Parties wishing tomake corrections tothisdraftshould submit themtotheSecretariat assoon
aspossible andnotlaterthan7February 1996. IftheSecretariat hasreceived nocorrections bythat
date, thedraftreport willbeconsidered asapproved (Rule 8oftheRules ofProcedure).
96-0043RESTRICTED
WORLD TRADE WT/SPEC/16
10January 1996
ORGANIZATION(96-0043)
International Dairy Agreement
INTERNATIONAL DAIRY COUNCIL
SECOND SESSION
Draft Report
Chairperson: Ms.BridCannon
1. TheInternational Dairy Council helditssecond session on17October 1995.
2. TheCouncil adopted thefollowing agenda:
A. Admission ofobservers
B. Evaluation ofworld dairy market situation
-Report ofthesession oftheCommittee onCertain Milk Products
-Status Report (IDA/W/7)
-Summary Tables (IDA/W/8 andIDA/CMP/W/6)
-Replies toQuestionnaires 4and5
C. Functioning oftheAgreement, including itsfuture operation
D. Adoption ofquestionnaires (IDA/W/5)
E. Financial implications ofdecisions byWTO Bodies (WT/L/76)
F. Calendar ofCouncil andCommittee meetings for1996
G. Other businessWT/SPEC/16
Page2
Admission ofobservers
3. TheCouncil welcomed signatories oftheAgreement including those whohavenotyetratified
(Brazil,ChadandHungary).TheCouncilwelcomedrepresentativesfromAustralia,Canada,CostaRica,
Korea andMexico, inaccordance withRule10oftheRules ofProcedure, which permits Members
oftheWTO notsignatories totheAgreement tofollow theproceedings oftheCouncil inanobserver
capacity.
4. Inaccordance withRule11oftheRules ofProcedure theCouncil mayinvite non-signatory
countries notMembers oftheWorld Trade Organization toparticipate inthemeetings oftheIDAin
anobserver capacity. Atthissession, theCouncil welcomed therepresentative ofChinese Taipei.
5. TheCouncil alsoextended aninvitation, inaccordance withRule14oftheRules ofProcedure,
totheEconomic Commission forEurope, FAO, OECD andUNCTAD toparticipate asobservers at
sessions oftheCouncil totheAgreement. Atthissession, theCouncil welcomed therepresentative
from theFAO.
Evaluation ofworld dairy market situation
Report onthethird Session oftheCommittee onCertain MilkProducts
6. Concerning thethirdsession oftheCommittee onCertain MilkProducts, theChairperson of
theCommittee presented thefollowing oralreport totheCouncil.
7. TheCommittee onCertain Milk Products helditsthirdsession on16October 1995.
8. After examining thereplies tothequestionnaires, theCommittee reviewed themarket situation
forproducts covered bytheAnnex onCertain MilkProducts. Information andcomments regarding
milkproduction anddairy policies weregiven intheCommittee andwillberecorded inthefullreport
ofthemeeting.
9. TheCommittee noted thatworld production ofskimmed milk powder declined in1994,
particularly inEuropean countries. Whole milkpowder production continued toincrease. World butter
andbutter oilproduction continued itslong-term diminishing trend. World cheese production continued
toexpand in1994.WT/SPEC/16
Page3
10. World consumption ofskimmed milkpowder continued todecline in1994, asworld prices
remained relatively high. World butter consumption appeared tohavelevelled offafteralong-term
decline. World cheese consumption continued itslong-term growth trend.
11. World exports ofskimmed milkpowder recovered slightly in1994 andthose ofwhole milk
powder alsoincreased. World exports ofbutter areestimated tohavedeclined further, butthere was
anotable surge inRussian import demand intheclosing months of1994andintoearly 1995. Cheese
exports increased in1994.
12. World skimmed milkpowder stocks increased in1994. However, inthemiddle of1995stocks
weresubstantially lower thanoneyearearlier. Itappears likely thatstocks willremain low,atleast
for1995. World butter stocks were10percentlower attheendof1994 thanoneyearpreviously,
andafurther substantial decline isexpected in1995. On1January 1995, stocks ofcheese inthemain
producing countries were lower thanayearearlier. Cheese stocks areforecast toremain relatively
lowasthedomestic consumption andexports ofmost major cheese producers areexpected togrow
faster thanproduction.
