RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/CTD/M/26 
5 September 2006 
 
 (06-4271) 
Committee on Trade and Development 
Twenty-Sixth Special Session  
 
 
 
NOTE ON THE MEETING OF 7 JULY 2006 
 
Chairman:  Ambassador Burhan Gafoor (Singapore) 
  
A.
 ADOPTION OF THE AGENDA ........................................................................................................1  
B. AGREEMENT -SPECIFIC PROPOSALS ............................................................................................1  
C. ALL OTHER OUTSTANDING ISSUES .............................................................................................9  
D. OTHER BUSINESS ......................................................................................................................12  
 
  A. A
DOPTION OF THE AGENDA  
1. The draft agenda for the meeting as containe d in airgram WTO/AIR/2854 of  26 June 2006 
was adopted . 
B. AGREEMENT -SPECIFIC PROPOSALS  
2. The Chairman  began by commenting on the overall pro cess.  He said that the work of the 
Special Session was part of the larger scope of th e Doha negotiations and as the Director-General had 
mentioned in the previous week, the Doha Round of  negotiations was in a crisis.  The question that 
arose was whether the Special Session should conti nue, stop or intensify its work.  In his view, 
Members could not afford to be complacent and desp ite the situation relating to the larger process, 
they had to continue working towards the Decemb er deadline given by Ministers in Hong Kong.  
There needed to be an outcome on special and di fferential treatment (S&D) once the Round came to a 
conclusion.  In that sense, the wo rk of the Special Session was important because it formed part of the 
single undertaking and would need to form a part of  any final package.  He said that there would 
undoubtedly be some impact in terms of Members' mood, but at the same time there was a need for 
Members to continue engaging on the Agreement-spec ific proposals and the other outstanding issues.  
They needed to keep in mind that the work of the Special Session was an important part of the overall 
process.   
3. He recalled that at the last formal meeting held on 1 June, Members had resumed discussions 
on the Category III Agreement-specific proposals.  At  that point he had indicated that he would 
continue informal consultations on some of those proposals.  He had convened a small, informal 
group meeting on 5 July to continue work on some of  the Agreement-specific pr oposals, in particular 
on proposal Nos. 24 and 25 and also proposal No. 79, all of which related to the Agreement on Sanitary and Photosanitary Measures (SPS).  The discussions on proposal Nos. 24 and 25 were based 
on earlier small group discussions that were held in May.  On these proposals, Members continued to 
face some difficulty in finding a right balan ce between predictability on the one hand, and 
automaticity on the other.  Members needed to co ntinue their work and although they had made 
progress, it was not going to be easy to find a balance.   On proposal No. 79, Members had made some TN/CTD/M/26 
Page 2  
 
  progress in terms of gaining a better understanding  what the proponents were seeking and his 
intention was to continue consulting on that propo sal.  It was his understanding that the proponents 
were considering revising the proposal and coming  up with alternate language in the form of a 
decision-making text.  He said that the discussions at the informal, small group meeting had been productive, but that there was clearly more work to be done.   
4. The Chairman
 went on to provide an overview of the status of the remaining 16 Agreement-
specific proposals.  On proposal Nos. 28, 29 and 30 on the Agreement on Import Licensing Procedures, he said that Members had come up w ith revised language which was discussed at the 
formal meeting held in March.  Even though th e work on those proposals was far from complete, it 
was encouraging that Members had been able to come up with revised language which they could 
build on as they moved forward.  On proposal No. 13 relating to Article XVIII of the GATT 1994, 
Members had also been able to come up with revised language which was also discussed at the 
meeting held in March.  Again, that provided a b asis to continue their discussions.  He urged the 
proponents of that proposal to meet with other stak eholders so that once consultations on that proposal 
resumed, Members could move forward.  As he had mentioned earlier, he had held several rounds of 
informal discussions on proposal Nos. 24 and 25 rela ting to the SPS Agreement.  The delegations of 
China and Egypt had put forward some suggested  language on those proposals which had provided a 
basis for future discussions.  On proposal No. 79,  more work was needed and he would continue informal consultations on that proposal.  Therefor e, since work had began in February 2006, Members 
had made some progress on seven out of the remaini ng 16 Agreement-specific proposals.  As for the 
remaining nine proposals, considerable work would be required if Members were to reach 
convergence.  The nine proposals included propo sal No. 14 on  Article XVIII:A of the GATT 1994;  
proposal No. 22 on the Understanding in Respect of  Waivers of Obligations under the GATT 1994;  
proposal No. 77 on the Understanding on the Interp retation of Article II.1 (B) of the GATT 1994;  
proposal No. 78 on the Understanding on the Interp retation of Article XXVIII of GATT 94; proposal 
Nos. 82 and 83 on the Agreement on Technical Barrie rs to Trade;  proposal No. 85 on the Agreement 
on Trade Related Investment Measures;  and pr oposal Nos. 86 and 87 on the Agreement on the 
Implementation of Article VII of the GATT 1994.  On those nine proposals, it was not a simple 
question of drafting or semantics.  The divergences were on substance and there had to be convergence on the basic ideas before Members could engage in textual discussions.  For that to 
happen, Members, and more particularly the proponents,  needed to reflect and engage in bilateral and 
informal consultations.  It was important to co me up with clear recommendations by the December 
deadline and he hoped that as Members reflected on the larger process, they would be able to continue 
engaging in consultations.  He sai d that Members had undertaken textual work on seven proposals and 
were yet to engage in textual discussions on the re maining nine proposals.  In order to get into a 
textual process, Members needed to reach convergen ce at the conceptual and substantive level.  
5. Continuing under the agenda item on Agreement-sp ecific proposals, he went on to address the 
duty-free quota-free (DFQF) market access decision agreed  at Hong Kong.  He recalled that at the last 
formal meeting, the LDCs had tabled a paper on Rul es of Origin.  At that time, Members had not had 
time to consider the paper and the LDCs had re quested an opportunity to make a Powerpoint 
presentation at the next formal meeting.  Since th e last formal meeting the LDCs had also tabled 
another paper on market access.   
6. On behalf of the LDCs, th e representative of Zambia
 presented the paper on rules of origin 
(TN/CTD/W/30).  He said that he would first address some of the issues that the LDCs felt Members 
needed to address regarding rules of origin.  Firs t, it was common knowledge that rules of origin 
could severely limit market access.  If a country had DFQF market access into a market but faced 
restrictive rules of origin, there was little or no value in that DFQF market access.  Simplified rules of 
origin were therefore important in that respect.  From the LDCs perspective, if the DFQF market 
access decision was to be implemented as a multilateral decision rather than a series of General 
System of Preferences (GSPs), it required a single set of rules of origin.  Different GSPs had different rules of origin, for example, the European Union had different rules of origin for different GSPs.   TN/CTD/M/26 
 Page 3 
 
