New Zealand and the United States have successfully applied for the World Trade Organisation to re-hear their case against a Canadian dairy export scheme which both countries believe is illegal, Trade Negotiations Minister Jim Sutton said today.

Mr Sutton said New Zealand and the United States firmly rejected Canada's view that the WTO appellate body's decision earlier this month was the end of the matter.

"It quite clearly was not. The appellate body declined to rule on the complaint that Canada was providing illegal export subsidies to its dairy industry, as it felt it had insufficient information at this stage to make any determination. That is definitely not the ringing endorsement of the scheme some people in Canada have made it out to be."

Mr Sutton said it was an important case for New Zealand.

"Canada's de facto export subsidies cost New Zealand about $80 million a year because of their depressing effect on world dairy prices. That's more than $5500 per year for each New Zealand dairy farmer."

The current dispute concerns a replacement dairy export scheme the Canadians devised to replace a scheme already ruled illegal by the WTO in 1999. A disputes panel ruled in favour of the challenge to the scheme by New Zealand and the United States earlier this year.

Mr Sutton said that while the Appellate Body disagreed with some aspects of the Panel's legal analysis, the Appellate Body made it clear in its ruling that it was not finding that the Canadian measures were consistent with Canada's WTO obligations.

He said it was vital for the whole international trading system that the rules be clarified. At the moment, the legality of the Canadian dairy scheme was in limbo.

"I regret that this dispute has been further prolonged, but I think it's important for New Zealand to see the process through to resolution. It's essential that the integrity of WTO rules relating to export subsidies is not undermined.

"The WTO dispute settlement mechanism has proved extremely valuable for New Zealand. It has enabled better access for our butter to Europe and the removal of unjustified restrictions on our lamb exports to the US. It has also confirmed our challenge to Canada's original dairy export scheme, and protects our right to pursue a further challenge to the replacement scheme."

ENDS

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