Bridges Weekly Trade News Digest • Volume 13 • Number 43 • 16th December 2009

Countries Exchange Technical Notes on SSM

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At an informal small-group meeting last Thursday convened by the chair of the WTO agriculture negotiations, trade negotiators exchanged ‘technical notes’ simulating how the proposed special safeguard mechanism could work in practice.

The special safeguard mechanism, widely known as the SSM, is intended to allow developing countries to protect farmers in the event of import surges or price declines. The mechanism has been a source of significant controversy in the WTO farm talks: exporters allege that the SSM could be used to block normal trade, while developing country importers argue that the mechanism would be vital to helping them defend domestic producers from volatile markets.

Disagreement over the SSM was widely blamed for triggering the collapse of high-level WTO trade talks in July 2008. Last week’s technical exchange does not seem to have eased the controversy.

Three exporting countries - Brazil, the US and Uruguay - made presentations on the safeguard mechanism. A fourth exporting country, Australia, has also prepared a technical note. That document was not presented at the meeting, but trade sources reported that it had been shared informally with a few delegations.

Delegates familiar with the discussion indicated that the presentation by Uruguay focused in particular on how often countries have used other safeguard instruments, such as the WTO’s Agreement on Safeguards and Countervailing Measures, as a remedy, and also considered the extent to which countries already have room to manoeuvre between their actual ‘applied’ tariffs and the maximum permitted ‘bound’ rates to which they have agreed at the WTO. Proponents of the special safeguard mechanism argued that the focus of discussions should be on how the safeguard should work, not on the agreed mandate for the instrument.

The US presentation considered the cases of India, Turkey, China and the Philippines, taking as examples soybeans, palm oil and apples, and looking primarily at the period from 2002 to 2007. The US sought to suggest that, if the safeguard were ‘triggered’ when average import levels increased by 10, 20 or even 40 percent above historical averages, normal trade in many years could be affected. However, sources reported that it remained unclear how the US had incorporated the three-year rolling average in its simulation.

The simulation by Brazil looked at one example only, that of soybeans, and examined the extent to which trade in the product was ’seasonal’ and therefore subject to important increases and decreases in different months during the year.

The Australian paper, although not discussed at the meeting, was reportedly the most detailed and technical analysis conducted on the issue so far. The study simulated Chinese imports of swine offal and soybeans, Indonesian rice, coffee and capsicum imports, and Indian imports of apples. The study suggested that “intensive work in one or more blocks of time” would be needed “in the coming months.”

The G-33 group of developing country proponents of the special safeguard mechanism was reportedly also planning to prepare a technical study for discussion early next year. Exporting countries indicated that a technical response from the G-33 would be a welcome contribution to the discussion.

ICTSD reporting.