Botulism scare a wake-up call, says BNZ chief economist

While New Zealand's exports to China have soared since the free trade agreement between the two countries came into effect, industry leaders say this country still needs to up its game when doing business in the world's second-biggest economy.

Fonterra's botulism fiasco, which came on the eve of the FTA's five-year anniversary, has been an expensive, brand damaging false alarm for New Zealand Inc.

The botulism scare was described by BNZ chief economist Tony Alexander as a wake-up call.

New Zealand Infant Formula Exporters Association chairman Michael Barnett said Chinese retail distributors were continuing to dump Kiwi infant formula products last week, because of a lack of demand, almost a month after Fonterra revealed that 38 tonnes of its whey protein had not been contaminated with botulism-causing bacterium as had been feared.


Barnett has just returned from leading a delegation of local baby formula exporters to China.

The group met with Chinese retailers, distributors and media in the hope of rebuilding this country's reputation for safe dairy products in the Chinese market.

Barnett said journalists he met in Shanghai remained unconvinced that no contamination had occurred in the Fonterra plant.

The association estimates that its members are losing around $2 million in sales a week in China as a result of the ongoing impact of the botulism debacle, which has spooked consumers in a country that's far more sensitive than most when it comes to food safety scares.

Chris Claridge, managing director of Christchurch-based formula exporter Carrickmore Nutrition, said the company's sales in China remained 40 per cent below pre-Fonterra crisis levels, despite the fact that his firm had not used any of the Fonterra whey protein in its products.

"I don't think New Zealand has fully come to grips with what the FTA has offered us," he said. "We need a co-ordinated strategy for China and past events would show that's not in place."

Barnett said last week's delegation had forged better links with Chinese food testing agencies and more focus needed to be placed on testing dairy products before they leave New Zealand. "We've shipped product when the testing process hasn't been finished and had product end up in the market when we've discovered there might be some doubt around it," he said.

"The term I'd use is hot shipping - it comes out of the factory and it's on its way while the testing is still in process."

Alexander said the botulism scare would not be the last "shock" to New Zealand's export relationship with China and this country needed to be better prepared for the next event.

"Extra effort needs to be put in on lines of communication and speed of response when these things happen," he said.

New Zealand Manufacturers and Exporters Association chief executive John Walley said some Kiwi exporters of "elaborate goods" - such as complex mechanical and electrical products - were still barred from entering China, five years into the FTA, because New Zealand has lacked the regulatory infrastructure to certify items as being compliant with the requirements negotiated in the trade agreement. "The problem has not been fixed,"Walley said. "It's close to being fixed."

Despite the challenges, Barnett said China, which received $7.9 billion of this country's exports in the year to August 2013, remained a huge opportunity.

"I think that we need to be careful we don't take short cuts in order to take advantage of the fact that we have a free trade agreement."