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Simulations on the Special Safeguard Mechanism. A Look at the December 2008 Draft Agriculture Modalities.

Working paper by Montemayor, Raul/ICTSD, 2010

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This paper aims to provide policy-makers, negotiators and other stakeholders with a clear technical assessment of how the December 2008 draft modalities (TN/AG/W/4/Rev.4) and the accompanying working document (TN/AG/W/7) could affect the functioning of the proposed special safeguard mechanism, and, in particular, accessibility of the mechanism and its effectiveness.

By Raul Montemayor, Federation of Free Farmers Cooperatives, Inc. (FFFCI)


Issue Paper No. 25


ICTSD Programme on Agriculture Trade and Sustainable DevelopmentApril 2010


Simulations On The Special
Safeguard Mechanism
A Look At The December 2008 Draft Agriculture
Modalities


ICTSD Project on Special Products and a Special Safeguard Mechanisms




l ICTSD Programme on Agriculture Trade and Sustainable Development


By Raul Montemayor, Federation of Free Farmers Cooperatives, Inc. (FFFCI)


Simulations On
The Special Safeguard Mechanism
A Look At The December 2008 Draft Agriculture
Modalities


Issue Paper No. 25


April 2010




ii R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Published by


International Centre for Trade and Sustainable Development (ICTSD)
International Environment House 2
7 Chemin de Balexert, 1219 Geneva, Switzerland
Tel: +41 22 917 8492 Fax: +41 22 917 8093
E-mail: ictsd@ictsd.org Internet: www.ictsd.org


Chief Executive: Ricardo Meléndez-Ortiz
Programmes Director: Christophe Bellman
Programme Team: Jonathan Hepburn, Marie Chamay and Ammad Bahalim



Acknowledgments


This paper has been produced under the ICTSD Programme on Agricultural Trade and Sustainable
Development. The activities of this programme have benefited from support from the UK Department
for International Development (DFID) and the Dutch Ministry of Foreign Affairs (DGIS). ICTSD is
particularly grateful to the developing country negotiators and capital-based officials who provided
comments on earlier drafts of this paper, as well as all the participants who expressed views and
made suggestions at a meeting with the author on 8 February 2010.



For more information about ICTSD’s Programme on Agricultural Trade and Sustainable Development,
visit our website at http://ictsd.net/programmes/agriculture/


ICTSD welcomes feedback and comments on this document. These can be forwarded to Jonathan
Hepburn at jhepburn [at] ictsd.ch


Citation: Montemayor, R, (2010), “Simulations on the special safeguard mechanism: a look at
the December 2008 draft agriculture modalities”. ICTSD Programme on Agricultural Trade and
Sustainable Development Issue Paper No.25, International Centre for Trade and Sustainable
Development, Geneva, Switzerland.


Copyright © ICTSD, 2010. Readers are encouraged to quote and reproduce this material for
educational, non-profit purposes, provided the source is acknowledged.


This work is licensed under the Creative Commons Attribution-Noncommercial-No-Derivative
Works 3.0 License. To view a copy of this license, visit http://creativecommons.org/licenses/by-
nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco,
California, 94105, USA.


The views expressed in this publication are those of the author(s) and do not necessarily reflect the
views of ICTSD or the funding institutions.


ISSN 1994-6856




iiiICTSD Programme on Agriculture Trade and Sustainable Development


TABLE OF CONTENTS


LIST OF ABBREVIATIONS AND ACRONYMS iv
LIST OF TABLES AND FIGURES v
FOREWORD vii
EXECUTIVE SUMMARY ix
1. BACKGROUND 1
2. OBjECTIVES OF ThE STUDY 3
3. METhODOLOGY 4
4. ThE VOLUME SSM 7


4.1 EffectoftheApplicationofRemedyCapsunderRev4andW7 7


4.2 EffectsofPro-RatingModalities 9


4.3 EffectsofCross-Checks 11


4.4 EffectsofImposition,HolidayandSpill-OverPeriods 13


4.5 EffectsofThresholdLevels 16


4.6 EffectsofRemedyCaps 17


5. ThE PRICE SSM 20
5.1 Baseline Results 21
5.2 EffectsofTriggerThresholds 22


5.3 EffectsofAllowableRemedyLevels 23


5.4 EffectsofCross-Checks 24


5.5 EffectsofRemedyCapsExpressedinPercentagePoints 25


5.6 EffectsofRemedyCapsExpressedasPercentagesofBoundTariffs 26


6. COMBInEdVOLuMEAndPRICESSM 27


7. EnROuTESHIPMEnTS 29


8. SEASONAL PRODUCTS 30
9. ExCLuSIOnOfnOn-MfnTRAdEInSSMAPPLICATIOn 31


10. SVE CONCERNS 32
11. CONCLUSIONS AND RECOMMENDATIONS 33
ENDNOTES 35
ANNEX A: WORLD TRADE ORGANIzATION COMMITTEE ON AGRICULTURE
(SPECIALSESSIOn),REVISEddRAfTMOdALITIESfORAgRICuLTuRE,
TnB/Ag/W/4/REV.4,6dECEMBER2008,ExCERPTSOnTHESPECIAL
SAFEGUARD MEChANISM (SSM) 40
ANNEX B: WORLD TRADE ORGANIzATION COMMITTEE ON AGRICULTURE
(SPECIALSESSIOn),REVISEddRAfTMOdALITIESfORAgRICuLTuRE,Tn/
Ag/W/7,6dECEMBER2008,SPECIALSAfEguARdMECHAnISM 43




iv R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


LIST OF ABBREVIATIONS AND ACRONYMS


CIF Cost, insurance and freight


COA Committee on Agriculture


G-33 Group of 33


GATT General Agreement on Tariffs and Trade


ICTSD International Centre for Trade and Sustainable Development


LDC Least Developed Country


MFN Most Favored Nation


NAMA Non-Agricultural Market Access


RAM Recently Acceded Member


SP Special Product


SSG Special Safeguard


SSM Special Safeguard Mechanism


SVE Small and Vulnerable Economy


TRQ Tariff Rate Quota


WTO World Trade Organization


YTD Year-to-date




vICTSD Programme on Agriculture Trade and Sustainable Development


LIST OF TABLES AND FIGURES


Table 4.1 Baseline Volume SSM Access Rates under Rev 4 and W7


Table 5.1 Baseline Access and Effectiveness Rates for Price SSM


Table 6.1 Modality and Parameter Settings for Combined Volume and Price SSM Simulations


Figure 3.1 Methodology for Assessing How Often Import Volumes Trigger the SSM


Figure 3.2 Methodology for Assessing How Often Price Depressions Trigger the SSM


Figure 3.3 Methodology for Assessing SSM Effectiveness


Figure 4.1 Volume SSM Access Rates Under Various Trigger Modalities


Figure 4.2 Volume SSM Access Rates Under Various Cross-Check Modalities


Figure 4.3 Volume SSM Access Rates Under Various Imposition and Holiday Periods


Figure 4.4 Volume SSM Access Rates Under Various Imposition, Holiday and Spillover Periods


Figure 4.5 Volume SSM Access and Effectiveness Rates Under Various Remedy Cap Threshold
Settings


Figure 4.6 Volume SSM Effectiveness Rates Under Various Percentage Point Remedy Cap Settings


Figure 4.7 Volume SSM Effectiveness Rates Under Various Percent of Bound Tariff Remedy Cap
Settings


Figure 5.1 Price SSM Access Rates under Various Trigger Threshold Settings


Figure 5.2 Price SSM Effectiveness Rates under Various Remedy Level and Trigger Threshold
Settings


Figure 5.3 Price SSM Access Rates Using Cross-Check Modalities


Figure 5.4 Price SSM Effectiveness under Various Percentage Point Remedy Cap Settings


Figure 5.5 Price SSM Effectiveness Rates Under Various Percent of Bound Rates Remedy Cap
Settings


Figure 6.1 Combined Volume and Price SSM Access and Effectiveness Rates under Various Parameter
and Modality Settings




vi R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


The world is producing more food than ever before. Yet, after decades of declining under-nourishment
rates, the number of hungry people is on the increase again in several countries. Environmental
degradation associated with intensive agricultural production – such as soil erosion, water pollution
and biodiversity loss – remains at an unacceptable level. The major challenge today is, therefore, not so
much to increase food production, but rather to ensure that agricultural production generates sufficient
income for the poor, promotes equity and contributes to the sustainable use of natural resources.


The reform of the global agriculture trading system currently being negotiated in the context of the
Doha Round – with the objective of establishing a “fair and market-oriented trading system” – will play
a major role in this process. Over the last fifteen years, world agriculture trade has grown almost twice
as fast as production. However, highly subsidised agricultural production and exports from member
countries of the Organization of Economic Co-operation and Development (OECD) as well as the anti-
competitive behaviour of trading firms are depressing world prices, thereby affecting development
prospects in the South. Tariff peaks, tariff escalation and technical barriers to trade (such as sanitary
and phyto-sanitary requirements) also limit market access and, thus, the potential gains from trade
which developing countries are expecting.


While it is widely recognised that developing countries as a whole will benefit from freer agricultural
trade, some fear that most of the new trading opportunities the Doha Round is set to bring would be
captured by a few middle-income countries and large food exporters. Lower income countries would
gain only little and might even lose from further liberalisation. Many still have large rural populations
composed of small and resource-poor farmers with limited access to infrastructure and few employment
alternatives. Thus, these countries are concerned that domestic rural populations employed in import-
competing sectors might be negatively affected by further trade liberalisation, becoming increasingly
vulnerable to market instability and import surges as tariff barriers are removed.


A large number of countries still depend on the export of a few commodities, the prices of which show
high volatility and long-term decline. Commodity dependence, the expected erosion of preferences
that some countries depend on for their export earnings, as well as increased food import prices due to
the elimination of export subsidies, will make it difficult for these countries to guarantee their growing
populations the food they need. In this context, safeguarding domestic food production capacity has
become an essential component of food security strategies in an increasing number of countries.


These concerns were first raised at the World Trade Organization (WTO) in the context of the
“Development Box” debate, in which developing countries tabled a set of proposals aiming at providing
flexibility for countries to enhance domestic food production and adopt measures to protect the
livelihoods of resource-poor farmers. These proposals included concrete measures to address dumping
and import surges. Some were eventually reflected in the so-called 2004 July package. The provisions
for special and differential treatment under Paragraphs 41 and 42 of the Framework Agreement are
probably the most innovative from a sustainable development perspective. They specify that “developing
country Members 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. These
products will be eligible for more flexible treatment.” The Framework Agreement further states that a
“Special Safeguard Mechanism (SSM) will be established for use by developing country Members.”


However, key aspects of these instruments – such as the selection and treatment of Special Products
(SPs), or specific modalities for a new SSM, including product coverage, possible trigger mechanisms
and remedies – were left for future negotiations. As a contribution to this highly controversial debate,
the International Centre for Trade and Sustainable Development (ICTSD) Project on Special Products


FOREWORD




viiICTSD Programme on Agriculture Trade and Sustainable Development


and a Special Safeguard Mechanism aims to generate knowledge and options to better articulate and
advance the concepts of SP and SSM from a sustainable development perspective.


Negotiations on the SSM reached a critical point in July 2008, when they appeared to be at least the
proximate cause for the collapse of ministerial level talks in Geneva. Subsequent negotiations, from
September to December of that year, focused primarily on the possible modalities for imposing safeguard
duties that would exceed pre-Doha bound tariffs. The then chair of the agriculture negotiations,
Ambassador Crawford Falconer (New Zealand), issued a revised modalities draft (TN/AG/W/4/Rev.4) in
December 2008, along with an accompanying document (TN/AG/W/7) that set out his thoughts on the
more recent evolution of negotiations on the SSM.


This paper aims to provide policy-makers, negotiators and other stakeholders with a clear technical
assessment of how the December 2008 draft modalities (TN/AG/W/4/Rev.4) and the accompanying
working document (TN/AG/W/7) could affect the functioning of the proposed special safeguard
mechanism, and, in particular, accessibility of the mechanism and its effectiveness.


Ricardo Meléndez-Ortiz
Chief Executive, ICTSD




viii R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


EXECUTIVE SUMMARY
Negotiations on new agricultural trade rules remain deadlocked more than nine years since the launch
of the Doha Development Round in 2001. Among the contentious areas of debate is the proposal for
a Special Safeguard Mechanism (SSM) which would allow developing countries to impose additional
safeguard duties in the event of an abnormal surge in imports or the entry of unusually cheap
imports. In particular, there continue to be disagreements as to whether developing countries will
be allowed to exceed or breach their bound tariffs – duty rates to which they are currently committed
in the WTO - when they impose additional safeguard duties, and if so, under what conditions and up
to what extent.


Some negotiating parties have insisted that WTO member countries should not be permitted to
backtrack on their commitments to keep their tariffs within bound levels. They have also claimed that
SSM could be repeatedly and excessively invoked, distorting the normal flow of trade in the process.
In turn, the G-33 negotiating bloc of developing countries, which has been the major proponent of
the SSM, has argued that breaches of bound tariffs should not be ruled out if the SSM is to be an
effective remedy. They have added that the SSM should be simple and operational so that developing
countries can promptly address market emergencies even as they pursue their food security, poverty
development and other developmental objectives.


In December 2008, the chairman at the time of the WTO Committee of Agriculture Special Session,
Ambassador Crawford Falconer, issued a revised draft negotiating text for agriculture following a series
of consultations after the collapse of the negotiations in July 2008. This text, labeled as TN/AG/W/4/
Rev.4 (hereafter referred to as Rev 4), contained a segment on SSM which continued to be unresolved.
In an attempt to straighten out the differences, Ambassador Falconer issued a separate document
labeled TN/AG/W/7, (hereafter referred to as W7), which proposed alternative text to cover cases in
which developing countries would be allowed to breach their bound rates when applying SSM duties.


A newly released ICTSD study reports on the results of simulations conducted when applying variations
of Rev 4 and W7 rules and modalities on the SSM. These simulations first measured the accessibility
of the SSM, that is, the frequency with which the SSM could be invoked to address import surges and
price depressions. A second set of tests determined the effectiveness of the SSM, or how often the
remedy was able to bring prices of imports to within an acceptable range of domestic prices. Monthly
data on imports of twenty seven products in six countries (China, Ecuador, Fiji, Indonesia, Philippines
and Senegal) were used as proxies for individual shipments in the simulations.


To recall, the volume SSM allows a graduated scale of safeguard duties in the form of additional
percentage points or percentages of bound tariffs if the cumulative volume of imports in a given year
exceeds the volume trigger by certain percentages. This trigger, in turn, is the average annual volume
of imports in the preceding three years. On the other hand, the price SSM can be imposed when import
prices dip below an established price trigger. This trigger is determined using the average monthly
price of imports during the preceding three-year period.


The simulations showed that the volume SSM could be invoked thirty three percent of the time if the
provisions of Rev 4, except caps and other restrictions, were applied. About half of the months (or
shipments) were deemed “problematic”, meaning that the import prices plus bound tariffs fell below
domestic prices by more than ten percent. The SSM was found to be effective in about one-fourth of
these “problematic” months by raising import prices to at least 90 percent of domestic prices.


If countries were not allowed to breach Doha starting tariffs as stipulated in Rev 4, the effectiveness
of the volume SSM dropped to two percent or less for all countries except Senegal (which was accorded




ixICTSD Programme on Agriculture Trade and Sustainable Development


special privileges because it was a least developed country or LDC). In turn, the overall effectiveness
rate increased to ten percent if countries were allowed to exceed their bound rates based on W7 rules.
In this scenario, remedies were capped at eight percentage points or one-third of the bound tariff,
whichever was higher, if the import surge was between 120 and 140 percent of the trigger. No breach
was allowed if the surge was less than 120 percent. Above 140 percent, the cap was set to twelve
percentage points or fifty percent of the bound tariff, whichever was higher.


