GUIDELINES FOR APPROACHING THE DESIGNATION
OF SPECIAL PRODUCTS AND SSM PRODUCTS IN
DEVELOPING COUNTRIES
By Luisa E. Bernal*
Paper prepared for ICTSD Informal Consultation entitled
Special Products and Special Safeguard Mechanism after the July Framework:
How do we Move Forward?
Geneva, 30 September 2004
*The author, Luisa E. Bernal, works at the South Centre in Geneva as Project Officer in Agriculture. This
paper is written in her personal capacity and does not represent the official position of either the South
Centre Secretariat or its member States.
2
GUIDELINED FOR APPROACHING THE DESIGNATION OF SPECIAL
PRODUCTS AND SSM PRODUCTS IN DEVELOPING COUNTRIES
Table of contents
I.
II.
INTRODUCTION ............................................................................................................ 4
DISCUSSIONS ON SPECIAL PRODUCTS AND SPECIAL SAFEGUARD MECHANISM IN THE
CONTEXT OF THE WTO AGRICULTURE NEGOTIATIONS......................................................... 5
II.1. Background to the discussion on SP and SSM in the WTO ................................... 5
II.2. Treatment of SP and SSM in the Framework for Establishing Modalities in
Agriculture adopted by the WTO General Council in July 2004 ................................... 7
III.
IMPACT OF TRADE LIBERALISATION IN FOOD SECURITY AND THE RURAL POOR AND
SMALL FARMERS IN DEVELOPING COUNTRIES ....................................................................... 9
IV.
GUIDELINES FOR THE INTERNAL DISCUSSION ABOUT THE DESIGNATION OF SP AND
SSM PRODUCTS IN DEVELOPING COUNTRIES ..................................................................... 15
IV.1. Guidelines for the discussion on the selection of SP products ............................ 15
IV.2 Problems related to availability of data ................................................................ 18
IV.3 Guidelines for the identification of SSM products ............................................... 19
ANNEX A......................................................................................................................... 20
ANNEX B......................................................................................................................... 21
3
I.
INTRODUCTION
WTO members adopted on 31 July 2004 a framework for establishing modalities in
agriculture. This text constitutes at present the basis for additional negotiations when
specific targets for reduction commitments on each area of the Agreement on Agriculture
(AoA) – market access, domestic support and export competition – will be agreed and
new rule elements developed.
The July framework incorporated provisions on Special Products (SP) and Special
Safeguards Mechanism (SSM) for developing countries as fundamental components of
the Special and Differential Treatment (SDT) to be accorded to these countries as part of
the Doha round. Products designated as SP will be subject to special treatment in terms of
market access commitments. Provisions on SSM would provide developing countries an
instrument to address import surges and price drops. The need for each of these
instruments has been justified by developing countries on the basis of their needs of food
and livelihood security, and rural development.
The framework left unresolved key aspects with respect to both these instruments
though, including how the products to be protected by these modalities should be
designated and treated. Nevertheless, food and livelihood security as well as rural
development needs of developing countries have been accepted as the basis for
operationalizing SDT. The challenge for WTO members would be to approach the
negotiations of modalities on SP and SSM in a way that builds on this basic criteria rather
than substituting it with purely trade-based parameters.
In this context, it would be of utmost importance that each developing country be
prepared to engage in the negotiations on modalities for SP and SSM so as to guarantee
that such provisions are really meaningful and respond to its particular needs and
circumstances. The purpose of this paper is to assist the internal discussions of
developing countries aimed at identifying potential SP and SSM products so as to inform
their participation in the negotiations of modalities for these instruments.
The paper is organized as follows: Section II provides a brief account of the
discussions on these provisions in the agriculture negotiations in the WTO, including the
implications of the framework for establishing modalities in agriculture adopted in July
2004. Section III discusses salient features of the experience of trade liberalisation in
agriculture for developing countries which may be most relevant for understanding the
type of situations that provisions on SP and SSM attempt to address. The fourth and last
section provides an illustrative set of issues to be considered when assessing the
particular relevance of various products to be subject to special treatment under the SP
and SSM categories.
4
II.
DISCUSSIONS ON SPECIAL PRODUCTS AND SPECIAL SAFEGUARD MECHANISM
IN THE CONTEXT OF THE WTO AGRICULTURE NEGOTIATIONS
II.1. Background to the discussion on SP and SSM in the WTO
The discussion on special products and special safeguard measures for developing
countries can be traced back to the very beginning of the agriculture negotiations in 2000.
In June that year, a group of developing countries presented a proposal on a Development
Box1 which detailed broad objectives and concerns of developing countries with respect
to the negotiations, including the need to provide adequate flexibility to these countries
for adopting measures to enhance domestic food production and protect the livelihoods of
the rural poor and small farmers.
Underlying the proposals of the Development Box was the belief that
indiscriminate trade liberalisation in agriculture negatively affects food security in
developing countries and destroy the livelihood of the rural poor increasing poverty and
inequality in the developing world.
