Summary
The South African International Trade Administration Commission is undertaking a comprehensive review of South Africa’s poultry sector trade policy in light of the objectives of the South African Poultry Sector Master Plan. This review could usefully draw on the EU’s experience of designing and applying trade policy tools in support of wider public policy objectives while respecting international trade policy obligations.
On 16 March 2021, a submission was made from the Department of Trade and Industry to the International Trade Administration Commission for a review of the entire tariff structure in the poultry sector. ITAC was directed to look at five issues:
- introducing specific rather than ad valorem duties (to minimise the scope for price under-reporting on invoices),
- simplifying the tariff structure, (to minimise the scope for misclassification of poultry products to circumvent higher import tariffs)
- consider specific anti-dumping measures (replacing specific anti-dumping duties for ad valorem anti-dumping duties)
- the possible use of other measures such as an entry price system (to prevent under reporting on import values)
- introducing import tariff rebates for exporters, where export targets are being met.
Submissions made to ITAC within the framework of this gazetted notification are now under consideration (1).
The gazetted notification reflects issues raised ‘in the 2019 Poultry Sector Master plan, agreed by government, local producers, importers and labour unions.’ According to the South African Fairplay Movement, ‘changing anti-dumping duties to a specific amount might be more effective than the present ad valorem duties’, given the scope for manipulation of import prices. It was suggested countries dumping chicken in South Africa ‘have shown they are able to lower prices to counter new tariffs’ (2).
This assertion is sustained by a review of Eurostat data over the 2012-2016 period when EU poultry meat exports to South Africa took off. This data which has been made available on the EC poultry data dashboard, shows the average recorded price of EU frozen chicken meat (frozen Gallus) exports to South Africa fell 30% between 2012 and 2016. What is more there was considerable variation in the average monthly prices reported with a spread of between 8% and 27% (3). Such price falls largely negated the impact of safeguard duties introduced by the South African authorities on imports from the EU over this period.
South African Frozen Poultry Meat Imports from the EU 2012-2016
| Tonnes | Ave Annual price €/kg | Monthly Average Price Range € /kg | |
| 2016 | 240,147 | €0.83 | € 0.75 – € 0.88 |
| 2015 | 183,607 | €1.00 | € 0.91 – € 1.16 |
| 2014 | 176,809 | €0.96 | € 0.97 – € 1.05 |
| 2013 | 134,466 | €1.05 | € 0.99 – € 1.14 |
| 2012 | 101,054 | €1.18 | € 1.05 – € 1.29 |
Source: EC Poultry trade Dashboard
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
Subsequent data is distorted by the application of Avian Influenza related restrictions on imports from various EU member states, which saw average unit prices increase. However, from 2018 when the South African authorities introduced safeguard duties, (see epamonitoring.net article, ‘South Africa Poultry Producers Seek Further Anti-Dumping Duties’, 9 March 2021), average recorded import prices began to fall again, declining almost 30% between 2017 and the early months of 2021.
South African Frozen Poultry Meat Imports from the EU 2012-2016
| Tonnes | Ave Annual price €/kg | Monthly Average Price Range € /kg | |
| 2021 | 3,237 | €0.88 | € 0.85 – € 0.91 |
| 2020 | 68,800 | €0.92 | € 0.83 – € 1.13 |
| 2019 | 108,643 | €0.94 | € 0.76 – € 1.04 |
| 2018 | 67,158 | €1.03 | € 0.79 – € 1.29 |
| 2017 | 66,116 | €1.19 | € 1.00 – € 1.33 |
Source: EC Poultry trade Dashboard
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
For individual consignments more disaggregated data from the South African Revenue Service analysed by the South African Poultry Association reveals even more dramatic declines with prices for some export categories from certain EU member states being far lower than the average data suggests.
Against this background the Fairplay Movement points to the use by the South African government of specific duties on imports from the USA, with duty free access only being allowed within a clearly defined tariff rate quota arrangement (2).
