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Instrument

Categorising products as "sensitive" or "special"

Description

Sensitive products are excluded from general tariff liberalisation. Hence, tariff protection is ensured at least for a transitional period or is reduced to a lesser extent. Sensitive products are defined during negotiations on trade agreements. Sensitive products are often products for which liberalisation is politically difficult to achieve, which are particularly relevant to food and nutrition security and rural development, which have the potential to become competitive in the future (infant industry), the liberalisation of which would have an immediate negative impact on poor population groups.

There is as yet no ‘sensitive products’ category under WTO rules and discussions are still ongoing about its definition and quantities. To make it easier to define exceptions during the liberalisation process, the inclusion of two instruments is under discussion: first, ‘sensitive products’ that apply to both industrialised and developing countries, and second, ‘special products’ that apply exclusively to developing countries with the aim of supporting food and security, securing livelihoods and rural development. The ‘sensitive’ or ‘special product’ category also exists in many bilateral trade agreements (e.g. the Economic Partnership Agreements (EPA) between the EU and ACP). These are excluded from the liberalisation process.

Many economists are of the opinion that complete liberalisation of agricultural trade is not always beneficial for economic development and that protecting certain sectors such as those employing a high proportion of poor people can be an appropriate measure. However, it is important to ensure that where protection is provided, it does not enrich a group of powerful producers.
As an alternative, safeguards are a useful measure to protect against sudden import surges. The agri-food sector can also be supported through beneficial framework conditions and input and production subsidies.

Requirements

  • Compatible regional and world trade law (WTO conformity)
  • Clear and coherent political strategy and targets for policy-makers and public authorities
  • Constant market surveying and forecasting
  • Efficient customs administration
  • Close cooperation and knowledge sharing with research institutions
  • Market price information systems

Possible Negative Effects

  • Inefficient economic structures are preserved, thus distorting the market
  • Higher prices for consumers (loss of consumer surplus) and the processing industry (usually short-term)
  • Prices of complementary products could rise
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This page was last edited on 24 October 2019 | 9:42 (CEST)
Implementation Level
  • National Government
Required Budget
low ($)
Impact Horizon
  • short
  • medium
Administrative Complexity
medium
Ministries Involved
  • Agriculture, Fisheries & Forests
  • Trade, Industry & Economic Development
  • Finance
Trade Impact
distorting
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