The Doha Ministerial Declaration broadly reflected the concerns of developing
countries stating that “special and differential treatment for developing countries shall be
an integral part of all elements of the negotiations […] so as to be operationally effective
and to enable developing countries to effectively take account of their development
needs, including food security and rural development.”2
Many developing countries endorsed and built upon the concepts put forth in the
Development Box and made concrete proposals to operationalise those concepts in each
of the pillars or areas of the Agreement on Agriculture (AoA) - market access, domestic
support and export competition.3 Requests for flexibility with respect to commitments in
market access resulted particularly controversial, especially so those calling to exempt
certain agricultural products from tariff reductions and to establish a mechanism to
protect local markets from cheap imports, subsidised or otherwise. Developing countries
stressed such flexibilities were fundamental to address concerns related to food and
livelihood security and rural development as reflected in the Doha Ministerial
Declaration. Other WTO members, particularly the U.S. and members of the Cairns
Group, contested this view stressing that securing availability of food through imports is
the best way to guarantee food security especially for the poor.
1
See WTO document G/AG/NG/W/13 of 23 June 2000 presented by Cuba, Dominican Republic,
Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka and El Salvador.
2
WT/MIN(01)/DEC/1, para. 13.
3
See e.g. non-paper on Food Security presented by Cuba, Dominican Republic, El Salvador, Honduras,
Kenya, Nicaragua, Nigeria, Pakistan, Peru, Sri Lanka, Venezuela and Zimbabwe; non-paper on Special and
Differential Treatment by the African Group, Cuba, Dominican Republic, El Salvador, Honduras, Kenya,
Pakistan and Sri Lanka ; non-paper on the Development Box by Cuba, Dominican Republic, El Salvador,
Honduras, Kenya, Nigeria, Pakistan, Sri Lanka and Zimbabwe; proposal on Comprehensive reform in the
areas of market access, domestic support and export competition, with effective S&D for developing
countries (JOB (02)/174); proposal on specific inputs for a Special Safeguard mechanism (SSM) for
developing countries (JOB(02)/177); proposal on food security by India (G/AG/NG/W/192).
5
Broad support for developing countries’ position however, led the Chairman of
the Agriculture Special Session to include in the first draft modalities paper dated March
20034 provisions to allow developing countries to designate a number of agricultural
products “as being special products with respect to food security, rural development
and/or livelihood security concerns”5, which would be subject to a minimum tariff
reduction as compared to the general rule. The text also contemplated the possibility of
establishing a Special Safeguard Mechanism for developing countries whose details
needed to be negotiated.
Without solving the broader controversy on whether such provisions were
justified on the grounds of food security or otherwise, technical discussions on Special
products (SP) concentrated on how those products could be designated and what
flexibility in terms of treatment should be accorded to them. Whereas proponents
favoured self-designation, meaning each developing country will decide on what
products to identify as SP, other WTO members stressed the need for formulating
objective criteria that would limit the scope of SPs and guarantee such provisions would
have a minimal impact on trade. With respect to treatment, proponents insisted on
exempting these products from tariff reductions and new commitments on Tariff Rate
Quotas (TRQs)6, while others members insisted that no exceptions were acceptable and
that improvements in market access should be the norm for all products.
Discussions on the Special Safeguard Mechanism (SSM) focused mainly on the
method for the designation of products acceding to this instrument, and whether any
specific product could be designated as SPs and SSM, as proponents were arguing for.
Members have devoted very little time to analysing the actual structure of the safeguard
mechanism.
Once members failed to agree on modalities in March 2003 due to differences on
these and other fundamental issues of the negotiations, discussions moved to a more
general level aiming at a ‘framework’ or set of parameters outlining the contours of a
future agreement. This was done without specifying numerical targets for reduction
commitments or fully developing rule elements to be included in a revised agreement,
including provisions on SP and SSM. Negotiations of a framework in agriculture started
in August 2003 spur by a joint proposal of the US and the EC suggesting this way of
proceeding, and extended until July 2004 when the General Council adopted a Decision
which included a framework for establishing modalities in agriculture.
The major concerns of proponents of SP and SSM in the context of negotiations
of a framework in agriculture referred to first, guaranteeing that provisions for these
instruments were included and, second, avoiding too restrictive a language that would
undermine their negotiation position in the next phase of the negotiations.
4
WTN/AG/W/1/Rev.1 of 18 March 2003.
WTN/AG/W/1/Rev.1, para. 11.
6
TRQs refer to commitments made by WTO members during the Uruguay Round to provide access
opportunities for a specified volume of imports at a lower tariff rate than that resulting from tariffication.
5
6
II.2. Treatment of SP and SSM in the Framework for Establishing Modalities in
Agriculture adopted by the WTO General Council in July 2004
Provisions for both SP and SSM are contemplated in the framework for establishing
modalities in agriculture, adopted by the WTO General Council as part of the July
Decision.
Provisions on Special Products
Paragraph 41 of Annex A of the General Council Decision reads:
“41. 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 criteria and treatment of
these products will be further specified during the negotiation phase and will
recognize the fundamental importance of Special Products to developing
countries”7
The July Decision has been useful in advancing the negotiations on SP in three
ways. First, by guaranteeing that developing countries will have access to this flexibility
in a revised agreement on agriculture, which at many instances of the long negotiation
process looked unlikely; second, by clarifying the basic parameters that should guide the
designation of SP, being these food and livelihood security and rural development needs.
The endorsement of these concepts by WTO members as the basis for operationalizing
Special and Differential Treatment (SDT) is, indeed, an important departure from the
Uruguay Round, and a positive step forward in the multilateral system in recognising the
particular circumstances and concerns of developing countries in relation to trade
liberalisation in agriculture. Third, through the Decision, WTO members have
acknowledged the fundamental importance of SP for developing countries.
