RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/COMTD/M/57 
5 July 2006 
 
 (06-3243) 
Committee on Trade and Development 
Fifty-Seventh Session  
 
 
 
NOTE ON THE MEETING OF 11 MAY 2006 
 
Chairman:  Mr. Faizel Ismail (South Africa)  
  
A.
 ADOPTION OF THE AGENDA ........................................................................................................2  
B. OBSERVERS ............................................................................................................................... ..2 
(i) Request for attendance of ad hoc observers ...............................................................................2  
(ii) Further consideration of the requests for observer status by the League of Arab 
States, the Organization of the Petroleum Exporting Countries (OPEC), the Gulf 
Organization for Industrial Consulting, the Organisation Internationale de la 
Francophonie, the Common Fund for Commodities, the Organization of Arab Petroleum Exporting Countries (OAPEC) and th e Groupe de la Banque Africaine de 
Développement.................................................................................................................. ..........3
 
C. REPORT ON THE 39TH SESSION OF THE JOINT ADVISORY GROUP ON THE 
INTERNATIONAL TRADE CENTRE UNCTAD/WTO  (ITC/AG/(XXXIX)/208)............................3  
D. NOTIFICATIONS UNDER THE ENABLING CLAUSE .......................................................................6  
- COMMUNICATION FROM THE EUROPEAN COMMUNITIES ON THE AGREEMENT ON 
TRADE IN GOODS OF THE FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC 
COOPERATION BETWEEN THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS 
(ASEAN)  AND THE PEOPLE 'S REPUBLIC OF CHINA (WT/COMTD/51/A DD.2) ..........................6  
- COMMUNICATION FROM THE UNITED STATES ON THE FRAMEWORK AGREEMENT ON 
COMPREHENSIVE ECONOMIC COOPERATION BETWEEN ASEAN  AND THE PEOPLE 'S 
REPUBLIC OF CHINA , THE PROTOCOL TO AMEND THE FRAMEWORK AGREEMENT ON 
COMPREHENSIVE ECONOMIC COOPERATION BETWEEN ASEAN  AND THE PEOPLE 'S 
REPUBLIC OF CHINA , AND THE AGREEMENT ON TRADE IN GOODS OF THE 
FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC COOPERATION BETWEEN 
ASEAN  AND THE PEOPLE 'S REPUBLIC OF CHINA (WT/COMTD/51/A DD.3).............................6  
- COMMUNICATION FROM JAPAN ON THE FRAMEWORK AGREEMENT ON 
COMPREHENSIVE ECONOMIC COOPERATION BETWEEN ASEAN  AND THE PEOPLE 'S  
REPUBLIC OF CHINA AND THE AGREEMENT ON TRADE IN GOODS OF THE 
FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC COOPERATION BETWEEN 
ASEAN  AND THE PEOPLE 'S REPUBLIC OF CHINA (WT/COMTD/51/A DD.4).............................6  
- GENERALIZED SYSTEM OF PREFERENCES - NOTIFICATION BY THE EUROPEAN 
COMMUNITIES (WT/COMTD/N/4/A DD.3 – WT/COMTD/57)...................................................8  
- COMMUNICATION FROM BRAZIL ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.1) ..............8  WT/COMTD/M/57 
Page 2  
 
  -
 COMMUNICATION FROM CHINA ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.2)...............8  
E. DECLINING TERMS OF TRADE FOR PRIMARY COMMODITIES , AND ITS IMPLICATION TO 
TRADE AND DEVELOPMENT OF PRIMARY COMMODITY EXPORTING COUNTRIES ....................12  
- PRESENTATION BY THE INTERNATIONAL COFFEE ORGANIZATION ..........................................12  
F. REVIEW OF STEPS TAKEN TO PROVIDE DUTY-FREE AND QUOTA -FREE MARKET 
ACCESS TO LEAST -DEVELOPED COUNTRIES ............................................................................14  
G. TECHNICAL COOPERATION AND TRAINING ..............................................................................17  
- TECHNICAL COOPERATION AUDIT REPORT FOR 2005  (WT/COMTD/W/148).........................17  
H. OTHER BUSINESS ......................................................................................................................19  
ANNEX .......................................................................................................................... .......................20  
 
  A. A
DOPTION OF THE AGENDA  
1. The Chairman  said the draft agenda for the m eeting was contained in document 
WTO/AIR/2803 circulated on 13 April 2006 and a revision issued on 5 May 2006.   
2. He said he wished to make some observations on the draft agenda.  He firstly noted that the 
report on the 39th session of the Joint Advisory Group (JAG) on the International Trade Centre 
UNCTAD/WTO (ITC) would be presented to the Committee on Trade and Development (CTD) at the present meeting and that Ambassador Mary Whelan of  Ireland, Chairperson of the 39
th session of the 
JAG, and Mr. Denis Bélisle, Executive Director of th e ITC, were present for that purpose.  He also 
recalled what had been decided at the last meeti ng with regard to the CTD's consideration of the 
agenda item relating to paragraph 51 of the Doha Declaration.  In  particular, the Committee had 
agreed that its next review of the developmental aspects of the negotiations, for which the Secretariat 
would revise its background paper WT/COMTD /W/143/Rev.1, would take place at the 58th Session 
on 6 July 2006.  The item was, therefore, not in cluded on the agenda for the present meeting.  
3. The Committee adopted  the agenda. 
B. OBSERVERS  
(i) Request for attendance of ad hoc observers 
4. The Chairman  recalled that at previous sessions of the CTD, Members agreed to invite a 
number of intergovernmental organizations on an ad  hoc, meeting-by-meeting basis.  These included 
the Arab Maghreb Union (AMU), the Common Fund for Commodities (CFC), the Economic 
Community of West African States (ECOWAS), th e Economic Cooperation Organisation (ECO), the 
Inter-Arab Investment Guarantee Corporation, th e Islamic Development Bank (IDB), the African 
Union (AU), the Organisation of the Islamic Confer ence (OIC), the South Centre, the Pacific Islands 
Forum, the United Nations Environment Progra mme (UNEP), the West African Economic and 
Monetary Union (WAEMU) and the World Intellectua l Property Organization (WIPO).  He said that, 
following the decision taken at the previous meeti ng of the Committee, the organizations had been 
invited to the present meeting.  He proposed that the organizations be invited to the next formal 
meeting of the CTD. 
5. It was so agreed .  WT/COMTD/M/57 
 Page 3 
 
 
  (ii) Further consideration of the requests for observer status by the League of Arab States, the 
Organization of the Petroleum Exporting Countries (OPEC), the Gulf Organization for Industrial Consulting, the Organisation Int ernationale de la Francophonie, the Common 
Fund for Commodities, the Organization of Arab Petroleum Exporting Countries (OAPEC) and the Groupe de la Banque Africaine de Développement 
6. The Chairman
 said that at previous meetings, the Committee had had before it a number of 
requests for observer status.  He said that if there was no change in positions to extend observer status 
to any of those applicants, then the Committee would take note and would revert to those requests at 
the next meeting.   
7. It was so agreed . 
C. REPORT ON THE 39TH SESSION OF THE JOINT ADVISORY GROUP ON THE INTERNATIONAL 
TRADE CENTRE UNCTAD/WTO  (ITC/AG/(XXXIX)/208) 
8. The Chairman  invited Ambassador Mary Whelan, Chairperson of the 39th session of the JAG, 
to introduce the report.   
9. Ambassador Mary Whelan, the Chairperson of the 39th session of the JAG  made the following 
statement:  
"Mr. Chairman, distinguished Members, The Joint Advisory Group on the International Trade Centre held its 39
th session from 
24 to 28 April 2006 and the report of the meeting is contained in document ITC/AG/(XXXIX)/208.  It is with pleasure that I submit this report to you this morning with a few remarks on the proceedings. 
In the opening statements, the Director-Gen eral of WTO and the Secretary General of 
UNCTAD addressed delegates on the importance of ITC being an integral part of the 'trade triangle'.  They noted that ITC's wo rk with the private sector would help to 
ensure that developing countries benefite d fully from the opportunities presented by 
the multilateral trading system and the outcome  of the Doha Round of negotiations.   
In his statement to the Group, Mr. Bélisle  said that the outgoing ITC management 
team was proud to have contributed to increasing the delivery of ITC's technical assistance by over 80 per cent in the past  five years and to have provided 
programmes, tools and publications that  were in high demand throughout the 
developing world.   
The JAG congratulated Mr. Bélisle for his excellent leadership and expressed full 
confidence in the ability of the new senior ma nagement team to take the organization 
forward.  Countries requested more ITC programmes that have a real impact on reducing poverty, such as South-South trad e, service exporting, export-led poverty 
reduction and initiatives to mainstream women in trade development.  Many representatives emphasized the important role that ITC should play within the 
framework of the Aid for Trade initiative as it was at the heart of the ITC's mandate. 
Reflecting the widespread confidence in ITC, a number of government 
representatives announced voluntary contributions to the ITC.  On behalf of the Group I would like to express our thanks to  the Governments of Canada, China, 
Denmark, France, Germany, India, Ireland, Italy, Japan, the Netherlands, Norway, WT/COMTD/M/57 
Page 4  
 
