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Predatory dumping is not unlawful, but SA should implement rule of law

The government needs to act as the poultry industry is threatened by cheap imports and more jobs are at risk

 

SA has one of the most progressive and advanced constitutions in the world. It was the consequence of the combined wisdom and diverse experience of the lawyers and politicians who drafted it after the shackles of apartheid were removed.

 

It was the first constitution in the world to include social and economic rights as justiciable rights. These rights include the right of access to housing, healthcare and education. They were included in recognition that what the majority of our people need and want is income to allow them and their families to enjoy sufficient food to eat, have a roof over their heads and have their children educated.

 

These second-generation rights are as important to the majority of our people as those first-generation human rights relating to freedom of expression, freedom of assembly and freedom from unlawful arrest. Consequently, and as a major innovation, the second-generation rights are justiciable under our Constitution.

 

By the same token, the rights granted to all South Africans have little practical meaning for the millions of those in our nation who are unemployed and forced to live in circumstances the Constitution does not countenance. Our unemployment rate is one of the highest in the world and keeps growing.

 

In the face of substantial unemployment, it is crucial to preserve and protect current employment and to encourage all means of creating new employment. It is in that context that the position of SA’s chicken industry has attracted the attention of a new organisation, the FairPlay Movement.

 

I am no expert on unemployment and even less an expert on the poultry industry. However, my understanding is that over the past six years, few industries have been as badly affected by retrenchment, closures and liquidation as the poultry industry. This sector is not just central to SA’s food security, it is also a leading agricultural employer; with 110,000 direct and indirect employees and as many as 20,000 jobs in other industries dependent on it.

 

One of the factors in the contraction of the chicken industry has been ascribed to dumping by foreign producers and especially from some members of the EU.

 

What is dumping? In both South African and international law, dumping constitutes the sale by a foreign producer of a product at a price that is below that normally charged by it in its home market, or at a price below the cost of production. In some cases, the purpose of dumping is what is known as predatory. Here the intention of the exporter is to force local producers into insolvency and closure. In other words, the destruction of competition. The foreign predatory dumper is then able to export its products into that country at higher prices without fearing competition from the producer or producers who have been forced out of business. Most people would be surprised to learn that such conduct is not prohibited by South African or international law.

 

International trade is governed by international law. The most important provisions of that law are to be found in the General Agreement of Tariffs and Trades (GATT) that was signed by 23 nations in Geneva in 1947. By 1995, 123 nations had signed it. With effect from January 1 1995, GATT became a World Trade Organisation (WTO) teary. Dumping is not unlawful under international law — it is “condemned”. The only remedy allowed for those harmed by predatory dumping is the imposition of import tariffs “not greater in amount than the margin of dumping in respect of such product” (GATT article VI.3).

 

Why would the WTO not wish to prohibit and criminalise predatory dumping? The reason is to be found in the preamble to GATT, which states that its purpose is the “substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis”. In other words, it is to promote open markets free of preferences and tariffs.

 

South African law also does not prohibit predatory dumping but, following GATT, it allows the imposition of a tariff in cases where dumping causes material damage to an existing industry. International law also prohibits SA from taking “specific action” against dumping.

 

Even where the dumping is proven to be causing harm to a local industry, and even if the dumping is predatory, the government retains discretion as to whether to impose import tariffs. It follows that the cards are stacked in favour of foreign producers who dump their products in SA and this even applies to predatory dumpers.

 

So, what can be done about it? This is where the rule of law comes into the picture. In the case of the international community, there is no equivalent of a national parliament. However, there are laws that emanate from different bodies. The most important are treaties that are entered into by sovereign states.

 

The WTO dispute-settlement system is based firmly in the rule of law. There are now decisions that are binding on nations that have joined the system and there is a court of final appeal called the Appellate Body of the WTO. It sits in Geneva. The main users of the WTO dispute-settlement system are the large trading nations. It is in their interests that trade agreements be respected and implemented according to their terms. Until recently, the main users were the US, the EU and Canada, followed by Brazil, India, Mexico, Argentina, Korea, Japan and Thailand. Today, China, as it becomes a major trading nation, is using the WTO procedures more and more frequently.

 

I might mention that there is a present concern that the Trump administration in the US, with its exceptionalist policies, will withdraw from the system and ignore rulings it does not like. If it does become an outlier, I have little doubt this will in the end be to its great disadvantage. In our contracting, globalised world, reciprocity has become more important and, as a consequence, compliance is growing.

 

The international rule of law requires all nations to recognise that the law applies to them regardless of their political or military power or their size or wealth. This applies no less to SA.

 

An amendment to the provisions of GATT is cumbersome and takes many years to achieve and become effective. I would suggest that a far more practical approach to achieve fair play in the South African chicken industry is for the government to take such steps as are lawful under international and South African law to prevent predatory dumping.

 

The most important of these is the imposition of tariffs in those cases where the government can establish that the dumping “causes or threatens material injury to the established” chicken industry. The evidence that would be required to establish this is beyond my knowledge and I am unable to comment on the prospects of success.

 

I do know that if the facts establish predatory dumping — that is, that the party or parties dumping have as their motive or one of their motives the destruction of South African competitors — the rule of law and fair play in trade dictate that on moral and legal grounds such action should be taken. It would indeed be in the interests of the government to take such action against a practice that is doing damage to a very important industry and potentially causing a significant loss of employment for thousands of workers.

 

Consideration might also be given to the institution of proceedings against the dumper or dumpers under the Competition Act of 1998. This would be possible only if it could be established that there was predatory pricing by a dumper or dumpers that have dominance in the poultry industry.

 

What constitutes dominance in the market is not simply stated.

 

The future success of our country depends on equalising the wealth that remains so unfairly distributed more than 20 years since the end of apartheid. Unemployment is a blight upon the economy. Every day, we should give thought to the millions of our fellow citizens who cannot find employment and to the suffering this causes for them and their families. Predatory dumping is calculated to exacerbate this misery.

 

It is for these reasons that I immediately accepted the invitation to become the patron of the FairPlay Movement. It is my hope that together with other interested parties, our efforts can make a difference. One area where we can make an immediate difference is in helping to tackle the plight of those rendered jobless by dumping and the many dependants who have previously relied on that income from the chicken industry.

 

Where dumping has exacerbated poverty, hardship and hunger, civil society must devise ways to bring relief. This is what the Social Support Summit seeks to achieve.

 

• Goldstone is a former Constitutional Court judge. This is an edited excerpt from his keynote speech at Wednesday’s Social Support Summit in Johannesburg.

First published in Business Day on 02 August 2017
https://www.businesslive.co.za/bd/opinion/2017-08-02-predatory-dumping-is-not-unlawful-but-sa-should-implement-rule-of-law/

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