ICOS, the Irish Co-operative Organisation Society, has slammed the recent decision by US authorities to increase the import tariff for butter by almost a third, or $0.51/kg, saying the move does not match the US supposed stance of opening free trade between Europe and the US.
The increased tariff comes into effect immediately, meaning the current tariff for Irish butter exports entering the US now stands at $2.05kg.
The tariff affects all countries without a free trade pact with the US and will run to at least the end of December 2015.
ICOS said there was no warning or no consultation carried out with European authorities in the lead-up to the tariff increase and that the “punitive tariff flies in the face of the US government’s stated positions on the matter”.
ICOS says it has raised the issue with officials, both in the European Commission and also in the World Trade Organisation.
“While the move does indeed seem to be legal, it certainly does not match the US rhetoric of opening free trade between Europe and the US, and certainly sends a bad signal in agriculture as the TTIP negations are set to ramp up a gear,” ICOS said in a statement.
The move will almost certainly have an immediate impact on the Kerrygold brand in the US, the Irish dairy industry’s key product in the US market.
Ornua, which markets the Kerrygold brand in the US on behalf of the Irish dairy industry, recently announced that Kerrygold is the number three branded butter in the US and was on track for volumes sales growth of 30% this year.
As such, ICOS say the decision by US authorities to increase the import tariff on butter is all the more galling when the price of US butter remains incredibly robust.
Domestic demand and consumer consumption of butter and cheese in the US has been exceptionally strong this year. This has insulated US prices for these commodities in comparison to the price declines butter and cheese have seen in other parts of the world.
With the Russian market now closed, EU dairy exporters have increased their focus on the US market over the last year. The latest figures from the EU Milk Market Observatory indicate that EU exports of butter to the United States have almost doubled during the first seven months of 2015. With over 8,900t of butter exported during that period, the US is now the second largest destination for European butter and closing in rapidly on the number one spot occupied by Saudi Arabia.