Smith Raises Milk Issue In Canada

International Trade Minister Lockwood Smith has questioned the appropriateness of Canada's system of paying farmers for dairy exports.

In informal remarks to a C D Howe Institute luncheon in Toronto ahead of this weekend's APEC Trade Ministers meeting, Dr Smith said the payment system had serious implications for world trade.

New Zealand believes that the Canadian scheme means that the price paid by domestic consumers for milk products cross-subsidises export prices, allowing them to be kept artificially low.

Dr Smith told the luncheon that if other countries followed Canada's example the groundwork achieved during Uruguay Round trade liberalisation would be at risk.

"I will raise this matter during bilateral discussions with my Canadian counterpart Art Eggleton," Dr Smith said.

The minister also said the trading relationship between Canada and New Zealand was healthy but he was surprised the two countries were not more important to each other.

"It seems to me that the underlying rationale for closer integration between us through trade and investment links remains valid," Dr Smith said.

The minister noted that Canadians were showing great interest in New Zealand's economic reforms, particularly the deregulation of agriculture.