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Poultry War to Hit Consumers

19 June 2013

SOUTH AFRICA - The final decision on tariff increases on imported frozen poultry meat may have devastating consequences for consumers, local producers, importers and even international relations, depending on who emerges the victor in the "chicken wars".

According to Iafrica.com, the fight started when the South African Poultry Association (Sapa) launched its application for tariff increases at the International Trade Administration Commission (Itac) in March. The association is asking for increases of up to the maximum bound rate of 82 per cent, negotiated at the World Trade Organisation (WTO) in order to protect the local industry from lower-priced imports.

The arguments for and against this form of protectionism have been emotive, with a substantial number of accusations flying to and fro, indicating the high level of anxiety by all parties involved. Argentina, affected by the application, broke its silence on the matter to clarify what it calls some "untruths" that have been bandied around.

In a letter to Trade and Industry Minister Rob Davies at the end of last month, the Argentinian poultry association, Cepa, said the inclusion of poultry meat exports coming from Argentina, Brazil and Uruguay in the Sapa application could cast a shadow over the Mercosur-Southern African Customs Union (Sacu) trade agreement.

Cepa president Roberto Domenech said the countries in trade bloc Mercosur (Argentina, Brazil, Uruguay and Paraguay) signed a framework agreement for the creation of a free trade area between Mercosur and Sacu in December 2000 and signed a preferential trade agreement four years later.

Cepa asked to be allowed, as an interested party, access to the investigations through the Argentinian embassy in Pretoria. But Itac said the investigation was conducted within the domestic policy framework and it "is consistent with the negotiated WTO-bound most favoured nation ceiling rates".

At the heart of the application is the request from local producers for protection against cheap imports and their concern about the "adverse effect on employment and the industry as a whole". The local poultry association claims that at least 5000 jobs have already been lost because of the distress experienced by small and large producers.

Sapa CEO Kevin Lovell says producers are affected by high input costs and market imbalances caused by import volumes that increase or decrease erratically, which makes it impossible to factor them into business planning or modelling.

"The production cycle is so long that once production decisions are made, producers are locked into it for 22 months, with no way of reducing production in the face of unexpected declines in demand other than to slaughter broiler stock at a huge loss," says Mr Lovell. In times of global oversupply, countries resort to dumping products on other markets, destroying local industries.

But the Association of Meat Importers and Exporters (Amie) says consumers should not be called upon to finance bad business models. The sector is not distressed, but individual companies have problems, it says.

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