RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/COMTD/M/59 
20 November 2006 
 
 (06-5579) 
Committee on Trade and Development 
Fifty-Ninth Session  
 
  
NOTE ON THE MEETING OF 4 OCTOBER 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. NOTIFICATIONS UNDER THE ENABLING CLAUSE .......................................................................4  
- 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) ..........................4  
- 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).............................4  
- 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).............................4  
- COMMUNICATION FROM BRAZIL ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD//57/A DD.1) .............4  
- COMMUNICATION FROM CHINA ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.2) ..............4  
- COMMUNICATION FROM INDIA ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT//COMTD/57/A DD.3) .............4  WT/COMTD/M/59 
Page 2  
 
  -
 COMMUNICATION FROM PAKISTAN ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.4) ..............4  
- COMMUNICATION FROM THE EUROPEAN COMMUNITIES – RESPONSES TO QUESTIONS 
SUBMITTED BY BRAZIL , CHINA , INDIA AND PAKISTAN ON THE REVISED 
GENERALIZED SYSTEM OF PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES 
(WT/COMTD/57/A DD.5) ...........................................................................................................4  
D. DECLINING TERMS OF TRADE FOR PRIMARY COMMODITIES , AND ITS IMPLICATION TO 
TRADE AND DEVELOPMENT OF PRIMARY COMMODITY EXPORTING COUNTRIES ......................7  
E. PARAGRAPH 51 OF THE DOHA DECLARATION ON IDENTIFYING AND DEBATING 
DEVELOPMENTAL ASPECTS OF THE NEGOTIATIONS , IN ORDER TO HELP ACHIEVE THE 
OBJECTIVE OF HAVING SUSTAINABLE DEVELOPMENT APPROPRIATELY REFLECTED .............17  
F. REVIEW OF STEPS TAKEN TO PROVIDE DUTY-FREE AND QUOTA -FREE MARKET 
ACCESS TO LEAST -DEVELOPED COUNTRIES ............................................................................17  
G. ELECTRONIC COMMERCE ..........................................................................................................18  
H. ELECTION OF THE CHAIRPERSON OF THE SUB-COMMITTEE ON LEAST -DEVELOPED 
COUNTRIES ............................................................................................................................... .19 
I. OTHER BUSINESS ......................................................................................................................19  
 
 A. A
DOPTION OF THE AGENDA  
1. The Chairman  said that the draft agenda for the 59th Session of the Committee on Trade and 
Development (CTD) was contained in document WTO/AIR/2885/Rev.1 issued on 
29 September 2006.  He explained that a separate meeting of the CTD to discuss technical cooperation issues – including the Strategic Revi ew of WTO-Provided Tr ade-Related Technical 
Assistance and the Technical Assistance and Training Plan for 2007 – was scheduled for 
3 November 2006.   
2. The Committee adopted
 the agenda. 
B. OBSERVERS  
(i) Request for attendance of ad hoc observers 
3. 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. 
4. It was so agreed .  WT/COMTD/M/59 
 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 
5. 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.   
6. It was so agreed . 
7. The Chairman  said that he wanted to bring to the attention of the Committee a request that 
had been received from the Interna tional Coffee Organization (ICO).  In particular, the ICO had asked 
whether it could attend the CTD's future discussions  under the commodities agenda item.  He recalled 
that the ICO had made a very interesting presentation at the 57th Session under the agenda item 
relating to commodities, and said that the commoditi es discussion in the CTD was clearly of interest 
to the ICO.  He inquired whether it was acceptabl e to Members to consider inviting the ICO on a 
meeting-by-meeting basis to attend the commodities discussion at future meetings of the CTD.  
8. The representative of the United States  said that in principle she had no objection.  However, 
she wondered if the Committee should think furt her on the issue, in particular on possible 
implications for other institutions that might have similar interests.  She also pointed out that the 
commodities discussion at every CTD meeting might not  necessarily be of interest to the ICO.    
9. The representative of Egypt  said that the positions of Members on the issue of requests for 
observer status and ad hoc observer status were  well known and on the record.  However, his 
understanding was that the Chairman was aski ng whether the ICO could attend the commodities 
discussion as an invitee.  He believed that this was something the CTD could consider on a meeting-by-meeting basis.  
10. The Chairman
 said that he had noted the comments made by the US representative, and was 
willing to consult informally if necessary on the issues she had raised.  However, as a general 
principle, he inquired whether the CTD was willing to consider inviting the ICO to the commodities 
discussion on a meeting-by-meeting basis. 
11. It was so agreed . WT/COMTD/M/59 
Page 4  
 
  C. N
OTIFICATIONS 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) 
12. The Chairman  said that communications from the EC, the US and Japan raising questions on 
the notifications made by ASEAN and China in 2005 had been circulated as documents WT/COMTD/51/Add.2, Add.3 and Add.4 respectivel y.  He recalled that he had informed the 
Committee at its last meeting that the responses from ASEAN and China had been submitted 
bilaterally to each of the three Members that had ra ised questions.  A number of delegations had then 
indicated that they wished to see all the responses, and were of the view that the responses should be 
circulated as a CTD document.  It had been ag reed that he would consult with the concerned 
delegations, and would report back to the CTD at the present meeting.  However, while he had held 
two informal consultations since the last formal CT D meeting, he informed the Committee that he had 
nothing concrete to report as yet.  He, nevert heless, believed that progress was being made, and 
suggested that he continue to consult with the c oncerned delegations with a view to reporting to the 
CTD at its last meeting of 2006 at the end of November.  
13. It was so agreed
.  
- 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) 
- C OMMUNICATION FROM INDIA ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT//COMTD/57/A DD.3) 
- C OMMUNICATION FROM PAKISTAN ON THE REVISED GENERALIZED SYSTEM OF 
PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES (WT/COMTD/57/A DD.4) 
- C OMMUNICATION FROM THE EUROPEAN COMMUNITIES – RESPONSES TO QUESTIONS 
SUBMITTED BY BRAZIL , CHINA , INDIA AND PAKISTAN ON THE REVISED 
GENERALIZED SYSTEM OF PREFERENCES SCHEME OF THE EUROPEAN COMMUNITIES 
(WT/COMTD/57/A DD.5)  WT/COMTD/M/59 
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  14. The Chairman  recalled that the EC had notified its revised GSP scheme at the 57th Session of 
the CTD on 11 May 2006.  Communications raising questions on the EC's revised GSP scheme had been received from Brazil, China, India and Pakistan and were circulated in documents WT/COMTD/57/Add.1 to Add.4 respectively.  The EC's  responses to the questions were circulated in 
document WT/COMTD/57/Add.5.  He said that some de legations had indicated at the last meeting of 
the CTD that they were still studying the EC's resp onses, and it was therefore agreed that the item 
would remain on the agenda for the present meeting.   He inquired whether any Member wished to 
take the floor. 
15. The representative of Brazil
 said that the questions that had been raised by his delegation on 
the EC's revised GSP scheme were to a large extent motivated by concerns over a lack of 
transparency.  He said that Brazil's first question re lated to the possibility of the EC providing figures 
in value and quantity of imports covered by the EC's GSP scheme.  The second question concerned 
the issue of how the EC expected developing count ries to verify whether they met the statistical 
requirements set by EC Council Regulation No . 980/2005.  The third question addressed the 
graduation of a number of products exported by Br azil.  He explained that the written responses by 
the EC to the first two questions indicated that da ta could be provided on a bilateral basis, while the 
EC in its response to the third question had provid ed Brazil's share of EC GSP imports for a number 
of products.  He went on to say that his delegati on had attempted to obtain from the EC in Brussels 
further information relating to the questions that had been raised, for example by requesting data on 
the EC's imports from Brazil under the GSP.  Unfort unately, the requests made by his delegation had 
not been acknowledged or answered by the EC.  He said that this was a major source of concern for 
his delegation, and therefore requested that the item concerning the EC's revised GSP scheme remain 
on the CTD's agenda.       
16. The representative of India  said that, like Brazil, his delegation's concerns with the EC's 
revised GSP scheme, and in particular the special  incentive arrangement for sustainable development 
and good governance ("GSP-plus"), emanated from the lack of transparency in its formulation and 
implementation.  While India thanked the EC for the responses, he said that his delegation felt that the 
responses from the EC were inadequate and did not tr eat the main points raised in the questions by 
India.  He said that he wished to elaborate a little  on why his delegation felt that the EC’s responses 
were inadequate.  The EC's response to the first question from India did not spell out the 
"development, financial or trade needs" of devel oping countries that the EC was seeking to address in 
the GSP-plus, but only enumerated the conditions to  be fulfilled by developing countries to become 
eligible for GSP-plus.  Similarly, the EC's res ponse to India's second question did not clarify the 
unique "development, financial or trade needs" of  those countries qualifying for the special incentive 
arrangement.  The answer again only spelled out the criteria to be met by a country seeking GSP-plus 
benefits, and not the special or unique needs of those countries which the EC was seeking to address 
through the GSP plus scheme.  Moving to India's fourth question, he said that the EC had not clarified 
how the criteria chosen helped in identifying th e "development, financial or trade needs" of the 
countries selected.  He explained that his delega tion also wanted to know how the international 
conventions referred to by the EC in their res ponse – international conven tions on human and labour 
rights, environmental protection and good governan ce – were linked to the development needs of 
developing countries.  
17. He said that his delegation had a follow-up query to the EC’s response to India's fifth 
question.  In particular, his delegation wanted to  know whether any information was available in the 
public domain regarding the selection process for GSP- plus, for instance the details of the countries 
who applied for it.  His delegation also wanted the EC to elaborate on its response to India's seventh 
question regarding the criteria used as the basis fo r determining the vulnerability of a country, in 
particular the requirement that the percentage  of GSP-covered imports  from a country under 
consideration be less than 1 per cent of total EC imports under GSP.  He said that his delegation 
looked forward to the EC's responses, and that these might be of use in discussions in other WTO WT/COMTD/M/59 
Page 6  
 
