New Zealand has triggered a second disputes proceeding at the World Trade Organisation, over alleged export subsidies paid by the Canadian government to its dairy producers. Wellington claims that although Ottawa lost an earlier case last year, it has failed to scrap the subsidies by January, as it had promised to do.

Indeed, the New Zealand government has claimed that new measures put in place by the Canadians, following the protracted and complicated dispute, have merely allowed provincial governments to carry on creating subsidies for their dairy producers, after the federal government in Ottawa scrapped its support measures.

Wellington said: “The effect of these schemes is that Canada is exporting subsidized dairy products without counting these against its export subsidy reduction commitment levels. As a result, once again Canada is in violation of its obligations under…the (WTO) Agreement on Agriculture.”

If Canada loses this case, it could be made subject to punishing retaliatory duties, which could be particularly problematic if the US becomes involved in the case, as it did last year.

By Keith Nuthall, correspondent