Special safeguards for developing country agriculture: a proposal for WTO negotiations

Abstract

Trade liberalization, particularly QR elimination, enhances border-to-domestic price transmission. A political obstacle to further liberalization (and to exposure to greater price transmission) in developing countries is fear of extended ‘low price’ periods in import-competing sectors. World commodity prices show shock persistence and asymmetry, with short-duration spikes and longer-duration troughs. Developing countries are unlikely to adopt fiscally burdensome domestic programs to compensate for persistent low-price episodes, making border measures attractive. WTO Special Safeguards could address low price problems, but present rules exclude their use by most developing countries. A possible modification of the Special Safeguard Clause could encourage reduction of overall protection. World price characteristics and the implications of low price periods for import-competing farmers are reviewed. To manage low-price risk under WTO commitments a restricted price floor policy could be implemented through a Special Safeguard Mechanism. An example illustrates the levels, frequency and duration of such a price-floor-based surcharge.