In this opinion article, XA director Donald Mackay questions why legitimate legal processes are being overlooked in the dispute over European Union chicken imports. Mackay acknowledges that his consultancy is not a disinterested party in the matter.
I read the recent fiery opinion piece by Francois Baird of FairPlay and feel compelled to respond. To be clear, I am a director of a consultancy with a bird in this fight.
Nevertheless, my comments have less to do with the facts of the chicken fight – that has been going on for years – than it does about the worrying trend of avoiding a legitimate legal process (such as an antidumping action) and to instead fight this out in the media.
So here are the facts:
Dumping is an economic concept, not a criminal one and a legal remedy already exists to deal with this. When an antidumping application is brought, a very specific and defined allegation is made. The companies in the countries accused of dumping then have an opportunity to prove they are not dumping.
Their submissions are scrutinised by the International Trade Administration Commission of South Africa (Itac) through an audit process before a decision is taken on whether the allegation is true or not. If it is true, then an antidumping duty is imposed. Once the duty has been imposed, the effect of the dumping has been offset and is no longer an issue. Importantly, only companies can dump; the European Union (EU) cannot dump, so marching on the EU's offices and aggressive media coverage cannot get the EU to do anything.
Making the allegation of dumping versus being guilty of dumping is not the same thing. This burden of proof is important though because antidumping duties are not imposed just because the industry wants them. There needs to be prima facie evidence that dumping is occurring.
The perception seems to be that the application process is burdensome, but this is in fact not true. Bringing an application without substance has far-reaching implications, so due process must be followed. The real cost of responding and disproving the allegation is far more complex and expensive. There are not many legal areas where you are deemed to be guilty unless you can prove your innocence, but this is one of them, so good and complete applications are important.
The vitriol currently focused on the EU by the South African Poultry Association (Sapa) and, by extension, FairPlay, without any facts, has the potential to have really far-reaching consequences. As mentioned, the EU cannot dump nor can they stop their exporters from dumping, if this is indeed happening. We already see the recent entry of the Department of Agriculture, Forestry and Fisheries into the fray, with their refusal to open the market to Dutch chicken, after the Netherlands was declared free of avian influenza.
The explicit reasons given for their refusal are related to the performance of the domestic industry, rather than animal health concerns. If you keep up this sort of aggressive behaviour, not based on facts, but simply on anger, emotion and lobbying, then soon we should expect consequences and these consequences will likely be felt in the sectors exporting to the EU.
How much of the distress suffered by the local industry is caused by European exports? We simply don't know, but there is a lot of evidence that any injury it may be suffering is caused by other factors besides imports. We know that the cap on brining limits, imposed at the beginning of this year, removed around R7-billion of revenue earned from selling water as chicken.
We know the maize price roughly doubled in 2016, and that feed costs account for over 70% of the cost of producing a chicken (the maize price has subsequently dropped again). Causality matters, which is why it is a cornerstone concept in all trade remedy matters.
We know, based on import statistics from the South African Revenue Service, that imports from the EU have dropped over 60% in the last 12 months, yet the overall import volumes have been fairly constant over the same period. Now unless the whole world wants to dump their chicken here, this would seem to indicate a different problem to the ones so easily thrown about by FairPlay and Sapa.
In the EU’s press release on August 2, they confirm the same position. “It remains inexplicable, if there was dumping, why the local poultry industry, represented by the Sapa, has not filed a dumping complaint to Itac as they have done in the past. Sapa has not. Notably, South African trade authorities also acknowledge that dumping is not the issue.”
So why all the aggressive press coverage over an issue which can easily be dealt with through a legitimate legal process? I don't pretend to understand the dark arts of the public relations world, but certainly, the coverage has little to do with solving the problems in the chicken industry, given that the European exporters are unlikely to be reading the media coverage and can't respond to an allegation not officially made.
Judge Goldstone makes similar allegations but escalates the allegation to predatory dumping of which there is even less evidence. Predatory dumping requires intent, and for most exporters, they sell into the market which will pay the best price for their products. I am not saying that predatory dumping never happens. It certainly does, but it is rare as the amount of capital required is significant and is almost impossible to coordinate. In other words, when this happens, it is carried out by one company.
There are many exporters of European chicken, from relatively small producers to very large companies and it is inconceivable that they are all working together to destroy the South African chicken industry.
Now Mr Baird will almost certainly say I ignored the allegations of subsidisation. So, let me respond. If there is evidence of prohibited subsidies, then bring the appropriate action. If there is not, then let's stop making these silly comments in the media.