THE GREAT CHICKEN “CONSPIRACY”
The Chicken debate.
Introduction
One of South Africa’s biggest chicken producers is selling 15 of its 25 farms to stay afloat after years of fighting dumping (dumping occurs when a product is sold at below the cost of production in South Africa by importers). Because of the cutbacks Rainbow Chicken, will retrench approximately 1,500 workers in early 2017.Another Limpopo based, family-run poultry business in Polokwane, has already closed after at least 30 years of existence, potentially putting more than 1000 people out of work. Furthermore the country’s third biggest chicken producer will also be retrenching approximately 1,500 workers. This amounts to a potential total job loss of approximately 4,500 jobs in total in the poultry industry alone. All this at a time when no further job cuts can be afforded in South Africa.
A brief chicken dumping background
The SA Poultry industry has seen more market disruptions in recent history than anyone could ever imagine. Although the current disruptions are caused by American chicken, the history is filled with many anti-dumping duties (“AD”) in the past few years against countries such as Brazil, and the European Union (“EU”) (especially Germany, the Netherlands and the UK). During 2015 the following AD’s were slapped against the above countries as follows: Germany 31.3 -73.33%, Netherlands 3.86 – 22.81% and the UK 12.07 to 30.99%. These duties were imposed mainly because the EU imports to SA during 2013 constituted approximately 80.8% of all imports into SACU.
It is important to note that South Africa and the EU has signed a treaty , Trade, Development and Cooperation Agreement (“TDCA”), which affords the EU free-trade status or very low tariffs in some cases. The TDCA makes provision for “provisional remedies on an emergency basis (usually prior to AD or other Tariffs being imposed) where there is a “serious disturbance” in the market place of the other party and where “exceptional circumstances” require “immediate action”. This gives the affected country quick remedial action to prevent local industry collapse. Not so under the AGOA.
Enter the USA
The USA by the way, also currently has AD duties imposed against it’s chicken by S.A. at approximately 0.60c p/kg over the past 5 years or so which expires during April 2017. Now what is the fuss about in respect of US chicken? The answer is the African Growth Opportunities Act (“AGOA”) and this is why it creates havoc in the SA poultry industry.
AGOA is a legislation that provides duty-free market access to the United States for qualifying sub-Saharan African countries by extending preferences on more than 4 600 products. The renewal of AGOA is done at US Congress level of which the previous AGOA was set to expire on 30 September 2015.Minister Davies explained in respect of existing AD duties against the US that “We instituted an anti-dumping duty because we were saying that they [chicken] were being sold at below the cost of production in South Africa”.
In view of the new negotiations on AGOA i.e. from 1 October 2016, the SA government advised the SA Poultry Association to find a solution, with their US counterparts, regarding US chicken imports and hinted that the solution “will take the form of a quota”. Needless to say that Poultry Associations could not agree on a solution until the eleventh hour of negotiations. This impasse, resulted in the US congress making all sorts of threats including excluding S.A. from AGOA, a situation South Africa could not afford nor risk. Ultimately the S.A. government buckled under pressure and agreed to a 60,000 ton per annum of chicken to be imported duty-free from the US annually.
The Chicken or the Tariff
The discourse with regards to the US chicken imports has therefore changed from dumping chickens into the SA market to a fixed quota of 60,000 tons to be imported into SA as a result of AGOA. What are the solutions available to this new dynamic? Unlike the TDCA with the EU, AGOA does not have remedies for “serious disturbance” in the domestic market of a party, therefore “exceptional circumstances” and “provisional measures” do not exist in this instance. Does this mean that the Poultry industry in SA will eventually go under due to this dilemma? Perhaps not and maybe yes, but there are still other remedies to be explored, only then may they throw in the towel. So whether the US chicken will stay or some form of tariff introduced will remain a “chicken and egg” situation for now.