  Committees.  He added that his delegation supporte d Brazil in requesting that the item concerning the 
EC's revised GSP scheme remain on the CTD's agenda, since his delegation was yet to receive satisfactory responses to the questions it had raised. 
18. The representative of Pakistan
 said that her delegation had ma de some preliminary comments 
on the EC's responses at the last CTD meeting, and that  she wished to reiterate some of those points.  
She drew the attention of the Committee to the third question that had been raised by Pakistan, which 
concerned the GSP-plus arrangement.  She said th at Article 9, paragraph 3(b) of EC Council 
Regulation No. 980/2005 defined a " vulnerable country" as one whose GSP-covered imports to the  
EC represented less than 1 per cent in value of the EC's total GSP-covered imports.  Pakistan's 
concern was that many countries whose income was mu ch higher than that of Pakistan stood eligible 
for GSP-plus by virtue of meeting the less than 1 per cent criterion, while Pakistan, a low-income 
country, was effectively screened out on account of  having 1.1 per cent in value of GSP-covered 
imports to the EC.  She said that her delegation had asked whether the criteria were objective, but that 
the answer provided by the EC did not address the concern of her delegation that a country like 
Pakistan was being marginalized and denied prefer ential access in spite of a much lower level of 
income than other countries.  She said that the cr iteria did not match the declared objectives of the 
scheme, and that the less than 1 per cent criterion was prejudicial to low-income countries such as 
Pakistan. 
19. She continued by saying that another question submitted by Pakistan touched on the issue of 
whether those countries that were unable to ratify 14 of the specified 16 conventions in Annex III, 
Part A of EC Council Regulation No. 980/2005 and put them into effective implementation by 
31 October 2005 were rendered ineligible for the en tire duration of the scheme. In that context, 
Pakistan had commented that this was tantamount to  a closed list, and that, by giving unrealistic 
deadlines, went against the EC's desire to assist countries in achieving good governance and 
sustainable development.  She said that the replies given by the EC on this point were unsatisfactory, 
and also indicated that the EC had not answered Pakistan's question on why a seventh convention on 
the protection of the rights of migrant workers and members of their families had not been included in 
Annex III, Part A for ratification and effective impl ementation.  She added that the replies offered by 
the EC were just a repetition of general inform ation that was already available, which led her 
delegation to conclude that the scheme had been d esigned in a manner to include some Members and 
exclude others by using non-objective criteria, and by giving unrealistic deadlines for the ratification 
of only some UN conventions. 
20. The representative of the European Communities  said that he was not in a position at the 
present meeting to respond to the points raised by th e previous speakers.  He said that his delegation 
had sought to show maximum transparency on the content and rationale of the EC's revised GSP 
scheme.  Written responses to the questions that had been raised on the scheme had also been 
distributed to all Members.  He said that his de legation was willing to enter into further discussion on 
the scheme and to respond to any follow-up questions that Members might have, either as part of the 
discussion in the CTD or on a bilateral basis.  In th is regard, he encouraged Members to approach his 
delegation for further discussion and to communicate their concerns.     
21. The Chairman  said he had noted that the EC was willing to provide further information on its 
revised GSP scheme, and indicated th at he was also available should delegations wish him to arrange 
informal consultations on the issue.  He proposed that the Committee take note of all interventions, 
and that the item concerning the EC's revised GSP scheme remain on the CTD's agenda.     
22. It was so agreed .    WT/COMTD/M/59 
 Page 7 
 
