RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/AG/SCC/R/4 
13 July 2005  
 (05-3136) 
Sub-Committee on Cotton  
  
 
SUMMARY REPORT ON THE FOURTH MEETING OF THE SUB-COMMITTEE 
ON COTTON HELD ON 22 JUNE 2005 
 
Note by the Secretariat
1 
 
 
1. The Sub-Committee on Cotton, which was esta blished by the Committee on Agriculture, 
Special Session at its formal meeting on 19 No vember 2004 in accordance with the instruction 
resulting from the decision on the Doha Work Pr ogramme adopted on 1 A ugust 2004 by the General 
Council (WT/L/579, refers), held its fourth me eting on 22 June 2005 under the chairmanship of 
Mr. Tim Groser of New Zealand. 
2. The agenda as contained in WTO/AIR/2592 was adopted. 
ITEM A:  ASSESSMENT OF PROGRESS IN THE AGRICULTURE SPECIAL SESSION  
(i) Statement by the Chairman 
3. Under this agenda item the Chairman gave his assessment of progress in the agriculture 
negotiations with a particular focus on cotton.  A su mmary of the statement made by the Chairman is 
attached to this report (see Annex 1). 
(ii) Statements by Members 
4. Following a general statement (see Annex 2), Be nin reintroduced the main elements of the 
proposal tabled by the African Group at the last  meeting of the Sub-Committee titled "Proposed 
Elements of Modalities in Connection with the Sectoral Initiative in Favour of Cotton" 
(TN/AG/SCC/GEN/2 dated 22 April 2005, refers).  Benin noted that the proposed modalities covered 
the three pillars of the Agreement on Agriculture a nd also took into account the results of the cotton 
panel between Brazil and the United States.  Benin, echoed by Chad, also recalled the proposal for an 
emergency fund supporting cotton production and farmer s to counter heavy cotton subsidies and   
falling international prices.  The Fund would rema in in place temporarily until all trade-distorting 
support in cotton were substantially reduced or elim inated.  The representative of Benin referred to 
the example of Argentina which had been a net exporter of cotton but was today importing cotton 
because of the subsidies mentioned earlier.  This was exactly what the four proponents of the Cotton 
Initiative were working at preventing from happening to their own cotton sectors. 
5. Argentina thanked Benin for its statemen t on and assessment of the cotton sector in 
Argentina, an assessment which it sh ared.  Argentina had always said that the Cotton Initiative tabled 
by the four West and Central African countries ha d come too late for Argentina because its cotton 
production had collapsed, going from 1 million tons to virtually nothing and Argentina was now a net- 
importer of cotton.  The cotton sector in Argentina had still not recovered and the impact of the 
                                                      
1 This document has been prepared under the Secret ariat'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/4 
Page 2  
 
 disappearance of the cotton sector had been disastr ous in the three provinces which grew cotton as 
these provinces were amongst the poorest in the country.   
6. Burkina Faso noted its support for the statement made by Beni n.  The cotton problem was one 
of deep concern, and Burkina Faso looked forwar d to finding rapid solutions to reduce the heavy 
burden borne by poor cotton farmers at home.  Burkina Faso wished to note the different supports 
which were being shown to the issue of cotton in its region.  The new president of the World Bank, 
following a recent field visit in Burkina Faso, had stated the World Bank's commitment to speak for 
and about the plight of cotton farmers.  Hen ce, Burkina Faso, echoed by Chad, stressed the 
seriousness of the situation, and noted that it and the other proponent countries were solely requesting 
fair trade rules so as to afford to their farmers th e right to live with dignity .  Burkina Faso once again 
called on all Members to engage c onstructively and devote their efforts to a swift resolution of the 
cotton issue. 
7. The representative of Mali fully associated itsel f with the statement made by Benin and 
stressed a few additional points. He first noted that he had attended, in the past year, cotton meetings 
in Senegal, Burkina Faso and Benin where, thr ough their spokespersons, African cotton farmers, had 
been increasingly present.  Farmers had noted that while a year or two ago, they had the impression 
that the cotton sector was in a bad shape and mayb e doomed to disappear, today this was no longer 
merely an impression.  As far as they were concerned, the cotton sector was "programmed" to disappear.  As political representatives of their St ates, Mali and the other countries had played down 
such statements and did not share such an unders tanding of the situation because they believed that 
their partners had not "programmed" the disapp earance of cotton in West and Central Africa.  
Reverting to the issues of subsidies, Mali noted  that the cotton sector was in serious trouble in 
countries of the region, and when cotton did not sell,  or sold at very low prices, governments had to 
resort to subsidies to dispose of  excess cotton.  However, the funds devoted to supporting the sector 
could be used for many other urgent problems, he nce putting governments in an extremely difficult 
situation.  Mali stressed that the issue had to be d ealt with in the WTO, and in particular in the Sub-
Committee on Cotton.  Obviously, Mali and the ot her proponent countries continued to welcome 
bilateral proposals, but they preferred that th e issue be addressed multilaterally, within the WTO. 
8. The representative of the United States noted th at he had a lengthy statement encompassing 
both trade and development aspects which he wished to  make at the appropriate stage of the meeting 
(the statement is attached in Annex 2 of this re port).  Under this agenda item, the United States 
wished to note that over the last ten days there had been intensive consultations on a number of 
technical issues including domestic support.  The discussions had been difficult technically as well as 
politically but they had provided a lot of focus on how  the agriculture negotiations might be able to 
move forward on the different trade elements unde r discussion in the Sub-Committee.  While there 
was clearly not a breakthrough yet, it was within that context that the United States strongly hoped that Members would be able to see a substantial reduction in all trade-distorting measures affecting 
the sector to help resolve the problems at hand. 
9. Benin noted, along with Burkina  Faso, that the African Group had tabled its proposal 
TN/AG/SCC/GEN/2 two months ago.  The proposal had been designed by the African Group as an input to the "first approximation" on modalities for both agriculture and cotton, foreshadowed for the 
end of July.  On the basis of that proposal, the African Group now called for written responses or alternatives to their own proposal so that the four  proponents of the Cotton Initiative and the African 
Group as a whole could commit to both informal and formal discussions and negotiations.  This was 
urgent in light of the end July "first approxi mation" and the need to design modalities on cotton. 
10. Burkina  Faso added that vague assessments and little movement did not provide much 
substance to report on.  Burkina Faso echoed the call by Benin for written responses to the proposal 
tabled by the African Group to help the proponents report to their governments that there had been 
new developments in the Sub-Committee.  TN/AG/SCC/R/4 
 Page 3 
 