  Sweden, Switzerland, the United Kingdom and the European Commission for their 
support. 
Under 'Other Business' the representative of the Government of Denmark recalled 
that the final report of the external evaluation of ITC had been completed and Denmark was in a position to hand over the follow-up on the evaluation to the JAG 
and to ITC Management.  The Group invited ITC to report back regularly on progress 
made in implementing the recommendations  addressed to it.  ITC's Executive 
Director Designate, Ms. Patricia Francis, indicated her intention to put in place a 
'transition team' to review the implica tions of each of the recommendations and 
propose concrete measures for their implemen tation.  The transition team would help 
articulate ITC's strategic orientation and future work programme by September 2006 
in preparation for a discussion at the In formal JAG meeting later in the year. 
A second item discussed under 'Other Business ' was the ITC Strategic Framework for 
the biennium 2008-2009.  ITC's Executive Director observed that ITC had received a request from UN Headquarters in New York to submit a draft of its strategic 
framework in consultation with its Governin g Body.  It was agr eed that the proposed 
document would be sent to members of th e JAG for their even tual comments.  I 
understand that a number of comments were re ceived and have been incorporated in 
the strategic framework document. 
The Executive Director and I are available to reply to any questions from Members. Thank you Mr. Chairman." 
10. The representative of Egypt
 said he had two questions.  The fi rst related to evaluation.  He 
said an evaluation of technical assistance was also ongoing in the WTO, and he wondered whether anything could be learned from ITC's experience.  Second, he noted that the JAG Chairperson had 
mentioned the importance of Aid for Trade in ITC's work. He inquired about the format used by ITC 
in its work on Aid for Trade. 
11. The representative of the Philippines
, on behalf of the Association of Southeast Asian Nations 
(ASEAN), said he did not have any particular questi ons or comments at this time.  He said ASEAN 
encouraged ITC to continue with its good work.  ASEAN also wished Mr. Bélisle good luck in his 
future endeavours. 
12. The representative of the United States  said she hoped the US would one day be one of the 
major contributors to the ITC.  The US would contin ue to remain active in substance on a number of 
initiatives.  She said her delegation had still not ex amined the JAG report and looked forward to doing 
so.  She wished to highlight that the US had participated in the TradeMap and Product Map 
programmes which had helped facilitate the non- agricultural market access (NAMA) negotiations, 
and in programmes sponsoring services assessments in various countries which had helped facilitate 
the services negotiations.  Her delegation wished to  see the ITC continue to provide support to WTO 
Members.  She paid tribute to the leadership  of Mr. Bélisle over the past several years. 
13. The representative of Pakistan  said her country was a beneficiary of a number of ITC 
activities and had found them very useful.  Her de legation acknowledged the efforts of Mr. Bélisle 
and his team in increasing ITC's delivery of services by over 80 per cent in recent years. 
14. The representative of Zambia  acknowledged the work undertaken by the ITC, particularly in 
LDCs.  He hoped that collaboration with the ITC would continue, particularly in the area of Aid for 
Trade.  He thanked Mr. Bélisle for his efforts.  WT/COMTD/M/57 
 Page 5 
 
 
  15. The representative of the European Communities  said his delegation had no specific points to 
raise on the JAG report.  He said his delegation had a high opinion of the work of the ITC and acknowledged the achievements of  Mr. Bélisle and his team. 
16. The representative of Ecuador
 said her country, and in particular the private sector, had been a 
beneficiary of ITC activities.  Her delegation wished  to thank the donor countries and the ITC.  She 
noted that paragraph 12 of the JAG report said that development would come from four key areas:  
market access, flexibility, Aid for Trade and better public -private sector connecti ons.  In this regard, it 
was important to highlight that questions relating to  market access were not in the hands of the ITC 
but in the hands of some countries that could offer greater access to products from developing countries.  With regard to flexibility, she said th at different countries had different ways of seeing 
development and it was necessary to take into account countries' various needs and interests.  On the 
Aid for Trade initiative, she said her delegation did not want it to be a competitive process between 
countries.  Aid for Trade should also not reduce am bition for greater market access or go against the 
objectives of the Doha Round.  Finally, the relati onship between the public and private sector was in 
the opinion of her delegation a way of creating effe ctive synergies for development.  She thanked 
Mr. Bélisle for his efforts. 
17. The representative of Guatemala
 said her country was a beneficiary of ITC activities.  She 
thanked the ITC for its efforts and encouraged the organization to continue with its highly effective 
work. 
18. The representative of Senegal  said his country had benefited from the support of the ITC.  He 
paid tribute to Mr. Bélisle and wished  him success in his future endeavours. 
19. The representative of Honduras  said his country was a beneficiary of ITC activities.  His 
delegation encouraged the ITC to continue with  its important work for developing countries. 
20. The representative of India  commended the useful work done by the ITC and in particular Mr. 
Bélisle.  The work of the ITC and the Unite d Nations Conference on Trade and Development 
(UNCTAD) was very useful for developing countri es grappling with the development component of 
trade liberalization. 
21. The representative of El Salvador  thanked the ITC for the support it had provided to his 
country.  He hoped the ITC would continue with its good work. 
22. The representative of Uganda  said his country was a beneficiary of the Joint Integrated 
Technical Assistance Programme (JITAP).  He adde d his voice to those that had thanked the ITC, and 
wished Mr. Bélisle success in his future endeavours. 
23. Mr. Denis Bélisle, the Executive Director of the ITC , said he wished to first respond to the 
questions from Egypt.  On the question relating to ev aluations, he said that in the case of the ITC this 
had been a long exercise.  The objective of the evaluation was to make the ITC function better.  It included 34 specific recommendations which present ed opportunities for the enhancement of the 
organization.  His suggestion to the WTO when undert aking a similar exercise was to cooperate to the 
maximum extent with the evaluators and insist that they make specific recommendations.  On the 
question relating to Aid for Trade, he said the ITC was created solely for  this purpose.  Aid for Trade 
was, therefore, not a new activity for the organization.  The ITC was a small organization and was aware that its work was more effective when done in collabora tion with others.  Collaboration was 
undertaken mainly with UNCTAD and the WTO, but  also with other organizations including the 
World Bank, the United Nations Development Progr amme (UNDP), the United Nations Industrial 
Development Organization (UNIDO) and WIPO.  He agreed that the Aid for Trade initiative could 
not be a substitute for enhanced market access.  He  also emphasized the importance of a private sector WT/COMTD/M/57 
Page 6  
 
  that had the skills and know-how to take advantage of market access opportunities.  The ITC was 
following very closely the discussions relating to  Aid for Trade and the enhanced Integrated 
Framework (IF).  The ITC believed that the IF w as a tool that worked, but could work better, 
especially if more funding was provided.  It woul d be welcome if the Aid for Trade initiative could 
bring in the necessary funding.  He thanked delegatio ns for their support to the ITC and asked them to 
continue to give their support to  the new senior management team. 
24. The Committee took note
 of the report on the 39th session of the JAG and forwarded  it to the 
General Council for adoption.  It expressed its suppor t for the work of the ITC and its appreciation for 
the efforts of Mr. Bélisle. 
D. NOTIFICATIONS UNDER THE ENABLING CLAUSE  
- C OMMUNICATION FROM THE EUROPEAN COMMUNITIES ON THE AGREEMENT ON 
TRADE IN GOODS OF THE FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC 
COOPERATION BETWEEN THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS 
(ASEAN)  AND THE PEOPLE 'S REPUBLIC OF CHINA (WT/COMTD/51/A DD.2) 
- C OMMUNICATION FROM THE UNITED STATES ON THE FRAMEWORK AGREEMENT ON 
COMPREHENSIVE ECONOMIC COOPERATION BETWEEN ASEAN  AND THE PEOPLE 'S 
REPUBLIC OF CHINA , THE PROTOCOL TO AMEND THE FRAMEWORK AGREEMENT ON 
COMPREHENSIVE ECONOMIC COOPERATION BETWEEN ASEAN  AND THE PEOPLE 'S 
REPUBLIC OF CHINA , AND THE AGREEMENT ON TRADE IN GOODS OF THE 
FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC COOPERATION BETWEEN 
ASEAN  AND THE PEOPLE 'S REPUBLIC OF CHINA (WT/COMTD/51/A DD.3) 
- C OMMUNICATION FROM JAPAN ON THE FRAMEWORK AGREEMENT ON 
COMPREHENSIVE ECONOMIC COOPERATION BETWEEN ASEAN  AND THE PEOPLE 'S  
REPUBLIC OF CHINA AND THE AGREEMENT ON TRADE IN GOODS OF THE 
FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC COOPERATION BETWEEN 
ASEAN  AND THE PEOPLE 'S REPUBLIC OF CHINA (WT/COMTD/51/A DD.4) 
25. The Chairman  recalled that the Framework Ag reement on Comprehensive Economic 
Cooperation between ASEAN and China was notified to the CTD at the 52nd Session in 
February 2005 and that the Agreement on Trad e in Goods of the Framework Agreement on 
Comprehensive Economic Cooperation between ASE AN and China was notified to the CTD at the 
54th Session in October 2005.  
26. He said that communications raising questions on the notifications had been received from the 
EC, the US and Japan.  The communicati ons had been circulated as documents 
WT/COMTD/51/Add.2, Add.3 and Add.4 respectively.  He suggested that the three communications 
be treated together.   
27. The representative of the Philippines , on behalf of the ASEAN member countries, said that  
senior officials from ASEAN and China had conclude d a meeting in Hanoi, Viet Nam the day before 
the present meeting of the CTD.  The replies to the questions from the EC, the US and Japan were 
now being put in their final form.  They  would be made available very shortly. 
28. The representative of China  said he wished to associate himself with the intervention made by 
the Philippines. 
29. The representative of the United States  thanked ASEAN and China for the information 
provided.  She said her delegation wished to retain  the item on the agenda for the next CTD meeting  WT/COMTD/M/57 
 Page 7 
 
 
  and looked forward to receiving the replies as soon as possible so that capitals would have sufficient 
time to review them in preparation for the next meeting.  
30. The representative of the European Communities  thanked ASEAN and China for the 
information provided and said his delegation awaited the replies with  great interest.  He hoped they 
could be provided early so that delegations woul d have enough time to prepare for the next meeting. 
31. The representative of Japan  thanked ASEAN and China and said that his delegation also 
looked forward  to receiving the responses as soon as possible.  
32. The representative of China  said his delegation had taken note of the request from the 
representative of the US that an item relating to the ASEAN-China notifications be placed on the agenda for the next CTD meeting.  However, his delegation did not believe this was required.  The 
notifications had been on the CTD's agenda for a lo ng time.  China and ASEAN had been very patient 
and had allowed enough time for Members to raise questions.  He said that the written questions had 
been received quite some time after the notifi cations had been made.  According to China's 
understanding of the procedures under the Enabling Clause, his delegation could not accept placing  
an item relating to the ASEAN-China notifications  on the agenda of the next CTD meeting. 
33. The representative of the United States
 said she was surprised by the intervention by China, 
since the item relating to the A SEAN-China notifications was already on the CTD's agenda and the 
questions had been submitted to th e Committee under this agenda item.  It was not an issue of putting 
something new on the agenda, but simply reverting to an item that was already there.  The US could not accept that this item should not be on the agenda for the next meeting.   
34. The representative of the European Communities
 said his delegation also wanted the item to 
remain on the agenda for the next meeting of the CTD.  This would allow the Committee an  
opportunity to review and discuss the responses that would be submitted by ASEAN and China. 
35. The representative of Japan  said he wished to associate himself with the interventions of the 
US and the EC. 
36. The Chairman  said he would consult with the pa rties after the responses by ASEAN and 
China had been provided.  If the Members that ha d submitted the questions were satisfied with the 
responses, then there may not be a need for the i ssue to be discussed in the CTD.  Members were, 
however, also free to raise the issue during a future CTD meeting.  The consultations would then have 
to deal with the matter of how to treat the issue in the CTD.      
37. The representative of the United States  said she appreciated the basic elements of the 
Chairman's proposal and welcomed the suggestion th at consultations be held.  She said her concern 
was that an item concerning the notifications by  ASEAN and China was already on the agenda.  Her 
delegation had been expecting responses to the wr itten questions submitted to  be provided by ASEAN 
and China at the present meeting.  The Committee  had been told that the responses were being 
prepared and would be ready soon.  The Committee should, therefore, re vert to the agenda item at its 
next meeting. 
38. The representative of Switzerland  said the item should remain on the agenda until the process 
of transparency had been fully satisfied. 
39. The Chairman  said that ASEAN and China were currently in the process of preparing 
responses to the written questions that had been s ubmitted.  He proposed to wait to see whether the 
responses were satisfactory to the Members that had submitted the questions.  If this was not the case, WT/COMTD/M/57 
Page 8  
 
