RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/10
6 July 2001
(01-3428 )
Committee on Agriculture Original:  English
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 on
Measures 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 submitted to the
Committee on Agriculture a "Proposal to Implement the Marrakesh Ministerial Decision in favour of
LDCs and NFIDCs" (G/AG/W/49).  The sponsors of this proposal have submitted an elaborated
proposal which has been circulated as G/AG/W/49/Add. 1 (copy attached as Annex 3).  The list of co-
sponsors now includes Peru, bringing the number of co-sponsors up to 17.  The proposals were the
subject of continuing discussions, including at an  Informal Roundtable Discussion with the IMF, the
World Bank and the FAO as well as at the regular meeting of the Committee on 28-29 June 2001.
3. The IMF representative stressed that the IMF has sufficient financial resources but lending by
the IMF had to be aimed at addressing balance-of -payments problems.  The World Bank representative
observed that World Bank lending for rural deve lopment had declined from about US$4 billion per
annum a decade ago to US$1 billion last year, the lowest level ever.  This decline was due not to lack of
World Bank resources, but to a decline in demand fo r loans aimed at agricultural and rural development.
The World Bank representative stated that the Bank was concerned that agricultural development was
no longer being accorded a high priority in many deve loping countries in terms of the use being made of
the Bank's resources.  Frustrations were expresse d by the proponents of the proposal that adequate
financing facilities to meet the short-term difficultie s of the NFIDCs and the LDCs were not existent.  A
detailed summary of the discussions at both meetings is attached in Annexes 1 and 2.
4. Regarding future work, I noted that there is support among Members to continue the
consultation.  I intend to organize more informal consultations.  There will also be an opportunity to
pursue the issue at the Special Session of the Committee on Agriculture in July in the context of thediscussions on food security.  This will contribute to define more clearly the scope of issues that need
to be taken up in the context of implementation.  The content of my consultations will include how toG/AG/10
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address short-term financial difficulties, whether present IMF and World Bank facilities are suited to
address concerns, and the proposed revolving fund.  I will also provide opportunities to consult in a
wider context including the issues of food aid and technical and financial assistance to improve
agricultural productivity and infrastructure.
5. As agreed by the Committee on Agriculture at its meeting on 28-29 June 2001, this report is
submitted to the General Council on my responsibility as Vice-Chairman of the Committee.G/AG/10
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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 29 June 2001
6. Egypt noted that the participants in the Roundtable had reached the conclusion that the current
financial facilities available under the aegis of the IMF and World Bank did not serve the purpose of
the Marrakesh Decision.  These facilities were anchored in balance-of-payments relief at the IMF, and
in long-term agricultural production projects at the World Bank.  Because of time constraints, there
had not been a full discussion of the proposal for a new food financing facility.  In view of the risingopposition of civil and other sections of society to further liberalization in agriculture, it was
becoming increasingly difficult for the decision makers in various capitals to engage wholeheartedly
in the work of the special negotiating sessions.  Doha presented a unique opportunity to convince the
doubters of the feasibility and desirability of further reform of the multilateral trade system.  This
would be impossible without a suitable sign of the international community's commitment to address
the concerns of the weaker trading partners.  NFIDCs and LDCs were frustrated and disappointed
about the lack of constructive engagement and the slow pace of discussions, and reiterated a
willingness to accelerate work on the issue with a view to presenting the Ministers at Doha with a
pleasant surprise.
7. In Pakistan's view, it would be embarrassing for Ministers if the Marrakesh Decision was not
operationalized before the Doha conference, six years after it had been taken; this issue should be one
of the many deliverables at Doha.  The NFIDCs and LDCs had tried to explain the rationale of their
proposal, and put forward a solution.  The existing facilities of the IMF and World Bank did not cater
to the needs of the proponents.  The Contingency Financing Facility (CFF) of the IMF was not used
frequently because of the conditionality, and this conditionality had been further strengthened.  Thepossibility of modifying the CFF criteria was remote.  Since the existing facilities did not meet the
needs, alternative institutions should be cons idered, for example the International Fund for
Agricultural Development (IFAD).  IFAD was an international financial institute, had logistic
capacity, but lacked money.  In response to those who failed to see the lin k between prices and the
reform programme, Pakistan pointed out that according to the OECD, support to agriculture had risen,
which naturally had led to falling prices.  Especially Cairns Group countries should not be blind to
this link between increased support and falling prices.
8. Venezuela noted that the concentration on short-term financing at the Roundtable should not
mean that other topics, including food aid as well as technical and financial assistance, were not
important.  The discussions at the Roundtable had led to the conclusion that the existing financial
facilities were not adequate for the needs addressed by the Marrakesh Decision.  Unfortunately, at the
Roundtable there had been no opportunity to discuss the proposal in detail.  Venezuela emphasized inparticular two aspects of this proposal: the self-financing character of the fund, and the possibility that
IFAD could be a more appropriate framework for the administration of this fund given the lack of
flexibility of the IMF and the World Bank.
