Govt and Fonterra criticise EC butter suspension plans

Fonterra said it had longstanding butter contracts in Europe. Picture / Peter Meecham

Trade Minister Phil Goff and the world's biggest dairy exporter, Fonterra Cooperative Group Ltd, tonight criticised European Commission (EC) plans to cut the legs from under New Zealand's butter exports to Europe.

The EC said today it would adopt a regulation retrospectively suspending New Zealand butter imports from Thursday July 12.

Fonterra called the move "extraordinary" , and Mr Goff said it was not an appropriate response to a court ruling that some technical aspects of regulations governing butter imports were invalid.

The European Court of Justice this week ruled invalid certain parts of the EU regulations governing New Zealand's butter imports.

"But this is not an appropriate response," Mr Goff said.

"Trade ought to continue while the Commission considers - in consultation with New Zealand - what needs to be done to respond to the court judgment."

On July 11, the European Court of Justice ruled in favour of a German dairy trader, Egenberger GmbH, which challenged the EU regulation that governs the New Zealand butter quota.

The German company was challenging a range of issues, including the requirement that import licences are only issued in the United Kingdom.

The Frankfurt court referred several questions to the European Court of Justice concerning the dairy regulation's consistency with Community law.

Fonterra chairman Henry van der Heyden said the court decision had said nothing about suspending the trade.

"It is ridiculous for the Commission to react by stopping all trade while they decide what to do next," he said.

The EC had a strong obligation to ensure business continues uninterrupted.

"We have long-standing contracts and obligations with key European customers who rely on our product to serve European consumers," he said.

Fonterra was confident it had sufficient product on hand to meet customers' needs in the short term, but "any prolonged delay would compromise our ability to carry on our business with them".

New Zealand has preferential access to Europe under arrangements negotiated at the time when Britain joined the European Economic Community.

But most of the NZ butter sold in Europe is marketed through Arla, a Danish-Swedish group, which effectively controls New Zealand's Anchor brand in the British yellow fats market - New Zealand's traditional dairy foothold in Europe - with 75 per cent ownership of their Anchor/Lurpak joint venture.

Mr Goff said New Zealand and the EU had a good relationship and a history of consulting closely whenever issues arise in the trading relationship.

"The EU and New Zealand together negotiated the current market access opportunities for New Zealand butter in the EU market," he said.

"Given the EU's international commitments they should review their proposed action immediately and find a way for the trade to continue while the legal problem is solved".

Mr Goff said he had written to Mariann Fischer Boel, the European Agriculture Commissioner to express concern over the "serious implications" of the suspension for New Zealand.

"Officials are in urgent discussions with the EC to determine how this matter can be resolved as quickly as possible," Mr Goff said.

Mr van der Heyden said the EC had made a mistake in drafting its internal rules around the dairy trade, and now needed to fix that.

- NZPA