18th March 2008
Special Products and The Special Safeguard Mechanism - an Introduction to the Debate and Key Issues in the Context of WTO Agricultural Negotiations
Empirical evidence of the impact of trade liberalization on food and livelihood security and rural development is limited and inconclusive. On the one hand, it is widely recognized that the subsidizing of agricultural production and exports in OECD countries, as well as the anti-competitive behaviour of trading firms, can negatively affect development prospects in developing countries (FAO, 2002). On the other hand, a number of lower income countries have expressed concerns that further liberalization might have negative impacts on their food and livelihood security. In particular, they fear that lowering bound tariffs will reduce their ability to protect themselves against agricultural market instability and make them increasingly vulnerable to import surges and cheap imports.
These concerns cannot be overlooked, particularly in lower income countries where agriculture employs nearly three quarters of the labour force and generates around 30 percent of GDP. According to the FAO, the implementation of reform commitments under the WTO Agreement on Agriculture (AoA) by developing countries has been associated with increased cases of import surges, which have damaged or threatened to damage or displace viable domestic production1 (FAO, 2000). Existing evidence suggests that marginalized and resource poor farmers in particular faced economic and social adjustment challenges associated with the liberalization of domestic agriculture markets.
Against this backdrop, numerous developing countries have been reluctant to engage in further trade liberalization under the Doha Round without ensuring adequate flexibilities to enhance their domestic food production and protect the livelihoods of their rural poor and small farmers. Special and differential treatment (S&DT) for developing countries, integrated in the design of trade rules, represents one effort to address these concerns. Such differentiated treatment kicked into place during the Uruguay Round, in which agriculture became subject to multilateral disciplines for the first time. As the pace of agricultural liberalization grew, many developing countries realized that these provisions, often confined merely to longer time periods for implementation and lower tariff reduction commitments, would not be effective in safeguarding their development concerns. The concept of Special Products (SP) and the Special Safeguard Mechanism (SSM) thus emerged as alternative proposals to address these objectives.
In the latest set of developments, WTO Members agreed on 1 August 2004 on a framework in agriculture that will constitute the basis for the negotiations of full modalities - the next phase of the negotiations. Paragraph 41 of the framework clearly states that “Developing countries will have the flexibility to designate an appropriate number of products as Special Products, based on criteria of food security, livelihood security and rural development needs.” The text also indicates that the criteria and treatment of Special Products will be further specified. In addition, paragraph 42 states that a Special Safeguard Mechanism will be established for use by developing countries, the details of which will be developed in the next phase of the negotiations. One of the key challenges now facing WTO Members is to devise effective criteria for the selection of SPs and the parameters for the use of the SSM, and to work out modalities to operationalise those two concepts.
After reviewing existing WTO mechanisms for protection against import surges and market fluctuations by developing countries, this paper analyses the negotiating history of the SP/SSM concepts and the positions of key WTO Members and country groupings. The paper then briefly describes the relevant provisions of the August Decision, and discusses their significance. Finally, it provides an overview of the options proposed by various experts to deal with some of the key issues surrounding the SP/SSM mechanisms, and highlights the need for timely and policy-oriented research and dialogue in order to provide an informed input into the WTO negotiating process.