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Chicken tax strains US-South Africa relationship

Thursday, 05 March 2015 Published: | Nathaniel Glidden

Source: Council on Foreign Relations Blog

For the past fifteen years, South Africa has been taxing poultry imports from the United States. This chicken tax has not been popular among representatives in the U.S. Congress.

Senator Chris Coons of Delaware has been particularly vocal, and his opposition was again reported on in a New York Times article two weeks ago.

Senator Coons’ concerns are twofold: the tax hampers U.S. poultry exports, one of Delaware’s staple industries. Additionally, the tax is considered unfair given that South Africa receives trade benefits under the African Growth and Opportunity Act (AGOA), a non-reciprocal trade program that allows sub-Saharan countries party to the agreement to export approved products to the United States untaxed. As a member of AGOA since 2000, South Africa has benefited from untaxed exports to the United States for products such as luxury automobiles and wine.

Despite the grumblings among members of Congress, South Africa has been reluctant to remove the poultry tax.  In part, the South African government claims that removing the tax would undermine local producers as U.S. poultry is cheaper than South African poultry. Additionally, South African officials have found justification in the World Trade Organization’s protectionist “anti-dumping” laws, which permit countries to impose levies on a product if it is introduced into a market at less than normal value. South Africa is protecting its local economy not just from cheaper U.S. poultry, but also poultry imports from the Netherlands, Germany, and the United Kingdom as well. Though the chicken tax is intended to protect the local poultry industry, it has unintended consequences. It raises prices because local suppliers do not provide enough poultry to meet local demand.

Though in accordance with the World Trade Organization’s protectionist “anti-dumping” law, South Africa’s chicken tax, which can be as much as 82 percent of the value of poultry imported, has become a thorn in the United States’ side. Senator Coons has gone so far as to recommend that the United States discontinue its AGOA partnership with South Africa. AGOA expires this year and will be up for reauthorization in September. As South Africa faces a projected growth rate of a meager two percent, it is in its interest to re-sign AGOA in order to maintain its export revenue stream. What remains to be seen is whether Senator Coons’ efforts will sway the Obama administration, which is in favor of re-signing the agreement with South Africa. If Coons succeeds, the U.S.-South Africa bilateral relationship along with South Africa’s trade benefits and economic opportunities may change for the worse.

This is a guest post by Nathaniel Glidden, intern for the Council on Foreign Relations Africa Studies program. He is currently pursuing a Master’s in International Affairs with concentrations in Development and Cities & Social Justice at The New School. Sourced from the Council on Foreign Relations Blog page. 

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