Now chickens are at the center of a bitter fight between South Africa and Europe in a manner in which Chinese steel and Mexican-made cars became political dynamite last year as politicians including U.S. President Donald Trump championed anti-free trade rhetoric.
Threatening local companies and jobs, European Union is selling chicken legs, thighs and wings at below cost, South African farmers and labor unions say. They say that dark meat is sold as a waste product because EU producers make enough money marketing breasts in their home market. Compared to their peers in South Africa, its farmers are simply more competitive, Europe says.
“We definitely have distress,” South African Trade Minister Rob Davies said in an interview Jan. 24. “We will not have an industry to raise the competitiveness of” if imports continue to flood the market.
Watching the demise of its chicken industry, which employs 60,000 people and is source of 65 percent of all meat consumed in the country or upsetting the relations with its biggest trading partner are the choices that the argument has left South Africa with. A free trade deal between the EU and southern African countries, including South Africa, was signed last year – called the European Partnership Agreement, and the row marks a rocky start to it.
“We’re moving into a more protectionist sort of world,” said Mike Schussler, chief economist at Johannesburg-based research company Economists.co.za. “South Africa has one of the most open agricultural markets in the world and seems to be paying the price.”
According to data compiled by the South African Poultry Association, from 0.5 percent in 2012 when tariffs were removed, Europe’s share of South Africa’s bone-in chicken imports has grown to 80 percent. Claiming that the industry is under threat, 5,000 jobs are being cut by South Africa’s biggest chicken producers, including RCL Foods Ltd. in contrast.
“If things stay the same there will be no chicken industry in a year’s time,” Scott Pitman, managing director of RCL’s consumer division, said by phone.
Noting a 35 percent fall from the 20-year high of 19.45 rand in 2014 are shares of RCL which produces several food brands other than chicken.
“The market is looking forward and anticipating lower feed costs” as South Africa’s two-year drought eases, said Victor Dima, a Dubai-based analyst at Arqaam Capital. Chickens in South Africa are fed corn among other feed-stuffs.
According to the International Poultry Council, just behind the U.S., Australia, Brazil and Peru, South Africa is the world’s fifth-biggest consumer of chicken per capita.
There’s no reason for South Africa to impose duties against them and its chicken exports comply with trade laws, The EU says. Given that the bloc last year imposed tariffs as high as 73.7 percent on Chinese steel that it says is dumped in Europe, the accusation of dumping is a sensitive one for the EU.
“The real problems of the South African poultry industry are not so much caused by the imports from the EU but that it is suffering from structural problems affecting its competitiveness,” Cecilia Malmstrom, the EU’s trade commissioner, said in a Jan. 11 letter to South African Minister of Trade Rob Davies.
(Adapted from Bloomberg)
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