With a provisional tariff, the coffee-producing country is seeking to curb the impact of subsidized imports of American powdered milk, which already control more than 60% of the market.
By an official resolution dated September 16, the Government of Colombia decided to impose provisional countervailing duties of 4.86% on imports of powdered milk originating in the United States.
This measure, which will be in effect for four months, is part of an investigation launched last July into possible subsidy practices in that country, which have affected national production.
According to the Ministry of Commerce, Industry and Tourism of the coffee-producing country, the decision responds to preliminary indications that the United States is implementing at least five subsidy programs for the production of liquid milk, an essential input for powdered milk.
In 2023, these aids would have reached US$ 1,209 million, which explains the 4.86% margin imposed by the Gustavo Petro administration.
HOW DOES IT IMPACT THE COLOMBIAN MARKET?
The increase in imports of subsidized milk powder from the United States has been significant. These are offered at prices significantly lower than those of liquid milk of Colombian origin, affecting the competitiveness of local producers. In 2023, 62.22% of the milk powder imported by Colombia came from the United States, a situation that has generated an adverse impact on national production.
The preliminary analysis also indicates that subsidized imports have led to a preference for imported products in the industrial sector, to the detriment of Colombian liquid milk. This affects in two ways:
- Decreases the use of installed capacity in the local spraying industry
- Reduces milk purchases from domestic producers.
“This evaluation found that in 2023 there was a 13.12% increase in purchases of subsidized powdered milk from the United States compared to 2022,” the Ministry reported.
With a tariff of 4.86%, the Ministry of Commerce is seeking to curb the impact of subsidized imports of American powdered milk, which already control more than 60% of the market.
AN ONGOING RESEARCH
The investigation is being carried out by the technical team of the Directorate of Foreign Trade, in accordance with national regulations and the commitments of the World Trade Organization (WTO). The Minister of Commerce, Luis Carlos Reyes Hernández, stated that “the definitive measures that are adopted, if there is merit for it, will be proportional, balanced and in accordance with the findings of the same.”
The investigation is ongoing, with the participation of interested parties, including the U.S. government, exporting and importing companies, and the Colombian dairy industry.
THE PROBLEMS OF THE DAIRY SECTOR
Fall in producer prices: Since April 2023, the price paid to farmers per litre of milk has fallen by 16%, directly affecting the profitability of producers.
- Milk overproduction : Better weather conditions have increased production, but the industry's capacity to process the surplus is limited, leading to rising inventories. In June 2024, inventories reached 196.4 million liters, a significant increase from 116.4 million in 2023.
- Fall in consumption : Consumption of milk and dairy products has decreased significantly in recent years, with falls of 9% in 2022 and 6% in 2023. Although there is a slight recovery of 0.9% in 2024, it is not enough to reverse the crisis.
- Stability of consumer prices : Despite the fall in producer prices, milk prices for consumers have remained stable, with an increase of only 0.94% in the last year. However, dairy products such as cheese have risen between 2.95% and 5.03%.
- Impact of imports : Imports of milk powder, especially from the United States, have increased significantly. These subsidized imports have affected local producers, worsening the crisis in the sector.
- Lack of structural measures : According to industry representatives, the necessary measures have not been taken to manage peaks and falls in production, which has left the dairy industry vulnerable to these fluctuations.
