Is It Time to Cry Fowl over Possible Chicken Tariffs?

Cape Times (South Africa), April 25, 2013 | Go to article overview

Is It Time to Cry Fowl over Possible Chicken Tariffs?


BYLINE: Wilmot James and Geordin Hill-Lewis

On April 12 the Government Gazette published the long-awaited customs tariff application brought by the South African Poultry Association to raise duties on certain categories of imported chicken. The bird industry has been complaining about the strong rise in imports over the last few years, claiming that the spike in foreign birds is shutting down small producers and hurting larger ones.

Tariffs are a protectionist device and, when implemented, tend to hurt the consumer by driving prices upwards. In this case, it is also not clear that tariffs will actually work. Exporters would easily be able to exploit the EU-SA free trade agreement to get chicken into South Africa without tariffs.

The most recent Department of Trade and Industry (DTI) statistics indicate that there has been a sharp rise in frozen chicken cuts (bones included or bone-in as the industry jargon goes) from the EU.

In particular, imports from the Netherlands have grown spectacularly, from R3 million in 2010 to R305m in 2011, reaching R639m by 2012, a rate of growth of about 20 000 percent! The scale of increased production is simply not plausible. The suspicion is that the chicken originates from a part of the world that otherwise will be subject to import or dumping tariffs, a phenomenon known in trade jargon as "round tripping".

On the other hand, local poultry producers are in a difficult position and are in serious need of a break. Shedding jobs is no small matter in any country, especially in one such as ours with such painfully high unemployment levels. DTI statistics indicate that 107 857 individuals are directly or indirectly employed in the broiler sector of the chicken business.

So here is the thing: what is more important, protecting some portion of the jobs in the sector or keeping chicken prices lower for all consumers? Undoubtedly, the effect of a tariff will be to drive prices for consumers up at the till, but we do not really know by how much?

Likewise, we do not really know what the effect of increasing the tariff will be on employment. Why have we not seen a comprehensive cost-benefit analysis completed by the International Trade Administration Commission (Itac) on the socio-economic consequences of the proposed tariff increases? Who, for example, will be worst affected and who will benefit the most?

Without such a study it is not immediately clear what the response to the new tariffs will be from both the industry and consumers. …

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