An increase in import duties on chicken and pork will be a strain on people's resources.
At the end of last week, the Russian government raised duties on chicken and pork imports in 2009. Russian meat producers are satisfied with measures that restrict competition with cheaper meat imports. However, economists believe that in crisis conditions, the government must support ordinary consumers, whose diet depends on the prices of chicken imports. Experts propose price regulation for Russian meat-producing companies in order to prevent a surge in meat prices.
On December 12, the government's press service issued a resolution on a rise in import duties on chicken and pork and a simultaneous drop in import duties on beef. The resolution was signed by Prime Minister Vladimir Putin. This lengthy document reduces poultry meat import quota by 300,000 metric tons and increases duties on above-quota poultry imports to 95% from the present 60%. At the same time, duties on above-quota pork imports will be raised to 75% from the present 60%, while those on above-quota beef imports will remain intact at the current 30% level. Duties on all types of meat imports within the quotas will not be changed: they will stay at 15% for beef and pork, and at 25% for poultry meat.
Under the document signed by the Prime Minister, the quota for pork imports will be raised to 532,000 metric tons from the present 502,000 due to the inclusion of pork trimming (which was a separate item before) into the quota. Starting January 1, 2009, pork import duties will be raised to 75%, but they should be no less than €1.5 per kilo. Duties on above-quota poultry imports will surge to 95%, but no less than €0.8 per kilo. The current duty rate on pork imports into Russia is 60% of its customs value, but no less than €1 per kilo, and on poultry imports is also 60%, but no less than €0.48 per kilo.
Experts are surprised at the new protectionist measures, which will definitely lead to a rise in the domestic prices of cheap pork and poultry varieties. "The restriction of competition with cheaper imported meat could be justified to a certain extent in a period of rising incomes in the population, which then has to pay for low competitiveness of domestic production. However, when people's incomes are falling, it is hardly necessary to give price advantages to Russian companies," says Yevgeny Gontmakher, head of the Social Policy Centre at the Economics Institute of the Russian Academy of Sciences. According to him, the government could demand that, in exchange for protective import duties, domestic producers should fix or lower the prices of cheap pork and poultry grades included in ordinary meals. "I realize that price regulation is a partial return to the past, but this measure is justified in crisis conditions for people to be able to afford a rational diet. Otherwise, protected by duties, domestic producers will be able to arbitrarily raise prices under the pretext of future production growth," warns Gontmakher.
Meat producers approve of the government's decision. "Over the past ten years, the Russian poultry raising sector has nearly tripled its output. Its 2008 figure is projected to reach 2.2 million metric tons, while imports will decline from 65% to 35%. The new 95% rate of import duty on poultry will be the maximum possible rate, while the real rate will be 80%," said Sergei Yushin, head of the executive committee at the National Meat Association. He is convinced that poultry raising and pig farming may become competitive in Russia in several years through investment and customs tariff policy.
The Ministry of Agriculture reports that in 2008, Russian farms of all categories will produce 9.2 million metric tons of fattening livestock and poultry, 6.7% up from last year. The highest growth rates have been achieved in poultry and pork production - 16.5% and 8%, respectively. However, Russian domestic production has been growing against a backdrop of fast growing meat imports. Thus, over the first ten months of this year, pork and beef imports grew by nearly 22% due to cheap import meat prices and Russian farms' failure to meet the domestic demand (see Nezavisimaya Gazeta of December 9, 2008).
At the same time, even experts admit that the Russian livestock breeding sector is facing serious problems that are not likely to be resolved during the crisis. "To import a kilogram of pork above the tariff quota, one must pay between $2 and $3 in customs duties, but with high domestic prices even high duties will not stop meat imports," Yushin said. According to him, private farms, which account for over a half of pork production, cannot be regarded as reliable producers for meat processing plants. Meanwhile, the global market has registered a substantial fall in meat prices in recent months. "Pork and beef prices in the United States, Canada, Brazil and Australia have dropped between 10% and 30% in recent months," Yushin added.
Mikhail Sergeyev