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South Africa Avoids Trade Spat with Brazil

07 October 2013

SOUTH AFRICA - South Africa narrowly avoided a trade spat with Brics colleague Brazil over the poultry tariff review by opting for import tariffs as opposed to anti-dumping measures.

Brazil had indicated that it would not be happy and would resist anti-dumping duties on chicken products from the country, sources close to the matter said.

According to BusinessReport, in an interview on the sidelines of the the first national summit on broad-based black economic empowerment, Trade and Industry Minister Rob Davies said anti-dumping measures against Brazil had been rejected.

Gilmar Henz, the Brazilian agricultural attaché to South Africa, said there was no proof that Brazil exported its poultry at less than the cost of production in that country, hence anti-dumping tariffs would have been awkward at the very least.

Mr Henz confirmed that South Africa was the only country out of the 120 that Brazil did business with to have started an anti-dumping investigation.

"Anti-dumping investigations are difficult, they are costly to both the government and the private sector. We as Brics believe that bilateral traditions must be used to solve or negotiate problems," he said.

On Monday, South Africa raised tariffs on imported chicken products by 8.75 percentage points on average and 82 per cent for a "whole bird" to protect local producers. The measures are targeted mainly at Brazil which accounts for 52 per cent of South Africa’s chicken imports.

Mr Davies said he agreed with a statement by Cosatu that Brazil and Argentina were significant exporters of poultry products to South Africa, but he would not comment on the claim that "this is not surprising as these countries are known for their protectionist policies, in particular subsidies to their agricultural sectors".

He said South Africa’s added protection against cheap poultry imports still had an additional challenge from the EU because of the bloc’s free trade agreement with South Africa.

Mr Davies said chicken imports were threatening jobs in the local chicken production sector, but it was now possible that more jobs would be created.

Henz said South Africa still needed to import some mechanically deboned meat cuts because it did not have the technology to produce them, hence the tariff review did not raise these exponentially.

"Brazil is an agricultural produce powerhouse, our soya, maize, beef, coffee and sugar, among other things, are produced far cheaper," he said.

He added that even the cost of electricity was much cheaper in Brazil than in South Africa, which reduced input costs in agricultural production.

Mr Davies said: "We never said the tariff dispensation is a magic wand. Soya is being produced in South Africa and some of it is exported. There are a number of projects in place to grow more of it. What we need is a lot of vigilance from the competition authorities. We want to see no conflict between small and large companies."

He denied that poor South African consumers, who relied on chicken as their main source of protein, would suffer most from the imposition of tariffs.

Mr Davies said: "We are supporting the local production sector, so there is a lesser burden on those on low incomes."

He also wanted a review on the practice of injecting brine into chicken.

Some chicken products of local producers had been found to contain as much as 30 per cent brine.

Cosatu said a protected market for local producers should be accompanied by conditions, including the creation of decent jobs. It noted that the five local poultry producing companies had claimed that 11,995 direct jobs and 14,892 indirect jobs were likely to be created if tariffs were imposed to the maximum rates of 82 per cent.

The labour federation said: "It is interesting to note that labour costs are not the major costs as preached by neoliberal economists. Furthermore, an important input in manufacturing of poultry feed is soya bean mill, of which 90 per cent is imported. Therefore, the challenge is for the government to ensure that the whole value chain of chicken production, in particular feedstock, is produced locally."

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