9. Sri Lanka appreciated the opportunity to discuss this topic at the informal Roundtable, and
clarified the overall purpose of the proposal.  This proposal called for effective implementation of the
Ministerial Decision, including three mechanisms: food aid, financing facilities, and technical and
financial assistance to increase agricultural production and infrastructure.  The co-sponsors of the
proposal had highlighted the reasons why the Decision remained unimplemented at previous
meetings.  They proposed that all food aid should be fully in grant form, requested donor countries to
commit greater commodity volumes under the Food Aid Convention, and to make this aid availableG/AG/10
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when it was most needed, during periods of high market prices.  On access to financing facilities, they
proposed the creation of a special facility to maintain the normal value of food imports during times
of high market prices without further jeopardizi ng their balance-of-payments positions.  The group
proposed the establishment of an inter-agency f und with two components: one variable component to
ensure that adequate financing was made available at concessional terms to NFIDCs and LDCs attimes of high market prices; and a fixed component to provide technical and financial assistance to
NFIDCs and LDCs for specific projects linked to improving agricultural productivity and related
infrastructure.  They also proposed to ensure the predictability of the operationalization of the
Decision, and recommended that all stakeholders make commitments in different areas.
10. Sri Lanka then addressed the questions posed at the March formal meeting of the Agriculture
Committee and at the Roundtable.  The first set of questions was related to the causality between the
Uruguay Round reforms and the higher import bills experienced by NFIDCs and LDCs.  The group'spaper had observed that in the first two years of implementation, world market prices for food had
increased as trade-distorting support was reduced.  In subsequent years, prices had decreased since
trade-distorting support to agriculture had increased to levels of the base period.  Sri Lanka stressed
that the comparison should be between an outcome with the Uruguay Round and one without  the
Uruguay Round.  There was a long-t erm downward trend in food prices since the beginning of the
previous century, and this trend was likely to continue.  Other primary commodities exported by
developing countries experienced a similar downw ard trend.  Hence, export earnings also had a
downward trend, influencing the terms of trade.  Th e argument that the reform process had not had
any adverse effects on the capacity of NFIDCS and LDCs to purchase food contradicted the argument
made by the same people who claimed beneficial effects of the reform process for developingcountries stemming from agriculture.
11. A second set of questions concerned whether the food-aid component should remain within
the Food Aid Convention, whether the WTO was the appropriate forum for countries to make
commitments in the different areas, and whether the establishment of a new fund fell within the
Committee's mandate.  Sri Lanka believed that the Marrakesh Decision had emerged as a consequenceof the liberalization process undertaken in the WTO context.  Hence the implementation of the
responsibilities attached to the Decision lay also within the WTO.  Although the level of food aid was
decided under the Food Aid Convention, it was morally and practically incorrect to claim that the
issue of food aid should be dealt with outside the WTO because the Decision called for the adoption
of guidelines to ensure that appropriate levels of food aid were made available to NFIDCs and LDCs
in fully grant form.  Under the Decision, the Minister s recognized that in order to address the short-
term difficulties experienced by these countries in financing normal levels of commercial imports,they would be eligible to draw on the resources of  international financial institutions under existing
facilities or facilities to be established.  In the absence of a Ministerial Conference, the General
Council was empowered to review the Decision for its effective implementation.  The General
Council, in its decision of December 2000, had mandated the Agriculture Committee to examine
possible means of improving the effectiveness of the implementation of the Marrakesh Decision.Therefore, the Committee had a mandate to examine such new schemes.
12. The last set of questions addressed by Sri Lanka was related to the proposed inter-agency
revolving fund, and to technical clarifications on the existing financial facilities, how they functioned,
and why they were under-utilised.  The informal Roundtable had proved that the existing financial
facilities under the Bretton Woods institutions could not be used by the NFIDCs and LDCs due to the
conditionalities attached to such facilities, the limited product and country coverage, and their greater
relevance to the policy decisions of beneficiary countries than to the needs of NFIDCs and LDCs.
The group sponsoring the proposal intended to provide technical details at an appropriate time on the
organization, implementation and monitoring of the inter-agency fund.  Sri Lanka invited interested
delegations to submit alternative proposals while taking into account the weaknesses inherent in theexisting mechanism.G/AG/10
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13. Peru shared the previous speakers' view about the inadequacy of the existing financial
mechanisms and supported the creation of a new fund for short-term financing of normal import
levels of basic food products as an important contribution to food security.  Increasing food import
bills constituted an obstacle to development.  The new proposal dealt only with one of the aspects of
the Marrakesh Decision, but Peru continued to be in terested in a full implementation of the Decision.
14. Trinidad and Tobago recalled that the first proposal had addressed the three elements of the
Marrakesh Decision, namely food aid, access to financing facilities, and technical and financial
assistance to increase agricultural productivity and infrastructure.  The Roundtable, which had
addressed the section of the proposal that dealt with short-term financing facilities, had not been
encouraging.  The existing facilities could not and did not respond to the needs of the NFIDCs and
LDCs in implementing the Ministerial Decision.  There was a need to be innovative in creating an
instrument, i.e. the proposed revolving fund, which could facilitate implementation of the Decision.Consultations on all aspects of the Decision had to be pursued.  Trinidad and Tobago pointed out that
aside from the Bretton Woods institutions there was another international organization with
experience in financing that was involved in the area of agricultural development and food security:
IFAD.  In light of the negative and rigid position adopted by the IMF and the World Bank at the
Roundtable, WTO Members should examine whether IFAD might not be the ideal agency to managean operationalized revolving fund.
