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.

Protectionism in our backyard

Driving home from work in Wellington I pass a huge Turners and Growers billboard near the Beehive, and there is now another near the airport. I think they’re innovative.

  

The billboards are a small move in a big battle to remove New Zealand’s last remaining, innovation stifling, export monopoly.

The company Zespri has a monopoly on exporting New Zealand kiwifruit to all countries except Australia. Technically a monopsony, because they have a monopoly on buying all kiwifruit from New Zealand growers who wish to export their produce outside Australasia, Zespri is one of only two single-desk sellers of agricultural products left in the developed world.

On the issue, Agriculture Minister David Carter has said the government will be guided by what most growers want – but what about the other growers? Blocking non-Zespri growers from exporting overseas because they are a minority is like banning all dairy producers who don’t supply Fonterra from exporting overseas. Fonterra is subject to competition as Zespri should be.

An Australian Productivity Commission research paper said that pooling of returns across growers “tends to reward lower-valued products at the expense of higher valued products, discouraging the more efficient and innovative producers”. If Zespri is doing as well as it claims, it should have nothing to fear from innovative competition. And what is wrong with competition? In Econ 101 you will learn that a monopoly exporter selling 10 units into an overseas market won’t normally get a better price than two suppliers selling 5 units of the same product. Obviously a firm with rivals will be more innovative and efficient than a monopoly.

Meanwhile a recent Turners & Growers press release, Turners & Growers ‘Mobbed’ by Media And Buyers At Asia Fruit Logistica, highlights missed opportunities:

Buyers here are fascinated with the look of our ENZARed kiwifruit and love the flavour. ENZA Gold is also proving extremely popular and the combination of new high quality apple and kiwifruit varieties under the ENZA brand is creating strong demand. Buyers here want New Zealand kiwifruit. They can’t believe that there’s a monopoly around New Zealand kiwifruit.

Quite rightly the New Zealand government has pushed strongly on the world stage for the freeing-up of trade barriers – yet the Zespri monopoly is blatant protectionism right in our back yard.