Summary
The South African Poultry Association has applied for anti-dumping duties on imported chicken from five countries, Brazil, Denmark, Ireland, Poland, and Spain. The four EU member states accounted for around 95% of total EU frozen chicken and offal exports to South Africa in 2019-20. The hard reality facing South African poultry producers is that since 2012 the average price paid for imports of these products from the EU has fallen 24%, while prior to the introduction of Avian Influenza based phytosanitary restrictions in December 2016, import volumes more than doubled. Given the challenges posed by the under-reporting of the value of imports, false classification of imports and fraudulent declarations other policy measures such as minimum import price requirements may need to be considered. Additional measures may also be required on public health ground to improve handling practices and traceability in cases of food poisoning outbreaks.
On 23 February 2021, the South African Poultry Association (Sapa) ‘applied for anti-dumping duties on imported chicken from five countries including Brazil and four European Union nations – Denmark, Ireland, Poland and Spain’ (1) During 2019 and 2020, together these four EU member states countries accounted for 95.2% of EU frozen chicken meat and offal exports to South Africa (2).
Table 1: EU Exports of Frozen Chicken meat and offal (Gallus) to South Africa 2019-2020 (tonnes)
| Total EU | Ireland | Denmark | Spain | Poland | Sub-Total | Sub Total % | |
| 2020 | 77,497 | 31,353 | 14,336 | 23,809 | 31 | 69,529 | 89.7% |
| 2019 | 117,348 | 28,099 | 22,895 | 17,182 | 47,760 | 115,936 | 98.8% |
| …. | |||||||
| 2012 | 107,182 | 4,965 | 6,887 | 1,721 | 0 | 13,572 | 12.7% |
| 2011 | 71,269 | 5,154 | 7,102 | 2,287 | 0 | 14,543 | 20.4% |
Source: EC, Poultry Trade Data,
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
Sapa argues frozen chicken parts were being exported to South Africa ‘at prices lower than their production costs, and/or lower than they are selling the same product in their home markets.’ In both 2019 and 2020, there was a huge divergence in the average price of these imports on a month-by- month basis and between exporting EU member states (1).
More significantly since 2012, when EU exports of frozen chicken meat and offal really began to take off, the average price paid for imports of these products from the EU has fallen 24%. For frozen chicken meat the fall in the average annual price between 2012 and 2020 was -22% (from an annual average price of €1.18/kg to €0.92/kg) and for frozen chicken offal -42% (from an annual average of €1.03/kg to €0.60/kg) (2).
Table 2: EU Exports of Frozen Chicken meat and offal (Gallus) to South Africa 2019-2020 (€/kg)
| EU | Ireland | Denmark | Spain | Poland | |
| 2020 | Annual Average €0.89
Monthly Range: €0.78 – €1.06 |
Annual Average €0.93
Monthly Range: €0.81 – €1.26 |
Annual Average €0.93
Monthly Range: €0.78 – €1.07 |
Annual Average €0.82
Monthly Range: €0.74 – €0.92 |
Annual Average €0.43
Monthly Range: €0.39 – €0.67 |
| 2019 | Annual Average:
€0.91 Monthly Range: €0.74 – €1.02 |
Annual Average:
€0.93 Monthly Range: €0.76 – €1.13 |
Annual Average:
€0.96 Monthly Range: €0.81 – €1.06 |
Annual Average:
€0.81 Monthly Range: €0.72 – €0.87 |
Annual Average:
€0.92 Monthly Range: €0.68 – €1.05 |
| …. | … | …. | … | … | … |
| 2012 | Annual Average:
€1.17 Monthly Range: €0.98 – €1.29 |
Annual Average:
€0.97 Monthly Range: €0.81 – €1.28 |
Annual Average:
€1.07 Monthly Range: €0.90 – €1.15 |
Annual Average:
€0.67 Monthly Range: €0.54 – €1.14 |
Annual Average:
N.A. Monthly Range: N.A. |
Source: EC, Poultry Trade Data
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
Sapa maintains the prices at which chicken meat and offal is being imported from the main EU exporting countries constitutes ‘dumping under World Trade Organisation and South African rules’ and was unfair since it stifles production and employment growth in the South African poultry supply chain. It is asserted in recent years imports have led to the loss of 15,000 local jobs. According to Sapa Chair, Aziz Suliman, ‘imports were not only affecting larger poultry businesses, but also the small-scale black producers, who employed about 110,000 people directly and indirectly’ (1).
According to Sapa there has been a huge 400% increase in South Africa poultry meat imports in the past two decades, with imports coming to account for 30% of the market in South Africa (1). This compares to imports accounting for only 7% of consumption in the EU (3).
