Agoa.info - African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/SA farmers play 'chicken' with US tariffs

SA farmers play 'chicken' with US tariffs

SA farmers play 'chicken' with US tariffs
Published date:
Wednesday, 29 August 2018
Author:
JOE BAVIER
Source:

Herman Pretorius is just the kind of white South African farmer U.S. President Donald Trump expressed concern for when he barged into the country's delicate land reform debate by ordering an investigation into the "large-scale killing of farmers".

But for the greying, bespectacled 58-year-old, wading knee-deep through some 35,000 chickens at his isolated homestead in South Africa's North West province, it's the United States and its cheap poultry exports that are a threat.

"We cannot compare our chickens with theirs. The price difference will kill us," said Pretorius, speaking with a gravelly voice in his native Afrikaans.

For years, the two countries have fought over poultry: Washington has kept South African poultry out on health and sanitation grounds while Pretoria accuses US farmers of dumping chicken at below-cost prices and has imposed tariffs.

But in 2015, South Africa's powerful poultry industry agreed to exclude 65,000 tonnes of US chicken from the anti-dumping tariff - in return for the renewal of broader duty-free US trade access that benefited other South African industries.

Now, as a consequence of his "America First" trade strategy, Trump's decision to impose tariffs on steel and aluminium has reignited the poultry clash, threatening nearly $2 billion of South African exports to the United States under Washington's flagship African trade legislation (AGOA).

South African poultry farmers say because US aluminium tariffs apply to South Africa - even though aluminium should be exempt under the AGOA agreement - the 2015 chicken deal is void and it's time to slap tariffs on US poultry again.

After months of threats, the South African Poultry Association (SAPA) pulled the trigger last week and filed a lawsuit against its government, calling for the US poultry tariff exclusion quota to be suspended.

In its quest to rebalance trade relationships, Trump's administration is giving no quarter as it targets friend and foe alike, from the European Union to China. Coming on the heels of a row with Rwanda, the dispute with South Africa highlights how even the smallest trading partners are not being spared.

"We're not the cause of anybody's problems, and yet we've been affected," South African Trade Minister Rob Davies told Reuters in July. "We've become collateral damage in a trade war that is not of our making."

DUMPING DISPUTE

When Pretorius set up his first chicken coops 27 years ago, he said competition from foreign imports wasn't an issue.

Now, he runs 14 industrial chicken houses that turn out more than half a million birds every few weeks. But in recent years he said his business has stagnated - and he blames cheap poultry imports for driving down prices.

"The damage got to a point where I wanted to expand my business ... wanted to create jobs for our people. But the imports from overseas hurt me badly," Pretorius said. "I want the South African government to increase the import tariffs."

In the 20 years from 1995 to 2015, South Africa's annual poultry consumption nearly tripled to more than 2 million tonnes. But local production has expanded at a slower rate than imports, which account for a quarter of consumption.

To protect local farmers, the poultry industry lobbied for protectionist measures and in 2000 the government imposed an anti-dumping tariff on US "bone-in" poultry. The duty is currently fixed at 9.40 rand ($0.64) per kg.

"That just levels the playing field for our own producers versus their dumped product," said SAPA's Marthinus Stander.

South Africa argues that the US industry is tailored to Americans' preference for white, de-boned breast meat. Since US producers can recover their costs with the sale of breast meat, SAPA says the thighs and drumsticks favoured by South Africans can be exported at below cost.

US producers say the South African tariff is illegal.

"The anti-dumping duties imposed on US poultry were based on a flawed legal theory ... that has twice been held by WTO (World Trade Organization) panels to be inconsistent with international rules," said James Sumner, president of the USA Poultry & Egg Export Council (USAPEEC).

In 2015, U.S. authorities approached the South Africa and, using the threat of a withdrawal of South Africa's AGOA benefits, pushed for a quota exempt from the tariff.

