WORLD TRADE  
ORGANIZATION  WT/WGTDF/W/31 
28 June 2005 
 (05-2754) 
Working Group on Trade, Debt and Finance  
   
TRADE LIBERALIZATION AS A SOURCE OF GROWTH;  THE IMPORTANCE OF 
MARKET ACCESS AND THE REDUCTION OF OTHER TRADE BARRIERS IN 
THE DDA NEGOTIATIONS;  EXTERNAL FINANCING, COMMODITY 
MARKETS AND EXPORT DIVERSIFICATION 
 
Note by the Secretariat
 
   
 
 
  
 
I. INTRODUCTION 
1. This Note responds to a request from the Gr oup for a short background note on the remaining 
three themes that the Grou p has agreed to examine.
1    
II. TRADE LIBERALIZATION AS A SOURCE OF GROWTH2 
2. In general terms, trade liberalization promotes economic growth by rais ing the productivity of 
an economy through static and dynamic gains from trad e.  Static gains accrue through a more efficient 
allocation of resources as lower trade restrictions reduce the bias against investment in the tradable 
goods and services sectors of the economy, and thro ugh economies of scale to producers of exported 
goods and services who benefit from increased market opportunities abroad.  Dynamic gains accrue 
from faster rates of capital accumulation and t echnical progress that are encouraged when the 
economy is opened up to increased competition a nd to flows of knowledge and investment from 
abroad.3 
3. In the 1990s, the conviction that trade libera lization and openness to external competition 
promoted growth was supported by numerous cross-country studies.4  Sachs and Warner (1995) found 
that openness was a highly significant determinant of growth and, combined with legal recognition of 
property rights, could even represent sufficient co nditions for growth in poor economies.  Using 
                                                      
1 See WT/WGTDF/W/2, August 2003. 
2 The agreed terms for the examination of this theme are:  "Trade liberalization is among several factors 
that can improve the allocation of resources at national and international levels, and hence improve the resilience to external shocks.  As a factor in improving productivity and the allocation of resources, trade 
liberalization can impact favourably on the debt servic ing capacity of economies, as  it may result in increased 
sources of foreign exchange such as net exports and foreign direct investment.  Provided  that trade liberalization 
and reforms are sequenced and timed properly, taking into account the special needs of developing countries, 
they could also reduce adjustment costs and enhance the ability of these developing countries to reap benefits 
from them." 
3 Santos-Paulino and Thirlwall (2002). 
4 E.g., Dollar (1992), Sachs and Warner (1995), Edwards (1998), Frankel and Romer (1999). This document has been prepared under the Secretariat' s own 
responsibility and without prejudice to the positions of Members and to their rights and obligations under the WTO. WT/WGTDF/W/31 
Page 2  
 
