Last week European Union Agricultural Commissioner, Mariann Fischer Boel, announced the return of protectionist subsidy measures to support the local dairy market and European dairy producers' incomes following a rapid slump in world dairy prices.

The move comes despite agreement in November last year to refrain from introducing any new trade barriers within the next 12 months, designed to help finalise the ailing Doha negotiations.

The decision is expected to drive world prices down sharply by encouraging local farmers to keep producing milk and the EU to stockpile dairy products.

Federal Minister for Trade, Simon Crean, and Minister for Agriculture, Tony Burke, this week fired off a letter to their European Union counterparts outlining their opposition to the reintroduction of export refunds and the damage this does to progress on liberalising world trade.

But Commissioner Fischer-Boel insists that with world market prices now below EU market prices, EU exporters were no longer able to compete.

In an interview with Rural Press ahead of a meeting with EU trade commissioner Catherine Ashton this week, Mr Crean said it was fair to say the move was protectionist, but he was still awaiting details on the potential impacts on Australian farmers and world dairy prices.

He said the decision came as a surprise because the new trade commissioner had displayed good intentions to conclude the Doha round, and this subsidy introduction was "counter to the sentiments" and "against the spirit of intention" to finalise Doha and remove trade barriers.

He said fighting fire with fire, and introducing protection measures for our own industry would only exacerbate the "downward spiral to closing down markets", despite causing some short-term hardships for Australian farmers.