On the other hand, the text clearly establishes certain limits to the possible scope
of SPs, for instance, by requiring that only an appropriate number of products could be so
designated. The Decision is not clear as to how that number could be determined leaving
many options open, including the possibility of negotiating a specific (and very likely,
arbitrary) number of SP applicable to all members entitled to use the provision. This
option has been discussed during the negotiations. The Decision also commits members
to further specify the basic criteria of food and livelihood security for those products.
Such specifications would serve in itself and/or together with a specific numerical
restriction, to limit the scope of SP. The challenge for WTO members would be to
genuinely build on the basic criteria of rural development and livelihood and food
security for the designation of SPs, rather than to substitute it with entirely trade-based
indicators.
7
Annex A of document WT/GC/W/535 of 31 July 2004.
7
Regarding the treatment of special products, the Decision provides no guideline; it
has been left open for negotiation. But the treatment of SPs will not be decided in a
vacuum; it will be determined as part of a broader package, including negotiations on the
parameters for the designation of sensitive products (another concept introduced in the
July framework for some agricultural products) and the treatment to be accorded to them.
Certainly, paragraph 31 of the framework in agriculture indicates that members –
developed and developing alike, “may designate an appropriate number, to be negotiated,
of tariff lines to be treated as sensitive, taking account of existing commitments for these
products.” According to paragraph 39, developing countries will benefit from special and
differential treatment (SDT) in the designation and treatment of sensitive products. This
would imply that these countries may designate more sensitive products and undertake
lesser reduction commitments with respect to tariffs and tariff rate quota than may
otherwise be required for such products designated by developed countries.
The introduction of the concept of sensitive products, however, undoubtedly
complicates the negotiations on special products because it could be argued that, to a
large extent, the purpose of both categories of products is the same: to provide flexible
treatment to certain agricultural products with respect to further trade liberalisation.
However, the justification for each is quite different, and this should impinge, in a
meaningful and important way, on how the products under each category are to be
designated and treated. As explained above, the concept of SP resulted out of concerns of
developing countries with respect to the impact of trade liberalisation on food security
and the livelihood of the poor and small farmers as reflected in the Doha Declaration and,
now, in the July General Council Decision. On the other hand, the concept of sensitive
products developed late in the negotiations out of the impasse in deciding how to
incorporate flexibility for the sensitive sectors of the industrialised countries, protected
behind tariff peaks, in the overall formula for the reduction of tariffs.
Therefore, even though no formal link have been established in the agriculture
framework between special products and sensitive products, it is likely that the actual
negotiations will very much progress in tandem and be quite intertwined.
Provisions on SSM
Turning to the issue of the SSM, paragraph 42 of Annex A of the July Decision
establishes the following:
“42. A Special Safeguard Mechanism (SSM) will be established for use by
developing country Members.”
The vagueness of this language basically reflects the controversy surrounding the
issue. The main contribution of the July Decision with respect to the negotiations on SSM
is the clear commitment made by members to establish the new mechanism for
developing countries which was not always guaranteed throughout the negotiation
process until now. Otherwise, the Decision provides guideline neither on how the
8
designation of products under the SSM should be made nor on basic parameters for the
negotiations of the actual safeguard mechanism.
With respect to the designation of SSM products, whereas proponents of these
provisions insist on their identification on the basis of food and livelihood security and
rural development needs, other WTO members have insisted on establishing a link
between these provisions and the extent of liberalisation already undertaken, or to be
made in future, on any particular product. That is, it has been suggested that the SSM
should be made available for products with rather low tariffs.
Once more, although no formal link has been established in the Decision between
the provisions on sensitive products, special products and safeguards, the history of the
negotiations show these may be negotiated as a package given the arguments put forth by
some Members, in the sense that the said instruments may be redundant.
III.
IMPACT
OF TRADE LIBERALISATION IN FOOD SECURITY AND THE RURAL
POOR AND SMALL FARMERS IN DEVELOPING COUNTRIES
As mentioned above, developing countries have justified the need for provisions
on SSM and SP on the basis of concerns on food and livelihood security and rural
development. In that respect, it would be useful to review the experience of developing
countries with trade liberalisation, with the objective of better understanding the
background against which the original concepts of the Development Box, now reflected
(although incomplete) in the SP and SSM provisions of the July framework, were put
forth for discussion in the negotiations.
It is important to say that the impact of trade liberalisation on food security and on
the livelihood of the rural poor and small farmers in developing countries is a subject of
considerable controversy. This controversy is nurtured to a certain extent, by the
conceptual gap between economic and trade analysts and those involved in food security
and livelihood development8, as well as by the various methodological approaches used
to asses the impact of trade liberalisation on small farmers and poverty more broadly.9
Those conceptual and methodological difficulties impose caution in attempts to draw
conclusions of general application beyond the particular setting and specifications within
which any particular study have been framed, and compel to pay attention to the caveats
inherent in such specifications when interpreting results.
8
See e.g. Stevens, C. et al. International trade, livelihoods and food security in developing countries, IDS
Working Paper 215, December 2003.