 
 11. The representative of Brazil noted that she could only but support what her African 
colleagues had just mentioned with regard first to  the importance of the issue to the economies of 
developing countries and second on the need to find  a solution to it.  Brazil also understood the 
feeling of frustration felt by the African Group due to the lack of response to their proposal which Brazil had positively welcomed, both for being put on the table and because it could be a good basis 
for discussion in the Sub-Committee.  Brazil along with  the G-20 had tried to play a constructive role 
in the agriculture discussions and had come forw ard with suggestions th at would benefit cotton 
directly.  Brazil was still waiting for positive reacti ons from developed countries mainly on the issue 
of trade-distorting policies as positive contributions  and good will from all were crucial to moving 
forward and successfully concluding the negotiations .  Brazil recognized that this was not an easy 
task, but Members had a mandate which, Brazil, for its  part, was trying to abide by.  Brazil noted its 
readiness to cooperate with the Chairman on the best  way forward but just wanted to again state its 
support to the issue and recognize the fact that th e African countries had tried to make a concrete 
proposal and stimulate a debate.  Brazil further stated  that reactions to what had been tabled by the 
African group could provide a starting point.  Fi nally, Brazil noted that while negotiations were 
undergoing within the wider context of agriculture, if the Sub-Committee was to be successful, it also 
had to work as thoroughly as possible. 
12. Argentina stated its support for the statements made by Brazil, Benin and Burkina Faso who 
all had raised an important point.  There was a need for Members to provide a response to what had been proposed by the African Group.  The trade aspec ts of the Cotton Initiative had to be responded to 
as required by the negotiating process in order to est ablish the points of agreement and the points of 
divergence if they existed. 
13. The representative of the European  Communities noted that all Members agreed that a 
solution had to be found to the par ticular problem of cotton which was politically extremely difficult.  
The European Communities had repeatedly reaffirmed  its will to move forward and there was now a 
proposal by the African Group which was a good basis for discussions.  However, in light of the 
technical elements contained in the proposal, the European Communities wished to echo the 
suggestion made by Benin to hold informal consu ltations in a smaller setting to allow for a more 
substantive exchange. 
14. Benin recalled that the proponent countries had insi sted that the Chairman of the Agriculture 
negotiations also chair the Cotton Sub-Committee in  order to establish consistency between the two 
bodies.  The July mandate clearly stated that the i ssue of cotton had to be dealt with "ambitiously" and 
Benin hoped that there would be more ambition for cotton than in the agriculture negotiations as a 
whole.  It was on that basis that the African Group had tabled its proposal and Benin wished to thank 
the United States for its initial reactions as this w ould enable the proponents to report some progress 
to their governments and farmers.  Benin, echoed by Burkina  Faso, suggested that the Chairman 
organize a visit of some developed partners on the fiel d in Africa, to allow for a first hand look at the 
realities on the ground and the expectations poor rural populations set upon th e negotiations.  Benin 
believed that such a visit would contribute to incr easing the speed of the negotiations and raising the 
level of ambition, which Benin believed should be as high as possible. 
15. The representative of Côte  d'Ivoire echoed both Benin's and the European Communities' 
suggestion to hold informal consultations in a smaller setting for a more  detailed and technical 
discussion of the African group proposal.  The A frican Group had adopted an offensive position in 
tabling its proposal of 22 April 2005 and needed to  initiate bilateral contacts with Members on its 
proposal so as to make progress in the negotiations. 
16. Several strong statements of support for and confidence in Tim Groser to stay on as the 
Chairman of the Sub-Committee on Cotton were made throughout the meeting by a number of 
Members including Benin, Burkina Faso, Chad and Mali, the four proponents of the Cotton Initiative. TN/AG/SCC/R/4 
Page 4  
 
 17. Statements made by the following delegations  were forwarded to the Secretariat and are 
attached to this summary report:  Benin (on behalf  of the Four Co-Sponsors of the Sectoral Initiative 
in Favour of Cotton), Senegal, and the United States (see Annex 2). 
I
TEM B:  COHERENCE BETWEEN TRADE AND DEVELOPMENT ASPECTS : UPDATE ON THE 
DEVELOPMENT ASPECTS  
18. The Chairman recalled that the terms of re ference establishing the Sub-Committee on Cotton 
clearly referred to the need of coherence betwee n trade and development aspects of the cotton issue 
(paragraph 1.b and paragraph 5 of  Annex A, WT/L/579 refers). 
(i) Statement by the Secretariat 
19. The Chairman, on behalf of Mr Chiedu Osakwe of the Secretariat, informed the Sub-
Committee of the following: 
(a) the fourth Round of Consultations on th e Development Assistance Aspects of the 
Cotton Initiative would take place on Monday 18 July at 10 a.m. and the convening fax would be issued shortly. 
 
(b) the Director-General would issue a Se cond Periodic Report to the General Council on 
the "Implementation of the Development Assistance Aspects of the Cotton-Related Decisions in the July Package" after the Summer break.  This report would update document WT/GC/83 of 3 December 2004 to the General Council. 
(ii) Statements by Observer Internationa l Intergovernmental Organizations 
20. The representative of the IMF briefed the Su b-Committee on the outcome of the Cotton 
Seminar the IMF had organized in Cotonou, Benin on 18 May to assess the macroeconomic 
consequences of cotton price developments, partic ularly for the main cotton-producing countries, and 
also to consider concrete steps that would safeguard progress towards achieving the Millennium 
Development Goals (MDGs).  The Seminar was attended by Mr. de Rato, the Fund's Managing 
Director, the Finance, Agriculture and Trade Mini sters of the Cotton Proponents, cotton farmers, 
producers and representatives from industrial countries, and the WTO. 
21. The statement made by the IMF along with the Joint Policy Declaration, adopted at the 
Cotonou meeting, are attached to this report (see Annex 3). 
(iii) Statements by Members 
22. The representative of Burkina Faso noted that the agricultural sector, and cotton in particular, 
was the main provider of jobs with 2.5 million people employed in that sector in Burkina Faso.  This 
was clearly a crucial element of the development concerns of the government of Burkina Faso as 
cotton was vital in the fight against poverty.  Burkina Faso hoped that the response under the 
development aspects of cotton would correspond to the recommendations in the Joint Policy 
Declaration from the IMF Cotton Seminar organi zed in Cotonou in May.  Infrastructure and 
cultivation methods had to be improve d in order to boost the cotton industry.  The development aspect 
was as important as the trade track because trade results would not be relevant if those new trade 
opportunities could not be seized because of a failing cotton industry. 
23. Guinea noted that, as mentioned by Benin, alt hough the Cotton initiative had been initiated by 
four countries, 33 of the 53 African countries also depended greatly on the cotton sector.  Guinea just 
wished to remind all partners that there were a lot of other cotton producing countries in Africa which 
had also to be kept in mind when pla nning development projects and activities.  TN/AG/SCC/R/4 
 Page 5 
 
 
 24. The representative of China noted that cotton pr oducers and the cotton sector in China were in 
a similar situation to that of Indian cotton pro ducers and sector, hence China shared many of the 
points India had made. 
25. Benin noted that the countries concerned by the cotton problem in Africa were mainly LDCs 
exclusively dependent on cotton and this was comple tely different to situations in other countries 
which had a more diversified production base.  Re garding the trade track of the Cotton Initiative, 
Benin thanked the United States for its comments and welcomed the start of a debate.  Benin noted 
that economic theory stated that countries whic h were not competitive in one area had to stop 
producing in that area and African countries, desp ite underdevelopment, produced cotton three times 
cheaper than cotton produced in the United States.  Hence, according to economic theory, Benin noted 
that the United States should stop producing cotton and leave it to countries which were more 
competitive.  Regarding the elimination of subsid ies in favour of cotton and possible benefits for 
African cotton producers, Benin, echoed by Burkin a Faso, stressed that the issue at hand was the 
recognition that those subsidies distorted internatio nal trade in cotton and that problem had to be 
addressed first.  Studies had shown that the impact of the removal of subsidies on African farmers 
could be significant especially in  reducing poverty.  Hence, Members had to focus on getting rid of 
the distortions and allowing African farmers to ta ke their responsibilities and try to benefit from a 
world market free of subsidies. 
26. Côte d'Ivoire, in reaction to the United States ' statement referring to the competition between 
cotton and synthetic fibres, noted that studies had sh own that synthetic fibres were also dependent on 
petrol prices and this had to be taken into acc ount in assessing the possibility for cotton to gain a 
competitive edge. 
27. Statements made by Benin (on behalf of the Four Co-Sponsors of the Sectoral Initiative in 
Favour of Cotton), India and Rwanda (on behalf of the African Group), were forwarded to the 
Secretariat and are attached to this summary repor t (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. 
28. The Chairman summed up the discussions of the fourth meeting of the Cotton Sub-Committee 
and provided some concluding remarks.  A summary of the remarks made by the Chairman is attached to this report (see A nnex 1:  Concluding Remarks
). 
ITEM C:  OTHER BUSINESS  
Date of Next Meeting 
 29. The Sub-Committee agreed to meet again on 18 July 2005, following the Agriculture Week 
of 4 to 8 July. 
Chairman's Report to the Special S ession of the Committee on Agriculture 
 
