Cunliffe David: Dairy Industry Restructuring Amendment Bill — Second Reading 
Text is incorporated into the Bound Volume 
Cunliffe David: Dairy Industry Restructuring Amendment Bill — Second Reading 
[Sitting date: 21 June 2012. Volume:681;Page:3268. Text is incorporated into the Bound Volume.] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 Members opposite may be wondering why an Auckland member is taking a call on this bill the Dairy Industry Restructuring Amendment Bill. I would just like to say— 
Hon Trevor Mallard 
: Maybe it’s because you drink milk. 
Hon DAVID CUNLIFFE 
: My mother brought me up to drink milk. That is dead right. But actually for my colleague’s information— 
Hon Trevor Mallard 
: He’s the drinkers’ representative. 
Hon DAVID CUNLIFFE 
: That is it. I am the drinkers’ representative. I actually grew up in the shadow of the Clandeboye dairy factory in South Canterbury and worked on farms in that area. 
Hon Trevor Mallard 
: Wasn’t there quite a lot of pollution down there? 
Hon DAVID CUNLIFFE 
: It had some impact I think it is fair to say colleague Trevor. To my great interest I later found myself working as a consultant to the New Zealand Dairy Board around the time that consideration was being given to the merger into what became known as Fonterra. I have a longstanding interest in these issues and I am delighted now as Labour’s economic development spokesperson to be able to make a contribution—a small one—to this debate. 
I would like to pick up where my colleague the Hon David Parker left off and just address the issues around Trading Among Farmers. There is a very fine balance it seems to us to be struck. On the one hand we need to ensure that the benefits to farmers which are considerable and the benefits to the nation which are also considerable of the cooperative ownership structure are not gradually unravelled. We do not want to see New Zealand’s No. 1 export industry suddenly become owned by foreigners because the value of that industry to New Zealand is roughly akin to I do not know the banking industry. Banking and finance as we know rather than having a positive impact on our current account are a perennial drain to the tune of billions of dollars because the ownership is offshore. We cannot afford—we absolutely as a country could not afford—that to occur with Fonterra. So there is a huge national interest a long-term national sovereignty interest here as well as a very tangible and quite proper farmer interest in retaining a long-term cooperative structure. 
So the question that arises is whether the advantages of the Trading Among Farmers proposal—in terms of redemption risk in terms of permanent capital and underlying that in terms of the ability of the organisation to draw in outside equity so that it might further invest in the development of consumer products and more advanced nutraceuticals getting more value out of a bucket of milk if you like—would be outweighed by the risks of a gradual erosion of corporate ownership and control. The argument against that risk is that Trading Among Farmers sets up the trading of units—not full shares—and those are non-voting and that is accepted. But I can be absolutely clear to members of this House that notwithstanding that the stock market and many of the institutional investment interests there are absolutely drooling at getting their hands on Fonterra units. They only wish it was more than $500 million—at least double would have suited them. It is essential in the face of that pressure that the balance is retained. That is why as my colleagues have said Labour has been in discussions with Fonterra around a legislated cap on the amount of units. Those discussions have not yet concluded. For this moment in time of course we have no option but to maintain our opposition to this bill because in its current form it seems to us that the risks of a gradual and progressive erosion of farmer ownership and control and therefore of national sovereignty and long-run national interests are just too high. They are too high because there is nothing in the law to cap the level of units and the constitution could be changed under market pressure at some future point. 
The interests of external investors are not the same as the interests of farmer shareholders. They will—to some extent quite legitimately—pull in different directions. It is essential that the law to some extent allows for that but does not allow for so much of it that that pressure gradually pulls the cooperative apart. 
There are some significant process issues around this bill to do with the rush and haste with which it was forced through the Primary Production Committee. I want to pay tribute to the work of the committee but I want to reflect the views of many members from around the House that this bill went through too fast and that farmer submissions and other submissions were not fully or adequately heard. They want to recognise that farmers themselves are having some serious second thoughts about aspects of this proposal. Notwithstanding the Fonterra Shareholders’ Council support farmers themselves are going to have to vote. That will be quite finely balanced and we look forward to picking up this debate in the light of that vote.