Rural round-up

February 11, 2016

Mixed outlook for New Zealand agriculture in 2016 – industry report:

New Zealand’s agricultural sector is looking at mixed prospects in 2016, with dairy facing another difficult year but most other sectors expected to perform well, according to a new industry report.

In its Agribusiness Outlook 2016, global agricultural specialist Rabobank says dairy prices continue to be weighed down by strong supply growth, particularly out of Europe after the recent removal of quotas.

Releasing the report, Rabobank general manager Country Banking New Zealand Hayley Moynihan said the recovery in dairy prices now risks arriving too late to enable a confident start to the 2016/17 season. . .

Marlborough farmers battle two-year drought

Farmers in Marlborough are making the best of some of the toughest climatic conditions in a long time, Beef and Lamb New Zealand says.

The industry body’s northern South Island extension manager, Sarah O’Connell, said recent rain had lifted spirits in the region but had not broken the two-year drought.

The past two seasons were some of the hardest farmers have had, Ms O’Connell said. . .

Alliance plans to start docking farmer payments for shares to bolster balance sheet – By Tina Morrison

(BusinessDesk) – Alliance Group, New Zealand’s second-largest meat cooperative, plans to start withholding some stock payments to its farmers from next week to bolster its balance sheet and force suppliers to meet their share requirements.

From Feb. 15, Alliance will withhold 50 cents per head for lamb, sheep and calves; $2 per head for deer; and $6 per head for cattle, it said in a letter to shareholders. The payments will go towards additional shares in the cooperative and will only apply to farmers who have fewer shares than required, it said.

Alliance is moving to entrench its cooperative status as its larger rival Silver Fern Farms waters down its cooperative by tapping Chinese investor Shanghai Maling Aquarius for capital to repay debt, upgrade plants and invest for growth. . . 

New PGP programme to boost wool industry:

Primary Industries Minister Nathan Guy has welcomed a new Primary Growth Partnership programme aimed at lifting the profitability and sustainability of New Zealand strong wool.

‘Wool Unleashed’, or W3, is a new seven-year $22.1 million Primary Growth Partnership (PGP) programme between the Ministry for Primary Industries (MPI) and The New Zealand Merino Company.

The programme is expected to contribute an estimated $335 million towards New Zealand’s economy by 2025. . . 

New Primary Growth Partnership programme sets sights on strong wool:

A new collaboration between The New Zealand Merino Company (NZM) and the Ministry for Primary Industries (MPI), announced today, aims to deliver premiums for New Zealand’s strong wool sector—a partnership that could see an additional $335 million contribution towards New Zealand’s economy by 2025.

“‘Wool Unleashed’, or W3, is a new 7-year, $22.1 million Primary Growth Partnership (PGP) programme led by NZM that will derive greater value from New Zealand’s strong wool,” says Justine Gilliland, Director Investment Programmes at the Ministry for Primary Industries. . . 

World’s best Pinot Noir winner found passion by chance – Jendy Harper:

Imagine arriving in a foreign country at the age of 13, unaccompanied, knowing no one and not being able to speak the language.

This was Jing Song’s experience when she came from China to Christchurch 16 years ago.

At her family’s advice and expectation, she became an accountant but no one guessed she would find her true passion in a Central Otago paddock.

Fast forward 16 years and Ms Song collected the trophy for the best Pinot Noir in the world at the IWSC competition in London last year. . .

NZ beef exports to Taiwan rise to a record, propelling it to 3rd largest market – Tina Morrison:

(BusinessDesk) – New Zealand beef exports to Taiwan rose to a record in 2015, propelling it to the country’s third-largest beef market behind the US and China.

In 2015, New Zealand’s beef exports to Taiwan jumped 36 percent to $188.6 million, while the volume increased 20 percent to 23,442 tonnes, according to Statistics New Zealand data compiled by the Meat Industry Association. That pushed it above Japan in value and ahead of Japan and Korea in volume to become the country’s third-largest beef market.

Taiwan also takes higher-value meat, with an average value last year of US$5.68 per kilogram, compared with US$5.08/kg for the US, and US$4.94/kg for China, according to AgriHQ data. . . 

NZ small dairy farmers content with their lot:

New Lincoln University research has found many small dairy farmers are content with the size of their operation, despite the constant calls for economic growth.

Dr Victoria Westbrooke and Dr Peter Nuthall, from the Faculty of Agribusiness and Commerce, surveyed 330 randomly selected farmers running small dairy farms for the small farmers’ organisation (SMASH). The project was funded by  via OneFarm.

