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A free trade deal between New Zealand and Russia is a step closer, with news that 'scoping discussions' between the two governmment have begun.

Trade Minister Tim Groser said Russia has agreed to proceed towards a formal trade agreement, subject to a satisfactory outcome of scoping discussions.

"This is a significant step which in the long term could have significant potential for New Zealand businesses looking to expand into the broader European market," he said.

Russia imported food worth US$30 billion in 2008 and was the world's fifth largest food import market. It was, said Groser, among the world's largest importers of meat and dairy products.

"Opportunities also exist in the wider agritech sector and in services where tourism and education are growing areas of interest," he said.

New Zealand wine is hit with a 20 per cent tariff, dairy products up to 50 per cent, fruit 10 per cent, wood 15 per cent and vegetables 9 per cent, says the Ministry of Foreign Affairs and Trade.

Dairy giant Fonterra, New Zealand's biggest exporter, welcomed news of the talks, saying that Russia was the world's
Russia is the world's largest market for imports of butter and cheese and a significant dairy export market for us.

New Zealand dairy exports to Russia last year, mostly butter and cheese, were worth approximately $120 million. More than half of Russia's internationally imported butter comes from New Zealand.

"Russia has the potential to become an even more important market for the New Zealand dairy industry and for Fonterra," said Kelvin Wickham, Fonterra's managing director of global trade.

Catherine Beard, executive director at Export New Zealand, said Russia offered significant potential trade opportunities for New Zealand, particularly as it was among the world's largest importers of meat and dairy products.

As well as these more traditional New Zealand exports, Beard said there were further opportunities for developing the new face of New Zealand's international trade.

"Looking towards the future, Russia could be a valuable trade partner for developing Kiwi agri-tech businesses, as well as our service sector - such as education and tourism," she said.

"If New Zealand becomes one of the first countries in the world to negotiate an FTA with Russia, we'll have a strong first-mover advantage in several market sectors.

"We eagerly await further talks in the coming months and offer our full support to developing this valuable trade partner, " said Beard.

There was a lot of water to go under the bridge, said Trade Minister Groser, but a Free Trade Agreement (FTA) with Russia and its customs union partners of Belarus and Kazakhstan could present "a unique opportunity for New Zealand to future-proof its relationship with an emerging economic powerhouse."

New Zealand exported $NZ187m of products to Russia last year - a modest total, said Groser, but there was a lot of potential and the "trajectory is positive."

New Zealand's exports to Russia grew 267 per cent from NZ$51.0 million in 2000 to NZ$187 million in 2009.

"An FTA could provide a boost to the trade relationship, and provide New Zealand with a significant 'first-mover' advantage, which would improve our position in the market relative to our trading competitors," Mr Groser said.

In a Q & A published along with the announcement, Groser said that Russia was interested in a FTA with New Zealand because it was "increasingly looking to the dynamic Asia-Pacific region as a driver for future economic growth."

As an experienced participant with a history of high quality and comprehensive FTAs, New Zealand was an attractive partner for Russia, said Groser.

New Zealand's exports to Russia have grown 267 per cent from NZ$51 million in 2000 to NZ$187.1 million in 2009. The average annual growth rate over this period was 23.1 per cent.

Groser said that while there has been a big jump in exports to Russia, they have not kept pace with that country's overall import increase, particularly in agricultural products, which were up around 500 per cent since 2000.

"With a huge population and a growing sector of wealthy consumers, demand for luxury goods, and in particular high-quality food and beverage products, is high. This presents an excellent opportunity for New Zealand firms."

"Russia's position as a significant food importer has clear benefits to New Zealand. Russia is looking to further develop its agriculture sector. This presents opportunities for New Zealand through exports of our agriculture systems, and through exports of agricultural, forestry and construction equipment," said Groser.

Scoping discussions are preliminary talks where both parties try to set out the overall scope and ambition for any FTA. Steps are taken to then initiate formal negotiations.


- HERALD ONLINE