Access to the volume SSM did not appear to be unduly affected by the so-called pro-rating modality.
Under this mechanism, monthly import volumes during the preceding three years were analyzed and
the average import volume during months when SSM was not imposed was used as a substitute for
the import values during months when SSM was used. The volume trigger was then computed using
the adjusted (non-SSM) annual import totals for the three years. This procedure has been proposed
by some export-oriented countries in an attempt to preserve “normal trade” – the natural growth of
imports that occurs over time - despite the imposition of the SSM.


Access rates dropped to almost a third of baseline results if a “cross-check” was applied, meaning that
the volume SSM could not be imposed if domestic or import prices were not declining at the same
time as an import volume surge.


The simulations also showed that the accessibility of the SSM was directly proportional to the length
of time that the remedial duty could be imposed. For example, a four-month imposition period
yielded an access rate of sixteen percent while a twelve-month modality yielded a twenty percent
result. Access rates went down by between one-fourth and one-third of baseline results if the SSM
could not be re-imposed during a so-called holiday period equivalent to the length of the first period
of imposition. In turn, the availability of the SSM tended to be the same, irrespective of the length
of the imposition period, if the remedy was allowed to “spill over” only up to the first two months
of the succeeding year.


The effectiveness of the volume SSM peaked when caps were set at around twenty percentage points
if the surge was between 120 and 140 percent of the trigger, and thirty points if the surge was more
than 140 percent. On the other hand, the cap had to reach 250 percent of bound tariffs to approximate
the same result.


The study also noted that the price SSM had not been tackled as intensively as its volume counterpart in
the negotiations. This is despite its potential value in effectively and fairly addressing price depressions.
The simulations showed however that the remedy was less accessible and effective than the volume SSM
under baseline settings. Access rates averaged only eighteen percent and effectiveness rates settled
at six percent of “problematic” months. Prohibiting the breach of Doha starting tariffs rendered the
price SSM almost inconsequential, with effectiveness rates declining to between zero or one percent
for most countries.


Rev 4 defined the price trigger as 85 percent of the average monthly price of imports, converted to
local currency, in the preceding three years (thirty six months). If subsequent import prices fell below
this trigger, a price SSM remedy could be imposed equivalent to 85 percent of the difference between
the import price and the price trigger. The simulations showed that the availability of the remedy
increased by more than fifty percent if the trigger was set instead to 100 percent of the thirty six-
month price average. At the same time, the effectiveness rate advanced by forty percent even if the
remedy was limited to 85 percent of the price difference.


Imposing a parallel cross-check on the price SSM by disallowing its use if import volumes were not
increasing in tandem with a price depression resulted in a significant decline in access rates to between




x R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


eight and twelve percent. Effectiveness rates similarly reached their peak when remedies caps were
set to between twenty and thirty percentage points or 250 percent of bound tariff levels.


On the basis of these results, the study recommended that the pro-rating method for computing volume
triggers could be adopted in order to address the concerns of exporting countries that normal trade
and trade growth would be unduly compromised by the imposition of SSM. The study also noted that
even under the most flexible conditions, the overall effectiveness of the SSM did not exceed twenty
three percent, indicating that imports would continue to enter despite the imposition of SSM duties in
eight out of every ten “problematic” months.


In turn, developing countries could be accorded easier access to the remedy once imports exceed
trigger levels by a certain threshold. Cross-checks or additional restrictions, for example, may not
be necessary unless the volume SSM is to be re-imposed. Shorter imposition periods can be allowed,
provided the volume SSM can be re-imposed if the surge aggravates. Remedy caps could be adjusted
upwards to ensure that the measure is able to effectively address import surges or price depressions.
Additional rules can be adopted so that the resultant remedies do not amount to excessively high
breaches over bound tariff rates. The study also suggested removing the W7 remedy cap provisions
altogether and simply adjusting the level of remedies mentioned in Rev 4 in order to simplify the
application of the SSM.


The study recommended that en route shipments be assessed price SSM duties based on the preceding
year trigger or the new trigger that is notified after the shipment has already left port, whichever is
lower. Alternatively, the existing price trigger at the time that the shipment departed the exporting
country could be used. Difficulties in establishing universal rules to cover so-called “seasonal” products
were noted. The proposal also pointed out that limiting the application of the SSM to imports coming
from outside preferential trading agreements could backfire against exporting countries when they try
to access markets outside their preferential trade areas.




1ICTSD Programme on Agriculture Trade and Sustainable Development


In July 2008, the Chairman of the World
Trade Organization (WTO) Committee on Agri-
culture (COA) Special Session, Ambassador
Crawford Falconer, issued a draft agriculture
text labeled as TN/AG/W/4/Rev.3 (hereafter
referred to as Rev 3), which sought to capture
the emerging consensus, and also underline the
remaining areas of disagreement in the ongoing
negotiations on agricultural trade rules under
the Doha Development Round. Unfortunately,
the negotiations collapsed, although attempts
were subsequently made to revive the talks.
In December 2008, Ambassador Falconer
issued TN/AG/W/4/Rev.4 (Rev 4) as a revised
text for consideration during the negotiations
in late 20081, following a series of formal and
informal consultations.


Among the most contentious issues in the
negotiations was the Special Safeguard Mechanism
(SSM) proposal which was incorporated in the
market access provisions of the draft text. SSM
is a trade remedy intended to help developing
countries address surges in import volumes or
declines in import prices by allowing them to
temporarily impose additional safeguard duties
on imports. It is worth noting that SSM provisions
in Rev 4 were simply copied in full from the Rev
3 version, indicating no progress or movement
since the collapse of the negotiations in July
2008, particularly on bracketed provisions (on
which no agreement has been reached). A critical
area of disagreement centered on the issue of
whether developing countries would be allowed
to exceed their pre-Doha Round bound tariffs -
duty rates to which they are currently committed
in the WTO - if they applied SSM duties on top of
their post-Doha bound tariffs. Perhaps realizing
that no consensus would be reached on the Rev
4 provisions pertaining to this issue in time for
the December 2008 negotiations, Ambassador
Falconer issued a separate document labeled
TN/AG/W/7 (W7) which suggested a compromise
modality for these so-called “above the bound
rate” SSM applications.2


However, no definitive breakthrough emerged
from the December 2008 discussions. To a
large extent, this was purportedly due to


continued wrangling over the SSM. Negotiations
are still ongoing, although prospects for a final
consensus on the SSM issue in particular, and
all other areas of the negotiations in general,
remain unclear.


Despite the current impasse on the SSM issue,
assessing the effect of emerging proposals on
the utility and effectiveness of the remedy
and its potential impact on trade continues
to be useful and relevant. Since negotiations
are still ongoing and will presumably generate
a final agreed text at some point, analytical
work can help negotiators work out a mutually
acceptable compromise on SSM, thus speeding
up this process.


To recap, Paragraphs 132 to 146 of Rev 4
currently stand as the official negotiating text
in relation to SSM. Among other things, these
paragraphs stipulate how either the volume
or price SSM will be triggered, what level of
remedies can be applied, and how long and
repeatedly such remedies can be imposed
on imports. Interestingly, there were no
bracketed provisions in this SSM section up to
and including Paragraph 143, implying, perhaps
from Ambassador Falconer’s perspective, but
certainly not from the point of view of some
major negotiating blocs, that there was a
general consensus up to that point.


Paragraph 142 of Rev 4 prescribed an all-
encompassing rule that developing countries
would not be allowed to exceed their pre-Doha
bound tariffs when applying volume or price
SSM duties on top of their applied tariffs.3 This
proposed rule was vigorously supported by
several negotiating blocs, including those with
mainly export interests, on the grounds that
any breach of tariff bindings would constitute
“backsliding” on trade reform commitments.
In turn, the G-33, which had been the main
proponent of the SSM, argued that such a
cap on remedies would effectively render
the SSM unable to address import surges and
price depressions. In an attempt to resolve
this standoff, Paragraphs 144 to 145 were
appended so as to allow developing countries


1. BACKGROUND




2 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


to exceed their pre-Doha starting tariffs, but
only to a certain extent, subject to additional
conditions, and with new limits on imposition
periods. (Notably, these paragraphs referred
only to the volume SSM and were silent on
whether price SSM duties could similarly breach
pre-Doha tariff levels.)4


However, agreement on the compromise
text remained elusive in the lead up to the
December 2008 negotiations, which explains
why they continued to be bracketed in Rev
4. Meanwhile, discussions and consultations
on new modalities were pursued and led
Ambassador Falconer to issue W7, in which
he proposed new language to cover, among


other things, instances when the volume SSM
could be triggered “above the bound rate”.
In particular, paragraph 3 of W7 specifies the
conditions by which developing countries could
exceed their current bound tariffs, the caps
on remedies that can then be applied, and the
period during which “above the bound rate”
measures could be imposed. Although not an
official negotiating text, Paragraph 3 of W7, if
adopted, would presumably replace Paragraphs
144 and 145 of Rev 4.


Other portions of W7 sought to address the
issue of “seasonal” products and other pending
issues in the SSM discussion. Notably, W7 also
did not refer at any instance to the price SSM.




3ICTSD Programme on Agriculture Trade and Sustainable Development


The basic objective of this study is to evalu-
ate the effect of various provisions in Rev 4
and W7 and other relevant proposed modali-
ties and rules on the SSM. In particular, the
study seeks to determine how often the SSM
can be used to address import volume surges
and price depressions, and how effective it
will be in resolving domestic market problems
that may arise as a result of the entry of large
volumes and/or cheaply priced imports to
developing countries. The study also tracks


the behavior of the safeguard measure when
applying modalities intended to prevent the
excessive use of the remedy or its distortive
effects on normal trade patterns.


The analysis is intended to help negotiators
acquire a better and more factual under-
standing of the SSM and hopefully provide
indicators of possible areas of compromise
which could help lead to a consensus on
the issue.


2. OBjECTIVES OF ThE STUDY




4 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


3. METhODOLOGY
As in previous versions5 of this study, the
analysis focuses on two critical features of the
SSM, namely, the extent to which countries
will be able to access it, and the extent to
which it will be effective.


Accessibility is defined as the frequency with
which the SSM can be invoked to address import
surges and price depressions. For this purpose,
monthly data on import volumes, prices, and
foreign exchange rates were compiled by
country and by product. Each set of monthly
data was assumed to correspond to a single
“shipment” or importation. A simulation mo-
del was then developed to analyze various
options for the SSM as contained in Rev 4


and W7. Where relevant, data sets on annual
consumption, bound tariffs, and tariff rate
quotas (TRQs)6 established during the Uruguay
Round were taken into consideration, as were
tariff reductions and new market access
conditions set out in Rev 4.


The SSM was deemed “accessible” if a volume
or price trigger was breached and other
pertinent rules allowed for the imposition
of remedial safeguard duties. The number of
months during which such access was allowed
was then compared to the total number of
months in the relevant data series to come up
with an access rate in terms of a percentage
of total months.


Figure 3.1: Methodology for Assessing how Often Import Volumes Trigger the SSM


Figure 3.1 above illustrates the approach used
to measure how often the safeguard would
be triggered by import volume increases.
The horizontal bars correspond to cumulative
import volumes in a given implementation
year (July to June in this case). The bars
colored red indicate the months during which
volume-based SSM duties could be imposed. In
this example, safeguard duties can be imposed
whenever import volumes exceed both the
volume trigger (indicated by the blue line)
and TRQ7 commitment levels (indicated by the
green line).


The access rate is the proportion of total
months in which safeguard duties can be
imposed (indicated by the red bars on the
graph). For example, if additional safeguard
duties could be imposed for a particular


commodity in twelve months out of a data
series involving 60 months, the access rate is
deemed to be twenty percent.


The access rate for the price-based SSM was
calculated in a similar way. In Figure 3.2
below, the red horizontal bars indicate the
“shipments” or months during which a price-
based safeguard could be used. Normally, the
price-based safeguard could be invoked once
the import price falls below the price trigger
(blue line) by a certain percentage or thres-
hold. However, as mentioned earlier, safegu-
ard duties cannot be applied if cumulative
import volumes have not yet exceeded the
TRQ commitment for the year. This explains
why some of the horizontal bars remain black
despite the fact that they fall significantly
below the price trigger line.




5ICTSD Programme on Agriculture Trade and Sustainable Development


The effectiveness of the SSM, in turn, was
measured through a three-step procedure.
First, the study counted the number of months
or “shipments” during which average import
prices (converted to local currency), plus bound
tariffs, fell below corresponding domestic
wholesale prices by more than ten percent.
These months were deemed “problematic” and
considered as months during which additional
safeguard duties were needed. Secondly, the
study assessed whether additional safeguard


duties could in fact be invoked during these
“problematic” months when various rules and
restrictions were applied. Thirdly, if additional
safeguard duties could be imposed during
a “problematic” month, the study assessed
whether the resulting price of imports,
inclusive of bound tariffs plus SSM duties, would
consequently rise to within ninety percent of
domestic prices or higher and thereby remove
the “problem”. In such instances, the SSM was
deemed to be “effective”.


Figure 3.2: Methodology for Assessing how Often Price Depressions Trigger the SSM


Figure 3.3: Methodology for Assessing SSM Effectiveness




6 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Figure 3.3 above gives an illustration of
how the effectiveness of an SSM measure is
determined. The horizontal bars correspond
to average import prices in each month
(shipment), while the grey bottom portion is
equivalent to the import price converted to
domestic currency and the green portion is the
monetary equivalent of the applicable bound
ad valorem8 tariff. A month during which the
import price plus tariff (the grey plus green
portion) falls below the wholesale domestic
price line (the blue line) by more than ten
percent is deemed to be a “problematic”
month. If additional safeguard duties can be
invoked in these “problematic” months, a
red bar equivalent to the monetary value of
the additional safeguard duty is appended.
The safeguard is deemed to be “effective”
if this additional duty is able to bring total
import prices (shown as the grey plus green
plus red bars) to within at least ten percent of
domestic prices.


Take an example in which forty out of 100
months were deemed “problematic”. If the
SSM could be invoked in twenty out of the forty


problematic months but could address the price
gaps effectively in only ten months, the remedy
would have an effectiveness rate of twenty five
percent (ten out of forty months).


In total, the simulations and analysis covered
twenty seven agricultural products from six
developing countries, namely the Philippines,
Indonesia, China (a recently acceded member
or RAM), Ecuador and Fiji (classified as small
and vulnerable economies or SVEs) and Senegal
(a least developed country or LDC). The model
utilized data mostly from 2000 to 2005 (2002
to 2007 for the Philippines).


The simulations used in this study were based
exclusively on available historical data. No
attempt was made to forecast prices, demand,
consumption and other variables, or to use
these to project SSM behavior in future years.
The model also did not consider how import
volumes and prices would have reacted to
the imposition of SSM duties. Accordingly, any
findings should be treated with caution and
should be considered as primarily indicative
instead of conclusive.




7ICTSD Programme on Agriculture Trade and Sustainable Development


The first part of this analysis focuses on the
volume-based SSM. The price-based SSM was
temporarily deactivated9 in the simulation
model in order to isolate the behavior and
impact of its volume counterpart.


For the simulation, the baseline was initially
established using the following general set-
tings:


a) The calendar year (January to December)
was used as the implementation year.10


b) The volume trigger for each year was set
to the average annual volume of imports in
the preceding three years.


c) The previous year’s volume trigger was
retained or carried over if computations
showed that the current year’s volume
trigger was lower and SSM was applied
during the preceding three-year period.


d) Computation of volume SSM duty:


i. If cumulative imports were less than
110 percent of the volume trigger, the
additional SSM duty was zero;


ii. If imports were between 110 percent and
115 percent of the trigger, the additional
duty was twenty five percent of current
bound tariffs or twenty five percentage
points, whichever was higher;


iii. If imports were between 115 percent and
135 percent of trigger, the additional
duty was forty percent of the current
bound duty or forty percentage points,
whichever was higher;


iv. If imports were more than 135 percent
of the trigger, the additional duty was
fifty percent of the current bound duty
or fifty percentage points, whichever
was higher.


e) No cap was applied on the SSM duty that
could be imposed.


f) SSM duties could not be imposed on
imports falling within TRQ commitments. It
was assumed that TRQ commitments would
first be satisfied before out-quota imports
would be allowed.11


g) All imports of products, including those
with TRQ commitments, were, however
assumed to be out-quota and subject to
bound (not applied) tariffs. Countries were
assumed to be able to freely raise applied
rates to bound levels, if they were lower,
before considering the imposition of addi-
tional SSM duties.12


h) Volume SSM duties could be imposed for
a maximum of twelve months, with no
constraints on re-imposition.


i) No cross-checks13 were applied.


j) No distinction was made between MFN and
non-MFN imports.14


k) Products were assumed to be classified
as special products (SPs) with a tariff cut
of eleven percent over the prescribed
implementation period, except LDCs like
Senegal which would have zero cuts.15
(Paragraph 129 of Rev 4 prescribed this
as the minimum average cut for SPs even
as it allowed for zero cuts for a certain
percentage of SP tariff lines.)


