NewsSouthern AfricaSouth African farmers play chicken with Trump tariffs


Posted on Wednesday, 29 August 2018 15:34

South African farmers play chicken with Trump tariffs

By Reuters

President Donald Trump pauses while speaking during a dinner for evangelical leaders in the State Dining Room of the White House, Monday, Aug. 27, 2018, in Washington. Photo: Alex Brandon/AP/SIPAHerman Pretorius is just the kind of white South African farmer U.S. President Donald Trump expressed concern for when he barged into the country's delicate land reform debate by ordering an investigation into the "large-scale killing of farmers".

But for Pretorius, who keeps about 35,000 chickens on his farm, its America's cheap poultry exports that are a threat.

"I would like the South African market and the government to put the import tariffs higher so that for us in the market the prices can be better. We cannot compete with subsidized chickens from overseas and we cannot compare our chickens with theirs. The price difference will kill us. This would level the playing field with the American and overseas markets," he said.

For years, the U.S. and South Africa have fought over poultry: Washington has kept South African poultry out on health and sanitation grounds while Pretoria accuses U.S. farmers of dumping chicken at below-cost prices and has imposed tariffs.

In 2015, South Africa's powerful poultry industry agreed to exclude 65,000 tonnes of U.S. chicken from the anti-dumping tariff - in return for the renewal of broader duty-free U.S. trade access that benefited other South African industries.

Now, as a consequence of his "America First" trade strategy, Trump's decision to impose tariffs on steel and aluminium has reignited the poultry clash, threatening nearly $2 billion of South African exports to the United States under Washington's flagship African trade legislation (AGOA).

AGOA grants qualifying countries duty-free access to U.S. markets for thousands of goods and South Africa is among the main beneficiaries.

In the 20 years from 1995 to 2015, South Africa's annual poultry consumption nearly tripled to more than 2 million tonnes. But local production has expanded at a slower rate than imports, which account for a quarter of consumption.

When Pretorius set up his first chicken coops 27 years ago, he said competition from foreign imports wasn't an issue.

Now, he runs 14 industrial chicken houses that turn out more than half a million birds every few weeks. But in recent years he said his business has stagnated - and he blames cheap poultry imports for driving down prices.

South African poultry farmers say because U.S. aluminium tariffs apply to South Africa - even though aluminium should be exempt under the AGOA agreement - the 2015 chicken deal is void and it's time to slap tariffs on U.S. poultry again.

After months of threats, the South African Poultry Association (SAPA) pulled the trigger last week and filed a lawsuit against its government, calling for the U.S. poultry tariff exclusion quota to be suspended.

Poultry industry is standing firm

"We are preparing to go the legal route on this and merely standing by what we agreed," said SAPA chair, Marthinus Stander.

"The South African Poultry Association believes that because the U. S. has violated AGOA it is full within its rights to respond and retaliate. It comes at a very difficult time especially under President Trump who has been known to favour a trade war and we run the risk of possibly being suspended from AGOA ourselves," said economist, Sam Rolland.

A blanket suspension of South Africa's AGOA status would hit the transportation equipment industry hardest. About 85% of its nearly $1.4 billion in exports to the United States were covered by AGOA last year.

Now that SAPA has filed a lawsuit to force a suspension of the poultry quota, the South African government finds itself in an awkward position.

If the anti-dumping tariff is reapplied, South Africa risks retaliation from Washington which could have a more far-reaching impact on the economy as a whole.

"The different sectoral linkages in the economy mean that we run the risk of job losses not just in those direct sectors such as automotives and such as wine, it also affects all the downstream industries that make use of vehicle parts and also the incomes that could potentially be lost," said Rolland.

Ultimately, with legal action pending, the South African government's hands may be tied. And despite the broader economic implications, South Africa's poultry industry is standing firm.

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