RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/AG/SCC/R/2 
21 April 2005  
 (05-1647) 
Sub-Committee on Cotton  
 
 
 
SUMMARY REPORT ON THE SECOND MEETING OF THE SUB-COMMITTEE ON 
COTTON HELD ON 22 MARCH 2005 
 
Note by the Secretariat1 
 
 
1. The Sub-Committee on Cotton, which was established by the Committee on Agriculture, 
Special Session at its formal meeting on 19 Nove mber 2004 in accordance with the instruction 
resulting from the decision on the Doha Work Pr ogramme adopted on 1 August 2004 by the General 
Council (WT/L/579, refers), held its second meeting on 22 March 2005 under the chairmanship of 
Ambassador Tim Groser of New Zealand. 
2. The agenda as contained in WTO/AIR/2532 was adopted. 
ITEM A:  INTRODUCTORY STATEMENT BY THE CHAIRMAN  
3. The Chairman recalled that Members had agreed at the first meeting of the Sub-Committee to 
leave behind procedural questions and get started on the actual work to be carried out.  Time was 
short and much work needed to be done in the Sub-Committee.  The overall goal remained the 
objectives set out in the Doha Ministerial Declar ation and the Agreed Framework which all Members 
had accepted as the basis for work.  The Chairman's intention was for the Sub-Committee to get down to work as quickly as possible.  The basic task the Special Session of the Committee on Agriculture 
had conferred on the Cotton Sub-Committee was to  conduct work on all trade-distorting policies 
affecting the sector in all three p illars of market access, domestic support and export competition, as 
specified in the Doha Text and the Framework Ag reement.  This had to be within the general 
framework of the negotiations on agriculture.  With those points in mind, the Chairman proposed that the Sub-Committee adopt the draft work programme he had tabled. 
4. The draft work programme proposed by the Ch airman was adopted by the Sub-Committee, 
with paragraph 1(a) modified at the request of Braz il to draw directly on the language of paragraph 4 
of Annex A of the Agreed Framework.  The wo rk programme of the Sub-Committee on Cotton is 
attached to this report (see Annex 1).   
I
TEM B:  ASSESSMENT OF PROGRESS IN THE AGRICULTURE SPECIAL SESSION  
5. Under this agenda item the Chairman gave his assessment of progress in the agriculture 
negotiations with a particular fo cus on cotton.  A summary of the  statement made by the Chairman is 
attached to this report (see Annex 2). 
6. Benin echoed the Chairman's call to start s ubstantial work in the Sub-Committee.  Benin 
noted its agreement with Brazil's request to modify  paragraph 1(a) of the proposed work programme 
so as to draw directly on the language of paragr aph 4 of Annex A of the Agreed Framework.  Benin 
also informed the Sub-Committee of the meeting of the Ministers of Trade and Agriculture of Benin, 
                                                      
1 This document has been prepared under the Secretariat's own responsibility and is without prejudice 
to the positions of Members or to their rights or obligations under the WTO. TN/AG/SCC/R/2 
Page 2  
 
 Burkina Faso, Mali and Chad in Ouagadougou on 10 March and conveyed to Members the Ministers' 
acknowledgement of the establishment of the Sub- Committee on Cotton whos e work they would be 
following very closely.  Finally, the representative  of Benin thanked Members for their contributions 
in finding a consensus to get the substan tive work of the Sub-Committee started. 
7. Statements made by the following delegations  were forwarded to the Secretariat and are 
attached to this summary report:  Paraguay and Zambia on behalf of the group of LDCs (see 
Annex 4). 
I
TEM C:  COHERENCE BETWEEN TRADE AND DEVELOPMENT ASPECTS : UPDATE ON THE 
DEVELOPMENT ASPECTS  
8. The Chairman recalled that the terms of refe rence establishing the Sub-Committee on Cotton 
clearly referred to the need of coherence between trade and development aspects of the cotton issue 
(paragraph 1.b and paragraph 5 of Annex A, WT/L/579 refers). 
9. On behalf of the Secretariat, Mr. Chiedu Osakwe, Director of the DDA Specific Duties 
Division updated the Sub-Committee on new developments since the Director-General's first 
substantive report of December 2004 on development-re lated aspects of cotton.  The Secretariat report 
outlined the latest activities of the OECD, Eur opean Union, United States and the African 
Development Bank.  The statement made by the Secret ariat is attached to this report (see Annex 3). 
10. Under this agenda item, the IMF, UNCTAD as well as the European Communities reported 
on their activities linked to the de velopment aspects of cotton.  The statements made by the European 
Communities, IMF and UNCTAD are attach ed to this report (see Annex 4). 
11. Following the presentation by the European  Communities, Benin th anked the European 
Communities for being frank but asked who was goi ng to pay to help African countries emerge from 
problems that others had caused, in particular with regard to trade distortions.  The Africans had not 
come begging but seeking a fair market for their pr oducts so that they could live from the produce of 
their own hands.  Agencies such as the IMF and the World Bank had advocated privatisation but 
without funding for adjustment and training, reform for reform's sake would yield nothing.  Benin 
stressed the need for coherence and coordination between the IMF, the World Bank and the big 
players.  Finally, the representative of Benin st ated that trade and market distortions had clearly 
hampered the cotton sector causing for 2005 a 400 milli on dollars deficit for three of the four West 
and Central African cotton producers and exporters which had tabl ed the Sectoral Initiative on Cotton. 
12. The representative of Burkina Faso thanked the Chairman and partners for their efforts under 
the development-related aspects of cotton.  He wa s concerned that some seemed to believe that no 
more aid was needed by the cotton sector.  This issue was on the table because there was a genuine and serious problem for the West and Central African cotton sector.  Burkina Faso wished to remind 
Members that the objective of the WTO was that of development through trade which was exactly 
what the four countries sponsoring the S ectoral Initiative on Cotton were seeking. 
13. The representative of Kenya emphasized the importance to address the issue of coherence 
between the trade and development aspects of cott on.  Kenya also thanked those who had presented 
their development initiatives but wished to point out the importance of finding out whether there were 
duplications of those initiatives and also their im pact on the cotton sector .  Regarding domestic 
support, Kenya sought a clarification of the reference made by the European Communities on the 
need for the African Group to accept Green Box subsid ies.  Indeed, Kenya noted that there was a clear 
mandate under paragraph 16 of the Agreed Framework on that issue. 
14. The representative of Japan noted his country's wi sh to participate positively in the resolution 
of the problems facing the cotton sector and particul arly in the area of infrastructure and capacity  TN/AG/SCC/R/2 
 Page 3 
 
