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Peter Wilson: Apples And Milk Present The Same Trade Problems

Peter Wilson
Peter Wilson

We've probably got about as much chance of prising open the United States dairy market as selling apples to Australia.

And for the same reason -- brute force politics.

The apple embargo must be one of the longest-running trade disputes in history. For 89 years they've kept our apples out by claiming they could infect Australian orchards with the fireblight disease.

Scientific evidence was presented disproving this, and the result was an Australian-inspired import regime which made it economically unrealistic for New Zealand growers to try to sell their apples across the Tasman.

The case was taken to the World Trade Organisation and an interim report received by the Government says New Zealand's arguments have been accepted. The final report is due mid-year.

The Australian growers will almost certainly find a way around this as well, and the Australian government has no political will to do anything about it.

It's simple politics. Australian orchards are clustered in important electorates, which makes the growers a powerful lobby group. Australian politicians don't want to upset them, because they would lose votes.

The case for a free trade deal with the US which would include dairy products is running into identical problems.

A group of 30 US senators has written to Trade Representative Ron Kirk claiming New Zealand uses anti-competitive practices, and that Fonterra wields power over international prices.

Those senators are the voice of the US dairy lobby, or the part of it that doesn't want to compete with New Zealand products.

They have asked for their concerns to be given "very careful attention" in the context of the negotiations that have started in Melbourne to extend the existing P4 free trade agreement between New Zealand, Singapore, Brunei and Chile to include Australia, the US and Vietnam.

They have thrown a big spanner into the works, which Prime Minister John Key, Trade Minister Tim Groser and Federated Farmers are trying to remove.

Groser has described the arguments put forward by the senators as "cobblers" but the minister, a former top trade negotiator, knows how hard it's going to be because it is, as he says, all about politics.

When Key was in Washington last week attending the nuclear security summit, he pushed New Zealand's case as hard as he could in meetings with Vice-President Joe Biden and Agriculture Secretary Tom Vilsack. They were probably polite and said they would consider the situation.

Federated Farmers president Don Nicolson has written to the senators explaining why they've got it wrong and arguing that the dairy industries in both countries stand to gain, not lose, by working together.

He has invited them to attend Federated Farmers conference in Invercargill in June and it will be interesting to see whether any of them take it up. Nicolson has also written to the other 70 senators, who didn't sign the letter, explaining the real situation.

Key is reported to be considering going to Wisconsin to deal directly with the dairy farmers, which is typical of his do-it-yourself attitude to problems like this. But as prime minister he can't just turn up and start talking, which is one of the reasons he wants an invitation to meet President Barack Obama later this year. That could open the doors he needs to get through.

So far there has been more speculation than information about the likelihood of this invitation turning up on Key's desk. It has been "expected" for months, all that's needed it "confirmation" -- and a date.

By all accounts, Key and Obama get along. Obama personally invited Key to the nuclear security summit, which at first seemed odd because New Zealand doesn't have any nuclear material that could be used to make weapons. It was about New Zealand's anti-nuclear policy, it turned out, with a senior US official saying that because of it Key "more than earned" a place at the table.

What strange times these are. A president who is working on reducing nuclear weapons stockpiles and New Zealand's position apparently perceived to be a laudable aim. The problem that caused the Anzus rift has been reduced to something hardly worth mentioning by either side.

But, while the relationship soars to new heights of agreeable friendship, that may not seep deep enough to overcome the political realities of free trade and the entrenched positions of the lobby groups and those politicians they influence.

Successive New Zealand governments have sought a bilateral free trade agreement with the US but it remains as elusive as ever.

Extending the P4 into the Trans-Pacific Partnership represents the best chance, but multi-national free trade agreements are extremely difficult to negotiate. Having the dairy problem in the mix -- and there are also problems with Chile in that regard -- makes the situation even more delicate.

The US, however, is considered to want the Trans Pacific Partnership to work because it would open gateways into Asia and it may believe the gain is worth the pain of getting round whatever domestic roadblocks are put in place by the lobby groups.

If that is so then the partnership will happen, and Key is going to do everything he can to ease the way.

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