RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/6
28 November 2000
(00-5100)
Committee on Agriculture
IMPLEMENTATION OF ARTICLE 10.2 OF  THE AGREEMENT ON AGRICULTURE
Report by the Vice-Chairman, Minister Yoichi Suzuki, to the General Council
1. At its meeting on 18 October 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 which had been identified in the report presented by the Director-General and the
Chairman of the General Council on their consultations on implementation issues and concerns as
being appropriate for such action.
2. In the case of the Committee on Agriculture the relevant part of this report, which constitutes
the Committee's mandate in this matter, is as follows:
"On tiret 6, regarding the development of internationally agreed disciplines to govern
the provision of export credits, export credit guarantees or insurance programmes
pursuant to Article 10.2 of the Agreement, I propose, on the basis of our discussions,
that the General Council instruct the Committee on Agriculture to include in theagenda of its regular meetings an item on the implementation of Article 10.2 and to
report back on the Committee's progress on this issue to the General Council at its last
regular meeting of this year.
It is my understanding that in pursuing their work on export credits in accordance
with Article 10.2, Members will of course take into account the provisions ofparagraph 4 of the Marrakesh Decision on net food-importing countries, in which
Ministers agreed that any agreement on export credits should ensure appropriate
provision for differential treatment in favour of least-developed and net food-
importing developing countries."
3. As instructed by the Special Session of the General Council, an item on the implementation of
Article 10.2 of the Agreement on Agriculture was included on the agenda of, and was the subject of
discussions at, the regular meeting of the Committee held on 14 November 2000,  including withrespect to the provisions of paragraph 4 of the Marrakesh Ministerial Decision on least-developed and
net food-importing developing countries.
4. A detailed summary of the discussion in the Committee on the implementation of Article 10.2
of the Agreement and on the provisions of paragraph 4 of the Marrakesh Ministerial Decision is
attached hereto as Annex I.  A statement made, at the invitation of the Committee, by the observer ofthe OECD on the negotiations currently underway w ithin that Organization on a sector understanding
on agricultural export credits is included in the attached summary (Annex I, paragraph 22 refers).  A
document introduced by Mercosur (Argentina, Brazil, Paraguay and Uruguay) as a contribution to
further discussion and transparency in this area (G/AG/W/47) is attached hereto as Annex II.
5. Overall, it was considered that the Committee's first round of discussions on this subject had
been useful.  In this regard it was noted that the question of the implementation of Article 10.2 and ofG/AG/6
Page 2
the related provisions of the Marrakesh Ministerial Decision would, as appropriate, remain on the
agenda of the regular meetings of the Committee.
6. As agreed by the Committee on Agriculture at its meeting on 14 November 2000, this report
is submitted to the General Council on my responsibility as Vice-Chairman of the Committee.G/AG/6
Page 3
Annex I
Implementation of Article 10.2 and the related provisions of the Marrakesh Ministerial
Decision:  Summary of the disc ussion at the meeting of the
Committee on Agriculture on 14 November 2000
1. Brazil, on behalf of MERCOSUR, stated th at MERCOSUR had circulated a proposal on
export credits (document G/AG/W/47 dated 14 November 2000 refers) which MERCOSUR had
tabled in the context of the FTAA negotiations.  The text had not been circulated as a proposal as such
but was intended as a constructive contribution to a transparency exercise on the issue of export
credits in the Committee on Agriculture.   The intention was to share with Members an example of a
plurilateral endeavour to develop internationally agreed disciplines on agricultural export credits.
Since the text had been developed to fit a regional context, it would probably need to be reviewed and
adjusted to better reflect a multilateral approach.  One of the issues that the paper had not addressedwas the needs of the net food-importing countries , as well as LDCs, and MERCOSUR intended to do
that at the appropriate time.
2. Brazil noted that the text contained a number of positive elements which MERCOSUR
believed to be illustrative of any discussions that may be held on this matter in the  WTO.  Firstly, the
text was non-product-specific, i.e., it was not tailored to suit the specific needs of countries or regions.The disciplines were horizontal in nature and essentially non-discriminatory.  Further, an effort had
been made to achieve a more thorough definition of what export credits for agriculture products were.