Using the Rev 4 baseline settings outlined
above, Table 4.1 below shows that the volume
SSM would be available (denoted as “Avail” in
table) in about one-third of total months. The
remedy in turn would be “needed” in about
half of the total months during which import
prices inclusive of bound tariffs were at least
ten percent lower than domestic prices. The
volume SSM would be available in about one-
third and effective in one out of every four
of these “problematic” (denoted as “Probl” in
table) months.


4. ThE VOLUME SSM


4.1 Effect of the Application of Remedy
Caps under Rev 4 and W7




8 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Table 4.1: Baseline Volume SSM Access Rates under Rev 4 and W7


The access rates under the baseline scenario
were basically unchanged if pre-Doha starting
tariffs could not be exceeded when imposing
SSM duties as stipulated in Paragraph 142
of Rev 4.16 However, the effectiveness rate
dropped to two percent or less for all countries
except Senegal. Senegal preserved most of
its baseline rates by virtue of unbracketed
provisions in Paragraph 143 of Rev 4 which
allowed LDCs to breach pre-Doha bound tariffs
by forty percent or forty percentage points,
whichever was higher. In contrast, China’s
effectiveness rate dropped from twenty one
percent to zero while that of the Philippines
declined to one percent.


The significant drop in effectiveness rates
arose from the fact that the Rev 4 caps
effectively limited the allowable remedy to
the difference between current bound rates17
and pre-Doha starting tariffs. The resulting
remedy was consistently too small to bridge
most “problematic” gaps between domestic
and import prices.


Let us take for example a product with a
fifty percent pre-Doha starting tariff, which
is subjected to an assumed eleven percent
tariff cut for special products (SPs). If this cut
is applied in eleven equal annual installments
as provided in Paragraph 63 of Rev 4, the
starting tariff will be cut by 0.5 percent at
the start of implementation and by another
0.5 percent every year thereafter. If the
remedy caps introduced by Paragraph 142 of
Rev 4 were then to be applied, SSM duties
will not be able to exceed 0.5, 5.5 and eleven


percent on the first, fifth and last year of
implementation for this sample product. If
a country selected the zero tariff cut option
for an SP as provided in Paragraph 129 of Rev
4, it would not be able to apply any volume
SSM remedy for the said product since there
would be no difference between bound and
pre-Doha starting tariffs in any year.


Given this outcome, one could conclude that
any modality that allowed a breach of pre-
Doha starting tariffs would almost always
result in a more accessible and effective SSM,
even if additional restrictions over the use
of volume SSM remedies were imposed. The
table above shows for example that although
access rates declined significantly when the
imposition period was reduced from twelve to
four months as provided by W7, the overall
effectiveness rate still improved considerably
for most countries when remedies were
allowed to exceed bound rates based on
W7 rules. Only Senegal saw a drop in its
effectiveness rate, but this was mainly due
to the contraction of the imposition period to
four months.


In the following simulations, the provisions
of Rev 4 (except Paragraphs 144-145) and
Paragraph 3 of W7 were assumed to operate
simultaneously but separately. This means that
Rev 4 rules, except the capping provisions,
were applied and any resultant SSM remedies
were subjected to the caps outlined in W7.
The baseline setting was additionally reset
with the following parameter changes and
additions, consistent with W7:18


COUNTRY
Baseline Rev 4 Rev 4 Caps W7 Caps


Access Effectiveness Rate Access Effectiveness Access Effectiveness
Rate Probl Avail Effect Rate Avail Effect Rate Avail Effect


China 15% 47% 22% 22% 10% 10% 0% 6% 11% 11%


Ecuador 37% 21% 33% 23% 37% 33% 2% 19% 19% 8%


Fiji 33% 68% 28% 21% 33% 28% 2% 16% 12% 3%


Indonesia 41% 41% 27% 27% 41% 27% 2% 10% 8% 7%


Philippines 37% 48% 43% 17% 37% 43% 1% 18% 24% 4%


Senegal 43% 64% 45% 42% 43% 45% 42% 24% 26% 24%


Total 33% 49% 34% 25% 32% 32% 10% 16% 17% 10%




9ICTSD Programme on Agriculture Trade and Sustainable Development


a) The imposition period was reduced from
twelve to four months.


b) Notwithstanding the schedule of remedies
allowed in Rev 4, volume SSM tariffs would
be subject to the following caps:


a. If cumulative imports did not exceed
120 percent of the trigger, the remedies
could not exceed current bound rates
(zero remedy);


b. If the magnitude of the import surge
was between 120 and 140 percent of the
trigger, remedial tariffs were limited to
one-third of the current bound tariffs or
eight percentage points, whichever was
higher;


c. If cumulative imports exceeded 140
percent of the trigger, remedies could
not exceed one-half of the bound tariff
or twelve percentage points, whichever
was higher.


One of the major criticisms of the SSM is that
it will be excessively and abusively invoked,
consequently distorting and restricting the


normal flow and growth of international
trade. It has further been argued that import
volumes will decline, if not totally stop,
once a volume SSM duty is imposed. Not
only will further imports during the current
year be curtailed, but the trigger volume
for the succeeding year will also go down
since a lower annual volume of imports will
be included in the subsequent three-year
average. With a lower trigger, SSM could then
be imposed more easily by the importing
country in the following year. A continuous
cycle of SSM imposition and lower triggers
followed by more SSM impositions may ensue
and eventually prevent any reasonable level
of trade and trade growth to occur.


Rev 4 initially addressed this concern of
exporting countries by stipulating in Para-
graph 140 that the previous year’s trigger
will be carried over to the current year if a)
SSM was invoked in the preceding three years
and, b) the resulting new trigger was lower
than the trigger in the preceding year. Figure
4.1 below shows that if this trigger carryover
modality (which was incorporated in the
baseline setting) was not applied, access to
the remedy improved slightly from 15.9 to
16.2 percent of total months.


4.2 Effects of Pro-Rating Modalities


Figure 4.1: Volume SSM Access Rates Under Various Trigger Modalities




10 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


A so-called pro-rating procedure for computing
triggers has also been proposed to further
address concerns over the adverse effect of
SSM imposition on future triggers and access to
markets. This was incorporated in the second
sub-paragraph of Paragraph 3 of W7.


In one interpretation of this pro-rating proce-
dure, the average monthly volume of imports
during non-SSM months in each year is used
as a proxy, or substitute, for imports during
months when SSM was imposed during the
year.19 However, if the actual volume of
imports during a particular month was higher
than the proxy, the actual volume was used.
The adjusted import volumes per year were
then computed, and the totals for the three
years were averaged to come up with a new,
pro-rated trigger. Figure 4.1 above shows that
when this pro-rating modality using annual
proxies was applied, the access rate declined
to 14.4 percent.


The effect of pro-rating was less pronounced
if a single proxy was used to substitute for
imports during months when SSM was imposed
over a thirty six month period.20 Here, the
overall access rate averaged 15.2 percent,
still slightly lower than the baseline result of
15.9 percent, but almost a percentage point
higher than when annual proxies were used.
Of the countries covered by the study, only
Fiji appeared to be particularly vulnerable to
either pro-rating modality.


If the pro-rating modality using thirty six
month proxies was applied while suspending
the carryover rule, the overall access rate
reached 15.4 percent. This was slightly lower
than the result in the reverse (baseline)
scenario where the carryover rule was applied
without the pro-rating modality.


In general, the pro-rating modality tended
to increase the volume trigger over baseline
levels. Intuitively, this would make it harder
to breach the trigger and make use of volume
SSM remedies. In actuality however, the
higher trigger merely delayed the onset of the
breach in some instances, but once the trigger
threshold was breached, access to the SSM was


retained for essentially the same number of
months. This explains why overall access rates
seem to have not been affected significantly
by the pro-rating modality.


However, there were cases when a delayed
access to an SSM remedy had a greater impact
on access rates. If a product had a tariff rate
quota (TRQ) commitment and the imposition
of SSM spilled over to the next implementation
year due to a delayed breach of a higher pro-
rated trigger, SSM duties would have to be
suspended at the start of the succeeding year
until cumulative imports surpassed the TRQ
commitment. By the time imports exceed the
TRQ level in the succeeding year, a volume
surge condition may not apply any more. This
would preclude the re-application of SSM. In
effect, the portion of the imposition period
that spilled over to the succeeding year would
have been lost.


A similar situation could arise if the spillover
limit provisions (as discussed in Section 4.4)
were applied.


Some critics of the pro-rating proposal have
argued that irreparable damage may be done
to domestic industries if countries are unable
to promptly implement the SSM remedy in
response to an import surge. This is particularly
relevant for developing countries which have
weak import data gathering capacities. Delays
in validating the existence of import surges
are inevitable and will only be exacerbated
by higher triggers arising from the pro-rating
modality. In this regard, it should be noted
that the pro-rating modality will require a
disaggregation of import volumes by month,
whereas the carryover method involves a
simple averaging of annual import volumes.


It could be further debated whether an annual
or 36-month average for non-MFN months is a
suitable and accurate proxy for imports during
months when SSM was imposed. Imports may
have seasonal trends which cannot be captured
by simple averages.


In a recent submission21, the G-33 also main-
tained that pro-rating was unnecessary since




11ICTSD Programme on Agriculture Trade and Sustainable Development


the original modality for computing triggers
was already sufficient to sustain “normal
trade”: this was based on three-year averages,
and allowed the use of SSM remedies only if
cumulative imports breached the triggers by
a certain percentage. The G-33 pointed to
data showing that the annual growth rate in
imports of certain commodities did not exceed
single digits, and concluded that exporting
countries would have more than enough
leeway to expand their markets even if the
triggers were not pro-rated since imports
would have to exceed 120 percent of the
trigger before SSM duties could be applied.
They added that while imports could possibly
taper off once SSM duties were imposed, this
would happen only after imports had already
exceeded the three-year average import level
by more than twenty percent. On this basis,
they concluded that triggers in subsequent
years would not decline dramatically, and
normal trade and normal trade growth would
generally be preserved, even in the event of
an SSM imposition.


The G-33 further alluded to the experience with
the existing Special Safeguards (SSG) during the
Uruguay Round implementation period: during
this time, developing countries made use of the
measure sparingly. They pointed to instances
when imports did not decline, and in some
cases even increased, after the imposition of
SSG duties. The negotiating bloc reasoned that
developing countries would utilize the SSM in a
similar manner due to difficulties in promptly
collating trade data, domestic concerns about
food sufficiency, and other intervening factors.


The G-33 reiterated that the SSM was supposed
to address import surges and price depressions
that adversely affected importing countries,
and could not be expected to simultane-
ously compensate exporting countries for their
ac-tual or potential losses arising from an
SSM imposition.


Obviously, the actual effect of a pro-rating
modality would depend on the behavior of
imports of each specific commodity. If imports
for a certain product breach the volume trigger
early in the year, the subsequent trigger will tend


to be relatively higher because the proxies will
be used for a larger number of months. In turn,
some exporting countries have argued that their
access to markets with high import growth rates
will be seriously curtailed if SSM is imposed,
and that the pro-rating modality is necessary to
ensure that such access is reinstated even when
SSM is applied. Unfortunately, the study did
not have sufficient data to make a comparative
analysis of the impact of the proposed modality
on products with varying import trends. As
noted earlier therefore, any conclusions from
the analysis should be considered as merely
indicative and based exclusively on the historical
data available for the study.


Another proposed modality which was pur-
portedly intended to curb the unnecessary
application of SSM remedies is the so-called
cross-check mechanism.22 Paragraph 3 of W7
provided in particular that the volume SSM
would “normally not be applicable unless the
domestic price is actually declining”. This rule,
which was not present in Rev 4, arose from the
argument that there would be no urgent need
to apply remedial SSM duties if an import surge
was not causing a decline in domestic prices.


Different interpretations of the cross-check
rule were used in determining the effect of
the modality on the volume SSM. Figure 4.2
below shows that access to the remedy declined
significantly from the baseline level of sixteen
to only 6.1 percent if the SSM was allowed only
when the average monthly domestic price of
the product from the start of the year up to the
current month (year-to-date or YTD) was lower
than the average monthly domestic price of the
product in the preceding three years. If YTD
domestic prices had to be lower than the three-
year average by at least ten percent, the access
rate dipped further to 1.1 percent. A twenty
percent threshold for the cross-check effectively
rendered the volume SSM inaccessible.


Getting accurate and timely data on domestic
prices of specific commodities would presu-
mably be a major problem in most developing


4.3 Effects of Cross-Checks




12 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Figure 4.2: Volume SSM Access Rates Under Various Cross-Check Modalities


countries. A possible alterative is to compare
YTD monthly prices of imports to three-year
monthly import price averages. Simulations
show that this variation resulted in slightly
less deleterious effects on access to the
SSM. Still, the results fell significantly
below baseline levels. Overall access rates
declined to 7.2, 4.5 and 3.7 percent when
using zero, ten, and twenty percent thres-
holds, respectively.


A third variation compared the YTD average
import price to the average price of imports
during the same period in the preceding year.
Here, the access rate similarly declined to
around seven percent. If the YTD price had
to be at least ten percent lower than the
reference price, the access rate went down
to four percent, and then slid further to 2.8
percent when the threshold was raised to
twenty percent.


These results indicate that access to the volu-
me SSM remedy was particularly vulnerable
to the application of any cross-check moda-
lity based on domestic or import prices.
Operationally, it would also be difficult to
secure import and domestic prices, and make
the necessary price comparisons promptly.
Further, the available price data may not
be disaggregated so as to make a precise
comparison of prices possible. In large countries
like China, domestic prices may additionally
vary significantly across different ports of
entry and production or marketing zones.


Nominal domestic prices generally and nor-
mally rise due to inflation, and the chances
of such prices declining over the years appear
quite remote. Such a trend will almost always
preclude the availability of the volume SSM
if a cross-check is imposed. One option
would be to deflate the nominal prices using
consumer price indices. However, getting the
necessary price data on time would continue to
be a problem.


Delaying the response because prices have
not yet reacted to an import surge could
also arguably lead to irreversible damage to
domestic markets. The effect of imports on
domestic prices may not be immediate. By
the time domestic prices start to decline and
allow for SSM imposition, it may be too late to
reverse the trend and mitigate its impact.


The G-33 has additionally argued in a recent
submission23 that requiring cross-checks will
result in further and unnecessary delays since
countries will have to gather additional data
before they can apply the remedy. They also
presented trade data to support their contention
that there was no direct link between import/
export volumes and trends in either domestic
or import prices.


It is debatable whether import prices can
be a suitable proxy for domestic prices in
determining whether an import surge is
harming local sectors and would therefore
require a remedial response. Import prices




13ICTSD Programme on Agriculture Trade and Sustainable Development


may be increasing relative to average prices in
preceding periods, but they may still end up
significantly cheaper than domestic prices. One
alternative would be to compare import prices
inclusive of bound tariffs against domestic
prices. However, securing accurate data on
import and especially domestic prices would
again be a problem.


