The recent Agreement on Reciprocal Tariffs (ART) between Bangladesh and the US gives many American goods, including frozen chicken meat, duty free access to the Bangladesh market.
The market for chicken in the US is very different from the market in Bangladesh. In the US, chicken parts are sold separately after processing. US consumers have a strong preference for chicken breast. Chicken breast retails for about $3.50 per pound in the US, while chicken legs retail for about $1.50 per pound. Chicken processing plants in the US make profit selling chicken breast, but sell chicken legs at a loss (below production cost).
A US exporter has offered halal-certified frozen “chicken leg quarters” at a price of $1,490 per tonne ($1.49 per kg), which includes sea freight and marine insurance to Chittagong port. That translates to about Tk183 per kg. As the production cost of processed chicken in the US is probably about $1 per pound (about $2.20 per kg), these chicken legs are in fact being offered below production cost.
How does this compare to processed chicken in Bangladesh? More than 90% of the chicken grown in Bangladesh is sold live at wet markets. However, restaurants and superstores do buy processed chicken. At present, the average farmer in Bangladesh produces live broiler chicken at a cost of about Tk135 per kg. Transporting live chicken to a slaughterhouse increases its cost to about Tk139 per kg. During processing, the intestines, blood, feathers, etc. are removed, increasing the cost of the remaining (edible) weight. Processing plant costs (labour and refrigeration) are added, increasing the cost of processed chicken to about Tk219 per kg.
As American chicken legs will be significantly cheaper than local processed chicken, it is obvious that Bangladeshi consumers and restaurants will prefer to buy American.
Under GATT and WTO trade rules, importing countries have the right to impose “anti-dumping duties” to stop any product from being “dumped” (exported below production cost). Frozen chicken legs are exported from the US at a price which is below production cost. The Government of Bangladesh therefore has the right to impose anti-dumping duties on frozen chicken legs. Article 6.4 of the ART recognizes this right. It states that “Nothing in this Agreement shall constrain, or otherwise prevent, a Party from imposing additional tariffs to remedy unfair trade practices.”
However, Bangladesh cannot impose an anti-dumping duty at whim. The Government of Bangladesh must first officially investigate and find evidence of an unfair trade practice. Fortunately, any economist who examines the prices of chicken legs and chicken breasts in the US can deduce that profits from sale of chicken breast (at a high price) are cross-subsidizing the sale of chicken legs (allowing legs to be sold at a low price). Therefore, a strong economic argument can be made that the export of low-priced chicken legs from the US constitutes dumping.
The present taxes on imported frozen chicken are over 62% at present (25% customs duty, 10% supplementary duty, 15% VAT, 5% advance income tax, 7.5% advance tax). Bangladesh has maintained high taxes on the import of frozen chicken because chicken legs are sold below production cost in countries like the United States and Brazil. The taxes on American frozen chicken legs will fall to zero once the ART agreement is in force. Bangladeshi farmers will then suffer from unfair competition, unless an anti-dumping duty is imposed on imported frozen chicken legs.
The ART agreement is against the interest of tens of thousands of families in Bangladesh whose livelihood depends on chicken farming. It is shocking that the interim government signed this agreement without consulting representatives of the poultry industry.
Kazi Zahin Hasan is a director of Kazi Farms Limited. He has a BA in Economics from Oberlin College, and a master’s degree from Columbia University.
