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Groser: China-New Zealand Dairy Exchange Centre signing

Hon Tim Groser

Minister of Trade


19 March 2014

Speech

Address - China-New Zealand Dairy Exchange Centre signing ceremony and launch, Beijing


Distinguished Guests

It is a pleasure to be in Beijing as part of the visit of New Zealand's Prime Minister, Rt Hon John Key, to China which includes meetings with Premier Li Keqiang and President Xi Jinping.


This morning, I am delighted to be here with my ministerial colleague, the Hon Nikki Kaye, Minister for Food Safety, to witness this innovative agreement between the National Dairy Industry Technology System and Fonterra. I will leave it to the three distinguished speakers who are to follow me to talk directly about the China-New Zealand Dairy Exchange Centre. They are much better informed than me on the specifics of the project and its future evolution. Rather, I will reflect on the broader context of this initiative.

The idea of ‘food security’ stands at or near the apex of concerns of people everywhere. Food security is fundamental to human life and will forever be such. But the concept of food security does require interpretation in the light of national circumstances and those circumstances change. A wise food security policy for a land-locked, least-developed country will look very different to a wise policy for Singapore, which has literally no farms but whose people still need food security.

In the past, ‘food security’ has all too often been interpreted as ‘self-sufficiency’. This has to change and is changing right around the world. There are a number of factors at play.

First, we are at the start of a process of integrating our respective farming sectors through comprehensive international trade negotiations. While the process in the WTO is moving forward only at very slow speed, the Uruguay Round was the key point of departure in integrating world agriculture into the framework of international economic law. I have no doubt that eventually we will all have to return to Geneva to continue the process of multilateral liberalisation. In the meantime, the focus is on FTAs and, in particular, a variety of regional ‘mega-deals’, at least one of which involves China – the RCEP, or Regional Comprehensive Economic Partnership Agreement amongst 16 countries. Inevitably, this will introduce, albeit slowly, exposure to competition in the same way it has with respect to industrial products since the Second World War.

Second, we clearly need to take account of environmental impact of farming. Even before we consider the role of land in food production, farming is first and foremost about water – 70% of the planet’s fresh water is used in producing food. Countries with an abundance of fresh water have different choices to those for whom high quality fresh water is a large constraint. Future agriculture development has to be based on environmental sustainability.

Third, we are seeing an explosion of wealth around the world. Since 1990, more than 75 developing countries have been experiencing faster rates of per capita income than the United States. China is by far the most important of these countries, but is not alone. Rapid urbanisation is the inevitable by-product of income growth and it is a difficult process to manage. That process of rapid urbanisation has huge consequences for rural communities.

In certain countries – and I saw this many times before going into politics nearly 10 years ago when I had the privilege of chairing the WTO agriculture negotiations in Geneva – there has been a tendency to try to avoid any structural adjustment at all. I understand the reason for this – it is always inspired by the desire to protect vulnerable rural communities from change. We need to be acutely sensitive to their needs, but taken too far, there is a danger of locking those rural communities into low agricultural productivity and relative poverty when compared with their increasingly prosperous kinfolk in the cities.

Fourth, as developing country after developing country increases disposable income, demand for food changes – fundamentally away from basic staple crops towards protein. To produce protein of high quality and efficiently requires a degree of technical sophistication that can be very challenging. The State of Uttar Pradesh, India’s largest State, has some 200 million people. There are over two million dairy farmers. In NZ there are some 10,000 dairy farmers. The State of Uttar Pradesh and NZ produce approximately the same amount of milk. The two dairy industries are literally worlds apart.

This provides, I believe, the context for the China-New Zealand Dairy Exchange Centre. The platform for this is of course the FTA between our two countries – China’s first with a developed country. This has led to an extraordinary increase in trade in dairy between us and without that platform, we would not be here today. But the character of our future partnership in dairy is changing rapidly and this initiative is a part of that shift. Some of China’s largest and most efficient companies are starting to invest in New Zealand – and we very much welcome that. Equally, Fonterra is starting to invest seriously in milk production in China. Given the size even of current demand, let alone projections of future consumption, it is literally impossible for New Zealand to meet anything other than a small part of China’s dairy consumption.

What I think is exciting about this development is that it links in with that broader development agenda I tried to describe. There is a future for sophisticated, productive Chinese dairying – Fonterra is a cooperative and it would not be investing its shareholders’ money here – and their shareholders are all farmers - if this were not the case. There are good jobs for young Chinese in the dairy industry but they need training to be part of a modern dairy industry. The key to this is technology, applied in an intelligent way to the needs of the market.

Given the vast size of China, there are obviously limits to what we can do to spread good ideas and good practices, but we are 100% committed to doing what we can. And in any event, what is important is to seed good ideas strategically in one or two places and watch what happens. Good news travels fast so we need to make this work.

Thank you

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