Critics of the cross-checking modality have
argued that the volume and price SSMs were
intended to be two distinct remedies that
would not be contingent on each other. They
have further reasoned that a price cross-check
on the use of volume SSM comes close to
requiring proof of injury, if not also causality.
This would not make it very different from
regular safeguards and would run against the
objective of the SSM – to provide developing
countries with a simple and effective tool to
react quickly to market emergencies.


Finally, it could again be noted that the pro-
rating modality discussed above already assures
exporters of historical levels of access and a
reasonable amount of trade growth. Importing
countries which are affected by import surges
beyond pro-rated trigger thresholds should
arguably be given the prerogative to make use
of remedies if they deem it necessary, whether
or not domestic or import prices behave in a
particular manner.


Paragraph 3 of W7 stipulated that the maximum
period for imposing a volume SSM duty would
be [4/8] months and that the remedy could


not be re-imposed until an equivalent number
of months (or ‘holiday’ period) had elapsed.
It further provided that if an SSM measure
was triggered in the last [2/4] months of the
implementation year, its application could spill
over to the succeeding year only for a maximum
period of [2/4] months.24


For purposes of the simulation, the baseline
setting assumed a maximum imposition period
of four months, with no restrictions on re-
imposition and spillover.25 As indicated earlier,
the access rate for volume SSM under these
parameter settings was sixteen percent.


If the volume SSM was allowed to be applied for
a maximum of six months instead, the access
rate improved to nineteen percent and further
to twenty one percent if an eight-month period
was allowed. Access rates reached their peak
of twenty nine percent when the imposition
period was set to twelve months, as originally
provided in Rev 4. These results shown in
Figure 4.3 below indicate that access rates
were clearly sensitive to imposition periods.


Access rates declined significantly if volume
SSM remedies could not be re-imposed during
a holiday period equivalent to the imposition
period. For example, a four-month imposition
period followed by a four-month holiday reduced
the access rate from sixteen to eleven percent.
The decline was slightly less pronounced when
six and eight-month imposition and holiday
periods were applied. If SSM was allowed for
twelve months but could not be re-imposed
during the next twelve month period, the
access rate dropped by about a third from
twenty nine to twenty percent.


4.4 Effects of Imposition, holiday and
Spill-Over Periods




14 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Figure 4.3: Volume SSM Access Rates Under Various Imposition and Holiday Periods


Another set of simulations tested the behavior
of volume SSM when the remedy was not
allowed to spill over to the following year
beyond a certain number of months. Figure
4.4 below reveals that a maximum spillover
period of two months effectively removed
any positive impact of longer implementation
periods. Access rates were limited to between
fifteen and sixteen percent when imposition
periods were set to four, six, eight or twelve
months. In effect, the spillover cap stopped
the application of the SSM beyond February
of each year irrespective of the imposition
period. The declines in access rates were
therefore more pronounced as the imposition
period grew longer since more months tended
to be excluded from SSM coverage.


It should also be noted that products with TRQ
commitments had built-in spillover constraints
since SSM duty application would have to be
suspended at the start of the succeeding


year until such time that cumulative imports
exceeded TRQ levels.


The last set of simulations applied simulta-
neous limits on how long the volume SSM
could initially be imposed, the length of the
‘holiday’ period during which it could not
be immediately reimposed, and how many
months the remedy could be allowed to spill
over to the following year. If a four-month
imposition and holiday period was applied
together with a two-month spillover limit, the
access rate declined from the baseline level of
sixteen percent to a level of eleven percent.
However, access rates did not vary much
from this result when longer implementation
and holiday periods were imposed. Again,
this was because the two-month spillover
cap limited the application of SSM duties up
to February of the succeeding year, irrespec-
tive of the length of the imposition and holi-
day periods.




15ICTSD Programme on Agriculture Trade and Sustainable Development


Critics could argue that a holiday period unfairly
prevents a country from addressing a continuing
import surge, especially if the initial imposition
was not able to effectively stem the inflow
of imports. It could further be noted that a
historical level of imports plus an allowance for
growth would have already entered domestic
markets before SSM duties could be initially
imposed. Hence, SSM re-imposition would not
unduly compromise the interests of exporting
countries. On the other hand, exporters could
point to the possibility that the imposition of
SSM duties could be unreasonably prolonged
even if imports are no longer harming domestic
markets. One possible compromise is to require
a cross-check or validation measure before SSM
can be re-imposed, but not at the time of initial
imposition. For example, re-imposition could be
allowed if imports continue to come in despite
the imposition of SSM duties, or if the import
surge aggravates to a higher threshold level.
However, data availability problems could again
be an issue in this regard.


The limitation on safeguard duties spilling over
to the following year acts much like the end-of-
year cap to SSG imposition which was enforced
during the Uruguay Round implementation
period. This may not have much effect on
products which have TRQ commitments that


naturally interrupt the application of SSM
duties at the start of each year and until
such time that imports exceed TRQ levels.
For other products however, access to the
remedy may be more significantly curtailed,
especially if their production and marketing
cycles naturally spill over to the succeeding
year. In such cases, choosing a different
implementation year26 may be a convenient
way for importing countries to retain access
to the SSM during critical periods.


It is possible that the SSM will be applied
interminably if the imposition period is too
long and holiday and spillover limits are not
imposed. The application may spill over to the
succeeding year long enough for imports to
again accumulate over the trigger threshold.
A surge condition will again prevail when the
imposition period ends and the SSM can then
be immediately re-imposed. To avoid such
eventualities, shorter implementation periods
in the range of four to six months may be
adopted. Re-imposing the remedy could be
permitted under certain conditions. If the
application of an SSM duty has spilled over to
the following year, a holiday period can be
enforced after the imposition so as to allow
exporters a breathing spell from SSM duties.


Figure 4.4: Volume SSM Access Rates Under Various Imposition, Holiday, and Spillover Periods




16 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


4.5 Effects of Threshold27 Levels


W7 stipulated that a first set of remedy caps
(eight percentage points or one-third of current
bound tariffs) would apply if cumulative imports
fell between 120 and 140 percent of the volume
trigger. Below the 120 percent threshold, reme-
dies would not be allowed to breach bound
tariffs. In excess of a 140 percent breach of
the trigger, governments would be allowed to
raise remedies to twelve percentage points
or fifty percent of bound tariffs, whichever
was higher.


Figure 4.5 below shows that if the thresholds
were lowered to 115 and 135 percent to
coincide with the thresholds for remedies under
Paragraph 133 of Rev 4, access to the remedy
improved slightly from sixteen to seventeen
percent. More stringent thresholds had pro-
portional effects on the SSM. For example,
access rates went down to twelve percent when
a 140 to 160 percent threshold combination
was applied. Consistent with earlier findings,
pro-rating the volume trigger using thirty six-
month average import volumes as proxies did
not materially change the results.


Adjusting the remedy cap thresholds affected
effectiveness rates less significantly. The uti-
lity of the SSM went down from the baseline
level of ten to eight percent when a 140 to
160 percent instead of a 120 to 140 percent
threshold combination was applied. A similar
result arose when the pro-rating modality was
additionally imposed.


Some have argued that SSM tariffs should not be
allowed to breach bound rates except in truly
problematic instances, such as when import surges
exceed 140 percent of the trigger. However, the
impact of an import surge on domestic prices
does not only depend on its magnitude, but
also on the timing of the arrival and disposal of
the imports in local markets, the price of the
imports compared to local products, and other
relevant factors. Hence, even a nominally small
surge could severely disrupt domestic markets.
Disallowing the use of the SSM until the surge
reaches very high levels could have disastrous
consequences. In turn, trigger modalities, parti-
cularly if pro-rating is applied, could ensure that
exporters will preserve their historical access to
markets even if SSM is applied at comparatively
low surge levels.


Figure 4.5: Volume SSM Access and Effectiveness Rates Under Various Remedy Cap
Threshold Settings




17ICTSD Programme on Agriculture Trade and Sustainable Development


It may also be practical to harmonize Rev
4 and W7 thresholds to avoid confusion. To
recall, Rev 4 set the thresholds for remedies
at 110 percent, 115 percent and 135 percent
of the volume trigger, with different levels of
SSM duties allowed within each range. In turn,
W7 imposed caps on remedies depending on
whether the breaches were less than 120
percent, between 120 and 140 percent, and
over 140 percent of the volume trigger. One
way to harmonize the two texts is to apply
the same thresholds. Rev 4 would then define
the allowable remedies while W7 would set
the corresponding caps for such remedies
under each common range.


Going further however, a case could be made
to integrate the two modalities altogether so
as to simplify the SSM. The remedies stipulated
in Rev 4 act like caps in themselves, since they
limit the extent of the SSM duty that can be
applied, albeit at levels higher than those
allowed by W7. Accordingly, Rev 4 remedies
could simply be adjusted without having to
impose a second layer of remedy caps such as
those in W7.


As mentioned earlier, Paragraph 3 of W7 set
limits on allowable SSM remedies in terms
of percentage points or as a percentage of
current bound tariffs.28 A higher cap was
applied if import volumes fell within the
second (higher tier).


If we isolate the impact of percentage point
remedy caps (by temporarily setting the caps
expressed as percentages of bound tariffs to
zero), we can see from Figure 4.6 below that
a four percentage point remedy cap for the
first tier and a six percentage point limit for
the second tier made the SSM effective in only
about 8.3 percent of “problematic” months.
In comparison, the baseline effectiveness rate
was around ten percent when using the eight-
and-twelve percentage point combination.
Effectiveness rates progressively improved as
caps were increased in equal increments. If
the caps were set to the maximum allowable
remedy of fifty percentage points under Rev
4, the volume SSM registered an optimal
effectiveness rate of 12.4 percent.


Figure 4.6: Volume SSM Effectiveness Rates Under Various Percentage Point Remedy Cap Settings


4.6 Effects of Remedy Caps


If the percentage point remedy cap was
in turn deactivated, and only the caps in
terms of percentages of bound tariffs were
applied, Figure 4.7 below shows that the
effectiveness rate would hit 6.5 percent under
the baseline setting of one-third and one-half


of bound tariffs in the first and second tiers,
respectively. If the caps were set to three-
fourths and 100 percent of bound tariffs,
the volume SSM was able to successfully
bridge price gaps in 8.5 percent of “proble-
matic” months.




18 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Even at extremely high levels such as 250
percent of bound tariffs, the effectiveness
rate was not able to match the optimal
level achieved when maximum percentage
point remedy caps were applied. This can
be traced to the fact that the bound tariffs
of the products covered by the simulation
were comparatively low, such that remedies
in the form of percentage points tended
to yield higher effectiveness rates than
safeguard duties expressed as percentage of
bound tariffs.29


As mentioned earlier, SSM has been criticized
by some negotiating groups for opening the
door for WTO member countries to effectively


renege on their tariff reduction commitments
by allowing them to breach their bound rates.
SSM advocates counter that the very purpose
of safeguard duties, much like countervailing
and anti-dumping measures, is to respond to
market aberrations in an effective manner
even if these may necessitate the temporary
breaching of bound tariffs. They add that
such caps were never applied to special
safeguard (SSG) duties that were used by
developed (and developing) countries during
the Uruguay Round implementation period.
Hence, there would be no reason to suddenly
impose them on a measure that was purposely
intended to help developing countries in the
Doha Round.


Figure 4.7: Volume SSM Effectiveness Rates Under Various Percent of Bound Tariff Remedy
Cap Settings


The case of China, which had to agree to
relatively low tariff bindings for many of its
products during its accession negotiations, has
been cited by those who oppose large levels
of remedies, particularly those in terms of
percentage forms. If a particular remedy was
capped at eight percentage points for example
and added to a three percent bound rate, it
would be tantamount to almost tripling the
bound rate. On the other hand, some countries
with higher bound rates have been demanding
higher remedy caps based on percentage
points in order to use meaningful remedies. If
the same remedy of eight percentage points
was appended to a forty percent bound tariff,


the increment would be equivalent to only
twenty percent.


One could argue that it is the countries and
products with low bound rates, which are
more vulnerable to import surges and price
depressions, which should be accorded better
access to the SSM and higher levels of remedies.
Allowing access to an effective safeguard
remedy to address market emergencies would
also give countries added confidence in pursuing
tariff reform more aggressively. At the same
time however, the worries of other countries
that bound rates will be excessively breached
by SSM remedies need to be considered. One




19ICTSD Programme on Agriculture Trade and Sustainable Development


possible compromise would be to allow for a
higher level of percentage point remedy caps but
provide that any such remedy, when converted
to ad valorem equivalents, should not exceed a
certain percentage of bound tariffs.


Apart from the issue of what would be reasonable
caps on SSM remedies, it should be noted from
the simulations that the effectiveness of the
volume SSM is innately limited. At most, it will
be able to address problematic price gaps and
arguably stop subsequent imports in only about
one out of every ten instances. Even when
Rev 4 provisions were applied without caps on
remedies and additional rules under W7, the
overall effectiveness rate reached only twenty
five percent of “problematic” months. These
results tend to validate the arguments of the
G-33 that trade will not necessarily be paralyzed
by the SSM. Additionally, the experience with


the SSG in the Uruguay Round indicates that
developing countries typically underutilize the
remedy, either because of difficulties in securing
the necessary data on time, or due to internal
pressures from importers or consumer advocates
to defer the application of safeguard duties.


Finally, there does not seem to be any
overriding reason for imposing additional
caps on remedies considering that the Rev
4 schedule of remedies already constitutes
limits on what countries can impose in terms
of SSM remedies. As mentioned earlier, if the
idea is to allow breaches of bound rates only
in exceptional circumstances, the threshold
and remedy settings under Rev 4 could just
be adjusted accordingly without having to
superimpose a second layer of remedy caps. This
would greatly simplify the operationalization of
the SSM.




20 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Paragraph 135 of Rev 4 defined the price
trigger as 85 percent of the average monthly
price of imports during the preceding three-
year period, converted to domestic currency.
It included a proviso that if a country’s
domestic currency had depreciated by at
least ten percent during the preceding twelve
months, the average exchange rate during
the preceding three-year period, instead of
the current exchange rate, could be used
in converting import prices to domestic
equivalents. Paragraph 136 added that price-
based SSM remedies should be applied on a
shipment-by-shipment basis and that the
remedial duty should not exceed 85 percent
of the difference between the import price
and the price trigger. Paragraph 142 then set
overriding caps on SSM remedies by stating
that the pre-Doha starting tariff cannot be
exceeded when applying volume or price SSM
tariffs on top of current bound tariffs.


Notably, most of the discussions and nego-
tiations to date have focused on the volume
SSM and have seemingly ignored or set aside
issues relevant to the price SSM. For example,
W7 was issued exclusively to try to bridge
differences in opinion on the volume-based
remedies and therefore did not make any
reference to the price SSM.


There have been speculation that an
effectively neutral price SSM that would be
subject to absolute caps under Paragraph
142 of Rev 4 had been silently accepted by
some negotiating parties as a quid-pro-quo
for a more progressive volume SSM. It is also
possible that the negotiators simply have had
no time to deal with the price SSM given the
wide divergence in negotiating positions on
the volume SSM. Still, the price SSM remains a
potentially more useful remedial measure for
importing countries and, from the perspective
of exporting countries, a fairer method for
addressing market emergencies.


Import prices have a more direct impact on
domestic markets in the importing country than
the volume of imports. Imports may increase


due to local deficiencies or increased demand
without necessarily having to be cheaper than
domestic prices. On the other hand, even a
relatively small volume of imports may have
a dramatic effect on domestic prices if it is
dumped at extremely low prices during critical
periods of the year.


A remedy that is based on the difference
between current and historical import prices
is also more precise in terms of addressing the
problem. In comparison, it is difficult if not
impossible to determine the appropriate SSM
tariff that will arrest an import surge.


The price SSM is arguably fairer since it will be
imposed selectively on particular shipments
which are priced below the trigger. Subsidized
exports will have a greater tendency to fall
into this category. The application of the price
SSM will therefore help level the playing field
in favor of countries who do not subsidize
their exports. In comparison, the volume SSM
will affect all countries whether or not they
subsidize their exports, and whether or not
they were responsible for the import surge.
A country that starts to export late in the
year, for example, may be hit immediately
by SSM duties, while a competing exporting
country that manages to bring in products
before the volume trigger is breached will not
be affected.


