TRALAC - Trade Law Centre

SA-US poultry groups 'need to take talks seriously' - Q&A with Senator Coons

Tuesday, 24 March 2015 Published: | Ellis Mnyandu

Source: Business Report (South Africa)

This past Friday, Business Report had an interview with US Senator Chris Coons (Democrat, Delaware) about the long-running dispute between South Africa and the US over Pretoria’s anti-dumping duties on US poultry exports.

Coons, along with his Republican counterpart Johnny Isakson of Georgia, want South Africa to scrap the duties or risk being kicked out of the African Growth and Opportunity Act (Agoa), a preferential trade scheme that allows duty-free access into the US of various South African exports, including cars, wine, citrus and textiles.

Here is the Q+A of my conversation with Coons, who warned that the window of opportunity to salvage South Africa’s participation in Agoa was closing fast as Congress would soon be seized with other weighty trade matters, leaving little or no time to resolve South Africa’s Agoa status before September, when the current scheme is set to expire.

 

BR: On a scale of 1 to 10, where would you say the parties are in their efforts to try and resolve this matter?

COONS: In terms of progress in the engagement between the South African and the American government, we’re at a very positive place. I would say an 8. Ambassador (Mninwa) Mahlangu, who is the new South African ambassador to the US has been very responsive and engaged. Trade and Industry Minister Rob Davies has been responsive and engaged. We have a wide number of Senators and (President Barack) Obama’s administration’s trade representative, Ambassador Michael Froman – we have had a series of conversations over several years now that have led to a stronger and better clarity to what the issue is, and focus on trying to resolve a 15-year-old dispute through which South Africa is using anti-dumping duties to block American poultry from the South African market.

On the first point I would say the governments are talking well and respectfully and are engaged. But the parties here who really have to negotiate are the South African Poultry Association (Sapa) and USA Poultry and Egg Export Council (Usapeec)/National Chicken Council. I am concerned that Sapa does not seem to be taking the private negotiations… seriously, and do not seem to have a sense of the importance of time. There is a very short window in which we can get Agoa re-authorised before it begins to have very negative consequences. It expires in September.

Most of the countries that take advantage of Agoa work in textiles – in Lesotho or Kenya for example. Across the continent, South Africa is the only country that has a very advanced economy and uses Agoa to export vehicles, finished products, as well as agricultural products, and some textiles – but overwhelmingly, it’s advanced finished products.

I have heard from other African ambassadors from across the continent. They are very concerned with how long this is taking, and that the South African poultry issue has not been resolved. So I would say a 4 – on how the Sapa/Usapeec negotiations are going. They need to step up, make them formal, make them in person and move them quickly.

 

BR: In January, Davies indicated to me in a conversation in Davos that an offer had been prepared, and was ready to be tabled. So where is that?

COONS: There was an initial offer from Sapa and an initial response from Usapeec. So they are still far apart. The tonnage, the volume that they are discussing is still several multiples apart. What I am trying to convey is that this is a classic private negotiation. The first party comes to the table and says we’ll give you two, and the second party comes to the table and says we need 20 or 30. It’s up to them. I don’t think I should get into the specifics of exactly or what they are negotiating or need to negotiate, but they must find a middle-point that is acceptable to both parties. And there hasn’t been a second round.

They’ve only proffered their first offer, and they’ve had informal, casual conversations since then. What I am trying to convey, is that, yes, Davies is correct, Sapa has made an offer. We have about a month left. I expect the trade package that will move through the Senate to be taken up in committee in April and to be moved to the floor of our Senate probably by the end of April, maybe early May at the latest.

This is an issue that is much smaller than Obama’s initiative about Pacific trade. We have to get this done before we take up the much larger, more complex issues involving 20 other countries as the Pacific. So there is a closing window for us to get the focus of the American Congress on re-authorising Agoa before it has negative consequences for the continent, and I want to see this done.

 

BR: So in your view Senator what would be the most appropriate step by Sapa? I know you say you don’t want to get into specifics but the background here, which I am picking up – is the fact that while South Africa might well be an advanced economy – we’ve got this hybrid situation of advanced and not so advanced – 25 percent unemployment and half of the population living below the poverty line, so we’ve got jobs to protect.

COONS: And I well understand South Africa’s complex economy and challenges. And the South African government has been very responsive and forward leaning on these issues. I would like to see South Africa continue to benefit from Agoa. I am willing to fight for a long-term extension for Agoa, but it is unreasonable to expect me, when my state’s major export is chicken, and my Republican partner Johnny Isakson – his state’s major export is chicken – it is unreasonable to expect us to say, we’re going to work very hard, let’s say, for a 10-year extension so that all South African products – from automobiles, to wine, to citrus – can come into my country duty free, quota free, and yet the one thing that my state is trying to sell around the world has faced this complete barrier for 15 years. That’s not fair trade.

I agree with you, Agoa is a wonderful tool to continue to help the necessary and important development of South Africa, and from my first meeting with Davies in South Africa when I visited three years ago, I have been saying I am committed to working to press the American poultry industry to invest in South Africa, to engage in technology transfer and training, and real partnership because South Africa’s poultry industry must grow. It should be the basis for regional leadership by South Africa.

In my view, this is not just the case of ‘I want access for my state’s products to the South African market’. I think there’s a genuine win-win possibility here of positive long-term partnership.

 

BR: Apart from South Africa, are there any other markets that you are also looking to export to?

COONS: There are many other markets. The counter-veiling duties that South Africa has used for 15 years, the World Trade Organisation (WTO) has declared them illegal in a recent case involving India. They have also been used by China, Indonesia, by many other countries. There are a number of promising markets around the world where US poultry has been blocked, either because of a misapplication of an avian influenza phytosanitary standard – or because of the misuse of counter-veiling duties. I understand that it is the role of someone like Davies – around the world most countries want to protect their home industries – I understand that. And part of the challenge of global trade is to continue to negotiate in a way that creates more and more market access, but in a way that is not unfair.

