Hansard and Journals
Dairy Industry Restructuring Amendment Bill (No 2) — Second Reading, In Committee, Third Reading
Dairy Industry Restructuring Amendment Bill (No 2)
Hon JIM ANDERTON (Minister of Agriculture) : I move, That the Dairy Industry Restructuring Amendment Bill (No 2) be now read a second time. The Dairy Industry Restructuring Amendment Bill (No 2) was introduced into the House on 14 August this year. It was read for the first time on 21 August and was referred to the Primary Production Committee for consideration. The committee received and considered 10 written submissions on the bill. The bill amends the Dairy Industry Restructuring Act 2001. It provides for the export rights to 11 designated dairy export markets, at the expiry of the rights currently held by the Fonterra Cooperative Group. The bill will complete the transition begun in 2001 to a new industry structure, without the monopoly powers of a statutory marketing board. It will also provide certainty to all the dairy industry’s stakeholders about the future access they have to these markets.
As well as provisions relating to dairy export markets the bill also extends existing regulation-making powers relating to the New Zealand Dairy Core Database. This is an important industry-good asset containing information on dairy herds and their production performance. The key issues raised in the submissions on the bill related to which export markets should have all restrictions removed and which should continue to be regulated under the new system, the term of allocation for export licences, how long allocated export licences should be valid for, and the scope of powers given to the chief executive of the Ministry of Agriculture and Forestry for the purposes of monitoring and enforcing compliance with new allocation rules.
Issues about the current management of the New Zealand Dairy Core Database were also at issue. Of the current 11 designated markets, the bill provides for all export restrictions to be removed from two markets and from parts of four other markets; in other words, these two markets will no longer be designated markets. In the case of four further designated markets, new, narrower definitions are provided for. The bill provides for export licences to all remaining designated markets to be reallocated periodically among New Zealand dairy companies, on the basis of each company’s share of total milk solids collected from New Zealand dairy farmers. The new arrangements will come into effect as the initial allocations made to Fonterra in 2001 expire, from now through to 2010.
Some submissions to the committee strongly supported removing export restrictions to certain markets, as this would complete the transition begun in 2001, and provide more export opportunities for dairy companies. However, one submission strongly opposed removing export restrictions to some markets, on the basis that this could risk destruction of some value to New Zealand interests. The committee has not recommended any change to which market should remain regulated and which should have restrictions removed. I believe that the committee has considered this matter carefully in the context of the relevant purposes of the principal Act, and I commend its final decisions and recommendations to the House.
The fact is that for some markets, because of the particular import arrangements operating, export licences allocated to multiple participants would not be legally enforceable. The New Zealand Government could therefore not guarantee that licence holders would be able to exercise their rights, even if those rights were actually given. Therefore, the New Zealand Government, by removing export restrictions for these markets, will be providing opportunities for a wider group of New Zealand - based companies to expand their export activities. For one other market the benefits of regulation are not sufficiently large to justify the cost of continuing a regulation.
The bill provides for export licences to be allocated to multiple participants on a periodic basis. This was to be done annually, for the next 3 years, which was proposed in the bill, but moving to every 3 years—that is, triennial allocations—from 2011 onwards. The proposed triennial allocation period was intended to provide a balance between the interests of growing companies, which would tend to favour a shorter allocation period, of course, and those of established companies, which would tend to favour a longer allocation period. The committee has recommended that export licences should always be allocated annually; in other words, the committee recommends not moving to triennial allocations in later years. As the committee points out, no matter what the allocation period is, companies will be able to predict with relative accuracy what their share of export licences will be, as each allocation approaches.
The bill provides a number of powers to the chief executive of the Ministry of Agriculture and Forestry for the purposes of monitoring and enforcing compliance with the rules of allocation for export licences. These include powers of entry, search, seizure, and the power to require certain information. After seeking clarification of the rationale and scope of these powers, the committee has recommended a number of amendments. These amendments aim to clearly define when and how these powers will apply, and to generally make the monitoring of the compliance regime more workable and effective. I believe they are all in the spirit of good legislative practice, and I am therefore appreciative of the committee’s work in this regard.
The bill extends existing regulation-making powers relating to the New Zealand Dairy Core Database, so that if a copy of the database is vested in an entity other than the current operator, which, of course, is the Livestock Improvement Corporation, regulations can be made to apply to any new entity. This will ensure the ongoing integrity of the database, for the benefit of the whole industry.
This bill represents an important step in the evolution of the New Zealand dairy industry. It provides a fair and equitable mechanism for a wider group of companies to access designated dairy export markets. I would like to thank the chairman and members of the Primary Production Committee for their expeditious but thoughtful consideration of the bill and for their timely report, which was tabled on 31 October this year. I commend the bill to the House.
Hon DAVID CARTER (National) : National will be supporting the Dairy Industry Restructuring Amendment Bill (No 2) through all its stages, and I thank the Minister for his comments. To my mind this legislation shows the maturity of the dairy industry and the way it has moved a huge amount since the late 1990s, when we considered whether there was a better way than the old mechanism of sale through the New Zealand Dairy Board. Following the initial restructuring of the dairy industry, we saw the formation of a very large company called Fonterra, which collects 95 percent of all milk produced in this country. The company has clearly done very, very well in the last few years, and I congratulate Fonterra on its performance.
I also share the celebration of dairy farmers who now find themselves seeing a record payout. This is driving the whole of the economy, and if members want further proof of that, they can just look at the comments made by the Governor of the Reserve Bank when he reviewed interest rates a couple of times ago. He made the comment then that interest rates would remain high because of the Fonterra payout. It was interesting that he made those comments as the payout was being predicted by Fonterra, and certainly before any dairy farmers had actually received the benefit of that additional payout.
What the statement proves, and what all New Zealanders need to realise, is that the economy of New Zealand is hugely affected by the success of the whole of the dairy industry. Because of Fonterra’s dominance within that industry, the success of Fonterra affects the livelihood and the standard of living of all New Zealanders. So National is pleased at this further step in the maturing of the dairy industry, and is certainly heartened by the performance of the dairy industry since that time.
The Minister said that the Primary Production Committee handled its role efficiently and reported back on time. Again, it is a disappointment to me to find that we are in urgency—the final rush before Christmas—having to now put this bill through all its stages, when it has been sitting on the Order Paper for the whole of November and could have been done under the normal process. But the legislation must be passed by the end of this year. If members look at the commencement date, which is covered in clause 2, they will see that the legislation will come into effect on the receiving of the Royal assent. We all know that even the Governor-General requires his Christmas holidays, so here we are in urgency making sure that this bill is actually put through. I acknowledge that the whips rang me quite recently to say that we would be changing the Order Paper this morning as a means of making sure that this legislation would go ahead of the taxation legislation. That is how critical it is that the bill be passed.
I will make a couple of comments about the procedure through the select committee and about one or two of the changes we made. As the Minister said, there is the issue of the allocation period for licences. We heard submissions both ways as to whether it should be on a 3-yearly or a 1-yearly allocation basis. Although we were persuaded in the end that there would be an additional cost associated with an annual allocation process—we did not think those costs would be huge—we were very keen that the industry maintained a system that allowed maximum efficiency within the industry. That means that we are encouraged by the dairy industry restructuring legislation and by the way that new players have been coming into the scene and competing against the dominance of Fonterra.
I do not think that Fonterra has much to worry about, because it is such a dominant player, but these new players—the likes of Synlait and Open Country Cheese—have been good for the industry by giving the farmers of New Zealand other choices as to where they may decide to send their milk. We were keen to make sure that the allocation process reflected what we predict, from the select committee point of view, will be ongoing new entrants into this industry. This has to be good for farmers and also for the whole of the New Zealand economy.
The committee was certainly also concerned, initially, about issues around the powers of entry, search, and seizure. We put a lot of effort into this, but at the end of the day the committee was convinced that whilst the measures within the legislation are quite severe, they are necessary. Under no circumstances can the Government entertain not being in a position to carefully monitor compliance with the actual figures by which these quota allocations are finally made. They will be made on the basis of the milk collected from individual farmers. On that basis it will be a direct proportional share of the dairy industry, and the Government needs to have the ability to make sure that that system is sound and complied with by the industry—not that I suspect any of the players who are responsible would attempt to cheat that system.
The final issue I will touch on is the core database. We received submissions—particularly from one company, Ambreed New Zealand—that argued that what is in place now has not delivered fairly, as was expected by the select committee when it heard the original dairy industry restructuring legislation back in early 2000 or 2001. Having listened to the arguments from Ambreed, I sympathise with the position it finds itself in. As it clearly said to us, price equals access, and I think there is an issue around whether we got that legislation right in the original Dairy Industry Restructuring Act. Having said that, I point out that the committee was quickly made aware that the very issue raised by Ambreed was actually outside the scope of the bill. I think it is important that Parliament notes the words in the report from the select committee: “This matter, however, is outside the scope of the bill, but needs further investigation.” I suspect that over time that will occur.
