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John Armstrong is the Herald's chief political commentator

John Armstrong: Key to push Putin on stalled FTA talks

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Key and Putin are set to meet face to face for the first time. Photo / AP
Key and Putin are set to meet face to face for the first time. Photo / AP

Prime Minister John Key is more hopeful than confident that Russian authorities now have the political will to complete the negotiation of a free trade agreement which satisfies New Zealand's expectations.

Mr Key flies to Vladivostok today for the annual summit of leaders from Asia-Pacific Rim economies where he has scored a highly sought after one-on-one meeting with the conference's host, Russian President Vladimir Putin.

Mr Putin became Russia's President for the second time in March.

At previous Apec summits, Mr Key appeared to strike a rapport with Dmitry Medvedev, Mr Putin's immediate predecessor.

It will be Mr Key's first face-to-face meeting with Mr Putin.

While Mr Key may raise concerns about what is happening in Syria - the Russians back the Assad regime and have frustrated United Nations efforts to end the civil war - the primary item on the bilateral meeting's agenda is the stalled negotiation of a ground-breaking free trade agreement (FTA) between New Zealand and Russia.

Trade Minister Tim Groser has been to Moscow twice in recent weeks to try to rescue the negotiations, which have dragged on for two years.

The major sticking point has been Russia's worries about cheap New Zealand agricultural products shutting out domestic producers, while New Zealand insists any deal must be "high quality' in terms of coverage and the phasing out of tariff barriers.

Russia's reluctance to conclude a deal has been exacerbated by its accession to the World Trade Organisation, membership of which has meant economic trade-offs detrimental to Russian industry and necessitated cutting tariffs on all dairy products, for example, from around 20 per cent to under 15 per cent.

On Monday, however, the Russian Embassy in Wellington said it was Moscow's "firm intention" to complete negotiation of an FTA by the end of the year.

That assurance will almost certainly be echoed by Mr Putin during and after his meeting with Mr Key.

The shift of tack by Russia may be the result of Mr Putin planning a surprise initiative as this year's Apec chairman. There is talk of Russia coming up with an alternative to the Trans-Pacific Partnership (TPP) , the mechanism through which New Zealand and eight other Apec members are trying to negotiate a "high-quality" free trade pact.

Neither Russia nor China is a member of the United States-dominated TPP, and Russia does not see the grouping as being the precursor for a wider Asia-Pacific free trade area.

Mr Putin's competing and still vague "Eurasian-Pacific" initiative would include Russia, China and other central Asian nations and ultimately link Apec to the European Union.

In order to be credible, however, the initiative will require that Russia shows a willingness to forge free trade agreements of the kind it has been negotiating with New Zealand.

New Zealand, however, is wary of the domestic political difficulties facing Mr Putin and his colleagues when it comes to cutting tariffs.

Back in 2010, Russia took up a suggestion from Mr Groser that the two countries hammer out an FTA which, if it comes to fruition, will be the first of its kind for Russia.

Last week Mr Groser would not rule out progress being made in Vladivostok, but said it was "now very much up to the Russians".

While in Vladivostok, New Zealand's Trade Minister will meet his TPP counterparts, with ministers expected to reaffirm progress in negotiations, which have now reached a critical stage. However, dealing with the various sticking points is on hold until the outcome of the American presidential election is known.

Meanwhile, New Zealand will also be keeping a close eye on another TPP-like arrangement, the fledgling Regional Comprehensive Economic Partnership (RCEP), which is being put together by members of the Association of Southeast Asian Nations (Asean).

Mr Groser said there had been exploratory discussions for several years on something which could end up being a vast regional free trade area.

New Zealand would be a member by virtue of its free trade agreement with Asean.

Mr Groser saw the RCEP as "useful insurance" should the TPP negotiations fail to produce a result.

"We are not going to put all our eggs in the TPP basket," he said.

The TPP has been seen by New Zealand as a back-door means of getting a free trade agreement with the United States. The latter is not party to the fledgling RCEP, however.

- NZ Herald

John Armstrong

John Armstrong is the Herald's chief political commentator

Herald political correspondent John Armstrong has been covering politics at a national level for nearly 30 years. Based in the Press Gallery at Parliament in Wellington, John has worked for the Herald since 1987. John was named Best Columnist at the 2013 Canon Media Awards and was a previous winner of Qantas media awards as best political columnist. Prior to joining the Herald, John worked at Parliament for the New Zealand Press Association. A graduate of Canterbury University's journalism school, John began his career in journalism in 1981 on the Christchurch Star. John has a Masters of Arts degree in political science from Canterbury.

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