Fran O'Sullivan on business

Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Free trade deal hinges on PM's charm offensive

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Vladimir Putin has serious form in the macho stakes: He's tranquilised a Siberian tiger to save a TV crew, attached a tracking device to a polar bear, ridden horses bare-chested and was this week filmed at the sharp end of a motorised hang-glider (suitably frocked-up in a white jump suit and goggles) teaching young cranes to fly on a new migration path.

He is also an ex KGB-head, a judo black belt and flier of fighter aircraft.

"So Mr President, with all your street cred and political bravura what's stopping you doing a free trade deal with New Zealand? ... We're just 4.4 million people to your 140 million ... There's nothing to be afraid of? ... Let's just get this deal closed so we can announce a free trade deal that will benefit both our peoples at a time when we must all take bold steps to ensure economic growth."

Of course that's not how John Key will play out New Zealand's position when he amps up the charm-meter for his face-to-face meeting with the President of the Russian Federation on Russky Island late this afternoon.

Pity.

Putin would probably appreciate a political leader who had the spunk to directly 'call him'.

Irrespective, the personal chemistry between Key and Putin will be all-important. Officials always ensure such meetings are strongly choreographed. But at the end of the day politics dominates. Some political leaders lose courage if they feel they cannot carry the domestic argument. Others make the case to their peoples.

And if Putin wants the deal done quickly - and Key will have to make some persuasive running on that score - he will order his Ministers and officials to increase the negotiating tempo and work through the necessary trade-offs.

The Prime Minister has good reason to be more than hopeful that the Putin meeting will result in a renewed commitment from both sides to get the deal done.

Both sides are playing a careful public hand.

But the verbal semaphore was clear when Key shared a panel with Igor Shuvalov, who is Russia's First Deputy Prime Minister at the opening session of the CEOs Summit.

The two positions basically came down to this:

Russia: We can't afford a classical pure deal (axe tariffs and open markets) which would put our agriculture exports at risk.

New Zealand: Yes, you can if you phase out your subsidies over a long period so your industry has time to adjust.

This was the successful formula that New Zealand used when negotiating the historic bilateral deal with China. Helen Clark's Government also committed New Zealand's dairy industry to help the fledgling Chinese dairy move to an advanced platform.

But the big breakthrough in the Chinese talks came when Premier Wen Jiabao announced he wanted a future where every Chinese child would drink a glass of milk a day and ordered his officials - in Clark's presence - to finalise talks within a set deadline.

Yesterday, Key tipped in another enticement: the tantalising prospect of Fonterra helping the Russian dairy sector in a similar fashion (although it's not clear to what degree Key had consulted Fonterra before playing the NZ company into the trade-off in front of the CEO summiteers).

The most positive signal that Russia means business is the recalibration of the Putin meeting which will be attended by senior figures from both sides: Shuvalov and NZ Trade Minister Tim Groser, who has extended his stay in Vladivostok to make progress on the detail.

Key has made it clear that a low-quality FTA would be a "road to nowhere". After years of badgering other nations to open their doors to agricultural competition New Zealand would lose all international credibility if is rescinds previous positions to simply notch up trophy FTAs.

But while the road ahead is more difficult for Russia - which is at an early phase of the liberalisation cycle - Shuvalov said openly that in his country's case not being integrated with the Asia Pacific at regional and bilateral levels is "more risky" than embracing change.

So, Mr Putin - will you put your imprimatur to this deal? Bagging a clean free trade deal with New Zealand will embolden Russia to make progress with the 34 other nations which have joined Russia's free trade queue. And another notch to your belt.

- NZ Herald

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