FW: [WTO-INTL] Agriculture talks this week
Manicandan
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From: WTO-INTL
[mailto:WTO-...@LISTSERVER.CITIZEN.ORG] On
Behalf Of Shefali Sharma
Sent: Tuesday, March 09, 2010
11:18 PM
To: WTO-...@LISTSERVER.CITIZEN.ORG
Subject: [WTO-INTL] Agriculture
talks this week
Hi All,
Discussions are taking place this week on agriculture at the WTO. However, meetings have mainly been taking place in a small group at the New Zealand Mission in a “Walk in the Woods” format of about 20 countries. One meeting took place yesterday in which the Special Safeguard Mechanism (SSM) was discussed. The idea of the SSM is for developing countries to be able to raise their import duties beyond their bound rates at the WTO--when (and if) the Doha Round is agreed—so that they can prevent imports from displacing local farmers and food production.
On the agenda yesterday were two papers that the G33 circulated in February. One was dated Feb 5 on “Cross-check” and another on the Price based SSM, dated Feb 11. These were both circulated on the OWINFS listserve. Another meeting took place this morning on Sensitive Products. Tomorrow more discussion on SSM is to be expected. The countries present in these meetings have been: US, Japan, EU, Australia, New Zealand, Canada, Turkey, Korea, India, Philippines, Barbados, Dominican Republic, Indonesia, Paraguay, Uruguay, Argentina, Brazil, Malaysia, Thailand and Costa Rica.
This morning’s discussion entailed a repeat of existing positions on “sensitive products” except that Brazil was more vocal saying that developed countries should give more market access in agriculture if they seek more in industrial products . This is in reference to the US which continues to demand for sectorals in the Non-agriculture Market Access (NAMA) negotiations, particularly from China, India and Brazil.
In the current agriculture negotiating text (Dec 2008 text), those products that developed and developing countries designate as “sensitive” will not be subject to the same level of import duty cuts as the rest. Developed countries such as Japan, Canada, Iceland, Norway, Switzerland and the US are among those who have pushed for “sensitive” products to ensure that their own agriculture products of importance are covered under this category. Countries like Brazil, Uruguay, Argentina are saying that the level of ambition in agriculture has to equal that of NAMA (non agriculture market access). Therefore, they feel that there is a need to revisit the Sensitive products paragraphs.
In yesterday’s meeting, the G33 spoke about the two papers that it had circulated last month. I have pasted below three SUNS articles from February that discuss the contents and background surrounding these papers. But yesterday, the G33 actually introduced these papers in the meeting for the first time to solicit responses from other members.
The reaction by countries like Canada was not linked to the papers directly but rather a statement that if all of G33’s concerns were taken on board then they would have the right to impose higher duties on close to 70% of all agriculture tariff lines. They said studies show anywhere from 30-50% to 70% of tariff lines would be protected if the G33 got their way. They said, the safeguard should be “special” and not be used all the time. Australia supported this position. Uruguay, who is usually quite vocal against the SSM, did not speak. Paraguay said that 85% of their agriculture economy is dependent on exports.
There was also criticism by exporting countries that the G33 only used export data for their figures and that defenders of the SSM should be sharing what is happening to volumes and prices domestically to actually prove injury to the domestic market. However, there was not too much open debate in the meeting itself. Behind the scenes, some exporters are saying that a “cross check” is necessary, otherwise what would be the point of allowing an SSM. One exporting country delegate remarked, “ It would be better not to cut agriculture duties at all rather than allowing an SSM that gives so much flexibility.”
India, Barbados, Philippines were among some who defended the G33. India said that the G33 has done a good job of coming up with technical contributions to the debate around SSM and there is real data presented. If the findings are unsound then the opponents should come out with some concrete inputs in response to the papers. Barbados also defended the right to use an SSM without having to prove injury in the domestic market as did the Philippines. The currently available safeguard in agriculture does not require proof of injury.
Currently the agriculture negotiations draft says that developing countries can only raise their import duties higher than their bound levels (when Doha is agreed) if there is both a decline in domestic agriculture prices as well as an increase of imports in their domestic market. This requirement is called a “crosscheck”—a check that volume is increasing and the price is declining at the same time if an SSM is to be used. If only one is happening, the current text does not allow developing countries to go beyond their import duty cap to protect domestic farmers and their production.
The G33 presented their paper that shows why a “crosscheck” would make it difficult to effectively use the SSM. The main point is that countries should be able to go beyond the import duties agreed to in the Doha Round whenever local production and farmers are jeopardized by a decline in domestic prices because of imports or when there are too many imports coming in. Countries have to still agree on the level of price declines and the amount of imports that would trigger the use of an SSM.
The G33 also began discussion on the second paper yesterday highlighting why the current negotiating text does not properly deal with a price related SSM and how it can be improved. Finally, they introduced two new papers which were not discussed—one on Small and Vulnerable Economies and the SSM and one on “Pro-rating”—another problematic element of the current text on SSM. I am attaching the one on pro-rating.
The meeting will continue to tomorrow morning and price based SSM is on the agenda.
Best,
Shefali
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TWN Info Service on WTO and Trade Issues (Feb10/11)
22 February 2010
Third World Network
Price-based, simple-to-use SSM indispensable, asserts G33
Published in SUNS #6863 15 February 2010
Geneva, 12 Feb (Kanaga Raja) -- The price-based Special Safeguard Mechanism (SSM) "is an indispensable trade remedy instrument" for most developing countries, and one that must be simple to use and be effective "for ensuring food security, livelihood security, and rural development of the millions of farmers, mostly small and marginal, in the developing world," the Group of 33 (G33) asserted in a paper circulated on Thursday at the World Trade Organization.
