Developing countries stress importance of SSM

At a WTO meeting convened to discuss the question of a Special Safeguard Mechanism in agricultural trade, many developing countries voiced the need for such an instrument to insulate themselves from trade shocks in the sector.

by Kanaga Raja

GENEVA: A large number of developing countries at the WTO have strongly underlined the need for a Special Safeguard Mechanism (SSM) in agriculture in order to protect themselves from sudden import surges and/or price declines.

They also argued that such a mechanism should be simple and effective to use, and that the issue of the SSM should not be linked to other areas of the negotiations, in particular market access.

The views of these developing countries came at the first session of the WTO Committee on Agriculture in Special Session dedicated to discussing the issue of the SSM since the Nairobi Ministerial Conference last December.

The Nairobi Ministerial Decision on the SSM states:

“The Ministerial Conference … decides as follows:

“1. The developing country Members will have the right to have recourse to a special safeguard mechanism (SSM) as envisaged under paragraph 7 of the Hong Kong Ministerial Declaration.

“2. To pursue negotiations on an SSM for developing country Members in dedicated sessions of the Committee on Agriculture in Special Session (‘CoA SS’).

“3. The General Council shall regularly review progress in these negotiations.”

Unchanged positions

In his statement at the dedicated session, which was held on 11 May, the Chair of the Agriculture Committee in Special Session, Ambassador Vangelis Vitalis of New Zealand, said that since 8 March, he has had 44 bilateral consultations, and these were supplemented by meetings with many negotiating groups.

Based on these consultations, the chair said, it is clear to him that the basic positions of members on the SSM have not changed from the meetings before and during Nairobi, and that these positions reflect the underlying concerns on both sides that have remained unchanged.

According to the chair, the proponents continue to emphasize the importance that they attach to this issue. Since they consider the SSM to be a standalone issue, they do not see a linkage with market access negotiations. Some members have stressed that an outcome on the SSM is necessary for MC11 (in 2017) and that without an outcome in this area, it would be hard to envisage broader outcomes.

Other members consider that it would be difficult to achieve convergence on the SSM in the absence of outcomes on market access more generally.

“We can’t deny these persistent gaps between members’ fundamental positions. At the same time, we shouldn’t disregard ideas from the past that may hint at pragmatic ways forward to bridge these gaps,” said the chair.

He reiterated that there is a clear mandate from the ministers and he intends to make all the necessary efforts to facilitate discussions on the SSM.

According to trade officials, Indonesia, on behalf of the G33 developing-country grouping, said that the WTO Agreement on Safeguards is very cumbersome to apply, hence there is a need for a Special Safeguard Mechanism for agricultural products, specifically for developing countries, which would be easier and faster to apply.

Ministers affirmed in Nairobi that developing countries will have recourse to the SSM, Indonesia said, noting that WTO members had also agreed to work on the SSM in the 2004 July framework agreement and in the 2005 Hong King Ministerial Declaration.

The SSM is of utmost importance to developing-country members as a whole, said Indonesia, which expressed hope that the discussion will further the effort to find solutions on this issue.

It highlighted that the Agreement on Safeguards is not tailored to addressing import surges in an abrupt manner for developing countries. Import surges and price falls need to be addressed immediately as they occur.

Indonesia urged work on an agreement that will be meaningful in establishing such a mechanism. The G33 had been constructively engaging in the discussion in the lead-up to Nairobi, and had submitted numerous proposals to the Agriculture Committee in Special Session. The G33 has shown flexibility and its proposal has provided special treatment for least developed countries and small and vulnerable economies. It also has limited product coverage and addressed the issue of predictability.

Despite all these efforts, however, some members have rejected the idea and have lingered around a political debate. Trying to link the SSM with other issues will be counterproductive, Indonesia cautioned, adding that there should be no preconditions for negotiations.

India said that it does not have access to the safeguards that are already allowed in the Agriculture Agreement. It cited the example of tapioca production in the country, saying that it used to have tapioca production but the industry got wiped out due to import surges. By the time it could use the safeguards according to the WTO agreement, it was already too late, with tapioca cultivation being wiped out. India used this example to underscore why developing countries would need a Special Safeguard Mechanism.

China, supporting the G33 statement, said that the SSM is a standalone issue. Unlike the special safeguard that is already in the Agriculture Agreement, the SSM is anticipated to be an instrument for developing countries to address import surges. China called upon all members to implement the Nairobi decision to actively respond to the G33 proposals.

Botswana, on behalf of the Africa, Caribbean and Pacific (ACP) Group, said that it supports the affirmation at Nairobi that developing countries should have the right to use the SSM. It appreciated the fact that the negotiations will be undertaken in dedicated sessions. It also emphasized that the SSM must be simple and effective to use.

Great interest

According to trade officials, Turkey, South Africa, Sri Lanka, the Philippines, Bolivia and Korea supported the G33 statement.

South Africa said that as a developing country, it has access to special safeguards under Article V of the Agreement on Agriculture, but is unable to use it as it is too complicated. The SSM is of great interest to many developing countries and South Africa is ready to work constructively towards such an outcome.

Bolivia said that the G33 has shown considerable flexibility to take into account the concerns of members. The need to have an SSM is on account of the imbalanced outcome of the Uruguay Round. So, the use of the SSM should not be exceptional, it added.

Turkey said that it has read the Nairobi decision very carefully which states that developing-country members have a mandate to have recourse to an SSM. The mandate is not to discuss whether to talk about the SSM – the objective is to design an operational mechanism. The July 2015 paper submitted by the G33 is a good basis for work, it said, adding that it is ready to discuss concrete proposals.

The European Union said that it heard very different views in the meeting. The SSM as designed in the 2008 Rev.4 draft agriculture modalities text was linked to significant tariff cuts. It was an exceptional measure used in exceptional circumstances. The SSM should be designed as a specific instrument, it said.

According to trade officials, Australia submitted two questions on the issue at the meeting:

1. What is the experience of members using safeguards in free trade agreements (FTAs) and in the WTO?

2. What has changed in agriculture market access since the SSM was proposed sometime ago?

Norway said that there is a need to address the issue of FTAs with regard to the SSM. If everyone is excluded, what is the point of it?

According to trade officials, India said that the issue of FTAs keeps coming up. The free trade agreements do not feed into the multilateral system, it pointed out.

Bolivia underlined that FTAs are not a subject in this house.

According to trade officials, several large agricultural exporters including Paraguay, Mexico, Uruguay, Brazil, Argentina, Colombia and Chile expressed concerns over the SSM as it would limit their exports to the markets of developing countries. This mechanism could have a negative impact on South-South trade, they said.

According to trade officials, the United States did not speak on this issue.

According to trade officials, in his concluding remarks, the chair said that it was a good “throat-clearing” session. There is a clear message from the G33 that there is no link between the SSM and market access, and price decline is a real problem.

He welcomed the fact that no one has opposed the discussion on the SSM. “You are all very faithful to the ministerial decision,” he said, adding that many members want to see movement elsewhere in order to calibrate the engagement.

He also said that there is no clear division between developing and developed countries. Members all seem to have shared concerns on price declines and import surges, but draw different conclusions, said the chair.

Many countries which are for the SSM say that this is a mechanism to counterbalance the fact that rich countries are subsidizing their farmers.

Members also have an interest in the other part of the negotiations, whether it is market access or domestic support. Now, the homework is to follow up, said the   chair.   (SUNS8240)                            

Third World Economics, Issue No. 616/617, 1-31 May 2016, pp8-10