30. The Chairman stated that in making 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.  Keeping in mind the interests of all Members the report would be circulated to Members, as part of the Summary Report on the formal meeting of the Committee on 
Agriculture Special Session, and if a factual erro r was discovered an amendment would be issued. TN/AG/SCC/R/4 
Page 6  
 
 Annex 1
 
 
Statement by the Chairman, Mr. Tim Groser 
at the Fourth Meeting of the Sub-Committee on Cotton held on 22 June 2005 
  
Agenda Item A(i):  Assessment of Progress in the Agriculture Special Session
 
   Under this Agenda Item "Assessment of Progress in the Agriculture Special Session", I would 
just ask you to read the document that I have to prepare setting out in formal terms my assessment of 
where we stand.  Unfortunately, b ecause of the intensity of the informal consultations process, I have 
not written it yet so I am slightly hesitant to outline it today.  I think all I would say in the 
circumstances is certain obvious points.  First of a ll, please read the paper, when I will have written it, 
in conjunction with the Agreed Framework of July 2004.  This is very important because in practice 
what has happened particularly in recent months is  that Members have been focusing on a set of 
issues in each of the three pillars and the choice of those issues is really dictated by what I call a 
logical sequencing of any complex negotiation.  By th at I mean and I have said this in many occasions 
in one way or another:  you do not get to the key issues without having some structure at least set down in a provisional way. So, if you like, putting off issues for later is simply a matter of how you, 
in a prudent way, put a negotiation as complex as this together. 
 
 Hence my comment, read my paper in conjunc tion with the July fra mework because all of 
you have particular points of sensitivity;  what is important to Honduras will not be important to New 
Zealand or as important to New Zealand and vice- versa and it is very important for each of the 
delegations for whom some crucial point recorded in  the Framework is not being developed that they 
have confidence that this will be developed in the subsequent phase and in fact if we do not move to 
some level of convergence on some of the structures required in the three pillars, we will never get to 
these points of deep concern to the individual delegati ons.  So, that is the key point.  The Agriculture 
framework of July 2004 represents what in French is called the "acquis" of the negotiation.  It is based 
on the Doha Development Agenda mandate and is fully intact.  Now, regarding the question of 
balance, as I will be saying in one way or another in this set of questions I am  putting out, this is not 
the next iteration of the Framework but rather a set of questions that I think I need guidance from the 
Membership on, before I can attempt anything that  we might describe as a "first approximation" of 
full modalities.  I cannot describe balance either in a precise way or necessarily define it even in a positive sense.  
I think I can define it in a negative sense however, in  a sense that is finally a subjective judgement, 
like beauty, balance is in the eye of the beholder.  I do not think you can have by the end of July this 
year, 12 months after a considerable achievement last year, something that moves forward the two 
pillars in Export Competition and in Internal Support and nothing on Market Access.  I do not 
imagine that, no matter what the different assessments on balance are in this Room. I do not think that 
that would meet a minimum sense of balance.  Mark et Access is by far the most complex, by far the 
most sensitive and of course Market  Access is a term that covers a whole series of other vital and 
difficult issues such as this balance between the fullest possible liberalization of tropical products, 
addressing the issue of preferences or the questi on of recently-acceded Members.  All of these are 
very important matters to the dele gations concerned and often to the Membership as a whole.  So, the 
Market Access pillar, no matter how much political guidance I get from the Members in the next few 
weeks, could not contain the same level of precision,  but we have to have something in my personal 
opinion.  If that is not a judgement shared by the Membership, the Membership will let me know.  So 
the questions that I am going to put to your Govern ments are questions where I think we need some 
convergence in the next few weeks and the corollary of  that is of course what happens if I do not get 
convergence amongst the Membership.  I do hope that the AVE lesson is firmly in people's minds 
because it is very much in my mind.  I do not really believe that some of these issues on structure are  TN/AG/SCC/R/4 
 Page 7 
 
 
 going to become easier just by pushing them into  the September to December phase and I do not think 
your Ministers will appreciate it if we serve th em up an undifferentiated mass of inadequately 
prepared issues at the Hong Kong Ministerial Meeting.   That is the logic behind this whole concept of 
"First Approximation".  
 What we will get by 31 July depends on you because I will continue to adopt a bottom-up 
approach, trying to develop convergence on key points, doing it incrementally because I know 
perfectly well that a top-down approach might work in some negotiations but it will not work in this 
negotiation.  You cannot solve fundamental political  problems around which there is no convergence 
by inventing an elegant technical solution to it.  I can give you 10, 15, 20 "elegant" technical solutions 
to some of these Market Access problems for exampl e but, unless the expectations of the Membership 
have been adjusted accordingly, they will never be acceptance of them.  So I think that it is important 
that you read this paper with great care.  I would suggest you should not try and mine it for every nuances because it is just possible that somebody wo rking under pressure may not get some nuance, 
that you particularly like, in. 
 
 But I will be trying to steer the process in some  directions and try a nd find some balance in 
the way I do it.  Now this is very important for the work of the Sub-Committee.  We have two tracks:  
we have the development track and we are going to  review that. My sense is: "finalement ça bouge", 
but this is all very difficult, putting it all together in the development track.  But on the trade track, our 
work is intimately linked to progress in the agriculture  negotiations.  All three pillars will have to play 
a role in trade policy reform of cotton.  I personally am of the view that, "la question primordiale", is 
the question of internal support in our range of ve ry sensitive issues there.  So, we know there is a 
baby inside and I am sure it will prove to be very  healthy but getting it out is a very painful process, 
very painful, and more painful for some than for ot hers it seems.  I think we will get there but I think 
it is essential that the Membership when it looks at  the general set of questions does keep cotton in 
mind particularly from the proponents' point of vi ew and I know that my West and Central African 
colleagues share this judgment.  It is not just them.  There is a whole lot of other developing countries out there for whom this is not perhaps an issue of  the same extreme relative importance as it is to our 
proponent countries, but it is still a very important  matter.  But on the other side there are deep 
sensitivities.  They cannot just be washed away.  They have to be managed in a prudent way as we 
move towards reform process.  So, I hope that pe ople, when they look at the overall questions I put, 
will bear cotton in mind because I think it is a key political issue into the orientation I am 
recommending they adopt for the next few weeks.  Concluding Remarks
 
