Thailand's Zero-Tariff Policy Boosts New Zealand and Australian Dairy Exports

Thailand's decision to abolish import tariffs on dairy products from New Zealand and Australia starting January 1, 2025, is reshaping the regional dairy trade landscape. This policy change reduces the landed cost of imported dairy ingredients, notably skim milk powder and whole milk powder, providing a competitive edge to exporters from Oceania while exerting pressure on Thailand’s local dairy industry.

Imported dairy products are now significantly cheaper than domestically produced raw milk, with domestic prices around THB 21–23 per kilogram, nearly double the import cost. This price disparity is prompting Thai processors to increasingly rely on imported supplies. Data from early 2025 already indicate a rise in whole milk powder imports from New Zealand, suggesting that processors are swiftly adapting to the new pricing dynamics.

New Zealand is poised to gain the most benefit from this tariff removal, as its exports face no volume restrictions under the free trade agreement with Thailand. This allows New Zealand exporters to expand their shipment volumes without quota limitations. In contrast, Australian exports remain subject to quota allocations, with tariffs outside those quotas potentially reaching 194.4%.

Thailand's inward processing-style refund mechanism adds another layer of competitiveness for exporters and processors. Dairy ingredients imported for further processing and re-export can qualify for duty refunds, provided companies adhere to specific documentation and export timelines. This system enhances Thailand’s role as a regional dairy processing hub, boosting the competitiveness of manufacturers using imported dairy ingredients for export-oriented production across Asia.

Despite these liberalization measures, Thailand is balancing greater trade openness with support for local farmers. Strict compliance procedures are in place, including approvals from the Department of Livestock Development and trade authorities. Certain dairy categories continue to operate under WTO-linked quotas, and some importers are required to purchase domestic raw milk to absorb local oversupply.

Analysts foresee stronger import penetration and increased consolidation within the industry over time, as Oceania exporters deepen their presence in the Thai market. This could lead to higher productivity pressures on Thailand’s dairy producers.