The recent ‘mini-ministerial’ of WTO negotiations broke down partly over the issue of a special safeguard mechanism for agriculture in developing countries. While this is a minor issue, it struck at the heart of negotiations over market access and moving generally to more open markets. The WTO Secretariat Information and Media Relations Division has released “An Unofficial Guide to Agricultural Safeguards” to help explain the issues.

The unofficial guide makes clear at the beginning what the issue is not about, “The problem is not about protecting poor farmers in general — that is already covered by what has been agreed on the formula for developing countries to cut tariffs; smaller or no cuts for “special products”; different treatment for small and vulnerable economies, recent new members and special cases such as Bolivia; and exemptions for least-developed countries.”

Safeguards are defined as “contingency restrictions on imports taken temporarily to deal with special circumstances such as a surge in imports.”
They are not a new concept. Safeguards that applied to all products were included in the General Agreement on Tariffs and Trade (GATT), and there is a Safeguards Agreement in the Uruguay Round Agreement that created the WTO. The provisions can be used if a domestic industry is injured or threatened with injury caused by a surge in imports accompanied by a price fall. A price decline alone does not qualify. The restrictions can be on quantity imported like a quota or an increase in tariffs above the bound rate. An injury test is required, and negotiations for compensation must be pursued. These safeguards can be applied on agricultural products, but the current Agriculture Agreement has a Special Agricultural Safeguard (SSG). This safeguard can be triggered by import surges or price declines without a need to prove injury or negotiate compensation. It can only be applied to products that had quotas and other quantitative restrictions converted to tariffs under the Uruguay Agreement.

The Doha Round would create a third type, the Special Safeguard Mechanism (SSM), but only for developing countries not eligible to use the SSG because they did not switch from quotas to tariffs under the Uruguay Agreement. Like the SSG, it could be triggered if the import surge or price decline is big enough, without any need to test injury, negotiate compensation or have previously converted to a tariff. It could not be used if another safeguard was used on the product. Most of this had already been hashed out.

The point of contention was using the SSM to increase tariffs above the bound tariffs commitments made in the Uruguay Round, or for new members like China, above the rates committed to when joining the WTO. This is where basic philosophy entered the debate. Some countries opposed tariffs higher than the current commitments as a matter of not going back on liberalization achieved in previous rounds. Use of the SSM was to be related to cutting tariffs from pre-Doha Round levels, not triggered by normal fluctuations in price or normal trade expansion and limited to the period of liberalization. Other countries insisted they be allowed to help poor and vulnerable farmers with the SSM. The July 10 draft agriculture text had the higher tariffs in square brackets indicating no agreement.

Attempts at a compromise were based on allowing tariffs to go above the pre-Doha Round commitments, but constraining them by establishing additional criteria. These included a minimum increase in imports ranging from 15% to 40%, limits on how high the tariff could rise above the current bound maximum to 15% of the post-Doha bound rate or 15 percentage points whichever is higher as in the 10 July draft and how many products could exceed the pre-Doha tariff levels in a year such as 2.5% of products. Consensus could not be reach on these numbers.

The two sides were divided by two issues that have bedeviled the Doha talks throughout their seven years. The first one was market access for exporting countries. Much of the time in the talks was spent on how to fashion programs to not give market access. The level of tariff cuts in the four tiers for developed countries and how much less should developing countries do took the first four years of the talks. The next three were spent on how many sensitive products countries should be allowed with lower tariff cuts and how big the tariff rate quotas (TRQ) should be for sensitive products with smaller tariffs reductions. After that discussions centered on special products for developing countries and how little they could reduce tariffs given that there was no requirement for TRQ to expand market access.

The other issue was whether the Doha talks were part of a larger agenda to move toward trade liberalization or just a way to extend managed trade for the foreseeable future. Allowing for higher tariffs and a small increase in imports, like 15 percent, to trigger higher tariffs appeared to be designed to manage normal trade flows rather protect against a genuine surge in imports. High bound tariffs with low applied tariffs and the SSM together would have provided the perfect conditions for managed trade.

Supporters of more open trade are correct to be skeptical about how to revive the Doha talks as long as these two fundamental issues are not resolved. WTO members can’t play lip service to the benefits of free trade and then spend most of the negotiating sessions scheming to prevent trade from happening. The same developing countries that helped to end the talks are the ones that have a growing middle class that seeks access to more and cheaper food and millions of poor people that need an opportunity to participate in international trade to improve their economic conditions. Those countries need to be reengaged in the trade policy reform debate.