Office of Hon Jim Sutton

Speech Notes 29 October 2001 World Dairy Federation meeting, Auckland

Fonterra deputy chairman Greg Gent, ladies and gentlemen: thank you for the opportunity to speak at this illustrious gathering.

As you may know, dairying is extremely important to New Zealand. One in every five export dollars earned by this country comes from dairy products.

So I'm delighted that New Zealand is hosting this conference.

With more than 700 delegates here in Auckland, it really puts our industry in the international spotlight.

I hope that while you are here, you get the opportunity to get out and about and see some New Zealand dairying farming in action.

We are proud of our industry here in New Zealand.

It is a dynamic industry, growing and developing in many ways.

On Friday, the New Zealand industry will be celebrating the formal launch of Fonterra, a dairy co-operative that encompasses 95 per cent of the New Zealand industry.

The company started operations earlier this month, and has already racked up an impressive number of joint venture initiatives. Truly, it is one of New Zealand's few multinational companies and has already consolidated its place as one of the world's top 10 dairy companies.

In the space of a week, Fonterra has announced joint ventures with Europe's largest dairy co-operative, Arla Foods, and an Indian company, Britannia Industries.

They follow a surprise announcement in August of an alliance with the giant Nestle company to jointly market a range of dairy products in American markets.

The formation of Fonterra required the waiving of some of New Zealand's business acquisition laws, which the Government I am a part of facilitated. We did so on the understanding that the industry would adhere to a comprehensive regulatory package designed to ensure there would be competition in the domestic market.

That facilitation brings with it obligations for Fonterra to honour to New Zealand.

To those people from Fonterra here tonight: the government has facilitated your merger with legislation, now it is your job to live up to the promises you have made through performance. The whole community expects it.

But, while Fonterra has responsibilities to New Zealand, the Government also has responsibilities to do everything it can to help New Zealand's exports overseas. Unfortunately, the international dairy market is one of the most protected sectors in the world.

Of the dairy trade analysed by MFAT to date, exports of $4.65 billion last year attracted duties of $610.3 million at overseas borders - an average duty rate of 13.1 percent.

This is in addition to quotas, to "trade chilling" duties (excessively high duties which prohibit trade) and non-tariff measures which further restricted trade.

By dairy product, some $224.4 of the tariffs were levied on butter exports. Another $177.8 was levied on whole milk powders. And $142.3 was levied on cheeses.

These are significant costs to be borne by the dairy sector. As total dairy exports exceeded the figure analyzed, the data underestimates the impact on our dairy sector of duties paid on our exports to overseas markets.

The proposed new round of world trade negotiations is extremely important to New Zealand.

I will be working hard with other trade ministers from the Cairns Group of agricultural exporting nations at the WTO meeting in Doha next week, to ensure that there is meaningful progress, such as substantial decreases in tariffs and expansion of tariff quotas, improvements to tariff quota administration, reductions to trade- and production-distorting domestic support, and an end to export subsidies.

But that's next week's issues! Tonight, I wish you all well for the future. Enjoy this meal and your conference.

Thank you.

ENDS

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