 
 My thinking in a very general sense is this :  Members still have not come together on the 
many deeply technical issues that also have a hi gh political content to them.  We are working around 
the clock seven days a week to achieve this and I repeat my political point.  People must look at the 
overall state of the negotiations, also with the cotton i ssue in mind.  What I can see is that when and if 
we can bring some of these elements together, I th ink that would be a very fruitful moment to sit 
down in some type of very informal setting and th en go through the elements very much with the 
cotton perspective in mind.  Then we can see where we  see some real promise of reform from some of 
these elements.  So I think, that is the general id ea that I have in mind following the intervention of 
Benin and the European Union and taking full note of the substantive points made by the 
United States.  So perhaps I will ask the Membership  as a whole to reflect on that because I can see 
that that could be quite a useful way of getti ng some coherence between the Agriculture Committee 
and the Cotton Sub-Committee.  So we are continuing down this track.  I have not lost confidence in 
this negotiation, that is why I did not resign wh en I made a certain personal decision and we will 
carry on.  TN/AG/SCC/R/4 
Page 8  
 
  I would also like to make a non-prepared but informal couple of remarks on the underlining 
theme of some interventions.  Starting from Amba ssador Amehou's point about the full recognition 
that it is not just the proponent countries that have dire needs here.  I just want to say to all  developing countries with an interest in cotton,  that  I have not been able to spend much time in the 
last month or so with the proponent countries but I think it is in their interest that I have not spend 
much time with them because I have been focusing on  the substance of the trade track that ultimately 
is essential to all cotton producers but I have discuss ed this many times privately with them and my 
strong recommendation is take these assurances absolutely at face value.  I think that when it comes to 
the substance of this, it is very clear to me that if  we can put together a good and ambitious package in 
agriculture that this is going to benefit all the cotton producers.  I think it would be unacceptable to 
suggest that a poor cotton producer in India, Chin a or in the three Argentinean provinces mentioned 
earlier, are somehow less deserving and that is not what the proponent countries are saying.  Not at all.  The way in which this is distinguished with respect to the West and Central African countries is 
not based on this point.  Not at all.  It is just b ased on the fact that they have this unique dependency 
on this one sector.  From memory 90 per cent of a ll the cotton produced in the proponent countries is 
exported.  It is the relative impor tance of this issue for the West and Central Africans that is the 
distinguishing fact and not somehow a moral claim.  So these economies will be affected in a such a 
sharp way by these issues and that is the basis of the di stinction and I really think it is in the interest of 
everybody if nobody's good fate is called into ques tion here within the developing world because that 
is not an issue here.  The changes will be MFN on the trade track and they need to be, they will spread 
their benefits I would hope on that basis and all cotto n farmers who are either lightly subsidized or not 
at all, I hope will get the benefits from that.  Bu t the development assistance track has a particular 
urgency to it with respect to these countries that  are unusually dependent and anybody who represents 
a country in this Room that also has perhaps an unbalanced dependence on one or two commodities 
and I represented a country that used to be in th is position, I can assure you, needs to reflect very 
carefully on that point. 
 
  TN/AG/SCC/R/4 
 Page 9 
 
 
 Annex 2  
 
Statements at the Fourth Meeting of the Sub- Committee on Cotton held on 22 June 2005 
 
 
Agenda Item A(ii):  Assessment of Progress in the Agriculture Special Session  
  
Statement by Benin
 
on behalf of the Four Co-Sponsors of the Sectoral Initiative in Favour of Cotton  
 
 Mr Chairman, Distinguished delegates, Ladies and Gentlemen, 
 
 My delegation, together with those of the th ree other co-sponsors of the sectoral initiative in 
favour of cotton, would like to associate itself with th e statement just made by the delegate of Rwanda 
on behalf of the African Group.   I would also like to thank you, Mr Chairman , for convening this meeting, and to commend 
you for your tireless efforts to push forward th e cotton issue in the framework of the ongoing 
agricultural negotiations.   Following the establishment of the Sub- Committee on Cotton on 19 November 2004, our 
joint efforts have enabled us to: 
 
• establish the terms of reference of the Sub-Committee on Cotton; 
 
• draw up a work programme which requires us to work on all trade distorting policies affecting 
the cotton sector in all three pillars of market access, domestic support, and export 
competition. 
 
 Another significant step was the submission by the African Group, on 29 April 2005, of 
proposed elements of modalities on cotton (doc ument TN/AG/SCC/GEN/2 dated 22 April 2005). 
  Indeed, we now have the substance for the negotia tions on this subject that is so vital to the 
national economies of several African countries, incl uding LDCs, and to the welfare of millions of 
people that are already living under the poverty threshold. 
 
 It is important now that we move forward on this issue.  It seems to me that our concern is one that is shared by some of the parties involved in the cotton issue.  Indeed, the European Trade 
Commissioner, Mr Peter Mandelson, also confirmed th is on 19 April of this year in Bamako, (Mali) 
when he stated that "[t]he Special Sub-Committee on Cotton that has been set up in Geneva must now 
deliver results ." 
  This is why the four co-sponsors of the sect oral initiative in favour of cotton would like, 
through me, to invite Members to seek, in a constructi ve spirit, concrete results to the proposals of the 
African Group.  
 We would like to be able to rely on the coope ration of all of the parties involved and all WTO 
Members in holding constructive discussions that will help to solve this issue ambitiously, 
expeditiously, and specifically. TN/AG/SCC/R/4 
Page 10  
 
  
Mr Chairman,   As in the past, we remain open to negoti ations and to consultations of any kind. 
 
 We reiterate our availability and our commitm ent to seeking appropriate solutions to this 
problem.   It is with this in mind that we invite all of the parties concerned to participate effectively in 
the negotiations with concrete a nd constructive proposals.  Indeed, we are one month away from the 
first approximation of outcome of the different negotiations, including the negotiations on cotton. 
 Mr Chairman,   The "first approximation" of July must represen t an opportunity to record encouraging results 
on cotton. 
  The challenge is enormous, and expectations are high. 
  We would therefore be grateful, Mr Chairman, if in addition to the formal meetings of the 
Sub-Committee on Cotton, you could also organize inte nsive informal consultations to enable us to 
move forward. 
  Our countries stand ready to participate in this  process with a view to reaching, as rapidly as 
possible, a consensus that is  acceptable to all Members. 
 
 
Mr Chairman, Distinguished delegates,   We can and we must act in this spirit.  
 Let me conclude by expressing the hope of my  delegation and of the other three co-sponsors 
of the sectoral initiative on cotton that you will con tinue to chair the Sub-Committee on Cotton:  we 
all recognize and appreciate your availability, your  know-how, your relationa l skills and your aptitude 
for finding a consensus.  
 Thank you. 
   TN/AG/SCC/R/4 
 Page 11 
 
 
 Statement by Senegal  
  Mr Chairman,  
 On behalf of my Ambassador, I would like to thank you not only for convening this meeting, 
but for all you have done to move the cotton issue fo rward.  May I also take this opportunity to 
emphasize the importance of the cotton initiative for Senegal and the country's support for the African 
Group's guidelines and recommendations on the matter, as already noted by the Ambassador of Benin. 
 
 Mr Chairman, I call upon each and every one of us to make a real commitment to 
safeguarding this sector.  It is a sector of great importance to our economies, as African cotton producers emphasized at a recent meeting in Saly, Senegal, on 6 and 7 May 2005, when they called 
for "concrete and tangible actions, as a matter of urgency, to improve the trade reforms of certain 
cotton-producing  countries and at long last support the sustainable development of the sector by 
guaranteeing producers minimum prices in order to preserve their incomes."  I would like to highlight 
the words "concrete" and "tangible" and the phrase "sustainable development" so as to emphasize 
firstly the "quality effect" of the measures to be ta ken, and secondly, the expected medium -and long-
term results, i.e. the reform and improvement of the industry's structures as an effective contribution 
to the growth and development of our countries, th us bettering their means of participating fully in 
world trade. 
 
