How ‘chicken’ is stalling the South Africa-U.S. trade agreement

22/05/2015

Chicken Stalls AGOA Deal

Chicken Stalls AGOA Deal

South Africa’s inclusion in the U.S. African Growth and Opportunity Act (AGOA) trade agreement is less than certain after a protracted battle between South African and American poultry associations over South Africa’s imposition of duties on U.S. chicken.

The squabble over chicken has led some U.S. lawmakers to suggest that South Africa be placed on a three-year probationary period, with reviews every six months, once the AGOA is renewed for a 10-year term.

Why the AGOA is important for the South African economy

The U.S. is due to re-authorize the AGOA, which opens export opportunities to the US for a host of Sub-Saharan African nations, before Sept. 30, 2015. The program was first authorized in 2000 for a fifteen-year term.

Though the amount of imports from AGOA countries totals around 1% of U.S. exports, manufactured goods from South Africa have accounted for the bulk of these goods. The U.S. is South Africa’s third-largest trading partner, after China and the European Union, accounting for 6.8% of its total trade.

South African exports to the States have been particularly focused on vehicles, but also include minerals – such as diamonds, chemical products, and machinery. In 2014, South Africa exported US$8.3 million in goods to the U.S.

Though U.S. economic benefits from the program are minimal, it has served to improve relations with Sub-Saharan countries across the board.

What has chicken got to do with it?

The poultry standoff began when the U.S. expressed outrage over the South African government imposing anti-dumping penalties on U.S. frozen chicken part imports in 2000. ‘Dumping’ refers to foreign companies or countries exporting goods at a price lower than locally-produced goods.

The poultry industry is critically important to the South African economy, one South African trade official said, as it has the “propensity to create jobs” and creates “empowerment” in the workforce, as part of an effort to reverse decades of apartheid-enforced segregation and inequality.

The South African Poultry Association (SAPA) has been adamant about the need to protect South African poultry producers in any trade deal with the U.S.

The U.S. refutes the charge that is undercutting local industries by exporting chicken to South Africa, pointing to a vast increase in demand for poultry.

An April 1 statement from the U.S. Department of Agriculture claims that South African consumption of chicken products has increased substantially; according to this document, South Africa imported 70,000 tons of chicken in 2000, yet imported more than 400,000 tons in 2014. The report states,

The reality is that the South African domestic industry hasn’t been able to keep up with increases in consumer demand, and foreign imports are already an integral part of the market

Could there be a resolution on the horizon?

After several weeks of both sides trading barbs, the SAPA stated on April 21 that it is willing to make concessions to ensure South Africa is included in the renewed AGOA treaty.

SAPA is drafting a letter with “realistic, rational and reasonable proposals,” SAPA CEO Keith Lovell told South African newspaper Independent Online.

“I am confident that what we propose is fair and rational,” he said.

For the Americans, the sweet spot is to get sufficient access to not find it worthwhile to pursue the matter.

The country’s Department of Trade and Industry said the proposed compromise will see U.S. chicken exports restored to 2000 levels, while accounting for an increase in the market since that year.

However, trade negotiators will still have to work out what the tonnages of chicken parts and whole chickens will be. Lovell is understood to be unhappy with proposed volume amounts suggested by the U.S..

It remains unclear when a final decision will be reached, but South African negotiators will have to keep in mind that the current AGOA framework expires at the end of September.

Do you think the parties will reach an agreement in time for the September deadline? Do you think South African sensitivities on the poultry issue are justified?

 Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Author: Jacqueline Côté

I am a working journalist, with experience as SNL Financial’s Canadian correspondent for its Mining and Metals vertical. I also served as the Managing Editor for Central Asia Newswire – covering daily economic and investment news in the region – as well as Features Editor for the Washington-based Magharebia.com, which covers developments in the North Africa region. I have been published in The Montreal Gazette, The Guardian (UK), The New Statesman (UK), Red Pepper (UK), Geopolitical Monitor and CNN.com.

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