15. The Dominican Republic, on behalf of Honduras
, reminded the Committee that the Marrakesh
Decision contained a long-term and a short-term component.  The short-term component aimed to
resolve difficulties in financing normal levels of commercial imports, while the long-term component
was designed to improve agricultural productivity and infrastructure.  The Roundtable had made itclear that the existing facilities were not designed  to cover short-term needs as foreseen in the
Decision.  Therefore, a new self-financing fund of 1.2 billion dollars to be contributed by multi-lateral
organisms and donors had been proposed.  There had been a lack of political will to resolve this
problem in the six years since the adoption of th e Decision.  Time before the Doha Conference was
running short, and the lack of satisfactory soluti ons to this and other implementation problems would
condition their acceptance of new elements for the future work programme of the WTO.  The
Dominican Republic and Honduras desired a more detailed discussion of the proposal, and asked their
trading partners for the necessary flexibility to reach a solution.
16. Cuba noted that the proposal constituted a new effort to find a concrete solution to one part of
the Marrakesh Decision.  It was clear that the existing facilities could not be adapted to the needs of
NFIDCs.  Thus, a new fund had to be created in a multilateral framework.  The fact that until now the
WTO had not been able to correct this problem resulting from the Uruguay Round showed that therewas a lack of political will.  This resulted in considerable insecurity in developing countries when it
came to accepting new commitments in the organization.
17. Jamaica recalled the importance for developing countries of resolving implementation issues.
The operationalization of the Marrakesh Decision was one such issue.  Jamaica had co-sponsored the
proposal, but had also indicated that it remained open to other options.  One example, IFAD, was afinancial institution whose involvement could assist in effectively addressing Jamaica's concerns.  As
preparations for Doha intensified, Jamaica anticipated concrete positive responses to advance this
discussion.
18. Nigeria stressed that the need to implement the Marrakesh Decision was ever more urgent in
view of other problems facing LDCs, most of whic h were in Africa.  These problems included heavy
debt overhang, natural disasters, droughts, wars and the AIDS pandemic.  In view of these problems it
was imperative that a way be found to implement this Decision in line with Article 16 of the
Agreement on Agriculture.  If the present proposal was not acceptable, Nigeria invited developedG/AG/10
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countries to make counterproposals that would lead  to a resolution.  Such a solution would increase
confidence in the multilateral trading system.
19. Argentina questioned the link between international prices and the agricultural reform
process, and recalled its statement at the March Committee meeting on this subject (G/AG/7 refers).
Many factors had influenced prices, including the Asian crisis and technological progress.  When theimplementation period had started, prices had increased, but at the end of the implementation period
for developed countries, prices had fallen.  The proposal was interesting and should be analyzed, but it
was based on the unjustified assumption that there was an obvious link to prices.
20. India reiterated that this was a real implementation problem arising from the Marrakesh
Decision.  India was concerned with the non-implementation of this decision affecting the most
vulnerable developing countries, which would lead to a loss of these countries' faith in the WTO's
responsiveness to their problems.  India shared these concerns since it had graduated from being a netfood importing country to self-sufficiency or even marginal exports.  India urged the Vice-Chairman
to develop a road map for the work leading up to Doha to find a solution to this problem.  If food
prices had decreased, and food aid had increased, India wondered why import bills had increased
since the Uruguay Round.  Through the Vice-Chairma n, India requested FAO to analyze this problem
and provide more information to the Committee.
21. New Zealand stressed that it had faithfully implemented the Marrakesh Decision and its
follow-up at the Singapore Conference.  LDCs wishing to trade with New Zealand had almost duty-
free access, and starting on 1 July 2001 would have completely duty-free access for all products.  New
Zealand's food aid was guaranteed on a cash-only ba sis, and targeted assistance to agriculture was
provided through its bilateral aid programme.  New Zealand was neither for nor against the proposedshort-term financing facility, but remained to be convinced of the need for a new fund.  At the
Roundtable, New Zealand had hoped to see an attempt to use the existing framework of the IMF and
the World Bank since it saw significant barriers to the development of a new fund within the
timeframe envisaged.  New Zealand also saw difficulties in the notion of the WTO as a rules-based
organization taking on this issue, and was struggling to find a way forward.  Like India, New Zealandwould endorse a road map, as well as further informal consultations and discussions at the July
Special Session.  If Ministers at Doha decided that the concept of a short-term financial facility should
be pursued, then New Zealand would work faithfully to activate such a decision.
22. The European Communities noted that, similar to New Zealand, it had also opened its markets
to LDCs.  Regarding the proposal, the EC agreed that food aid should be in fully grant form, and
should not be a means of surplus disposal.  The EC was not convinced by the justifications given for
the new fund.  The Marrakesh Decision referred clearly to countries facing negative effects in termsof availability of food on reasonable terms and conditions, while the proposal referred to rising import
bills, which might be caused by other factors, such as growing populations or higher incomes.  While
the Decision referred to the financial facilities of  the current international organizations, the proposal
suggested to create a new fund outside the umbrella of the current institutions.  In addition, the EC
was not convinced that the current financial facilities were inappropriate to meet the problems relatedto the availability of food.  The EC remained open to further technical discussions to facilitate a better
understanding of the issue.  Food security would also be addressed in the negotiations under Article
20.  Implementation of the Marrakesh Decision was important, and there was scope for significant
improvements of conditions for the provision of food aid.
