EU chicken import duty increase likely

18 Jan 2017

Business Day, 18 January 2017
By Linda Ensor

A hike in the safeguard duty on bone-in chicken imports from the EU appears to be a likely outcome of a high-level meeting between the government, business and labour on Tuesday.

In December, Trade and Industry Minister Rob Davies imposed a provisional 13.9% safeguard duty on the imports and instructed the International Trade Administration Commission (Itac) to review the duty, considering the effect imports would have on other Southern African Customs Union members of the economic partnership agreement with the EU.

The poultry industry criticised the provisional duty as inadequate to deal with the crisis caused by the import of bone-in chicken portions from the EU. It applied for a 37% duty.

As Itac has concluded its investigation into the effect of the imports of the EU chicken portions on the domestic market, the safeguard duty review should not take long to finalise.

The meeting of about 40 representatives of various government departments, industry, trade unions and state entities such as the Industrial Development Corporation decided to set up a joint task team to address the short, medium and long-term challenges facing the poultry industry, including devising ways to ward off the imminent retrenchments and plant closures by producers.

Another outcome of the high-level meeting was that the government would negotiate with chicken producers such as RCL Foods to consider ways to avoid plant closures and retrenchments. RCL plans to retrench 1,355 workers at the end of January.

South African Poultry Association CEO Kevin Lovell said that the joint task team would devise a plan to salvage the industry in a way that complied with SA’s obligations under the World Trade Organisation and trade treaties.

Garth Strachan, Department of Trade and Industry deputy director-general, said the industry would have to make reciprocal commitments. In return for government support — for example higher tariffs — producers would have to commit to improving their competitiveness through investment in technology so that the tariffs did not simply serve to keep prices and profits high at the expense of consumers. A key emphasis of the deliberations was on "shared responsibility", he said.

An increase in industry competitiveness would mean that support measures would only be needed in the short term. Another measure the department was considering is the designation of chicken as a product government departments and state-owned entities are required to procure locally.

The Department of Agriculture, Forestry and Fisheries is also involved in a number of projects to support local producers and to provide feed for the poultry industry.

An interdepartmental government task team has been working on a rescue plan for the industry since mid-November and has accumulated a body of data on the structure of the industry, import penetration, cost drivers, competitiveness and transformation.

"We are looking at the value chain as a whole, so robust data was critical," Strachan said.

He said there had been agreement at the meeting there is a crisis despite disagreement about its causes and some data.