 
  D. DECLINING TERMS OF TRADE FOR PRIMARY COMMODITIES , AND ITS IMPLICATION TO TRADE 
AND DEVELOPMENT OF PRIMARY COMMODITY EXPORTING COUNTRIES  
23. The Chairman  said that, based on the discussion that took place under this agenda item at the 
last meeting of the CTD, an invitation to make a presentation to the Committee had been extended to 
the International Cocoa Organization (ICCO).  He  was pleased to inform the Committee that the 
ICCO had accepted the invitation and that a represen tative of the organization was in attendance at the 
meeting.  He introduced Dr. Jan Vinger hoets, Executive Director of the ICCO.  
24. The representative of the ICCO  said that while some of the features of cocoa were similar to 
those of other commodities, the cocoa economy also had some unique characteristics.  He identified 
five main characteristics of the world cocoa economy, which were:  a high volatility of cocoa bean 
prices in the international markets, implying wide fl uctuations in the prices received by farmers;  a 
declining trend in the real prices for cocoa beans over time (the prices which farmers received for 
cocoa had declined substantially over the past 25 years);  a high geographic concentration in the 
production and export of cocoa, with West Africa being the main region of origin;  the fact that the bulk of cocoa (95 per cent) was produced by smallholde r cocoa farmers;  and the fact that while cocoa 
beans were important as an ingredient in chocolate,  they were relatively unimportant in the value of 
chocolate. 
25. He said that prices of cocoa beans had fluctuated sharply and increasingly over time.  The 
daily volatility in prices, as measured by the standa rd deviation, had recently reached a level of 
2 per cent.  To put the price volatility for cocoa in pe rspective, he compared the fluctuations in cocoa 
prices to the  fluctuations in coffee prices.  He ob served that the price volatility for coffee used to be 
higher than for cocoa ten years ago, but more recent figures indicated that prices were equally volatile 
for both commodities.  With regard to the declining trend in prices fo r cocoa beans, he said that this 
could be illustrated by the trend in real prices be tween 1980 and 2005.  He observed that during the 
first half of that period, prices declined from over 3,000 Special Drawing Rights (SDRs) per tonne to 1,000 SDRs, while during the second half of the period  the trend in the movement of prices appeared 
to have been more sideways than downward.  In the period 1998-1999, prices declined to an all-time 
low of 750 SDRs per tonne.  He explained that the ICCO econometric model of the world cocoa economy indicated that in a "normal" year, prices for cocoa beans declined in real terms.  The model 
predicted that prices would decline by about 2.5 per cent in the first year and at a slower rate in 
subsequent years, down to less than 1 per cent in the ninth year.  Prices in real terms were projected to 
decline by over 15 per cent during a period of ten years, and would only increase during a year in 
which the stocks of cocoa beans in  the world declined.  The ICCO m odel, therefore, indicated that 
cocoa bean prices would only increase in years wh en production was much lower than consumption, 
that is, when the shock of a substantial defic it in supply caused prices to increase.  Paradoxically, 
therefore, a bad year in production – a year  with bad weather – was good for the farmers. 
26. On the concentration of cocoa production, he noted that world production of cocoa beans had 
reached a level of 3.5 million tonnes, and was grow ing at a trend rate of between 2 and 2.5 per cent 
per annum.  Production of cocoa was highly concentrat ed in West Africa.  The two largest producers 
– Côte d’Ivoire and Ghana – accounted for about two- thirds of world exports from origin countries.  
In addition, the share of the five largest expor ting countries – Côte d’Ivoire, Ghana, Indonesia, 
Nigeria and Cameroon – accounted for more than 90 per cent of world exports.  He continued by 
saying that a unique characteristic of the cocoa sect or was that cocoa was almost exclusively produced 
by smallholder farmers.  He explained that a typical cocoa farmer in West Africa owned between 
2 and 3 hectares of land, and that cocoa was the only or main source of cash income.  For the rest, the farming families grow food for their own consumpti on.  He added that cocoa was the only agricultural 
commodity he knew of where the position of smal lholder farmers was so dominant.  The ICCO 
estimated that there were more than 3 million co coa farmers in Africa, Asia and Latin America. WT/COMTD/M/59 
Page 8  
 
  27. The ICCO representative said that cocoa was,  on the one hand, of overriding importance for 
the production of chocolate.  Chocolate was defined by cocoa, and it was not possible to produce chocolate without cocoa beans.  However, he not ed that the value of co coa beans was relatively 
unimportant in the value of chocolate and therefore in the price the consumer paid for chocolate. In 
particular, the cost of cocoa b eans accounted for less than 10 per cent of the price paid by the 
consumer for most chocolate products.  The remain ing 90 per cent consisted of trade, processing, 
profit and manufacturing margins, costs of other ingr edients, transport and  advertising costs, and 
value-added taxes in the consuming countries. 
28. He explained that the five characteristics of the world cocoa economy easily defined the 
positions of the different stakeholders, which he di stinguished broadly as the consumers, the traders 
and manufacturers, and the farmers.  He noted that  chocolate consumers were generally satisfied, as 
they got what they wanted and what they were w illing to pay for – albeit sometimes with a time lag – 
for example dark chocolate of high quality, organic chocolate or "origin" chocolate.  There was a strong tendency towards diversification in the ch ocolate market, resulting in more value per unit 
weight while also making the chocolate market more alive and interesting.  He pointed out that the 
traders and manufacturers – at least the efficient ones – were also relatively satisfied, since over the 
past one hundred years the chocolate industry had c onstantly expanded.  He continued by saying that 
the story was completely different for the farmers.  Farmers had to work hard on hot and humid cocoa 
farms, and the productivity of land and labour was low.  Farming practices were also basically 
unchanged from one hundred years ago. The farmer and his family had to harvest and open 25,000 
pods for one tonne of fermented and dried cocoa beans, which was an enormous and very labour-
intensive job.  With a decent price and a relatively lo w tax, the farmer would be lucky if one tonne of 
dry beans brought in a net income of US$ 1,000. 
29. On the issue of low land productivity in cocoa farming, he said that the introduction of hybrid 
varieties of cocoa beans had made some difference in recent decades.  As a result, yields had been 
increasing over the last 25 years.  However, the yi eld increases were to a very large extent due to 
higher yields in Malaysia and Indonesia, to a smaller extent in Côte d’Ivoire and – very recently – in 
Ghana.  In many cases, yields on cocoa farms amounted to between 500 and 700 kg of dry beans per hectare, while the yields on cocoa farms in Malaysia were between 1,200 and 1,500 kg 
per hectare.  Yields in Malaysia were, therefore,  more than double the world average.  Despite low 
productivity and the tendency for prices to decline, howe ver, he noted that there was a constant threat 
of overproduction of cocoa, with supply growing fast er than demand.  He explained that increased 
grindings of cocoa beans triggered a strong increase in  production, and that when grindings of cocoa 
beans showed a healthy increase over three to five  years, production reacted by increasing with a 
jump, resulting in oversupply and increases in stocks. 
30. He remarked that cocoa farmers were willi ng to accept declining real prices and were 
prepared to continue to increase cocoa production, despite lower prices.  Apparently, there were no – 
or only limited – alternatives  for the cocoa farmer s.  He said that he was sure that many cocoa 
farmers were poorer today than 25 years ago.  Furthermore, with good agricultural land becoming 
scarcer in many countries, many cocoa farmers were most probably worse off than in the early 1990s, 
when cocoa prices had already fallen dramatically fro m the much higher levels in the early eighties. 
He took as an example the income of a "well-to-do"  cocoa farmer in West Africa.  The farmer grew 
three hectares of cocoa, yielding 650 kg per hectar e, and the family had to handle 50,000 cocoa pods.  
If the farmer was lucky, this would bring a net inco me of US$ 2,000, which, for an average family of 
six or seven, amounted to some US$300 dollars per capita per year.  Growing their own food, the 
family could achieve an income of a bit more th an US$1 per day per person.  However, with a little 
less land, or with somewhat lower prices and/or higher  taxes, the income of the family would drop to 
below one US$1 per capita per day.  Therefore, with  the declining trend in prices and the constant 
threat of overproduction, a family's income could eas ily drop to very low levels.  He explained that  WT/COMTD/M/59 
 Page 9 
 