The effect of the price SSM will not be
unnecessarily prolonged because remedies
will be applied on a shipment-by-shipment
basis, not for several months. If the prices of
subsequent shipments do not fall below the
trigger, the price SSM cannot be re-imposed.
In the case of the volume SSM, remedial tariffs
could theoretically be retained for the pres-
cribed number of months even if the effect of
the import surge has already abated.


Finally, the price SSM is specifically mentioned
as an integral part of the SSM in the Doha
Development Agenda and therefore rightfully
deserves as much attention and examination
as its volume counterpart.


5. ThE PRICE SSM




21ICTSD Programme on Agriculture Trade and Sustainable Development


For the price SSM simulations, the baseline
was initially established using the following
general settings:


a) The calendar year (January to December)
was used as the implementation year.30


b) If the local currency at the time of
importation had depreciated by at least
ten percent at any time during the last
twelve months, the import price was
computed using the average exchange rate
during the three years preceding the year
of importation.


c) Import prices were valued in local currency
using the applicable exchange rate.


d) The price trigger for each year was set to
85 percent of the average monthly price
of imports during the preceding three-year
period.


e) Computation of the price SSM duty: if the
import price fell below the price trigger,
the additional duty would be equivalent to
85 percent of the difference between the
import price and the price trigger.


f) No cap was applied on the SSM duty that
could be imposed.


g) SSM duties could not be imposed on imports
falling within TRQ commitments, if any.31


h) All imports of products, including those
with TRQ commitments, were however,
assumed to be out-quota and subject to
MFN bound (not applied) tariffs.32


i) Countries were assumed to be able to
freely raise applied rates to bound levels,


if they were lower, before considering the
imposition of additional SSM duties.33


j) Price SSM duties would be imposed on a
shipment-by-shipment basis.


k) No cross-checks34 were applied.


l) No distinction was made between MFN and
non-MFN imports.35


m) Products were assumed to be classified
as special products (SPs) with a tariff cut
of eleven percent over the prescribed
implementation period, except LDCs such
as Senegal which would have zero cuts.36
Paragraph 129 of Rev 4 prescribed this
as the minimum average cut for SPs even
as it allowed for zero cuts for a certain
percentage of SP tariff lines.)


Simulations were undertaken to gauge the
accessibility and effectiveness of the price
SSM under various parameter and modality
settings. The volume SSM was deactivated37
in order to isolate the behavior of the
price SSM.


Table 5.1 below shows that the price SSM was
available in eighteen percent of all months if
Rev 4 provisions were applied without any caps
on remedies. The remedy was available in only
about one-fourth of the months during which
there were “problematic” price gaps, and was
ultimately effective in addressing these gaps
in only six percent of “problematic” months.
In comparison, the volume SSM could have
been applied in one-third of the total months
and was effective in addressing price gaps in
twenty five percent of “problematic” months
in a scenario where caps on remedies were
also not applied.


5.1 Baseline Results




22 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Table 5.1: Baseline Access and Effectiveness Rates for Price SSM


The lower access rates could be traced to the
shipment-by-shipment modality for applying
price SSM remedies which precluded the use
of the measure over extended periods. Access
rates for the Philippines, and particularly
China, were comparatively lower, mainly due
to high TRQ commitments which significantly
limited the opportunities to make use of
the remedy. In general, lower access rates
coincided with lower effectiveness rates.


If remedies were capped such that pre-Doha
bound rates could not be exceeded when SSM
duties were added to regular bound tariffs,
the overall effectiveness rate dropped to
one percent. Again, because it was allowed
to exceed its pre-Doha bound tariffs by forty
percent or forty percentage points by virtue of
its being an LDC, Senegal was the only country
that managed to benefit somewhat from the
price SSM. Still, its effectiveness rate was
only 5% of “problematic” months, indicating
that the allowable remedies were largely
insufficient to offset gaps between domestic
and import prices.


Ecuador and Fiji ended up with one percent
effectiveness rates while China, Indonesia


and the Philippines saw their rates plunging
to zero.


Inasmuch as the remedy caps render the price
SSM effectively useless, the simulations below
evaluate the measure without setting any caps
on remedies, unless otherwise specified.


Paragraph 135 of Rev 4 defined the price trigger
as 85 percent of the average monthly price of
imports during the preceding three years. This
was equivalent to saying that the price SSM
could not be applied if the current CIF import
price (adjusted in case of severe depreciation of
the currency) was more than 85 percent of the
three-year price average.


If SSM remedies were allowed once import
prices fell below the three-year average price
(equivalent to a 100 percent threshold), the
access rate predictably rose from the baseline
level of eighteen percent and reached thirty
percent. In turn, access to the price remedy
fell to thirteen percent if the trigger was set to
75 percent of the three-year price average, as
shown in Figure 5.1 below.


5.2 Effects of Trigger Thresholds


COUNTRY
Baseline Rev 4 Rev 4 Caps


Access Effectiveness Rate Access Effectiveness
Rate Probl Avail Effect Rate Avail Effect


China 1% 47% 1% 0% 0% 0% 0%


Ecuador 24% 21% 47% 19% 20% 47% 1%


Fiji 41% 68% 35% 6% 24% 35% 1%


Indonesia 14% 41% 23% 11% 41% 23% 0%


Philippines 37% 48% 24% 4% 14% 24% 0%


Senegal 24% 64% 33% 6% 24% 33% 5%


Total 18% 49% 27% 6% 18% 27% 1%




23ICTSD Programme on Agriculture Trade and Sustainable Development


Clearly, access to the price SSM was closely


related to how the price trigger was defined.


As will be seen in subsequent discussion on


remedies in Section 5.5, this definition also


influenced the effectiveness of the measure


in addressing “problematic” gaps between


import and domestic prices.


Paragraph 136 of Rev 4 stated that the


price SSM remedy shall be 85 percent of the


difference between the CIF import price


(adjusted when necessary for depreciation)


and the trigger price, which in turn was


eighty five percent of the average monthly


import price in the preceding three years. As


mentioned earlier, this resulted in an overall


effectiveness rate of about six percent


of “problematic” months under baseline


settings without caps on remedies.


Interestingly, the effectiveness rates did not
change dramatically when the remedy levels
were adjusted while the trigger was pegged
to 85 percent of the three-year price average.
Figure 5.2 below shows that if the remedy was
limited to only 80 percent of the difference
between import and trigger prices, the
effectiveness rate dropped by only about one
percentage point to 5.3 percent compared to
when a 100 percent remedy was allowed.


If the trigger was set to 100 percent (instead
of 85 percent) of the three-year price average,
effectiveness rates conspicuously improved as
a result of improved access to the remedy. Even
if the remedy was limited to only 80 percent
of the difference between import and trigger
prices, the price SSM came out to be more
effective (at 9.4 percent) than when the trigger
was set to 85 percent of the price average and
the remedial duty was set to 100 percent of the
difference between import and trigger prices.
In the latter case, the effectiveness rate was
only 6.5 percent.


5.3 Effects of Allowable Remedy Levels


Figure 5.1: Price SSM Access Rates under Various Trigger Threshold Settings




24 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Figure 5.1: Price SSM Access Rates under Various Trigger Threshold Settings


These results indicate that threshold levels
are more important than remedy levels in
influencing the effectiveness of the price
SSM. This was mainly because higher access
to the remedy as a result of more favorable
thresholds tended to increase the chances
of the SSM being effective. In contrast, a
high remedy level was useless if the SSM
could not be accessed due to very restrictive
thresholds. Notwithstanding this, it appears
more logical to allow prices to move within
tolerable levels and set the threshold to
somewhere below 100 percent, and then
provide for full remedies once prices fall
beyond the threshold level.


It is worth noting that the trigger threshold
of 85 percent set by Paragraph 135 of Rev
4, coupled with a maximum remedy of 85
percent of the price difference, effectively
limited the allowable remedy to 72 percent of
the absolute difference between the import
price and the three-year price average.


Paragraph 137 of Rev 4 additionally stated
that the price SSM cannot be imposed if


“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”. This parallel cross-check
mechanism effectively linked the use of the
price SSM to the trend in import volumes.


For purposes of the simulation, the phrase
“manifestly declining” was interpreted to
mean that the year-to-date (YTD) cumulative
volume of imports was lower than the volume
of imports during the same period in the
preceding year by a certain percentage or
threshold. If this threshold was set to zero
percent, meaning that current import volumes
simply had to exceed corresponding volumes
in the previous year, Figure 5.3 below shows
that the access rate would decline from the
baseline level of eighteen percent (where
no cross-checks were applied) to twelve
percent. Further increases in thresholds had
less dramatic effects. At the twenty percent
threshold level, the residual access rate was
nine percent.


5.4 Effects of Cross-Checks




25ICTSD Programme on Agriculture Trade and Sustainable Development


Figure 5.3: Price SSM Access Rates Using Cross-Check Modalities


The second part of the condition in Paragraph
137 was not considered in the simulations in
view of difficulties in determining what was
“manifestly negligible”. Crafting a formula
that would determine if a certain volume of
imports would be “incapable of undermining”
domestic prices was also problematic.


Intuitively, one could argue that cheap im-
ports may not be a matter of major concern
if imports were not only not rising but in fact
were even declining. Local supplies may have
stabilized following a period of shortages,
thus making large imports unnecessary. While
import prices may have come down relative
to previous years’ levels, domestic prices
may have also declined in tandem with the
increase in supply. In such a situation, there
may be no need to impose additional SSM
duties. In comparison, very cheap imports
that coincide with a surge in import volumes
could exert a more direct and severe effect
on domestic markets.


It may not however be appropriate to link a
single shipment to the trend in import volumes
over an extended period. Further, import
volumes may not immediately or always move
in an opposite direction to import prices.
Cheap imports could still exert significant


impacts on domestic markets even if volumes
are relatively small, particularly if they come in
during critical months of the year. Postponing
remedial action on such imports may result in
irreversible damage in succeeding months.


No formal discussions on “above the Doha
bound rate” remedies for price SSM have been
publicly initiated. However, as section 5.1 above
shows, the remedy becomes almost unusable if
paragraph 142 caps were applied in full to the
price SSM. In such a scenario, effectiveness
rates are close to zero for most countries.


For purposes of discussion, simulations for
the price SSM were undertaken adopting the
nomenclature of W7 for the volume SSM,
such that price SSM duties would be allowed
to breach Doha bound rates by a certain
number of percentage points or by a certain
percentage of bound tariffs if the CIF prices
fell between seventy and eighty percent of
the trigger price.38 A higher remedy cap would
be applied if the price depression was more
than seventy percent of the price trigger. No
breaching would be permitted if import prices
were eighty percent of the trigger or higher.


5.5 Effects of Remedy Caps Expressed
in Percentage Points




26 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Figure 5.4: Price SSM Effectiveness under Various Percentage Point Remedy Cap Settings


Figure 5.4 above shows the effectiveness
of the price SSM when the remedy caps in
terms of percentage points were adjusted
while remedies in the form of percentages of
bound tariffs were deactivated. If price SSM
remedies were capped at eight percentage
points in the first tier and twelve points in
the second tier as with the volume SSM, the
effectiveness of the remedy was 4.7 percent
of “problematic” months. The effectiveness
of the measure approached its peak of around
six percent, when remedy caps were set to
twenty and thirty percentage points for the
first and second tier, respectively.


Effectiveness rates appeared to be more
closely correlated to movements in remedy
caps expressed as percentages of bound tariffs.
The utility of the price SSM was 3.2 percent
of “problematic” months in the W7 baseline
scenario in which remedies were capped at one-
third and one-half of bound tariffs for the first
and second tier, respectively. The effectiveness
rates consistently increased as remedy caps were
loosened, and leveled off at around 5.5 percent
when remedies were limited to a maximum of
200 percent of bound tariff levels.


5.6 Effects of Remedy Caps Expressed
as Percentages of Bound Tariffs


Figure 5.5: Price SSM Effectiveness Rates Under Various Percent of Bound Rates Remedy
Cap Settings




27ICTSD Programme on Agriculture Trade and Sustainable Development


Although separate simulations on the volume
and price SSM give good indicators of the
behavior of each remedy, a better and more
realistic gauge of the utility of the SSM can
be generated by allowing both measures to
operate simulaneously.39 This is of course with
the understanding that only one measure,
whether a volume or a price SSM, can be
applied at any one time. The overall result
could intuitively be more than the sum of the


effects of the individual remedies since, for
example, a volume SSM could be available when
a price SSM is not, and vice-versa. Even if they
coincide, one measure may allow for a higher
remedy than the other.


For this purpose, simulations were made using
a combination of modalities and parameter
settings outlined in Table 6.1 below. Figure 6.1
below illustrates the results of the simulations.


6. COMBINED VOLUME AND PRICE SSM


Table 6.1: Modality and Parameter Settings for Combined Volume and Price SSM Simulations


Under the baseline setting, the overall access
rate was forty two percent of total months,
while the SSM was effective in twenty-three
percent of “problematic” months. In this
scenario, no caps or additional restrictions
were imposed on SSM application.


Figure 6.1 below shows that, in a “low” scenario
where most of the additional restrictions and
conditions included in W7 were applied, the
combined access rate was cut to almost a
third of the baseline result. The effectiveness
rate, in turn, dropped from twenty three to
six percent of “problematic” months.40 In this


scenario, volume SSM remedies could not
be applied if YTD import prices were higher
than three-year averages, while countries
would only be able to invoke the price SSM if
YTD import volumes exceeded corresponding
volumes in the same period in the preceding
year. Additionally, remedies were capped at
eight percentage points or one-third of bound
tariffs in the first tier, and twelve percentage
points and one-half of bound tariffs in the
second tier, as stipulated in W7. The imposition
period was further reset to four months, with
a holiday period of four months and a spillover
limit of two months.


Baseline Low Medium High


Volume SSM


Pro-rating No Yes, 36-month
proxy


Yes, 36-month
proxy


Yes, 36-month
proxy


Cross Check No Import Price No No


Imposition/Holiday/Spillover 6-0-12 4-4-2 6-0-2 6-0-2


Price SSM


Trigger Threshold 100% 85% 100% 100%


Cross Check No Yes, 0%


Threshold No No


Remedy Level 85% 85% 85% 85%


Remedy Caps


Percentage Points


First Tier none 8 20 50


Second none 12 30 50


% of Bound Tariff


First Tier none 33% 33% 50%


Second Tier none 50% 50% 50%




28 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Figure 6.1: Combined Volume and Price SSM Access and Effectiveness Rates under Various
Parameter and Modality Settings


Finally, a “high” scenario which retained
“medium” settings but raised the remedy
caps to fifty percentage points or fifty
percent of bound tariffs for both tiers


yielded basically the same result, altho-
ugh effectiveness rates inched up a little
bit further to nineteen percent of “proble-
matic” months.


A “medium” scenario retained the pro-
rating modality but removed cross-check
conditionalities on the use of either the volume
or price SSM. The imposition, holiday, and
spillover periods were reset to six, zero, and
two months respectively. The trigger threshold
was reinstated to 100 percent. Remedies
were capped at a higher twenty and thirty


percentage points for the first and second
tiers, respectively, while remedy cap levels in
the form of percentages of bound tariffs were
retained. Under these parameter settings,
access to the SSM hovered near baseline levels
at thirty eight percent of the total months,
while the effectiveness rate reached eighteen
percent of “problematic” months.




29ICTSD Programme on Agriculture Trade and Sustainable Development


Paragraph 139 of Rev 4 stipulated that export
shipments that were already en route to
their destination after a volume or price SSM
remedial duty was imposed by the importing
country would be exempted from any additional
SSM assessment.


