Tariff cuts are not for the birds
SA has experienced a surge in imports of bone-in chicken portions from the EU
TRADE between SA and the European Union (EU) is governed by the Trade Development and Co-operation Agreement, which provides for tariff eliminations by the EU on imports of poultry, meat, eggs and egg products from SA.
Under Article 15 of the agreement SA eliminated tariffs on imports of these products from the EU from January 1 2012. By 2012, SA’s chicken meat imports represented 20% of the total chicken meat market, which resulted in the South African Customs Union (Sacu) raising the general tariff on five categories of imported chicken products against the whole world, with Brazil and Argentina being the main exporters to Sacu at the time.
However, because the agreement established a free trade agreement between SA and the EU, and prohibits the parties from increasing general tariffs against each other’s goods, EU chicken exporters to SA were exempted from the general tariff increases effected in 2012 and continue to enjoy duty-free access to the South African market. Since Sacu implemented the increases in general tariffs, SA has experienced a surge in imports of bonein chicken portions from the EU.
The increase of imports is attributable not only to the duty-free status which they enjoy under the agreement, but also the fact that Sacu, whose population prefers bone-in chicken meat, is a perfect market for EU producers as there is little or no market for bone-in chicken meat in their domestic market.
The agreement permits the use of traditional unfair trade remedies such as antidumping duties to deal with unfair trade practices. The agreement also provides for fair trade measures (safeguards) which can be invoked to protect domestic producers against injurious effects of imports in particular circumstances.
One such measure is found in Article 16 of the agreement which provides for a safeguard measure that can be invoked where the imports of products originating in one party cause or threaten to cause a serious disturbance to the markets in the other party. In this regard complaints must be immediately considered by the Co-operation Council to find an appropriate solution and, where exceptional circumstances require immediate action, the affected party may take provisional measures to limit or redress the disturbance.
The International Trade Administration Commission has created a legal framework to enable interested parties in SA to use the Article 16 agricultural safeguard in the agreement. It pub- lished the guidelines and conditions pertaining to a safeguard application in terms of Article 16 of the agreement in Government Gazette Notice 744 of 2013 on July 19 2013. The guidelines provide a procedure for applying for safeguard measures on the importation of agricultural products originating in the EU.
It is stated in the guidelines that the provisional measures that may be taken in exceptional circumstances will take the form of a provisional safeguard duty which will stay in place until such time as a decision has been reached by the Co-operation Council and, in the absence of a solution, the matter must be referred for arbitration.
Article 16 does not stipulate what would constitute “an appropriate solution” from the meeting of the council. It is expected that this may include the suspension of concessions or obligations, quantitative import restrictions, duty increases to most-favoured nation levels or any other measure.
For SA’s Department of Trade and Industry to present a matter of an
EU chicken exporters to SA were exempted from the general tariff increases and still enjoy duty-free access
alleged disturbance to the Co-operation Council it must have a prima facie case demonstrating that imports from the EU are causing or threatening to cause serious disturbance to the South African market.
With the negotiation of the recent Interim Economic Partnership Agreement (EPA) between the EU on the one hand and Angola, Botswana, Lesotho, Mozambique, Namibia, SA and Swaziland on the other (SADC-EPA States) there is concern the safeguard mechanism provided for under Article 16 of the agreement will become redundant. However, in this situation recourse can be found under Article 34(2) of the Interim SADC-EU EPA which is to some degree similar to Article 16 of the agreement as it contains a safeguard mechanism designed to protect domestic producers against a surge in imports originating from the EU. Article 34(2) of the Interim SADC-EU EPA also provides for provisional measures to be employed in critical circumstances and states that such provisional measures may be taken for a maximum period of 180 days where they are taken by the European Community and 200 days where taken by an EPA state.
Article 16 of the agreement appears to be stronger than the Interim SADCEU EPA in relation to provisional duties as it does not provide for a maximum time period in which provisional measures are to be removed. Therefore, the provisional measures remain in place for as long as the Co-operation Council has not reached a decision. Under the Interim SADC-EU EPA, provisional measures are limited to 180 days where they are taken by an EC Party or 200 days where they are taken by an EPA state.
Article 16 of the agreement is also silent on the type of safeguard measures that may be applied, whereas under the Interim SADC-EU EPA there is a restriction on the safeguard measures that may be imposed and the customs duty may only be increased up to a level which does not exceed the most-favoured nation applied rate at the time of taking the measure.
Therefore, if the agreement were to be replaced by the Interim SADC-EU EPA, one of the consequences for SA and local poultry producers is that the current agricultural safeguard provision under Article 16 of the agreement would be replaced by a different safeguard provision which, inter alia, contains restrictions on the type of safeguard measures that can be imposed as well as time limits for removal of the safeguard measures.
Such bilateral safeguard in the Interim SADC-EU EPA appears to be weaker than that provided for in Article 16 of the agreement. It is also important to note that the final SADC-EU EPA has recently been initialled; however, it is not available publicly and therefore it is not possible to ascertain at this stage whether the agricultural safeguard provision under the final SADC-EU EPA has been subject to change.