Fran O'Sullivan: 'Fonterra first' puts rest outside the loop

Primary Industries Minister Nathan Guy has seemed unconcerned by the worries of smaller exporters.

Wellington Beltway denizens often refer to MFAT as standing for the Ministry for Fonterra and other Trade.

It owes its genesis to the strong emphasis that the Ministry of Foreign Affairs (MFAT) places on market access and tariff reductions for dairy products in New Zealand's free trade agreements.

But it's also due to the fact that the foreign ministry has often gone in to bat for Fonterra when it gets sideswiped with major trade disruptions of its own or others' making: the 2008 Melamine disaster where Fonterra's then partner Sanlu was caught up in the Chinese dairy-wide scandal that sickened 300,000 babies; the DCD affair which affected the placement of product in several parts of Asia and the "false botulism" issue which was a wakeup call to our major dairy player and Government food safety authorities to tighten security across the supply chains.

As the largest player in the NZ dairy industry - and the world's largest dairy exporter - Fonterra has a lot riding on both its brand and the New Zealand brand.

But unlike the NZ Dairy Board it does not enjoy a monopoly on the export dairy trade from New Zealand. Other players - like Westland Milk Products, Tatua, Open Country and Synlait - have fast developed major added-value export businesses.

Then there are the raft of smaller businesses - those that this and previous Governments have referred to as the "engine of the New Zealand economy" - who have climbed into the market with entrepreneurial zeal and established infant formula export brands well ahead of the dominant dairy player.

Problem is, when it came to the latest major dairy safety scare - a malicious and criminal threat by a still unknown party to contaminate infant formula with 1080 poison unless the Government banned its use by the end of this month - the other players were the last to find out.

Infant formula exporters - shamefully left out of the loop while Government officials worked behind scenes to "increase vigilance and security" across the total supply chain - might be forgiven for thinking that "Fonterra first" mentality has also been embraced by the Ministry for Primary Industries and its Minister Nathan Guy.

That it took all of four months from when the 1080 threat was first received until the Government went public, suggests MPI is still well behind. This also suggests that MPI - just like MFAT - is still living in a prior world where the NZ Dairy Board enjoyed a monopoly on dairy exports.

On TVNZ's Q&A programme last Sunday, Guy demonstrated a tin ear when it came to the concerns of one particular manufacturer who was said to have a $2 million shipment of valuable product held up in China because it didn't have the "1080-free" certification the Chinese authorities are now requesting.

Guy flannelled to the point where he gave the impression that smaller players would be justified in thinking they are just unwelcome fleas on the elephant rather than smart businesses which responded to the signal in the bilateral free trade deal between New Zealand and China and invested in an area where Chinese demand was strong.

So, the minister talked about alerting the manufacturers and international trading partners but was singularly uninformed over the smaller exporters' plight.

There was no commitment from him personally to follow up and put it right as fast as possible - this was in the officials' corner.

It was always a given that the Chinese authorities would demand certification from New Zealand that products were tested as 1080-free once the issue was publicised.

But by not bringing the smaller players into the loop until late last month they were denied the opportunity to withhold product from overseas markets until after the issue had been publicised and settled.

Behind the scenes there is also a lot of grumbling about the atmosphere in which the smaller players signed confidentiality agreements before being brought appropriately into the loop about issues that affect the livelihoods of their businesses.

Another key problem is the mixed imperatives of the Ministry of Primary Industries (MPI).

Professor Alan Reilly, who was a peer reviewer for last year's "Botulism" or Whey Protein Inquiry, observed: "A key public focus in recent times for the ministry has been on expanding dairy production, adding value and gaining greater access to overseas markets. Food safety appears not to have had the visibility it deserves in the ministry, and there are the usual tensions between the roles of being a regulator and an enabler of industry. This is akin to being a poacher and gamekeeper at the same time."

The latest brouhaha should alert a sensible Government to simply reinstate the previous Food Safety Authority and charge it with implementing Miriam Dean's recommendations from the Whey Protein Inquiry report. Rewrite food safety regulations (still lagging), run the risk ruler over the dairy sector and liaise with all players from Fonterra down to produce adequate industry-wide protocols to use should food safety scares occur.

That it took all of four months from when the 1080 threat was first received until the Government went public, suggests MPI is still well behind. This also suggests that MPI - just like MFAT - is still living in a prior world where the NZ Dairy Board enjoyed a monopoly on dairy exports.

During the consolidation of China's dairy industry, both MFAT and MPI were slow to recognise the interests of the smaller infant formula exporters.

The big Government agencies need to dump their "Fonterra first" mentalities and embrace the broad and challenging NZ dairy market of today.

Cabinet Ministers could give some useful direction.

But so far they haven't.