Poor will pay for chicken trade war
|Published
There is no question that our poultry producers are facing hard times, says Wilmot James, DA Shadow Minister of Trade and Industry There is no question that our poultry producers are facing hard times, says Wilmot James, DA Shadow Minister of Trade and Industry
Our poultry producers are facing hard times and SA poor will suffer for it, says Wilmot James, DA Shadow Minister for Trade and Industry
A trade war over lowly chicken seems so improbable and South Africa’s poor, who obtain most of their protein from gallus gallus domesticus, will pay the price for it. An early victim of the early skirmishes was the US, priced out of the market when South Africa imposed punishing anti-dumping tariffs in 2000, with the predictable consequence of reducing imports from 31 000 tons in 1999 to only 344kg in 2005.
What happened next had major consequences for our credibility as a trading nation and bedevilled our status as a partner in the application of the Africa Growth and Opportunity Act, no small a matter that focused President Barack Obama’s and his trade delegation’s attention during their recent visit.
The Appeals Court found that the International Trade Administration Commission failed to accurately calculate what is known as the anti-dumping sunset review timetable for 70 products, including poultry sourced from the US. The ruling meant that when South Africa - in 2006 - renewed the anti-dumping duties on meat bone-in portions, it was found to be illegal.
The commission launched an appeal against the ruling (which if applied required the Trade and Industry Minister to withdraw the duties) which was heard, the march of our law being as slow as elsewhere, at the end of April 2011. A year later, the court confirmed the initial ruling against the government, but then gave it three years to review the legal grounds upon which the duties were imposed in the first place.
It would not be the first time that the International Trade Administration Commission, despite its website propaganda that it is an “excellent institution”, would not serve the Department of Trade and Industry well. In what many concede was the work of amateurs, the commission drew blood when it imposed anti-dumping duties on whole chicken and boneless cuts from Brazil in February last year. Not slow off the mark, Brazil brought a dispute against South Africa at the World Trade Organisation but, perhaps befitting unfolding fraternal relationships in the Brics family, requested a friendly resolution.
Perhaps because he didn’t want to spoil the party with the Durban summit on the horizon, Trade and Industry Minister Robert Davies did not press ahead with anti-dumping duties against Brazil.
Instead, a general tariff against all imported chicken came under consideration triggered when the South African Poultry Association brought an application before the commission to raise it closer to the allowed limit.
What is the problem? The association represents local chicken producers. It claims it can’t compete against cheaper imports and runs the risk of closing businesses and losing jobs. In a country with a 25 percent unemployment rate, that is no small thing. Our domestic chicken business does not export. Consumers have been sucking up the imports that have been rising rapidly since last year with the result that the chicken trade deficit was over R3 billion by this year.
Broken down by category, it is the frozen bone-in portions (chicken meat and edible offal) that have risen very rapidly.
This has been accompanied by dramatic changes in the origin of the imports. In 2000, we imported most of our frozen bone-in portions from the US. In 2010, it was Brazil. Today, it’s Europe, most significantly, the UK and the Netherlands.
Statistically speaking, the Netherlands is particularly interesting. According to Department of Trade and Industry (DTI) figures, frozen bone-in products have increased from R3 million in 2010 to R305m last year, a spectacular rate of growth.
As far as we can tell, there have been no new investments in the chicken business in the Netherlands, leaving many with the suspicion that we are looking at the phenomenon called round-tripping, where the Dutch chicken actually originates from export-seeking producers like Brazil.
There is no question that our poultry producers are facing hard times. But is a general tariff increase a good idea? Lawrence Edwards wrote (Financial Mail June 21-26) that the poultry association’s application for a tariff increase has so many problems of fact and argument that it can’t be justified. With the international commission’s shoddy history, there can be no great faith in its ability to adjudicate well. The association’s application was heard on 11 June and little since.
This is why the DA supports the offer made by the more credible and competent Competition Commission to conduct a comprehensive market inquiry into the chicken business. Deputy Commissioner Trudi Makhaya apparently said the poultry sector is one the commission will consider during its upcoming strategic planning process because it has features that may prevent or restrict competition.
The difficulty with the International Trade Administration Commission reveals a much deeper problem with the quality of our civil service in the world of trade. We are told that at major trade negotiations we compare poorly with, say, India, whose officials often do not have economics PhDs or understand the hard bargaining over complex tariffs lines. India’s trade desks have up to five times as many personnel as ours.
And, there appears to be no organised investment in educating and training the pipeline of trade experts needed in the world of trade globalisation and liberalisation.
What about the African Growth and Opportunity Act? Davies recently said we should do everything possible to remain a partner in that act as it has been mutually beneficial. It will require that we make a proper deal with them, as we should with Brazil. Trade relations with Brazil are not as they should be, simply because we, despite the Brics propaganda, have not bargained a proper deal with them. Davies should strengthen bilateral arrangements, something to which he has shortsightedly not been inclined.
In an unprecedented act, the European commissioner for trade, Karel de Gught, climbed into Davies and the DTI for the shoddy manner in which bilateral trade arrangements were being wound down (“after all the trouble it took to set up” a former Department of International Relations and Co-Operation professional complained to me) in Tsar-like fashion, leaving his thin staff of trade specialists to pick up the pieces. The EU debacle is but a symptom of a deeper problem of trade expertise in our trade and foreign affairs ministries.
What of poor chicken? The commission apparently completed its work at its most recent meeting of July 9 and will be sending its recommendations to increase - or not - tariffs on certain categories of imported chicken.
If it does propose increased tariffs, it will be an act against the poor, who will pay the price for protectionism.
The chicken business is big business involving large food companies with reasonable profit margins. Davies should not allow big business to bury the hatchet in the heads of poor South Africans. Rather than raising tariffs, ask the Competition Commission to conduct a thorough market review.
* Wilmot James is the DA Shadow Minister of Trade and Industry
** The views expressed here do not necessarily reflect those of Independent Newspaper
Saturday Star