FairPlay Movement submission to the International Trade Administration Commission (ITAC) in support of the South African Poultry Association’s application for an increase in the rate of customs duty on frozen chicken in terms of Government Gazette No. 42068
In terms of Government Gazette No 42068, published on 30 November 2018, the International Trade Administration Commission (herein after referred to as ITAC or the Commission) called for any objections or comments to the application by the South African Poultry Association (SAPA) for an increase in the general rate of customs duty on frozen meat and edible offal of fowls of the species Gallus domesticus, with specific reference to bone-in portions classifiable under tariff subheading 0207.14.9 and boneless cuts classifiable under tariff subheading 0207.14.1 from 37% ad valorem and 12% ad valorem, respectively, to 82% ad valorem.
The FairPlay Movement makes the following comments in support of the Application:
Introduction to the FairPlay Movement
The FairPlay Movement is a not-for-profit trade movement that wants to end overly aggressive and predatory trade practices between countries. Its ultimate aim, namely to preserve and create jobs in domestic industries, will be achieved when big and small nations play by the same rules. It supports the principle that penalties and corrective measures for transgressing these rules apply equally to everybody.
FairPlay was founded in October 2016. In alliance with existing organisations and trade and industry experts, it formulates and promotes strategies to defend communities made vulnerable by predatory trade practices, and promotes sustainable livelihoods.
Over the past two years, the FairPlay Movement has specifically been campaigning against opportunistic imports of chicken into SACU states. The campaign was set in motion to unite the efforts of all parties that are suffering under the strain caused by chicken dumping in the region. To this end, FairPlay has formed coalitions to support workers who stand to lose their jobs and all people whose livelihoods are made vulnerable due to dumping.
In making these comments, the FairPlay Movement wishes to add civil society’s voice to the SAPA application, thus ensuring that inputs are not limited to experts and technical enquiries. Accordingly, these comments are not attributable to the applicants (or any other party to the proceedings) and are made independently.
The Need for Protection
The chicken industry accounts for more than 120 000 direct and indirect jobs in the SACU economy. Each of these jobs supports a number of dependents, and accounts for further dependencies in the affected local economies. As a largely rural industry, chicken farming impacts most powerfully on rural jobs, small towns and their economies, and dependent small businesses. When jobs are lost due to opportunistic predatory chicken imports, the viability and sustainability of the rural economy and small towns are directly endangered.
The Predatory Nature of Chicken Imports into the SACU Region
Import volumes of dutiable bone-in portions have nearly tripled in 2017 when compared to the previous year. It is a significant spike in a trend that has manifested over the last three years. Current statistics and trade conditions indicate that imports will continue unabated unless the local industry is given better protection.
Low priced chicken imports cause price suppression, which in turn constrains local production and investment. Local producers lose market share to producers that can expand their markets through predatory pricing thanks to generous subsidies received from their home governments.
South Africa is a highly efficient producer of chicken, more than able to compete with foreign producers. Competing against foreign government subsidies, however, is an impossibility. It is well known that production costs of chicken producers in the European Union, the USA and Brazil are subsidised either directly or indirectly, and that this support enables them to expand their export markets at the expense of domestic industries.
Strategic Industry Worthy of Protection
The poultry industry is the largest component of South Africa’s agriculture sector, contributing 19.8% of agricultural GDP in 2017 (up from 18.3% in 2016), and 40.0% of animal product gross value (up from 39.2% in 2016). The “farm-gate” value of poultry production, including meat and eggs, was R54.810 billion in 2017, a 17.0% increase from R46.861 billion in 2016.
The gross value of primary agricultural production from poultry meat (inclusive of all types of poultry) for the period 2017 was R44.04 billion, reflecting an annual increase of 20.1%. Poultry meat contributed 32.1% to the gross value of animal products (up from 30.7% in 2016) and 15.9% to all agricultural production (up from 14.3% in 2016).
Chicken is South Africa’s most popular source of meat protein and the largest staple protein for low income households. Far from a luxury, it is a necessity in the diet of the majority of South Africans, particularly the poor and vulnerable. Accordingly, chicken consumption has doubled since the year 2000 and consumers now spend more on chicken than on mealie meal, brown bread, rice or beef.
Rural economic development and employment aside, any disruption of the local chicken industry will directly affect the food security of lower-income households throughout the SACU region. Food security equates to national and regional security.
The inadequacy of the WTO definition of dumping
The General Agreement on Trade and Tariffs defines dumping as such: For the purpose of this Agreement, a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.
This definition of dumping relies on price as a determining factor. It overlooks the multiple state interferences at play in the over-production of commodities, such as chicken in Brazil, the USA and the EU. When exporting countries are able to reduce their cost of production through direct and indirect subsidies (including social support such as a social wage), predatory trade practices are enabled and local producers are destroyed.
This is exactly what is happening in the SACU region: efficient producers of chicken are increasingly falling victim to predatory trade practices that circumvent the intent of the mechanisms that should ensure equitable trade between nations.
While the Commission is bound by the regulatory framework within which it operates it is imperative that recognition be given to the predatory nature of chicken imports into the SACU Region and that relief be provided by way of the remedy contemplated in the Application.
The outcome of the SAPA application will have a decisive economic and social impact on the SACU member states. Regardless of what ITAC decides, the outcome will not be neutral. It will affect the livelihoods of thousands of workers, their dependants and the towns where they live. Growth, transformation and job creation will either surge or regress dramatically, depending on whether the decision sends a supporting or discouraging signal for new investment. Ultimately, the strategically important local chicken industry can contribute to stability, food security and long-term growth in the SACU region – or its demise can result in a group of impoverished, dependent and economically colonised countries.