The text also sought to identify the scope and nature of what would be officially-supported export
credits.  Nevertheless, in the light of recent developments in the WTO dispute settlement mechanism,
MERCOSUR believed that the language of this pape r deserved further careful consideration in order
to ensure that all aspects of governmental partic ipation in the area of export credits were covered.
MERCOSUR was convinced that the use of governmental resources must be carefully monitored and
regulated under any circumstances, be it under concessional or favourable terms, be it under alleged
market terms.  Secondly, the overall terms and conditions set out in the text were generally
compatible with international market practices for agricultural products.  It was important to note thatthe text was not biased in favour of economies with surplus resources.  Thirdly, the text did not
provide for derogations, neither under special market circumstances nor for matching practices, a
highly questionable practice very common in the OECD for industrial products.  Fourthly, despite the
fact that the document was designed for a regional free-trade area, it was important to note that its
horizontal character would make it suitable for any open-ended framework.
3. Brazil expressed the hope that the elements contained in the MERCOSUR paper might
provide guidance to the WTO about the main essentia l parameters in any multilateral disciplines for
export credits covering agricultural products.
4. The EC stated that by signing the Marrakesh Agreement WTO Members had undertaken to
work towards development of internationally agreed disciplines to govern the provisions of export
credits in Article 10.2 of the Agreement on Agriculture.  However, nine months after the agreed date
for starting Article 20 negotiations, disciplines foreseen in an agreement reached in Marrakesh in1994 had not as yet been agreed.  As a consequence,  export credits covering exports of agricultural
and food products had not been governed by any specific discipline within the Agreement on
Agriculture, including transparency requirements.  Th is had resulted in total flexibility for those WTO
Members that used this instrument to boost their exports.  Some WTO Members resorted to long-term
state guaranteed export credits for a significant part of their trade in certain commodities, such asgrains.  Traders would not normally be able to obtain credits that substantially exceeded the lifetime
of the goods before they had been consumed, transformed, or resold locally.  Furthermore, due to the
state guarantee the interest rate was lower than what a bank would normally charge.  This constituted
a subsidy.  Given the wide range of forms that officially supported credits could take and theG/AG/6
Page 4
confidential nature of some of the data regarding subsidized export credits, it was generally difficult
to determine the exact magnitude of support that was provided to exports by this instrument and the
extent to which trade was distorted.  What was clear was that officially supported export credits did
distort trade.  Specific strict WTO rules and disciplines should therefore cover them like any other
mechanism used to support exports.  In the short term and in other certain circumstances, it was fair torecognize that export credits could lower the food bill of the net food-importing countries.  However,
in the long run, using export credits to overcome food security problems had several drawbacks.
Granting export credits to poor countries would increase their future debt burden which could worsen
the problem of heavily indebted poor countries.  Food aid on fully grant terms, aid and technical
assistance to structural development were tools that were far more appropriate.
5. The EC stated further that the negotiations on the development of disciplines on export credits
had started more than five years ago in the OECD where disciplines had previously been negotiatedon export credits for exports of industrial goods.  Australia, Canada, the European Communities,
Japan, Korea, New Zealand, Norway, Switzerland, the United States, as well as Argentina, which was
not an OECD member, had participated in these negotiations which had moved on only recently.
Hopefully an agreement could be reached at the OECD by the end of this year so that the use of
subsidized export credits become progressively closer to commercial practices.  In the view of the EC,
this would be an important step in the right direction for the whole of the WTO membership.
Notwithstanding the EC's final position on the latest proposal of the Chairperson in the OECD
negotiations, it must be clear that this agreement could only be a first step for further improvements in
disciplining export credit practices.  Regarding the OECD negotiations on export credits, the EC
considered that if as hoped there was an agreement in the OECD by the end of the year, it could onlybe part of the implementation of the Uruguay Round and not an early harvest of the new WTO
negotiations on agriculture.  For the current negotiations on agriculture, the EC objective was to bring
export credit practices as close as possible to commercial practices, i.e. to improve the disciplines that
could be agreed in the OECD.  These disciplines should then be integrated into the new WTO
Agreement on Agriculture.
