28 Jul 2011

Competition expert criticises US dairy farmers' attitude

10:21 am on 28 July 2011

An American competition expert is not impressed with US dairy farmers' persistent opposition to free trade with New Zealand.

US farmer lobbyists campaigned against the inclusion of dairy products in a bilateral free trade deal between New Zealand and the United States when the idea was discussed several years ago.

The US National Milk Federation has continued the opposition during negotiations for a wider Tran-Pacific Partnership agreement that would include the US and New Zealand.

They perceive Fonterra as a government-backed near monopoly that would be able to compete with them unfairly in their own market if it was opened up under a free trade deal.

Dr Robert Willig, an economics professor at Princeton University and an internationally recognised consultant in competition and anti-trust law, thinks their concern is ill-conceived.

While Fonterra is large in New Zealand, he says, both the co-operative and New Zealand as dairy producer are small on the world market, so any concern that they have global market power is wrong.

Dr Willig says US dairy industry is very much influenced by government regulations which are not consistent with economic efficiency.

The economics professor is the leading author of a report Fonterra commissioned from international competition specialist Compass Lexecon.

It concluded the way Fonterra calculates its farm gate milk price is sound and that competition in the New Zealand dairy industry has increased grown since Fonterra was created.