Farm trade safeguard would have limited impact - study

GENEVA Wed Jun 23, 2010 3:46pm IST

Farmers harvest soybeans in Argentina's town of Estacion Islas  April 3, 2010. REUTERS/Enrique Marcarian/Files

Farmers harvest soybeans in Argentina's town of Estacion Islas April 3, 2010.

Credit: Reuters/Enrique Marcarian/Files

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GENEVA (Reuters) - A controversial plan to allow developing countries to raise tariffs temporarily to cope with a destabilising flood of food imports or drop in food prices would actually have little impact on trade flows, a new study shows.

Disagreements over the "special safeguard mechanism" were the immediate cause of the collapse in July 2008 of the last major attempt to conclude the World Trade Organization's long-running Doha round to open up world trade.

Since then, negotiations have continued at the technical level to determine just how it could work in practice.

All 153 WTO members agree there should be a safeguard to help developing countries and make the global trading system fairer, but they differ widely over the way it would work.

Many developing countries with large numbers of poor farmers such as India say they need to be able to respond quickly to surges in imports that could put local producers out of business, damaging their long-term ability to produce food.

Food exporters from the United States to Costa Rica say they fear the safeguard could be abused to choke off normal growth in trade, especially if importers are allowed to raise tariffs above today's levels, let alone any lower levels agreed in a Doha deal, as one proposal would allow.

A simulation by the International Centre for Trade and Sustainable Development, a non-government organisation, shows that on the basis of the latest proposals, tabled in 2008, the safeguard had little impact, especially when prices fell.

"The special safeguard mechanism had limited effectiveness even under ideal conditions," said Raul Montemayor, author of the study.

Montemayor, national manager of the Philippines organisation Federation of Free Farmers' Cooperatives (FFFCI), said more work needed to be done on the price safeguard, which would be useless unless countries were allowed to raise tariffs above current "pre-Doha" levels.

Even if they were, the safeguard would only be triggered half as often as by volume surges, according to the simulation based on monthly import data for 27 products in six countries -- China, Ecuador, Fiji, Indonesia, Philippines and Senegal.

The study showed the safeguard could only be used in one third or fewer of cases when an import surge occurred, and was effective in narrowing price gaps between domestic and import prices in only a quarter of cases.

(editing by Paul Taylor)

(For complete study, click link.reuters.com/jyb53m )

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