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TWN Info Service on WTO and Trade Issues (Sept07/11)

21 September 2007


WTO split widens on special safeguard issue

The WTO agriculture negotiations have remained stuck on the special safeguard mechanism (SSM) after a second day of discussion on this issue in the so-called Room E process on Monday (17 September).

The meeting spent the whole afternoon on the SSM issue, with developing countries in the G33 defending their case for a strong instrument, while a number of other countries insisted that there be strict limits placed on the use of the SSM.

The wide split among WTO members has made the SSM a major issue of contention that could generally block progress on the agriculture talks.

The SSM discussion started on 14 September on general aspects.  The gulf between the two groups widened when more specific aspects were discussed on Monday. 

Two of the most contentious issues were the demand by the countries with exporting interests for "double checking" (that the SSM can be used only when both the price and volume factors are satisfied) and for limiting the SSM increase in tariffs to the Uruguay Round bound rates.  This was rejected by the G33 members.

Below is a report of the second day of the SSM discussion.  It was published in the South North Development Monitor (SUNS) on 19 September 2007, and is re-published here with the permission of SUNS.  Any reproduction or re-circulation requires permission of SUNS (sunstwn@bluewin.ch).

With best wishes
Martin Khor
TWN

WTO split widens on special safeguard issue
Published in SUNS #6326 dated 19 September 2007
By Martin Khor (TWN), Geneva, 18 Sept 2007

Agriculture negotiations at the WTO have remained stuck on the special safeguard mechanism (SSM) after a second day of discussion on this issue in the so-called Room E process on Monday (17 September).

The Room E meeting, involving 36 delegations, spent the whole afternoon on the SSM issue, with developing countries in the G33 (including India, Venezuela, Indonesia, Kenya, and Cuba) defending their case for a strong instrument, while a number of other countries including the United States, Brazil, Argentina, Paraguay and Uruguay insisted that there be strict limits placed on the use of the SSM.

The wide split among WTO members has made the SSM a major issue of contention that could generally block progress on the agriculture talks.

The G33 group of over 40 developing countries, backed by the ACP and African Groups, have been advocating for an effective SSM instrument for developing countries to enable them to raise their tariffs above the bound levels when the import price of a product drops or the import volume rises beyond a certain degree (known as the "trigger" level).

The SSM proponents argue that an effective SSM instrument is needed to safeguard their farmers from import surges or import price declines that would adversely affect the products and livelihoods of local farmers, and their countries' food security.

The establishment of a SSM for developing countries has been agreed to by WTO members. The issues now at stake include the triggers and when they can go into effect, by how much the tariffs can be raised, and for how long the SSM can remain in effect for a product after the initiation.

The SSM discussion started last Friday (14 September) on general aspects, and it was already evident that there was a continuing split between the WTO members with defensive and offensive interests in agriculture (See SUNS #6325 dated 18 September 2007).

The gulf between the two groups widened when more specific aspects were discussed on Monday (17 September). According to diplomats, two of the most contentious issues were the demand by the countries with exporting interests for "double checking" (that the SSM can be used only when both the price and volume factors are satisfied) and for limiting the SSM increase in tariffs to the Uruguay Round bound rates.

On "double checking", some of the WTO members insisted that the SSM can be used only if both the price and the volume factors are satisfied.

(For example, if a country wants to use the SSM because the price trigger has come into effect, it must also be checked whether the volume of imports has risen to the level of the volume trigger).

The G33 members, however, told the meeting that the "double checking" concept was unacceptable. For them, if either the price factor or the volume factor is triggered, the SSM would come into effect. The G33 members also reminded that the Hong Kong Ministerial Declaration had agreed on the use of both triggers for the SSM.

(Paragraph 7 of the Hong Kong Ministerial Declaration states that "Developing country Members will also have recourse to a Special Safeguard Mechanism based on import quantity and price triggers, with precise arrangements to be further defined").

Just as contentious was the issue of the remedy in the SSM. The G33 members have proposed, for the remedy for price decline, that the additional tariff to be imposed can be of a level that fully offsets the decrease of the import price. (The proposed reference price will be the average level of the immediate previous three years).

In the G33 proposal, the remedy for the volume factor will depend on the extent of the volume increase vis-a-vis the reference level, with the extent of additional duty matching the extent of volume increase (on a scale provided in the proposal).

The agricultural-exporting countries, however, insisted that, under the SSM, the additional tariff can raise the SSM rate to above the new Doha Round bound rate but cannot exceed the bound rate set by the previous Round (the Uruguay Round).

