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TWN Info Service on WTO and Trade Issues (Dec04/5)

14 December 2004

Third World Network

 

G33 presents detailed paper on Special Safeguard Mechanism (SSM)

The G33, which is a group of over 40 developing countries concerned about the effects of liberalisation on small farmers, presented a joint six-page statement on Special Safeguard Mechanism (SSM) during negotiations on agriculture held in the WTO on 13 December.  It was the most detailed paper prepared so far by the group, which is also known as the SP-SSM Alliance. 

The paper provides details why the present safeguard measures do not meet the needs of developing countries, and thus why thee is a need for a SSM.

It concludes by putting forward “general parameters” that should guide the negotiation of modalities on SSM.  These parameters are that the safeguard measure shall be automatically triggered; be available to all agricultural products and to address situations of import surges and swings in international prices; price and volume-triggered safeguards shall be contemplated; and both additional duties and quantitative restrictions can be used to provide relief from import surges and decline in prices; and the mechanism should be simple, effective and easy to implement.

The G33 paper had the support of many developing countries but met with some opposition from developed countries.

Below is a report by Goh Chien Yen on the G33 paper and the discussions.

With best wishes

Martin Khor

TWN

 

 

 

 

G33 presents detailed paper on Special Safeguard Mechanism (SSM)

TWN Report by Goh Chien Yen, Geneva, 14 Decembner 2004

The G33, which is a group of over 40 developing countries concerned about the effects of liberalisation on small farmers, presented a joint six-page statement on Special Safeguard Mechanism (SSM) during negotiations on agriculture held in the WTO on 13 December.  

It was the most detailed paper prepared so far by the group, which is also known as the SP-SSM Alliance. 

The G33 in its paper recalled that paragraph 42 of Annex B (on agriculture) of the July Framework adopted by the General Council states that “a special safeguard mechanism (SSM) will be established for use by developing country Members.”

The paper provides details why the present safeguard measures do not meet the needs of developing countries, and thus why thee is a need for a SSM.

It concludes by putting forward “general parameters” that should guide the negotiation of modalities on SSM.  These parameters are that: 

---  The safeguard measure shall be automatically triggered;

---  The safeguard measures shall be available to all agricultural products.

---  The safeguard measures should be available to address situations of import surges and swings in international prices. Therefore, price and volume-triggered safeguards shall be contemplated.

---  Both additional duties and quantitative restrictions shall be envisaged as measures to provide relief from import surges and decline in prices.

--- The mechanism shall respond to the institutional capabilities and resources of developing countries; hence it should be simple, effective and easy to implement.

The G33 also stated that “the SSM is an integral part of the Special and Differential Treatment (SDT) provisions under the market access pillar.  As such, the SSM constitutes a fundamental element for addressing the existing imbalances in the agreement.  In this context, the SSM should provide developing countries and Least Developed Countries (LDCs) with an effective and flexible instrument to address their distinct susceptibilities to import surge disturbances and the ruinous effects of down swings in prices.”

During the discussions at the WTO, developed country members including the EU, US, New Zealand and Australia, however disagreed with the G33 position.  These developed country members argued that the SSM should be designed to facilitate the overall objective of liberalisation and should not be used for defensive purpose. As such the SSM should operate more like the current SSG (special safeguard) provision in the agriculture agreement.

However the G33 paper presented reasons why the current SSG measures in the agriculture agreement are inadequate for developing countries.  It said:  “Not all WTO members have had access to this mechanism—something that the new SSM will address; nor has this instrument been available for all agricultural products. Furthermore, the specified technical conditions for making use of this instrument seem to act as constraining factors for their use by many developing countries.”

“An important deficiency is related to the fixed reference price built into the price-triggered safeguard. For developing countries having been exposed to inflationary pressures and instances of currency devaluation the fixed reference price in-built in this instrument has no relationship with current trends in prices hampering the possibility of the measure being invoked by the affected countries.”

The G33 paper stated that the FAO had pointed out that:  “To apply the safeguard, the current nominal price of imports in domestic currency should be lower than the corresponding average price effective during the 1986-1988 period, which was a period of very depressed international prices and strong overvaluation of many developing countries’ currencies. This implies that the trigger price for these countries turns out to be very low in comparison with any current prices.”

