Am­a­teur­ish ap­proach to trade leaves poor in chicken soup

Weekend Argus (Saturday Edition) - - ISSUES - WIL­MOT JAMES

A TRADE war over the lowly chicken seems so im­prob­a­ble and South Africa’s poor, who ob­tain most of their pro­tein from Gal­lus gal­lus do­mes­ti­cus, will pay the price for it.

An early vic­tim of the skir­mishes was the US, priced out of the mar­ket when South Africa im­posed pun­ish­ing anti-dump­ing tar­iffs in 2000, with the pre­dictable con­se­quence of re­duc­ing im­ports from 31 000 tons in 1999 to 344kg in 2005.

What hap­pened next had ma­jor con­se­quences for our cred­i­bil­ity as a trad­ing na­tion and be­dev­illed our sta­tus as a part­ner in the ap­pli­ca­tion of the Africa Growth and Op­por­tu­nity Act (Agoa), no small mat­ter that fo­cused the at­ten­tion of Pres­i­dent Barack Obama and his trade del­e­ga­tion dur­ing their re­cent visit.

The ap­peals court found that the In­ter­na­tional Trade Ad­min­is­tra­tion Com­mis­sion (Itac) failed to cal­cu­late ac­cu­rately the “anti-dump­ing sun­set re­view timetable” for 70 prod­ucts, in­clud­ing poul­try from the US. The rul­ing meant that when South Africa – in 2006 – re­newed the an­tidump­ing du­ties on meat “bone-in” por­tions, it was found to be il­le­gal.

Itac launched an ap­peal which was heard – the march of our law be­ing as slow as else­where – at the end of April 2011. A year later the court con­firmed the ini­tial rul­ing but gave the govern­ment three years to re­view the le­gal grounds upon which the du­ties were im­posed in the first place.

It was not the first time that Itac has not served the Depart­ment of Trade and In­dus­try well. In what many con­cede was the work of am­a­teurs, Itac drew blood when it im­posed anti- dump­ing du­ties on whole chicken and bone­less cuts from Brazil in Fe­bru­ary last year.

Brazil brought a dis­pute against South Africa at the World Trade Or­gan­i­sa­tion (WTO) but, per­haps be­fit­ting the un­fold­ing fra­ter­nal re­la­tion­ship in the Brics fam­ily, re­quested a “friendly” res­o­lu­tion.

Per­haps be­cause he did not wish to spoil the party, what with the Dur­ban Brics sum­mit on the hori­zon, Trade and In­dus­try Min­is­ter Rob Davies did not press ahead with anti-dump­ing du­ties against Brazil. In­stead, a gen­eral tar­iff against all im­ported chicken came un­der con­sid­er­a­tion when the SA Poul­try As­so­ci­a­tion (Sapa) brought an ap­pli­ca­tion be­fore Itac to raise it closer to the al­lowed limit.

What is the prob­lem? Sapa rep­re­sents chicken pro­duc­ers who claim they can­not com­pete against cheaper im­ports and run the risk of clos­ing busi­nesses and los­ing jobs. In a coun­try with a 25 per­cent un­em­ploy­ment rate, that is no small thing. Our chicken busi­ness does not ex­port, but lo­cal con­sumers have been suck­ing up im­ports with alacrity, with the re­sult that the chicken trade deficit is over R3 bil­lion this year.

Bro­ken down by cat­e­gory it is the frozen bone-in por­tions (chicken meat and ed­i­ble of­fal) that have risen rapidly. This has been ac­com­pa­nied by dra­matic changes in the ori­gin of the im­ports. In 2000 we im­ported most of our frozen bone-in por­tions from the US. In 2010 it was Brazil. To­day it is Europe, with Bri­tain and the Nether­lands be­ing the most sig­nif­i­cant.

Sta­tis­ti­cally speak­ing, the Nether­lands is par­tic­u­larly in­ter­est­ing. Ac­cord­ing to Depart­ment of Trade and In­dus­try fig­ures, frozen bone- in prod­ucts have in­creased from R3 mil­lion in 2010 to R305m last year, a spec­tac­u­lar rate of growth. As far as we can tell, there have been no new in­vest­ments in the chicken busi­ness in the Nether­lands, leav­ing many with the sus­pi­cion that we are look­ing at “round-trip­ping”, where the Dutch chicken ac­tu­ally orig­i­nates from ex­port-seek­ing pro­duc­ers such as Brazil.

There is no ques­tion that our poul­try pro­duc­ers are fac­ing hard times. But is a gen­eral tar­iff in­crease a good idea?

Lawrence Edwards wrote that Sapa’s ap­pli­ca­tion for a tar­iff in­crease had so many prob­lems of fact and ar­gu­ment that it could not be jus­ti­fied. With Itac’s shoddy his­tory there can be no great faith in its abil­ity to ad­ju­di­cate well. Sapa’s ap­pli­ca­tion was heard on June 11, and we have heard lit­tle since.

This is why the DA sup­ports the of­fer made by the more cred­i­ble and com­pe­tent Com­pe­ti­tion Com­mis­sion to con­duct a com­pre­hen­sive mar­ket in­quiry into the chicken busi­ness. Deputy Com­mis­sioner Trudi Makhaya ap­par­ently said that the poul­try sec­tor is one the com­mis­sion will con­sider dur­ing its strate­gic plan­ning process be­cause it has fea­tures that may pre­vent, dis­tort or re­strict com­pe­ti­tion.

The dif­fi­culty with Itac re­veals a much deeper prob­lem with the qual­ity of our civil ser­vice in the world of trade. We are told that at ma­jor trade ne­go­ti­a­tions we com­pare poorly with, say, In­dia, whose of­fi­cials more of­ten than not have economics PhDs and un­der­stand well the hard bar­gain­ing over com­plex tar­iffs. In­dia’s trade desks have up to five times as many staff as ours.

What about Agoa? Davies said re­cently we should do ev­ery­thing pos­si­ble to re­main a part­ner in Agoa as it had been mu­tu­ally ben­e­fi­cial. It will re­quire us to make a proper deal with them, as we should with Brazil.

Trade re­la­tions with Brazil are not as they should be, sim­ply be­cause we have not made a proper deal. Davies should strengthen bi­lat­eral ar­range­ments, some­thing he has not been in­clined to do.

In an un­prece­dented act, the Euro­pean trade com­mis­sioner, Karel de Gught, climbed into Davies and his depart­ment for the shoddy man­ner in which bi­lat­eral trade ar­range­ments were be­ing wound down. The EU de­ba­cle is but a symp- tom of a deeper prob­lem of trade ex­per­tise in our trade and for­eign af­fairs min­istries.

What of poor chicken? Itac ap­par­ently com­pleted its work at its most re­cent meet­ing and will be rec­om­mend­ing a tar­iff in­crease – or not – on cer­tain cat­e­gories of im­ported chicken. Let’s see what hap­pens. If it does pro­pose in­creased tar­iffs it will be an act against the poor, who will pay the price for pro­tec­tion­ism.

Chicken is big busi­ness in­volv­ing large com­pa­nies with rea­son­able profit mar­gins. Davies should not al­low big busi­ness to bury the hatchet in the heads of the poor, al­ready strug­gling with low growth, high un­em­ploy­ment, in­creased fuel costs and spik­ing elec­tric­ity charges. Rather than rais­ing tar­iffs, ask the Com­pe­ti­tion Com­mis­sion to con­duct a thor­ough mar­ket re­view of the chicken busi­ness.

James is DA spokesman on trade and in­dus­try.

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