Should special agricultural safeguard be ignored? An evaluation for dairy trade

ABSTRACT

This study measured the impact of special agricultural safeguards (SSG) on dairy products imports by the US and Japan. It was observed that dairy products have been the most affected by this protectionist measures, and that these countries are relevant importers that impose SSG. The tariff lines subject to SSG were selected, and the period of analysis was from 1995 to 2015. The results showed that the impact of SSG applied by the US was much higher than for Japan. The overall estimated value of imports that did not happen due to the application of SSGs was approximately USD 2 billion. Specifically for the Brazilian economy, the condensed milk not exported to the US due to SSG applied cost the country BRL 345 million in GDP value and almost 4.5 thousand jobs. These results might be underestimating these effects, since the SSG tariff was not subject to calculation in several years.

KEYWORDS:

• Special safeguard
• SSG
• dairy products
• input-output matrix
• Brazil

JEL CLASSIFICATION:

• F13
• C67

Acknowledgments

We acknowledge the financial support provided by São Paulo Research Foundation (Fapesp) to elaborate this work.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ In addition, a test of injury or threat of injury is also not needed in order to use this protectionist instrument.

² The derivation of this equation can be found in Orcutt (1950).

³ Although the productive structure not suffering many variations, this technical coefficient matrix is calculated by also considering the prices of products and inputs observed in the economy and, hence, may suffer some variations due to relative price changes depending on the matrix year. However, the only important factor is the change in relative prices and not absolute prices. Even older matrices, if no physical structural changes have taken place, may well represent the current relations, considering the scenario of that year’s relative prices, which may vary randomly throughout the years.

⁴ The export growth shock was calculated by considering the price of liquid milk used as an input. Since the prices do not consider the added value of liquid milk for condensed milk, the impacts are underestimated. However, the shock was entered into the sector corresponding to condensed milk production, which is ‘Dairy products and ice creams’.