Better deal with China on the cards

New Zealand and China have agreed to scope out a better free trade deal.

Prime Minister John Key met with the Chinese President Xi Jinping in Beijing on Tuesday night where they both committed to exploring an upgrade to the 2008 agreement.

Mr Key went to Beijing this week with one main focus - carving out a much improved trade deal for exporters.

Mr Key emerged from the meeting pleased to have come away with some progress.

"He [President Xi] said there's very strong consumer demand in China for New Zealand products.

"He wouldn't be standing in the way of New Zealand getting better access."

The two leaders agreed for both country's trade ministers to meet in Peru in a few weeks time to nut out the details.

Mr Key said he had received assurances that more access for New Zealand's dairy products would be critical to any new deal.

"They've gone from being a little more on the fence on the issue to saying look we understand it's important to New Zealand. We're a valued partner and actually China's consumers want to buy more of our products.

"They understand that even though we [dairy] are 40 percent of the market here, how important it is to us and the pressure on New Zealand dairy farmers because of prices at the moment."

Mr Key said in the spirit of the free trade agreement that was signed in 2008, China was genuinely going to find a way to progress it.

Under the current deal, dairy products such as whole milk powder are hit with higher tariffs when they trigger volume safeguards. Those safeguards are often met quite early in the year.

Chair of Fonterra John Wilson said volumes were only going to keep increasing. He said the market was very different to what it was when the agreement was signed in 2008.

"We're working with government and would like to see safeguards brought down, quicker than what's in place."

Mr Key said New Zealand would not renegotiate the FTA if dairy was not included.

He said forming an extradition treaty with China was also being considered, but not in connection with the FTA.

Mr Key said the Chinese president wanted between 30 and 60 people living in New Zealand to be sent back to face charges of fraud and embezzlement.

"He's been raising that issue with me for quite a number of years. They're not saying if you give us one, we'll give you the other."

Former trade negotiator Charles Finny said there was a lot of water to go under the bridge before formal negotiations on the upgrade could take place.

"The 2008 agreement it was a three and a half year/four year negotiation. Plus it was almost an eight month preparation for the that negotiation. So I'm not at all surprised to see this taking a while," he said.

Mr Key said the trade ministers would ultimately work to put a package together that sets out a framework for a better trade deal.