 
 building.  Recently, Japan had sent a group of expe rts in the field of rural development to Chad.  
Concerning the visit by trainees from Mali, Benin and Burkina Faso to Japan, requested by those 
countries, a final decision would be announced shortly. 
15. The representative of Senegal noted his support of the statements made by Benin and Burkina 
Faso.  The representative of the European Communit ies had cited a number of actions and assistance 
projects and Senegal could only hope that this was actually contributing to the development of the 
cotton sector.  However, and as pointed out by Be nin, the representative of Senegal noted that the 
manner of giving was more important than what was being given. 
16. The Chairman summed up the rather lively debate by stating that  both the European 
Communities and Benin gave priority to progressi ng on the trade front and ending trade-distorting 
policies especially those of developed countries.  He noted that it was inconceivable that there would 
be a result in the agriculture negotiations without serious reform in domestic support and cotton but 
also in market access.  Therefore, ultimately th e work in the Sub-Committee and in the agriculture 
negotiations would be brought together, and development assistance would be needed to help 
countries adjust.  The Chairman also noted that th e WTO's role was to create  opportunities, not trade 
outcomes, but countries sometimes needed significan t development-related help  to make use of the 
opportunities.  The African proponents of the Sectoral Initiative on Cotton were not asking for 
preferences but for assistance to make use of the system. 
17. In closing the meeting, the Chairman said that he looked forward to targeted interventions by 
Members on their assessment of progress in th e Agriculture Special Session and to continued 
contributions by International In tergovernmental Organizations to the discussion on the development-
related aspects of cotton. 
18. Statements made by the following delegations  were forwarded to the Secretariat and are 
attached to this summary report:  the European Co mmunities and Rwanda on behalf of the African 
Group (see Annex 4).  The Chairman asked that any delegation that wanted its statement included as 
an attachment in the summary report on the formal  meeting should sent it to the Secretariat in 
electronic format as soon as possible. 
ITEM D:  OTHER BUSINESS  
Date of Next Meeting 
19. The Sub-Committee agreed to meet again on 28  April 2005, following the April Agriculture 
Week. 
Chairman's Report to the Special Session of the Committee on Agriculture 20. In concluding the Chairman stated that in maki ng his report to the Special Session of the 
Committee on Agriculture he would bear in mind the statements made by all Members, that the report 
would be short and entirely factual, the essence of  which would be about the adoption of a work 
programme by the Sub-Committee and the start of subs tantive work along the lines specified in that 
work programme.  Keeping in mind the interests of  all Members the report would be circulated to 
Members and if a factual error was discovered an amendment would be issued. TN/AG/SCC/R/2 
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 Annex 1
 
 
WORK PROGRAMME OF THE SUB-COMMITTEE ON COTTON 
ADOPTED ON 22 MARCH 20052 
 
 
 1. Nature and Scope of Work Programme  
(a) Under the direction of the Chair, and until the Sub-Committee directs otherwise, 
work in depth on all trade-distorting policies affecting the sector in all three pillars of 
market access, domestic support and export competition: 
(i) Assessment of Progress in the Agriculture Special Session. 
(ii) Coherence between Trade and Development Aspects: Regular Update on the 
Development Aspects. 
(b) Work within the framework of sub-paragra phs (i) and (ii) above will be based on 
technical papers and submissions to be cont ributed by interested participants, as well 
as on the basis of factual information and data to be prepared by the Secretariat at the 
request of the Sub-Committee. 
 
2. Basis of Work 
(a) The Doha Ministerial Declaratio n and the Agreed Framework. 
 
3. Organization of Work Programme 
(a) Work to be conducted through consulta tions, informal and formal open-ended 
meetings of the Sub-Committee. 
(b) Chair to prepare periodic reports on the Sub-Committee meetings to the Special 
Session of the Committee on Agriculture. 
 
4. Sequencing of Work Progr amme and Timetable   
(a) Where possible, the Sub-Committee meetings will be held on dates as close as 
possible to the Special Session meetings of the Committee on Agriculture. 
(b) Additional consultations, formal or informal  meetings to be scheduled by the Chair 
after consultations with Members. 
 
                                                     
 
2 (TN/AG/SCC/1, dated 24 March 2005).  TN/AG/SCC/R/2 
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 Annex 2  
 
Statement by Ambassador Tim Groser 
Second Meeting of the Sub-Committee on Cotton held on 22 March 2005 
 
 
Agenda Item 2(b):  Assessment of Progress in the Agriculture Special Session  
 
Now that we have  a basis for proceeding to get into the substance of cotton, what I want to 
do is to have what will be prob ably rather preliminary first disc ussion of progress in the actual 
agriculture negotiations, which I hope will allow yo u, the membership of the Sub-Committee, then to 
react.  This will be an on-going evolutionary proc ess, I imagine, as we build up specificity in the 
agriculture negotiations.  I suspect you will be able  to make more and more informed comments about 
how well or how badly this fits the particular needs of  cotton.  So that to me is what this item will be 
about, and it will be on our agenda, I imagine,  for all of our Sub-Committee meetings.   
  I am making this observation on my own authority obviously.  Your assessments would be, I 
am sure, different in nuance here and there.  But I think we are making progress in the agriculture 
negotiations in a way that will powerfully inform the long-term results in cotton.  Since the July 
Framework was adopted, we have moved steadily, I think perhaps a little slowly but that all depends 
on your perspective of course, towards building on th e agreements of July.  Most of the work that we 
have done has been building up the technical base of the negotiation, and on many of these issues it is 
already apparent that the work that we have done is  extremely important in terms of the cotton sector.  
 
