Description

Safeguards are WTO-level protective measures. Countries can apply safeguards, i.e. import quotas or higher import tariffs, if there is a surge in import volumes of a certain product or import prices fall "significantly".

The details of safeguards (e.g. the definition of an import surge) are regulated in trade agreements and lose their importance to groups of countries aiming to establish a customs union and harmonise their agricultural policies. That said, the form of safeguards imposed on third countries becomes more important, since they have to offer protection to all members of the economic area.

The general safeguard mechanism as per GATT 1947 Article XIX and the WTO Agreement on Safeguards can be applied to both industrial and agricultural products. On the other hand, the Special Agricultural Safeguard (SSG) is only available to 39 countries and only for currently 6,156 selected agricultural products. Because of this restriction, developing countries are calling in the Doha negotiation round for the SSG to be replaced by a special safeguard mechanism that would be available to all developing countries.

Safeguards can be an appropriate instrument for protecting domestic markets against short-term unexpected drops in prices. The more liberal a country’s trade regime is and the more domestic prices are affected by fluctuations on the world agricultural market, the more important safeguards become. When safeguards are included in trade agreements, they provide vital leeway for developing countries; nevertheless, they are recommended to be used as a temporary protective measure rather than a permanent one.

Safeguards are usually applied for limited periods of time, e.g. no more than three years under WTO rules. Their process for approval is relatively complex and time- consuming. As an alternative, many developing countries use applied tariffs that are lower than WTO bound tariffs. In this case, countries can increase tariffs up to the bound level without the use of specific safeguard arrangements if import prices rise too high or prices fluctuate.

Requirements

• A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
• Clear and coherent political strategy and targets for policy-makers and public authorities
• Close cooperation and knowledge sharing with research institutions
• Compatible regional and world trade law (WTO conformity)
• Constant market surveying and forecasting
• Efficient customs administration
• Market price information systems

Possible Negative Effects

• Inefficient structures and enterprises are retained / market distortion
• Higher prices for consumers (loss of consumer surplus) and higher costs for the processing industry (usually short-term)
• Price of complementary products could increase