EUROPEAN nations are 'recalcitrant subsidisers' that could devastate Australian dairy exports, Nationals leader Warren Truss says. 

Mr Truss has stepped up his criticism of the European Union over a likely war on dairy subsidies, with the EU now offering 50 per cent subsidies on its milk powder, butter and cheese exports.

The net effect has seen dairy prices slump from their record highs seen in 2007-08.

"The EU's move will kill off any hopes of a recovery in world dairy prices, locking in unsustainably low prices for its own farmers and everyone else," Mr Truss said.

The federal government has always spoken about its contacts in Europe and in the new Obama administration, he said.
"Now is the time to use them."

Australia's dairy farmers have "had the rugs pulled out from under them" due to the EU's subsidies.

During this week's World Economic Forum visit in Davos, Trade Minister Simon Crean and Deputy Prime Minister Julia Gillard should get the EU to "make sense" and stop any retaliatory action from the US, Mr Truss said.

If subsidies became entrenched, Australia should seek relief and compensation through the World Trade Organisation's disputes process, he said.

"The importance of this issue cannot be overestimated. We will all be worse off if EU dairy subsidies are allowed to snowball into a full-on trade war."

AAP