 several measures of liberalization, Greenaway ( 2002) found that there is a positive relationship 
between liberalization and growth, although with a la g.  Brunner (2003) found that trade had a large 
and significant effect on income levels, and Lee et  al. (2004) that openness to competition had a small 
but positive effect on growth.  Waczairg and Welc h (2003) demonstrated robust positive effects from 
liberalization on growth and investment rates, a nd Dollar and Kraay (2004) found that globalization 
led to faster growth and to poverty reduction.  Matoo et al. (2001) found that openness led to 
improved growth performance in the services sector as well as in manufacturing.   
4. A common theme of these and other studies is that  in order for liberal trade policies to boost 
economic growth over the long-term, they must be accompanied by other policy reforms.
5  Baldwin 
(2002) noted that trade liberalization is rarely impl emented in isolation and its effects on growth can 
only be estimated as part of an overall economi c reform package.  Appropriate macroeconomic 
policies are regularly cited as being important to support a programme of trade liberalization.  More generally, the importance of there being a positive i nvestment climate to support trade liberalization 
has received a great deal of attention recently, not ably by the World Bank (2005).  Taylor (1998) and 
Wacziarg (2001) found that a poor investment cl imate can undermine the benefits of trade 
liberalization, and Winters (2004) concluded that  trade liberalization is unlikely to boost economic 
growth in an economic environment that is not con ducive to investment.  Winters identifies corruption 
and lack of, or poor quality, trade-related institutions  as particular obstacles  to raising growth, and 
notes that trade liberalization can itself contribut e to the fight against corruption because the less 
restrictive, more transparent and non-discretionary  is trade policy, the lo wer are the incentives and 
opportunities for corruption. 
5. Trade liberalization can promote not only fast er economic growth, but also more robust 
economic growth that helps improve the economy's resilience to external shocks
.  This was described 
in a previous background Note by the Secretariat (WT/WGTDF/W/4, paragraphs  27-30) that reviewed 
the role of trade liberalization and of a strong multilateral trading system underpinned by the WTO Agreements as a "shock absorber" in helping to ensure  that the emerging markets' financial crisis of 
the late-1990s did not degenerate into  a shock for the real sectors of economies that were affected.  As 
a result, adjustment to the crisis and recovery from it was faster and less costly than might otherwise 
have been the case. 
6. The relationship between trade liberali zation and foreign debt servicing capacity
 was 
examined in a previous Secretariat Note (WT/ WGTDF/W/9).  On the one hand, removing overseas 
market access restrictions can improve the ability of  indebted countries to earn the foreign exchange 
they need to service their external debt, and he lp them avoid resorting to further unsustainable 
borrowing.6  Several studies have concluded that the gain s that can be derived from eliminating trade 
barriers on indebted countries' e xports far outweigh annual flows of ODA and debt relief that they 
receive. 
7. On the other hand, and in many cases more importantly, liberalizing domestic trade 
restrictions is likely to have favourable effects on a country's debt servicing capacity.  The role of 
trade liberalization at home in removing the anti-export bias of price signals to investors and producers that comes from maintaining high import ta riffs and NTBs is well documented ("a tax on 
imports is a tax on exports"), and is compleme ntary to the increased export opportunities that are 
generated by trade liberalization abroad.  Liberaliz ing import restrictions releases resources for new 
investments in export industries.  It can also attract foreign investment to these industries, which 
supplements domestic savings for investment a nd provides a vehicle for inward transfers of 
                                                     
 
5 See also WT/WGTDF/W/29. 
6 See WT/GC/W/356/Add.1 for an elaboration.  WT/WGTDF/W/31 
 Page 3 
 
 
 technology, helps create faster and more robust ec onomic growth, and provides an injection of foreign 
capital that is generally recognized as being more  stable and less costly than debt-financing.7 
8. Trade liberalization will invariab ly cause adjustments in the dome stic economy.  Attention to 
the sequencing and timing of liberalization  can help to ensure that adjustment takes place as smoothly 
and quickly as possible (e.g., the reallocation of resources out of import substitution activities into 
export industries) and to contain adjustment costs. 
9. With respect to sequencing, economic theory an d the practice of many developing countries 
since the 1970s and 1980s point to the importan ce of starting with the replacement of quantitative 
restrictions by price-based restrictions such as tariffs, so as to allow the domestic economy to 
recognize and adjust to price signals from abroad.  A next step is the rationalization of the tariff 
structure – e.g., reducing the number of different ta riff rates and their dispersion.  Lowering tariff 
peaks offers especially good prospects for removing significant distortions to the domestic economy8, 
and from a theoretical point of view a single, uniform tariff for the whole economy is the best option so that there is no distortion of price signals be tween different domestic industries and sectors and 
market forces can allocate resources to their most e fficient and profitable employment.  Finally, tariff 
rates can be steadily reduced. 
10. Attention to the sequencing of trade liberaliza tion with the reform of other parts of the 
domestic economy is also important.  Balance-of-p ayments stability can frequently be a concern for 
developing countries in this contex t, since imports are likely to increase relatively quickly in response 
to the liberalization of import barriers, particularly where these barriers were high, whereas the increase in exports is likely to follow only after a lag as resources move into export activities.  A 
study by Santos-Paulino and Thirwall (2002) of th e experience of a large sample of developing 
countries since the mid-1970s confirmed this patter n, and concluded that if foreign exchange 
shortages are to be avoided, and the process of trade li beralization is not to be forced to a halt or even 
into reverse, the goal must be to liberalize in such  a way as to keep the current account of the balance-
of-payments at a level sustainable through long-term capital inflows without the need for deflation.   
11. Several authors (e.g., Edwards (1989)) have studied  the fiscal impact of trade liberalization, 
and pointed to the importance of strengthening the revenue base of economies  where tariff revenues 
make up a large proportion of tax revenue, which is  the case for some developing countries.  An IMF 
study (by Ebrill, Stotsky and Gropp (1999)) indicates that well sequenced  tariff reforms can be 
revenue-neutral (or in some successful cases, revenue  raising) if part of an overall fiscal reform, 
which would include, on the one hand, the offsetting of the negative effect on public finances of the 
lowering of average tariffs by the elimination of tariff peaks and of tariff exemptions, and, on the 
other hand, the introduction of internal taxes (suc h as the value-added tax).  The IMF conclusions 
have been subject to discussion at an earlier General Council meeting on Coherence, and again 
reviewed by the Working Group on Trade, Debt and Finance in its examination of the relationship 
between trade and finance (WT/WGTDF/W/9).   
12. Supply-side policy reforms to strengthen the export sector of the economy may be an 
important consideration in some cases, but eviden ce suggests these should be targeted at the economy 
as a whole rather than at export activities in par ticular, and they should not formally become a 
prerequisite for trade liberalization.
9  For one thing, it is likely to be very difficult to reorient investors 
and producers towards export markets as long as heav ily sheltered domestic markets offer them 
                                                      
