Dumping fees can sour EU relations

21 Nov 2014
Business Report
Londiwe Buthelezi

South Africa’s anti-dumping measures could cost consumers and the economy dearly.

Economists said yesterday that if the country imposed anti-dumping duties on poultry from some of the EU member countries it was investigating, it could sour already fractious relations with one of its largest trade and investment partners, but it might be necessary.

On Wednesday, the International Trade Administration Commission of SA (Itac) told Parliament that it had started investigating British, German and Dutch firms suspected of dumping poultry products in South Africa. If it finds evidence, dumping duties could be imposed and, in the worst case, the entire poultry industry in these countries could be fined.

The mood between South Africa and the EU has already been strained following the Department of Trade and Industry’s decision to phase out bilateral investment treaties with about 13 European nations last year.

The EU later banned imports of South African citrus fruits over fears that they were contaminated with the fungal black spot disease, a move that some people said reflected a simmering trade war.

“It [the atmosphere] is not good. We’ve introduced tremendous risk to the equation. No country or investor likes it when rules change,” said Nicky Weimar, a senior economist at Nedbank.

But she said as South Africa pursued its New Growth Path strategy, a degree of interference was expected because that was what this growth roadmap suggested.

“It is for the development of the local industry but it is not something an economist can agree with. It imposes costs on the economy and removes competitiveness that would have encouraged local producers to think innovatively.”

A trade relations analyst said the problem was that countries were not treated with the same degree of scrutiny. The EU had been treated differently and if dumping allegations ended in the imposition of duties, the trade bloc was bound to take notice even though its own problems had directed people’s attentions away from lesser concerns.

Goolam Ballim, Standard Bank’s chief economist, said people needed to recognise that South Africa’s economic relations and negotiations with the EU were long-standing. “At some point they need to be reformulated and bargaining will be hard struck. South Africa will need to be defensive of its international policies.”

He said Trade and Industry Minister Rob Davies’s general approach towards bilateral trade agreements with the EU was to be welcomed because for too long Europe’s significant lobby groups had worked to the detriment and exclusion of notable benefits to emerging markets, including South Africa.

As Itac reviews more tariff application from associations representing local producers, more foreign products could face increased import tariffs.

Chief commissioner Siyabulela Tsengiwe said the applications that it had received included import tariffs for wheat and other food products.

The portfolio committee on agriculture, forestry and fisheries told Itac it was concerned that there were many other applications because simply putting protection in place and adopting a defensive mechanism could reflect South Africa as protectionist and ruin relations with other trade partners.

According to the Trade Law Centre’s research, since the establishment of the World Trade Organisation in 1995, South Africa has initiated more than 200 anti-dumping investigations, most of which resulted in the imposition of duties.

But Ballim said during stressed economic times, markets dis default to protectionism to insulate their local industries from foreign harm and South Africa was not the only economy doing this.

“It is necessary for South Africa to be aligned with anti-dumping measures even if it means it will affect some of our trading partners in the emerging markets.”