TRALAC - Trade Law Centre

Dumping duty a bone in AGOA’s chicken pie

Sunday, 12 April 2015 Published: | BIANCA CAPAZORIO

Source: Sunday Times

It's been 15 years, but there’s still no clarity on when chickens from the US will be able to cross the road to South Africa.

The delay now threatens to cost this country dearly as the deadline swiftly approaches for the US to decide whether to renew the African Growth and Opportunity Act (Agoa), which has given South Africa and other nations on the continent unfettered access to the massive US market.

At the centre of the Agoa debate lies the issue of South Africa’s “antidumping” duty on imports of US chicken, which has rubbed Americans up the wrong way for years.

As it stands, US poultry providers pay a 37% import duty of bone-in chicken, along with an extra antidumping duty of R9.80 a kilogram.

Having been unable to see eye to eye on the merits of this duty, US and South African negotiators have settled for bargaining about how many tons of chicken could be exempted from it. This week, representatives of the SA Poultry Association and of the United States of America Poultry & Egg Export Council meet in Portugal to try thrash out an agreement.

Given how tough the negotiations have been so far, it’s unlikely to be an easy meeting.

At a press conference on Friday, Trade and Industry Minister Rob Davies played down the rift, saying the two countries “just need to find the sweet spot”.

But for South Africa, that “sweet spot” is carving out some market share for its chicken industry in the US without imports having too much of an impact on the local industry.

Davies is obviously keen to protect the local industry, saying on Friday that it was an important sector because of the “tens of thousands” of jobs it created and its low barriers to entry.

With Agoa in the balance, the chickens have come home to roost. The current Agoa agreement, which has allowed 90% of South Africa exports into the US duty free for the past 15-years, expires on September 30.

Davies said the renewal of the agreement by the US Congress could go down to the wire, but he hoped it would be renewed early. He admitted that this definition of “early” had already come and gone.

The humble chicken drumstick remains one of the biggest stumbling blocks to South Africa’s continued membership of the Agoa pact.

In the US market, white chicken meat is king, which means that a surplus of brown meat, including drumsticks and wings, is looking for a market. In a bid to protect the local poultry industry — led by the likes of Astral Foods and Rainbow Chickens — South African producers have lobbied to keep the extra taxes on US chicken.

This week, Patrick Gaspard, the US ambassador to South Africa, presented the case for South Africa scrapping the extra “antidumping” duty on chickens bred by American farmers.

“If the antidumping duty against US chicken were removed, it wouldn’t mean that US producers would replace the South African poultry industry, but merely that the US would compete against the other foreign producers already in the market,” Gaspard said.

Gaspard said that South Africans consumed about 1.8 million tons of broiler chicken a year, of which 1.1 million tons are produced locally.

About half of the $350-million South African market for imported chicken is for bone-in birds.

The extra duties on US imports were “prohibitively expensive”, he said.

He firmly rejected the notion that the US was holding South Africa “hostage” on the renewal of Agoa.

“Absolutely not -the US has made clear our consistent position that we want Agoa seamlessly renewed, and that we want South Africa included. Both [the US government] and Congress, however, have also made clear that we want to resolve outstanding issues blocking US trade, most notably on several agricultural products.”

US legislators are furious about the antidumping duty.

In particular, senators representing two US poultry producing states, Chris Coons of Delaware and Johnny Isakson of Georgia, have threatened to block the passage of Agoa unless South Africa’s chicken problem is solved.

Last year, 13 US senators wrote to South Africa, expressing their concern about agricultural taxes, particularly on bone-in chicken.

But on Friday Davies attempted to play down the role of chicken in the renewal of Agoa, saying it was “not a foregone conclusion” that solving the poultry problem would automatically grant South Africa Agoa agreement renewal.

Davies also admitted that he had asked South African chicken producers: “What can we concede in the interests of the bigger outcome, which is ensuring our continued presence in Agoa?” On Friday, the US embassy said that although Agoa was a “good deal” for both countries, some issues, including US chicken exports, needed to be resolved before the US could decide whether to grant “zero duty access” to South Africa.

This article was first published in Sunday Times: Business Times

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