 
  There were also different rules of origin between markets.  For example, Canada and Australia had 
different rules of origin for LDCs.  That was a r eal problem for producers in LDCs because the same 
product could face different rules of origin requi rements from one market to another, making it 
difficult to conform to those rules of origin a nd benefit from the DFQF market access.  What the 
LDCs were seeking was a single set of rules of or igin which would cover the DFQF market access.  
The debate on rules of origin had been going on for quite some time.  Discussions on  preferential and 
non-preferential rules of origin had taken place and th e LDCs hoped that the work on rules of origin 
in the Special Session would also contribute to the wider debate on rules of origin, especially 
preferential rules of origin.  Rules of origin co uld be used for a number of purposes.  The LDCs 
wished to have rules of origin address the issue of tr ade deflection.  He said that rules of origin could 
be used as a protectionist tool, to promote industr ialization and sometimes to promote investment.  
The LDCs were attempting to reduce trade deflection.   He said that there were a number of origin 
conferring criteria.  For agricultural products, orig in was usually conferred using the wholly produced 
criteria as defined in the Kyoto Convention of the World Customs Organisation.  Wholly produced criteria are not usually regarded as contentious and mo st rules of origin used those definitions.  The 
other way to confer rules of origin was through substantive transformation.  He said that there were 
three main ways of conferring origin through substa ntive transformation.  The first was a change of 
tariff classification, or change of tariff heading, represented by a change from one tariff heading to 
another tariff heading and was perhaps the most si mple way of confirming origin.  The second was 
value addition and local content which were being considered together.  Value addition was where 
origin was conferred when a certain percentage of  value was added.  Local content was where the 
origin was conferred if a certain value of lo cal content was used.  The third was specific 
manufacturing process where origin was conferred if  the manufacturing process involved a specified 
manufacturing process, such as, in the case of textiles,  knitting.  The LDCs did not wish to negotiate 
rules of origin line by line because that would take  a long time.  The easiest way to confer rules of 
origin was through a change of tariff classification,  but this entailed a number of problems.  One 
involved a situation where insignificant processes changed tariff headings.  For example, if you took 
fish and froze it, that could result in a change of  tariff heading.  There were other instances where 
significant processing might not change the tariff headi ng.  For example, if a compressor was used to 
make a fridge and then the compressor was imported,  the compressor could have the same tariff line 
as the fridge.  Origin would not be conferred because there was no cha nge in the tariff heading.  The 
Commission for Africa Report had recommended usi ng change of tariff headings and a 10 per cent 
value addition criteria which was a bottom line reco mmendation.  He said that if one used process 
application, then by definition, that would need to  be negotiated line by line.  What the LDCs were 
recommending was the use of value added and or loca l content criteria.  There were two approaches 
in defining rules of origin.  There could be very  broad qualifications on rules of origin or more 
detailed ones.  For reasons of clarity and ease, th e LDCs were proposing a mo re detailed qualification 
for rules of origin.  On value addition, the LDCs were proposing that origin could be calculated by 
subtracting the value of non-originating materials from the ex-works price of the good, dividing this 
by the ex-works price and multiplying by one hundred .  So if, for example, the ex-factory price was 
US$100 and the value of the non-originating materials was US$70, then the value added would be 30 per cent.  The rules of origin would therefore conform to a 30 per cent criteria.  Or the value 
addition could be calculated using the local cont ent calculation where the value of originating 
materials would be divided by the ex-factory price and this then multiplied by one hundred.  That was 
comparable to a situation where the value of orig inating material was US$30 and the ex-factory price 
was US$100, as the same 30 per cent local value c ontent would be achieved.  The LDCs were 
suggesting using a detailed calculation that woul d be easy to understand and conform to.   
7. He said that the LDCs also wished to address the problem faced by landlocked LDCs in 
adding value.  If materials were sourced within th e region of the LDC, then the cost of moving the 
intermediate good to the place of manufacture should be  included in the value of the material.  So for 
example, if Rwandan coffee was processed in Uganda , the cost, insurance, freight (CIF) costs of 
moving the coffee to Uganda would be added to the value of the originating materials.  The inverse 
was that when there were non-originating materials,  the CIF would be deducte d because otherwise the TN/CTD/M/26 
Page 4  
 
