25 May 2009

NZ to seek overturn of US dairy subsidies

3:23 pm on 25 May 2009

New Zealand Trade Minister Tim Groser says he will be making a case to have US dairy subsidies overturned when he meets trade and agriculture representatives at an international meeting in June.

The United States government is to subsidise the export of more than 90,000 tonnes of milk powder, butter and cheese in response to a similar move by the European Union earlier this year.

Mr Groser says it is a setback for the dairy industry and will be damaging to world markets.

He fears the subsidies will destabilise the international dairy market, just as it was recovering, but says it is not too late to turn things around.

Mr Groser hopes to discuss the issue at the Cairns Group international agriculture coalition meeting in Bali in June.

He has talked to Australian trade minister Simon Creen, who chairs the group, and says the matter will be on the agenda.

Australia on Saturday described the announcement of subsidies as a "serious backward step".

G20 nations, including the US, recently pledged to refrain from protectionism.

Rural groups condemn move

The Dairy Companies Association has joined exporter Fonterra, dairy farmers and Federated Farmers in condemning the US move.

Association chairman Malcolm Bailey says it will create uncertainty over the pricing of dairy products and payouts for New Zealand farmers, while doing very little for US farm incomes.

Mr Bailey rejects claims by the US dairy export council that New Zealand has been driving down world prices by flooding the market with surplus production.

He says New Zealand has to meet world market prices and supply and demand without engaging in intervention and subsidisation.

Mr Bailey says the European Union has acted fairly responsibly and generally used intervention buying, rather than export restitution, so they have not depressed the market.

Chris Galen from the US National Milk Producers Federation told Morning Report the subsidy is legal and any reaction should be carefully considered.

He described the subsidy as a small step using an existing programme, rather than a major change that would be a violation of trade commitments.