Unresearched dribble?!

I received so many comments (for my fledgling blog) on my post Protectionism in our backyard that I thought I would respond with another blog post. Flattered as I was to discover how many Zespri growers are apparently among my readership, I thought this comment at least required response:

What absolute uninformed and unresearched dribble.
Put some skin in the game and I doubt you would barking on about philosophical rhetoric….

Unresearched dribble?!  Can any serious participant in this debate be unaware of the enormous amount of research done by the Business Roundtable on agricultural marketing regulation, in general in this ACIL report and then later in a specific study on kiwifruit in this report?  This research was highly influential in the decisions taken by past governments to deregulate producer boards.  Export monopolies for dairy, pipfruit and kiwifruit were all to be removed.  Kiwifruit was stated to be only a matter of time.

Other respected organisations such as the Productivity Commission in Australia have advised against single desk regulations.  With one or two exceptions they have been dismantled worldwide.  Why should kiwifruit in New Zealand be an exception to well-established research findings and governmental decisions?

More recent arguments for kiwifruit deregulation were made in the 2009 report by NERA Economic Consulting here.  The 2025 Taskforce called for the monopoly to be removed.

Turners and Growers have presented facts about pipfruit deregulation here. There are no serious calls for the pipfruit industry to be re-regulated, yet nothing stops the government from doing that if it were desirable.  The profitability of land use is the basic reason for the growth or contraction of land-based industries, not marketing arrangements.  Wool has contracted relative to the deregulated dairy industry for this reason.

Bottom line: it is an extraordinary restriction on the freedom of a producer to ban them from selling something they have produced to a willing buyer in New Zealand or anywhere in the world.  We do not impose that restriction on hundreds of thousands of other New Zealand producers, including horticultural producers.  It would be ludicrous to argue that they should have to get the consent of a competitor for the right to export.  If Zespri is as good as it says it is it may lose no business – but potential competition will keep it on its toes and protect growers. 

National as a party and in its 2009 Government Statement on Regulation states that it is for free enterprise and against monopolies.  Where is the serious piece of independent analysis showing a case for restricting freedom of commerce in kiwifruit exporting?   Here is a challenge to Zespri and like-minded growers: if you think the arguments for the monopoly stack up, ask the government to seek advice on them from the New Zealand Productivity Commission when it is set up next year.  It is being established for exactly that kind of inquiry.

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7 thoughts on “Unresearched dribble?!

  1. Roger, from the quick look I had I think a lot of the responses you got to your previous message are of the form: there is lots of producer surplus out there and we want it and to hell with any deadweight losses we may cause in getting it. The responses argue that the monopoly is good for producers and don’t care about the damage done to consumers.

  2. three points
    1 So according to the Business Round Table ACIL report the Kiwfruit industry should be down the toilet and apples should be going great guns. mmm not very accurate report is it? Woops don’t tell me reality doesn’t fit with ideology yet again. Do you think they could get a refund?
    2 Damage to the consumer .. The ignorance is incessant. There is no monopoly or monopsony in NZ.The regulations do not apply in NZ or Australia (is your friend Mr Gibbs making his fortune in the Australian market? Share holders in T and G might think not) NZ is an open market consequently NZ consumers enjoy pricing that reflects disposal costs of fruit not production costs. Simply Kiwifruit sold under our cost of production in NZ. There is NO MONOPOLY in any other market, as we sell against Chile and other overseas competitors and of course we compete with all other fresh fruit. The consumer chooses Zespri over many other choices because they see value .. marketing 101.
    3. The real NZ consumer damage is the costs the existing supply chain drives into the consumer as recently highlighted by the Greens. These include gauging margins and double dipping commissions. Perhaps you could take a look at that.. Might take a bit more effort than shooting from the hip over a latte though -are you up for it?

  3. Roger, there are many reasons why the kiwifruit industry has not been deregulated. Two of them are: A) It’s working. Exceptionally well. You say that our ‘Industry structure’ and Zespri is innovation stifling. That can only mean one thing, you haven’t read the facts and you are not aware of how much the kiwifruit industry spends on innovation as a percentage of revenue….and B) The structure is unique with the allowance for ‘Collaborative Marketing’ arrangements and the creation of the independent body, KNZ.

    With regard to your comment about the profitability of land use being the basic reason for the growth or contraction of land-based industries, not marketing arrangements…The kiwifruit industry is a land-based industry and it’s performing exceptionally well. If the marketing arrangement is not responsible for this exceptional performance please tell us Roger, what is?

  4. Turnus Rises
    NO MONOPOLY in any market – exactly. But the whole case for single desk selling is based on the idea that the seller can influence world prices (prevent ‘weak selling’) and capture monopoly rents. No monopoly, no case for a single desk.
    Roger Kerr

  5. Darren
    Answer to your last question: the state of world markets of course.

    Please see the research papers I cited for further analysis. All the points you make were made about the dairy industry prior to deregulation. Hundreds of horticultural products are produced and marketed in dozens of countries. Why don’t we see single desks everywhere?
    Roger Kerr

  6. Roger,
    Why don’t we see single desks everywhere?
    Because they are incredibly difficult to create and…before the New Zealand kiwifruit growers came together and gave such a convincing practical example of how a single desk structure can work successfully, the world didn’t really know how well they could perform.

    Have you had a chance to research our innovation spend?

  7. Thanks for the feedback.. didn’t realise weak selling was in NZ’s best interest? Sheep farmers will be relieved. Don’t know about influencing world prices with Chile selling at 1/3 of the Zespri price. But the international consumer must feel relieved with you as his champion perhaps your next campaign could focus on the value of plain pack clothing and have a expose on Canterbury, Adidas or even Pierre Cardin.. but then you’d have to buy some new shirts?
    Finally you side stepped the expose on the scandalous margins been taken on fruit and vegetables through the supply chain. Not up to it ? There is a latte in it for you!

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