Poultry woes

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For many years, South Africa has imposed an anti-dumping duty on specific poultry imports from the US. This duty was recently increased, and now ranges from 12% (boneless cuts) to 37% (bone-in portions).

At the time the new import tariffs were promulgated, the South African poultry organisation had already indicated to the International Trade Administration Committee (ITAC) that the dumping of poultry products at low prices created problems for the local industry.

The World Trade Organisation (WTO) agreement on agriculture, which regulates trade between countries, provides various ways in which a country can prevent damage to its markets by products being imported at lower prices (dumping). Anti-dumping tariffs can be regarded as penalties for contravening the rules of bilateral trade.

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A penalty not readily granted
An industry that wants to apply for an anti-dumping tariff has to follow a rigorous process. Only a few agricultural industries have managed to obtain anti-dumping tariffs, and in many cases only for a limited period. Some years ago, the South African poultry industry obtained anti-dumping tariffs against specific US imports. A trade agreement with the EU, meanwhile, resulted in the higher import tariffs levied in 2014 not being applicable to imports from the EU.

Following a well-prepared application by the poultry industry that demonstrated to the ITAC’s satisfaction that dumping had indeed taken place, the ITAC imposed additional anti-dumping tariffs on poultry imports from various countries in March 2015.

Enter Agoa– and complications
In 2000, the US passed the African Growth and Opportunity Act (Agoa), with the aim of providing tariff-free entry into the US market for sub-Saharan countries. South Africa is a major beneficiary of Agoa, exporting more than US$2 billion worth of products to the US under Agoa in 2008. South Africa exports more than 150 different tariff line products to the US under Agoa.

Citrus fruit and concentrated citrus fruit juice, wine and ethanol are the most successful products under Agoa and have the highest growth potential. On the other hand, it is exceedingly difficult to comply with US sanitary and phyto-sanitary measures.

The current Agoa agreement expires in September this year, and SA and US government officials are negotiating a new agreement.

Senators from the major poultry-producing states in the US oppose the inclusion of South Africa in Agoa unless South Africa provides market access for US poultry without the anti-dumping tariffs.
After much tough negotiation, the local poultry industry had to agree to allow 65 000t of chicken imports at lower tariffs.

A compromise bought at a cost
While everyone is relieved that South Africa remains a beneficiary of Agoa, the poultry industry’s decision to accommodate the US will have a negative impact on local poultry prices and put margins under pressure. Moreover, it creates a worrying precedent for future trade relations.

Anti-dumping duties serve as protection against the dumping of products in other countries. They are a country’s reaction to unfair trade practices applied by another country or specific company within a country.

To apply for an anti-dumping duty, the industry involved must prove that the dumping causes material damage to the local industry. The ITAC asked SARS to apply an anti-dumping tariff only after rigorous investigation and after providing opportunity for all to comment.

The provision of a quota for imports within an anti-dumping tariff based on pressure from politicians in the US creates an opportunity for other politicians to use the same type of threat in future. If, for instance, the dairy industry manages to get an anti-dumping tariff imposed on low-priced cheese imports, we may see lobbyists from Wisconsin and Florida protesting and trying to block South African exports to the US.

In general, South Africa’s agriculture and agro-processing industries are competitive with their counterparts in other countries. Our import tariffs are relatively low compared with those of other countries as the policy has been to provide industries with tariffs that place a certain amount of pressure on them.

If import tariffs are fixed at relatively low levels and further diluted by trade agreements, we shall need to use trade remedies such as anti-dumping tariffs to protect our markets against unfair trade practices.