Trade talks could pave way to US deal

Trade talks that could pave the way to a trade deal with the United States will begin in Australia today.

New Zealand will open trade talks in Melbourne for a Trans-Pacific Partnership (TPP) with the United States, Brunei, Chile, and Singapore.

The TPP would build on the previously negotiated P4 trade agreement between New Zealand, Brunei, Chile, and Singapore with the first round of talks to expand the agreement with the inclusion of the US, Australia, Peru and Vietnam.

The first round of negotiations to expand the TPP to was to take place a year ago, but the US postponed the first set of talks at the last minute, in the wake of the Obama inauguration.

Now the US is ready to start five days of talks in Melbourne next week.

Prime Minister John Key has described the TPP as "our most important trade negotiation, working towards a free-trade agreement with the United States".

The Government has already appointed former prime minister and World Trade Organisation (WTO) boss Mike Moore as ambassador to Washington, with instructions that a US free trade deal is a priority.

Free access to the US market has long been a holy grail for New Zealand exporters of meat and milk, but they have already run into warning shots from their rivals in the US, concerned about a potential surge of NZ produce onto their domestic market.

US dairy farmers are already pleading for protection from Fonterra.

The US uses tariffs and quotas to keep out foreign dairy products - NZ has a quota of only 151 tonnes of butter a year - but Fonterra has built a profitable trade in milkpowders, including milk protein concentrates which sell for high prices.

US dairy farmers are just beginning to recover from nearly two years of severe losses and commodity-price swings, with the help of taxpayer-funded subsidies last year.

US farmers fear Fonterra's cooperative structure and control of about 88 percent of New Zealand's milkflows would help it undercut them on price.

- NZPA