“It was clear from this research, and similar previous work, that the farmers were content to simply carry on working their current farm,” Dr Westbrooke says. . . 

LIC posts half year result:

Livestock Improvement Corporation (NZX: LIC) has announced its half-year result for the six months ended 30 November 2015.

LIC total revenue for the six month period was $145 million, 9 per cent down on the same period last year. Net profit after tax (NPAT) was $15.9 million, down 46 per cent from the previous year.

LIC signalled reduced earnings in October (NZX, 20 October 2015), as a result of the lower forecast milk payout and reduced spending on-farm.

It is now expected that the year-end result will be closer to a break-even position, chairman Murray King said. . .

Silver Fern Farms Premier Selection Awards 2015 winners announced:

Auckland’s Botswana Butchery has taken out the title of Premier Master of Fine Cuisine at the Silver Fern Farms Premier Selection Awards, held in Auckland last night.

The popular restaurant also won awards for Best Beef Dish and Best Metropolitan Restaurant.

Executive Chef Stuart Rogan, who manages Botswana Butchery in Auckland and Queenstown as well as Auckland’s Harbourside Ocean Bar and Grill, impressed judges with his dish: Silver Fern Farms Reserve beef eye fillet, braised short rib with parsley, mustard and horseradish crust, carrot puree, asparagus, whipped garlic and cep jus. Head judge Kerry Tyack described Rogan’s dish as ‘consistent and faultless’. . . 


Joyce writes to TPP protesters

February 11, 2016

Minister of Economic Development Steven Joyce has penned an open letter to TPP protesters:

An open letter to all TPP protesters, 

Dear protesters,

I’ve been listening to you over the past few years, months and weeks. Last week I literally took it on the chin in defence of the TPP.

You have been accusing the Government of not opening up and giving information. So, I’d like to take the opportunity to set the record straight on a few matters. 

I would like to make the point that trade access is hugely important for a small country like New Zealand. Without fair and equal trade access we can’t sell as many of our goods and we get less for them. And that means fewer jobs.

In particular it’s about jobs in regional New Zealand and in our small farming communities like those in the Far North who are hugely dependent on whether our farmers and exporters can sell their goods. And that it’s really hard selling meat into Japan with a 38.5% tariff on what the locals charge.

Investor state dispute resolution is hugely more likely to help New Zealand than hinder it. We already have an independent justice system that protects the legitimate activities of all sorts of companies including large multi-national ones so nothing much really changes for us unless we start doing something like nationalising companies at a fraction of their value. However having an independent process might be helpful for our companies in countries where the court system is perhaps not quite as independent.

Some people who have been really loud in this debate just reject the whole concept of trade. People like Jane Kelsey would roll back the China FTA, the Korean one, the South East Asia one, any one of them. Because they just really don’t like trade for ideological reasons. I would point out, that without the China FTA we would have been a very quiet country after the GFC. A country that would be able to afford far fewer of the medicines that some are rightly concerned about access to.

There are others who say that they support free trade, but not this deal. They try to say that this one is worse and yet can’t point to why. It was negotiated by the same fine officials that negotiated all the other deals, contains very similar clauses, and the same trade-offs. You can’t help feeling that for those people this is about politics, not trade. Perhaps they are grumpy that their lot is not signing the deal.

There are those who say it sacrifices our sovereignty. Well, how can that be so? We have the sovereign right to withdraw from any trade agreement at any time. There is no one holding us to any of them. However there is a reason that we tend not to leave. We’d have to give up the benefits as well as the costs and so far the benefits have obviously outweighed any costs every time.

There are even those who say it’s anti-democratic; even though the current government was elected more than once on supporting the TPP, and the elected parliament has to approve the legislation. The next logical democratic test would be for the loud fence-sitters of the Labour Party to go to the next election promising to scrap the TPP, but I wouldn’t hold my breath for that one.

There are also those that are opposed to the TPP because people don’t know enough about it. What a pity then that those at Te Tii Marae didn’t take up the rare opportunity of hearing from and discussing the issue with the elected leader of our country.
I too would have been happy to have this discussion last week and indeed just had it at the Iwi Leaders meeting, before one person decided the answer was to throw her toy. 

The most important point I’d want to make is the reason behind why this government is doing signing this deal. Because every one of us cares about the future of this country. We want it to provide good jobs for our people, good security for our families, and a big enough national income that we can afford the best health care and the best education services. It is our sincere belief that this agreement will help us do that for New Zealanders.

