Trade deal talks with US hit snag

A multibillion-dollar trade agreement involving New Zealand and the United States is in trouble in its first week of negotiation, with 30 US senators criticising this country's "anti-competitive practices".

Trade Minister Tim Groser says a letter signed by the senators and sent to US Trade Representative Ron Kirk is a significant obstacle, which will be countered by major Kiwi lobbying in Washington.

Negotiations for the Trans-Pacific Partnership started in Melbourne last week. The group is aiming to extend the free trade agreement between New Zealand, Singapore, Chile and Brunei to include the US, Vietnam, Peru and Australia.

The eight countries in talks cover 470 million people with a combined gross domestic product of US$16 trillion.

As the talks began, Idaho senators Mike Crapo and Jim Risch led 28 other US senators, including former Democratic presidential nominee John Kerry, in urging "very careful attention to dairy trade concerns" through a letter to Mr Kirk.

"Because of the anti-competitive practices in New Zealand's dairy industry and the extensive degree of control it wields over world dairy markets to the detriment of the US dairy industry, we are deeply concerned that an expansion of US-New Zealand dairy trade would further open the US to these imports," the senators wrote.

Losses to US dairy producers may total up to US$20b during the first decade of the agreement if restrictions were fully phased out in the partnership, they said. There was little to be gained for US dairy producers in the agreement.

Senator Kerry, who lost to former US president George W Bush in the 2004 presidential election, chairs the US Senate Foreign Relations Committee.

Mr Groser said last night that the letter would have "considerable influence" in negotiations.

"It's a real concern," he said. "We should make no mistake about it – this is a very powerful lobby we're taking on."

Prime Minister John Key would lead lobbying in Washington to fight the Kiwi cause.

Mr Groser, Foreign Affairs Minister Murray McCully, Agriculture Minister David Carter, plus Fonterra, industry lobbyists and the incoming ambassador to the US, Mike Moore, would also lobby Washington.

"This will be a major exercise and we will partially succeed because the facts are extremely strong on our side," Mr Groser said.

It was "palpable nonsense" to say that Fonterra had created an unfair market. Though that company dominated the domestic market, it had to compete like every other company on the international stage, he said.

The United States used subsidies for its dairy producers, whereas New Zealand did not.

"It's a very, very politicised argument, trying to suggest that somehow New Zealand doesn't play it fair, when any person who looked at it objectively would reach exactly the opposite conclusion. New Zealand has enemies on dairy trade around the world and always has had."

In a submission to the US International Trade Commission this month, the present New Zealand ambassador to the US, Roy Ferguson, said partnership negotiations would "not be easy".

US concerns about New Zealand dairy were misplaced, however.

While the US accounted for 13 per cent of global milk production, New Zealand accounted for only about 2 per cent, Mr Ferguson said.

The first round of partnership negotiations ended last week; the next is scheduled for Los Angeles in June.