South Africa and Ghanaian Poultry Industries to Joint Forces Against EU Dumping of Poultry Parts

Summary
Poultry producers and trade unions in South Africa and Ghana have joined the FairPlay anti-dumping movement in opposing dumping of EU poultry parts on African markets. In West Africa, the EU poultry trade is seen as fuelling migration pressures. Given the scale of EU exports to 38 sub-Saharan African countries, this is a pan-African issue. Pressures on EU exporters to find new markets beyond the EU’s borders will increase in the coming years driven by expanding EU production, accelerating export growth and possible Brexit related trade disruptions. The experience under the EU-South Africa trade agreement suggests action by African governments will need to reach beyond tariff measures, although the use of non-tariff measures will increasingly be constrained by the obligations entered into by African governments under the EPAs concluded with the EU.

More broadly EU trade practices (e.g. the import of live chickens from Ukraine for slaughtering in the EU) suggests a need for stricter traceability requirements and the enforcement of rules or origin requirements under trade agreements with the EU.

Press reports at the beginning of December 2017 indicated the Ghana National Poultry Association, the South African Poultry Association, the Food and Allied Workers Union of South Africa and the FairPlay anti-dumping movement, ‘have agreed to form a united front against EU poultry dumping’.  This follows sustained protests in South Africa over the rise in EU poultry meat exports which have seen ‘huge job losses, factory closures, production scale-backs’ (1).

On the basis of FAO reports, representatives of the Fair Play movement have claimed Ghanaian poultry processing plants have been reduced to 25% capacity utilization while feed mill operations have been reduced to 42% of capacity utilization (3). Currently 95% of the Ghanaian market for poultry meat is served by imports of frozen poultry parts (2). According to Victor Oppong Adjei, chairman of the Ghana National Poultry Association: ‘If imports were restricted, Ghana’s poultry industry would be able to launch a major recruitment drive, creating more than 200,000 jobs’ (1).

Speaking before the UN General Assembly Ghana’s President made an explicit link between expanding EU sales of poultry parts and migration, arguing ‘Ghanaians who embark on the risky journey to Europe are poultry farmers or entrepreneurs who “sell their shops and undertake the journey because they can no longer compete with the tonnes of frozen chicken dumped on African markets annually” (3).

The alliance seeks to pressure the ‘Ghanaian and South African governments to apply tighter tariffs on poultry imports from Brazil, the EU and the US’. However other proposals to mitigate the effects of growing EU exports are also being suggested, including ‘applying health, food safety and labelling rules akin to EU policy on meat imports’. The introduction of such measures it is held could ‘potentially lower the volume of chicken the bloc exports to South Africa and Ghana’ (1).

The application of stricter traceability requirements would appear essential given the frequency of Avian Influenza outbreaks in EU member states and neighbouring countries which trade both live poultry and poultry meat into the EU (8). This needs to be seen in a context where poultry raised in the Ukraine is increasingly being shipped for slaughtering and meat preparation in the EU. This enables Ukrainian poultry meat to gain EU originating status for trade both within the EU and with countries with which the EU has trade agreements in place (9, 10).

This is not just an issue for Ghana and South Africa. Chris Ward of the Fair Play movement has noted how Senegal and Cameroon have at various times faced similar challenges from the ‘dumping’ of EU poultry parts. It is maintained that in Senegal 70% of broiler operations have closed as a result of EU ‘dumping’, while at one time prior to the introduction of quantitative restrictions EU dumping practices had resulted in the loss of 120 000 jobs in Cameroon (3).

The issue of the impact of EU sales of poultry parts at prices which in no way reflect EU poultry production costs is a common problem across Africa, with rising consumer demand leading to a major EU export focus on African markets.

Trends in EU Poultry meat exports to top 5 sub-Saharan African destinations 2012-2016

2012 2013 2014 2015 2016 % increase
South Africa 131,832 158.548 203.412 213.413 270,176 +104.9%
Ghana 69.156 75252 56.900 68,283 77,159 +11.6%
Benin 139.817 139,247 163.844 138,414 116,882 -16.4%
DRC 34,231 28,625 33,697 35,269 44,465 +29.9%
Gabon 25,785° 25,070 29,409 37,330 31,925 +23.8%
400,821 426,742 487,262 492,709 540,607 +34.9%

Source: EC, ‘EU Market Situation for Poultry’, Committee for the Common Organisation of the Agricultural Markets, 17 November 2016
° EC MADB

This is seeing not only a significant expansion in poultry meat exports to the top five sub-Saharan African destinations, but also to a generalized increase in EU poultry meat exports to the 33 other sub-Saharan African countries where EU poultry meat exporters have a market presence. Together these other 33 destinations took 149,197 tonnes of EU poultry meat exports in 2016.  This constituted a major expansion on earlier years (5).

