The Economist | 17 November 2015
South Africa spurns free trade to protect its meat market
SOUTH AFRICANS eat about 1.8m tonnes of chicken a year, from flame-grilled drumsticks slathered in peri-peri sauce to “walkie talkies”, a dish of chicken feet and heads popular in townships. Chicken, the cheapest meat here, is the main source of protein for poorer South Africans. But demand is growing, and a weak currency has sent prices soaring by 13% over the past two years. Prices may well climb higher still due to a scorching drought that is devastating South African agriculture and pushing up the price of grain that farmers feed to chickens.
All of this makes the South African government’s slowness in resolving a trade impasse with America over imports of chicken, beef and pork all the more baffling. The chicken dispute, in particular, has been dragging on for some 15 years. American producers complain that their access to the South African market is frustrated by high duties (imposed ostensibly because American producers have been “dumping” chicken at below the cost of production) and a bewildering array of non-tariff barriers such as concerns that American chicken may be contaminated by bird flu or other diseases.
Frustrated diplomats complain that they are tired of talking about chicken, and are flummoxed by the South African government’s unwillingness to resolve it. Now Barack Obama, America’s president, has stepped in with tough talk and an ultimatum. Unless South Africa removes barriers to American meat within 60 days it could lose preferential access to America’s markets that was granted under the African Growth and Opportunity Act (AGOA). This would affect South African exports of citrus and wine, at a potential cost of hundreds of millions of dollars and tens of thousands of jobs. “We do not take this decision lightly, and, in fact, have been working hard over many months—indeed years—to help South Africa avoid such action,” said America’s trade representative, Michael Froman. “Unfortunately, the issues persist.”
In June, Mr Obama renewed AGOA, which lets African countries sell many goods tariff-free to America. South Africa was included despite critics within Congress arguing it was rich and mature enough not to need a leg up. But South Africa’s AGOA membership was made subject to an “out-of-cycle review” of its eligibility, with a key condition being that South Africa eliminates barriers to American trade and investment. South Africa promised to end punitive “anti-dumping” duties on American chicken, and allow imports of 65,000 tonnes a year (far less than the nearly 170,000 tonnes imported in the first eight months of this year from Brazil, the biggest exporter to South Africa). The heel-dragging has continued, with the latest hold-up ostensibly due to health and safety concerns related to American meat. South Africa missed an October 15th deadline to finalise health rules saying its veterinary experts were still working on the issue. The South African Poultry Association argues that more American chicken on South African plates would result in the loss of 6,500 jobs and threaten the development of black-owned, small-scale chicken farms. America argues that its drumsticks would be duelling mainly with those of other foreign producers.
At a time when South Africans desperately needs jobs, and the economy is dipping towards recession, the country needs all the friends and benefits it can get. Rob Davies, the South African trade minister, has gamely insisted that the chicken row is close to being resolved. In 2014, the total value of South African exports to the America under AGOA was $1.7 billion, and this is not something that South Africa will want to jeopardise. Still, the opposition Democratic Alliance has griped: “We have behaved in such a way that one would swear there was no obvious and massive national interest in maintaining our preferential access to the world’s biggest economy.”
But such free-trading sentiments are far from universal in South Africa and the governing African National Congress (ANC). Many of its members wish to spurn the “bullying” West in favour of touting ties with China and Russia. Tony Ehrenreich, an organiser with the Congress of South African Trade Unions, an ANC alliance partner, called Mr Obama’s warning a “blatant attempt at extortion.” Yet this is a game of chicken that South African cannot win.