THE trade scenario since January 1, 2005 is changing with the World Trade Organization’s rules and regulations facilitating trade through fair and equitable competition. One of WTO’s concerns is the risk of cheap imports the producer country may face. The developing countries need to evolve a strategy to face such a situation. One such option is to choose crops which are under dumping threat. It is known as the special products strategy.
It is a protective instrument put forward by the developing countries to protect their producers and markets from trade distortions such as dumping and import surges.
The recently agreed paragraph 41 of the July Framework provides developing countries with the advantage of defining special products (SPs) that would permit them to designate certain crops based on principles of food security, livelihood and rural development. By defining these special products they would have the opportunity to protect these crops by using appropriate tariffs.
Special product mechanism is a political and technical instrument to integrate effectively and coherently developmental and negotiating concepts within the context of trading negotiations by formulating trade policies that foster the right of governments to protect their products and the concept of food sovereignty.
The definition of the SPs poses challenges and opportunities for developing countries; it should not be understood as the mechanism to solve systemic trade distortions such as the subsidies and dumping practices by the North.
To identify key products subject to special protection should be seen as a protective tool required by the developing countries to protect their economies and local markets from dumping practices and import surges. The use and implementation of this instrument is to make effective the Principle of Special and Differential Treatment (SDT).
Now, the question arises what criteria should be used by developing countries in order to define SPs? It is important to keep in mind that identifying the SPs would require a combination of several social, economical, financial and cultural indicators to appropriately reflect the needs and circumstances of each country. Moreover, probably not all SPs identified at the national level would have the same level of importance or sensitivity and therefore would not require the same degree of protection in relation to tariff reductions.
According to the July Framework Agreement, the definition of the SPs should be based on criteria of food security, livelihood security and rural development. These concepts, agreed by the international community, provide a good base to elaborate key products that need to be protected according to the special circumstances of each country.
In the process of identifying SPs, two main questions should be asked:
a) Who are the key socio-economic groups to protect?
b) What kind of products should be protected?
First of all, look at the targeted group which is to be protected. Mostly our small farmers lack access to modern facilities. They are also deprived of productive and economic resources. It is expected that this will be the most affected group by the process of trade liberalization.
Within these groups, women are crucial stakeholders because of their significant participation in agricultural sector, their lack of access to economic and productive resources and their responsibilities as the major food providers towards their families and communities.
Now the point is which products should be protected? Identifying these would require a few considerations such as:
The most important products for the socio-economic and trade growth, according to national figures on the economic value of the product to the total agricultural GDP. It is also important to consider economic implications of the products at regional level. For example, maize crops could be important in several regions of the country, but not for one particular region with a high level of poverty, where that crop could be planted.
The level of importance of products for social and cultural development for example is by taking into consideration the nutritional needs and preferences of the population.
The identification of agricultural substitute products: Protection to and from substitute products could be seen in two ways: The protection that governments should offer to secondary domestically-produced crops that could become, during lean season, the highest economic value to the total agricultural GDP or could also be used as the main nutritional product to satisfy the dietary needs of the population, particularly in rural areas.
The other aspect is protection from the substitute products; that is, when main domestic products are displaced from local markets by foreign-produced imported substitutes which are cheaper than the main products.
It follows that special products could be selected to achieve two purposes:
To avoid any increase in import competition for products those are particularly important for rural economy;
To protect the government revenue by maintaining tariffs on items that yield significant revenue – which probably means maintaining tariffs at mid-range levels since ultra high rates tend to generate very little revenue as they permit few imports.
Developing countries need to make different preparations for identifying the items for which these two alternative uses are relevant.
The question arises: for which products does the government wishes to restrict imports? What are the developmental benefits (in terms of livelihoods) that these restrictions achieve? How is this restriction attained at present? Are the current mechanisms for achieving this likely to become invalid as a result of the Doha negotiations? Are the imported products direct or indirect competitors for a domestically produced crop? These are the questions need to be asked to identify a plausible list of special products that should not be liberalized.
Different questions are required in the case of those items that are important for revenue generation. Given that the provisions on special products apply only within the agricultural negotiations it follows that they do not necessarily cover non-agricultural products that are important sources of tariff revenue.
To identify the items that are important, the governments need to assess their current revenue generated by import duties and ‘taxes having equivalent effect’. They need to project how these revenues might change given foreseeable developments in markets apart from any WTO negotiated liberalization.
Our policy makers should clearly figure out the performance of each major and minor crop. It is right that major crops like wheat, sugarcane, cotton, and rice accounts, on average, contribute 33.6 per cent to the value-added in overall agriculture. The minor crops account for 12.2 per cent of the value-added in overall agriculture.
The policy makers should also focus on minor crops like dates, chillies, and gram, etc. because a large part of rural population depends on these minor crops. These minor crops require certain amount of protection from import surges. If the government fails to do so then a large part of our rural population will suffer.
After a precise definition of special products the policy makers should examine the contribution of various major and minor crops to the GDP and then decide about the appropriate special products.
THE trade scenario since January 1, 2005 is changing with the World Trade Organization’s rules and regulations facilitating trade through fair and equitable competition. One of WTO’s concerns is the risk of cheap imports the producer country may face. The developing countries need to evolve a strategy to face such a situation. One such option is to choose crops which are under dumping threat. It is known as the special products strategy.
