EU changes goal posts for New Zealand butter imports

The EU has split New Zealand's one year butter quota of 76,667 metric tons into six month periods to prevent more than 55 per cent of the annual quota entering in the first half of the calendar year.

Sutton said New Zealand exports to the EU were only 4 per cent of the butter consumed in the region, so could hardly be described as a threat to the EU market.

"While New Zealand is supportive of the reforms of the EU's Common Agricultural Policy agreed earlier this year, we are concerned that the EU seems to have taken CAP reform as a licence to make changes which could disrupt our trade,"​added Sutton in a statement on Monday.

Recent changes to CAP, driven by the European Commission, have hacked away at subsidies to European farmers, largely in a bid to tackle criticisms of protectionism. But the news that the EU has sub-divided New Zealand's annual butter quota fell on discontented ears.

"It [Europe] claims that it is justified to remove an alleged incentive to import butter early in the year when prices are likely to be higher than after the EU intervention price reductions programmed for 1 July,"​ said Sutton.

"The regulation requires the splitting of the quota for the next four years while programmed price cuts are carried out. Exports of butter above the quota volume are uneconomic, they face a tariff of €1,896/tonne, which is equal to a tariff of about 150 per cent at today's prices,"​ he added.

Sutton said that not only were the European moves likely to restrict commercial operations and cut across long-term contracts with EU retailers, they were also inconsistent with the EU's obligations under the World Trade Organisation (WTO).

"WTO members are not permitted unilaterally to alter the commitments they undertook during negotiating rounds. The "binding" of the annual butter tariff quotas by the EU was an important result of the Uruguay Round for New Zealand. We will be making it quite clear to the EU directly and through the WTO that its actions are inappropriate,"​ he added.

Reports in the Australian and New Zealand press this week quote Henry van der Heyden, chairman of dairy giant Fonterra as saying the new regulation represents "unnecessary and unjustified interference" with New Zealand's butter trade.

"Fonterra cannot see how the EU Commission can reasonably claim that the small proportion of New Zealand butter entering under the quota can cause problems in the very large EU butter market,"​ van der Heyden said on Monday. Fonterra had only just announced a settlement in which it paid the British government £11 million in back duties on butter shipments disputed since 1996.