9
See e.g. Narayanan, S. and Ashok Gulati (2002), “Globalization and the Smallholders: A review of the
issues, approaches, and implications”, MSSD Discussion Paper No. 50, Rural Development Department,
The World Bank, Washington, DC., for a review of the implications of different methodological
approaches to the analysis of the impact of trade liberalisation on small farmers.
9
Notwithstanding the above, there are certain elements that come across in the
literature in a recurrent manner, and are particularly relevant for the discussion on SP and
SSM in the WTO as explained above.
A first issue that arises is a clear association between trade liberalisation and
increased inequality. More concretely, a paper by the World Bank found that trade
openness is negatively correlated with growth amongst the poorest 40 per cent of the
population.10 Studies undertaken by UNU and WIDER11 also attest of a significant
increase in inequality over the last two decades, which the analysts link to the
implementation of trade liberalisation policies in countries without adequate institutional
capacity to manage the process of reform. John Madeley et al., on the basis of a literature
review on the impact of trade liberalisation in the food security of the South,12 suggests
that income inequality is a prominent and recurrent theme in many of the studies
reviewed, and that the most affected are those who lack access to assets of various kinds
(e.g. education, land) and/or access to finance. IFAD makes a related point by suggesting
that the initial distribution of assets and access to markets is important for determining
the impact of trade liberalisation on the poor. “Liberalization works best for the rural
poor where the distribution of access, skills and probably assets is not very unequal.
Liberalization and globalization with initial gross inequality can allow the powerful to
abuse their special access, and so result in the poor becoming poorer.”13
A second important issue coming across the literature is that trade liberalisation
implies, or is accompanied by, wider economic reforms which usually entail the
reduction of state intervention in the economy and the withdrawal of governmental
support from a variety of social and other services. Of special relevance for the purposes
of this study is the evidence available on the effects of the dismantling of marketing
boards, which in many developing countries were involved in a variety of activities,
including procurement and marketing of various goods (e.g. food and inputs for
agriculture production) and services (e.g. extension services and market information).
Evidence suggests that where competition has been boosted among private traders
with the removal of the state, farmers have been able to command a better price for their
produce.14 However, in several developing countries, and particularly so in Sub-Saharan
Africa, the withdrawal of the state created a vacuum, which the private sector has simply
not filled, or filled in a way not necessarily advantageous for small farmers and the rural
poor: “where the private sector is still weak, a few traders or companies hold monopolies
10
OXFAM (2000), “Agricultural Trade and the Livelihoods of Small Farmers”, a discussion paper for
DFID towards development a White Paper on Globalisation, Oxfam Policy Department, Great Britain.
11
Van Ginkel, H. (2000) “Poverty and Inequality”, Remarks by the Rector of the United Nations
University to the World Bank-UNU Public Forum, Tokyo 25 February 2000.
12
Madeley, J. and Solagral (2001), The impact of trade liberalisation on food security in the South. A
CIDSE Background Paper. Brussels.
13
IFAD (2001). Rural Poverty Report 2001. The Challenge of ending rural poverty. Oxford University
Press for the International Fund for Agricultural Development, p. 162.
14
Narayanan, S. et al., supra note 9.
10
and farmers lack bargaining power on the price they receive for their goods.”15 Under
such circumstances, small farmers often find themselves at the losing end of imperfect
markets, forced to sell their produce at low prices and pay high ones for the goods and
services they buy. Furthermore, according to IFAD, the liberalisation of the input markets
in West and Central Africa has been particularly disappointing being directly associated
“with a decline in input use, with negative implications for sustained increases in
agricultural productivity.”16
Put more broadly, pervasive market failures in developing countries, particularly
those relevant to the rural poor and small farmers, calls for state interventions of different
nature and at different levels. However, reforms towards greater openness and a reduced
role for governments have weakened the institutional arrangements in developing
countries called to promote development and growth of the agricultural sector.17
Related to the above, it is important to note that trade liberalisation has been
accompanied by a conscious decision of reorienting agricultural production towards
exports, including by concentrating the available resources for governmental support to
agriculture in promoting non-traditional export-oriented sectors.18 In many instances it is
export conglomerates that facilitate credit and extension services to small farmers
connected to them under various institutional arrangements (e.g. contract farming).
Indeed, studies carried out by the FAO in 23 developing countries provide
evidence of the diversification of the export basket of the countries concerned mainly in
fruit and vegetables, floriculture, farmed fish and fish exports.19 Agricultural export
expansion has brought benefits to the rural poor though increased employment and/or
wages for farm labourers, and by allowing some independent farms to produce for the
export-oriented sector commanding higher prices. “In Central America, the value of fruit,
vegetables and flower exports increased by 17.2% a year in 1985-92. Though they still
represent a small fraction of total exports, expanding production has generated hundreds
of thousand of jobs, especially for women drawn from poor rural households.”20
On the other hand, case studies carried out by FAO in developing countries also
provide evidence of increased farm concentration which, although on one hand may have
increased productivity with positive results, it has also marginalized small producers and
15
Kanji, N. and Stephanie Barrientos (2002), “Trade liberalisation, poverty and livelihoods: understanding
the linkages”, IDS Working Paper 159, Institute of Development Studies, Brighton, p. 16.
16
IFAD, supra note 13, p. 168.
