Key plays down US trade warning

John Key. Photo / Natalie Slade

Prime Minister John Key is not fazed by a substantial group of United States senators warning against the Trans Pacific Partnership trade talks on the basis that they involve New Zealand and its powerful dairy industry.

"You would expect those who come along to those type of significant negotiations to start at their extreme or hardest position," Mr Key said at his post Cabinet press conference yesterday.

He also said that New Zealand would not be part of any deal that excluded agriculture.

He challenged the assertion by the senators that Fonterra's virtual domestic monopoly was anti-competitive globally and he did not believe it would be a stumbling block in the talks.

"Fonterra provides a largely monopoly position here in New Zealand but in the international markets Fonterra actively competes."

It represented only 2 per cent of dairy production internationally, he said.

Thirty senators, including former Democratic presidential candidate John Kerry, sent the letter to US Trade Representative Ron Kirk ahead of the first set of TPP talks in Melbourne last week. The group represents almost a third of the 100-strong Senate.

The United States, Australia, Peru and Vietnam are negotiating to join an existing free trade deal between New Zealand, Singapore, Chile and Brunei.

The senators' letter expressed concerns about Fonterra's virtual domestic monopoly.

"Despite New Zealand's small size, its dairy industry is a global power," the letter said. "The Administration should consider whether genuine competition is possible as it proceeds with the TPP ..."

It says they had been told that losses to US dairy producers could total US$20 billion ($28.3 billion) over the first decade if US restrictions on New Zealand dairy exports were fully phased out.

It finishes: "Because of the anti-competitive practices in New Zealand's dairy industry and the extensive degree of control it wields over the world dairy markets to the detriment of the US dairy industry, we are deeply concerned that an expansion of US-NZ dairy trade would further open the US to these imports while providing little additional market for American farmers in New Zealand and other Pacific countries.

Mr Key is visiting Washington next month to attend the Nuclear Security Summit at the invitation of US President Barack Obama and he said he expected there would be a chance to discuss the TPP talks.

The TPP talks involved about 200 officials from the eight participating countries and the next talks are due to be held in Los Angeles in June.

"These are a challenging set of circumstances and we want a high-quality agreement," Mr Key said.

He believed all participants wanted a high-quality agreement though whether it could be done in two years, as is hoped by the US, was not clear.

Mr Key said the US would not sign unless it was in its best interests just as New Zealand would not either.

Evidence pointed to liberalisation stimulating economic activity and jobs "and it drives greater productivity and efficiency".