Safeguard Investigation: Powdered Milk and Gouda
Thank you for the opportunity to submit written commentsto the safeguard investigation into imports
of powdered milk and Gouda1
.
The dairy industry associations in Argentina (Centro de la Industria Lechera); Australia (Australian
Dairy Industry Council); European Union (European Dairy Association and Eucolait); New Zealand
(Dairy Companies Association of New Zealand); United States (National Milk Producers Federation,
International Dairy Foods Association and US Dairy Export Council) and Uruguay (Camara de la
Industria Lactea del Uruguay) respectfully submit the following comments. These countries account
for the majority of the global trade in dairy products.
The industry associations appreciate the Government of Chile’s earlier decision not to proceed with
provisional safeguard measures on the products subject to investigation (skim milk powder, whole
milk powder and Gouda). Our comments below relate to the ongoing investigation into definitive
safeguards, and the requirements under the WTO Agreement on Safeguards. Under the WTO
Agreement on Safeguards, a measure may only be applied where there is (1) a surge in imports and;
(2) this surge results in or threatens to cause serious injury to the domestic industry that produces like
or directly competitive products.
The Comisión Nacional Encargada de Distorsiones (CNDP), according to the WTO notification, has
determined with the information available that the serious injury sustained by the domestic industry
had been caused by a sharp drop in import prices, and, by the dramatic increase in imports in recent
years, which had led to a loss of sales volume and market share for domestic production.
There has been no decrease in import prices. On the contrary, the US dollar price of imported Gouda
and whole milk powder, both from the major supply sources and averaged across all origins, was up
significantly in 2017 compared to 2016. The US dollar price of SMP from all origins was also higher in
2017 than in 2016.
The increase in imports of powdered milk and Gouda to Chile in 2017, compared to relative levels in
2016, is largely due to the increase in local consumption which has resulted in a structural deficit for
dairy. Consumption surpassed production in 2015, with the gap widening to a level where
consumption rates were 7.3% higher than production at the end of 2017 (Annex I).
(1)Notification under subparagraph (a) of paragraph 1 of Article 12 of the WTO Agreement on Safeguards
concerning the initiation of an investigation process and the reasons for it – Chile – Powdered milk and Gouda
cheese. Document reference is G/SG/N/6/CHL/20 dated 9th March 2018.
(2)Imports are therefore an important means of meeting growing rates of domestic consumption.
Additionally, Chilean farmers have benefitted from this increase in consumption, to the extent that
local prices in Chile have increased 10.6% between 2016 and 2017 (Annex II).
We are concerned that the imposition of safeguards on powdered milk and Gouda has the potential
to cause trade diversion, potentially undermining commodity prices in all export destinations. This
would impact upon the producer price for milk in all trade exposed economies. Chile is an exporter of
dairy products, with many agricultural producers reliant on exports. This action may set an unhelpful
precedent for those countries that are destinations for Chilean origin dairy products.
In addition, adding value from imported dairy products creates jobs and wealth in Chile and provides
the potential for re-export of finished foods products.
Chile has a longstanding commitment to free trade and economic integration and has benefitted from
this in the form of new markets for Chile’s goods and services, which support local jobs; provide choice
for consumers and businesses, and contribute to economic growth.
Chile has been at the forefront of regional and global economic integration, as an active member of
the Cairns Group in support of liberalisation of trade in agricultural products; a proponent of high
quality Free Trade Agreements (including with all six countries represented in this letter) and
supporter of the WTO. This commitment to free trade was demonstrated most recently during Chile’s
hosting of the signing of the Comprehensive and Progressive Trans-Pacific Partnership Agreement and
support for the decision at the WTO Ministerial meeting in Nairobi in December 2015 to eliminate
export subsidies.
Countries and businesses are facing greater uncertainty and the global rules-based trading system is
under considerable strain. It is important therefore that those countries and industries such as dairy
who benefit from adherence to global rules and the multilateral trading system continue to
demonstrate support for these institutions and the principles of transparency, non-market distortions,
economic integration and open and free trade.
In conclusion, the undersigned industry groups’ respectfully request that the Chilean government not
proceed with the application of safeguards on these dairy products.
Download the full PDF here.