POSSIBLE MODALITIES FOR THE SPECIAL SAFEGUARD MECHANISM (SSM) - PowerPoint PPT Presentation

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POSSIBLE MODALITIES FOR THE SPECIAL SAFEGUARD MECHANISM (SSM)

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Title: POSSIBLE MODALITIES FOR THE SPECIAL SAFEGUARD MECHANISM (SSM)


1
POSSIBLE MODALITIESFOR THE SPECIAL SAFEGUARD
MECHANISM (SSM)
  • By Raul Q. Montemayor
  • National Business Manager
  • Federation of Free Farmers Cooperatives, Inc.
    (FFFCI) Philippines
  • Chairman, Asian Farmers Committee
  • International Federation of Agricultural
    Producers (IFAP)

2
OUTLINE OF PRESENTATION
  • Background
  • Limitations of UR AoA Special Safeguard (SSG)
    Duty Provisions
  • Proposed Special Safeguard Mechanism (SSM)
    Modalities
  • Related Issues

3
THE NEED FOR TRADE REMEDIES
  • Developing countries forced to open up markets in
    Uruguay Round despite uncompetitiveness of
    sensitive products
  • Developed countries maintained most support and
    protection to sensitive sectors
  • Available trade remedies were inadequate and
    difficult to use

4
THE GATT-UR AoA SPECIAL SAFEGUARD DUTY (SSG)
  • UR-AoA required tariffication of products
    previously protected by import restrictions
  • Lower in-quota tariffs imposed on imports of
    tariffied products within tariff rate quota
    (TRQ) imports in excess of TRQ charged higher
    out-quota tariff
  • Additional SSG duty could be imposed on imports
    of tariffied products if
  • import volumes exceeded a trigger volume, or
  • Import prices fell below a trigger price

5
DATA ON SSG USAGE
  • Only 39 WTO member-countries had SSG privileges
    for 6,156 tariff lines
  • Only 22 were developing countries who accounted
    for half of SSG tariff lines
  • Only 10 countries invoked SSG between 1995-2001
  • Most developing countries had no SSG option or
    did not invoke SSG

6
MAJOR LIMITATIONS OF SSG
  • Complicated formulas the case of price-based
    SSG

7
SOURCE FAO (Ramesh Sharma)
8
MAJOR LIMITATIONS OF SSG
  • Complicated formulas the case of price-based
    SSG
  • Biases against developing countries the case of
    SSG volume triggers

9
SSG Volume Trigger Volume Trigger V (I
x S) C I - Average Historical Imports (in
last 3 years where data is available) S -
Scaling factor (based on ratio of imports to
consumption) C - Change in consumption
(C) (between 2 years where data is available)
  • Scaling factor S ranges from 100 to 125 S is
    higher if historical import/consumption ratio is
    smaller
  • Developing countries usually have smaller
    import-to-consumption ratio and end up with
    higher S and larger V, making it more difficult
    to breach trigger
  • Developing countries often lack data on
    consumption at specific tariff line level if no
    data, S is set to maximum of 125
  • Consumption of basic foods normally rising in
    developing countries, resulting in higher C and V

10
MAJOR LIMITATIONS OF SSG
  • Complicated formulas the case of price-based
    SSG
  • Biases against developing countries the case of
    SSG volume triggers
  • SSG duties often not enough to control import
    surge or price decline
  • SSG duty based on applied, not bound, tariff
  • Volume SSG cannot exceed 1/3 of applied rate
  • Price SSG disproportionate to price variance

11
SOURCE FAO (Ramesh Sharma)
12
MAJOR LIMITATIONS OF SSG
  • Volume-based SSG can be applied only up to end of
    current year
  • Only products tariffied in the UR and marked
    with SSG could be given SSG protection
  • Least-developed countries (LDCS) exempted from
    tariffication, and therefore had no SSG privilege

13
OTHER CONSTRAINTS TO USAGE OF SSG BY DEVELOPING
COUNTRIES
  • Inability to promptly enact necessary domestic
    legislation and regulations
  • Lack of administrative capacity to implement SSG
    rules
  • Phobia against WTO disputes in case of erroneous
    application of SSG rules
  • Lobbying by influential importers and users
  • Weak counteraction by producer groups

