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Between a rock and a hard peck
It is a well established fact that chicken is Trinidad and Tobago’s most popular form of protein as its appeal cuts across the country’s class, race, religious, gender, location and age differences. Given the popularity of chicken in the local market, an entire agro-processing industry has developed that caters to the seemingly insatiable national demand for the commodity. This industry includes four major processors with massive industrial-scale “factories” in which thousands of chickens are bred to maturity, hundreds of pluck shops that are responsible for buying the live chickens from processors and preparing them for the market, as well as chicken sold to supermarkets, groceries and the country’s many fast food outlets. It is estimated that the local poultry industry produces, on an annual basis, ten million dozen table eggs and about 48 million broilers, approximately equal to 92 million kilograms of live weight. At about 70 kilograms per capita annually, T&T probably consumes as much chicken per capita as any other nation.
The production of chicken nationally supports thousands of jobs—many of which are in rural areas, making the poultry undoubtedly the most successful agro-processing industry in modern T&T. It is partly the success of the T&T’s poultry industry—along with the fact that the industry is dominated by a small number of large players who employ scores of small sub-contractors who also breed chicken—that has made the agro-processors a target for cheap imports from North America. According to the local industry, the country has been flooded with imported, frozen chicken parts from the US that is providing unfair competition to the local producers. The US is able to export chicken legs and thighs because the American market is dominated by demand for breast and wings. The importers of the frozen, American chicken meat, on the other hand, argue that the local producers are a coddled cartel with connections in Cabinet and that the imports are doing the nation a favour by maintaining downward competitive pressures on chicken prices.
In trying to adjudicate between the local producers of chicken and the local importers of the product, the Government faces two unpleasant alternatives: If it does nothing, it runs the risk of the local poultry industry being decimated with thousands of suppliers, farmers, pluck shop owners, salesmen and others facing retrenchment or the loss of their investments. There is clear evidence from Jamaica in the eighties that imports can quickly devastate a Caribbean poultry industry. On the other hand, if the Government decides to implement the tariff increase that is the subject of today’s lead story, it runs the risk of making the imported chicken parts more expensive, which will reduce the competitiveness of the local industry and eventually pave the way for higher-cost local product. In effect, the Government is caught between the proverbial rock and a hard place in attempting to please the consumers of chicken, who want the price of the commodity to be as low as possible, and the local processors, who argue that they are supporting thousands of jobs.
The consumers of chicken would be in favour of a completely free market with no tariffs while the local processors would argue that that approach leads to a temporary reduction in prices while local production is being snuffed out and then consumers would be completely at the mercy of the local importers. Ideally, the Government would want to maintain enough competition in the poultry market to make sure that prices are stable but with enough profit margins to ensure that the large processors are incentivised sufficiently to maintain and eventually increase their production while reinvesting in their businesses by introducing state-of-the-art production, processing and animal health standards. Both sides of this argument—consumers versus producers—are compelling and therefore the Government needs to ensure that its decision does the least harm. If the Government decides to go in the direction of protecting the local industry by introducing a small tariff, it would need to ensure that the impact of the measure is properly monitored and reviewed so that unintended consequences are minimised.
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