The Fairplay Movement also called on ITAC to study carefully the trade defence policies used by the EU not only in the poultry sector but also in other sensitive EU agri-food sectors. In this context it quoted remarks by the then EC Trade Commissioner Phil Hogan to the effect that ‘while imports offer more choice at a competitive price for our consumers and businesses, we need to make sure they come to Europe on fair terms, not dumped or subsidised, and that they do not make us over-dependent’ (2).
The need for a comprehensive approach to tariff policy is highlighted by the extent to which Brazil sought to take advantage of South African AI linked bans on imports of EU poultry meat. Even in the face of the revised South African MFN tariffs applicable to Brazil introduced in March 2020 (see table below), by February 2021 Brazil had been able to ‘pushed its share of South Africa’s poultry imports to 77%, up from… an average of 55% in 2020’. There seemed to be a direct correlation with ‘Brazilian supplies of bone-in chicken are increasing as European supplies decline’ (4). This suggests the ITAC comprehensive review of how tariffs and associated trade measures are designed and applied is sorely needed.
South Africa’s Revised MFN Tariffs and Wider Tariff Treatment (March 2020 revision)
| Tariff Code | Product | Old MFN | New MFN | EU | EFTA | SADC | Mercosur |
| 0207 | Old New | Old New | |||||
| 02071210 | MDM | Free | Free | Free | Free | Free | Free |
| 02071220 | Carcasses (necks, offal frozen) | 31% |
31% |
Free | 31% | Free | 31% |
| 02071290 | Frozen Whole Birds | 82% | 82% | Free | 82% | Free | 82% |
| 02071410 | Boneless Cuts | 12% | 42% | Free | (12%) 42% | Free | (12%) 42% |
| 02071420 | Offal | 30% | 30% | Free | 30% | Free | 30% |
| 02071490 | Bone in Portions | 37% | 62% | Free | (37%) 62% | Free | (37%) 62% |
| Special Measures | Anti-dumping duty for USA R9.40/kg outside of 96,972 tonne TRQ | Safeguard Duty 25% to be phased down | |||||
Source: South Africa Revenue Service (special measures section analysis USDA)
(EU- European Union, EFTA – European Free Trade Association; SADC – Southern African Development Community
The ITAC review needs to be seen in the context of the fierce debate underway in South Africa on what would constitute an appropriate poultry sector tariff policy. This discussion however appears to be hung up on the narrow issue of what constitutes ‘dumping’ (5) and whether such dumping of poultry meat from the EU is taking place (6).
This discussion can lose sight of the wider issue of the public policy objectives to which trade policy processes and trade policy measures can be legitimately subordinated. EU agricultural trade policy is certainly designed with wider public policy objectives in mind, with the EU then seeking to frame international trade rules in ways which are consistent with the EU’s chosen trajectory for the pursuit of wider public policy objectives through its agricultural trade policies in what are deemed to be sensitive sectors.
| Comment and Analysis
The Fairplay Movements call for ITAC to study carefully the trade defence policies used by the EU would appear to be particularly relevant. The EU uses a variety of measures to manage imports of poultry meat. This basic regime consists of: · The maintenance of a disaggregated system of high MFN tariffs, which maintains · The application of a wide range of tariff rate quotas (TRQ), established in line · The operation of a system of import licences for the application of agreed TRQs, · The maintenance of a special safeguard mechanism to control access to the EU The application of this trade regime means the growth in EU consumer demand for poultry meat is almost exclusively met by EU producers despite the cost of production disadvantages EU producers face. While this allows an expansion of imports of poultry meat cuts and products, as required, this is carefully managed This would not be such a problem if the EU poultry meat trade regime did not stipulate higher levels of EU production which also inevitably generate higher levels of poultry parts production, which then need to be disposed of on 3rd country market (largely sub-Saharan African markets), given the limited market for these poultry parts in the EU. What is more, the higher prices which the protective EU poultry meat trade regime generates on the EU market, enable EU poultry parts to be sold at prices which are based not on underlying EU poultry production costs, but on the costs of shipping minus the cost of alternative methods of disposal of unwanted poultry