17
Green, D. and Jamie Morrison (2004), “Fostering Pro-sustainable Development Agriculture Trade
Reform: Strategic Options Facing Developing Countries”, a paper presented at the IIED and ICTSD
Strategic Dialogue on Agriculture, Trade Negotiations, Poverty and Sustainability, Windsor 14-16 July
2004. p.5.
18
South Centre (2001), “Agriculture in Developing countries: Which way forward? Small farmers and the
need for alternative, development-friendly food production systems”, TRADE Series, Occasional Paper No.
4, South Centre, Geneva.
19
See FAO, (2003) WTO Agreement on Agriculture: The Implementation Experience – Developing
Country Case Studies, Commodities and Trade Division, Rome.
20
IFAD, supra note 13, p. 183.
11
added to unemployment.21 A study on the horticulture industry in Kenya while
suggesting that the growth of the horticultural industry in the country have had a positive
impact in the income of the rural poor, particularly through the creation of employment, it
also documents the displacement of small farmers as the major providers of horticultural
products by large commercial farms and those owned by exporters.22
The concomitant effect of the reorientation of agricultural production towards
exports has been the neglect of domestic food production. Furthermore, high transport
costs in the rural areas together with increased trade openness and low world prices,
including as a result of subsidies to production and export provided by industrialized
countries, has made it more cost effective for urban areas to provision food from the
world market than from domestic production.23 This reduces the commercial outlets for
the produce of the rural areas affecting the prospects for growth. Oxfam for example,
calls attention to the effect of subsidized wheat imports from the EU in the markets of
SADC countries indicating that the commercial demand for millet and sorghum produced
by the poorest sections of the population may shrink in a context of few alternatives for
farmers to shift production to different crops.24 Under such circumstances poor producers
may retreat to subsistence and remain trapped in poverty.
At the national level, a food security strategy based on guaranteeing the
availability of import food, being through commercial imports or food aid entails
significant risks, particularly so for poor countries highly dependent on a few export
commodities. Certainly, in spite of the progress seen in the diversification of production
for export, these sectors still represent a small value of exports of developing countries.
Overall, with the liberalisation of agricultural trade imports has increased faster than
exports in the majority of developing countries. FAO has documented a ratio of food
imports to total export earnings minus debt servicing of more than 50 per cent in some
cases.25 Indeed, the poorest countries in particular, are dependent on the export of a few
commodities whose prices show high volatility and a long term decline. This would raise
questions with respect to the sufficiency and stability of the export earnings to pay for
commercial imports of food, especially in situations of high world prices. As with respect
to food aid, in addition to being an inherently unreliable source of food imports, evidence
suggests that it has been in the decline and that it may be in short supply precisely when
prices are high and poor countries may be most in need of aid.26
21
Quoted in Madeley, J. et al., supra note 11, p.9.
See McCulloch, N. and Masako Ota (2002), “Export horticulture and poverty in Kenya”, IDS Working
Paper 174, Institute of Development Studies, Brighton.
23
Dorward, A., J. Kydd, J. Morrison and I. Urey (2004), “A policy agenda for Pro-Poor Agricultural
Growth”, World Development, Vol. 32, No.1, pp. 73-89, 2004, p.77.
24
OXFAM (2001), “The effects of EU cereals sector reform on Southern Africa”, European Research
Office, p. 12.
25
See FAO (2001), “Some issues related to food security in the context of the WTO negotiations on
agriculture”, a paper presented in the Round Table on Food Security in the Context of the WTO
Negotiations on Agriculture held in Geneva, 20 July 2001.
26
See Diaz-Bonilla, E. (2002), “On Boxes, contents, and users: food security and the WTO negotiations”, a
paper presented at the OECD World Bank Global Forum on Agricultural Trade Reform, Adjustment and
Poverty, Paris, 23-24 May, 2002.
22
12
In this respect, the situation of Sub-Saharan Africa stands out. The region’s
dependence on a few export commodities, the expected erosion of preferences from
which they depend on for their export earnings, in addition to the agreed elimination of
export subsidies in the context of the WTO negotiations which will increase the price of
their food imports, and high levels of debt, implies that these countries may find it
difficult in future to guarantee an appropriate level of food imports to feed a growing
population.
The Marrakesh Decision on Measures concerning the Possible negative effects of
the Reform Programme on Least-Developed and Net-Food Importing Developing
Countries adopted during the Uruguay Round aimed at guaranteeing adequate availability
of basic foodstuff to these countries when faced with difficulties to secure such
availability on appropriate terms and conditions. However, the Marrakesh Decision has
not been implemented and attempts by developing countries to improve its mechanisms
to make them more effective and operational have failed. On the other hand, the
possibility for export diversification to enhance the capacity of these countries to pay for
increased food imports also has serious limitations, including the restrictions in access to
foreign markets and distortions created by subsidies to agricultural production in
developed countries. These concerns would call for considerations of a set of policy
measures directed to promoting local food production in order to reduce the dependence
on food imports of these countries. These measures may include the protection of specific
products through tariffs.
A final important aspect to consider from the experience with trade liberalisation
has been the vulnerability of developing countries to import surges. Evidence coming out
of case studies undertaken by FAO27 attests this, as well research undertaken by civil
society groups. In many cases, import surges are related to subsidised imports from
industrialised countries. Analyses of this phenomenon by FAO over the period 19842000 in a group of 28 countries led to conclude the following:
“[T]he frequency of surges is marked… The phenomenon was relatively
frequent for some product groups, notably some meats and vegetable oils.
