Amateurish approach to trade leaves poor in chicken soup

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.