  landlocked countries would find it difficult to conform to  an origin conferring criteria.  He said that 
the cost of moving a container from Mombassa to Rwanda was about US$6,000.  If that was added to the cost of the imported material, it would be diffi cult to conform to local content criteria and the 
landlocked countries would be penalized simply becau se of the costs of transport.  The LDCs were 
suggesting the use of a system that deducted the costs of the CIF from non-originating material.  
There were also instances where one could not deduc t the CIF.  For example, if there was through 
transport from one country to another where the CIF was included, rather than attempt to deduct the 
CIF which was often difficult, one could have a lower percentage to confer or igin and that would be 
adjusted to take into account the co st of the CIF.  He said that ther e was also a need to guard against 
insufficient working processes.  For example, simp le packaging, re-packaging, freezing or drying, 
should not confer origin.  That would protect LD Cs from being subject to transhipments and would 
protect the country which was importing from transh ipment.  Territoriality was something that was 
included in a number of rules of origin.  What th e LDCs were suggesting was that if a product was 
produced in a LDC and was then shipped to anothe r country that was not an LDC for a particular 
process, for example shipping a pair of trousers to another country to fit in a zipper, and the finished 
product returned to the LDC where it was manufactured , since most of the process was carried out in 
the LDC, it would still confer origin in the LDC concerned .  With respect to cumulation, the LDCs 
were proposing three types of cumulation.  The fi rst type was cumulation with preference giving 
countries where the materials would be considered as originating in the LDC.  The second type was 
diagonal regional cumulation, where one attempte d to avoid having a situation where it was not 
possible to move to a regional customs union or te rritory where there were different market access 
provisions for LDCs compared to non-LDCs.  That related to cumulation with members of regional 
grouping as long as most value addition was in the LD Cs.  For example in the case of the potential 
COMESA customs union, cumulation could take place in Kenya and the other LDCs so that there would be the same external tariff.  The third t ype was cumulation with neighbouring countries which 
could be granted on specific request.  There were a number of countries that neighboured LDCs and 
for specific items one might wish to request cumulati on with neighbouring countries.  The fourth type, 
full cumulation, had not been included because LD Cs were being considered as a single customs 
territory, so by definition there would be  full cumulation with all other LDCs.   
8. He went on to present the paper on DFQF market access (TN/CTD/W/31).  He said that the 
paper was based on paragraph 42 of the Doha Mini sterial Declaration.  The LDCs assumed that 
Members agreed that S&D was necessary to enable LD Cs to use trade as a development tool and that 
at Hong Kong it was agreed that LDCs be provi ded with a minimum of 97 per cent DFQF market 
access product coverage with a view to eventually  providing up to 100 per cent coverage on an 
incremental basis.  It was also assumed that Me mbers understood that the decision agreed to at 
Hong Kong was a framework agreement and what Me mbers needed to work towards was how they 
would implement that decision.  What the LDCs we re seeking was that the DFQF market access to be 
provided to them in such a way which was comme rcially meaningful and coupled with simplified 
rules of origin.  A paper that had been prepared by the Secretariat provided information on the total 
tariff lines by country and the total dutiable LDC e xports.  The United States (US) had a total number 
of 10,496 tariff lines.  If they achieved 97 per cent DFQF market access, around 300 tariff lines would be excluded.  The LDCs were requesting that the exports to the US under the 97 per cent be 
commercially meaningful to the LDCs.  There were also other issues.  For example, the EU provided 
DFQF market access to LDCs under Everything-but-Arms (apart from a few tariff lines which were 
still dutiable).  However, that was not the full pi cture.  The question was whether the LDCs could 
benefit from that DFQF market access.  If the rules of  origin were complicated as they were under the 
Cotonou Agreement, then it was difficult to access tho se lines.  That was not an actual market access 
issue, but a theoretical market access issue.  Memb ers needed to address both issues at the same time, 
as they needed to ensure that th ere was DFQF market access in term s of numbers and, in addition to 
tariff lines that were duty-free, there needed to be simplified rules of origin.  In terms of 
implementation, the LDCs were suggesting that  the developed country Members provide DFQF 
market access on tariff lines where positive duties were still applied to LDC exports.  That might 
seem obvious, but there were some zero rated lines whic h were not specifically DFQF market access.   TN/CTD/M/26 
 Page 5 
 
