Modalities phase: chair’s report to TNC, July 2003
is the report by the negotiations’ chairperson to the Trade Negotiations
Committee, circulated to WTO member governments on 7 July 2003. Prepared
by chairperson Stuart Harbinson under his own responsibility, the report
is “intended to assist participants in their deliberations on
agriculture in the preparatory process for the Fifth Meeting of the
Mr Harbinson says: “Achieving the objective of establishing modalities as soon as possible has continued to remain elusive. … As matters stand, collective guidance and decisions are required on a number of key issues in order to clear the way for reaching [the goal set out in the Doha mandate]”.
7 July 2003
Committee on Agriculture
Negotiations on Agriculture
Report by the Chairman, Mr. Stuart Harbinson, to the TNC
This report is intended to assist participants in their deliberations on agriculture in the preparatory process for the Fifth Meeting of the Ministerial Conference. The report is divided into two parts: (i) a brief factual account of the work carried out by the Committee on Agriculture, Special Session since Doha, including references to the relevant documents, and (ii) a section highlighting in a non-exhaustive manner key issues and questions which, in view of the Chairman of the Committee on Agriculture, Special Session, participants need urgently to address. The report is submitted by the Chairman on his own responsibility and is without prejudice to the positions of participants.
“13. We recognize the work already undertaken in the negotiations initiated in early 2000 under Article 20 of the Agreement on Agriculture, including the large number of negotiating proposals submitted on behalf of a total of 121 Members. We recall the long-term objective referred to in the Agreement to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this programme. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture.
“14. Modalities for the further commitments, including provisions for special and differential treatment, shall be established no later than 31 March 2003. Participants shall submit their comprehensive draft Schedules based on these modalities no later than the date of the Fifth Session of the Ministerial Conference. The negotiations, including with respect to rules and disciplines and related legal texts, shall be concluded as part and at the date of conclusion of the negotiating agenda as a whole”.
On 26 March 2002, the Committee on Agriculture adopted a programme under paragraph 13 and 14 of the Doha Development Agenda covering the period March 2002 to March 2003 with a view to establishing modalities for the further commitments, including special and differential treatment, by the date mandated by Ministers (TN/AG/1 refers). In accordance with this programme, between June 2002 and March 2003 seven meetings of the Special Session of the Committee on Agriculture were held, complemented by a series of inter-sessional and other informal consultations. In the course of the work, many negotiating proposals and informal papers as well as other specific inputs for the negotiations were submitted by a wide range of participants. As required by the agreed programme, the Chairman submitted on his own responsibility on 18 December 2002 an Overview Paper (TN/AG/6 refers), on 17 February 2003 the First Draft of Modalities for the Further Commitments (TN/AG/W/1 refers), and on 18 March 2003 a revision of the First Draft of Modalities for the Further Commitments (TN/AG/W/1/Rev.1 refers). Participants' comments concerning these three papers are reflected in the Secretariat summary reports of the relevant meetings of the Special Session (TN/AG/R/6, 7 and 8 refer). The Chairman reported regularly to the Trade Negotiations Committee (TNC) on the work carried out and the progress made (TN/AG/2 to 5 and 7 to 9 refer).
Throughout the period covered by the programme adopted on 26 March 2002, participants engaged in detailed and focused debate. Considerable progress was made in some areas. However, at the formal meeting of the Special Session on 31 March 2003, the Chairman had to conclude that, overall, participants remained far apart on key issues and, in the absence of collective guidance from participants on possible bases for compromise, there had been no scope for producing a second draft of modalities at that juncture. In these circumstances, it was not possible to establish modalities within the time-limit foreseen by Ministers.
While many participants were concerned by the seriousness of the situation resulting from the failure to meet the established deadline, the Special Session of the Committee agreed at this meeting on the need to continue and intensify its work in order to establish modalities for the further reform as soon as possible. To this end it was agreed that the Chairman should continue to organize technical and other consultations in order to facilitate progress on all fronts, taking into account also the need for a balanced work programme. He noted that in carrying out this work participants should bear in mind that consultations on specific issues have to be seen as part of the package as a whole.
