G-33 PROPOSES SPECIFIC NUMBERS FOR SPECIAL SAFEGUARD MECHANISM

An informal G-33 proposal containing specific values for additional duties that developing countries could apply when facing agricultural import surges proved controversial at a 24 March meeting that took place at the end of the recent agriculture week.

This 'special safeguard mechanism' (SSM) is intended to allow developing countries to quickly put in place high tariffs (beyond bound levels) on farm imports to shield their agricultural sectors from import surges or a collapse in import prices. The 42 members of the G-33 have long lobbied for such a mechanism, arguing that the existing 'special safeguard' (SSG) under Article 5 of the WTO Agreement on Agriculture can only be used by a small number of developing countries, and that too in a very limited manner. Members are still in the process of defining how the SSM would function; the Hong Kong Declaration stipulates that it will be based "on import quantity and price triggers."

Paper specifies price and volume triggers, safeguard duties

The G-33's informal paper proposed specific thresholds for changes in import price and volume from the three-year average levels that would trigger the SSM, along with ceiling figures for additional safeguard duties. The new proposal inserts numerical values into the blanks that were present in the group's October 2005 proposal outlining how it wanted the SSM to operate (see BRIDGES Weekly, 2 November 2006).

The G-33 provides for four tiers of increased import volume levels, each linked to correspondingly higher levels of potential safeguard duties. A country would not be allowed to impose any additional duties if the import volume of a particular product increased by less than 5 percent over the three-year average. For an increase of 5 to 10 percent, however, countries would be allowed to impose an additional duty of up to 50 percent of the bound tariff for that product or 40 percentage points, whichever was higher. If import volumes went up by 10 to 30 percent, the potential additional duties would rise to 75 percent of bound tariff levels, or 50 percentage points. Finally, for increases in import volume that exceed 30 percent of the average level, countries would be permitted to impose a maximum additional safeguard duty of 100 percent of the bound tariff, or 60 percentage points.

As for price-triggered safeguards, the paper provides for safeguard duties to be imposed in two different 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 three-year average 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 size of the addition would depend on the size of the price fall. The proposal further stipulates that developing countries would be allowed to start imposing shipment-by-shipment safeguard duties if two shipments in a row of the particular product are at prices at least 5 percent lower than the trigger level. Levying duties on a shipment-by-shipment basis is likely to be more effective at restraining imports beyond the trigger level.

The proposal also specified that if a developing country's currency has depreciated by at least 10 percent over the previous year, it would be allowed to calculate the import price of a product by using the average exchange rate over the preceding three-year period. This would insulate the country from recent depreciation, which could otherwise make imports appear artificially expensive and thus above the price level that would 'trigger' the extra duties.

Differences among developing countries exposed

Discussions on the G-33 paper at the meeting indicated that it had exposed some differences among developing countries, and notably within the G-20, about the precise purpose of the SSM.

According to the G-33, the SSM is simply an emergency measure for affording a measure of protection to domestic farmers, one that should be available to all developing countries for all products, and for an indefinite period. Countries that took this position included G-20 members China, India, Indonesia, Nigeria, the Philippines, and Venezuela, in addition to, Trinidad and Tobago, Turkey, Sri Lanka, Zambia, Jamaica, Nicaragua, Kenya, the group of Asian, Caribbean, and Pacific (ACP) countries, Honduras, the Dominican Republic, and Madagascar.

Opposition came from farm exporters -- both developed and developing countries -- which argued that the G-33's proposed SSM could be used as a pretext for protectionism, in turn hurting the developmental prospects of poor countries that export agricultural products. They view the SSM primarily as a means of making some developing countries feel more comfortable about implementing tariff liberalisation, and argued that the G-33's proposed trigger were too low.

Some of the countries, which included the US, the EU, Canada, Australia, New Zealand, Argentina, Chile, Malaysia, South Africa, Egypt, and Thailand, called for restricting the SSM to products in which trade was already substantially liberalised. Others argued that products already been partially shielded from tariff cuts by virtue of their designation as 'sensitive' or 'special' should not be eligible for the SSM.

Five recently-acceded Members, Croatia, Moldova, Jordan, Albania and Oman, asked to be granted recourse to the SSM, a request that received widespread sympathy. Most new Members of the WTO have particularly low tariffs as a result of bilateral market access negotiations during the accession process.

Major agricultural exporter and G-20 coordinator Brazil stayed out of the fray, insisting that the nature of the SSM was not a big issue. It contended that when the level of ambition in market access becomes more clear, the SSM will fall into place accordingly.

Nevertheless, agriculture negotiations Chair Ambassador Crawford Falconer (New Zealand) suggested that agreeing on the core aspects of the functioning of the SSM did not require a broad agreement on farm tariff cuts, saying that Members needed to find a middle ground between the G-33's fears that an SSM could end up being as ineffective as existing safeguard provisions and the exporters' concerns about unfair protectionism.

ICTSD reporting.