 We have had some interesting discussions on the Green Box.  We have advanced the question 
of reductions in trade-distorting support.  We have talked about the Blue Box.  We have had a very 
preliminary discussion only on product-specific AMS caps which may become very important in this 
sector.  We have advanced our language on the base and reference periods for domestic support 
commitments.  We have built up the text – not yet to the point that the membership is comfortable, but 
we have built up the text on parallelism in the export competition dossier.  Again this does have 
implications for cotton, this is very clear.  You know where we are on AVEs, which is the issue of my 
particular focus and the membership's focus at the moment.  We have had some interesting but very 
preliminary discussions on tariff escalation, an issue I know from my Paraguayan colleague is of 
particular importance to his country, and I am sure  other cotton exporters, and we touched a little bit 
on some other associated issues.   
  Now let me just pick out a little bit more, going through some of these issues in a little more 
depth, where I think the implications for cotton are large.  On the Green Box there are some very, 
very carefully negotiated language about the Green Box review, which I think is crystal clear.  The 
basic principles and effectiveness of the Green Box are going to have to remain in place through this 
negotiation.  But we have had some interesting pr oposals for clarification, particularly I would say 
from a development perspective, and it is already cl ear that the membership is prepared to consider 
these proposals, but they will still need to comply  with the fundamental requirement of having no 
more than a minimal effect on trade or production.  So I'll be looking to build on that sort of early 
points of convergence on this, and I suspect that this negotiation may not be quite as difficult as some 
people might have feared.  We shall see.   
 
 On the question of domestic support, while there are issues other than the internal support pillar, this is the most important pillar for cotton, no question about that, and I am very confident in 
saying that because I have heard so many of you tell me that was your view too.  So what progress are 
we making on the domestic support pillar?  Well we  are making quite some progress.  As you know, 
last week we moved in a tentative way but not in a definitive way, I am very careful not to seek 
agreement on an isolated component until people can see part of a bigger picture, but there appears to 
be broad convergence for creating the tiered formula.  We have agreed on that in principle in July, on TN/AG/SCC/R/2 
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 the basis of absolute levels of trade-distorting support, which I think will  greatly facilitate the 
negotiation, and is rational, as many Members have argued, because it targets what the real problem 
is.  As for countries which relatively support their ag riculture very highly, I think the expectation of 
the membership is we will come to that at a subsequent point.  They will clearly make a contribution 
and their representatives in the agriculture negotia tions have not shied away from accepting that 
political responsability in terms of the balance requir ed in this negotiation.  So I think people are 
being reasonable and sensible and we are moving in  the right direction on what is actually the most 
important issue facing the cotton sector, which is moving towards a harmonizing formula for 
reductions in trade-distorting support. 
  The work so far on product-specific AMS caps is not advanced because I think we need to advance other aspects first, but it is certainly ther e.  This, as I said earlier, could become very 
important for cotton.  But what we have done is quite a lot of useful work  on the base reference 
periods for these domestic support reductions.  The base periods in the caps will clearly be related to 
levels of support during the Uruguay Round implementation period.  There are some other proposals, 
touching on the issue of product-specific reductions via AMS caps, but there is no consensus at this point. 
 
 We have had a preliminary discussion on th e Blue Box, which again will be important to 
cotton.  I think this is going to be a very difficult area of the negotiation, but it is clearly in play and 
we will need to advance our work.   On export credits, once again an issue of great importance to trade in cotton, there is of course 
enormous clarity in terms of the final objective of  elimination, and you can't get a higher level of 
ambition than elimination. We are making very steady progress, developing texts on parallelism, 
including, most important, on export credits.  As you heard me say to the membership in both the 
TNC and in Agriculture, there is onl y one area of the export competition pillar that I feel a little bit at 
sea on, and that is the issue of food aid.  I cannot quite see my way through this at the moment.  But 
overall we are making good progress developing these texts of what you might call will become legal 
texts on parallelism in due course. 
 
 AVEs I don't think I need to speak at any length on.  Some of you may have heard me 
yesterday at the informal TNC.  It is clear that the Kenya meeting provided a vital forward push on 
this issue, it is immensely sensitive on both sides.  It is very important that we get a result that is seen 
as reasonable and fair.  It will not be perfect, ot herwise the politics of this  will be transferred and 
pollute the negotiation on sensitive products in th e market access area.  And I think you have heard 
me present this from both the exporter, or offensiv e interest, and from the importer, or defensive 
interest.  Both to me are entirely legitimate positi ons and that is why it is taking us a little bit longer, 
but I am not blocked on this.  We are making progress.  It is the most important of all of the so-called 
gateway issues.  We can't begin to start a serious di scussion of a tiered formula in market access until 
this has been resolved, but people on both sides of the politics on this are wo rking extremely hard.  I 
am not getting any messaging that I need to go above their heads to say I am not getting cooperation.  
That is not true and it is not fair.  So I think we are making progress here. 
 
 Now, I have outlined a very personalized assess ment of what I think are some of the most 
important issues, using my own judgement and the advice of my advisers in the Secretariat to focus 
on issues which clearly are profoundly important for the cotton sector.  I would like to open the floor 
now for any observations.  Please remember that we have only now just got an agreement on our work 
procedure.  The negotiations in Agriculture are still developing traction and movement and I will have 
this item on the agenda, as I indicated at the beginni ng, for all of our meetings of the Sub-Committee.  
I see this as a vital part of the work of the Sub-Co mmittee to allow you to draw attention to particular 
points in the negotiations on agriculture that you fe el need highlighting because of the implications for 
cotton.  So the floor is open and I hope that that is a useful conceptual structure for you.  TN/AG/SCC/R/2 
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 Annex 3  
 
Statement by the Secretariat at the 
Second Meeting of the Sub-Committee on Cotton held on 22 March 2005 
 
 
Agenda Item 2(c):  Coherence Between Trade And Development Aspects:  
Update On The Development Aspects Of Cotton  
 
 
 Thank you Chairman.  In accordance with the in structions in paragraph 1(b) on "Cotton", and 
paragraph 5 of Annex A in the decision by the General Council on 1 August 2004, the Director-
General provided a substantive First Periodic Repor t (circulated in document WT/GC/83), to the 
General Council in December 2004, on the "Impleme ntation of the Development Assistance Aspects 
of the Cotton-Related Decisions in the July Package".   
  On behalf of the Secretariat, I am providing, as requested by Members, a short progress report 
on relevant developments since the Direct or-General's first substantive report.   
 