From April to mid-June 2003, the Chairman organized 11 informal technical and other consultations on a wide range of issues. A further meeting of the Special Session was held at the end of June In the course of these meetings, it became evident that the failure to establish modalities for the further commitments had given an added edge to making progress in essential technical work, with worthwhile further progress being achieved in a number of the rule-related areas. However, the same could not be said with respect to core issues regarding the modalities for the further commitments, notwithstanding repeated appeals by the Chairman for all delegations to work on and come forward with solutions that might contribute to the development of a basis for compromise. In these circumstances, achieving the objective of establishing modalities as soon as possible has continued to remain elusive. The Chairman has continued to keep the TNC regularly abreast of the state of play.
Clearly, any modalities established must faithfully reflect the Doha mandate. As matters stand, collective guidance and decisions are required on a number of key issues in order to clear the way for reaching this goal. In the following paragraphs, an attempt is made to highlight the issues and questions which, in the Chairman's view, are the most urgent. For this purpose, this section is organized according to the so-called three pillars of the Agreement on Agriculture, i.e. market access, export competition and domestic support, it being understood that, in line with the Doha mandate, special and differential treatment has to be an integral part of all elements of the negotiations and that non-trade concerns are to be taken into account in the negotiations as provided for in the Agreement on Agriculture. Participants will, no doubt, also bear in mind the linkages that exist between all areas under negotiation, both within agriculture and across the negotiations under the Doha Development Agenda as a whole.
For reference, a copy of the revised First Draft of Modalities for the Further Commitments (“revised First Draft”) is attached (Annex 1). It should be noted that some participants do not accept the revised First Draft as a basis for the negotiations. These as well as a number of other participants have noted that their negotiating proposals remain on the table (for a survey of proposals see TN/AG/6 and subsequent specific inputs by participants). Further, it is important to underline that the issues and questions for urgent attention raised in the following paragraphs do not necessarily constitute an exhaustive list of the matters that participants may wish to address in connection with the revised First Draft, nor are they intended to prejudge the results of the negotiations. Finally, the issues and questions raised in the present paper are specified on the understanding that, on matters not explicitly highlighted in this paper, an eventual outcome on modalities would reflect the progress made in the technical and other consultations since 31 March 2003.
The negotiations on agricultural market access are confronted with having to reach compromises on a wide range of issues. The principal areas involved are: the modalities to be employed for reducing tariffs and other means to improve market access such as expanding market access opportunities through tariff quota access commitments; rule-related issues, such as tariff quota administration and special safeguards; other market access issues related to certain non-trade concerns; and special and differential treatment in relation to both the negotiation of further access commitments and rules.
Tariff Reduction Formulas: Main Options
A formula reduction in tariffs will play a key role in achieving the objective of “substantial improvements in market access” as agreed by Ministers at Doha. In this context, many participants have also raised the need to tackle tariff peaks and tariff escalation. As matters currently stand there is, on the one hand, strong and widespread support for a flexible, simple average reduction formula along the lines of the formula used in the Uruguay Round (36 per cent average reduction target with a minimum cut of 15 per cent for developed participants) and, on the other hand, strong support amongst a range of other participants for a Swiss-type formula that would result in the harmonisation of developed participants' tariffs, with the maximum tariff at the end of the implementation period being 25 per cent ad valorem for any tariff item. Given the unwillingness of the proponents of these two approaches to compromise, the Chairman put forward the graduated simple average reduction formula outlined in paragraphs 8 to 15 of the revised First Draft in an attempt to bridge the wide gap. The principle underlying this approach is “the higher the tariff the greater the required average reduction rate” (rising in bands from  to  per cent, subject respectively to a minimum cut per tariff line). Under each of these options special and differential treatment would generally apply in the form of lower tariff reduction targets and a longer implementation period.
Key issues to be resolved are which of the above formulae should be retained or whether any of them can be modified in such a way as to make it broadly acceptable. In the latter case, the details would have to be specified.
Many developing country participants accept that a tariff reduction formula should also be applicable, with appropriate adaptations in terms of reduction target rates and implementation periods, to their tariffs. However, a number of these countries have made the point that tariffs are their only instrument of defence and that their ability to improve market access critically depends on developed countries’ commitments in the areas of domestic support and export competition. They are seeking maximum flexibility in some areas in order to address their food security, rural development and/or livelihood security concerns. In this regard, a significant number of developing countries has welcomed the inclusion in the revised First Draft of the concept of special products (“SP products”) which would be eligible for significantly lower reduction rates, although a number of them would like these products to be fully exempted from reduction commitments. On the other hand, some other developing countries have raised concerns regarding the implications of this concept for South-South trade (this point was also made in the discussions on a possible special safeguard mechanism for developing countries mentioned in paragraph 14(c) below). Some developed and developing countries have also flagged concerns regarding the possible creation of a large loophole and underlined the need for real improvements in market access.