I have been privileged to follow at close quarters the progress of this deal over many months. I think our negotiators have done a great job for New Zealand. We didn’t get everything we wanted, and nor do we ever. But the result of their work is that more Kiwis will have jobs and opportunities to bring up their families while living in this country. And that’s worth signing up for.

He also used the response to the Prime Ministers Statement to speak about the TPP:

The transcript is here:

Hon STEVEN JOYCE (Minister for Economic Development): Mr Deputy Speaker, firstly, may I say that I hope you had a good summer break. I hope it was relaxing. Mine was, thank you. I rode a horse, grew my vegetables, went to the Wairarapa and to the Hawke’s Bay and Coromandel. I went up north last week—pretty relaxing up there. I had a launch of the Tai Tokerau Northland Economic Action Plan. We had a visit from the occasional visitor to Northland, the current MP Mr Peters. I also had, it is fair to say, a reasonably well-reported experience with an unmanned aerial vehicle.

It was an interesting day indeed at Waitangi. I have been thinking about that day on the odd occasion since, and I have been thinking about the protesters. I have been thinking about them because they have had, obviously, a lot to say—and fair enough, too; it is the nature of protest. But a lot of what they have had to say has been very interesting. Primarily, they have accused this Government of not opening up and giving information.

I think the Trans-Pacific Partnership is very important. I think it is one of the political fault lines about whether we are going to be forward-looking as a country, embracing the opportunities that the world provides to us in an open, competitive environment that gives our exporters and farmers a chance to succeed; or take a backward-looking, defensive position, where the world is out to get us and we should just try to crouch down and hope the world goes away, which is what some of the other Opposition politicians promote.

So I would like to devote a small amount of time this afternoon to making a few points about trade and the Trans-Pacific Partnership. I would like to make the point that trade access is hugely important for a small country like New Zealand. It is not just important; it is hugely important. Without fair and equal trade access, we cannot sell as much of our goods, we get less for them, and that means fewer jobs and lower incomes.

In particular, it is about jobs in regional New Zealand, in our small farming communities like those in the far north that I visited last week, who are rightly looking for opportunities for their young people to be employed. It is about the people who know it is really hard selling meat into Japan with a 38.5 percent tariff over what the locals are able to sell it for. It is about the people who are trying to sell kiwifruit , or ice cream , into Trans-Pacific Partnership countries.

I heard the Leader of the Opposition pooh-poohing the dairy benefits of the Trans-Pacific Partnership today. Well, there is a small ice cream company on the Hauraki Plains , which has been started by international investors, that is providing jobs to those people who would appreciate the opportunity to sell ice cream into the US and Japan. I am told by the protesters about investor-State dispute resolutions. Well, that is hugely more likely to help New Zealand than hinder it. We already have an independent justice system that protects the legitimate activities of all sorts of companies, including large multinational ones, which, if they feel wronged, can go to court in this country.

Nothing will change for us, unless we start doing something like nationalising companies at, I do not know, 5 percent of their value—and then we would have other problems anyway. But the investor-State dispute settlement provides opportunities for New Zealand companies in countries where the court system is perhaps not quite as independent. Some people have been really loud in this debate, but reject the whole concept of trade. Why would you listen to Jane Kelsey if you are actually interested in trade? Give Jane her due: she hates trade agreements. She would roll back the China free-trade agreement, she would roll back the Korea free-trade agreement, she would roll back the South-east Asia free-trade agreement—any one of them—so why would you get advice from her? She is hardly likely to provide advice that is reasonable and balanced.

I would like to point out that without the China free-trade agreement we would have been a quiet country after the global financial crisis , a country that would be able to afford far fewer of the medicines that those protesters claim to be concerned about having access to. There are others who say that they support free trade, but not this deal. They try to say “This one is worse.”, but yet they cannot point to why it is worse. They keep talking about all sorts of things. It was negotiated by the same officials—including Tim Groser , who used to be an official—who negotiated all the other deals. It has similar trade-offs , similar clauses—and it is just not good enough, apparently. Perhaps they are grumpy that their lot did not sign the deal. I do not know. But that is a ridiculous way to approach the arrangement.

Then there are those who say it sacrifices our sovereignty. I had an experience, as we know, with somebody who said that—well, not quite in those words—last week. How can that be so? We have the sovereign right to withdraw from any trade deal at any time—any trade deal at any time. I understand that with the Trans-Pacific Partnership it is 6 months’ notice, then you are out. We never do withdraw, but why not? Because we would have to give up the benefits as well as the costs, and every single Government has said that the benefits are worth having, and they have not walked away.