According to them, allowing the SSM rate to go above the Uruguay Round levels would be to "go backwards", and would deprive the exporting countries of market access (to the countries making use of the SSM) that had already been agreed to during the Uruguay Round.

In their view, the use of the new SSM should be linked only to the new liberalisation commitments of the Doha Round, but not alter the commitments already made in the previous Round.

The G33 members counter-argued that the SSM is meant to address the problem of import surge so that local farmers would not be adversely affected. By limiting the additional tariff to only the Uruguay Round rate would be inadequate as in many cases that would not solve the problem.

Some G33 members gave examples of cases in which they would require additional duty that would take the tariff above the Uruguay Round rate, to address the problem. Even with the present rates, set by the Uruguay Round, they were already facing problems arising from import surges.

They said that therefore it would not make sense to restrict the SSM in such a way as to limit the SSM duty to the Uruguay Round rates.

They also reminded that the present safeguard agreement and the present safeguard mechanism in the Agreement on Agriculture did not contain such a limitation (that the duty after SSM use cannot exceed the rate of the previous Round).

Each group also used the argument that their political constituency would not allow them to take a position different from what they are now taking. One of the agricultural exporting countries stated that its constituency would not be able to accept a system that allows their market access to be eroded by their partners being able to raise their tariffs above the Uruguay Round rates.

Some G33 members responded that their constituencies in turn would not be able to understand it if they were to accept a SSM instrument that did not allow them to deal with the problem of import surge because the duty increase is limited to the Uruguay Round rates.

According to diplomats, the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, said that since the present WTO safeguard agreement allows for the additional duties to go above the level of the previous Round, then countries could make use of it (instead of creating another safeguard mechanism).

And if the present safeguard agreement is inadequate to deal with agriculture, the route should be to amend that agreement, rather than to set up a new SSM.

Falconer also suggested whether it was possible to have a SSM remedy system in which normally the duty cannot go above the Uruguay Round level, but in unusual conditions, such as if serious injury can be shown, the duty can go above the Uruguay Round level. The issue then would be how to define an unusual situation, or to define serious injury.

However, the G33 members did not yield from their original position, according to diplomats.

Several diplomats, from both sides, privately said that the split on the SSM issue could make it one of the deal-breakers in the negotiations to obtain agriculture modalities.

With the discussion on SSM having finished, at least for this round, the Room E discussion moved next on Tuesday afternoon (18 September) to a cluster of issues that the Chair has not dealt with in his 17 July modalities paper, including tariff escalation, preference erosion, tropical products and commodities.

Falconer has planned that this first round of post-summer break talks would take up three weeks, and that the three-week period will end this Friday.

The talks will on late Tuesday afternoon move on to domestic support.

"We need to know what the United States is going to say, or to not say, on domestic support, because so many other things - and not only in agriculture - will hinge on this," said a senior agriculture negotiator from the capital of a developing country that is heavily involved in the talks.

Diplomats have been privately speculating among themselves whether the US can or will say anything significant on its domestic support offer, especially since its Presidential fast-track authority has run out, and its 2007 Farm Bill is still being formulated.

Some diplomats point to the accusations by the US Trade Representative Susan Schwab that some developing countries are blocking the Round (because they do not agree with the 17 July NAMA modalities text prepared by Canadian Ambassador Don Stephenson) as a sign that the US will not offer anything new on domestic support.

In their view, the US has been deliberately preparing public opinion to blame others for not accepting the NAMA text and thus deflect the blame away from itself when it becomes clear that it would not make a new agriculture offer.

The Schwab tactic was on display again on September 17 when, speaking at a conference, the USTR said how the Doha Round will play out should be known in the next 4 to 6 weeks, and success depends mostly on large developing countries being willing to open their markets.

"The question we're dealing with at this point in Geneva is, will a handful of countries that made very negative comments in July recognise that we all need to come together and show flexibility?" Schwab said, replying to questions. "We're going to know in the next 4 to 6 weeks how that's going to play out."

Conversations with many diplomats from developing countries have made clear that in any blame game that may develop - and almost everyone believes that such a blame game is almost inevitable - they do not want to be in a position to have fingers pointed at them if the talks break down.

But at the same time they also do not want to give up on their principles and positions, just to avoid being blamed.

The diplomats are walking a tight-rope, not wanting to surrender their important positions, and not wanting to be blamed if and when things go wrong. +

 


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