30 March 2021

Chicken industry lists the harm done by dumping

Submitted by Archy Hlahla
Chicken industry lists the harm done by dumping

First published in the Business Day, 30 March 2021.

In a fitting answer to critics who say dumped chicken imports are doing no harm, the local industry has set out in great detail the damage done and the threat to local chicken producers and local jobs by a flood of unfairly priced dumped imports.

The information is contained across hundreds of pages in the application by the South African Poultry Association (SAPA) for anti-dumping duties against Brazil and four European Union countries.

The application relates only to bone-in chicken (leg quarters, thighs, wings etc) imported from Brazil, Denmark, Ireland, Poland and Spain.

It also quantifies the extent of dumping. In the three financial years from July 2017 to June 2020, more than half of the bone-in chicken imported into South Africa was dumped product – imported at prices below the relevant sales price in the producer countries.

The import value of this dumped bone-in chicken totaled R6.4 billion. That’s a multi-billion motivation to lobby against measures to restrict dumped imports, and perhaps explains the articles and letters in Business Day from importers and their supporters arguing against tariffs.

Dumping is taking place because the major chicken producers in Brazil and the EU make their northern hemisphere profits from the preference there for chicken breast meat. That sells at premium prices, and the brown meat – bone-in chicken – piles up as an unwanted surplus.

This surplus chicken is frozen and sold in bulk packs to any market that will take it and at any price they can get. Prime markets for the past two decades have been west Africa and South Africa. The local chicken industries in west Africa – Ghana, Senegal, Ivory Coast in particular - were devastated. The South African chicken industry is trying to prevent that happening here.

The harm done to the local industry is an important part of the application. To secure anti-dumping duties, the industry must show that dumping is taking place, and also that it is causing material injury to local producers.

Importers like to argue that there’s no dumping, and that imports in any case do no harm. The application refutes both arguments, detailing the damage that dumping has done over the past three years. The general arguments are public and the supporting detail is contained in confidential submissions.

The industry has lost revenue, profits and market share, putting local jobs in the most vulnerable rural communities in peril. Because dumped imports have taken the bulk of increased local demand, the industry has been unable to grow sufficiently to achieve economies of scale.

While the industry has invested in additional production capacity, some of it is lying idle. Increased production could not regain market share because of the continued inflow of dumped chicken.

Employment levels were retained over the past three years, after significant job losses in previous years, but this may not continue.

“If no action is taken to remedy the material injury caused by dumped imports, then the participating producers may be forced to consider reductions in employees, as they were forced to do in 2016 and 2017.”

Not only has the industry suffered harm, it expects this to continue unless dumped imports are curbed. The application points to a significant oversupply of chicken in Brazil and the EU, and says producers there will be looking for export markets. South Africa, beware.

Import levels have reduced recently because of the economic impact of the coronavirus pandemic, the application says, but this is expected to reverse as the pandemic abates and the global economy returns to pre-pandemic levels and practices.

Anti-dumping measures are not protectionism, another argument that importers make frequently. Dumping is a transgression of WTO rules which bring the rule of law to international trade.

SA’s International Trade Administration Commission (ITAC), the independent body to which the application was made, has already said that on the evidence, a prima facie case of dumping has been made, and the dumpers are now required to answer the case against them.

High levels of dumped imports have severely damaged South Africa’s chicken and sugar industries. It should be no surprise that both have called for action against unfairly priced dumped imports which have caused contraction and job losses and spread misery in poverty-stricken rural areas.

Importers also like to present the poultry sector master plan, which they signed, as an export charter. It is not. It is a balanced document, aiming to protect the industry against unfair trade such as dumping and enabling it to invest and create jobs to serve expanded local and export markets. Exports will not happen unless a distressed industry is stabilized and revitalized.

There are barriers to exports to markets such as the EU, including insufficient state veterinary staff and facilities to provide the health clearance certificates the EU demands. The EU has kept poultry imports to less than 7% of the market – well below the 20% in SA – through a battery of “trade defense measures” that mollycoddle a protected and hugely subsidized agricultural sector.

The other drum that importers like to bang is that of price – they argue that if the government agrees to these horrible import tariffs, then the consumer price of chicken will rocket and the poor will suffer. Yet, in Ghana, when the dumpers had free reign, a US Department of Agriculture report in 2017 showed that the price of chicken rose to R226.69/kg, which is more expensive than steak in SA today.

Importers fail to explain how tariffs on some imports from some countries making up only a portion of the 20% of chicken imports can cause a massive rise in all retail chicken prices, including the 80% of chicken provided by local producers.

As signatories to the poultry master plan, chicken importers are committed to combatting unfair trade such as dumping. If they devote some time to reading the application for anti-dumping duties, including the damage done by dumped imports, they might revise their optimism that investigation will find no evidence of dumping.

Published by Archy Hlahla on behalf of Francois Baird, founder of the FairPlay movement