WORLD TRADE  
ORGANIZATION  TN/AG/SCC/GEN/4 
1 March 2006 
 
 (06-0894) 
Sub-Committee on Cotton Original:   French 
  
 
PROPOSED MODALITIES FOR COTTON UNDER THE MANDATE 
OF THE HONG KONG MINISTERIAL DECISION 
 
Communication from the Co-Sponsors of the Sectoral Initiative in Favour of Cotton
 
 
 
 The following communication, dated 1 March 2006, is being circulated to Members and 
observers for the meeting of the Sub-Committee on Co tton of 2 March 2006, at the request of the co-
sponsors of the Sectoral Initiative in Favour of Cotton.  
_______________ 
 
 1. These proposals aim to answer the questions put by the Chairman of the Special Session of 
the Committee on Agriculture and to operationalize some of the decisions taken at the Hong Kong 
Ministerial Meeting, in particular  regarding domestic support and the se arch for a "mechanism to deal 
with income declines in the cott on sector until the end of subsidies".  More specifically, it focuses on: 
- Implementation of Members' decisions to  address cotton "ambitiously, expeditiously 
and specifically" (paragraph 4 of Annex A to the July 2004 Framework Agreement and paragraph 11 of the Hong Kong Decision); 
- implementation of Members' decisions to search for a " … mechanism to deal with 
income declines in the cotton sector until th e end of subsidies … " (paragraph 12 of 
the Hong Kong Decision). 
I. DOMESTIC SUPPORT 
2. These proposals are based on the "acquis" as set out in the July 2004 Framework Agreement 
and in the Ministerial Decision adopted at Hong K ong.  This is summed up in the paper by the 
Chairman of the Special Session of the Committe e on Agriculture, made available to Members on 
9 February 2006.  To facilitate the negotiati ng process, we have based our proposals on the 
Chairman's questions concerning cotton in the paper of 9 February 2006. 
3. The purpose of this submission is to propose specific modalities for implementing Members' 
decisions on cotton, as we indicated at the Sp ecial Session of the Committee on Agriculture of 
17 February 2006 on presenting the first elements  (TN/AG/GEN/12) of a reduction formula for 
domestic support for cotton. 
4. This submission follows the structure of the qu estions put by the Chairman of the Committee 
on Agriculture. TN/AG/SCC/GEN/4 
Page 2  
 
  A. "
WHAT CONCRETELY WOULD BE A "MORE AMBITIOUS " REDUCTION IN TRADE -DISTORTING 
DOMESTIC SUBSIDIES FOR COTTON PRODUCTION BE IN ORDER TO SATISFY THE CRITERIA THAT 
THE REDUCTION BE MORE AMBITI OUS THAN THE GENERAL FORMULA ?"1 
1. Operationalizing the term "more ambitious" 
5. More ambitious reduction must be construed, as the co-sponsors of the Sectoral Initiative in 
Favour of Cotton already outlined in their cont ribution of 17 February 2006 (TN/AG/GEN/12 and 
TN/AG/SCC/GEN/3), in relation to the general re sult of the agriculture negotiations on domestic 
support. 
6. Correction coefficient (c):  the co-sponsors of the Sectoral Initiative in Favour of Cotton 
propose the following formula for determining the sp ecific rate of reduction of the AMS for cotton: 
Rg = General reduction as a percentage;  final result for reduction of the AMS 
 Rc = Reduction for cotton as a percentage;  final resu lt for cotton in order to meet the requirement 
for specificity and more ambition. 
 
 
  7. This formula meets Members' expectations: 
 - It provides an ambitious result for co tton in the event of a modest result in 
agriculture; 
 
 - it imposes a higher level of ambition in the event of an ambitious result in agriculture;   - it is degressive in relation to the additi onal effort required for cotton based on the 
level of ambition of the result for agriculture in general. 
 
