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Importers’ tariff proposal gets dumped

Importers’ tariff proposal gets dumped

The suggestion from chicken importers that South Africa should remove all tariffs on imported chicken has been well and truly dismissed. You might say it’s been dumped.

Importers have been suggesting that to counter rising food prices the government should remove all import tariffs on chicken, and commit not to institute any more tariffs for the next three years.

The debate continued in the past week, with Izaak Breitenbach of the SA Poultry Association calling the proposal “superficially appealing but economically dangerous”.

In a statement and a letter to the Sunday Times, Breitenbach pointed out that the main driver of rising prices is not tariffs but the impact of the Ukraine war on the prices of poultry production input costs such as grain, fuel and fertiliser. This had come when prices were already rising because of the effect of the Covid-19 pandemic on global trade.

He said the proposal would do two things. It would be a severe threat to the South African poultry industry, which is recovering from decades of dumped and predatory chicken imports.

“Removing tariffs and guaranteeing no new tariffs for three years would lead to a flood of predatory chicken imports, worse than what we experienced in the years to 2018,” he said.

“That led to contractions and job losses, and this would happen again without tariffs. The biggest impact would be felt by small-scale independent producers, quite often family-owned enterprises, which are the backbone of our rural communities.”

“The poultry industry is a R50bn strategic national industry and asset, responsible for more than 100 000 jobs and vital for food security. Putting this globally competitive industry at risk is not in the interests of consumers or the country.”

There is currently a 62% tariff on bone-in chicken imports from non-European Union countries. Yet, even after applying that tariff, landed prices from some of these countries were still below South African producer prices.

“That is not fair trade,” Breitenbach said. And it would be even less fair if those tariffs were removed.

The other effect of removing tariffs would be to benefit the chicken importers calling for the tariff removal, Breitenbach pointed out, because reduced imports would have resulted in reduced profits. That is why FairPlay asked last week whether importers were “talking their own book”.

Buy local, duty-free chicken

FairPlay founder Francois Baird took issue with the numbers used by importers to justify their call for tariff removal.

In a letter to the Sunday Times, Baird said that Paul Matthew, CEO of the Association of Meat Importers and Exporters, had nullified his argument with his own statistics.

Matthew “beguiles consumers with the prospect of a 33% price drop” if tariffs are removed, Baird said.

“The flaw in his arithmetic becomes evident when Matthew goes on to say that local poultry producers supply 85% of the chicken on the South African market, with importers contributing only 14.9% to national chicken consumption.

“So even if his theoretical price cut applied to all of that 14.9%, it would have no effect on the 85% of chicken supplied by local producers.”

FairPlay believed the tariffs should remain, as they contributed to the revival of an industry hammered by decades of dumped imports, and enabled South African jobs. 

“Our advice to consumers is to support local jobs by buying South African chicken – it’s safe, healthy, nutritious, and it’s already tariff-free,” Baird said.

There was also a barbed comment from David Wolpert, CEO of AMIE before Matthew, and who has said it was a mistake and “stupid” for his successor at the importers’ association to sign the poultry master plan.

In his letter to the Sunday Times, Wolpert supported Matthew’s contention that there were too many tariffs on imported chicken, it was time to stop regular tariff increases and there should be more focus on chicken exports. But he was scathing about Matthew’s call to end existing tariffs.

“It is naïve to expect all poultry tariffs to be removed. It would be fiscally unaffordable and would lead to an avalanche of similar requests from other essential industries,” Wolpert wrote.

No wonder Wolpert doesn’t want to be classified as part of the imports lobby.

A televised debate

The issues of dumping, tariffs and the poultry master plan were also covered in a debate on BDTV, anchored by Michael Avery, host of Business Watch.

It featured the same three protagonists – Izaak Breitenbach, David Wolpert and Francois Baird – plus Donald Mackay, who is a trade advisor to chicken importers.

Breitenbach shot down one of the key allegations made by importers, that chicken prices have risen by 10% a year for the past 10 years.

Official statistics showed price increases for the past five years had been only 3.5%, which is below the inflation rate in South Africa, he said.

He pointed out yet again that food price increases were a global issue, pushed upwards by rises in raw materials – for the poultry industry the most important are maize and soya, which are priced internationally.

Both he and Baird said imports are not an issue – the problem is dumped and illegal chicken imports.

“We need a level playing field and It’s more or less level now,” he said. As long as those tariffs remain in place.

On the other hand, Mackay and Wolpert criticised the validity of recent anti-dumping duties after an investigation by the South African trade regulator, the International Trade Administration Commission (ITAC).

“There were many errors in the investigation and duties were imposed based on those errors,” Wolpert said.

Baird pointed out the impact of dumping on small-scale producers, who were a vital in supplying chicken to rural communities, but were the first to go out of business when dumping increased.

“We need to worry about the whole value chain,” he said.

AGOA quota up for renewal

President Jacob Zuma and US President Barrack Obama during a press briefing at the Union Buildings in Pretoria, 2013. Photo courtesy: GCIS / CC BY-ND 2.0

One of the issues raised during the BDTV interview was the substantial volumes of chicken imported from the United States at pricing equivalent to dumping.

The problem is that the US is importing legally at pricing equivalent to dumping in terms of a quota exempted from anti-dumping duties, negotiated in 2016. Breitenbach said the South African poultry industry would definitely oppose the renewal of the quota when it comes up for review in 2025.

The quota – which has risen from 65 000 tonnes to more than 70 000 tonnes of bone-in chicken a year – was forced on South Africa during negotiations for AGOA trade agreement with the United States in 2016.

The US made the poultry quota a condition of signing the agreement, which gave substantial benefits to a variety of South African exports, particularly the steel and motor industries.

Because of the benefit to the whole economy, the poultry industry agreed, and “took one for the team” as an executive put it.

So, since 2016, the US has had a licence to dump huge volumes of chicken portions in South Africa free of penalties. If the quota is exceeded, as it was in 2019, the excess is subject to anti-dumping duties which have been in place since 2000.

The US has risen to become the second largest exporter of chicken to South Africa, behind Brazil.

Breitenbach said the industry would “make our voices heard” in opposing the quota renewal.