In its new technical paper (JOB/AG/5), the G33 voiced its concern that despite the mandate of the Hong Kong Ministerial Declaration on the Agriculture chapter of the Doha Development agenda that developing countries "shall have recourse" both to volume-based and price-based SSM, this issue of price-based mechanism has remained unaddressed.
According to the Hong Kong Ministerial Declaration, these are necessary Special and Differential Treatment (S&DT) instruments, and "the Doha Round must deliver on this basic S&DT requirement in order to fulfill its development mandate," the G33 reiterated.
The present modalities text, the G33 complained, includes several restrictive conditionalities that would make the instrument not only ineffective but also inoperable.
The G33 recently submitted a comprehensive 14-page paper aimed at refocusing the debate on the SSM, as well as two technical papers on specific issues relating to the SSM, namely, price and volume cross-check conditionalities and seasonal products. (See SUNS #6856 and #6861.)
In its latest technical paper, the G33 highlights some issues and concerns on the price-based SSM, and provides some analysis and technical contributions for its design and structure.
According to the paper, the Hong Kong Ministerial Declaration stipulates that developing countries shall have recourse to both "volume-based and price-based SSM". These are necessary Special and Differential Treatment
(S&DT) instruments, along with the Special Products (SP), for ensuring food security, livelihood security, and rural development of the millions of farmers, mostly small and marginal, in the developing world.
"The Doha Round must deliver on this basic S&DT requirement in order to fulfill its development mandate," stressed the G33.
The price-based SSM, the G33 said, is an indispensable trade remedy instrument for most developing countries, and it is not surprising that all the developing countries that opted to use their entitlement to the Special Safeguard Provisions (SSG), over the period 1995-2004, invoked the price-based SSG.
The price-based measure is better suited to address the price sensitivities of domestic producers to low-priced and/or subsidized exports (dumped into their markets) which contribute to the volatility in the world agricultural markets. Developing countries will also be more susceptible to external shocks as trade liberalization deepens, the paper adds.
The paper draws attention to five major areas in the Chairman's revised draft modalities text (TN/AG/W/4/Rev. 4) that it says require immediate attention and resolution: (a) access to and application of the SSM (triggers and cross-check); (b) remedies and pre-Doha cap; ( c) "MFN-trade only"; (d) en route shipment; and (e) ad valorem price-based SSM option.
These areas need to be addressed with a view to ensuring that the SSM is operational, accessible, and effective for all developing countries, the
G33 further stressed.
Access to the SSM is the first major step in addressing import price volatility, says the paper. The reference price and trigger threshold, among other operational elements, play the critical role in determining access to the SSM, the frequency of access to the SSM, as well as the remedy.
The 85% trigger in paragraph 135 of the Chairman's text, the G33 said, is very low as this can adversely affect access to and effectiveness of the SSM.
(Paragraph 135 of the Chair's text states: "As regards the price-based SSM, it shall be applicable where the c. i. f. import price of the shipment entering the customs territory of the developing country Member, expressed in terms of its domestic currency falls below a trigger price equal to 85 per cent of the average monthly MFN-sourced price for that product for the most recent three-year period preceding the year of importation for which data are available, provided that, where the developing country Member's domestic currency has at the time of importation depreciated by at least 10 per cent over the preceding 12 months against the international currency or currencies against which it is normally valued, the import price shall be computed using the average exchange rate of the domestic currency against such international currency or currencies for the three-year period referred to above.")
A number of studies support its view, said the G33, highlighting for instance, a South Centre simulation of import data from 56 developing countries for the period 2004-2007 that demonstrates that even using the 100% trigger (the reference price) could effectively restrict access to the SSM to about 20% of all agriculture tariff lines. If the trigger is brought down to 85%, access is further reduced to 12% of agriculture tariff lines of these countries.
Based on the above study, the principle of "universal access" of all agricultural tariff lines to the SSM ("no a priori exclusion") in paragraph 132 of the Chairman's text will be restricted by: (I) the reference price; and (¡i) further by the trigger threshold.
(Paragraph 132 of the Chair's text states: "The SSM shall have no a priori product limitations as to its availability, i. e. it can be invoked for all tariff lines in principle. A price-based and a volume-based SSM shall be available. In no circumstances may any product be, however, subject to the simultaneous application of price - and volume-based safeguards. Nor shall there be application of either of these measures if an SSG, a measure under GATT Article XIX, or a measure under the Agreement on Safeguards is in place.)
Looking at the incidence of triggering, an International Centre for Trade and Sustainable Development (ICTSD) study covering 27 agricultural products for six developing countries during the period 2000-2005 found that at a 100% trigger, the SSM was triggered in 17% of the 72 months. At 90% of the reference price, access was reduced to 13% of the 72 months.
And if the trigger was set to 80%, access to the SSM was brought down to 9% of the 72 months.
Similarly, according to the G33 paper, a study by the UN Food and Agriculture Organization (FAO) in 2006 covering 10 commodities in "which import surges are reported to be widespread in recent years", during the period 1986-2004 found that "any level beyond 10% or so will compromise the effectiveness of the reference price, for both triggers and remedies"
and that a "5% threshold appears reasonable for maintaining the effectiveness of the trigger."