8. For the purpose of illustration, the following table shows hypothetical Rg values and the 
corresponding Rc values, starting at 60 per cent,  which is deemed to be a modest result. 
Rg % >>>  Rc %  Difference % 
60 >>>  82.2 22.2 
70 >>>  84.3 14.3 
80 >>>  88.3 8.3 
90 >>>  93.7 3.7 
100 >>>  100 0 
 
2. Base period 
9. Operationalization of the term "more ambiti ous" according to the method described above 
will be based on the values of s upport for cotton recorded throughout implementation of the results of 
the Uruguay Round, i.e. the six-year period from 1995 to 2000.  To calculate the base value of support 
(to which will be applied the proposed specific re duction formula), the arithmetic average of the 
amounts recorded for cotton in the DS:4 s upporting tables from 1995 to 2000 will be used. 
                                                      
1 "Agriculture negotiations:  non-exhaustive list of questions", Chairman of the Agriculture 
Negotiations, 9 February 2006, page 20, question 3(i). (100 – Rg)*100 
3*Rg Rc = Rg + ----------------------  TN/AG/SCC/GEN/4 
 Page 3 
 
 
  3. Elimination of all trade-distorting measures 
10. The Ministerial Decision of 18 December 2005 (WT/MIN(05)/DEC) advocates, in 
paragraph 12, a " … mechanism to deal with inco me declines in the cotton sector until the end of 
subsidies ". 
11. This decision reflects the wish of all Members to eliminate in full all cotton subsidies that 
cause distortion in the international market.  It also takes account of the Doha decision to give priority 
to international trade issues that affect the poorest countries more particularly. 
12. The results of recent research by the World Bank show the importance of this issue for poor 
countries and, what is even more essential, the need  for all cotton subsidies to be removed in order to 
attain the development effect.  A digest of this research2, prepared by the World Bank shows: 
 - That liberalizing the cotton market would have a significant impact on the global 
economy (+ $283 millions) and on internati onal market prices (+ 12.9 per cent); 
  - that the distribution of these benefits will favour the African countries, which stand to 
gain more than 50 per cent of them; 
 
 - that these benefits will accrue only if all support programmes are eliminated
. 
 13. According to the World Bank, a partial result woul d reduce the benefits to one quarter of what 
they would be in the event of total elimination of support. 
14. For all these reasons, the co-sponsors of the Sect oral Initiative in Favour of Cotton propose: 
 - that the Members of the WTO should deci de in April 2006 to eliminate all market-
distorting support measures by  a date to be determined; 
  - that the Members of the WTO should undert ake to agree before the end of the Doha 
Round to an end-date for such elimination. 
 
B. "
HOW , AS A PRACTICAL MATTER , CAN WE MEET THE HONG KONG DIRECTION TO GIVE 
PRIORITY TO REACHING THIS OUTCOME AND , AS REGARDS IMPLEMENTATION , ACHIEVE IT 
OVER A SHORTER PERIOD OF TIME ?"3 
1. How to fulfil the mandate to give priority to an agreement on cotton 
15. In order to operationalize the Hong Kong decisi on to give priority to seeking a solution for 
cotton, the proposal is a follows: 
 - Giving priority to seeking a solution fo r cotton means addressing it with a higher 
level of ambition and within a shorter peri od of time, as required in the July 2004 
Framework Agreement and the Hong Kong Ministerial Declaration; 
 
 - The approach and the formulae propo sed in this paper take account of the 
interdependence of the two issues (cotton and agriculture); 
                                                      
2 Les négociations sur le coton, situation post-Hong Kong et perspectives , statement by the World 
Bank, Geneva, 21 February 2006. 
3 "Agriculture negotiations:  non-exhaustive list of questions", Chairman of the Agriculture 
Negotiations, 9 February 2006, page 20, question 3(ii). TN/AG/SCC/GEN/4 
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   - in accordance with the Hong Kong ma ndate, it is proposed that 31 March 2006 
should be set as the date for a decision on the above-mentioned formula. 
 
