Special safeguard tariff impacts on the Brazilian sugar exports

Abstract

Purpose – This paper aims to present a critical analysis of special safeguards (SSGs) and a simulation of their effects on Brazilian sugar exports to countries such as the US and the European Union (EU) bloc. Design/methodology/approach – The first stage involved the identification of tariff lines for the EU and the US sugar imports from Brazil between 1995 and 2013. Next, notifications of World Trade Organization about SSGs were examined to identify the years when the measure was applied on the sugar trade by these countries. For the years when SSGs were applied, the values of these additional tariffs were calculated. This information was used, along with price elasticities, to obtain the effects of an increase in Brazilian sugar exports in the absence of SSG and also the overall impact on the Brazilian economy, using its input-output matrix. Findings – Results indicated that the estimated value of the direct, indirect and income effects of SSG tariffs on Brazilian sugar exports to the EU and the US markets through the period 1995 to 2013 could amount to BRL 22 billion in terms of the exporting country GDP. This suggests that this policy can be highly perverse, as it translates into lower domestic production for both, the exporting and the importing countries. This issue is relevant for discussions on the global sugar market, given the facts that it is one of the markets which have been most distorted by protectionism. Originality/value – This issue is relevant for discussions on the global sugar market, given the facts that it is one of the markets which have been most distorted by protectionism.