G-33 OUTLINES SPECIAL SAFEGUARD MECHANISM FOR DEVELOPING COUNTRIES

The forty-odd members of the G-33 WTO grouping last week came forward with a methodology for a 'special safeguard mechanism' (SSM), as provided for in the 2004 July Package (WTO/L/579), which would allow developing countries to quickly put in place high levels of tariffs to protect themselves from import surges or a collapse in import prices. Unlike the existing 'special safeguard' (SSG) under Article 5 of the WTO Agreement on Agriculture, which can be used by only a minority of Members for a limited number of products, all developing countries would have recourse to the SSM.

The SSM would modify the WTO Agreement on Agriculture to permit developing countries to impose duties higher than the bound ceiling level on farm imports in the event that import volumes rise above their three-year average, or if import prices fall below their average level for the three years preceding the year in which the duty is being imposed. The provisions for the import price-related safeguards include a component that insulates them from recent depreciation in the domestic currency rates of the importing country, which could otherwise make imports seem artificially expensive and thus above the price level that would 'trigger' the extra duties.

Additional duties imposed under the SSM would last a maximum of 12 months. The G-33 outlines provisions for four tiers of increased import levels, the sizes of which would be negotiated. While importing Members would not be allowed to levy additional duties for the tier that comprises increased imports just over the average level, they would have the right to impose steadily higher safeguard duties to counter import surges falling into the three higher tiers. These additional duties would be capped for each tier, either as a fixed number of percentage points or as a certain percentage of the bound tariff for the product concerned.

In an attempt to clarify the status of products 'en route' to importing countries on the basis of contracts settled before the trigger volume is exceeded -- a source of great confusion during the EU's recent imposition of quotas on some Chinese textile exports -- the proposal specifies that such shipments would be exempt from additional duties but counted towards the threshold volume and price level for the following year.

Safeguard measures imposed in response to a drop in the import price of a product would be levied in one of two ways: on a shipment-by-shipment basis, where the specific amount of additional duties would not exceed the gap between the import price of each shipment and how much it would have cost at the trigger price level; or on a percentage 'ad valorem' basis that would not be higher than what is necessary to compensate for the difference between the import price and the trigger level.

The G-33 suggests that import surges for perishable and seasonal products could be identified and offset by considering reference periods shorter than the standard three-year period.

The proposal stipulates that for the sake of transparency, developing countries would have to notify the Committee of Agriculture of any measures taken under the SSM, "as far in advance as may be practicable and in any event within 30 days of the implementation of the such action."

Most developing countries are ineligible to use the existing special safeguards (SSG) clause under the Agreement on Agriculture because they did not 'tariffy' their various non-tariff border protection measures during the Uruguay Round. Instead of converting such measures into tariff levels of a roughly equivalent level of protection, many developing countries chose to bind their tariffs at very high levels, thus disqualifying them from recourse to the SSG. Furthermore, even the developing countries that did retain the right to invoke the SSG have often been unable to do so, not least because its trigger price levels date back to 1986-1988, and are thus far lower than current import prices. The G-33 contends that the SSM will rectify these problems, and serve as an effective means for developing countries to protect themselves from import surges.

The G-33 SSM paper follows its 12 October proposal describing how developing countries might designate 'Special Products' for low tariff cuts based on food security, livelihood security and rural development criteria (see BRIDGES Weekly, 26 October 2005).

A copy of the G33 Special Safeguard Mechanism for Developing Countries Proposal is available here.

ICTSD reporting.