Frozen Potato Chips (French Fries) trade war between South Africa and the European Union

South Africa and the European Union (EU) are headed for another bruising dispute over trade access.

At issue this time around are frozen potato chips (frozen french fries) from the EU, imports of which have risen 1,398% compared with 2009, and which local producers say are hurting the South African market.

The EU has now requested "consultations"with South Africa, following the recent introduction by South Africa’s International Trade Administration Commission (Itac) of a provisional safeguard duty of 61.42% on imported frozen chips.

Itac introduced the duty this month after investigating an application by food company McCain, supported by Nature’s Choice and Lamberts Bay Foods. It found there was sufficient evidence that the surge in imports was harming the local industry.

The chip row comes after European trade chief Karel de Gucht gave South Africa a tongue-lashing this month at the second South Africa-EU Business Forum.

He said the EU had liberalised many more lines than South Africa, and that South Africa had enjoyed a steady surplus in trade in agricultural goods.

The EU said in a recent communication on the frozen chip duty, circulated by the World Trade Organisation (WTO), that it has "a substantial interest as an exporter in this case"and submitted questions that may be raised during the consultations with Itac.

Itac confirmed the consultations will take place next month.

A trade expert said a request for consultation was a serious indication of EU concern, but not as serious as a formal dispute at the WTO.

The imposition of the safeguard duty comes amid news that McCain, supported by other producers, last month requested Itac to probe claims that producers in Belgium and the Netherlands are dumping products in South Africa at discounts of more than 51% and 22%, respectively.

The European Commission said in a submission dated July 19 it was surprised to see that despite the weaknesses identified and submitted to Itac on the "non-injurious situation of the domestic industry", Itac nevertheless went ahead with the second proceedings, the antidumping investigation.

The European Commission referred to "injury indicators"in the non-confidential version of the McCain application which show positive trends, with price increases of 12%, employment up 9% and production up 15%.

XA International Trade Advisors director Donald MacKay said the EU was clearly concerned about having the safeguard measures in place and the antidumping case starting at the same time. "We believe there were never grounds for the safeguard, and nothing has changed our view. Itac has not provided a calculation of how they got to the duty level imposed, and have refused to provide this calculation by ignoring our request."

Affected Potato Importers (API), represented by XA International Trade Advisors, and the European Potato Processors Association said the Itac report on the provisional safeguard duty did not contain a "single reference"to any of the submissions it had made to Itac.

"This total disregard for API’s submissions … is a clear indication of bias and a predetermined outcome, which is extremely worrying,"Mr MacKay said.