Cheesed-off European dairy producers dismayed at U.S. tariffs

ROME/PARIS (Reuters) - European cheese makers complained on Thursday of being held “hostage” in a transatlantic trade battle that had nothing to do with them after the United States slapped 25% tariffs on the sector in retaliation for state aid to aerospace group Airbus.

The dismayed reaction came a day after the World Trade Organization gave Washington the green light to slap punitive tariffs on a range of European products, including spirits and cheese, in punishment for illegal EU aircraft subsidies.

“What is happening is absurd; we have to see if the American customers are willing to accept the price increase,” said Giuseppe Ambrosi, president of Italian dairy association Assolatte. Earlier, the consortium that oversees production of Parmesan said U.S. consumers could expect to pay $5 per kilo (2.2 lbs) more for the hard Italian cheese.

In the jargon of trade negotiations, cheese is what is sometimes referred to as an “offensive” product for the European Union - one it has a particular interest in selling and thus one that is particularly vulnerable to punitive tariffs.

While sales of dairy products account for less than 5% of EU agri-food exports to the U.S. market, the symbolic importance of European cheeses has made them a target for trade officials seeking to make a point while limiting the hurt to American consumers.

High-profile products like Parmesan or various kinds of blue veined cheeses have been targeted periodically over the years in trade disputes between the United States and Europe.

The EU exports 133,000 tonnes of cheese to the United States every year, according to figures from the European Dairy Association (EDA). Most are what it called “‘typical’ European cheeses with unique characteristics” with particular importance for the regions where they are traditionally produced.

FILE PHOTO: Italian Parmesan (R) and Pecorino Romano (L) cheese are displayed on a counter at a deli in Rome, Italy, October 3, 2019. REUTERS/Yara Nardi/File Photo

“It’s an enormous market for us. It’s our No.1 cheese market outside the EU,” said Benoit Rouyer, economist at French dairy industry body CNIEL. “Even for premium products, it creates a problem of accessibility. Our ambition is to reach the broadest possible population in the U.S., our cheeses are not intended for an elite.”

Most high-quality cheese can take several months to mature, meaning the immediate impact on producers may not be felt immediately and some may find new markets.

The U.S. Trade Representative’s office told the industry it will not offer a grace period for goods still in transit when the tariffs take effect Oct. 18, the Cheese Importers Association of America said.

For cheese ready for sale, exporters face a choice of imposing higher prices or accepting a cut themselves.

“But as 25% is not an insignificant amount, that will be hard to do,” said David Swales - head of Strategic Insight at the UK Agriculture and Horticulture Development Board.

With a final list of what products will be hit not due until Oct. 18, the industry was still seeking details. But Parmesan and pecorino sheep’s cheese from Italy, English Cheddar and Stilton, as well as Emmentaler, Gruyere varieties are all likely to be affected.

Other well-known varieties, including French blue-veined Roquefort and two Dutch artisanal cheeses -- Gouda Holland and Edam Holland – were not on the list issued by U.S. authorities.

However, the EDA said it was concerned by discrepancies in treatment offered to different member states and said the whole EU area should be treated as a single bloc in WTO terms.

In broader terms, it said the sector was being made to pay for a battle in which it was not involved.

“Agri-food products and hence the farming community is now regularly taken as hostage in trade disputes, this is a development that is unacceptable,” EDA General Secretary Alexander Anton said in a statement.

Additional reporting by Siddharth Cavale in London, Phil Blenkinsop in Brussels, Nikolaj Skydsgaard in Copenhagen, Stephen Jewkes in Milan, Toby Sterling in Amsterdam; Writing by James Mackenzie; Editing by Dan Grebler