6. Canada stated that the undertaking to work towards the development of internationally agreed
disciplines to govern the provision of export credit guarantees or insurance programmes was an
outstanding commitment from the Uruguay Round of negotiations.  Canada had engaged in
negotiations in the OECD towards an understanding that would contain disciplines on the practices of
the participating OECD members.  Canada believed that this was an important first step in reducing
the potential to circumvent export subsidy commitments.  The understanding was to contain
appropriate provisions in favour of least-developed countries and net food-importing developingcountries.  This was in response to the commitment in the Marrakesh Ministerial Decision concerning
the least-developed and net food-importing developing countries to ensure that any agreement made
appropriate provision for differential treatment in favour of least-developed and net food-importing
developing countries.  Canada was committed to pursuing an understanding which provided
meaningful disciplines, not one that legitimised existing practices.  Canada was seeking maximumrepayment terms that were as close to commercial practices as possible.  Regrettably the negotiations
at the OECD were not yet concluded.  Canada remained hopeful that the negotiations held this week
in Paris would result in consensus on an understanding.  Successful negotiations would be an
important first step towards meeting the commitment in Article 10.2 of the Agreement on Agriculture
but this would not exclude export credits from being discussed in negotiations to continue the reformprocess in agriculture.  Canada and other Cairns group members had proposed the elimination of the
export subsidy element of subsidized export credits in the context of the current negotiations on
agriculture.  Canada looked forward to pursing this objective in the on-going WTO negotiations.
7. The United States thanked Brazil for having introduced the paper referred to above and
welcomed the commitment expressed by Canada a nd the EC to moving forward in the OECD and
reaching an agreement on export credits.  The subject of export credits was one of great importance to
the US.   The United States was committed to reaching an agreement at the OECD and believed thatG/AG/6
Page 5
this could be achieved.  The United States called upon those who were negotiating, as well as the
other countries that were involved in the negotiations, to press forward to find an agreement and to
bring these very difficult discussions to their earliest possible conclusion.
8. New Zealand welcomed MERCOSUR's contribution to the Committee's deliberations on the
implementation of Article 10.2 of the Agreemen t on Agriculture.  New Zealand, too, had been
disappointed by the lack of progress in implem enting Article 10.2 of the Agreement.  New Zealand
believed that the development of internationally ag reed disciplines on the provision of export credits
referred to in Article 10.2 were an integral part of the Uruguay Round outcomes, and essential to
ensuring that export subsidy disciplines were not circumvented by the use of subsidized export
credits.  Intensive negotiations were proceeding this week in the OECD in Paris on the issue of export
credits.  New Zealand was participating constructively and positively in those negotiations, and like
other participants, called on all other participants in that forum to work to ensure that they wereconcluded as quickly as possible and no later than by the end of the year, given the importance of this
issue to the wider membership.
9. Mauritius thanked Brazil for having introd uced MERCOSUR's paper on the implementation
of Article 10.2 of the Agreement on Agriculture.   Mauritius wished to remind Members that, in
looking at the elaboration of disciplines on export credits, they needed to consider differentiatedmeasures for least-developed and net food-importing developing countries in accordance with
paragraph 4 of the Marrakesh Decision on least-developed and net food-importing developing
countries, and looked forward to workin g with other Members on this issue.
10. Japan noted that discussions on export credits were currently going on in the OECD and
members of the OECD, including Japan, were trying to reach an agreement before the end of this
year.  These discussions were based on Article 10.2 of the Agreement on Agriculture.  Japan did not
exclude  having discussions on export credits in the WTO as an implementation issue in respect of the
existing Agreement on Agriculture.  However, it wa s perhaps more realistic to wait for the results of
the OECD discussions.  In any case, Members could discuss export credits within the framework of
on-going agricultural negotiations based on Article 20 of the Agreement.
11. Australia thanked Brazil for presenting the paper that MERCOSUR had contributed to the
FTAA negotiations.   Australia was also very interested in having a set of disciplines agreed as soon
as possible – a set of real disciplines that brought further discipline to the use of export credits.