 Thank you, Mr Chairman.   TN/AG/SCC/R/4 
Page 12  
 
 Statement (and exhibits) by the United States
 
  
Introduction 
  During the past ten days the Chairman has called us together for a series of intensive meetings 
on several of the technical issues critical to each pi llar of the agriculture negotiations in hopes of 
achieving a first approximation in July.   Progress has been possible because our Chai rman has divided the issues into more 
manageable tasks to keep us focused with th e intention of building on areas where there is 
convergence, and pushing us where we differ,  to ultimately bring it all together. 
  We have worked, intensely, on all three pilla rs.  In the Export Competition pillar we have 
focused on the elimination of export subsidies.  In  the Market Access pillar we have had a formula-
related discussion around structure, but have yet to r econcile the divergent levels  of ambition.  And in 
the Domestic Support pillar the discussion has focu sed on the structure of domestic support reductions 
and on the criteria for the green and blue box policies.   The issues may be discussed individually, but nothing is agreed until everything is agreed, 
and the decisions will only be made when there is a balance in the entire packag e.  Cotton needs to be 
part of that package. 
  The Sub-committee on Cotton was created to  review the progress in the agriculture 
negotiations and to discuss how the trade liberali zation we are negotiating impacts least developed 
countries and their cotton sectors.  We are also here  to review issues specific to cotton – both trade 
related and developmental. 
  If we are committed to ensuring we improve the situation for Africa, including its cotton 
farmers, we need to acknowledge all of the challenges facing cotton and address them 
comprehensively.  
 Addressing any one of them inde pendently will not ameliorate th e situation.  As recognized 
by many participants in recent multilateral cott on conferences, a multi-pronged response is necessary. 
  We have repeatedly said we understand the importance of cotton in many African nations, 
and today I hope to share with you some tangibl e examples of how we believe we can make progress 
toward improving the situation.  I want to make three main points:  
  First, cotton-specific trade reform is not e nough to improve the situation for Africa and its 
cotton farmers.  Numerous independent studies have not found significant price impacts from cotton trade liberalization, particularly if the resu lt is focused on removing domestic support programs. 
 
 Therefore, secondly, we need to look more deeply at challenges facing the cotton sector in 
Africa, including increased global competition, development issues, and flagging demand for cotton products.  I will refer to these issues and how the United States is committed to development projects in Africa to help further their competitiveness.  
 Finally, numerous studies showing that, to ensure  that a new Doha agreement helps, not hurts, 
African countries and LDCs, we need an agreement with comprehensive tariff reductions.  The United 
States is committed to concluding a new agreem ent with substantial commitments across all 
commodities and markets, including cotton.  This approach offers the best  chance for WTO Members 
to deliver economic benefits to Africa. 
  TN/AG/SCC/R/4 
 Page 13 
 
 
 Further Reductions in Domestic Support Are Not Enough 
 
 To be blunt, developed countries are an easy target in cotton discussions because only a few countries use domestic support.  However, anyone committed to improving the situation for Africa, 
including its cotton farmers, must take note that credible estimates find minimal price impacts on 
cotton from domestic support. 
  In 2004, the Food and Agricultural Organiza tion (FAO) of the United Nations published a 
review of the literature on cotton liberalization.  Th is review extensively critiqued previous studies, 
including work done for Brazil and the West African countries.  
 
 The FAO itself estimated that the removal of all subsidies and tariffs for cotton worldwide 
would result in just a 3.1 percent increase in cott on prices.  The impact of removing U.S. programs 
alone:  approximately 2 percent.  
 This result is consistent with several other studies, including a 2003 study by an IMF 
researcher, who found that globa l cotton subsidy and tariff elimin ation would have a 2.8 percent 
impact.  The impact of eliminating U.S. programs alone:  2 percent.  
  Thus, although these studies assumed that U.S. payments are fully production-distorting, they nonetheless estimate that, at current prices, the impact of U.S. farm programs on world cotton prices 
is about 1 cent per pound. 
  Let me be absolutely clear:  while we be lieve, as these studies suggest, our programs have 
minimal impacts, the United States is committed to implementing the recent WTO cotton decision.  We have been engaging in in tensive domestic consultations on the matter and will make an 
announcement on compliance shortly. 
  We are committed to the Doha Mandate of substantial reform and increasing the market 
orientation of world agriculture.  Nonetheless, we must recognize that further reductions in domestic 
support for cotton are not enough for Africa or its cotton sector.  At minimum, other factors that must be addressed include high or unpredictable tariffs and discretionary TRQ administration.  But the 
deeper problems, and solutions, lie elsewhere. 
 
Challenges Facing Cotton in Afri ca: Increasing Competition, Developmental Challenges, and 
Flagging Demand 
  To better the situation for Africa and its co tton sector, we must recognize and address other 
significant issues affecting cotton returns.   Specifically, African farmers face increasing competition worldwide, serious developmental 
challenges, and flagging demand for cotton products .  Each of these issues threatens continued poor 
returns for African cotton farmers and low prices for cotton.  Each must be addressed in turn. 
 
Increasing Global Supply Means West Afri ca Must Increase Its Competitiveness 
 
 The global situation for cotton has been changi ng.  A major challenge for all cotton producers 
is that increased worldwide cotton production is expected to continue, pu tting downward pressure on 
prices. 
  Several major-producing countries have increased yields significantly while yields in the C-4 
countries have remained flat.  The net result is to weaken the competitive position of West African 
countries relative to other producers. (Exhibit 1)  
 TN/AG/SCC/R/4 
Page 14  
 
 Developmental Challenges and U.S. Response 
 
 Cotton is becoming a more competitive industry, and development assistance is needed to assist West Africa and its cotton sector to be more economically viable.  
 Africa must overcome increases in pest and crop disease, poor seed production and soil 
degradation, insufficient infrastructure, and domes tic marketing arrangements that negatively impact 
the price actually paid to farmers.   To this end, U.S. development agencies ar e fully engaged to address the obstacles faced by 
cotton-producing countries in West Africa.  The Un ited States Agency for In ternational Development, 
United States Department of Agriculture, and th e United States Trade and Development Agency 
continue to work with the West Africans on development activities. 
  Under the United States' Millennium Challe nge Account (MCA), hundreds of millions of 
grant dollars will flow into key West African c ountries (Benin, Mali, and Senegal; and Burkina Faso 
less so) in a way that the countries determine.  These countries have the opportunity to specifically 
target cotton farmers, but, to date, have chosen not to.  They have, however, proposed projects that 
would help the cotton sector generally, such as infrastructure projects.    The United States recognizes that West Africa is looking for immediate action.  That is why 
USAID is taking immediate action on 6 of the 15 "interventions" that are recommended in the 
assessment prepared by the U.S. Government with the C-4.  They are:  
1.  Strengthen Private Agricultural Organizations  2.  Link U.S. and West African Agricultural Research Organizations  
3.  Arrest Soil Degradation and Loss of Fertility in Cotton Areas  
4.  Expand the Use of Good Agricultural Practices in Cotton Farming Systems  5.  Establish a West African Ginning School  6.  Improve the Quality of Cotton throu gh Better Seed Cotton Grading and Classing. 
  We believe the Biotechnology Conference that th e U.S. is sponsoring this month (21-24 June 
in Mali) at the request of the C-4 and others will al so be responsive to some of West Africa's cotton-
related needs.   We do not believe that a stabilization f und can appropriately address the development 
obstacles facing West African countries in this sector. 
 
