EC rejects SAPA allegations of dumping of poultry parts

In the face of an ongoing campaign against poultry meat imports from the EU led by SAPA, the EC continues to deny accusations of ‘dumping’, placing a very narrow construction on the concept. While the AI outbreaks have provided some short term relief to the South African poultry sector, this is not seen as providing a long term solution. Calls by the South African authorities for an international initiative to address the structural surplus of ‘brown meat’ on international markets, continue to be ignored by the European Commission.

Concerns expressed by EC officials over South African SPS capacities within and beyond the poultry sector, could well be indicative of the scope for escalation of the current poultry sector dispute into a generalised EU-South Africa agri-food sector trade war.

In April 2017 the EU Delegate to South Africa rejected as ‘false claims’ allegation from the South African Poultry Association of EU dumping of bone-in chicken portion poultry parts on the South African market and that this was ‘causing widespread job losses in the industry’.  The EU delegate claimed ‘as we speak, there is no dumping of EU chicken in SA’, noting how the outbreak of avian influenza in the EU ‘had resulted in a fall of more than 66% in EU exports on bone in chicken portions this year’. He also argued the EU accounted for only 10% of overall poultry consumption in 2016 with ‘such a relatively moderate market share’ being highly unlikely to be ‘the main cause of the problems facing the South African industry’. It was argued if there was such dumping SAPA ‘would have filed a complaint to the International Trade Administration Commission (Itac) for dumping, as they did in the past’. The argument being, if there was dumping going on at the present time, SAPA would have filed a complaint (1).

EU Poultry Meat exports to South Africa 2013-2016 and January to February 2017

2013 2014 2015 2016 Jan-Feb 2017 % change Jan-Feb 2016
South Africa 158,548 203,412 213,577 270,176 18,137 -41%
Extra- EU Total 1,428,470 1,503,984 1,489,430 1,616,232 240,213 +5.3%

Source: EC, ‘EU Market Situation for Poultry’, Committee for the Common Organisation of the Agricultural Markets, 20 April 2017

The EU Delegate attributed the current problems of the South African poultry industry to the need for a restructuring of a ‘heavily concentrated local industry… to allow more space for small and medium sized enterprises to operate’. He argued ‘merely imposing higher duties on EU imports would only result in importers switching to other chicken exporting countries’ (1).

SAPA meanwhile sought to respond comprehensively to the EU Delegates remarks. SAPA Chair Achmat Brinkhaus claimed it was ‘false and misleading for the EU to claim no dumping was taking place as this was only based on the fact that the outbreak of bird flu in the main chicken-producing countries in the EU’, which meant no exports could take place to South Africa from these countries at the present time.  However he noted ‘the bird flu ban is temporary, and dumping will resume when the ban is lifted’.

In terms of the anti-dumping issue, SAPA CEO Kevin Lovell pointed out how SAPA had applied in the past for anti-dumping duties but since they could only be applied to individual EU member states, such measures had proved ineffective (1). This ineffectiveness of anti-dumping remedies accounted for why SAPA had now opted for safeguard duties rather than anti-dumping. It did not reflect an absence of ‘dumping’ of unwanted EU poultry parts, the EU Delegates claims that the South African government itself ‘acknowledge that dumping is not the issue’ notwithstanding. (1)

SAPA representatives also sought to place South Africa poultry meat imports from the EU in the context of total poultry meat imports which ‘currently represent about 26% of consumption’ in South Africa (1).

The decline in EU poultry meat exports to South Africa since December 2016 was also highlighted in a presentation by the EU Counsellor for Trade and Economics in a presentation to the South African parliaments’ Portfolio Committee on Trade and Industry.

Perhaps more ominously the Counsellor also highlighted EU concerns over staffing levels in South Africa government laboratories and departments dealing with SPS and food safety controls.  It was maintained the EU needed ‘to be convinced…of South Africa’s ability to deal with exposure to prohibited medicine and growth hormones…not only for poultry but for all commodities’ (4). These remarks however, were balanced by a declaration to the effect that ‘the difficulties being experienced by the South African poultry industry should not undermine the mutually beneficial trade relationship the country has with the EU‘ (5).

The Counsellor further highlighted how the ‘EU is currently engaging with SAPA to create an export strategy for South African chicken’ (4).