23. Venezuela replied that the Marrakesh Decision referred also to difficulties in financing
normal levels of food imports.  Regarding the link between the reform process and prices, the fact that
there were many factors should not serve as an excuse to delay action.  Paragraph 5 of the Marrakesh
Decision clearly referred to existing financial facilities and to possible new ones; thus the proposal
aimed only at implementing something already contained in the Decision.G/AG/10
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24. Egypt requested all delegates to concentrate on the proposal, which dealt with short-term
financing requirements.  Food aid did not replace these.  Egypt was grateful for duty-free market
access for LDCs, but this did not provide for food security.  The new fund did not have to be outside
the Bretton Woods organizations; the proposal menti oned that these organizations should be involved
in its management.  The fund was supposed to be commercially viable, and would constitute a safetynet for bad times, which would help countries to go fu rther in their liberalization efforts.  Import bills
of NFIDCs and LDCs for 2000/2001 were expected to rise by around 6 per cent.  The Decision was
meant to help NFIDCs and LDCs precisely in these situations, even if they did not reflect long-term
market developments.  Since it was to be expected that subsidies would be reduced through the
ongoing negotiations, this would definitely result in price increases, probably about three to four years
after the conclusion of an agreement.  If nothing was done now, it would be very difficult to address
that future situation, since it would take time to establish a new funding facility.
25. Canada recognized the concerns of some LDCs  and NFIDCs over food security, particularly
in the context of continuing agricultural trade liberal ization. However, it reiterated the need to keep in
mind the actual impact of the Uruguay Round on prices, which it believed to be slight.  Canada
looked forward to further consultations on the issue.  If there were significant reductions in trade-
distorting subsidies, this should normally result in rising prices, but the Uruguay Round results hadnot given a very good experiment  to confirm this hypothesis since subsidies were still high.  The
Marrakesh Decision was about the impact of the Uruguay Round.  In the future, further reduction in
trade-distorting subsidies might actually result in risi ng prices.  This suggested it would be appropriate
to deal with the concerns of countries about the potential price impact of more significant reforms in
the context of the negotiations.  The discussion of food security in the July Special Session would beimportant in this regard.
26. Australia noted that it was interesting that according to the World Bank, the use of loans for
agricultural development had declined.  It would be  useful to explore with the World Bank how this
could be reversed.  Agricultural development would be important to improve the food security
situation of NFIDCs and LDCs.  Other ways of improving the food security situation and address
some of the concerns giving rise to the Marrakesh Decision were to work to eliminate export
subsidies, reduce domestic support and increase market access.  Australia looked forward to
addressing these issues in more depth at the July Special Session in the context of the discussion of
food security.  Australia appreciated that these aspe cts addressed the longer-term issues, and that there
also were short-term considerations.  In this context Australia noted the proposal to establish a new
fund, and looked forward to work with the IMF, the World Bank and the NFIDCs and LDCs on their
concerns.
27. The United States also expressed concern at the decline in investment in agricultural and rural
development noted by the World Bank.  It was important to reverse this trend in order to address food
security.  Although they addressed very important issues, the United States had reservations about the
specifics of the proposals, for example on the need for a new billion-dollar fund.  The US considered
fora other than the WTO more appropriate for making binding commitments on food aid.
28. As the biggest net food importer, Japan understood the necessity of making the Marrakesh
Decision effective.  Japan looked forward to partic ipating in further informal meetings on the issue.
29. Switzerland believed that food aid should best be discussed in the Special Session of the
Committee on Agriculture.  Switzerland remained committed to the Food Aid Convention, strongly
supported the proposal that food aid should be provided in fully grant form, and was ready to increaseits commitments under the next Convention.  However, food aid should not create dependence or
jeopardize local production.  In this light, technical assistance, which was also part of the proposal,
was of primary importance.  With respect to financial facilities, the Swiss view was that they were
best dealt with in the context of the Bretton Wood s institutions.  The Roundtable had shown that thereG/AG/10
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were under-utilised facilities, and that both the World Bank and the IMF would welcome increased
use of their facilities.  Switzerland was not convinced that the existing facilities were not appropriate
to accommodate the concerns, and looked forward to more informal consultations.
30. Norway agreed that the Marrakesh Decision needed to be operationalized.  Norway thought
that food aid should be given in fully grant form , and that there might be a need to increase the
commodity volumes under the Food Aid Convention as well as technical and financial assistance.
Starting on 1 July 2002, Norway would fully open its  markets for imports from LDCs.  As to short-
term financing, Norway was not yet sure that the best solution was the creation of a new mechanism.
First it should be analyzed what could be done to  improve the existing mechanisms.  Norway looked
forward to a continued dialogue.
31. The Vice-Chairman summarized the discussions.  Regarding future work, the Vice-Chairman
planned to continue the informal consultations.  There would also be an opportunity to pursue the
issue at the Special Session in July in the context of the discussions on food security.  The content of
the consultations would include how to address short-term financial difficulties, whether present IMF
and World Bank facilities were suited to address concerns, and the proposed revolving fund.  He
would also provide opportunities to consult in a wi der context including the issues of food aid and
technical and financial assistance to improve agricultural productivity and infrastructure.G/AG/10
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ANNEX  2
Examination of Possible Means of Improving the Effectiveness
 of the Implementation of the Marrakesh NFIDC Decision –
Summary of the Interventions by the IMF, the World Bank and the FAO at the Informal
Roundtable Discussion held on 18 June 2001
The International Monetary Fund
Item (i)     The issue of access to the financing facilities of the international financial institutions
32. The IMF makes its financial resources available to member countries through a variety of
lending, including through the following four "regular" facilities:
(a) Stand-By Arrangements (SBA):  Designed to deal with any temporary balance-of-
payments (BOP) problem.  The typical SBA is for 12-18 months, but may be as longas three years and disbursement of financing is usually conditioned on the borrower
meeting specified performance requirements.  Loans must be repaid within 3 ¼-5
years.  The expected repayment period is shortened to 2 ¼ - 4 years if the country’s
external position allows it to repay earlier.
