It’s hard to make sense of what is happening around chicken, with all the noise in the media. Allegations fly of dumping and jobs at stake and the consumer losing access to affordable protein. And now into this mix, we must also add something which has not seen much airplay in the media, but which is really important. The EU has requested consultations with SACU about poultry. As innocent as this sounds, this is to be taken very seriously indeed. Here is why.
In February 2016, ITAC initiated an agricultural safeguard investigation against chicken from the EU, in terms of Article 16 of the Trade, Development and Cooperation Agreement (TDCA). Don’t fall asleep on me now. The detail matters here. The important bits to note are that this is an agricultural safeguard action, and it was launched under the TDCA. Agricultural products, it turns out, are very specifically defined in terms of the TDCA and bone-in chicken, which was the subject of the investigation, was specifically catered for in Article 16 of the agreement.
In the time since the initiation of the investigation, a few important developments occurred, the most important being an outbreak of Avian Influenza (AI) in the EU. This resulted in many of the largest European exporting countries being closed to exports to South Africa, materially dropping the import volumes from the EU.
Then, in October 2016, a portion of the TDCA ceased to operate and was instead replaced by a new agreement with the EU, known as the Economic Partnership Agreement (EPA). The EPA is different to the TDCA in a few important ways, which had bearing on the safeguard investigation and also have given rise to the EU’s request for consultations with SACU:
- The EPA’s equivalent provision to Article 16 of the TDCA (Agricultural Safeguards), no longer covers bone-in chicken. This is a very big deal as one would expect, if an investigation is to transition from one agreement to another, that it would transition to a comparable provision. This is now not possible.
- The volume of chicken being imported from the EU has dropped because of the outbreak of AI.
- The investigation is transitioned to Article 34 of the EPA, which is a bilateral safeguard, not an agricultural safeguard. This is a fundamentally different thing and is typically in place to deal with a surge in imports which result from the implementation of the trade agreement. So, if the agreement is implemented and, for instance, as part of that implementation, the duties on chicken are removed, then this would be a valid provision to invoke (assuming such duty removal resulted in a surge in imports). This did not happen. In fact, it is not possible to happen, because the duties on chicken from the EU have been at zero since 1 January 2013. If anything the volume of imports from the EU have dropped since the implementation of the EPA.
We now have a safeguard investigation on falling volumes of chicken imports from the EU. And also, the investigation which was initiated, was initiated under a completely different legal framework and doesn’t really fit into the new framework, but it has been wedged in and the investigation continues. Only there is then a lot of silence. Letters fly to and fro, but nothing else happens. Until September 2018 when a duty of 35.3% is imposed on bone-in chicken from the EU. This is a large duty on a large value of imports (around €183 million per annum). And the exports from the EU drop and move to the USA and Brazil. Not all, but enough to be felt.
Those duties dropped slightly in March 2019 and will drop again a year later, until after 3.5 years they disappear completely.
Where we are now
The EU is not happy. South Africa is an important market for their chicken, but perhaps more importantly, the way this has been handled is problematic. The Netherlands (the largest exporter to SA) has been declared free of AI, but the Department of Agriculture, Forestry and Fisheries (DAFF) is refusing to lift the ban on chicken from the Netherlands. There is every indication that this is deliberate and designed to protect the local industry (a problem in terms of the WTO Agreement on Sanitary and Phytosanitary Measures). This ban persists till today, by the way.
And finally, it seems, the EU may raise a dispute with SACU. The first step in this process is to request consultations (which was done on 14 June 2019). If an amicable solution can’t be found within 40 days (unlikely), then the EU will request a move to arbitration. An arbitration panel will be convened and the matter will be considered by the panel. It is anyone’s guess how this will go. We are in deep, unchartered waters here, with a lot at stake. This is about more than just chicken. It’s about our relationship with our largest trading partner and right now this is definitely not looking good.