China's child policy change to boost NZ dairying

China's softening of its one-child policy could generate large infant-formula sales, Prime Minister John Key says.

"They are doing that and China has about 1.35 billion people, and if they didn't change that policy they would go through population decline," Key said at the National Fieldays at Mystery Creek yesterday.

"I don't think they want that, so they have moved to a two-child policy.

"A lot of infant formula will be sold over the next decade or two."

He said at Fieldays today that New Zealand contributed 80 per cent of infant-formula sales in China, and this could only be expected to grow.

The extra value from infant-formula sales away from milk commodity trading would benefit New Zealand agriculture, he said.

Key said the recovery of countries from the global financial crisis, the approaching resolution of free-trade talks and agriculture innovation gave him confidence that export sales would continue to increase.

The main things that kept him awake were the strong New Zealand dollar, a problem in the main market of China, which was unlikely to happen, and a large disease outbreak or food-safety issue.

Key said he was confident that agriculture would lead growth to achieve the target of $64 billion in sales by 2025 and boosting exports from 30 per cent of gross domestic product to 40 per cent through intensified farming and moving up the "value curve".

This would require 50,000 new jobs, with many of the new workers required to hold high-level or tertiary qualifications, and more business generated from research and development, including from co-investment between the Government and industry in the Primary Growth Partnership.

Key is determined that the Government will progress trade negotiations with export partners to advance agriculture and the economy.

He said New Zealand needed to get its free-trade agreement negotiations with South Korea and the Gulf states "over the line", and eventually with Russia and Belarus and the Trans-Pacific Partnership with the United States and other countries.

Key is off to Washington next week to work with President Barack Obama to gain traction with trade talks.

"It's worth remembering with TPP there are 12 countries, and each of them come with different issues they bring to the table, but in terms of the US and New Zealand, we are very much in the camp of a comprehensive deal, and that is the only deal we would want to complete, and that means particularly agriculture," Key said.

Other countries such as Japan might want to push back on agriculture reform, but New Zealand did not agree with that, he said.

"A lot of what we will be doing in the US, at least when we are talking to President Obama and other members of the Cabinet ,is pushing pretty hard on the fact that the deal has to be comprehensive and we have to see total elimination of tariffs and quotas over time," he said.

"We accept there is a phase-out for that and it won't happen instantly, but it has to happen over time and a sense of that timetable for that deal."

South Korea is close to completing talks with Canada and Australia, and Key is confident negotiations will end satisfactory without New Zealand relenting on agricultural trade issues.

Key said China had been a colossal contributor to growth in agricultural exports, and more exciting was that consumer demand for liquid and powder milk, meat, horticulture and viticulture goods was only beginning.

"They are already our biggest market for export goods and I think they will continue to exponentially grow," he said.

That relationship had to be nurtured and New Zealand had to make sure it continued to boost its other markets, he said.

About $8 billion of trade between the two countries in 2008 consisted of New Zealand importing $6b of Chinese goods and exporting $2b.

Today trade has grown to $20b, with New Zealand exports to China climbing to about $12b.