 
  That went back to the issue of ensuring that th e DFQF market access was commercially meaningful.  
For those developing countries that considered th emselves in a position to provide LDCs with DFQF 
market access, they needed to ma ke their positions known by the end of 2006 or in the shortest time 
possible.  They needed to provide as a first step, DFQF market access to products of export interest to 
LDCs and those which were commercially meaningf ul to LDCs with a commitment to gradually 
achieving 100 per cent DFQF market access.  In that c ontext, he said that the LDCs had had a number 
of positive bilateral discussions with a number of developing countries.   
9. He went on to say that there were two ways to define the percentage of zero rated tariff lines 
for LDCs.  One was by dividing the total number of  lines by the number of lines that were DFQF.  
The other was by using a trade-weighted, average system.  For ease of understanding, the LDCs were 
suggesting the use of the first method which divided the total number of lines by the total number of 
lines that were zero duty for LDCs.  The LDCs also wi shed to see the rules of origin for DFQF market 
access conform to the suggestions contained in docum ent TN/CTD/W/30.  He said that the paper also 
highlighted that market access was not just about tariffs.  Among other things, it was also about rules of origin, sanitary and phytosanitary measures, non-tariff barriers, aid for trade and removal of 
supply-side constraints.  Although it was important for the LDCs to receive DFQF market access, 
Members needed to also concentrate on the other demand-driven issues, such as non-tariff barriers.  
For the LDCs, the implementation modalities of  the Hong Kong decision on DFQF market access 
were part of the unfinished business of the Agr eement-specific proposals and the LDCs therefore 
wished to engage on discussions on the implementati on of the decision in the Special Session of the 
CTD, the body that was mandated to carry out the ne gotiations on S&D.  The developed countries and 
the developing countries declaring themselves in a position to provide DFQF market access to LDCs 
should, by the time they submitted their comprehensive draft schedules of concessions, indicate how they intended to implement the commitments th ey had assumed under the Decision of Measures in 
Favour of Least-Developed Countries.  That was a way for those countries to explain how they were going to provide DFQF market access in a manner th at ensured stability, security and predictability.  
In earlier discussions on the proposal for DFQF mark et access, Members had stated that they could 
not include the commitment to DFQF in their schedul e of commitments.  The LDCs therefore wished 
to know in what manner the DFQF market access could be made stab le, secure and predictable.  The 
LDCs were also asking the developed countries and those developing countries declaring themselves 
in a position to do so, to provide a provisional list of products that they initially intended to exclude 
from the DFQF market access, the steps they intended to take to progressively achieve compliance 
with the obligation of DFQF market access and the time frame.  In essence, the LDCs were asking 
those countries to provide a negative list that coul d be used as the basis of negotiations with the 
LDCs.  That was the difference between the deci sion on DFQF market access and a GSP which was 
non negotiable.  The LDCs felt that it was important for them to participate in the process.  Once the 
developed countries and those developing countri es declaring themselves in a position to provide 
DFQF market access provided the necessary information,  they would enter into negotiations with the 
LDCs to allow the LDCs the opportunity to negotia te further improvements in market access.  In 
regard to the monitoring and review, that entaile d annual reporting by Members to the CTD Regular 
Session, some Members had already reported to the CTD and, while that was appreciated, that was 
only one part of the process.  The implementation modalities also needed to be decided on in the 
Special Session of the CTD.  The Integrated Data  Base (IDB) had been used when preparing the 
paper, however, it did not contain a lot of info rmation on preferential data because Members only 
provided such data on a voluntary basis.  In that respect, he requested that Members provide preferential data to the IDB as part of their overall commitments. 
10. The representative of Japan 
said that it was his understanding that the matter of the forum in 
which to discuss the issues related to the DFQF market access decision was yet to be resolved and 
discussing the LDC submissions in the Special Session did not mean that the matter had been settled. 
11. The representative of the European Communities  began by commenting on the paper on 
Rules of Origin.  He said that while it was not co mpletely clear what the LDCs' objective was in the TN/CTD/M/26 
Page 6  
 
  area of rules of origin, he was nonetheless relieved to  hear that the intention was not to negotiate a 
single set of harmonized preferential rules of origin li ne by line, as that would take a lot of time.  If 
that was not the case, he asked what the LDCs envisaged.  Was it to come up with common guidelines that individual countries could follow when applying their rules of origin in the context of autonomous measures in favour of LDCs?  That, in a sense was an elaboration of what Ministers had 
already agreed to at Hong Kong, in terms of Me mbers ensuring that preferential rules of origin 
applicable to imports from LDCs were transparent and simple.  He had also received some more technical questions from his capital which he would be  interested to discuss more informally with the 
LDCs.  He was particularly keen to understand w hy one way of calculating rules of origin had been 
proposed rather than any other.  On the paper on market access, he said that while his delegation had 
not had the opportunity to consider it in detail, it supported the concern of the LDCs to build on what 
Ministers had agreed on at Hong Kong in terms of follow up and concrete implementation of the 
decision by Members.  His delegation also understo od the LDCs' concern for Members to achieve the 
medium term objective of providing DFQF market ac cess to all products originating from all LDCs.  
His delegation was, therefore, supportive of the need for consultations to take place between the 
LDCs and those countries that were taking steps to  implement the decision.  His delegation also 
understood that the LDCs were keen to receive information on which pro ducts would be excluded 
under the potential 3 per cent exclusion.  His delegati on saw that as an important factor of the benefits 
accruing to the LDCs from the decision.  That was a process that would need to be engaged in quickly 
in order to provide a more comprehensive picture of how they would benefit.   
12. The representative of India
 said that both papers represented crucial aspects as a follow up to 
the Hong Kong decision to provide LDCs with DFQF ma rket access.  He shared some of the issues 
raised by the representative of th e European Communities (EC), in terms of the specific technical 
concerns that the LDCs had on rules of origin.  His delegation essentially agreed with what was 
contained in the market access paper and informed Me mbers that India was in the final stages of its 
internal process of attempting to come up with a programme that would conform to the DFQF market 
access decision.   
13. The representative of Pakistan  said that her delegation fully supported the implementation of 
the decision on DFQF market access for LDCs.  She dr ew the LDCs' attention to paragraph 1 of the 
market access paper where she highlighted that the qualifications to providing DFQF market access to 
LDCs had not been mentioned in its entirety.  In th at context, she requested that the reference relating 
to the need to take into account the impact on develo ping countries at similar levels of development as 
presented in paragraph 36a(ii) of Annex F of the Hong Kong Ministerial Declaration be included.  
With respect to the rules of origin paper, her de legation, like India and the EC, wished to understand 
the aim of the paper because the Agreement on Rules of Origin did not relate to preferential schemes.  She said that her delegation felt that the proposal  on Article 7.1 on "Cumulation with preference 
giving countries" gave S&D to developed countries a nd might not be in favour of LDCs since if an 
LDC's market access depended on the use of materials from preference giving countries, it might 
make those products less compe titive and deprive other developi ng and least-developed countries 
from supplying those materials. 
14. The representative of the United States
 noted that resolution of the LDC S&D proposals by 
Ministers at Hong Kong was an effort to ensure th at the Doha Round of negotiations delivered for the 
LDCs.  It was her delegation's hope that that early  harvest would reaffirm Members' commitment to 
issues of concern to LDCs and build a momentum for the overall negotiati ons.  Her delegation stood 
by the decision agreed to at Hong Kong and was co mmitted to implement its te rms.  The text of the 
decision indicated that implementation issues were to be discussed in the Regular Session of the CTD 
and Chairman Tsang's closing statement at Hong Kong urged Members to set out by the end of 2006, the means by which they would implement the deci sion.  Her delegation's 15 May submission to the 
Regular Session of the CTD set out an overview of the US process for implementation of DFQF 
market access for LDCs and was an elaboration of that process.  In providing information on how it would implement the decision, her delegati on had hoped to help Members understand its  TN/CTD/M/26 
 Page 7 
 
