Feathers fly in tariffs war

2013-05-26 14:00

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Local poultry producers and importers argue over what matters more: affordable chicken or local jobs

The battle around raising tariffs on imported chicken has descended into a smear campaign, with opposing lobbies calling each other liars and producing completely contradictory facts to support their positions.

Chicken importers and producers both claim the other is dooming South Africa to job losses as high as 125?000. Both claim the other is steering South Africans towards dangerous food insecurity and stealing a staple protein from the mouths of the poor.

These rival doomsday scenarios are contained in submissions to the International Trade Administration Commission (Itac), which must decide on the tariffs, but increasingly also in public campaigns by the Association of Meat Importers and Exporters (Amie) and the SA Poultry Association (Sapa).

Sapa has asked Itac to raise tariffs on most kinds of chicken to the maximum 82% allowed under World Trade Organisation rules and a decision is expected soon after the commenting period ended early this month.

Itac will meet on June 11 and invite both lobby groups to make final presentations before making a recommendation to Rob Davies, the minister of trade and industry, says Rika Theart, Itac’s senior manager for tariff investigations.

“Approximately 20” submissions on the proposed tariffs were received before the May 10 cutoff date, she said in answer to emailed questions.

Among those who made submissions were the US Egg & Poultry Association, which has in the past blasted existing South African antidumping duties against their members as “illegal”.

Amie is making a last-ditch attempt to stave off the higher tariffs by launching a court case, putting out polemical advertisements and starting a petition campaign in butcheries.

The cornerstone of their campaign is the claim that the tariffs will make chicken up to 50% more expensive.

“I don’t know if it will influence Itac, but we want to get a message out to consumers,” says David Wolpert, the CEO of Amie.

Their campaign has collected about 10?000 signatures in less than two weeks, he says.

He has also launched urgent court proceedings against Sapa and Itac because Amie feels it was not given enough time or information to effectively counter the application for higher tariffs.

Sapa declared most of the figures in their application “confidential” and will now have to justify that classification in court.

The industry around meat importing also provides 15?000 jobs that could be threatened, Wolpert says in reaction to Sapa’s claims that up to 20?000 jobs in local chicken production will be lost “in the short term” if the industry is not protected.

Sapa’s CEO, Kevin Lovell, calls some of the Amie numbers “twaddle”, while Amie says the same about Sapa’s numbers.

According to Lovell, the maximum tariffs Sapa requested will push up chicken prices by between 10% and 15% – a “small price to pay” to defend their industry from an allegedly imminent jobs blood bath.

The numbers are complicated by the fact that “chicken” refers to a number of different products and the proposed duties on them differ.

Sapa and Amie agree the most important local product is “bone-in pieces” – wings, thighs, drumsticks and breasts sold in bags or braai packs.

The requested tariffs range from between R2.20 and R11.11 per kilogram for different forms of chicken. Most chicken is already subject to tariffs of 27%, so the increase would be less than these new requested tariff levels.

Once imported chicken is made more expensive, local producers will “probably” raise their prices to more or less the same level, says Lovell.

According to chicken prices cited in the rival lobby groups’ submission to Itac, the extra tariff on bone-in pieces will likely be slightly less than R7 per kilogram.

According to Theart, Itac is conducting a thorough investigation of the sector.

“Itac follows a developmental approach to tariff setting, bounded by industrial policy objectives.

“The focus is on the outcomes: increased domestic production, investment, job retention and creation, as well as international competitiveness.”

Welport claims imported chicken is already more expensive and competes on quality rather than price.

“The industry does have problems, but they are looking for an easy way out,” he says.

Amie blames the local producers’ woes on a “poor business model”, which is “not only flawed but ethically questionable”. Its main point of attack is the controversial practice of “brining” (injecting chicken with salt water).

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