In tandem with the tariff reduction formula to be established, participants should decide whether the concept of SP products should be retained and, if so, what approach would be appropriate in determining how developing country products should be classified as “SP”. In the latter case, a critical question is whether this should be done by way of self-declaration or of objective criteria to be specified.
In the light of the tariff reduction formula agreed, there are a number of other major issues on which decisions are required in tandem. They include:
(a) Whether existing tariff quotas should be expanded and, if so, in the way proposed in paragraphs 17 to 23 of the revised First Draft or by some other modality. Furthermore, should there be trade-off possibilities between the depth of tariff cuts for individual products and the degree of tariff quota expansion? Some participants have also called for the reservation of a certain share of tariff quotas or their expansion for small (commodity) suppliers.
(b) Whether the special safeguard provisions of Article 5 of the Agreement on Agriculture (“SSG”) should cease to apply for developed countries and, if so, (i) at the end of the implementation period, or (ii) two years thereafter (paragraph 25 of the revised First Draft refers).
(c) Can it be agreed that a new special safeguard mechanism for developing countries should be established along the lines indicated in paragraph 26 of the revised First Draft and as further developed in the course of technical consultations (Annex 2 refers)? In the affirmative, participants will have to decide the criteria to determine the products to be eligible for measures under such a safeguard mechanism.
(d) Whether the provisions regarding preferential schemes which are contained in paragraph 16 of the revised First Draft are acceptable or should be further refined and, if so, in what way.
(e) Whether the market access package should also include complementary approaches, such as sectoral initiatives or any other means to further improve market access. In this regard, are the recent proposals on cotton (which go beyond market access) submitted by four African countries acceptable (TN/AG/GEN/4 refers)?
Other market access issues
There are various areas of the modalities set out in the revised First Draft, and under the Agreement on Agriculture as it stands, where, explicitly or de facto, non-trade concerns such as food security or the need to protect the environment are taken into account. However, some participants feel that insufficient attention has been accorded to these concerns, particularly in regard to the need to secure the viability of rural areas in all countries, including in areas with disadvantaged or high-cost agricultural production conditions. Other participants hold the opposite view.
Specifically in the context of market access a number of other non-trade concerns or other issues have been raised by some participants in the negotiations. In these regards:
(a) Are participants prepared to agree that the agriculture modalities should contain provisions for additional protection for a limited list of GIs?
(b) Should the agriculture modalities include an authoritative interpretation of the conditions under which Article 5.7 of the Agreement on the Application of Sanitary and Phytosanitary Measures can be invoked?
(c) Should the agriculture modalities include an authoritative
interpretation of Article 2 of the TBT Agreement with respect to
It should be noted that a number of participants hold that these issues are not covered by the Doha mandate. In their view, these matters can only be addressed in the appropriate fora, i.e. the TRIPs Council, the SPS Committee and the TBT Committee, respectively.
At Doha, Ministers agreed to aim at “reductions of, with a view to phasing out, all forms of export subsidies”. In the area of export competition, the negotiations have covered export subsidies, export credits, food aid and state trading export enterprises. While in the course of the work since March 2002 progress has been made in some of these areas, decisions are still required on a number of key points.
The key question is whether the formula for the phasing out of export subsidies contained in paragraphs 29 to 35 of the revised First Draft can be agreed. In the alternative, participants would have to decide on the specifics of other modalities, including the target expressed in quantitative terms, the implementation period and path, as well as the modalities under special and differential treatment.
Progress has been made on developing strengthened disciplines concerning officially supported export credits, export credit guarantees and insurance programmes (“export financing support”). The draft of a possible new Article 9bis or 10bis of the Agreement on Agriculture is contained in Attachment 5 of the revised First Draft and, in an updated version, attached as Annex 3 to this report (a further revision reflecting the results of recent consultations is in preparation). While a number of other details still have to be negotiated, key decisions to be taken include:
(a) the question of the length of the maximum repayments terms in excess of 180 days to be accorded under the provisions of special and differential treatment (paragraphs 8 and 9 of Annex 3 refer);
(b) the details of possible more favourable terms of export financing support in respect of exports to developing country Members experiencing emergency situations (paragraph 10 of Annex 3 refers).
