Is global trade turning into a food fight?

ORGANISED food fights date back to medieval times, with the Battle of the Oranges in the northern Italian city of Ivrea being one of the oldest. The festival, in which oranges are thrown between organised groups, is said to commemorate the city’s defiance against a tyrannical ruler. Fast-forward 900 years and we are still witnessing organised food fights, although in these disputes no one is in danger of being hit by oranges or other succulent projectiles.

In SA, agricultural products that are the subject of international trade disputes include everyday foods such as chicken, frozen potato chips and cheese. If basic economics tells us that trade between nations provides real benefits to their citizens, what are these disputes about and what do they tell us about the state of international trade?

Trade disputes are nothing new and are often made worse by cyclical downturns in economic activity. Yet The Economist recently opined that “protectionism has been largely held at bay throughout the economic crisis”. This echoes the view of the head of the Genevabased World Trade Organisation (WTO), who in a speech last year optimistically remarked that the use of trade-defence measures by the WTO’s 157 members, specifically antidumping investigations, had declined between the onset of the financial crisis in 2008 and 2011. Antidumping investigations are a useful barometer of international trade friction because they are conducted around the world and their effect on trade can be readily measured.

By way of a brief primer, antidumping investigations are administrative proceedings that investigate allegations of unfairly (low) priced imports that cause commercial harm to the importing country’s domestic producers. Antidumping investigations have been around for nearly a century. SAlaunched its first investigation in the early 1920s and between 1995 and 2010 conducted 222 investigations, making it the fifth-most-prolific user after India (613), the US (442), the European Union (414) and Argentina (277). What makes antidumping investigations especially contentious is that there are only two possible outcomes: an import duty may or may not be imposed. Either result directly affects business interests and trade flows. Not surprisingly, parties on opposing sides of these investigations often hurl accusations and threats of legal action at each other and the investigating authority. In the recent investigation of chicken imports from Brazil by SA’s investigating authority, the International Trade Administration Commission (Itac), domestic producers asked why the government was allowing imports to devastate SA’s poultry industry, while importers blamed the producers’ own business failings and lower quality products for what they claimed were a modest level of imports. Brazil challenged SA’s action at the WTO. The dispute ceased only after SA decided to remove the duties that had been imposed on the imports.

This brings me back to the present state of international trade, where the picture is a little less rosy than the one suggested by The Economist and the WTO’s director-general. Although the number of antidumping investigations declined from 2008 to 2011, the duties imposed as a result of these investigations have tended to remain in place longer, in effect increasing the stockpile of duties. There also has been an increase in antidumping investigations around the world and in SA since last year. A likely factor behind this is the lingering nature of the economic downturn. Businesses in SA and around the world not only have to struggle with diminished economic activity, but also with foreign companies aggressively looking for new markets.

Could present economic conditions lead to a tsunami of antidumping investigations? I think this is unlikely. National investigating authorities must play by well-defined domestic and international rules that require extensive factbased investigations. Investigation results can be challenged in domestic courts or internationally at the WTO. For these reasons, although the pace of antidumping investigations may continue to increase in the short term, the number of investigations is likely to return to pre2012 levels once there is sustained, worldwide economic growth. And I would therefore agree with the sentiment expressed by the WTO’s director-general and The Economist in so far as the Great Recession has not been marked by a severe outbreak of protectionism.

Amrein is senior manager: policy and research at Itac.