WTO’s Special Safeguard Mechanism (SSM) is a protection measure allowed for developing countries to take contingency restrictions against agricultural imports that are causing injuries to domestic farmers. The contingency measure is imposition of tariff if the import surge causes welfare loss to the domestic poor farmers. The design and use of the SSM is an area of conflict under the WTO.
What are safeguards?
In WTO’s terms, safeguards are contingency or emergency restrictions on imports taken temporarily to deal with special circumstances such as a surge in imports. Contingency restriction means imposition of an import tax if the imports are causing injuries to domestic agricultural sector. The original GATT itself allows such restrictions to protect domestic economy.
Doha Development Agenda and the origin of the SSM
At the Doha Ministerial Conference, the developing countries were given a concession to adopt a Special Safeguard Mechanism (SSM) besides the existing safeguards (like the Special Agricultural Safeguard or the SSG). This SSM constituted an important part of the promises offered to the developing world at Doha (known as Doha Development Agenda) and the Doha MC became known as a development round.
As mentioned, the Special Safeguard Mechanism (SSM) allowed developing countries to raise import duties on agricultural products in response to import surges.
Difference between SSM and other safeguards under Agreement on Agriculture
The SSG was available to all countries- both developing and developed whereas the SSM is allowable only to the developing countries. It is to be mentioned that the SSG was available as it was inducted under the GATT agreement; whereas the SSM was the invention of the Doha MC.
Conflict among WTO members about the structure of the SSM
But the design of exact rules of the SSM created conflict among the WTO members. Setting the conditions for putting restrictions on imports and the amount of tariff imposition became contentious issues and it caused the delay in the implementation of the entire Doha Development Agenda. Powerful negotiating countries at the WTO, the US and India had conflicting versions about the structure of the SSM. Other countries joined the two sides later. The G33 supports India’s stand whereas the advanced countries and some agricultural exporting countries like Brazil supports the US stand.
Both groups differed substantially on many aspects of the SSM. Following are the main issues which created the conflict.
- What should be the trigger factor that allows a developing country to put restrictions (raising tariff) on imports?
- What should be the level of tariff that can be imposed on injurious imports
India argued for higher level of tariff and lower import surge for making the SSM. On the other hand, the US and allies argued for lower tariffs and higher imports for using the SSM. In 2008, the trade discussions got to a standstill because of the above conflicting views on SSM; especially due to the difference among the US and India.
Basically, the underlying cause of the disagreement among members was the inability to distinguish between import surges that do not threaten the livelihood conditions of developing country farmers and those that do. Much of the debate has focused on the circumstances under which the SSM could be evoked and how high safeguard duties could rise.
The developed countries want developing nations, including India, to agree to use SSM instrument when imports surge on a sustained basis by 40% over the previous year. On the other hand, India and the G33 insist that the mechanism can come into play if imports rise by about 10%.