Progress has also been made regarding the development of strengthened disciplines on food aid. A draft of the envisaged new rules in this area is contained in Attachment 6 of the revised First Draft. A major point of controversy among participants is, however, whether the provisions of paragraph 4(b)(i) of Attachment 6 referring to emergency or critical food need situations are appropriate. In particular, there remain differences in views whether food aid should be triggered on the basis of appeals by specialized United Nations agencies only or whether the broader concept contained in paragraph 4(b)(i) is preferable. Similar differences in views prevail with regard to the provision of food aid for other purposes (paragraph 4(b)(ii) refers). There is also not full consensus to the effect that food aid shall be exclusively provided in fully grant form (paragraph 4(b)(iii) of Attachment 6 refers). Decisions on these three points are needed.
State Trading Export Enterprises
There continues to be some debate whether Article XVII of GATT 1994 provides for sufficient disciplines or whether, as part of strengthened disciplines in the area of export competition and of the agriculture package as a whole, the modalities should cover state trading export enterprises. In this regard, a key question for decision is whether the modalities should incorporate an undertaking not to restrict the right of any interested entity to export, or to purchase for export, agricultural products, subject to a phasing-in period to be negotiated as set out in paragraphs 5(b)(ii), 5(c) and 5(d) of Attachment 7 of the revised First Draft.
Export restrictions and taxes
In the context of the debate on food-security, a number of participants have called for the prohibition or progressive reduction/elimination of export restrictions and export taxes while other participants have not been in favour of such a strengthening of the provisions of Article 12 of the Agreement on Agriculture. The key issue to be decided is whether the new rules contained in paragraphs 39 and 40 of the revised First Draft should become part of the overall package on agriculture.
In the area of domestic support, the main issues to be decided include:
(a) Whether the modalities contained in paragraphs 44 and 45 of the revised First Draft concerning the Blue Box can be agreed upon and, in the affirmative, which of the two options proposed in these paragraphs should be retained (i.e. a cut by  per cent of Blue Box payments or the inclusion of Blue Box payments in the AMS and the respective S&D modalities). In the alternative, participants would have to decide on the specific modalities of an alternative approach in terms of the depth of reform expressed in quantitative terms, the implementation period and the corresponding modalities under special and differential treatment.
(b) Whether the modalities to reduce Amber Box support by  per cent (for developing countries:  per cent) and to cap product-specific Amber Box support as contained in paragraphs 46 to 48 of the revised First Draft can be agreed upon. In the alternative, participants would have to decide on the specific modalities of an alternative approach in terms of the depth of reform expressed in quantitative terms, the implementation period and the corresponding modalities under special and differential treatment.
(c) In tandem, can it be agreed that the de minimis level under Article 6.4 of the Agreement on Agriculture should be reduced by [0.5] per cent per annum over a period of five years for developed countries, and that the level for developing countries should be maintained ( paragraphs 51 to 53 of the revised First Draft refer).
As for the Green Box, a number of participants have proposed strict new disciplines, including provisions such as a cap on Green Box payments or the elimination of certain forms of direct payments to producers. Other participants have pointed out that the Doha mandate calls for substantial reductions for trade-distorting domestic support which, by definition, would exclude the Green Box. Attachments 8 and 10 of the revised First Draft include a number of adjustments, particularly in the context of S&D. Can these be agreed?
Can participants agree:
(a) that least-developed countries shall not be required to undertake reduction commitments (paragraph 54 of the revised First Draft refers)?
(b) that developed countries shall provide duty- and quota-free access to their markets for all imports from least-developed countries (paragraph 55 of the revised First Draft refers)?
Recently acceded Members
The key issues for decision are whether recently acceded Members should have special flexibility and, if so, whether that flexibility should be in the form of more time to implement the reduction commitments (paragraph 56 of the revised First Draft refers) or whether, as proposed by a number of Members concerned, recently acceded Members should have more wide-ranging flexibility in the areas of market access and domestic support and, if so, what would be the specific modalities?
Additional flexibility for certain other groupings
A further question is whether other groupings such as small island developing States, other vulnerable developing country groupings or transition economies should have special flexibility. Views among participants differ. In the affirmative case, the modalities would need to be specified.
FINAL POINTS > back to top
New date for submitting draft schedules
With respect to paragraph 14 of the Doha Ministerial Declaration, a new date for the submission of comprehensive draft Schedules based on the modalities to be established will need to be set.