In the case of the volume SSM, the application
of this rule is quite clear because the existence
of an import surge will be validated and the
corresponding remedial duties, whether as
percentages of bound tariffs or percentage
terms, and applicable caps if any, will be
publicly declared and notified to the WTO.
Shipments which are en route prior to this
notification should rightly be spared from the
SSM duty since they could have been cancelled
or diverted if the exporters knew about the
additional assessment in advance. In turn,
shipments made after the notification would be
undertaken with full prior knowledge of how
much additional duty would have to be paid.


In the case of the price SSM, the validation
of a price depression will be undertaken only
when the shipment arrives in the importing
country, and the SSM remedial duty will be
computed depending on the CIF price of each
individual shipment compared to the price
trigger. There can therefore be no advance
notification of a price SSM imposition, nor can
there be en route shipments in this sense.


It is the notification of the price trigger for
the current year that is more relevant with
respect to en route shipments. It will normally
take some time to gather import price data
before triggers for the new implementation
year are activated. Shipments may already be
en route when the new triggers are notified,
and the exporters may end up having to pay
more, or less, in price SSM duties depending
on the new trigger level.


Instead of exempting en route shipments in
such cases, the previous year’s trigger may be
carried over to the next year until such time
that a new trigger is announced. Upon arrival,
en route shipments could be assessed price
SSM duties based on the old or new trigger,
whichever yields the lower equivalent duty.
Another option is to use whatever trigger was
officially in effect at the time the shipment
left the exporting country.


A similar situation could theoretically apply
to volume SSM if an importing country
decides to shift to a higher level of remedies
as a result of a continuing surge of imports
before it completes the imposition of an
initial SSM duty for a prescribed number of
months. Shipments that are en route be-
fore the higher safeguard remedy is notified
could be assessed only the initial (lower) duty
upon arrival.


7. EN ROUTE ShIPMENTS




30 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Rev 4 initially referred to the seasonality
issue by stating in Paragraph 140 that the
maximum period for imposing volume SSM
duties on a “seasonal product” would be six
months, or the period of actual seasonality
of the product, whichever is longer. Non-
seasonal products, on the other hand, would
be subject to a twelve-month maximum
imposition period.


Paragraph 4 of W7, in turn, provided in
bracketed text that if the volume SSM was
applied for a total of twelve months during
two consecutive twelve-month periods, it
could not be re-imposed during the subse-
quent twelve-month period. The paragraph
also contained proposals to undertake in-
terim reviews on the operation and impact
of the SSM with respect to seasonal and peri-
shable products.


Unfortunately, the simulations could not carry
out special studies on the effect of SSM on
seasonal products due to the lack of a workable
and universally acceptable definition of what
is a “seasonal” product and its “period of
actual seasonality”. From the point of view of
exporters, the critical periods during which
they would want to limit access to SSM and
its re-imposition could coincide with the peak
season for imports in the recipient countries.
On the other hand, importing countries may
want to control the entry of imports for the


duration of their harvest season or regular
marketing cycles.


The G-33 has also pointed out in a recent
submission41 that “seasonality” is not a univer-
sal norm with respect to agriculture products
and that seasonal patterns vary by country,
by product and over time. On this basis, the
G-33 concluded that it would be unrealistic
to impose any general rule or modality for
“seasonal” products.


For the importing countries, a convenient way
to address the issue is to select an appropriate
implementation year for each of their sensitive
“seasonal” products. For example, if harvests
of a certain product occur early in the year,
a July-June implementation period may
maximize the chances of invoking SSM during
the first half of each year. Alternatively,
countries could base their selection on the
trend in imports of that product. Obviously,
this does not address the interests of
exporters. However, the rules give the impor-
ting countries the sole prerogative to define
their implementation year.


Although specific simulations were not con-
ducted for “seasonal” products, the discus-
sions in Section 4.4 above indicated that the
imposition of holiday periods and shorter
imposition periods had significant effects on
the accessibility of the volume SSM.


8. SEASONAL PRODUCTS




31ICTSD Programme on Agriculture Trade and Sustainable Development


Paragraph 138 of Rev 4 stipulated that 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”.
This means that all trade within preferential
trading agreements will operate outside the
ambit of the SSM. The volume and price
triggers will use data on imports only from
outside, and remedies cannot be imposed on
imports coming from within, the preferential
trade areas.


There have been speculations that this
provision was advocated by countries with
export interests who wanted to preserve and
enhance their preferential position under
regional trade agreements vis-à-vis competing
exporters from other countries. Paragraph
138 would shield them from any SSM duties,
while their competitors from outside the
trade area would run the risk of paying addi-
tional safeguard duties if a volume surge situ-
ation ensued.


In turn, countries with principally defensive
interests who agreed to waive or minimize
the usage of safeguard duties when joining
the free trade agreements were reportedly
banking on a progressive SSM modality in the
Doha Round to regain access to the remedy.


Operationally, having to segregate imports by
source and compute triggers based on a subset
of imports may create more problems especially


for developing countries which have very weak
import monitoring and data gathering systems.
Tighter implementation of rules of origin to
prevent the surreptitious trans-shipment of
goods and avoidance of coverage may also lead
to added burdens on exporters.


The advantage that exporters gain from
Paragraph 138 when selling within the prefe-
rential trade area can also be easily reversed
when they try to access outside markets. This
time, they will be the ones to bear the brunt
of the SSM, while some of their competitors
who joined the importing country in their
own trade agreements will escape from any
safeguard duty imposition.


One could argue that the effects of import
surges and price depressions do not depend
on the source of the imports. Such market
emergencies will exert the same effect on
domestic markets whether imports are MFN
or not. In turn, imports from within regional
trade agreements may be more disruptive
since they will be assessed lower preferential
tariffs and would therefore tend to be cheaper
and potentially in larger volumes.


Finally, discriminating against MFN imports
in the application of the SSM may further
distort international trade. Preferential trade
agreements will diverge more conspicuously
from multilateral trade pacts under the WTO,
leading to further discrimination and confusion
in the application of trade rules.


9. EXCLUSION OF NON-MFN TRADE IN SSM APPLICATION




32 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


Annex I of Rev 4 defined a small, vulnerable
economy or SVE “as one whose average share for
the period 1999-2004 (a) of world merchandise
trade does not exceed 0.16 per cent and (b) of
world NAMA trade does not exceed 0.10 per
cent and (c) of world agricultural trade does
not exceed 0.40 per cent”. Rev 4 contained
various references to SVEs, in most cases
providing them with additional privileges
and flexibilities in recognition of their size
and susceptibility to market aberrations.
Paragraph 111 for example required smaller
reductions for in-quota tariffs of SVEs, while
Paragraph 127 allowed them to retain a larger
percentage of their existing SSG tariff lines.
They additionally became eligible for lower
tariff reductions (Paragraph 65) and more
flexibilities in handling special products or
SPs (Paragraph 130). A bracketed provision
in Paragraph 144 of the SSM text would have
accorded them extra leeway in breaching Doha
starting and current bound tariffs.


In a 2009 position paper42, the G-33 endorsed
proposals to lower the SSM remedy thresholds
for SVEs, and to amend Paragraph 144 of Rev


4 so as to allow SVEs to breach their bound
rates by seventy five percentage points or
seventy five percent of their current tariffs
when applying SSM. The group also proposed
that SVEs be permitted to impose SSM on up
to thirty percent of their tariff lines in any
given period.


Unfortunately, only Ecuador and Fiji were
the only SVEs that could be included in the
simulations, and it would be inappropriate to
make any definitive conclusion on the basis of
such a limited set of data. With this caveat,
it may be worth noting in any case that Fiji
and Ecuador’s access to the volume SSM was
close to the average for all countries covered
in the study. However, Fiji in particular had
a relatively high frequency of “problematic”
months, indicating its susceptibility to cheap
imports. Both countries had lower-than-
average effectiveness rates. These results
could help support demands for higher
remedies and remedy caps for SVEs. For price
SSM, the access rate of the two countries
was better than average. Ecuador manifested
relatively better effectiveness rates than Fiji.


10. SVE CONCERNS




33ICTSD Programme on Agriculture Trade and Sustainable Development


The baseline simulations described above
indicate relatively high frequencies for
accessing the SSM – thirty three percent for
the volume SSM and eighteen percent for
price SSM under the baseline scenarios in
Sections 4 and 5. When both remedies were
simultaneously put into operation while
using baseline settings outlined in Table 6.1,
the average access rate climbed to forty
two percent.43


However, under the same settings, the SSM
appeared to have limited effectiveness:
twenty five percent for the volume SSM, only
six percent for the price SSM, and twenty
three percent when combined (under baseline
settings in Table 6.1). This means that, at
best, remedial SSM duties would be able to
raise import prices to beyond ninety percent
of corresponding domestic prices in only
about two out of every ten months in which
import prices, inclusive of bound tariffs, were
cheaper by more than ten percent. (Since only
half of the months exhibited “problematic”
price gaps, this meant that the SSM would be
useful and effective only once in every ten
months.) Imports would presumably therefore
continue to come in during the other eight
“problematic” months even if the SSM was
imposed, since they would continue to enjoy
a price advantage of more than ten percent
over domestic goods.


The results of the simulations on the pro-
rating modality could help lead to a solution
to the current impasse on the SSM.


Arguably, the simulations show that the pro-
rating modality did not excessively affect
access to the volume SSM or its effectiveness.
In some cases, it did delay the implementation
of the remedy and limited overall access to it,
particularly if rules restricted the spillover of
SSM remedies to the succeeding year. However,
even when such instances were taken into
account, the availability and utility of the SSM
was essentially preserved.


The pro-rating method would nonetheless
ensure that volume triggers will not be unduly
depressed by SSM invocation and normal
trade will not be excessively restricted in
the process. Exporters would continue to
enjoy historical levels of market access plus
an allowance for trade growth equivalent to
the initial threshold for invoking the volume
SSM. Of course, there would be the possibility
that trade will taper off, or even completely
stop, once SSM duties were imposed. Still,
the simulations show that even under “ideal”
conditions, the effectiveness of the SSM in
making imports comparatively more expensive
than domestic products was quite limited.
There therefore remains a distinct possibility
that exports would continue to increase even
in the face of SSM duties.


The pro-rating modality however applies only
to the volume SSM. In the case of the price
SSM, additional duties could be imposed even
when imports have not reached a certain
level, and would continue to be assessed as
long as subsequent imports are priced below
the price trigger. On the other hand, it could
be argued that the price SSM is self-regulating
in the sense that only “cheap” imports will be
affected and remedies will only be applied to
individual shipments. The simulations further
show that the price SSM pales in comparison to
the volume SSM both in terms of accessibility
and effectiveness, and would therefore not
impact trade flows to the same extent.


Based on the foregoing and the results of
the simulation, the following proposals could
be considered in crafting a final version of
the SSM:


a) A pro-rating method could be applied
in computing annual triggers, with the
average monthly volume of imports during
non-SSM months during the preceding three
years to be used as a proxy for imports
during SSM months. However, the actual
volume of imports could be retained if


11. CONCLUSIONS AND RECOMMENDATIONS




34 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


it is higher than the proxy during an SSM
month. The SSM could be invoked only
if cumulative imports during the year
exceed the pro-rated trigger by a certain
threshold percentage, and the framework
for thresholds and remedies set out in
Paragraph 133 of Rev 4 could be retained.


b) Additional conditions could be imposed
only if a volume SSM will be re-imposed,
rather than at the time of initial imposition.
Considering that comparisons between
domestic and/or import prices will be
problematic, an alternative would be to
allow re-imposition if imports continue
to come in during the initial period of
applying SSM duties, or if the import surge
goes over the threshold for the next tier
of remedies.44


c) Imposition periods need not be unduly
long. They can be set to six or four months,
provided countries will be allowed to re-
impose the remedy in accordance with
additional rules and qualifications that
may be agreed upon, such as in b) above.
In order to not unduly prolong the use
of the volume SSM, the application of
remedies may be allowed to spill over to
the succeeding year by a maximum of four
months. In such cases, a holiday period for
re-imposition could take effect after the
spillover period.


d) If necessary, countries could additionally
nominate their implementation year to suit
the “seasonality” of specific products.


e) W7 caps need not be imposed; instead,
the thresholds and remedies prescribed in
Paragraph 133 of Rev 4 could just be adjusted
so that they act as remedy prescriptions and
caps at the same time. This would allow for


a simpler understanding and application of
the SSM.


f) The price SSM could be a separate but
integral part of the SSM modality.


g) The price trigger could be set at 100 percent
of the average of monthly import prices in
the preceding three years. The price SSM
could be imposed only if import prices fall
below the trigger by a certain percentage
threshold. The price SSM remedy would
thus be equivalent to the full difference
between the import price and the trigger.


h) A shipment that is en route could be
assessed price SSM duties on the basis of
the notified trigger prevailing at the time
of departure from the exporting country.
Alternatively, it could be subjected to
an SSM duty based on the preceding year
trigger or the new trigger that is notified
after the shipment has already left port,
whichever comes out to be lower.


i) All imports, whether MFN or not, would be
considered when applying SSM rules.


j) No cross-checks would be applied on either
the volume or price SSM.


k) In order to obviate the application of
percentage point remedies that would
result in very high ad valorem equivalents,
it could be provided that remedies in a
particular tier will be X percentage points,
provided that this does not exceed more
than Y percent of bound tariffs.45


l) Due consideration should also be accor-ded
to the particular situation and vulnerabi-
lities of SVEs, RAMs and LDCs when crafting
SSM rules.




35ICTSD Programme on Agriculture Trade and Sustainable Development


ENDNOTES
1 WTO Committee on Agriculture Special Session, TN/AG/W/4/Rev.4, “Revised Draft


Modalities for Agriculture”, 6 December 2008. Excerpts of Rev 4 pertaining to the SSM are
shown in Annex A.


2 WTO Committee on Agriculture Special Session, TN/AG/W/7, “Revised Draft Modalities for
Agriculture, Special Safeguard Mechanism”, 6 December 2008. A copy of TN/AG/W/7 is
attached as Annex B.


3 Assuming a Doha Development Round agreement is reached, countries will start with
their tariffs prevailing at the end of the Uruguay Round implementation period for each
product tariff line. These are referred to as pre-Doha bound or starting tariffs. These
initial tariffs will then be reduced based on modalities to be agreed upon and will result
in a maximum or bound level of tariffs for each tariff line during each year of the Doha
Round implementation period. Countries can set their actual tariffs at the bound levels
or opt to impose lower, but not higher, applied rates. Notably, Paragraph 133 of Rev 4,
which prescribed the SSM duties that could be imposed in the event of import surges or
price depressions, stipulated that these additional duties will be added to applied, and
not bound, rates.


4 The volume SSM is intended to protect against import surges. If the cumulative volume of
imports in a given year exceeds the average annual volume of imports in the preceding
three years, the SSM is triggered. On the other hand, the price SSM is designed to shield
countries from drops in the price of imports, which compete with the domestic market.
In this case, the SSM is triggered when the price of an import dips below the average
monthly price of imports during the preceding three year period.


5 See “The Special Safeguard Mechanism: Findings From A Simulation Exercise”, by Raul
Montemayor, ICTSD Information Note Series-Information Note 2, October 2007, http://
ictsd.org/i/publications/11208/; “Implications of Proposed Modalities for the Special
Safeguard Mechanism: A Simulation Exercise”, by Raul Montemayor, ICTSD Agricultural
Trade and Sustainable Development Series-Issue Paper 10, November 2007, http://ictsd.
org/i/publications/11208/; and “How Will The May 2008 ‘Modalities’ Text Affect Access To
The Special Safeguard Mechanism, and the Effectiveness of Additional Safeguard Duties”,
by Raul Montemayor, ICTSD Agricultural Trade and Sustainable Development Series-Issue
Paper 15, June 2008, http://ictsd.org/i/publications/12616/.


6 In the Uruguay Round Agreement, countries were required to remove their quantitative
and other non-tariff import restrictions and replace these with tariff equivalents through
a process and formula called “tariffication”. Since the resultant tariffs were relatively
high, these countries were required to allow a certain volume of imports of each “tariffied”
product, called a tariff rate quota (TRQ), to enter the country at a preferentially low
(TRQ or in-quota) tariff. Imports in excess of the TRQ would be assessed the regular or
out-quota tariff.