Then there are those who even say it is anti-democratic, though the current Government has been elected—I do not know, once, twice, three times on the Trans-Pacific Partnership, and the elected Parliament has to approve the legislation. That is democracy. I have got an idea: if it is about democracy, why do the protesters not persuade the guy who is trying to sound like he agrees with them to actually go to the country in 2017 with a commitment to pull out of the Trans-Pacific Partnership, a commitment to leave the Trans-Pacific Partnership? He should stop waffling around, and wander out there and say: “I’m with you, protesters. I agree with you. I’ll pull New Zealand out of the Trans-Pacific Partnership.” Then we can have a further democratic test about the future of this legislation.

The most important point I want to make today is the reason why this Government is doing this, because everyone on this side of the House cares about the future of this country. We wanted to provide good jobs for our people, security for our families, and a big enough national income so that we can afford the best health care , the best education services, and so on, that my friend the toy-thrower was worried about.

It is our sincere belief that this agreement will help do this for this country; otherwise, we would not be here. So I say to Andrew Little : at least the protesters have the excuse that they maybe do not know all there is to know about the agreement, but if you have been in this House, if you have been in the debate, you should be prepared to stand up for your country. He can stand up either way. He can stand up in favour, or stand up against, but enough of this mealy-mouthed going out—he spent half his speech, half his speech, nearly, saying how much he hated the Trans-Pacific Partnership, but on the radio this morning he was saying that he would support it and would not withdraw from it.

Well, I say that if you really want to show any sort of leadership, then step up and say you will pull out, sunshine, because your rhetoric does not match what you are actually doing. You are playing politics with the future of New Zealanders. His colleagues know it, and it is not good enough.

This will be an important year for New Zealand. They all are, but this is an important one. In this year this Government, the John Key Government, will focus on building the opportunities for New Zealand, growing the skills, growing the innovation, building our infrastructure, improving our natural resources allocation, attracting investment in this country, and, most important , providing export access to our farmers and to our businesses to be able to sell overseas.

That is crucially important, so for any naysayer on the other side who has a speech-writer trying to write up stories about this Government having a vision, I say: look in the mirror, it is you who are playing politics and have no vision for this country. Thank you.


Foundation for sustainable social dividends

February 10, 2016

John Key's photo.

As a country, we will never get wealthy, build a strong and growing economy, and create jobs but selling to ourselves. Trade is our lifeblood. – Prime Minister John Key.

He is right about why we need trade.

But it’s not just that trade is the way we earn our way in the world, it’s what the money we earn enables us to do – get wealthier as a country so we build a strong and growing economy and create jobs.

Trade is the foundation from which we get sustainable social dividends.

And trade with fewer tariffs and quotas which we will get under the Trans pacific Partnerhsip (TPP) is better than what we have now.


TPPA true & false

February 4, 2016

The National Party has a webpage giving the facts and refuting the myths on the Trans Pacific Partnership Agreement (TPPA) which is being signed in Auckland today.

Don’t believe that?

Chapman Tripp says:

The TPP began life modestly as an initiative between New Zealand and Singapore, but the ambition was that it would evolve into a trans-Pacific agreement.  The first recruits were Chile and Brunei and the net has subsequently extended to Australia, the United States, Canada, Japan, Malaysia, Mexico, Peru and Vietnam.

New Zealand now finds itself in the vanguard of the new wave of economic globalisation.  This is a coincidence of the worldwide focus on FTAs to further integrate economies, the prominence of Asia, and the United States’ and Japan’s renewed interest in the Pacific Rim. 

Some find this uncomfortable.  Many, including the protesters at Seattle, found the birth of the WTO in 1994 similarly uncomfortable.

Difficult as change can be, this is an opportunity which will not come again.  In its final form, the TPP is the biggest free trade deal in a generation and will establish the architecture of Asia Pacific trading relationships for decades to come.  . . 

and concludes

. . . Labour’s frustration is understandable.  The TPP does not appear to include the specific reservation of rights Labour wanted.  New Zealand negotiators could perhaps have sought a more nuanced provision, such as appears in the NZ-Korea FTA, which arguably preserves some scope to expand the OIA screening regime.  It is hard to see that the more absolute language in the relevant TPP annex was a deal breaker for other negotiating parties. 

Negotiating parties tend not to publicly announce their bottom lines in advance to avoid painting themselves into a corner, as Labour has effectively done.  One cannot, of course, sensibly weigh up the overall merits or demerits of a 6000 page 12 party agreement by looking only at one provision.  To attempt this is to miss the wood for the trees. 

