RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/NG/R/8
15 October 2001
(01-5019)
Committee on Agriculture
Special Session
SUMMARY REPORT ON THE EIGHTH MEETING OF THE SPECIAL SESSION
HELD ON 28 SEPTEMBER 2001
Note by the Secretariat
1. As agreed by the General Council at its meeting of 7–8 February 2000 the negotiations for
continuing the reform process under Article 20 of the Agreement on Agriculture are being conducted
in Special Sessions of the Committee on Agriculture (WT/GC/M/53, paragraph 12 refers).  The eighth
formal meeting took place on 28 September 2001.  The meeting was chaired by Ambassador Apiradi
Tantraporn (Thailand).
2. The agenda as contained in WTO/AIR/1612 was adopted.
ITEM A :W ORK PROGRAMME FOR THE SECOND PHASE OF THE NEGOTIATIONS
(i) Report by the Chairperson
3. In accordance with the agreed arrangements for the second phase of the negotiations
(G/AG/NG/7, paragraph 4 refers) the following report was made by the Chairperson on the main
features of the in-depth work carried out thus far in the three informal Special Sessions held in May,
July and September 2001:
"Under the Work Programme for the second phase of the negotiations under Article 20 of the
Agreement on Agriculture Members agreed that the Chair would report on the informal
Special Sessions (G/AG/NG/7).  The following covers the discussions that took place during
the informal Special Sessions held on 21-23 May, 23-25 July and 24-26 September 2001.  I
would like to stress that this report, which I submit on my own responsibility, is not meant to
be a comprehensive and exhaustive account of nine days of discussions but a very briefsummary of some of the main points raised in the informal Special Sessions.
"At the informal Special Sessions held in Ma y, July and September, in-depth work was
carried out on tariff quota administration, tariffs, the Amber Box, export subsidies, export
credits, state trading enterprises, export restrictions and prohibitions, food security, foodsafety, rural development, geographical indi cations, the Green Box, the Blue Box and the
special agricultural safeguard.  The discussions were based partly on elaborated proposals
made by Members.  I will not try to summarise these submissions.  They have been made
available to participants and are the only authoritative source of the position of these
Members.  This report must therefore be read in conjunction with the submissions by theseMembers.
"Tariff Quota Administration
"On tariff quota administration submissions were made by Australia, the European
Communities, Japan and Switzerland.G/AG/NG/R/8
Page 2
"In the discussion that followed the view was expressed that some basic principles should be
set out for the administration of tariff quotas.  However, the point was made that no single
administration method suited all situations and the choice of method depended on many
factors, including the domestic market and individual product characteristics.  It was
recognised that there was some guidance given already through other WTO Agreements such
as the Agreement on Import Licensing Proc edures and Article XIII of the GATT.
"Some Members stated that tariff quotas were transitional mechanisms that should lead to
single tariff systems but other Members disagreed and one suggested that, if they were to be
converted to tariff only systems, then the transition would need to be based on Article XXVIII
of the GATT.
"In examining the current operation of tariff quotas it was suggested that, where tariff quotas
were not being filled, either the quota was not necessary or the administration method was
preventing access.  A number of proposals were made on how to address cases of persistent
under-fill, including reducing in-quota tariffs and carry-over of unused portions of tariff
quotas.  Other Members, however, stated that fill-rates had to be interpreted carefully and that
under-fill could have many causes and it was not necessarily a sign of restrictiveadministration methods.
"In the discussion a number of specific methods of quota administration were examined
including auctioning, first-come-first-served, allocation to state trading enterprises and
allocation to producer groups.  Auctioning, in particular, was extensively discussed and someMembers felt that this method had many advantages in many cases.  Other Members were not
convinced for a variety of reasons, including the concern that the price paid for the import
licence at the auction could mean bound tariffs were exceeded.  Concerning other methods,
several Members noted that each method discussed appeared to suit specific situations but
each method also appeared to have advantages and disadvantages in other situations.