Similarly, although all countries experienced import surges, some were
affected more often than others, Guinea, Malawi, Niger, Philippines and
Tanzania being some examples. Finally, and on the whole, import surges
have occurred more frequently in the post-1994 period.”28
FAO further documents shortfalls of production in the countries concerned during
the same period, although clarifies that no causal link between import surges and
production shortfalls can be established without more in depth analysis of the issues that
may be at play in each particular case. Poor rural areas and small farmers are particularly
vulnerable to import surges: their lack of resilience made that what could be temporary
27
See FAO (2000), Agriculture, Trade and Food Security. Issues and options in the WTO negotiations
from the perspective of developing countries, Vol. II: Country case studies, FAO, Rome.
28
FA0 (2003), “Some Trade Policy Issues relating to trends in Agricultural imports in the context of Food
Security”, Committee on Commodity Problems, Sixty-fourth session, Rome. The study covered 28
developing countries in different regions.
13
shocks in prices and increases in imports may have permanent negative effects for the
rural areas. On the other hand, the institutional weakness and lack of financial resources
of developing country governments implies there are not safety net available to support
the rural poor: in situations of shocks to the rural livelihoods such as those caused by
import surges or price drops the results are increased unemployment or otherwise lower
incomes for the poorest.
Case studies carried out by FAO on the implementation of the Agreement on
Agriculture (AoA), evidence that developing countries have had difficulties to deal with
import surges relying only on tariffs in an attempt to protect farmers from the effects of
import surges. Other instruments to address this phenomenon contemplated in the AoA as
the Special Safeguards are not available to the majority of developing countries and the
use of the traditional trade-remedy instruments (i.e. anti-dumping, countervailing
measures and safeguards) in the context of the GATT, even in the cases of those
countries that have enacted necessary legislation have not been used due to particular
constraints faced by developing countries. “The Honduran case study notes that the
limited utilization of trade remedies legislation can be due to its complexity; the high cost
of the process in relation to the magnitude of the market in dispute; and the limited
capacity of the affected organization or enterprises to provide the required information to
justify the opening of an investigation, carrying out the studies, and doing the follow- up
the WTO’s rules require.”29 Small farmers in developing countries who are numerous and
are widely scattered find themselves in a particularly difficult situation for making use of
these kind of instruments.
There is also evidence in some developing countries of the use of market-based
instruments established to address price volatility. Some of the instruments that although
very limited, have been adopted with success include future markets; forward
contracting, especially for non-staple cash crops; commodity exchanges; and warehouse
receipts systems. Notwithstanding this, there is also evidence that low prices tend to
persist and that market based instruments as those mentioned above although suitable to
address short-term price fluctuations cannot protect against prolonged periods of low
prices.30
Based on the above discussion, it can be said that trade liberalisation: i) has
further marginalized the poorest who lack the capabilities and assets to take advantage of
opportunities opened by trade liberalisation and are unable to cope with its effects; ii) has
eroded the ability of the state to intervene for correcting pervasive market failures in
markets relevant to the rural poor and small farmers; iii) has led to the promotion of
agricultural systems oriented towards export with the side effect of neglecting domestic
food production; iv) has led to increased penetration of food imports to local markets
effectively eliminating outlets for the produce of the local farmers who may retreat to
subsistence production; and v) has increased food-import dependence, which in the case
of some countries have reached levels that when compared with the pattern of export
earnings evidence significant vulnerability.
29
30
FAO (2003), supra note 19, at p. 7.
Narayanan, S. et al., supra note 9, at p. 29.
14
It is against this background that the need for provisions on SP and SSM can be
understood. Basically, SP and SSM aim at protecting the livelihood and food security of
the rural poor and small farmers by avoiding exposing them to the effects of further trade
liberalisation in the context of limited capacity of the state to support them in other ways.
In addition, SSM provisions should provide an instrument to developing country
governments to react quickly and effectively against import surges and price slams that
could otherwise destroy the livelihoods of the rural poor and small farmers and
irremediably affect viable domestic enterprises.
In that respect, provisions on SP and SSM can be considered defensive
mechanisms geared to assist the rural poor and small farmers coping with the effects of
further trade liberalisation. Such instruments can provide a breathing space for
governments to implement enabling policies necessary to allow the rural poor and small
farmers to actually benefit from trade liberalisation. The viability of those enabling
policies may also depend on the support of the international community. Of particular
importance would be that industrialised countries move quicker with reforms in
agriculture by dismantling the barriers to developing countries’ exports and eliminating
subsidies to production and exports that contribute to import surges and dumping in the
developing world.
IV.
GUIDELINES FOR THE INTERNAL DISCUSSION ABOUT THE DESIGNATION OF SP
AND SSM PRODUCTS IN DEVELOPING COUNTRIES
The purpose of this section is to provide guidelines to developing countries for
approaching the internal discussion for the identification of relevant products from the
point of view of food and livelihood security, and rural development needs.
It is important to stress that although food security can be defined at different
levels, including that of a country as a whole, today it is accepted that food security is
mainly concerned with household’s and individual’s access and guarantees to food,
which in turn depend on each household’s livelihood alternatives. This would suggest
that the in-country analysis for the identification of SP and SSM products should attempt
to go beyond products captured by nation-wise indicators to identify those that may be
meaningful for the poor and food insecure at a lower, more focalised scale.