Australia said it supported many of the comments made by others regarding the OECD negotiations
and looked forward to having them concluded by the end of this year.  Australia considered this to be
a very important implementation issue under the Agreement on Agriculture and looked forward to the
EC approaching the issue of traditional export subsidies with the same enthusiasm and fervour as itwas approaching the issue of export credits.
12. Malaysia stated that the issue of export credits was of great concern to Malaysia.  Malaysia
hoped that there could be a speedy conclusion to th e on-going negotiations at the OECD.   However,
even if these negotiations were successfully concluded at the OECD, in the view of Malaysia this
would not fulfil the mandate of Article 10.2 since disciplines should be developed in the WTO.Malaysia did not wish to see disciplines that were developed in the OECD transposed to the rest of the
WTO membership.  This matter had to be discussed within the Committee on Agriculture to see
whether an OECD agreement could gain wider membership and whether there was a consensus for it
to be accepted as having fulfilled the objectives of Article 10.2.   This should not preclude the
possibility to discuss the present and other proposals, and Malaysia was grateful in this regard toBrazil for its contribution.  Malaysia stated that export credits had seriously affected Malaysia's
exports in third country markets and it was for that reason that Malaysia was enthusiastic that this
baggage left behind was part of the implementation concerns from the Uruguay Round Agreement
and was seriously addressed.G/AG/6
Page 6
13. Colombia thanked the MERCOSUR countries for their contribution regarding disciplines on
export credits.   Colombia supported the initiative that this issue be discussed in the Committee on
Agriculture and in the WTO.   Colombia noted that the Committee had on numerous occasions been
informed that the OECD was close to reaching an agreement and a definition of such disciplines but
as of to date this had not been possible.  Colombia's position was that any initiative on export creditdisciplines should be worked out within the framework of the WTO.
14. Chile welcomed Brazil's contribution on behalf of  MERCOSUR.   Chile considered this to be
a relevant part of the transparency and information exercise, particularly as it came from a group of
developing countries. While Chile recognized that progress had been made in the OECD, this was an
implementation issue that should be dealt with within the WTO.   This was a topic of great importance
to Chile and Chile was willing to continue holding discussions in this forum.
15. Thailand thanked Brazil for its contribution on behalf of MERCOSUR.  While Thailand
wished to encourage the rapid conclusion in the OECD,  Thailand supported previous speakers that
the results achieved in the OECD should also be discussed in the WTO.
16. Egypt stated that it supported the statements made by Mauritius and Malaysia.
17. Mexico underlined the importance that Mexico attached to addressing Article 10.2.  In
Mexico's view this was an implementation issue rather than an issue for a new round of negotiations.
Mexico hoped that there would be a speedy solution found to what was contained in the provisions of
Article 10.2.
18. Hungary stated that it was amongst those Me mbers which had been concerned for several
years about the lack of implementation of Article 10.2.  Hungary wished to join previous speakers in
the hope that the negotiations currently goin g on within the framewor k of the OECD would be
concluded by the end of the year.  In Hungary's view this would be an important first step in
implementing the obligations that were accepted by all Members under Article 10.2.  Hungary agreed
that this was an issue of implementation which by no means meant that it could not addressed in the
current negotiations on agriculture.  Indeed, Hungary supported  this issue being  taken up and the
further strengthening of the disciplines on export credits.
19. Brazil stressed that is was not opposed to the exercise that was going on in the OECD.  Brazil
considered this to be a legitimate exercise for the members of the OECD. But this exercise did not
fulfil the implementation of Article 10.2.  MERCOSU R therefore wished to have a process in the
WTO to implement Art. 10.2.    Brazil noted that in case of a dispute it was appropriate to have a legal
framework of rules that all Members were comfortable with, and knowledgeable of, and had
participated in  making.
20. The United States asked those delegations which had referred to the possibility of an OECD
agreement being subject to further negotiations in the WTO to elaborate and to indicate whether they
wanted this to be done immediately or as part of the next round of negotiations.
21. In response to the question raised by the United States, Brazil stated that Brazil sought the
development of disciplines on export credits in the WTO, either as an implementation issue or, if the
objectives regarding the implementation of 10.2 were not achieved, as part of the mandatednegotiations in agriculture.
