Fran O'Sullivan: Collins row a distraction from the real issue

It's hard to believe Judith Colins did not discuss NZ's dairy trade at the dinner. Photo / Mark Mitchell

Opposition politicians are sinking their fangs into Judith Collins over the Oravida affair, distracting attention from the critical question of whether John Key's recent "milk run" to China delivered real results and not simply good PR.

It's hard to imagine the combative Justice Minister sitting as quiet as a wax doll while the issue du jour - New Zealand's dairy trade with China - remained "off the table" as her friend Stone Shi entertained her along with an influential Chinese border official at a private dinner in Beijing. Her visit was, after all, at a time of great sensitivity for New Zealand - not simply for Shi's company, which had appointed Collins' husband as a director.

But the Opposition has yet to produce any hard evidence to underpin its parliamentary assertion that Collins is the "Minister of Corruption".

What is of far more national importance is the efficacy of Key's mission to China to rebuild confidence in the New Zealand dairy industry.

After his meetings with the Chinese leadership in Beijing last month, Key radiated confidence that New Zealand's reputation for high-quality safe food had been strengthened in the wake of Government actions to address the Fonterra botulism scare. The scare - which proved to be a false alarm - badly harmed Chinese consumer confidence in New Zealand products and caused widespread collateral damage to exporters.

In Beijing, Key went out of his way to underscore that New Zealand is a producer of high-quality food, with world-class regulatory systems.

The question now is whether Beijing was convinced by Key.

Will it be New Zealand that continues to set its own food-safety standards for its own dairy exports worldwide, including China? Or will it be China that not only sets the food-safety standards for New Zealand dairy exporters entering the country but also puts a big brake on numbers entering the market.

The Ministry for Primary Industries (MPI) has received feedback from Beijing after its recent "systems audit" of New Zealand dairy-processing facilities.

But industry representatives say they are yet to hear from MPI which companies will fit Beijing's requirements after May 1, when new registration rules take effect for infant formula manufacturers.

This is awfully late given that some exporters might have to divert perishable product into other markets if they don't make the cut.

There are concerns in the industry that officials are sitting on the issue while they forge a response.

There is also the question of whether the Government will offer transition assistance to those exporters who are wiped from the table while they seek new markets.

The dairy industry is New Zealand's largest goods exporter and is a significant contributor to the economy.

It's important to note that while China was a closed economy, New Zealand's then Dairy Board was working to open markets worldwide for our exporters. Those markets not only accepted our food-safety standards but, as with Chile, also welcomed the New Zealand industry's input into their sectors.

What is now at issue is whether in trying to rebuild confidence with Beijing after a series of incidents like the DCD and false botulism scares, the Government may have allowed the pendulum to swing in China's favour.

Under the China/New Zealand free-trade agreement the tariff on infant formula was reduced to zero after a mere four years. New Zealand exporters were responding to market signals - and the FTA provisions - when they began manufacturing product for Chinese consumers.

In response to a series of domestic scandals, Beijing is rapidly consolidating its dairy sector into a market led by a few national champions. The argument goes that why should a plethora of New Zealand firms continue to have market access when China is rationalising its own participants?

This is realpolitik.

But it neglects the fact that New Zealand does have an FTA with China and should push back with Beijing to honour its provisions rather than accept a fait accompli.

Fonterra's confirmation this week that its bulk whey protein and infant formula base powders still face Chinese bans - and Key's response that it is up to Fonterra now - suggests the Government is not going to go further out on this limb.

Strangely, Labour - which negotiated the FTA in the first place - is silent on the issue, preferring to play the ball against Collins than enter the more esoteric debate over just who sets our standards.

I might be attributing more strategic cunning to the Opposition than it deserves.

The Oravida affair would certainly have registered during the recent visit to China by Parliament's foreign affairs select committee. So, it is inevitable that NZ First leader Winston Peters and Labour Party trade spokesman Phil Goff (both former Foreign Ministers) will have sought further political intelligence during their China sojourn over the unnamed participant at the Collins dinner. Peters now says that official was from the AQSIQ (China's quality regulator).

The issue will basically die until Parliament resumes next month.

But expect a swift resurrection if New Zealand infant formula exporters get pushed from the market and Oravida's fresh-milk exports continue.

That's retail politics.