SA has introduced higher duties for imported frozen potatoes from Europe in a bid to protect the local industry, a move that could lead to a sharp rise in the price of French fries at a time when many households are struggling to afford the basics as the cost-of-living crisis deepens.
The International Trade Administration Commission (Itac) — the organisation tasked with customs tariff investigations, trade remedies and import and export control — imposed provisional anti-dumping duties for frozen potato chips imported or originating from Belgium, Germany and the Netherlands.
The provisional duties — which are up to 181% for German producers, 104% for some producers in the Netherlands and 23% for those in Belgium — will be in place until January 2023 when the final five-year tariff determination will be finalised. This as the state moves to curb dumping. Many of the affected European producers shot themselves in the foot by failing to submit any information to allow Itac to calculate their specific dumping margins.
Previously, there were no duties for German producers, while Dutch and Belgian producers faced not more than 30% duties under the previous five-year anti-dumping regime that expired in 2021.
‘Inappropriately initiated’
Trade expert Donald MacKay said to impose anti-dumping duties, Itac has to find dumping, material injury and the injury must be caused by the dumping and not something else.
“Implied in all of this is that the domestic industry can supply the market with at least the volumes facing anti-dumping duties, which is clearly not the case at the moment,” MacKay said.
The domestic industry was a substantial importer of frozen potatoes from Belgium and the Netherlands during the period of investigation and this remains, he said.
“There are shortages of raw material (potatoes) in the local market, so it’s not clear how the domestic industry will be able to supply the market if the imported chips are removed from the market. Chips will, in other words, become quite a bit more expensive,” MacKay said, adding that any increase in food prices is “dangerous” under the prevailing economic climate in which many households are stretched.
MacKay said it should be kept in mind that the domestic industry didn’t bring the current application for anti-dumping duties. Itac self-initiated the investigation and “there is every indication that this was inappropriately initiated given the supply conditions in the market.”
The local industry is responsible for about 45,000 jobs and contributes about R8.5bn to the economy.
Implied in all of this is that the domestic industry can supply the market with at least the volumes facing anti-dumping duties, which is clearly not the case.
— Donald MacKay, trade expert
Potatoes SA (PSA), which represents local producers, has long lobbied for tighter anti-dumping measures amid rising production costs that threaten the viability of farming enterprises.
The World Trade Organization (WTO) explains that dumping is, in general, a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. Thus, in the simplest of cases, one identifies dumping simply by comparing prices in two markets.
Willie Jacobs, the CEO of PSA, previously stated that the battle between the local potato industry and global importers has a long-standing history, “with SA being considered a prime destination for dumping frozen processed potato products.”
He explained that because agricultural dumping usually results from a high volume of surplus potato products not usable by the countries of origin, “we need to be cognisant of the fact that this occurs in cycles.”
“Once excessive stocks are depleted, SA will enter periodic shortfalls, resulting in consumer price spikes ... South African producers will need to cater for local demand once more, but price volatility will deter them from entering the market again. Reaction from producers’ level is also very slow and can take years to build up production again,” Jacobs said.
“The extended importation of cheap potato products will have reduced the demand for the local potatoes and our potato farmers will be forced to pull back on planting new crops, leading to a risk of the seed pipeline running dry,” he said.
Francois Baird, the founder of FairPlay Movement, an organisation that aims to fight predatory trade practices and dumping, said on Tuesday the anti-dumping duties are long-overdue, as previous duties expired in July last year because Itac failed to complete its investigation in time.
“Unfortunately, in the year to July, South African potato farmers and thousands of local jobs will have been at risk due to increasing volumes of dumped potato chips from EU countries. The industry has said it can handle fair competition, but cannot compete with dumped products.
“The decision to impose provisional anti-dumping duties ahead of a final tariff determination may be an early positive outcome of the agriculture and agro-processing master plan, signed last month,” Baird said.
Itac was yet to respond to requests for comment on Tuesday.
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