POSSIBLE MODALITIES FOR THE SPECIAL SAFEGUARD MECHANISM (SSM) By: Raul Q. Montemayor National...
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Transcript of POSSIBLE MODALITIES FOR THE SPECIAL SAFEGUARD MECHANISM (SSM) By: Raul Q. Montemayor National...
POSSIBLE MODALITIESFOR THE SPECIAL SAFEGUARD
MECHANISM (SSM)
By: Raul Q. MontemayorNational Business ManagerFederation of Free Farmers Cooperatives, Inc. (FFFCI) – Philippines
Chairman, Asian Farmers CommitteeInternational Federation of Agricultural Producers (IFAP)
OUTLINE OF PRESENTATION
BackgroundLimitations of UR AoA Special
Safeguard (SSG) Duty ProvisionsProposed Special Safeguard
Mechanism (SSM) ModalitiesRelated Issues
THE NEED FOR TRADE REMEDIES
Developing countries forced to open up markets in Uruguay Round despite uncompetitiveness of sensitive products
Developed countries maintained most support and protection to sensitive sectors
Available trade remedies were inadequate and difficult to use
THE GATT-UR AoA SPECIAL SAFEGUARD DUTY (SSG)
UR-AoA required “tariffication” of products previously protected by import restrictions
Lower in-quota tariffs imposed on imports of “tariffied “ products within tariff rate quota (TRQ); imports in excess of TRQ charged higher out-quota tariff
Additional SSG duty could be imposed on imports of “tariffied” products if:– import volumes exceeded a trigger volume, or– Import prices fell below a trigger price
DATA ON SSG USAGE
Only 39 WTO member-countries had SSG privileges for 6,156 tariff lines
Only 22 were developing countries who accounted for half of SSG tariff lines
Only 10 countries invoked SSG between 1995-2001
Most developing countries had no SSG option or did not invoke SSG
MAJOR LIMITATIONS OF SSG
Complicated formulas – the case of price-based SSG
SOURCE: FAO (Ramesh Sharma)
MAJOR LIMITATIONS OF SSG
Complicated formulas – the case of price-based SSG
Biases against developing countries – the case of SSG volume triggers
SSG Volume Trigger
Volume Trigger V = (I x S) + CI - Average Historical Imports
(in last 3 years where data is available)
S - Scaling factor(based on ratio of imports to consumption)
C - Change in consumption (C)(between 2 years where data is available)
Scaling factor S ranges from 100% to 125%; S is higher if historical import/consumption ratio is smaller
Developing countries usually have smaller import-to-consumption
ratio and end up with higher S and larger V, making it more difficult to breach trigger
Developing countries often lack data on consumption at specific tariff
line level; if no data, S is set to maximum of 125% Consumption of basic foods normally rising in developing countries,
resulting in higher C and V
MAJOR LIMITATIONS OF SSG
Complicated formulas – the case of price-based SSG
Biases against developing countries – the case of SSG volume triggers
SSG duties often not enough to control import surge or price decline– SSG duty based on applied, not bound, tariff– Volume SSG cannot exceed 1/3 of applied rate– Price SSG disproportionate to price variance
SOURCE: FAO (Ramesh Sharma)
MAJOR LIMITATIONS OF SSG
Volume-based SSG can be applied only up to end of current year
Only products “tariffied” in the UR and marked with SSG could be given SSG protection
Least-developed countries (LDCS) exempted from tariffication, and therefore had no SSG privilege
OTHER CONSTRAINTS TO USAGE OF SSG BY DEVELOPING COUNTRIES
Inability to promptly enact necessary domestic legislation and regulations
Lack of administrative capacity to implement SSG rules
Phobia against WTO disputes in case of erroneous application of SSG rules
Lobbying by influential importers and users
Weak counteraction by producer groups
SPECIAL SAFEGUARD MECHANISM (SSM)
Part of proposed special and differential treatment (SDT) package for developing countries under Doha Development Round
Exclusive for developing countries Improved version of UR SSG
PROPOSED SSG IMPROVEMENTS IN SSM PROPOSALS BY G33
Expanded coverage– All listed products (criteria-based?, limits?)– All developing countries (including LDCs)
Simplified and more developing country-friendly formulae and rules for triggers and safeguard duties
Longer and more flexible period and method for applying special safeguards
Higher levels of special safeguard protection
VOLUME-BASED SSM MODALITIES
Volume trigger set to average annual import volume during most recent three (3) preceding years for which data is available
SSM duty can be imposed if cumulative import volume during a year exceeds volume trigger
Additional SSM duty can be maintained for up to 12 months from imposition
SSM duty to depend on degree of import surge and will be a percentage of bound tariff, or absolute percentage points, whichever is higher
VOLUME TRIGGER-BASED SSM DUTY
Excess Imports (E) SSM Duty (whichever is higher)
As Percent Over As Percent of Absolute
Trigger Volume Bound Tariff Percentage Points
E < X 0 0
X1 < E < X Y Z
X2 < E < X1 Y1 Z1
E > X2 Y2 Z2
PRICE-BASED SSM MODALITIES
Price trigger is average monthly price of product for most recent three preceding years for which data is available
SSM duty can be imposed if C.I.F. price of import of product (in local currency) exceeds price trigger
Price of import can be adjusted in case of significant currency depreciation
SSM duty can last a maximum of 12 months
PRICE-BASED SSM MODALITIES
Price-based SSM can be imposed on:– A shipment-by-shipment basis, with the SSM duty not
exceeding the difference between the import price of each succeeding shipment and the trigger price; or
– An ad valorem basis, with the SSM duty not exceeding the difference between the import price of subsequent shipments and the trigger price, expressed as a percentage of the trigger price (or bound tariff?)
A country may shift from ad valorem to shipment-by-shipment SSM duty if import prices of at least two subsequent shipments fall below trigger price by certain percentage
OTHER PROPOSED SSM MODALITIES
Temporary re-imposition of quantitative restrictions (QRs)
Simplified countervailing measure Konandreas maximum contingency level
(MCL) proposal
SIMPLIFIED COUNTERVAILING DUTY MEASURE (SDCM)
Product-Specific
AMS------------ProductOutputValue
Non-Product-Specific
AMS------------
TotalAgricultural
Output
Product-SpecificExport
Subsidy--------------
Total Exports ofProduct
SDCMin % = + +
*Figures for product and non-product specific AMS and export subsidies shall be based on preceding year bound commitment levels in the absence of formal notifications of actual usage from exporting country
MAXIMUM CONTINGENCY LEVY
Countries start year with an MCL allowance per product computed as a percentage of value of 3-year historical imports
Countries can impose price or volume-based SSM based on SSM triggers and modalities
Cumulative value of total SSM tariffs imposed must not exceed MCL allowance for the year
RELATED SSM ISSUES
Can developing countries use SSM instead of SSG for sensitive products previously enjoying SSG privileges under UR-AoA?
Can special products (SPs) automatically enjoy SSM privileges?
To what extent will SSM and other SDT privileges deter South-South and total trade?