Increasing chicken import tariffs will hurt consumers and broader economy, says local association
An association representing meat and poultry importers and exporters has warned that hiking import tariffs for chicken will hurt SA consumers and the broader economy.
According to research conducted by international business advisory firm FTI Consulting on behalf of the Association of Meat Importers and Exporters (AMIE) further trade protection will be at the expense of the consumer, who may have to purchase specific broiler/poultry meat products at higher prices.
SA’s poultry sector has recorded a jobs bloodbath in recent years and has ascribed its demise to cheap chicken imports from Brazil, the US and Europe.
The SA Poultry Association has lodged an application to the International Trade Administration Commission (Itac) — the organisation tasked with customs tariff investigations, trade remedies, and import and export control — calling for an increase to the ad valorem tariff on bone-in and boneless frozen chicken portions to 82% from existing levels of 37% and 12%, respectively.
However, according to the AMIE although some jobs will be created in the poultry industry, the tariff increase will have a net negative impact on jobs across the economy. Total employment in the broiler industry was 47,025 in 2017, of which 58% were unskilled workers. The AMIE says that approximately 1,618 new jobs will be created in the broiler/poultry sector following the ordinary duty increase. But jobs losses in other sectors will outweigh the new jobs created in that sector.
PODCAST | Business Day Spotlight: EU is not playing fairly with SA’s poultry industry
“There will be a net loss of 1,440 jobs due to employment losses in the rest of the economy,” the association said, adding that the tariff increase will lead to a drop in GDP of R1.1bn in the first year.
It said a policy designed to reduce domestic unemployment via foreign trade should not ignore the employment effect of SA’s participation in trade.
“Imports also create employment through, for example, support services such as inspections, clearing agents, transport and monitoring laboratories.”
Trade protection will also create an immediate supply gap which local producers will hope to fill, but this will come at a high cost to the economy. The drop in imports will cause an immediate supply gap of between 44,650 and 108,839 tonnes in the local market, the AMIE said.
The association said that the poultry industry already has high levels of trade protection, with general tariffs, anti-dumping duties and safeguard duties in place. Despite the existing protection measures, SA producers have not become competitive exporters, the association said.
“There is little evidence that further protection will allow them to do so.… High levels of existing trade protection have not encouraged domestic producers to fill the current supply gap,” the AMIE said.
It said there are alternative measures available, such as reducing barriers to growth for small-scale farmers, support for new entrants and alternative policies that may increase the competitiveness of producers.
“Trade protection is not the only lever that government has at its disposal. The anticipated positive impact on the broiler industry will come at a cost to the broader South African economy,” the AMIE said.
Earlier in July, trade & industry minister Ebrahim Patel said calls by the poultry sector to hike import tariffs will not necessarily solve the industry’s challenges. Patel said SA will have to think of a broader competitiveness programme for the sector.
Late in 2018 Fairplay, an organisation which aims to fight predatory trade practices and dumping, as well as trade unions and various civic organisations, backed the application for a tariff hike.
“We have watched in dismay as a highly competitive local industry has been reduced to an existential crisis by years of steadily increasing imports of chicken portions dumped below the cost of production,” Fairplay founder Francois Baird said at the time.
“Higher tariffs will help protect the industry and the thousands of jobs which are at risk because of these opportunistic imports that have been steadily rising to the point where imports now claim between a quarter and a third of the SA market.”
As a result, he said, smaller producers have gone out of business and larger ones have contracted, shed jobs and have been forced to change their business models.