The proposed Special Safeguard Mechanism in the Doha Round negotiations

What is it about?

The Special Safeguard Mechanism that has been proposed by the G33 group of developing countries in the Doha Round of multilateral trade negotiations taking place in the World Trade Organization is intended to allow these countries to increase bound tariffs when either the import price or the import volume spikes downwards. Most analysis of this proposal has been undertaken assuming perfectly competitive markets. In this paper, it is assumed that there are imperfectly competitive intermediaries.

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Why is it important?

With a very small number of such firms, the potential benefits of the SSM practically disappear. A second conclusion is that the implementation of the SSM requires a degree of technical sophistication that is not likely to be realised in practice. While the second of these conclusions raises a practical problem, the first is more fundamental because in several of the international markets for the commodities that the G33 are likely to choose, a small number of multinational firms have a large market share, implying imperfect competition.

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