The volume "cross-check" outlined in Paragraph 137 of Rev. 4 (Chair's
text) adds another layer of restriction before the price-based SSM can be invoked. The effects of a very low trigger threshold (e. g. 85% and below) when combined with the mandatory cross-check further constrains access to the SSM.
(Paragraph 137 states: "Developing country Members shall not normally take recourse to the price-based SSM where the volume of imports of the products concerned in the current year is manifestly declining, or is at a manifestly negligible level incapable of undermining the domestic price
level.")
The paper cites an FAO study, where the maximum 47% of the 190 potential triggering of SSM (at 100% trigger threshold) of the 10 highly traded commodities in developing countries during 1986-2004 was substantially reduced to below 7% (while chicken, beef, dairy, and sugar were not
triggered) if the threshold was set to 70%.
"If this very limited triggering is also subjected to the volume cross-check, the SSM will be inaccessible and therefore meaningless," said the G33.
Moreover, the G33 noted that in its paper on price and volume cross-check conditionalities (JOB/AG/3), import prices and import volumes do not always move in symmetry as abrupt movements in imports and prices do not necessarily coincide. Further, the proponents of the cross-check failed to recognize the transaction lag effects in normal business transactions since changes in demand and supply are not instantaneously translated to changes in domestic prices. These lag effects tend to be more acute in developing countries because of the very inefficient distribution system and poor and inadequate infrastructure.
The G33 believes that requiring a mandatory cross-check to accompany price declines prior to invocation of price-based SSM would make this instrument inaccessible and inoperable. The availability of and access to the price-based SSM can be adversely restricted by the parameters set out in the Chairman's text (the 85% trigger and the volume cross-check), said the G33.
On the claim of other Members that "developing countries will indiscriminately use the SSM to the fullest to protect their domestic producers by applying the SSM in every incidence of triggering", and that "the SSM will restrict normal trade" and also "drag import levels to zero", the G33 said that these fears and doubts of Members are "disproportionate", and not supported by empirical evidence on the implementation of the SSG, a similar trade remedy measure.
It cites a WTO report that revealed that developing countries hardly used the SSG (Special Safeguard provision) despite frequent triggering and only
6 out of 22 developing countries entitled to the SSG applied the mechanism. It is also important to emphasize that the rest of these 22 developing countries (the majority) abstained from using the safeguard despite experiencing import surges and import price declines in the period 1984-2000.
Looking at the applications of the price-based SSG by five developing country Members (Barbados, Costa Rica, Korea, the Philippines, and
Nicaragua) the G33 paper found that the safeguard: (I) did not result in the reduction of trade; (ii) did not alter the general trends/patterns of trade; and/or (iii) did not prevent the imports to grow.
"Thus, the above experience in the use of SSG by developing countries establishes no clear basis for a very restrictive level of trigger and the introduction of the volume cross-check."
If the availability and access to SSM is the first major step in addressing import price declines, the remedy is the major element that determines the usefulness and effectiveness of the measure, says the paper.
According to the G33, unlike the level of remedy in the volume-based SSM, the determination of appropriate level of remedy for the price-based measure is more straightforward, which is the price gap. The price gap has two elements: (a) the difference between the reference price and import price; and (b) the difference between the ad valorem duty when applied to the reference price and the ad valorem duty when applied to the import price. An ideal remedy would contain both these elements.
The ability to fully offset the price gap guarantees that depressed import prices cannot dampen domestic prices to levels that can destabilize and/or obliterate domestic production. The Chairman's texts have only dealt with the difference between the import price and the reference price without capturing the second element of the price gap, i. e. the difference between the ad valorem duty when applied to the reference price and the ad valorem duty when applied to the import price.
It is clear that the 85% remedy in paragraph 136 of the Chairman's text can hardly guarantee that import price volatility will not harm the domestic industry, says the paper. In addition, assuming that the product is duty free, the 85% remedy is effectively further reduced to 72% offset since the trigger price is 85% of the reference price, instead of 100%.
(Paragraph 136 states: "The price-based SSM remedy shall apply on a shipment-by-shipment basis. The additional duty shall not exceed 85 per cent of the difference between the import price of the shipment concerned and the trigger price.")
The paper points out that in addition to the limitations of the Chairman's proposed remedy, the pre-Doha cap in paragraph 142 of the Chairman's text will further deny access to the remedy for products with zero tariff overhangs since the level of actual remedy that can be imposed mainly depends on the level of the difference between the applied and bound tariffs. Hence, for products with low or no tariff overhang there will be hardly any option to address price declines.
(Paragraph 142 of the Chair's text states: "The above provisions on triggers and remedies apply subject to the limitation that the pre-Doha bound tariff is respected as the upper limit and shall prevail as such.")
The G33 (in Table No. 5 of its paper) summarizes how much the full offset is restricted by the limitations set in paragraphs 136 and 142 of the Chairman's text: (a) price drops within the 85% of the reference price are exempted from the remedy; (b) the 85% compensation is effectively a 72% offset; ( c) the 72% offset is 33% to 53% less than the "full-offset" for the price drops of $15 to $80, respectively; and (d) the 72% offset is not applicable/available if the product has no tariff overhang, or is limited by the level of overhang.
In view of these limitations, the G33 believes that the SSM remedy under the Chairman's text is "ineffective, inapplicable, and therefore, meaningless".
