European milk makers eye Thailand exit over Australia, New Zealand rivals’ tariff advantages

European milk producers have called on the Thai government to cut tariffs on dairy imports or face job losses and an exodus of operations

Some have already called it quits and shut down long-established factories, while others are considering a move elsewhere in Asean

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A glass of milk. European milk producers based in Thailand have called for lower dairy import tariffs. Photo: Shutterstock

Published: 9:30am, 9 Oct 2023

European milk producers based in Thailand have called on Bangkok to cut its tariffs on dairy imports or face an exodus of their operations to other Asean member states and job losses in the domestic sector.

Thailand is the world’s second-largest exporter of flavoured UHT milk-based drinks by volume, but its dairy production could come under threat as European producers consider moving elsewhere in the region, according to a report to the government by major Thai milk producers obtained by This Week in Asia.

Producers in Thailand such as Switzerland’s Nestle and the Netherlands’ FrieslandCampina have long relied on imported dairy ingredients from the European Union, the United States, Australia and New Zealand, as Thai domestic production is insufficient for their needs.

But they fear that from 2025, when free-trade agreements with New Zealand and Australia have fully matured, competitors from those countries will be able to access cheaper raw materials, by virtue of the tariffs on dairy imports no longer applying, ultimately edging European producers out of the market.

According to the report, this will result in producers from nations that cannot access zero-tariff New Zealand or Australian milk ingredients paying as much as 214 per cent more for these essential factors of production.

Oliver Fall, vice-president of consultancy Edelman Global Advisory who is familiar with the negotiations between the Thai dairy industry and the government, told This Week in Asia that some European milk producers’ operations in the kingdom had already ceased while others could soon be moving to Indonesia, Malaysia or Vietnam.