Chicken dumping

OP-ED: Cowardly farmers’ chickens come home to roost

Last year, South Africa’s chicken farmers successfully lobbied for tariff protection from competitors in the United States, Brazil, and elsewhere. Red Rob Davies agreed to steal from the poor to give to the rich. But now, the snubbed exporters are getting irate, and are threatening revenge, writes Ivo Vegter in Daily Maverick.

IN trade lobbying circles, they use a term: “dumping”. This is short-hand for “annoying competition from foreigners who are prepared to sell things for less than we want to charge our customers”. It is a term that is designed to make “lowest discount prices!” sound like a bad thing.

Usually, if Alice wants to sell me something for less than Bob charges, I’d consider it a good thing. Alice probably spent money advertising her wares as the best deal in town, to make sure I know to buy from her. If all goes well, that means I won’t buy Bob’s overpriced junk. This sucks for Bob, but the competition benefits me, as the consumer.

For some reason, the notion has arisen among legislators that all this changes if Alice is not South African. If she’s a filthy foreigner, Alice’s aggressive pricing is called “dumping”, and threatens Bob with material injury.

In fact, cheap imports are no different from any other competition, of course. Alice still has to make a profit, eventually, and lower prices still benefit me, the consumer. However, now Bob can appeal to the chief commissioner of a bureaucracy called the International Trade Administration Commission of South Africa, for relief. That relief, if granted, usually takes the form of import tariffs raised on Alice’s goods, to make it harder for her to sell her wares, and improve the chances that I’ll prefer Bob’s overpriced junk.

The reason they call it “dumping” is because the World Trade Organisation (WTO) agreements to which South Africa is a party explicitly prohibit countries from taxing imported goods any more than they tax domestic goods. The exception that is carved out is for cases in which, by some obscure formula, it is determined that the goods are being sold at less than their “normal value” in the country of origin. In addition, the WTO rules to which South Africa agreed say that anti-dumping tariffs may only be levied in cases where the imports cause or threaten injury to a domestic industry, or materially retard the establishment of a domestic industry.

Of course, all price competition causes or threatens material injury. That’s kind of the point of competition. You’re not supposed to benefit your competitors. You’re supposed to eat their lunch. But if you do, the losers get to go to the teacher to complain about how much you are benefiting your customers, at the expense of their fat profit margins and low productivity.

In practice, because real prices are notoriously hard to compare between countries, claims of dumping are usually based on the difference between import pricing and domestic pricing in the destination country. That is, if you can import stuff for less than I can make them at, I would complain about “dumping” in the hope of protecting my inefficient business from your ruthless competition.

There’s a domestic version of this kind of complaint, in which Alice’s pricing is called “predatory”. It is just as bogus, of course. Again, this is what competition is all about. If we just nicely split up a market among a cartel and grant all of them a statutory right to profit, why would anyone bother to compete for market share by offering customers better quality at lower prices?…..

Daily Maverick: Read the full article