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The Government has struck a compromise deal on New Zealand's $250 million-plus a year quota butter trade with Europe, which allows Fonterra to keep a large slice of the trade while giving European importers a chunk.
The agreement, yet to be ratified, on the new long-term arrangements follows a European Court of Justice decision this year.
It effectively called for an end to Fonterra's control of the quota butter trade, which gives New Zealand imports access at a preferential tariff, allowing bigger profits on sales than otherwise available. The court wanted European importers - other than a Fonterra UK subsidiary - to have a slice of the action.
Trade Minister Phil Goff said yesterday the proposed regime resolved this issue by providing a guarantee to newcomers that they would have access over time to bid for a share of New Zealand butter.
"The needs of traditional importers, however, are taken into account by guaranteeing them more than half of the New Zealand butter quota."
The new regime, beginning on January 1, will replace current short-term arrangements which expire at the end of the year.
As part of the package, the tariff for New Zealand butter imported under the quota will be reduced to €700 ($1,358) per tonne from the current rate of €868.8 per tonne, a cut of nearly 20 per cent.
Although Fonterra will lose a significant chunk of the trade and associated "quota rent" profits over time, the drop in the tariff rate will provide the co-op with some consolation.
Goff said Government officials had been in daily contact with the European Commission while he had discussions with Europe's Agriculture Commissioner, Mariann Fischer Boel.
"The final package strikes an appropriate balance between meeting the [court] ruling and ensuring that the EU's long-established commitments to New Zealand are taken into account," he said. The EU Council must approve the changes.
