Poverty Impacts of the Volume-Based Special Safeguard Mechanism

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 thirty-one countries finds that poverty is generally increased following the imposition of this 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.