22. At the invitation of the Vice-Chairman, the representative of the OECD stated that in
accordance with a commitment made in the context of the Uruguay Round, the participants to the
Export Credit Arrangement began negotiations in 1997 on complementary guidelines to cover
officially supported export credits for agricultural products.  In successive communiqués of the OECDCouncil Meeting at ministerial level, OECD Mini sters had urged the participants to conclude anG/AG/6
Page 7
agreement on export credits for agricultural products.  In this year's communiqué, dated 27 June 2000,
OECD Ministers strongly regretted the failure of the participants to the Export Credit Arrangement to
reach agreement on an Understanding covering agriculture as mandated in the Uruguay Round.  They
called for the negotiations to be resumed and successfully concluded by the end of July if possible,
and by the end of 2000 at the latest.   Pursuant to  this latest mandate from OECD Ministers, the
participants had accelerated their programme of work. The participants had met on three occasions
since the OECD Ministerial, including twice in Special Session on agriculture in July and September,
and intensive negotiations were currently going on in an effort to finalize the negotiations for an
Understanding on Export Credits for Agricultural Products, including provision for the differential
treatment of net food-importing developing countries in accordance with the WTO Marrakesh
Decision.  This accelerated programme also refl ected the continued strong commitment of OECD
member governments to resolve this issue in the forum of the participants.  The meeting of the
participants in September 2000 was constructive and brought the participants closer to reaching
agreement on an Understanding.  Whilst differences remained, hopes were high that these could be
bridged at the current meeting and that the Understanding could be concluded and implemented as
from 1 January 2001.
23. Bolivia sought clarification from the OECD representative as to whether any provisions were
being  negotiated in favour of net food-importing countries within the context of the disciplines on
export credits and, if so, whether the countries concerned were represented in the OECD negotiations.
24. Uruguay requested the OECD representative to elaborate on the meaning of an understanding
under the Arrangement.
25. In response, the representative of the OECD st ated that he was not in a position to comment
on the status of the negotiations at OECD which we re taking place on the same day.  Concerning the
question from Bolivia on whether net food-importing countries are represented in the OECD
negotiations, he noted that only OECD countries and Argentina participate but he could not presently
provide a comprehensive list of participants.  With regard to the question from Uruguay, he noted that
"the Arrangement" referred to the Export Credit Arrangement, and "the Understanding" referred to theSector Understanding on Export Credits for Agricultural Products which was currently being
negotiated..
26. In response to the sentiment expressed by Brazil that the report by of the OECD had failed to
provide more transparency on the issues discussed at the OECD, the Vice-Chairman noted that it was
perhaps more the responsibility of those WTO Members participating in the negotiations to inform the
Committee on such matters.G/AG/6
Page 8
Annex II
CONTRIBUTION BY MERCOSUR (ARGENTINA, BRAZIL, PARAGUAY AND URUGUAY)
TO THE 14-15 NOVEMBER 2000 REGULAR MEETING OF THE COMMITTEE ON
AGRICULTURE UNDER PART I, ITEM G OF THE AGENDA*
The following document is a contribution by Mercosur (Argentina, Brazil, Paraguay and
Uruguay) to the deliberations of the Committee on Agriculture on the implementation of Article 10.2.
                                                     
* (G/AG/W/47, dated 14 November 2000).G/AG/6
Page 9
Restricted
For Official Use Only
FTAA.ngag/w/88
May 16, 2000
Original: Spanish
Translation: FTAA Secretariat
FTAA – NEGOTIATING GROUP ON AGRICULTURE
MERCOSUR
EXPORT CREDITS  FOR AGRICULTURAL PRODUCTS
ARTICLE 1
DEFINITION AND SCOPE
1.1. Export credits for agricultural products are considered to be any type of financial activity
whose source is official resources, for the purpos e of improving and marketing agricultural products,
for export, covered by the FTAA Agreement on Agriculture.
1.2. An illustrative, though not an exhaustive list of institutions and programs to be covered by
this chapter can be found in Annex I†, and shall be periodically revised.