7 See WT/WGTI/W/95 and W/103.   
8 In this case,  increased trade volumes can offset any negative effect on revenue. 
9 World Bank World Development Report, 2005:  A Better Investment Climate for Everyone  
(Washington D.C., 2004). WT/WGTDF/W/31 
Page 4  
 
 certain profits behind high import restrictions.
10  Active export promotion may be defended on 
grounds of economic efficiency if exporting i nvolves positive externalities.  Exports may require 
specialized transportation infrastru cture such as storage facilities which are then available for new 
exporters.11  However, a review of African countries th at used export promotion policies found that 
export promotion may well be an inefficient use of public funds.12  Michaely (1991) found no 
statistically meaningful correlation between expor t growth and the presence or absence of export 
incentives.13  
13. With regard to the timing of trade liberaliza tion, acknowledgement of the need for a more 
gradual approach for developing countries and LDCs than for developed countries forms an integral 
part of the WTO Agreements, such as S&D provision s that give transition periods for implementation 
of trade rules.  This more measured pace of lib eralization can be justified on a number of grounds, 
such as market conditions, resource availability, and the need to manage economic and social 
adjustment costs in countries where av erage income levels are very low.14  
III. THE IMPORTANCE OF MARKET ACCESS AND THE REDUCTION OF OTHER 
TRADE BARRIERS IN THE DDA NEGOTIATIONS15  
14. Market access barriers in world trade remain significant for products of export interest to 
developing countries.  An IMF/World Bank study s uggests that trade liberal ization, especially for 
agricultural products and textiles and clothing, can ge nerate large benefits for developing countries in 
terms of incomes, exports and employment.  These be nefits would derive in part from the elimination 
of access barriers to industrial country markets, but also in good part from reform of the trade regimes 
of developing countries themselves.  The static in come gain alone for developing countries compares 
favorably with levels of development assistance.  Overseas development assistance levels have been 
on the order of US$50–60 billion over recent years, r oughly equivalent to the estimated income effect 
on developing countries of removing barriers to trade in textiles and clothing.16 
15. A number of more advanced countries have granted comprehensive tariff and quota free 
access to LDCs.  The Monterrey Consensus calls on "developed countries that have not already done 
so to work towards the objectiv e of duty and quota-free access for all Least-developed Countries as 
envisaged in the Programme of Action for the L east-developed Countries adopted in Brussels".  LDC 
exports are disproportionately affected by tariff peak s in Quad Markets.  Experience has shown that  
broad-based tariff-free market access for LDCs can assi st in diversifying their export structures. 
Recent research suggests that under such schemes, if  adopted by all Quad markets, LDC exports to 
the Quad might increase by 30 to 60 per cent or US$2.5 billion.  However, while increased 
preferences for LDCs are a step in the right direction, all recent studies measuring the gains of a 
                                                      