The Sapa application for anti-dumping duties is now under consideration by to South Africa’s International Trade Administration Commission (Itac) ‘which will investigate the complaint before making a recommendation to the Minister of Trade, Industry and Competition.’ This process is ‘expected to take about 12-18 months’ (1).
The new application needs to be seen against the background of the five-year review of existing anti-dumping duties and the launch of South Africa’s Poultry Sector Master Plan, designed to restore the sector to its previous growth path.
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Putting South African Safeguard Duties on Imports from the EU in Context Sapa is seeking additional duties of 35% on Brazil, 146% on Denmark, 136% on Ireland, 35% on Poland and 77% on Spain. This is based on the “dumping margin” which is calculated on the basis of ‘the difference between what producers sell for in their home countries and the price at which the same products are imported into South Africa’. South Africa already had anti-dumping duties in place on imports from German, the Netherlands, and the United Kingdom since 2015. Sapa sought to have these anti-dumping duties increased since it was felt they would otherwise be ineffective. In 2018 safeguard duties were approved against all EU countries, with the rate being set at ‘35.3%, reducing to 30% in March 2019, 25% in March 2020 and 15% in March 2021’, with these being scheduled for removal in March 2022. This provides the immediate background to Sapa’s renewed anti-dumping application in regard to trade with the EU. However, it also needs to be seen in the context of the March 2020 increase in South Africa tariffs on ‘chicken portions from non-EU countries, such as Brazil, the US and Argentina.’ These new tariffs are ‘62% for frozen bone-in-chicken portions (up from 37%) and 42% for frozen boneless portions (up from 12%).’ These tariff increases however cannot be applied to imports from the EU, given the ‘tariff standstill’ provisions of the EU-SADC EPA. The safeguard duties applied to imports from the EU and the anti-dumping duties being sought on imports from the EU are designed to close this gap in South Africa’s poultry sector tariff policy. This would then avoid the situation where partial measures allow other global poultry exporters to expand their market share in South Africa. For example, we find from 2013 to 2016 the application of higher MFN tariffs and anti-dumping duties on non-EU suppliers allow EU exporters to expand their market share. Conversely, the application of Avian Influenza linked bans on imports form a range of EU member states from December 2016, allowed non-EU suppliers to expand exports to South Africa. South Africa application of safeguard duties and anti-dumping duties to close the gap in the existing trade policy are thus essential to the creation of the market space for renewed production and employment expansion in the South African poultry sector. Fair Play, ‘State of Play 2021’ |
Sapa’s broiler organisation’s general manager, Izaak Breitenbach, argues ‘South Africa’s meat sector had long been globally competitive’, but was now being undermined by unfair competition (4). In terms of trade with the EU, this unfair competition has really taken off since 2010, when EU export of frozen chicken meat and offal amounted to only 14,278 tonnes (2).
Izaak Breitenbach also highlighted how the position of South African poultry producers had become ‘more precarious since Covid-19 disrupted retail globally, so that chicken-producing countries all sit with overflowing cold-storage facilities and are looking around for markets to target with this surplus.’ Against this background he urged the South African government to be vigilant and make full use of available trade remedies (1).
It is recognised that in terms of the poultry meat import trade other problems also exist. These include under-reporting of the value of imports, false classification of imports and fraudulent declarations of re-exports. These challenges need to be addressed within any comprehensive South African poultry sector trade policy (4).
Beyond these purely trade concerns a range of public health issues related to this trade are seen as arising from the handling of imported products before they reach South African consumers. It is maintained EU (and Brazilian) chicken meat is imported frozen in bulk, after which it is commonly ‘thawed, injected with brine and then repackaged and sold as fresh or refrozen’ poultry parts. Consequently, ‘EU poultry often ends up in SA shops in bags that list up to 11 potential source countries.’ According to Sapa, ‘it is not unusual to see a label stating Germany and/or Hungary and/or Ireland and/or Denmark and/or Argentina and/or Brazil’, with these retail packages clearly containing meat which has been ‘defrosted, repackaged and refrozen’ (2).