This legislation is necessary. It has to be passed by the end of this year—in other words, within the next few days so that the Governor-General can put his signature to it and then himself have a holiday. I think the select committee did a very admirable job with this complex legislation. This legislation will put the dairy industry in good heart for the future. This industry is also of vital importance to New Zealand.
Dr ASHRAF CHOUDHARY (Labour) : I will take just a very brief call on the Dairy Industry Restructuring Amendment Bill (No 2). As the previous speaker said, this is a bill on which the Primary Production Committee took a very bipartisan approach. We all worked together on it for the farmers of this country and for the industry. We are very pleased it is to be passed before the end of this year, because it will be applicable from early next year.
The bill removes the restrictions of exporters through to markets, and, as was highlighted before, it gives us a reference period for determining the allocation. That means the data will span three seasons rather than two, which was originally in the bill. Also, it highlights the power of entry, search, and seizure of documents in the workplace and talks about the control of a core database.
Overall, it is a very good bill. As the Minister said before, it is really an evolution of the dairy industry from 2001 onwards. It will certainly allow exporters a much better and more streamlined opportunity to export our dairy products around the world.
With those few words, I commend this bill to the House and look forward to the deliberations on it. Thank you.
ERIC ROY (National—Invercargill) : As those listening may have ascertained, there is a great deal of unanimity on the Dairy Industry Restructuring Bill (No 2), so I will not be taking a very long call. I think there are some salient things that need to be said, and I will run through those.
The first is that the Primary Production Committee, under the chair of David Carter, continues the tradition of looking for the best outcomes in solving whatever comes before it. There is always a great deal of goodwill and unanimity about what we end up doing, and this bill is no exception. We recognise the significance and importance of the dairy industry to New Zealand, and we gave earnest consideration to the issues raised in the Dairy Industry Restructuring Bill (No 2). This bill was quite specific. It was not wide ranging, and, as has been suggested, some submitters wished to bring up matters that were not contained within the bill. Whether or not we are sympathetic to them, we are limited in what we can and cannot do.
When the Minister of Agriculture introduced this second reading, he made a comment that I think we can identify with. He said that this bill is part of the evolution of the dairy industry. The dairy industry is New Zealand’s most significant exporter. Fonterra is our biggest company; it generates huge amounts of revenue through exports. But the dairy industry is an evolving industry, and one of the interesting things is that we have seen that it does have the maturity to actually advance. It is not trapped in any kind of time warp.
Besides Fonterra, there are now seven other players, even though their combined mass occupies about 5 percent of the dairy industry. The provision allowing those players to operate is what we actually had to deal with, and the allocation of opportunity in the area of export markets. There are perhaps four conditions that come into decisions about this matter. There are the conditions and rules of the importing country, the desires and expectations of the exporters, the desires and expectation of the producers, and the international rules that exist under the World Trade Organization. All those things kind of come together, and we had to look at allocation of specific markets. Other speakers have outlined the issues surrounding that.
As David Carter said, one of the issues that perhaps has a bit of traction but is not within the bill is the way in which the core database is operated. His comment that price is access sums it up. I think an issue that the industry needs to address is whether what exists now is serving the industry in the best possible way. If the industry is to continue to progress, it needs to have all the information in the database relatively available to other players; otherwise, we are limiting the genetic resources, the sharing of information, and all of those matters. As I said, this matter is outside the scope of the bill and therefore was something we could not consider. However, it may well be addressed at a different time in a different forum.
I am pleased that the Minister is prepared to accept all the amendments recommended by the select committee. We gave quite considerable consideration to how this measure can best operate, and I think we are all pretty much happy with the bill as it is reported back in this second reading. As has been stated, National will support this bill through all its stages.
NATHAN GUY (National) : I think it is important that I make a contribution to this debate. I want to put it on the record from the start that the company I am involved with is a Fonterra supplier and a shareholder in LIC, but the Dairy Industry Restructuring Amendment Bill (No 2) is going to enable greater competition in the dairy industry, which I think is fundamental. The important point I want to make around those two companies is that there are seven players outside of Fonterra, albeit they are small players in the overall dairy industry. But it is important that the markets are opened up and that Fonterra does not have a monopoly over them. I think that that is what this bill sets out to achieve.
I also make the particular point that here we are, at 20 to 12 during the day. We are in urgency—we do not normally sit at this time of the day—to put this bill through Parliament because it is important. But I say to the Minister and the other members over on the other side of the Chamber in the Labour Government, and to those members who prop up the Labour Government, that this bill has been lurking around on the Order Paper for about the last month. Yet here we are, having to put this legislation through in a mad panic under urgency. It is important for the cornerstone of our economy that it goes through today—extremely important—and we will support it in going through. But I make the point that the Government has had to slam the House into urgency because it is so hopeless at managing the things on its Order Paper. This is a hopeless Government. It has had a month to get this legislation through, but here we are today, at 20 to 12, having to put it through under urgency.
Another important point that I make on this bill—and I will probably make further contributions on it when we get into the Committee stage—is that it will allow export licences to be allocated on the basis of a proportion of the milk solids collected from dairy farmers, with a minimum threshold of 0.1 percent of the total milk solids collected. Those export rights will become available between 2008 and 2010 on a yearly basis. That is a very important point to make there. Those rights outside that period will become available from 2011 on a 3-yearly basis.
The other important point, which has been touched on but which I think it is worth making a further contribution on, is around the core database that LIC tends to have a monopoly over in the current regime. It was a little outside this bill to get into the nitty-gritty of that, but I think that with Mr Carter’s chairmanship of the Primary Production Committee, it may be something that the select committee seeks to have a further look at in 2008. It is not necessarily fair that price dictates the level of service for the other minority companies that are trying to get involved in providing a service and dealing with the core database.
So those are some issues that I think we need to make a contribution on. I would like to get the Minister, in the Committee stage, to talk about the definition of milk solids, because that would be an important contribution. I think the Minister should tell the House that whether “milk solids” is written as one word or as two words is significant, because the words have a different definition. So it would be worthy of the Minister in the Committee stage to make a contribution and explain the definition and why that is so, for the benefit of listeners.
National is supporting the passage of this legislation through the House. We wonder why we need to be in urgency to get it through, because if the Government were organised we would not need to be ramming it through under urgency.
Hon David Carter: Oh, here we go—the Labour leftie.
R DOUG WOOLERTON: In reply to David Carter, I say we will pay it back, on our own terms and when we think it is appropriate—with the appropriate hype and all the rest of it as members would expect. So I tell those members they will not miss it when we do it—
Colin King: Go home and have a look at the news.
R DOUG WOOLERTON: —and they should keep an eye on the news, and they will get there.
I think that it is right to say that New Zealand First supports this Dairy Industry Restructuring Amendment Bill (No 2). I was listening to the previous speaker Nathan Guy, and I just want to run over the things that have made the New Zealand dairy industry great.
Hon David Carter: A lot of people want to run over you.
R DOUG WOOLERTON: I know that a lot of people want to run over me, and I know the reasons they want to. But I will talk about what made the New Zealand dairy industry great, and why we in New Zealand First have concerns about it. A lot of it is encompassed in this bill, but not in the detail. This bill allows the transfer of quota that was shifted from the New Zealand Dairy Board to Fonterra, and that will now go further out to other dairy companies. I will give a couple of illustrations of that.
The New Zealand dairy industry has done well, because we have ensured that it stayed in the ownership of New Zealand farmers and in the ownership of New Zealand, and we have made no bones about the fact that we would protect that industry in any way, shape, or form that we could. It has been a longstanding joke that if the Dairy Board of the day got into trouble it would come to this Parliament, talk to the Prime Minister and the Minister of Agriculture, and ensure that laws were put in place to guard the dairy industry. Now we are seeing proposals to split up the dairy industry and to open it up to overseas owners and wider ownership.
People do not remember, and many people do not understand, that it is the quotas we hold, and the quotas that have allowed us to get into markets—mainly in Europe—that have provided the cream on top of the cake for the dairy industry. Those quotas were held and jealously guarded by the Dairy Board and by Fonterra. Now they are going wider, and I hope that the companies that pick them up respect that, and guard them as jealously and as carefully as has been done in the past.
Dairy farmers, traditionally, have understood something that beef farmers, sheep farmers, and wool farmers in New Zealand have not understood. They have understood the value of vertical integration. Individual farmers have understood that they could not market their products themselves, and they could not turn milk into cheese themselves. So they hired “suits” or, in the early days, white-coated people, dairy factory managers, to do those things while the sheep, beef, and wool industries allowed overseas interests to dominate the market. They became price-takers, and the Vesteys, Hellabys, and all the rest of them clipped the ticket on everything. So that made those industries that allowed overseas companies to dominate the marketing of their products weaker than the dairy industry.