10 Michalopoulos, C. (1987). 
11 See WT/WGTDF/W/29 for references to improvements in trade facilitation, customs clearance and 
infrastructure as a boost to the trad able goods and services sectors. 
12 Bacchetta and Jansen. 
13 Cited in Bacchetta and Jansen, op.cit. 
14 Bacchetta and Jansen, p. 6. 
15 The agreed terms for the examination of this th eme are:  "Non-discriminatory substantial reduction 
of trade barriers by WTO Members in the context of current WTO negotiations, under the Doha Development 
Agenda, especially in areas where Members' barriers affect  products of export interest to developing countries, 
can be a valuable contribution that the WTO can make, within its remit, to improving their opportunities for growth, and to overcoming the problem of external indebtedness of developing countries by increasing their 
ability to earn the foreign exchange they need.  Relevant studies suggest that the gains that can be derived from 
eliminating barriers on these countries' exports outweigh and complement the annual resource flows they receive of ODA and debt relief – flows that th e Monterrey Consensus has pledged to increase." 
16 IMF/World Bank (2002).  WT/WGTDF/W/31 
 Page 5 
 
 
 global, non-discriminatory reduction of trade barriers,  in the context of the Doha Round, point to 
much larger gains for all countries, including developing countries. 17   
16. Protection carries a high price in both industrial and developing countries.  Estimates by the 
World Bank of the welfare gains from eliminati ng post-Uruguay Round barriers to merchandise trade 
– in both industrial and developing countries – range from US$250 billion to US$620 billion 
annually, with about one-third to one-half accrui ng to developing countries.  In absolute terms, 
developed countries gain more, but in terms of GDP, deve loping countries are the largest beneficiaries 
from full liberalization, including the rem oval of distortions in farm trade.   
17. Agriculture is one of the most distorted sectors of  international trade. Support to agriculture in 
OECD countries including that provided through import barriers is almost $ 1 billion a day-more than 
five times all development assistance.18  Trade barriers facing deve loping-country exporters of 
agricultural products are four to seven times higher in industrialized countries than the barriers facing 
their exporters of manufactured products, and two to three times higher in developing countries.  
Problems of tariff peaks, tariff escalation, specifi c duties and subsidies are all more pronounced for 
trade in agricultural products.  Agricultural libera lization in both industrial and developing countries 
is likely to have long-term, dynamic effects on deve loping-country production and trade.  Static gains 
alone would be in the order of US$30 billion in income and US$120 billion in exports per year.   
18. The World Bank has estimated that the benefits of global liberalization in agriculture – the 
elimination of all border restrictions and subsidi es – would top $350 billion for the world as a whole.  
A significant reduction in protection of agriculture  would produce new income opportunities for the 
world's poor that far exceed those that can be anticipated from present levels of development 
assistance.   
19. Finally, removing restrictions on trade in ser vices can boost the benefit substantially – and 
improve efficiency in the services sector – a majo r determinant of competitiveness as most services 
are inputs to production. 
20. Market barriers to some key developing-country ex ports have made it harder for them to take 
full advantage of the opportunity to grow through in tegration into the world economy.  Tariffs still 
constitute an important source of distortions a nd economic costs.  Deve loped countries' tariffs 
continue to show peaks (15 per cent and higher) and escalation (rising with the degree of processing) in sectors of export interest to developing count ries. Developed countries display much lower bound 
and applied average tariffs than developing countries,  although tariff peaks exist in selected industries 
(food and footwear in the European Union and Japan; textiles and clothing, footwear, glass and 
electrical parts in the Unit ed States and Canada).  Border protec tion in agricultural products is also 
well above that of manufactures in both developed and developing countries.  In developed country 
markets, the average bound and applied rates for agricu ltural products is four to nine times higher than 
that on industrial products (depending on countries a nd on the methodology used), and for developing 
countries the average is two to  three times higher than that for industrial products.
19  On agricultural 
exports to the OECD, poorer countries face tariffs that exceed those on typical inter-OECD exports 
(of all products) by factors of 10 or more.20  
21. Reform of market access in developing countries,  where average tariffs are high, tariff peaks 
also affect products exported by developing c ountries, and bindings limited, themselves would 
contribute as much to a development-oriented multil ateral trading system as OECD policies.  Apart 
                                                      