 
  this was the main problem in the world cocoa economy, and that he would move on at this point to 
discuss possible solutions to the problem. 
31. He said that the first major option was to incr ease cocoa bean prices in the world market.  He 
explained that this option would have to be implemented through an agreement between the major 
cocoa-exporting countries and would, therefore, always  imply a limitation of exports.  For that reason, 
it was called the export-limitation option.  With  the high geographical concentration in cocoa 
production, only between the three to five largest exporting countries would need to participate in 
such a scheme to make it potentially successful.  He elaborated that two different strategies could be 
distinguished in an export limitation scheme.  Th e first strategy consisted of a mechanism under 
which cocoa-producing countries applied higher export  taxes.  Following such higher taxes, farmers 
would limit their cocoa production, which would, in turn, result in lower exports and higher prices on 
the world market.  The advantage of such a scheme was that it would be relatively easy to implement 
for individual countries.  A technical problem, however, was that the governments in the countries concerned would have to agree on the level of export taxes in each of the participating countries, since 
differing supply elasticities between countries implied th at the applied taxes should not be the same in 
all countries.  A more serious fundamental problem  with any scheme working with export taxes was 
that all the advantages of the higher taxes would go to the governments, while the burden of the production limitation would fall on the farmers.  He questioned whether this would be acceptable to 
farmers, and whether farmers would put pressure on their governments to give them a substantive 
share of the benefits, thereby undermining the wh ole system.  He also questioned whether such a 
scheme would trigger a strong reaction from the pub lic and private sectors in the major consuming 
countries, since the consumers would have to pa y more and the money would go to the governments 
of the producing countries, and not to the farmers. 
32. He said that the alternative strategy in an export-limitation scheme was to work with export 
quotas for each of the participating countries.  Apart from the costs of the system , all the benefits from 
such a scheme would go to the farmers.  He noted th at a main issue with su ch a scheme was that the 
countries had, over time, to agree on the export quota for each of the participating countries.  Another 
major problem was that an elaborate system was re quired in each country to buy the excess supply of 
cocoa beans which would emerge.  The excess supply woul d have to be destroyed or, at best, used  as 
fuel, since there was only so much cocoa powder sch ool children could consume as cocoa drinks.  He 
said that, in his view, it would be difficult for major cocoa-producing countries to agree on export quotas.  What was observed at present was that each c ountry wanted to increase its market share at the 
cost of the other countries, and a complete cha nge in attitude would, therefore, be required to 
successfully implement an export-quota system.  Th ere was also a risk that  the internal market 
arrangements required in each count ry, with the government acting as buyer of last resort, could result 
in a costly, bureaucratic  machinery, prone to manipulation and corruption. 
33. The ICCO representative said that the second ma jor option to increase the incomes of cocoa 
farmers was through the further development of the world cocoa economy.  This option required 
several types of action with specific objectives, ranging from improving the efficiency of marketing to introducing better farm practices a nd providing better planting material.  He informed the Committee 
that the ICCO was already attempting action in some of these areas, and said that he wanted to give a brief overview of the types of action which he belie ved were most urgently required, following which 
he would point out some complications that could result from such actions, if successful.  
34. The first type of action he wished to discuss was action taken to improve internal marketing 
arrangements, which had the objective of providing a la rger share of export revenues to the farmers.  
He explained that, in practical terms, this coul d only be achieved when farmers were organized in 
cooperatives or associations.  While only a small nu mber of cocoa farmers worldwide were organized 
in cooperatives, he said that there were a relativel y large number of cooperatives in Côte d’Ivoire, the 
largest cocoa producer in the world.  He said that the ICCO had experimented in Côte d’Ivoire with a WT/COMTD/M/59 
Page 10  
 
  system to prepare the cocoa for export at cooperative warehouses in the interior of the country.  To 
that effect, the ICCO had, through an industry working group, developed a simple but effective 
system of getting the cocoa from the farmer, through th e cooperative, to the port of export.  This was 
only done after the bags with the cocoa had been check ed for quality and sealed for quality guarantee.  
The system had the added advantage that all cocoa c ould be traced back to its village of origin.  He 
explained that the new system was much better and cheaper than the traditional system, and gave full 
control of the cocoa to the cooperative, while pr oviding additional income to the farmers.  The 
financial gain for cooperatives and farmers amounted to only about 5 per cent, but that was significant 
for poor segments of the population.  He added that  the success of the experiment had encouraged the 
ICCO to roll out the system in other countries.  If su ccessful on a larger scale, the new system of trade 
and traceability would revolutionize the internal trade in cocoa beans in the producing countries.  He 
suggested that a next step in the progress of coopera tives, after they were able to successfully deliver 
the exportable product to the port, could be for th em to become exporters themselves, or even 
undertake further processing before exporting. 
35. He said that this brought him to the subject of adding value to cocoa beans before export.  He 
explained that the first stage of processing of co coa beans, consisting of the production of cocoa 
liquor, cocoa butter and cocoa powder, was traditionally  heavily concentrated in the major chocolate 
consuming countries.  Today, however, more than 30 per cent of this processing took place in origin 
countries, and Côte d’Ivoire, Malaysia and Ghana ha d become large exporters of cocoa semi-finished 
products.  There were, however, a few problems with the production and export of these semi-finished 
products.  The value added was quite  low, and processing in consuming countries took place on a very 
large, fully automated scale, using beans from different  origins.  To attract foreign investors for the 
processing of cocoa beans, origin countries had to provide incentives by way of subsidies, which 
further eroded the economic benefit from processing, probably reducing them to marginal levels in 
some cases. Finally, he said that there still existed a certain amount of tariff escalation for cocoa semi-
products.  While effective tariffs on cocoa semi-pr oducts were generally zero or very low, some 
cocoa-producing countries – specifically Malaysia, Brazil and Indonesia – still faced significant 
tariffs.  For this reason, he called on the WTO to help in achieving the full eradication of tariffs 
against cocoa processing in origin countries, whic h would constitute a direct contribution to the 
further development of the coco a sector in origin countries. 
36. He explained that a third area of action was in the further development of the consumption 
side of the market.  The more chocolate consumers at e, the better it was for the farmers, in particular 
because with a rapid growth of consumption there was a smaller risk of oversupply.  There was, 
therefore, a "generic promotion" of chocolate and c hocolate consumption in place.  He said that in the 
mid-1990s, the ICCO had been successfully involv ed in consumption promotion in Japan.  The 
organization was presently setting up a similar promo tion project in Russia, and had just begun initial 
preparatory work in China.  He explained that some cocoa-producing countries had come up with 
some funds for this work, but that, in his view, th ese countries should invest more.  Fortunately, some 
had recently started to pay more attention to their own cocoa consumption.  He went on to say that 
working on the consumption side of the mark et was still something new for cocoa-producing 
countries, and that the authorities, organizations and farmers in these countries should become much 
more pro-active in this area.  In particular, he  said that the producing countries should give the 
consumers what they were willing to pay for.  If,  for example, the consumer was willing to pay for 
organic cocoa, this type of cocoa should be pr ovided.  He added that while producer countries 
correctly complained about the high costs of certif ication for organic cocoa, he believed they should 
work together to find a solution to the problem.  As  more niche markets were developing in cocoa and 
chocolate, he suggested that, in order to enha nce farmers' incomes, producers should be more 
enthusiastic in delivering what consumers wanted. 
37.
 The last area of action he said he wanted to  talk about comprised all activities aimed at 
increasing productivity on the cocoa farms.  He str essed that it was necessary for productivity in  WT/COMTD/M/59 
 Page 11 
 
