May 24, 2007

New Zealand government to regulate dairy export markets

New Zealand Agriculture Minister Jim Anderton that the country's Cabinet has agreed to policy proposals that will assure for rights to regulate dairy export markets and allow all New Zealand dairy exporters to have a chance to compete for market share within regulated markets.

In order to cut compliance and administrative costs to the sector, the proposals also include deregulation of some markets where regulation can no longer be justified.

This way, stakeholders and any other interested parties will have an opportunity for further input of policy process during the Select Committee Stage as the Bill is considered by the Parliament, Anderton said.

Regulated dairy markets were established when the DIRA was enacted. They generally operate where importing countries have country-specific tariff quotas for New Zealand products. Under the DIRA, a subsidiary of Fonterra holds exclusive access to these markets for fixed periods, but these fixed periods expire progressively between mid-2007 and 2010.

Anderton said since some transition measures are needed, the Cabinet has also agreed to make regulations under the existing DIRA to implement interim measures for two markets where the initial allocations to Fonterra will expire in June and July 2007. He added that export licences for these two markets will be allocated to Fonterra till the end of 2007 and from 2008 and beyond, export licences to these markets would be subject to the policy framework in the Amendment Bill, which is aimed at facilitating the competitive environment for dairy product processing and exporting envisaged in the DIRA.

Export boundaries will be removed from the markets for butter to Canada, cheese to Japan and to parts of the US cheese markets.

For the remaining regulated dairy export markets (including butter and cheese to the EU, milk powder to the Dominican Republic, prepared edible fat to Japan and the parts of the US cheese markets where New Zealand can designate the importer or importers), export licences would be allocated to exporters on the basis of the proportion of milk solids collected directly from farmers in New Zealand. Export licences would be allocated annually between 2007 and 2009. For allocations made in 2010 and beyond, export licences would be allocated for periods of three years. Various other criteria would apply to the allocation mechanism.