EU exporters have proved extremely adapt at shifting exports between sub-Saharan African markets depending on the national trade policy measures in place.  In 2017 with the introduction by the South African government of a ban on poultry meat imports from selected EU member states on SPS grounds, ‘EU exporters have responded by focusing on other sub-Saharan African markets’. While in the first 9 months of 2017 EU exports of poultry meat to South Africa fell 70% compared to the corresponding period in 2016, exports to Ghana rose some 73% while those to the DRC and Gabon  rose 59% and 89% respectively (replacing 53% of the volume of exports lost to the South African market) (4). It remains to be seen whether increases in exports to other sub-Saharan African markets where EU poultry exporters have a presence allowed the EU to fully replace the lost markets in South Africa.

EU Poultry Meat Exports to the Main Sub-Saharan African Destinations

Jan-Sept 2016 Jan-Sept 2017 % increase
South Africa 205,220 62,984 -70%
Ghana 57,353 99,020 +73%
Benin 90,047 88,132 -2%
DRC 27,275 43,278 +59%
Gabon 20,405 38,566 +89%
Sub-Total 400,300 331,980 -17.1%
% share top 5 SSA 33.5% 27.3%
Extra-EU total 1,193,477 1,217,859 +2.0%

Source: EC, ‘EU Market Situation for Poultry’, Committee for the Common Organisation of the Agricultural Markets, 23 November 2017
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf

EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets 17 November 2016

Overall the joint campaign which has been initiated seeks to ‘outlaw dumping and predatory pricing’ (1). This issue is of obvious relevance in other ACP countries where efforts are underway to promote local poultry sector development.

Comment and Analysis

An international initiative to address the disruptive effects of EU exports of residual poultry parts on local poultry sector development in Africa is long overdue.  This EU trade, which took off following the ban on feeding meat and bone meal to livestock, has seen the pattern of the EU poultry meat exports transformed. In 2003 only 26.5% of EU poultry meat exports were destined for African ACP markets but by 2016 this had risen to 46.8%, with the actual volume of exports increasing 147% from 273,420 tonnes to 674,877 tonnes.

This trade takes place at prices the sole requirement of which is that the price received by the exporter should exceed the cost of transportation, minus the cost of alternative disposal. The extremely low prices this gives rise to make the application of safeguard duties largely ineffective.

Thus we find that while in December 2016 the South African government introduced a safeguard duty on imports of poultry meat from the EU of 13.9%, between January and June 2015 and January to June 2017 the average price of EU poultry meat exports fell 18.5%. Thus even with the application of the safeguard duty the landed price of EU poultry meat in the first 6 months of 2017 was still 7% below the average landed price in the first six months of 2015.

In addition to these trade problems in South Africa, across much of Africa the trade in frozen poultry parts takes place in ways which violate even the most basic of food safety requirements, namely the maintenance of the integrity of the cold store chain from producer to consumer. As a consequence this trade can pose serious threats to human health.

There would appear to be an urgent need for international action to:

a) ensure the food safety integrity of supply chains handling frozen poultry meat from producers to final consumers;

b) regulate EU exports of poultry parts at prices which do not reflect production costs in Europe.

Action on this issue would appear urgent, given the trends in EU poultry meat production and exports and the possible trade effects of a ‘hard’ Brexit in the poultry meat sector.

In terms of trends in the EU poultry meat sector, the latest EU Agricultural Outlook report from December 2017, projects an expansion of EU poultry production by 680,000 tonnes between 2017 and 2030, an increase of some 4.6% but an expansion of EU poultry meat exports of 261,000 tonnes or some 17.6% over the same period. Pressure on EU exporters to find new extra-EU markets will thus only increase in the coming years.

Pressures on both UK and EU27 companies to find outlets for poultry meat beyond the existing borders of the EU28 could further increase were there to be a ‘hard’ Brexit, which resulted in the imposition of standard MFN duties on mutual trade in poultry meat.  Currently the UK exports some 250-300,000 tonnes of poultry meat to the EU27, largely consisting of poultry parts and fifth quarter cuts of the bird, while the EU27 exported 440,000 tonnes of poultry meat to the UK in 2015, consisting largely of breast meat. The imposition of standard MFN duties would bring mutual trade in poultry meat to a virtual halt.

The loss of these existing markets would leave both UK and EU27 exporters looking for alternative markets, with the principal alternative market for UK exports of poultry parts and fifth quarter cuts consisting largely of sub-Saharan African countries.

