The threat is to South Africa’s beleaguered chicken industry and most likely to others such as the dairy industry, which have been hard hit by dumped imports. It is also a warning to other industries vulnerable to dumping, such as steel, textile and cement.
Trade predators will exploit the recovery in demand as lockdowns ease and food supply chains are repaired. They will pounce on vulnerable industries such as the chicken industry and flood the country with massive volumes of dumped product, putting local producers and thousands of jobs at risk, and endangering South Africa’s food security. It will be their opportunity to gain market share in order to take out the local producers.
As always, consumers will lose out because cheap imports provide profits for importers and middlemen, and the benefits are not passed on to the public.
The predators will use a mountain of frozen chicken, which has built up in Europe, Brazil and other major chicken-producing areas. Demand was curtailed by lockdowns, but production continued largely unabated. European Union chicken producers have even called for a halt to imports into the region because their freezers are overflowing.
That stockpile will be unleashed on South Africa and probably other vulnerable countries in Africa and the Caribbean where local industries have previously been devastated by huge volumes of dumped EU and Brazilian chicken. The coronavirus stockpile enables them to export with added vigour. The trade predators, in the EU, Brazil and elsewhere, will become super predators, seeking to dominate chicken sales at the expense of local industries and local jobs. And once they dominate local markets, they have pricing power and can keep on raising prices. We believe that this is a scenario facing many agricultural commodities in South Africa and Africa.
Now more than ever, it is time to safeguard our agriculture sector and to safeguard the public against predatory trade. The disruption in trade as a result of Covid-19 impact on production and supply chains signals a disruption in the status quo.
Predatory trade such as dumping, and unfair trade barrier such as the unfair application of sanitary and phytosanitary (SPS) requirements, favours the dominant producers who are heavily subsidised by their governments.
Abuse of dominance behaviour is set to get worse. Dominant producers with huge stockpiles will sell frozen chicken and other commodities at any price to grab market share and cripple local producers, and then recoup losses in the longer term once they have captured the new markets.
We are in the lull before the storm – we need to anticipate the attack that we know is coming and act expeditiously to head it off. We know that those who dumped previously are likely to be the worst of the new dumpers because predatory trade is an abuse of dominance and those who were dominant in the past are now in an even better position to prey on our local producers.
If we do not act now we will pay a heavy price for it. Jobs will be lost, businesses will go bankrupt, we will become food insecure and left to the vagaries of an international price for food denominated in US dollars against a weak rand. More people will go hungry and child stunting will increase dramatically – that is how we stand to lose our future.
What needs to be done?
Firstly we must institute rigorous anti-dumping investigations of all food imports that impact on national food security, listing those countries which are currently dumping and preparing detailed anti-dumping applications to penalise them for transgressions of World Trade Organisation fair-trade rules.
For example with regard to chicken imports, South Africa currently has anti-dumping duties in place against three EU countries – the Netherlands, Germany and the UK – and the US
The EU duties have been in place since 2015 and the local industry has applied to have them renewed and increased because existing tariffs are ineffective. The US duties have been in force from 2000, but since 2016 the US has been allowed to bring in substantial quotas free of these duties.
The local chicken industry should be investigating anti-dumping duties against Brazil and a number of other countries. These need to be finalised and applications made to South Africa’s trade regulatory body, the International Trade Administration Commission (ITAC). We urge other agricultural commodities vital to national food security such as the dairy industry to do the same.
A second priority is to speed up the tariff application process.
It can take 18 months to have new tariffs approved, and the predators will use every one of those 18 months to dump as much chicken in this country as possible. It is an 18-month period which could sound the death knell of a strategic industry, and the government must ensure tariffs can be put in place much quicker.
Trade unions must be on the alert, because thousands of jobs are at risk while dumping continues. Crippling the local food producers would have a huge ripple effect on other industries – chickens consume nearly half of the country’s maize crop, while transport and food processing account for thousands of additional jobs.
Unions need to make their own investigations, and then press government and the industry to act against dumping, and to promote local food production. Consumer-protection and food-safety organisations need to look into the many questionable aspects of dumped food imports and the implications for food safety.
Finally, one of the lessons of the pandemic is that no country can afford to depend on imports for its food security. There has been global disruption of many industries, and this includes the food supply chain, from production to distribution and sale. South Africa needs to support local production and keep imports to the absolute minimum.
FairPlay is waving a red flag, because we know the predators are waiting. A wave of dumped imports is coming and local jobs are under threat. Longer term, our food security could be at risk.
The predators are not yet ready. The time to build our defences is now – civil society, trade unions, government and business must stand together if we are to ward off predators who would weaken our country by killing a national industry and thousands of jobs.
Francois Baird is founder of the FairPlay movement.
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