parts. In this context it needs to be borne in mind unwanted EU poultry parts poultry parts can no longer be turned into meat and bone meal for use as animal feed. It is this situation which gives rise to the low level of prices paid on imports of poultry meat from the EU. The EU poultry industry has long since acknowledged that ‘in the absence of import tariffs…the EU market would rapidly be influenced by imported products, with EU producers increasingly restricted to supplying niche markets’ (7). This 2005 evaluation of the EU poultry trade regime argued the application of this regime, maintained prices between 11.5% and 13.1% and production between 7% and 13.3% higher than would be the case in the absence of this protective trade regime. This situation has not changed radically since 2005, with the price competitiveness of EU poultry production still falling far short of that of other major global suppliers (see companion epamonitoring.net article, ‘Report highlights vulnerability of EU poultry sector to liberalisation of trade in poultry meat’, 5 September 2017). Looking beyond the trade policy tools used by the EU in the poultry sector, we find in the fruit and vegetable sector, for some 15 selected fruit and vegetable products the EU operates a minimum entry price system. This system is aimed at protecting EU producers from low priced imports by imposing a specific duty on imports when daily import prices fall below a predetermined seasonally varying stipulated minimum entry price. This system of protection is known as the EU entry price system. This non-tariff measure prevents the entry of the concerned products to the EU market below the stipulated entry price and serves to reduce the price competition from low priced imports for the concerned EU fruit and vegetable producers. To operate this system the EC generates a ‘synthetic’ import price which the Commission refers to as the standard import values (SIVs). The applicable SIVs, published on a daily basis by the EC are calculated from a survey of fruits and vegetable prices for each product and export origin, collated from designated representative fruits and vegetables wholesales markets in all the EU member countries. The use of the Entry Price System gives rise to a composite duty which is made up of an ad valorem tariff and a specific duty component. Significantly, where duty free access is granted, only the specific duty would be imposed, unless otherwise stipulated. In the dairy sector the EU uses an administrative mechanism to limit competition from imports. This is based on licensing arrangements which on food safety and public health grounds, determines which enterprises can place dairy products for sale on the EU market (so called ‘approved undertakings’). The licensing of ‘approved undertakings’ is highly decentralised and effectively means only EU dairy companies can place dairy products for sale on the EU market. This greatly reduces the commercial space for competition from dairy products imported from beyond the EU’s borders. There would thus, appear to be a rich EU experience of trade policy design and implementation intended to achieve wider public policy objectives while respecting international obligations, which the current ITAC review could usefully draw on.
|
Sources:
(1) South African Government Gazette, Vol 669, 16 March 2021, No.44277
https://mcusercontent.com/b7a9f3246b31f312546df800d/files/ec06e196-85b1-48cc-aa24-295226ba81ac/Tariff_restructure_gazette_March_2021.pdf
(2) fairplaymovement.org, ‘Comprehensive tariff restructure is in the offing’, 29 April 2021
https://fairplaymovement.org/comprehensive-tariff-restructure-is-in-the-offing/
(3) EC Poultry Trade Dashboard
https://agridata.ec.europa.eu/extensions/DashboardPoultry/PoultryTrade.html
(4) fairplaymovement.org, ‘Brazil profits from EU woes’, 21 April 2021
http://fairplaymovement.org/brazil-profits-from-eu-woes/
(5) businesslive.co.za, ‘Check the facts (and figures) over poultry dumping’, 28 April 2021
https://www.businesslive.co.za/bd/opinion/letters/2021-04-28-letter-check-the-facts-and-figures-over-poultry-dumping/
(6) businesslive.co.za,’ Can Mr Wolpert confirm or that such activity took place on his watch?’, 30 APRIL 2021
https://www.businesslive.co.za/bd/opinion/letters/2021-04-30-letter-did-or-did-not-chicken-dumping-take-place/
(7) Agra CEAS Consulting, ‘Evaluation of the Common Market Organisation (CMOs) for pigmeat, poultrymeat and eggs’, Contract 30-CE-0009330/00-422134/CC/November 2005,
http://ec.europa-eu/agriculture/eval/reports/pig_poultry_egg/fullrep_en.pdf