Japan next for Key after frustrating summit

ONE-ON-ONE: Prime Minister John Key and Russian 
President Vladimir Putin during their meeting at the Apec summit in Vladivostok.
ONE-ON-ONE: Prime Minister John Key and Russian President Vladimir Putin during their meeting at the Apec summit in Vladivostok.

Prime Minister John Key kicks off a three-day trip to Japan today, fresh from one of the most frustrating Apec summits of the four he has attended.

The talks, held on Russky Island off the coast of the far eastern Russian port of Vladivostok, saw little concrete progress on a free trade deal with Russia.

His first bilateral meeting was canned after a no-show at the summit by Hong Kong, and the death of Julia Gillard's father saw the Australian leader head home before her one-on-one with Mr Key. They had planned to unveil an “event” to mark the 30th anniversary of closer economic relations.

At the same time the forum saw storm clouds ahead for the world economy that have prompted some economies to turn inward towards protectionism, especially of food producers, and away from “comprehensive” free trade deals.

To complicate matters, the rivalry between the United States and China has taken on a trade dimension, with the Trans-Pacific Partnership (TPP), led by the US, facing a new China-India axis based around a fledgling “Asean plus 6” free trade pact that would include New Zealand.

Mr Key believes the two can be complementary, though he points out the TPP is more advanced. But he also acknowledges a successful TPP offers more for New Zealand because it includes the US. New Zealand already has a free trade deal with China and an agreement to pursue one with India.

At the very least another rival free trade player on the block will slow progress and tie up negotiating resources.

As the Apec talks wrapped up yesterday, Mr Key said the slowdown in China and problems in Europe were casting a shadow over the global economy.

Leaders at the summit saw protectionism on the rise in the past two years and a “more fortress mentality” developing, especially in South America, as global financial woes deepened. “That is quite a worrying factor.”

Greater trade integration, through deals like the TPP, would not be financially costly but might stimulate growth, he said.

Against that background New Zealand was in good shape. If China's growth slowed - and it was “on hold and reducing” - that would have a knock-on effect for Australia and then New Zealand.

However, with China growing at more than 7 per cent there was still “a bow wave of demand” for commodities such as dairy products, which would fare better than “hard commodities”, such as minerals, during the next decade.

Dairy prices have risen recently, though that was partly a short-term effect of a bad drought in the US.

Mr Key's talks with Russian President Vladimir Putin had canvassed the latter's “domestic sensitivities” about the impact of New Zealand agricultural imports under a free trade deal.

An invitation from Mr Putin for him to visit Moscow next year indicated the timetable on the Russian side, but there were still no guarantees, Mr Key said. “My view is he will eventually get us there, but it will take more time.”

The leaders met after a two-hour delay as Mr Putin ran over time hosting an Apec business forum.

Mr Putin told him he wanted to consult Belarus and Kazakhstan, which are included in the talks, and “get back to NZ” later in the year.

At a question and answer session with business leaders, Mr Putin said Russia and its partners were determined to complete the deal with New Zealand. “It is a difficult process that requires ability to compromise but we need and must find compromise.”

In his speech to the summit, Mr Key said only the World Trade Organisation, not bilateral and regional trade deals, could correct fundamental imbalances in economies.