US extends extra tax on EU dairy goods

US extends extra tax on EU dairy goods
The US has decided to continue an extra 25% tariff on EU exports, including Irish dairy products, for at least another six months

The US has decided to continue an extra 25% tariff on EU exports, including Irish dairy products, for at least another six months.

The tariff is likely to hurt Ireland, because we are one of the EU’s top three butter exporters, shipping 60% together with France and the Netherlands.

Ireland saw especially strong growth in 2019, exporting 63% (20k tonnes) more butter products than in 2019.

The US accounted for 17% of the EU’s butter exports in 2019, up by 7,000 tonnes from 2018.

ICOS European affairs executive Alison Graham said the punitive 25% extra tax resulted from the World Trade Organisation (WTO) decision in favour of the US, in a dispute over subsidies for the EU airplane manufacturer, Airbus.

She said until the WTO rules in June on the value of the EU’s compensation entitlement, in a similar case against the US airplane manufacturer, Boeing, negotiations are not expected between the EU and US on tariffs.

The US tariffs come on top of dairy market uncertainty over the effect of the spread of coronavirus, particularly on China’s huge dairy imports.

Coronavirus effects on markets include the risk of a worldwide shortage of containers for shipping goods, because they were not unloaded fast enough in China.

With coronavirus said to have temporarily kept half of China’s 30 million truck drivers off the road, the imports and exports of the world’s No 2 economy fell sharply in February.

But there are now some signs of import and export cargo flows reverting to normal levels, in tandem with China reporting a slowdown in new coronavirus cases.

One of the biggest dairy exporters to China, Fonterra in New Zeland said there was some disruption, but its products were reaching Chinese markets.

This was reflected Tuesday in a price fall of only 1.2% at the Global Dairy Trade auction, in which the outcome depends heavily on Chinese demand.

Some docks in China are clogged with shipping containers.

More tonnage of container ships is idle around the world now than during the global financial crisis, according to shipping data services.

The world’s biggest container handling port, Los Angeles, saw a 15% fall so far this year, their biggest decline in shipping volume since the 2008 financial crisis, due to logjams in China.

But Chinese government agencies have announced measures to get logistics functioning properly again.

Elsewhere on the global dairy market, drought in New Zealand is likely to keep a lid on supplies. Fonterra Co-Operative has revised its forecast milk collections for the 2020 season from 1,530 million kg of solids to 1,515m, due to persistent drought conditions across New Zealand.

IFA national dairy chairman Tom Phelan has urged co-ops to support farmers in this long, wet and stormy spring calving season, with a February milk price increase.

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