US tariff hike to cost Irish dairy exports €40 million – Ornua CEO

The recently announced US tariff of 25% on Irish cheese and butter exports would mean €40 million in duties on an annual basis, according to Ornua CEO John Jordan.

Speaking to AgriLand at the official opening of Ornua’s €30 million cheese facility in Avila, Spain, yesterday, the CEO outlined what this will mean.

Tariff troubles

“The US announced a 25% tariff on cheese and butter as part of a list of products in response to a ruling from the WTO [World Trade Organization] that it won when it took a claim that Europe was subsidising Airbus production.

Six months after that, Europe took a counter-claim against the US for Boeing subsidies. So in a way, at the moment, we’re collateral damage of what is an airlines’ dispute – and that’s very frustrating for Ireland.

Jordan noted that, going by cheese and butter exports to the US in 2019, on an annual basis, such tariffs would amount to over €40 million.

Continuing, he added: “Unless that €40 million is recovered in price increase in the market, it’ll either come out of our profits or it will impact on the return ultimately to farmers.

“Certainly our hope and our ambition is that we will put price increases through; that makes us a little bit less competitive – we’re already a premium product in the market – but now we’ll be asking consumers to pay an even higher premium.

Our concern around that is how elastic is the price – will we see a decrease in consumption over time?

“Our bigger picture of hope is that these tariffs are part of a political debate and that over maybe the next six, nine or 12 months we might see it would either be decreased or maybe negotiated away if our new EU trade commissioner Phil Hogan can ‘get stuck into’ the Americans,” the CEO said.

Brexit

Turning to the other big international issue on trade, the UK’s long-drawn departure from the EU, Jordan said:

“Three and a half years in and I think we’re all suffering from Brexit fatigue. As I’ve said previously, any change in our trading relationship with the UK has the risk of making us less competitive.

“We’re already living with the currency exchanges that present challenges.

We have mitigated those risks as best we can over the last number of years and continue to work with that. It has afforded us the opportunity to get very close to our customers.

“Because certainly customers, their key thing is about security of supply long-term. And we’ve been working through our customer base with that.

“Where it ends, who knows at the moment: Certainly the December elections in the UK will make interesting watching on TV at night time,” the CEO concluded.

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