WORLD TRADE  
ORGANIZATION  TN/AG/GEN/18 
8 June 2006 
 (06-2735) 
Committee on Agriculture 
Special Session Original:   English 
 
 
  
MODALITIES FOR NEGOTIATIONS ON AGRICULTURAL COMMODITY ISSUES 
PROPOSAL SUBMITTED BY THE AFRICAN GROUP TO THE SPECIAL SESSION OF 
THE COMMITTEE ON AGRICULTURE 
 
Communication by the African Group
 
 
  
Background and Mandate 
 The problems which African countries encount er in taking effective policy measures for 
alleviation of poverty and for improving living c onditions in rural areas are compounded by the long 
term trend of declining prices of primary agricu ltural commodities and their volatility which adversely 
affect both producers and exporters.   During the African Union Extraordinary Conf erence, held in Arusha on 23 November 2005, 
African Ministers strongly emphasized the need to address these issues within the WTO rule-based 
system.  The Arusha Declaration and Plan of Acti on which were adopted at that Conference noted 
with concern "the lack of progress in WTO negotiations in addressing commodity-dependent 
producers' concerns" and stressed the "need to  establish concrete modalities for addressing 
commodity price volatility".  The need to take follow-up action for the implementation of these and 
other recommendations of the Arusha Declaration w as subsequently endorsed and re-emphasized by 
the Executive Council of the African Union at its me eting held on 20-21 January 2006 in Maputo.  In 
addition, at the recently concluded African Uni on Trade Ministers meeting held in Nairobi on 12-
14 April 2006, Ministers underscored the urgent n eed to establish concrete modalities to address the 
particular trade-related concerns  of developing and least develope d countries related to commodities 
as agreed in the Hong Kong Ministerial Declaration. 
 
 In this context the African Group underscores the specific mandate adopted at the Hong Kong 
Ministerial Declaration for the negotiations on commoditi es.  In particular, it states that in addition to 
intensifying the work that is being undertaken  in the Committee on Trade and Development on the 
problems which several developing and least deve loped countries that are dependent on export of 
commodities face, as a result "of the adverse impact of  the long-term decline and sharp fluctuation in 
the prices of these commodities", it is necessary to address the "particular trade-related concerns of 
developing and least-developed countries related to  commodities in the course of the agriculture and 
NAMA negotiations."
1 
  Annex A of the Hong Kong Ministerial Declara tion further clarifies that "there was general 
support" among the participants to the adoption of modalities for negotiations which were "capable of 
addressing effectively key areas" of concerns of comm odity-dependent countries.  In this regard, it 
                                                     
 
1 See Para. 55 of the Hong Ko ng Ministerial Declaration. TN/AG/GEN/18 
Page 2  
 
  identifies the following key areas of negotiations  on which such modalities would have to be 
developed:  
• The elimination of tariff escalation, where it discourages the development of 
processing industries in the commodity-dependent exporting countries. 
 
• Review and clarification of the current st atus of GATT 1994 provisions relating to the 
stabilization of prices through the adoption of supply management systems by commodity-dependent producing countries, with the aim of revising these provisions. 
 
• Review and clarification of the provisions  on the use of export taxes and export 
restrictions under such systems. 
 
• More concrete undertakings in the area of the non-tariff measures.
2 
  
2. Modalities to be adopted for negotiations on commodity issues 
 Taking into account the above mandate, th e African Group proposes that the following 
modalities should be adopted for negotiations on the areas listed above.  
2.1 Tariff Escalation 
 
 In light of the adverse impact of tariff escalation on the capacity of commodity-dependent 
producing countries to develop processing industries,  it is urgent to adopt modalities that would 
ensure that tariff cuts following the application of the formula result in satisfactory reductions in the 
level of tariff escalation.  Commodity-dependent producing countries shall negotiate with Members 
maintaining such tariff escalation with the aim of finding appropriate solutions. 
 