"Tariffs
"On tariffs, submissions were made by Australia, Japan and a group of developing countries
(MERCOSUR, Chile and Bolivia).
"A range of Members supported a proposed "cocktai l" approach to tariff reform, i.e. a general
flat rate cut supplemented by a non-linear formula that would reduce higher tariffs by greater
amounts, an expansion of tariff quotas, and special and differential treatment for developing
countries.  It was noted that this approach could be used to reduce or eliminate tariff peaks
and escalation and the dispersion  in tariff levels between countries.  Some of these countries
also stated that, as tariff quotas were expanded, in-quota tariff rates should be reducedespecially if historical fill rates were below certain thresholds.
"A range of other Members preferred the formul a used in the Uruguay Round, i.e. an average
reduction from bound rates subject to a minimum reduction for individual tariff lines.
"One Member also suggested that a request-and-offer approach could be used which could
result in, or be complemented by, a more general modality for tariff reductions.  Another
Member suggested reductions should be from applied rates.
"Some developing countries stated that the size of tariff reductions they could consider would
depend on reductions in export subsidies and domestic support provided by other countries.
In addition, special and differential treatm ent would be required which would allow
developing countries to reduce tariffs by lesser amounts over longer periods.  It was also
proposed that developing countries should, in certain circumstances, be able to re-evaluateG/AG/NG/R/8
Page 3
tariff bindings.  Many Members considered that particular emphasis should be given to
improving market access opportunities for products of export interest to developing countries.
"Another issue that was raised concerned tariff forms as some Members suggested that all
tariffs should be expressed in simple ad valorem  terms.  Other countries, however, stated that
different forms reflected different situations in different countries and some, such as specificduties, were more simple, transparent and predictable than ad valorem  tariffs.
"In addition, a number of other specific issues were raised, including liberalisation of market
access for tropical products;  preferential schemes and the erosion of tariff preferences;  the
implications of the  specificities of different countries' production systems;  special treatment
for transition economies and recently acceded countries;  the issue of the base period for
establishing market-access commitments; the difficulties facing Members that had ceased toapply special treatment under Annex 5 of the Agreement on Agriculture;  and special
treatment for countries with low tariffs on agricultural products.
"Amber Box
"On the Amber Box submissions were made by the EC, Australia and Japan.  In addition, a
group of developing countries (Cuba, the Dominican Republic, El Salvador, Honduras,
Indonesia, Kenya, Nicaragua, Nigeria, Pakistan, the Philippines, Sri Lanka, Tanzania,
Venezuela and Zimbabwe) made a presentation on special and differential treatment on this
occasion.
"In the discussion a number of Members stated that all forms of trade-distorting domestic
support had to be eliminated in developed countries, either immediately or over a period of
time.  The current rules were considered too lax and commitment levels for some countries to
be too high.  Therefore, better rules were needed to control trade-distorting supports duringtheir phase out period.  It was suggested that future commitments to reduce Amber Box
support should be at a disaggregated level.
"Other Members stated that flexibility was needed in all countries.  While reductions in
Amber Box support could be negotiated, this sh ould be within the existing framework of the
Amber, Green and Blue Boxes.  In this context, it was also noted that reductions in the de
minimis  levels for developed countries could be considered.  Furthermore, stricter rules, such
as applying commitments at a disaggregated level, could make support systems more rigid
and in some cases more trade distorting.
"It was also noted that different types of supports in different countries could have different
trade-distorting effects.  Thus, subsidies that were based on prices and given to products thatwere mostly exported could be considered to have a similar effect as export subsidies.
"In addition to the general discussion of Amber Box commitments, a number of specific
issues were raised such as the effect of inflation on commitments and the methodology for
calculating the value of production.