None of the signatory countries will be perfectly satisfied with the deal.  Each will have a particular clause or clauses that they would prefer were not there.  The US Republican Senator, Orrin Hatch, for instance is chagrined that the IP chapter grants only five, and not eight, years’ protection to biologics. 

But if support for the deal was premised on perfection, then it would go the way of the Doha Round.  It is no coincidence that TPP opponents play the single issue game.  Conflating whether one gets everything one wants, and whether the deal is acceptable overall, is a classic black hat strategy. 

The art of negotiating involves being able to push hard for one’s positions, then to stand back and work out whether (even if one did not get all one wanted) the deal on the table is better than no deal at all. 

Here, the question is even more stark.  Would New Zealand be better off inside, or outside, the tent?  MFAT’s national interest analysis reaches a firm conclusion, having weighed everything up over 276 pages.  It is respectfully suggested that this conclusion deserves to be afforded more weight than anyone’s position based on a single issue.

Those last two paragraphs nail it.

The deal isn’t perfect but it is better than no deal at all and New Zealand is better inside the tent than outside it.

The usual nonsense at Waitangi purports to be about the TPPA threatening the Treaty but the Federation of Maori Authorities is cautiously supportive:

. . .Chair Traci Houpapa said there were benefits and opportunities for Māori and all New Zealanders.

“We’ve analysed those documents ourselves and while we have a level of comfort we agree with the 12 month consultation process that the signing on the 4th of February triggers.”

Ms Houpapa said the removal of some or most tariffs for exporters would have financial benefits for the federation’s regional members.

“Māori have a predominate footprint in primary sector industries, we are land, water or sea based so our exporters have obvious benefits if the removal of tariffs are in place and TPP provides for that.”

FOMA is happy with the provisions within the agreement that acknowledge the Treaty of Waitangi, which say it must be enshrined, but FOMA recognises further analysis of what that means is required. . . 

“We recognise TPP is a complex trade arrangement which requires time to fully digest and understand. Our members support the trade benefits and want assurance that our national sovereignty and Treaty partnership are maintained. We welcome proper engagement with government and our members on this important matter,” said Ms Houpapa.

Proper engagement will achieve what all the protests prefaced on political agendas won’t.

Charles Finny says the TPPA deserves praise from Maori:

I believe that rather than being inadequate in its protections for Maori, TPP is if anything a taonga in the way it protects the rights of the New Zealand Government to discriminate in favour of Maori. This in turn, I think, adds enormous mana to Maori.

I feel Maori are being poorly advised from some quarters and it is essential that ministers and government officials spend even more time explaining the protections for Maori in the agreement and the trade benefits that will flow to Maori from it. These benefits are substantial.

TPP is an agreement between 12 countries. Pretty much all the 12 jurisdictions are home to indigenous minorities – for example, the First Peoples of the United States, Canada, Mexico, Peru, Chile, the Aboriginal people in Australia, the Malays in Singapore and Malaysia, and the Ainu in Japan.

Yet none of these peoples is mentioned in the main text of the deal and none of their Governments has secured agreement from the other members that they should be allowed to discriminate in favour of them.

In contrast Maori are mentioned, as is the Treaty of Waitangi. Article 29.6 of TPP is actually titled “Treaty of Waitangi”. It says that “provided that such measures are not used as a means of arbitrary or unjustified discrimination against persons of the other parties or as a disguised restriction on trade in goods, trade in services and investment, nothing in this agreement shall preclude the adoption by New Zealand of measures it deems necessary to accord more favourable treatment to Maori in respect of matters covered by this agreement, including in fulfilment of its obligations under the Treaty of Waitangi”.

This is pretty much the same clause that has been included in all free trade agreements (FTAs) New Zealand has negotiated since 2001. It has stood the test of time. It has allowed multiple Treaty settlements to be completed and has not had (as some critics claim will happen under TPP) “a chilling effect” on Government’s ability to adopt policies more favourable to Maori than other New Zealanders or nationals of these FTA partners.

TPP’s protection of the Treaty goes even further than earlier FTAs. It states “the parties agree that the interpretation of the Treaty of Waitangi, including as to the nature of the rights and obligations arising under it, shall not be subject to the dispute settlement provisions of this agreement.” This means it is entirely up to New Zealand to determine if any discrimination has occurred because of the treaty (so long as this is not a disguised restriction on trade).

I am frankly amazed the US and others have agreed to this provision. Our ministers and officials have done a great job achieving this. All Maori should be saying: “Well done!” . . 