  he would be available for consultations with th e parties concerned about how the issue could be 
addressed. 
40. The representative of the United States
 said she had taken note of the Chairman's proposal.  
Her delegation would leave the issue for the moment, but without prejudice to its position.  She said she would consult with her capital on this procedural point and would also consult with the Chairman 
on the position of her delegation. 
41. The representative of the European Communities
 said his delegation would be happy to 
participate in consultations before the next CTD m eeting.  The expectation of his delegation was that 
the responses by ASEAN and China would be circ ulated to the CTD and discussed by the Committee 
as part of the transparency process that Members had been engaged in. 
42. The representative of China  said his delegation had taken note of the interventions by 
previous speakers.  He said that China's concerns  on this agenda item should also be recognized by 
the Committee.  His delegation had procedural con cerns, though different from those of the EC and 
the US.  He said he would consult with his capital to see how the matter could be dealt with. 
43. The Chairman  said he recognized China's concern that the written questions had been 
submitted some time after the notifications had been  made and that the notifications had been on the 
agenda for a relatively long period of time.  He also recognized that the CTD was committed to the 
principle of transparency.  As Chairman, he was suggesting that the partie s attempt to resolve the 
matter before the next meeting in the manner that he had already described.  
44. It was so agreed .  
- G ENERALIZED SYSTEM OF PREFERENCES - NOTIFICATION BY THE EUROPEAN 
COMMUNITIES (WT/COMTD/N/4/A DD.3 – WT/COMTD/57) 
- C OMMUNICATION FROM BRAZIL ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.1) 
- C OMMUNICATION FROM CHINA ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.2) 
45. The Chairman  said the notification by the EC on its revised GSP scheme had been circulated 
in document WT/COMTD/N/4/Add.3.  The texts of the legal instruments on which the revised GSP 
scheme were founded had been circulated in doc ument WT/COMTD/57.  Communications raising 
questions on the EC's revised GSP scheme had been received from Brazil and China and had been circulated in documents WT/COMTD/57/Add.1 and Add.2 respectively.  He understood that India 
had also submitted written questions at the present meeting.
1  He invited the EC to introduce its 
notification. 
46. The representative of the European Communities  said the EC's revised GSP scheme came into 
force on 1 January 2006 for a three-year peri od until the end of December 2008.  The new GSP 
scheme was made up of two legislative pieces:  C ouncil Regulation No 980/2005 of 27 June 2005 and 
Commission Decision (2005/924/EC) of 21 December 2005 on the list of the beneficiary countries 
qualifying for the special incentive arrangement fo r sustainable development and good governance. 
47. He said the EC's GSP scheme was the system of preferential trading arrangements through 
which the EC extended preferential access to its mark ets to developing countries.  The EC's GSP was 
                                                      
1 The questions from India were later circulated in document WT/COMTD/57/Add.3.  WT/COMTD/M/57 
 Page 9 
 
 
  the most widely used of all developed-country GSP systems.  The volume of EC imports from 
developing countries under the GSP was greater than  the combined volumes of imports under the US, 
Canadian and Japanese GSP systems.  In 2005, EC imports under the G SP totalled €43 billion. 
48. There were five sets of arrangements under th e EC's previous GSP scheme: the general 
arrangement, the 'Everything but Arms' arrangement  for LDCs, and three sp ecial incentives which 
granted additional tariff preferences for count ries committed to fighting drug production and 
trafficking, and to countries committed to prom oting labour rights and environmental standards. 
49. The revised GSP system was designed to be simple r, more transparent and more stable.  Since 
1 January 2006, there were three arrangements in pl ace instead of five.  The general arrangement was 
available to all developing countries without an y conditions.  The coverage of the general 
arrangement had  been increased by 300 products, mo stly in the agriculture and fishery sectors.  The 
'Everything but Arms' arrangement for LDCs remain ed unchanged.  Finally, a new GSP incentive for 
sustainable development and good governance – the 'GSP-plus' – had been introduced.  It provided duty-free and quota-free access for approximately 90 pe r cent of exports from beneficiary countries.  
50. In order to benefit from GSP-plus, countries had to meet a number of criteria.  For one, they 
had to have ratified and effectiv ely implemented core UN and IL O conventions on core human and 
labour rights and conventions rela ted to good governance and the protection of the environment.  
They also had to demonstrate that their economi es were "dependent and vulnerable".  This would 
include countries with poorly diversified economies,  small economies, landloc ked countries and small 
islands.  The dependence criterion was met when the five largest sections of a country's GSP-covered 
exports to the EC represented more than 75 per cent of its total GSP-covered exports.  A country was 
considered vulnerable if its GSP-covered exports  represented less than one per cent of total EC 
imports under the GSP. 
51. On the subject of graduation, he said certai n products from GSP beneficiary countries could 
be removed from the GSP scheme if countries became highly competitive in the EC market.  This was 
a sign that these products no longer needed the GSP to  boost the volume of exports.  Graduation was, 
therefore, not a penalty, but an indication that the GSP had successfully performed its function, at 
least in relation to the country and product in qu estion.  This ensured that the GSP focused on the 
countries most in need and helped them play a great er role in international trade. Changes had been 
made to the graduation mechanism to make it si mpler.  The previous system, which had three 
complex criteria, had been replaced with a single st raightforward criterion:  share of the Community 
market expressed as a share of exports from GSP c ountries.  The share in question was 15 per cent of 
exports. 
52. The Chairman
 inquired whether those Members which had submitted written questions on the 
EC's notification wished to take the floor. 
53. The representative of Brazil  said his delegation was interested in receiving responses from the 
EC to the questions it had submitted.  His delega tion expected the responses to be as comprehensive 
and detailed as the questions required. 
54. The representative of China  said the questions raised by his delegation were self-explanatory.  
China also shared an interest in the questions s ubmitted by Brazil and India.  This was not only for 
reasons of transparency but also because of the impact the EC's revised GSP scheme could potentially 
have on the multilateral trading system.  His de legation looked forward to receiving written replies 
from the EC.    
55. The representative of India  said his delegation looked forward to receiving responses as soon 
as possible to the questions it had submitted.  His de legation also shared interest in the questions WT/COMTD/M/57 
Page 10  
 
  submitted by Brazil and China.  In order to make the response process more efficient his delegation 
had attempted not to duplicate their questions. 
56. The representative of Guatemala
 said that the EC in its notif ication had identified two legal 
instruments relating to its revised GSP scheme.  Council Regulation No 980/2005 of 27 June 2005 
gave detailed and precise information on the sch eme.  Commission Decision (2005/924/EC) of 
21 December 2005 provided a list of the beneficiary countries qualifying for the GSP-plus 
arrangement, which included Guatemala.  Guatemal a's eligibility to participate in the GSP-plus 
arrangement had been confirmed through an assessment  of the effective implementation of the main 
conventions on human and labour rights and co nventions related to good governance and the 
protection of the environment.  The special treatme nt granted by the EC to imports from Guatemala 
was an important element of the economic relati onship between the two parties.  Her delegation 
hoped the preferences would in the future be enha nced to give more certainty, stability and more 
market access opportunities to  exports from Guatemala. 
57. The representative of th e European Communities  said he would first respond to the questions 
submitted by Brazil in document WT/COMD/57/Add.1.  In response to the first question relating to 
the provision of figures on EC imports from GSP beneficiaries on a monthly and annual basis, he said 
that given the size and the complexity of the data co ncerned, the EC could on a bilateral basis provide 
monthly and annual figures in value (in Euros) and in quantity of imports covered by each 
arrangement of the EC GSP by beneficiary and by product (tariff line).  The second question from 
Brazil related to statistical requirements set by Re gulation No 980/2005.  In this regard, he said the 
statistical requirements were set by the provisions  of article 14.6 of Council Regulation No 980/2005 
under which tariff preferences would be removed on th e basis of the most recent COMEXT data.  The 
production of the COMEXT statistics on GSP trade was based on statistical data provided by EU 
Member States and collected by Eurostat.  Th ese data were available on bilateral request. 
58. He said the third question from Brazil concerne d the removal of tariff preferences on products 
in Section IV of EC Regulation No 2658/87 (prepa red foodstuffs; beverages;  spirits and vinegar; 
tobacco and manufactures and tobacco substitutes).  The response of the EC was that the average 
value of EC imports from Brazil included in S ection IV and covered by  the EC GSP general 
arrangement enjoyed by Brazil represented 22.4 per cent of the value of EC imports of the same 
products from all GSP beneficiaries over three con secutive years (2001-2003).  As this figure was 
above the 15 per cent threshold set by article 14.1 of Council Regulation No 980/2005, tariff 
preferences for these products from Brazil had to be removed.  With regard to the fourth question on 
why the EC chose to use a graduation system that affected entire sections of the Harmonized System 
(HS), he said the new GSP scheme including its gr aduation mechanism had been designed to be 
simpler, more transparent and fully objective.  In  particular, the 34 GSP-specific sectors set under the 
previous GSP regulation were no longer utilized and had been replaced by the twenty-first sections of 
the Common Customs Tariff of Council Regulation No 980/2005 which reflected the HS 
methodology.    
59. The fifth question from Brazil asked why the EC  had decreased the graduation threshold of 
25 per cent to 15 per cent.  He said the new G SP scheme including its graduation mechanism had 
been designed to be simpler, more transparent a nd fairer.  Under the previous GSP scheme, tariff 
preferences were removed on the basis of three diff erent criteria, including the share of preferential 
imports, a development index and an export-specia lization index.  These complex criteria had been 
replaced with a single straightforward criterion unde r the new GSP scheme, namely the share of the 
EC market as expressed as a share of preferential imports.  The sixth question sought information on the reasons for removing the mechanism of review of  the graduation system.  He said the revised GSP 
scheme was designed to be more stable, providing pr edictability for importers and exporters.  As far 
as graduation was concerned, this implied that, as set  by article 14.3 of Regulation No 980/2005, the 
removal of sections from the GSP scheme would apply as from 1 January 2006 until  WT/COMTD/M/57 
 Page 11 
 