Participants will be aware that the provisions of Article 13 of the Agreement on Agriculture will expire at the end of 2003. This point is not covered in the revised First Draft.
This report may have to be updated in the light of the results of further work prior to the Fifth Meeting of the Ministerial Conference. In this regard, it should be noted that a further meeting of the Special Session is to be held on 16 to 18 July 2003 and there may also be further developments subsequent to this meeting.
ANNEX 1 > back to top
ANNEX 2 > back to top
Possible Architecture of Developing Country Special Safeguard Mechanism (SSM): Non-Exhaustive Outline by Chairman of Matters for Further Technical Work (version of 7 March 2003)
Agreement on Agriculture — Draft Article 5bis
Reservation in Schedules of the right to have recourse to price-triggered or quantity-triggered Special Safeguard Measures in respect of certain products which meet certain conditions. Such products to be designated in the Schedule of the developing country concerned with the symbol “SSM”.
< Scope of product coverage of SSM
Least-developed and net food-importing developing countries may designate up to [N] products, in their primary or semi-processed form at the HS eight digit level (e.g., HS 1006 30 00, “Semi-milled or wholly milled rice” ), provided that the following conditions are complied with …. (to be developed).
Other developing countries may designate [N-n] products, in their primary or semi-processed form at the HS eight digit level, provided that the following conditions are complied with …. (to be developed).
< General conditions relating to the application of SSMs
Special safeguard measures, whether price or quantity triggered, may not be applied in a manner which results in import access opportunities being reduced below a level corresponding to average annual imports in the period 1999 — 2001.
No special safeguard measures shall be applied to imports of designated products originating in other developing countries.
SSMs may be applied concurrently with any countervailing or anti-dumping duties imposed in accordance with the relevant WTO Agreements. Such measures may not be applied in conjunction with measures under the Agreement on Safeguards, nor with measures under Article 5 of the Agreement on Agriculture.
Form of Special Import Measures
(a) Price-triggered: An additional duty not exceeding any
positive difference between the c.i.f. import price of a
shipment expressed in terms of the domestic currency of the
importing developing country concerned, on the one hand, and, on
the other hand, a corresponding import reference price
representing the monthly average import price of the product
concerned over a recent three year period excluding the three
highest and three lowest monthly averages. In the absence of
relevant average import price data for a particular product, the
import reference price may be constructed on the basis of
published representative export price quotations, provided that
details of the prices and methodology employed are notified in
advance to the Committee on Agriculture.
(b) Volume-triggered: An additional duty of not more than 30 per cent ad valorem to be imposable in any year on any quantity of imports in excess of 125 per cent of the average volume of imports in the immediately preceding three year period. This additional duty shall not be applied beyond the end of the year in which it has been imposed.
Transparency and notification requirements
Appropriate and full notification requirements to be developed at the appropriate stage.)
< Duration and review
(To be developed at the appropriate stage.)
ANNEX 3 > back to top
Revised draft for further consideration of a possible new Article 9 bis or 10 bis of the Agreement of Agriculture on Governmental Support for Export Financing (version of 21 March 2003).
Subject to the provisions of this Article, Members shall not, directly or indirectly, provide support or enable support to be provided for or in connection with the financing of exports of agricultural products, including the credit and other risks associated therewith, otherwise than on market related terms and conditions. [Each Member accordingly undertakes not to provide export financing support otherwise than in conformity with this Article.] [Each Member accordingly undertakes not to provide export financing support otherwise than in conformity with this Article and with the commitments as specified in that Member's Schedule.]
Forms and providers of export financing support subject to discipline
Export financing support that is subject to the provisions of this Article includes:
(a) direct financing support, comprising direct
credits/financing, refinancing, and interest rate support;
(b) risk cover, comprising export credit insurance or reinsurance and export credit guarantees;
(c) government-to-government credit agreements covering the imports of agricultural products exclusively from the creditor country under which some or all of the risk is undertaken by the government of the exporting country;
(d) any other form of governmental export credit support, direct or indirect, including deferred invoicing and foreign exchange risk hedging.
