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TWN Info Service on WTO and Trade Issues (Nov07/14)

9 November 2007


The following article was published in the SUNS on  2 November and is reproduced with permission.  Any reproduction and recirculation requires the permission of SUNS (sunstwn@bluewin.ch).

Best wishes
Martin Khor
TWN


Agriculture: Intense talks on special safeguard mechanism
Published in SUNS #6357 dated 2 November 2007
By Martin Khor, Geneva, 1 Nov 2007

The "Room E" agriculture negotiations at the WTO focused on the issue of Special Safeguard Mechanism (SSM) for developing countries on 30 and 31 October and the topic is expected to feature for a third day on 1 November afternoon.

The G33 grouping of over 40 developing countries (with mainly defensive interests in agriculture) circulated a "non paper" on SSM on 30 October, summarizing the major points of its previous proposals and its most recent position.

Argentina, Paraguay and Uruguay (sometimes termed "APU") also circulated a paper that focused on "cross-referencing".

According to diplomats, the paper proposed that if the volume of an imported product increases such that the "volume trigger" comes into effect, before the SSM is used it has to be determined first whether there has been a change in price and in which way.

It is argued that the volume increase may be due to an increase in demand for the product, and not to a price decline, in which case the SSM should not be used to raise the tariff.

The cross-referencing issue was one of the major issues discussed during the two days. Apparently, the APU group claimed that the G33 in a previous paper had also accepted the principle of such a "cross-referencing", and the Chair of the meeting, Ambassador Crawford Falconer of New Zealand, also asked the G33 to explain if there is a difference between the APU proposal and the G33 position.

G33 sources said that the G33 position has been that the mandate is that the price and the volume triggers can be used to put the SSM into effect, and that either trigger can be used in a stand-alone way, without having to refer to the other trigger.

In its "non-paper" to Room E, the G33 said that the Hong Kong Declaration recognized two distinct triggers. "Any attempt to introduce double triggers through market tests or cross checking would not only make the mechanism unduly complicated or burdensome but would also not be in line with the mandate," said the paper.

According to diplomats, another key issue raised by the Chair was the question of the need to limit the number of times the SSM can be invoked (during a particular period).

The other controversial issue was in the treatment of SSM, whether to limit the tariff increase in the SSM to the Uruguay Round bound rates. A number of countries are advocating that the allowed increase in duties under the SSM should not bring the duties above the Uruguay Round levels.

The G33 members have argued however that the SSM should be allowed to offset the decline in prices by an adequate increase in duties, even if these go above the Uruguay Round rates.

They also cite that the normal safeguard (in the WTO's safeguard agreement) and the existing special agricultural safeguard (SSG) do not have any restrictions such as that the increase in duty cannot exceed the bound rates of the previous Round.

The G33 "non-paper" circulated at the meeting also stressed the need for developing countries to be able to raise the duties to above the Uruguay Round rates (see below).

Falconer remarked that whether the SSM should allow duties to be raised above the Uruguay Round levels was a political issue which should be decided on by Ministers, according to diplomats.

In its "non-paper" dated 25 October, the G33 stated that there is a clear mandate for the SSM in both the Hong Kong Declaration and the July 2004 Framework Agreement.

It said that SSM is important for the operationalisation of the Special and Differential Treatment mandate and the development dimension of the Doha Development Agenda. For developing country Members, operationally effective modalities for SSM and Special Products are central to reaching agreement in these negotiations.

"The SSM is a trade instrument to respond effectively to vital agriculture concerns of farmers in developing countries," said the paper.

Continuing distortions including those caused by subsidies require developing countries to safeguard their essential development concerns as well as safeguard against any market instability of import surges or price depressions through an effective and easy to use emergency trade remedy.

The SSM is a trade measure for developing country Members and LDCs, therefore it should be able to address and remain as long as there is abnormality in the world trading system.

The G33 stressed that "the word special' in Special Safeguard Mechanism refers not to the circumstances in which it should be applied but to highlight the fact that normal safeguards as established in the WTO Safeguard Agreement is inadequate to address price declines and import surges.

