The Act Party fears the government is bringing in agricultural subsidies via the back door, 30 years after they were phased out by the fourth Labour government.
The party thinks payments by the Provincial Growth Fund (PGF) could violate rules against subsidised agriculture.
But the Minister for Regional Economic Development Shane Jones, who runs the fund, has dismissed any risks to New Zealand.
The PGF is a $3 billion fund to bring development to provincial New Zealand over three years.
The risk of it providing an agricultural subsidy in drag surfaced in Parliament on Tuesday.
Act leader David Seymour asked whether Mr Jones had been advised that some of the fund expenditure might have to be reported to the World Trade Organsation (WTO), as a hidden subsidy.
Mr Jones replied that he had sought advice about this risk, but he laughed off any consequences.
"Naturally, advice has been sought from the Foreign Affairs Department," Mr Jones told Parliament.
"However, given that the adjudication and appeals (processes) of that international trade body are in a state of disarray, I am not bothered by that at all."
Mr Jones was referring to a looming crisis in the WTO's appeals processes, because the Trump administration is blocking new judges from being appointed to that role.
This is thought likely to stymie new rulings by the WTO.
Despite Mr Jones' dismissal of any dangers, his office later confirmed a press release had been toned down after advice from the Ministry of Foreign Affairs and Trade (MFAT).
It referred to a loan for up to $1.8 million to Taranakipine by the PGF, which was announced last week.
A reference in the media statement to "helping make the factory competitive" was removed on official advice.
There have been no further developments in this story.
But a veteran trade expert said New Zealand would be unlikely to violate rules against state subsidies for agriculture by mistake.
Stephen Jacobi, who is executive director of the New Zealand International Business Forum, said PGF paymenmts would have been carefully scrutinised by a govermment committed to trade rules before being signed off.
He said the main danger would be if any governmment payments made goods cheaper.
However there was a spirit of the law, as well as a letter of the law, and New Zealand should take care to abide by it, he said.