Fran O'Sullivan: Blacklist is just not cricket, Ralph

Woolworths chairman Ralph Waters says the supermarket chain's policies are quite similar on this side of the Tasman.

A verbal shove from NZ's business elite might do more to spark a policy shift than any Countdown boycott

Which Kiwi business leader had the chutzpah to rock up to Woolworths chairman Ralph Waters at Kirribilli House last Friday and tell him, "This is not really cricket, Ralph"?

Sources suggest the New Zealand delegation may have been enjoying the bonhomie too much to personally hassle Waters over Woolworths' decision to blacklist NZ suppliers to its supermarket home brands.

In any event, some I spoke with agreed with the line (which is not without merit) that consumer preferences for locally sourced-or-made products is what is behind the current patriotic preferences for Australian food lines at a time when the Aussie economy is in a deep funk. The argument goes that Woolworths and Coles are simply responding to this consumer demand rather than driving it.

But it is nevertheless a pity because a well-aimed verbal shove from NZ's business elite (such as: "Ralph, how does THIS further an Australasian single economic market?") might do more to spark a policy shift within the Woolworths boardroom than the proposed retaliatory consumer boycott of the company's Countdown supermarkets in New Zealand.

That sort of emotional response is how trade wars start.

Waters - acknowledged as a transtasman business leader - is chairman of Woolworths, one of the two major Australian supermarket chains (the other is Coles) to ban New Zealand producers from supplying some product lines for their home brands. He also chairs Fletcher Building which will next week unveil its financial results in Australia for the first time, rather than at the company's Penrose HQ.

He is also chairman of the local organising committee for the 2015 Cricket World Cup which will be co-hosted by Australia and New Zealand and hence has an obvious leadership role to play in transtasman relations.

Waters joined other Australian business leaders at the A-list cocktail party that Australian Prime Minister Tony Abbott threw for John Key and the visiting NZ business delegation at his official Sydney residence on Friday.

The ban was clearly the issue du jour for Key who had fielded numerous media questions on why no breakthrough had resulted from his talks with Abbott.

Nelson-based Talleys - which has been affected across the Tasman - has argued that the supermarkets' policies are a breach of the Closer Economic Relations Agreement. Crown Law has advised the Government there has been no breach of the Closer Economic Relations Agreement.

Key did take the opportunity to raise the ban with Waters. It appears he got a very polite explanation that Woolworths' policies are quite similar on this side of the Tasman where its subsidiary Countdown sources local product from New Zealand suppliers.

The Prime Minister relates that Waters told him that Woolworths never bought product from Talleys. But rival Coles did. "The second thing is he says they run exactly the same campaign in New Zealand where they can't get them to buy anything other than New Zealand meat.

"He has tried really hard to get them to buy New Zealand meat in Australia - it's a far better product but no one will do it."

Not all NZ producers are faring badly. Woolworths is looking out for some - Fonterra is said to be among them.

The Prime Minister points out the backstory to the affair is that both Woolworths and Coles are under fire within Australia over alleged predatory practices amid allegations of bullying suppliers. That is why the two prime ministers have suggested Talleys (and other NZ suppliers affected by the current policies) direct their complaints to the Australian Competition and Consumer Commission which has both companies in its sights. And follow that up with submissions to the upcoming inquiry into competition practices.

The Australian supermarket practices may not breach CER. But they certainly do breach the spirit of the single economic market ethos which has been under way since 2003.

While both Woolworths and Coles have subscribed to a voluntary code of conduct between the retailers and the nation's food and grocery suppliers, this is not a transtasman agreement.

If the Australasian single economic market is to work in practice, transtasman agreements need to evolve, taking account of competition issues in the broader market. This will require political leadership. According to Key, Abbott views the single economic market as something akin to China and Hong Kong. "One economy, two countries."

Both governments are looking to do more things.

One example is exploring whether it is opportune to coalesce their respective government agencies in China, outside of the Beijing capital.

While both countries would maintain separate embassies in Beijing, in other cities like Shanghai they would combine forces to promote Australasian business, investment and tourism.

Since Key's return, the Prime Minister's department has reached out to various New Zealand businesses to ask them for their views. At a practical level this could for instance result in joint marketing to Chinese tourists and combining forces at food supplier level to service the Chinese hotel and restaurant trade. Getting more bang for the buck and ensuring scale is the major driver.

The Woolworths and Coles supplier imbroglio does indicate a need for careful thought before the New Zealand Government signs up to a transtasman foray offshore.

It would pay to get the market dynamics sorted out first in the transtasman market before our suppliers join forces further afield.