The G33 maintained that whether to include "preference trade" in the SSM should be best left to the parties in a preference agreement themselves, and if the importing Member includes preference trade in its calculation of price triggers (reference price), then the preference trade should be subject to the remedy.
However, says the paper, paragraphs 135 and 138 of the Chairman's text preclude a Member from taking safeguard action against other Members which are parties to a preference trade agreement.
"Hence, this exclusion is a further restriction to the already constrained SSM in terms of its availability, accessibility and effectiveness."
(Paragraph 135 of the Chair's text is highlighted above. Paragraph 138
states: "The calculation of volume or price triggers, and the application of measures in accordance with the relevant provisions of this section, shall be on the basis of MFN trade only.")
Whatever the merit, if there is one at all, for excluding the preference trade from the SSM, nothing precludes preference trade from recourse to similar safeguard measures particularly the WTO Agreement on Safeguards and the Special Safeguard Provisions (SSG) under the Agreement on Agriculture (AoA) as the rules apply on MFN basis, the G33 paper adds.
"The rationale for precluding preference trade from the SSM is not justified when numerous bilateral and regional free trade agreements contain provisions to invoke agricultural safeguard measures."
On the issue of non-application of en route shipments, the G33 paper notes that the proposal under paragraph 139 of the Chairman's text that the SSM
- whether price-based or volume-based - cannot be applied to en route shipments is technically infeasible for the price-based SSM, as it is to be imposed on a shipment-by-shipment basis in which the level of remedy for each shipment may vary depending on the level of the price gap, and by the fact that by the time the calculation of remedy is being made, the shipment has already arrived and by definition is de facto en route.
(Paragraph 139 of the Chair's text states: "Any shipments of the product in question which, before the imposition of the additional duty, have been contracted for and were en route after completion of custom clearance procedures in the exporting country, either under the price- or volume-based SSM, shall be exempted from any such additional duty, provided that where a volume-based SSM may be applicable in the next twelve-month period, the shipment of the product in question may be so counted in that period for the purposes of triggering the SSM.")
The G33 said that it had proposed (in documents JOB06/64 and JOB08/47) a well defined transparency and notification mechanism which is based on the SSG. The proposal contains two elements to be notified "in advance as far as practicable": (I) the price-triggers; and (ii) the "implementation of the first action".
Since the information on price triggers will be readily available through advance notification and other transparency mechanisms, the premise for justifying the en route issue no longer exists.
"Therefore, the en route shipment prohibition must be dropped from the Chairman's text on the price-based SSM," the G33 stressed.
Citing a previous G33 proposal of an ad valorem price-based SSM as an alternative to the shipment-by-shipment basis, the G33 said that unlike the shipment-by-shipment method, this option operates like the volume-based SSM where a uniform ad valorem SSM duty is to be applied to every price of shipment that falls below the trigger within the duration of the SSM.
In addition, this method requires notification of: (I) the date of invocation; (ii) the level of remedy; and (iii) the period of application.
Therefore, this method offers a predictable price-based SSM option since once invoked, the exporters and importers would know that for a definitive period of application, any price of shipment that is below the trigger shall be remedied with the uniform level of ad valorem duty, says the paper.
In some conclusions, the G33 underscored that in accordance with the S&DT mandate of Hong Kong and Doha, the price-based SSM must be "operable, accessible and effective" in addressing temporary price declines for ensuring food security, livelihood security and rural development in developing countries.
First, as regards the trigger, a calibration of the threshold is a must so as not to unduly restrict access. The Chairman's 85% trigger provides access to the SSM at a very limited level of incidence and coverage of products and must be raised. In addition, the mandatory volume cross-check can unnecessarily restrict access to the safeguard and must be deleted from the Chairman's text.
A second concern is the structure and ineffectiveness of the remedy. These are further compounded by the introduction of the pre-Doha cap as this will penalize products that undertook early liberalization (already low tariff regime). Thus, the G33 strongly believes that for the SSM to be truly effective and meaningful, the remedy must be 100% and the pre-Doha cap must be removed.
Third, says the paper, the MFN-trade only limitation is a serious cause of concern especially with the proliferation of regional and bilateral free trade agreements. In addition, most, if not all, of the existing bilateral and regional agreements have safeguard provisions.
Thus, the G33 is of the view that it is best left to the parties in a regional or bilateral agreement to decide for themselves whether recourse to SSM is necessary.
Fourth, the non-application of SSM to en route shipment is inoperable in a shipment-by-shipment case and provides further operational difficulties amid the lack of reliable and real time data and institutional mechanisms in most developing countries. It is also technically infeasible for the shipment-by-shipment price-based SSM since the level of remedy every shipment may vary depending on the price gap.
The G33 views that advance information through notification of price triggers is already sufficient for the exporters to execute informed business decisions; and thus the en route shipment prohibition should not apply to the price-based SSM.
Fifth, the ad valorem price SSM method offers an option to institute a predictable price safeguard since a uniform duty is to be applied over a definitive period of application.
In order to move forward on the above issues on the price-based SSM, the
G33 urged the Members to address these issues as soon as possible in the interest of delivering a truly developmental outcome consistent with the Doha and Hong Kong mandates. +
TWN Info Service on WTO and Trade Issues (Feb10/08)
17 February 2010
Third World Network
G33 positions on cross-check, seasonality issues in SSM
Published in SUNS #6861 dated 11 February 2010
Geneva, 10 Feb (Kanaga Raja) -- Following from the recent submission of a comprehensive paper aimed at refocusing the debate on the Special Safeguard Mechanism (SSM), the Group of 33 (G33) developing countries at the World Trade Organization (WTO) has circulated two further papers on specific issues relating to the SSM, namely, price and volume cross-check conditionalities and seasonal products.
