John Key

Wellington, March 14 NZPA - Prime Minister John Key hopes that trade talks started in Australia today could pave the way for not only a deal with the United States, but also the entire Asia Pacific region.

New Zealand has begun talks in Melbourne for a Trans-Pacific Partnership (TPP) which would build on the previously negotiated P4 trade agreement between New Zealand, Brunei, Chile and Singapore to include the US, Australia, Peru and Vietnam.

"The start of the talks in Melbourne is an important milestone in our free trade agenda," Mr Key said.

"As well as better access to the US market, an eight nation TPP would pave the way for a potentially bigger prize - a free trade area for the entire Asia Pacific region. These talks will take some time, but the second round of talks is scheduled to take place in June."

Mr Key said trade deals were important to New Zealand as they removed barriers for exporters and New Zealand would continue to seek bilateral and multilateral deals where possible.

The first round of negotiations to expand the TPP was to take place a year ago, but the US postponed the first set of talks at the last minute, in the wake of the Obama inauguration.

Now the US is ready to look at the issue again with New Zealand increasing its efforts as well.

The Government has already appointed former prime minister and World Trade Organisation (WTO) boss Mike Moore as ambassador to Washington, with instructions that a US free trade deal is a priority.

Free access to the US market has long been a holy grail for New Zealand exporters of meat and milk, but they have already run into warning shots from their rivals in the US, concerned about a potential surge of NZ produce on to their domestic market.

US dairy farmers are pleading for protection from Fonterra.

The US uses tariffs and quotas to keep out foreign dairy products -- NZ has a quota of only 151 tonnes of butter a year -- but Fonterra has built a profitable trade in milkpowders, including milk protein concentrates which sell for high prices.

US dairy farmers are just beginning to recover from nearly two years of severe losses and commodity-price swings, with the help of taxpayer-funded subsidies last year.

US farmers fear Fonterra's cooperative structure and control of about 88 percent of New Zealand's milkflows would help it undercut them on price.