WORLD TRADE  
ORGANIZATION   
WT/COMTD/W/130 
6 May 2004 
 (04-2035) 
Committee on Trade and Development Original:   English 
  
 
DECLINING TERMS OF TRADE FOR PRIMARY COMMODITIES 
 
Submission by the delegations of Kenya, Uganda  and Tanzania on how the work on examination  
of the issues identified in the Non-Paper (WT/COMTD/W/113) submitted  
by them could be allocated among the various WTO bodies 
 
  The following communication, dated 5 May 2004, is being circulated at the request of the 
above delegations. 
 
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I. INTRODUCTION  
1. During the GATT years it was the normal practic e for the rules adopted for negotiations to 
provide for the establishment of separate procedures or mechanisms aimed at ensuring that adequate 
and priority attention was paid to the liberalisation of trade in tropical products.  There was no agreed 
definition of the term "tropical products", but ther e was a general consensus on treating all agricultural 
commodities which were produced in tropical regi ons, where almost all developing countries are 
situated, and their processed forms as tropical produ cts.  These products included:  cotton, sugar and 
tobacco, which are also produced in the temperate zone countries.   
2. The practice to treat tropical products as a sp ecial sector for negotiations influenced the 
Uruguay Round negotiators to provide, in the preamb le to the Agreement on Agriculture, that in 
negotiations that may be arranged in the future for liberalisation of trade and for improvements of the 
rules applicable to trade in agricu lture, special attention should be paid to the liberalisation of trade 
"in agricultural tropical products". 
3. The crisis situation that has been created as a r esult of the trend towards a persistent decline in 
prices of primary agricultural products and their volatility, motivated the delegations of Kenya, 
Uganda and Tanzania, to suggest on behalf of  the Commodity Exporting Developing Countries 
(CEDCs) that there was an urgent need for WTO Members to address the problems that these 
developments posed to their trade and economic de velopment.  The discussions that took place in the 
CTD and later in the General Council on the basis of the Non-Paper submitted by them resulted in 
consensus being reached on the inclusion of paragra ph 28 (quoted below) in the draft Ministerial Text 
that was transmitted for consideration at the Cancun Ministerial: 
"Taking into account the dependence of many developing countries 
on a few commodities and the problems created by long term and 
sharp fluctuations in prices of these commodities, we instruct the 
Committee on Trade and Development, within its mandate, to continue with its work on this issue in cooperation with other 
relevant international organiza tions and report on progress to the 
General Council before our next session.  We recognise also that WT/COMTD/W/130 
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 various trade related aspects of the issues could be addressed in the 
ongoing negotiations, particularly in the framework of the negotiations on agriculture and non-agricultural market access". 
4. In the discussions in the CTD meeting held on 18 February, it was noted that, because of the 
failure of the Cancun meeting, the Ministerial text  as a whole was not formally adopted even though 
there was no controversy among Members on the text of the above paragraph.  There was therefore 
general support to the view that at its next meeti ng the CTD should consider how, as suggested in the 
above paragraph, responsibilities could be allocated for the examination of specific issues identified in 
the Non-Paper. 
5. Besides nurturing discussions in CTD and other competent WTO bodies, the three countries 
which have co-sponsored the Non-Paper may deci de to bring in substantial proposals in bodies 
established under the Trade Negotiations Committee, such as the Special Session of the Committee on 
Agriculture, the Negotiating Group on Market A ccess for Non-Agricultural Products as well as any 
other that may be relevant. 
II. PROPOSALS FOR ALLOCATION OF RESPONSIBILITIES FOR WORK ON 
COMMODITY ISSUES AMONG DIFFERENT WTO BODIES 
 