The comprehensive 14-page paper on shifting the focus of the debate on the SSM to the development dimension of the Doha Round was introduced at the WTO last week by Indonesia, on behalf of the G33 (see SUNS #6856 dated 4 February 2010).
The WTO is currently hosting a two-week negotiating session on agriculture, devoted mainly to continuing work on data and templates. An open-ended meeting of the Special Session of the Committee on Agriculture is to be held this Friday afternoon where the Chair of the agriculture negotiations, Ambassador David Walker of New Zealand, is expected to provide, amongst others, an assessment of the two week's of talks.
In its paper on price and volume cross-check conditionalities (JOB/AG/3), the G33 argues that subjecting any triggered SSM to a mandatory cross-check is an unnecessary complication on the operation of and access to the SSM; and in its paper on seasonality (JOB/AG/4), the G33 is of the view that there are no grounds for a provision on seasonal products, and that the inclusion of such a concept in the architecture of the SSM would only add to its complexity without providing any additional value.
The G33, in the first paper on price and volume cross-check conditionalities, has said that the Chair's texts (TN/AG/W/4/Rev. 4 and TN/AG/W/7) include provisions that effectively impose a priori conditions for invocation of the SSM. Among others, the texts envisage that: (a) Members will not resort to the volume based SSM if the domestic prices for the concerned products are not declining; and (b) Members will not take recourse to the price based SSM if the volume of imports for the concerned products are "manifestly declining".
The G33 believes that these conditions will constrain the use of the SSM, and limit its availability and effectiveness.
The G33 paper says that while analysing the impact of trade on domestic markets, economic models assume "a single national market for a homogeneous good that embraces all national sales and purchases and in which the good is sold directly by producers to final consumers. The supply of imports and demand for exports are assumed to be perfectly price elastic."
"However," the paper adds, "the reality is different. Most often, markets are neither isolated nor perfect, and price elasticity vary."
The paper explains that the quality of most agricultural products is different depending on the country, the variety of climate, locations of markets, and changes in freshness during transportation. That is why many imported products have separate marketing channels from domestic products.
Agricultural goods are traded in very complex supply chains through a number of intermediaries before they reach retail stores. Along the way, goods may be processed and changed physically. Such conditions will very much affect the competition between imports and domestic products particularly if the markets are inefficient. The nature of relationship between imports and price is also affected by a number of other factors such as demand and supply structure, market structure, and price elasticities.
"Therefore, the relationship between prices and imports may not be as clear-cut as envisaged in the Chair's texts," says the G33.
In its analysis of import surges and prices, the paper finds that the food price index of the FAO (UN Food and Agriculture Organization) increased to 191 in 2008 from its level of 122 in 2006. World cereal price index increased from 145 in 2006 to 349 in April 2008 and decreased to 174 at the end of the year. Similarly, world rice prices increased from $436 per ton in 2007 to $782 per ton in 2008 and down to $545 per ton in 2009. World oilseeds price index of about 140 at the beginning of 2007 increased to 280 in mid 2008 and decreased to around 140 in end of 2008.
The paper further cites a South Centre study that found that 15% price declines were identified in about 3,446 tariff lines while 10% price declines were recorded for 6,413 tariff lines in a sample of 56 developing countries between 2004-2007.
Based on the 1992-2007 data compiled from World Agricultural Supply and Demand Bulletins (WASDE) prepared by the USDA (US Department of Agriculture), it is clear that the world price of certain products have not moved in close proximity with the export volumes. Any export fluctuation seems to have had no direct and significant impact on price movements in the given period, the paper concludes.
In examining three major and worldwide commodities, wheat, rice and maize, the paper reveals that export volumes and price fluctuations are not linked. While world wheat prices fluctuated almost 100% in the last 18 years, the world wheat export volumes did not show significant changes.
Similar cases were also observed in world rice markets during 1992-2007 periods. While rice prices fluctuated over 100% in the given period, the import volume of the rice did not show a significant fluctuation. A similar situation has also been observed in world maize markets - while maize price changed over 90%, the world maize import volume increased by less than 10%.
Analysis of the three major products clearly suggest that movements in both import volumes and prices do not necessarily coincide, the paper underscores.
Similar findings are found in other studies, said the G33, pointing for instance to the South Centre study covering the 2004-2007 period and data from 56 developing countries that showed that for over 85% of volume import surge cases, no price decline (measured in terms of import prices falling below 85% from the preceding three-year import price average) takes place.
"It is obvious that a cross check conditionality will negatively affect access to the SSM," said the G33.
On a country basis with domestic price data, the FAO has also identified several cases where import volumes and prices do not always move in an asymmetric fashion, and in fact, import surges do not directly affect the domestic prices. Some of these cases also point to the existence of decreases in domestic production while domestic prices are not declining.
The paper also cites the above mentioned South Centre study as stating that "when the cross check requirement is imposed, the price-based SSM could not be used for about 20% of cases where there are price declines". In other words, in 20% of the cases, empirically, price depressions did not coincide with the volume surges.
Time is of the essence for the SSM to be effective, the G33 stressed. There will be a considerable time lag between import surge and its impact on both domestic prices and industry. These lags are part and parcel of normal business transactions. The effects of shifts in demand and supply are not instantaneously translated to changes in prices.