 
  cocoa production to increase dramatically.  While co coa production techniques in most countries were 
still very similar to the practices of 100 years ago, he explained that it was now possible to use hybrid 
varieties, fertilizers and some pesticides.  At the same time, there was no forest land left to open up nowadays, and good farm land was becoming increasingly scarce.  He said that he wished to mention 
three areas of action which were of utmost importance.  First, he indicated that farmers needed better 
planting material which was more resistant to p ests and diseases and which gave good yields of high 
quality over many years.  The ICCO had been very  active in this area and was presently implementing 
its second large-scale project concerning better plan ting material.  Considerable progress had been 
made, and the project was at the stage where the best  materials were being selected for distribution to 
the farmers.  He noted, however, that it was often difficult to reach the farmers. 
38. Another high-priority area was that of pests a nd diseases, which he said presented a very big 
problem for cocoa.  According to best estimates, about one third of annual cocoa production was lost 
due to pests and diseases.  An eradication of th ese losses would increase world cocoa production by 
50 per cent, a figure which illustrated that pests and diseases caused an enormous loss of resources, 
including land, labour and current inputs.  It was, therefore, necessary to take urgent action to deal 
with the problem.  In this regard, he said that the ICCO had recently agreed with the Common Fund 
for Commodities that cocoa pests and diseases would be a priority area in the future, and that a first 
project proposal in this area had just been completed. 
39. He explained that in order to increase productiv ity on cocoa farms, it was also necessary to 
improve the cultivation practices of  the farmers.  While significantly more was known today about 
growing cocoa than 30 or 40 years ago, much – if  not most – of  that knowledge was still "on the 
shelf".  In other words, it was known in research sta tions but had not yet reached the farmers.  What 
was required most urgently was good agricultural ex tension work for the cocoa farmers.  It was, 
however, unfortunate that in most cocoa-produc ing countries, the extension services no longer 
reached the farmers.  He said that this was, in  his view, the result of the "liberalization and 
privatization" drive of some multilateral financ ial institutions during th e 1980s and early 1990s.  A 
system of agricultural extension, suitable for larg e-scale farming in North America and Europe, had 
been transplanted to West Africa , and as a result, in most countries in West Africa the smallholder 
cocoa farmer had to pay for extension services.  He questioned how a farm er with two or three 
hectares of land pay could for extension services.  While the idea was that these services would be delivered through cooperatives, he pointed out that it  was difficult to find effective cooperatives.  In 
West Africa, for example, less than 10 per cent of the farmers were organized in cooperatives, so the 
system did not work.  He said that he believed that it was high time that initiatives towards  
liberalization and privatization were corrected, a nd that farmers were provided with the technology 
that was "on the shelf". 
40. He added that increasing productivity on cocoa farms brought with it a certain risk.  If it were 
possible to successfully and rapidly increase produc tivity on cocoa farms, the production of cocoa 
might increase much faster than consumption, resu lting in sharply declining prices and a collapse in 
the incomes of farmers, which was exactly the opposit e of what was desired.  He said that the solution 
did not lie in going slow on efforts to increase produc tivity, but rather in limiting the growth of total 
production.  It was necessary to make cocoa more  competitive, to dramatically modernize cocoa 
farming and trade, and to turn the cocoa farmer in to an agricultural entrepreneur.  This could be 
achieved through well articulated polices and pr ogrammes of the producing countries for their 
agricultural sectors, including cocoa.  At the sam e time, what was required was alternative production 
and income opportunities for the land and labour  that would no longer be required in cocoa 
production.  
41. He went on to say that each cocoa-produc ing country needed a sound framework for a 
rational agricultural policy.  However, there were only very few developing countries in Sub-Saharan 
Africa that had a well-based and well-formulated ag ricultural policy.  Only very few cocoa-producing WT/COMTD/M/59 
Page 12  
 
  countries knew what their cocoa resources were on th e ground, and only had rough estimates of the 
number of cocoa farms in the country, the number of  hectares under cocoa and the age profiles of the 
cocoa trees.  He pointed out that it was difficult fo r a country to formulate policies when it did not 
know what its production capacity was.  Therefore, all cocoa-producing countries needed an inventory 
of their cocoa resources, as well as an inventory of all their resources in agriculture more generally.  
Subsequently, they would need to develop th e institutional framework, including the human 
capabilities, to formulate and implement  policies a nd programmes.  He said that providing support to 
countries to implement that work was beyond the remit of the ICCO, although the organization did 
what it could.  It seemed more the task of ins titutions such as the Food and Agriculture Organization 
(FAO), the World Bank and bilateral donors such as th e EC and the US.  He emphasized that without 
well-articulated and well-implemented policies of  the producing countries towards agriculture, 
including the cocoa sector, it would never be possible to solve the problem of the low incomes of the 
cocoa farmers.  Presently, the cocoa-producing count ries had no basis for more sophisticated policies, 
and knew only one policy prescription, which was to pr oduce more and more cocoa.  What they were 
in need of was the capability to form ulate what they wanted to achieve  in their cocoa sectors, in terms 
of different areas including production and employment , and as part of an overall agricultural policy. 
42. The ICCO representative said that the agricu ltural policies of cocoa-producing countries had 
to offer alternative production and income opportunities to cocoa farmers.  That was, by definition, a 
difficult area for the ICCO.  The organization had star ted to look into this, but hoped that others could 
be of more assistance to the countries in finding solu tions.  He elaborated that the ICCO believed that 
the education and training of farmers was of particular importance, since "better farmers" would be 
better able to exploit alternative opportunities in farm ing, and would more easily grasp that there were 
other crops to grow apart from just cocoa.  Op tions for diversification, including in terms of 
inter-cropping with cocoa and diversification on co coa farms, had the advantage that the individual 
farmer became less dependent on one  product for his cash income.  He added that the ICCO believed 
there was a direct role to play for the WTO.  Wh ile there were only limited trade barriers left for 
cocoa, including cocoa semi-products, he observed that  there were still serious trade barriers for many 
other agricultural products.  To the extent that  the WTO succeeded in bringing down these barriers, 
the cocoa farmers would benefit, as it w ould enhance their opportunities for production 
diversification. 
43. In offering some final thoughts, he  said that he did not believe in a "quick fix" solution for the 
income problems of the cocoa farmers, and that it appeared that the problems of the cocoa farmers 
would only be solved the hard way.  In particular , the only lasting solution was to train and educate 
the cocoa farmers and to further develop the cocoa economy, the agricultural sector and the 
economies of the countries concerned.  The only real  solution, therefore, was through "development".  
On the question of whether the cocoa-producing countri es might be able to levy a limited export tax to 
finance the development of cocoa for the enhancemen t of farmers' incomes, he said that he believed 
that cocoa-consuming countries would be prepared to match the resources earned to form a fund for 
the development of the world cocoa economy.  In  this way, the cocoa farmers could benefit 
enormously from a rela tively small export tax. 
44. The Chairman
 thanked the ICCO representative for the presentation, and opened the floor for 
questions and comments. 
45. The representative of the United States  said that the ICCO representative in his presentation 
had briefly mentioned Malaysia as a producer and exporter of cocoa.  She recalled that the CTD had 
some time ago heard a presentation from Malaysia about its experiences with commodities, but could 
not recall whether the presenter from Malaysia had specifically mentioned cocoa.  She, therefore, 
inquired whether the ICCO representative could elaborate on some of the good practices that 
Malaysia had applied in the cocoa sector, and whet her those practices were possibly transferable to 
other countries, particularly in Africa.  She rema rked that the presentation had also touched on the  WT/COMTD/M/59 
 Page 13 
 
