Jones Shane: Dairy Industry Restructuring Amendment Bill — Second Reading 
Text is incorporated into the Bound Volume 
Jones Shane: Dairy Industry Restructuring Amendment Bill — Second Reading 
[Sitting date: 14 June 2012. Volume:680;Page:3030. Text is incorporated into the Bound Volume.] 
Hon SHANE JONES (Labour) 
: 
 Tena koe Mr Speaker. Before I turn my attention to the Dairy Industry Restructuring Amendment Bill I would like to echo what the Minister for Primary Industries has said acknowledge the role played by Shane Ardern as the chair of the Primary Production Committee and say that it is one of the most interesting select committee experiences that I have had the opportunity to either endure or enjoy since 2005. More in sorrow than in anger we oppose this bill. We do so knowing that we were the architects under the leadership of Helen Clark who enabled this monopoly to come into existence. It was a monopoly that enjoyed the privilege of escaping the purview by and large of the Commerce Commission—no small gesture made by the Government at that time. Unfortunately the size of the gesture has been inversely related to the level of gratitude from those who have benefited from it in the rural community. As a rural-born Labour politician I have learnt to live with that. I look forward to the Committee stage of this bill because deep down I do not think there is a single member in the House who would not like to see a broad level of support given the centrality and the power of the dairy industry in our New Zealand economy. But at this stage I stand on behalf of my party and no doubt the sentiments I offer will be echoed by my other colleagues. 
At the pith of the debate that bedevilled us during the select committee process was whether or not “New Zealand Inc.” was going to be better served by enabling TAF to come into existence especially the unit trust which will allow for beneficial entitlements derivatives or unit instruments to be held by non-producers. That was a key debating point. I formed the view that I was not convinced by what the Fonterra advocates had to say. I want to say also that they put forward a quality level of submissions as did their opponents. But during the course of the debate I was and remain troubled that the existence of this particular unit trust does provide over time a slope that could inexorably lead to demutualisation. For those reasons we are actually looking forward to discussing with the Government and other stakeholders a set of amendments later in the process.  
I want to follow up on what the Minister has had to say. Not surprisingly a number of the members on this side of the House—in particular the Maori members—have been lobbied and have been cajoled in my case by a dairy company that is partly owned by Dalmatians and a dairy company that is owned by Maori. They have both had interesting things to say: that this bill may actually lessen the level of rivalry between what I might call the minnow players and the mother ship Fonterra. I think all New Zealanders have an interest in seeing a flourishing Fonterra. No New Zealander has an interest in seeing a calcified institution or an institution that unwittingly allows the cooperative legacy to slip away from it because rest assured the sophistication of the analysts the advisers and the observers once the TAF proposal gets up and running must not be underestimated—but that is for another day.  
We did have concerns and reflected them through the select committee process as to whether or not the new standards for setting the milk price were going to enable Fonterra to set itself up as a model not so much of how it performs as an institution but perhaps of how a notional efficient firm performs. At one level no one wants to see a level of subsidy being delivered through an unreasonable milk price from Fonterra to its rivals but at the same time we shared a concern that in the absence of rivalry Fonterra may not actually prove to be as strong as it should be. Also in the absence of rivalry we could not be confident that the actual milk price—which does impact on the daily lives of New Zealand families—could be managed.  
The Minister has talked about the term “contestability”. We have—I certainly have—sought advice and looked through various sources of information as to what this will likely be. In the absence of a very tight definition as to what “contestability” means I fear that we could see a reversion back to the Telecom-like litigation of the 1990s and after 2001-02. I certainly know that the Minister being a strong pro-commerce man does not want to see that. We do not want to see that. The Commerce Commission is going to enjoy a level of oversight over how the milk price is set and I think where that probably will come undone is that it will be first quite bureaucratic and second highly unlikely to enjoy the power to exert considerable levels of influence or game-changing behaviour. But that has been where the bill settled.  
I want to also talk about the importance at one level of enabling Fonterra to continue its strategy. During the submissions I amongst others said we were not particularly interested in hearing about your brand strategy the geopolitical considerations. That is a job for the shareholders their directors and their managers: to go out and do perhaps what the Catching the Knowledge Wave conference failed to do—actually go and turn from a raw commodity more wealth. I do not think there is a single member on this side of the House who does not want to see that happen. But does one need to do it in such a way where we run the risk of importing shareholders—owners of capital—into a cooperative structure and inevitably building a potentially level of tension? We were told that sounds conspiratorial. We were told that sounds quite lurid; that farmers will continue to enjoy total control as to what happens to the cooperative. As we currently understand the law that may or may not be the case. But as night follows day once these derivatives start to be traded I am absolutely certain a level of influence will emanate from this new class of shareholder—the directors or the broader stakeholders the actual producers—the guys and girls in “Strugglers’ Gully” so to speak managing debt milking cows looking for sharemilkers deciding whether a Kiwi or a Filipino should fit the bill. That is my fear. I fear that we will have investor capital and we will have producer capital and inevitably the cost of that tension will be the erosion of the underlying principles and the core meaning of what it is to have a cooperative.  
We did have concerns that the select committee process was truncated but those of us who have been Ministers in the past realised that certain imperatives are set down. Government members of the select committee I must say were—certainly to me anyhow—slightly indulgent to enable us to ask a whole bunch of questions. I do not want what I am saying to be used in any sense to deride the level of camaraderie that we as fellow parliamentarians enjoyed in trying to deal with this bill. But at the end of the day it got to very deep fundamental beliefs. Does one believe that this bill is in the best interests of New Zealand’s largest exporter which enjoys a level of commercial privilege shared by no other commercial entity in New Zealand? That is an inescapable fact. And are we doing the right thing as parliamentarians by enabling this kind of evolution? It can be said that that level of sovereignty belongs with the owners of the cooperative. We heard that argument very powerfully but I say to those stakeholders in that cooperative by dint of the Government of the time society has enabled you to enjoy what is virtually a State-trading level of privilege. So there has to be give and take.  
We are not blind to the fact that there are large capital issues at stake to drive an expansion in Fonterra etc. but without straying into the commercial mechanics as to how one does that in the absence of safeguards which may or may not come to pass in the Committee stage we at this stage as I have said will not be supporting this bill. We fear the long-term implications not only to our economic sovereignty and to the performance of this particular institution but of whether we are allowing and acquiescing in the demutualisation of a proud cooperative structure which has defined the growth of New Zealand’s most enduring industry—the dairy industry. So despite the fact—as referred to—that friends on the other side of the House were very charitable in the time made available we were unable to close the gap. I look forward to hearing what might come through the Committee stage. Thank you.