TWN Info Service on WTO and Trade Issues (Feb08/25)

28 February 2008

Trade: G33 takes strong stance on SSM in Room E meeting
Published in SUNS #6423 dated 27 February 2008

By Martin Khor, Geneva, 26 Feb 2008

The Group of 33 strongly criticised the section on Special Safeguard Mechanism (SSM) of the revised agriculture text during a small-group agriculture meeting held at the WTO on Monday (25 February).

The coordinator of the G33, Indonesian Ambassador Gusmardi Bustami, presented the views of the G33, which comprises more than 40 developing countries whose priorities in the Doha negotiations are to defend and promote food security, farmers' livelihoods and rural development.

The G33 coordinator told the chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, that the contents of his 8 February text on the SSM were "extremely inadequate" and that his proposed architecture on the SSM would only create a stringent, restrictive, burdensome, ineffective and non-operational mechanism for developing countries and LDCs.

The SSM is a special safeguard for the use of developing countries which has been mandated in principle by the WTO's Hong Kong Ministerial meeting in 2005. It is supposed to enable countries affected by a certain increase in volume or a certain decrease in price of agricultural imports to raise duties above the bound rates, and to be easier to use than the normal safeguard that already exists in the GATT.

Unlike the normal safeguard which requires evidence of serious injury to local producers before it can be used, the SSM can be invoked without showing such injury, when either a price trigger or a volume trigger comes into play (i. e. when there is a price decline or a volume increase that reaches the "trigger" level).

While the G33 has been championing the setting up of a simple and effective SSM, some other WTO members want it to be used only under very stringent conditions, and for the remedy to be very limited. The Chair's text seems to have taken the side of the opponents of an easy-to-use or effective SSM, also imposing strict conditions for the "triggers" and a very limited extent to which the additional duty can be imposed.

For example, in the Chair's text, the extra duty cannot bring the new duty level above the pre-Doha bound rates, i. e. for most developing countries, these are the rates agreed to in the Uruguay Round. There is no such restriction either in the normal safeguard or in the special agricultural safeguard (SSG), established in the Uruguay Round, which some members (mainly developed countries) are allowed to use.

The G33 coordinator said that the SSM should be more effective, flexible, practical and operable than the existing or any possible revised SSG, with regard to the product coverage, triggers and the remedies.

He added that the SSM should not be designed with layers of limitations for use, which in the end would only provide an ineffective mechanism.

He stressed that the SSM must be an operable and effective mechanism for all developing countries and LDCs. A new kind of differentiation of treatments on SSM among the developing countries is simply unacceptable and inappropriate. Emergency situations in all developing countries should receive equal attention as well as treatments.

[The G33 was apparently referring to para 133 of the Chair's text, which allows LDCs to use the SSM to exceed their pre-Doha bound tariffs by 20 percentage points for both price-based and volume-based measures, and which allows small vulnerable economies (SVEs) to do the same during an emergency, but only for volume-based measures. Other developing countries are not allowed to raise tariffs above the pre-Doha bound rates.]

The G33 is of the view that the SSM is a trade measure and shall be a permanent mechanism as long as there is abnormality and imbalances in the world trading system.

The G33 said it has been flexible, constructive and had made significant movements; however, no major movements or flexibilities have been demonstrated in other crucial agriculture issues, whether in the market access pillar or domestic support.

It called for a much more balanced agriculture text, in particular, for a fair and balanced solution with respect to special products and SSM.

Although the G33 had high expectations that a revised draft text on SSM would be balanced, logical and operable, yet in fact the text on SSM has not accommodated these important aspects of a mechanism.

It made clear that its proposal on SSM remains on the table. It appreciated and supported the text in Paragraphs 129, 134, 135 and 139.

The G33 also had comments on a paragraph-by-paragraph basis. On para 126, it welcomed the first part of the para that SSM can be invoked for all products and the product scope is not limited. But it said the second part of the paragraph contradicts or negates this universal coverage principle and therefore it is unacceptable. [The second line says the SSM shall not be invoked for more than 3 or 8 products in any 12-month period.]

This restriction, in conjunction with the other restrictive propositions of SSM (in triggers and remedies of both volume-based and price-based measures) makes it virtually impossible for developing countries and LDCs to operationalize the SSM, said the G33.

It reiterated that it is impossible to decide in advance what products and sections may be vulnerable to import surges or price depressions in the future.

It thus advocated that the scope of application of SSM will, therefore, be determined by triggers and cannot be limited, a priori, to a set of products or tariff lines.

On para 127, the G33 said it supported this para, with the understanding that price based and volume based SSM shall both be available and that both shall operate independently; and that the reference on "an anti-dumping or countervailing measure" shall be deleted since it would not be relevant and is a totally different issue.

On Para 128, the G33 said it cannot accept the first sentence. Instead, the G33's proposal is the appropriate one, which is "a rolling average of imports of a 3 year period for which data is available", as is the case in Paragraph 130 of the price based SSM.

The G-33 noted that the paragraph has recognized the concept that more serious surges would require higher remedies as well as a three stage scale of triggers and remedies. However, the triggers and remedies featured in the revised draft text makes the SSM useless and ineffective.

Therefore, the remaining part of the paragraph, especially the new numerical suggestions outside the G-33's positions is unacceptable. It would only provide a useless, meaningless and ineffective SSM for developing countries and LDCs.

The G33 also viewed footnote 17 in this paragraph as unacceptable and asked for it to be deleted. It said the footnote suggests another differentiation among the developing Members, serves another layer of limitation or restriction and that it would make it impossible for developing countries and LDCs to implement the SSM. It places conditions on the SSM that are clearly more onerous than the SSG.

