Groser sees good progress in TPP talks, but concerned US and Japan may do side-deal on dairy that ignores NZ; Key cautious

Groser sees good progress in TPP talks, but concerned US and Japan may do side-deal on dairy that ignores NZ; Key cautious

By Lynn Grieveson

Trade Minister Tim Groser has returned from a TPP ministerial meeting in Sydney over the weekend confident that the "finish line" for the trade agreement is in sight.

But he is increasingly concerned that the United States and Japan might get together to make a sweetheart dairy access deal on the side that might not be in New Zealand's interests.

Groser told Audrey Young of The Herald  his "central concern" now was that the rules over tariffs and access for dairy produce could be agreed between Japan and the US, and imposed upon New Zealand.

"The US interests are not New Zealand's interests," he was quoted by The Herald as saying. Groser later told Radio New Zealand he expected Governments would be in a position to take deals back to their parliaments in the first quarter of next year.

Prime Minister John Key, talking to reporters before Tuesday's caucus meeting, said he had not had a chance to discuss the weekend's meeting with Groser, but shared his view that "dairy is very important, and it is very important that we see progress when it comes to dairy."

"The TPP is a 'one in a lifetime' opportunity for a high quality trade agreement, " he said. "I don't think we should trade it away that easily."  

High quality deal?

Key did not rule out walking away from the free trade negotiations if there was no chance of zero tariffs on New Zealand dairy produce.

"In the end, like any negotiation, it's sort of 'see how it all goes'. All I can tell you is what I have said so often before - that the feedback that I've always had from President Obama is that he's very committed to a high quality deal, " he said." Let's see how that plays out."

Key also did not rule out stepping back from the line of  'zero tariffs on all agricultural products', to allow some tariffs on primary produce in exchange for a zero tariff deal on dairy.

"Let's wait and see," he said.  "Like any free trade agreement that we undertake, you never get 100% of what you want but we are going to start at the maximum position and see how it goes."

However he talked down concerns over a potential 'sweetheart deal' between the United States and Japan, saying: "interestingly enough, I don't know how big a deal dairy actually is for Japan anyway. It's a much bigger issue for the United States."

"Don't forget the United States have real gains to be made when it comes to beef and dairy into Canada and other markets, so I am pretty sure you will find that the dairy lobby in the United States will be as active wanting liberalisation as the New Zealand lobby is."

Spierings on Ebola and the payout

In addition to concerns over the outcome of the TPP, Fonterra CEO Theo Spierings now has Ebola on his mind.

Spierings told TV3's The Nation on Saturday he was concerned the spread of the virus could potentially close borders to trade in West Africa, where Fonterra sells five to six percent of its product.

"The question is 'can it be contained quickly?'. It doesn't feel to me as if it is under control at the moment - and I am saying it mildly," he said. "I am quite worried about it, and I am very worried it will spread because I have lived in West Africa and it is very difficult to contain a virus to a certain region."

Key said anything that dampened down the return to New Zealand dairy farmers was of concern.

But farmers can take heart from Spierings confidence that there would be a rebound in demand, and prices, for dairy produce. He said on The Nation that the current dairy price of US$2640 a tonne set in the latest GlobalDairyTrade auction was "way below" what he and other milk traders and milk companies saw as a "very fair price" of around US$3,500.

Fonterra's current forecast for the 2014/15 season of NZ$5.30/kg is predicated on a return to US$3,500/tonne. Economists have lowered their forecasts to around NZ$4.80/kg in recent weeks after a series of poor auctions.

"We will come back to that level, whether it is four months or six months, but we will get back to it," he said of the US$3,500/tonne level. He was asked about the economists' forecasts and said Fonterra's forecasts were based on detailed views of both supply and demand, neither of which the economists had.

Peak cow?

Asked if New Zealand had now reached 'peak cow' following years of dairy conversions, Spierings said there was still potential for a further growth (through both conversions and productivity increases) before the degradation of freshwater meant the emphasis was "on the productivity route only."

"New Zealand can easily grow for the next ten years by two percent, three percent, but we need different solutions," he said.

He said Fonterra had looked at New Zealand's dairying regions catchment by catchment and still saw growth of 2-3% per annum in production in all areas.