 
  31 December 2008.  However, as provided under Article 28.3 of the same regulation, the GSP 
Committee would examine the effects of the curr ent scheme, on the basis of a report from the 
Commission covering the period from 1 January 2006.   This report would cover all preferential 
arrangements including changes in export trends a nd would be presented in time for discussion on the 
second GSP implementing regulation whic h would start on 1 January 2009. 
60. The seventh question from Brazil requested th e EC to provide background information on 
how the criteria to identify "vulnerable" countries we re decided.  He said he had already discussed 
this point earlier and would therefore not repeat hi mself.  With regard to the eighth question on the 
criteria used to determine the sensitivity of produc ts, he said the EC took decisions regarding the 
sensitivity of products after intensive consultati on between Member States which took into account 
the situation of products in the respective industries.   The EC decisions were reflected in Annex II of 
the list of products included in each of the GSP arrangements. 
61. The representative of the Europ ean Communities said he wished to move on to respond to the 
questions submitted by China in document WT/COMTD /57/Add.2.  He said he had answered China's 
first question when responding to the sixth question from Brazil.  China's second question related to 
rules of origin and whether China's products coul d enjoy GSP treatment based on origin accumulation 
within APEC and the ASEAN-China grouping.  He said that at present there were three regional groups benefiting from regional cumulation.  These  were ASEAN, the Central American Common 
Market (CACM) together with the Andean Commun ity, and the South Asian Association for Regional 
Cooperation (SAARC).    
62. In response to China's third question, he sai d there was no transitional arrangement which 
would continue processing applications made unde r the previous GSP scheme for the special 
incentive for the protection of the environment.  However, under the GSP-plus arrangement, two of 
the conventions to be ratified and effectively impl emented, namely the Convention on International 
Trade in Endangered Species and the Conventio n on Biological Diversity, included provisions 
relating to the protection of tropical forests.  China's fourth question concerned requests for 
information.  He said the EC could on bilateral re quest provide monthly and annual figures of imports 
covered by each arrangement of the EU GSP by benefi ciary and by product (tariff line).  As far as the 
special arrangement for LDCs was concerned, all 'd utiable' products with the exception of Chapter 93 
(arms and ammunition) were included.  The arra ngement granted duty-free and quota-free access to 
the EC market.  Full liberalization of sugar and ri ce would be phased in during a transition period.  
Duties on those two products would be gradually reduced until duty-free access was granted for sugar 
at the latest by 1 July 2009 and for rice at the la test by 1 September 2009.  In the meantime, the EC 
had offered immediate and real market access to the 50 LDCs through the creation of duty-free quotas 
for sugar and rice.  These quotas had increased annua lly.  He said that 9,776 products (tariff lines) 
imported from LDCs out of the 9,840 tariff lines of the Common Customs Tariff in 2005 
(99.4 per cent) were covered by the 'Everything but  Arms' arrangement. In trade value, this amount 
represented €15.88 billion in 2005.  
63. The representative of Norway
 said the Norwegian GSP scheme was in the process of being 
revised.  The revision aimed to si mplify procedures and make information more easily available to 
interested exporting countries.  A study on the Norwegian preferential system had been carried out by 
the Norwegian Institute of International Affairs, wh ich was an independent agency.  This study, which 
was without prejudice to the outcome of the revisi on process, was available electronically.  A working 
group in the government was in the process of id entifying possible proposals for simplification and 
improved information procedures.  The conclusions we re expected to be reached by the end of the 
year.  The Committee would be notified as soon as possible thereafter.  WT/COMTD/M/57 
Page 12  
 
  64. The representative of India
 inquired whether it would be possible to receive responses from 
the EC at the present meeting to the questions his delegation had submitted.  Otherwise, his delegation 
would be satisfied to receive written responses at a later date.    
65. The representative of the European Communities  said his delegation had only just received 
the questions from India and would therefore provide written responses at a later stage.    
66. The Committee took note  of the EC's notification and of all interventions.  
E. DECLINING TERMS OF TRADE FOR PRIMARY COMMODITIES , AND ITS IMPLICATION TO TRADE 
AND DEVELOPMENT OF PRIMARY COMMODITY EXPORTING COUNTRIES  
- P RESENTATION BY THE INTERNATIONAL COFFEE ORGANIZATION  
67. The Chairman said that based on the discussion th at took place under this agenda item at the 
previous meeting of the CTD, an invitation to  make a presentation to the Committee had been 
extended to the International Coffee Organization (ICO).  He was pleased to inform the Committee 
that the ICO had accepted the invitation and that a representative of the ICO was in attendance at the 
meeting.  He introduced Mr. Pablo Dubois, who w as the Head of Operations at ICO.  He invited 
Mr. Dubois to make his presentation. 
68. In his presentation, the representative of  the International Coffee Organization  highlighted 
that coffee was one of the world's most important  traded commodities and that many countries were 
heavily dependent on it.  He reviewed the developmen t of the world coffee market in the last 25 years, 
and in particular outlined experiences under th e export quota system period from 1980 to 1989, the 
free market period from 1990 onwards and the coffee pri ce crisis which began in 2000.  In spite of the 
evidence of higher producer returns under a policy of international supply management, he observed 
that today's political, economic and technical conditi ons ruled this out as a realistic option.  The 
challenge was to improve the situation without overt market intervention.  He pointed to a number of 
areas where action was possible both with respect to  national policies and inte rnational cooperation.  
These included information and guidance, diversifi cation, adding value to coffee, competing on 
quality rather than on price, capacity building a nd market development.  He also summarized a 
number of ICO activities relating to the setting of  basic quality standards, the dissemination of 
statistical data and information, technical studi es and seminars, coffee development projects and the 
promotion of consumption.  The full presentation ma de by the representative of the ICO is reproduced 
in the Annex. 
69. The representative of Ecuador  wondered whether specific examples of tariff escalation and of 
powerful companies that restricted competition coul d be given.  She said that Ecuador had great 
difficulty in obtaining market access, regardl ess of the quality of the coffee it produced.  Her 
delegation was interested in knowing whether there were any projects being undertaken by the ICO to 
promote alternatives to the production of coffee.   
70. The representative of the United States  said her delegation recognized the difficulties faced by 
countries that were dependent on primary commod ities such as coffee.  The presentation by the 
representative of ICO illustrated that the conditions in  commodity markets contributed to the inherent 
volatility in commodity prices.  Though the ICO did not have a role in managing markets, her delegation believed the organization could do more to assist producer s in managing the consequences 
of unpredictable market conditions.  In that cont ext, her delegation saw a role for a rejuvenated, 
reformed ICO that strengthened its orientation towards freely functioning markets and that would 
devise and implement programmes to help coffee fa rmers improve quality, efficiency and access to 
markets.  She said the United States re-joined the ICO because the organization was seen as a valuable forum in which the US could work with  its trading partners, the private sector and non- WT/COMTD/M/57 
 Page 13 
 
 
  governmental organizations to address the full range  of issues affecting coffee production, trade and 
consumption.  The US would work with the ICO to he lp ensure that the organization played a key role 
in the coffee sector and was increasingly effectiv e in assisting the primary commodity exporting 
countries' understanding and adaptation to market conditions. 
71. The representative of Brazil  said his delegation appreciated the work undertaken by the ICO.  
Brazilian coffee producers had been significantly affect ed by the price crash in recent years.  They 
also had serious concerns about tariff peaks and tariff escalation.  He wondered whether the 
representative of the ICO could elaborate on the effects of tariff peaks and tariff escalation on coffee producers. 
72. The representative of Angola
 said his country had been one of the main coffee producing 
nations in 1973 and 1974, but the situation had since changed. He wondered whether the ICO was 
assisting his country in any way. 
73. The representative of Pakistan  inquired about the objective of the ICO's price-fixing function, 
since coffee growers did not significantly benefit from it. 
74. The representative of the ICO  said the organization did not operate a regulatory system 
because such a system was not f easible at the present time and under present conditions.  However, 
there were many other areas in which internationa l cooperation could work effectively within the 
framework of the ICO.  Examples included the promotion and dissemination of sustainability initiatives, the provision of information and projects under very favourable terms for coffee producers.  
He welcomed the intervention of the United States.  The US had an important contribution to make to 
the ICO and had one of the most dynamic markets.  The specialty sector in the US was a model to 
many other countries in terms of successfully mark eting value-added coffees.  The US Agency for 
International Development had de voted considerable resources to support projects in some of the 
affected countries. He said the ICO had recently pub lished a study on the tariffs that affected coffee. 
The study identified the countries for which problems occurred.  The ICO had also prepared another 
study which had not yet been published.  The second study, which would be published shortly, looked 
not only at the question of tariffs but also identif ied new markets for coffee producers.  He said the 
ICO had recently got a project approved with funding from the Common Fund for Commodities for 
coffee producers in Ecuador.  The project related to diversification of production.  With regard to the 
question from Angola, he said the ICO had recently launched a project in Angola worth several million US dollars.  The objective of the project was to rehabilitate qualit y areas and encourage the 
production of quality coffees.  
75. The Committee took note
 of the presentation and of all interventions. 
76. The Chairman  said he wanted Members to reflect wher e they wanted to go with the agenda 
item concerning commodities.  The Committee ha d now heard a presentation from one Member – 
Malaysia – and had also heard presentations from the Common Fund for Commodities, UNCTAD and 
the ICO.  The presentations had been very useful  in helping the Committee to focus its work and 
discussions.  He, therefore, suggested that the CT D continue to hear from Members or relevant 
institutions.  Specific institutions that had been suggested in past discussions included the Food and 
Agriculture Organization (FAO), the ITC, the Worl d Bank and the International Tropical Timber 
Organization (ITTO).  He inquired whether Member s wanted an invitation to be extended to any 
particular organization for the next meeting of the CTD.  
77. The representative of Kenya  said a proposal that would be tabled in the Special Session of the 
Committee on Agriculture was currently  being finalized.  The intention was to share the proposal with 
the CTD.  She also proposed that the FAO be invite d to make a presentation at the next meeting of the 
CTD.   WT/COMTD/M/57 
Page 14  
 