 In December the Director-General judged that  "a significant start had been made", with 
"overall good progress", but that so much more remained to be done.  The Director-General reported that "bilateral donor Members "had moved rapidly to reflect cotton-sector priorities in their bilateral 
donor programmes"; and, that "relevant multilatera l and regional agencies had also responded 
expeditiously".  The Director-General noted that while the proponent countries had welcomed the 
Consultative Framework, he had established, the implementation process, and the results, the 
Director-General pointed to the deep concern of  the proponent countries regarding the urgency of 
their domestic economic circumstances, directly lin ked to the continuing long-term downward trend 
in cotton prices and their virtual singular dependence on that commodity with consequences for their 
macroeconomic performance. 
 
 Since the December 2004 report, although there is scope for more action, nonetheless, four 
relevant, positive developments have taken place and de serve mention, at this stage, to Members.  (It 
needs to be borne in mind that this report is an update on developments that have been previously 
reported). 
 
• First , the OECD Development Assistance Committee (DAC) organized a "Briefing" on 28 
January.  The Briefing implemented one of the "agreed Outcomes" from the WTO Secretariat 
Cotton Workshop in Cotonou last year.  The purpose and timing of the "Briefing" were designed to accelerate implementation of the development aspects of the cotton-related decisions in the 
July General Council Decision.  All the key stake holders were present: bilateral donors, and the 
proponent countries.  The results were positive and contributed to the implementation process.  It 
is useful to underline that the DAC Chairman in  his "Concluding Summary" remarks, noted that 
"collapse of the cotton sub-sector in the West Africa, would harm development efforts.  That, 
short and medium-term measures were required to address the current difficulties faced by the 
cotton sub-sector.  And, that the regional dime nsion (regional integration, organizations and 
infrastructure) was critical for assistance and support to the cotton sub-sector.  In noting the long-
standing efforts of donors' support to the development of the cotton sub-sector in West Africa, the 
DAC Chairman underscored the political priority  accorded by DAC Members and multilateral 
institutions to work with the West African countries on cotton development issues.  The EU, the US and the African Development Bank outlined comprehensive medium-term actions for assisting the West African countries through c ooperative multilateral efforts.  Particularly 
highlighted were programmes to address price risks and volatility  through market-based hedging 
and insurance schemes.  Participan ts acknowledged the necessity for stepped-up coordination.  It TN/AG/SCC/R/2 
Page 8  
 
 was also self-evident that, although well design ed programmes existed with availability of 
resources, there was the need for an urgent shift in gears to reflect greater operational reality on 
the ground in the proponent countries.  The me eting acknowledged the linkage between progress 
on the cotton issue and successful preparations for the Hong Kong Ministerial.   
• Second , the EU has forwarded to the Secretariat an  "Update" on the implementation of the EU-
Africa Cotton Partnership, agreed between the EU and African countries in July 2004.  The contents of the "update" illustrate concrete progress and give meaningful impetus to the 
development assistance aspects.  The areas of "update" correspond to the 7 areas agreed in the 
EU-Africa Action Plan namely: i) International Trade; ii) Nationa l and regional cotton strategies; 
iii) Policies and institutions; iv) Technological i nnovation; v) Risk management and finance; vi) 
Chain integration; and, vii) Coordination.  The de tailed EU "update" will be circulated at the next 
Secretariat-organized consultations on the im plementation of the Development Aspects.  
However, one point, out of several, that is highli ghted from the "EU Update" is the conclusion, by 
the EU, on how to better manage the complicated challenge faced by the African countries with 
the recent and continuing sharp drop in cotton prices.  The EU notes that, "The African cotton 
sector again learned that reserve funds do not suffice anymore to manage the effects of the price 
risks and that hedging price risks should be considered" .  At the same time, from EU resources, 
€45 million has been allocated and approved for an all-ACP capacity-building programme on 
commodities, of which €15 million are reserved for cotton.  In addition, France (an EU Member) 
is playing a leadership role.  It is concluding f easibility studies for a new regional programme for 
cotton support in several clearly identified areas, which, include amongst others, "a regional price 
insurance scheme in complement to national self-insurance initiatives" .   
• Third , the United States have also forwarded to the Secretariat an update on its implementation of 
the development assistance aspects pursuant to the July Package.  In the update, the US re-affirms 
its commitment to the development aspects.  The update shows that the US  development agencies 
(USAID, USTDA and the MCC) have been fully mobilized to address the obstacles faced by the 
cotton producing countries.  The updates indicate s that significant resources are available for 
eligible countries in the Millennium Challenge Account (MCA) to address development obstacles, 
including on cotton, if eligible countries identify cotton as a priority and propose well defined 
cotton projects in accordance with that priority .  Benin, Mali and Senegal are eligible.  Burkina 
Faso is a "threshold country".  Furthermore, th e US update informs that an inter-departmental 
team visited West Africa in January for dialogue , engagement and needs assessment.  Following 
this visit was circulated a "Summary and Findings of the West African Cotton Assessment".  The identified 15 possible areas of intervention in production, transformation, and cotton marketing.  
The US confirms that "short-term assistance can be provided on a number of interventions ...", in 
the identified areas.  The update refers to releva nt programmes, such as approved US funding for 
WAEMU-sponsored regional railway integration feas ibility study to the value of US$ 614,600.   
• Fourth , the African Development Bank (AfDB) is a principal African regional actor in the 
implementation process.  Its contributions are positive and tangible.  More significant gains can 
be made with greater support from bilateral do nors and relevant multilateral institutions for the 
projects and activities of the AfDB.  Currently, th e African Development Bank is preparing "a 
Multinational Programme for the Improvement of the Competitiveness of the Cotton Sub-Sector 
in Central and West Africa", with the support of the FAO.  To this end, a mission was undertaken 
by the FAO, early in March 2005, in Benin, Burk ina Faso, Mali (and Côte d'Ivoire) to identify 
activities to be considered for financing under the programme.  The African Development Bank 
has announced a Workshop for 25
th March, in Burkina Faso, to validate the findings of the FAO 
identification mission.  All the stakeholders a nd officials of the West African Economic and 
Monetary Union (WAEMU) are expected to attend this workshop.  The WTO Secretariat strongly 
urges support for the programmes, projects an d activities by the African Development Bank, 
around which many if not most of the African countries are focusing their efforts.    TN/AG/SCC/R/2 
 Page 9 
 
