Dumping and predatory trade

Concern over rebate argument from UCT economists

An article by economists from the University of Cape Town supports the proposal for temporary rebates on chicken imports. But does it rest on firm foundations?

In the Daily Maverick, Professor Lawrence Edwards and researcher Jing Chien from UCT’s school of economics, said there are many reasons why the government should consider a temporary reduction in import duties. They argue that a key consideration is the retail price of chicken.

The article then goes on, at great length and detail, to justify the authors’ conclusion that rebates “will provide some relief to consumers who have faced very high food prices”.

FairPlay does not wish to get into an economic argument with distinguished academics – we will leave that to economists.

However, we have two main observations about a report that will delight chicken importers, who have enthusiastically supported the government’s rebate proposal. It may also impress Trade and Industry minister Ebrahim Patel, who will decide whether or not to implement rebates.

The first observation is that the article focuses only on the possible impact that rebates could have on retail chicken prices. This is not the reason that rebates are under consideration – they are being investigated as a means to encourage a rapid increase in chicken supply because of local shortages caused by bird flu outbreaks. It is supply, not price, that needs to be analysed, and whether or not there is a shortage that would justify rebates to fill the gap.

Second, and perhaps more importantly, is that the authors appear to view import tariffs as the sole reason for a continued rise in chicken prices.

“A multitude of high and rising barriers to imports of chicken products lies behind the strong increase in the consumer price of chicken imports,” they state.

There’s no mention of the perfect storm that has battered the poultry industry for the past few years. No mention of the billions of rand in extra costs that poultry producers have faced because of power cuts and other infrastructure failures. No mention of the billions in extra costs because of high feed prices and the impact of bird flu, which has resulted in 8.5 million chickens being culled so far this year, without any government compensation.

The only crisis the authors see, and mention at the start, is one of supply due to bird flu. After that, it’s all about tariffs and retail prices. The fact that the industry is struggling in the face of multiple challenges, and selling chicken at a loss, does not factor as a reason for price increases, now or in the future.

No, it’s apparently all due to import tariffs, which must come down.

Did the authors take any other factors into account? And, if not, could it be that their article is based in part on a false premise? We will await the judgment of economists.