WORLD TRADE  
ORGANIZATION  TN/AG/SCC/GEN/2 
22 April 2005 
 
 (05-1654) 
Sub-Committee on Cotton Original:  French 
  
 
PROPOSED ELEMENTS OF MODALITIES IN CONNECTION WITH 
THE SECTORAL INITIATIVE IN FAVOUR OF COTTON 
 
Communication from the African Group
 
 
 
 The following communication, dated 19 April 2005, is being circulated to Members and observers before the meeting of the Sub-Committee on Cotton of 29 April 2005 at the request of the 
African Group.  
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I. HISTORICAL BACKGROUND OF THE SECTORAL INITIATIVE IN FAVOUR OF 
COTTON 
1. Cotton production and trade are important activities in the economic and social lives of 
several African countries. 
1.1 Thirty three African countries out of a total of  fifty three are producers and net exporters of 
cotton. 
2. Cotton plays an essential role in the economic and social development of the African 
countries. 
2.1 In Benin, Burkina Faso, Mali, and Chad, fo r instance, cotton production accounts for five to 
ten per cent of gross domestic product (GDP).  Cotton al so plays a central role in their trade balance, 
accounting for close to thirty per cent of total export revenue, and more than 60 per cent of agricultural exports revenue. 
2.2 Several million people in Africa depend direct ly on the production a nd exportation of cotton. 
2.3 As a result, cotton plays a strategic role in the development policies and poverty reduction 
programmes of a number of African countries. 
3. Several African countries have introduced refo rms in the cotton sector and have made the 
necessary adjustments to improve quality and co mpetitiveness in this branch of production. 
4. The impact of these reforms on the development of the African countries has to date been 
virtually nullified by the fact that certain WT O Members continue to apply support measures and 
subsidies that distort global market prices, contrary to the basic objectives of the WTO. 
5. The African countries consider it essential for WTO Members that continue to distort 
competition through trade practices that are contrary to the rules and principles of the Organization to 
make the necessary adjustments. TN/AG/SCC/GEN/2 
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 6. It should be stressed that the objective of the D oha Development Agenda is to agree, within 
the framework of the current round of trade negotia tions, on rules that take account of the specific 
needs of the developing countries and that suppor t the development efforts of the poorest WTO 
Members (WTO/MIN(01)/DEC/1). 
7. Various studies have shown that the elimina tion of domestic support and export subsidies 
would have a positive impact on world cotton market prices.  Indeed, the elimination of the measures 
and policies that distort the international cotton trade would help to promote cotton production and 
trade in the African countries, particularly in the least developed among them, thereby acting as an important catalyst for poverty reduction in the countries concerned. 
8. It should be recalled that the main objective of  the Doha Development Agenda is to establish 
a fair and market-oriented trading system, including  reforms to correct and prevent restrictions and 
distortions in world agricultural markets.  WTO Members also undertook to take account of the needs and interests of developing countries, particularly  the least developed countries (LDCs), which are the 
most vulnerable of all. 
9. It was in the light of the above considerati ons, and to correct the asymmetries resulting from 
the domestic support measures and export subsidies of  certain WTO Members that seriously distort 
trade in cotton, that the four above-mentioned WCA countries - Benin, Burkina Faso, Mali, and Chad - submitted to the WTO, in April 2003,  a sectoral initiative in favour of cotton 
(document TN/AG/GEN/4 of 16 May 2003). 
10. At its meeting of 21 March 2005, the Dis pute Settlement Body adopted the Report of the 
Appellate Body in United States – Subsidies on Upland Cotton  (WT/DS267/AB/R) and the Report of 
the Panel (WT/DS267/R and Corr.1, Add.2 and Add.3) as modified by the Appellate Body report. 
II. DECISIONS ADOPTED BY THE WTO GENERAL COUNCIL AT THE END OF 
JULY 2004 CONCERNING COTTON 
11. Following its session in Geneva on 27 July to  1 August 2004, the WTO General Council 
stressed the importance of sectoral initiative in fa vour of cotton and took note of the parameters set 
out in Annex A of the "July Package" (documen t WT/L/579 of 2 August 2004) within which the 
trade-related aspects of the issue would be pursued in the agriculture negotiations (see paragraph 1(b) 
of the July Package:  document WT/L/579 of 2 August 2004). 
12. The General Council also recognized the importance of cotton for a certain number of 
countries and its vital importance for developing countries, especially LDCs.  It called upon WTO 
Members to work on cotton under all the pillars to achieve ambitious results expeditiously 
(paragraph 46 of the July Package:  document WT/L/579 of 2 August 2004). 
13. The General Council recognized the importance of cotton for many countries and its vital 
importance for developing countries, especially LDCs .  It decided to address the issue ambitiously, 
expeditiously, and specifically, within the agricultu re negotiations.  Work would encompass all trade 
distorting policies affecting the sector in all thr ee pillars of market access, domestic support, and 
export competition (Annex A, paragraph 4 of the above-mentioned Decision). 
14. The General Council also decided to create a sub-committee on cotton, which would meet 
periodically and report to the Special Session of the Committee on Agriculture to review progress.  
Work would encompass all trade-distorting policies aff ecting the sector in all three pillars of market 
access, domestic support, and export competition (A nnex A, paragraph 4 of Decision WT/L/579 of 
2 August 2004).  TN/AG/SCC/GEN/2 
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 15. The Sub-Committee on Cotton was set up on 19 No vember 2004.  Its terms of reference and 
work programme are set out in documents TN/AG/13 of 26 November 2004 and TN/AG/SSC/1 of 29 March 2005. 
16. Coherence between trade and development aspects of the cotton issue would be pursued as set 
out in the text of the July Package (Annex A, pa ragraph 5 of the July Package:  document WT/L/579 
of 2 August 2004). 
III. PROPOSED ELEMENTS OF MODALITIES FOR COTTON 
17. The purpose of this submission is: 
 - To ensure that the results of the negotia tions correspond to the decision of July 2004, 
which stipulates that the cotton issue shoul d be addressed ambitiously, expeditiously, 
and specifically; 
  - to speed up the negotiating process with a view to reaching a decision on cotton by 
July 2005 in connection with the first approximation of the outcome on this issue. 
 