 
  These are the 4 areas where th e Secretariat can prov ide a positive update on the development 
aspects of cotton, based on the information that has been made available to it.  Obviously, this is work 
in progress.   
 
 In addition to this factual "update", severa l comments are constructively offered in the hope 
that they would be useful for Members as positiv e contributions in the preparatory efforts for the 
Hong Kong Ministerial.   
 
• First , continued price instability and downward trending in cotton price (at a six year low of 47 
cents per pound), all due to a wide range of fact ors, are cause for serious concern for the cotton 
proponents.  However, potentially significant results could be produced in the implementation of the development assistance aspects of cotton, if there is greater accelerated and cooperative focus by the bilateral donor community and the releva nt multilateral institutions in assisting the 
proponents to establish, either at country or regional levels, market-based instruments for 
commodity price risk management .  Several options have been suggested by the experts.  These 
include, inter alia , hedging schemes to reduce uncertainty ; agricultural price risk insurance ; and 
self-insurance schemes .  And, here we believe that the World Bank has a role to play.   
• Second , many of the bilateral donors have designed well conceived programmes.  But there is 
need for greater speed to shift to  operational projects.  And, here  the operational reality clearly 
suggests that that leadership could be provided by the African Development Bank, on the spot, 
working in close partnership with the West African  Economic and Monetary Union.  The AfDB is 
committed and predisposed.  As underlined by the Director-General in his First Periodic Report, 
coordination remains a major challenge.  Greate r progress would be made and more efficiency 
would be achieved with enhanced coordination.   
• Third , there is need for continuing commitment on the part of the proponents to domestic reform, 
including in the cotton sector to ensure that the assistance provided is optimally utilized.  There is 
also a need for feedback and inputs to the dono rs, for well prepared project documents, and for 
submitted projects to directly reflect expressed priorities.   
• Fourth , the recently released Report of the Africa Commission provides many useful 
opportunities.  This is an area of follow -up action for all concerned parties.   
 At this early stage, the Secretariat would like  to underline the necessity for accelerating action 
on all these fronts in order to provide a concrete ba se for a  meaningful Second Periodic Report by the 
Director-General to the Hong Kong China Ministerial.    
 To conclude, the Secretariat would like to:   
• inform
 Members that it will convene the 3rd and 4th Rounds of the Director-General's 
"Consultative Framework for the Implementati on of the Development Assistance Aspects of 
Cotton", on 7 April and 7 July; and also,  TN/AG/SCC/R/2 
Page 10  
 
 • inform
 Members that following discussions with the OECD Secretariat, a "c otton section" will be 
created in the 2005 Report from the OECD/WTO Trade-Related Technical Assistance Database 
to be released before the Hong Kong Ministerial Meeting.  Doing so will implement one of the 
"Outcomes" agreed at the 2004 Cotonou Cotton Workshop.  It will also enable the "monitoring 
and tracking" of progress on programmes, projects and activities, either planned or implemented 
in the follow-up to the cotton-related decisions  on the Development Assistance Aspects of Cotton 
in the 2004 July Package.     
 Director-General Dr. Supachai remains fully seized and focused on this issue and will 
continue to advance progressive and early implementation at every opportunity.   
 
  TN/AG/SCC/R/2 
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 Annex 4  
 
Statements at the Second Meeting of the Sub- Committee on Cotton held on 22 March 2005 
 
 
Statement by the European Communities  
 
EU-Africa Cotton Partnership - preparation, progress and expectations 
 
 
2004 PREPARATION OF PARTNERSHIP 
 
February 2004:  Two communications 
• EU-Action Plan on agricultural commodities 
• Proposal for EU-Africa Cotton Partnership 
− Trade & development 
 April 2004:  Council conclusions 
• Endorsing proposal and urges for action 
• Obtaining fairer international trade conditions 
• Supporting cotton in Africa:  competitiveness;  policies and institutions;  cotton in EPAs and 
price risk management 
• Consider EC membership of ICAC 
 
Obtaining fairer international trade conditions on cotton 
 
• Supporting an effective and specific solutio n on cotton within the WTO agricultural 
negotiations 
− Encouraging all developed and major DC to complete market access to cotton and 
cotton based products from LDCs 
− Aiming within WTO at the elimination of all forms of export subsidies for cotton 
− Striving to secure a commitment from majo r cotton producing countries to undertake 
reforms with respect to trade distorting domestic support.  
• Supporting African countries to  defend and negotiate their ca se in the multilateral trade 
context. 
 
