Prime Minister John Key has publicly reprimanded Trade Minister Todd McClay for "dancing on the head of a pin" leaving Key to give false answers to reporters over fears of Chinese trade retaliation.

After days downplaying Stuff reports, McClay on Monday revealed officials have been "for months" examining reports that China could retaliate if an investigation into steel dumping in New Zealand went ahead.

He also apologised to Key for not seeking more detail on the issue, but he stopped short of offering his resignation.

JOHN HAWKINS/FAIRFAX NZ Trade Minister Todd McClay has asked for a full review of the broader issues.

Key said McClay's answers to media at a joint press conference in Indonesia, after Stuff broke the story, left the impression "that the only correspondence, the only discussion, had been between Zespri and a non-Government organisation and that's not true".

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There had been discussions and correspondence with others.

"He should have made both the media and me aware of that."

"I think he took a very literal interpretation of the question that was asked of him. While that ...may have been technically correct the point I was making to him is that's giving a very specific and, I think, 'dancing on the head of a pin'-type of answer to what was really a broader question. "

But Key said assurances from China that there would be no retaliation over an investigation into steel dumping still stood.

He said McClay had not offered his resignation but had apologised to him.

Labour leader Andrew Little called for Key to sack McClay.

"A Minister who does not appreciate the seriousness of possible retaliatory action by our biggest trading partner against some of our biggest export industries simply should not be in the job."

But Key continued to describe the fears of China retaliating as "unsubstantiated rumours".

"I think it still does fit in that category."

There had been "engagement" like the one between an NGO and Zespri.

"What has happened is where there have been questions raised about whether, if there was an action taken, there would be retaliatory action the minister and the ministry have sought assurances that wouldn't take place," Key said.

"And to the best of our knowledge they have received those assurances."

But McClay was hamstrung in what he could say about a possible complaint about steel dumping because under WTO rules the Government could not confirm that until a formal investigation was launched.

McClay said on his return from Indonesia he had asked for a full review.

"I want to make it clear today that there have been discussions and limited correspondence over the past few months as the Ministry of Foreign Affairs and Trade has endeavoured to assess the veracity of these reports," he said.

"I have apologised to the Prime Minister for not being able to provide more details at the time."

The complaint by Pacific Steel was lodged with the Ministry of Business, innovation and Employment,

NZ must tell Chinese authorities of the complaint under the free trade agreement with China.

McClay reiterated the Government has sought and received assurances any competition issues would not impact on trade between the two countries.

"I stand by my view the assurances should give our exporters confidence that our trading relationship with China remains in good heart."

Both kiwifruit exporter Zespri and McClay last week executed big about-turns, after initially denying New Zealand exports had been threatened, eventually confirming the reported approach to Zespri - but McClay did not disclose other reported concerns.

But a spokesman for the Department of the Prime Minister and Cabinet said Key was not alerted to the threat to initiate "industry consultation" – the first step towards measures to hold up exports at the border – because it was unsubstantiated.

Stuff has confirmed Key's foreign affairs adviser Taha MacPherson was kept in the loop.

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