Summary
The continued growth in EU poultry meat imports into South Africa in 2016 will exceed projected increases in imports from the US. This is accelerating job losses in the poultry sector. Commitments entered into under the trade agreement with the EU have prevented the South African government from reigning in imports form the EU. This highlights the potential threat EPAs pose to African efforts to promoted integrated poultry sector development.
While from January to June 2016 EU poultry meat exports to South Africa were up 45% compared to the corresponding period in 2015, by September the rate of expansion in the volume of EU poultry meat exports had begun to slow down, with exports volumes being only 35% up on the corresponding 9 month period in 2015. If this rate of increase continues to the end of 2016, the EU will export almost 75,000 tonnes more frozen poultry meat to South Africa than in 2015.
This expansion will exceed the volume of improved access granted to the South Africa market for US exporters under the deal reached to avert the loss of South Africa’s AGOA access to the US market. This poultry sector deal will allow the importation from the US of some 65,000 tonnes of bone in chicken per annum free of anti-dumping duties. However US poultry suppliers will still have to pay the standard 37% MFN duty which has been in force since October 2013. This is likely to be a continued source of irritation to US exporters, since under the provisions of the TDCA/SADC EPA EU suppliers enjoy duty free access to the South African market.
According to the South African Poultry Association, for every 10,000 tonnes of additional poultry meat imports some 1,000 jobs are lost in the local poultry supply chain in South Africa.
Press reports suggest that the process of job losses in the South African poultry value chain is gathering pace. In September 2016 it was reported Rainbow Poultry, South Africa’s largest poultry producer was planning to retrench 1,355 workers. Retrenchments are also looming at South Africa’s second largest poultry producer, Astral, where 12.6% of the workforce is currently scheduled to be laid off at the company’s subsidiaries, Goldi and Mountain Valley.
Source:
EC ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 17 November 2016
http://ec.europa.eu/agriculture/poultry/presentations/market-situation_en.pdf
Fin24.com, ‘Blood bath as Rainbow job hopes fade’, 13 November 2016
http://www.fin24.com/Economy/Labour/News/blood-bath-as-rainbow-job-hopes-fade-20161111
Financialmail.co.za, ‘Chicken war hatching’, 21 October 2016
http://www.financialmail.co.za/features/2016/10/21/chicken-war-hatching
city-press.news24.com, ‘Imported chicken is slaughtering the local industry, says poultry association’ 23 June 2016
TRALAC, ‘ITAC’s agricultural safeguard investigation into chicken imports from the EU and the transition from the TDCA to the EU-SADC EPA’, 24 Feb 2016
Reuters, ‘SA, Poland in controversial poultry deal’, 24th June 2016
http://www.iol.co.za/business/news/sa-poland-in-controversial-poultry-deal-2038088
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Comments and Analysis Based on SAPA figures the projected expansion of EU poultry meat exports in 2016 could see the loss of up to 7,500 jobs in the South African poultry value chain (poultry meat processing, poultry production and feed supply).
Looking more broadly the continued growth in EU poultry meat exports to South Africa needs to be seen in the context of the commitments entered into under the 1999 EU-South Africa trade agreement. The provisions of this agreement have seriously constrained the South African government’s trade policy space in the poultry sector.
In the case of poultry meat, while the initial level of tariff preference enjoyed by EU exporters varied by poultry meat product, in all areas EU exporters came to enjoy major tariff preferences. This was particularly the case following the October 2013 decision of the South African governments to use the ‘water’ in their WTO ‘bound’ tariff commitments to increase the applied duties on poultry meat imports. The aim of this policy measure was to improve the level of protection afforded domestic poultry producers in the face of a seemingly endless increase in poultry meat imports . However the ‘tariff standstill’ commitments included in the TDCA meant these increases in the MFN import duty could not be applied to imports from the EU. This served to increase the margins of tariff preference enjoyed by EU exporters compared to their competitors in Brazil, the USA and Thailand.
This has enabled EU poultry meat suppliers to progressively expand their hold on the South African market for poultry meat imports. From a share of only 2.2% of total poultry meat imports in 2009, by the first six months of 2016 the EU accounted for almost 47% of all poultry meat imported in to South Africa. This has been achieved despite the production cost disadvantages which EU producers face relative to producers in these other major poultry meat exporting countries.
The relative importance of the EU in Total South African poultry meat imports (Code 0207) 2009-2015
Similarly, the TDCA ‘tariff standstill’ commitments meant when the South African authorities sought to impose anti-dumping duties on imports of frozen poultry parts from the EU (in July 2014), these duties had to be applied on a country and company specific basis. This saw exports of frozen poultry parts from the EU to South Africa continue to increase, with these imports increasingly coming from non-traditional EU suppliers. This growth in EU poultry meat exports continued into 2016, with exports to South Africa from January to June 45% higher than in the corresponding period in 2015.
The lifting of SPS restrictions on imports of poultry meat from certain EU member states over this period also assisted in this continued expansion of EU poultry meat exports to South Africa.
EU Poultry Meat Exports to South Africa – heading 0207, tonnes (2009-2015)
At the beginning of 2016 South Africa’s International Trade Administration Commission (ITAC) launched an investigation into the scope for applying safeguards under articles 16 and 24 of the TDCA. However, before this investigation could be completed the SADC-EU EPA came into force, with articles 16 and 24 of the TDCA being repealed and replaced by the safeguard provisions in the EPA. This means the process of instituting safeguards will now have to be re-instituted under the new less favourable EPA safeguard provisions. The jury is therefore still out on the real value of these safeguard provisions in the poultry sector.
Viewed from a wider sub-Saharan African perspective it is clear the commitments made under trade agreements with the EU can come to have important effects on a governments policy space for the nurturing of local poultry sector development.
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Key words: Poultry
Area for Posting: Poultry sector, SADC EPA