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On the Economics of the Safeguard Mechanism (SSM) for Imports of Agricultural Products

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  • MacLaren, Donald

Abstract

A Special Safeguard Mechanism (SSM) has been proposed in the negotiations on agriculture that are part of the Doha Round in the World Trade Organization. The objective of the SSM from the viewpoint of the G-33 is to provide improved livelihood security for poor farm households in developing countries. The proposed instrument to achieve this objective is an increase in the applied tariff once the import price has fallen below some trigger level or once the quantity imported exceeds some target level. The purpose in the paper is to analyse in this context the effects of market structure and tariffs on the behaviour of prices under uncertainty. The analysis is conducted using Monte Carlo simulation of an n-firm Cournot oligopsony/oligopoly of intermediaries to evaluate the effects of the tariff on the mean and standard deviation of prices. It is concluded that the objective of the SSM is unlikely to be achieved through the permitted instrument, viz., an increase in ad valorem tariffs.

Suggested Citation

  • MacLaren, Donald, 2011. "On the Economics of the Safeguard Mechanism (SSM) for Imports of Agricultural Products," Conference papers 332138, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332138
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