Moreover, the G33 highlighted additional elements in the architecture of this safeguard instrument act as deterrents in their use by developing countries.

“For instance, only additional duties are contemplated in this instrument as relief measures while the general safeguard provisions under GATT allows for the use of additional duties and quantitative restrictions.

“Furthermore, important constraints are in-built in this safeguard instrument  with respect to the potential relief that the special import measure can provide by limiting the level of the additional duty to be imposed in respond to import surges. Such constraints as they currently stand, combined with the particular tariff profile of developing countries may not provide for adequate relief. “

The G33 also pointed out that “the trigger levels are less sensitive to low levels of imports with the implication that when the national food supply is based largely on domestic production, imports have to increase by more than 25 per cent in one year for invoking the measure. Yet, from a food security perspective in developing countries these are often the most sensitive situations and such a large threshold for triggering the measure severely restricts its responsiveness to the particular circumstances of developing countries”

The G33 also pointed out that “the current agriculture safeguard instrument requires certain level of sophistication in terms of administrative capabilities as well as customs’ facilities and infrastructure. This sophistication is currently out of reach of many developing countries and thus a simpler mechanism may be necessary in the context of designing a SDT safeguard provision for developing countries.” 

The G33 paper also highlights problems that developing counties face in trying to use the general safeguard provisions under Article XIX of GATT and the Agreement on Safeguards.

It pointed out: “The GATT’s general safeguard provisions require Members invoking the measures to prove injury or threat thereof to the domestic industry and establish through an investigation based on objective evidence that there is a causal link between increase in imports and the injury or threat thereof to the domestic industry.” 

Many developing countries, the G33 explained, “lack the institutional capacity to implement in a rigorous manner the detailed procedural requirements necessary to apply the safeguard measures in accordance with the Safeguards Agreement.  Furthermore, the nature of agriculture in many developing countries characterised by large number of subsistence and small farmers makes it difficult to meet the conditions established in the Safeguard Agreement to prove the causal link between increased imports and injury, necessary for invoking the measure.

“An additional feature of the special import measures under the safeguard agreement is that it can be implemented only when a product is being imported in such increased quantities and under such conditions as to threaten injury to the domestic industry. Therefore, the measure would provide relief from import surge situations but does not address situations of price volatility per se.”

Therefore, “all these factors inhibit the use of the safeguard instruments under the GATT and the Safeguard Agreement, as well as the Agreement on Agriculture by developing countries and leave them exposed to the vagaries of international prices and sudden increase in imports with detrimental effects on farmers’ livelihoods, rural development and food security,” the G33 explained.

During the discussion, some developed countries such as the EU, US and New Zealand wanted to place other limitations on the G33’s proposal on the SSM. The EU and US were against the proposal of extending the mechanism to all agricultural products. They advocated instead that a criteria should be negotiated to limit the number of products that can have recourse to this mechanism. For instance, it was suggested that it should be limited to only staple food products or products necessary for food security and that these products should be produced in the developing country concerned. Another limitation proposed by these members, is that products identified for the mechanism should be at the 8-6 HS digit level.

These developed country members added that since the SSM should facilitate the liberalisation process.  For example, products that have undergone greater tariff reduction could be another method to identify products for the SSM.

India supporting the G33 proposal, pointed out that the issue of market access raised in this context is not relevant to the SSM, because the SSM is already discussed within the context of this round of negotiations.

The G33 proposal was supported by other developing country members including, Kenya, Philippines, China and Brazil. They wanted to see that this becomes a workable and effective mechanism.

Kenya said that there should be no limitations to the SSM in order to address the problems of import surges and price fluctuations.

The G33 further pointed out that “as an SDT measure the SSM must represent an improvement on the existing safeguard provisions in terms of establishing a mechanism that is responsive to the needs of the developing country Members and LDCs and the particular circumstances of their agricultural sectors.  Building on the flexibilities embedded in the existing safeguard provisions rather than extracting from them would be the adequate approach to follow in devising the modalities for the new special safeguard mechanism.”

 


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