  78. It was so agreed
. 
F. REVIEW OF STEPS TAKEN TO PROVIDE DUTY-FREE AND QUOTA -FREE MARKET ACCESS TO 
LEAST -DEVELOPED COUNTRIES  
79. The Chairman  recalled that the Committee had agreed at its last meeting to include, for all 
remaining meetings of the year, an agenda item re lating to the Decision taken at Hong Kong, China, 
on the provision of duty-free and quota-free (DFQF) market access to LDCs.  He inquired whether 
any Member wished to take the floor. 
80. The representative of Switzerland  said that his country had, on an autonomous basis, decided 
in 2001 to gradually introduce DFQF market access fo r products originating in LDCs.  Since then, all 
industrial products from LDCs benefited from a zero- tariff regime.  In the agricultural sector, tariff 
reductions had been undertaken in various step s.  Switzerland was currently revising its legal 
framework relating to GSP tariff preferences.  In th is regard, Switzerland would take account of the 
Hong Kong Decision on DFQF market access for LDCs with the aim of implementing the Decision as quickly as possible with maximum product coverage.  The legal text would be presented to Parliament 
in 2006 with the expectation that the relevant measures would be introduced by the beginning of 
2007. The Swiss GSP scheme was part of a more comp rehensive strategy to facilitate the integration 
of LDCs into the world economy.  In addition to measures to improve market access, Switzerland also 
granted support for trade-related technical assi stance with the aim of ensuring that products 
originating from LDCs met the require ments of international markets.  He said the success of a DFQF 
market access regime did not only depend on the efforts made by the importing countries.  The 
stakeholders in the exporting countries also had a role to play.  The DFQF opportunities needed to be 
known to exporters in the LDCs, and the procedur es to obtain the necessary origin certificates from 
the national certification board needed to be customer-friendly.  
81. The representative of the European Communities
 said that developing countries, and in 
particular small and vulnerable ec onomies, would need an extra push in order to make their full 
integration into the world trading system a succ ess.  The acceptance by other developed countries in 
Hong Kong, China, to follow the EC in granting DF QF market access to products originating in LDCs 
was an important step.  His delegation believed it was important that the Decision be properly and 
quickly implemented. 
82. The representative of the United States  said her delegation welcomed the opportunity to begin 
a dialogue in the CTD on the implementation of DFQF market access for LDCs as directed by 
Ministers in Hong Kong, China.  The United States  would participate actively in the dialogue by 
providing information to assist Members in unders tanding its implementation plans and to enable 
them to share their views at key decision points in  its domestic process.  He r delegation hoped other 
Members shared the commitment of the United St ates to transparency and looked forward to 
understanding more fully the implementation plans of other Members, including developing countries 
in a position to provide DFQF market access to  LDCs.  Her delegation recognized there was no 
requirement in the Hong Kong Decision that the pres ent dialogue take place or that Members engage 
in transparency and share information at the present time.  There had, however, been much discussion 
on the DFQF issue in other forums where her dele gation felt there had been insufficient understanding 
of the US domestic process for implementation.  Her delegation believed that the lack of understanding had led at times to an unfortunate dynamic in the discussion.  She said the US was committed to engaging constructively on the issue.   Although the Director-General's initial timeline 
called for the implementation plans to be submitte d in the fall of 2006, her delegation felt it was 
critical to provide information on the US domestic  process earlier so that discussions with other 
delegations could put all Members on a path of better understanding.  WT/COMTD/M/57 
 Page 15 
 
 
  83. She said her delegation had circulated a paper at the present meeting.2  The paper gave an 
overview of the US process for the implementation of DFQF market access for LDCs.  Her delegation 
hoped the paper would help to bri ng expectations in line with the realities that existed, and would 
provide enough information to allow Members to wo rk together within a practical framework.  The 
US domestic process was designed to inform the decision-makers of the stakeholder views to the 
fullest extent possible as well as to maximize the tr ansparency of the decision-making process.  All 
stakeholders, including WTO Members, would have the opportunity to provide input on the full range 
of decisions that would be required to implemen t the DFQF Decision.  Her delegation planned to 
continue to provide information in the CTD on the US domestic consultative process and on how 
Members could participate in the process.  This paper was the first in a series of submissions that 
would provide information to Members on the implementation by the US of the DFQF Decision.  Her 
delegation looked forward to discussing the issue further in the CTD.  
84. The representative of Norway  said his country had been giving DFQF market access for all 
products from LDCs since 1 July 2002.  He wished  to mention that in a recent presentation by the 
Secretariat on DFQF market access for LDCs, it ha d been stated that the product coverage of the 
Norwegian DFQF scheme for LDCs was 97 per cent.  This was incorrect and his delegation was in 
contact with the Secretariat on the issue.  While there were no tariffs on products from LDCs, Norway 
did have a safeguard mechanism on some tariff lin es, in particular on grain and feedstuff.  The 
safeguard mechanism had as yet not been used.  He  said the safeguard mechanism had been 
mentioned in the study that he had referred to  during the discussion under agenda item D.  The 
question of whether to maintain the safeguard mech anism would be considered as part of the review 
currently being undertaken of the Norwegian GSP scheme.       
85. The representative of Senegal  thanked the US for its submission, which he saw as a kind of a 
notification.  It was an illustration of how the tr ansparency process should work.  Transparency was 
essential for the implementation of the Hong Kong Decision on DFQF market access for LDCs.  The US submission allowed Members to understand the implementation process of the Decision, which 
was particularly important for LDCs.  His delegation believed that it woul d have been useful if the US  
had also communicated the content of its subm ission to the Negotiating Group on Market Access 
(NAMA), since the Group was discussing modalities.  Developed countries, and developing countries 
in a position to offer DFQF market access, should make such submissions when relevant proposals 
were discussed in the context of the agriculture and NAMA negotiations. He said these were his 
preliminary comments on the US submission while waiting for comments from his authorities.  
86. The representative of Zambia
, on behalf of the LDC Group, thanked the representative of 
Switzerland for his intervention outlining the steps be ing taken to implement DFQF market access to 
products from LDCs.  He also ac knowledged and took note of the document circulated by the US 
delegation on DFQF market access.  The LDC Group would study the document and make comments in due course.  He thanked the representative of No rway for informing the Committee of the steps that 
Norway had taken to provide DFQF market access to LDCs.  
87. He said the LDC Group attached great importance to the work of the CTD, in particular the 
critical role it had in facilitating discussions on i ssues that impinged on the development prospects of 
developing countries.  The LDC Group was committed to  the faithful execution of the mandate of the 
CTD, which was limited to a review process and did not deal with issues that were being negotiated 
under the Doha Development Agenda. The Group full y appreciated the efforts that Members were 
making to provide enhanced market access to LDCs  through their respective preferential market 
access schemes and was in full agreem ent that these schemes, once im plemented, should be reviewed 
by the CTD. The LDC Group looked forward to fina lizing modalities on DFQF market access, as well 
as on simplified and transparent rul es of origin, as was agreed to by the Ministers at Hong Kong, 
                                                     
 
2 The paper was later circulated as document WT/COMTD/W/149. WT/COMTD/M/57 
Page 16  
 
  China.  He explained that these modalities were curr ently being worked on in the Committee on Trade 
and Development in Special Session (CTDSS).  The Group would be presenting in the near future two 
papers in the CTDSS in order to expedite the process.  Once the process was concluded, the CTD 
would have an opportunity to review the implemen tation process as mandated in Annex F of the Hong 
Kong Ministerial Declaration.  The LDC Group lo oked forward to working with the membership 
towards an early conclusion of th e work in the CTDSS so that th e CTD could have some positive and 
progressive reviews at the earliest possible date. 
88. The representative of Canada
 said his delegation was of the view that Members were at the 
present time in the implementation phase of the Hong Kong Decision.  The appropriate forum for 
discussions on the implementation process was the CTD. 
89. The representative of Japan  said his delegation was willing to  notify the implementation of 
DFQF market access for LDCs in accordance with the Hong Kong Decision on DFQF market access 
for LDCs.  He said Japan was still in the proces s of undertaking domestic consultations.  Japan 
wanted to implement the Decision as soon as it could. If possible, this would be done in 2007.  His delegation would inform the Committee after a date and a plan for implementation had been decided 
upon.       
90. The representative of the United States
 said the position of her delegation was similar to that 
of the delegation of Canada.  The United States di d not interpret the Hong Kong Decision on DFQF 
market access for LDCs to mean that negotiations on the issue were continuing in the CTDSS.  Her 
delegation would proceed to fulfil the implementa tion mandate of the Hong Kong Decision.  As an 
early exercise in transparency, information had been  shared with the CTD at the present meeting.  The 
purpose was to allow Members to be fully aware as to  how they might participate in the United States' 
process of implementation. 
91. The representative of Djibouti  thanked those delegations that had made interventions 
outlining the steps they were taking to provide DFQF market access to LDCs.  He said, however, that 
once products from LDCs reached the borders of im porting countries, they frequently came up against 
other obstacles.  For example, the products were some times said to be incompatible with international 
standards.  It was important for solutions to be found to such problems.  
92. The representative of Cambodia  said he wished to recall that the Chairman of the Hong Kong 
Ministerial Conference had stated in his closing re marks that the Decision on DFQF market access for 
LDCs, and in particular paragra ph (ii), was to be understood as a framework that was subject to 
further negotiations in Geneva.  While the CTD wa s mandated to review th e implementation of the 
Decision, Members were not yet at the implementa tion stage.  The understanding of his delegation 
was that the CTDSS should engage in further negotia tions on this issue.  The products that would be 
covered as part of the 97 per cent DFQF market access were as yet unknown and needed to be negotiated. LDCs were also concer ned about the 3 per cent of products that would be excluded.  They 
did not want to experience a fall in their exports, especi ally of products such as textiles and clothing.    
93. The representative of Zambia
, on behalf of the LDC Group, said he had listened carefully to 
the interventions made by the representatives of Canada and the US.  The understanding of the LDC 
Group was that negotiations would take place in the CTDSS.  The CTD would from time to time review the negotiations and the recommendations coming from the CTDSS.    
94. The Committee took note
 of all interventions.  WT/COMTD/M/57 
 Page 17 
 