The dairy industry kept our marketing in-house, we kept it in New Zealand, and we make no bones about it. That has been the strength of the dairy industry. Dairy farmers have always understood that they had to hire marketers, they had to market manufacturing people, and they had to market their products in other countries while retaining ownership, retaining control, and making sure the returns thereof came back to this country.
A couple of smaller dairy factories are starting up around the country as we speak. One is called New Zealand Dairies Ltd, in Studholme, not far from Timaru, but we are seeing in those companies a lack of capital. We are seeing them go to the people they are selling to. In this case it is a bunch of Russians. I do not mean a bunch of Russians in that they are not honest; I mean—
Hon David Carter: Xenophobia!
R DOUG WOOLERTON: No, no. This is a fact, and these people have put money into this company and now want to control it. I say to Mr Carter and to this House that xenophobia is what has made the dairy industry great. The dairy industry did not follow the stupid, naive market views that were followed by the meat industry, which is now giving profits to everybody except farmers; or the wool industry that is now on its knees, giving profits to everybody except farmers; or the sheepmeat industry, which is now giving profits to everybody except farmers. That is what—
Colin King: That is rubbish.
R DOUG WOOLERTON: Oh no—it is not rubbish, because the dairy industry that once was the poor cousin of agriculture now dominates agriculture and is earning in excess of 20 percent of our export earnings—because of xenophobia. We decided we would keep this industry within this country and we could control it, and we should still be doing that. We should not allow other countries or other people to come in and take the profits away from our farmers. We have the ability in this country to provide the money we need for this industry.
Hon Member: Come on, Stalin!
R DOUG WOOLERTON: This is not about Stalin. I would just like people who are listening to know that the National members are laughing and mocking in a way that seems quite sad to me, because I grew up in a National Party that took the ownership of the dairy industry seriously. It believed that the ownership of the dairy industry should be in the hands of New Zealand farmers. That was the National Party I grew up in, and now National members mock me for making this speech to say that this industry should be New Zealand - owned. I am not saying that Fonterra should have a total stranglehold on the industry—
Eric Roy: You just did.
R DOUG WOOLERTON: —but I am saying there should be legislation ensuring that whoever starts up dairy farming in this country is a New Zealand company with New Zealand ownership. I hear Mr Eric Roy, who now comes to this Parliament to earn the substantial part of his living. Mr Roy owns a big sheep farm down out of Gore but it does not make enough money for him, so he has to come to this Parliament as an MP to supplement his income, and now he sits here and mocks me when I am trying to protect the dairy industry. Instead of flitting around the world, why did he not involve himself in his industry and protect it while the dairy people were protecting theirs?
Eric Roy: I’ll put my record up against yours any day.
R DOUG WOOLERTON: Well, the member can put his record up against mine. I would like to see that, actually, because my record on dairy company directorship is a damn sight better than Mr Eric Roy’s record on his pitiful sheep-farming career. I tell members that if they look at the returns going to sheep farmers and at the returns going to dairy farmers, then therein lies the story. There is no need to look further. But because of a philosophical belief in unfettered markets, Mr Eric Roy is happy to see the dairy industry go to whoever is the highest bidder. We in New Zealand First are not.
Hon David Carter: Oh, rubbish!
R DOUG WOOLERTON: Mr Carter can say “rubbish” and we will hear his contribution, but Mr Carter is happy for other people beyond these shores to involve themselves in the New Zealand dairy industry. We in New Zealand First are not.
- Bill read a second time.
Part 1 Amendments to Dairy Industry Restructuring Act 2001
Hon DAVID CARTER (National) : I think the important section of the bill is around clause 2, “Commencement”. This legislation has to be passed by 31 December 2007. The date is important because it was the original date on which the allocation to Fonterra of these licences was set. The history goes back to the issue around quota allocation being very difficult to determine at the time of the dairy industry’s restructuring in 2001, when the Dairy Industry Restructuring Act was going through Parliament.
I point out that although the Act went through Parliament in 2001, the discussions on the deregistration of the New Zealand Dairy Board and the opening up and restructuring of the industry actually commenced through the late 1990s. I think Parliament should record today the efforts made by a former Minister of Agriculture, the Hon John Luxton, who drove this process and initiated it. It was something that at the time was not widely accepted by some of the dairy—
R Doug Woolerton: While he and Wyatt Creech were starting up a cheese factory.
Hon DAVID CARTER: Well, Mr Woolerton says that they managed to start up a cheese factory, which was a very successful initiative. It was allowed by this very legislation, and it is something that that member ought to applaud instead of knocking. But that member is at the stage when he is living in the last century, I assure members. Mr Woolerton is living in the last century, but I just say to him—I have a few things I want to say, but I do not want to use up my time—that this industry has been moving on for a long time. It is time that “Rip Van Winkle” woke up and took the chance to look at what has happened, because we should be very proud of this industry.
I say to the Minister in the chair, Jim Anderton, that one of the interesting little developments in the Primary Production Committee was to be found in the definitions. We found, to our surprise, that the whole of the quota issue is determined by the amount of milk solids collected on New Zealand farms. Through this process we found, to our absolute amazement, that the word “milksolids”—and I say it as one word because we found there was a reason why it had to be one word rather than two words—had never been defined in legislation. So we have included that definition to make sure it is there in the legislation so that any subsequent allocation is made on that basis.
The other issue I will touch on, which I did not mention in my first contribution, is around the calculation of quota and the ability of companies now to do that over a period of three seasons. This was something that struck the select committee. The select committee members know, because of the climate change issue as much as anything else, about the issue of droughts affecting particular regions. It is certainly something that is on the minds of the select committee members.
For example, if Westland were to be devastated by a drought in any one particular year, then more than that year would be affected in production terms. The effect of that drought could flow over 1 year, 2 years, or even 3 years. The select committee recognised that and has therefore given the ability for the calculation of quotas to be on the basis of recognising the effect on more than 1 year or 2 years’ production, but in actual fact 3 years’.
I think those are the main points, but one that is certainly of annoyance to members on this side of the Chamber is the fact that the Government, after having had this bill on the Order Paper for some time, has not been able to move it in normal sitting time. Here we are now in urgency, driving the bill through all its stages so that the Governor-General can get it on his desk prior to the Christmas break, sign it, and make sure it is done.
This issue has been around since early 2000. The Government has had 7 years, and now here we are, in the very last, dying days of this Parliament—in fact, in the dying days of this Government, I suggest—rushing it through all its stages.
Dr Ashraf Choudhary: Dream on!
Hon DAVID CARTER: Ashraf Choudhary laughs, but he is the only member on that side of the Chamber who is laughing. At least this bill is finally being attended to, and for that I congratulate the Minister.
ERIC ROY (National—Invercargill) : As has been suggested, there is a great deal of unanimity about this Dairy Industry Restructuring Bill (No 2). However, it is appropriate that we need perhaps to highlight one or two natural issues because, as the Minister said, we are in a process of evolution and we may want to come back and look at some of the things recorded in this debate.
I draw members’ attention to clause 4, “Interpretation”, in Part 1. I note the somewhat vitriolic attack on my good self by Doug Woolerton in the earlier stages of this debate about the need to be xenophobic. If he is prepared to look at who is an eligible participant within the interpretation provision of this legislation, he must be shaking in his shoes. There are two qualifications to be a participant: an entity must hold an export licence and it must collect at least 0.1 percent of the milk production of New Zealand. For a member who is claiming that we need to be xenophobic and need to protect the monopolistic structure, he is allowing and sanctifying in this legislation a provision that someone who holds one-thousandth of the production of New Zealand and an export licence is out there competing in the export field. I am sure this must be of great concern to Mr Doug Woolerton, who has this view that it is extraordinarily necessary to be a monopoly.
I would just make the point that we are in a state of evolution. That is good, because we cannot stand still—we go either forwards or backwards. I believe this legislation is going forward. But the time may well come when we say: “Hang on, we used to have a monopoly and now it is an oligopoly.” As I said in the second reading, as far as I am aware—someone may correct me—seven players are now contesting with Fonterra. At the moment this is not an issue, because those players only have to have one-thousandth of the production in order to be in there.
Hon David Carter: They could be Russians.
ERIC ROY: Some of them could be anybody. Yes, that is a very good point, I say to Mr Carter. For example, New Zealand Dairies, which is situated at Studholme, is a Russian investment in the New Zealand dairy industry. Mr Woolerton, who is claiming the xenophobic approach to monopolistic management of the dairy industry, must be gravely concerned about that.
R Doug Woolerton: I said that’s what made this industry great.
ERIC ROY: Yes, well, Mr Woolerton must be worried that the industry is turning on its head.