What I am trying to point out, and the South African government has been responsive but Sapa has not, is that European poultry has wide open access to the South African market, Brazilian poultry has access to the South African market, American poultry does not.

I am one of the leading champions in the American Congress for securing long-term duty free, quota free access to a very wide range of advanced products to the American market for South Africa. I am simply asking that we do this on a fair basis.

 

BR: But what would you say to the fact that if indeed South Africa is kicked out of Agoa, that would be somehow counterproductive because we’ve got a lot of countries in the region that depend on South Africa.

COONS: That is a legitimate concern. South Africa is an essential regional driver. From Mozambique, to Botswana, to Lesotho, to Swaziland to Namibia, so you would have a very negative consequence. The automobile plants have supply chains in the region. The citrus growers in the Cape have employment and regional consequences. So I would agree that it would be truly unfortunate for South Africa not to continue in Agoa.

I am eager to fight for South Africa’s inclusion in Agoa, but on a fair basis to my home state. My own state for a very long time was a centre of automobile manufacturing in the US. We had two large automobile plants. They are closed. And I have thousands of former automobile workers in my state, who when they read in newspapers… that I am working hard so that South African automobile (manufacturers) and South African automobile workers could have the opportunity to sell their automobiles into our market with no duty, they will turn to me and say, that’s great Senator Coons, but what are you doing to help Delaware?

This is how representative Democracy works. I am a friend of and advocate for South Africa and South Africa’s development, but I am also charged with advocating for my home state.

We no longer export automobiles from here, but we do still export chicken. So I think it’s a small consideration. South Africa benefits from Agoa to the tune of roughly $2.5 billion (about R30bn) a year and I think that should continue.

And I think South Africa should continue to develop as a regional hub for sustained economic growth and I am excited to work with Davies and President Jacob Zuma and Mahlangu and others in South Africa to achieve that desirable end, but first we must resolve this issue of concern to my state and to 20 other states where poultry is an important employer of working people.

 

BR: So help me understand, what would be most appropriate here. It sounds to me Sapa might essentially be toying with the idea of quotas, while on the other hand, it sounds to me that you want an outright scrapping of these duties.

COONS: I understand that Sapa and Usapeec would most likely negotiate a quota. And I understand that might be the outcome. What I am looking for is an acceptable negotiation where Sapa and Usapeec agree between them on what is the exact outcome. Longer term, the duties should be scrapped. They don’t comply with WTO rules.

But in the short term, Davies, Mahlangu and our Froman (the US trade representative) agree that by private agreement Sapa and Usapeec can come up with a temporary waiver through a quota.

 

BR: Will that be acceptable to you?

COONS: If the size of that quota is acceptable to Usapeec.

 

BR: What is scheduled in the next few weeks? What’s on the calendar on this front? A delegation from South Africa was recently in Washington.

COONS: That is my main concern. I do not believe there is a currently scheduled formal negotiation between Sapa and Usapeec and that’s what should happen next. I met with the delegation from South Africa. We had a very respectful and constructive discussion, but that was government to government. Now we need Sapa to come to the table quickly and formally, and negotiate in good faith with Usapeec.

If you think about it, the South African government, the South African economy, has a great deal to lose if Agoa is not extended for South Africa. The countries in the region that take advantage of Agoa for textiles, like Lesotho, are going to begin losing contracts for the holiday season for textiles within a few weeks. I had another meeting in January with a dozen ambassadors from Gabon to Kenya, from Mauritius to Lesotho, who were desperate that Agoa be re-authorised by March to avoid the loss of contracts and to avoid the loss of jobs. March is already passed. Congress will not take this up and move it overnight. Everything we do, we do slowly. But the window for trade negotiations and the window for legislation on trade is going to be April, not September, but April.

My concern is that Sapa needs to come to the table promptly and fairly.

 

BR: And just before we wrap up here. Can you share with us, what are the products that are in dispute here? Is it whole chicken, bone-in chicken?

COONS: I should let the American poultry industry speak to what their export goals are. But broadly speaking, globally, you are correct that Americans consume a very large amount of white chicken meat. Typically we export dark chicken meat, but I am not speaking on behalf of the American poultry industry. My hunch is that they are seeking to export both whole chicken and chicken parts, and in most of the world we are exporting dark chicken meat. But that’s best left to Usapeec.

If I can just summarise: There is a clear path to a fair and responsible compromise, but I am getting the impression that Sapa is not taking these negotiations seriously and is willing to jeopardise our countries’ important trade relationship. The South African government has been a good partner, but time is running out. Sapa and Usapeec must get to the table for formal negotiations promptly.

 

BR: One final question. Say some resolution is found – do you think the angst that has characterised this process will also dissipate when a resolution is found. I am just worried that perhaps in the grand scheme of things the US is hurting itself here by appearing to be bullying its way on this issue, which then makes other people who have interests in this part of the world look like saints.

COONS: I don’t think that will be a fair characterisation. What we are working hard for is a long-term, wide open opportunity for South Africa to access the American market, and all we are seeking is some improvement, modest improvement in the fairness of access of one of our products to the South African market.

I am a true friend of South Africa and I am determined to work steadily over the years that I serve in our Senate to improve our relations – economic, cultural, security, political and I would agree that if all you knew about me was that I was pushing for my home state products you might have this misunderstanding or misapprehension of my motive. My motive is for us to have a fair, strong, steadily improving relationship of countries based on mutual respect and fair trade.

 

* Ellis Mnyandu is the editor of Business Report.

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