TAIPEI (Global Views Monthly/TVBS News) — Imagine this scenario: When foreign milk enters Taiwan duty-free and appears on retail shelves nationwide, would prices drop or stay the same? Most people's first instinct might be that milk prices would decrease, reflecting the zero-tariff cost savings. Yet, four months after New Zealand's duty-free milk entered Taiwan's market, prices have remained stubbornly unchanged.
Under the "Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu on Economic Cooperation" (ANZTEC, 臺紐經濟合作協定), New Zealand liquid dairy products (including fresh and long-life milk) can be imported duty-free beginning in 2025. So why, after four months, does New Zealand brand milk still retail at approximately NT$129 per liter, failing to deliver the price reductions consumers anticipated?
The primary reason New Zealand milk prices have remained static, regardless of tariff status, lies in the complex "quota" system designed into the liquid milk tariff mechanism under the Taiwan-New Zealand agreement. Fang Ching-Chuan (方清泉), secretary general of the Dairy Association of Taiwan (DAT, 中華民國乳業協會), explains that the Taiwan-New Zealand agreement, signed in 2013, clearly stipulates that a certain quota of milk can be sold in Taiwan duty-free. This quota increases by 1,500 metric tons every three years, with dairy products exceeding the quota subject to a tariff of NT$14 per kilogram.
Take 2024 as an example, a year when tariffs still apply: New Zealand liquid milk imports totaled 13,305 metric tons, against an annual quota of 10,000 tons. This means that over 75% of these imports were already duty-free last year. Furthermore, New Zealand liquid milk imports represented only about 23% of Taiwan's total liquid milk imports last year, resulting in a relatively limited impact on the overall market.
Beyond Tariffs: Other Factors Affecting Milk Pricing
Furthermore, despite consumer expectations that retail milk prices would decrease due to duty-free imports, both importers and exporters maintain their own costs and pricing strategies. Consequently, retail milk prices may not align with consumers' expectations for price reductions. Generally speaking, the cost of placing milk on Taiwan's retail shelves accounts for approximately 35% of the overall selling price — a substantial portion of the cost structure.
Moreover, New Zealand milk positions itself in the retail market by emphasizing natural ecological features like pristine mountains, clean water and vast grasslands. With the country's strong brand image, it maintains premium market positioning. Some industry insiders candidly admit that from a business perspective, if importers can sell at high prices, maintaining those prices yields higher profits. "If it sells at NT$100, why reduce the price to NT$80?" they ask.
"Fresh milk requires a balance between production and sales, so New Zealand's duty-free liquid milk won't flood in immediately after the January 1 opening. It requires time for preparation and market development," observed Kung Chien-Chia (龔建嘉), chairman of Diary Farming Sustainable Association of Taiwan (台灣農酪產業永續發展協會). He notes that New Zealand milk currently sells at prices even higher than Taiwan's milk. When it might reach price parity with Taiwan's fresh milk, or even undercut it, represents a key indicator to watch. "A reduction of just NT$10 or NT$20 per liter would actually create a significant impact." Four months after New Zealand's duty-free milk entered Taiwan's market, it has not yet triggered dramatic changes in price or volume in Taiwan's retail market. However, this should not lead to complacency about its impact. In fact, a gradual "boiling frog" effect is already quietly underway.
"Taiwan's liquid milk self-sufficiency rate was originally 90%, but in recent years, with the gradual opening under the Taiwan-New Zealand agreement, the self-sufficiency rate has now dropped to around 75-78%," Kung Chien-Chia (龔建嘉) stated candidly. New Zealand's duty-free liquid milk was only fully opened this year, yet Taiwan's liquid milk self-sufficiency rate has already begun to decline. "This indicates that the displacement of domestic liquid milk is already occurring; it's just a question of to what degree."
U.S. Zero-Tariff Milk: A Terrifying Prospect
While the impact of New Zealand's duty-free milk on Taiwan warrants ongoing attention, industry players are currently more concerned about whether U.S. liquid milk might follow New Zealand's zero-tariff model, especially at this critical juncture when Trump has launched a global tariff war.On April 1, a delegation of three people, including the vice president of trade policy and operations from the U.S. Dairy Export Council (USDEC, 美國乳品出口協會), visited Taiwan. One of their stops was the Dairy Association of Taiwan. The U.S. representatives expressed their vision for Taiwan-U.S. cooperation in dairy industry development, mentioned their intention to increase U.S. dairy exports, and expressed concern about Taiwan's import competitiveness, stating they "do not want non-tariff barriers beyond tariffs."
Unexpectedly, Trump announced reciprocal tariffs on global imports the very next day. "After careful consideration, it's terrifying!" Fang candidly admits that the industry is deeply concerned about the negotiation outcomes. If, as President Lai Ching-te (賴清德) suggested, negotiations with the U.S. "start from zero tariffs," and U.S. milk follows New Zealand's zero-tariff model into Taiwan, the impact could be "even more severe than that of New Zealand tariff milk!"
Examining import figures reveals that Taiwan's total liquid milk imports in 2024 amounted to 57,877 metric tons. U.S. imported fresh milk, primarily sold through Costco (好市多), dominated with 33,290 metric tons (57.5% market share), followed by New Zealand's combined fresh and UHT milk at 13,305 metric tons (25% market share). Current U.S. fresh milk sales to Taiwan operate under the 2002 WTO framework, which imposes a 15% tariff on foreign liquid dairy imports below 21,298 tons, with an additional NT$15.6 per kilogram for quantities exceeding this threshold. "If U.S. liquid milk tariffs are also reduced to zero in the future, the impact will certainly be more severe than with New Zealand," Kung Chien-Chia (龔建嘉) warned.
"If the government thinks it's acceptable for self-sufficiency rates to keep declining, then we're just part of the trend," said Kung Chien-Chia (龔建嘉), who is also the founder of local fresh milk brand "Better Milk" (鮮乳坊), which celebrates its 10th anniversary this year. He emphasized that Better Milk aims for brand differentiation and will completely update its milk packaging beginning in May, clearly presenting information about single farms, independent farmers, quality, flavor systems, production records and animal welfare certifications. "If your quality can truly reach the top tier, you don't need to fear being replaced. We encourage dairy farmers to create product differentiation."
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