17 IMF/World Bank (2002). 
18 Wolfensohn, Statement at Cohere nce Meeting, 22 October 2004. 
19 WTO (2001), IMF/World Bank (2002). 
20 IMF/World Bank (2002). WT/WGTDF/W/31 
Page 6  
 
 from domestic efficiency gains and a reduction in remaining anti-export biases, developing countries 
re increasingly large markets for each other.  Almost 40 per cent of developing countries' exports go to other developing countries.  Mi ddle-income developing countries have  substantially increased their 
global market share in the past two decades, so  their trade policies no longer have only minor 
consequences for their trade with each other and with low-income developing countries.   
22. Benefits to developing countries from abolishing their own protection have been estimated at 
US $60 billion.
21  The Monterrey International Conference on Financing for Development highlighted 
in its conclusions that "meaningful trade liberaliz ation is an important element in the sustainable 
development strategy of a country".22  Still, the leadership of the industrialized countries in reducing 
trade barriers is a prerequisite for a pro-developm ent outcome.  Liberalization initiatives by industrial 
countries would send a strong signal to developing  countries about the importance and urgency of 
following up with their own reforms.   
IV. EXTERNAL FINANCING, COMMODITY MARKETS AND EXPORT 
DIVERSIFICATION23 
23. The question of external finance for commod ity exporters is echoed in the "Monterrey 
Consensus" which states that "m ultilateral assistance is needed to mitigate the consequences of 
depressed export revenues of countries that still depend heavily on commodity exports24 and that "for 
many countries in Africa, least-developed countri es, small island developing States and landlocked 
developing countries, ODA is still the largest source of external financing and is critical to the 
achievement of the development goals and targ ets of the Millennium Declaration and other 
internationally agreed development targets".25 
24. The problem of the structural decline in th e terms-of-trade and its impact on commodity-
dependent exporters, in particular their greater vul nerability to trade and current account imbalances 
and indebtedness, is recognized internationally.  More than 50 developing countries depend on three 
or fewer commodities for more than half of their exports. 
25. 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 de clined by more than 20 per cent since 1980.  For 
African countries, which comprise the most of the commodity-dependent exporting countries (CDECs) the decline is more than 25 per cent. In other words, over the past 20 years, the prices of 
exports of African countries have consistently falle n in relation to the price of import prices.  
UNCTAD (2001) suggests that at such a level of deve lopment, the low level of both domestic savings 
and investment (respectively 15 per cent and 18 per cent in Sub-Saharan Africa) and continued mis-
match between the two calls for external public financing for an extended period of time.  
26. In this same period, the World Bank's index for commodity prices decreased by 47 per cent, 
with prices of coffee, cocoa, sugar and palm oil falling by nearly 70 per cent.  The 2002 real price of coffee was just 14.2 per cent of its price in 1980.  Taking into account 10 major tropical agricultural 
                                                     
