TWN Info Service on WTO and Trade Issues (Mar08/02)
5 March 2008
Third World Network

Agriculture: Meeting on SSM grapples with FTA question

Published in SUNS #6425 dated 29 February 2008

By Martin Khor, Geneva, 28 Feb 2008

Proponents and opponents of an effective Special Safeguard Mechanism for developing countries crossed swords at a small-group agriculture meeting at the WTO on a second day of discussion on the SSM on Tuesday (26 February).

One of the important issues that emerged in the discussion was whether agricultural products that come under bilateral or regional free trade agreements would also be covered by the SSM, i. e. whether an importing developing country can use the SSM agreed to in the WTO to raise tariffs on products imported from its FTA partners beyond the rates agreed to in the FTA.

On Monday (25 February), the Room E meeting (to which 36 WTO delegations are invited) had held its first day of talks on SSM, with the G33 and its members criticising many aspects of the revised text of the Chair of the agriculture negotiations, New Zealand Ambassador Crawford Falconer.

The Monday meeting saw many exchanges of views between the G33 - the group of over 40 developing countries which are the main advocates of an effective and simple-to-use SSM - and Falconer, with other members being less active. (See report in SUNS #6423 dated 27 February 2008).

At Tuesday's meeting, the opponents of an effective SSM instrument took an active role in the negotiations, while several G33 members strongly responded to them and defended their own position, according to trade diplomats.

A group of three developing countries - Argentina, Paraguay and Uruguay (known as the APU) - circulated a document (JOB(08)/6 on their views on the section in the Chair's text dealing with SSM.

The APU paper supported some parts or options in the Chair's text on SSM that opt for very restricted coverage and treatment in the use of the SSM. It also made some proposals of its own with even more stringent conditions than in the Chair's text for using the SSM.

The APU paper 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.

The APU also proposed that the volume-based SSM may be maintained only until the end of the calendar year in which it has been imposed, and no product can be subject to the SSM for more than two consecutive 12 month periods and the remedial duty shall be phased down by a half after the end of the first year.

On the issue of transparency, the APU paper proposes that the SSM operate in a transparent manner, giving 7 detailed measures on transparency. These include the need to provide basis on which calculations of import volumes and prices are made, that conditions for applying the SSM are included in domestic law, as well as stipulations on publications and notification, enquiry points, consultations, and the need for availability of data if the SSM is to be applied.

Another severe restriction is that no developing country shall take recourse to the SSM measures on any product originating from another developing country. Also, the SSM shall only be in force during the Doha Round implementation period, after which it shall expire.

The APU also made clear in their proposed remedies, that under the SSM, the developing country cannot raise the tariff above the bound rate existing previous to the Doha Round. For most developing countries, this means the extra duties under the SSM are restricted to their not being able to exceed the rates that the countries committed to under the Uruguay Round.

One of the APU countries said that not crossing the Uruguay Round rates is a "red line" for the APU. This was countered by the G33 countries who are of the view that the SSM would be ineffective unless countries are allowed to impose duties that bring the rates above the Uruguay Round levels, and that the normal GATT safeguard and the existing agricultural safeguard (SSG) both allow the duty levels of the previous Round to be exceeded.

Another key point in the APU paper is that it wanted to amend the Chair's paragraph 134 (on preferential trade) to the following: "Trade under preferential agreements, including FTAs and Customs Unions, shall be excluded from the calculation of volume or price triggers and shall be exempted from the application of any additional duty under the SSM."

According to trade diplomats, there were heated exchanges between several G33 members and the APU members, especially on the issues relating to the restriction of not exceeding the Uruguay Round rates, and on excluding FTA trade from the use of the SSM.

On the preferential trade issue, the G33 at Monday's meeting had supported the option given in the Chair's text on this matter in its paragraph 134: "Where preferential trade is included in the calculation of volume or price triggers, the additional SSM duties shall be applied also to preferential trade. Where preferential trade is excluded from the application of remedies, that preferential trade shall not have been included when calculating volume and price triggers."