Demand for Cotton Products Has No t Grown Enough to Support Prices 
 
 In addition to helping West Africa through de velopment assistance, focus needs to be placed 
on action that can support prices in the long term:  building demand.  
 Despite record cotton production, prices, a lthough down, have not reached record lows 
because of the increase in China's import demand.  When China is increasing imports or decreasing 
exports, cotton prices go up. (Exhibit 2)  
  But demand for cotton is losing ground as the synthetics industry continues to expand.  
Between 1990 and 2003, only the U.S. among major consumers increased per-capita consumption of 
cotton products more than synthetics.  In the past decade, cotton consumption has grown about 
1.5 percent total while synthe tic consumption has increased 5 percent per year. (Exhibit 3)  
  TN/AG/SCC/R/4 
 Page 15 
 
 
  To help cotton we must find ways to increas e demand for cotton products. We can start by 
breaking down any protective tariff walls and elim inating the potential to distort trade through 
administration of tariff-rate quotas and licenses for cotton and cotton products.  
Shared Interests: Ambition in Market Access 
 
In order to ensure that the Doha negotiations improve the s ituation for Africa, WTO Members 
also need to support an ambitious result that looks beyond cotton.    
Studies by World Bank and IMF researchers and others have shown c onsistently that the 
biggest economic benefits – indeed, almost all of  them – will accrue from comprehensive market 
access reforms, which will increase consumption, expand choices, and reduce barriers to trade. 
 
These studies also suggest that an unambitious market access Doha resu lt will hardly change 
LDC welfare, and could even hurt them if on ly export subsidies and domestic support are 
substantially reformed. 
 
Without dramatic improvements in market ac cess across all markets and products, Members 
will not see significant improvements in world pri ces or welfare – regardless of the outcome of 
agriculture subsidy negotiations. 
 
Conclusion 
 
 The United States now has several years of e xperience engaging intensively on both the trade 
and development-related aspects of the cotton issue.   Through that experience, we have come to 
realize that there is no simple solution to the problems confronting Africa and its cotton sector.  
Cotton-related trade reform, while important, will ha ve minimal effects.  More significant would be 
increasing Africa's cotton competitiveness, and we ar e undertaking developmental efforts to achieve 
precisely that.  In addition, creative approaches to create demand for cotton pr oducts are needed long-
term.  Finally, studies have shown that only a round offering dramatic improvement in market access 
across all markets and products will provide the needed boost to Africa’s economic well-being. 
 
Some have advocated for an early harvest for cotton, but we maintain that would only 
undermine our ability to effectively achieve broad-b ased global farm trade reform.  Efforts that push 
this approach are counterproductive.   The research is clear:  Multilateral commitment s to substantially reduce tariffs across all 
markets and products are necessary to increase all Members' welfare. 
  This does not mean the United States is unwilli ng to further reduce trade-distorting support 
for cotton, it only means your help  will be required to do so.   
  We have to bring home a comprehensive a nd aggressive Doha Round agreement to ensure 
that our shared interests are met.   TN/AG/SCC/R/4 
Page 16  
 
 Exhibit 1 
Yield Per Harvested Acre 
 
China
IndiaBrazil
U.S.
African C-4
020040060080010001200
95 96 97 98 99 00 01 02 03 04Pounds
 
 
Exhibit 2 
China’s Net Trade vs. “A” Index 
 
-10-50510
1980 1984 1988 1992 1996 2000Million Bales
$0.00$0.25$0.50$0.75$1.00
$/Pound
China Net Imports A Index
 
 
Exhibit 3 
World Retail Per-Capita Fiber Consumption 
 
Cotton CottonSyntheticSynthetic
0246810121416
1990 2003Pounds
 
  TN/AG/SCC/R/4 
 Page 17 
 
 
 Data for Exhibit 1 
 
Yield Per Harvested Acre (Lbs./Acre)   
  95 96 97 98 99 00 01 02 03 04 
China 785 794 913 902 918 972 983 1049 848 990 
United States 537 705 673 625 607 632 705 665 730 855 
Pakistan 523 452 471 419 573 544 517 542 487 686 
India 284 296 269 269 269 248 274 269 344 389 
African C-4 375 351 351 300 296 278 340 318 354 331 
Source: USDA - Foreign Agriculture Service Production, Supply, & Distribution (PS&D) 
Database ( http://www.fas.usda.gov/psd/ ). 
 
 Data for Exhibit 2 
 
 China Net Imports 
(Million Bales) 1/ A Index 
($ per Lb) 2/ 
1980 3.544 0.942 
1981 2.199 0.738 
1982 1.01 0.767 
1983 -0.096 0.877 
1984 -0.859 0.692 
1985 -2.798 0.49 
1986 -3.153 0.621 
1987 -2.236 0.723 
1988 -0.188 0.664 
1989 1.008 0.824 
1990 1.277 0.829 
1991 1.028 0.631 
1992 -0.442 0.577 
1993 0.059 0.707 
1994 3.877 0.914 
1995 3.024 0.856 
1996 3.603 0.786 
1997 1.8 0.722 
1998 -0.322 0.589 
1999 -1.575 0.529 
2000 -0.207 0.573 
2001 0.107 0.418 
2002 2.376 0.559 
2003 8.659 0.692 
Source:  
1/ USDA - Foreign Agriculture Service Production, Supply, & Distribution (PS&D) Database 
(http://www.fas.usda.gov/psd/
). 
2/ National Cotton Council  Monthly Prices Database 
(http://risk.cotton.org/prices/ ). 
 TN/AG/SCC/R/4 
Page 18  
 
 Data for Exhibit 3 
 
Retail Cotton Consumption 
(Million 480-lb Bale Equivalents) 
  1990 2000 2002 2003 2004
World 85.33 90.79 94.71 97.02  99.31 
U.S. 12.21 20.51 20.81 21.22  21.21 
ROW 73.13 70.28 73.90 75.80  78.11 
Source: 'World' - PCI, World Synethtic Fibres Supply/Demand Report, 2004 
'U.S' - U.S. Retail Consumption=U.S. mill use + U.S.  textile imports - U.S. textile exports, data to 
calculate found in USDA - Economic Resear ch Service, Cotton & Wool Outlook 
(http://www.ers.usda.gov/Publications/so/view.asp?f=field/cws-bb/ ). 
 
  TN/AG/SCC/R/4 
 Page 19 
 
 
 Annex 3  
 
Statement by the IMF 
at the Fourth Meeting of the Sub-Committee on Cotton held on 22 June 2005 
and Joint Policy Declaration, adopted at the Cotonou meeting of 18 May 2005 
 
 
Agenda Item B(ii):  Coherence between Trade and Development Aspects:  
Update on the Development Aspects  
 