(b) Extended Fund Facility:   Designed to provide medium-term assistance in particular
to members with (a) an economy suffering serious payments imbalance relating to
structural maladjustments in production and trade and where price and cost
distortions have been widespread; or (b) an economy characterized by slow growth
and an inherently weak balance-of-payments position which prevents the pursuit of
an active development policy.  The length of an EFF arrangement is typically threeyears and disbursement is conditioned on the borrower meeting specified
performance requirements, including structural reforms.  The facility has longer
repayment periods than other facilities, 4 ½ - 10 years; the expected repayment period
is shortened to 4 ½ - 7 years if the country’s external position allows it to repay
earlier. If agriculture is targeted in a reform programme, countries can availthemselves of this facility.   Some of the countries on the WTO NFIDC list would be
eligible to use this facility.
(c) Compensatory Financing Facility (CFF): Provides financing for members
experiencing temporary export shortfalls or excesses in cereal import costs, based on
balance-of-payments situation.  Interest rates are market-related, but are concessional
in that the terms are better than would be available from commercial banks.
Repayment in 3 ¼  – 5 years.   The access limits have a range of up to 55 per cent of acountry's IMF quota.
(d) Poverty Reduction and Growth Facility (PRGF):  Highly concessional loans (0.5 per
cent interest) with longer-term repayments (5 1/2-10 years).  The PRGF could
incorporate agricultural sector reform policies, as part of an overall strategy to reduce
poverty.  An eligible country may borrow up to a maximum of 140 percent of its IMFquota under a three-year arrangement; this limit (which is not an entitlement) may be
increased under exceptional circumstances to a maximum of 185 percent of quota.
Eligibility is based principally on a country’s per capita income and eligibility underG/AG/10
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the International Development Association (IDA), the World Bank’s concessional
window (the current cut-off point for IDA eligibility is a 1999 per capita GDP level
of $885); accordingly, many of the countri es on the WTO NFIDC/LDC list qualify.
The PRGF is fully financed (i.e. available to meet the total theoretical demand).
33.   According to its mandate, lending by the IMF must be aimed at addressing BOP problems.
In the specific case of a loan request under the cer eal component of the CFF, developments in cereal
imports are examined from a BOP perspective, i.e., if import prices rise, the BOP situation has to
indicate that there is a need.   The CFF has been used infrequently.  The most recent use of the cereals
component was by Bulgaria in 1997.  Conditionality is one of reasons for its infrequent use, the
availability of other instruments is another.   Infrequent use is not a problem of lack of financial
resources.
Item (ii) The scope for adapting the existing programmes and facilities of the
international organizations in light of the Marrakesh NFIDC Decision
34. The IMF is based on revolving resources.  Thus, the notion of “unused resources” (mentioned by
some participants in the roundtable) does not apply.
35.  The CFF was recently reviewed as part of a process of refocusing the IMF.   The decision taken
in this regard has reduced access, strengthened conditionality, as well as established a stronger link to
overall  BOP conditions.  There were also voices among IMF members to abolish the CFF.   The IMF
will review its decision concerning the CFF not later than 30 August 2002 .
36. As an alternative to adapting existing IMF facilities, countries concerned could analyze their
situation from a balance of payments perspective, to determine whether their perceived financing
needs could be met through recourse to IMF financing.
Item (iii)   The Proposal to Implement th e Marrakesh Ministerial Decision in Favour of
LDCs and NFIDCs submit ted by Côte d'Ivoire, Cuba, Dominican Republic,
Egypt, Honduras, Jamaica, Kenya, Mauritius, Morocco, Pakistan, Peru,
Senegal, Sri Lanka, St. Lucia, Trinidad & Tobago, Tunisia and Venezuela
37.   The IMF position remains that it is in a position to meet any anticipated balance-of-
payments needs.   In accordance with its mandate, the IMF could consider the proposal only if it was
related BOP difficulties.    Since the proposed new fund falls outside its authority, the IMF cannot
make a contribution.
38.  In theory, it would be easier to amend the CFF than establish a new fund.G/AG/10
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The World Bank
Item (i)     The issue of access to the fina ncing facilities of the international financial
institutions
39.   World Bank lending for agriculture and rural development decreased from 30 per cent of its
total in 1978-81 to 9.6 per cent in 2001 - the lowest level ever.  It was US$ 3.5 billion a decade agobut only US$ 1 billion in 2000.  As the World Bank's approach has become more demand-driven,
requests for agricultural and rural development loans have declined.  This development is alarming
since 70 per cent of those living on less than a dollar a day live in rural areas and most are farmers.  In
view of this development, the Bank is currently conducting a review of its agricultural sector and rural
development strategy.
40. Most client countries have under-performing agricultural sectors, partly as a result of under-
investment in Green Box measures.  In many cases, there is a pronounced urban bias, with mostpublic investment flowing into the cities.  In addition, the domestic policies in developing countries
often depress the internal terms of trade against agriculture.  Overvalued exchange rates and other
government interventions in many client countries co ntinue to adversely affect prices for agricultural
products.  Farmers in many developing countries remain net tax payers due to their own government's
interventions.  In such circumstances, conditionality is imposed to ensure that the client country's own
policies do not make World Bank-financed projects less likely to succeed.