"On special and differential treatment a numbe r of ideas were put forward including higher
de minimis limits and greater scope for exemption for subsidies than that currently provided
by Article 6.2 of the Agreement on Agriculture.  Countries with economies in transition and
some recently acceded countries noted that th ey, too, needed some form of flexibility to
address their specific needs.G/AG/NG/R/8
Page 4
"Export Subsidies
Submissions on export subsidies were made by the Cairns Group, Switzerland, Japan, Israel
and a group of developing countries (Nicarag ua, Pakistan, Panama, Peru, Venezuela and
Zimbabwe).   A group of CARICOM countries (Antigua and Barbuda, Barbados, Belize, the
Commonwealth of Dominica, Grenada, Guyana, Ja maica, St. Kitts and Nevis, St. Vincent and
the Grenadines, Republic of Trinidad and Tobago and Suriname) also tabled a submission on
export competition and domestic support.
"In the discussion many countries supported elimination of export subsidies and some
Members stated that for them tariff reductio ns would be linked to reductions in export and
production subsidies in other countries.  While the proposal to introduce extra disciplines
limiting the amount of export subsidy per unit exported was noted, it was also stated that suchdisciplines should be complimentary to the reduction and elimination of export subsidies.
"Another position was that further reductions of export subsidies could be negotiated provided
that the subsidy elements of all other forms of export supports were treated in an equivalent
way, including support provided through export  credits, insurance and guarantee programmes,
state trading enterprises or through the abuse of food aid.  In addition it was stated that some
domestic support measures linked to prices or returns could have a similar effect as export
subsidies and should therefore be subject to specific discipline.
"Another idea put forward was to apply a flexible formula for export subsidy reductions,
whereby in return for greater average reduct ions some flexibility should be given for
rebalancing between products.  However, in response it was stated that this could lead to
increases in export subsidies on some products and greater complexity in rules and
commitments.
"The need for special and differential treatment was stressed and a number of methods were
suggested, including a longer implementation period, continuation and/or expansion of the
existing exemptions under Article 9.4 and a degree of flexibility to use export subsidies to
assist economic diversification and development.  It was noted that some flexibility for
developing countries for subsidies for non-agricultural products was already available in theAgreement on Subsidies and Countervailing Measures.
"It was also noted that some net food-importing developing countries might face difficulties
as a result of further reductions or the elimination of export subsidies and that any disciplines
or commitments developed in the negotiations had to take account of these concerns in an
appropriate manner.
"Export Credits
"The EC, the United States, Australia and Japan made submissions on export credits.
"Although it was pointed out that negotiations on developing disciplines on export credits
were under way in the OECD, several Members stated that while the work in other for a could
be taken into account, the disciplines should be developed in the WTO where all Members
could participate and where the work could focus on all subsidy aspects of export credits and
related programmes.
"It was also pointed out that the establishment of disciplines was an implementation issue and
the matter that needed to be addressed in the negotiations was the subsidy element of export
credits rather than export credits themselves.  While the view was expressed that subsidized
export credits are particularly trade distorting, the observation was also made that the subsidyG/AG/NG/R/8
Page 5
element of export credit schemes was generally small compared to the overall amount of
export credits and also compared to export subsidy usage in some cases.
"The view was expressed that in developing disciplines on export credits, it would be
necessary to take into account food security concerns.  Some Members stated, however, that
food aid should only  be given in fully grant form and should not damage local production ordisplace another country's exports.
"State Trading Enterprises
"Submissions on state trading enterprises were made by Japan and the United States.
"In the discussion some Members stated that they wanted to remove trade distortions but the
existence of an STE did not automatically mean distortion.  In their view, it was important to
focus not on the legal status of the enterprises but whether or not their activities were trade
distorting.  In fact, many of the problems identified, such as price pooling and price
differentiation, were also features of private and co-operative enterprises.  Some other
Members added that STEs were needed to ensure agriculture markets functioned smoothlyand that they could be used to counter the market power of some large private enterprises or
the subsidies used by other countries.  It was also pointed out that in some developing
countries state trading enterprises were needed, particularly where the private sector was not
well developed.
"However, there was also the view that state trading enterprises could distort trade and that
inadequate notification requirements made it difficult to determine whether or not they were
circumventing rules or commitments.  Furthermore, they could not be compared to large
private sector corporations because STEs often benefited from government guarantees and
their objectives were not always orientated towards profits.  Therefore, strengthened ruleswere needed to restrict their ability to distort trade and to clarify the definition of terms such
as "special privileges".
