Editorial: Zespri should lose export monopoly

Opinion

Monopoly kiwifruit marketer Zespri is confident it has the support of growers, saying they appreciate their industry's success. If so, it is to be congratulated on a job well done. Further, it can be taken that it would continue to enjoy the backing of those growers if its control of all kiwifruit exports to countries other than Australia was removed. Why, then, is Zespri so opposed to Turners & Growers' request to chart its own course beyond the orchard gate? Clearly, it takes comfort from its monopolistic position, no matter how antediluvian that may be.

Zespri is the country's last remaining produce export monopoly. The kiwifruit industry has operated a single-desk system since 1987, first under the Kiwifruit Marketing Board and for the past decade through Zespri. Those 10 years have been an undoubted success story, with impressive increases in volume and export value. Not profitable enough, however, according to Turners & Growers, which says it is time to allow competition "to release the potential of the kiwifruit industry".

In a paper and independent economic report sent to Government ministers, Turners & Growers says New Zealand faced increasing competition from other countries in its markets. Its share of world kiwifruit exports by volume had fallen from 54 per cent in 1990 to 29 per cent in 2006. To survive, the industry needed investment and innovation from additional players. In particular, additional research and development into new kiwifruit varieties was required. Zespri's monopoly status discouraged this because the value-added benefits of investment could not be extracted.

Whatever the merit of Turners & Growers' claims, it is undoubtedly true that most growers continue to support Zespri and the concept underpinning it. The single-desk structure was set up to provide greater export clout. Importantly, it was to stop individual companies undercutting each other in overseas markets, thereby reducing orchard returns. This factor remained evident in the establishment of Fonterra, as dairy farmers sought a structure that would deliver them the maximum dividend. Rationalisation, reduced overheads and improved marketing were key words in the dairy giant's formation. Its success has prompted sheep and beef farmers to favour a similar path.

Significantly, however, Fonterra does not have the status of a monopoly. It has to withstand competition that would increase if dairy farmers lost faith in its management or corporate strategy. Zespri should be no different. It is fundamentally wrong to prevent the likes of Turners & Growers striking out on their own in export markets if they are disenchanted with the present selling arrangements. Any grower that believes Zespri is inefficient or too cumbersome to react quickly to changing market conditions should be able to try to do better.

The Government surely recognises this. It also knows the history of producer boards, why they were deregulated, and that Zespri is the last of the line. Yet it seems content to take the course of least resistance. Agriculture Minister David Carter says the stripping of Zespri's monopoly status is not on the Government's agenda. It would be guided by what most growers wanted.

Mr Carter knows the answer to that, but that answer smacks of self-interest, not principle. Additionally, protectionism like this sits oddly with New Zealand's championing of free trade. Turners & Growers and other growers confident of the quality and pricing of their produce should have the right to compete in export markets. If Zespri is on top of its game, it will be equal to this.