On Monday, the G33 had said that it appreciates the inclusion of this text by the Chair and that it supports this paragraph. The G33 is of the view that the Chair's text in paragraph 134 is fair as it leaves it to each country to choose how it would like to treat products under its preferential trade, as long as the country is consistent in the measures it takes, whatever the option it chooses.

At the meeting, APU countries contested the Chair's text and advocated their own draft (cited above), and they wanted a clarification that the SSM could not be used on products that are covered by the additional duties specified under the FTAs.

Some G33 countries, including Venezuela and supported by the Philippines, argued that unless the FTA concerned specifically states that special safeguards under the WTO cannot apply to products covered by that FTA, the importing country can invoke and make use of the SSM mechanism.

Another developing country said that if this was the case, then the FTAs already signed may have to be re-negotiated.

Developing countries advocating a strong SSM were of the view that the multilateral system and its rules take precedence and if countries would like their FTA trade to exclude the use of mechanisms (like the SSM) established under the WTO, this would have to be dealt with within the FTAs concerned and not through the multilateral system giving a blanket exception to trade under the FTAs.

According to trade diplomats, Falconer seemed in his conclusion on this issue to share the view that the WTO rules establishing the SSM had to be consistent in the treatment of preferential trade, and it is up to the FTAs to deal with the SSM issue within the FTA's own rules, if they wanted to.

On this issue of the SSM and imports under the FTAs, an expert opinion was provided to the SUNS by an expert on international trade issues, Bhagirath Lal Das, who was formerly Director of International Trade Programmes in UNCTAD, also a former Ambassador and Permanent Representative of India to the GATT, and author of several books on the WTO.

Responding to a request from the SUNS for comments on this issue, Das stated: "It is not unusual in the multilateral rule-making process to come across situations when multiple conflicting objectives have to be reconciled through a proper balance.

"The correct and practical approach in such situations of dilemma is first to identify the core concern and core objective and then to work out how the other elements, seemingly in conflict with them, can be positioned properly.

"In the case of SSM in agriculture, the core concern is the sustainability of agriculture in the developing countries and the core objective is to give protection to it from imports in difficult times.

"Imports of an agricultural product from 'any country' can contribute to the damage to the local production. Thus it will not be rational and realistic to exclude imports from 'special relation countries', for example, from 'FTA countries'.

"Of course, the situation is somewhat different when a set of countries have totally merged their trade and production economy, for example, the EU countries. In that case, the damage is to be assessed in this integrated unit 'as a whole'.

"And the relief is also for the integrated unit 'as a whole'. (There are some provisions in the current rules for 'injury to domestic production in a region of a country', but then the relief is also focussed to imports exclusively in that region.).

"Thus, so long as a country is a separate trade and production unit for agriculture, the damage to country's agriculture in the context of SSM should be considered with respect to the imports from all sources and similarly the relief should also be targeted to the imports from all sources, irrespective of whether the country has a special bilateral or plurilateral agreement of any type, for example, through FTA.

"Thus all imports, including those from the FTA countries, should count both for the trigger and relief.

"Then the question may arise how to get to that relief when FTAs may not have a provision for such relief. It is not an insurmountable problem. Once the membership of the WTO have agreed to the new SSM, it will amount to a political commitment to it. Thus FTAs, including the operation of the existing FTAs, would be considered to be guided by it.

"Besides, as a technical and legal precaution, a stipulation could be made in the agreement on SSM in the current negotiation that the SSM provision would be operational, 'irrespective of any provision to the contrary in FTAs contracted under Article XXIV of the GATT 1994 or under the Enabling Clause.'.

"It is relevant to keep in mind that the use of SSM does not have to be specifically included in an FTA for the SSM to be operational as between the FTA contracting parties.

"Whenever an FTA is silent over any matter, the normal WTO rules will operate. Thus, if SSM is not explicitly prohibited in an FTA or if the protection against import of agricultural products is not explicitly restricted to certain specified measures, there will be nothing wrong in using SSM between the FTA contracting parties once SSM gets into the WTO framework." +