This raises serious food safety concerns in its own right and through undermining ‘traceability’ makes it difficult to respond to poultry related food poisoning incidents. This contrasts sharply with the food safety requirements placed on domestic South African poultry producers (2)
| Comment and Analysis
It is clear that since 2012, the price of EU exports of frozen chicken meat and offal have fallen dramatically, while until EU 2017 export volumes (in the absence of SPS linked import restrictions), were rising exponentially. Since 2013 the South African government has struggled to set in place a comprehensive trade policy which effectively protected domestic producers from what is seen as unfair competition. This competition is seen as unfair, since it is seen as being based on the dumping of poultry meat at prices which bear no correlation with the production costs in the exporting countries or the prices at which similar products are sold on exporting country markets. The big gap in South African efforts to establish a comprehensive poultry sector trade policy arose from the implementation of the EU-South Africa Trade Development and Cooperation Agreement, concluded in 1999 (and the subsequent October 2016 EU-SADC Trade Agreement). This agreement · Prevented the application of higher MFN import tariffs (introduced in October 2013) to imports from the · Circumscribed the use of ant-dumping duties, by requiring them to be company and country specific · Has seen the EC challenge the use of the safeguard mechanism on purely technical grounds, with an This created a situation where measures taken against imports from the other major global poultry exporters (Brazil and USA) has simply seen the EU expand exports to South Africa. This was clear in the evolution of EU frozen chicken meat and offal exports from 2013 to the end of 2016. EU exports of Total Poultry Products, Chicken (Gallus) Meat and offal 2010-2020 (tonnes)
Source: EC, Poultry Trade Data, It is apparent from the changing country of origin of EU chicken meat and offal exports that given the pan-European nature of many EU poultry companies, company and country specific anti-dumping measures can easily be circumvented. What is more, safeguard, measures tend to be undermined as a result of the under reporting, false classification, or fraudulent declaration of poultry meat imports. In light of these practices, which serve to circumvent both safeguard and anti-dumping duties, consideration may need to be given to establishing a minimum import price for the different categories of frozen chicken meat offal and other poultry products imported into South Africa. The establishment of such a reference price system, rather than declared prices, would then provide the basis for calculating safeguard and anti-dumping duties. Such a reference price system is used is used extensively by the EU in the sensitive fruit and vegetable sector. More broadly, it is apparent the only mechanism which has had a significant impact on curbing South African imports of frozen chicken meat and offal from the EU, has been the imposition of phytosanitary based import bans arising from avian influenza outbreaks in the EU. This strongly suggests tariff-based trade policy measures implemented within the context of EU-South Africa trade agreements, are largely ineffective or are challenged by the European Commission. The only trade policy tool which has proved effective has been the application of quantitative restrictions in the form of phytosanitary linked import bans. This strongly suggests a need for the type of tariff rate quota (TRQ) based chicken meat import regime which has been so effectively used by the EU to support the growth of domestic EU chicken meat production in the face of growing EU consumer demand. This is particularly important in an EU context given the cost disadvantages EU producers face, relative to the major global poultry meat exporters. Unfortunately, the provisions of the EU-SADC EPA seek to restrict the use of such quantitative restrictions on imports from the EU (under Article 39 ‘Prohibition of Quantitative Restrictions’) (5). It should be noted however these provisions are not as stringent as those under the EU-Ghana EPA (6).
In light of the health concerns which have been raised in relation to the handling of imported poultry meat prior to it reaching South African consumers, consideration could usefully be given to establishing on public health grounds: · Mandatory’ country of origin’ labelling requirements for all poultry meat imports, based on the country of · ‘Farm to fork’ traceability requirements for all poultry meat placed for sale on the South African market. · Import licensing arrangements linked to a mandatory requirement for all enterprises importing and placing The use of ‘approved undertaking’ requirements is a central feature of the EU dairy regime. |
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Sources
(1) Iol.co.za, ‘Sapa applies for anti-dumping duties on ‘unfair’ chicken imports from 5 countries’, 23 February 2021
https://www.iol.co.za/business-report/economy/sapa-applies-for-anti-dumping-duties-on-unfair-chicken-imports-from-5-countries-346cdd9e-d12a-40ef-a109-091fc97deae5
(2) EC, Poultry Trade Data
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
(3) Sapa, ‘Cutting imports will help poultry sector grow and create jobs’, 25 January 2021
https://www.businesslive.co.za/bd/opinion/2021-01-25-cutting-imports-will-help-poultry-sector-grow-and-create-jobs/
(4) farmersweekly.co.za, ‘Consumer spending will determine poultry sector’s fortunes’, 28 December 2020
https://www.farmersweekly.co.za/agri-news/south-africa/consumer-spending-will-determine-poultry-sectors-fortunes/
(5) EC, ‘Economic Partnership Agreement between the European Union and its Member States, of the one part, and the SADC EPA States, of the other part’, OJ L250/3, 16.9.2016
https://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153915.pdf
(6) EC, ‘Stepping stone economic partnership agreement between Ghana, of the one part, and the European Community and its Member States, of the other part’, OJ L287/3, 21.10.2016
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2016.287.01.0003.01.ENG