Comparing safeguard measures in recent regional and bilateral trade agreements
As negotiators pursue talks on a workable agricultural safeguard mechanism at the World Trade Organization, it is critical that they have access to up-to-date and reliable information on the extent to which recent bilateral and regional trade deals include clauses on safeguards.
This paper, which builds on a previous ICTSD study, provides policy-makers and others with an evidence-based analysis of the implications of recent bilateral and regional trade negotiations for developing countries’ ability to use safeguard measures to protect domestic producers from sudden surges in the volume of imports or price depressions.
Global market prices for a number of commodities have continued a steady decline from peaks in 2011, after a period of pronounced volatility and recurrent high prices that prevailed from 2006 onward. Slowing demand for commodities in major economies such as China, coupled with falling oil prices and a robust supply-side response to recent high price episodes, have contributed to the recent slide. The new market environment has also prompted concerns that “counter-cyclical” domestic support payments in some major producing countries may exacerbate the fall in prices by shielding producers from market signals and contributing to surplus farm production at the global level.
At the same time, recurrent extreme weather events and changing patterns of temperature and precipitation are having increasingly significant consequences for agriculture in developing countries, especially in areas reliant on rain-fed production systems. Analysts anticipate that these challenges will become more acute as a result of climate change in the years ahead – posing new obstacles to the international community as it seeks to achieve the ambitious Agenda 2030 target of ending hunger and malnutrition. In particular, increased weather-related volatility on global markets is likely to affect the “stability” component of food security in developing countries.
At the World Trade Organization (WTO), developing country negotiators from the G-33 coalition have highlighted their desire to be able to make use of a simple and effective safeguard mechanism to help protect domestic producers from sudden volume surges or price depressions. A decision at the WTO ministerial conference in Nairobi determined that the trade body’s members would pursue negotiations on this topic in dedicated sessions of the Committee on Agriculture.
At the same time, farm exporting countries from both developed and developing countries have argued that this issue should be addressed as part of broader talks on market access at the WTO. Negotiating dynamics in this area have been affected by market integration efforts in bilateral and regional trade negotiations, including the twelve-member Trans-Pacific Partnership (TPP) that was concluded in 2015.
As both importing and exporting country negotiators pursue talks on a workable safeguard mechanism that could be agreed upon at the WTO, it will be critical for them to have access to up-to-date and reliable information on the extent to which recent bilateral and regional trade deals include clauses on safeguards, as well as analysis on the potential significance of these provisions for ongoing efforts to craft an international instrument in this area.
This paper, by Willemien Viljoen, provides policymakers, negotiators and other stakeholders with an impartial, evidence-based analysis of the implications of recent bilateral and regional trade negotiations for developing countries’ ability to use safeguard measures to protect domestic producers from sudden surges in the volume of imports or price depressions. As such, it builds on and updates previous ICTSD analysis on this same topic by addressing developments in preferential negotiations on trade.
The use of safeguard measures is regulated in multilateral trade agreements and regional and bilateral agreements. The applicable multilateral agreements are the General Agreement on Tariffs and Trade Article XIX, the World Trade Organization (WTO) Agreement on Safeguards and Article 5 of the WTO Agreement on Agriculture. The WTO Agreement on Safeguards provides clear guidelines and strict procedural obligations to which governments must adhere. Global safeguard measures are product specific and need to be applied on a most favoured nation basis, thus without discrimination against other WTO member countries. However, safeguard provisions provide for discriminatory treatment in two instances: 1) when excluding partner countries from global safeguard actions and 2) when excluding third countries and only imposing bilateral or regional safeguard actions on partner countries. These two exclusions were found in a number of the examined trade agreements.
Bilateral and regional safeguard mechanisms are an integral part of most regional trade agreements to address the effects of trade liberalisation initiatives under the applicable agreement. However, there are still recently concluded agreements which are silent on the issue of bilateral or regional safeguards. Most free trade agreements concluded in recent years provide special and different safeguard mechanisms which share the same or similar grounds for the invocation of trade-restrictive measures such as the global safeguard mechanism, but only address the effects of certain bilateral or regional free trade agreements, and are thus only applicable between the contracting parties of such bilateral or regional agreements. Although there are some systematic differences between the global and general bilateral or regional safeguards, similar provisions to those found under WTO law are included in the trade agreements. Many of the agreements include exactly the provisions of the WTO Agreement on Safeguards, while several others make direct reference to the procedure and obligations contained in WTO rules.
The study examined 26 agreements which were selected based on various criteria. The sample of agreements is geographically diverse, includes countries from all continents and includes a mix of older and more recently concluded ones in order to evaluate the development of safeguard provisions over time. Furthermore, the sample also includes a mix of North-North, North-South and South-South trade agreements.
Of the 26 chosen agreements, 23 have been notified to the WTO as being in force, while two are yet to be notified (the SADC-EU Economic Partnership Agreement and the Trans-Pacific Partnership Agreement), while one (the Tripartite Free Trade Agreement) is yet to be concluded. The agreements are divided into categories, based on the following characteristics:
No bilateral or regional safeguard provisions;
Bilateral or regional safeguards without special conditions; and
Bilateral or regional safeguards with special conditions.
Furthermore, those agreements containing specific bilateral or regional safeguard provisions (mainly agricultural safeguards) are also highlighted and the provisions assessed.
Subsequent to the evaluation, the following determinations were made for the agreements examined.
The only agreements without any reference to a bilateral safeguard measure are the Australia-Chile FTA, the New Zealand-Hong Kong Closer Economic Partnership Agreement and the New Zealand-Chinese Taipei Economic Cooperation Agreement.
The only instance in which bilateral or regional safeguards do not specify additional conditions for implementation is in the case of the investigation procedures and the determination of serious injury or the threat of serious injury.
The majority of agreements contain specific conditions for the implementation of general bilateral or regional safeguards. These specific provisions vary from agreement to agreement but mostly relate to the type of measures which can be applied, the period of application, notification, compensation and dispute settlement.
The specific safeguards mostly apply to safeguard measures applicable to agricultural products. However, other specific provisions include safeguards specific to trade in textiles, forestry products and certain industrial products.
Indications are that in recent years the use of specific safeguard measures in bilateral and regional trade agreements has gained in popularity; where previous analysis (reference) found limited utilisation of specific safeguards, six of the agreements included in this analysis contain different types of specific safeguard measures. In some of the most recent agreements there are specific safeguard provisions for various products and member countries included within detailed and complex frameworks.
Some of the recently concluded agreements are not only comprehensive in terms of coverage provided for in the agreement, but also contain the most comprehensive provisions regarding bilateral and regional safeguard measures, especially in the case of allowances for special safeguard provisions.
The examination shows that there has been an evolution not only of safeguard provisions in trade agreements, but also the coverage, scope and structure of these trade agreements.
Regional and bilateral agricultural safeguards can inform the multilateral negotiations to ensure a special safeguard mechanism which is transparent, predictable, accessible, manageable and effective, allowing for limited product coverage and asymmetry in application.
However, this approach can be cumbersome and will require careful negotiation and drafting, industry and capacity needs-based assessments and preparedness by all parties concerned.
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 Kruger, P., W. Denner, and J.B. Cronje. 2009. Comparing Safeguard Measures in Regional and Bilateral Agreements. ICTSD Programme on Agricultural Trade and Sustainable Development. Geneva: International Centre for Trade and Sustainable Development.