 
 Thank you, Mr. Chairman, for the opportunity to update the Sub-Committee once again on IMF cotton-related activities.   Today, I would like to report on the high-level meeting that the government of Benin and the 
IMF's African Department organized in Cotonou on 18 May 2005 to discuss with African cotton 
producers the macroeconomic impact and policy impli cations of the fall in the world cotton price for 
the principal West African cotton- producing c ountries.  Against the background of a 25 percent 
decline in cotton prices over the past year, senior officials from Benin, Burkina Faso, Chad and Mali, 
cotton firms and farmers, and officials from intern ational trade and devel opment agencies, debated 
ways to respond to the crisis in the sector, wh ich threatens to undermine macroeconomic stability, 
economic growth, and poverty reduction programs. 
  In his opening statement, the IMF Managing Director noted that prices for cotton exports had recently fallen to their lowest level since 1994.  Th e rise in the world cotton supply had been the key 
factor in the price decline, accentu ated by the strong euro  (to which the CFA franc is pegged).  The 
IMF Managing Director proposed a four-pronged response. 
  First, preserving macroeconomic stability.   There was agreement that domestic price 
adjustments, while difficult, were necessary in orde r to preserve fiscal stability.  Such adjustments 
were being put in place by both private sector and state-owned cotton firms.  For instance, Burkina Faso indicated that prices paid to cotton growers in the coming season would be reduced and 
that additional declines could deter farmers from harvesting their crops.  Mali also noted producer 
prices for the coming season would decline to protect the 2006 budget from significant sector support.  According to the producers' association in Burk ina Faso, agreements on producer pricing in 
Burkina Faso had been facilitated by farmer ow nership of capital in cotton ginneries, which had 
helped improve understanding of deve lopments in world prices.  There was a broad consensus that the 
potential adverse impact of the decline in prices on poverty should be addressed by well-targeted and 
temporary measures to protect the poor rather than price supports.   Second, enhancing the efficiency of cotton production.  Raising efficiency is key to the 
long-term viability of the sector and boosting farmer  incomes, and will also strengthen the ability to 
cope with external shocks.  While the need  for improved productivity was uncontested, some 
participants drew attention to their countries' adju stment problems.  The World Bank outlined ways to 
improve competitiveness by reducing production costs,  improving management of cotton sales, and 
improving infrastructure and the investment envir onment.  The Bank emphasized the importance of a 
regional approach based on market integration a nd policy convergence, with specialization raising 
efficiency.  USTR discussed areas where U.S. fundin g could help improve African cotton production, 
processing, and marketing. 
  Third, eliminating developed countries' cotton subsidies.  The proponents of the Cotton 
Initiative underscored their continuing efforts to el iminate competitor countries' domestic support as 
well as trade-distorting export subsidies.  Their removal, according to some studies, would have 
obviated the need for downward adjustments in prod ucer prices and would have spurred production in TN/AG/SCC/R/4 
Page 20  
 
 non-subsidizing countries.  The WTO Secretariat not ed that the trade-related aspects of the Cotton 
Initiative would be addressed with in the framework of the Doha Round "ambitiously, expeditiously, 
and specifically."  Participants took note of the WTO appellate body recent ruling on the application 
of certain cotton subsidies and the intention of the parties involved to implement the decision.  Some 
African participants also urged that cotton sector reforms not be put on hold in anticipation of the 
early elimination of trade distortions. 
  Fourth, protecting the poor during adjustment.   The most contentious issue was how 
development partners could help.  African propo sals for a regional emergency fund to support cotton 
prices were viewed with some scepticism by de velopment partners, alt hough France mentioned that 
the French authorities supported discussing how such  a fund might work.  The European Commission 
pointed out that direct, case-by-case budget support would be more effective than a regionally managed price support fund.  The IMF, in tu rn, emphasized that a support fund would reduce 
available resources for poverty reduction spending a nd risked supplanting the role of banks in 
financing the cotton sector.  However, the IMF stood ready to augment arrangements under the 
Poverty Reduction and Growth Facility (PRGF) if th ere is an external financing requirement resulting 
from terms of trade shocks.  The United States indi cated that three of the four proponent countries 
could potentially have much greater access to assi stance for their cotton sect ors through the U.S. 
Millennium Challenge Corporation while implementing the necessary reforms.   At the end of the meeting, the participants i ssued a joint policy declaration describing in more 
detail the elements of the above proposed four-pronge d response.  This declaration has been circulated 
as a background document to this meeting and is also available, together with the speech of the IMF 
Managing Director, on the IMF website.   Thank you for your attention. 
 
  TN/AG/SCC/R/4 
 Page 21 
 
 
 COTONOU COTTON CONFERENCE  
MAY 18, 2005 
JOINT -POLICY STATEMENT  
 
 
 
The Context  
 
The growth of the cotton sector in West Africa a nd Central Africa over the past four decades has been 
one of the major export success stories of sub-Sa haran Africa:  no more so than in Benin, 
Burkina Faso, Chad, and Mali where the perform ance of the sector affects overall economic 
performance.  The viability of the sector is under pressure as farm ers and ginners are facing declining world cotton 
prices, exacerbated by the appreciation of the euro  against the US dollar (accounting for a 20 percent 
drop of local currency prices), producer subsidies in some major cotton producing countries, a surge 
in output from other developing countries including China, Brazil, India and Pakistan, and by slow productivity gains in cotton producing African countries.  These developments in the cotton sector could have adverse macroeconomic effects in the region:  
reducing growth;  weakening the fiscal and external pos ition;  and, straining efforts to reduce poverty.  
However, we recognize that the economic implica tions depend to an important extent on policy 
responses – and this was the focus of the conference discussions.  
Policy Responses So Far  
 The governments of Benin, Burkina Faso, Chad and Mali have implemented to varying degrees sector 
reform strategies during the past few years.  Reforms have aimed in particular at increasing producer's involvement in cotton sector management, reducing th e cost structure of ginning companies through 
privatization and opening up competition in the ginn ing sector.  However, implementation has been 
uneven and the results of these reforms, so far, have been mixed.  
At the same time, the governments have sought th e removal of developed country subsidies in the 
context of the Doha round world trade negotiations.  This is being taken forward by the WTO Cotton 
Sub-Committee that addresses both the trade and de velopmental aspects of cotton, including with 
wide-ranging discussions at a seminar in Cotonou one year ago.  Trade ministers from Benin, Burkina Faso, Chad and Mali recen tly issued a declaration stressing the necessity of quick progress in 
the negotiations. 
 The World Bank and International Monetary Fund ha ve strongly supported structural reform in the 
cotton sector in the affected countries as well as th e liberalization of international trade through the 
removal of trade-distorting subsidies in industrial countries.  
But more needs to be done to ensure continuing m acroeconomic and fiscal stability in the context of 
low cotton prices, to safeguard economic pr osperity and progress toward the Millennium 
Development Goals.  Additional steps are needed by both West African exporting countries and the industrialized countries. TN/AG/SCC/R/4 
Page 22  
 
 Looking Ahead – Policy Requirements  
 
Seminar participants recognized the serious cha llenges facing the West African cotton sector with 
cotton prices unlikely to rise significantly in the peri od ahead.  Participants reached a consensus that a 
multi-pronged response is necessary.  The key points of this response are: 
 