5-6 July 2004 Paris:  EU-Africa Cotton Forum  
• Legitimate:  input, prep meeting + 250 participants 
• Endorsement of EU-Africa Cotton Partnership 
• Action Plan with 7 areas: 
 1.  International trade 
2.  National strategies: competitiveness + vulnerability 
3.  Policies & institutions: reforms 
4.  Technological innovations: sustainability 5.  Risk management and finance: access to risk markets 6.  Chain integration:  difficult 
7.  Coordination 
 TN/AG/SCC/R/2 
Page 12  
 
 EU-AFRICA COTTON PARTNERSHIP 
 
7 main action areas agreed  
 
1.  International trade , similar to EU Council conclusions, but  
 
1.1  Add "continued political support of the EU to the African cotton initiative" 
1.2  Specify in WTO solution on cotton, market ac cess, domestic support an d export subsidies, as 
well as specific time frame 
1.3  Export subsidies (same as Council) 1.4  Add to complete market access from LDC:  'without quotas and customs duties' 1.5  ACP would like to see 100% decoupling of EU cotton subsidies 
1.6  Commission will monitor impact of CAP reform in cotton on production and trade.  
 
7. Coordination (3 levels) 
 A.  National level: 
 
• Business associations 
• Public - private 
• Donor coordination 
 
B.  Regional level:  
• Regional integration in EPAs 
• Thematic coordination 
 
C.  International level:  
• ACP Group on cotton 
• EU - cotton donors 
• EU-ACP Comité d'Orientatio n et de Suivi (COS-coton) 
− Public – private 
− Chaired by Amb. Benin 
− Mobilize finance 
− Steer implementation 
− Coordinate with IOs + others 
• ICAC 
• Website:  www.cotton-forum.org (www.cotton-acp.org) 
  TN/AG/SCC/R/2 
 Page 13 
 
 
 Today's dialogue  
 
African realities Solutions Donor response 
Subsidized cotton supply 
reduce world market price and limits export markets Agreement in WTO to phase out 
(most) trade distorting subsidies Deal with trade & development 
coherently: more aid will depend on WTO solution 
Financial deficits in cotton 
sectors affect the government 
budget and social programs Decouple automatic relation 
government from cotton sectors 
Increased competition on the 
world market and long term 
decline in international cotton 
prices Improve market organisation, 
policies, productivity and quality 
Poor systems to manage price 
volatility Access to hedging + improved self-
insurance National level : (sectoral) 
budget support and project 
support.  Competes with other 
dev priorities. 
Regional level : support 
specific programs. 
International level : support to 
multilaterals, i.e. risk management of World Bank 
 
Mid Term Review:  national level  
 
• New support to cotton to proponents:  Benin (€10m), Burkina Faso (€10m), Mali (€15m) and 
Chad (€5m)  
− joint EC/MS meetings in Burkina Faso a nd Mali, in association with World Bank. 
• Reprogramming uncommitted Stabex funds to cotton:  Senegal, Cote d'Ivoire and Togo. 
• EC funds for unforeseen are now programmable  (transfer of B to A envelope):  Benin 
(€52m), Burkina Faso (€60m), Mali (€30m), Chad (€5m). 
• Additional new resources to co untry programs:  Benin (€18m), Burkina Faso (€95m), Mali 
(€50m). 
 Regional level  
 
• IFDC/UEMOA/ECOWAS:  Marketing Inputs Regionally (funding NL) 
• EC-RIP / UEMOA:  
− Quality/cotton instrument classing (UNIDO) 
− Need for a regional support on regulatory environment 
• New France-funded initiative (€3m) 
− Strengthening several regional bodies 
− Several themes:  including biotech 
 
International level  
 
• Preparation of €45m international capacity building program on agricultural commodities, 
incl €15m cotton (for ACP) 
− World Bank:  risk management 
− FAO:  strategies/plans, technology transfer 
− UNCTAD:  transactions/regulations 
− CFC:  projects (such as on instrument classing) 
• EC contribution of €25m to a Global Index Insurance Facility, under preparation by World 
Bank 
 TN/AG/SCC/R/2 
Page 14  
 
 EC cotton development policy  
 
• EC is doing a lot with existing mechanisms  and procedures:  national, regional and 
international. 
• EC funds for unforeseen are now programmable, accessible to the countries. 
• The proposed cotton fund  
− would conflict with existing principles a nd priority setting at national, regional and 
intra-ACP. 
− Not practical.  Long start-up.  New criteria/procedures.  Countries with different 
levels of deficits.  
 Conclusion  
 
1. EU commitment and political support to cotton initiative 
2. Strong EU-Africa Cotton Partnership and effective coordination 
• Mid Term Review (2004):  
− Millions for unforeseen are now programmable in ACP countries 
− Benin, Mali and Burkina Faso received additional resources 
− New allocations to 4 proponents for cotton action plans 
• End of Term Review in 2006:  be part of the debate - compete other uses 
• Some regional EU activities, need for complementary projects 
• Cooperation with international organizations operational in second half of 2005 
• Policy coherence:  progress on trade is now necessary  TN/AG/SCC/R/2 
 Page 15 
 
 
 Statement by Paraguay  
 
 
 The delegation of Paraguay thanks you for your efforts to realize the Sub-Committee's 
objective of correcting the policies and distortions affecting the international cotton trade. 
 
 Cotton growing and exports are of paramount importance for Paraguay, and have been so for 
a very long time.  Our country's main vulnerability lies in its dependence on only a few products and a 
few destination markets.  At present there is a tota l imbalance in the international trading system as 
regards conditions governing competition, domestic  support and international prices, and market 
access conditions.  
 Paraguay does not have the same approach to the cotton issue as other WTO Members.  As a 
landlocked developing country with a small agricu lture-based economy, in which cotton ranks as the 
second largest export product, Paraguay is not invo lved in preferential market access schemes nor 
does it have any trade preferences or request tariff preferences that are not consistent with the WTO principles.  On the other hand, it believes that the outcomes to be agreed in this Organization should 
take this situation into account. 
 
 There are few barriers to market access for co mmodities such as cotton, as a raw material, 
with mostly low tariffs.  It is when it acquires a certain amount of value-added, however, that the 
problems begin and tariff escalation appears, alon g with tariff peaks that hamper processing and 
prevent the conditions necessary for countries such as Paraguay to initiate projects for the 
industrialization of their own raw material, which ma y open up opportunities for investment, jobs, and 
so forth. 
 