 
  subject of export taxes, and asked whether the ICCO representative could elaborate on this issue, 
particularly in the context of the ongoing deba te among WTO Members as to whether export taxes 
should be promoted or eliminated.  On the issue of  tariff escalation, she said that escalation existed in 
both developed and developing countries, including in the cocoa-producing countries themselves.  On 
the subject of cooperatives, she said she found inte resting what the presentation had brought out about 
most models of cooperatives not ha ving been appropriately applied.  She said, however, that she was 
not quite convinced by the ICCO representative's call for a correction to the liberalization and 
privatization process, and asked for more clarification on his logic.  
46. The representative of Benin  said that there were two points he wished to raise on the 
presentation.  The first point related to the remark  made by the ICCO representative on the lack of 
well-formulated agricultural policies in countries in S ub-Saharan Africa.  In this regard, he said that 
tremendous efforts had been made by countries in th at region, often with the financial and technical 
assistance of international organizations, to develop clear agricultural policies.  Pressure from international financial institutions had also co ntributed to the process of agricultural policy 
formulation.  He added that the formulation of policies in agriculture and other areas served as the 
basis for a country's poverty reduction strategy.  Th erefore, he felt that the remark by the ICCO 
representative seemed rather general, and perhaps re quired some qualification.  In particular, it was 
his view that the main problem lay in the implem entation of policies, due to a number of reasons 
including a lack of financial and human resources.  He said that his second point related to the issue of 
diversification, and in particular the difficulties that producers of particular commodities faced in 
attempting to diversify.  For example, if a cocoa farmer was asked to diversify into cotton production, 
the farmer would face similar problems, including a continual fall in prices due to international trade 
policies.  The problem of commodity producers had to, therefore, be seen from a global perspective. 
47. The representative of Egypt
 said that it was important to identify the main cause of the 
problems faced by cocoa farmers. In this regard, he asked if the ICCO representative could clarify 
whether the problems stemmed mainly from an inequa lity in the distribution of profit margins, or 
from an imbalance between supply and demand. 
48. The representative of Sri Lanka  said that, in his view, the main determinant of continually low 
prices for cocoa was excess supply.  He also point ed out that the benefits to cocoa farmers from 
diversification was not obvious, since other commodities faced similar problems.  In this regard, he referred to the point made in the presentation that the cost of cocoa beans accounted for less than 
10 per cent of the price of most chocolate produc ts, and asked the ICCO representative what the 
figure would be for other commodities such as coff ee or tea.  He also asked whether the ICCO 
representative could give some examples of c ountries that had successfully managed their 
participation in the world cocoa economy.  In this  regard, he said that he was interested in the 
Malaysian experience, since it was his understanding that cocoa production in Malaysia was not based 
on smallholder farmers but on relatively larger plan tations.  On the issue of whether countries should 
use export taxes to limit exports, he remarked that if the tax revenue was used for welfare 
enhancement and the development of industry, the burden would not necessarily fall on the farmers.  
He also referred to "fair trade" campaigns, and in  particular the mechanism through which the revenue 
from taxes paid to obtain a product with a "fair trade"  label was routed back to producers.  He noted 
that the administrative costs of such campaigns we re potentially very high, and suggested that these 
costs could be reduced if a procedure with simi lar objectives was undertaken at the national level. 
49. The representative of the European Communities
 said that he had noted from the presentation 
the importance of enhancing export opportunitie s for commodity-producing countries and on 
developing productive capacity within those countries.   He inquired what more could be done on the 
export side, including through the development of nich e markets.  As for the development of capacity 
within countries, he said that resources for this purpose were available, and referred to the Aid for 
Trade initiative as a possible source of funds.  He noted, however, that it was necessary for WT/COMTD/M/59 
Page 14  
 
  commodity-producing countries to ensure that th e development strategies they presented to donors 
took into account the various commodity sectors that th ey wished to see develop.  He said that there 
was a willingness on the donor side to consider projects relating to specific areas, in particular if they 
were identified as priorities by the countries concerned,  but remarked that it was important at the same 
time to see such initiatives in a broader developmen t context, and therefore to not pursue a narrow 
sector-specific focus.  He inquired whether the IC CO had a mandate to work in collaboration with 
other international commodity organizations as well as with development institutions like the World 
Bank.  On the issue of export taxes, he said that in his view it was probably not necessary to try and 
raise  resources in a s ector-specific manner when funds could be obtained through broader initiatives 
like Aid for Trade.  Finally, he asked whether the representative of the ICCO could comment on the 
potential of commodity-producing countries to pursue downstream diversification.  
50. The representative of Brazil
 said that a  key challenge for commodity-producing countries 
was to increase productivity.  In addition, he said th at part of the solution to the commodities problem 
lay in a decrease in the number of farmers producin g any given commodity, though he recognized that 
the possibilities of diversification into other agricultu ral commodities were limited.  He remarked that 
a large increase in world demand for cocoa seem ed unlikely, and that additional consumer 
expenditure would tend to go into higher value- added products.  Referring to the question by the 
representative of Sri Lanka on the commodity value in a final product, he said that for some commodities the value could be much less than 10 pe r cent.  He remarked that the industries that 
provided the added value to commodities and prepar ed finished products were for the large part 
located in developed countries.  In that regard, he inquired what the prospects were for such industries 
moving to commodity-producing countries, and what were the trade policy measures that would assist 
such a shift.  
51. The representative of Malaysia
, referring to the mention that had been made by the US of 
Malaysia's earlier presentation in the CTD, clarifie d that the presentation had focused on the palm oil 
industry.  She said that even though Malays ia placed emphasis on adding value in commodities 
production, and placed significant importance on r esearch and development, it frequently faced the 
familiar problems of declining prices, price volatility and tariff escalation.  She added that cocoa was 
a relatively less important commodity for Malays ia in terms of production than other commodities 
such as palm oil and rubber and, in response to the point raised by the representative of Sri Lanka, 
clarified that cocoa producers in Malaysia were smal lholder farmers.  She said that she agreed with 
the representative of Sri Lanka on the potential use of  export taxes, and explained that the revenue 
obtained from export taxes levied by Malaysia on cer tain commodities were routed back to assist in 
the development of industries. 
52. The representative of Ecuador  said that the present discussion touched upon the important 
question of how trade could enhance development and contribute to poverty reduction.  On the 
commodities problem, she remarked that the ICCO representative had mentioned both domestic issues 
and external issues.  The lack of well-structured agricultural policies, divers ification and productivity 
enhancement were key domestic issues  that had to be dealt with.  With  regard to external issues, she 
said that she wished to emphasize the need for coherence between the WTO and other institutions, in 
particular the Bretton Woods institutions.  She also not ed that other specific elements to deal with the 
commodities problem included education and capacity building.  She asked the ICCO representative 
for his views on how technological innovation could lead to potential solutio ns to the commodities 
problem. 
53. The representative of the ICCO  said that a major problem in most cocoa-producing countries 
was that they did not know how much cocoa they ha d, which made it extremely difficult to formulate 
policies.  On the point he had made in his presentation on the impact of liberalization and 
privatization, he said that, in his view, agricultural ex tension should be a public service.  He explained 
that a farmer requiring extension had to find a coope rative able and willing to pay for extension work,  WT/COMTD/M/59 
 Page 15 
 
