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Luxton Welcomes Canadian Milk Ruling

"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

"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.


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