"The view that exporting STEs had greater trade-distorting effects than importing STEs was
expressed but not shared by a number of Members.
"It was also suggested that the strengthened ru les covering STEs should be developed in the
framework of Article XVII of the GATT or of the work on competition policy rather than in
the agriculture negotiations.
"Export Restrictions and Prohibitions
"On export restrictions submissions were  made by Japan and the United States.
"In the discussion the view was put forward that there is an imbalance in rights and
obligations between importing and exporting countries.  As one of the ways to deal with this,
it was proposed that export restrictions should be replaced by export taxes that would bebound and reduced over the implementation period.  Other Members proposed prohibiting
export taxes and restrictions, with the view also being held that for developing countries this
should not extend to export taxes for revenue raising purposes and to net importers of the
foodstuff concerned.
"While not accepting the notion of an imbalance between importers and exporters, a number
of other Members also recognised that tighter disciplines were needed on export restrictions.
The point was made that in considering export restrictions, the underlying causes had to be
addressed, such as tariff escalation in developed country markets that made development of aG/AG/NG/R/8
Page 6
food processing industry difficult.  It was also pointed out that the GATT recognised the need
to assist the development of industries in developing countries.
"A number of developing countries stated that the special treatment provided in Article 12.2
of the Agreement on Agriculture should remain.
"Food Security
"Given the importance of food security it was not surprising that there were several
presentations and a lengthy discussion.  Subm issions were tabled by a group of developing
countries (Cuba, Dominican Republic, El Salv ador, Honduras, Kenya, Nicaragua, Nigeria,
Pakistan, Peru, Sri Lanka, Venezuela and Zimbabwe), the United States, Japan and Peru.
"In the discussion Members considered that food security was important to all countries but
particularly for developing countries.  Some developing countries stated that despite the
Declaration from the World Food Summit in 1996 and the Uruguay Round Agreement on
Agriculture the food security situation in a number of countries had worsened.
"Several developing countries stated that food security depended on domestic production,
particularly when production and exports were subsidised in other countries.  It was stressed
that greater flexibility was needed to promote production and protect subsistence farmers.
Suggestions were made on expanding existing exemptions under Article 6.2 or pursuing a
positive list approach whereby developing countries could decide which products or sectorsshould be subject to WTO commitments and disciplines.
"Other developing countries shared the same concerns but noted that climatic, geographical
and other factors dictated the production potential of each country.  Therefore, trade was an
essential element of food security and no country could rely solely on domestic production.Trade liberalisation, as part of an integrated set of policies, would improve food security.
Some of these countries noted that global food production was greater than demand and that
they had the potential to greatly increase production without negative environmental
consequences.  Poverty was at the root of food insecurity and trade was an essential part of
any solution to poverty.
"Other Members stressed that food security was important to all countries and the specific
nature of agriculture along with the wide range of potential threats to food security meant
security was best achieved by a combination of domestic production, stockholding and trade.
"Some Members considered that a proposal to create an international stockpile could be a
useful complement to existing measures but domestic production had to be developed as well.On food aid, some Members felt that binding commitments were needed to prevent aid levels
falling when prices increased and that food aid should generally be given in fully grant form.
"Food Safety
"Submissions on food safety were made by the EC and Japan.
"A proposal was made to set out the legitimate use of the precautionary principle in an
Understanding that was based on the SPS Agreement and relevant dispute settlement cases.
In this regard, it was noted that different countries had different levels of real and perceivedrisks and that an understanding on precaution in food safety would be useful, not least in
terms of trade liberalisation.  It was also suggested that this important consumer concern had
to be addressed in the negotiations and that it was necessary to balance a cautious attitude to
food safety with avoiding unjustified trade barriers.G/AG/NG/R/8
Page 7
"Another view was that  recent developments  in food safety, such as biotechnology and
consumer information requirements, should be taken into account in the negotiations.  The
issue of the traceability of food throughout the product chain was raised.
