Norman Russel: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Third Reading 
Text is incorporated into the Bound Volume 
Norman Russel: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Third Reading 
[Sitting date: 11 May 2011. Volume:672;Page:18605. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on the Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill or rather the “Movement of the Goalposts Bill”. This bill requires Fonterra to supply subsidised milk to its competitors but it changes the goalposts. Previously Fonterra could have stopped providing subsidised milk to its competitors sooner but now we will delay so that Fonterra will have to provide subsidised milk to its competitors—its overseas-owned competitors in particular—for a longer period.  
There are many reasons why this bill is flawed. We could start with the obvious one. Why are we making a New Zealand - owned producers cooperative subsidise its foreign-owned competitors so that they can compete against it in the foreign markets? That is an absurd proposition and unbelievably this House is voting for this absurd bill.  
The background as to why this bill is particularly ill-timed is what is happening in commodity prices. Over the last 100 years commodity prices dropped very dramatically about 1.2 percent a year across all commodities looking at food iron ore and other minerals but in the last 7 to 10 years all of that century of drop in the value of commodities has been wiped out because commodities have increased dramatically in value right across the board. So a century of slow decline in the value of commodities has been reversed in the course of a decade.  
Against that backdrop those who produce commodities whether it be milk powder or iron ore have suddenly found the assets that produce those commodities suddenly become much more valuable than they were previously. In Australia of course we have seen the massive boom in Western Australia—linked to iron ore in particular but not only to iron ore—and in New Zealand we have seen the boom in prices for land that has access to water to produce dairy solids and dairy protein has become much much more valuable as we have seen that dramatic reversal.  
Some of the hedge funds in describing the current situation have talked about a paradigm shift. It has been a complete paradigm shift when after a century of slowly declining commodity prices we have suddenly seen this dramatic reversal. Of course the reason for the reversal is that the planet is finite. It is pretty simple. What we have found is that there is a big increase in demand coming out of China and India in particular and there is limited capacity to supply that demand because of course there is not more agricultural land with access to water being created nor are there more iron ore mines being created nor is more oil being created. Those are finite resources so in the context of that backdrop we have seen a big spike in prices.  
One of the outcomes of that process is that people who want access to those resources that have become very expensive are looking at how they can secure their supply chains and New Zealand is part of the global supply chain for food protein particularly dairy protein. We have seen a lot of overseas interest in buying up New Zealand land processing facilities and agricultural processing facilities. We have seen the loss of PGG Wrightson just recently with its very valuable seed stocks and other agricultural service companies have become targets for overseas buyers. 
As the value of these commodities has increased dramatically we have seen a much greater overseas interest in buying up New Zealand land and processing facilities and the supply chains that all go with it. This means that the context for the Dairy Industry Restructuring Act when it was originally passed has dramatically changed. It is no longer the same world that it was when the Act was first put in place. When some people come to look at the situation they treat it as if nothing has changed but of course everything has changed. It means that no longer do these regulations ensure that we have a competitive domestic raw milk market in New Zealand. They do no such thing. They are not designed any more to do that—well they may be designed to do that but that is not what they are doing any more. What they are doing now is supplying raw milk to the overseas-owned competitors of Fonterra because raw milk and the dairy protein that comes out of it is incredibly valuable.  
The Green Party is a very strong believer in New Zealand production so we are very keen to make sure that raw milk is provided at a competitive price to New Zealand - owned producers based in New Zealand. We want to support New Zealand industry we want to make sure that the New Zealand raw milk market is competitive and that milk in that market is at a competitive price. If these regulations were restricted to simply providing raw milk to New Zealand producers whether it be New Zealand - owned producers even exporting or whether it be just for the domestic market then we would be supportive. But what these regulations do is ensure that raw milk is provided at effectively a subsidised price to the overseas-owned competitors of Fonterra who then transform that raw milk into the products—mostly milk powder but not only—which then compete against Fonterra in Fonterra’s overseas markets.  
This is what has changed between the original Dairy Industry Restructuring Act and this bill that we are considering at the moment. The problem is that people have not realised that the world is no longer the same so they are treating the dairy market as it used to be. Part of what stands behind this is we do not want to upset our trading partners. Part of the regulation of the New Zealand dairy sector is to make sure that we do not upset our trading partners and do not attract any kind of World Trade Organization action because of uncompetitive practices within our domestic dairy market. These provisions are in place in order to try to knock aside any attempts to challenge the regulations governing the New Zealand dairy market.  
But of course what has happened is that in the past because New Zealand was promoting relatively cheap commodities it was in our interests to try to break down trade barriers all around the world in order to get those commodities into those markets. But now the exact opposite is happening. Those markets are desperate for New Zealand dairy products. The Chinese are not consuming a lot more of New Zealand dairy produce because of our free-trade agreement with China. They are consuming a lot more of our dairy produce because they need it because it is clean and safe—particularly safe after the melamine scandal—and because they need access to the food protein.  
Globally what we are seeing is that food protein is in shorter and shorter supply and it becomes more and more valuable and those markets where previously we were trying to overcome barriers to get our food in there actually are desperate for our food and really want our food. So the whole global context has changed. It is kind of like saying back in the 1940s the 1950s or even the 1960s if we look at the oil market countries all around the planet wanted oil. They were desperate for oil. The problem with oil was not that there was a trade barrier to oil. People were buying oil because really needed oil. Other commodities are now becoming more and more like oil because we have a global shortage of those kinds of food commodities. Other countries really want New Zealand primary produce and that is one of the fundamental things that has changed.  
The concern that we have to let overseas companies buy up our land let overseas companies buy up our processing facilities and have these regulations in place all of which are designed to stop any World Trade Organization action against New Zealand all of which are designed to maintain a multilateral trading environment in which we can get our goods into those markets has been turned on its head. Now those markets are desperate for our goods. Orienting our entire dairy industry regulations around the concept of trying to avoid World Trade Organization litigation by making sure we sell off our land to overseas owners without breaking our World Trade Organization commitments making sure we allow Synlait to be bought up by overseas owners and have these dairy industry regulations in place so that we do not upset our World Trade Organization commitments all of that has been turned on its head.  
Now we are in a powerful position because we have access to something that people want. In fact what we should be doing is looking after that valuable thing. We should be preventing the overseas buy-up of our land and preventing the overseas buy-up of our processing facilities and our agricultural servicing companies. We should be protecting Fonterra and not making it subsidise its foreign-owned competitors in New Zealand through the Dairy Industry Restructuring Act and the amendments that are before us now. It is by understanding how the world has changed in the last decade that we can understand how fundamentally ill-conceived this particular amendment bill is and how fundamentally ill-conceived the framework of the dairy industry in New Zealand is at the moment. The Green Party will not be supporting this bill.