• John Luxton
Food, Fibre, Biosecurity and Border Control

"The decision by the WTO Appellate Body rejecting Canada's dairy export subsidy scheme is a major boost for rural New Zealand," Food and Fibre Minister John Luxton said today.

Canada subsidises its dairy exports by making milk available to processors at prices lower than normal domestic prices when the resultant products are to be exported. This allows Canada to enter world dairy product markets despite the fact that domestic product prices are more than twice those in the world market.

New Zealand challenged the scheme last year and our views were endorsed by a WTO dispute settlement panel in May 1999. Canada later appealed certain aspects of that ruling, as it is entitled to do within the WTO system. Today's decision vindicates New Zealand's actions.

"We had always believed that such systems contravened the WTO rules we fought so hard for in the Uruguay Round", Mr Luxton said. "The Appellate Body decision is clear - WTO Members cannot devise new schemes to circumvent their export subsidy commitments. We will be watching policy developments in Canada very closely to ensure the faithful implementation of the ruling."

"The world dairy market is one of the most heavily subsidised markets already. Over US$2 billion is paid out each year on dairy export subsidies alone. For New Zealand to have stood aside and left a scheme such as the Canadian one go unchallenged could have opened the flood gates for yet more subsidies".

"The positive result of this case complements nicely our goal of obtaining the complete elimination of all agricultural export subsidies in the forthcoming WTO negotiations."

"This victory is most satisfying for rural New Zealand. An essential element in assuring the long term sustainability of rural incomes is to ensure that our producers are not facing unfair competition from other countries. As export subsidies are reduced, some countries' dairy industries and bureaucrats will be searching for more ingenious ways of subsidising agriculture. Today's decision shows such action will not be tolerated", the Minister concluded.