Willis NicolaNICOLA WILLIS (National): It is a particular honour to rise tonight to speak about the Dairy Industry Restructuring Amendment Bill (No 3). As Minister O'Connor has mentioned in the House several times over recent days I worked at Fonterra for several years between the years of 2012 and 2017. I admit readily that when I started my work at Fonterra I was sceptical of this idea of a cooperative propped up by a piece of legislation with special rules running New Zealand's dairy industry. I was sceptical because my view was that actually competitive markets wherever they can be should be allowed to flourish and can serve New Zealand best. But what I learnt when I was at Fonterra is quite how different our dairy industry is because of the global context in which it operates and the nature of the milk business and what it truly involves.I remember vividly early on in my time at Fonterra sitting down with a man called John Wilson. When I sat down with John Wilson he was a director on the board. He later became the chairman and various members of this House tussled with him in that role and he is now departed. But what I remember him saying to me so vividly when I questioned him and I said Why is it so important that we have a cooperative running our dairy industry?" he said "Nicola the existential fear that all dairy farmers have is that the milk will not be picked up. We fear the possibility of becoming peasants in our own land where other countries other nations other companies own our manufacturing stainless steel they make the profits from our milk and we exist at their whim and mercy and we must work to ensure that is never the case." And John Wilson was right.I continue to have some scepticism about the performance that Fonterra has had in recent years the decisions it's made and the investments it's made. I can tell you very frankly that I know there are men and women working at Fonterra today who share that disappointment who wish that they had performed better for their farmers. But we must remember that the most important people in all of this are not the managers at Fonterra not the people even sitting around the board table or the executives; it is the suppliers to Fonterra—the 10500 farmers who own that cooperative—that we should all in this House be considering because when they do well New Zealand does well.I would say that the thing I learnt the most when I was working at Fonterra was that we need to think about those farmers and how we ensure that they are best placed to create more value from the land to do it in a sustainable way and to compete effectively on the world stage. This bill is not fit for the global world the competitive world in which Fonterra must compete. This is a piece of legislation which is timid in a world that has changed rapidly.In 2001 when Fonterra was formed it had about 97 percent of milk supply in New Zealand. Today we find ourselves in a world where Fonterra actually only gets around 80 percent of milk supply. We have a matured market. We have competition. We have independent processors entering New Zealand because they know how efficient our farmers are at producing milk and what they want to do is get a slice of the action. There has been competition. We now find ourselves in a very different place. The place we find ourselves in is that Fonterra is having to compete in a world that is viciously difficult to compete in when it comes to producing milk at value effectively and at a higher return for farmers.So what National says about this bill is that it does not strike the right balance. It does not ensure that New Zealand dairy farmers can remain competitive internationally. That's no surprise because actually the ideas in this bill and Minister Damien O'Connor knows this came about after a very dated report: the Commerce Commission Review of the state of competition in the New Zealand Dairy Industry. That report is four years old now. Actually what's happened in the four years since is that every year Fonterra has lost about another 1 percent of milk supply in New Zealand. That trend has not ended yet Damien O'Connor has introduced to this House a bill that may have worked four years ago but is not fit for today.I want to take you through a couple of the elements because the first is this concept of open entry and exit. I think it makes sense that Fonterra should be able to make its own commercial decisions over who it is required to take milk from. Right now what Fonterra's required to do is pick up milk from anyone who wishes to supply it to them. Of course this bill takes some good steps forward. It says "Well actually if farmers are farming unsustainably then Fonterra shouldn't have to pick it up. If they're new conversions it shouldn't have to pick it up." but actually it should go further than that.I want to actually walk you through what happens right now in New Zealand if a farmer leaves Fonterra and says "Well I want to supply milk to a competing processor; a foreign-backed processor whose said that next year they might pay me a little bit more." Well what happens when they do that is that that foreign-owned processor can be very confident and that farmer can be confident that if they fall over the next day they can just go trotting back to Fonterra.I want you to think about the impact that has on the psyche of farmers who know that if it doesn't work out they can always return to Fonterra. I put it to you that it seems completely right in a competitive market that Fonterra should be able to have some discretion over the terms on which it accepts milk. We have now a far more competitive market than when the Dairy Industry Restructuring Act (DIRA) was formed and these open entry and exit provisions need to move accordingly because actually if we get that wrong the threat Damien O'Connor—the threat Minister is that we get an oversupply of stainless steel in New Zealand such as that we have empty factories running at half-capacity up and down this country inefficiently unsustainably and frankly not profitably. And the result for New Zealand? The result is our farmers get less for their milk shareholders get fewer returns; our local towns our provincial suppliers our provincial contractors—there's less money for them too. We all need this to be a competitive industry that is working efficiently and these rules will not allow for that. That should bother you Minister O'Connor and it certainly bothers us on this side of the House. I want to turn also to the raw milk regulations; because these are an area that I know deeply upsets many of—ASSISTANT SPEAKER (Hon Ruth Dyson): In the bill? NICOLA WILLIS: The raw milk regulations are designed within the DIRA and what this bill doesn't do—this is absolutely in the bill. ASSISTANT SPEAKER (Hon Ruth Dyson): Sorry the first reading should be about what the bill does do rather than what it doesn't do. NICOLA WILLIS: Let me tell you what this bill does Madam Speaker. ASSISTANT SPEAKER (Hon Ruth Dyson): That would be good. NICOLA WILLIS: What this bill does is it perpetuates the current regime. That means that farmers are forced to send their milk from their cows down the road to a foreign-owned competitor at price so that that foreign competitor can get a leg up in this world—can get a leg up can get their foothold in the New Zealand dairy industry. What I put to you is that in a globally competitive dairy market where Fonterra is competing with businesses of huge scale across the world how can it possibly make sense for Fonterra to continue to have to effectively subsidise foreign competitors to come here and set up in New Zealand? It doesn't make sense. I'll tell you the image I have in my mind when I think about this requirement. I think of the farmer who showed me his videocam of the tanker that he followed that picked up milk from his farm and drove down the road to another factory. I sympathise with that farmer because it is very hard for me to explain to him why that makes sense or why that serves our country or New Zealanders. I invite Damien O'Connor to explain that because here on this side of the House we absolutely support a competitive dairy industry a dairy industry in which there are multiple processes but we think the time has long passed where we need to prop up new entrants into the future. I know the members of the National "Ag. caucus" will be very constructive on the select committee for this bill; that is the way they're made. But I am deeply concerned that we have opposite us a Government that does not fundamentally respect farmers. They owe it to New Zealand farmers to get the structure of Fonterra right to get the DIRA right. This isn't about annual returns one year; this is about the very structure of our dairy industry. This bill fails to deliver for the globally competitive world that our farmers farm in and we oppose it.ASSISTANT SPEAKER (Hon Ruth Dyson): The next call is a split call."