18. In accordance with the above-mentioned deci sions of the WTO General Council on cotton, 
the WTO African Group proposes the following elements  of modalities under the three pillars of the 
negotiations on agriculture: 
Market Access 
 
19. Market access for international trade in cotton shall be improved.  The LDC cotton producers 
and net exporters shall enjoy bo und duty-free and quota-free access fo r cotton and its by-products. 
Domestic Support 
 
20. Domestic support measures that distort international trade in cotton shall be eliminated by 
21 September 2005  at the latest. 
21. Specific disciplines shall be developed to prevent the box-shifting of domestic support. 
21.1 Ambitious cotton-specific criteria shall be developed for the measures authorized under the 
green and blue boxes.  
Export subsidies 
 22. All forms of cotton export subsidies shall be eliminated by 1 July 2005  at the latest. 
IV. DISCIPLINES FOR MONITORING AND CONTROLLING DOMESTIC SUPPORT 
AND SUBSIDY ELIMINATION MEASURES 
23. Every year, WTO Members shall notify the Organization of their cotton production and 
export activities and programmes, providing any sta tistics and figures relating to the implementation 
of these modalities. 
24. The WTO Secretariat shall periodically report to Members on the effective implementation by 
Member countries of the agreed measures, and shall monitor such implementation. TN/AG/SCC/GEN/2 
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 V. COHERENCE BETWEEN THE TRADE AND DEVELOPMENT ASPECTS OF THE 
COTTON ISSUE 
25. Depressed cotton prices on the international mark et due to the domestic support and subsidies 
granted by certain developed countries have caused distortions and deprived cotton producers and the 
economies of the African cotton producing and net exporting countries of the investment resources 
required to enhance productivity, promote compe titiveness in the sector, and maintain the recognized 
comparative advantage of African cotton. 
25.1 They have also had a serious adverse impact  on the living standards and social conditions of 
producers, and have aggravated poverty in the producing communities.  
26. This has clearly generated an even more pressi ng need for investment in the cotton sector.  
We recall in this connection the conclusions a nd recommendations of the WTO Regional Workshop 
on Cotton held in Cotonou on 23 and 24 March 2003, calling upon WTO Members and the 
international, regional and subr egional organizations to provi de the cotton producing and net 
exporting developing countries, and in particular th e LDCs, with the technical and financial assistance 
necessary to reinvigorate the cotton sector and im prove its competitiveness.  These recommendations 
and conclusions are more relevant that ever. 
27. In order to contain the serious socio economic  consequences for the farming communities of 
the resulting losses of revenue, an emergency suppor t fund for cotton production shall be set up. 
27.1 The resources allocated to this fund shall be equivalent to 20 per cent of the value of cotton 
production for the most favourable of the three most  recent years in each of the countries concerned. 
 
27.2 The resources shall decrease in proportion to the pace of elimination of the domestic support 
measures and subsidies at issue.  27.3 The resources are intended to serve as a safety net, and would be allocated directly to the 
cotton producers in a transparent and equitable manner. 
 27.4 The fund shall be managed by a tripartite  commission made up of representatives of the 
donors, the producers, and the governments.  28. In this connection the General Council, in adop ting the results of the first approximation of 
the outcome of negotiations in July 2005, shall recommend to all bilateral and multilateral partners 
that they develop, approve, and finance, by December 2005, a safety net programme under the said 
fund for all the African cotton producing and net exporting countries concerned. 
29. During its session of December 2005, the General Council shall take note of the commitments 
of Members and international, regi onal and subregional organizations w ith respect to the financing of 
the fund, and shall report to the Sixth Ministerial Conference. 
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