31 Jul 2012

New hurdles in 'tense' Russia-NZ trade talks

8:00 am on 31 July 2012

Trade Minister Tim Groser says the final stages of New Zealand's trade negotiations with Russia are being played out in a tense atmosphere ahead of its entry to the World Trade Organisation next month.

But Mr Groser is still hopeful a deal will be substantially agreed by the time Prime Minister John Key and his Russian counterpart Vladimir Putin meet at APEC in September.

Russians are fearful about what next month's entry into the free trade club of the WTO could mean for local jobs.

A culture of corruption and inefficiency has left Russian manufacturers vulnerable to imports from foreign firms that don't face the same costs, Radio New Zealand's economics correspondent says.

Mr Groser says New Zealand is the first of 30 countries hoping to complete trade deals with the Russians.

But the backlash has thrown up new obstacles to the deal.

Mr Groser says the political atmosphere in Moscow is very tense on anything to do with trade liberalisation as a result of the WTO.

"You can understand that, you know countries coming into a system, being asked to do things, giving up sovereignty, it's been a very, very difficult process for the Russians, so it's not been easy".

New Zealand is also facing uneasiness from Belarus, also part of the negotiations, along with another former Soviet Republic, Kazakhstan.

Belarus sells $1 billion a year of dairy produce to Russia, and local producers are nervous.

However, Mr Groser says the deal could lift investment and the transfer of know-how from New Zealand to Belarus, to the significant benefit of its dairy farmers.