R Doug Woolerton: Of course, I’m worried. You’ve seen my statements all over the place. You’re not worried.
ERIC ROY: But he is still voting for this provision.
The second point I wish to raise is in relation to section 28A, which is to be inserted into the Dairy Industry Restructuring Act by clause 12. Here we give a delegated responsibility in terms of transferring export licences. I commend to members the amendments that are in place. One of the things we tend to do with quite a degree of abandon at times is to put these delegated responsibilities into legislation that states that we can do whatever we want by Order in Council. To transfer a licence is quite a significant issue, and although it is appropriate that it be done by Order in Council, it is also appropriate that we have a very clear methodology and process so that there is adequate consultation and adequate checks and balances. That is why I commend to members that the amendments in this bill are passed, because the Primary Production Committee has given due consideration to all of those elements.
The third point I would raise again in this Committee debate relates to the elements to the database. Although the dairy industry is a leading light in many respects in the New Zealand pastoral industry, in terms of genetic gains it is not the leader. The leader now in terms of production through genetic gains is the sheep industry. I believe that one of the key factors is the fact that the sheep industry has open access to its database. Yet the dairy industry has said that it is under the Livestock Improvement Corporation and, yes, there can be access, but the access costs so much per cow. One of the members of the select committee may remind me what the figure is, but I think it is about $2 a cow. As David Carter said earlier, price is access. If I were a dairy farmer and I said that the genetic property of the Livestock Improvement Corporation is the only one we are really interested in—
COLIN KING (National—Kaikoura) : It is a pleasure to speak in the Committee stage of the Dairy Industry Restructuring Amendment Bill (No 2), and I take great confidence and comfort from the speakers who have spoken previously. I want to deal with two areas, one of which is the integrity that is required around a quota system. It is very, very important, because we mention the farmer a lot—the producer of milk solids and suchlike—but the quota is owned by the Crown, and is part of the process of our getting free trade or privileged access to various markets. On that basis, whatever a quota management scheme is about, it has to have integrity.
When we look at new section 29A, inserted by clause 14, we understand just how structured and how principled this process is. That cannot be overlaboured, because we are an export nation; we export 85 percent of what we produce in this country. It is very difficult when we hear the speaker from New Zealand First talking about Fortress New Zealand and that kind of mentality, because, in actual fact, we have to continually argue for the removal of barriers. Quota access, by its very nature, is privileged nation access. It is a very fine line. Effectively, in the world of trade, New Zealand runs two arguments, and it is very important that we are seen to be very thorough and have quota management processes that have integrity.
When we go through section 29A to section 29J, we find that the chief executive has some wide, sweeping powers to be able to go in and check the data, the record-keeping, of anybody who has access to that export market. We see that, at the end of the day, if any of those laws and regulations that underpin the integrity of the quota system are breached, the fines are quite substantial. We see that the fines have been extended under this bill up to $200,000, with a further fine not exceeding $10,000 for every day or part of a day during which an offence is continued. So there is a high level of accountability. That is good to see, and I myself think it has to be there, because from time to time people from the dairy industry have been dragged before various countries’ officials to explain their actions. That sometimes can have an effect upon other quota markets that are held. When we look at the dairy industry we see that this quota is not large as a proportion of the whole of the dairy industry—it is rather small. But in the sheepmeat industry, a very large part of the access to Europe is under quota. So I am pleased, and I take great comfort from the way that this bill progressed through the select committee. I am comfortable that it is fine.
The second thing I want to talk about is the Livestock Improvement Corporation’s core database. This issue is something we need to get sorted, because in itself it can actually be a barrier to improving the productivity of this nation—and not only within the dairy industry. As there is more demand for our products to be scrutinised, we will have to get into areas such as animal identification, and the Livestock Improvement Corporation’s database is a vehicle whereby we can identify the very cuts of meat that people are consuming. The Livestock Improvement Corporation has raised an issue here—we see that it came from AmBreed New Zealand originally, which is a competitor within the market—and it is important to realise that there are other valuable aspects that the Livestock Improvement Corporation’s animal database can contribute to. As a nation we will continue to export a lot of what we produce, and when we consider that 85 percent of what we produce overall goes overseas, it is important that we do it well.
I commend the select committee for processing this legislation in a timely fashion. This issue is something that those in rural areas have been very concerned about since 2001.
R DOUG WOOLERTON (NZ First) : I just want to cover a couple of points made by Eric Roy, when he mockingly said I would be quivering in my boots at this legislation. Of course, he is right, because I and some of my colleagues voted against the Dairy Industry Restructuring Act, the one put into this Chamber by Mr John Luxton when he was the Minister for Food, Fibre, Biosecurity and Border Control. It broke up the monopoly of the Dairy Board and allowed Fonterra to become a monopoly, to a degree. Before that it was not possible to start up a private dairy company, as we know. While Mr Luxton was changing the law for the dairy industry, he was proceeding with plans to start up his own dairy factory, and that is what he did. The National Party thinks that that is good business. I do not think it is the right thing to do. Yes, Mr Luxton obeyed the letter of the law, as we do, but did he do what was morally right? No, he did not, and neither did his colleague Mr Wyatt Creech. He also did not do what was morally right, but now they both have a very successful dairy company, which they are about to lose control of. Mr Talley is going to own that dairy company in Matamata, and Mr Luxton and Mr Creech will do very well out of that. So I will not be going to great lengths to thank Mr Luxton for the Dairy Board restructuring, or, indeed, for any of the legislation that followed.
We in New Zealand First do worry about those sorts of things, because the laws that allowed the dairy industry to become huge and great and internationally competitive are now bit by bit being dismantled. Part of that is the record-keeping that we hear the members of the National Party talking about in LIC, based in Hamilton, which has an amazing database. It is one of the most amazing outfits in the world when it comes to genetics for dairy cows. There have been many assaults on the Livestock Improvement Corporation, which is what it was known as then. People have wanted to get access to its database and access to its information for years, not for the assistance of the dairy industry and not to progress our enterprises, but for their own material gain. That has been staved off, but for how much longer, one wonders?
The arguments are always along the lines of those we have heard today: that opening up access to that information to everybody and his or her mother’s dog will help things in New Zealand and in other countries. We in New Zealand First want to know how it will do that, because we do not believe it will. We think that information should be protected for the benefit of the people who paid for it, for the people who set it up, and for the people—
Eric Roy: It’s xenophobic!
R DOUG WOOLERTON: It is not xenophobic; it is called looking after one’s best interests.
Hon David Carter: It’s communism too!
R DOUG WOOLERTON: No, it is not about communism. New Zealand First supports PGG Wrightson and the sort of enterprises it is involved in overseas, such as operating dairy farms in Chile and that sort of thing, because hopefully the money will return here. But we do not support people who come here and take our money back to their country.
Eric Roy: Oh, so we don’t have reciprocity. It’s a one-way street.
R DOUG WOOLERTON: We do have a one-way street. Those members over there used to believe in reciprocity in the sheep industry, and they used to believe in a fair go.
I remember my father telling me about the days when the farmers in the South Island would toddle across to Tooley Street—I do not like to bring the Chair in, but this is of interest to people, I am sure—and the English of the day used to treat them to drinks, look after them, and give their wives little presents. And they would do the farmers like a dinner. My forebears in the dairy industry thought that that was for toffs and idiots who did not know how the world worked. We believed that an industry should be tied up by those who owned it and should operate for their benefit. But no, no, the people across the Chamber who come from sheep and beef stock backgrounds believed that we should give the wealthy English lords and ladies their cut of the pie. They have done so, and they still do today.
I hope those people are happy about that, because in the dairy industry we think that is nonsense. In the dairy industry, we think that is a rip-off. In the dairy industry, we think that is just childish, naive behaviour. We think the dairy industry should be run for the benefit of the farmers, not for the benefit of the ticket-clippers throughout the world. That is the way the dairy industry has been run and that is what has made it great, over and above other industries that have been going a lot longer than it and that were in fact seen as the premier industries in the agricultural business.
New Zealand First reluctantly supports this bill. We make the points I have made: that it is certainly a sad day when we see people gradually losing control of their industry, supported by the National Party. [Interruption] While I am making this speech I am being mocked by the very people whom farmers put into this Parliament, thinking they would support farmers. I am here to tell farmers not to rely on the National Party for the support of their industry, sadly.
RODNEY HIDE (Leader—ACT) : I rise on behalf of the ACT party to support the Dairy Industry Restructuring Amendment Bill (No 2); it is a good bill. I will respond to some of Mr Woolerton’s comments. It seems to us that this is a good bill, because I do not think that farmers’ interests and producers’ interests are served by having only a monopoly exporting into those quota markets. If we look at the history of the world, then we will see that it has always been smaller companies with an idea that have come along, have innovated, and have provided the new markets and the new ways of doing things, and they have provided for an increase in prosperity for everyone. That is why we support this bill.