He also posts on Facebook:

TPP contains two types of dispute settlement. In the media and political criticism the two are often confused. There is the standard (in WTO and all our FTAs apart from CER – the reason why apples took so long to resolve)provisions which allow parties to the agreement to challenge breaches of the agreement. This is a purely government to government process and applies to the full agreement unless specified (e.g. interpretation of the Treaty of Waitingi the dispute settlement provisions do not apply). Then, in the investment chapter only, there is the investor state dispute settlement mechanism. This allows a company to challenge a government if it believes that government has breached its commitments in the investment chapter only. Many of the critics (who should know better) suggest that governments can be sued for breaches of outside of the investment provisions. This is not possible.

It is important to stress that TPP is worded differently to NAFTA and the Australian investment treaties that were used to challenge plain packaging of cigarettes. The critics often cite these agreements as examples of why we should fear ISDS without noting the fact that TPP has been drafted with the sloppy drafting in earlier agreements in mind.

New Zealand has been agreeing (indeed advocating for ) ISDS provisions in investment treaties and FTAs since the late 1980s (see for example the original China NZ Investment protection agreement). To date the NZ Government has yet to face a challenge.

Put simply I believe these provisions provide useful security for NZ investors offshore. Some of the governments we trade with and have FTAs or investment treaties are far more likely to breach these agreements than we are.

There are multiple exclusions (e.g. our Overseas Investment laws) and multiple acceptances of our right to regulate to protect the environment, to protect human health and safety, to discriminate for Maori under the Treaty of Waitangi etc to ensure that TPP will not have the type of chilling effect on policy making that the critics maintain. And, on top of the above protections, tobacco is completely carved out of the agreement so no worries there.

But is you want to nationalise huge hunks of the economy without compensation – you do have a problem. As you would if you tried to use human health as a justification for a policy if there was no science to justify the policy. Until recently I did not think that future NZ Governments would act in this way. This is why I think we have nothing to fear and that these provisions can only benefit NZ.

Stephen Jacobi wrote an open letter to Labour leader Andrew Little. It’s worth reading in full, I have chosen the extract with most relevance to farming:

. . . I agree that the dairy aspects of TPP are not as good as they could have been and as we had hoped.  But they are in the view of the negotiators and the dairy industry the best that could have been achieved in the circumstances.  Dairy still benefits more than any other sector from tariff cuts in key markets and the establishment of new tariff quotas.  The meat deal – specifically beef to Japan – is a significant market opening about which the industry has welcomed. Without this we will not be able to compete with Australia which already has an FTA with Japan. To call the rest ‘not much’ is a serious under-estimation – tariff reductions and/or elimination for horticultural products including kiwifruit, wine, wood products and seafood cannot so easily be dismissed. Addressing tariff and non-tariff barriers for manufactured products like health technologies and agricultural equipment is also significant.  This will result in the creation of new markets as you suggest. . . 

Duncan Garner says the political consensus on free trade is over:

After decades of supporting free trade, Labour has chosen to veer left into the bosom of New Zealand First and the Greens and oppose the TPP. It’s short-sighted and totally hypocritical, in my view. It looks like the party has had its strings pulled by anti-TPP academic Jane Kelsey.

This is a serious and controversial departure for Labour, and it may yet hurt the party among middle New Zealand voters.

Do these politicians know that our bottled wine can be sold tariff-free in Canada, Japan and the US on day one of the TPP being implemented? Why would you oppose that after we as a country have fought for this for so long? Most fruit and other produce can be exported tariff-free too, as a result of the TPP.

I travelled the world with Labour and National Party ministers for years, watching them fight bloody hard for market access for our exporters. I have seen a block of New Zealand butter selling for $25 in Japan; the same with cheese. Some of these tariffs are so high our exporters are locked out.

I’ve also seen Phil Goff, Helen Clark, John Key, Mike Moore and Tim Groser invest thousands of hours over the years for this sort of deal. Rather than accuse them of selling out, I’d argue they’ve done a great job. . . 

The truth is Labour has taken a massive risk opposing the TPP. I sense the silent majority understands we have to be part of it, despite the noise from the usual suspects.

Labour is divided and bleeding over the TPP. More Labour MPs want to voice their opinions in support but they’ve been silenced.

Ms Clark, Mr Key, Mr Moore, Mr Groser and David Shearer aren’t idiots. They know New Zealand has no choice but to be on board. Foreign investment is crucial into New Zealand too.

