to take up the
issues separately, that is access to the financing facilities of the international financial institutions;
food aid; and technical and financial assistance.G/AG/7
Page 8
ANNEX 2
PROPOSAL TO IMPLEMENT THE MARRAKESH MINISTERIAL DECISION
IN FAVOUR OF LDCS AND NFIDCS
Submitted by Côte d'Ivoire, Cuba, Dominican Republic, Egypt, Honduras,
Jamaica, Kenya, Mauritius, Morocco, Pakistan, Senegal, Sri Lanka, St. Lucia,
Trinidad and Tobago, Tunisia and Venezuela *
We are grateful to the Vice-Chairman of the WTO Committee on Agriculture for inviting
concrete proposals by the NFIDCs and the LDCs on the relevant points under paragraph 21 of the
Draft Ministerial Declaration of 18 October 1999 related to the implementation of the MarrakeshMinisterial Decision on Measures Concerning the Possible Negative Effects of the Reform Process on
Least-Developed and Net Food-Importing Developing Countries.  We look fo rward to the following
proposals being given immediate and favourable consideration to allay the genuine concerns of the
NFIDCs and LDCs and effectively implement the relevant Ministerial Decision which is a legal
commitment of WTO Members under Article 16 of the Agreement on Agriculture.  We are confidentthat the discussions in the Committee on Agriculture on this issue will  lead to the submission of
positive suggestions to the General Council for adoption.
The main objective of the Agreement on Agriculture was to decrease the structural surpluses
generated in the past by production and trade-distorting policies in agriculture.  It is, therefore,obvious that if this fundamental objective of the AoA is successful, the effect for the NFIDCs and
LDCs will be an increase in the cost of their food imports.  The period since the UR came into being
provides a good example for examining the experien ce of NFIDCs and LDCs as regards their food
import bills.
According to the data provided by FAO (see Ta ble I), these two groups of countries are facing
much higher cereal import bills than before.  Taking the two years prior to 1995 as a benchmark
(i.e. the average of the two marketing years 1993/94 and 1994/95), the increase in the cereal import
bills in 1995/96 to 1996/97 amounted to 36.6 per cent for the two groups of countries taken together.
Nearly all of this increase (35.1 per cent) was due to increases in the per unit cost of imported cereals,as volumes changed only marginally.  Moreover, even after the world prices returned to more normal
levels since the 1997/98 marketing year, the cereal import bills of these two groups of countries
remained at a much higher level than they were prior to 1995.
In view of the above, the causality betw een policy reforms under the Uruguay Round and
higher food import bills for the LDCs and NFIDCs is clear.
Proposals for Implementation
The Ministerial Decision includes three mechanisms to respond to the difficulties faced by the
LDCs and NFIDCs:  food aid, access to financing facilities, and technical and financial assistance to
increase agricultural productivity and infrastructure.  We have the following proposals in respect ofeach of these three mechanisms.
___________________
*(G/AG/W/49, dated 19 March 2001.)G/AG/7
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Food Aid
Unfortunately, it has been observed that food aid is lower when world market prices are high
and hence more food aid is needed, and vice versa.  Moreover, the  new Food Aid Convention (FAC)
approved in June 1999 has lesser volume of commodity commitments (4.895 million tonnes, in wheat
equivalent) than under the previous 1995 FAC (5.35 million tonnes, in wheat  equivalent) and 1986
FAC (7.5 million tonnes).
We therefore, propose that:
(i) all food aid should be fully in grant form;(ii) donor countries should commit greater commodity volumes under the Food Aid
Convention;
(iii) the donor countries commit that the food aid volumes will increase in years of high
world market prices when such aid is most needed.  This can be achieved by
providing appropriate flexibility in the C onvention, e.g. carry forwards from periods
of low prices and hence of low demand for food aid and call forwards from nextyear(s) contributions under the FAC.
Access to Financing Facilities
The NFIDCs and LDCs need access to special financing facilities to maintain the normal
volume of food imports during times of high market  prices without further jeopardizing their balance-
of-payments position. Experience has shown that the existing facilities under the Bretton Woods
institutions, due to the conditionalities attached and other technicalities, have not been used by the
countries in need of such financing.  Moreover, the required financing facility should have some
corresponding link with physical stocks of food grains.  We therefore propose that:
(i) FAO, in the light of its experience and work in this area, should be asked to provide
estimates of the volumes of normal annual food imports that are needed by individual
NFIDCs and the LDCs to maintain consumption levels, and assess the assistance
needed to import these quantities;
(ii) an inter-agency Revolving Fund should be set up with two components.  The first,
and variable component  of this Fund (to comprise existing and/or new financing
facilities as appropriate), will be to ensure that adequate financing at concessional
terms is made available to the NFIDCs and LDCs in times of high world market
prices;
(iii) the producing countries commit, in years of plentiful supplies as we are witnessing
now, to put aside over and above volumes required for food aid, emergencies and
essential nutritional assistance projects, sufficient national food reserves in
accordance with the normal import requirements of the NFIDCs and LDCs as
indicated by FAO;
(iv) these reserves should be released to the LDCs and NFIDCs at reasonable prices, in
times of high world market prices, to help them, together with available food aid,
meet their normal import requirements.G/AG/7
Page 10
Technical and Financial Assistance
Further, we consider it essential that technical and financial assistance be provided to the
NFIDCs and the LDCs to increase agricultural productivity and infrastructure.  This will  address
directly the very problem responsible for the heavy dependence of LDCs and NFIDCs on the world
market.  We, therefore, propose that:
(i) the second, and fixed component of the above-mentioned Revolving Fund should
provide technical and financial assistance to NFIDCs and LDCs for specific projects
linked to improving agricultural productivity and related infrastructure;
(ii) this technical and financial assistance to be provided to the NFIDCs and the LDCs
should be over and above the regular bilateral and multilateral activities of donors in
this area.