 
  G. TECHNICAL COOPERATION AND TRAINING  
- T ECHNICAL COOPERATION AUDIT REPORT FOR 2005  (WT/COMTD/W/148) 
95. The Chairman  invited the Secretariat to introduce the Technical Cooperation Audit Report for 
2005, which had been issued as document WT/COMTD/W/148.   
96. The Head of the Technical Cooperation Audit Unit (TCAU)  said the report contained in 
document WT/COMTD/W/148 was the fifth annual re port of the Technical Cooperation Audit (TCA) 
and covered the period from 1 January to 31 Decemb er 2005. The report was distinct from past TCA 
reports as it systematically considered the implementation of TCA recommendations made in earlier reports. He noted that the 2006 Technical Assistance (TA) and Training Plan made specific references 
to the recommendations made in the previous year's  TCA report and that the preparation of the TA 
plan for 2007 also paid attention to the TCA recommendations.  Most of the recommendations had 
been considered for implementation. Recommendations  which were believed to be still valid had been 
repeated for future implementation.  Another new feature of the 2005 report was that an attempt had 
been made to measure TA by sel ected performance indicators.  The overall observation was that the 
TA process and the results achieved in the previo us year coincided with the views expressed by 
Members at the 56
th Session of the CTD when the Secretariat report on the implementation of the TA 
Plan for 2005 was discussed. 
97. He said the TA and training activities in 2005 were  similar to those deliv ered in 2004 in terms 
of quantity, and that the overall feedback from Me mbers continued to be positive.  The significant 
number of TA workshops, seminars and courses of short duration included a very high number of 
beneficiaries.  The Secretariat had, therefore, con tinued to deliver TA activities for the benefit of as 
many people as possible and to satisfy the maximum possible number of requests.  The conclusion 
reached was that the quantitative approach still prev ailed over a qualitative one. On the other hand, it 
was also found that the global planning framework did not hinder but rather gave enough flexibility 
and opportunities for the individual TA provider s in the Institute for Training and Technical 
Cooperation (ITTC) and the operational divisions to select the participants, limit their number more 
systematically and better tailor the programmes and de livery methods to their needs.  The very high 
rate of satisfaction of the participants showed that  they welcomed the Secretariat's efforts to improve 
quality.  He observed that an explicitly quality-focused  approach might result in a lesser number of 
TA activities of a generic type but longer in dur ation and more oriented to problem-solving and 
capacity building. Such an approach would requi re not only the support of Members but also the 
exploration of new TA modalities and avenues. 
98. With regard to the performance aspects of TA ac tivities in the previous year, he said that the 
choice of the performance indicators, which  were derived from the concepts of results-based implementation and evaluation, demonstrated  a valid  picture of TA.  The indicators in question were: 
the contribution to strengthening Members' trade-related human resources; the proportion of women 
among the beneficiaries; a broad representation of Members' organizations in WTO TA; substantive 
areas addressed by TA reflecting Members' demands ; the percentage of back to office reports 
(BTORs) that showed participants' high satisfac tion with the results; the percentage of BTORs 
demonstrating that TRTA objectives were fully achie ved; evidence on feedback, effects and impact;  
and the percentage of BTORs demonstrating high effi ciency. As far as possible, data were collected 
and analyzed on all these indicators.  It was recommended that TA provider units should bear in mind these indicators when planning and delivering TA to Members. 
99. He said that while the report noted the conti nued satisfaction of the participants with the 
quality of TA received, it also suggested areas for improvement throughout the TA cycle.  These recommendations were included in the last sectio n of the report.  Among the newly developed 
approaches endorsed was the exploration of the poten tial of low-direct cost TA that would combine WT/COMTD/M/57 
Page 18  
 
  the modality of e-training (to cover a basic know ledge of WTO), followed by regional activities at 
advanced level with participants selected from amon g those that underwent e-training.  This approach 
could save the generic part of most TA activities, whic h might take more than one day.  The time thus 
saved could be used for the needed country or region-specific case studies and exercises and problem-
solving. He said that a good results-based ma nagement should regularly utilize evaluative 
information.  The availability of such informati on and its dissemination was crucial.  The report, 
therefore, suggested improvements in the reporting and follow-up mechanism.  
100. The representative of Switzerland
 said his delegation supported the recommendations made at 
the end of the report to improve WTO's TA.  His de legation also took note of the progress that had 
been made in 2005 in identifying needs, defini ng measurable aims and enhancing collaboration 
between ITTC and the Trade Policy Review Divi sion.  However, his delegation still had some 
concerns with regard to the large number of shor t-term activities and wondered if there were too many 
of them.  The relatively low rate of participation in  regional events was also a matter of concern.  The 
fact that the Secretariat had no control on partic ipation in national events made him wonder whether 
such activities were truly efficient, in particular  if there were more than 60 participants.  His 
delegation noted that the TCA report was based on onl y 68 per cent of inputs due.  He believed this 
was insufficient and said the Secret ariat should request that all input s be submitted.  His delegation 
was still in favour of introducing performance indicat ors on particular products.  It was hoped that 
some progress could be made on this matter. 
101. The representative of Japan  said his delegation was satisfied that the new initiative on 
performance indicators had been introduced in the re port.  He said he had a general comment to make 
based on paragraph 99 of the report.  The paragrap h in question raised two questions.  The first 
question was whether the right TA programmes we re being delivered.  The second question was  
whether the TA activities should be reduced in number,  made longer and benefit less people.  He said 
it would be necessary to look on a programme-by- programme basis when considering whether to 
reduce the number of activities or make them of a longer duration.  He believed that follow-up 
discussions on these issues would be necessary. 
102. The representative of the United States  said it was apparent that the quality and effectiveness 
of TA activities had improved.  This was due in pa rt to better planning and execution by providers and 
more preparation and targeting of  participants by recipient countries.  The recommendations in the 
report should be implemented.  Her delegation was particularly impressed by the Rules Divisions' 
experience in using e-training for introductory topics and as a prerequisite for more advanced training.  
The model could also be used in other areas.  E-trai ning was useful in reaching more participants than 
would be the case if only in-person training was offe red.  Her delegation was also open to the issues 
raised by other delegations and was willing to partic ipate in any consultations that might take place. 
103. The representative of Pakistan  referred to the table on page 15 of the report.  She said the 
table made a distinction between the Ministry of Trade and the Ministry of Commerce as recipient 
organizations.  In Pakistan, however, there was no di stinction between the two entities.  With regard 
to the question regarding the length of TA activities,  she said the Ministry of Commerce in Pakistan 
found it difficult to spare officers for longer periods. Shorter, more intensive courses were, therefore, 
preferred. 
104. The representative of Zambia  referred to the question of whether to reduce the number of TA 
activities.  He said he would prefer if the number was maintained, and if possible even increased.  
Efforts should be made to improve the content of  the training activities so as to further build the 
capacity of participants.  He said that further cons ultations on the training activities would be useful. 
105. The representative of the European Communities  said the overall picture on TA delivery was 
positive, in particular as almost all activities were ra ted highly by the beneficiaries.  He welcomed the  WT/COMTD/M/57 
 Page 19 
 
 
  emphasis that had been placed on needs assessment.  Ensuring that requests were made on needs 
assessments was the responsibility of the beneficiari es.  The WTO could assist if necessary.  He 
inquired whether the Secretariat could indicate how many of the requests received had been based on  needs assessments. 
106. He said the report mentioned many possible sour ces of needs analysis.  His delegation was 
willing to accept this as long as these were part of a broader analytical approach.  Needs analyses 
which were carried out in a vacuum did not really address the problem of strengthening the 
consistency of TA.  The exceptions were the need s identified in the various WTO Committees, which 
were often similar for a number of countries and c ould therefore be dealt with in a multi-country 
context.  
107. He said his delegation agreed that more work n eeded to be undertaken to build indicators in 
the design of TA activities.  He wondered whether the Secretariat could indicate how this could be 
taken forward. He noted two fundamental questions in paragraph 99 of the report.  The first was 
whether the right trade-related TA programmes we re being delivered.  The second was whether the 
number of TA activities should be reduced, but exte nded in duration with fe wer participants.  His 
delegation did not have an an swer at this time, but was interested to hear the view of the beneficiaries.  
The questions could then be returned to at a future date. 
108. The Head of the TCAU
 said the issue of the number of TA requests that were based on needs 
assessments had been discussed in the informal consultations organized by the ITTC.  A model 
developed by the Secretariat was ready for use by  Members to undertake their needs assessments.  
Some Members had used this model while others preferred defining their needs in different ways. 
109. With regard to the issue of the duration of TA  activities, he said the question had been raised 
in the report mainly with regard to regional activ ities.  Providers of TA were increasingly introducing 
new, more interactive, methods of imparting kn owledge such as exercises, group activities and mock 
negotiations.  These were perceived by beneficiaries as more useful than a typical lecture followed by 
questions and answers.  More interactive activities,  however, required more time.  It was in this 
context that the issue had been raised in the report.   He said the bulk of the cost of TA activities was 
most likely airline tickets, so the additional cost  of extending an activity by a day or so would 
probably not be that high. 
110. On the question of reducing the number of TA activities, he said that representatives from 
several beneficiary countries had told him that sta ff could often not be spared to attend too many 
activities.  He also noted that the level of participa tion in some activities was quite low.  He, therefore, 
believed that the impact on capacity building woul d be higher if  there were fewer activities. 
111. The Committee took note  of the Technical Cooperation A udit Report for 2005 and of all 
interventions.    
H. OTHER BUSINESS  
112. No matter was raised under "Other Business". 
113. The meeting was adjourned . WT/COMTD/M/57 
Page 20  
 
  ANNEX 
Presentation by the International Coffee Organization 
 
Coffee in the last 25 years 
Coffee is one of the world's most important traded  commodities, produced in more than 60 countries 
and providing a livelihood for some 25,000,000 co ffee farming families around the world.  Many of 
these countries are heavily dependent on coffee, whic h can account for over 75% of their total export 
earnings.  Among consumers, coffee is a universally popular drink, with over US$80 billion in retail 
sales a year.  There are two main types of traded  coffee, Coffea Arabica and Coffea canephora, the 
latter usually called Robusta. 
 
To facilitate an effective assessment of the current market situation a nd outlook for coffee, I shall start 
by briefly reviewing the development of the world coffee market in the last 25 years.  In this time the market has gone through two distinct phases,  from 1980 to 1989 and from 1990 to the present, 
punctuated by periods of volatility and, from 2000 to 2004, crisis conditions for producers.  As well as 
analyzing the market, I shall refer to activities pur sued by the ICO designed to promote equilibrium 
between production and consumption.  As such, this paper should be seen to be complementary to the 
Non-Paper on the decline in prices of primary commodities circulated to  the Committee by Kenya, 
Uganda and Tanzania in May 2003 (WT/COMTD/W/113).   Briefly, I should like to remind Members that the ICO is an intergovernmental organization 
established under the auspices of the United Nations in 1963 and designed to facilitate international 
cooperation on coffee in view of the great econom ic importance of the product.  The ICO has 
continued to operate under 6 successive Internati onal Coffee Agreements since then, of which the 
2001 Agreement is the latest.  It has 74 Member s of which 44 are exporting Member countries 
accounting for over 97% of world coffee production and 30 are importing Members responsible for 
around 80% of world coffee consumption. 
 