 Basically in view of the foregoing, we would suggest assessing and giving consideration, 
under the market access pillar of the agriculture negotiations, to the following stages: 
 
 Cotton as a raw material; 
 cotton as a processed material, up to a specified level of processing; 
 cotton products, for final consumption. 
 
 The issues of tariff peaks and tariff escalati on will need to be addressed so that it can be 
assessed how and to what extent they affect the weakest and most vulnerable developing economies in 
the system.  
 Lastly, we wish to support the suggestions ma de by China and Brazil that paragraph 1(a) of 
the Work Programme circulated on 28 February should incorporate the three pillars of agriculture, in 
accordance with the July 2004 Decision. 
 
 TN/AG/SCC/R/2 
Page 16  
 
 Statement by Rwanda on behalf of the WTO African Group
 
 
 
 I would like to thank you, Mr Chairman, for your efforts to further our work in the Sub-
Committee on Cotton. 
 
 The outline you have just presented us of the activities undertaken since our last meeting has 
enabled us to make an updated a ssessment of the results achieved. 
 
 The African Group has taken note of the comments on the status of the cotton issue in the Special Session of the Committee on Agriculture and on the development component of that issue.  
 There is no longer any need to revert to the importance of the "cotton issue" for our Group or 
to the urgent need to address the matt er in a fair and appropriate manner. 
 
 However, we do wish to stress once again the need for a balance between the measures to be 
taken under the "development" component to save a cotton sector that is struggling for survival, and 
the bold and ambitious solutions to be sought on the trade front to an affliction that needs to be dealt 
with at its roots:  the domestic support measures  and the export subsidies that are causing trade 
distortions. 
  It is essential that all of the WTO Members, in conformity with the spirit and letter of the 
"July Package", should find solutions to the issues rais ed by the sectoral initiative in favour of cotton, 
as regards both its trade component and its de velopment component, by addressing the matter 
"ambitiously, expeditiously and specifically  within the agriculture negotiations". 
 
 This is not the time for statements of intentio n, procrastination, or speeches.  We must move 
forward on the basis of concrete proposals and an unambiguous commitment by all parties involved to 
achieving tangible results in the shortest time possible. 
 
 The credibility of this Organization would unq uestionably suffer an enormous blow if, by 
next July, no tangible result had been achieved, if no progress had been made towards finding a 
genuine solution. 
 
 The programme of the Hong Kong negotiations  already promises to be laborious, and we 
would be wise to lighten the burden by doing what we can to settle, here in Geneva, as many of the 
issues under negotiation in the framework of the Doha Development Agenda as possible. 
 
 And it would be difficult to find a more appropr iate outcome for this development round than 
the resolution of an equation whose factors are al l closely linked to vital development issues for 
countries that happen to be among the least developed of the international community. 
 
 In the next few days, the African Group will be  submitting its proposals on cotton, in keeping 
with the decisions adopted in July 2004, which stipulate that cotton should be addressed ambitiously, 
expeditiously and specifically. 
 
 We urge all of the parties involved, and indeed the WTO Members in general, to cooperate 
actively and usefully in settling this problem, which remains a test for our Organization.   The African Group would like to thank the WTO Secretariat, which has just provided us with 
updated information on the actions and initiatives undertaken by the bilateral and multilateral partners 
in support of the cotton sector. 
  TN/AG/SCC/R/2 
 Page 17 
 
 
  We sincerely hope that these actions and initiati ves will be significant, and that they will be 
able to provide a remedy, however slight, to the serious prejudice and the considerable losses suffered 
by producers and by the economies of the cotton producing and exporting countries, evaluated at 
approximately 400 million US dollars for the last 3 years. 
 
 In this connection, we also strongly recommend that the request by these countries for the 
creation of an emergency fund in support of the co tton sector be taken into account as rapidly as 
possible. TN/AG/SCC/R/2 
Page 18  
 
 Statement by Zambia on behalf of the LDCs
 
 
 
 At the outset, I would like on behalf of the LDC Group, to thank you, Mr. Chairman for 
convening this meeting and also to thank you for your introductory statement. We also wish to align 
ourselves with the statement made by the Ambassa dor of Rwanda on behalf of the African Group. 
 
 The LDC Group appreciates the efforts that you are making Mr. Chairman, to find a lasting 
solution to the issue of Cotton through the work of this Sub-Committee.  We wish to reiterate the 
sentiments we expressed at the last meeting of the Sub-Commi ttee on the need to advance the 
developmental dimension of the question on Cotton in order to better address the critical problems that beset our producers. 
 
 The terms of reference for the Sub-Committee,  i.e. "to ambitiously, expeditiously and 
specifically address the issue of cotton" will require the concerted efforts of all the membership of the 
WTO taking into account the urgency of the matter.  
 The Group of LDCs is convinced that under your steward leadership, the work of this Sub-
Committee will indeed yield positive results an d not remain another academic exercise.  TN/AG/SCC/R/2 
 Page 19 
 
 
 Statement by the representative of the International Monetary Fund  
 
 
Cotton Initiative—Update on Development Aspects  
 
 Thank you, Mr. Chairman, for the opportunit y to address this session of the Sub-Committee 
on Cotton on the issue of Coherence between the Trade and Development Aspects in the cotton 
sector.  In this brief presentation, I would like  to update members on some  recent cotton-related 
activities in the IMF's relations with Mali, Chad, and Burkina Faso and say a few words about the 
situation in Benin.  This does not mean that cott on-related activities are igno red in the IMF's relations 
with other low-income cotton producers, but, in the interests of Members' time, I thought it preferable 
to limit my presentation today to the four proponent countries of the Cotton Initiative.  
 Mali 
  On 7 March 2005, the IMF's Executive Board approved the first review under Mali's US$13.7 million PRGF arrangement.  Directors noted that economic performa nce was adversely affected by 
the economy's vulnerability to exogenous shocks - in particular the decline in the world cotton price.  
At the same time, unresolved structural problems - in particular, the persistent operating losses of the 
cotton sector - and delays in carrying out reforms,  continued to weigh on economic performance.  
Directors underscored the importance for the economy and for the public finances of improving the performance of the cotton industry.  They regrette d the delay in privatizing the state-owned cotton 
company, CMDT, and hoped that the authorities wo uld make best use of the additional time by 
obtaining the support of producers and putting in pl ace an appropriate institutional and regulatory 
framework.  Directors welcomed the recent measures to reduce the projected operating deficit of the 
cotton sector, including a fundamental reform of th e producer price mechanism and cost reductions at 
the CMDT, and looked forward to their full implem entation.  At the same time, some Directors 
observed that a reduction in cotton subsidies in key cotton-producing developed countries could 
improve world cotton prices and strengthen the viabilit y of the cotton sector in Mali and the region.  
 Chad 
 