"In every catchment, in the coming 10 years, we can still grow, with 60% percent based on conversions and more animals, and 40% on productivity."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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The TPP duck appears a be winged (from last weeks dairy report yesterday an outsiders view)
http://www.cigionline.org/sites/default/files/no37_0.pdf
While potential trade deals may have serious implications for competition and trade, their realisation is poor, and although most other countries are reluctant to compete with Fonterra, the United States, in particular, looks ready to roll up its sleeves and challenge New Zealand’s dairy industry dominance.
New Zealand persists in the TPP negotiations with the increasingly forlorn hope of greater access to the US dairy market, despite the obvious fact that that will not happen. The United States is an intense competitor in overseas markets, and likely to become more so. 
I am pretty sure you will find that the dairy lobby in the United States will be as active wanting liberalisation as the New Zealand lobby is - maybe in the same way Hollywood does.

Understanding this perspective would improve the quality of the free trade debate:
 
http://www.oftwominds.com/blogoct14/free-trade10-14.html
 
And then ask "que bono". Think not inter country but intra country.
Special interests in country 1 are enabled to screw the majority in country 2.
Special interests in country 2 are enabled to screw the majority in country 1.
 
That is Win Win (aka TPP) so we have the basis for a successful free trade agreement. 
 
Tim is definitely 'the man' for this job.

Meanwhile at growth of 2-3% for the next ten years we continue to be part of the problem. Still think he's way to optimistic, Theo I mean.
And why the concentration on dairy in the TPP. Surely our future needs to be pinned to other stuff like IT, surely the IP parts of the agreement are way more important for us going forward?

Spot on!

Well said Henry_Tull.
I just hope the dairy fraternity in NZ become increasingly aware of the implications the TPP has for not only themselves but the environment as well. 
I'm still waiting for the media to roll up their sleeves and challenge our government on explaining in detail what advantages the TPP has for all in sundry other than proposed "zero" tarrifs.
 

Peak dairy is well and truly already here. If we have to import feed for the cows then there are too many of them.
If there is to be all these further conversions, what will we do for meat, fruit and vegetables in this country? Anyone thought of that?
Old proverbs contain a lot of wisdom and the one about putting all your eggs into one basket is no exception.
Theo Spierings and Fonterra are driven by their own interests, certainly not those of NZ, NZers who need more than milk and cheese, and the NZ environment
The conversation must be had  and once we realise that all this growth cannot continue, perhaps before it is too late, we will realise that we don't need any agreements requiring us to abandon our sovereignty for anything at all.
Groser do you really need your name etched on a tarnished trophy?

The likely investor protection provisions mean the government will be sued if it introduces regulations or laws protecting the environment or workers that crimp profit making potential. The TPP is all about creating a supposed level playing field by reducing sovereignty. Yeah right, NZ will be on an equal footing with Japan and US with equal power at the secret investment adjudication courts they also want. TPP is the end game of corporate globalisation

Federated Farmers don't sound hopeful on benefits of TPP for agriculture
http://www.radionz.co.nz/news/rural/257971/tpp-benefits-for-farmers-doubted
 

The power of the dairy lobby? See no evil, hear no evil....
http://www.radionz.co.nz/news/rural/257965/deputy-mayor-says-he'll-be-sacked

Can't believe Fonterra have got away with this, it is soooo damn embarrassing on so many levels.

My understanding is that the Council accepted the buttermilk in to the Council's waste water plant and got their 40 pieces of silver for it.  Was it the greed of the Council blinding them to the reality of what they were doing?

Theo can talk all he likes about milk prices going up some time in the future, but the latest doing the rounds is that Fonterra advance is dropping to $3.80 from the 20 Nov payment.  If this is known now by the Board/management why is it not getting out to shareholders now? I heard OCD is saying $4.70-4.90 season, Synlait is $5 so why is Fonterra the only ones that don't appear to be facing their suppliers reality? Is there some higher pressure being applied to see the world through rose coloured glasses?
 
DC would you ask Theo for a catergorical denial that the advance rate is dropping?  

CO, how does Fonterra's cost structure compare to the competition? Or is that a big unknown?

Sorry Aj I don't have that info to hand and have dodgy internet where I am for next wee while.  

Seems the 'overheads in farming' cannot be controlled, even from the inside, so large measures taken to reap the profits in another fashion and after a century of hard work, in the same family enterprise.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1134...