The World Trade Organisation (WTO) ruled in favour of the US and New Zealand this week over a long-standing dispute regarding Canada's dairy export practices.

This is the second time a WTO compliance panel has determined that Canada's provincially run two-tier pricing system provided an export subsidy that Canada used to exceed its WTO limits.

When the first ruling was made last year, Canada appealed the decision to a WTO appellate body, which agreed in January 2002 that the original panel used an incorrect price standard when determining its decision and therefore rendered no decision on the dispute.

As a result, the US and New Zealand governments asked the WTO to re-hear the case using the required data. The most recent decision again supports the US complaint.

The major US dairy organisations welcomed the ruling. A joint communique issued by the US Dairy Export Council, the International Dairy Foods Association and the National Milk Producers Federation, reads: "The dispute was never about eliminating Canada's dairy export subsidies or supply management, but about enforcing the rights of the US and New Zealand to be sure that Canada lives within its Uruguay Round commitments.

The US organisations also said that they understand that Canada may appeal the ruling to a WTO appellate panel and if that occurs, a final decision will likely come this autumn. They added that "cautious optimism" best describes the US industry's opinion of future developments.