MercoPress. South Atlantic News Agency

Argentina/Chile milk war beginning to boil

Argentina warned Thursday that if Chile imposes safeguards on Argentine imports of dairy produce to Chile it will take the case to the consideration of the World Trade Organization as contemplated in current commerce legislation.

In a Foreign Affairs ministry release from Buenos Aires, Argentina states that exports of dairy produce have not harmed Chilean farmers.

The Chilean Dairy Farmers association formally requested this week the imposition of safeguards on Argentine dairy produce imports because of its "distorting" impact for the local industry; disloyal competition conditions and subsidized energy costs benefiting Argentine farmers.

In the release Argentina recalls that both countries have adhered to legislation which clearly states that conditions for imposing safeguards are "the existence of an increase in imports of such a magnitude that they cause or threaten to cause serious harm to the production sector of similar produce or directly in competition".

"Until these conditions are not verified, the imposition of safeguard measures will have no legitimacy", points out the Argentine Foreign Affairs and Trade ministry.

Without mentioning figures the release refers to "official Chilean data" regarding milk and derivates production during the first five months of this year, as well as prices paid out to Chilean farmers.

"Based on these figures the harm to the Chilean dairy industry can't be proved. Much less argue that the competitiveness of Argentine production is based on the existence of subsidies and that this is a valid argument for the imposition of safeguards", highlights the release.

The Chilean Dairy Farmers association officially requested a 31.5% safeguard tariff for one year on liquid and powder milk and Gouda cheese, of which Argentina has become Chile's main supplier.

The "explosive increase" of Argentine imports this year have "distorted prices" in Chile and has a negative impact particularly for small and medium companies of the industry argues the Dairy Farmers Association.

According to the Chilean Central Bank Argentine liquid milk imports reached the equivalent of 129 million litres of milk representing a 79% increase over the same period a year ago.

Based on this Chilean milk processing plants are lowering prices paid to local farmers and have anticipated further significant drops for the coming spring. The average milk price for dairy farmers is currently 23 US cents.