My friend runs a hotel in rural Waikato. The Chinese bought it recently. They have invested thousands into doing it up; they employ 33 locals in and around Tirau and Rotorua. Without the Chinese owners it would have closed and 33 Kiwis would be out of work. We have no option but to be international traders. Without it we die, slowly.

I predict the sky won’t fall in. And exporters stand to make billions more in the years ahead.

We won’t get rich buying and selling to each other; we need barriers broken and global doors open.

That’s why we must continue to fight for international trade deals — knowing there will always be a boisterous but small mob who hate the idea, no matter what the facts. 

Brian Easton who is no apologist for the right, asks can we afford not to adopt the TPPA?

. . . While there has been much focus on the TPP deal, there has been hardly any mention of the WTO (World Trade Organisation) agreement in Nairobi which prohibits agricultural export subsidies. Some 30 years ago a trade negotiator commented to me that getting rid of this dumping might be the best single thing we could do for our exporters. Not only would it stop the undercutting of their markets but it would force domestic agricultural reform because the dumping nations could no longer export the surpluses arising from their subsidies. There is not a lot of this subsidising going on at the moment but without an agreement export subsidies are likely to come back – to New Zealand’s detriment.

What was not always mentioned was that the chair of the WTO agricultural committee which negotiated the deal was a New Zealand ambassador, who is the fifth New Zealand chair in succession. This not only reflects the excellence of our Geneva ambassadors and the priority we give to agriculture in the WTO, but that the powerful – most notably the US – trust New Zealand to do a good job. That trust arises from the way we behave in other trade negotiations, including the TPP. The implication is that if we defaulted on the TPPA we would damage that trust and our ability to function effectively in a wide range of other international negotiations we care about, including on climate change.

That puts us in an extremely invidious position over the TPPA. Sure, we could turn it down, losing both its benefits and its downsides. Were we to do so, however, we would compromise the trust our international activity depends upon, especially the possibility of other trade deals which would open up markets currently restricting our exports. . . 

. . . Japan and the US (indeed the whole of the North American bloc) are members of the TPP. We have been struggling for ages to get deals with these two but have been too low on their pecking order to be noticed. So you might think of the TPPA as a means of getting the deals.

That is a positive, but of course the deals have to be favourable to us. Many argue they are not although their vehemence is offset by those who argue the opposite. The truth is that there are positives and negatives and different people balance them differently. In my opinion it is not much use focussing on a subset of the outcomes and ignoring everything else. Deals are about giving and taking.

The logic in this column is that we now do not have much choice about the TPPA. The government is trapped into agreeing to it because rejecting it has implications for other trade deals and our wider international relations. That is probably what our MFAT officials are advising, although no doubt there are many diverse views in there, just as there were with Vietnam. Here is my best guess about what is likely to happen.

There is a signing of the agreement in Auckland this Thursday. The exercise is primarily ceremonial – agreeing to a common text and exhibiting solidarity. I suppose the protests outside are ceremonial and for solidarity too.

The twelve partners then go away and prepare for the implementation of the text. Some things can be done by regulation, some require a change in law. The degree to which each partner has to do this differs according to their constitutional arrangements. . . 

 

By now there are so many imponderables that there is insufficient room in a column to pursue them all in a balanced way. My guess is that, given the way we are trapped by the wider international issues, the cautious advice is to proceed on the path of implementing the legislation for the TPPA, making as much international progress elsewhere. We can then review whether we really want to go ahead with the implementation. Legislation can always be reversed, agreements abrogated, although if the government changes its mind it is better that some other partner pulls the plug. Much of what is due to happen will be less ceremonial than this Thursday.  

And Prime Minister John Key says:

. . . “Opponents claim we’re giving away our sovereignty and that’s completely wrong – the TPP has almost identical provisions to the China free-trade agreement.”

Mr Key said other countries would not be able to write New Zealand laws and the TPP didn’t increase the cost of pharmaceuticals.

“The TPP is our biggest free-trade deal, successive governments have worked to get free trade with countries like the United States, Japan and Canada for 25 years,” he said.

“It will create significant new trade and economic opportunities for New Zealand… it gives our exporters access to 800 million customers in 11 countries across Asia and the Pacific.”

And those new opportunities will create jobs here, increase our GDP and earn us the money we need to pay our way.

The deal isn’t perfect but it’s better than what we’ve got and a long way better than what we’d have if our competitors were in the warmth of the tent and we were left out in the cold.


