WTO verdict no threat - Sutton

By PHILIPPA STEVENSON agriculture editor

Trade Minister Jim Sutton and dairy giant Fonterra are confident New Zealand will not suffer any fallout from the World Trade Organisation ruling against a Canadian dairy export scheme.

In December, New Zealand and the United States won against an appeal by Canada to the WTO.

In June, the trade body found that Canada's practice of paying farmers above-market prices for much of their milk allowed them to sell the remainder below cost to exporters of such products as cheese and butter. The exporters then undercut foreign rivals.

Sutton said Canada's dairy practices cost New Zealand about $35 million a year in lost exports.

But while the Canadian Government and dairy industry have agreed to change the scheme, the producer representative Dairy Farmers of Canada (DFC) has urged its Government to challenge the practices of other countries.

DFC president Leo Bertoia said: "DFC believes the Government should seek to clarify the overall status of export subsidies through WTO challenges to other countries' systems."

DFC economist Archie MacDonald said he believed an aspect of the ruling would hit New Zealand because the panel said any exports at prices below the average national cost of production were subsidised.

New Zealand clearly exported some butter and milk powder below its cost of production.

Sutton strongly disagreed, saying: "Any comparison with New Zealand's situation - where there is a complete absence of subsidies to producers and the market is open to full international competition - is laughable."

He described the WTO victory as a "welcome milestone in the ongoing fight to eliminate export subsidies".

Fonterra senior trade strategist Ken Geard said New Zealand had not been made vulnerable by the WTO ruling.

The Canadian industry was very different to New Zealand's, which had very low, if any, barriers to imports and did not have a high domestic price for milk. Most Canadian milk was sold domestically while most New Zealand milk was exported.