I have to say that I was somewhat amazed when I listened to Mr Woolerton’s comments. He does know the industry, having worked in it, but I would suggest to Mr Woolerton that if xenophobia worked, as he says it does, then countries like Albania, North Korea, and Cuba would be rich and prosperous. In a country of 4 million people, we cannot eat all the cheese we produce, we cannot drink all the milk we produce, and we cannot use all the primary produce we produce, and that is why xenophobia does not work. We have to be open to the world. We have to like people from other countries.
Mr Woolerton has an idea to build a fortress around our industry, where we would not change anything, we would not allow any competition or choice, and we would not innovate.
R Doug Woolerton: Oh no, I didn’t say that.
RODNEY HIDE: Mr Woolerton says he did not say that, but the implication of having one buyer and it being run as a farmer cooperative is precisely that. Mr Woolerton said that, yes, New Zealand First has the view that we should have a fortress around New Zealand and that we should protect ourselves from foreigners. We also learnt that Mr Woolerton thinks that anyone who disagrees with New Zealand First and Mr Woolerton is, somehow, an idiot who does not understand the issues as well as he does. He would rather say that than debate the arguments and ideas.
I have also learnt this about Mr Woolerton, and I think this is a sad day. When Mr Woolerton disagrees with someone, it is because that person has ulterior motives. I think it is a sad day when we attack former members of this House for having ulterior motives for what they do. We might disagree with them, but I do not think we have seen people here with ulterior motives promoting legislation.
I make this point, again to Mr Woolerton. Having people who are doing well in business and making money is good for New Zealand, it is good for the farming industry, and we want a successful and prosperous dairy industry all the way along, at every step of the way. That is what will make the dairy industry successful into the 21st century and beyond. The idea that we can somehow have a locked-up little market, where one company sells to the world and that will be good for farmers, has to be absurd. Like I have said, I say to Mr Woolerton that if that worked, then Albania would be rich, North Korea would be rich, and Cuba would be rich.
Hon David Carter: And Doug would be president.
RODNEY HIDE: And Doug could be the president of those countries for life. So the ACT party rises to support this bill.
I learnt one other thing about New Zealand First members. Here they are, railing against this bill, and I have learnt that they are xenophobic and proud of it. I learnt that they want to have a fortress around New Zealand, that they believe in monopolies, that they attack people who disagree with them as having ulterior motives and for being stupid, and that this bill is a disaster for the dairy industry. I then learnt one other thing: New Zealand First will vote for the bill, along with every one of us. Thank you, Mr Chairman.
Hon JIM ANDERTON (Minister of Agriculture) : Because of some of the comments made, I should apologise profusely, having been in Parliament for 24 years, 9 of them under National Governments. Never before has there been urgency before Christmas to push things through, so I have to acknowledge that this is an extraordinary precedent, and it is probably due an apology! Those members who have not been here as long as I have will know that this is all correct! I am putting this through to the Tui ads, so they can say “Yeah, right!” at the end of it.
In a slightly more serious vein, I want to move an amendment on the advice of parliamentary counsel, which I have discussed with the Chairman of the Committee. The amendment will see a minor change in wording, but there will be a different meaning. I refer to page 18, paragraph (b) in clause 29, which has the wording: “(b) the right to access documentation relating to the application for a search warrant and the exercise of a search power under the Official Information Act 1982.” I am advised by parliamentary counsel that the correct wording should be “the right under the Official Information Act 1982 to access documentation relating to the application for a search warrant and the exercise of a search power …”. I am sure the select committee meant exactly that, but I am advised that it would better to have that wording rather than the original wording. Thank you, Mr Chairman.
Hon DAVID CARTER (National) : The National Party will certainly accept that amendment as proposed now by Mr Anderton. I just want to tidy up a comment that Mr Anderton made. It is not clause 29; it is actually clause 14, which inserts new section 29K(6)(b). Just for the record, it is clause 14 that is being amended. But I think it is a very sensible amendment. I am surprised the select committee did not pick it up in the first place.
- The question was put that the amendments set out on Supplementary Order Paper 171 and the following amendment to clause 14 in the name of the Hon Jim Anderton to Part 1 be agreed to:
to omit paragraph (b) of new section 29K(6) and substitute the following new paragraph:
(b)the right, under the Official Information Act 1982, to access the documentation relating to the application for a search warrant and the exercise of a search power.
- Amendments agreed to.
- Part 1 as amended agreed to.
Part 2 agreed to.
Schedule agreed to.
Clauses 1 and 2
NATHAN GUY (National) : I want to make a contribution today that I think is very important in the Chamber. I want to talk just on the schedule. The Primary Production Committee worked hard on this to get it right, and I think it is a fair point that I am about to make. The director-general or chief executive of the Ministry of Agriculture and Forestry technically allocates the export licences. We need to be mindful that the New Zealand dairy industry is primarily based on pasture-fed diet, and primarily our animals are outdoors all year round. We all know that climatic changes occur. In parts of New Zealand we can have a drought, and we are currently experiencing a mini-drought on the East Coast of the North Island. If we think back, in recent times we have had floods, we have had snowstorms, and we have had weather bombs throughout the country.
The significant point I want to make to the Committee is that the select committee worked hard and has come up with the provision in schedule 5B that allows those seeking an export licence to have their historical data analysed out to three seasons. The point I am making is that if we have a weather bomb, and farmers are constrained, as we know can be the case, that flows through to the heifer replacements—that is, the young cows that are going to come into the herd. It needs to be broad in its approach, so that we looking at not just one season or two seasons, but we are taking that data analysis out to three seasons, which I think is very, very important. I acknowledge the hard work, under David Carter’s leadership, of those members on the select committee who do own a set of gumboots, and who have come through a grassroots upbringing, like some of us in the National Party, who were well aware of the point that this is very, very important.
I turn to those members on the other side of the Chamber who were on the select committee and who have not come through that process. I am not sure whether there is one farmer left in the Labour caucus who would even be aware of that point. So this is a significant point in this bill that will mean it is fair, right across the board, that when the director-general or the chief executive of the ministry is technically allocating quota, he or she can look back across those three seasons of data.
- Clause 1 agreed to.
- Clause 2 agreed to.
- Bill reported with amendment.
- Report adopted.
Hon JIM ANDERTON (Minister of Agriculture) : I move, That the Dairy Industry Restructuring Amendment Bill (No 2) be now read a third time. The bill was introduced into the House, as I said during the Committee stage, on 14 August this year. It was read for the first time on 21 August, then referred to the Primary Production Committee for consideration. The committee tabled its report on 31 October. The bill has now had its second reading and has passed through the Committee of the whole House.
The New Zealand dairy industry has become the country’s largest and most important export industry. For the year ended 31 March 2007, the dairy industry contributed a total export value of $8.4 billion, representing 25 percent of total merchandise exports. New Zealand dairy products are exported to 152 countries.
At the farm level, dairy accounts for an estimated 35 percent of the agricultural sector’s GDP and 2 percent of total GDP. When we include dairy manufacturing and the dairy industry’s contribution to other sectors, such as wholesale trade, we see that the wider dairy industry’s contribution to total GDP is around 7 percent.
The bill is the obvious next step in the industry’s transition to a new structure without the monopoly powers of a statutory marketing board. In the 6 years since the Dairy Industry Restructuring Act was passed, the industry has shown itself to be extremely capable of not only surviving but also thriving in this less regulated environment. This bill will provide the industry with certainty about designated export markets, and will therefore allow industry players to plan for the future with confidence. I believe that this is why the industry has expressed general support for the approach taken in this bill.
The industry has shown itself to be a highly successful organisation and industry sector in reaching world markets and helping New Zealand to be well positioned for the future. The framework contained in this bill will allow all industry players to participate fully in that success and continue to position the industry well on the world stage. I commend this bill to the House.
Hon DAVID CARTER (National) : National supports the Dairy Industry Restructuring Amendment Bill (No 2) and congratulates the Government on finally bringing this matter before the House today. I think that when people analyse the contributions made in the debate we have had in the second reading, the Committee stage, and now the final reading in quick succession, the interesting Hansard will, of course, be that of the New Zealand First member Doug Woolerton. I thought I would make just one or two points, because a lot of the information he stated in his contribution—which was absolutely incoherent, I might add—is incorrect.
First of all, Mr Woolerton congratulated the dairy industry and noted its huge progress over the last decade, and I support that. But he then went on to criticise the Dairy Industry Restructuring Act of 2001, which led to the formation of Fonterra. So in one breath he was criticising Fonterra and its performance, and in the next breath he was saying what wonderful progress this company has made for the benefit of all New Zealanders. I find that logic very, very difficult to understand.
