Key says TPP not worth signing without inclusion of dairy in comprehensive tariff liberalisation

By Lynn Grieveson

Following Trade Minister Tim Groser's return from the latest round of Trans-Pacific Partnership (TPP) free trade agreement talks held in Singapore last week, the government is sounding slightly cooler on the deal - with Prime Minister John Key warning that an agreement that did not allow free access for our dairy products to the US and Japanese markets would probably not be worth signing up for.

Key said he still thought it was possible an agreement could be reached on a comprehensive deal that saw nearly all tariffs removed, but sounded a note of caution when speaking to reporters on Tuesday.

"Come and ask me after I've been to the White House. I might have a bit of a better download on that," he said.

"At the end of the day the thing with these deals like TPP, they are very complex but the prize at the end is very significant. I just can't see President Obama signing up to something that is not a comprehensive deal. I fully expect it to have long phase outs and take a period of time, but overall the modelling we saw was an economic uplift of somewhere between about two and four billion dollars a year."

"The obvious question for New Zealand would be 'if we couldn't get access for dairy would we even sign up for a deal like that?'" Key said.

"There are always trade-offs and there is always give and take and that would have a significant impact on the modelling."

Key said it was "too early to tell" if fears that access to Japan for our dairy products could be blocked were well founded, although a recent meeting with a visiting representative of Japan's Liberal Democratic Party held out some hope.

"He still held out the view that they could get to basically total elimination of tariffs, but over a fairly long period of time," said Key.

"I would be deeply concerned about any deal that didn't have dairy. I think it is not so much a matter of threatening the Japanese, it's a matter of being realistic. If there is not a good deal on the table, then one question would be: 'do we want to be a party to that?'. A second very good question is, 'would the Americans?'," he said.

"It would be very difficult to take New Zealand into a deal like TPP if our major export industry was excluded. Australia did that when it signed an FTA with the United States and it excluded sugar, but it really didn't fix the problems that they needed, and that's one of the reasons they are back looking at TPP."

Key reiterated that he wanted the most comprehensive deal possible with all, or nearly all, tariffs removed.

"Obviously we have got to be realistic and reasonable, but I think all of us have a sense of what comprehensive looks like," he said.

"If you are leaving out your major industry it doesn't feel comprehensive to me."