"On the other hand, concerns were expressed that such approaches could result in increased
import barriers.  A number of Members stated that the issue of food safety was a matter for
the SPS and TBT Agreements.
"Rural Development
"Submissions were made by Norway, Japan, a group of developing countries (Cuba,
Dominican Republic, El Salvador, Honduras, Kenya, Nicaragua, Sri Lanka, Pakistan andZimbabwe) and Cyprus.
"Several developing countries supported the proposal that flexibility was needed to address
rural development concerns.  It was also stated that rural development depended on protecting
farmers from adverse effects of liberalisation.  A number of developing countries noted thatthey should be able to choose what products were subject to disciplines under the Agreement
on Agriculture, to re-evaluate tariffs, to have access to a special safeguard and to have the
right to introduce subsidies to promote production of products for domestic consumption.  At
the same time developed countries should improve market access and eliminate trade-
distorting subsidies.
"Some other developing countries questioned the need for such extensive flexibility.  They
pointed out that financial restrictions meant that developing countries could not afford
subsidies and the right to increase tariffs or introduce import restrictions could hurt other
developing countries that did not use subsidies.   In their opinion rural development would be
promoted by farmers getting better access to markets and by removing competition from
subsidised production and exports.
"A number of net food-importing developing countries, land-locked developing countries and
small island developing states stressed their rural development concerns.  They held that theirspecific situations had to be appropriately taken into account. In some cases, existing
commitments and decisions, such as the Marrakesh Decision on Least-Developed and Net
Food-Importing Developing Countries, should be revisited to improve provisions related to
rural development.
"Some developed countries noted that agriculture was often the principal economic activity in
many rural areas.  Due to high production costs related to geographic and climatic factors,Green Box measures alone were not always  sufficient to achieve rural development
objectives and protection and production related supports were needed.  Transition economies
stated that they needed sufficient flexibility to be able to provide assistance to farmers for
restructuring and dealing with indebtedness.
"Geographical Indications
"Submissions were made by the European Communities and Switzerland on geographical
indications.
"Some Members stressed the importance of geographical indications in terms of the
information they conveyed to consumers on quality, production methods and the origin of
certain products.  A mechanism for protection was put forward to extend the product coverageG/AG/NG/R/8
Page 8
of the additional protection currently provided for wines and spirits, notify such names, and
prevent their unauthorised use.
"While a number of Members recognised the importance of geographical indications and
extension of protection, it was considered that negotiations on this subject should take place in
the TRIPS Council. In this context, the view  was also expressed that progress in the
agriculture negotiations depended on progress on geographical indications in the TRIPS
Council.
"The concern was also raised that geographical indications could be used as a new instrument
of protectionism.
"Green Box
"Submissions on the Green Box were made by the European Communities, Japan, Argentina,
Namibia, Cyprus and a group of developing  countries (Cuba, Dominican Republic, El
Salvador, Kenya, Honduras, Nicaragua, Pakistan, Sri Lanka and Zimbabwe).
"From the discussions it was clear that there were wide differences of views held by different
Members, as some wanted the Green Box relaxed while others wanted it tightened.  There
was also the proposal to have only a single general subsidies box, with developing countries
having additional  access to a Development Box which would include measures under market
access and export competition as well as domestic support.
"A number of Members stated that Green Box measures could be more than minimally trade
distorting.  Others noted the large sums transferred to farmers under Green Box schemes.
Therefore, the criteria for exemption under the Green Box should be examined and tightened.
Some Members suggested that decoupled income supports should be taken out of the GreenBox or have reduction commitments applied to them.  Another Member referred to the lack of
a quantitative definition of what constituted minimal trade-distorting effects or effects on
production.
"It was considered that trade distortion could be caused by the excessive amount or
cumulative effect of payments and the best way to prevent this was to limit the total value of
subsidies that could be provided.
