Which came first — the chicken or Trump’s tariffs?
Trump's ‘America First’ strategy, and imposing tariffs on steel and aluminium, has re-ignited the poultry clash, threatening nearly $2bn worth of South African exports to the US
Herman Pretorius is just the kind of white South African farmer US President Donald Trump expressed concern for when he barged into the country’s delicate land-reform debate by ordering an investigation into the "large-scale killing of farmers".
But for the Pretorius, wading knee-deep through some 35,000 chickens at his isolated homestead in the North West, it’s the US and its cheap poultry exports that are a threat. "We cannot compare our chickens with theirs. The price difference will kill us."
For years, the two countries have fought over poultry: Washington has kept South African poultry out on health and sanitation grounds while Pretoria accuses US farmers of dumping chicken at below-cost prices and has imposed tariffs. But in 2015, SA’s powerful poultry industry agreed to exclude 65,000 tonnes of US chicken from the anti-dumping tariff — in return for the renewal of broader, duty-free US trade access that benefited other South African industries.
Now, as a consequence of his "America First" trade strategy, Trump’s decision to impose tariffs on steel and aluminium has re-ignited the poultry clash, threatening nearly $2bn worth of South African exports to the US under Washington’s flagship African trade legislation, the African Growth and Opportunity Act (Agoa).
South African poultry farmers say because US aluminium tariffs apply to SA — even though aluminium should be exempt under the Agoa agreement — the 2015 chicken deal is void and it’s time to slap tariffs on US poultry again. After months of threats, the South African Poultry Association (Sapa) pulled the trigger last week and filed a lawsuit against its government, calling for the US poultry tariff exclusion quota to be suspended.
In its quest to rebalance trade relationships, Trump’s administration is giving no quarter as it targets friend and foe alike, from the EU to China. Coming on the heels of a row with Rwanda, the dispute with SA highlights how even the smallest trading partners are not being spared.
Agoa grants qualifying countries duty-free access to US markets for thousands of goods and SA is among the main beneficiaries. SA’s poultry industry agreed to the deal despite its exports remaining blocked from entering the US market. It calculates the quota has cost about 6,500 jobs
"We’re not the cause of anybody’s problems, and yet we’ve been affected," trade and industry minister Rob Davies told Reuters in July. "We’ve become collateral damage in a trade war that is not of our making."
When Pretorius set up his first chicken coops 27 years ago, competition from foreign imports wasn’t an issue. Now, he runs 14 industrial chicken houses that turn out more than half a million birds every few weeks. But in recent years he says his business has stagnated — and he blames cheap poultry imports for driving down prices.
"The damage got to a point where I wanted to expand my business … I wanted to create jobs for our people. But the imports from overseas hurt me badly," Pretorius says. "I want the South African government to increase the import tariffs." In the 20 years from 1995 to 2015, SA’s annual poultry consumption nearly tripled to more than 2-million tonnes. But local production has expanded at a slower rate than imports, which account for a quarter of consumption.
To protect local farmers, the poultry industry lobbied for protectionist measures and, in 2000, the government imposed an anti-dumping tariff on US "bone-in poultry". The duty is currently fixed at R9.40/kg. "That just levels the playing field for our own producers versus their dumped product," said Sapa’s Marthinus Stander.
SA argues that the US industry is tailored to Americans’ preference for white, de-boned breast meat. As US producers can recover their costs with the sale of breast meat, Sapa says the thighs and drumsticks favoured by South Africans can be exported at below cost. But US producers say the South African tariff is illegal.
"The anti-dumping duties imposed on US poultry were based on a flawed legal theory ... that has twice been held by World Trade Organisation (WTO) panels to be inconsistent with international rules," says James Sumner, president of the USA Poultry and Egg Export Council (Usapeec).
In 2015, US authorities approached SA and, using the threat of a withdrawal of SA’s Agoa benefits, pushed for a quota exempt from the tariff. Agoa grants qualifying countries duty-free access to US markets for thousands of goods and SA is among the main beneficiaries.
SA’s poultry industry agreed to the deal despite its exports remaining blocked from entering the US market. It calculates the quota has cost about 6,500 jobs.
Now that Sapa has filed a lawsuit to force a suspension of the poultry quota, the South African government finds itself in an awkward position. If the anti-dumping tariff is re-applied, SA risks retaliation from Washington
"It was for the good of the other industries. So we kind of put on a Team SA hat in terms of making the rest of the Agoa benefits possible," says Stander, who is CEO of Country Bird Holdings, one of SA’s top poultry producers.
Last year, according to Sars data compiled by Sapa, the US exported more than 87,000 tonnes of poultry to SA, up more than 200% from 2016 and second only to Brazil’s 337,476 tonnes.
Davies has said that when the White House announced tariffs of 25% on steel and 10% on aluminium this year, claiming imports threatened its national security, Pretoria sought an exclusion. SA’s steel and aluminium exports to the US last year were worth more than $650m, according to SA’s Trade Law Centre. But since they constituted just 1% of US steel and a little more than 1% of its aluminium, they represented no threat to the SA, SA argued.
"We were just told that we were out. We were not going to be considered for exemption. The tariff was going to apply to us," Davies says.
Now that Sapa has filed a lawsuit to force a suspension of the poultry quota, the South African government finds itself in an awkward position. If the anti-dumping tariff is re-applied, SA risks retaliation from Washington, which could have a more far-reaching impact on the economy as a whole.
The Usapeec’s Sumner told Reuters his group would lobby the US government to take action if the quota is revoked over the metal tariffs. "It has absolutely nothing to do with poultry trade between the US and SA," Sumner said. "Sapa is trying to be opportunistic here and to increase trade frictions unnecessarily."
South African meat importers also oppose any suspension of the quota. They say it would push up prices for consumers and could provoke Washington’s wrath. "It’s quite possible the Trump administration would take SA on," said David Wolpert, CEO of the Association of Meat Importers and Exporters of SA.
The form of any possible US retaliation is unclear for now. "We cannot speculate on what SA may or may not do with respect to its tariffs and non-tariff barriers," a US state department official wrote in response to Reuters’ queries. But analysts and South African officials worry the country’s Agoa benefits may be in danger, again.
Washington used the threat of a withdrawal of Agoa benefits to press Kenya, Uganda, and Tanzania to roll back tariffs last year on second-hand clothing from the US. Rwanda refused and its Agoa benefits were curtailed in July.
A blanket suspension of SA’s Agoa status would hit the transportation equipment industry hardest. About 85% of its nearly $1.4bn in exports to the US were covered by Agoa last year.
Ultimately, with legal action pending, the South African government’s hands may be tied. And despite the broader economic implications, SA’s poultry industry is standing firm. Says Sapa’s Stander: "We agreed something to benefit the South African industries, and that benefit has been taken away ... We just want what’s fair."