2.2 Adoption of an appropriate legal instrument clarifying GATT rules applicable to 
joint action by commodity-dependent produc ers and the reaffirmation of the use of 
export restrictions and export taxes 
 
 Article XXXVIII of GATT 1994 authorizes Member s to take joint action, including action 
through international arrangements, "to stabilize and improve conditions of world markets" in 
commodities.  Such action could include measur es "designed to attain stable, equitable and 
remunerative prices for exports of such products" an d could be taken under the umbrella of WTO or 
"elsewhere, as appropriate".   In accordance with these provisions, in the past, a number of commodity agreements – in 
which both producing and consuming countries particip ated – were negotiated, many of them under 
the auspices of UNCTAD.  These commodity agreements have r esulted in the establishment of 
international commodity organizations for implemen tation of their provisions.  Since the clauses 
included in this agreement for establishing a pr ice stabilization mechanism were found to be 
ineffective, these clauses were not included in the agreements that were adopted after reviewing the 
experience of their operation.  As a result, these agreements do not at present provide a mechanism of 
price stabilization. 
  Against this background, there is increasingly a  view amongst commodity experts and policy makers in commodity-dependent exporting countries that for commodities like coffee and cocoa, 
                                                     
 
2 See Notes to Annex A of the Hong Kong Ministerial Declaration, para. 21.  TN/AG/GEN/18 
 Page 3 
 
 
  where the distortion of prices is the result of oversupply of a structural nature in the international 
markets, appropriate action may have to be take n by the producing countries themselves, by entering 
into arrangements for management of supplies, inter alia , through control of over production and/or 
imposition of restrictions on exports.  
 In order to facilitate the adoption of such  arrangements for supply management, in which 
commodity-dependent  producing countries only participate, it would be necessary to adopt  an 
appropriate legal instrument clarifying and improvi ng the rules of Article X XXVIII relating to "joint 
action" and other relevant GATT rules.  
 The modalities for the negotiations of the legal instrument shall provide for the following: 
 
• The provisions of Article XXXVIII in th e chapter on Trade and Development of 
GATT 1994, Part IV which inter alia  stipulates that the WTO Members could take 
"joint action" through "international arrange ments" for ensuring "stable equitable and 
remunerative prices" for exports of pr imary agricultural commodities should be 
reviewed, clarified and improved to provide  that the term "arrangements" covers 
both: 
 
− Commodity agreements of which all interested producing and consuming 
countries are parties;  and 
 
− Agreements of which only commodity-dependent producing countries are parties. 
 
• Such producers' agreements may be negotia ted by the producing countries themselves 
or adopted after negotiations undertak en under the auspi ces of UNCTAD or 
International Commodity Organizations.  Th ey may be negotiated on an international 
or regional basis and may provide for par ticipation of associations of producers. 
 
• The exception provided by Article XX(h) which permits member countries or 
intergovernmental commodity agreements, to apply export restrictions and other 
measures that may not be consistent with th e rules of GATT, provided that they are 
necessary for the attainment of their objectives,  shall also apply to the agreements in 
which commodity-dependent  producing countries only participate. 
 
• It shall further be reaffirmed that the existing rules permitting countries to impose 
taxes on exports for the attainment of development and other objectives, including those relating to the stabilization of prices of  primary commodities, shall also apply to 
export taxes levied in pursuance of such agreements. 
 
2.3 Technical and financial Assistance 
 
• Technical assistance needed for the adop tion of such supply management systems 
shall be provided by relevant organizati ons including UNCTAD, to which necessary 
resources should be made available, and wh ere feasible, by International Commodity 
Organizations;  and 
 
• Financial resources required inter alia
 to compensate farmers for the loss of income 
which may occur in the period immediately following the adoption of supply management systems, as a result of thei r having to reduce production, shall be 
provided by the international financial institutions such as World Bank and IMF TN/AG/GEN/18 
Page 4  
 
  and/or by the agency that may be established in WTO for administering Aid for 
Trade. 
 
• The Common Fund for Commodities has an important role in terms of providing 
project finance to farmers for diversificati on of production to other crops and for the 
development of other sectors of production. 
 
• There should be a periodic review of the developments in the world commodity 
markets and their impact on the trade and economies of commodity-dependent 
exporting countries. 
 
 
3. Non-Tariff Measures 
 Modalities shall provide for the adoption of th e suitable procedures for negotiations on the 
elimination of non-tariff measures affecting trade in commodities.  
 
 
__________