Implications of Proposed Modalities for the Special Safeguard Mechanism: A Simulation Exercise
by Raul Montemayor
Agricultural Trade and Sustainable Development Series • Issue Paper 10
While it is widely recognised that developing countries as a whole will benefit from freer agricultural trade, some fear that most of the new trading opportunities would be captured by a few middle-income countries and large food exporters. Lower income countries would gain only little and might even lose from further liberalisation. Many still have large rural populations composed of small and resource-poor farmers with limited access to infrastructure and few employment alternatives. Thus, these countries are concerned that domestic rural populations employed in import-competing sectors might be negatively affected by further trade liberalisation, becoming increasingly vulnerable to market instability and import surges as tariff barriers are removed.
A large number of countries still depend on the export of a few commodities, the prices of which show high volatility and long-term decline. Commodity dependence, the expected erosion of preferences that some countries depend on for their export earnings, as well as increased food import prices due to the elimination of export subsidies, will make it difficult for these countries to guarantee their growing populations the food they need. In this context, safeguarding domestic food production capacity has become an essential component of food security strategies in an increasing number of countries.
These concerns were first raised at the World Trade Organization (WTO) in the context of the “Development Box” debate, in which developing countries tabled a set of proposals aiming at providing flexibility for countries to enhance domestic food production and adopt measures to protect the livelihoods of resource-poor farmers. These proposals included concrete measures to address dumping and import surges. Some were eventually reflected in the so-called 2004 July package. The provisions for special and differential treatment under Paragraphs 41 and 42 of the Framework Agreement are probably the most innovative from a sustainable development perspective. They specify that “developing country Members will have the flexibility to designate an appropriate number of products as Special Products, based on criteria of food security, livelihood security and rural development needs. These products will be eligible for more flexible treatment.” The Framework Agreement further states that a “Special Safeguard Mechanism (SSM) will be established for use by developing country Members.”
However, key aspects of these instruments – such as the selection and treatment of Special Products (SPs), or specific modalities for a new SSM, including product coverage, possible trigger mechanisms and remedies – were left for future negotiations. As a contribution to this highly controversial debate, the International Centre for Trade and Sustainable Development (ICTSD) Project on Special Products and a Special Safeguard Mechanism aims to generate knowledge and options to better articulate and advance the concepts of SP and SSM from a sustainable development perspective.
The present Issue Paper (No. 10), on “Implications of proposed modalities for the Special Safeguard Mechanism: a simulation exercise”, by Raul Montemayor seeks to evaluate various proposals for a Special Safeguard Mechanism (SSM) that would allow developing countries to defend themselves from import surges and prices depressions. The study aims to analyse the proposal made by the G-33 developing country group at the WTO, and those of other trading partners, by examining how the imposition of different requirements might affect the use of the safeguard in six different country case studies.