UPDATE 2-WTO condemns Australian ban on New Zealand apples

Mon Aug 9, 2010 11:28am EDT

* Australia ban not scientifically grounded, panel finds

* New Zealand apples banned since 1921 * Ruling could also open other markets

(Adds details, background, quotes, byline)

By Jonathan Lynn

GENEVA, Aug 9 (Reuters) - Australia's decades-old restrictions on imports of New Zealand apples break international trade laws and should be amended, the World Trade Organization said on Monday. The WTO panel ruling should open the way for New Zealand to resume sales of apples to its biggest trading partner after nearly 90 years, and holds out the possibility of access to other Asian markets where its apples are banned for similar reasons.

Like many trade disputes this one turned on health and safety rules, which are vulnerable to being exploited by domestic producers to ward off foreign competition.

The WTO experts did not back Wellington on all its claims, disagreeing that Australia's sanitary controls were arbitrary.

But in a 597-page report they found that Australian safety checks on New Zealand apples were unscientific and disrupted trade more than necessary, and that New Zealand's rights under global trade law had been damaged as a result.

The dispute marks a rare tiff across the Tasman Sea, involving two neighbours with about $13 billion a year in two-way trade. Both countries have strict quarantine rules to protect their agriculture from foreign infections.

Australia banned New Zealand apples in 1921 because of fears that fire blight, a disease that attacks apple and pear trees and rose bushes, could spread. Wellington has tried to have the ban lifted since 1986, and began a challenge at the WTO in 2007.

Wellington argued that the ban was not justified on scientific grounds as fire blight cannot be carried on mature fruit. Canberra disagreed, so New Zealand then asked Australia to define what quarantine arrangements would be necessary.

EFFECTIVE BAN

Rules proposed by Australia in 2007 to cover fire blight and two other pests were so tough that New Zealand argued they amounted to a continued ban.

The ruling will be welcomed by New Zealand producers such as Turners & Growers (TUR.NZ).

New Zealand officials estimate that lifting the Australian ban could add NZ$30 million ($22 million) within two to three years to apple exports totalling NZ$400 million in 2009.

But the ruling could also open other markets, according to industry lobby Pipfruit New Zealand. "The implications for us run a lot deeper in terms of other market access issues that we currently have," said Pipfruit NZ Chairman Ian Palmer.

New Zealand had particular problems with Japan and South Korea. "Korea is one of the expanding markets that we would like to be in, but they have the same fire blight ban that the Australians have," Palmer told Reuters.

New Zealand exports 75-80 percent of its annual crop of about 400,000 tonnes, mainly to Europe and especially Germany and Britain, as well as to the United States and Asia, notably Taiwan.

The ruling could also crack open the Australian fruit market to imports from other suppliers, such as the United States and Chile, the world's third biggest apple exporter.

The two countries now have 60 days in which to appeal. (Additional reporting by Alex Tarrant in Wellington; Editing by Stephanie Nebehay/David Stamp)

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