The Australian Dairy Industry Council (ADIC) has urged Parliament to scrutinise the proposed Australia-European Union Free Trade Agreement (FTA) more closely, arguing that the current terms do not adequately protect the interests of Australian dairy farmers, processors and manufacturers. The council has called for the agreement to be rejected in its present form unless concerns over reciprocal market access are addressed.
The debate centres on the imbalance between Australian dairy imports from Europe and exports to the European market, alongside proposed changes to tariffs on cheese and continuing trade restrictions affecting some Australian dairy products.
According to figures cited by ADIC, Australia imported 71,912 tonnes of European dairy products worth A$858 million during the 2025–26 financial year. In comparison, Australian dairy exports to Europe totalled just 349 tonnes, valued at A$28 million. This represents a dairy trade deficit of approximately A$830 million.
ADIC Chair Ben Bennett said the agreement’s implications for individual agricultural sectors required greater attention. He argued that the key consideration for Parliament should be whether the agreement delivers fair and reciprocal trading opportunities for Australian dairy producers.
Cheese Tariff Changes Raise Concerns Across the Dairy Supply Chain
Under the proposed agreement, Australia would phase out its remaining out-of-quota tariff on European Union cheese, currently set at A$1.22 per kilogram, over three years. ADIC considers this one of the most significant remaining dairy tariffs in Australia’s trade relationship with the EU.
The council argues that the proposed changes could increase competitive pressure on Australian cheese manufacturers, particularly because some Australian dairy exports to Europe would continue to face tariff-rate quotas and above-quota tariffs.
Tariff-rate quotas allow specified quantities of a product to enter a market at a preferential tariff, while imports exceeding the permitted quantity may face higher duties. According to ADIC, retaining such restrictions on Australian exports while reducing Australia’s cheese tariff could create unequal market-access conditions.
The potential implications extend beyond imported specialty cheeses. European dairy products compete across multiple segments, including cheese for foodservice, processed dairy ingredients and products used by food manufacturers.
For Australian processors, changes in import competition could influence purchasing decisions, pricing strategies, production volumes and demand for domestically produced milk.
Cheese Manufacturing Has Wider Implications for Australian Milk Producers
ADIC Deputy Chair John Williams highlighted the importance of cheese manufacturing to Australia’s dairy supply chain. Approximately 40% of Australian milk is used to produce cheese, making the sector an important market for dairy farmers and processing businesses.
He noted that competition affects not only premium cheese products but also high-volume applications such as pizza toppings, sandwiches, burgers, UHT milk, dairy ingredients and nutritional products. In these markets, purchasing decisions can be strongly influenced by price, product specifications and supply reliability.
Australian dairy farmers and processors also face comparatively high operating costs, including energy, labour, transportation and regulatory compliance. ADIC argues that additional import competition could intensify the pressure on domestic businesses already managing these expenses.
The council also points to growth in European dairy production and exports as a factor that could affect competition in the Australian market. However, the extent of any impact would depend on future import volumes, pricing, consumer demand and the competitiveness of local processors.
Factory Closures Intensify Concerns About Processing Capacity
The debate comes amid wider concerns about Australia’s dairy manufacturing capacity. ADIC reports that one in four dairy products consumed in Australia is already imported and that 26 Australian dairy factories have announced closures over the past four years.
Factory closures can have consequences beyond individual businesses. Reduced processing capacity may limit milk procurement opportunities for farmers, affect regional employment and increase dependence on imported finished products or ingredients.
Re-establishing processing operations can require substantial investment in equipment, infrastructure, labour and supply-chain relationships. Williams therefore warned that the loss of domestic capacity could be difficult to reverse.
For regional dairy communities, the implications include potential changes to milk collection arrangements, local employment and the long-term viability of dairy production. The scale of these effects would vary by region and depend on available alternative processors and market conditions.
Parliament Faces Decisions on Market Access and Industry Competitiveness
ADIC has called for the proposed agreement to receive closer parliamentary scrutiny, emphasising the need to assess the consequences for dairy farmers, processors and regional economies.
The central issues include the proposed cheese tariff phase-out, continuing restrictions on some Australian exports, differences in production costs and the potential effects on domestic processing investment.
A comprehensive assessment would also need to consider the agreement’s wider trade benefits, opportunities for Australian exporters in other sectors, potential consumer price effects and the specific conditions governing dairy access to European markets.
For Australia’s dairy industry, the outcome could influence the competitive environment for milk production, cheese manufacturing and dairy ingredient supply over the coming decades.
Bennett argued that dairy should receive specific consideration within the broader trade negotiations rather than being treated as a secondary agricultural issue.
As the agreement progresses through the relevant parliamentary and approval processes, the balance between improved market access, import competition and the resilience of domestic dairy manufacturing remains a central issue for industry stakeholders.