Quota system period 
During the first period from 1980 to 1989, the market  was stabilized through the ICO export quota 
system.  As might be expected, the medium term vol atility in this period was relatively low in spite of 
marked movements in 1986 (Graph 1).  The ICO com posite indicator price reached a high in March 
1986 of 204.23 US cents/lb and a low of 69.05 cents in August 1989, following the suspension of 
quotas on 4 July 1989, giving an average price for the period of 127.08 cents and 23 points of variation from the standard devia tion of the average (see Graph 1).  WT/COMTD/M/57 
 Page 21 
 
 
  Graph 1:  Volatility of the ICO compos ite indicator price – 1980/81 to 1989/90 
-30.00-20.00-10.000.0010.0020.0030.00
Oc t -
80Mar -
81Aug-
81Jan-
82Jun-
82Nov-
82Apr-
83Sep-
83Fe b-
84Jul-
84Dec-
84May-
85Oc t-
85Mar -
86Aug-
86Jan-
87Jun-
87Nov-
87Apr-
88Se p-
88Fe b-
89Jul-
89
month/ year
 
There was one serious frost in Brazil in 1981, leading to a drop in world production of nearly 16%, 
followed by a price rise in annual average terms of 8% the following year (see Table 1).  As is 
normally the case with replantings, global production rose after a 5 – 6 year lag by 27% in 1987 relative to 1981 with a corresponding drop in prices rela tive to that year of 14%.  Again, as could be 
expected, average prices for the period were subs tantially higher than during the period when the 
system no longer operated (Table 2). 
 
Table 1:  Volume of production and exports, value of exports and ICO 
composite indicator price – 1980 to 1989 
E xports (calendar year)
Production 
(crop year)% v a r ia t io n  
on production 
1/ Volume ValueICO 
composite 
indicator 
price% v a r i a t io n  
on ICO 
composite 
price 1/
Y ear (000 b ags) (000 b ags) ( million U S $) (U S cents/lb )
1980 80 726 60 248 11 778 150.671981 100 496 60 517 8 087 115.42
1982 84 685 -15.73 64 546 9 014 125.00 8.30
1983 89 263 66 258 9 243 127.981984 83 991 68 623 10 680 141.191985 90 170 71 359 10 831 133.10
1986 81 194 64 511 14 309 170.93
1987 107 914 27.43 71 951 9 589 107.81 -13.751988 89 461 65 816 9 437 115.96
1989 94 120 75 912 8 683 91.67
1/  Refers to 1981 
 
 WT/COMTD/M/57 
Page 22  
 
  Table 2:  Coffee prices in the last 25 years 
US cents/lb 
 
Period averageICO composite 
indicatorColombian 
MildsOther MildsBrazilian 
NaturalsRobustas
1980-89 127.97 152.02 139.94 153.43 116.00
1990-99 95.68 123.51 116.08 106.54 75.28
2000-04 54.33 77.27 71.11 59.02 34.38
2005 89.36 115.73 114.86 102.29 50.55
on 5 May 2006 93.13 114.78 112.89 102.35 61.47 
 
The regulatory mechanisms for coffe e involved the setting by the ICO of a price range agreed by both 
producing and consuming governments, which was maintained through a system of export quotas 
with documentary controls both at the exporting an d importing ports.  Although there was some fraud, 
this was never sufficient to impede the success of the system in maintaining the agreed price ranges.   
 There is no doubt that in terms of earnings the syst em was beneficial to producers.  Table 3 shows 
export earnings in the 1980s (with quotas) compared  with the subsequent free-market years.  
Nevertheless, it is im portant to recognize that current conditi ons are not conducive to reinstating such 
a mechanism.  Politically, developed countries are not  in favour of measures to regulate trade.  
Technically, without the cooperation of importing countries it is unlikely that an effective quota 
system can be set up. 
 
Table 3:  Average annual coffee export earnings of coffee producing countries 
(1980-1989, 1990-1999 and 2000-2005) 
Million US$ 
 
Period average TotalColombian 
MildsOther MildsBrazilian 
NaturalsRobustas
1980-89* 10 165 2 281 3 020 2 599 2 265
1990-99 8 995 2 018 2 893 1 990 2 0932000-04 6 234 1 133 2 118 1 630 1 353
2005** 8 628 1 751 2 406 2 976 1 495
*    It is assumed that there was no dual production in any country in the period
** Partial - totals may include estimates for some countries 
 
Free market period 
The period of uncontrolled markets from 1990 to the present shows greater medium-term price 
volatility with highs of 202.39 cents in Septembe r 1994 and a low of 41.17 in September 2001, with 
31 points of variation from the standard deviation of  the average (Graph 2).  The average for the ICO 
composite indicator price during this period was 82. 37.  Again, during this period there was a severe  WT/COMTD/M/57 
 Page 23 
 
 
  frost in Brazil in 1994.  Although this led to a drop in world production of some 10% in 1995, 
compared with the 16% in 1982, with prices rising some 118% between 1993 and 1994, it is 
interesting to note that, with replanting, produc tion by 1999 had risen by 35% relative to 1994 and 
prices had dropped by 38% (Table 4).  This i ndicates that the global increase in production and 
subsequent price fall caused by c limatic shocks under free market c onditions was considerably greater 
than under a controlled market.  
 Moreover, contrary to what has often been asser ted, the short-term price incentive caused by 
shortages under free market conditions appears to have caused greater over-production than under 
quotas, which had a built-in disincentive to produce over and above quota entitlements.  In addition, 
the mechanisms used in the regulatory period favo ured stock holdings in producing rather than 
consuming countries, which to an extent also strengthened the producers' position. 
 
Graph 2:  Volatility of the ICO compos ite indicator price – 1990/91 to 2004/05 
 
-20.00-10.000.0010.0020.0030.0040.0050.0060.00
Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97 Oct-98 Oct-99 Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05
month/ year
 
 WT/COMTD/M/57 
Page 24  
 
  Table 4:  Volume of production and exports, value of exports and 
ICO composite indicator price – 1990 to 2005 
 
Production 
(crop year 
commencing)% v a r ia t io n  
on 
production  
1/Volume of 
total exports 
(calendar 
year)Value of total 
exports 
(calendar 
year)ICO 
composite 
indicator 
price% v a r ia t io n  
on ICO 
composite 
price 1 /
Calend ar year (000 b ags) (000 bags) (million U S $)
1990 93 321 80 562 6 866 71.53
1991 101 552 75 777 6 501 66.80
1992 88 913 78 163 5 326 53.35
1993 90 366 74 972 5 689 61.63
1994 95 154 70 487 10 125 134.45 118.16
1995 85 250 -10.41 67 573 11 614 138.421996 101 865 77 549 9 999 102.07
1997 95 872 80 264 12 880 133.91
1998 106 163 80 095 11 444 108.95
1999 115 109 35.03 85 871 9 502 85.75 -38.05
2000 114 882 89 243 8 177 64.25
2001 106 646 90 516 5 389 45.60
2002 122 073 88 457 5 127 47.74
2003 103 764 85 912 5 597 51.91
2004 111 817 31.16 90 703 6 881 62.15 -55.10
2005 106 489 86 311 8 628 89.36
1/  Refers to 1995 for 1999 and 2004, ot herwise it refers to the previous year 
 Looking at prices to coffee farmers, ICO data (s ee Table 5) shows that in the period 1980/81 to 
1988/89, prices paid to growers averaged 69.24 US cents/lb, with annual average highs of 98.36 cents 
in 1985, and lows of 61.36 cents in 1983/84.  In the period from 1990 to 2005, the average had 
dropped to 63.97 cents/lb with highs of 113.32 cents in 1994/95 and lows of 31.28 cents in 2001/02.  I 
want to emphasize that these are annual averages of  all available country prices weighted by volume 
of exports; the figures will of course differ for specific countries (Graph 3). 
 
Table 5:  Prices paid to growers (weigh ted by exports levels) – 1980/81 to 2004/05 
 
1980/81 67.65 1993/94 76.83
1981/82 65.75 1994/95 113.32
1982/83 62.32 1995/96 85.90
1983/84 61.36 1996/97 102.26
1984/85 67.36 1997/98 95.08
1985/86 98.36 1998/99 70.92
1986/87 74.28 1999/00 58.55
1987/88 63.55 2000/01 37.64
1988/89 62.53 2001/02 31.28
1989/90 50.87 2002/03 37.70
1990/91 49.47 2003/04 44.56
1991/92 43.19 2004/05 69.70
1992/93 43.18 
 
  WT/COMTD/M/57 
 Page 25 
 
 
  Graph 3:  Prices paid to growers (weigh ted by exports levels) – 1980/81 to 2004/05 
 
20.0030.0040.0050.0060.0070.0080.0090.001 00.001 1 0.001 20.00
1 980/81 1 983/84 1 986/87 1 989/90 1 992/93 1 995/96 1 998/99 2001 /02 2004/05
crop year
 
 
The coffee crisis 
The coffee price crisis began in 2000 and continue d until the end of 2004.  During these five years a 
large number of coffee producers were unable to  cover their production costs and many only 
continued to produce coffee because of the lack of alternatives or because they still cultivated 
subsistence food crops.  The effects on farmers have been clearly documented by the ICO (see 
document ICC-89-5 Rev. 1) and included an exacerbation of poverty in coffee communities 
worldwide, with additional social  effects such as migration to urban areas, illegal emigration, and 
cultivation of illicit drugs.  With respect to the ba lance of payments of coffee producing countries, it 
must be noted that whereas in the late 1980s a nd part of the 1990s, earnings by coffee producing 
countries in terms of FOB exports were around US$10 – 12 billion p.a., during the crisis years they 
slumped to just over US$5 billion, implying losses in earnings in excess of US$30 billion.  On the other hand, it is worth noting that the coffee ma rket in industrialized countries continued to be 
relatively healthy with steadily rising reta il sales, particularly in terms of value. 
 
This striking discrepancy was publicized by the Executive Director of the ICO, for example in 
submissions to the G8 and to UN fora and has been  recognized by many orga nizations concerned with 
development in low-income countries.  The conse quences are now being seen in the form of a number 
of initiatives designed to promote greater sustainab ility in coffee.  Obviously, in accordance with the 
UN Rio Principles, this must include economic sustai nability and it remains to be seen how effective 
these initiatives will be in this respect since sever al of them are unwilling or unable to address the 
issue of covering production costs through adequate prices.  Moreover, for successful implementation 
of such schemes, representatives of producers shou ld be involved in the decision-making process to 
ensure their concerns are met.
3  Finally, care is needed that su ch schemes are equally accessible to 
small as to large producers. 
 
