Anger grows at US dairy protectionism

NZ dairy farmers will be hurt by the US move to protectionism, say local industry leaders. Photo / Amos Chapple

Prime Minister John Key has added his voice to condemnation over the United States' decision to reintroduce export subsidies on dairy products.

"It's a very disappointing move and its unhelpful because frankly it runs the risk now it sets off even further subsidies from Europe," Key told NewstalkZB.

The US move followed the European Union's (EU) reintroduction of export subsidies in January.

At the weekend Trade Minister Tim Groser described the step as disappointing, a setback, short-sighted and damaging to world markets.

Key said he was sure New Zealand's opposition was clear to the US administration.

"It's a very unhelpful move and it really runs a bit against the statements the Americans made that they didn't want protectionism."

Key said he discussed trade with President Barack Obama during their recent phone call, in which he had highlighted concerns about protectionism.

President Obama gave no indication the move was on the cards. New Zealand now wanted to see the details.

"At this point we don't know how large the subsidies are and how much money effectively the Americans are allocating to their producers."

Groser said the export subsidy assistance would have a relatively small effect on US dairy farmers' income and could be counterproductive by depressing international dairy market prices.

"Unsubsidised producers, like those from New Zealand, will bear the cost of these trade-distorting measures."

The move sent a negative signal to other World Trade Organisation (WTO) members, Groser said.

He hoped to discuss the issue with US Trade Representative Ron Kirk and US Secretary of Agriculture Tom Vilsack at the Cairns Group Ministerial meeting in Bali in early June.

Labour trade spokeswoman, Maryan Street, said the Government needed clarification of the US claim that it wanted to minimise the impact on countries such as New Zealand.

The Australian government, through its embassy in Washington, voiced strong objection and Labour wanted a similar move from New Zealand.

The Government should register objection before Groser's meeting with Kirk, said Street.

"New Zealand cannot wait till that meeting to register its protests, as the subsidies are due to kick in from July."

Dairy Companies Association of New Zealand chairman Malcolm Bailey said the move would undermine confidence in the global market and hurt New Zealand farmers.

The world dairy product market had shown some signs of recovery in recent weeks, he said.

"At a time when the elimination of export subsidies remains on the negotiating table at the World Trade Organisation in Geneva, this is a lousy signal to the global trading system about US intentions.

"The New Zealand dairy industry deserves better than this."

Federated Farmers' Philip York said he was shocked at the move.

"The US dairy lobby is more interested in protecting subsidies than in exporting on free market principles."

Fonterra's managing director of global trade, Kelvin Wickham, said it was bad news for the market and for New Zealand farmers who competed internationally.

- NZPA