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The impact of WTO agricultural trade rules on food security and development: an examination of proposed additional flexibilities for developing countries

Alan Matthews

IIIS Discussion Paper No. 371

WTO rules constraining the protection developing countries can provide to their agricultural sectors have been a controversial element of the emerging regime governing agricultural trade. Developing countries with largely defensive interests, grouped in the G-33, have sought the maximum flexibility to maintain tariff protection both for use as a development strategy, to promote their food security and for short-term market stabilisation. To this end, they have sought the introduction of Special Products (SP) designation as an additional way to limit tariff reductions in any Doha Round agreement, as well as seeking the introduction of a Special Safeguard Mechanism (SSM) which would allow additional duties in the event of particularly depressed world prices or a sudden import surge.

These proposals have been accepted in principle by all WTO members. However, the design of these instruments has been among the most difficult issues in the agricultural negotiations. Countries with defensive interests in the negotiations fear that a lack of sufficient flexibilities in the current and proposed WTO rules could lead to economic and social disruption if tariffs on sensitive commodities are substantially reduced and if they are prevented from taking action to offset a sudden surge in imports or unusually low world market prices. Countries with offensive interests, including some developing countries, fear that too much flexibility would limit their market access gains, and thus their ability to use agricultural exports as a route to greater food security and rural development through raising the per capita incomes of their food-insecure farmers.

This paper explores the value of the proposed SP designation and the SSM for development, food security and poverty alleviation. In each case, the rules set out in the latest draft modalities proposed by the Chairman of the WTO agricultural negotiations are described and their likely effectiveness is assessed.

The draft modalities on SPs appear to be more settled, although this apparent agreement may be misleading and may simply reflect the negotiators’ focus on the SSM and other issues since 2008. The December 2008 modalities propose that developing countries could self-designate up to 12 per cent of their tariff lines as SPs (13 per cent in the case of SVEs and RAMs), guided by indicators based on the criteria of food security, livelihood security and rural development. This proportion is closer to the G-33 proposal of 20 per cent than to the more restrictive alternatives on the table. Further, a proportion (5 per cent) would be exempt from tariff cuts, although the overall average cut would have to be 11 per cent (10 per cent for SVEs and RAMs). The proposed indicators appear to be so broad that they are unlikely to constrain developing countries in their choice of tariff lines to designate as SPs. Taking into account that the majority of developing countries have substantial tariff overhang between bound and applied tariffs, and also taking into account the possibility to avoid formula tariff cuts through designating sensitive products, these SP modalities mean only a few developing countries would be required to reduce applied tariffs as a result of the Doha Round.

The situation with respect to the SSM is different. The proponents of the SSM want an effective, easy to operate instrument which addresses their development needs. They thus reject the current texts which impose conditions on its use, limiting when it can be invoked and the extent of the remedies. However, applying the existing draft modalities, and particularly the volume-based SSM, would seem potentially to expose a high proportion of trade with developing countries to the risk of supplementary safeguard duties. SSM proponents protest that, in practice, developing countries are unlikely to use more than a fraction of these opportunities. If, indeed, SSM proponents envisage using the mechanism on relatively few occasions, then there would seem to be scope to construct rules which clarify when these occasions would occur.

 


Last updated 28 August 2014 by IIIS (Email).