The Government will face the political heat from Kiwi farmers if dairy liberalisation does not feature as a major win for New Zealand exporters in the Trans Pacific Partnership (TPP).
The US Government is now expected to go into "fast-track" mode to get the negotiations on the TPP finalised after the Senate last night effectively gave Barack Obama the authority to conclude the 12-nation trade deal. There is still one more vote to come to ratify Obama's "trade promotion authority" but it is seen as a fait accompli.
What is not yet a fait accompli are the projected gains for Kiwi farmers from the deal.
Trade Minister Tim Groser is being urged to slow the pace of negotiations down to ensure the New Zealand's agriculture interests are aggressively pursued during what has been billed as the "endgame" for the talks.
International Business Forum executive director Stephen Jacobi makes the point that there are a range of other "sensitive" market access issues that have still to be determined from NZ's perspective.
The major stumbling blocks for NZ dairy access are posed by Japan and Canada, which have import tariffs on dairy of more than 200 per cent.
Groser is on record in Parliament as saying that unless the TPP is in the "net national interest" New Zealand will not be a party to the agreement.
This parliamentary interchange with former Labour Trade Minister Phil Goff last October tells the story:
Phil Goff: When successive New Zealand governments have committed themselves strongly to the principle that the Trans-Pacific Partnership must be high quality and comprehensive, will he sign up to a deal that does not meet that standard by continuing to allow damaging market access restrictions on major New Zealand exports, such as dairy and beef; if so why?
Tim Groser: The only deal that I would recommend to our Cabinet, and through it to this House, is that we accept and pass the enabling legislation. It would be a deal that addresses all of our issues on a comprehensive basis, without any exceptions for our important export industries.
More than 18 months, the elasticity of Groser's commitment is starting to be tested included by John Key whose own position on TPP appears to be less hardline. "From what I've seen at the moment, if in theory we froze time and concluded the deal as I see it, it's net positive for New Zealand. But it wouldn't be doing enough for dairy for us to be comfortable and we would like to do some more there," Key told a post-Cabinet press conference earlier this week. "There are a lot of other sectors that would be very happy about it."
Dairy is highly protected globally.
Those protections are evaporating within the European Union as dairy farmers there move into a more competitive mode.
In such an environment, it does seem daft that other much bigger nations get exercised over the impact of a small country on global dairy trade.
But New Zealand doesn't sell the bulk of its milk and dairy products to a robust domestic consumer market.
About 95 per cent of dairy products produced here are exported. New Zealand also accounts for 35-40 per cent of all dairy products trade globally.
New Zealand has used a range of diplomatic trade experts to prosecute the case for TPP in Washington DC (former World Trade Organisation boss Mike Moore is the US ambassador) and in Ottawa where Simon Tucker is High Commissioner.
The two "tradies" turned diplomats have been making a valiant case for trade liberalisation where dairy is concerned. Canada frequently claims that Fonterra is just a state-trading enterprise which enjoys a quasi national monopoly on dairy exports from New Zealand. The debate in the US has modified since its own dairy exporters became more competitive. Then, earlier this year, Moore told a major agri-journal: "There are no supertankers of [New Zealand] milk sitting off the horizon, waiting to bomb Boston. We produce just 3 per cent of the world's milk."
It was a good try.
Over the next few months, we'll learn whether NZ's negotiators have been able to turn the debate around in New Zealand dairy farmer's favour or whether the Trade Minister will make good on his earlier pledge to Parliament if the result is less than satisfactory.