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Current as of 20/02/17 06:19AM NZST

Fran O'Sullivan: More professionalism needed with China


New Zealand needs to tighten up its business dealings and be more disciplined in its communications.

Sir Henry van der Heyden's China warning was a step too far. Photo / Richard Robinson
Sir Henry van der Heyden's China warning was a step too far. Photo / Richard Robinson

Fonterra directors would have been startled to wake up yesterday to the Herald's front-page photo of Sir Henry van der Heyden emblazoned with "Don't ever trust them" - Ex-Fonterra head on China business.

Fonterra's fortunes have after all been greatly enhanced by its strong relationship with its biggest customer: China.

Yesterday was van der Heyden's swansong as chairman at Fonterra; his last board meeting after having successfully handed over the reins to his successor, John Wilson.

It should have been a time of celebration.

Instead, van der Heyden had to break from the boardroom lunch to front queries over his reported comments and issue an upfront apology. "I apologise to China, its people and its Government," van der Heyden told me. "It was an ill-judged comment taken out of context."

"I regret making it ... my comments went too far."

There's no point in rubbing van der Heyden's face in the sand on this one (he'll already have done that to himself).

Personally, I believe him when he says the comments were part of a broader discussion about the realities of doing business in China.

Many Kiwi businesspeople - including those who would have fronted to the Tauranga event where van der Heyden made his comments - are frightened they'll be ripped off.

The be careful message should be sent. But issuing a blanket statement was a step too far.

Van der Heyden has spent the past four years getting Fonterra's relationship with China back on track after the melamine tainted-milk scandal at the dairy co-operative's former Sanlu joint-venture and successfully taking the co-operative through its capital restructuring.

He is also about to take over the reins as the chairman of Auckland International Airport, which is experiencing strong growth as a result of the major uplift in Chinese tourists and its pivotal partnership with China Southern Airlines.

The airport and Fonterra will be hoping their Chinese counterparts accept van der Heyden's explanation that his comments were taken out of context, that is, lost in translation, and take on board his fulsome apology.

I'd be surprised if influential players did see the comments as indicative of a blanket bias against all Chinese. After all, President Xi Jinping has himself been upfront about the need to stamp out corruption - it is a reality.

But the episode is yet another illustration of the need for New Zealand to tighten up in its business dealings and be more disciplined in its communications with China.

Just think about it.

It's just seven weeks since John Key led a very successful business delegation to China to celebrate 40 years of diplomatic relations and the fifth anniversary of the bilateral free trade deal.

During the mission there was plenty of behind-scenes talk about long-standing blockages in the meat trade finally being overcome with public announcements pending.

The reality has been somewhat different. New Zealand meat exporters have since had their containers stuck on Chinese wharves, the upshot of a failure in the first instance by the Ministry of Primary Industries to communicate sufficiently in advance to Chinese counterparts the changes to the certification of New Zealand product following the dissolution of the old Ministry of Agriculture and Food Safety Authority, which were merged into the new ministry.

It's worth probing whether the trade blockage - finally overcome yesterday when Primary Industries Minister Nathan Guy announced that the Chinese food safety authority (AQSIQ) had accepted a total of 1600 certificates reissued under the previous New Zealand Food Safety Authority and given approval for the backlog of exports to be cleared - could have been dealt with more adroitly.

Instructively, AQSIQ's officials are now working with their New Zealand counterparts on new meat export certificates to cover future trade. The big question is why this did not happen in the first place.

There are suggestions that officials from MPI and AQSIQ have been at odds since the Chinese body found out about the presence of agricultural chemical DCD in New Zealand milk products through media reports rather than through direct communications in January.

Questions do need to be asked on this score. Were Chinese officials simply making a point? If so, surely Trade Minister Tim Groser or Foreign Minister Murray McCully should have made calls at a very high level to get some sense earlier?

It's no good simply broadening relations with multiple countries and signing up more and more free trade deals if our ministers don't use their cachet directly and publicly when the inevitable issues and trade disputes arise, or countries use behind-the-border barriers to defeat the purpose of FTAs.

In this respect, a bit of public pressure is well overdue.

The problem is New Zealand also has to contend with the fallout from the Zespri double invoices affair.

It's now clear that Foreign Affairs officials warned Zespri in 2008 that its importers were evading customs duties which the kiwifruit exporter's lawyer acknowledged could cause "reputation risk" for New Zealand and result in arrests.

Zespri argues it was subsequently misled by Chinese officials that there was nothing untoward.

But the upshot has been reputation damage for the kiwifruit exporter, with its Chinese subsidiary Zespri Management Consulting found guilty by a Chinese court of smuggling, fined $960,000 with reparation payments of as much as $10 million and an employee sentenced to five years in prison. The financial impact contributed to Zespri's major profit drop announced yesterday.

The DCD affair was well canvassed in this column earlier in the year.

But have the lessons been learned?

More issues have emerged over honey smuggling this week, where business people have been buying up New Zealand honey and selling it directly through Taobao instead of going through appropriate channels and paying the relevant Chinese taxes. This does have to be addressed within China and in New Zealand by the relevant authorities.

If trade with China is to flourish, our exporters need to protect their brands and take a leading role in communicating with regulatory authorities in both countries and their customers.

What it all points to is an end to amateurville and greater professionalism all round.

Debate on this article is now closed.

- NZ Herald

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Head of Business for NZME

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

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