Baldock Larry: New Zealand Horticulture Export Authority Amendment Bill (No 2) — First Reading 
Baldock Larry: New Zealand Horticulture Export Authority Amendment Bill (No 2) — First Reading 
[Volume:607;Page:4677] 
LARRY BALDOCK (United Future) 
: 
 On behalf of United Future I rise to support this bill’s progression to the select committee. It is important to understand that this bill amends the New Zealand Horticulture Export Authority Act in two ways. One suite of changes relates to the operation of the authority in general. As it stands the Act allows quantitative restrictions to be imposed on the export of prescribed products. Although those provisions are not used their continued existence in legislation is inconsistent with New Zealand’s international trade obligations. 
Three other general amendments to the Act suggested by the authority itself are aimed at improving its administrative efficacy. There is a hearing process for Horticulture Export Authority decisions on export licence applications and also where the authority believes on reasonable grounds that a licensed exporter has conducted export operations that prejudice the current product group’s export marketing strategy. However there is no provision for hearings to be held on other statutory decisions of the Horticulture Export Authority so the bill will change that. The bill also allows costs to be awarded to all parties in the case of any dispute under the Act overriding the precedent set by the recent arbitrator who did not award costs to all parties. Finally the current Act does not allow the Horticulture Export Authority to revoke redundant export licences and therefore the register of exporters includes some redundant information. The bill tidies that up. 
Beyond those changes to the general operation of the authority the bill also contains specific amendments relating to the kiwifruit industry. It provides the kiwifruit industry with an option to coordinate the export of kiwifruit to Australia through the Horticulture Export Authority. Kiwifruit exports to the rest of the world except Australia are managed by Zespri in a single-desk export regime. Here I would like to echo the comments made by the member who spoke previously to me in congratulating Zespri on the fine work it has been doing in recent years. As a resident of Tauranga in the Bay of Plenty I welcome the transfer of Zespri’s head office to Mount Maunganui where it will continue to make a significant impact on the economy of the Tauranga region. 
The bill amends the definition of “product” under the Act to include a specific reference to “kiwifruit for export to Australia” otherwise all kiwifruit exports could be prescribed conflicting with the Kiwifruit Industry Restructuring Act and the Kiwifruit Export Regulations that regulate all exports except those for Australian consumption. Since the Australian market for kiwifruit was deregulated in 1988 it has been swamped with low-quality kiwifruit coming from New Zealand which has damaged the market. There is also a problem with the re-exporting of New Zealand kiwifruit from Australia to other countries where it competes alongside high-quality Zespri product. 
The industry considers that bringing kiwifruit exports to Australia within the Horticulture Export Authority framework will allow marketing to be coordinated and quality standards to be applied leading to increased returns. The move will make it possible to limit or end illegal re-exporting because exporters will be required in their export licences to comply with an agreed marketing strategy. Increasing returns from the Australian market will reduce the margin between this and higher-value Asian markets thereby reducing the incentive for re-export. 
The problem of re-exporting was highlighted by a recent Commerce Committee report that found that Zespri had withheld payments to 20 growers it suspected of illegally exporting fruit to Asia and the Middle East. This was the only recourse available to Zespri in the absence of the solutions that this bill will provide. Zespri claimed that some exporters were sending fruit to Australia which they were entitled to do but were then involved in this fruit being sent to other countries for example Taiwan and China where it competed on price with Zespri’s fruit. Only the Ministry of Agriculture and Forestry has the legal power to investigate suspected breaches of kiwifruit export regulations and Zespri was acting outside its statutory authority in this instance. However it was able to suspend payments because it has a monopoly on export except to Australia. We are hopeful that this bill will ensure that Zespri is not forced to take those actions in the future. 
However it also has to be said that this problem has been around for some time. When the Government decided in 1989 not to include Australia in its kiwifruit regulations because it was deemed to contravene the principles of closer economic relations kiwifruit industry leaders were unhappy at the prospect of an open slather Australian market. The Chairman of the Kiwifruit Marketing Board Paul Heywood predicted that “grower returns from the Australian market are likely to be poor as a result of this decision which is not in the long-term best interests of the industry.” The Managing Director of Fruitfed Export John Mangon warned: “If the Australian market is flooded with fruit exporters over there are quite likely to buy it cheap and fly it somewhere else.” Regrettably those prophecies came to fruition. Low-quality New Zealand exports had a far-reaching effect on much better lines of New Zealand fruit on the same market where sceptical buyers forced the price down. At this time Australian kiwifruit also began to appear on the market. 
Things have not improved. In the 1999  
Gazette 
 trade standards for kiwifruit were revoked and in the same year the Kiwifruit Export Regulations came into force to regulate all New Zealand kiwifruit exports except exports to the unregulated Australian market. Because Australia is the only unregulated market for kiwifruit some growers and exporters tend to treat it as a dumping-ground for low-quality product undermining the price while returns from other export markets have increased over time. Declining quality has led to a downgrading of kiwifruit in supermarkets with very little promotion and the Australian consumers are therefore substituting other better-quality fruit for kiwifruit. Low returns in the Australian market encourage the illegal re-export of kiwifruit to Asia damaging returns from New Zealand exports to these high-value markets. Zespri has estimated that this activity cost it $1.9 million in 2001 alone. Details of the volumes involved are difficult to obtain given the re-export of product via Australia. 
The key question that the select committee will need to grapple with is whether the Horticulture Export Authority is the most suitable mechanism for controlling kiwifruit exports to Australia. The authority serves horticultural product groups that do not have single-desk marketing. Its powers under the Act are minimal since the spirit of the legislation is that it should be used to enable industries to succeed not restrict them. The 1998 review of the Horticulture Export Authority resulted in the Ministry of Agriculture and Forestry receiving 203 submissions with 85 percent of respondents supporting the authority’s retention. 
If the bill is passed kiwifruit exporters and growers would need to form a product group and apply to the Minister of Agriculture and the Minister of Foreign Affairs and Trade for an Order in Council to prescribe exports to Australia under the Act. The Minister must be satisfied that there is industry support for this application. The product group would then be responsible for developing its export marketing strategy obtaining industry support for it and submitting it to the Horticulture Export Authority for approval. The authority can then license exporters allowing the industry to put standards in place lift returns and stop exports. 
The advantages of working under the Horticulture Export Authority lie in the existing legislation the authority’s independence and the experience that exists within the authority. Industries are free to decide whether to use the Horticulture Export Authority and are free to withdraw. The select committee process should determine whether the kiwifruit industry is genuinely supportive of working under the authority. 
The alternatives seem to be limited. For the Australian market there is no desire to replace the current multiple export environment with a modified single-desk system like Zespri. The industry could work together to maintain standards but attempts to do this voluntarily have met with only limited success partly because it is not enforceable without statutory backing. Our hope is that this is the best-available mechanism to ensure that growers exporting to Australia receive adequate return for quality product and we shall be looking with interest to the return of this bill from the select committee following the submission process.