 
  since the extension service would not be made avai lable unless it was paid for upfront, and that an 
enormous amount of know-how was not reaching the cocoa farmers because of the systems in place in several countries. 
54. He continued by saying that he wished to address five general points relating to comments 
that had been made by delegations.  The first point concerned the issue of productivity and why 
Malaysia enjoyed much higher productivity than other cocoa-producing countries.  He said that 
Malaysia had relatively high labour costs, and cocoa was very labour-intensive.  Therefore, Malaysia 
had been forced to increase its la nd and labour productivity in order to  remain competitive.  He added 
that Malaysia was well organized in its cocoa produc tion and had the best research facilities for cocoa 
in the world.  Farmers were assisted in several ways and were provided with new techniques as they 
were developed, for example the "grafting" techni que.  He said that other cocoa-producing countries 
could potentially also achieve similar yields since the knowledge and know-how was there, but 
resources were needed for this purpose.    
55. The second point he wished to discuss concerned th e question of adding value to cocoa beans.  
He said that he believed that many coca-produc ing countries lost money by processing cocoa beans 
into semi-finished products.  This was because th ese countries had to offer subsidies to foreign 
companies to assist in the processing of the beans.  He explained that there was little value-added in 
the production of cocoa butter and cocoa powder, and, while trade barriers on these items were on the 
whole relatively low, he did not believe that cocoa-producing countries would gain much by attempting to produce more semi-finished products.  W ith regard to final products, he said that there 
were virtually no trade barriers facing the major co coa-producing countries.  However, he remarked 
that if it were profitable to produce chocolate in W est Africa, it would already have been done.  There 
were a number of reasons why chocolate was not being produced in most cocoa-producing countries, 
for example the fact that chocolate production re quired different ingredients including beans of 
different origin, and that it was more profitable to produce close to the consumer.  He gave the example of Venezuela as a country that had beg un producing and exporting quality chocolate, but 
stressed that this was a rare success story. 
56. He said that the third point related to the consumption side, and in  particular issues 
concerning niche markets.  He emphasized that he wa s generally in favour of niche markets for cocoa, 
but cautioned that the positive effect arising from the development of niche markets would probably 
not be strong enough to benefit all cocoa farmer s.  With regard to organic cocoa products in 
particular, he explained that there was currently a shortage on world markets,  because it was generally 
expensive and complicated to obtain proper certifi cation for such products.  That being said, he 
believed that the market for organic products had pote ntial, and was growing.  On the issue of fair 
trade, he said that most consumers had not been prop erly informed of how it worked in practice.  In 
particular, in the case of cocoa the extra premium pa id for the fair trade label went to cooperatives, 
and not directly to the farmers.  He explained, how ever, that in his view this was probably the right 
mechanism to use, as the cooperativ es allocated the funds to project s to benefit communities, while 
cocoa production would increase tremendously – w ith the corresponding fall in prices – if the 
premium were given directly to farmers.  More ge nerally on the consumption side, he said that he 
continued to see great potential for chocolate consump tion, and pointed in particular to the potential 
for increased chocolate consumption in China and India, as well as in other fast-growing developing 
countries.  He added that in cocoa-producing coun tries, drinks made with cocoa were another area 
where consumption could potentially increase, in pa rticular in view of the availability of large 
quantities of cocoa powder in these countries. 
57. He said that his fourth point concerned the qu estion of export taxes, and expressed his view 
that such taxes could only serve as a potential tool  for the development of the cocoa sector if there 
was a clear understanding and agreement on their use.  He explained that what had been observed in a WT/COMTD/M/59 
Page 16  
 
  number of countries was that the tax revenues raised  from the cocoa sector were simply collected by 
the relevant Ministry and were not used to develop the sector. 
58. Finally, he said that the mandate of the I CCO was broad enough to a llow for cooperation with 
all organizations working on commodity issues, as we ll as on development issues more generally.  He 
added that the ICCO was experiencing difficultie s in finding resources to undertake activities to 
develop the cocoa sector in various cocoa-producing countries.  Part of this difficulty stemmed from 
his observation that many donors were currently not financing specific projects, preferring instead to 
allocate large sums to only some institutions.  He  said that he was willing to explore how resources 
from the Aid for Trade initiative could be used to develop the cocoa sector. 
59. The Committee took note
 of the presentation and of all interventions. 
60. The Chairman  said that the Committee had now heard a presentation from one Member – 
Malaysia – and had also heard presentations from the Common Fund for Commodities, the United 
Nations Conference on Trade and Development (UNCTAD), the ICO, the FAO and the ICCO.  He believed that the presentations had been very useful  in allowing the Committe e to focus its work and 
discussions.  He, therefore, suggested that the CT D continue to hear from Members or relevant 
institutions.  He recalled that Kenya had indicated at  the last meeting of the CTD that it would consult 
with the African Group to see if any Member within  that Group would be interested in making a 
presentation.  He also recalled that specific institu tions that had been suggested in past discussions 
included the International Trade Centre UNCTAD/ WTO (ITC), the World Bank and the International 
Tropical Timber Organization (ITTO).  He inquired whether any Member wished to make a presentation at the next meeting of the CTD, or whether the Committee wanted  an invitation to be 
extended to any particular organization.  
61. The representative of the United States
 said that her delegation was interested in hearing from 
other organizations working on commodity issues, including the ITC, the World Bank and the International Monetary Fund (IMF).  She suggested th at it might be useful to invite more than one 
organization at a time.  
62. The Chairman
 said that the US representative's idea to invite more than one organization to a 
meeting of the CTD was a useful one.  He suggested  that a panel discussion could be held, to which 
could be invited a number of organizations such as the IMF, the ITC, UNCTAD and the World Bank.  He elaborated that each organization could make a short presentation, focusing on policy options and 
solutions, after which the floor would be opened.   
63. The representative of Egypt
 suggested that, as part of the panel discussion, the CTD could 
consider the question of, with a view to providing an input on, how Aid for Trade could potentially 
help in finding solutions to the commodities problem.   
64. The Chairman  said that the suggestion of the representative of Egypt was constructive, and 
indicated that it might be possible to invite the Chai rperson of the Task Force on Aid for Trade to the 
panel discussion.  He proposed that the Secretar iat consider how and when to organize the panel 
discussion, and also suggested that the Secretariat prepare a summary of the main elements of the 
discussion that had taken place in the CTD on the co mmodities issue up to the present.        
65. It was so agreed .  WT/COMTD/M/59 
 Page 17 
 
