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TRADE-AFRICA: Agriculture Talks Stuck on Import Surge Safeguard

Aileen Kwa*

GENEVA, Mar 7 2008 (IPS) - The Group of 33 developing countries has denounced the draft text on the special safeguard mechanism in the current Doha Development Round of World Trade Organisation (WTO) talks as ‘‘extremely inadequate… stringent, restrictive, burdensome (and) ineffective’’.

The special safeguard mechanism (SSM) has been proposed in response to the frequency of food import surges into developing countries’ markets over the past two decades.

Many of these countries had lowered their tariff levels, usually as a result of the international financial institutions’ structural adjustment programmes, leading to the closure of production plants, increased rural unemployment and a deepening in the agrarian crisis in many such countries.

The mechanism proposed by the Group of 33 (G33) would allow developing countries to increase their tariffs when import volumes surpass pre-existing import volumes by certain amounts. Higher tariffs can also be invoked if import prices fall beneath certain levels.

The text was proposed by the chairperson of the agriculture talks, New Zealand ambassador Crawford Falconer. The G33 represents a total of 46 developing countries in the WTO.

The mechanism is a trade measure supported by a diverse group of developing countries. This group is led by Indonesia and is composed of countries from all regions: India, China, the Philippines, Nigeria, Kenya, Senegal, Tanzania, the Dominican Republic, Jamaica and Bolivia, to name only a few.

The denouncement of the text has moved the talks into a stalemate. The ‘‘chair’s text’’, as Falconer’s draft text is called, contains ‘‘multiple limitations which in the end would only provide an ineffective mechanism’’, as the G33 said at a meeting last week.

To complicate matters further, three developing countries which export agricultural commodities – Argentina, Uruguay and Paraguay – have recently proposed even more restrictions than the chair’s draft.

According to a G33 delegate, who spoke on condition of anonymity to IPS due to the sensitivity of the talks, ‘‘the SSM is a big problem. There is a heated debate on this issue. The chair’s text is the first time we have a full text on the SSM issue but we didn’t like what he did’’.

According to this delegate, the discussions are going ‘‘the wrong way’’ because Falconer wants to limit the number of invocations or times when the SSM can be invoked.

Also, Falconer wants a higher trigger, which refers to import surge volumes having to be high before the mechanism can be activated. He also wants to restrict it to only the Uruguay Round bound rate, which refers to the level at which import tariffs were bound during the round of global trade talks before the current Doha Round.

Said the delegate, ‘‘there are layers and layers of restrictions. The mechanism may ultimately not be effective. And now we have this new proposal by Argentina and others which is even more restrictive!’’

While the G33 had asked for the SSM to cover all products, the chair had suggested in brackets – meaning that the exact number is yet to be finalised – that the SSM can only be invoked during any given 12 month period for between three to eight tariff lines.

This is despite countries usually having multiple tariff lines for a single product. Three to eight tariff lines might cover less than a single product.

In response, the G33 has argued that this restriction is ‘‘unacceptable’’. According to the statement which Indonesia made on behalf of the G33, the restriction ‘‘makes it virtually impossible for developing countries and least developed countries (LDCs) to operationalise the SSM.

‘‘It is impossible to decide, in advance, what products and sections or tariff lines may be vulnerable to import surges or price depressions in the future,’’ according to the statement.

Research which the United Nations’ Food and Agriculture Organisation (FAO) published in 2005 shows that up to 12,167 import surges were recorded between 1980 and 2003 for 102 developing countries. This translates into, on average, a total of five occurrences of import surges a year per developing country.

In a 2003 study on the same topic (‘‘Some Trade Policy Issues Relating to Trends in Agricultural Imports in the Context of Food Security’’) the FAO looked at 28 countries and eight commodities. The latter were wheat, rice, maize, vegetable oils, bovine meat, pork, poultry meat and milk.

It concluded that, at any given time, there was a 33 percent likelihood that an import surge was occurring in each product and in each country. Worse still, the price slumps for primary commodities could linger for significant periods of time: between 25 months for coconut oil to 70 months for bananas.

The FAO also found that the impact of these import surges on local production was severe. In Senegal, tomato paste imports from Europe had increased 15-fold and local production dropped by 50 percent. In Burkina Faso, tomato paste imports increased fourfold and cut local production by half.

In Jamaica, the doubling of imports of vegetable oils cut local production by 68 percent. In Kenya, dairy imports had increased ‘‘dramatically’’ with the effect that local milk sales fell as dramatically.

The other controversial aspect of the SSM has to do with the level that import surges would need to reach before the safeguard can be invoked. The group had proposed that countries should be able to invoke the SSM when an import surge reaches a level of five percent more than a previous three year average.

The chair had included this figure in brackets but he also included the alternative figure of 30 percent which opponents of the SSM had put forward. Research shows why this would be problematic.

In Nepal, rice farmers’ incomes shrank by between 40 and 50 percent and milling factories closed down when imports increased by what seems like a measly seven to eight percent. This was found in a study that ActionAid Nepal conducted into Nepal’s experience as a result of rice import surges from India when the latter went through a ‘destocking’ exercise in 2001/2002. The non-governmental ActionAid focuses on development and human rights.

Apart from these issues, there is the controversial matter of whether countries acting to stymie an import surge are allowed to raise tariffs above the tariff levels which they had committed themselves to during the Uruguay Round. The chair’s text disallows this. But the G33 is adamant that this be included.

Indeed, an existing safeguard mechanism called the special safeguard clause limited for use only by a few countries in the WTO allows for this. It has been used principally by the EU and U.S..

Indonesia, on behalf of the G33, said ‘‘for us, we remain firm that the basic principle must and shall be that all developing countries, including LDCs and small and vulnerable economies, be entitled to the remedies that can go beyond the Uruguay Round bound level’’.

*The first article in a two-part series