 
  implementation plans as well as enable other Memb ers to contribute their views on key decision 
points in its domestic process.  That was one of the issues that was important to LDCs in terms of knowing how the decision was going to be implemented.  As  her Government reviewed its options for 
programmatic and other changes, it welcomed othe r Members' substantive ideas on implementing the 
decision.  Information on other Members' plans and c oncerns would also be us eful in her delegation's 
deliberations.  While her delegation was interested in hearing others views, the terms of the decision 
had been agreed by Ministers at Hong Kong and we re no longer open for negotiation.  It was clear 
that Members would provide DFQF market access fo r at least 97 per cent of products originating from 
LDCs defined at tariff line by 2008, or no later than the start of the implementation period.  She said that her delegation was fully committed to implemen ting the decision in a manner that would result in 
meaningful market access opportunities for products  of export interest to LDCs and urged all 
Members to work towards a successful completion of the overall negotiations so that none of the 
valuable work that had been carried out thus far w as lost.  With respect to rules of origin, the DFQF 
decision was to be implemented autonomously wi thout prejudice to consideration of the LDCs 
submission on rules of origin.  She noted that to the extent that the LDC submission complemented 
implementation on a different basis, it was not cons istent with Annex F on rules of origin.  She 
clarified that Members could not assume that issues relating to the implementation of the decision were now part of the agenda of the Special Se ssion of the CTD and hoped that it remained where it 
was originally placed. 
15. The representative of Brazil
 said that his capital was still examining both papers.  Brazil was 
working with its Mercosur  partne rs in order to grant further preferential market access to all LDCs.  
As was agreed in Annex F of the Hong Kong Mini sterial Declaration, developing country Members 
were permitted to phase in their commitment and enjo y appropriate flexibility in coverage.  That had 
not been reflected in the LDCs' submission.  However, his delegation would work towards providing 
meaningful market access to the LDCs. 
16. The representative of Norway  said that his delegation had not had time to consider the LDC 
submissions and would therefore make some pr eliminary remarks.  He asked how the LDCs 
envisaged the relationship between the rules of origin  relating to the decision and the rules of origin 
that would arise from the work programme on the harmonization of rules of origin.  One would have thought that they would approach that by applying whatever came out of the harmonization work programme to the rules of origin relating to the DF QF decision.  With respect to cumulation, he said 
that there were extensive rules on cumulation not only with preference giving countries, but also 
diagonal regional cumulation, which included not on ly the LDCs but other countries that were not 
necessarily a part of a regional grouping as stated  in the proposal contained in paragraph 6 of 
Article 7.  His delegation wondered whether that would not extend the preferences to a number of 
countries that were not LDCs.  As he had mentioned before, there were a number of things relating to 
rules of origin that he did not understand including th e formula.  In that context regardless of whether 
that issue was to be discussed in the Special Sessi on or the Regular Session of the CTD, it merited the 
presence of rules or origin experts. 
17. Responding to the issues that had been  raised, the representative of Zambia
 said that for the 
LDCs, the forum in which to discuss the implementa tion of the DFQF decision was a non issue.  The 
LDCs wanted an opportunity to address implementa tion issues of DFQF market access and rules of 
origin and there were a number of reasons as to why these discussions should be held in the Special 
Session of the CTD.  In the closing session of the Hong Kong Ministerial Conference, the Chairman 
proposed that Ministers take note of the understanding  that the text concerning the DFQF decision of 
paragraph 36a(ii) was a framework and that deve loped Members and developing Members declaring 
themselves in a position to do so, set out by the end of 2006, the means by which they would implement the decision.  His delegation agreed with the representative of the US that the text of the 
decision was clear on providing DFQF market access for at least 97 per cent of products originating 
from LDCs, but the same could also be said for th e NAMA negotiations.  The text was clear that 
Members needed to reduce tariffs, the problem was how  to do that and the LDCs were faced with the TN/CTD/M/26 
Page 8  
 