13. Since themiddle of1994, prices forallthemain dairy products haveincreased. Thetwo
principal factors have been thereduced export supplies since mid-1994 andthelowvalue ofthe
United States dollar. Inaddition, strong demand forbutter inDecember 1994andJanuary 1995drove
upinternational prices formilkfatandtheyhavesubsequently remained atthese highlevels. Forthe
restof1995, itisexpected thatlimited export supplies andlowstocks willcontinue tosustain
international prices.
14. Inthethirdquarter of1995, theworld market situation forallproducts remained veryfirm.
Slight increases inbutter production insome countries havebeenoffset byincreased consumption and
manufacturing use. World butter stocks remained atlowlevels andworld prices continued athigh
levels. Increased demand formilkpowders, either forexport ordomestic use,coupled withreduced
stocks levels, underpinned highworld market prices. Theworld cheese market hasremained steady,
withstock accumulations insome markets resulting inalessbuoyant market situation.WT/SPEC/16
Page4
15. Forthethirdquarter of1995, thefollowing price ranges were reported (pertonf.o.b.):
-between US$2,150 andUS$2,380 forskimmed milkpowder forhuman consumption;
-between US$2,200 andUS$2,480 forwhole milkpowder;
-between US$2,100 andUS$2,550 forbutter;
-between US$2,350 andUS$2,750 foranhydrous milkfat;
-between US$2,150 andUS$2,500 forCheddar cheese.
Status Report
16. Foritsevaluation ofthesituation inandoutlook fortheworld market fordairy products, the
Council hadbefore itvarious documents prepared bytheSecretariat: theStatus Report ontheworld
market fordairy products (IDA/W/7), atableonmilkdeliveries (IDA/W/8), summary tables onthe
products covered bytheAnnex onCertain Milk Products (IDA/CMP/W/6) andanoteonfoodaid
(IDA/W/9). Since thediscussions intheCommittee concerned those sections oftheStatus Report
which dealwithmilkpowders, butter andcheese (which willbereflected inthereport ofthatmeeting),
theCouncil focused onother sections oftheStatus Report.
Replies toQuestionnaires 4and5
17. TheChairperson recalled thatannual dataonmilkanddairy products other thanthose covered
bytheAnnex onCertain Milk Products wastobeprovided inQuestionnaire 4according toRule23
oftheRules ofProcedure. TheSecretariat hadcirculated anairgram on15August 1995 reminding
participants tosubmit their responses. TheCouncil took note ofthechecklist ofreplies to
Questionnaire 4(IDA/W/10) aswellasofreplies subsequently received fromBrazil, Japan andNorway.
18. TheCouncil tooknoteofthechecklist ofreplies toQuestionnaire 5(IDA/INV/1/Rev.1) as
wellasthereplies received fromNorway andJapan which werenotinthechecklist. TheChairperson
noted thattodateonlythree Parties hadreplied toQuestionnaire 5.Article III:3oftheInternational
Dairy Agreement stipulates thatParties shallprovide information ontheirdomestic policies andtrade
measures, andontheirbilateral, plurilateral ormultilateral commitments inthedairy sector andshall
make known, asearly aspossible, anychanges insuchpolicies andmeasures thatarelikely toaffect
international trade -withtheproviso thatParties arenotrequired todisclose confidential information.
Under Rule23oftheRules ofProcedure, participants haveagreed tosubmit thisinformation, inthe
format ofQuestionnaire 5,within fourmonths following theentry intoforce oftheAgreement, orWT/SPEC/16
Page5
within fourmonths following theiracceptance oftheAgreement. TheChairperson urged signatories
torapidly comply withthisrequirement.
19. Concludingthedairymarketreview,theCounciltooknoteoftheStatusReport,otherdocuments
andrelated statistical information, ofamendments suggested concerning thesedocuments, andofother
comments made.
20. TheCouncil agreed thattheStatus Report (IDA/W/7) asamended andcompleted inlightof
morerecent information andtaking account ofthecomments made, bereleased fordistribution toWTO
members andforallothers whowereinterested astheFirstAnnual Report oftheInternational Dairy
Agreement. Duetobudgetary constraints, thisreport would probably notbepresented asasales
publication, butwould bepublically available onrequest.
Functioning oftheAgreement, including itsfuture operation
21. TheChairperson recalled thattheAgreement hadtodateonly9Parties. Certain major dairy
exporting countries werenotparty totheAgreement. Importantly, Australia hadnowtaken afinal
decision nottoadhere totheAgreement. Consequently, theadherence tominimum export prices was
untenable. Furthermore, itwasunlikely thatmajor dairy trading countries which were notParties
would actively contribute totheexchange ofinformation inthisforum, withtheexception ofCanada.
