Assessing the Impacts of a Special Safeguard Mechanism for Agriculture in the Doha Development Agenda

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Virginia Tech

The agricultural negotiations in the World Trade Organization's (WTO) Doha Development Agenda (DDA) are calling for a specific Special Safeguard Mechanism (SSM) for developing countries that will protect agricultural producers from import surges or price declines, and could potentially add stability to domestic markets. While most of the parameters of this SSM have been decided upon, the DDA negotiations faltered on the issue of whether or not developing nations should be allowed to exceed their pre-Doha bound tariff rates when invoking the SSM. For developing countries, tariffs on agricultural products are an important policy tool to support domestic prices and protect their smallholder producers from global market shifts. Tariffs, however, distort world prices and create global welfare losses. The purpose of this thesis is to assess the impacts of the SSM on global prices and welfare using a non-spatial, synthetic, stochastic, global, partial equilibrium model of the world soybean market. The SSM is assessed in concert with the currently proposed DDA tariff cutting formulas since the additional duties allowed under the SSM are proportional to prevailing bound tariff levels. This study asserts that the SSM actually decreases global price and welfare stability, decreasing world prices of the commodities on which an SSM is placed, though positively affects tariff revenues for those particular commodities. While the SSM may offer a short-term solution for developing countries, its long-term outlook as a price stabilization tool is a not credible argument.

soybean, partial equilibrium, Doha Development Agenda, SSM, special safeguard mechanism