Furthermore, it said, a ceiling of a current or existing bound tariff evidently makes no sense and there is no logic in it. Any Member does not need the SSM and it is within its fundamental right to reach this kind of ceiling.

The G33 made three additional points: (a) the additional duties and percentage points is notably too low and ineffective as well as that it shall be "whichever is higher"; (b) the base for imposing additional duty shall be bound tariff rather than applied tariff; and ( c) the numbers of the minimum increase is too high.

The G33 said it supported Para 129. However, it had several objections or reservations on para 130, which deals with the trigger for the price-based SSM. On this para, the G33:

-- Rejected the suggestion of setting the trigger price at 70% of the reference price. The G-33 advocated its own proposal of a reference price 100%, which it said already takes into account the normal fluctuation prices as they are based on a monthly moving average and which would already reflect the long term trend in prices;

-- On Footnote 20, the G-33 would accept the concept if only that such obligation sets in after or following the initial use of the trigger price in line with Footnote 4 of the G-33 proposal;

-- Called for the deletion of the term "MFN-sourced" (in brackets). It wanted to know the reason and logic why it has been suggested and moreover, why this applied only to the price based SSM;

-- Was of the view that it would be an additional burden to differentiate between MFN and Non-MFN sourced price. For the G-33, the preferential trade issue is clear and had been resolved in Paragraph 134.

-- Appreciated that the paragraph has incorporated some important elements which is based on G-33's proposal, such as Footnote 18 and Footnote 19 of the revised draft text;

On Para 131 (on the remedy for the price-based SSM), the G33 could not accept the first sentence since it has only incorporated that the price based SSM remedy shall apply only on a shipment-by-shipment basis. This paragraph should have also made reference to "ad-valorem base calculation".

The remaining sentence of the paragraph is unacceptable to the G33 because:

-- The additional duty is restricted to only 50% of the difference and in addition to that, the trigger price is already suggested to be 30% lower than the monthly moving average over a recent three year period. The additional duty is further restricted through a cap, which would only make the SSM meaningless and ineffective;

-- For Members (to impose additional duties) to reach a Doha Bound Rate obviously does not require the use of a SSM. Any Member has the fundamental right to raise the duties to an existing bound rate anytime they wish;

-- The SSG has a 5-10% de minimis (or threshold) and the average reference price is fixed (1986-1988), which constitutes trade situations around 15-20 years ago. On the other hand, in the revised draft text, the SSM has been suggested to have a 30% threshold including a monthly moving average over a recent three year period calculation.

On Para 132, the G33 wanted this paragraph to be on the basis of best endeavour and thus wanted the phrase "as far as practicable" (now in brackets) to be retained. It also proposed that this paragraph be integrated with Paragraph 137 as part of a transparency system.

On Para 133, the G33 said it reflected a new kind of differentiation of treatment among the developing countries. It added that differentiating or distinguishing poor farmers among developing countries would not be factual and appropriate. Instead, the SSM should be available to all developing countries including LDCs, and all should be entitled to remedies that can go beyond the Uruguay Round bound level without distinguishing or having pre-conditions and additional special conditions attached to it.

On Para 134 and para 135, the G33 appreciated the inclusion of the texts.

On Para 136, the G33 said that the Chair's suggestion that the duration of the remedies is only until the end of the year of invocation (of the SSM) is unacceptable. The G33 retained its own position that the duration should be for a period of 12 months.

On Para 137 (on transparency), the G33 was of the view that the SSM shall not be more burdensome for developing Members and LDCs to implement. The period of 15 days is limited and therefore 30 days remains the appropriate period.

The G-33 could not accept the suggestion of requiring advance information on on-going calculations of triggers, since it would be operationally difficult and burdensome. It also suggested that this paragraph (with the 30 days provision and the specific modifications) be integrated with Paragraph 132.

On Para 138, that the SSM be in force for the duration of the implementation period [after which it shall expire], the G33 said that:

-- The SSM is a trade measure and shall be a permanent mechanism available for developing countries and LDCs, as long as there is abnormality and imbalances in the world trading system;

-- The SSM is an integral part of Special and Differential Treatment in addressing the problems of food security, rural development and livelihood security in developing countries and LDCs, and therefore cannot be simply limited to an irrelevant implementation period such as a trade round;

-- Stipulating any expiration would render the SSM as more restrictive than the SSG.

According to a trade diplomat, Indonesia was supported in putting the G33 positions at the meeting by other G33 members such as India and Venezuela.

Much of the discussion at the meeting was reportedly between Falconer and the G33 members, with most other members being surprisingly quiet.

Falconer reportedly put forward an oral suggestion that developing countries that are now eligible to use the SSG could somehow choose to make use of the SSM instead in ways that may raise the additional duty to above the pre-Doha bound rates. However, said the diplomat, it was unclear to many in the meeting what the Chair meant by this or how it would operate.

Before the meeting, on 20 February, three countries, Argentina, Paraguay and Uruguay (known as the APU), had submitted a document (JOB(08)/6, presenting their views on the section in the Chair's text dealing with SSM.

The APU view is that the SSM should be even more stringent in terms of coverage, triggers and treatment than what is in the Chair's text.

For example, the APU proposed that the SSM shall not be invoked for more than 3 products in any 12-month period, and that these products must meet more conditions, such as that they have undertaken the full formula cuts in the tiered formula, and that they are produced domestically or are close substitutes of products produced domestically. +