 
21 Hoekman (2004). 
22 Paragraph 27 of the "Monterrey Consensus".  
23 The agreed terms for the examination of this theme are:  "The difficulties of most developing 
countries to attract development finance, from private or public sources, are acknowledge d.  The lack of external 
financing  is an important element in limiting their ability to diversify their exports.  Interest was expressed in 
improving Member's understanding of factors that lead to high volatility in commodity markets and of factors 
hampering developing countries' efforts to move away from commodity exports, despite notable domestic 
reforms underway." 
24 Paragraph 37. 
25 Paragraph 39. 
  WT/WGTDF/W/31 
 Page 7 
 
 
 commodities (copper, coconut oil, palm oil, sugar, cocoa, coffee, tea, pepper, groundnuts, jute, cotton 
and rubber), in 2002 alone devel oping countries would have earned US $243 billion if real prices of 
these commodities had remained the same as their 1980  price level.  This is almost five times the 
world's aid budget. 
27. In a recent study the IMF reported that a char acteristic common to the commodity dependent 
developing countries in Sub-Saharan Africa is that  movement in their terms of trade is a key 
determinant of macroeconomic perfo rmance and has an important imp act on real national incomes.  
For example, coffee is the predominant export of Et hiopia.  The slump in world coffee price produced 
a 40 per cent fall in Ethiopia's terms of trade resulti ng in a decline of about 6 per cent in the country's 
real income.26 
1. Work in other Organizations 
28. A number of international organizations ar e involved in work on commodities. UNCTAD has 
provided the main forum for discussion and nego tiation on the problems faced by commodity 
exporting countries as a result of declining prices a nd their volatility.  Its mandate enabled it to 
establish the Common Fund for Commodities to sup port developing commodity dependent countries 
in their efforts to improve and diversify their commodity production and tr ade and thereby increase 
their export earnings as well as sustain their real incomes.   
29. In the short-term, market-based price risk mana gement schemes help farmers manage the risk 
of falling prices on global commodities markets through the use of derivatives (futures and options).  
However, farmers in developing countries have very  poor access to these instruments.  In this regard, 
the Common Fund for Commodities and the World Ba nk have initiated activities to combine efforts 
on price risk management in East Africa to expl ore new, market-based, approaches to assist these 
developing countries better manage their vulnerability to the volatility of commodity prices of coffee 
and cotton, to begin with.  Another solution to the problem would be making compensatory financing 
schemes that are user-friendly and wo rkable.  Compensatory finance has an important potential role in 
insulating developing countries from the worst effect s of international commodity price volatility, and 
indeed in reducing volatility.   
30. At UNCTAD XI, the Sao Paolo Consensus stated that "UNCTAD should continue to monitor 
developments in commodity markets and assist developing countries, in particular those most dependent on commodities, in formulating strategi es and policies to respond to the challenges of 
commodity markets, including over-supply, and a ddressing links between international commodity 
trade and national development, particularly po verty reduction.  It should analyse and promote 
exchange of information on commodity markets and experiences with factors, policy issues and 
responses influencing the competitiveness of the commodity sector so as to contribute to diversification, adding value, and more effective participation in the supply chain, including through 
assistance for institution building; an alyse and support the developmen t of appropriate and effective 
mechanisms and capacity to respond to commodity price fluctuations and to mitigate earnings 
shortfalls, in particular by improving the capacity to apply modern commodity price risk management 
and financial instruments; and follow up, as appropriate, on the recommendations addressed to 
UNCTAD in the report of the Meeting of Eminent Persons on Commodity Issues." 
27 
31. The International Task Force on Commodity  Risk Management (ITF), convened in 
January 1999, is a partnership of  private and public sector institu tions exploring new, market-based 
approaches for assisting small-scale producers in developing countries to better manage their 
vulnerability to commodity price fluctuations.  The World Bank is taking the lead in the development 
                                                      
