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GTAP Resource #4384

"A Need for Caution in Applying the Volume-Based Special Safeguard Mechanism"
by Ivanic, Maros and Will Martin


Abstract
Abstact:
The proximate cause of the collapse of the Doha Agenda negotiations in 2008 was disagreement over the volume-based Special Safeguard Mechanism (SSM). This measure is more cumbersome to use than the price-based safeguard and hence seems likely to be used mainly when price-based safeguard cannot be used, particularly when import prices have not declined and imports are rising because of an adverse shock to domestic output. While many simulations of the SSM on domestic prices are available, there appear to be none examining its impacts on the welfare of poor households. Whether such a safeguard will increase or reduce poverty can only be determined empirically—if there are enough small, poor farmers who are net sellers of the commodity when the duty is imposed, then it may reduce poverty. If most small, poor farmers are net buyers of dutiable products, then poverty will likely rise. Empirical analysis for twenty-eight countries finds that poverty is generally increased following the imposition of a safeguard. The adverse poverty impact of the duty is larger when the quantity safeguard is likely to be triggered, because declines in farm output reduce the benefit to poor producing households from higher prices.

Methodology:
We use historical yield data (FAO) to describe the distribution of yield shocks and their correlation across crops and regions. We then use this distribution to create a set of 500 Monte Carlo simulations in which we use the GTAP model to translate yield shocks into changes in tariffs (in line with the SSM proposal with the use of the recently introduced compementarity feature of GEMPACK) and consumer prices and incomes. Finally, we gather GTAP output to estimate the distribution of global poverty using a sample of 31 developing countries. We assess the implication of the SSM proposal for poverty by comparing the distributions of poverty with and without SSM tariffs.

Results:
We find that the imposition of SSM tariffs results to...


Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2014
Version:
Created: Ivanic, M. (4/9/2014)
Updated: Ivanic, M. (4/9/2014)
Visits: 1,765
- Economic analysis of poverty
- Agricultural policies
- Food prices and food security
- Not Applicable


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