Mr Woolerton then spoke against two of my former colleagues in this Parliament. I am referring to the Rt Hon Wyatt Creech and the Hon John Luxton. He said that both those people drove through the dairy industry restructuring legislation in 2001, and he implied quite definitely that they did that for personal gain. For the sake of the record, I say that neither of those gentlemen was in Parliament in 2001 and they could not have been involved in the debate. They were not in Parliament. To be absolutely fair to them, I note that by that stage they had retired from Parliament. They saw an opportunity under the dairy restructuring to set up a very successful dairy process called Open Country Cheese, and I congratulate them on their ability to establish that company. It has been a significant contributor to the very regional economy that Mr Woolerton came from.
The final point is that Mr Woolerton, having railed against the Dairy Industry Restructuring Bill (No 2), concluded his remarks by saying that the bill was dreadful legislation but that he would vote for it. I think that just goes to show something about Mr Woolerton’s career. He has been involved in the National Party and in New Zealand First, and he now completes his parliamentary career as a true and committed member of Helen Clark’s Labour team.
Dr ASHRAF CHOUDHARY (Labour) : I will take just a brief call. First, I thank David Carter for his good chairmanship of the Primary Production Committee. We work very closely and in a bipartisan way on that committee.
Earlier on, Nathan Guy suggested that the Minister should probably define the term “milk solids”. I will define that term for the House. As a scientist I guess it is probably my job to explain these things. We have two definitions. “Milksolid” as one word is milk solid that contains milk fat plus protein. The definition of the second term, which consists of two words, “milk solids”, is milk protein and fat plus other elements in the milk. So two clearly defined words have been used, I say for the sake of clarification. The farmers get paid on the basis of milksolid—one word—which is milk fat and milk protein, and, of course, the levies to the dairy farmers are also based on that definition. With that explanation I commend the bill to the House.
ERIC ROY (National—Invercargill) : I too will take a brief call in the third reading debate of the Dairy Industry Restructuring Amendment Bill (No 2). It is not so much that there are concerns that some things are not being covered, but that all that is said in the debating process is recorded in Hansard, and at future times people will look at that record and interpret the bill against that. I am largely stimulated by the remarks of the New Zealand First member Doug Woolerton, who seemed to have some comments to make about the ills of the meat industry in relation to the dairy industry.
I ask members to let me just place it on the record that I, along with the rest of the National Party, am essentially very proud of the achievements of the dairy industry. We think it is great that the dairy industry is the leading industry in New Zealand. We are pleased with the way that it has gone forward, particularly after the Dairy Industry Restructuring Act of 2001 was passed, when Fonterra came forward. If the measure is the viability of the dairy industry and the price increases we are seeing in dairy products right now, we can see that rather than the restructuring being an impediment to development, the industry has done exceedingly well. I note, coming from my part of New Zealand, Southland, the great desire of people from the North Island to invest in dairying in the south. If that is an indication of the state of the dairy industry, it is certainly doing very well.
Mr Woolerton alluded to the comparative situation between milk and meat, and said that if we transferred a xenophobic cooperative structure into the meat industry we would immediately solve all the problems, or that had we gone there initially we would not have the problems in the meat industry that we have today. There are some significant issues which I think change the whole landscape.
For example, those who represent dairy farmers in terms of their processing and marketing are under a greater degree of scrutiny than anybody else, because the farmers are themselves under scrutiny. Every single day, sometimes twice a day, when dairy farmers milk they have an opportunity to measure their own performance. They might note that they have more milk and the milk vat is up one day, and ask what they did or did not do. So dairy farmers have a very, very rigorous way of measuring themselves, and they tend to apply that to those who represent them.
The second thing is that milk is a homogenous product. Milk is pretty much the same all over New Zealand. There are variations in butterfat levels and slight variations in milkfat percentages, but, essentially, the product is the same. That is not so in the meat industry.
Thirdly, milk stores relatively easily after it has been processed in comparison with meat products. Particularly as the future of the meat industry is moving into chilled products, meat is becoming even more fragile and requires a greater movement of product through, so it cannot be stored for any length of time till the market is just absolutely right.
Fourthly, there is just an acceptance of milk generally as a product. If people in the world who have never consumed Western products before are given a variety of foods to consume, of the three products that they will consume again and again, two of them are milk products: ice cream, and chocolate. There just is a universal acceptance of milk as a product in the world, and there is a great desire of Third World countries to consume more calcium in order to be healthier and grow better, and that association is with milk products. So there is a universal acceptance of milk. Which product do dairy farmers have as a competitor? Well, they have soy milk. That is virtually the only competitor that is out there to milk, so they have captured an opportunity that is just there because there is such a great demand for the product. But in the case of meat, it competes with a whole range of animal and fish proteins that are out there, so it is in a much more competitive environment. So just to say we should apply this to that, and that will solve all the problems, is an issue. I think we needed to simply place that on the record.
As has been said, the milk industry—the dairy industry—is the foremost part of the New Zealand economy. It is important that we pass this legislation today so that the industry can take the next steps, and so the people who are now involved in company structures outside of Fonterra have an opportunity to provide some stimulus to the industry, not on a competitive basis—well, not specifically for that reason—but with product development, and with opportunities in packaging, marketing, and branding. They are in the marketplace enhancing and increasing the appreciation of the products that are produced out of New Zealand. Yes, those people are a very small section of the industry, but we also need them as a measure against Fonterra. How does one measure a monopoly if there are no other players in the market to say how well they are doing? When they do that, we actually have some measures. I see all those things as healthy, and I see it as a sign of a company that is viable, healthy, growing, maturing, and serving a very, very useful part of New Zealand’s economy.
National supports the third reading of this bill.
R DOUG WOOLERTON (NZ First) : New Zealand First also supports the third reading of the Dairy Industry Restructuring Amendment Bill (No 2), but it does so with provisos—our vote will not come with a proviso; one either votes for a bill or one does not—and with warnings. This bill is at the end of a very long chain, which started with the Dairy Industry Restructuring Act. To guard ourselves against the ramifications of that Act, we had the formation of Fonterra, which came after that Act. The farmers believed that they needed a bigger company in order to protect themselves from competitors. I was a very strong advocate for Fonterra. I was opposed to the Dairy Industry Restructuring Act, but once that had passed I was a very strong advocate for Fonterra. The National Party was not, and many other people were not as keen on Fonterra as I was. My faith, and New Zealand First’s faith, in Fonterra has been realised. But members should make no mistake about it: we are now in a situation where Fonterra will be very different from what it has been, and in our view it will be weakened because of proposals on the floor that are currently outside the parameters of this bill.
Let me deal with a few of the issues that have been raised after my previous speech. One of those issues concerns the word “xenophobia”. Somebody was giving me a lecture about the dairy industry not being able to eat all its cheese and having to export. Well, that is precisely what the proponents of the cooperative structure in the early days of the dairy industry understood immediately—that this was all about exporting. It was all about excellence, and it was all about marketing. The farmers of the day hired people to do all those things, and they did them successfully. I might say that they were not afraid to pay them. Right from the earliest days the salaries in the dairy industry, outside of the farming operation itself, have been very, very good, and the expertise has been at the leading edge of innovation in our country.
The people who set the industry up knew that we had to export. We had to get into new products, and we had to innovate. They did all those things through retained earnings and through borrowings, to the degree that Fonterra now has a credit rating that has slipped since the announcement that it may list on the stock exchange, but that is still second only to that of the Government. Fonterra does not have a credit rating of some third-tier meat company, or whatever, but one that is second only to that of the Government. Those people went after innovation at a rate seen nowhere else in our economy, and it has been really, really successful.
So rather than looking backwards—and I note the talk of Rip Van Winkle and xenophobia—this is an outward looking industry that has always been at the forefront of innovation. This is an industry that is modern. This is an industry that has not gone to other places and begged. This industry has looked after itself. It has been a leading-edge industry, and I have been a proponent of it since my earliest days.
Nathan Guy: You are flip-flopping!
R DOUG WOOLERTON: Oh no, we are not flip-flopping.
I might say that the retained earnings of myself, my three brothers, my father, and many of our contemporaries are still in that company today, because in the days that we operated—not the days of my brothers, though one of them is still going—it was a dollar in and a dollar out for the share. In those days we did not allow other people to come in and get a chunk of the dairy industry. There was one motivation: to grow the company and to grow the industry. Every farmer knew that the result of that growth was a better milk price. Farmers knew what was happening in their company. They knew how successful the executives and the managers were by what was in that milk price.
I tell members that farmers understand this industry like no other. They understand what the executives are doing and they understand the profits that come from the different profit centres within this industry. They are not just suppliers of milk, but they will be if they let other people into this industry—they will become suppliers of milk. But at the moment they own a leading-edge company that from this little place, New Zealand, controls one-third of dairy produce available for market in the world. That is no mean feat. That has been mocked today by members of the National Party as being xenophobic and backward looking, which it is not. It is leading edge technology, and I support it.
