Zakhele Mthembu | What’s wrong with dumping? The case of chicken imports
SA likes chicken. But the rising cost of living is testing that love. (Image: Getty)
Dumping is described as international price discrimination, in which a product is cheaper in the importing market than in the exporting market of that product. This practice is frowned upon, as evidenced by calls to curb dumping through measures such as tariffs or outright bans on certain imports. One wonders when did cheap prices become a bad thing?
Dumping, for example, would be Brazil or the EU (European Union) exporting cheaper chickens to South Africa than those produced locally. This is an issue that has plagued local commercial chicken farmers, as this statement released by an organization representing the South African poultry industry shows.
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The general opposition to dumping is that it has a negative impact on local industry. Cheaper chicken from overseas will mean less revenue for local producers. This has a negative influence on economic development and job creation in the poultry industry. The Department of Trade and Industry had instituted tariffs on chicken imports before they expired and were not renewed, sparking industry anger, the statement from the SA Poultry Association shows.
From the consumer’s point of view, the tariffs, which a priori make the products more expensive, are an injustice. Every tariff instituted by a state essentially punishes a citizen of that nation for exercising their freedom and choosing to buy a foreign product instead of a local product. In a voluntary transaction, no force is used, so ideally no law should apply. When it does, it is arbitrary because it is not based on an objective to harm an individual in this trade but other third parties.
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When a consumer buys chicken from a retailer and chooses the foreign option (perhaps because it’s cheaper or said person simply likes foreign products, being “bourgeois” and all), the government should not punish him by putting a tariff on said chicken, making it more expensive than it would be without the tariff. The impact of this sale between a consumer and the retailer of chicken imported from abroad is neither illegal nor unfair in his case. Thus, to operate a law (tariff) is an injustice.
By its nature, commerce is the antithesis of force, so it should attract no operation of law until there is violation of rights, which would not be commerce by nature.
Regardless of the unregulated importation of chicken resulting in lower prosperity for local chicken farmers, it is still not just that tariffs are instituted on the product sold.
The government of our country should not punish any citizen for exercising their freedom to choose a product. Local producers are not entitled to the patronage of South African citizens. They have to earn it in the market. Therefore, the decision of the Ministry of Trade and Industry to impose a moratorium on raising tariffs on chicken imports is commendable. In a situation where food inflation is at frightening levels, any move that raises the price of a staple like chicken should be welcome.
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The poultry industry in South Africa is not alone in claiming protection from its more efficient, or sometimes subsidized, foreign counterparts. Multiple local industries are part of business operations to seek state protection. The usual objection to a substantial level of free trade (without tariffs or imports) is that exporting countries either subsidize these companies or apply tariffs as well.
Such objections, of course, focus on poultry producers, since consumers are not the ones who complain about the infiltration of foreign chicken. How do we know? Through the lens expressed consumer preference for foreign chicken through their purchase of said chicken. If the exporting country has tariffs, it only means that its citizens are forced to pay more for the products. Therefore, this should not be an excuse to violate the freedom of choice inherent in the freedom of South Africans by artificially raising the price of products through tariffs.
Dumping is frowned upon in some circles. Yet without cheap products and services, sometimes from overseas, some people’s standard of living would decline.
More important than any consequence of protectionism, as illustrated by tariffs, is that it violates the natural rights of citizens to make free choices. It is an attempt by the government to socially organize a population to support certain businesses over others; a classic case of picking losers and winners.
Since trade policy is constantly changing, duty relief cannot be guaranteed to last forever. Yet, as long as it is still there, it must be shown how this situation in chicken should be the norm in every product or service. We should go further and instead of a moratorium, tariffs should be completely abolished. The benefits expected from lowering or eliminating tariffs (lower prices) exist in every category of products subject to tariffs.
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Therefore, I implore us as a country to seriously consider the reality of true free trade. Even if we are alone in this endeavor internationally, the advantages far outweigh the disadvantages of such a policy. More specifically, free trade is consistent with a society committed to justice, regardless of the results.
Zakhele Mthembu, BA law LLB (Wits), is a legal researcher at the Free Market Foundation.