The EU and US have agreed to a five year truce on a tariff battle which arose as a result of the Boeing-Airbus aircraft dispute.
The news has a welcome spin-off for Irish dairy farmers. This is because when the US was cleared by the World Trade Organisation (WTO) to impose retaliatory tariffs on the EU in 2019, one of the sectors it chose was EU dairy exports.
It applied a 25% tariff, which immediately made Irish butter and cheese exports to the US far more expensive than they were previously.
In spite of this, Irish dairy exports to the US, particularly butter and cheese, continued to increase even after the tariffs were imposed in late 2019.
Bord Bia data shows that Irish dairy exports to the US in 2018, the last full year before the 25% tariff was introduced, were worth €295m, increasing in 2019 to €343m.
Substantial quantities of Irish dairy products were sent to the US in anticipation of the introduction of tariffs in late 2019.
Of particular interest is that last year saw the value of Irish dairy exports to the US increasing again, despite the 25% tariff, to €359m.
Looking at volume, in 2018 Ireland exported 48.4m kilograms to the US. In 2019 this increased to 54,3m kilograms and it increased again in 2020 to 57.4m kilograms.
Butter makes up half of all Irish dairy export to the US in volume and value, at 29.9m kilograms in 2020, worth €186m.
This indicates that in spite of the imposition of a 25% tariff Irish dairy exports were able to continue uninterrupted, with the market absorbing the additional 25% cost.
Now that the 25% tariff cost has been removed, Irish dairy exports to the US should expand at an even faster rate.
Ornua Co-Operative, owner of the Kerrygold brand, has welcomed the five year suspension of tariffs on Irish dairy products into the US.
Ornua are responsible for 90% of butter exported from the EU into the US and the tariffs represented an unwelcome barrier to doing business.
Kerrygold achieved remarkable growth in the US in 2020, throughout the imposition of tariffs, due to the change in consumer behaviour as a result of COVID-19.
In 2020 Kerrygold became the preferred dairy brand of 10% of US consumers, building on the premium reputation of Irish butter among American consumers.
Commenting on today’s development, John Jordan, CEO Ornua said: “We welcome today’s decision to prolong the suspension of punitive tariffs on Kerrygold in the US. The removal of tariffs represents a unique opportunity for continued growth and further investment in the US market in line with our ambitious growth strategy.
“Kerrygold is currently the number two butter brand with significant opportunity to further grow its market share in a 330 million consumer market.”