Butter imports spread new discord with New Zealand

Relations have soured between Britain and New Zealand amid allegations of a Europe-wide campaign to protect home producers against butter imports.

The row centres on the import of spreadable butter, which is malleable straight from the fridge and has quickly become a popular alternative to blocks of spread hard enough to bend knives and tear bread. Anchor is at present the only company selling the product in the United Kingdom and has enjoyed booming sales as a result.

This success was soured last week when several New Zealand Dairy Board executives in Britain were technically "arrested" by UK Customs and Excise officers who claimed that technically the product was not butter as defined by the European Union. Although the raw materials are the same, the manufacturing process for the new product is different.

Sir Dryden Spring, chairman of the New Zealand Dairy Board, reacted angrily to the claim, saying that British customs were trying to block imports of spreadable butter from New Zealand by alleging that it did not qualify for entry under the EU quota for reduced import duty.

Under international trade rules, New Zealand has been allowed to export nearly 77,000 tons of butter a year to the EU. The board saw last week's move as part of a bid to erect trade barriers and protect European dairy farmers. Sir Dryden said it was another example of the dairy trade being "subject to interference, control and distortion by foreign governments".

Sir Dryden likened trading with the EU to peeling "the layers of an onion - there is always another restriction underneath".

Neville Martin, a spokesman for the New Zealand Dairy Board, added: "Under the British investigation, officials are looking at everything they can get their hands on in relation to New Zealand butter. Some of it smacks strongly of attempts to slap non-tariff trade barriers on New Zealand."

The board refused to say how many of its officials were being questioned by British customs.

UK Customs and Excise were equally cagey. Although officials spent yesterday morning deep in discussion on the subject, they later refused to give details, saying that they did not comment on individual cases.

However, they did confirm that they had received a written ruling from the European Commission four months ago saying that spreadable butter from New Zealand did not meet the qualifying conditions to benefit from the reduced import duty. The ruling said that the reason for this was apparently because it is not "directly manufactured from milk and cream", a spokeswoman said yesterday.

The move could spell disaster for Anchor, which has seen sales rise sharply by 33 per cent, year on year since the new butter was launched in Britain in 1993. The firm sold 5,000 tons of spreadable butter last year.

If the British move succeeds, spreadable butter would be subject to a punitive rate of duty which would remove it from British shops. The New Zealand government has taken up the issue with the European Commission in Brussels.

The British inquiry follows the seizure of a shipment of New Zealand Anchor butter by Dutch customs in September last year. The Dutch claimed that tests showed the butter contained too much fat to qualify for entry under New Zealand's EU quota and imposed an extra duty of NZ$1.8m. New Zealand has lodged an appeal and the case is continuing.