                                                      
3 Ponte, Stefano – Standards and Sustainability in the Coffee Sector; a global value chain approach.  
Winnipeg, IISD, 2004 . WT/COMTD/M/57 
Page 26  
 
  Other ICO activities 
Quality  
The ICO has strongly promoted quality through setti ng basic quality target standards for coffee in 
terms of defects count and moisture content (see I CC Resolutions numbers 407 and 420).  This is seen 
by the ICO as a means of encouraging consumpti on by setting a basic standard and has the added 
benefits of reducing the risk of  contamination by mycotoxins.  
 
Statistical data 
 
The ICO from its inception has disseminated statistical  data on trade and other variables relevant to 
coffee.  These are mainly disseminated electronica lly.  In addition the Executive Director issues a 
Market Situation Letter every month.  Great care is given to using the most reliable statistics including 
official data transmitted at monthly intervals by Members.  
Technical studies and seminars 
 Regular analysis of the market situation is comp lemented by studies on areas such as volatility and 
tariffs.  On technical issues the ICO has held regul ar seminars such as those on electronic trading and 
genetically modified coffee.  
Coffee development projects 
 The ICO has an important projects programme, working closely with the Common Fund for 
Commodities, but also involving other sources of finance.  During the period since 1995 the ICO has 
secured approval of 21 projects, mainly dealing in areas such as quality, improvement, market structure improvement, diversification, combating pests and diseases and modernizing infrastructures.  
This programme is worth some US$72 million. 
 
Promotion and information 
 
The ICO also looks at areas such as promotion of consumption, disseminating information contained 
in published studies on all aspects of coffee and communication and action on phytosanitary issues. 
 
The present situation 
As a result largely of the stresses on the produc tive sector worldwide caused by the crisis, the 
imbalance between supply and demand from 2000 - 2004 which led to the price crash has now been 
reversed (Graph 4).  Our estimates for 2005/06 ar e for world production of around 106 million bags 
compared with world consumption of 115 million;   for 2006/07 we see a balance of around 120 
million bags.  There are clear signs of a drawdown in stocks in producing countries, estimated at 
23.35 million bags on 1 October 2005 compared w ith 28.11 million on 1 October 2004.  This has led 
to a marked upward move in Arabica prices.  Th e ICO Other Mild Arabicas indicator more than 
doubled from the beginning of 2004 to mid-March 2005, with the main increase  starting in December 
2004 and is now (9 May 2 006) 113.79.  Robusta prices, on the other hand, continued depressed until 
the beginning of 2005, where the price was virtually identical to that on the first trading day of 2004 
(37.59 cents).  There has been further upward moveme nt here too, with the Robusta indicator reaching 
over 61.93 cents on 9 May, a rise of around 65%.  There is a significant difference between the 
supply/demand dynamics of the two main types of coffee.   
Again, it is worth noting that the price recovery still does not reach levels attained during the 1980s, 
as shown in Table 2.  WT/COMTD/M/57 
 Page 27 
 
 
  Graph 4:  Supply and demand 1990 to 2005 
 
80859095100105110115120125
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005*
year commencing
World supply World demand
 
 Lessons from the crisis 
It is clear from the figures I have given you that clim atic events and other supply shocks remain a real 
threat to the development of a balanced market  and sustainable conditions for the world coffee 
economy.  In spite of the evidence of higher producer returns under a policy of international supply management, I must re-emphasize that the political, economic and technical conditions of today rule 
this out as a realistic option.  The challenge then is to improve the situation without overt market 
intervention.  The whole question of learning lessons  from the crisis and seeking sustainable solutions 
were addressed by the very important Second ICO World Coffee Conference in Salvador, Brazil last 
September.  I would urge all interested in coffee to study the papers presented, which may be accessed 
on the ICO Website, www.ico.org
. 
 
From the experience of recent years, I would like to draw your attention to six areas in which action is 
possible both with respect to national po licies and international cooperation. 
 
Information and guidance 
 
The first one is information and government and institutional attitud es to production policy.  It is 
essential for policies in coffee producing countries to be  established to create conditions for farmers to 
understand the perils of indiscriminate planting in pe riods of higher prices, and to discourage planting 
in sub-optimal areas wherever possible.  With respect to information,  the ICO has emphasized 
communication via its website and provides important research facilities through its Library.  It has 
also cooperated with the International Trade Centre UNCTAD/WTO to produce a comprehensive 
guide for coffee exporters, now complemented by  a Web-based Question and Answer service.  
 
Diversification 
 
A second area is to encourage appropriate diversific ation, both in terms of national dependence on 
coffee and a reduced number of other commodities, and also at the farm level to create a more 
diversified productive portfolio, to the extent possibl e and using all available instruments.  In this WT/COMTD/M/57 
Page 28  
 
  context, the ICO is giving considerable priority to diversification projects (in the last year two projects 
have been launched in Mexico and Ecuador) whic h do not eliminate coffee production but encourage 
alternatives, and vertical diversification into higher va lue types of coffee.  I must add that this process 
would be greatly assisted by the removal of trade barriers to agricultural product imports in developed countries, and the elimination of tariffs.  The IC O has recently sponsored a project, funded by the 
European Community and the Common Fund for Co mmodities, firstly to analyze coffee production 
costs and profitability in representative producing countries, and then following this up with an 
analysis of the options for diversification.  The r esults will be presented at a workshop at the ICO on 
24 May 2006.    Adding value  
Thirdly, I also believe that adding value to co ffee through increasing quality and, where conditions are 
appropriate, producing coffees for niche markets su ch as the organic market makes sense to all 
stakeholders in the coffee market.  The ICO's first project funded by the Common Fund for 
Commodities in 1995 was the gourmet coffee project,  which gave considerable impetus in a number 
of countries to the production and marketing of high qua lity, premium-priced coffee.  In Brazil, it led 
to a new international perception of the high qua lity of pulped natural Arabica (descascado) coffees 
and pioneered internet auctions for marketing.  Furthermore, ICO Resolutions 407 and 420 stimulate 
producers to attain basic quality standards which can  also be used in marketing programmes.  The 
bottom line is that consumers will drink more coff ee if the quality is good, leading to gains in all 
sectors of the market.  This area is closely linke d to promoting domestic consumption in producing 
countries since this gives invaluable experience be fore embarking on exports of processed coffee.  
Finally, I should mention that new transport tec hnologies are making it more technically feasible to 
export roast coffee but tariff escalation on processed coffee in many markets remains a problem (see 
ICO document ICC 94-6).  
 
Competing on quality rather than price 
 
Fourthly, it would be of great benefit to farmers if large roasters switched from a policy of competing 
on price, which is becoming (at least in mature markets) less and less effective as an incentive in terms of sales volumes, to competition on quality, where there is empirical evidence that improved 
growth in sales is more likely.  This is clearly de monstrated by the success of quality-oriented roasters 
such as Illycaffè but must be balanced by considering price pressures on mainstream roasters from supermarkets and pressure to maximize short-term margins driven by the effect on share prices of quarterly results.  At present, regular coffee trader s in producing countries tend not to offer premiums 
for quality.  The lessons of the ICO gourmet coffee pr oject were that growers with a superior product 
must contact traders acting for roasters anxious to secure premium quality and willing to pay an 
appropriate premium.  Hence competition on quality would effectively guarantee premiums to farmers 
who worked to secure a good qualit y crop.  Some companies are begi nning to do this with success but 
in many others a mind-set persists in which comp etition and price remain ke y linked considerations.  
In this context, a study in 2001 concluded that “i ncreased corporate financialisation of giant roasting 
firms entails that their more pressing goal is not expansion of activity per se  any more.  Their goal is 
rather the maximisation of profit in the short term to increase the value of shares".
4  And with this 
perception it is crucial to acknowledge that the prim e, and indeed legitimate, duty of large companies 
is to their shareholders, not to their suppliers.  While this remains the case farmers must accept that 
they will continue to face an environment in wh ich powerful companies endeavour to use all their 
organizational resources to secure the keenest prices .  Any countervailing influence on this dynamic 
must, therefore, come from governments or perhap s through schemes agreed by companies in pre-
competitive frameworks. 
                                                      
4 Ponte, Stefano – The ‘Latte Revolution’?  Winners and Losers in the Global Coffee Marketing Chain.  
Copenhagen, Centre for Development Research, 2001.  CDR Working Paper  01.3.   WT/COMTD/M/57 
 Page 29 
 
 
  Capacity building 
 
The development of farmers' or ganizations such as associati ons and cooperatives can help in 
improving services, bargaining power and access to credit and risk management instruments.  It can also facilitate the work of extension servic es, which also need strengthening in many cases, 
particularly since the drive for internal market lib eralization in the 1990s often led to the weakening 
or even disappearance of such structures.  
Market development 
 
Finally, I believe that it is crucial, particularly  in view of the promotional efforts by competitive 
beverages such as soft drinks, to maintain effec tive programmes for market development.  In most 
industrial countries, this is already being done eff ectively by the private sector.  However, in some 
countries, such as emerging markets like China, or in the producing countries themselves, the private sector lacks the strength or coordination to make a large impact.  Here, the ICO has already shown 
that it can act as a catalyst for umbrella educati on and image building campaigns in cooperation with 
the private sector, which can have a positive effect on consumption.  I am delighted in this context to 
note the very useful Guide to promote coffee cons umption, which makes comprehensive use of the 
experiences of Brazil, commissioned by the ICO and disseminated at our last Council Session.  The Guide can be downloaded from the ICO website (www.i co.org) and is also available as a CD.  This 
gives in English, French and Spanish comprehens ive methodologies and techniques for the promotion 
of coffee consumption, with emphasis on produc ing countries.  Not only does developing local 
consumption provide a valuable alternative mark et outlet but it increases producer awareness of 
consumer demands, promotes small and medium en terprise and provides vital experience for the 
eventual export of value-added pr oducts.  Following this up, ther e are now some positive signs that 
some international donors are beginning to recognize the importance of support for market 
development.   
 While still on market development, and this affects all areas, I must add that I am also very pleased 
that the major coffee roasters in Europe are coopera ting with us in the Positively Coffee Programme 
to disseminate a new generation of objective and positive research findings which indicate real 
beneficial effects on health of coffee consumption.   
 
Conclusion 
A sustainable coffee economy requires attention to the three UN criteria of economic, environmental 
and social sustainability.  In lookin g at initiatives to achieve this end, it is crucial to recall the causes 
and effects of the period of crisis from which we ar e just emerging.  Not only must this be done at 
national level, but also in the context of interna tional initiatives, which is why i am pleased that the 
United States has now rejoined the ICO, restoring the representative nature of the Organization as a 
forum to develop appropriate polici es to achieve a healthy and prosperous market for all players in the 
world of coffee.  There is much to be gained  in many areas through cooperation rather than 
confrontation, but to achieve this all stakeholde rs must be allowed an equal voice to defend and 
explain their legitimate concerns.   
 
__________