 On 16 February 2005, the IMF's Executive Board approved a US$38.2 million PRGF 
arrangement and granted additional interim assistan ce of US$2.1 million under the enhanced HIPC 
initiative.  While welcoming the strengthened ec onomic management and improved transparency, 
including in the management of oil resources, Dir ectors stressed that Chad continued to face daunting 
challenges, including widespread poverty and im portant impediments to growth.  The authorities 
needed to continue efforts to manage the oil revenue in an efficient and transparent manner to reduce 
poverty.  Decisive progress was also needed on struct ural reforms, particularly in the cotton sector, to 
lay the foundations for a sustained expansion of the non-oil economy.  In that regard, the authorities 
will prepare a reform strategy, in consultation with  the World Bank, aimed at determining a timeline 
for the privatization of the cotton company, Co tontchad, and measures to strengthen producers' 
organizations.  Progress in this area, together with increased inve stment in infrastructure programmed 
for 2005, should contribute to productivity gains in the non-oil economy. 
 
Burkina Faso   On 2 February 2005, the IMF's Executive Board completed the second and third reviews of Burkina Faso's economic performa nce under a US$36.6 million PRGF arrangement.  While Directors 
noted that Burkina Faso's economy performed well in 2004, several challenges to sustaining economic 
success lay ahead, especially in the face of a sharp fall in world cotton prices and a rise in oil prices.  
Directors welcomed the authorities' commitment to  structural reforms to promote economic growth 
and enhance competitiveness,  particularly the liberalization and pr ivatization of the cotton sector.  
They agreed that the determination of the producer price of cotton should continue to be the TN/AG/SCC/R/2 
Page 20  
 
 responsibility of the private sector parties involv ed. However, and especially if the world price of 
cotton did not rebound in the coming months, Directors encouraged all parties - including the 
government as shareholder in the largest ginning company - to discuss ways to increase the pass-
through of world prices to partic ipants in the sector.  Some Dir ectors called on the international 
community to help Burkina Faso overcome financial difficulties stemming from the decline in cotton 
prices. 
 Benin 
  The last arrangement with Benin under the PRGF expired in March last year.  In the context of the last IMF Article IV consultation in Oct ober 2004, Directors called for a more determined 
implementation of structural reforms, especially with respect to the cotto n sector.  A background 
paper on cotton sector reform in Benin emphasized the difficulties associated with the reform 
programme, including the accumulation of payment arrears by some ginners; irregularities in the 
provision of inputs; dissatisfaction among farm ers with the management  of some producers' 
organizations; and the existence of a quota system for ginners.  Directors noted Benin's high dependence on cotton exports and on trade with Ni geria, and encouraged th e authorities to intensify 
their efforts to promote export diversification while  maintaining a liberal trade and exchange system.  
At the same time, it was noted that Benin's pove rty reduction efforts would benefit greatly from 
increased access to industrial countries' markets. 
  TN/AG/SCC/R/2 
 Page 21 
 
 
 Statement by the representative of the UNCTAD  
 
 
 I should like to brief the Sub-committee on some activities on cotton undertaken by 
UNCTAD. 
 
 On 28 February and 1 March 2005 a workshop was organized in Bamako, Mali, by 
UNCTAD, in cooperation with the Internationa l Cotton Advisory Committee (ICAC) and the 
Common Fund for Commodities (CFC).  This was carried out in the context of a small project 
financed by the CFC on "improving the sustainabi lity of the cotton sector in West and Central 
Africa".  This meeting was gener ously hosted by the Government of Mali and the organizers express 
their deep gratitude for this support.  The meeting was attended by 80 participants from around the 
world, comprising representatives of governments , international organizations including the WTO 
secretariat, civil society, researchers, farmers and the private sector.  The countries directly involved 
in the project are Benin, Burkina Faso, Came roon, Chad, Côte d'Ivoire, Mali and Togo.  
  The meeting had a focused coverage.  It was fairly modest and there was no intention to have 
an exhaustive discussion of all the problems faced by  the cotton sector in the region.  The aim was to 
identify specific actions that would improve the sustainability of the cotton sector from both the 
economic and environmental points of view, within a dynamic framework.  Input use and input supply 
systems as well as quality and traceability issues we re emphasized.  Discussions, which were based on 
a draft report prepared by a consultant, were very lively and action oriented.  It emerged that even 
though the cotton sector of the countries in the regi on appeared to have many  similar features, there 
was a lot that they could learn from each other.  Th is has given the organizing institutions very good 
indications about devising a programme focused on the specific subjects covered at the meeting.  And 
they intend to do so without delay.  
 
 The draft report is being revised in the light of the discussions.  The outcome of the meeting, 
including the proposals for action will be finalized and posted very soon on the UNCTAD website, 
http://r0.unctad.org/commodities/events.htm.  
 
 In the context of its mandate on providing market information and transparency, UNCTAD 
has recently prepared a comprehensive file on cotton.  This file, in French, is posted on the website 
http://r0.unctad.org/infocomm/francais/coton/plan.htm.  The English version is expected to be posted 
on March 24 on http://r0.unctad.org/in focomm/anglais/cotton/sitemap.htm.  
 
 
__________