AGOA deliberations – removal of anti-dumping duties or a loss of duty free access?
Willemien Viljoen, tralac Researcher, discusses the ongoing dispute over South African chicken imports from the United States
Deliberations are underway between South Africa and the United States (US) on South Africa’s continued inclusion in the US-Africa preferential trade scheme; the African Growth and Opportunity Act (AGOA). The battle between the two countries is centred on market access issues in South Africa for US frozen chicken imports (HS 0207149), specifically the anti-dumping duties that have been in place on the tariff line for the past 15 years. This is the same product South Africa and Brazil were at loggerheads about; a dispute that was taken to the World Trade Organization (WTO) Dispute Settlement Mechanism and resulted in an overall increase in South African duties on chicken imports. Anti-dumping duties on bone-in frozen chicken imports are currently also applied on imports from Germany, Netherlands and the United Kingdom.
What is the crux of the US-South Africa chicken battle? The removal of a valid trade remedy measure applied in South Africa in exchange for the retention of duty free access to the US market for certain South African export products.
The US is one of the largest producers of chicken meat in the world. In 2013 the US produced approximately 17 million tonnes of chicken meat (18% of world production), while South Africa produced approximately 1.5 million tonnes (1.6% of world production). In 2013 the US exported 2.9 million tonnes of frozen chicken to the world; 0.5 percent of which was exported to South Africa. South Africa mainly imports frozen chicken from the EU, UK and South America, while the main export destinations for US exports are Hong Kong, Angola, China, Mexico and Cuba. US exports to South Africa increased steadily over the last 13 years; between 2001 and 2014 exports grew by 17.5 percent. However, between 2012 and 2013 US exports declined by 33 percent. This can be attributed to the increase in the anti-dumping duty currently in place. Anti-dumping duties on US frozen bone-in chicken imports were first implemented in 2000 (Government Gazette 21947) and subsequently extended in 2006 (Government Gazette 29319) and in 2012 (Government Gazette 35238) following sunset reviews. After the last review the composition of the anti-dumping duty was adjusted to a single rate of duty (940c/kg) applicable to all US imports of the specific tariff line. Previously the anti-dumping measure consisted of two duty rates, 224c/kilogram for imports from two producers and 696c/kilogram from all other producers.
Deliberations between the national poultry industry associations to reach a mutually acceptable agreement of the value of US chicken imports to be eligible for a rebate on anti-dumping duties are strained. Thus far, the South African Poultry Association (SAPA) has offered a rebate on 50 percent of the annual tonnage which has been rejected as insufficient by the US Poultry and Egg Export Council (USPEEC). The resolve of SAPA to maintain anti-dumping duties has attracted criticism from various parties, including the Association of Meat Importers and Exporters of South Africa in that it is based on spurious arguments. However, an important aspect of anti-dumping duties seems to have been brushed aside throughout these deliberations. Anti-dumping duties are valid trade remedy measures that can be used to protect a domestic industry against harm caused by the unfair trade practice of dumping. These measures are allowable under the General Agreement on Tariffs and Trade (GATT) and the WTO if implemented according to the substantive and procedural requirements provided. If a concern is raised regarding the implementation of an anti-dumping measure the WTO Dispute Settlement Mechanism is the correct forum to address these concerns.
According to the WTO Anti-Dumping Agreement an anti-dumping measure must be implemented only to the extent necessary to remedy the harm caused to the domestic industry (normally indicated by the dumping margin). This was obviously taken into account when the anti-dumping duty on chicken imports were imposed, thus by offering a rebate on the anti-dumping duty it can result in further harm to the domestic chicken industry in South Africa. However, without a mutually agreed solution, it has been estimated that South Africa’s exclusion from AGOA will result in a loss of US$ 2 billion for the South African economy. This is mostly due to the loss of duty free access to the US market and the Most Favoured Nation (MFN) duties that will be applicable to important South African export products, including citrus fruits, wine and motor vehicles. If South Africa loses its duty free access for these products it will face an average specific duty of 1.96c/kg on citrus fruit exports, an average specific duty of 14.16 c/litre on wine exports and an average MFN rate of 2.5 percent on the export of passenger vehicles. The US is currently South Africa’s largest export destination for passenger vehicles (HS 8703) and the 6th and 8th largest export destination for wine and citrus fruits respectively. This leaves us with an interesting dilemma: Will the interests of the South African poultry industry with respect to competition from US imports trump the interests of South African industries benefitting from AGOA preferences in the US market? On the US side, how do the interests of poultry producers who want access to the South African market, weigh up against the inclusion of South Africa in a future AGOA?
International Trade Administration Commission (www.itac.org.za); WTO (www.wto.org); Business Day (http://www.bdlive.co.za/business/trade/2015/04/07/us-raises-agoa-issues-over-sa-poultry-sales); Business Report (http://www.iol.co.za/business/news/agoa-us-lawmakers-up-the-ante-1.1839717#.VSUKNfmUeCl); TradeMap (www.trademap.org)