The provisions of this Article shall apply to export financing support provided by or on behalf of the following entities, whether such entities are established at the national or at the sub-national level:
(a) government departments, agencies, or statutory bodies;
(b) any financial institution or entity engaged in export financing in which there is governmental participation by way of equity, provision of loans or underwriting of losses;
(c) any governmental or non-governmental enterprise, including a marketing board, which has been granted or enjoys, exclusive or special rights, privileges or financing advantages (such as the ability to borrow at the government cost of funds), or statutory or constitutional powers, in the exercise of which, or by virtue of which, support for or in connection with the financing of exports is provided;
(d) any bank or other private financial, credit insurance or guarantee institution which acts on behalf of or at the direction of governments or their agencies.
Terms and conditions
Export financing support which is provided in conformity with the following terms and conditions shall be deemed to comply with paragraph 1 above:
(a) Maximum repayment term: the maximum repayment term of a supported export credit shall not exceed the period beginning at the starting point of credit and ending on the contractual date of the final payment. The “starting point of a credit” shall be no later than the weighted mean date or actual date of the arrival of the goods in the recipient country for a contract under which shipments are made in any consecutive six-month period. The following maximum repayment terms shall be respected:
(i) for breeding livestock:  months for contracts up to and
including [$150,000]; and  months for contracts exceeding
(ii) for agricultural vegetable reproduction material:  months;
(iii) for all other products and destinations: [six months/180 days].
(b) Cash payments: if the repayment term is 180 days or more, a
minimum cash payment shall be required to be paid, by or on
behalf of the importer, at or before the starting point of the
supported credit, representing not less than [ ] per cent of the
total amount of the contract/shipment value but excluding
interest as defined in sub-paragraph (c) below. Financing
support shall not be provided in respect of such cash payments,
other than in the form of insurance or guarantees at market
rates against pre-credit risks.
(c) Payment of interest: “interest” excludes premiums and other charges for insuring or guaranteeing supplier or financial credits, banking fees or commissions relating to the export credit, and withholding taxes imposed by the importing country. Interest shall be payable. Where the repayment term exceeds 180 days, interest shall be payable not less frequently than every six months, with the first payment to be made no later than six months after the starting point of the credit.
(d) Minimum interest rates: the following minimum interest rates, not inclusive of and separate from risk-premium reflective of, as the case may be, the buyer/commercial, country/political and sovereign credit risks covered shall be applicable in respect of direct financing support and in respect of invoiced amounts benefitting from deferred payment under an export contract:
(i) For repayment terms of up to 180 days — the applicable Libor
(London Interbank Offered Rates);
(ii) For repayment terms in excess of 180 days and less than two years — the applicable Libor for floating rate based transactions and one year Government bonds/Treasuries for fixed interest rate transactions;
(iii) For transactions with repayment terms of two years or more — the applicable Libor for floating rate based transactions, and the Commercial Interest Reference Rates (CIRRS), as published by the OECD, for fixed interest rate transactions
(e) Repayment of principal: where the repayment term exceeds 180
days, the principal sum (transaction value minus cash payment)
of an export credit shall be repayable not less frequently than
at six-monthly intervals, starting not later than six months
after the starting point of the credit.
(f) Premiums in respect of coverage of risks of non-repayment under direct financing support, export credit insurance, reinsurance and export credit guarantees: premiums shall be charged, shall be risk-based and shall be adequate to cover long term operating costs and losses. Premium shall be expressed in percentages of the outstanding principal value of the credit and shall be payable in full at the date of issuance of cover. Premium rebates shall not be accorded. Furthermore, support in the form of export credit insurance, reinsurance or guarantees shall not be provided in respect of export financing contracts whose terms and conditions are not otherwise in conformity with the provisions of this paragraph.
(g) Risk sharing [to be developed].
(h) Foreign exchange risk: Export credits, export credit insurance, export credit guarantees, and related financial support shall be provided in freely traded currencies. Foreign exchange exposure deriving from credit that is repayable in the currency of the importer shall be fully hedged, such that the market risk and credit risk of the transaction to the supplier/lender/guarantor is not increased. The cost of the hedge shall be incorporated into and be in addition to the premium rate determined in accordance with this paragraph.
(i) Period of validity of export financing offers: credit terms and conditions (e.g., interest rates for direct financing support and all risk-based terms and conditions) offered for an individual export credit or line of credit shall not be fixed for a period exceeding six months without payment of premium.
Non-conforming financing support
Export financing supports which do not conform with any of the relevant provisions of paragraph 4 of this Article, hereinafter referred to as “non-conforming export financing”, constitutes export subsidies for the purposes of this Agreement and are subject to specific export financing reduction commitments under this Article.
