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Potential Implications of a Special Safeguard Mechanism in the WTO: the Case of Wheat

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  • Hertel, Thomas W.
  • Martin, William J.
  • Leister, Amanda M.

Abstract

The Special Safeguard Mechanism (SSM) was a key issue in the July 2008 failure to reach agreement in the WTO negotiations under the Doha Development Agenda. It includes both price (P-SSM) and quantity-triggered measures (Q-SSM). This paper uses a stochastic simulation model of the world wheat market to investigate the effects of policy makers implementing policies based on the SSM rules. As expected, implementation of the Q-SSM is found to reduce imports, raise domestic prices, and boost mean domestic production in the SSM regions. However, rather than insulating countries that use it from price volatility, it would actually increase domestic price volatility in developing countries, largely by restricting imports when domestic output is low and prices high. We estimate that implementation of the Q-SSM would shrink average wheat imports by nearly 50% in some regions, with world wheat trade falling by 4.7%. The P-SSM is discriminatory against low price, developing country exporters and tends to contribute to additional producer price instability.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado with number 61000.

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Date of creation: 25 Apr 2010
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Handle: RePEc:ags:aaea10:61000

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Related research

Keywords: Safeguard; SSM; WTO; volatility; wheat; food security; Agricultural and Food Policy; International Development; Q1; Q17; Q18;

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  1. Finger, J. Michael, 2009. "A special safeguard mechanism for agricultural imports and the management of reform," Policy Research Working Paper Series 4927, The World Bank.
  2. Thomas Hertel & David Hummels & Maros Ivanic & Roman Keeney, 2004. "How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?," NBER Working Papers 10477, National Bureau of Economic Research, Inc.
  3. Grant, Jason H. & Meilke, Karl D., 2009. "Triggers, Remedies, and Tariff Cuts: Assessing the Impact of a Special Safeguard Mechanism for Developing Countries," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 10(1).
  4. Jean-Jacques Hallaert, 2005. "Special Agricultural Safeguards," IMF Working Papers 05/131, International Monetary Fund.
  5. Martin, Will & Alston, Julian M, 1997. "Producer Surplus without Apology? Evaluating Investments in R&D," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 146-58, June.
  6. DeVuyst, Eric A. & Preckel, Paul V., 1997. "Sensitivity analysis revisited: A quadrature-based approach," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 175-185, April.
  7. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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Cited by:
  1. Karapinar, Baris & Tanaka, Tetsuji, 2013. "How to Improve World Food Supply Stability Under Future Uncertainty: Potential Role of WTO Regulation on Export Restrictions in Rice," 135th Seminar, August 28-30, 2013, Belgrade, Serbia 160387, European Association of Agricultural Economists.

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