  same question on the DFQF market access decisi on.  There needed to be some implementation 
modalities.  In addition, paragraph 36 of the Hong Ko ng Ministerial Declaration stated that "We take 
note of the work done on the Agreement-specific pr oposals, especially the five LDC proposals.  We 
agree to adopt the decisions contained in Annex F to  this document.  However, we also recognize that 
substantial work still remains to be done.  We commit ourselves to address the development interests 
and concerns of developing countries, especially th e LDCs, in the multilateral trading system, and we 
recommit ourselves to complete the task we set ou rselves at Doha.  We accordingly instruct the 
Committee on Trade and Development (CTD) in Sp ecial Session to expeditiously complete the 
review of all the outstanding Agreement-specific pr oposals and report to the General Council, with 
clear recommendations for a deci sion, by December 2006."  Paragraph 24 of Annex B of the Hong 
Kong Ministerial Declaration on NAMA stated that "In the discussions on this subject, it was noted 
that the Committee on Trade and Development in Sp ecial Session is examining the question of duty-
free and quota-free access for non-agricultural products  originating from LDCs.  Consequently, there 
is recognition by Members that the discussions in that Committee would most probably have an impact on this element of the NAMA framework, and w ould need to be factored in at the appropriate 
time."  From all of that, the LDCs contended that, not only were there issues to be discussed in terms 
of implementation of the decision, those issues we re meant to be discussed in the Special Session of 
the CTD.  On the question as to what the LDCs' obj ective was on rules of origin, he said that there 
were two issues involved.  First was why the LDCs were seeking rules of origin which applied across 
the board and second, was why the LDCs had opted fo r value addition or local content criteria.  The 
reason why the LDCs were seeking one set of rules of  origin was to ensure that if an LDC produced a 
good it could export that good to all developed co untries without being faced by fragmented markets 
due to different rules of origin.  For example,  an LDC producing apparel would be provided DFQF 
market access where the rules of origin in textiles allowed for the use of material from a third country.  
Where the rules of origin did not allow for the use of material from a third party, it would not be 
entitled to DFQF market access.  So an LDC could produce a shirt that would be accepted into one 
developed country market and not another.  That was not promoting multilatera l trade but seemed to 
be promoting trade deflection.  Therefore, issu es of harmonizing rules of origin across the board 
needed to be addressed.  For practical reasons, th e LDCs preferred to use value addition or local 
content criteria.  As he had mentioned earlier, where substantial transformation was involved, one 
could use change of tariff heading or value addition local content or specific manufacturing process.  If one used change of tariff heading, if the deve loped country agreed to have a negative list where 
everything was agreeable to change of tariff head ing except for a couple of lines, then progress could 
be made.  However, that was highly unlikely.  Memb ers would have to negotiate rules of origin on a 
change of tariff heading basis line by line.  That was the main reason why the LDCs had decided not 
to go for a change of tariff heading or specifi c manufacturing process which left value addition and 
local content criteria.  It was a purely practical is sue.  He confirmed that there had been bilateral 
discussions at the Ministerial level with the Gove rnment of India on the DFQF market access issue 
and the positive approach that was being taken by the Government of India on the issue was 
appreciated.  With respect to the issue raised by the representative of Brazil, he acknowledged that 
developing country Members declaring themselves in  a position to provide DFQF market access to 
LDCs were allowed flexibility in the provision of th at market access and stated that that could be 
added to the paper.  He said that the LDCs had not fo rgotten the qualifications that had been raised by 
the representative of Pakistan and would make the necessary changes to take those into account.  On 
the issue of providing cumulation with preference gi ving countries, he said that that was a normal way 
of looking at rules of origin and accepted that, for ex ample, the use of an intermediate product sourced 
from a preference granting country would be consider ed to be originating from the LDC in which it 
was processed.  Origin could not be conferred an y other way because if, for example, an LDC sourced 
cloth from a developing country to produce a shirt and then exported that shirt to that developing 
country, since the cloth came from that developing country to which the export was destined, the 
origin of the input would be as it had originated from the LDC manufacturing the shirt.  On the issue 
raised on the autonomous implementation of the deci sion, he clarified that while the LDCs did not 
disagree that the DFQF market access decision could be implemen ted under the Enabling Clause, it 
did not mean to say that it was a GSP.  In res ponse to the question raised  by the representative of  TN/CTD/M/26 
 Page 9 
 
