Bridges Weekly Trade News Digest • Volume 14 • Number 5 • 10th February 2010

Special Safeguard Mechanism: G-33 Rebuts Exporter Claims

Discuss this articleShare your views with other visitors, and read what they have to say

Two new informal documents from the G-33 developing country group have responded to exporters’ criticisms of the proposed ’special safeguard mechanism’ - a new tool that would allow developing countries to impose additional safeguard duties on imports in the event of a surge in import volumes, or a sharp drop in prices - ahead of a small-group meeting that the chair is holding this Thursday.

The two technical submissions complement a broader political proposal that was circulated at the end of January. The documents examine whether the special safeguard mechanism (SSM) should take into account seasonal variations in production and trade, and also whether a volume surge and price depression should occur simultaneously as a condition for imposing safeguard duties - both of which are key demands from exporters.

‘Seasonal’ trade

In their paper on ’seasonality’, the G-33 warn that a distinction must be made between ’seasonality in trade’ and ’seasonality in production’. While growing seasons may mean that production of certain products is skewed towards particular months of the year, these trends do not necessarily translate into increased international trade during those periods - for example, in the case of raw materials that are subsequently processed into non-perishable secondary products, and then traded throughout the year.

The group also argued that previous WTO mechanisms, such as the special agricultural safeguard’, or SSG, have looked at seasonality from an importers’ perspective. The SSG has been primarily used by developed countries to shield their domestic producers.

The G-33 paper reviews trade in cereals (rice, wheat, barley and corn); oilseeds (soybeans and soy pellets, meal and oil); ten different types of fruit; nine vegetable products; and sugar. Different products are characterised by widely differing production and trade patterns, the group concludes.

The document also looks at trade data from countries in both the southern and northern hemispheres (Argentina, Uruguay and the US). Because countries in both hemispheres also serve as import destinations, the group argues that no clear seasonality of trade emerges in many cases. “Exporters in general have diversified their markets and do not put “all their eggs in one basket,” the paper claims.

Even in a single country, for some products no clear seasonality pattern can be discerned, says the group. “For US wheat, large disparities in year-on-year data suggest that a pattern is not necessarily consistent across the years.”

While some products and product groups do show more marked seasonality at an individual country level, exports may still continue almost throughout the year - as in the case of US strawberry exports. In this case, the group asks, should strawberries be considered a seasonal product? If so, “should Argentina’s export data be used as a reference for the determination, or the US’s data?”

The group concludes that including the seasonality concept “in the SSM architecture would only add to its complexity without providing any additional value.”

“Cross-checks”

Exporters have long argued that a “cross-check” or link should be made between the presence of a volume surge and a price depression, on the basis that if import volumes are increasing but prices are not falling, there is continued demand from domestic consumers. The latest G-33 submission spells out the group’s reasons for rejecting this argument.

The G-33 looks at trends in wheat, rice and maize trade at the global level, and examines the extent to which these correlate with price movements over a 15-year period. “Movements in both import volumes and prices do not necessarily coincide,” the group concludes.

The paper also cites an ICTSD study showing that the availability of the SSM would be more than halved if the safeguard could only be used when a volume surges and price depression occurred simultaneously. The paper also reviewed work by the South Centre and the FAO that reached similar conclusions.

“A considerable time lag” can occur between an import surge and its impact on domestic prices and industry, the group argues - with such time lags being particularly acute in developing countries, due to “complex and thick layers of distribution chains and inadequate infrastructure.” The group warned that the proposed ‘cross-check’ would “unresponsive to practical needs.”

In addition, because many developing countries will in reality be unable to monitor real time price and volume data for all tariff lines all the time, the cross-check requirement would in effect make the SSM unworkable, the group observed. The poorest and smallest countries would also be the most affected by any such requirement.

Talks continue

The chair of the agriculture negotiations, Ambassador David Walker, is convening a small-group consultation on the SSM on Thursday. A follow-up meeting on Friday, open to all WTO members, is expected to share progress so far with the broader membership.

ICTSD reporting.

One response to “Special Safeguard Mechanism: G-33 Rebuts Exporter Claims”

Jonathan Hepburn 11th February 2010 at 09:20
To access ICTSD’s research papers on the special safeguard mechanism, please visit: http://ictsd.org/programmes/agriculture/special-products-and-special-safeguard-mechanism/