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The dangers of SPS measures being used to restrict import trade

By June 22, 2017 No Comments

The dangers of SPS measures being used to restrict import trade

This text was originally published on XA International

The Department of Agriculture, Forestry and Fisheries (DAFF) may believe they are doing a good thing by changing the sanitary and phytosanitary (SPS) rules around the importation of chicken. Not only are they changing these rules, but they are changing them without any valid scientific reason and they are doing this without even placing the new process out for comment. Such actions always end badly in the long term, but before we get there, lets unpack what has happened to bring us to this point.

On the 23rd of March 2017, I was sitting in the Trade and Industry Parliamentary Subcommittee, as part of a vigorous debate around the chicken industry, when Kevin Lovell, the CEO of the South African Poultry Association (SAPA), openly thanked DAFF for how long they had taken to open certain markets to allow the export of chicken to South Africa. DAFF were a bit fidgety and uncomfortable, however, Mr Lovell pushed on and asked them to change their process of opening supply countries following the outbreak of Highly Pathogenic Avian Influenza. Up until a few weeks ago, when an outbreak of HPAI was identified in a given country, that country would notify its trading partners (including South Africa), who would then close that country off from supplying to SA until the outbreak was under control. When the disease had been properly managed and no further outbreaks were identified for a prescribed period, the state vet of the country would then give the all clear and SA would once again open its markets for the product.

You will notice that at no point in the process is the financial state of the South African industry a factor here and it is crucial that it never be, because SPS issues are designed to protect the health and well being of South African humans, animals and plants, not to set trade policy for a given industrial sector. This sits within the ambits of the Department of Trade and Industry (DTI) and the Department of Economic Development (EDD), who have the investigative and technical capacity to make and implement such policies. If we end up with SPS issues being used to protect any given industry sector in bad times, then it rapidly follows that SPS measures should be lifted when companies are thriving and generating large profits. This is clearly ridiculous, hence the reason for SPS measures to not be used as trade policy instruments. But they are now with chicken. There is not ambiguity around this statement, as DAFF have quite openly stated their position in a public letter dated 18 May, saying

Considering the recent discussion with regards to the plight of the poultry industry, the Directorate Animal Health has submitted a recommendation to our principals and requested guidance on the subject.”

To be absolutely clear, this is a statement indicating that the decision DAFF is making is related to the financial performance of the industry, rather than sound scientific principles. It should be noted that the listed chicken producers, particularly Astral are generating good profits at the moment, so its not as if their already wealthy shareholders and directors need any help to make money.

Then just as Lovell requested in parliament, DAFF notifies the importers that they will be travelling to the Netherlands on a fact finding mission. This all happens despite DAFF’s assurances in parliament that they would not use SPS measures to affect trade. Well they have and this will have consequences.

South Africa and the EU are trying to bed down the recently implemented Economic Partnership Agreement (EPA) and to say there have been challenges would be a gross understatement. Actions such as the one taken by DAFF really do add unnecessary fuel to the fire and yes, it is unnecessary. The stress experienced by the industry had everything to do with the drought and escalating feed costs and very little to do with imports, evidenced by how well these companies are now doing since the feed costs have dropped again.

How will the EU react to what is clearly a violation of WTO jurisprudence and also a very direct attack on South Africa’s largest trading partner? A very important trading partner, buying high value added products (as opposed to, say, China which mainly buys low value added minerals). South Africa already brought a legally questionable safeguard action against the EU and now follows this up with an even more questionable SPS action. If Europe retaliates, and of course we really hope they do not, it will be another sector that will pay the price.

All of this comes, ironically, at a time where the EU wants to buy South African chicken, yet South Africa has no interest in this export market. It is worth reading this article by Chris Schutte, the CEO of Astral.

https://www.businesslive.co.za/bt/business-and-economy/2017-05-28-angry-bird-man-says-state-plan-to-export-fowls-just-wont-fly/

But it is equally interesting to read this article by Schutte’s competitor, Chris Coombes, CEO of Sovreign Foods.

http://www.rnews.co.za/article/14710/protection-of-the-poultry-industry-is-key-to-short-term-survival-but-not-the-long-term-answer

The industry needs to stop lobbying DAFF for illegal trade measures and DAFF needs to recall what its primary function is. There are no long term winners in a trade war with the EU and this sort of behaviour is exactly what leads to a confrontation we cannot win.

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