The politics of tariffs, and how it overshadows local industry

In apartheid South Africa, the domestic fuel price was a political decision. The determinant was the rise, and sometimes fall, of the imported price of the oil from which petrol and diesel are produced. However, what motorists paid at the pump, and when changes were made, was decided by a government minister.

The result was that the government tried to delay fuel price increases as the oil price rose, and then had to announce substantially higher prices, causing an outcry.  After one such incident, the government switched to a politically neutral policy.

It announced that fuel prices would change monthly depending on variations in the international oil price and the exchange rate. Blame the oil price, not the cabinet. That policy continues to this day.

However, in modern South Africa, it is trade tariffs that are the political decision.

Anti-dumping investigations are conducted by the independent International Trade Administration Commission, ITAC. The commission then forwards its recommendations on anti-dumping duties to the government, which may or may not agree with or implement the recommendations.

The poultry industry expected anti-dumping duties to be implemented last August against Brazil and four European Union countries, after an ITAC investigation found that frozen chicken portions from these countries were being dumped in South Africa and were harming the local industry.

The Minister of Trade, Industry and Competition, Ebrahim Patel, agreed that the anti-dumping duties were warranted, and that the industry was suffering harm.

However, citing concerns about retail prices, he deferred implementation of the new duties for 12 months. The poultry industry has called in vain for the immediate implementation of the duties that Minister Patel agreed were necessary.

That year is nearly up, but the industry has no guarantee that the anti-dumping duties will indeed be implemented in August. Whether or not there is another delay is not up to them, or to ITAC – it is a political decision.

As the financial newspaper Business Day has pointed out, Minister Patel faces political decisions on other duties, too. ITAC has recommended steep anti-dumping duties against products from India and China, two of South Africa’s partners in the BRICS group of nations.

Having moved away from rules-based tariffs, the government faces a dilemma of its own making. Will Minister Patel follow ITAC’s guidance, based on an investigation of the facts, or will anti-dumping duties be determined by a desire not to offend his BRICS allies?

As the poultry industry has learned to its cost, ITAC proposes but Minister Patel disposes.