The World Trade Organisation has upheld a ruling that Canada has been unfairly subsidising dairy products sold to the US and New Zealand.

An appeals panel of the WTO rejected Canada’s appeal against a ruling that its Commercial Export Milk programme amounts to a banned export subsidy. The WTO had originally ruled on the case, which was brought by New Zealand and the US, in 1999, enforcing changes in the programme. New Zealand and the US, however, insisted the revised programme was still in contravention of WTO laws and brought another case against Canada.

New Zealand and the US could now ask the WTO’s permission to impose trade sanctions on Canada.

“We are obviously very disappointed by the WTO decision, but it was already an appeal,” Canadian International Trade Minister Pierre Pettigrew was quoted as saying by Reuters. “We have the intention of conforming to the decision, after close consultation with the country’s dairy industry,”

New Zealand and the US welcomed the decision.

“Canada has been unfairly subsidising its dairy industry for years and American dairy farmers have been suffering because of it,” US trade representative Robert Zoellick said in a statement issued in Washington.

“This is an excellent result for New Zealand,” the country’s Trade Negotiations Minister Jim Sutton was quoted as saying by Reuters.

“Canada must now remove the export subsidies. We now expect Canada to act swiftly and bring itself into compliance,” Sutton added.