 
  E. PARAGRAPH 51 OF THE DOHA DECLARATION ON IDENTIFYING AND DEBATING 
DEVELOPMENTAL ASPECTS OF THE NEGOTIATIONS , IN ORDER TO HELP ACHIEVE THE 
OBJECTIVE OF HAVING SUSTAINABLE DEVELOPMENT APPROPRIATELY REFLECTED  
66. The Chairman  recalled that it had been agreed at the last meeting of the CTD that the 
Committee would continue its discussion of the devel opmental aspects of the negotiations under this 
agenda item at the present meeting, and that the Secr etariat would continue to  update the background 
paper it had been working on to assist Members in th eir discussion.  However, given the fact that the 
negotiations had, for the time being, been suspended,  he suggested that the Committee revert back to 
this agenda item at its last meeting of th e year to decide how to proceed.      
67. It was so agreed .   
F. REVIEW OF STEPS TAKEN TO PROVIDE DUTY-FREE AND QUOTA -FREE MARKET ACCESS TO 
LEAST -DEVELOPED COUNTRIES  
68. The Chairman  recalled that the Committee had agreed at  the beginning of the year to include 
for all remaining meetings of the year an ag enda item relating to the Hong Kong Decision on the 
provision of duty-free and quota-free (DFQF) market ac cess to LDCs.  He said that under this agenda 
item, the Committee had heard from a number of Me mbers on the steps they were taking, or had 
taken, to provide DFQF market access to LDCs.  Interventions had also been made on behalf of the 
LDC Group.  He inquired whether any Member wished to take the floor. 
69. The representative of Bangladesh , on behalf of the LDC Group, recalled that Ministers at 
Hong Kong, China had agreed that developed coun tries, and those developing countries declaring 
themselves in a position to do so, would provide DFQF market access on a lasting basis for all 
products originating from all LDCs, by  2008 or no later than the start of the implementation period, in 
a manner that ensured stability, security and predictab ility.  Taking into consid eration the situation of 
some Members finding it difficult to provide 100 per cent market access to all LDC products, 
Ministers had agreed that DFQF market access would be provided for at least 97 per cent of products originating from LDCs, defined at the tariff line leve l, by 2008 or no later than the start of the 
implementation period.  He went on to say that  Mi nisters, fully aware of the marginalization of the 
LDCs in global trade, and sympathetic to them, had asked the Members that might initially provide 
97 per cent DFQF market access to take steps to progressively achieve compliance with the 
obligations of complete DFQF market access to LDCs  by incrementally building on the initial list of 
covered products.  Ministers had also asked Member s to ensure that preferential rules of origin 
applicable to imports from LDCs were transparent and simple, and contributed to facilitating market 
access.  He said that Annex F of the Hong Kong Ministerial Declaration was a framework, and the 
Members were encouraged to set out by the en d of 2006 the means for implementation of the 
Decision.  Members were to notify the implemen tation of the schemes adopted under the Decision 
every year to the CTD.  The Co mmittee would annually review the steps taken to provide duty-free 
and quota-free market access to the LDCs and repor t to the General Council for appropriate action. 
70. He said that the LDC Group had submitte d modalities on DFQF market access and on 
transparent and simplified rules of origin in the CTD in Special Session (CTDSS), the Committee on 
Agriculture in Special Session and the Negotiati ng Group on Market Access.  The LDC Group 
believed that when the modalities were finalized, th e CTD would have an opportunity to review the 
implementation process as per the mandate contained in Annex F of the Hong Kong Ministerial Declaration.  Therefore, while the LDC Group appr eciated the notifications that had been submitted 
by Japan and the US in the CTD regarding their pl ans for implementation, and sincerely thanked them 
for their initiatives in providing LDCs with mark et access opportunities, the Group believed that the 
CTDSS, and not the CTD, was the appropriate foru m for discussing the issue at the present time.  He 
added that the LDC Group understood the positions of  Members which had led to the suspension of WT/COMTD/M/59 
Page 18  
 
  the negotiations, but was also worried that undue de lay in restarting the negotiations could harm the 
major theme of "development" in the Doha Work Progr amme.  There was also a risk that such a delay 
could lead to a proliferation of bilateral and regi onal trade agreements, which would run contrary to 
the spirit of the multilateral trading system.  The LDCs called on the major trading countries of the 
world to engage in informal consultations and co me back to the negotiating table as soon as possible. 
71. The representative of the United States
 said that the domestic process was ongoing in the US 
to meet the obligation to provide 97 per cent DFQF market access by the end of the Doha Round, and 
that there would be opportunities for all stakeholders to provide input into the process.  She added that 
the Hong Decision would be consistent with the US' GSP rules, and that the US GSP scheme was 
currently undergoing a review.  She said that the US was committed to implementing its commitment 
to LDCs as reflected in Annex F of the Hong Kong Ministerial Declaration.  
72. The representative of Korea  said that, like other countries, Korea was fully committed to 
contributing to the economic development of LDC Members.  She said that Korea had been taking 
steps with regard to the provision of DFQF mark et access for LDCs and that since 2000, Korea had 
been providing DFQF market access for 89 HS 6- digit product lines originating from LDCs.  In 
addition, in an effort to faithfully implement th e Hong Kong Ministerial Declaration, she said that 
Korea was currently working on expanding the produ ct coverage of DFQF market access to LDCs, 
and that the government was collecting views from interested parties on which products could be 
selected.  Once the product selection process was finalized, related domestic regulations would be revised.  She said that her delegation would continue  to inform the Committee of progress in efforts 
made to expand DFQF market access for LDC products. 
73. The representative of Japan
 made reference to the communica tion that had been submitted to 
the CTD by his delegation in document WT/COMTD/W /150.  He said that Japan's domestic process 
was ongoing with regard to the Hong Kong Decisi on, and confirmed Japan's  commitment to the 
Decision.         
74. The Committee took note  of all interventions.  
G. ELECTRONIC COMMERCE  
75. The Chairman  recalled that at the last meeting of th e Committee, he had raised the issue of 
electronic commerce (e-commerce) in the CTD.  As no delegation had taken the floor at that time, he had suggested that Members possibly needed more tim e to reflect on the issue, and it had been agreed 
that the issue would be considered at the present meeting.  He said that the CTD was one of four 
subsidiary bodies designated to carry out work on e-commerce under the WTO Work Programme on 
electronic commerce.  However, the CTD had agreed at its 53
rd Session in May 2005 that it would 
only revert to the agenda item concerning e-commerce if requested to do so by Members.  It was for 
this reason that e-commerce had not been on the CTD's agenda since May 2005 until the present 
meeting.  He continued by saying that Member s had agreed in paragraph 46 of the Hong Kong 
Ministerial Declaration to reinvigorate the Work Programme on e-commerce, including the 
development-related issues under the Work Programme .  In light of paragraph 46 of the Hong Kong 
Declaration, he asked Members whether they wished  to treat  the issue of e-commerce once again in 
the CTD.  
76. The representative of the United States  said that her delegation was taking seriously the idea 
of reinvigorating the Work Programme on e-commerce, but did not as yet have anything specific to propose on how the CTD could contribute to the pro cess.  She said that her delegation was aiming to 
have an active dialogue with othe r delegations over the next few weeks on possible ways in which 
e-commerce could be treated in the CTD.    WT/COMTD/M/59 
 Page 19 
 
 
  77. The Chairman  proposed that the CTD revert to the agenda item concerning e-commerce at its 
last meeting of the year.  He suggested that delegations could also consult informally among 
themselves before that meeting.   
78. It was so agreed . 
H. ELECTION OF THE CHAIRPERSON OF THE SUB-COMMITTEE ON LEAST -DEVELOPED 
COUNTRIES  
79. The Chairman  said that he had been informed that consultations had led to the proposal for 
H.E. Jean Feyder, Ambassador of Luxembourg, to  serve as the Chairman of the Sub-Committee on 
LDCs.  He asked whether this was acceptable to Members. 
80. It was so agreed . 
81. The Chairman  said that it was a great pleasure for him to welcome Ambassador Feyder to 
serve as the Chairman of the Sub-Committee on LD Cs.  He said that Am bassador Feyder had vast 
experience in the international arena.  The numer ous posts Ambassador Feyder had occupied in his 
career included Permanent Representative of L uxembourg to the European Union and Permanent 
Representative of Luxembourg to the United Nations in New York.  He said that Ambassador Feyder 
currently served as Ambassador and Permanent Re presentative of Luxembourg to the United Nations 
Office, the International Organizations and the WTO in Geneva. 
82. The Chairman of the Sub-Committee on LDCs  said that it was with pleasure that he was 
taking on this responsibility.  He thanked Members for the confidence they had placed in him, and 
said that their cooperation and the help of the Secr etariat would allow him to successfully perform his 
duties.  He said that he had previously served as Director for Development Cooperation in 
Luxembourg, which had given him the opportunity to  travel to several developing countries and 
LDCs, and had allowed him to gain some understa nding of the problems faced by these countries, 
including in the trade area.       
I. OTHER BUSINESS  
83. No matter was raised under "Other Business". 
84. The meeting was adjourned . 
 
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