 
  Norway, he said that what Members were dealing with in the Committee on Rules of Origin was non-
preferential rules of origin and not preferen tial rules of origin.  The work programme on 
harmonization of rules of origin related to non pr eferential rules of origin and the issues were 
different.  However, the LDCs were willing to discu ss rules of origin in any forum that the Special 
Session felt would be useful to discuss them in.  Ho wever that did not mean to say that the LDCs 
agreed that those issues should not continue  to be raised in the Special Session. 
18. The Chairman  said that even though some Members had not had enough time to consider the 
papers, in particular, the paper on market access,  the discussion had been useful and had provided 
Members with an opportunity to seek clarifications.  In his view, bilateral and informal consultations 
would have to continue between the key stakeholde rs, particularly between the LDCs and those that 
had made comments.  He therefore urged the LDCs to  continue to consult with the key stakeholders 
whose participation would be essential in implementi ng the decision.  There was a clear sense that 
Members agreed on the importance of implementing the decision  and that was encouraging.  It would be useful for Members to have more time to cons ider the two papers and consult internally with 
capitals.  At the next meeting, Members would have  another opportunity to discuss the papers.  He 
urged the proponents to also give some thought and reflect on the questions that had been raised, and 
consider whether they wanted to pr ovide more detailed answers.  It w ould be useful for the answers to 
be provided in written form since rules of origin was not an easy issue, even for the experts.   
19. The representative of Zambia
 said that the LDCs were keen to hold further discussions on the 
papers, either informally or with in the framework of the Special Se ssion.  The LDCs were also willing 
to provide written responses to any written questions  put in writing and if necessary to amend the 
papers. 
20. The representative of Japan  said that like others, his delegation was committed to 
implementing the Hong Kong decision on DFQF mark et access for the LDCs.  However, he reserved 
the right to further debate the forum in which th e issues related to the decision should be discussed.  
That was something that was still open and his dele gation hoped to take part in the consultations on 
how to deal with that issue.  His delegation had some comments on the rules of origin paper but felt 
that the paper should be discussed among the relevant experts.   
21. The Chairman  said that there was clearly a divergence of views on where the issue of 
implementation of the DFQF decision should be di scussed.  However, Members had raised a number 
of questions on the papers.  He noted the repr esentative of Japan's reservation and said that the 
proponents would need to undertake informal consul tations with the key stakeholders and consider 
whether or not they wished to table a revised pa per.  He said that he would provide another 
opportunity for Members to raise questions if they had any when they re-visited those papers at the 
next meeting in September.  He suggested that Me mbers with questions provide them in writing and 
make them available to the LDCs directly.  He underlined that a fundamental condition to pursuing 
the issue and achieving the full implementation of the DFQF market access decision, was the holding 
of consultations between the key stakeholders.  No  amount of discussion in the Special Session could 
take Members forward, in the absence of informal consultations between the ke y stakeholders.  As the 
Chairman, he was prepared to facilitate such a dial ogue and to undertake any in formal consultations if 
Members so wished.   
C. ALL OTHER OUTSTANDING ISSUES  
22. The Chairman  said that Members had last had a discussion on all other outstanding issues at 
the meeting held in April, and at that meeting,  the discussions had focussed mainly on the different 
elements that remained outstanding.  At that m eeting there seemed to be a focus on the Monitoring 
Mechanism and there seemed to be a general unders tanding that that could be a starting point for 
Members' work.  It was also suggested by some Members that the Monitoring Mechanism should be a 
tool to undertake regular evaluation of the eff ective utilisation of S&D provisions.  A number of TN/CTD/M/26 
Page 10  
 
  Members had also highlighted the need to de velop a common understanding on the objective, scope, 
structure and coordinating role of the mechanism.  He recalled that one member had stated that the 
Monitoring Mechanism meant different  things to different people.  So while there was a sense that 
Members should consider the notion of the Monito ring Mechanism, they were quite far from being 
clear on what exactly they had in mind.  He recalled that at the last meeting, he had suggested that 
Members keep in mind the three C's approach which w as, first, for each of them to "crystallize" their 
thoughts; second, to continue the informal "conversa tion" between themselves;  and third, to find 
"convergence".  It was his hope that Members had been able to give some thought to that and that they could build on the last discussion.   
23. The representative of the European Communities
 said that his delegation had little to add to 
what it had said at the last meeting in April.  He agreed that the discussion then had pointed to a broad 
convergence towards identifying the Monitoring Mechanism as the initial focus of work on the 
outstanding issues.  There were differences in appr eciation of what exactly a Monitoring Mechanism 
might entail and what its purpose would be.  Th ose were issues that Members still needed to 
collectively address.  His delegation wished to c ontinue the discussions in order to deepen the 
different elements involved.  The Chairman had already mentioned the types of headings against 
which Members could structure that discussion a nd he knew that other Members had ideas which 
were also worth exploring.  At that stage it was perhaps best to anticipate carrying out those 
discussions informally rather than formally. 
24. The representative of Kenya said that the Monitori ng Mechanism had been proposed by the 
African Group to monitor the implementation of  strengthened S&D provisions.  As had been 
mentioned, Members did not have  a common understanding on what the functions of the Monitoring 
Mechanism should be and how it would operate.  Without that common understanding, progress was 
unlikely.  If the common understanding was along the lines of what the African Group had proposed, then Members would need to ask themselves whethe r the time was right to put the mechanism in 
place, or whether it was best to wait until Members had made progress on the Agreement-specific 
proposals.  However, that was not something that should prevent Members from continuing their 
discussions on the Monitoring Mechanism.  He hope d that during informal consultations, Members 
could consult on other cross-cutting issues.  His dele gation had earlier mentioned that it was interested 
in pursuing a development framework which the African Group had proposed under Article XVIII of 
the GATT 1994. 
25. The representative of Brazil
 agreed that Members needed to reach a common understanding 
on the functions of the Monitoring Mechanism and agreed with the representative of Kenya that 
Members should monitor the implementation of th e strengthened S&D provisions.  There were two 
issues that were being discussed in  the WTO that Members needed to consider.  First, in the 
negotiations on agriculture, his delegation, along with  the Members of the G20, had put forward the 
idea of strengthening the monitoring of agricultura l policies which, as Members were aware, had an 
impact on development aspects.  The idea of strengt hening the monitoring of agricultural notifications 
relating to subsidies and other forms of export co mpetition policies had met with some difficulty.  
When Members referred to the Monitoring Mech anism to access how development was being 
addressed in the WTO negotiations,  they needed to take a horizontal approach.  In the Aid for Trade 
taskforce, there had been some discussion on possible recommendations on how to monitor and 
strengthen the evaluation of Aid for Trade projec ts and programmes.  About half of the S&D 
proposals related to technical assistance and there was a link between those discussions and the debate 
on Aid for Trade.  That was something that Memb ers needed to bear in mind when discussing the 
Monitoring Mechanism. 
26. The representative of Japan  said that his delegation did not ha ve any new ideas to add to those 
that it had put forward when the issue was last discu ssed.  He said that it was true that there was a lot 
in the Round to monitor and evaluate.  Aid for Trade as well as the development aspects of every 
negotiating body was something that was relevant to the work on S&D.  However, it was best to begin  TN/CTD/M/26 
 Page 11 
 
