4th February 2010
Bridges Weekly | G33 Paper on SSM Sparks Exporters’ Ire
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Members of the G33 group of import-sensitive developing countries aired their concerns about weaknesses in the Special Safeguard Mechanism, which would allow developing countries to raise tariffs in the case of an import surge or price depression, in a document released last week. In the face of strong criticism from exporters, the group laid out a politically charged position to advance ongoing technical discussions ahead of a March ’stocktaking’ exercise at the WTO.
The G33 provided a scathing critique of the most recent December 2008 WTO agricultural draft modalities, on the grounds that what is now on the table does not make a “serious dent into the removal of distortions in agricultural trade.” The group noted the absence of effective cuts in developed country subsidies and the protection of developed country markets through ’sensitive products’ as the basis of their assessment.
Reiterating that food security, the livelihoods of small farmers and rural development provided the motivation for the SSM, the G33 said that the mechanism should not be viewed “primarily through the prism of commerce.”
Given the ongoing ‘agricultural crisis’ in developing countries, the G33 stressed the importance of policy mechanisms, such as the SSM, as well as increased investment to help developing country farmers boost their productivity.
Part of a series of technical documents to be released in the coming days, this first paper sketches out the key political and technical issues on which the G33 members have reached a consensus. The G33 documents are a response to a recent call from David Walker, the chair of the WTO’s agriculture talks, for increased exchanges on the technical problems in the draft agriculture agreement. Walker hopes that more back-and-forth among delegates might help narrow the remaining gaps in the negotiations.
Major exporting countries such as Australia, Uruguay and the US informally circulated technical analysis of the SSM in October. The recent G33 paper attempts to address many of the issues that those countries raised while tying them into an analysis of the state of the negotiations.
The G33 paper was released on 27 January, three days before trade ministers gathered on the sidelines of the World Economic Forum in Davos, Switzerland to assess prospects for concluding the Doha Round this year. A delegate speculated that WTO Director-General Pascal Lamy would not be pleased with the timing of the document, since he “is trying to sell the idea that progress has been achieved” on the SSM.
‘Normal Trade’
Disagreements over the SSM were largely blamed for the collapse of high-level trade talks in July 2008; since then, exporters have taken care to outline many of their concerns with the mechanism. Among them, the protection of ‘normal trade,’ or trade outside of import surges, has been key. Exporters want to ensure that the SSM can only be used in the case of import surges and not in response to growth in ‘normal trade’.
Although the notion of normal growth in trade is not clearly defined, the G33 responded to exporter concerns by showing that, between 1987 and 2007, growth in trade for the ten most traded agricultural commodities has remained in the single digits, with the exception of soy.
The SSM has a proposed trigger of a ten-percent surge in import volume compared to a three-year moving average. The G33 document suggests that, under such a scenario, normal trade is likely to flow unimpeded.
But a delegate from an exporting country exclaimed that in some countries imports increased by “70 percent year over year” and that the use of aggregated data in the statistical analysis overlooked the variability across countries.
The G-33 paper effectively rejects the notion of normal trade and some delegates complained that it throws a wrench into the delicate machinery of the negotiations. One exporter-country delegate asserted in frustration that these are the “concepts that we have been working on” all along.
Additionally, exporters have called for more analysis and are awaiting the release of a detailed technical document and data describing the G33’s position on ‘normal trade’.
The SSM and the SSG
The G33 has pointed to the Special Agricultural Safeguard (SSG) - a Uruguay Round tool initiated by developed countries to limit import surges - in making its case on the SSM. Citing WTO data, the group shows that between 1995 and 2008, developing countries invoked the SSG a total of 527 times, while developed countries applied the measure 1,906 times, accounting for 78 percent of the measure’s use.
To press their case further, the G33 noted that Barbados, Costa Rica, Nicaragua and the Philippines were entitled to invoke the SSG 29 times between 2000 and 2004 yet used it only once.
The group’s paper suggests that it is unlikely that they would be ‘trigger happy’ in using the SSM. “Breach of the trigger cannot be presumed to mean invocation of the measure,” they said.
Although willing to use the SSG to build their case, G33 members have been extremely critical of conditionalities imposed on the SSM in the current agriculture modalities - many of which were not applicable to the similar yet differently rationalised SSG.
The paper cautions that the development dimensions of the SSM are “burdened with conditions far more restrictive than those on the SSG, which is mainly being used by developed countries.”
Conditions for the SSM, as it currently stands in the draft modalities, would require a variety of measures to ensure that it would only be used with due cause. These include seasonal limits, which may vary from an importer and exporters perspective, a check to ensure that import surges and price declines are concurrent and a methodology to prorate the three year average baseline of trade if the SSM is invoked, among others.
Speaking to Bridges, a trade official from the G33 said that the group wants “to make SSM more accessible and easily usable than the SSG.”
Exporters have not looked so kindly on the SSG. Celebrating the end of the SSG in the current Doha Round, a delegate said the “SSG was bad and was horrible for exporters.” More importantly perhaps, the SSG was had “in exchange for tariffication” while the SSM is “free,” the delegate noted. (Tariffication refers to the conversion of tariffs from a per unit figure to a percentage of the imported product’s value; per unit tariffs are more complex, making them difficult to compare across products.)
Response
Officials from exporting countries who spoke with Bridges roundly noted that ‘nothing new’ was presented in the G33 document. One went so far as to call it the “worst paper that they [the G33] have presented.”
A compromise on the SSM is seen as key to an agreement on agriculture, one of the pillars of the Doha Round talks. The G33 has said that its paper on the SSM is meant to clarify the group’s position, but one disgruntled delegate said that there is “no point in keeping on meeting” if the paper will form the basis of future talks.
Others have been been more conciliatory, even when questioning the SSM, noting that they need to understand why conditionalities on the SSM, for example, are considered ‘unnecessary’.
Challenging the assertion that the SSM protects poor developing country farmers, an official from an agriculture exporting developing country said that they “want to protect their farmers as well” through improvements in market access.
G33 members who spoke with Bridges repeated that they “would like to first resolve issues between developing country exporters and importers” and “hope that we will be able to resolve the problems of the SSM before the stock taking.”
Agriculture negotiators in Geneva are occupied with visiting trade officials and a series of small-group consultations with the chair, meetings that have focused on templates and data needs for scheduling commitments. A plurilateral meeting of 40 to 50 WTO members is expected to take place this Friday on the SSM. Two additional meetings are scheduled for Thursday and Friday of next week.
Although currently focusing on the technical issues, chair Walker is expected to move from a small group process into something involving the wider WTO membership before the stocktaking exercise in March.
ICTSD reporting.
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To see ICTSD’s series of papers on the special safeguard mechanism, please visit: http://ictsd.org/programmes/agriculture/special-products-and-special-safeguard-mechanism/