The commitments for each year of the implementation period, as specified in Part IV, Section IV, of a Member's Schedule, represent with respect to non-conforming financing support:
(a) in the case of scheduled reduction commitments relating to
the value of non-conforming export financing support, the
maximum level of such financing support in value terms, that may
be provided in that year in respect of the agricultural product,
or group of products concerned;
(b) in the case of scheduled quantity reduction commitments, the maximum quantity of an agricultural product, or group of products, in respect of which non-conforming export financing may be provided in that year; and
(c) in the case of scheduled reduction commitments relating to non-conforming repayment terms, the maximum non-conforming repayment terms that may be supported in that year in respect of the agricultural product, or group of products concerned.
Transparency and notification
No later than three months after the entry into force of this Article each Member shall submit a notification concerning that Member's export financing programmes, export financing bodies and other related matters in accordance with the format specified in Annex [ ] hereto. This notification shall be updated at the beginning of each subsequent year. At not less than [ ] monthly intervals Members shall submit a notification to the Committee on Agriculture in which details are provided of export financing commitments entered into in accordance with the format specified in Annex [..] hereto. Least-developed country Members shall not be required to submit such notifications. [Note: the Annexes referred to in this paragraph to be developed at the appropriate stage.]
Special and differential treatment
Special and differential treatment in favour of importing developing country Members shall comprise longer maximum repayments terms of up to [ ] months.
In respect of imports of basic foodstuffs least-developed countries and net food-importing developing countries as listed in G/AG/5/Rev.5 shall be accorded differential and more favourable treatment comprising:
(a) Maximum repayment terms of up to [ ] months;
(b) an exemption from the requirement to make cash payments under paragraph 4(b) above;
(c) an exemption from the requirement with respect to six-monthly interest payments under paragraph 4(c) above;
(d) an exemption with regard to the requirement, under paragraph 4(e) above, to make a principal repayment no later than six months after the starting point of the supported export financing; and
(e) an exemption of any risk sharing requirement under paragraph 4(g) above.
More favourable terms for export financing support in respect of exports to developing country Members experiencing emergency situations may be provided in accordance with this paragraph. An emergency is defined as a sudden, significant and unusual deterioration in a developing country Member's economy and in its ability to finance current imports of basic foodstuffs, and which may have far reaching consequences such as social deprivation or unrest. In the event of such an emergency the importing developing country Member concerned may request an exporting Member to provide more favourable export financing terms than are permissible under this Article. The importing developing country Member concerned shall concurrently notify the Committee on Agriculture in writing of the circumstances which are considered to justify more favourable terms than are permitted under the relevant provisions of this Article, together with details of the products concerned, so as to provide an opportunity for other interested exporting Members to consider responding to the request. The importing Member concerned shall allow a period of not less than [ ] days following the date of circulation of its notification before accepting any offer with respect to the provision of more favourable credit terms and conditions. Exporting Members concerned shall consider the request for more favourable terms in accordance with the need to sustain the viability of their export credits, export credit guarantees, or export credit insurance programmes. Where commitments are made to provide more favourable credit terms and conditions in response to such a request, details of the committed terms and conditions shall be notified by the exporting Member or Members concerned to the Committee on Agriculture, in accordance with the format specified in Annex hereto [to be developed], not later than [ ] days following the date on which the commitment was entered into by the exporting Member concerned. This treatment shall not extend beyond the duration of the emergency. The maximum repayment term permitted under this exception shall not exceed [ ].
Developing country Members providing direct export financing support may use the interest rates referred to in paragraph 4(d) above, plus appropriate risk-based spreads, as minimum interest rate benchmarks for direct financing support.
For developing country Members the provisions of this Article, other than those relating to notification and transparency, shall enter into force at the beginning of the year following the end of the developing country implementation period for export subsidy commitments: provided that, with respect to any product or group of products for which a developing country Member is listed as a significant exporter in document G/AG/2/Add.1, these provisions shall become applicable with effect from the entry into force of this Article; and provided further that the provisions of Article 9.4 of this Agreement shall also apply to export financing.
The provisions of Articles 3.1, 3.3, 8, 10.1 and 10.3 of this Agreement shall apply mutatis mutandis to the commitments with respect to export financing under this Article.
[Annexes hereto — to be developed.]