South Africa, US Seek Solution on Poultry Row Ahead of AGOA Renewal

29 January 2015

Efforts are ramping up between the US and South Africa to resolve their countries’ long-standing row over poultry trade, as Pretoria vies to ensure its continued eligibility in the African Growth and Opportunity Act (AGOA), a US programme that is up for re-authorisation this September.

In that vein, South African Trade and Industry Minister Rob Davies and US Trade Representative Michael Froman reportedly met last week on the sidelines of the World Economic Forum Annual Meeting in Davos, Switzerland in the hopes of advancing the discussions.

Since 2000, South Africa has had in place anti-dumping duties against imports of certain US chicken products. Claiming that such measures represent an unfair practice, US poultry meat exporters have been negotiating lower tariffs on their products over the past several years. More recently, they have also begun lobbying US lawmakers to tie South Africa’s continued AGOA access to the removal of those protection measures.

A solution within reach

“The dialogue between our two poultry associations had now reached the point of exchange of offers,” said Davies in comments to the BusinessReport.

He explained that South African and American poultry associations are working together on a programme which will include some additional market access for US poultry products as well as a development component involving increased investment, training, skills development, and support for intra-African trade.

“We hope that [the offers] will create the momentum for the re-authorisation of AGOA with South Africa included. That’s what we are looking to achieve,” said Davies.

Observers note that South Africa’s poultry trade policy has caused the country to face previous complaints, including at the WTO, where Brazil launched a case in 2012. (DS439) South Africa has also been a respondent in other WTO disputes raised by India, Indonesia, and Turkey, respectively, involving anti-dumping measures on other products. (See Bridges Africa, 17 February 2012)

AGOA eligibility at risk?

The South African duties have also drawn the ire of some US lawmakers, with Senator Chris Coons warning last month that he “will not allow AGOA to be reauthorised as long as South Africa continues its illegal and inappropriate ban on the import of all US poultry.”

Coons, a Democrat from the US state of Delaware, co-chairs a bipartisan group known as the “Senate Chicken Caucus” with Johnny Isakson, a Republican from the state of Georgia. The group aims to facilitate congressional discussions relating to poultry.

AGOA provides certain African products with preferential quota and duty-free access to the US market. The bill expands upon the US Generalised System of Preferences (GSP), a set of formal exceptions from the WTO’s most-favoured nation (MFN) principle, which allows developed countries to offer developing countries preferential treatment on specific goods. The GSP expired in mid-2013, with renewal legislation stalling in Congress.

In December 2014, Coons and Isakson addressed a letter to South African President Jacob Zuma warning him that continuous refusal to act – in other words, to lift the duties – on US poultry could result in the end of trade benefits granted to South Africa under AGOA.

“South Africa turned around and slapped heavy duties on our poultry. It was something we didn’t expect. We didn’t think it was a very friendly gesture and we’ve been trying to get those lifted ever since,” Kevin Brosch, a trade advisor to US poultry industry, said to television channel CCTV America at the time.

Statistics indicate that a potential loss of US trade preferences could have serious consequences as 90 percent of South Africa’s exports enter the US duty-free under AGOA. These totalled more than US$3.5 billion last year, creating more than 60,000 jobs, according to South Africa’s Department of Trade and Industry.

Davies said he was “a bit surprised by the threats involving South Africa’s AGOA status,” according to remarks quoted in the BusinessReport.

Pushing for AGOA’s re-authorisation

As attempts to find a solution over the poultry issue intensified over the past few days, a delegation of African trade ministers held discussions in Washington to push for the renewal of AGOA, which is set to expire in eight months.

In recent years, some US experts have argued that Washington should focus more on two-way trade agreements with Africa in order to preserve its competitive advantage, especially since the EU has now concluded negotiations for reciprocal Economic Partnership Agreements with three regional economic communities in Africa, namely the Economic Community Of West African States (ECOWAS), the South African Development Community (SADC), and the East African Community (EAC).

Debates in Washington also focused on making AGOA more effective by “graduating” more advanced countries, such as South Africa. (See Bridges Africa, 31 July 2014)

Critics of the Act often suggest that the scheme is constrained by its very design: AGOA imports are heavily concentrated on energy-related products whereas AGOA exports from LDCs are mainly dominated by apparel, largely from Lesotho, Malawi, and Madagascar.

Key agricultural products in which AGOA beneficiaries are competitive are excluded from the Act’s coverage. Over the years, some analysts say, the scheme has had only limited effects on job creation and structural transformation in Africa.

Additionally, some experts note that predictability has been a recurring concern for investors given that its re-authorisation is in the hands of US lawmakers. Furthermore, they say, AGOA eligibility is tied to specific standards, such as beneficiary countries working to improve the rule of law and human rights and setting labour standards, which can often lead to countries being dropped and reinstated from the programme.

Earlier this month, three countries – Swaziland, the Gambia, and South Sudan – had their AGOA status revoked. (See Bridges Africa, 19 January 2015)

ICTSD reporting; “Davies in bid to save SA’s Agoa access,” BusinessReport, 26 January 2015; “US lawmakers want South Africa to lift import taxes on poultry,” CCTVAmerica, 26 January 2015; “The chicken or the AGOA: US trade policy in Africa,” DEVEX, 23 January 2015; “US, South Africa in a flap over chicken trade,” REUTERS, 12 December 2014.

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