14
SPECIAL SAFEGUARD MECHANISM (SSM)
  • Part of proposed special and differential
    treatment (SDT) package for developing countries
    under Doha Development Round
  • Exclusive for developing countries
  • Improved version of UR SSG

15
PROPOSED SSG IMPROVEMENTS IN SSM PROPOSALS BY G33
  • Expanded coverage
  • All listed products (criteria-based?, limits?)
  • All developing countries (including LDCs)
  • Simplified and more developing country-friendly
    formulae and rules for triggers and safeguard
    duties
  • Longer and more flexible period and method for
    applying special safeguards
  • Higher levels of special safeguard protection

16
VOLUME-BASED SSM MODALITIES
  • Volume trigger set to average annual import
    volume during most recent three (3) preceding
    years for which data is available
  • SSM duty can be imposed if cumulative import
    volume during a year exceeds volume trigger
  • Additional SSM duty can be maintained for up to
    12 months from imposition
  • SSM duty to depend on degree of import surge and
    will be a percentage of bound tariff, or absolute
    percentage points, whichever is higher

17
VOLUME TRIGGER-BASED SSM DUTY VOLUME TRIGGER-BASED SSM DUTY VOLUME TRIGGER-BASED SSM DUTY
     
Excess Imports (E) SSM Duty (whichever is higher) SSM Duty (whichever is higher)
As Percent Over As Percent of Absolute
Trigger Volume Bound Tariff Percentage Points
E lt X 0 0
X1 lt E lt X Y Z
X2 lt E lt X1 Y1 Z1
E gt X2 Y2 Z2
18
PRICE-BASED SSM MODALITIES
  • Price trigger is average monthly price of product
    for most recent three preceding years for which
    data is available
  • SSM duty can be imposed if C.I.F. price of import
    of product (in local currency) exceeds price
    trigger
  • Price of import can be adjusted in case of
    significant currency depreciation
  • SSM duty can last a maximum of 12 months

19
PRICE-BASED SSM MODALITIES
  • Price-based SSM can be imposed on
  • A shipment-by-shipment basis, with the SSM duty
    not exceeding the difference between the import
    price of each succeeding shipment and the trigger
    price or
  • An ad valorem basis, with the SSM duty not
    exceeding the difference between the import price
    of subsequent shipments and the trigger price,
    expressed as a percentage of the trigger price
    (or bound tariff?)
  • A country may shift from ad valorem to
    shipment-by-shipment SSM duty if import prices of
    at least two subsequent shipments fall below
    trigger price by certain percentage

20
OTHER PROPOSED SSM MODALITIES
  • Temporary re-imposition of quantitative
    restrictions (QRs)
  • Simplified countervailing measure
  • Konandreas maximum contingency level (MCL)
    proposal

21
SIMPLIFIED COUNTERVAILING DUTY MEASURE (SDCM)
Product- Specific Export Subsidy --------------
Total Exports of Product
  • Product-
  • Specific
  • AMS
  • ------------
  • Product
  • Output
  • Value

Non-Product- Specific AMS ------------ Total Agri
cultural Output
SDCM in



Figures for product and non-product specific AMS
and export subsidies shall be based on preceding
year bound commitment levels in the absence of
formal notifications of actual usage from
exporting country
22
MAXIMUM CONTINGENCY LEVY
  • Countries start year with an MCL allowance per
    product computed as a percentage of value of
    3-year historical imports
  • Countries can impose price or volume-based SSM
    based on SSM triggers and modalities
  • Cumulative value of total SSM tariffs imposed
    must not exceed MCL allowance for the year

23
RELATED SSM ISSUES
  • Can developing countries use SSM instead of SSG
    for sensitive products previously enjoying SSG
    privileges under UR-AoA?
  • Can special products (SPs) automatically enjoy
    SSM privileges?
  • To what extent will SSM and other SDT privileges
    deter South-South and total trade?
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