7 Safeguard duties such as SSM cannot be imposed on TRQ imports. Only imports in excess
of the TRQ can be subjected to SSM duties.


8 Most tariffs are “ad valorem” or based on the value (cost, insurance and freight or CIF) of
an import. A ten percent ad valorem duty on an import costing $500 would be $50. Some
countries however still use non-ad valorem duties such as specific duties; i.e., $5 per ton
irrespective of value, or variations thereof.


9 In the simulations, both volume and price SSM rules were assumed to apply and operate
simultaneously, with the importing country using either a volume or price remedy,
whichever was higher, in any given month. To isolate the behavior of the volume SSM, SSM
price remedies were temporarily set to zero.


10 Countries are allowed to define their “implementation year” for each product; this may
not be the same as the calendar year but must span twelve months.




36 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


11 See endnotes 5 and 6. In practice, TRQs could be imported at various times of the calendar
year, depending on import prices, local demand, and other factors. Out-quota imports
could occur even before TRQ imports are exhausted, such as when the local demand
cannot be immediately satisfied by TRQ imports. However, it is impossible to determine
when TRQ imports will actually take place; hence the simulation model assumes that
all initial imports will be used to first fill up TRQ quotas before out-quota imports are
undertaken.


12 As mentioned earlier, countries may voluntarily set their applied rates lower than their
bound levels. In the simulations, it was assumed that such countries would be free to
raise their “applied” rates to “bound” levels, if these were lower, before considering the
use of SSM remedies. Notably, some countries have argued that any SSM remedy should be
added to “applied” and not “bound” rates, as is currently provided in Paragraph 144 of
Rev 4.


13 Refer to Section 4.3 for the discussion on cross-checks for volume SSM.


14 Bound tariffs that were committed by WTO member countries were to be applied to
imports from all other WTO member countries, without discrimination, under the so-
called “most favored nation” or MFN principle. However, many countries have also entered
into regional and bilateral trade agreements wherein they agreed to impose lower-than-
MFN tariffs on imports from their trading partners; such imports under special trade
agreements are referred to in the study and in the negotiating text as non-MFN imports.
Notably, Paragraph 138 of Rev 4 stipulated that only MFN trade will be considered in
the application of the SSM. This implies that non-MFN imports will be excluded in the
computation of triggers and in determining whether the triggers have been breached. SSM
duties also cannot be imposed on non-MFN imports.


15 Under Paragraphs 129 to 131 of Rev 4, developing countries will be allowed to self-designate
a certain number of products (twelve percent of tariff lines) as “Special Products” or SPs
using indicators based on food security, livelihood security and rural development. These
SPs would be subjected to lower-than-normal tariff cuts and up to five percent of SP tariff
lines may enjoy zero cuts. However, the overall average cut for SPs should be eleven
percent. In the simulations, it was assumed that developing countries will generally want
to use the SSM for the same SPs which are sensitive and important for their food security
and rural development objectives. Of course, the issue of whether SPs will also be allowed
access to the SSM is still subject to negotiations. Some exporting countries have argued
that their market access will already be imperiled since SPs will be subjected to lower, if
not zero, tariff cuts, and will suffer even more if SSM remedies are additionally applied.


16 China’s access rate declined because of a rule (Paragraph 66 of Rev 4) exempting products
of recently acceded members or RAMS whose tariffs were ten percent or less from any
further tariff reduction. Since this meant that the bound rates for such products would
be the same as their pre-Doha starting tariffs through the implementation period, no
remedies could be made available when the caps were introduced.


17 The “current” bound rate is the bound tariff level prevailing during the year. Since most
tariffs would be subjected to reduction during the implementation period, the current
bound rate would usually go down each year.


18 These additional stipulations under W7 were supposed to apply only to instances when
pre-Doha bound rates would be breached when applying SSM remedies. In the simulations
however, they were applied as a general rule inasmuch as remedies under W7 were almost
always higher than those available under Rev 4 if Paragraph 142 caps were applied.


19 In the sample table below, the months during which SSM was imposed between 2000 and
2002 are colored in red.




37ICTSD Programme on Agriculture Trade and Sustainable Development


The first adjustment is to set the import volumes during these SSM months to zero. The
remaining months in each year are then averaged to come up with the proxy import
volume for each year. For example, the proxy volume for 2000 is 182 (tons), which is the
average for the six months from January to June 2000 when SSM was not imposed.


The zero volumes are then replaced with the corresponding proxy figures. For example,
the 54 (tons) in October 2000 becomes 182, which is the proxy for 2000. However, if the
actual import volume is higher than the proxy, the actual volume is retained. This is the
case with July 2000 when the higher 214 (tons) figure is retained in lieu of the proxy of
182. The adjusted figures for each year are then added up and the totals for each of the
three years are averaged to arrive at the pro-rated volume trigger.


20 Using the same set of data as in endnote 18, the import volumes in each SSM month are
similarly set to zero. Instead of computing annual proxies however, the monthly volumes
during all the remaining non-SSM months during the 36-month period are averaged to
come up with a single monthly proxy – in this case, 171 (tons). This proxy figure takes
the place of import volumes during the SSM months, except if the actual import volume
is higher than the proxy (as in July and August 2000 and August 2001). The adjusted
figures for each year are also then added up and the totals for each of the three years are
averaged to arrive at the pro-rated volume trigger.


MONTH


ACTUAL IMPORTS
IMPORTS IN MONTHS


W/O SSM
ADJUSTED IMPORT


VOLUMES
2000 2001 2002 2000 2001 2002 2000 2001 2002


Jan 10 109 2 10 109 2 10 109 2


Feb 183 170 21 183 170 21 183 170 21


Mar 173 355 56 173 355 56 173 355 56


Apr 316 225 174 316 225 174 316 225 174


May 267 132 163 267 132 163 267 132 163


Jun 146 156 265 146 156 265 146 156 265


Jul 214 232 328 0 232 328 214 232 328


Aug 264 261 176 0 0 176 264 261 176


Sep 154 71 130 0 0 130 182 197 130


Oct 54 4 255 0 0 255 182 197 255


Nov 2 0 178 0 0 178 182 197 178


Dec 40 1 57 0 0 57 182 197 57


Total/Ave 1,822 1,717 1,806 182 197 150 2,303 2,429 1,806


MONTH


ACTUAL IMPORTS
IMPORTS IN MONTHS


W/O SSM
ADJUSTED IMPORT


VOLUMES
2000 2001 2002 2000 2001 2002 2000 2001 2002


Jan 10 109 2 10 109 2 10 109 2


Feb 183 170 21 183 170 21 183 170 21


Mar 173 355 56 173 355 56 173 355 56


Apr 316 225 174 316 225 174 316 225 174


May 267 132 163 267 132 163 267 132 163


Jun 146 156 265 146 156 265 146 156 265


Jul 214 232 328 0 232 328 214 232 328


Aug 264 261 176 0 0 176 264 261 176


Sep 154 71 130 0 0 130 171 171 130


Oct 54 4 255 0 0 255 171 171 255




38 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


21 WTO Committee on Agriculture, Special Session, JOB/AG/7, “G-33 Submission on the
SSM: Pro-Rating”, 5 March 2010. See also TN/AG/GEN/30, “Refocusing Discussions on the
Special Safeguard Mechanism (SSM): Outstanding Issues and Concerns on Its Design and
Structure”, 28 January 2010.


22 Under the “cross-check” mechanism, the volume SSM cannot be imposed if domestic or
import prices are not declining at the same time as an import volume surge.


23 WTO Committee on Agriculture Special Session, JOB/AG/3, “G-33 Submission on the SSM:
Price and Volume Cross-Check Conditionalities”, 5 February 2010.


24 In comparison, Paragraph 140 of Rev 4 allowed for an imposition period of twelve months
for most products except so-called “seasonal” products. The SSM could then be re-
imposed for another period of twelve months. However, if the remedy was used for two
consecutive periods, it would not be available in the next two succeeding periods. Rev 4
did not contain any spillover provision or limitation.


25 In the simulation model, the spillover period was set to twelve months to mimic a scenario
where the volume SSM would be allowed to spill over to the next year without limit.


26 While the simulation used the calendar year as the implementation year, WTO member
countries are free to designate a different twelve-month implementation period for any
of their products.


27 Here, “thresholds” refer to specific percentages by which imports exceed the volume
trigger, below or above which certain SSM remedies may or may not apply. For example,
remedies may not be allowed unless imports breach the 120 percent threshold; i.e.,
imports exceed the trigger by more than twenty percent. Or, higher remedies may be
allowed if the 140 percent threshold is breached.


28 If a certain product had a current tariff rate of thirty percent, and the cap was set to
eight percentage points, then the maximum allowable SSM duty would be eight percent,
thus bringing up the total duty to thirty eight percent. On the other hand, if the allowable
SSM duty was one-third of the current tariff, or ten percent, the total duty would add
up to forty percent. In the simulations on remedy caps, Senegal was allowed to exceed
its pre-Doha starting tariffs by forty percentage points or forty points, whichever was
higher. However, since W7 allowed a remedy of up to fifty percent of bound tariffs for
surges exceeding 140% of the trigger, Senegal was assumed to have the option to apply
this potentially higher remedy.


29 For example, if the maximum allowable remedy of fifty percentage points is added to
a bound tariff of 15 percent, it would be equivalent to increasing the bound rate by
an additional 333 percent. On the other hand, adding fifty percentage points to a 100
percent tariff would increase the bound rate by only fifty percent.


30 See endnote 9.


31 See endnotes 6 and 10.


32 See endnotes 3 and 11.


33 See endnote 11.


34 Refer to Section 5.4 for a discussion on cross-checks for price SSM.


MONTH


ACTUAL IMPORTS
IMPORTS IN MONTHS


W/O SSM
ADJUSTED IMPORT


VOLUMES
2000 2001 2002 2000 2001 2002 2000 2001 2002


Nov 2 0 178 0 0 178 171 171 178


Dec 40 1 57 0 0 57 171 171 57


Total/Ave 1,822 1,717 1,806 171 2,257 2,197 1,806




39ICTSD Programme on Agriculture Trade and Sustainable Development


35 See endnote 13.


36 See endnote 14.


37 As explained earlier, both volume and price SSM rules were assumed to apply and operate
simultaneously, with the importing country using either a volume or price remedy,
whichever was higher, in any given month. Volume SSM remedies were temporarily set to
zero in order to isolate the behavior of the price SSM.


38 Here, the privilege given to LDCs like Senegal to breach their Doha bound rates by forty
percentage points or by forty percent was again retained. However, if the adjustment
in remedy caps yielded a higher remedy, it was assumed that Senegal would avail of the
higher SSM duty.


39 A country may choose to apply either a volume or price SSM duty, but not both at the same
time. It is assumed in the simulations that a country will choose the remedy that yields
the highest safeguard duty on a per-shipment (monthly) basis.


40 The results from the simulations under the “low” and “medium” scenario were inflated
by the performance of Senegal which, as an LDC, was allowed to exceed its Doha bound
rates by forty percentage points or forty percent, whichever was higher.


41 WTO Committee on Agriculture Special Session, JOB/AG/4, “G-33 Submission on the SSM:
Seasonality”, 5 February 2010.


42 WTO Committee on Agriculture Special Session, TN/AG/GEN/29, “G-33 Proposal on the
Treatment of SSM Provided to the SVEs”, 10 February 2009. See also JOB/AG/6, “G-33
Submission on the SSM: Flexibilities for SVEs”, 4 March 2010.


43 Note that baseline parameter settings in Sections 4 and 5 were not the same as when
conducting baseline simulations for Section 6. For example, the imposition period was
reduced from twelve to six months in Section 6. This explains why the combined rates
were sometimes lower than the individual results in Sections 4 and 5.


44 To recall, Paragraph 133 of Rev 4 set three tiers with different remedy levels: below 115%,
115 to 135%, and above 135% of the volume trigger. A re-imposition of the SSM could, for
example, be allowed if an initial surge which fell within the second tier graduated into a
surge of more than 135% of the volume trigger after the first period of imposition.


45 For example, a rule could be set such that remedial duties could not exceed twenty
percentage points, provided this did not exceed 100% in ad valorem terms. Hence, if a
country had a tariff of ten percent, it would be allowed a maximum SSM duty of only ten
percentage points, which was equivalent to 100% over the current duty, and not twenty
points, which would be 200% of the current tariff rate.


46 Hereafter the “import price”.


47 A shipment shall not be considered for purposes of paragraphs 135 and unless the volume
of the product included in that shipment is within the range of normal commercial
shipments of that product entering into the customs territory of the importing developing
country Member.


48 The trigger price shall be publicly disclosed and available to the extent necessary to allow
other Members to assess the additional duty that may be levied.


49 Hereafter the “reference price”. The reference price used to invoke the provisions of this
paragraph shall be the average monthly c.i.f. unit value of the product concerned.


50 For the purposes of this provision a “product” is identifiable at the 6-digit level of the
Harmonized System (HS) nomenclature, but with the understanding that this can entail a
maximum of [4 - 8] tariff lines per product below that 6-digit level.




40 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


ANNEX A. WORLD TRADE ORGANIZATION COMMITTEE ON AGRI-
CULTURE (SPECIAL SESSION) REVISED DRAFT MODALITIES FOR
AGRICULTURE TN/AG/W/4/REV.4 (6 DECEMBER 2008)EXCERPTS
ON ThE SPECIAL SAFEGUARD MEChANISM (SSM)


I. DOMESTIC SUPPORT


. . . . .


II. MARKET ACCESS


. . . . .


D: SPECIAL AND DIFFERENTIAL TREATMENT


. . .


Special Safeguard Mechanism (SSM)


132. 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.


133. As regards the volume-based SSM, it
shall be applied on the basis of a rolling
average of imports in the preceding
three-year period (hereafter “base
imports”). On this basis, the applicable
triggers and remedies shall be set as
follows:


(a) where the volume of imports during
any year exceeds 110 per cent but
does not exceed 115 per cent of base
imports, the maximum additional
duty that may be imposed on
applied tariffs shall not exceed 25
per cent of the current bound tariff
or 25 percentage points, whichever
is higher;


(b) where the volume of imports during
any year exceeds 115 per cent but
does not exceed 135 per cent of base
imports, the maximum additional
duty that may be imposed on
applied tariffs shall not exceed 40
per cent of the current bound tariff
or 40 percentage points, whichever
is higher;


(c) where the volume of imports
during any year exceeds 135
per cent of base imports, the
maximum additional duty that
may be imposed on applied ta-
riffs shall not exceed 50 percent
of the current bound tariff or
50 percentage points, whichever
is higher;


(d) where, formally, these triggers
could be met, but the absolute
level of imports is manifestly neg-
ligible in relation to domestic pro-
duction and consumption, reme-
dies would not be applied.


134. Imports under any scheduled tariff rate
quota commitment may be counted for
the purpose of determining the volume
of imports required for invoking the
volume-based SSM (except where a
volume increase is entirely attributable
to a scheduled tariff rate quota increase
under Doha implementation phasing),
but no additional duty shall be imposed
on imports within such tariff rate
quota commitments.


132. As regards the price-based SSM, it shall
be applicable where the c.i.f. import
price46 of the shipment47 entering the
customs territory of the developing
country Member, expressed in terms




41ICTSD Programme on Agriculture Trade and Sustainable Development


of its domestic currency falls below
a trigger price48 equal to 85 per cent
of the average monthly MFN sourced
price49 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 do-
mestic 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 curren-
cies for the three-year period referred
to above.


133. 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.


134. 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.


135. The calculation of volume or price
triggers, and the application of mea-
sures in accordance with the relevant
provisions of this section, shall be on
the basis of MFN trade only.


136. 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.