6. The main objective of the commodity issue related discussions should be to contribute to 
identifying linkages with the ongoing Doha Round negotiations and to define options on how the 
concerns of Commodity Exporting Developing Countries can be addressed, taking into account the development focus of the current Round and the need for full integration of these countries into 
Multilateral Trading System. 
7. It is therefore proposed that in the first inst ance the responsibility for consideration of the 
issues listed in the illustrative list in the non- paper WT/COMTD/W/113 should be shared between: 
1. The Special Session of the Committee on Agriculture 
8. Negotiations on Agriculture are at present be ing held for the adoption of modalities for 
negotiations on tariffs and subsidi es.  In order to ensure that such modalities are applied in the 
negotiations on tropical agricultural commoditi es and their processed products in a way that: 
- Take into account special situation of trade in each of these commodities;  and 
- Result in actions being taken that are fully  responsive to the trade and development 
needs of countries dependent on exports of such commodities. 
9. It may be desirable to adopt complementary pr ocedures, which would permit negotiations in 
this sector being held on product-by-product b asis by using request and offer procedures. 
10. Other issues which could be discussed in the Special Session of the Committee on Agriculture 
with a view to adopting appropriate decisi ons or recommendations in the present on going 
negotiations should include the following: 
- Review of the provisions of GATT Article XXXVIII on joint action by WTO 
members for stabilization of prices of primary commodities and of Article XX(h) on 
commodity arrangements with a view to  adopting suitable measures, including 
arrangements by producing countries of systems for supply management, for commodities of which over supply in the world market is of structural nature.  WT/COMTD/W/130 
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 - Review of GATT rules relating to taxes on expor ts, particularly in relation to their use 
by countries either separately or in pursuance of the arrangements among producing countries for stabilization of prices of commodities. 
- Review of the IMF and Regional compen satory arrangements with a view to 
improving their effectiveness. 
- Impact of asymmetric concentration of pow er in value chains on prices received by 
farmers. 
2. Negotiating Group on Market Access 
11. The desirability of adopting special proce dures for securing tariff treatments for processed 
products that is more favourable and responsive to the needs of individual developing and least 
developed countries, than that which would result from the application of the modalities that are under 
discussions, would have to be give n consideration.  Such products include cotton textiles, jute 
products and rubber products. 
3. Committee on Trade and Development 
12. As a Committee responsible for overseeing the work on trade and development the CTD will 
continue to be responsible for reviewing th e progress made on the Commodity issue in the 
negotiations in the Special Session of the Committee  on Agriculture and in NAMA.  In addition the 
Committee should examine at its next meeting the fo llowing issues that have been identified in the 
Non-Paper that needs further examination and study; 
 The adverse impact of internal liberalizati on of trade (including abolition of marketing 
boards) by producing countries. 
 
 The role of private sector mechanisms in commod ity price risk management in stabilisation of 
prices. 
 
 The support needed for the adoption of progra mmes for diversification of production away 
from commodities suffering from structural over supply. 
 
 The impact the decline in prices of commodities is having on debt liabilities of Commodity 
Dependent exporting countries (CDECs), partic ularly those that are heavily indebted. 
 
 The provision of technical and where appropriate, financial assistance to the CDECs for the 
development of processing industries and fo r promotion of value added products. 
 13. The CTD will therefore continue to be the main body in the WTO responsible for discussing 
the manifold dimensions of the commodity issues. In this respect, the Committee should continue to 
provide the needed space to collect, presen t and review existing and ongoing research on 
commodities' trade, especially trade in those comm odities that are of interest to the Commodity 
Dependent Export Countries. 
14. Besides the above already mentioned a nd the illustrative list of the Non-Paper 
(WT/COMTD/W/113, pages 9-10), there are others, e ither more general or specific ones, such as 
"agriculture protection", "current  distortions generated by domestic  agricultural subsidies recognised 
as having significant effects on the international prices of commodities and rural income by small holders for export crops", The CTD should thus ai m at completing the list and could organise the 
issues in related sub-sets, which would allow a di scussion of required/desirable measures to unravel. WT/COMTD/W/130 
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 15. Depending on the outcome of those initial discussions, the Committee may transmit the 
discussion on certain sub-sets to competent WTO B odies, such as the Working Group on Trade, Debt 
and Finance and the Working Group on Trade and Transfer of Technology. 
III. CONCLUDING OBSERVATIONS  
 16. According to a recent UNCTAD study, the international prices of 12 major tropical 
agricultural products (copra, coconut, oil, palm oil,  sugar, tea, pepper, groundnuts, jute, cotton and 
rubber) have fallen from 1980 to 2002 by between 50 per cent and 86 per cent, after general inflation 
is taken into account.  The export earnings of so me Commodity Dependent Exporting Countries are 
almost entirely dependent on one or three of these commodities; many of them are least developed 
countries, several others are heavily indebted developi ng countries. There is an urgent need to look 
into the factors behind this situation and to fi nd ways of addressing some of them that require 
multilateral solutions to be ne gotiated in the WTO context. 
17. UNCTAD has estimated that as a result of the steep fall in prices of these commodities the 
terms of trade of the developing countries have d eclined by more than 20 per cent since 1980. For 
African countries, which comprise the most of the CDECs, the decline is more than 25 per cent. In 
other words, over the past 20 years, the prices of e xports of African countries have consistently fallen 
in relation to the price of import prices (OXFAM : The Commodity Challenge, page 3). There is a 
recognised link between deterioration in the terms of  trade and the inability of a number of affected 
countries to raise the standards of living of their people, many of which live below poverty level.  
18. The Doha Round has come to be known as a develo pment round.  From the point of view of 
developing countries including LDCs which are depe ndent on exports of primary commodities, the 
outcome of the round should assist them in strengthening the efforts they are making to alleviate poverty and to promote their economic development.   However, this will greatly depend on the 
effectiveness of the measures that will be agr eed upon in dealing with the problems posed by 
declining prices of commodities.  
19. Addressing the problems and issues in the commodity field will require a multifaceted 
approach. It is, therefore, necessary to ensure that  all international organizations that can contribute 
and are actively engaged in this area of work, e.g. UNCTAD, ITC, FAO, WB, the Commonwealth 
Secretariat and International Commodity Councils, ar e invited to participate in WTO discussions on 
commodity issues.   
 
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