Key puts NZ-Russian Free Trade Agreement pressure on Russia; Says agriculture subsidy reduction will help economies facing austerity budgets

Key puts NZ-Russian Free Trade Agreement pressure on Russia; Says agriculture subsidy reduction will help economies facing austerity budgets

By Alex Tarrant in Vladivostok

Prime Minister John Key has laid down a challenge for Russian President Vladimir Putin to act decisively on free trade negotiations between New Zealand and Russia, ahead of a meeting between the two at one of the world's leading trade forums.

New Zealand had been hoping to sign a high-level free trade agreement (FTA) with the Russia, Belarus, and Kazakhstan customs union by the end of this year's Asia Pacific Economic Co-operation (APEC) forum, set to end this week.

But progress has been slower than hoped as the Russians drag their feet, with the major fret being over allowing the New Zealand agriculture sector access to their domestic market.

It now looks more likely to come to a conclusion around the end of 2012-early 2013.

Speaking to media at APEC in Vladivostok, Russia, Key implied the ball was in the Russian court when it came to the timing for signing the free trade agreement between New Zealand and Russia. Key said that getting the agreement over the line required the political leadership and will to do so.

“There are always domestic challenges and issues to confront. But on the other side of the coin, we know that Russia’s looking at potentially up to 30 FTAs. The one with New Zealand is one with a real possibility – it’s probably arguably the closest – and while it has challenges, it ... forms the blueprint of the opportunity for Russia to expand," Key told media on Friday.

“It’s a political decision ultimately. In the end this FTA will go ahead if Vladimir Putin wants it to go ahead, and it won’t if he doesn’t," he said.

"In the end, our clear message is, New Zealand is ready to engage with these countries, led by Russia and this FTA. We think there are advantages to both countries, and we’d like to make progress.”

“To get an FTA over the line, in my experience, requires not only the officials to do all the work, but it needs political leadership. That’s because there are always the domestic concerns which raise themselves," Key said.

As well as the Russian talks, New Zealand was involved in a number of FTA negotiations which were tantalisingly close to completion.

“Arguably it’s the same position in Korea, and a little further back with India. [With] Taiwan we’re looking in much better shape," Key said.

'Get rid of subsidies to help with deficit reduction'

Earlier, Key called on world leaders to resume negotiations on the World Trade Organisation's Doha round of trade talks, aimed at reducing subsidies.

"The world is spending well over $200 billion a year on subsidies; fundamentally they’re not affordable," Key told media following his address to the APEC CEO summit.

"There’s a way through reducing those subsidies to make sure it’s fair for everyone, and that is through the WTO process," he said.

"Secondly, if we just embark on FTAs, we can deal with the issue of access – getting our goods and services into other markets – but we can’t deal with those other imbalances.

"If you take Europe, they’re spending well over a billion dollars a week on subsidies. We know these countries are highly indebted, and I think it’s a logical way through," Key said.

From New Zealand’s point of view there were real gains to be made if the Doha talks were resurrected. There were historical challenges to breaking down those trade barriers, Key said.

“The good thing with something like APEC, is that in the course of the 20-odd years this has now been going, we have now made progress. We’re seeing that with things like the Trans Pacific Partnership, which could ultimately lead to a free trade agreement between, amongst others, New Zealand and the United States," he said.

“But yes, we need more liberalisation around the world. I think we’ve just got to front up to those really serious challenges that we have.”

Deficit reduction

“I think we need to acknowledge that [there] are countries around the world now,that have significant levels of government debt, [and] they have significant deficits. They’ve got no obvious pathway back to surplus, and yet they need to get there," Key said.

"Here is a way of them cutting costs, which has got to be a lot more politically palatable, I would have thought, then cutting health or education funding," he said.

While the Doha round of trade talks had been on ice for a couple of years, there was an actual deal sitting on the table.

“What’s sitting outside that is really the issue of agricultural subsidies. That is the stumbling block, and that is the area where progress needs to be made," Key said.

"But in my view, we can only go so far with bilateral and regional deals. We ultimately need that global environment," he said.

“Even if we continue down this pathway of regional free trade agreements, they won’t deal with the issues for developing countries.”

Key accepted there were challenges with regard to nations such as Russia opening up to free agricultural trade.

“Yes they want to make progress, yes they want to move forward; and this customs union that they’ve developed essentially between Russia, Belarus and Kazakhstan has been a very important step for them," he said.

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