Bennett DavidDAIRY INDUSTRY RESTRUCTURING AMENDMENT BILL (NO 2)In CommitteeDebate resumed from 13 February.Part 1 Repeal of provisions that provide for expiry of subparts 5 and 5A of Part 2 (continued)Hon DAVID BENNETT (National—Hamilton East): Thank you Mr Chair and it's good to see Minister Chris Hipkins in the chair as well. I hope that he will be able to answer a very simple question that I put to the Minister last night. It's not an agricultural question; it is a policy question which I think that as a suitably qualified member of the Labour Cabinet he will be able to give us some direction upon. It is not something that is particular to the Minister of Agriculture but rather something that being of a policy nature he would be able to determine for us.That is in the Dairy Restructuring Amendment Bill (No 2) the question asked is around why they took out the clause around open entry and exit. Now for the Minister's awareness that clause was in the original bill that the National Party had presented to the House. Basically it gave the ability to Fonterra to say no to new conversions that they would have to provide capability in their industrial manufacturing sites to process. So effectively they have to provide the infrastructure in stainless steel to enable the production of those milk solids into products. Generally that would go into milk powders which are not value-added products because it is spare capacity that they would not have that major investment in.Now the Minister made it very clear that the emphasis that the Government is taking in this bill is to direct the industry into a more value-added approach and nobody has any problem with that. In fact Fonterra and farmers are very much in that zone. The question is: why then do they take out a clause that encourages now—because that open entry and exit provision is removed it means that Fonterra has to provide a lot more commodity-based infrastructure when if they'd left that clause in it would achieve their purpose of more value-add for the industry.So it's a very simple policy issue that I think the Minister in the chair would be able to give us direction on. He's a very astute Minister that understands a lot of the policies behind legislation like this so it's not something that we needed the actual Minister to be there to determine. So I'd like to have a reply from him as to why that clause was taken out because it seems contrary to the intention that the Labour Government has made clear in its speeches in this House last night. It just doesn't make sense when it's what the industry wanted it's what farmers wanted and it's what the general public want—to see more value-add—and yet we're taking out the one clause that would have encouraged that value-add and now we're encouraging more of the same in essence of a lot of powder production.The second issue that I didn't get a chance to talk about in my first contribution in the committee stage yesterday was in relation to regulated milk. This is the portion of milk that Fonterra has to supply to new start-up companies. When Fonterra was formed the intention was that of course there would be that supply to let those companies start and they get basically milk at cost price. Fonterra delivers it at cost price to these companies—Rt Hon David Carter: The old Fonterra argument.Hon DAVID BENNETT: No no; that's how it works Mr Carter.So effectively these companies get a start with not having to do their own collection at that point. Now what was looked at—from Fonterra's point of view they see that as becoming difficult to maintain because they're giving a very big start to those other companies and so the submission and what was agreed upon was to reduce that regulated large-scale provision of milk.Now that makes a lot of sense when you consider the argument that New Zealand First has made consistently in the public around the internationalisation of the dairy-processing industry. New Zealand First has been very careful on a number of occasions to make public statements saying that they don't believe New Zealand - regulated milk should go to international processors.If we look at our market and the production of milk even in the South Island there's a very high proportion that has an international component—for example Synlait; Bright Dairy and Food Co. Ltd a Chinese company has 39 percent; Open Country Dairy Ltd has a shareholding that's overseas based. If you look at some of the other companies like Yashili New Zealand Dairy and Oceania Dairy Ltd those companies also very much have an overseas presence in what they own and how they are owned. They effectively are getting subsidised milk from New Zealand farmers and the New Zealand cooperative for international companies. Rightly as you would expect New Zealand First found that very egregious and they have taken it upon themselves to say in many public statements how bad that is.I just want to quote the Rt Hon Winston Peters in the Waikato Times on 6 March 2017.Rt Hon David Carter: You're getting desperate.Hon DAVID BENNETT: I am brave. He said here that New Zealand First will not be so craven … While it is positive Fonterra will finally get control of its burgeoning milk pool in 2018/19 with discretion over taking milk from new dairy conversions we would ensure that 'regulated milk' only goes to New Zealand-owned processors." This is what New Zealand First has said in their policy and what they have said pre-election: "We will ensure that regulated milk only goes to New Zealand - owned processors."Now the regulated milk provisions in the bill that was put forward by the previous Minister have been removed. One cannot reconcile the fact that the Labour - New Zealand First coalition has removed the clauses that would limit regulated milk and in effect what New Zealand First is actually doing by voting for this bill in the form it is in now is increasing the amount of milk that now goes to international companies and internationally owned companies because they're not limiting that amount of regulated milk. That is very much contrary to the perception of New Zealand First. It's contrary to the approach that New Zealand First has always taken. There's another comment from the Rt Hon Winston Peters on 16 June 2016 where he said "If you look at this Act it only benefits the foreign processors." So instead of having the sunset clauses that would have applied in the legislation—that's the 80 percent threshold—and reducing it to 75 percent and keeping the legislation going the Rt Hon Winston Peters his comment was that this only benefits foreign-produced processors.I ask the New Zealand First Party to actually explain through the Minister—because the Minister will be acting on behalf of both coalition partners—why before this bill was actually introduced to this House yesterday they were so strident in their opposition to foreign processors and yet the very bill they bring in means that foreign processors have more access to milk. Why did they take away the provision that would have limited foreign processors' access to milk and replace it with nothing but encourage and mean that foreign processors have that access? It just does not make sense from a New Zealand First point of view that they would do that.So there are two things that I would like the Minister to explain. The first is a policy rationale: why this Government has taken out the open entry and exit provisions that would have meant that Fonterra would have been able to say no to new conversions and therefore would have been able to invest more money in value-add rather than just have to have more stainless steel there—why that was taken out. Secondly why the other provision on regulated milk was taken out which only has the effect of encouraging and increasing the milk supply at a regulated price to foreign companies.Those two things can still be left in this legislation and still enable the Labour Party to do their wider review. That doesn't preclude them doing that. I just can't understand why they've taken them out from a policy point of view because it doesn't match with the intention that the Labour Party said yesterday of wanting to have more value-add and it doesn't match with the intention that the New Zealand First Party has said of reducing the regulated milk that would go to international companies. So I'd really appreciate it if the Minister could answer those two questions. Thank you."