Wellington, May 24 NZPA - The United States' decision to reintroduce export subsidies on dairy products has disappointed New Zealand farmers and politicians.

The US move followed the European Union's reintroduction of export subsidies in January.

Dairy Companies Association of New Zealand chairman Malcolm Bailey said he was frustrated and disappointed with the move, which would undermine confidence in the global market.

It would hurt New Zealand farmers who "rely on the world market rather than subsidies for their incomes".

The world dairy product market had shown some signs of recovery in recent weeks, he said.

"At a time when the elimination of export subsidies remains on the negotiating table at the World Trade Organisation (WTO) in Geneva, this is a lousy signal to the global trading system about US intentions.

"The New Zealand dairy industry deserves better than this."

Trade Minister Tim Groser said the move was disappointing, a setback and damaging to world markets.

It was a short-sighted response, he said.

"Export subsidy assistance will have a relatively small effect on income for US dairy farmers, and may even prove counterproductive by creating uncertainty and depressing international dairy market prices.

"Unsubsidised producers, like those from New Zealand, will bear the cost of these trade-distorting measures."

The move sent a negative signal to other WTO members, Mr Groser said.

He hoped to discuss the issue with US Trade Representative Ron Kirk and US Secretary of Agriculture Tom Vilsack at the Cairns Group Ministerial meeting in Bali in early June.

Labour's trade spokeswoman, Maryan Street, said the Government needed to register its opposition of the move with the US administration.

"New Zealand also needs clarification of the United States' claim that it wants to minimise the impact on countries like New Zealand."

The Australian government, through its embassy in Washington, voiced strong objection and Labour wanted a similar move from the Government.

The Government should register objection before Mr Groser's meeting with Mr Kirk, Ms Street said.

"New Zealand cannot wait till that meeting to register its protests, as the subsidies are due to kick in from July."

Federated Farmers' Philip York said he was shocked at the move by US President Barack Obama.

"The US dairy lobby is more interested in protecting subsidies than in exporting on free market principles."

Fonterra's managing director of global trade, Kelvin Wickham, said it was bad news for the market and for New Zealand farmers who competed internationally.

NZPA