AGOA (African Growth and Opportunity Act) grants qualifying countries duty-free access to U.S. markets for thousands of goods and South Africa is among the main beneficiaries.

South Africa's poultry industry agreed to the deal despite the fact its exports remain blocked from entering the U.S. market. It calculates the quota has cost about 6,500 jobs.

"It was for the good of the other industries. So we kind of put on a Team South Africa hat in terms of making the rest of the AGOA benefits possible," said Stander, who is CEO of Country Bird Holdings Ltd - one of South Africa's top poultry producers.

Last year, according to South African tax authority data compiled by SAPA, the United States exported more than 87,000 tonnes of poultry to South Africa, up more than 200 percent from 2016 and second only to Brazil's 337,476 tonnes.

WASHINGTON'S WRATH

Trade Minister Davies said when the White House announced tariffs of 25 percent on steel and 10 percent on aluminium this year claiming imports threatened its national security, Pretoria sought an exclusion.

South Africa's steel and aluminium exports to the United States last year were worth more than $650 million, according to South Africa's Trade Law Centre.

But since they constituted just 1 percent of US steel and a little over 1 percent of its aluminium, they represented no threat to the United States, South Africa argued.

"We were just told that we were out. We were not going to be considered for exemption. The tariff was going to apply to us," Davies said.

Now that SAPA has filed a lawsuit to force a suspension of the poultry quota, the South African government finds itself in an awkward position. If the anti-dumping tariff is reapplied, South Africa risks retaliation from Washington which could have a more far-reaching impact on the economy as a whole.

The USAPEEC's Sumner told Reuters his group would lobby the US government to take action if the quota is revoked over the metal tariffs.

"It has absolutely nothing to do with poultry trade between the US and South Africa," Sumner said. "SAPA is trying to be opportunistic here and to increase trade frictions unnecessarily."

South African meat importers also oppose any suspension of the quota. They say it would push up prices for consumers and could provoke Washington's wrath.

"It's quite possible the Trump administration would take South Africa on," said David Wolpert, CEO of the Association of Meat Importers and Exporters of South Africa.

The form of any possible US retaliation is unclear for now.

"We cannot speculate on what South Africa may or may not do with respect to its tariffs and non-tariff barriers," a US State Department official wrote in response to Reuters' queries.

But analysts and South African officials worry the country's AGOA benefits may be in danger, again.

Washington used the threat of a withdrawal of AGOA benefits to press Kenya, Uganda, and Tanzania to roll back tariffs last year on second-hand clothing from the United States. Rwanda refused and its AGOA benefits were curtailed in July.

A blanket suspension of South Africa's AGOA status would hit the transportation equipment industry hardest. About 85 percent of its nearly $1.4 billion in exports to the United States were covered by AGOA last year.

Ultimately, with legal action pending, the South African government's hands may be tied. And despite the broader economic implications, South Africa's poultry industry is standing firm.

"We agreed something to benefit the South African industries. And that benefit has been taken away ... We just want what's fair," SAPA's Stander said. 

Read related news articles

South Africa walks a tightrope on US relations

South Africa has been conducting a high-wire act in its relations with the United States (US). It is maintaining friendships with Washington’s enemies like Russia, Iran and China while trying to avoid disrupting its economic relations with America. Tensions came closer than ever to breaking point this month as the US House of Representatives’ Committee on Foreign Affairs passed the US-South Africa Bilateral Relations...

28 March 2024

Remarks by Deputy Treasury Secretary Adeyemo on the US-South Africa economic relationship

As Prepared for Delivery in Johannesburg, South Africa Thank you for the warm welcome. I want to express my gratitude to Consul General Spera and the American Chamber of Commerce for hosting me. I am honored to be joined today by South African Entrepreneurs that are building companies to unlock the economic potential of their country.  I owe my own presence here today to the inspiration I drew from South Africa. In the middle of the...

