Despite the elimination of tariffs on New Zealand milk in 2025, consumers have not seen a price decrease. This article aims to explain why, addressing the apparent contradiction between zero tariffs and high retail prices. We will explore the complexities surrounding this issue, including historical trade agreements and the exploitation of consumers and local dairy farmers.
Why Hasn't New Zealand Milk Become Cheaper?
Initial Observations and Questions
The expectation was that with the removal of tariffs on New Zealand liquid milk in 2025, prices would immediately drop. However, supermarket prices have remained stubbornly high, suggesting either that the tariff elimination is not being passed on to consumers or that manufacturers are exploiting the situation for profit. This raises two crucial questions:
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Why haven't prices decreased despite the elimination of tariffs?
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Why is New Zealand milk, which is produced at a lower cost, being sold at a higher price than locally produced milk?
These questions need to be clarified to prevent dairy industry giants from misrepresenting the facts and misleading the public.
Debunking Misleading Explanations
Some dairy companies have attempted to justify the high prices by claiming that increased raw material costs have offset the tariff reduction. However, this explanation is deemed unconvincing, especially considering that New Zealand dairy farmers are the ones bearing the cost of feeding the cows.
The Reality: Zero Tariffs Before 2025
A more compelling explanation is that zero tariffs on New Zealand milk already existed before 2025. This fact was not widely publicized. While it seemed that New Zealand milk faced tariffs of approximately 30% for fresh milk and nearly 50% for long-life milk before 2025, a significant portion of imported milk was already entering Taiwan duty-free.
In July of last year, the Customs Administration of the Ministry of Finance issued a notice stating that imports of New Zealand liquid milk had almost reached the annual quota of 10,000 metric tons. Imports within the quota were duty-free, while those exceeding the quota were subject to tariffs.
The Taiwan-New Zealand Economic Cooperation Agreement
The background for this lies in the Taiwan-New Zealand Economic Cooperation Agreement signed on July 10, 2013. This agreement included a 12-year tariff quota for eight types of liquid milk, which would be eliminated by 2025, resulting in complete tariff elimination.
According to the agreement, New Zealand had a 4-year tariff reduction schedule for Taiwanese goods, while Taiwan had a 12-year schedule for New Zealand goods. While New Zealand largely offered duty-free access from the start, Taiwan maintained tariffs on key dairy products for 12 years, despite granting duty-free quotas.
Unveiling the Tariff Reduction Schedule
The tariff reduction list reveals that only full-fat fresh milk and full-fat long-life milk were imported in significant quantities. Although the base tariff rate was reduced over 12 years, the tariff on these products remained at NT$14 per kilogram.
Therefore, the zero-tariff policy that went into effect in 2025 was known 12 years in advance. The domestic dairy industry was shielded from competition during this period. However, measures were not taken to improve competitiveness, leading to the current situation.
The Impact on Consumers
For at least three years prior to 2025, around 10,000 tons of New Zealand milk were imported duty-free and sold at inflated prices. The current situation is not new, but the lack of consumer awareness has allowed businesses to profit. The recent news reports have exposed this exploitation.
Unjustified High Costs: Beyond Tariffs
Even with zero tariffs and low production costs, New Zealand milk is sold at a premium price. This raises the question of who is benefiting from the price difference. Online explanations often cite increased raw material costs, feed prices, oil prices, shipping costs, and the need for a 4°C cold chain.
Disputing Cost-Related Justifications
These explanations are unconvincing. Dairy farmers in New Zealand bear the burden of feed costs. The cost of packaged milk at the port of entry is already NT$30-40 per kilogram, which includes feed and shipping costs. The jump to NT$120+ at the supermarket remains unexplained. The claim that transport costs within Taiwan significantly increase the price is also questioned, as the country's small size doesn't justify such a dramatic increase.
Other excuses like exchange rates and rising labor costs in Taiwan are also refuted. The exchange rate doesn't fluctuate enough to justify such high prices. New Zealand wages are comparable to or higher than Taiwan's.
Exploitation and Lack of Transparency
The reality is that Taiwan has high prices compared to its wage levels. The claim that high prices are due to the quality of local milk or good grazing practices of New Zealand cows is also challenged. These are not valid excuses for excessive prices.
The Plight of Local Dairy Farmers
An anonymous dairy farmer reported that dairy plants asked farmers to reduce production due to tariff impact, only to later claim there was no need to do so. This highlights the exploitation of dairy farmers, who are often the first to suffer from industry changes.
Some dairy companies have also been known to encourage farmers to increase production, then purchase excess milk at reduced prices, resulting in losses for the farmers. This manipulation leaves farmers vulnerable and unable to cope with market fluctuations. This exploitation has been ongoing for the past 12 years.
In conclusion, the high price of New Zealand milk in Taiwan is a complex issue rooted in historical trade agreements, a lack of transparency, and the exploitation of both consumers and local dairy farmers. The elimination of tariffs was not a game-changer, as zero-tariff quotas already existed, and unjustified cost increases have perpetuated the problem.
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