Butter trade to resume, but question mark over 2007

Trade Negotiations Minister Phil Goff said today New Zealand would accept a European Commission proposal to let in the remainder of this year's butter exports.

But he was concerned no progress had been made to find a solution for next year's butter trade.

The issue follows a European Court of Justice ruling earlier this year that parts of the regulations controlling the New Zealand quota were invalid.

The European Commission has proposed that the rest of New Zealand's butter quota for this year be allowed after consultation with New Zealand officials.

The proposal is due to go to European Commissioners next week for approval.

"If it proceeds in its current form, we will accept this proposal but I am concerned that despite intensive consultations, we have still not made progress towards finding a solution for next year's butter imports," Mr Goff said.

New Zealand has preferential access to Europe for dairy products, dating from when Britain, its traditional customer, joined the European Economic Community.

It is charged a lower tariff on annual quotas for 77,402 tonnes of butter, 7000 tonnes of cheddar cheese, and 4000 tonnes of cheese for processing.

Fonterra has been earning extra profit from the quota rents, the difference in the world price at which the butter is exported from New Zealand and the price -- about $264 million a year -- at which it can then be sold in the European Union's protected market.

The butter imports to Europe were temporarily suspended following the European Court of Justice ruling.

The temporary ban was lifted but an estimated 30,000 tonnes of New Zealand origin butter was left in limbo awaiting a decision by the EU.

- NZPA