Potential Poverty Effects of the Special Safeguard Mechanism: the Case of Wheat

Abstract

Negotiations under the Doha Development Agenda include provisions for a Special Safeguard Mechanism (SSM). The SSM would allow developing countries to invoke an additional duty on agricultural commodity imports when prices fall below a specified price trigger (P-SSM) or net imports rise above a specified quantity trigger (Q-SSM). This research uses a Computable General Equilibrium (CGE) modeling framework to evaluate the potential poverty effects of the SSM in agriculture. Some argue that the SSM is necessary to protect developing country domestic producers from the variability in world commodity markets; however, existing research suggests that widespread use of the SSM may destabilize world prices and increase the cost of commodity imports for domestic consumers. Many of the main arguments in favor of the SSM focus on the well-being of vulnerable agricultural producers, yet many rural residents in poor countries are net purchasers of food, and urban poverty is a growing concern. Therefore, the potential for an SSM policy to mitigate poverty vulnerability seems unlikely. This research aims to augment the existing literature regarding proposed trade reform in the WTO by investigating the potential implications of the SSM on poverty in Brazil and Mexico by implementing the policy in the global wheat market.