41.  A number of reasons were responsible for the declining trend in loan disbursements,
including the following.  As the result of low comm odity prices, it has been difficult to obtain a
satisfactory internal rate of return.   Commodity prices have declined over the past 150 years in real
terms and, although the World Bank projects food demand to double by 2050, due to technologicalimprovements in agriculture it does not expect prices to rise in the long term.  Safeguards to address
legitimate environmental and social concerns also add to the cost of borrowing.   Furthermore, the
political reality is that the rural poor have little political voice and their interests are not a priority to
their own governments.
42. IDA terms for the lowest income countries are very favourable at 0.5 per cent interest and 30
years repayment.  Loans on IBRD terms are on commercial terms, although the World Bank AAA
rating provided some benefit.
43. With respect to short-term measures, the World Bank is committed to market-based
instruments with a view to reducing the effects of price fluctuations on farmers.  Since 1999 in a
number of cases commodity swaps have been part of loan agreements, whereby the commodity pricerisk was transferred to, and hedged by, the World Bank.   In addition, the World Bank has set up a
task force to explore commodity risk management to allow farmers in developing countries,
especially smallholders, to use options and futures contracts.   Eight related case studies are underway
and pilot projects are due to start in 2002.   Market-based risk management instruments are amenable
to both producers/exporters and importers of agricultural commodities.  It might be noted that the
Cotonou Agreement makes reference to, and encourages the use of, market-based instruments.G/AG/10
Page 12
Item (ii) The scope for adapting the existing programmes and facilities of the
international organizations in light of the Marrakesh NFIDC Decision
44.  As noted above, the demand for loans related to agriculture and rural development has
declined dramatically over the past decade.  Had there been demand, the World Bank could have lent
much more for agriculture and rural development.  (This does not imply that the World Bank hasunused financial resources since loans are financed from bond sales.   The World Bank has additional
borrowing capacity for client countries to request loans related to agriculture or rural infrastructure.)
Item (iii)   The Proposal to Implement th e Marrakesh Ministerial Decision in Favour of
LDCs and NFIDCs submit ted by Côte d'Ivoire, Cuba, Dominican Republic,
Egypt, Honduras, Jamaica, Kenya, Mauritius, Morocco, Pakistan, Peru,
Senegal, Sri Lanka, St. Lucia, Trinidad & Tobago, Tunisia and Venezuela
45.  The World Bank provides loans for investment but its charter does not permit lending for
consumption.   Furthermore, the World Bank provides very little in terms of grants and thus would not
be in a position to contribute to the proposed new fund.
46.   The World Bank considers market-based instruments (as outlined above) to be preferable to
the creation of a fund to compensate for unanticipated price shocks.   With respect to market-basedinstruments, the World Bank would consider subsid ising the premia for such price insurance policies.
The Food and Agricu lture Organization
Item (iii)   The Proposal to Implement th e Marrakesh Ministerial Decision in Favour of
LDCs and NFIDCs submit ted by Côte d'Ivoire, Cuba, Dominican Republic,
Egypt, Honduras, Jamaica, Kenya, Mauritius, Morocco, Pakistan, Peru,
Senegal, Sri Lanka, St. Lucia, Trinidad & Tobago, Tunisia and Venezuela
47.  The proposal is based on research undertaken by FAO and presented at a FAO roundtable at
the Palais des Nations on 21 March 2001.   If  there is interest in pursuing this proposal, FAO standsready to provide further information and assistan ce with respect to the needs assessment and the
operation of the proposed fund.
48. As a preliminary idea, the fund could be set up by providing ex-post compensation to
governments in times of import bills deviating sign ificantly from the long-term trend.   Governments
may then use these resources by providing targeted assistance to those that are adversely affected byincrease in prices. Also, these resources may be used to support food production and productivity
increasing programmes. In order to avoid rapid drawing down of the fund's capital, the level of
drawings could be capped.G/AG/10
Page 13
RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/W/49/Add.1
23 May 2001
(01-2663)
Committee on Agriculture Original:  English
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
Addendum
The attached Addendum concerning the Proposal to Implement the Marrakesh Ministerial
Decision in favour of LDCs and NFIDCs is being circulated at the request of the above-mentioned
Members.
_______________
OPERATIONALIZING THE MARRAKESH DECISION:
A NEW APPROACH TO SHORT-TERM FINANCING REQUIREMENTS
Introduction
The aim of this paper is to serve as a background document for the Roundtable on
Operationalizing the Ministerial Decision on Measures Concerning the Possible Negative Effects of
the Reform Process on Least-Developed Countri es and Net Food-Importing Developing Countries
(hereinafter referred to as the Marrakesh Decision).
The Roundtable seeks to bring together al l the parties concerned (LDCs, NFIDCs, donor
countries, the WTO, FAO, IMF and World Bank), in an effort to discuss the operationalization of part
of the proposals presented by a number of WTO Member states (document G/AG/W/49), namely to
create a new fund whose purpose is to provide the 's afety net' promised by the Marrakesh Decision,
under terms and conditions compatible with the latter .  It is hoped that the Roundtable would produce
an agreement on forging forward with ideas for fina ncing LDC/NFIDCs, to be presented at both the
autumn session of the IMF/World Bank and the WTO Ministerial in November 2001 for
implementation.
