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06 November 2009

Groser needs to take his message back to the Hutt


Tim Groser can see the future, but he needs to communicate it better

Trade minister Tim Groser's urbane manner has been polished over many years working as a diplomat and senior government trade negotiator. But as a former student of Hutt High School, his roots are urban Kiwi.

Getting back to those roots and finding ways to communicate with ordinary New Zealanders the realities of a rapidly changing world needs to be a higher priority in his already busy schedule. In a largely unreported speech to Federated Farmers earlier this week, he spelled out what some of these fundamental changes will mean for farmers and by extension for all New Zealanders.

The challenges involved in getting those messages across cannot be under-estimated. Even Federated Farmers, which heard the speech first-hand, has chosen to ignore his message that farmers must play their part in combating climate change or face consumer-led trade barriers in world markets.

Groser describes the prospects for our farm-based exports as a "good news story on steroids". Growth in the world population combined with rapid economic growth in many developing countries, and constraints on land and fresh water supply in many countries, means that demand for New Zealand's protein products will continue to grow in the years ahead.

At the same time there are vastly improved trading opportunities for our exports as a result of recently negotiated and pending free trade agreements.

But to tap this vast potential, we need to get our heads around the demands of our new consumers in Asia. Perhaps even more importantly, we also need to come to grips with changing consumer attitudes in our established markets in Europe and North America. Groser describes this as "the customer as the new trade regulator".

Food miles was the first concrete reminder that in this new sophisticated world we might face trade barriers that were not imposed by governments but by our customers - or more precisely, by companies like Tesco and Walmart who are the commercial interface with our customers.

In this case, it was a perceived product quality/value issue around climate change: the customer should seek out food produced closer to home on the rather primitive and usually wrong assumption that such food would be more ‘climate friendly'.

The food miles phenomenon arguably heralded a shift from agreements between nation states to agreements between producers and retailers. Global retailers are incredibly powerful in the market because they control what products reach consumers in practically all developed nations ... key areas of risk include animal husbandry practices, and also perceptions of the environmental impact of farming.

"These concerns, regulation and market imperatives mean that farmers have to manage their compliance with various standards and codes of practice that are aligned with international expectations ... this is both an opportunity and a risk for New Zealand," says a Dairy NZ paper quoted by Groser.

He then cites the largest company in the world - Walmart - which is putting in place a Sustainability Index based on complex matrix containing key supply chain processes and then factors in impacts on natural resources, something called ‘people and the community' and energy/climate change.

A few months ago British supermarket chain Waitrose banned fish deemed to be either over-fished or harvested by what they considered were irresponsible fishing methods, including bottom trawling. Now bottom trawling happens to be the method of extraction for New Zealand hoki. So our hoki were banned.

"Presumably the supermarket's costs went up and they were unable to find alternative suppliers of some species such as swordfish, so did they suffer commercial consequences? Nope: it was a huge commercial success.

"According to NZTE research, the idea of buying only sustainably managed fish proved so popular with their customers that they moved within a few months from having 4% of the British retail market for fresh fish to having 10% market share. As for NZ hoki, our problems became compounded when the Wall Street Journal took up the issue with an oped targeted at NZ hoki entitled ‘From the Deep Pacific: Ugly and Tasty with a Catch'. The NZ Seafood Industry has worked overtime to counter this. Frankly, we don't need reputational risk like this," he says.

After citing environmental sourcing initiatives by McDonalds and other major marketing chains that buy produce from New Zealand, Groser addresses climate change.

"First of all, I know some of you, maybe many of you, don't really believe NZ should take this issue seriously and in particular believe NZ agriculture should be left out of any climate change response by government.

"For a country that depends on trade and its customers, what sounds common sense to you? The rest of the world is saying ‘let's go down this road' but NZ says ‘no, no. we're going down that road. We think you are wrong'. Does that sound like even half way real? Not to me. Perhaps we should ask the guys at McDonalds and Walmart to give us their view?

"Now I know there are complex issues around climate change and the role of agriculture. But we have to have some balance here. I don't think it is in NZ's agriculture trading interests just to try and wish this away.

"The risk is not that if we do not come on board climate change, the EU or the United States are going to erect new barriers to NZ agricultural exports in the next few years. But that could turn out to be real in say, 5-8 years time if the NZ Government were, to be frank, stupid enough to opt out of all climate change obligations.

"The real risk is not about governments. It is that our customers, or rather the retailers that make the crucial decisions on sourcing, may walk away from New Zealand over environmental, climate change or production processes and methods. That is a real risk. Don't treat it lightly.

"We need to have integrity right throughout the supply chain. It won't be achieved easily and we will have to live with inconsistencies as we seek to close the gap between the objective of 100% Pure and current practices of some of our producers who just want to shut their eyes to this challenge."

In WHAM's view, it is vital that Groser's understanding of changes in world markets and what that means for New Zealand as an agricultural product exporter is communicated to all New Zealanders.

In essence, the country needs to recalibrate its image of itself as a sturdy producer of farm products for commodity markets, to one in which we see ourselves as producers of sophisticated products designed to meet the needs of affluent consumers whose attitudes and lifestyles may be very different from our own.

If a company doesn't understand or identify with its customers, it is very unlikely to succeed. The same could be said of our country and its major primary industries.

- Trevor Walton

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