The Baltic Course

Milk warfare?

By Maris Biezaitis

Free trade is being promoted amongst countries in Europe and even further at levels unprecedented in modern times, yet the friendly and neighboring Baltic states can't help themselves from staging regular trade wars of various scale. Latvia may often take advantage of being located geographically between its two closest neighbors, but seems to be finding it hard to swallow its pride when it comes to drinking cheap Lithuanian milk or eating Estonian meat

The idea of a common Baltic economy has been the dream of many a Baltic cosmopolitan and is the simplified way many Europeans see our market boasting a consumer population of only 8 million. Yet, when it comes to the pride of each small Baltic state, it shouldn't be underestimated. A large part of the populations in Estonia, Latvia and Lithuania count every last penny and will often choose the cheaper choice of any produce at their local supermarket, while many Balts will still prefer the local produce to even that of the neighboring country. This is good for supporting local economies, but many Europeans of today may still raise an eyebrow or two over such attitudes in times of open borders and free trade, where countries tend to specialize in producing specific goods, and don't see much difference in Lithuanian or Latvian cheese.

To Latvian dairy producers the idea of your local supermarket selling local goods is starting to fade, as Lithuania's largest shopping center company Vilniaus Prekybas, or VP Markets, has launched numerous supermarkets across the country offering cheaper than average prices for many of the goods sold. And this goes for dairy products too, and Lithuanian dairy products at that.

Upon first assumptions one might say Lithuanian base costs for milk are simply lower and thus the significant difference, but Latvia's dairy producers' association has called for anti-dumping measures as the same cheap Lithuanian milk costs more on the Lithuanian market than in the Latvian capital. The Baltic Course checked up on these claims and discovered that the same supermarket in Vilnius sold the same brand of Lithuanian-made milk for around 20 percent dearer than it does for in Riga.

Feliksas Degutis, commercial director of one of Lithuania's largest dairies Panevezio Pienas, denied all accusations of dumping, saying that they sell their milk products to distributors who then determine the price in Latvia. Mr. Degutis said that in any case, dumping is when something is sold for below or equal to base costs, and assured us that they are not selling anything to the Latvian distributors for below base cost, adding that the figure is in any case a trade secret.

The Latvian dairy association claims that if Lithuanian milk sells for a cheaper price in Riga than it does in Vilnius, then this is undoubtedly a case of dumping.

Latvia's domestic market protection committee is thus faced with looking up the definition of dumping and is taking its time in determining whether Lithuanian milk is being dumped on the Latvian market or not. Meanwhile, production costs rise and the demand for local milk falls in Latvia, bringing the purchase price for small farmers even lower. Latvian dairies also fear the fall in production will lead to smaller EU quotas.

We will follow up on this issue in our next edition, but it must be said that this milk war is only another one of the many battles fought between nations on the economic battleground, following mainly the fish war between Latvia and both its neighbors, haggling over divisions of traditional fishing grounds in the Baltic Sea and Gulf of Riga with fishermen regularly threatening to stage blockades of the country's largest ports.

Lithuania has meanwhile introduced counter measures for protecting its yeast market from dumping-level Belarus yeast, tagging Latvian-made yeast along with it, while for years Latvians living on the border to Estonia have been driving through the border to stock up on cheaper booze, fuel and sausages. But speaking of Estonian dumping, a number of Latvian specialists have even been quietly talking of Estonian capital investment dumping for the past few years.

For now, neither side yet seems ready to give up its guns, and will continue the struggle for national interests for as long as possible, but if the Baltics join the EU soon, this may not last all too long.

Go to Top of page