Sincere thanks is hereby extended to Mr. Yoichi Suzuki, Minister Plenipotentiary at the
Mission of Japan to the WTO, whose untiring ef forts as Vice-Chair of the Committee on Agriculture
at the WTO were instrumental in revitalising a subject long-thought dead and organising theG/AG/10
Page 14
Roundtable.  Special gratitude also goes to Frank Wolter and Thomas Friedheim, Director and
Counsellor respectively of the Agriculture Division and their staff, for their help and cooperation with
the current effort.  Last, but most definitely not least, to all the men and women of the delegations of
Member states who have, over the years, kept the flame burning.  To them we owe our appreciation,
gratitude and thanks. May the Almighty bless our efforts.
Why the Decision? And Why the Roundtable?
There is little argument that agriculture is - and will remain for the foreseeable future - the
essential sector for the majority of LDCs and NF IDCs, whose impact spills over from the economic
into the social and political arenas.  Food security is also a major policy objective of these countries,
particularly as they depend - to a smaller or larger extent - on importing a sizeable proportion of their
populations' food requirements.
In order for LDCs and NFIDCs to sign onto the Agreement on Agriculture (AoA) in 1994, the
Decision was taken by Ministers attending the launch of the WTO, with the express aim of providing
a 'soft landing' for those Member states whose economies were most liable to be affected from the
liberalisation of agriculture under the AoA.  Particularly, the Decision focused on the concept of'availability of adequate  supplies of basic  foodstuffs from external sources on reasonable  terms and
conditions'.  Hence, the Decision proposed three short-to-medium term response mechanisms (more
food aid in grant form, S&D treatment on export credit s, short-term credit facilities), as well as a
longer-term mechanism (technical & financial assistance to improve agricultural productivity and
infrastructure).
In view of the fact that the Decision has been a subject for little more than 'discussion' and
'review' for the last six years, the Roundtable, therefore, aims to:
- Galvanise all concerned states and parties into adopting a more practical and
pragmatic work programme aimed at moving from the 'discussion' phase to the
'doing' one;  and
- Study the proposal presented herein to address the needs of LDCs and NFIDCs in
their quest to satisfy their basic foodstuff requirements from the world market; under
a mix of terms and conditions that may be considered reasonable, with a view to
presenting a workable plan for implementation by the IV Ministerial Conference inDoha.
In order to visualise the urgency and importance of the issue at hand, a few figures would be
needed.  Drawing on figures published by FAO, the WTO
1 and other international sources, the
following facts stand out:
1. The combined populations  of the 49 LDCs and 20 NFIDCs broke through the 1 billion mark
in 1998, representing over 22 per cent of the combined population of all developing countries.
Meanwhile, undernourishment touched around 38% of LDC populations, and 17 per cent of
those of NFIDCs.
2. Per capita incomes  of LDCs in 1997 were 17 per cent of the average of developing
countries, while the p.c.i. for the NFIDCs in the same year stood at about 70 per cent of the
developing country average.
                                                     
1 'Implementation of the Decision on Measures…', document no. G/AG/W/42/Rev.3, WTO,
31 October 2000;  and 'Towards Improving the Operational Effectiveness of the Marrakesh Decision',
Discussion Paper no.2, FAO, Rome 2001.G/AG/10
Page 15
3. The combined cereals import bills  for LDCs and NFIDCs rose by over 10 per cent from
1993-95 to 1998/99, with a peak rise of 42.6 per cent in 1995/96.  It is forecast that the year
2000/01 will see a further rise of around 3 per cent ($800 million) in the value of cereal
imports for these countries aver the figures for 1999/2000.
4. Food aid deliveries to LDCs and NFIDCs fell from 5.65 million MTs in 94/95 to an
estimated 4.59 million MTs in 99/00; a drop of around 19 per cent.  It is notable that the
volume of food aid to LDCs in 1999 represented 99 per cent of the 90-99 ten-year average,
while that for NFIDCs was only around 63 per cent of said average - compared to a 60 per
cent rise in food aid deliveries to 'other' countries during the same period.  As to the
concessionality  of food aid, there remains at least one donor country which does not yet
provide such aid on a 100%-grant-basis.
5. The volume of  commercial imports  by LDCs and NFIDCs rose from 35.2 million MTs in
94/95 to an estimated 42.9 million MTs in 99/00 (a  rise of over 21 per cent), with a further
increase of 750,000 MTs forecast for 2000/01.
6. Although cereal import bills  are now thankfully lower than the peaks reached in 1995/96,
they still remain at a higher plateau than the period prior to 1994/95.
Scope and Magnitude of the problem
A recent FAO study2 concluded that the inadequacy of physical supplies of basic foodstuffs
on world markets are not currently an issue for reflection, and that the real problem lies in the
conditions of access facing LDCs and NFIDCs in obtaining their food requirements.  The study also
concluded that, in view of the language used in  formulating the Decision, the triggering mechanisms
for 'operationalising' the Decision should be based on the totality of effects and factors, i.e. onunexpected levels of food import bills of LDCs and NFIDCs on an individual basis, rather than
limiting them to individual factors that lead to the outcome (e.g. rises in world market prices, declines
in food aid deliveries, and so on).
