Potential implications of the World Trade Organization special safeguard mechanism in agriculture
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 (Q-SSM) measures. This dissertation employs econometric analysis and computable general equilibrium modeling in a stochastic simulation framework to investigate the effects of policy makers implementing alternative types of SSM policies in agricultural commodity markets. Results indicate that, had it been in place over the past two decades, the P-SSM trigger would have been breached for a higher percentage of historical trade flows when compared to the Q-SSM for cereal grains trade. Low value shipments are triggered more frequently and small shipments have a higher value of the mean intensity of the P-SSM duties that would have been permitted, yet small shipments are no more likely to trigger the P-SSM duty, when compared to larger shipments. While the P-SSM could be triggered more frequently than the Q-SSM, the trade weighted mean value of the P-SSM duty in all import markets is less than the unilateral Q-SSM duty that would be permitted if the quantity trigger is breached within a given year. Developing country exporters have a higher probability of triggering P-SSM duties within the market for cereal grains. Based on stochastic simulation modeling, it is concluded that implementation of the Q-SSM in the global wheat market reduces imports, raises domestic prices, and boosts mean domestic production of wheat in the SSM regions. However, rather than insulating countries that use the SSM from price volatility, the Q-SSM would actually increase domestic price volatility in these developing countries, largely by restricting imports when domestic output is low and prices high. Implementation of the Q-SSM within the global wheat market is estimated to shrink average wheat imports by nearly 50% in some regions, with world wheat trade falling by nearly 5%. Simulation of the P-SSM shows this policy to also have unfavorable effects, as it systematically discriminates against low price developing country exporters and it tends to exacerbate producer price instability.
Degree
Ph.D.
Advisors
Hertel, Purdue University.
Subject Area
Agricultural economics
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