Proposed tariff increase would make EU dairy products uncompetitive in this important market

Proposed tariff increase would make EU dairy products uncompetitive in this important market

Efforts by Ireland and other EU countries to find new dairy product export destinations are threatened by the Indonesian government’s proposal to increase import tariffs.

The move is in retaliation for EU plans to impose anti-subsidy duties on palm biodiesel from Indonesia, in early September.

Currently, EU dairy products sent to Indonesia are subject to a 5% import tariff.

However, the proposal is to increase the tariff rate as high as 25%.

Indonesia is a big export market for EU dairy products, so the move could have a significant effect on the EU dairy market.

Last year, the EU exported 164,000 tonnes of dairy product, at a value of £221 million.

The EU accounts for nearly 40% of all Indonesian imports.

Whey and milk powders make up the majority of shipments.

Up to mid-year, the EU had a 50% market share for skim milk powder imports in Indonesia.

Restrictive measures are also expected to include non-tariffs based barriers, such as delaying or rejecting import permits for EU-origin dairy products.

With the addition of the 25% tariff, nearly all dairy EU products would become uncompetitive, compared to alternative sources.

For example, EU butter could be more than double the price of butter from Australia.

The trade war over biodiesel from palm oil — of which Indonesia is the world’s largest producer — is a particular blow for Ireland, which had made Indonesia a priority market target, with Agriculture Minister Michael Creed having led the first Irish trade mission to Indonesia (and Malaysia) last November, to raise awareness of Ireland as a source of sustainable dairy products.

The EU tariffs followed an anti-subsidy investigation against Indonesian biodiesel producers, which showed they benefit from grants, tax benefits and access to raw materials below market prices.

The EU biodiesel market is worth an estimated €9 billion a year, with imports from Indonesia worth about €400 million.

Indonesia is less than 40% self-sufficient in dairy products, but looks primarily to Australia, New Zealand, and the US, to meet their dairy requirements

In 2017, Ireland sent €15m of dairy exports to Indonesia, which is predicted to be the seventh-largest economy in the world by 2030, and is already No 4 in population rankings.

July milk prices

Proposed tariff increase would make EU dairy products uncompetitive in this important market

Dairygold joined the other milk buyers this week in cutting the price for July milk by 1 c/litre (cpl), compared to the June milk price.

A Dairygold spokesperson said dairy markets have been challenging and uncertain for months, with butter returns falling significantly, far outweighing the marginal increases in powder prices.

More recently, cheddar cheese returns have been negatively impacted, primarily due to Brexit.

Almost every Irish dairy co-op has cut its milk price for July, by between 0.5 and 1cpl.

Price leader Carbery also cut 1cpl from their base milk price for July, but the Carbery Volatility Fund set aside in 2017 and 2018 is being activated to offset this reduction.

ICMSA’s Dairy Committee Chairperson Ger Quain said there is a more than 3cpl range in prices paid to dairy farmers across the country, costing a farmer supplying 400,000 litres €8,000 for the first seven months of the year.

Meanwhile, the Global Dairy Trade auction Tuesday saw the overall GDT Price Index down 0.2%.

More on this topic

Latest US and Chinese tariff hikes take effect in trade warLatest US and Chinese tariff hikes take effect in trade war

Tariffs on Chinese goods to US in force from todayTariffs on Chinese goods to US in force from today

Trade wars could lead to world-wide recessionTrade wars could lead to world-wide recession

‘War gaming’ how the world falls into recession‘War gaming’ how the world falls into recession

More in this Section

Teagasc publishes Prospectus of Courses for 2019Teagasc publishes Prospectus of Courses for 2019

Different Times: Ireland's Wild WestDifferent Times: Ireland's Wild West

Australian seaweed for climate-friendly cowsAustralian seaweed for climate-friendly cows

More women pursuing  farming careers: TeagascMore women pursuing farming careers: Teagasc


Lifestyle

Make-up artist Terry Barber reveals the secret to pulling off the bold lip look.This is how to make black lipstick work in real life, according to a catwalk make-up pro

Off to the Japan? After a trip to Tokyo, Ella Walker outlines the best things to eat between matches.These are the dishes to try if you’re going to Tokyo for the Rugby World Cup

It still surprises me as I am achingly private and do not enjoy being at the centre of attention.This Much I Know: Actor Aislin McGuckin

Bride Geraldine O’Donovan felt as wonderful as she looked on her big day — knowing she was supporting a cause close to her heart as she donned her wedding gown.Wedding on the Week: Supporting a cause close to their hearts

More From The Irish Examiner