22. There appeared tobethree possible avenues opentotheCouncil: first, continue tooperate
theAgreement asitwas;second, suspend theoperation oftheminimum priceprovisions; third, suspend
theoperation oftheAgreement initsentirety. Under thecurrent circumstances, thefirstoption was
notrealistic. Toomany Parties totheAgreement would finditimpossible toensure respect ofthe
minimum export prices iftheirmajor competitors werenotbound bythesamerestraints. Ontheother
hand, itwasalsoclear thatmany Parties believed thattheAgreement might havesome useful role
toplayasaforum fortheexchange ofinformation, which would make thethirdoption perhaps too
extreme, oratleastpremature.
23. Thesecond option (suspension ofminimum priceprovisions) could bedonethrough aDecision
byallParties tothisAgreement. Minimum prices forsome products hadbeensuspended inthepast
through suchdecisions. Under thecircumstances, suspension oftheminimum price provisions could
beaccomplished bythesuspension oftheoperation oftheAnnex onCertain Milk Products, asthe
entirety oftheAnnex relates totheminimum priceprovisions. Asaconsequence ofthis,theCommitteeWT/SPEC/16
Page6
onCertain MilkProducts should alsobesuspended, asitsrolewas"...tocarry outallthefunctions
which arenecessary toimplement theprovisions oftheAnnex." (Article VII:2(a)).
24. TheCounciladoptedaDecisionwhichwascirculatedasdocumentIDA/3dated17October1995.
ThetextoftheDecision isannexed tothepresent report.
25. Following theadoption oftheDecision, theCouncil agreed thatthereport oftheCommittee 's
finalmeeting would becirculated forcomments andadoption following thesame procedures usedfor
theCouncil 'sreports (Rule 8oftheRules ofProcedure).
Adoption ofquestionnaires (IDA/W/5)
26. TheCouncil adopted formats forQuestionnaires 1-5,regarding information tobefurnished
under Article IIIoftheAgreement (IDA/4). Itwasnoted thatParties totheAgreement weretomake
bestendeavours tosubmit theinformation asrequested inMarch andSeptember ofeachyear.
Financial implications ofdecisions byWTO Bodies (WT/L/76)
27. TheCounciltooknoteofacommunicationdated21July1995,fromtheChairmanoftheGeneral
Council totheChairpersons ofallWTO Bodies regarding theprocedure fordecisions having financial
implications which maybetaken byWTO Bodies (WT/L/76).
Calendar ofCouncil andCommittee meetings for1996
28. InlightoftheDecision adopted under agenda itemC(IDA/3), theCouncil decided toschedule
itsregular meetings for1996on19March 1996and17September 1996. Itwasnoted thatthese dates
remained subject tolaterconfirmation andmodification, ifnecessary.WT/SPEC/16
Page7
Other business
Report totheGeneral Council
29. TheCouncilagreedthatinaccordancewithArticleIV:8oftheWTOAgreement,theChairperson
would submit totheGeneral Council abriefreport onherownresponsibility, providing aresumé of
theactivities andconsiderations oftheCouncil inthefirstyearofoperation oftheInternational Dairy
Agreement. Thisreport wassubsequently distributed asdocument WT/L/90.
Chairperson 'snoteofthemeeting
30. TheChairperson presented abriefreport oftheCouncil meeting. Thereport bytheChairperson
wassubsequently distributed asdocument WT/L/89.WT/SPEC/16
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ANNEX
INTERNATIONAL DAIRY COUNCIL
Decision of17October 1995
1. Atitsmeeting on17October 1995, theInternational Dairy Council (the"Council") reviewed
thefunctioning oftheInternational Dairy Agreement (the"Agreement") pursuant toArticle IV:1(b)
oftheAgreement.
2. TheCouncil recalled thattheParties totheAgreement were subject totheminimum export
prices asspecified intheAnnex onCertain MilkProducts. However, given thelimited membership
oftheAgreement theCouncil considered thatadherence tominimum export prices wasuntenable.
3. Inlightofthese considerations, theCouncil decided tosuspend theapplication oftheAnnex
onCertain Milk Products andthefunctioning oftheCommittee onCertain Milk Products until
31December 1997. ThisDecision willtakeeffect on18October 1995.
4. TheCouncil agreed toreview themarket situation fordairy products atitsregular meetings.
Forthispurpose Parties would submit theinformation requested inQuestionnaires 1-4inadvance of
eachCouncil meeting.
5. TheCouncil agreed toreview thefunctioning oftheAgreement atitsfirstregular meeting
in1996.