KEY POINTS:
The United States' dairy sector is looming as a major stumbling block for any New Zealand-USA free trade agreement (FTA).
There has been increasing optimism in New Zealand about such a deal - either as a bilateral FTA or as part of an expanded "P4" trading block with
New Zealand Chile, Singapore and Brunei - but American farm lobbyists worry that NZ dairy exports could flood their domestic market.
In the heartland of US dairying, Wisconsin, a Democrat congressional candidate, Roger Kittelson has warned industry in the state could be in trouble if a free trade agreement with New Zealand materialises.
Imports from New Zealand - such as milk protein concentrates and other milkpowders - would compete directly with Wisconsin's production of milk, cheese, whey, butter, cream and lactose.
"I would not support any trade deal with any country that will displace American industries," Kittelson told the Daily Kenoshan newspaper.
"We need to ensure that our food supply is secure and we are safe from unfair trade deals."
The US uses tariffs and quotas to keep out foreign dairy products - New Zealand has a quota of only 151 tonnes of butter a year - but Fonterra has built a profitable trade in milkpowders, including milk protein concentrates which did not exist when the quotas were framed but sell for high prices.
Kittelson questioned why the US should bother with a free trade deal involving New Zealand: "What are we going to get out of trading with a country with only 4 million people?"
"Obviously, New Zealand will reap the benefits of this agreement."
He also criticised the Republican presidential candidate, John McCain, for suggesting the United States sign an FTA with New Zealand.
That statement - made two years ago in a meeting with Foreign Affairs Minister Winston Peters - that "one of our top priorities is a free trade agreement with New Zealand," has been repeatedly trotted out by advocates of such a deal.
"Senator John McCain has publicly expressed his support for a free trade agreement with New Zealand," Kittelson said.
"I wonder if the dairy industry in Arizona and the Southwest agrees with that position."
His statement followed a July CNN poll which found that over half of Americans now oppose free trade and view it as a threat to American jobs.
In recent months, Trade Minister Phil Goff has visited Washington, - one of a long chain of NZ ministers seeking a free trade deal with the United States - and two weeks ago US Secretary of State Condoleezza Rice visited Auckland and offered hope that the two countries may one day strike a free trade deal.
Rice held separate meetings in Auckland with Prime Minister Helen Clark and Foreign Affairs Minister Winston Peters and acknowledged she had had a very good discussion about the issue with Mr Peters.
"I will take back the considerable interest that continues to be there on a free trade agreement," she said.
"The United States should be committed to a free trade agreement.
But Kittelson warned that higher prices for dairy products in the US compared to other areas of the world would benefit New Zealand dairy producers and hurt those in Wisconsin.
"Few issues directly affect eastern and central Wisconsin more than the fate of our dairy farmers," said Mr Kittelson who spent 24 years as a dairy marketing specialist and the past nine with the US Department of Agriculture's Dairy Division.
In March 2002 an economic report estimated that New Zealand exports to the United States would increase by 51 per cent in the case of a bilateral NZ-US FTA and 49 per cent in the case of an FTA linking NZ, Australia, and the USA.
US exports to New Zealand would rise by about 25 per cent and virtually every US sector would benefit. The adjustment costs for the United States would be minimal - production in the most impacted sector, dairy, would decline by only 0.5 per cent.
- NZPA