These lag effects tend to be more acute in developing countries because of complex and thick layers of distribution chains and inadequate infrastructure. "Therefore, the proposed cross-check mechanisms shall render the SSM unresponsive to practical needs because it relies on contemporaneous data and ignores the dynamics of real business transactions," says the paper.
In addition, it adds, the volume and price cross-check conditions will prevent countries from using the SSM effectively as it will require collection of real time price data for all tariff lines all the time. Most developing countries including Small, and Vulnerable Economies (SVEs) and Least Developed Countries (LDCs) do not have the capacity to meet these data requirements in a timely fashion.
There may also be cases where the SSM cannot be invoked when an import surge takes place because domestic prices increase due to a natural disaster. As import penetration rises during the disaster period, developing countries do not have a chance to recover their production capacity. Their agricultural infrastructure could collapse and finally, they are deprived from achieving food security, livelihood security and rural development as enshrined in the Doha mandate.
In some concluding remarks, the paper notes that the SSM is a temporary emergency measure and is not intended to provide a permanent protection to farmers and producers in the importing countries. It is critical that importing countries must have ready access to the safeguard when needed.
Since prices and volumes do not always move in asymmetry all the time because of the transaction lag effects, mandating a further constraint (through the cross-check) on the SSM will be unrealistic and disproportionate. Either of the mandatory cross-checks can seriously hamper the use of the SSM and limit its timeliness and effectiveness in addressing a temporary import surge or price decline.
Another dimension is that the proposed mandatory volume and price conditions can prevent countries from using the SSM effectively as it will require collection of real time volume and price data for all tariff lines all the time, says the paper, pointing to the fact that it will be very difficult for most developing country Members especially SVEs and LDCs to monitor such data.
Such difficulty can also be seen in the implementation of the SSG (Special Safeguard) which can partly explain the apparent low utilization of both the volume-based and price-based SSG by developing countries.
Finally, says the paper, satisfying/breaching the triggers is already a sufficient condition for justifying the invocation of the SSM. In fact, the Chairman's proposed trigger thresholds both for the volume-based and price-based SSM can effectively bar access to the SSM for most of the agriculture tariff lines. The set thresholds can also significantly hinder/limit triggering of a product in any 12-month period.
Moreover, the utilization of a similar measure, the SSG, strongly suggests that despite frequent triggering, actual utilization of the SSG has been minuscule in terms of frequency of invocation and number of products and countries. Therefore, subjecting further any triggered SSM to the mandatory cross-check is an unnecessary complication on the operation of and access to the SSM.
Providing its perspective on the issue of seasonality, the G33 said that a comparison of the seasonality language incorporated in Article 5, paragraph 6 of the Agreement on Agriculture and document TN/AG/W/4/Rev. 4 and its associated document TN/AG/W/7 highlights how much more restrictive the SSM would be compared to the Special Safeguard provision (SSG).
The seasonal product provision in the SSG relates to seasonal products from the perspective of importing countries. Article 5, paragraph 6 of the Agreement on Agriculture states as follows: "For perishable and seasonal products, the conditions set out above shall be applied in such a manner as to take account of the specific characteristics of such products. In particular, shorter time periods under subparagraph 1(a) and paragraph 4 may be used in reference to the corresponding periods in the base period and different reference prices for different periods may be used under subparagraph 1(b)."
It is the importing Member that holds the authority to use a "shorter time period" in calculating the base period for the volume-based SSG, and "different reference prices for different periods" for the price-based SSG. There is clearly no separate limitation on the duration of application of the SSG remedy for seasonal products, said the G33.
However, says the G33 paper, the texts on the SSM in Rev. 4 and W/7 approach seasonality from the perspective of exporters. They stipulate a shorter duration of application for seasonal products applicable for volume-based SSM. The inherent flexibility available to importers in the SSG has not been reflected.
For reference, the paper highlights the related proposals as follows: (a) The volume-based SSM may be maintained for a maximum period of 12 months from the initial invocation of the measure, unless a seasonal product is involved, in which case the SSM shall apply for a maximum of six months or to cover the period of actual seasonality, whichever is the longer (Rev. 4, paragraph 140); (b) [In the event that the SSM for seasonal perishable product tariff lines is triggered and applied in two consecutive twelve month periods such that its total period of application is 12 months or more, it may not be applied in (or spill-over into) the subsequent twelve month period.] (W/7, paragraph 4).
In view of the above comparisons and in recognition of special and differential treatment provisions in the Agreement on Agriculture and the Doha declaration, the G33 reiterated its call for a more favourable development-oriented SSM vis-a-vis the SSG, and the pressing need to rectify the bias inherent in the current texts.
Noting that the justification for the restrictions on duration for seasonal products, and which can be found in paragraph 4 of W/7 is that "... it is perceived to be the only possible way of allaying even to a small degree anxieties about seasonality effects", the G33 paper examines to what extent seasonality patterns are prevalent in agricultural trade, and whether the existing seasonality pattern provides sufficient support for the inclusion of relevant restrictive conditions in the SSM architecture.
Apart from the fundamental issue of parity with the SSG, the G33 said that its analysis clearly establishes that there is no universal pattern of seasonality that can be established from the exporters' perspective.
It must first be pointed out that a distinction must be made between "Seasonality in trade" and "Seasonality in production". This is because irrespective of whether seasonality in production exists for a certain product, it would have no bearing on the issue at hand if the seasonality pattern is not observed in the trade figures, says the paper.