GDT drop 7.4%

February 3, 2016

Only the optimistic were expecting an increase in the GlobablDairyTrade price index but even the pessimistic would have been disappointed with the 7.4% drop.

gdt3216

gDt3.2.16

 


Three Labour leaders for TPP

January 28, 2016

Two of Labour’s former leaders, Phil Goff and David Shearer, who are still senior members of its caucus are quite clear that they support the Trans Pacific Partnership (TPP).

A third former leader, Helen Clark, also supports the agreement.

Mr Goff, a former leader and former Trade Minister and now an Auckland mayoral candidate, and David Shearer, also a former Labour leader, last night told the Herald they both still supported the TPP.

Mr Goff said the deal should be signed.

Former Labour Prime Minister Helen Clark also backed the TPP among 12 countries and it was begun under her leadership. Mr Goff was Trade Minister.

Labour has decided to oppose the TPP on the grounds that it undermines New Zealand’s sovereignty.

Mr Goff did not blatantly criticise Labour’s position. But he effectively dismissed that view and the suggestion that Labour would not be able to prevent foreign investors buying New Zealand residential property.

“Every time you sign any international agreement you give away a degree of your sovereignty.” He cited the China free trade deal negotiated when he was Trade Minister.

“We gave up the sovereign right to impose tariffs against China when we signed up to the China free trade agreement. But it came with quid pro quos. China gave up its right to impose huge tariffs on us.

“That’s what an international agreement is; it’s an agreement to follow a particular course of action and a limitation on your ability to take action against the other country.

“You have the ultimate right of sovereignty that you can back out of an agreement – with all the cost that that incurs.”

The costs of not being part of such a wide trade agreement would be significant.

The TPP obliges member Governments to treat investors from member countries as though they were domestic unless exceptions are written into the agreement. Labour wanted an exception written in for investors in residential housing but National did not seek it.

Mr Goff is critical of National for choosing not to do that.

“But there is more than one way to skin that particular cat,” he said. “We retained the right to make it financially undesirable or unattractive to buy up residential property in New Zealand.

“You can still impose, as Singapore and Hong Kong do, stamp duty on foreign investors.” . . 

Labour’s biggest achievement last year was the appearance of caucus unity.

This breaking of ranks shows that the veneer of unity was thin.

That some in Labour disagree with the caucus position might entertain political tragics.

But the bigger significance is that for the first time in decades it’s walking away from the consensus it’s had with National on free trade.

Caucus disunity might hamper its chances of returning to government. But it will get there sooner or later and any failure to foster free trade progress as successive governments have, won’t be in the country’s best interests.


Fonterra drops forecast to $4.15

January 28, 2016

Fonterra has dropped its forecast payout from $4.60 a kilo to $4.15.

In a newsletter to shareholders, chair John Wilson says:

  • Today we’ve unfortunately had to announce that the forecast Farmgate Milk Price for the 2015/16 season is being reduced from $4.60 per kgMS to $4.15 per kgMS.
  • When combined with the previously announced earnings per share range of 45-55 cents per share, this amounts to a forecast Cash Payout of $4.50 – $4.55 per kgMS for the current season after retentions.
  • I know the reduction of our milk price forecast will be very tough on your farming businesses. As we get closer to our half year results, we will look at ways we can use the expected improvement in dividend returns and the financial strength of our Co-op to help support your cash flow.
  • Global economic conditions are continuing to impact demand for a range of commodities, including dairy. Despite this, our Co-op is performing well in the areas within our control and is on-track to generate improved dividend returns to farmers.
  • We remain confident in the long-term fundamentals of international dairy demand, but right now, the market remains out of balance.
  • Our previous forecast was based on the consensus view that the market would return to balance over first half of this year. However, the timeline for that correction has been pushed further out.
  • Farmers in other regions, particularly Europe, have not responded to the lower global prices by reducing supply as rapidly as New Zealand farmers have.
  • Last week I met with the leaders of the other major international dairy co-operatives. All have a similar view to ours on the medium term forecast, with one European co-operative introducing incentives to encourage their farmers to reduce supply.
  • Clearly, current prices are unsustainably low for farmers globally and cannot continue in the longer term.
  • Given the uncertainty, there continues to be further price risk. Your Board will continue to update you as the season progresses.
  • The 9.8 per cent drop in the forecast means we have had to reduce the Advance Rate payments. . . 

This isn’t surprising and follows Westland’s announcement of a lower forecast payout.

Few farms would have made a profit on the higher forecast. Today’s announcement will mean the average farm will be earning about $50,000 less than had the earlier forecast been maintained.

Fonterra’s media release is here.


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