South Africa urges the government to suspend imports for European chips. The potato sector in the country fears dumping practices that threaten local production. In the past, this was already a reason for an increased import duty.
The concerns expressed by South Africa are directly linked to the corona crisis. The potato industry in the country is struggling with reduced demand, partly due to the closure of restaurants and fast food chains, and restrictions on trade. Increased imports of fries from the European Union would put further pressure on the market. To prevent this, lobbying is underway for a temporary import stop, various media in the country report.
South Africa is thus following the line of New Zealand and Australia, which previously urged the government to impose import restrictions. In addition, the potato sector in the United States wants a levy on European fries. This makes the so-called chip war in a new phase landed. A worrying situation according to trade organizations Vavi and Belgapom for whom the free trade principle is an important spearhead.
Next blow
The lobby in South Africa is led by the Potato and Vegetable Processors Forum (PVPF). This includes McCain Foods South Africa, Natures Garden, Lamberts Bay Foods and Potato South Africa (PSA). André Jooste, CEO of PSA, states that the local potato industry has already suffered significantly from decreased demand during the corona crisis. "The result was a significant price drop well below cost for producers and growing inventories at processors. Another blow due to cheap imports from other countries could be disastrous."
What particularly worries countries such as New Zealand, Australia and now South Africa is the government support that potato growers in Europe receive. This has created the impression that European fries are subsidized and can be offered abroad at dumping prices. The nuances that go with it are missing. Such as the fact that the compensation scheme in the Netherlands and Belgium, among others, is only for growers and not for the processing industry.
Rising protectionism
That is something that really bothers Hylke Brunt of the Dutch Association for the Potato Processing Industry (Vavi). According to him, there is no question of dumping. According to him, processors have no interest in this, given the losses suffered in recent months.
His Belgian 'colleague' Romain Cools, secretary of Belgapom, also views the rising protectionism with suspicion. "China's attacks on imported frozen products that the government claims are contaminated with Covid-19 are also an example of this. Although frozen potato products are outside the scope."
Previously a high import tax
In South Africa, attention is mainly paid to the large volumes of fries that are exported from Europe. In recent years, the EU share in the global chip trade, which is led by the Netherlands and Belgium, has continued to grow. In the past, increased imports were also a reason to increase the import tax. To protect the domestic market, the import tax was increased by 2013% in 63.
South Africa fears that its own chip production of approximately 230.000 tons per year will be swamped by the millions of tons exported by the EU. This fear is further fueled now that there are surpluses in Europe due to the corona crisis. New Zealand, Australia and the United States share similar concerns.
Long-term shortages
The PVPF has indicated to the South African government that this could have far-reaching consequences for local production in the long term. Once the European markets recover, major shortages could arise. Chip factories fear a shortage of supply in the long term if growers in the country now reduce their production, as potato cultivation is a multi-year process.
Jooste: "One consequence is that consumers may be confronted with high prices if South African growers and processors have to reduce or close their activities." In addition, the PSA leader underlines the importance of the potato industry for labor supply in South Africa. While waiting for the government, Jooste calls on buyers of frozen potato products to continue to support local production.
Joint approach in EU
Within the EU, parties such as Vavi and Belgapom work together in the fight against market protectionism. "The frozen fries thing in the EU is a real Benelux issue," says Cools. "More effort will be needed in the coming years on a common approach. It is therefore gratifying to note that the EU wants to deploy more resources to ensure free trade and proper functioning within the World Trade Organization (WTO)."