• Maintaining macroeconomic and fiscal stability in the region. 
- Domestic prices need to reflect developments in world market prices in order to preserve 
fiscal stability and ensure the efficient allo cation of economic resources, both of which 
are essential to poverty reduction and achieving the Millennium Development Goals. 
- Where the private sector already sets prices a return to government set prices should be 
avoided, relying instead on competitive market forces supported by the use of hedging 
instruments. 
- Where government ownership in the sector re mains, price-setting mechanisms need to 
link changes in world prices to domestic prices. 
- The potential adverse impact of the decline in prices on poverty should be addressed by 
well-targeted and temporary measures to protect  the poorest rather than price supports. 
• Raising efficiency is key to the long-term viability of the sector and boosting farmer 
incomes, and will also strengthen the ability to cope with external shocks.  
- The adoption of high yielding genetically modi fied cotton could offer a promising avenue 
to boost competitiveness. 
- We recognize that developing cross-border trade in seed cotton, as envisaged in the 
WAEMU treaty, would increase competition and reduce costs, and we are considering 
actions in this area.  This should also he lp in promoting the development of textile 
companies in the cotton producing countries.  The development of a regional cotton exchange would contribute to these efforts. 
- In some countries, strengthened producer asso ciations could facilitate participation in 
contract farming arrangements, input supply, and technical services. 
- Exploit additional room for cost reductions, especially at the ginning level. 
• Tackling trade distorting policies affecting the cotton sector within the framework of the 
multilateral trade negotiations.  
- The July 2004 Framework Agreement of th e Doha Round calls for addressing the trade-
related problems in the cotton sector "ambitious ly, expeditiously and specifically" within 
the framework of the agriculture negotiations. 
- The elimination of cotton subsidies would lead to higher cotton prices in the short run and 
spur production in non-subsidizing countries – a nd we see this as an important part of an 
ongoing effort to further liberalize world trade. 
- In this context, the recent WTO appellate c ourt ruling on cotton s ubsidies adds a legal 
dimension to the need for prompt action to address industrial country cotton subsidies.  TN/AG/SCC/R/4 
 Page 23 
 
 
 • Mobilizing donor support to strengthen th e supply side and to preserve poverty 
reduction objectives.  
- The impact of low cotton prices on macroe conomic management in cotton-dependent 
countries, could be mitigated through donor support for supply side reforms to promote 
economic opportunity and diversifica tion and to strengthen institutions. 
- Donors should also consider well-targeted suppor t in order to help the most vulnerable 
segments of the population cope with th e impact of exceptional price volatility. 
- Donors need to strengthen coordination in de livering such support in the context of a 
regional strategy for cotton, including intra-re gional seed cotton trade.  It remains critical 
that such support does not interfere with or  set back the development of market-based 
mechanisms in the cotton sector. 
- The IMF stands ready to augment PRGF arrange ments if there is an external financing 
requirement resulting from terms of trade shocks. 
 TN/AG/SCC/R/4 
Page 24  
 
 Annex 4
 
 
Statements at the Fourth Meeting of the Sub- Committee on Cotton held on 22 June 2005 
 
 
Agenda Item B(iii):  Coherence betw een Trade and Development Aspects  
Update on the Development Aspects  
  
Statement by Benin
 
on behalf of the Four Co-Sponsors of the Sectoral Initiative in Favour of Cotton  
  Mr Chairman, Excellencies, 
Representatives of International Organizations, and Regional and Sub-re gional Organizations, 
Distinguished delegates, Ladies and gentlemen,   On behalf of the co-sponsors of the Sectoral  Initiative on Cotton, I would like to endorse the 
statement made by the delegation of Rw anda on behalf of the African Group. 
 
 We would also like to thank the WTO Secretar iat, the bilateral and multilateral partners and 
the regional and sub-regional organizations for th e information they have just given us, which 
supplements the information provided at the last meeting of the Sub-Committee on Cotton, on the 
activities and initiatives conducted within the framework of the implementation of the 
recommendations of the WTO Regional Workshop he ld in Cotonou on 23 and 24 March 2004 and the 
WTO General Council decisions of late July 2004 on the development aspect of the cotton issue. 
  Such activities and initiatives are useful and fo rm part of the endeavour to support African 
cotton production, build up processing capacity and in crease the supply of cotton and its by-products 
on the international market. 
 
 Needs in this area are considerable and vari ed, and this is why the African cotton-producing 
countries call on their partners to provide more effective support for the different projects and 
programmes they have identified.  
 Such projects and programmes range from seed improvement and the development of 
cultivation techniques and ginning capacity, to cotto n processing, training, the organization of cotton-
producing communities and the sharing of successful experiences.   Our countries are continuing to work on the co tton-sector reforms they have already initiated. 
 
 Admittedly, the approach may vary from country  to country, but our objectives are similar in 
that we are seeking to improve production capacity  and increase competitiveness in a sector that is 
vital to the economies of our countries.   The African cotton-producing countries would lik e to be supported in this venture so as to 
ensure that the desired results are achieved. 
  TN/AG/SCC/R/4 
 Page 25 
 
 
 Mr Chairman, 
  May I take this opportunity to remind those pr esent of the recent visits of three leading 
international figures, namely the Managing Director of the IMF, the recently appointed President of 
the World Bank and the EC Trade Commissioner, to  Benin, Mali and Burkina Faso, respectively. 
 
 In these three countries, they saw and were able  to appreciate with a great deal of sensitivity 
what cotton represents for the economies of such countries and in the socio-economic life of cotton-
producing communities.  
 Their hearts were touched by the real diffi culties experienced in this area of production and 
by the genuine needs that exist as regard s the promotion of activities in the sector. 
  Consequently, we would once again urge all Members to join forces in order to save the 
African cotton sector and the vulnerable communities it employs. 
 
 We therefore call on all to rally together so that this objective can be fulfilled. 
  Thank you.   TN/AG/SCC/R/4 
Page 26  
 
 Statement by India
 
   India would like to thank the representative of  the IMF for his statement on the Joint Policy 
Declaration of the Cotonou Cotton Conference held on 18 May 2005.  India's statement is in response 
to an observation in the Declaration that one of the causes for the sector to be under pressure is a 
surge in output from other developing countries including India.   Cotton is a large sector in India and it is a source of livelihood for a very large number of 
small farmers.  These farmers have to cope with not  only the vagaries of nature but are also exposed 
to the same international situation as farmer s anywhere else in the developing world.  
  The Government of India is taking steps, as an y responsible government should take, to raise 
efficiency in the cotton sector which are in lin e with the policy recommendations made in the 
Declaration under the title "Raising efficiency as a ke y to the long term viability of the sector and 
boosting farmer incomes and strengthen their ability to cope with external shocks". 
  Indian farmers are also suffering from the fall in  prices of cotton in the international market 
and the Government is taking all necessary steps to enab le farmers to cope with this situation.  Such 
steps do not in any way contribute to distortions in the sector.   TN/AG/SCC/R/4 
 Page 27 
 
 
 Statement by the Rwanda (on behalf of the African Group)  
   The African Group thanks the WTO Secretariat, the bilateral and multilate ral partners and the 
regional and sub-regional organizations for the up dated information they have provided on the 
development aspects of the cotton issue. 
  This information supplements th e statements made by the partners on the question of how to 
address the recommendations of the WTO Regiona l Workshop on Cotton, held in Cotonou on 
23 and 24 March 2004, and the WTO General Council decision of late July 2004, also on the 
development aspects of the cotton issue, whic h instructs the Director-General of the WTO 
" … to consult with the relevant international organizations, including the Bretton Woods 
Institutions, the Food and Agriculture Organiz ation and the International Trade Centre to 
direct effectively existing programmes and any additional resources towards development of the 
economies where cotton has vital importance ". 
 
 The Group would like to recall the request it made at its meeting of 29 April 2005 in connection with development aspects, regarding the preparation of a table summarizing the different 
types of technical and financial assistance provided by certain WTO Members and the international, 
regional and sub-regional institutions to reinvigo rate the cotton sector in African cotton-producing 
countries. 
 
 In this connection, the African Group request s that the WTO Secretariat submit a country-by-
country status report for the consideration of th e Members, which would provide information on the 
actions and initiatives undertaken.  
 In this way, it would be possible to see the efforts made, to assess what remains to be done, 
and to ensure effective follow-up on prog ress with this aspect of the cotton issue. 
  Thank you.  
 
 
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