Dairy is a big hurdle of TPP discussions, with New Zealand seen as a threat to other dairy-producing countries.

Dairy is proving to be a difficult hurdle at Trans-Pacific Partnership (TPP) discussions in Hawaii this week, with some countries cautious about New Zealand's competitive dairy industry.

Reuters has reported a major sticking point in the talks is dairy, with Mexico under pressure to give Australia and New Zealand more access to its markets. However, Canada was resisting demands to open up its protected local industry.

ASB rural economist Nathan Penny said based on information about the TPP talks, it seemed the United States, Canada and Japan were all resistant to opening up their agricultural sectors to foreign competition.

He said Japan's dairy industry does not produce enough for the country's needs, but they have yet to reduce barriers to trade.

From New Zealand's point of view, Japan would be a good market due to its size, lack of competition, the older farming population and the shortage in some dairy products, Penny said.

"We are much more efficient than Japanese producers. It would be a huge opportunity for us, hence Japanese producers in part are heavily lobbying their own government to ensure that protection remains in place. Their industry would go through a structural change if opened up to competition," he said.

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New Zealand Trade Minister Tim Groser told TV3's The Nation that he was looking for "commercially meaningful access" for New Zealand's dairy industry into other markets.

"I'm not going to be dogmatic about how to define that, but there's nothing on the table yet that allows me to recommend to the cabinet that we should sign this deal at this point," he said.

The Canadian dairy industry was also highly protected - the Business News Network in Canada reported dairy was protected from foreign competition by tariffs that can run as high as 246 per cent.

Without a quid pro quo from Canada, the US was also unlikely to open up, Penny said.

"We're reliant on two deals to get one."

Without knowing the details of the agreement, Penny said it was difficult to determine how much the New Zealand dairy industry would affect those of other countries.

"For us, from an opportunity point of view, dairy is a big one. If we don't get a good deal on agriculture, then it's not really doing the job for us."

A better dairy deal was essential for New Zealand dairy industry representatives, with chairmen of the Dairy Companies Association of New Zealand (DCANZ) and DairyNZ urging TPP governments to give dairy as good an outcome as that of other goods.

DairyNZ chairman Hon John Luxton said there was no good reason for dairy to be left behind.

"I urge ministers to remember that this is an agreement to grow trade and support economic prosperity. Not one to maintain protection and distortion," he said.

"We are a small country, of four million people, where dairy is very important to our economic wellbeing. But we are not asking for a handout, our farmers are not subsidised, we do not protect our market. We just want a level playing field."

The "Saudi Arabia of milk"

The Wall Street Journal dubbed New Zealand the "Saudi Arabia of milk" in 2008, likening its dairy industry to the oil industry in Saudi Arabia, and it is a title that has stuck.

New Zealand is a giant in the dairy industry, with Fonterra the world's largest global milk processor and dairy exporter.

New Zealand's exports of milk powder, butter and cheese were worth about $12 billion in the 12 months to June 30, down 24 per cent on the previous June year.

Penny said New Zealand was still the one producer of dairy products that could influence global prices.

"The world prices of milk powders in particular, we're probably the dominant exporter in that sense. Where our production goes prices do tend to follow," he said.