Chicken import tariffs hiked

Business Day

Trade and Industry Minister Rob Davies has come to the rescue of South Africa’s "bleeding" poultry industry by significantly increasing the import tariffs on five categories of imported chickens. The new tariffs take effect from Monday and are based on the recommendations of the International Tariff Administration Commission (ITAC). The tariffs will apply to the Southern African Customs Union (Sacu) but not to imports from the European Union, with which South Africa has a trade and co-operation agreement.

Excluding the dramatic increase in the tariff duty on whole chickens, which constitute less than 1% of the total poultry imports over the past 12 months, the overall average tariff increase is 8.75 percentage points, Mr Davies said at a media conference Monday. He defended the increases as the legitimate use of South Africa’s policy space within the rules of the World Trade Organisation and said they did not constitute "protectionism". It was a measure to prevent dumping by the developed world of poultry products that were not consumed there but in the developing world.
"Today the chickens have come home to roost," Mr Davies quipped.

In terms of the new tariffs, the import tariff on whole birds has increased from the previous 27% to 82% (the maximum bound rate under the WTO rules); carcasses from 27% to 31%; boneless cuts from 5% to 12%; offal from 27% to 30%; and bone-in portions from a specific duty of 220c/kg (roughly 17%) to an ad valorem duty of 37%. Brining to be reviewed

At the same time that he announced the new tariffs, Mr Davies said the Department of Agriculture would undertake a review of the practice of brining — adding salt water to chicken products — and would issue new regulations to ensure consumers received fair value in this regard. He said the industry had to "clean up its act" in this regard and called on big poultry producers to develop supportive relationships with small farmers and ensure fair competition in the domestic market.Explaining the differentiation in tariff increases for the different categories of chicken products, Mr Davies noted that whole birds constituted a small percentage of the total Sacu market for poultry, was more expensive and was mostly consumed by higher-income households.

The domestic industry was at a significant price disadvantage in relation to the imported tariff, Mr Davies said. The import of whole birds represented less than 1% of poultry imports over the past 12 months.
With regard to carcasses, Mr Davies said this was an important source of protein for low-income households and was produced locally at a significant price disadvantage in relation to imports, which represented 2% of total poultry imports over the past 12 months. The decision on the tariff increase on boneless cuts was based on the fact that they were relatively expensive, were mostly consumed by high-income households and the domestic industry was at a price disadvantage relative to imports. Boneless cuts represented about 11% of total poultry imports over the past 12 months.

Mr Davies said the domestic industry was at a "significant price disadvantage" with regard to imported offal, which was an important source of protein for the poor and which represented about 5% of imported poultry over the past year. With regard to "bone-in" chicken portions, which constitute about 70% of domestic production, Mr Davies said that here too the local industry was at a significant price disadvantage in relation to these imports, which represented about 54% of total imports over the past 12 months. Mr Davies stressed that the level of the tariff increases had to strike "an appropriate balance in limiting the price-raising effects on poor households while ensuring that domestic producers are placed on an improved competitive footing as compared to their foreign counterparts".

He said: "This should allow for a fair and reasonable profit to producers and in turn encourage further investment, production and employment in the industry." The industry employed 48 000 people directly and a further 60 000 indirectly. "These measures are designed to support and promote the poultry producers across the entire Sacu market to ensure a sustainable and competitive industry that is able to provide greater food security to the region’s people," Mr Davies said. "We need to support the productive sectors of our economy."