The Agoa dilemma – what is there to offer US?

Published Apr 1, 2015

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THE RENEWAL of the African Growth and Opportunity Act (Agoa) and South Africa’s inclusion in it has reached a new level of intensity with 13 US Senators acting for their poultry industry “upping the ante” in the last few days, specifically around about the way South Africa, and in particular the local poultry industry, is conducting itself.

The inclusion of a 15 year old poultry dispute in the Agoa renewal – a completely unrelated aspect to the treaty – is seen by the South African poultry industry as a way in which US producers can circumvent the mechanism for resolving trade disputes, in this case a dispute relating to the dumping of chicken, specifically bone-in portions, into the SA market.

That the application of these duties has never been challenged by the US in the courts or at the World Trade Organisation – the correct forum for this kind of remedy – speaks for itself.

Strings attached

With this in mind, it’s useful to take a look at Agoa and what it really means. Agoa is a unilateral trade deal; it is a “gift”, a favourable set of trade conditions that would assist African countries to grow our exports into the US.

Now, it has become a gift with strings attached. It is a short cut to resolve a trade dispute in the favour of the US poultry producers through the back door by applying massive leverage. But might is not right.

To understand the problem it is easiest to think about the meaning of “fair” trade, the Americans see “fair” as unfettered access to our market, and we see ‘fair’ as prices of imported goods properly represent the real cost of production of these goods. Then we can compete for market share.

The Americans have a natural advantage over us as they source maize and soya at lower prices than we can. Now they want an unfair advantage as well. We have no truck with the fact that the value of the various products they produce – breast meat and dark meat – vary so widely but we have issue when they claim that the cost of production is linked to the value of the goods. Cost is real, value is perceptual.

Mindful as the South African poultry industry is that Agoa offers opportunities for South Africa to develop new trade ties and deepen existing ones, we have supported the renewal process since early last year, even though it is to our own detriment.

In good faith and for the greater good, we have agreed to a volume based quota equivalent to imports at the time the anti-dumping duty was applied, plus industry growth over the last 15 years, which concession is estimated will cost around 4 000 local jobs.

But this generous offer is not enough for the Americans; they want much, much more. In fact, they want to take out local industry volumes roughly equivalent to that produced by the third largest company in our industry. This equates to production that generates over R2 billion into our agricultural economy and a loss of more than 17 000 jobs. These estimates are not calculated by the local producers but by an independent economic adviser to government, and reflect total losses to the country, not only those in the chicken industry.

Rather than a hard and fast position on the part of a rigid and unyielding local poultry industry, how much more can we do to show that any more than this is simply too much for us to bear?

How do we demonstrate that that for us to accept this level of severe harm is not a reasonable expectation? And how can we negotiate when we are threatened, when pressure on deadlines is brought to bear, and we are not engaged in discussions as partners? Submission is not negotiation - it is the end result of unfair pressure.

A dispute such as this can but only find resolution if the Americans are prepared to understand the conditions of our market. We are prevented from exporting to most markets so what we produce here we must sell here. Increase imports and you shrink production.

Disposable income

Our market does not have the disposable income levels to grow yet – in time we believe this will happen. As a country we make up less than 0.5 percent of global gross domestic product.

As big as we are in Africa we are tiny in the bigger framework. The American chicken industry is more than 12 times bigger than us. This is not the way in which friendships are made, friendships are maintained, and how gifts are given.

The US is setting itself up to lose an opportunity to show Africa in general and South Africa in particular that they can be a better long-term partner for us than other countries can be. The door is still open and we are still ready to take each other into a joint future.

All the two industries need to accept is that trade policy is a matter for our governments and trade concessions are something in which we can both participate. Writing an agreement is simple and quick, but finding each other is proving to be harder and taking much longer than we would wish. We also want a quick solution – but one that will not destroy the livelihoods of thousands of South Africans and their families.

Kevin Lovell is the chief executive of the South African Poultry Association

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