The G33 examined monthly export figures (in volume) of major cereal/oilseeds, vegetable, and fruit products of export interest to exporting countries from both the Southern and the Northern hemisphere. As a first step, an examination was undertaken to ascertain whether clear seasonality patterns are discernible for products under review for a particular exporting country.
As a second step, for those products in which seasonality patterns were identified in their monthly export figures, one or more of the following examinations were undertaken: (a) whether seasonality patterns are diametrically opposite for the Northern and Southern hemisphere exporting countries; and/or (b) whether seasonality patterns observed in the overall export figures of an exporting country were also observed in its individual Member-to-Member bilateral economic relations.
The G33 paper highlights some findings from its examination of monthly data available. For rice, monthly export figures of the US, Argentina, and Uruguay showed that seasonality patterns either do not exist, or are too weak to be relevant. Similar results were also found for barley when export data from the US and Argentina were compared.
For US wheat, large disparities in year-on-year data suggest that the pattern is not necessarily consistent across the years. As for Argentina wheat, while the case for a seasonal pattern could be more readily made, the available data does not provide a definitive determination.
For soybean, says the paper, seasonal patterns were discernible in US and Argentina's data, although some irregularities seem apparent in Argentina's data. The point to note from soybean, however, is that this pattern is not mirrored in its related products. A further examination of Argentina's monthly export data for soybean by-products such as soybean meal, soybean oil, and soybean pellet showed that the seasonality pattern is not present.
This example would suggest that the seasonality pattern of a group of products cannot be inferred from just one product within its category; therefore, each and every product must be reviewed on its own merit for an accurate picture on the existence of seasonality patterns in a product, notes the paper.
For raw sugar cane, when US monthly data was examined, it was clear that no pattern of seasonality is present in exports. For corn, while the US data showed no seasonality patterns, Argentina's data exhibited a stable seasonality pattern. However, in further reviewing Argentina's export figures to a number of its individual markets, a clear seasonal pattern found in the overall context did not necessarily emerge.
An examination of monthly fruit exports by the US and Argentina showed that seasonality effect is more readily discernible than for cereals. In some products such as pear and apple, for example, the counter-cyclical seasons of the two hemispheres could be deduced through close observation of the export data.
However, except for some products such as grapes, grapefruits, and tangerines in which exports are concentrated in certain periods of the year (and therefore there is minimal level of exports during the remainder of the year), the data suggests that for most of the other fruits, exports are taking place for periods in excess of six months, in some cases throughout the year.
According to the paper, an examination of monthly export data of the US and Argentina for nine vegetable products revealed four different patterns: (a) Counter-cyclical, diametrically opposite seasonality pattern; (b) Seasonality pattern being exhibited in similar periods of the year; ( c) Seasonality pattern exhibited in exports of one country; and (d) No Seasonality Pattern.
Among the nine vegetables reviewed, onion was the only product that exhibited a counter-cyclical seasonality pattern. For black beans, cranberry beans, red beans, potatoes, and chickpeas, the seasonality pattern is apparently visible in only one country but not the other. While for black beans, cranberry beans and red beans, Argentina's export exhibit apparent seasonality trends, the opposite is true for potatoes and chickpeas.
In some conclusions, the paper says that a close examination of monthly export data currently under consideration provides the following findings:
(a) "Seasonality" is not a pattern that is prevalent in all products; i. e., it is not a universal norm;
(b) "Seasonality pattern" in general is not necessarily stable; it varies among countries, and on a year-to-year basis owing to annual fluctuations in monthly exports;
( c) "Seasonality pattern" in overall exports does not necessarily "translate" into individual bilateral trade relations; i. e., the seasonality pattern in the overall context and individual bilateral trade relations are not necessarily synchronous;
(d) A "Seasonality pattern" in one product is not necessarily replicated in related products. As such, it would not be accurate to infer the seasonality pattern of a group of products from just one product within its category; and
(e) There are large variations in period of exports for products exhibiting "Seasonal patterns" complicating what would be the "period of actual seasonality".
According to the paper, these findings clearly indicate that there are no grounds for a provision on seasonal products. The inclusion of such a concept in the SSM architecture would only add to its complexity without providing any additional value.
The G33 re-emphasized that its request is for a simple, operational, effective, and non-burdensome SSM. +
TWN Info Service on WTO and Trade Issues (Feb10/10)
17 February 2010
Third World Network
G33 takes offensive in WTO battle on SSM
Published in SUNS #6862 dated 12 February 2010
Geneva, 11 Feb (Shefali Sharma) -- The G33 tabled a paper at the World Trade Organization (WTO) on January 28 on the Special Safeguard Mechanism (SSM) that brings the central issues of food security, livelihoods and rural development back to the negotiating table of a Round that is supposed to be geared towards development.
These concerns have been brought "back" because the original G33 concepts for the SSM to be "special" (because existing WTO safeguards do not adequately address price declines and import surges), effective and "easy to use" are not operationalised in the current negotiating draft for agriculture, i. e. the draft of the Chair of the agriculture negotiations of December 2008, called the "December text".
Since May 2008, the text on SSM has been the subject of controversy and opponents of the SSM have also proposed new and increasing conditions on how, when and for how long developing countries can use the SSM.
The price-based SSM has barely been discussed; while much of the emphasis has been on volume "triggers" that would activate the SSM and on measures called "remedies" that developing countries could take to counteract import surges that threaten farm livelihoods and local food production.