Comment and Analysis

The issue of the impact of trade agreement provisions on the effectiveness of trade remedies is an important.  It is not essentially a narrow technical issue of interpretation of international trade rules which have been produced as a result of competing interests of different EU members, but rather the local production and structural economic development effects of the trade flows generated from a highly unequal global agri-food sector trade regime.

While the EU delegate claims the EU accounts for merely 10% of overall South African poultry consumption in 2016, this needs to be seen in a context where 2009 the EU accounted for only 2.2% of total South African poultry meat imports but by the first six months of 2016 was accounting for almost 47% of total South African poultry meat imports.  By the end of 2016 the volume of EU poultry meat exports to South Africa was over 50 times higher than in 2009.

Thus we find that taken together the provisions of the EPA require anti-dumping duties to be applied to individual EU companies and countries, while the EU poultry companies are increasingly pan European rather than national enterprises. This pan European nature of major EU poultry companies means that anti-dumping measures prove largely ineffective, since the company simply alters the port of departure and ‘country of origin’ of the products exported to South Africa. Thus we find the Dutch poultry group Plukon, which is reportedly the leading player in the European poultry market has subsidiaries in Belgium, Germany, Poland and now France and Bulgaria, via its recent acquisition of DUC S.A. This allows the company to respond to anti-dumping measures targeting its Dutch operations by shifting sourcing to an affiliated company (2).

Thus we find that while in July 2014 the South African government introduced anti-dumping duties on poultry meat from Germany, Holland and the UK (see companion article ‘EU frozen poultry meat exports to South Africa begin to bite’, 15 December 2016) this had no impact on overall volumes of poultry meat imports which continued to increase, as imports were simply sourced from non-traditional suppliers in the EU, such as Belgium, France, Spain and  Hungary (total poultry meat imports from the EU increased from 158,481 tonnes in 2013 to 203,414 tonnes in 2014,  209,971 in 2015 and 259,810 tonnes in 2016, a 64% expansion from the year prior to the imposition of anti-dumping duties to 2016).

In terms of the EU Delegate’s assertion that wider structural challenges face the South African poultry sector, the South African government has indeed acknowledged the need to address a range of competitiveness issues in the South African poultry industry, with a programme of remedial measures being developed to get to grips with improving the competitiveness of the sector (for details see companion article, ‘Will South Africa’s introduction of poultry safeguard duties by challenged by the EC?’, 23 February 2017).

However South Africa’s Minister of Trade and Industry Minister has also highlighted the existence of ‘serious structural distortions in the global market for poultry products’, linked to the global surplus of ‘brown meat’ which finds no market in developed economies, which need to be addressed (see companion article, ‘Need to restore differentiation in trade rules in support of structural transformation in Africa’, 27 April 2017).  In this context in January 2017 he called for an international initiative to address the structural surplus of ‘brown meat’ (3) (for more details see companion article ‘Africa continues to grow as export destination EU poultry meat despite AI outbreaks’, 24 April  2017). He emphasized how addressing competitiveness issues would be of little value if the structural problem of the surplus of brown meat on global markets was left unaddressed, since these poultry parts were being exported at ‘just above marginal cost’ to the developing world.  Indeed, this trade will continue so long as the prices received exceed the costs of transportation minus the costs of alternative methods of disposal of these ‘unwanted’ poultry parts.

More broadly, remarks about EU concerns over the capacity of official South African government institutions to deal effectively with SPS issues not only in the poultry sector (where South Africa has no export trade with South Africa) but also in other commodities, can be seen as a warning shot, highlighting the potential for the South Africa-EU poultry dispute to escalate into a broader agri-food sector trade war.

EU support to SAPA in developing an export strategy for the sector, is likely to be a source of concern to neighbouring Southern African poultry industries, where smuggling of South African poultry products is seen as an increasingly significant problem.

(1), ‘EU rejects SA’s dumping claims’, 19 April 2017
(2), ‘Dutch poultry group Plukon to expand in France and Poland’, 22 December 2016
(3), ‘Minister Rob Davies in the UK to discuss Brexit and trade with SA’, 25 January 2017
(4), ‘EU Worries Over Growth Hormones in SA Chickens’, 3 May 2017
5) Business Day, ‘Chicken issues should not mar trade relationship between EU and SA’, 2 May 2017

Key words:           Poultry, South Africa
Area for Posting:  Poultry sector, Southern Africa