"Therefore, a special safeguard mechanism is mandated in order to enable developing country Members and LDCs to invoke the SSM and use it more easily and effectively."

The G-33 said it has called for an effective and simple SSM which is not administratively burdensome to implement. This would refer to all aspects of the SSM, be it the product coverage, triggers and the remedies.

"However, it should remain clear and obvious that the G-33 has no intention to design a SSM that can be invoked literally hundreds of times without the existence of an import surge or price depression," it said.

On the issue of PRODUCT COVERAGE, the G-33 took note of the Chair's recognition that SSM must be available to all domestically produced products and its substitutes.

However, it remains important for the developing countries and LDCs that the SSM should effectively cover all products since no a priori list of domestically produced and substitute products can be established at any time, given the dynamic nature of domestic production, trade, consumer preferences and product uses.

"The G-33 remains firm that the SSM should not be linked to any product that has undertaken liberalization because when the livelihoods of poor farmers is threatened due to any price depression or import surge, the situation needs to be addressed regardless of the level of tariffs," it added.

The G-33 agreed with the Chair's original assessment outlined in his Challenges Paper that if preferential trade is to be counted in calculating the triggers, then the remedy must apply also to preferential trade, and vice versa.

That means the individual members would determine whether to include preferential trade or not in the triggers and the application of remedies.

On the issue of TRIGGERS, the paper said the G-33 has proposed a moving average which factors in normal fluctuations in trade. This ensures that the SSM would not disrupt normal trade.

The G-33 was of the view that the level of volume trigger should proportionately address the different levels of import surges. The smaller the import surge the smaller the remedy and vice versa. Therefore, multi-triggers and multi-remedies for volume trigger as proposed by the G-33 is the appropriate way ahead.

"As for the price trigger, the G-33 is of the view that 12-18 months average would not reflect the price of normal trade because the period cannot capture the trend in agricultural prices that would render the SSM to be an effective instrument against price declines," said the paper.

"The moving average incorporates the long-term trend of commodity prices to ensure that trigger prices are representative of more realistic trends in prices. Therefore, this measure would not be prejudicial to trade flows.

"The G-33 considers that taking the most recent three years for which data are available would be more suitable for calculating the trigger, given the diverse capacity in developing countries in providing the data. However, the G-33 remains open to consider other alternatives to better capture the situation of normal trade."

The G-33 also supported the Chair's opinion that the Hong Kong Declaration made it clear that there would be two distinct triggers. Any attempt to introduce double triggers through market tests or cross checking would not only make the mechanism unduly complicated or burdensome but would also not be in line with the mandate.

On the issue of REMEDIES, the G-33 stressed that the remedy for SSM must effectively address the problem.

"The SSM must be able to address the main problems regardless of the Uruguay Round bound levels," the G33 stressed. "Therefore, raising the duty only to the Uruguay Round bound rate would mean that in many cases the developing country would be able to offset the price decline and import surge to only a very limited extent.

"Thus the entire objective of having an SSM would not be achieved. The Agreement on Safeguard or SSG does not have such a restriction i. e. that mechanism does not require the Members to raise the duty up to any specific level. The SSM should be more flexible than the normal agreement on safeguards or the SSG."

Regarding the price remedy, the G-33 maintained that the compensation by way of remedy is the full difference between the trigger price and import price since that would enable the depressed prices to be raised back to the level of reference price.

On the duration of the use of the SSM, the proposal of the G-33 to use no more than 12 months duration is to deal with the situation when surges occur during harvest in the latter part of the year, said the paper.

"The suggestion to apply the SSM only to the end of the calendar or financial year would result in SSM not being able to effectively serve its purpose. However, a member may lift a remedy at any time once the market has stabilized."

The G-33 also reiterated its position that it has no intention to apply both the price and volume-based remedies to the same product at the same time.

On the issue of TRANSPARENCY, the paper said that the SSM should be applied in a transparent and non-discriminatory manner. Paragraph 7 of the G-33 proposal includes sufficient provisions on transparency, notification requirements and consultations.

 


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