What came first, the chicken or the reg(ulation)?
On 6 April 1998, I was one of many elated Salomon employees watching the ticker tape announce that our parent company, Travelers Group, had just merged with the banking giant Citicorp. Citi had commercial branches and clients in over 100 countries and a reach that went far beyond anything we could have built in 30 years. And, best yet, it didn’t have an equity derivatives department. The maths on this was simple. Our department would reap the benef it of immediate
has enjoyed protection from import tariffs and anti-dumping duties, which effectively prices US chicken out of the local market. The US claims the anti-dumping duties are unfair and two powerful US senators want these removed, or they promise to drop SA completely from the AGOA renewal scheduled for next year.
It is unavoidable that SA will need to sacrifice the poultry industry and thousands of related jobs for ‘the greater good’ of renewing AGOA to benefit the other industries and jobs that this renewal will secure. As with every trade agreement, there are always sectors that will suffer while others prosper and grow.
While economists trumpet the benefits of competition for any industry, the reality is that there are too many factors here that don’t come down to ‘just numbers’. With a labour-intensive economy where a large majority of workers lack the educational skills to retrain, retool and/or relocate to fill distant vacancies or more technical jobs, an entire generation of workers in particular sectors will find these trade agreements and the relaxing of tariffs to be a
#access to new clients, markets and revenue streams – and we would all keep our j obs. Our f oreig n exchange desk didn’t share the elation. Merging with the world’s l argest currency-t rading desk meant many of these traders would probably be searching for new places to work.
Trade agreements have many similarities with mergers. They bring unencumbered access to new prospects and revenue streams, normally with the added benefit of preferential tax treatment through the rela xation of protectionist policies. From a big- pict ure perspective, they are a win-win for producers and consumers alike, but, as with mergers, not everyone shares the bounty – or the elation.
Such is the current situation with t he Africa Growth and Opportunity Act (AGOA), a law that allows duty-free access i nto t he US for Sub-Saharan African nations for more than 7 000 tariff lines, without requiring reciprocity. South Africa, with the most diversified economy in the region, is by any estimate the largest winner. devastating blow.
The only short-term solution is to hopefully negotiate quotas that keep the market from being flooded with foreign chickens at prices below local production costs. If that can’t be negotiated, then we’ll need to get used to eating chickens that have accumulated frequent flyer miles.
The l ong- term solution i s better education standards and opportunities – at every level. In order to remain competitive on this global stage, it is imperative that we produce more engineers, MBAs and scientists who will be able to create, innovate and answer the call of new industries and technologies.
But arguably more crucial is the imperative that we build a labour force that can answer to new demands at every level of production so that when one door closes the next one isn’t bolted shut. If this is not our mission, the day will come when we’ll all need to survive on chickenfeed.