The G33 paper entitled "Refocusing Discussions on the Special Safeguard Mechanism: Outstanding Issues and Concerns on its Design and Structure" brings the focus back to the real purpose and necessity of such a mechanism for developing countries (see SUNS #6856 dated 4 February 2010).
The G33 is a group of 46 countries characterized by large agrarian populations and food security concerns, and that take a defensive position in the WTO's agriculture negotiations.
For months now, agriculture-exporting countries (both
developed and developing) have been demanding that the G33 table reasons and
evidence of the need for an SSM that is not as circumscribed as the one
proposed in the December text
(including some of the text that is in brackets).
The exporters are seeking assurance that their own exports under "normal" conditions will not be impeded. In meetings, this has been referred to as "normal trade flows," although exporting countries have yet to clarify whether normal trade refers to their own average exports or whether they mean "normal" global agriculture trade flows.
However, it is widely acknowledged by agriculture experts that global agriculture markets and trade are complex and far from "normal". They are characterized by price volatility, high incidence of import surges, oligopolistic behaviour, imperfect information and supply chains - all leading to widespread market distortions.
At a minimum, an effective SSM, in the absence of predictability of prices and volumes and any significant change in dumping practices of developed countries, would be a tool to protect developing countries where the majority of the population depends on farming as a way of life.
Food security, special and differential treatment towards developing countries and "correcting... distortions in world agricultural markets" were some of the key principles of the WTO's Agreement on Agriculture (AoA). And Article 20 of the AoA was meant to review the progress Members were making in reducing trade distortions and ensuring that food security was not undermined.
But after eight years of negotiating the Doha Round, and after a global food crisis and a financial crisis in recent years, the WTO Members once again find themselves with an agriculture draft that allows developed countries with massive domestic support programmes to "shift boxes", i. e. adjust their trade-distorting programmes and shift them to a category of support called the "Green Box" so that spending can continue with hardly any restraint or disciplines.
In fact, just a day after the G33 tabled their SSM paper, news broke that the European Union (EU) is increasing its subsidized sugar exports by an additional 500,000 tonnes. According to news reports, this would be 576,500 tonnes more than what the EU is allowed to do under its WTO commitments. (See SUNS #6855 dated 3 February 2010.)
This is following from the expansion of the EU's dairy quota in recent years that has not only dumped dairy on the world market, but forced small dairy producers in the EU out of business when there was oversupply and global prices went down.
Meanwhile, the US continues to defy WTO judgments on its subsidized cotton exports. And US President Barack Obama faces a tough Congressional fight in making any changes to the 2008 Farm Bill that actually increased US domestic agriculture spending for its agri-lobbies.
According to Senator Blanche Lincoln, a Democrat from Arkansas, who now heads the Senate Agriculture Committee, "The Farm Bill is a contract with our famers that they depend on to make business decisions. Changing the rules in the middle of the game would be detrimental to their operations and would cost us even more jobs in rural America."
The Doha Ministerial Declaration's Paragraph 13 formally brings G33 concerns into the negotiations "to effectively take into account [developing countries'] development needs, including food security, livelihood security and rural development." Yet, the notion of an effective and simple SSM and why the G33 are demanding it is being questioned.
The G33 have responded by tabling their "political" paper which is the first of a series of several papers they are tabling on the SSM. Two other papers on "seasonality" (the use of the SSM on "seasonal" products) and "cross check" were also circulated to Members on 5 February. (See SUNS #6861 dated 11 February 2010.)
The cross-check paper challenges the idea proposed in the December text that the volume related SSM can only be used if the price is also declining and conversely that a price related SSM can only be used if there is also evidence of a volume increase. The G33 has asked that the conditionality of a "cross check" be eliminated in the negotiating draft.
The seasonality paper discusses the notion of "seasonality" and whether a shorter time limit for an SSM can be imposed on so-called "seasonal" products given that the Northern and Southern hemispheres have opposite seasons and some countries produce certain products all year; while the same products can be considered seasonal in a specific country.
A G33 paper on the price-based SSM is to be expected this week in time for the informal agriculture session on Friday, 12 February. On 11 February, a meeting was planned to be held at the New Zealand Mission of some G33 Members, some developing and developed country exporters and the agriculture negotiations Chair, Ambassador David Walker of New Zealand.
A few more G33 papers are expected before the end of February and in time for the next two-week agriculture negotiating session on March 1-12.
The exporting countries have not made any formal remarks on the "Refocusing" paper, but criticism from some exporting country officials has been reported. It is expected that some discussion on this paper as well as the two technical papers will take place this week.
From the exporters' side thus far, Australia has presented a modeling exercise that makes the case for the December text; while Uruguay, Brazil and the US tabled short papers in the week of December 7.
Meanwhile, the South Centre, a Geneva-based think tank that supports developing country governments, has published a series of policy briefs and analytical notes on the SSM.
These papers cover various aspects of the SSM, including the incidence of import surges, trends in actual price declines and volume surges, an assessment of the proposed price-based SSM, why the volume-based triggers of the December text would be inadequate in dealing with actual import surges and a comparison of the Special Safeguard Provision (SSG) primarily used by developed countries with the proposed SSM.
One G33 official said that the SSM is meant to be used by many different countries with very different conditions. The official said, "We cannot just limit our debate to specific products and specific countries. It is an instrument meant for all developing countries." +
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