Binding Commitments and Effective Monitoring
To ensure certainty and predictability in respect of food aid, financing, and technical and
financial assistance, it is recommended:
(i) all major developed exporting countries should put aside supplies, under national
food reserves, specifically earmarked to be released to the NFIDCs and LDCs under
reasonable prices during years of high world prices;
(ii) developed countries and international development and financial institutions (World
Bank IMF, UNDP) should contribute to the financing of the two components of the
Revolving Fund which, in turn, should be managed by an inter-agency arrangement
with the full involvement of FAO;
(iii) the commitment of WTO Members regarding volumes of food aid, volumes of
physical reserves, contributions to the two components of the Revolving Fund are
inscribed in their country schedules as binding and legally enforceable;
(iv) the WTO Members should make regular annual notifications in respect of these
commitments to the Committee on Agriculture of the WTO.
We are willing to enter into discussions with our trading partners in good faith and with a view to
reaching effective solutions.  Depending on these discussions, we will be happy to provide further
technical elaboration of the points made in this proposal.G/AG/7
Page 11
__________Table I
Cereal Imports of LDCs and NFIDCs (1993/94  to 1999/00) - Information as of November 15, 1999
1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00
Import bill ($ million)
LDCs 1,375 2,195 2,272 1,871 2,357 1,996 na
NFIDCs 3,775 4,559 6,265 5,857 5,397 4,617 na
LDCs+NFIDCs 5,150 6,754 8,537 7,728 7,754 6,613 na
  % change over 1993/94-94/95 -13.5 13.5 43.4 29.8 30.3 11.1 na
Total volume imported (1000 tons)
LDCs 11,167 13,310 12,273 10,753 14,390 15,380 13,108
NFIDCs 25,516 25,995 26,093 28,038 30,974 29,370 31,542
LDCs+NFIDCs 36,683 39,305 38,366 38,791 45,364 44,750 44,650
  % change over 1993/94-94/95 -3.4 3.4 1.0 2.1 19.4 17.8 17.5
Food aid (1000 tons)
LDCs 3,932 4,326 3,305 2,553 2,669 3,157 na
  % of total imports 35.2 32.5 26.9 23.7 18.5 20.5 na
NFIDCs 1,857 1,325 641 495 622 616 na
  % of total imports 7.3 5.1 2.5 1.8 2.0 2.1 na
LDCs+NFIDCs 5,789 5,651 3,946 3,048 3,291 3,773 na
  % of total imports 15.8 14.4 10.3 7.9 7.3 8.4 na
Benefit from US EEP ($ m illion)
LDCs 99 35 1 0 0 0 na
NFIDCs 355 88 21 0 0 0 na
LDCs+NFIDCs 454 123 22 0 0 0 na
  % change over 1993/94-94/95 57.4 -57.4 -92.4 -100.0 -100.0 -100.0 na
Per unit import cost ($/ton)
LDCs 123.1 164.9 185.1 174.0 163.8 129.8 na
NFIDCs 147.9 175.4 240.1 208.9 174.2 157.2 naLDCs+NFIDCs 140.4 171.8 222.5 199.2 170.9 147.8 na
  % change over 1993/94-94/95 -10.4 9.7 42.0 27.2 9.1 -5.7 na
Wheat export price
US no 2 hard winter ($/ton) 143 157 216 181 142 120 110
  % change over 1993/94-94/95 -4.7 4.7 44.0 20.7 -5.3 -20.0 -26.7
1993/94-94/95 1995/96-96/97 1997/98-98/99
Averages (LDCs+NFIDCs)
Import bill ($ million) 5,952.0 8,132.5 7,183.5Total volume imported (1000 tons) 37,993.9 38,578.5 45,057.0Food aid (1000 tons) 5,719.8 3,496.8 3,532.0Benefit from US EEP ($ million) 288.5 11.0 0.0Per unit import cost ($/ton) 156.7 210.8 159.4Wheat export price ($/ton) 150.0 198.5 131.0
% change over 1993/94-94/95
Import bill 0.0 36.6 20.7
Total volume imported 0.0 1.5 18.6
Food aid 0.0 -38.9 -38.2
Benefit from US EEP 0.0 -96.2 -100.0
Per unit import cost 0.0 34.6 1.8Wheat export price 0.0 32.3 -12.7
Source:  FAO
.Figures for 1998/99 are provisional and for 1999/00 are estimates