The Group began deliberations on the Co-Chairs proposal, which called for a two-step approach to follow-up on forests. The first step called for establishment of an intergovernmental forum to continue policy dialogue, to be followed by a second step, initiation of an INC, which would be based upon two conditions: financial commitment for SFM and consensus on the need for a legally binding instrument. A clear divide emerged between those able to support the proposal and those who could not. Those accepting it characterized it as weak but acceptable in the spirit of compromise. Those opposing it noted that: a gradual rather than a two-step approach was desirable; the proposal seemed to prejudge the institution of an INC in 1999; the conditionality implied in the proposal was unacceptable; and the mandate for the forum was not inclusive enough. Given this impasse, a Friends of the Chair group was formed, following which a revised Co-Chairs text was circulated. This text called for the establishment of the intergovernmental forum to implement IPF recommendations and consider matters left pending by IPF. The forum would also identify possible elements of and work towards a consensus for international arrangements and mechanisms, including a legally-binding instrument and would report to the CSD in 1999. Based on that report, and on the decision by the CSD, an international negotiation process on new arrangements...or a legally binding instrument would be launched. A number of countries accepted the text as it stood and emphasized that it was very far from their original position of calling for an INC right away. Others introduced amendments, noting that the text posed difficulties for them. The Ministerial Group will meet again Friday morning.