WELLINGTON, New Zealand: New Zealand's negotiations with China for a bilateral free trade agreement still have tough issues to crack to meet an early 2008 deadline, Trade Minister Phil Goff said Thursday.

The talks, which began in November 2004, will enter a 10th round in January with the deal New Zealand is seeking still to be matched by China, he told a China Business Forum in the northern city of Auckland.

"There are still hard yards ahead, but goodwill and a genuine desire on both sides for an outcome will, I believe, help us to reach an agreement," he said.

Good progress had been made on New Zealand's proposal to eliminate tariffs on all trade goods, though for sensitive products they likely would be phased out over a number of years.

The trade in dairy products, New Zealand's second largest export, was still an issue for China, he noted.

On services, investment and government procurement New Zealand would prefer to have Most Favored Nation status, he said, but China was reluctant to offer concessions.

Negotiations likely would now center on areas of key interest to both sides, rather than an across the board MFN deal, he added.

"Our level of ambition for a strong agreement started at a much higher level than China's," he said.

"However, Premier Wen Jiabao's comment during his April visit to New Zealand that the agreement should be comprehensive, high quality, balanced and of mutual benefit has been a useful reference point in negotiations," Goff said.

An ambitious agreement could see New Zealand exports increase by up to 400 million New Zealand dollars (US$271 million; €206 million) each year for 20 years above the level of growth which would have occurred otherwise, he said.

Bilateral merchandise trade between the two nations totaled NZ$6.6 billion (US$4.5 billion; €3.4 billion) in the year ended Oct. 31, 2006, and was running 2.5-1 in China's favor.

New Zealand was the first developed economy to enter talks with China for a free trade deal.