1.3. For the purposes of this chapter, official resources may take the form of credits, financing,
interest rates, and export credit insurance and guarantees, among others.
ARTICLE 2
DISCIPLINES
2.1. All export-related credit operations of institutions and programs involved with official
resources for agricultural products shall respect the terms of this chapter, including private and State-
owned enterprises that hold exclusive or special rights to market agricultural products, resulting from
statutory or constitutional rights, the exercise of which could affect their acquisitions or sales, orinfluence imports or exports.
2.2. Terms and conditions for granting of credits
2.2.1. General Considerations
2.2.1.1. This chapter establishes the most generous terms and conditions to be used in the
context of the FTAA.  All FTAA member countries, taking into account the risk of such terms
and conditions becoming common practice in domestic agricultural policies, shall adopt the
measures necessary to prevent such practices becoming generalized.
                                                     
† Not included.G/AG/6
Page 10
2.2.1.2. FTAA member countries shall observe the credit terms and conditions for agricultural
products that traditionally enjoy usufructuary credit terms and conditions less favorable than
those authorized by this chapter.
2.2.2. Term of paymentsPre-shipment operations
2.2.2.1. The term of payment for credit operations in the pre-shipment period is the time
between the date on which the resources are available to the beneficiary and the date of
maturity of the capital.
2.2.2.2. The term of payment for pre-shipment credit operations covered by this article shall
not exceed 90 days.
Post-shipment operations
2.2.2.3. The term of payment for post-shipment export financing is the time between the date
of shipment or of the delivery of the goods, invoice, commercial contract, or requirements
contract and the maturity date of the final capital installment.
2.2.2.4. The payment period for products covered by this article shall not exceed 180 days,
and may be extendable for more than 180 days at the request of the debtor country, except in
the cases listed below.  The period of extension shall be substantiated by the debtor country
and be approved by the other FTAA members.
a) Bovines for animal improvement purposes: the term of payment shall not exceed 2 years
for contracts of up to US$150,000 and 3 years for contracts in excess of US$150,000.
b) Other animals for purposes of animal improvement: the term of payment shall not exceed
12 months.c) Plant material for reproduction: the term of payment for plant material (seeds, tubers and
similar material), exported for purposes of reproduction, shall not exceed 12 months.
2.2.3. Payment of capital
Pre-shipment operations
2.2.3.1. The value of export credit capital shall be paid in a single installment  or in equal and
successive installments beginning on the date on which the resources are available to thebeneficiary.
Post-shipment operations
2.2.3.2. The principal value of the export credit shall be paid in a single installment or in equal
and successive installments, based on the predetermined events set forth in item 2.2.3.
2.2.4. Interest payments
2.2.4.1. The form of interest payment shall be defined by free negotiation between the parties,
observing the terms defined in items 2.2.2 and 2.2.4.G/AG/6
Page 11
2.2.4.2. For the purpose of the provisions of this chapter, interest excludes:
a) any payment, such as premiums or other surcharges, for the purpose of ensuring or
guaranteeing credit to exporters;
b) any other payment, such as bank fees or commissions, related to export credit; andc) discounts made by importing countries.
2.2.5. Cash payment
2.2.5.1. Member countries shall require importers of agricultural products included in item
2.2.4 (a) that have received official resources to make cash payment of a minimum of 15
percent of the exported value, prior to or on the date of shipment of the goods.
2.2.5.2. Exported value shall be understood to mean the total value to be paid by the importer,
excluding interest.
2.2.6. Sharing of risk
2.2.6.1. Any type of credit guarantee dealt with in this chapter, including those financed with
resources from national treasuries, shall include a minimum level of private sector
participation.  The official insurance agency may only cover up to 85 percent of the value of
the transaction.
2.2.7. Minimum interest rate
[To be defined ]
2.2.8. General Provisions
FTAA member countries shall not use any form of official resource with a view to refinancing the
payment of capital and interest on export credits for agricultural products.
2.3. Sanctions
2.3.1. If a FTAA member country fails to comply with the disciplines established in this chapter,
any other FTAA member may cancel the trade preferences granted to the product benefiting from the
subsidized credit or apply other countervailing measures agreed upon in the context of the FTAA.
__________