Its time for Minister Rob Davies to withdraw the AGOA Poultry Rebate, and here’s the reason why…

In previous articles, I have written about how US tariffs have instigated a number of retaliatory measures from some of its major trade partners – bringing the entire global trading system on the cusp of a global trade war. I have also argued in past writings that the agricultural sector – particularly of the third world – was likely to become collateral damage of the tit-for-tat measures being initiated by the likes of China, Canada and the European Union (EU).

While the reciprocal measures of trading partners have become somewhat of a public spectacle, there has been negotiations behind the scenes. The US has entered into discussions with the likes of Canada, Mexico and the EU to negotiate for tariff exemptions and other related bilateral concessions.

For instance, in terms of steel tariffs, the US granted country exemptions to Argentina, Australia, Brazil and South Korea, while reaching in-principle agreements with Argentina, Australia, and Brazil. For aluminum tariffs, the US granted country-exemptions to Argentina, Australia, and Brazil, while reaching in-principle agreements with Argentina, Australia, and Brazil.

South Africa has been an affected party of the US’ steel and aluminum tariffs – with a 25% increase on steel and 10% increase on aluminum. Like other countries, South Africa has also been engaging the US and has since requested for exemption from duties. Unfortunately, South Africa has not been included under the list of countries that were granted temporary exemption from steel and aluminum tariffs, despite the country not being a threat to the US market.

The tariffs imposed on South Africa’s steel and aluminum equate to a partial withdrawal of the country’s benefits under the Africa Growth Opportunity Act (AGOA). This situation presents a potential problem for South Africa, because it means that the country may now be compelled to withdraw the temporary rebate provision on poultry. Under item (i) of Annexure 1.1 of South Africa’s “Temporary Rebate Provision” which provides for rebate of the full anti-dumping duty on bone-in cuts from the United States, the text reads:

This rebate item shall be suspended if any benefits that South Africa enjoyed under AGOA as at 1 November 2015 are suspended, and shall remain suspended for as long as those benefits under AGOA remain suspended…”

It appears that there might be grounds for anti-dumping duties on US poultry to be re-introduced.  For this to happen, Minister Rob Davies has to submit a written confirmation to the Minister of Finance that [part of] South Africa’s benefits under AGOA have been suspended. There is a lacuna in the provision – as it omits to specify if Minister Davies’ submission may be initiated after either “partial” or “full” suspension of AGOA. But this is open to debate for legal experts.

Minister Davies is now under pressure to reach an agreement with the US quickly before the private sector – particularly poultry producers – approach the courts, to force him to implement the withdrawal of the Temporary Rebate Provision.

Meanwhile, the poultry quota has already increased from 65 000 tons to 65 417 tons. Since the notice for this amendment was only published in the Government Gazzette on 27thJuly 2018, the rebate provision will be applied retroactively from 1stApril 2018 – meaning that the additional increase volume will be carried forward and distributed into the remaining quarterly periods in the 2018-19 year. In the previous year, US poultry exporters filled 87% of their allocated quota under the poultry rebate.

South Africa should actually be withdrawing the rebate in accordance with the provisions of the Temporary Rebate Provision, rather than increasing the quota of imports.

 

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