The EU has split New Zealand's yearly butter quota that is imported into the EU, which amounts to 76,667 metric tons of butter, into six-month periods to stop more than 55 per cent of the nation's butter produce entering Europe in the first half of the year.
The aim of this rule is to remove the incentive for New Zealand to import butter early in the year when prices are likely to be higher than after EU price reductions that are scheduled to take place 1 July 2004 have come into effect.
However, New Zealand's Trade Negotiation Minister, Jim Sutton, believes that the restrictions are inconsistent with the EU's World Trade Organisation (WTO) obligations. He fears that the rules will cut long-term contracts between New Zealand's dairy industry and EU retailers.
"Concessions negotiated in the WTO cannot be the subject of arbitrary action by any of our trading partners,"​ he said in a statement on Monday.
New Zealand's multinational dairy group Fonterra believes that the EU's actions are unjustified and unnecessary.
New Zealand's butter imports into the Europe amounts to 4 per cent of all butter consumed in Europe. Fonterra believes that the small portion of New Zealand butter entering the EU cannot have a big effect on the EU's large butter market as a whole.