Based on these conclusions, the study went on to compute the magnitude of excess import
bills for the period 1989-1998 based on 5 per cent and 10 per cent alternative thresholds.  It concluded
that, for all food items and 46 LDCs and 19 NFIDCs covered by the Decision, the aggregate "excess"food bill in the 'maximum' year (1995/96) over the mean of the period was $900 million (on the 5 per
cent rule) and $605 million (based on the 10 per cent rule)
3.
Availability of Financial resources
The Decision foresees the need of LDCs and NFIDCs to address both short-term financing
('to cover difficulties in financing normal levels of commercial imports') and a longer-term financial
need ('to improve their agricultural productivity and infrastructure').
On the short-term front, allusion has been made to the availability of financial resources under
the IMF 's Compensatory Financial Facility (CFF).  A recent evaluation undertaken by the IMF itself
                                                     
2 'Towards improving the Operational Effectiveness….', FAO, op. cit, pg. 4.
3 As shown in the FAO paper, the mean is the average for 1989-98 of the total "excess" import bills
(i.e. the aggregate of all countries studied with import bills greater than 5 per cent or greater than 10 per centabove trend).  Negative deviations from trend were not taken into account, since such deviations do not
constitute a 'problem' to be addressed by the Decision.G/AG/10
Page 16
points to the fact that 'there has been very little use of the CFF in recent years'4.  In fact, reliable
evaluative studies has come to the conclusion that, to make the CFF compatible with the terms of the
Decision, the CFF would need 4 adjustments:
1. Extend its coverage to all basic food imports (rather than cereals only).
2. Relaxation of its general conditionalities and rules on eligibility.
3. Streamline eligibility requirements for both LDCs and NFIDCs.4. 'Concessionalise' its resources, both in terms of repayment periods and interest levels.
It is to be noted that the same study concludes that 'the CFF is not the most suitable
instrument for addressing the problem .. (sic. to be addressed through the Marrakesh Decision)'
5.
Meantime, the role and operations of the World Bank  in the provision of short-term financing for
emergency food imports are not clear.
The longer-term requirement for multilateral financial resources is theoretically  available
through the World Bank's contributions to the Consultative Group on International Agricultural
Research (CGIAR), estimated at $ 50 million in 19986, and other World Bank projects in the field of
agriculture.  No clear figures are available to quantify the long-term technical assistance and
capacity-building programmes for LDCs and NFIDCs, or a detailed evaluation of their effectiveness
in raising productivity and production – a key component of the assistance foreseen in the Decision.
To sum up, the financing required to address the 'short-term difficulties' is practically
non-existent from any multilateral source on the terms - and under the conditions – foreseen in the
Decision; while the longer-term financing needed to upgrade physical and human resources in
agriculture are partially available via the World Bank.
The New Fund
This dearth of suitably conditioned short-term (<24 months maturity) financial resources
leads us to believe in the need for a totally new approach for the future, to be based on the philosophy
and intent of the Decision.  It is, in fact, neither inconceivable nor unreasonable to assume that the1995/96 surges could happen repeatedly in the future.  The idea is for the creation of a special Food
Financing Facility (F
3), solely designed for the implementation of the Decision.  The F3 could be
visualised as follows:
(a) In view if recent experience, its resource base is estimated at around $1,200 million7; to be
drawn from a 'consortium' of multilateral financial organisations, G-7 and other donors, and
major developed exporting Member states.
(b) The 'eligibility' of LDCs and NFIDCs to draw  on the resources of the Fund would be decided
on a country-by-country basis and in accordance with agreed-upon guidelines, and after a fairand factual computation/assessment was made of its requirements.  Levels of each country's
                                                     
4 'The Fund's Compensatory Financial Facility – Recent Developments', IMF Speaking points for the
Geneva Roundtable on Selected Agricultural Issues, Geneva March 21st, 2001  pg.2.
5 Ibid.
6 WTO document G/AG/GEN/31 of 15 December 1998, pg 23.
7 This figure was calculated on 2 years worth of credit facilities at the lower end level of $600 million,
as per the FAO study.G/AG/10
Page 17
compensation package could be capped in periods of surges in import bills, in order to avoid
harming the Fund's long-term financial viability.
(c) The resources available to the Fund could be 'recycled' or repayable, so as not to unduly
inflate the capital of said Fund.  In fact, in the years when import bills are amenable, theresources could be earmarked by donors, but not disbursed, with a view to the optimal
utilisation of such resources.  Repayments of  financial resources drawn-down by beneficiaries
would be effected under a medium-term scheme on terms more favourable than current open
market conditions.
(d) The responsibility for the administration and management of the Fund would need to be
centralised in a small bureaucracy; said bureaucracy to be overseen by a Management Board
comprising representations from the WTO, FAO, IMF, World Bank, donor states as well as
the beneficiaries.
This Fund would, obviously, not cover the long er-term requirements of LDCs and NFIDCs to
improve their basic infrastructures and enhance agricultural productivity.  In this respect, a call ismade out to all donor parties to earmark a greater proportion of any multi- and bi-lateral aid
programmes for such use.  It was the vision of the signatories to the Marrakesh Decision to 'wean'
recipients away from their food-aid 'dependancy'.  This can only be achieved through a serious,
concerted and cooperative effort aimed at improving levels of self-sufficiency of LDCs and NFIDCs –
while maintaining the gains achieved in the agricultural reform process under the AoA, and spurringthese countries towards greater engagement in futu re reform processes under the current negotiations
under Article 20 of the AoA.
__________