 
  by focusing on the scope and what to monitor in the context of S&D.  Members could then expand 
that to monitoring in other areas.  At the last  meeting, a number of Me mbers had suggested that 
previous submissions on the Monitoring Mechanism be re-visited and in that context he proposed that 
the Secretariat put together a compilation on the M onitoring Mechanism to provide a basis for further 
discussions.  
27. In response to the representative of Brazi l's suggestion, the representative of Kenya  said that 
the submissions that had been made on the Monito ring Mechanism in 2002 looked at how to enhance 
the usefulness or utilization of S&D provisions whic h Members were attempting to strengthen.  The 
paper recently circulated by the Aid for Trade ta skforce suggested the estab lishment of a monitoring 
body on Aid for Trade.  At that stage it was perhaps best not to mix what others were doing.  That 
could be  considered after finalizing the role and functions of the Monitoring Mechanism in the 
Special Session.  There had been some elements mentioned that could fit into the development framework, such as technical assistance under Aid for Trade.   
28. The representative of Switzerland
 said that it would be useful to have a compilation of the 
previous submissions on the Monitoring Mechanism.  There was also a compilation of some of the 
proposals on the Monitoring Mechanism in JOB(02)/ 138 which could be useful.  Based on what was 
contained in that document, a good starting point could be to build on the Monitoring Mechanism proposed by the African Group in document TN/C TD/W3/Rev.1/Add.1 which was a comprehensive 
submission. 
29. The Chairman
 said that it was clear that Members preferred discussions on the Monitoring 
Mechanism to continue informally.  He was, therefore, willing to organize informal consultations on 
the Monitoring Mechanism before th e next formal meeting which would be held in late September or 
early October, depending on what the situation was on the larger process.  He believed that compiling 
previous proposals on the Monitoring Mechanism was a good idea and could be done.  The Secretariat would prepare a simple compilation so as to preser ve the proposals in their original state without 
pre-judging the process.  He said that it would be useful for that compilation to be made available to 
Members before the summer break.  That would give  them enough time to consider it.  The value of 
the informal consultations would depend on ho w prepared Members were at the time of the 
consultations.  It was not a problem for him to organize the consultations, but what Members would 
get out of the consultations depe nded on them.  He therefore urged Members to give some thought on 
the issue.  That was something that Members need ed to reflect on internally as well as with other 
stakeholders.  With respect to the framework agre ement raised by the representative of Kenya, he said 
that in order to add value to the consultations, it w ould be useful to have additional information on the 
proposal from the proponents.  His sense was that if  Members wished to take  small steps forward, 
they would need to focus on the Monitoring Mechan ism.  However, they could also focus on other 
issues in the informal consultations.  That was some thing Members would have to prepare for in order 
to avoid repeating the general discussions that mi ght have already taken place in 2002.  If Members 
wished to see results on the outstanding issues, then  the process needed to be demand driven and there 
needed to be precision on any ideas put forward.   
30. He went on to say that that was the last meeting before the summer break.  As part of the 
2006 timelines the Special Session had a reporting requirement to the General Council that was 
scheduled during the last week of July.  The report to the General Council in July would be along the same lines as the last report made to the General Council in May.  It would be factual and simply 
reflect the status of work on the various cluste rs of issues, including on the Agreement-specific 
proposals, the outstanding issues and the DFQF market access issue.  As he had mentioned earlier, he hoped to hold the next formal meeting in the last w eek of September or the first week of October. 
Before that meeting, he intended to undertake so me informal consultations on the Agreement-specific 
proposals.  His intention was to continue discussions on proposal Nos. 24, 25 and 79 on the SPS 
Agreement, on which Members had already done quite  a bit of work.  On proposal No. 79, he hoped 
that the delegation of India would be able to cont ribute further in terms of providing more precise TN/CTD/M/26 
Page 12  
 
  language.  He also hoped that Members could conti nue informal consultations on proposal Nos. 28, 
29 and 30 on the Agreement on Import Licensing a nd proposal No. 13 on GATT Article XVIII.  He 
would perhaps hold two separate sets of informal  consultations, since the SPS proposals required the 
participation of SPS experts and the other proposal s required another set of experts.  He urged 
Members to undertake work on those Agreement-specif ic proposals before the next meeting.  He was 
also willing to undertake informal consultations on  the other outstanding issues.  As a result, he 
preferred that the next formal meeting take place pe rhaps in October, so that there was enough time to 
undertake informal consultations on some of the i ssues that he had mentioned.  As Members moved 
towards the December deadline, they  would need to begin constructi ng the S&D package, at least for 
the Agreement-specific proposals.  It was ther efore worthwhile investing time in informal 
consultations where Members could attempt to reac h convergence.  He said he was available to any 
delegation to discuss any issue they wished to raise. 
D. O
THER BUSINESS  
31. No issue was raised under other business. 
 
__________