13 March 2024

South African president Ramaphosa meets with US congressional delegation

South African President Cyril Ramaphosa today, 21 February 2024, received for a visit from a bipartisan congressional delegation from the United States of America, in Tuynhuys, Cape Town. The delegation is visiting South Africa at the invitation of the Aspen Institute. The President and the US congressional delegation discussed the importance of the relationship between South Africa and the US, which manifests in strong economic,...

21 February 2024

US congress receives Bill to review South Africa relations

A bill has been submitted to the United States congress calling for a full review of the country’s bilateral relationship with South Africa following the International Court of Justice ruling that found it plausible that Israel has committed acts of genocide against Gaza. The bipartisan bill which was introduced by US Republican congressman John James and Democratic Party congressman Jared Moskowitz this week could threaten South...

09 February 2024

Fitch research unit expects better AGOA deal for South Africa

Fitch’s research arm, BMI, believes SA has done enough to get improved trade terms under the African Growth & Opportunity Act (Agoa), which it expects to be extended and modified before its expiry in September 2025. But it warns that the deal might be stillborn if Donald Trump is elected US president. The research think-tank said in a note it assigns a 65% probability that Agoa will not only be renewed but modified to the benefit of...

09 January 2024

South Africa: BLSA CEO calls for more companies to leverage AGOA opportunities

Many more South African companies could benefit from the African Growth and Opportunity Act (AGOA), which gives eligible countries access to US markets free of tariff barriers, business organisation BusinessLeadership South Africa (BLSA) CEO Busi Mavuso writes in her weekly newsletter. Apart from mainstream formal sector businesses, there are opportunities to enable more entrepreneurs, including women-led...

20 November 2023

US ambassador: AGOA is an opportunity to deepen ties between the US and South Africa

President Joe Biden last December at the US-Africa Leaders Summit affirmed that the US will elevate its relationship with Africa. The future is Africa. One example is its youthful population: the median age on the continent is 19. By 2050, one in four people in the world will be in Africa. The US wants them to be healthy and wealthy. What happens in Africa will affect the rest of the globe — and we want to work together to ensure it is...

09 November 2023

US Senator Chris Coons proposes AGOA extension by 16 years, immediate review of SA’s AGOA eligibility

Powerful US Democratic Party Senator Chris Coons is circulating a discussion draft of a Bill to renew the African Growth and Opportunity Act (Agoa) for 16 years that would also require an immediate “out-of-cycle” review of South Africa’s eligibility for Agoa. That could lead to South Africa being removed next year from the programme, which has provided considerable benefits to SA exporters to the US of cars, fruits and wine, in...

07 November 2023

AGOA benefits extend beyond trade [incl. VIDEO of Friday's opening session]

Economies in Sub-Saharan countries stand to benefit far more from the African Growth and Opportunity Act (AGOA) than notable trade statistics, says President Cyril Ramaphosa. “AGOA enhances the diversification of African economies, enabling them to export value-added products. By enabling African countries to have preferential access to the US market, this opportunity incentivises African countries to develop and export value-added goods...

06 November 2023

South Africa pins its hopes on an early 2024 US Congress renewal of AGOA

South Africa’s government is hoping that the process to renew the African Growth and Opportunity Act (Agoa) by the US Congress will be concluded by early 2024, ensuring that more than 20 African countries continue to have duty-free access to the world’s largest economy.   This is the first time that the South African government has given a timeline for when it hopes the US Congress might extend Agoa, which has been renewed twice...

05 November 2023

SA trade minister Patel expresses confidence at media briefing about South Africa’s continued inclusion in AGOA

Ahead of South Africa hosting the US-AfricaTrade and Economic Cooperation Forum – also called the AGOA Forum – from November 2 to 4, Trade, Industry and Competition Minister Ebrahim Patel on October 26 briefed the media on the state of readiness for the forum, expressing confidence that the South African government’s relations with the US were strong. Various South African stakeholders have been motivating for...

26 October 2023

You are here: Home/News/Article/SA farmers play 'chicken' with US tariffs