While the current campaign calls for greater use of tariff measures, as South Africa’s use of safeguard duties, illustrates tariff measures have little impact on this trade, given the low prices charged.  The use of non-tariff measures is generally the only effective way of dealing with this disruptive and dangerous trade.

The use of such measures however is likely to be increasingly challenged as the EU moves ahead with the implementation of its economic partnership agreements in sub-Saharan Africa. These agreements include provisions prohibiting the use of quantitative restrictions (and similar such measures) on imports from the EU from the date of entry into force of these agreements. Already in the case of the EU-South Africa trade agreements EU poultry exporters and national governments have begun to pressure the European Commission to vigorously enforce trade agreement provisions prohibiting the use of quantitative restrictions on imports and to discourage the active use of safeguard measures. Speaking at the 2016 AVEC Conference Agricultural Commissioner Hogan committed the EC to concerted action to prevent the introduction of new obstacles to EU poultry meat exports to South Africa.

What Commissioner Hogan Said About South African Efforts to Manage Poultry Meat Imports from the EU

I am following with increasing concern the situation relating to a potential introduction of safeguard measures by South Africa on poultry imports from the EU.  Please rest assured that I am well aware of the economic importance of the South African market for the EU poultry industry. The broader political implications in South Africa and the fact that this action is taking place in the context of an imminent entry into force of the SADC-EU Economic Partnership Agreement are significant.

A.v.e.c. has been fully associated with the responses submitted so far by the Commission to the South African investigating authority, the International Trade Administration Commission (ITAC). Furthermore, given the significant EU interest in this case, many Member States’ authorities have approached the Commission services and are also actively associated with the investigation.

So far, the coordination between you, the Member States concerned and the Commission has been exemplary and I want to take this opportunity to thank you for that. I hope that our joint actions will yield the expected positive results. Given the nature of these agreements, it is important that the EU speaks with one voice at official level when developing these new export opportunities”.

EC, ‘Speech by Commissioner Phil Hogan at AVEC General Assembly’, 30 September 2016
https://ec.europa.eu/agriculture/sites/agriculture/files/docs/speeches/hogan-2016-09-30-avec.pdf

Against this background without concerted African action which mobilises public opinion in Europe to regulate this developmentally disruptive trade, sub-Saharan African poultry and poultry feed producers are likely to face a grim future, with growing African consumer demand for poultry meat increasing being met from imports rather than expanding domestic African poultry production.

This would be unfortunate given the strong backward linkages African poultry producers can develop to domestic grain and oilseed producers. These backward linkages can generate transformative income earning opportunities in rural areas, with the loss of these backward linkages being a major developmental concern.

Sources:
(1) Globalmeatnews.com, ‘Ghana joins forces with South Africa to fight EU’, 4 December 2017
https://www.globalmeatnews.com/Article/2017/12/04/Ghana-joins-forces-with-South-Africa-to-fight-EU
(2) pulse.com, ‘Frozen chicken collapsing local poultry industry’, 30 August 2017
http://www.pulse.com.gh/news/business/ghanas-agric-sector-frozen-chicken-collapsing-local-poultry-industry-id5613123.html
(3) Mail and Guardian, ‘EU chicken dumping starves Africa’, 10 Nov 2017
https://mg.co.za/article/2017-11-10-00-eu-chicken-dumping-starves-africa
(4) EC, ‘EU Market Situation for Poultry’, Committee for the Common Organisation of the Agricultural Markets, 17 November 2016
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(5) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(6) EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, Tables, 18 December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf
(7) EC ‘EU Agricultural outlook for the agricultural markets and income 2017-2030’, Full Report, 18 December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-fullrep_en.pdf
(8) EC, ‘Avian Influenza’ webpage
https://ec.europa.eu/food/animals/animal-diseases/control-measures/avian-influenza_en
(9) Globalmeatnews.com, ‘The Netherlands is MHP’s gateway to Europe’, 25 July 2017
http://www.poultryworld.net/Meat/Articles/2016/7/The-Netherlands-is-MHPs-gateway-to-Europe-2842516W/
(10) ‘Unfair to our farmers — Dutch Poultry Producers Rally Against MHP’, 23 June 2016
https://latifundist.com/en/interview/250-nespravedlivo-po-otnosheniyu-k-nashim-fermeram-miting-gollandskih-proizvoditelej-ptitsy-protiv-mxp
(11) AHDB ‘What might Brexit mean for UK trade in agricultural products?’ 12 October 2016
https://ahdb.org.uk/documents/Horizon_Brexit_Analysis_Report-Oct2016.pdf
(12) EC, ‘Speech by Commissioner Phil Hogan at AVEC General Assembly’, 30 September 2016
https://ec.europa.eu/agriculture/sites/agriculture/files/docs/speeches/hogan-2016-09-30-avec.pdf