"Some Members pointed out that to qualify under the Green Box a measure had to be at most
minimally trade distorting and they welcomed the shift from highly distorting supports of the
Amber Box to the Green Box.  With this basic criteria in mind they suggested that the policy
specific criteria could be reviewed and possibly extended.
"Another view put forward was that the Green Box should not be modified because Members
had designed their agricultural policies around the existing definitions of Annex 2.  Several
transition economies stated that the Green Box was essential for them to assist in the difficult
transition process.  However, along with some developing countries and small islanddeveloping states, they stated that it had not been designed with their specific problems in
mind and should be reviewed taking into account their specific situations.
"Blue Box
"The Cairns Group made a submission on the Blue Box.
"A number of Members stated that the Blue Box should be capped, then reduced and
eliminated because Blue Box payments distorted trade especially as they were based on landG/AG/NG/R/8
Page 9
areas and/or animal numbers that had been inflated by other distortionary policies.
Furthermore, the lack of any limit to the value of subsidies that could be provided under the
Blue Box meant it could undermine commitments to reduce trade-distorting subsidies.
"Although the Blue Box was considered to be a useful mechanism to assist reform away from
highly distortionary policies, opinions differed as to whether or not it was still needed.  It wassuggested that it was an interim measure in the Agreement on Agriculture but other Members
noted that this was not what was said in the Ag reement.  The point was made that the value of
supports given under the Blue Box was limited because the legal protection given by the
Peace Clause did not cover subsidies in excess of the level decided in the 1992 marketing
year.
"Special Agricultural Safeguard
"Submissions on the special agricultural safeguard (SSG) were made by a group of
developing countries (Argentina, Bolivia, Paraguay, Philippines and Thailand), Japan,
Namibia, Norway, Switzerland, and another group of developing countries (Cuba, the
Dominican Republic, Honduras, Kenya, Nicaragua, Pakistan, Sri Lanka and Zimbabwe).
"It was noted that the special safeguard had been negotiated in the Uruguay Round as part of
the tariffication package.  The Agreement on Agri culture stated that it was in force for the
duration of the reform process.  Some Member s noted that the SSG had not been used very
frequently but continued access would be needed if tariffs were to be reduced further.  It wasalso suggested that the SSG was less trade distorting than some other mechanisms, such as the
Agreement on Safeguards, and easier to apply for the importing country.
"For other Members the infrequent use of the special safeguard showed that it was not needed
and, as it had been part of tariffication, which was now completed, it should be eliminated.They also noted that the SSG was often reserved by Members for products that were already
well protected by high bound tariffs.
"A proposal to create a new form of countervailing duty mechanism for developing countries
was discussed.  The principles underlying the proposal were noted and it was considered thatthese principles could give a more targeted response than the proposal to extend the right to a
special safeguard to all developing countries.  Some developing countries also pointed out
that the issue was protecting subsistence farmers from import surges or price falls rather than
preventing imports of subsidised products.  For them they should be able to apply both
additional tariffs and/or quantitative restrictions in order to protect domestic agricultural
producers.  For a variety of reasons, a number of other Members had fundamental difficulties
with the concept and details of these proposals.
"A number of recently acceded Members and/or transition economies stated that they had
very open markets and needed access to a special safeguard if they were to consider further
tariff reductions."
(ii) Statement by Members
4. No Member took the floor.
ITEM B :O THER BUSINESS INCLUDING DATES FOR THE NEXT FORMAL AND INFORMAL SPECIAL
SESSIONS
5. No items were raised under other business.  It was noted that the following trade or non-trade
issues are to be taken up at the next informal Special Session meeting on 3-5 December:G/AG/NG/R/8
Page 10
environment, trade preferences, food aid, consumer information and labelling, and sectoral initiatives.
The next formal Special Session is scheduled to be held on 7 December 2001.
ITEM C :C HAIRPERSON 'S OUTLINE OF HER REPORT TO THE GENERAL COUNCIL
6. The Chairperson outlined the general content of the report she would be making to the
General Council (G/AG/NG/8 refers).
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