2. How to fulfil the mandate to implement over a shorter period of time 
16. With regard to "implement[ation] over a shor ter period of time", the co-sponsors of the 
Sectoral Initiative in Favour of Cotton reiterate a nd formalize their proposal of 14 February 2006 set 
out in document TN/AG/GEN/12 and TN/AG/SCC/GEN/3:  " III.  REDUCTION OF TIME 
FRAME :  The time period for the reduction of domestic  support for cotton shall be one third of the 
period agreed upon for the reduction of domes tic support in agriculture in general". 
C. 
THE PRECISE RELATIONSHIP BETWEEN COTT ON AND THE GENERAL APPROACHES UNDER 
CONSIDERATION TO AMS , DE MINIMIS AND BLUE BOX ?4 
17. The proposals above establish the relationship as regards the specific approach to cotton and 
the general approach in respect of AMS. 
18. The Hong Kong decision says " We recall the mandate given by the Members in the Decision 
adopted by the General Council on 1 August 2004 to address cotton ambitiously, expeditiously and 
specifically, within the agriculture ne gotiations in relation to all trade -distorting policies affecting the 
sector ... ".  All Members thus stated their agre ement to the inclusion of Blue Box and de minimis  in 
trade-distorting policies.  It is precisely for this  reason that the negotiators added to the Doha 
Development Agenda the "overall cut", covering AMS, de minimis  and Blue Box. 
19. "Ambitious, expeditious and specific" treatment accordingly applies to de minimis  and above 
all to Blue Box in the same way as it applies to the AMS. 
20. With regard to Blue Box, the following criteria will be applied in order to reach an ambitious, 
specific and expeditious outcome for cotton: 
 - The final results of the agriculture ne gotiations as regards Blue Box disciplines will 
be applied specifically to the cotton areas and yields eligible for Blue Box measures; 
 
 - without prejudging the outcome of the ne gotiations in terms of a lower ceiling and/or 
additional criteria, the ceiling to be applied specifically to cotton will be calculated as 
follows: 
 
   The "blue" ceiling for cotton will be one third of the general "blue" 
ceiling 
 
 - This submission will be supplemented by a separate one on additional criteria to be 
applied specifically to cotton. 
 
II. ASSISTANCE 
21. At the Sixth Ministerial Conference at Hong Kong , in the context of the search for coherence 
between the trade-related and the developm ent assistance aspects of cotton, Members "urge[d] the 
Director-General to further intensify his consulta tive efforts with bilateral donors and with 
multilateral and regional institutions (...), and to  explore the possibility of establishing through 
                                                      
4 "Agriculture negotiations:  non-exhaustive list of questions", Chairman of the Agriculture 
Negotiations, 9 February 2006, page 19, question 3(iii).  TN/AG/SCC/GEN/4 
 Page 5 
 
 
  such institutions a mechanism to deal with income declines in the cotton sector until the end of 
subsidies."  
22. This submission aims to give effect to that mandate, to define modalities and to set dates to 
ensure that the results of the work done under th e mandate can be made available for the single 
undertaking at the end of the Doha Round. 
23. The proposal takes account of: 
 - The fact that in the poorest countries the cotton sector needs to be reformed and also 
needs the necessary investment  to ensure that African cotton is competitive on the 
world market, thereby ensuring that poor c ountries are able to take full advantage of 
the opportunities afforded by a co tton market free of disruptions; 
 
 - the need to set up a safety net for cott on producers in the LDCs enabling them to 
survive until such time as internal and external reforms bear fruit. 
 24. Any support mechanism for producers must take account of the following elements: 
 - Support to producers must not become price support, so its amount must be 
determined in relation to the effects of s ubsidies on international market prices and 
take into account the phasing out of the support; 
  - the support must be distributed directly to producers under the supervision of a 
neutral and independent body; 
 
 - the support must be clearly limited in time;   - the support must be linked to a prog ramme to strengthen the productivity and 
efficiency of the cotton sector in Africa. 
 
25. For the foregoing reasons, the co-sponsors of the Sectoral Initiative in Favour of Cotton 
propose the following modalities: 
 - The Member countries of the WTO agree to the principle of creating a safety net for 
poor cotton-producing countries in Africa in April 2006; 
 
 - the Member countries decide in April 2006 to establish a task force to include 
multilateral financial institutions, donor countries and a representative of the 
WTO Director-General to prepare a proposal to this effect by July 2006; 
  - the Member countries of the WTO undertak e, in July 2006, to instruct their 
representatives at the World Bank to ask the Ba nk to agree to a donors meeting in the 
Autumn of 2006 and to adopt a programme and financing therefor in time for 
inclusion in the single undertaking at the end of the Doha Round negotiations. 
 
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