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South Africa defuses WTO poultry dispute with Brazil

18 February 2013

According to press reports, ‘the South African government has decided not to impose additional duties on the import of Brazilian chickens.’ In response to this move, Brazil is expected to drop its complaint in the WTO. In February 2012, the South African authorities had imposed additional duties of 62.93% and 46.59% respectively on imports of whole chickens and boneless cuts from Brazil (standard duties being 5% and 27% respectively), pending the finalisation of an investigation by the International Trade Administration Commission (ITAC) into allegations of dumping by Brazilian poultry exporters. ITAC had recommended that ‘antidumping duties on frozen Brazilian chickens be imposed’. However, South Africa’s Trade and Industry Minister Rob Davies declined to adopt ITAC’s final determination, ‘following complaints from the Brazilian government’. The Minister argued that a more ‘comprehensive strategy’ was required, since Brazil was not the only source of competition from imported poultry products.

The CEO of the South African Poultry Association (SAPA) expressed disappointment at the Minister’s decision, maintaining that ‘the general tariff would be an effective measure only if it could be applied to all countries.’ He maintained, however, that this would not be possible given the terms of the EU–South Africa Trade and Development Cooperation Agreement, which means that zero tariffs have to be applied on products originating in the EU.

The South African Poultry Association (SAPA) estimates some ZAR3.5 billion (€288.5 million) worth of chicken entered the South African market ‘at unrealistic prices’ during 2012, equivalent to about 5 million chickens per week. Dr Davies acknowledged that there was ‘growing foreign penetration of the local chicken market and something needed to be done’, but maintained that ‘the provisional antidumping duties…imposed had not had the desired effect,’ and that there was ‘scope for the general tariff for poultry imports to be increased without having to resort to antidumping duties’. This is in line with the government’s broader policy thrust towards using tariff increases within bound limits on a case-by-case basis to support industrial development. However, it requires the industries concerned to request such action and the government then needs to issue a ‘notice for the review of the applied customs tariff rate’. This has not so far occurred for poultry products. However, according to a researcher for South Africa’s Trade Law Centre (Tralac), tariff increases within bound limits have already been recommended for processed tomatoes and uncooked pasta, suggesting that the South Africa government is willing to use increased tariffs in clearly identified areas where imports threaten local agro-food sectors.

Food price rises have a disproportionate effect on the poor in South Africa, according to analysis in a working paper published by the United Nations University WIDER Institute. The paper analyses the effects of and government response to the two most significant food price rises in the decade to 2010, in 2002/3 and 2007/8. In the latter period, the increased expenditure on food by the poorest consumers was equivalent to 12.8% of their income; for the richest consumers the figure was 0.7%. The paper notes that while the government’s social welfare programme has provided an important safety net for the poorest 20% of the population, there is still no comprehensive food security policy in place.

Editorial comment

Governments need to balance the welfare of poor consumers against the need to protect producers against destabilisation by imports sold at below the cost of production. This balancing act is particularly difficult in the case of food, which is a vital element in poor people’s budgets and of central importance in most economies.

There are clear, if complex, WTO rules for determining whether or not imports are merely cheap or have been dumped (sold at below the cost of production). In the latter case, anti-dumping duties may be imposed, on that grounds that dumping destabilises legitimate trade. However, if cheap imports are being sourced in several countries, this suggests that domestic producers are uncompetitive rather than that imports are being dumped.

Different WTO rules apply to longer-term, but less focused, support for higher-cost domestic producers. One option is to raise applied tariffs within the bound maximum rate, agreed with WTO members. The new rates then apply to all imports that enter under most favoured nation (MFN) terms, i.e. all imports except those from countries with a preferential trade agreement. According to the EC’s market access database, the EU enjoys preferences on some four 8-digit tariff headings for fresh, chilled and frozen poultry meat, and four 8-digit tariff headings for prepared poultry meats. The additional option of using special safeguard measures exists: this would allow tariffs to increase above bound levels while an investigation into the impact of imports was undertaken.


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