137. The volume-based SSM may be main-
tained 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. For the next
immediate (consecutive) period, the
three year rolling average shall be
inclusive of that immediately preceding
period of imports when the SSM was in
place. However, where this would have
the effect of lowering the three year
rolling average below the level which
triggered the SSM in the initial period,
the trigger level for the initial period
shall apply. No product shall be subject
to the volume-based SSM consecutively
for more than two periods and where
such consecutive application has occur-
red this may not be resorted to again
before the elapse of a further two
consecutive periods.


138. The operation of the SSM shall be carried
out in a transparent manner and the
basis upon which ongoing calculations of
rolling averages of import volumes and
prices shall be accessible to all Members
so that they can be fully informed of
the basis upon which any potential
actions may be taken. Any developing
country Member taking action shall
give notice in writing, indicating the
tariff lines affected by the additional
SSM duty and including relevant data,
to the Committee on Agriculture as far
in advance as may be practicable or,
where this is not possible, no later than
15 days after the implementation of
such action. The Member taking action
shall afford any interested Members
the opportunity to consult with it in
respect of the conditions of application
of such action.




42 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


139. 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.


140. For least-developed country Members
they may, nevertheless, apply the
maximum remedy provided for above
even if this would otherwise entail
breach of a pre-Doha bound tariff,
provided that the maximum increase
over a pre-Doha bound tariff does
not exceed 40 ad valorem percentage
points or 40 per cent of the current
bound tariff, whichever is higher.
This would be provided that all other
relevant conditions for application of
the measure have been met.


141. [In the case of SVE’s referred to in
footnote 11 to these modalities, they
may apply the maximum remedy
provided for above even if this would
otherwise entail breach of a pre-
Doha bound tariff, provided that the
maximum increase over a pre-Doha
bound tariff does not exceed 20 ad
valorem percentage points or 20 per


cent of the current bound tariff,
whichever is higher, for up to a maximum
of (10-15) per cent of tariff lines in any
given period. This would be provided
that all other relevant conditions
for application of the measure have
been met.


142. For developing country Members other
than those referred to in the preceding
paragraph, they may apply the maximum
remedy provided for above even if this
would otherwise entail breach of a pre-
Doha bound tariff provided that (a)
the maximum increase over the pre-
Doha bound tariffs would be no more
than 15 ad valorem percentage points
or 15 per cent of the current bound
tariff, whichever is the higher; (b) the
maximum number of products for which
this provision would be invoked would be
no more than 2-650 in any given period;
and (c) this would not be permissible
for two consecutive periods. All other
provisions would be applicable.]


143. The relevant Articles of the Agreement
on Agriculture shall be amended to
reflect the above modalities.




43ICTSD Programme on Agriculture Trade and Sustainable Development


ANNEX B. WORLD TRADE ORGANIZATION COMMITTEE ON AGRI-
CULTURE (SPECIAL SESSION) REVISED DRAFT MODALITIES FOR
AGRICULTURE TN/AG/W/7 (6 DECEMBER 2008) SPECIAL SAFE-
GUARD MEChANISM
1. Based on constructive consultations


to this point, we have made genuine
progress on the SSM as relates to what
happens in cases where it would mean
going above the bound rate. And the
progress that we have made, while even
reaching something that I could describe
as tantamount to convergence on some
elements, has still been uneven. In other
words, we have made real progress,
but the unavoidable reality is that we
are still short of a clean text, let alone
actual agreement on key matters. That
being so I could hardly pretend that there
was something cooked and ready to go
that could be inserted in the revised
draft text.


144. But I could not leave things just like
that, because we have manifestly moved
on. The constructive engagement we
have had did at least quarry out certain
lines of direction and, one of these days,
a solution is actually going to have to
be found that works for everyone. We
need something to work on in a spirit of
getting to a conclusion. In that spirit,
and based on what I have heard, the
best I can suggest is the following as
an effort to represent the elements
of convergence that are emerging. It
is not in final legal drafting form but
could, hopefully, operate as a structure
to get us to closure. Adjustments could
obviously be made to the drafting below,
but if this issue ever going to be resolved,
my sense is that it something not a mil-
lion miles from what is outlined below
could be a way to create a springboard
to closure.


145. The following shall be the basis upon
which the SSM may be triggered for
“above the bound rate”:


The volume-based SSM shall, subject to
the conditions in sub-paragraph x below,
be applicable within a twelve month
reporting period. This twelve month
period may be a marketing year, calendar
year, fiscal year etc at the discretion of
the Member concerned. But, once chosen,
it is the binding basis for application.


The SSM shall become applicable when,
within that twelve month period, the
trigger levels, calculated in respect
of the average of the preceding three
years’ imports, have been met. If,
however, an SSM was in force during that
three year period, the monthly average
of the imports net of that period of
SSM application shall be calculated and
applied as the proxy imports for the
months during which the SSM was in
force, unless actual imports during its
application were higher.


Where the volume of imports during any
period exceeds 120 per cent but does
not exceed 140 per cent, the maximum
additional duty that may be imposed
shall not exceed one-third of the current
bound tariff or eight percentage points,
whichever is the higher.


Where the volume of imports during
any period exceeds 140 per cent, the
maximum additional duty that may be
imposed shall not exceed one-half of the
current bound tariff or 12 percentage
points, whichever is higher.


These remedies shall not normally be
applicable unless the domestic price is
actually declining. There may however
be exceptional circumstances where
the authorities have good reason to
believe that there would be at least
an imminent foreseeable decline but




44 R. Montemayor - Simulations On The Special Safeguard Mechanism:
A Look At The December 2008 Draft Agriculture Modalities


may lack sufficiently reliable data to be
in a position to verify that robustly at
the time. If so, action may be taken in
such exceptional circumstances, subject
to an expedited review by a standing
panel of experts in the event that this is
requested. In any case, in the event that
reliable data is subsequently available it
shall be used and, if it does not verify
decline, the measure shall be rescinded.


Once the SSM has been triggered, it
may be applied for a maximum of [4/8]
months and shall not be re-applicable
thereafter until an equivalent period of
months has elapsed.


If the SSM is not triggered until within
[2/4] months of the end of any given
twelve month period it may, however, be
applicable into the next 12 month period
provided that this is for no more than
[2/4] months and that the maximum
period of application and conditionality
for reapplication is also respected.


The SSM shall not be applied to more
than 2.5 percent of tariff lines in any 12
month period.


146. I feel that the above indicates elements
where there has been more manifest
convergence emerging and I am relati-
vely more optimistic that the above
could be used as a robust enough working
structure for getting to an agreement.
The area below is less well advanced
because the concept of any kind of
pause is still more sensitive than other
matters. At this point at least, there is
still not as much emergent consensus as
on some other elements and it may prove
to be the case that it is intractable.
There are some Members who would see
no need to even go here. On the other
hand I cannot ignore that this area has,
for other Members, proved to be an
important one which is perhaps all the
more so because it is perceived to be the
only possible way of allaying even to a
small degree anxieties about seasonality


effects. I think it’s useful to at least
lay out some options to help to foster
convergence, if the will is there. Some
would like there to be no pause. Others
would like to ensure that there can be
no consecutive application at all. If there
is to be a compromise the following are
the best I can offer. They need not be
mutually exclusive:


[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.]


[There shall be a review after 2 years of
the operation of the SSM as it applies to
seasonal perishable product lines, with
particular emphasis on the impact on
developing country Members exports.
The purpose of such a review will be
to determine whether there is any
disproportionate effect on seasonally
traded products and, if so, to recommend
ways and means to redress any such
impact in a manner which is compatible
with effective functioning of the SSM.]


[In the event that an SSM should be
applied for three consecutive twelve
month periods, the standing group of
experts shall, on request by an affected
Member, evaluate whether or not the
measure is effectively functioning as a
measure to deal with import surges of
an inherently temporary nature that is
not disrupting normal trade or whether
it is a response to an underlying
more structural problem. They shall
render their views and opinions in-
cluding non-binding recommendations
as appropriate.]


147. I should also note the fact that there are
other matters still requiring subsequent
decision. It has not been feasible to turn
to such matters in any detail since July
because the working priority has been




45ICTSD Programme on Agriculture Trade and Sustainable Development


to sort out the “above the bound rate”
approach first.


(a) Status of LDCs: Irrespective of a
“general” solution, it has been
the working hypothesis (no-one
has objected) that LDCs will have
a more flexible arrangement as
was originally conceived in Rev.3,
although the triggers and remedies
were never settled and LDCs had
sought greater flexibilities than in
the Rev.3 text.


(b) Status of SVEs: If there is a “gene-
ral” solution found, is it to be


assumed that this is applicable
to all developing countries inclu-
ding SVEs?


(c) Status of “Under the bound rate”:
Consultations subsequent to July
indicated that a number of Members
had areas in Rev 3 that they
disagreed with as regards “under
the bound rate” paragraphs. But it
was recognised that this could not
be progressed one way or another
until “above the bound rate” was
resolved. It is not clear how far
reaching any changes might prove
to be here.




Selected IctSd ISSUe PAPeRS
Agriculture trade and Sustainable development


How Would a Trade Deal on Sugar Affect Exporting and Importing Countries? .By Amani Elobeid. Issue Paper No.24, 2009.


Constructing a Composite Index of Market Acess.By Tim Josling. Issue Paper No.23, 2009.


Comparing safeguard measures in regional and bilateral agreements. By Paul Kruger, Willemien Denner and JB Cronje, Issue Paper No.22, 2009.


How would a WTO agreement on bananas affect exporting and importing countries? By Giovanni Anania, Issue Paper No.21, 2009.


Biofuels Subsidies and the Law of the World Trade Organisation. By Toni Harmer, Issue Paper No.20, 2009.


Biofuels Certification and the Law of the World Trade Organisation. By Marsha A. Echols, Issue Paper No.19, 2009.


competitiveness and Sustainable development


The Potential Role of Non Traditional Donors ‘Aid in Africa. Issue Paper No.11 by Peter Kragelund, 2010.


Resilience Amidst Rising Tides: An Issue Paper on Trade, Climate Change and Competitiveness in the Tourism Sector in the Caribbean. Issue Paper
No.9 by Keron Niles, 2010.


Aid for Trade and Climate Change Financing Mechanisms: Best Practices and Lessons Learned for LDCs and SVEs in Africa. Issue Paper No. 8 by Vinaye
Dey Ancharaz, 2010.


Hoja de ruta para el sector textil y confección y desarrollo sostenible en Nicaragua. Documento de Trabajo No.2 por Ana Victoria Portocarrero
Lacayo, 2010.


Hoja de ruta para el sector textil y confección y desarrollo sostenible en Guatemala. Documento de Trabajo No.1 por Pedro Prado et al, 2010.


dispute Settlement and legal Aspects of International trade


Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System. By Joseph Francois and Henrik Horn. Issue Paper No. 6, 2008.


Developing Countries, Countermeasures and WTO Law: Reinterpreting the DSU against the Background of International Law. By Andrea Bianchi and Lorenzo
Gradoni. Issue Paper No. 5, 2008.


Does Legal Capacity Matter? Explaining Dispute Initiation and Antidumping actions in the WTO. By Marc L. Busch, Eric Reinhardt and Gregory Shaffer. Issue Paper
No. 4, 2008.


Fisheries, International trade and Sustainable development


The Importance of Sanitary and Phytosanitary Measures to Fisheries Negotiations in Economic Partnership Agreements. By Martin Doherty. Issue Paper
No. 6, 2008.


Fisheries, Aspects of ACP-EU Interim Economic Partnership Agreements: Trade and Sustainable Development Implications. By Liam Campling. Issue
Paper No. 6, 2008.


Fisheries, International Trade and Sustainable Development. Policy Discussion Paper, By ICTSD, 2006.


Intellectual Property Rights and Sustainable development


Evaluación del impacto de las disposiciones de ADPIC + en el mercado institucional de medicamentos de Costa Rica. Por Grevin Hernandez’Gonzalez
y Max Valverde, Documento de Fondo No. 26, 2009.


Access to Climate Change Technologyby Developing Countries: A Practical Strategy. By Cynthia Cannady, Issue Paper No. 25, 2009.


Innovation and Technology Transfer to Address Climate Change: Lessons from the Global Debate on Intellectual Property and Public Health. By
Frederick M. Abbott, Issue Paper No. 24, 2009.


Technology Transfer in the TRIPS Age: The Need for New Types of Partnerships between the Least Developed and Most Advanced Economies. By
Dominique Foray, Issue Paper No. 23, 2009.


trade in Services and Sustainable development


Facilitating Temporary Labour Mobility in African Least-Developed Countries: Addressing Mode 4 Supply-Side Constraints. By Sabrina Varma, Issue
Paper No.10, 2009.


Advancing Services Export Interests of Least-Developed Countries: Towards GATS Commitments on the Temporary Movement of natural Persons for
the Supply of Low-Skilled and Semi-Skilled Services. By Daniel Crosby, Issue Paper No. 9, 2009.


Maritime Transport and Related Logistics Services in Egypt. By Ahmed F. Ghoneim, and Omneia A. Helmy, Issue Paper No. 8, 2007.


environmental Goods and Services Programme


Market Drivers in Renewable Energy Supply Goods: The Need to Level the Playing Field. By Veena Jha, Issue Paper No.10, 2009.


Environmental Priorities and Trade policy for Environmental Goods: A Reality Check., By Veena Jha, Issue Paper No.7, 2008.


trade and Sustainable energy


Climate Change and Trade on the Road to Copenhagen. Policy Discussion Paper, 2009.


Trade, Climate Change and Global Competitiveness: Opportunities and Challenge for Sustainable Development in China and Beyond. By ICTSD.
Selected Issue Briefs No.3, 2008.


Intellectual Property and Access to Clean Energy Technologies in Developing Countries: An Analysis of Solar Photovoltaic, Biofuel and Wind
Technologies. By John H. Barton, Issue Paper No. 2, 2007.


Regionalism and ePAs


Revisiting Regional Trade Agreements and their Impact on Services and Trade, by Mario Marconini, Issue Paper No.4, 2009.


Trade Agreements and their Relation to Labour Standards: The Current Situation by Pablo Lazo Grandi, Issue Paper No.3, 2009.


Legal and Systematic Issues in the Interim Economic Partnership Agreements: Which Way Now? by Cosmas Milton Obote Ochieng, Issue Paper No.2, 2009.


Environmental Issues in Economic Partnership Agreements: Implications for Developing Countries, by Beatrice Chaytor, Issue Paper No.1, 2009.


Global economic Policy and Institutions


The Microcosm of Climate Change Negotiations: What Can the World Learn from the European Union? By Håkan Nordström, Issue Paper No.1.


These and other ICTSD resources are available at http://www.ictsd.org




ICTSD’s Programme on Agricultural Trade and Sustainable Development aims to promote food
security, equity and environmental sustainability in agricultural trade. Publications include


• HowWouldaTradeDealonSugarAffectExportingand ImportingCountries?ByAmani
Elobeid.IssuePaperNo.24,2009.


• ConstructingaCompositeIndexofMarketAcess.ByTimJosling.IssuePaperNo.23,2009.


• Comparing safeguard measures in regional and bilateral agreements. By Paul Kruger,
WillemienDennerandJBCronje,IssuePaperNo.22,2009.


• HowwouldaWTOagreementonbananasaffectexportingand importingcountries?By
GiovanniAnania,IssuePaperNo.21,2009.


• TradeandSustainableLandManagementinDrylands.SelectedIssueBrief,2007.


• Biofuels Subsidies and the Law of theWorld Trade Organisation. By Toni Harmer, Issue
PaperNo.20,2009.


• BiofuelsCertificationandtheLawoftheWorldTradeOrganisation.ByMarshaA.Echols,
IssuePaperNo.19,2009.


Forfurtherinformation,visitwww.ictsd.org


ABOUT ICTSD


Foundedin1996,theInternationalCentreforTradeandSustainableDevelopment(ICTSD)isan
independentnon-profitandnon-governmentalorganisationbasedinGeneva.Byempowering
stakeholdersintradepolicythroughinformation,networking,dialogue,welltargetedresearch
and capacity building, the Centre aims to influence the international trade system such that it
advances the goal of sustainable development.


www.ictsd.org




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