Indeed, further trade liberalisation will affect the livelihood of the rural poor and
small farmers in different ways depending on their particular circumstances, livelihood
resources and strategies. Attempts to capture this complexity in a single indicator are
neither feasible nor recommended. Furthermore, gauging the particular relevance of these
variables hence the potential of any particular product to be designated as SP and SSM
would entail difficult trade-offs which should be decided in the context of an internal
discussion within each country rather than being imposed from the outside.
IV.1. Guidelines for the discussion on the selection of SP products
15
The identification of SP products would require: first, identifying the intended
beneficiaries, that is, the rural poor and small farmers; and second, identifying the
products on which their livelihoods depend on.
The identification of the intended beneficiaries would require a combination of
indicators at three levels31:
i) Definition of income level, with the objective of targeting the poor. One option
for this could be to use the standard World Bank poverty line of two-dollars a day.
On the other hand, each country has defined parameters to measure urban and
rural poverty, which may respond better to the realities of each country and its
own circumstances.
ii) Geographical context with the objective of targeting areas where the poor is
concentrated. Several studies suggest that poverty is concentrated in particular
areas and may be related to the lack an adequate resource base for production
such as fertile land and water, isolation, etc. More broadly, poverty is
concentrated in the rural areas in developing countries and agriculture is usually
the mainstay of the economy in those areas. The distinction between urban and
rural areas is usually made at the national level for purposes of various policies,
including the definition of poverty lines.
iii) An indicator of production capacity, such as landholding size to distinguish
between small and large farmers. There is no agreed international definition of
what a smallholding can be though. Each country uses its own standards. An
additional problem is that holdings of equal size may vary in productivity
depending, for example, on whether the farm is irrigated or not. However, the
danger that the scope of intended beneficiaries may expand beyond the poor is
accounted for by the indicators on income level discussed above.
In order to identify the products that may be of particular significance for
livelihood of the intended beneficiaries, a combination of indicators will also
necessary in order to assess the relative contribution of any specific product to
economy and the relative contribution of any specific product to the diet of
population.
the
be
the
the
i) The relative contribution of any specific product to the economy
There are several indicators that can be used to asses the contribution of any
particular product to the economy. From the production side, a standard indicator would
be the value of production of a particular crop to the total agricultural GDP. Another
important indicator would be the area of land dedicated to a particular crop. In both
instances and in addition to national level data, disaggregated values at the regional level
are warranted in order to cover those areas in which the poor is concentrated.
31
Annex A to the present note includes a table summarizing the indicators discussed below for the internal
discussions on the identification of SP products.
16
In addition to the above, the contribution of a particular sector to employment is
of utmost importance for purposes of the identification of SPs. These indicators are
particularly important for capturing products in which agricultural wage labourers’ and
landless people’s livelihoods depend on, which production-based variables may fail to
reflect. The relative importance of any particular product in terms of employment may be
gauged by determining the number of people employed in the sector both in absolute
numbers as well as a proportion to the total agricultural population. As above, in addition
to national level data, disaggregated analyses at the regional level are warranted to
capture the importance of the sector for specific regions.
ii) The relative contribution of any specific product to the diet of the population
Finally, the identification of products which play a prominent role in the
consumption profile of the country is an important issue from the perspective of food
security. Indicators used to determine the contribution of a particular product to the diet
of the population include the share of a particular product in total consumption as
reflected by its contribution to the total caloric intake.
Protecting staple foods through tariffs presents a dilemma for policy makers since
border protection on staples is likely to lead to higher prices for poor consumers.
However, there seems to be good reasons to protect staple foods for these products
constitute the livelihood base of the rural poor in many developing countries where
poverty in concentrated. Staple foods which may include cereals, roots, tubers and pulses
constitute the main source of caloric intake in developing countries.
An additional issue to consider here is the situation of particularly vulnerable
countries with high food import dependence as measured by low levels of self-sufficiency
and insufficient and/or unreliable export earnings. SP provisions may be used by these
countries to protect staple crops in an attempt to increase production and reduce
vulnerability.
Finally, it would be important to keep in mind when attempting to identify SP
products, the problem of substitutes. This refers to situations in which domestic products
may be displaced from local markets by not locally produced imported substitutes. This
would also affect no commercialised produce to the extent that substituted imports in the
local market create no incentives for investing in the production for markets.
This issue would require an assessment at two levels: first, the identification of
the special product itself, and then the identification of the imported substitute which is
the one to be protected.
As the discussion above shows, the designation of SP products entails a context
specific analysis where a combination (addition) of variables rather than a single
indicator is called for. Furthermore, even if an agreement were feasible in choosing
17
several indicators for the designation of SPs, deciding on the thresholds to apply for each
indicator would be very difficult and indeed arbitrary.
All of this lends support to an approach for the designation of SP that is based on
self-selection meaning that each developing country can analyse variables as those
indicated above and internally gauge the difficult trade-offs that will have to be made.