The difference comes when New Zealand First says that this industry should be protected, as it always has been, as opposed to what the National Party says, which is led by ticket clippers and market people who just want a chunk of this industry. They do not want to do the graft, they do not want to put in the work, they do not want to take the risk, and they do not want to put up the dough for investment; they want a chunk of this company. I tell members that if I were them and not involved in the dairy industry, and if I were just a money man from wherever, I would want a chunk of it too. But New Zealand First says: “Don’t let them have it.” We implore the farmers to keep control of it themselves as they always have. If they nurture this company and carry on as they have in the past, they will reap the benefits through their milk price. They will not reap the benefits of this company through a share price, because that is a one-off, and they will not reap the benefits of this company from a return on dividend. Other people will reap the rewards of the company through those avenues.
Farmers’ only avenue to a guaranteed result is through their milk price. The forefathers of this industry knew that. It is what they set up—
Sue Kedgley: What about the foremothers?
R DOUG WOOLERTON: And the foremothers. Sue Kedgley is absolutely right to pull me up, and I apologise to her for not mentioning them. In the farming industry it is the women who drive the finances, and they always have. It is the women who have largely had control of the purse strings. I could relate to members many an argument over those matters, but that is indoors stuff.
This industry has been at the forefront, and we are in danger of seeing it slip back. New Zealand First members will not stand by and keep their mouths shut and watch that happen.
NANDOR TANCZOS (Green) : I will begin by indicating that the Green Party is supporting this bill through its third reading, as I think all other parties in the House are. I simply say that this is a sensible bill. As has been said, it continues the process of dairy industry restructuring that has been going on for some time. It opens access and increases flexibility, and we support it for all those reasons.
I think Mr Hide was right in saying that innovation tends to come from smaller operators who come up with those innovations—before, of course, they are munched by the big operators who have the economic might in the marketplace. That is why the Green Party says that we are pro-business but we are anti-corporatism. In particular, we are against corporate welfarism, which is something we continue to see with the environmental subsidy going to a number of big businesses.
I also wish to make just a brief comment on the issue of the context of the broader Fonterra restructuring, which Mr Woolerton has spoken about very eloquently. The Green Party has also expressed concerns around the proposals. We see this as an inexorable process towards the overseas control of Fonterra and the end of the interests of New Zealand dairy farmers being at the heart of the company. We are aware that there are a number of safety mechanisms within the proposals, but we see them as delaying rather than stopping that process, so we do have concerns about those things.
A lot has been said about the bill itself and the access to those markets, and I think there has been a good discussion. I thought it would be useful to take a slightly broader view, because there is always great interest in the dairy industry across the nation and in Parliament. As I think Eric Roy in particular said, what affects the dairy industry affects the New Zealand economy as a whole. So there is always broad interest in these things.
I was interested in the dispute between Mr David Carter and Mr Woolerton in relation to the role of John Luxton and Wyatt Creech, whom Mr Woolerton alleged were setting up a cheese factory while preparing this legislation. Mr Carter made comments in reply but I was not here when they were here so I do not know about the ins and outs of that matter. But I do note something quite interesting in Speakers’ Rulings. Speaker’s ruling 71/2 talks about declaring financial interests. It states: “A farmer member does not have a financial interest in a bill to provide for the payment for and marketing of dairy produce.” I thought that was quite interesting when I came across it, because it kind of indicates another standard for farmers in the Speakers’ Rulings of the House itself. It is interesting because it seems to be the same across a number of issues in relation to farmers.
There have been big payouts to farmers recently and there are flows to the economy from that. Of course, the payouts to farmers flow to the economy for good and for bad. In the past there have been a number of calls for land use diversification, because when those payouts go down the whole economy is vulnerable. By increasing land use diversification we increase the resilience of the New Zealand economy. That has happened at times when there have been lulls in those prices. A booming wine industry is one example of a focus on diversification and on other ways of producing value from our land. For example, there has been the increase in forestry, although that has been moving backwards in recent times. There is a concern that the big payouts are reversing that trend and moving towards a conversion of large amounts of land into dairying, and there is a kind of monoculture spreading across the New Zealand landscape. I think someone described it as a geological shift in land use.
It is also interesting that much conversion is not on the basis of the payout per se, but on the capital gain to be made from the conversion. This is particularly so as access to water becomes more of an issue. Of course, there is increasing tension in this country and around the world in terms of access to clean water, and that will be an increasing issue for the rest of this century.
There has been massive expansion and intensification of dairy farming, sometimes in areas that are entirely inappropriate for dairy farming, and this is something that the Green Party is seriously worried about. I note the comments made by Environment Waikato’s Dr Peter Singleton, who said that the issues of dairying and water quality are urgent and critical, and that the only hope is through regulation. That comment was made in the context of Federated Farmers running a massive campaign to gut the Resource Management Act—side by side with the National Party, I might add—and to remove all environmental restrictions on farming activity. This is of enormous concern. In fact, Charlie Pederson said that Federated Farmers could not accept any constraint on the continued growth of dairy farming. I have to wonder whether he is including the laws of physics in that, because the reality is that we are starting to hit the environmental constraints, and no business can continue to expand indefinitely exponentially when confronted with environmental limits.
Let us be clear that the Green Party does want what is best for New Zealand farmers. We recognise the enormous economic importance of farming, and we recognise the communities that are built around farming, as well. We have opposed vigorously the closing of rural services—for example, schools—because we see the importance of those things. But we also continue to assert environmental accountability from farmers as we would from any other business. We recognise that the environment was not a big issue in the past. Many farming practices were developed at a time when environmental accountability was not really a matter of debate. No one was talking about it.
We also recognise that there is a natural stewardship in farmers. Farmers live on the land; they are obviously concerned with the sustainability of their farming operations, particularly family farmers, people who may have got their farms from their ancestors and who want to pass them on to their descendants. In that context we also note the increasing extent of corporate farming, where those social and family constraints are not as apparent. Of course, that is not always true, and being a family farmer does not necessarily mean one is a sustainable farmer, but I think there is an intrinsic interest among family farmers to look at questions of sustainability. That influence is now perhaps becoming less important in the farming sector.
We acknowledge that there has been a huge amount of progress in the farming sector. We have seen the growth in, for example, nutrient budgeting, which is an important mechanism for increasing sustainability and reducing environmental impact at the same time as increasing profitability in farming. We are seeing increasing riparian protection, and effluent management has become a lot better, but we have to acknowledge that many farmers are still not participating. We are saying that farmers’ representative organisations like Federated Farmers should be spending their energy supporting the change leaders in these areas, rather than continually defending the laggards.
The reality is that even with best-practice farming, simply as a result of the massive intensification and expansion of dairy farming, we will see a decline in water quality in this country. The point is that this is a challenge for all New Zealanders, not just farmers. We need to move beyond the rural-urban divide, and we need to move beyond seeing this as a farmer versus a greenie thing, and actually start to work together. I know that some farmers feel like they are getting the bash from environmentalists all the time, but we need to work together on these huge challenges.
- Sitting suspended from 1 p.m. to 2 p.m.
NANDOR TANCZOS: In confronting the environmental challenges before farmers, we have to move beyond the rural-urban split and start to work together. That means giving credit where it is due—and it is due in places; a lot of progress has been made—but also it is about farmers acknowledging that a lot needs to be done. We need to move beyond denial. We need to move beyond minimisation and ask how we are going to work on this stuff together. In the context of mass conversions, where a lot of money is being invested in dairy conversion, we have to acknowledge that the context is changing.
Climate change will change farming, both because of the climatic impact and because of the price of carbon. Environmental regulation will increasingly change the context. Issues around water access will increasingly change the context of farming, and there is increasing talk now of farmers and commercial users of water paying a price for the use of that water. That is something that will affect farmers. So industry leaders have to understand how the world is changing, rather than trying to hold back the tide.
TARIANA TURIA (Co-Leader—Māori Party) : It is good to be able to speak to legislation on which—an unusual occurrence—we generally all agree. That is pretty good, actually. When Samuel Marsden arrived in the Bay of Islands in 1814 with two cattle and a bull, he probably had no idea that less than two centuries later the dairy sector would constitute New Zealand’s biggest industry, injecting some $8 billion into the economy and constituting some 20 percent of all our exports. As the good reverend set about training Māori in British farming and gardening techniques, believing that those would pave the way to the adoption of Christianity, he would have been amazed at the dividends that such skills would pay off in 2007, for the Māori dairy sector now owns over 100,000,000 dairy shares, and Māori also represent over 15 percent of all sheep and beef interests in Aotearoa. That is the context in which the Dairy Industry Restructuring Amendment Bill (No 2) is being read.
