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Nothing to crow about

WITH the International Trade Commission’s (Itac’s) decision to raise the import tariff on chicken by 82%, I looked at the Agriculture Agreement among World Trade Organisation (WTO) members as finalised during the Uruguay Round and coming into effect in 1995.

From this, I will discuss if the 82% increase is justified or not.

The Uruguay Round (supposedly) committed countries to cut tariffs and to “bind” their customs duty rates to levels which are difficult to raise. How is it then that Itac approves the 82% increase?

Let’s begin by firstly clarifying what was requested by the South African Poultry Association (SAPA).

My understanding is that SAPA applied for an increase of certain duties to a maximum of 82% – the bound rate, as agreed to under the Agriculture Agreement – not an 82% increase on the existing rates.

If 82% is the agreed to bound rate for South Africa, this means the increase is indeed permitted under the WTO and Itac may be justified in approving the request.

So why did SAPA make the request? The association feels that:

• South African and other BLNS (Botswana, Lesotho, Namibia, Swaziland) producers are facing a large and rapid increase in the volume of imports of extremely low priced frozen poultry meat;
• Some small and medium-sized producers have shut down and others face the imminent threat of closure. Large-scale producers have been forced to make job cuts and if the threat persists, some may be forced to further scale back operations and possibly close; and
• The low priced imports are negatively impacting investment in the industry and associated industries, compromising SACU food security.

The table below shows existing and proposed rates:



Considering the above, perhaps the increase is justified because no South African wants further job losses and we certainly do not want to be reliant on others for food security.

Given that SAPA bases its argument on a large and rapid increase in the volume of imports though, I take a look at the trade data for these specific sub-headings in order to refute or confirm this.

Since 2002, imports have grown by an annual average of 33.68%, with the highest growth rates occurring in 2003 (76.1%) and 2011 (62.85%).

Considering the annual growth rates for the last five years, I see no compelling evidence to suggest a large and rapid increase in volumes; however, the quarterly and annual data shows a different picture!

In 2010, for example, South Africa’s total imports for the year for the above mentioned sub-headings equalled about R1.2bn.

Taking 2010 as the baseline for the large and rapid increase in volumes, I checked to see in which month of 2011 and 2012 this baseline was passed. In 2011, it took nine months and in 2012, it took just six months.

So what was previously imported in 12 months in 2010, was imported in just six months not two years later.

Therefore, it appears as though Itac was justified in approving an increase in the tariffs, as the claims made by SAPA do appear justified and are in line with the Agriculture Agreement of the WTO.

 - Fin24

*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.

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