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Chicken importers must read the literature on dumping

High levels of dumped imports have severely damaged SA’s chicken and sugar industries, and caused misery in poverty-stricken rural areas.

In a fitting answer to critics who say dumped chicken imports are doing no harm, the local industry has set out in great detail the damage done and the threat to local chicken producers and local jobs by a flood of unfairly priced dumped imports.

The information is contained across hundreds of pages in the application by the SA Poultry Association for anti-dumping duties against Brazil and four EU countries. The application relates only to bone-in chicken (leg quarters, thighs, wings) imported from Brazil, Denmark, Ireland, Poland and Spain. It also quantifies the extent of dumping.

In the three financial years from July 2017 to June 2020, more than half the bone-in chicken imported into SA was dumped product — imported at prices below the relevant sales price in the producer countries. The import value of this dumped bone-in chicken totaled R6.4bn. That’s a multi-billion motivation to lobby against measures to restrict dumped imports, and perhaps explains the articles and letters in Business Day from importers and their supporters arguing against tariffs.

Dumping is taking place because the major chicken producers in Brazil and the EU make their northern hemisphere profits from the preference there for chicken breast meat. That sells at premium prices, and the brown meat — bone-in chicken — piles up as an unwanted surplus. This surplus chicken is frozen and sold in bulk packs to any market that will take it, at any price they can get. Prime markets for the past two decades have been West Africa and SA.

The chicken industries in West Africa — Ghana, Senegal and Ivory Coast, in particular — have been devastated. The SA chicken industry is trying to prevent that happening here. The harm done to the local industry is an important part of the application. To secure anti-dumping duties the industry must show that dumping is taking place, and also that it is causing material injury to local producers. Importers like to argue there’s no dumping, and that imports, in any case, do no harm. The application refutes both arguments, detailing the damage dumping has done over the past three years.

The general arguments are public and the supporting detail is contained in confidential submissions. The industry has lost revenue, profits and market share, putting local jobs in the most vulnerable rural communities in peril. Because dumped imports have taken the bulk of increased local demand, the industry has been unable to grow sufficiently to achieve economies of scale.

While the industry has invested in additional production capacity, some of it is lying idle. Increased production could not regain market share because of the continued inflow of dumped chicken.

Employment levels were retained over the past three years, after significant job losses in previous years, but this may not continue. Not only has the industry suffered harm, it expects this to continue unless dumped imports are curbed. The application points to a significant oversupply of chicken in Brazil and the EU, and says producers there will be looking for export markets. SA, beware. Import levels have been reduced recently because of the economic impact of the coronavirus pandemic, the application says, but this is expected to be reversed as the pandemic abates and the global economy returns to pre-pandemic levels and practices.

Anti-dumping measures are not protectionism, another argument importers make frequently. Dumping is a transgression of World Trade Organization (WTO) rules, which bring the rule of law to international trade. SA’s International Trade Administration Commission (Itac), the independent body to which the application was made, has already said that, on the evidence, a prima facie case of dumping has been made, and the dumpers are now required to answer the case against them.

High levels of dumped imports have severely damaged SA’s chicken and sugar industries. It should be no surprise that both have called for action against unfairly priced dumped imports, which have caused contraction and job losses and spread misery in poverty-stricken rural areas. Importers also like to present the poultry sector master plan, which they signed, as an export charter. It is not. It is a balanced document, aiming to protect the industry against unfair trade such as dumping, and enabling it to invest and create jobs to serve expanded local and export markets.

Exports will not happen unless a distressed industry is stabilised and revitalised. There are barriers to exports to markets such as the EU, including insufficient state veterinary staff and facilities to provide the health clearance certificates the EU demands. The EU has kept poultry imports to less than 7% of the market — well below the 20% in SA — through a battery of “trade defence measures” that mollycoddle a protected and hugely subsidised agricultural sector.

The other drum importers like to bang is that of price — they argue that if the government agrees to these horrible import tariffs, the consumer price of chicken will rocket and the poor will suffer. Yet in Ghana, when the dumpers had free rein, a 2007 US department of agriculture report showed that the price of chicken rose to R226.69/kg, which is more expensive than steak in SA today.

Importers fail to explain how tariffs on some imports from some countries making up only a portion of the 20% of chicken imports can cause a massive rise in all retail chicken prices, including the 80% of chicken provided by local producers.

As signatories to the poultry master plan, chicken importers are committed to combating unfair trade such as dumping. If they devote some time to reading the application for anti-dumping duties, including the damage done by dumped imports, they might revise their optimism that investigation will find no evidence of dumping.

By Francois Baird, Founder of the FairPlay movement.

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