The bill allows the Fonterra Cooperative Group to have the right to keep exporting to designated markets, and also allows for other dairy processors to become eligible to hold export licences. The bill consolidates the position of New Zealand in the global marketplace once more, after the expiry date of the dairy quota markets established under the Dairy Industry Restructuring Act 2001. This opportunity to again secure a welcome mat in external markets is a move that the submitters and the Primary Production Committee endorsed, and it is a move that we in the Māori Party also fully embrace.
We see that the allocation of export rights to dairy quota markets to a wider group than Fonterra is consistent with kotahitanga, the principle of unity and purpose of direction. Allowing for greater participation and certainty in the dairy industry is a more inclusive approach, which should bring with it a wider support base amongst the industry. Public feedback supports that claim. The submission from the Tātua Cooperative Dairy Co. Ltd, which is based in Tātuanui, outside Morrinsville, supported the bill as finally enacting the goals of the Dairy Industry Restructuring Act: to maximise economic benefits for our country arising from tariff quotas as maintained by foreign Governments.
In that regard we know that Māori dairy farmers are ready and willing to take on the world. They want to be poised to benefit from the widened eligibility for export rights that will be put in place by this legislation. Just how ready they are is able to be gauged from a project that is currently collecting physical, financial, and environmental data from 45 properties in the Tai Tokerau, Te Arawa, Taranaki, and Ikaroa Rāwhiti regions. I am pleased to share with the House that the Māori dairy farmers of New Zealand have a project supported by the Ministry of Agriculture and Forestry that benchmarks Māori dairy farm physical, financial, and environmental performance. The data will be collected for three seasons, to balance the effects of climate, from across the four North Island regions. The farms will be benchmarked for their physical and financial performance, as well as receiving overseer assessments for environmental sustainability. The farms reflect varying ownership structures, from sharemilker to owner-operated to Māori incorporation - owned and governed farms.
We are hopeful that through that project, Māori farming authorities—incorporations and trusts—will be able to realise the benefit of meaningful management and monitoring information in order to support their future progress and development. The Māori Party welcomes the advancing of projects such as that one, as they will lead to a strong platform from which to enter designated dairy markets that operate country-specific tariff quotas for New Zealand products.
The bill will also provide future certainty to the industry, and given that the Livestock Improvement Corporation advises us the New Zealand dairy industry enjoyed, in 2006-07, its most productive season on record, such certainty is clearly a bonus. Just to put some context around all of this, I tell members that we are talking about 11,630 dairy herds and a population of 3,917,000 cows, which is an increase of 84,000 just in the least year.
But we do note that the changes will not be without controversy, particularly associated with Fonterra. It appears that Fonterra strongly opposes removing export restrictions for Japan in the cheese market, and for those parts of the United States designated markets without provision for designated imports. It believes that removing the restriction risks a significant loss of value to the New Zealand dairy industry and economy over time.
Meanwhile, other players, such as the Tātua Cooperative Dairy Co., have a completely opposite view to that of Fonterra, suggesting that the key thrust behind the Dairy Industry Restructuring Act of maximising the economic benefits for New Zealand arising from tariff quotas will be better achieved by the removal of export restrictions, thereby allowing other companies to expand and increase their performance. In such a view, the removal of export restrictions for cheese exports to Japan is therefore desirable.
We know that Fonterra held a round of five meetings with all of its Māori shareholders in the last week of November, so we are hopeful that if Māori had a view about the maintenance of tariff quotas, it would have been raised in those hui. We are all awaiting, too, the results of those hui, as we are keen to hear from whānau their thoughts on the selling-off of Fonterra shares to the overseas market.
The Māori Party has always believed that farmers must keep control of the dairy industry, and as such the proposal to sell off interests to external markets leaves us with considerable room for concern. It is the farmers, who own the shares now and who have put their hard work into the production of milk and the tilling of the land, who require our support. We would be concerned if overseas investors took control over an industry that is so crucial to the future prosperity of this country. So although we support the general intentions of this bill to open up the market, which will allow for greater participation and certainty in the dairy industry, we are, if you like, alert to the possibility of the inevitable issues around control that come when overseas investors raise interest in our land. Nā reira, tēnā koutou.
NATHAN GUY (National) : I wish to thank that member, Tariana Turia, for her contribution on the Dairy Industry Restructuring Amendment Bill (No 2). I enjoyed listening to the very sound debating points she put in front of the House today. This is a very important bill for the cornerstone of New Zealand agriculture. I have also enjoyed hearing the debates from the Green Party and, in particular, New Zealand First, because I want to take up the challenge from New Zealand First around what Mr Woolerton has been talking about in terms of Fonterra looking to the future around its capital structure regime. Mr Woolerton has spoken two or three times today, and it seems that during his addresses, he has been all over the park. On the one hand he has been saying that we do not want Fonterra to look offshore to overseas investors or even to internal New Zealand investors, and on the other hand he is saying we support competition. I believe that this bill will allow greater competition in the New Zealand dairy industry. Where Fonterra in the past has probably had a monopoly on some of these overseas markets, this legislation will let the smaller players—
Hon David Carter: They did have a monopoly.
NATHAN GUY: The chair of the Primary Production Committee, David Carter, points out that it did have a monopoly. The smaller players—there are about seven of those smaller producers in New Zealand, making up about 5 percent of milk that is exported—now have the ability to get into those markets. But I say to Mr Woolerton and New Zealand First, who are wading into this debate, it is really up to New Zealand farmers. Tariana Turia has acknowledged that today. New Zealand dairy farmers will make that decision without New Zealand First wading into the debate. New Zealand farmers are smart enough, and Fonterra, I believe, is smart enough, to recognise that we need to get Fonterra’s suppliers to agree to 75 percent of this to get it through. Seventy-five percent of farmers need to look outside their own backyards to make a decision in the direction of where Fonterra wants to go—not be driven to listen to what New Zealand First is saying, because it seems that New Zealand First is keen to look inwards instead of outwards. This is a big decision that New Zealand farmers need to make, and they will make it in their own time when they get all of the facts. I am not sure New Zealand First is full of the facts when it joins this debate today, because listening to Mr Woolerton I am confused as to where his party actually sits on this issue.
The other important thing to realise is that this industry is producing 15 billion litres of milk a year. When one thinks about it, one realises that we cannot export that fluid, fresh milk around New Zealand, so it has to be processed. The money for all New Zealand dairy farmers is in the fluid, fresh, the liquid milk market around the world. That means investing in worldwide markets. But New Zealanders cannot do that without opening it up. So the challenge to New Zealand First is whether it wants to see the status quo with Fonterra or whether it wants to see Fonterra move into the worldwide markets. I say to Mr Woolerton that New Zealand farmers, not the influence of New Zealand First, will make that decision.
The important issue with this bill—and we are in urgency—is for us to realise that it will allow greater competition in the New Zealand dairy industry. New Zealand dairy farmers have other external factors tthey are concerned about. I believe those external factors will be further debated in the House this afternoon. Farmers are concerned about the emissions trading scheme, and it will be interesting to hear the debate on that this afternoon. Agriculture is set to join that scheme in 2013, and I know that some of my colleagues will make valuable contributions this afternoon around that issue. We should not get drunk in charge and follow willy-nilly and be world pace-setters in this climate change debate, because we need to weigh up the economic opportunities and our environmental obligations. That is what the members of the Green Party and the Māori Party have been talking about this afternoon—balancing those issues. If we look at where New Zealand First members would like to see this whole debate go, we see they believe we should just stay in and look inwards instead of outwards.
Those are some of the challenges we need to think about addressing in the future—not having knee-jerk environmental debates such as Labour wants to have. We need to make sure we are investing in the future of research and development to ensure we are changing the microbes in the rumen of the cow’s gut and ensuring we are making changes at the grassroots level. The most important thing with an emissions trading scheme is to change behaviour—not to have it overall as a tax, which will just be struck down on each individual farmer. We need to change behaviour, and I am acknowledging that, but we need to ensure that the emissions trading scheme will direct the change of behaviour and not be just another tax. We have seen the Government come into the House to try to pass the “fart tax”. We have seen the Government come in to try to impose a carbon tax. We need to be mindful of weighing up the environment and the economic drivers.
In conclusion, the Dairy Industry Restructuring Amendment Bill (No 2) is very important. We are in urgency on a Wednesday afternoon, and the Ministry of Agriculture and Forestry has had this lurking around on the Order Paper for the last month. Now we find ourselves in urgency because it is very important that this bill is passed and gets the Royal assent before the end of the year. So National is supporting the bill. It is fortunate that we have had the good work of the Primary Production Committee, which has focused on the grassroots to ensure that some of the good changes in this bill will help as we move forward, accepting the challenges for the New Zealand dairy industry that lie ahead of us.