26 WT/COMTD/M/50. 
27 Sao Paolo Consensus, paragraph 100. WT/WGTDF/W/31 
Page 8  
 
 and implementation of this market based appro ach.  The ITF is partially supported through the 
contributions of donor countries.  Other stakeholde rs include internationa l institutions, farmers' 
organizations, commodity exchanges,  and other private sector entities.
28 
2. Work in the WTO 
(a) Committee on Trade and Development 
32. The Committee on Trade and Development (CTD ) is mandated to review developments 
affecting the trade and development of developing countries.  Declining terms of trade for primary 
commodities and its implications for trade a nd development of primary commodity exporting 
countries has been on the CTD agenda for some  time. In 2003, a Non-Paper (WT/COMTD/W/113) 
was submitted by Kenya, Uganda and Tanzania to  the Committee on Trade and Development.  The 
document, which identifies a number of causes of as well as possible solutions for this problem, 
proposes that the CTD examine the impact that declining prices for commodities was having on the 
trade and development of countries heavily depende nt on exports of primary commodities and their 
capacity to pay and service their external debt.29   
33. The discussions that took place in the CTD and la ter in the General Council on the basis of 
the Non-Paper submitted resulted in consensus being reached on the inclusion of paragraph 28 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 recognize also that 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". 
34. As an initial step the WTO Secretariat prepared  an inventory of non-fuel commodity studies.
30  
Subsequently, the proponents elaborated on their proposal and the role of the CTD and other WTO bodies in this issue.
31  The delegation of Switzerland proposed that the CTD approach provide for a 
forum for an in-depth discussion of the funda mental problems of the commodities sector, 
complementary to discussions in the negotiating bodies.32   
35. Over the course of the last year, the CTD has heard presentations from UNCTAD and the 
Common Fund for Commodities and more recently a case study presented by the Government of Malaysia in which it demonstrated  its success in  transforming it primary commodities sector primary 
commodities sector from merely producing and exporting primary raw materials to producing semi-processed, processed and finished products.  In thei r view, such a transformation had been necessary 
to ensure that its products remained competitive in  the global market.  The long-term viability of the 
                                                     
 
28 WT/COMTD/W/121, November 2003. 
29 WT/COMTD/W/113, 19 May 2003, paragraph 35. 
30 WT/COMTD/W/121, 20 November 2003. 
31 WT/COMTD/W/130, 6 May 2004. 
32 WT/COMTD/W/129, 5 May 2004.  WT/WGTDF/W/31 
 Page 9 
 
 
 primary commodities sector depended on making si gnificant leaps in local processing and taking 
advantage of downstream value-added ac tivities to produce high quality goods.33   
36. According to UNCTAD (2001), in order to reduce dependence on traditional commodity 
exports, an increased number of African countries has been moving into exports of processed goods 
and manufactures.  However, efforts have not al ways been successful in improving international 
competitiveness in such products, in large part because of low productivity and inappropriate 
exchange rates. 34  During the CTD meeting in February, th e representative of UNCTAD, in response 
to the request of the Chairman for other examples of countries that had had success in managing their 
commodities trade, said that experiences between c ountries were varied.  He went on to briefly 
describe some examples of success stories and the factors that had contributed to these successes.  
Firms in Kenya, having efficiently produced and ma rketed their products, had contributed to a large 
extent to that country's success, while the government  had also played a role through implementation 
of a strict and reliable quality control system for exports.  In Zimbabwe, a code of good practice had 
been put in place by the exporters themselves.  In the case of Colombia, the coffee industry was 
largely responsible for the successful marketing of Colombian coffee.  Brazil had successfully 
expanded soya production through gove rnment policy, while Thailand's success in poultry and shrimp 
was largely due to the actions of a single large comp any.  The key to Botswana's success was in using 
the rents generated from the mineral sector fo r the long-term development of the country.  35 
3. Negotiations 
37. The 1 August 2004 Decision (WT/L/579) gave a sp ecific mandate to the Special Session on 
the Committee on Agriculture and to the Negotiating Group on NAMA to take into consideration, as 
appropriate, concerns of devel oping countries, including commodities.  Tariff escalation and tariff 
peaks affect processed commodities in a number of ma jor markets (see above).  For example, in the 
EU a zero tariff applies to imports of cocoa beans but cocoa paste (semi-processed) is subject to a 
9.6 per cent duty and processed chocolate to tariffs as high as 25 per cent, affecting large non-LDC producers  such as Ghana and Ivory Coast.
36 
 
 
 
                                                      
33 WT/COMTD/W/52, p. 16. 
34 UNCTAD (2001), p. 29. 
35 Ibid, paragraph 68. 
36 IMF, Improving Market Access:  Towards Greater  Coherence Between Aid and Trade, March 2002.  WT/WGTDF/W/31 
Page 10  
 
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