For approaching such trade-offs, several issues might be considered with the objective of
identifying the relative vulnerability of different SPs to further trade liberalisation. In
particular, it would be important to place this analysis in the broader context of the
country’s strategy for agriculture development which sets the policy framework in which
protection for SPs will be provided. This would include an assessment of whether other
measures for the promotion of SP products will be available and if so, whether those are
sufficient (both in terms of resources available and the implementation capacity of the
country concerned) to address the vulnerability of those sectors and the livelihoods of
those who depend on them, in the face of further trade liberalization. As part of this
policy framework the tariff profile of the country concerned on any particular SP is an
issue to consider to the extent that it provides an indication of how exposed that particular
product may be already to import competition. This does not mean though that products
with high tariff may be necessarily excluded from the protection of the SP provisions
since the adequate level of protection will depend on the extent of vulnerability of the
sector and the availability or not of other policy instruments to support that sector. In
addition to the above, the international context relevant to a particular SP product or its
substitute would also be relevant since the vulnerability of a particular sector in the face
of further trade liberalisation will also be enhanced by the level of support provided by
other countries to that particular product.
IV.2 Problems related to availability of data
As mentioned above, the identification of relevant SP products for protecting the
livelihood of the rural poor and small farmers may require moving beyond national-level
indicators to look at the relative importance of particular products at a more locationspecific level. This possesses significant problems in terms of readily available data that
would allow reflecting the designation of SPs in each member’s schedule of
commitments.
However, data is available at the national level through the statistics gathered in
isolation by different departments as well as by NGOs and international organizations
working in the field such as FAO and IFAD. The data is thus dispersed but available.
Pulling the resources of these various organizations and increasing coordination between
various governmental departments will be necessary to collect and process the required
information. Assistance should be provided to developing countries for carrying this task
by institutions like FAO and IFAD, for example given their expertise in this area and
their involvement in developing countries through various programmes of assistance.
18
IV.3 Guidelines for the identification of SSM products32
Once the significant importance of particular agricultural products have been determined,
on the basis of food and livelihood security and rural development concerns, it would be
difficult to argue that such products may not be protected by the SSM.
The livelihoods of the rural poor and small farmers are indeed fragile and the lack
of safety net mechanisms and other types of support by the state to smooth the effects of
temporary shocks in prices and import surges (e.g. direct income support) on specific
sectors may put the livelihoods of the rural poor and small farmers under considerable
pressure.
In addition to the significance of any particular product for the food and
livelihood security and rural development needs of a specific country, it would be
important to consider the need for safeguard measures in sectors which are highly
subsidised and may be affecting otherwise viable industries.
Indeed, analyses on recent trends in imports by FAO indicates that “import surges
seem to be more common in product groups that are subject to high levels of subsidies in
exporting countries, notably dairy/livestock products (milk powder, poultry parts), certain
fruit and vegetable preparations and sugar.”33 Notifications by members to the WTO as
well as indicators of the level of subsidies complied by the OECD can provide the basis
for identifying particularly heavy subsidised agricultural products which in principle
creates justification for protection in developing countries.
Another way to identify sectors in which the use of the safeguard measure may be
warranted, would be those in which import penetration may be high as calculated by the
share of domestic consumption accounted for by imports. This suggests that the local
industry may be already under pressure and therefore, sudden increases in imports may
irremediably damage its viability.
In addition to the above, it would be relevant to consider the overall result of tariff
reduction negotiations which will entail reduction commitments of various degrees for
different products. Developing countries may consider whether agricultural products in
which deep tariff cuts are envisaged in application of the agreed formula would be
required to be protected under the SSM mechanism to address unforeseen circumstances.
32
Annex B to the present note includes a table summarizing the elements discussed below for the internal
discussions on the identification of products to be protected under the SSM mechanism.
33
FAO (2003), supra note 28, at p.6
19
ANNEX A
Summary of possible indicators for the identification of Special Products
Identification of intended beneficiaries
Identification of relevant products
e.g. standard World Bank two-dollar a day
poverty line; country specific definition of
poverty including distinctions between rural
and urban areas
Definition of
income level
Definition of
geographical
context
Definition of
production
capacity
Production
Contribution to
the economy
e.g. identification of rural areas and
particularly vulnerable areas such as those
isolated or poorly endowed in terms of
natural resources and/or access to
transportation, for example.
e.g. landholding size, maybe combined with
indicators of productivity.
e.g. share of the value of production of a
particular product over total agricultural
GDP; area of land dedicated to a particular
crop at the national and regional levels.
e.g. absolute number of persons employed
in a particular sector; share of people
employed in a particular sector relative to
Employment the total agricultural population both at the
national and regional levels.
e.g. share of a particular product out of total consumption
as reflected by its contribution to the total caloric intake.
Contribution to
consumption
ANNEX B
In addition to products identified as Special Products, the following table presents a summary of other elements to be considered for
the identification of products to be protected under the SSM mechanism:
Summary of elements for the identification of SSM products
Level of subsidisation
Level of import
penetration
Depth of tariff cuts
envisaged by the
formula approach
e.g. budgetary outlays and quantity of exports of a particular product supported by export subsidies
according to members’ notifications to the WTO; budgetary outlays and quantity of exports of a particular
product supported by export credits and similar programmes according to OECD data and each country’s
submissions as may be requested; notifications of WTO members on domestic support measures and
OECD relevant indicators such as the Producer Support Estimate (PSE).
e.g. share of imports of a particular product over total consumption.
e.g. percentage of tariff cut from the initial tariff
21
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