22 May 2015

Canada returns fire on Groser's dairy comments

1:59 pm on 22 May 2015

A Canadian dairy industry analyst said he could not fathom New Zealand Trade Minister Tim Groser's "aggressive" attack on the sector and said New Zealand was playing with fire.

During a recent interview on the Trans Pacific Partnership trade negotiations Mr Groser said the Canadian dairy industry belonged in the former Soviet Union and its market should be open to competition.

National MP Tim Groser

Tim Groser Photo: RNZ / Alexander Robertson

However, associate vice president of external research at the University of Waterloo in Ontario, Bruce Muirhead, said Mr Groser's attack was misplaced.

"And I was a bit taken aback, I guess, in part because he criticises our dairy system in Canada so aggressively, and also because it's not true that it would be something that would be at home in the old Soviet Union."

Dr Muirhead said while New Zealand's dairy system clearly benefited dairy farmers, the Canadian system, which matched supply with domestic demand, benefited both farmers and consumers.

"The head of the New Zealand Consumer Association is saying that milk in New Zealand may become a luxury item, and of course, you had that parliamentary inquiry into the price of milk in 2011, I think.

"The price in Canada is about $3.99 [Canadian dollars] for about four litres and I think the equivalent cost in New Zealand, even given the drop in global dairy prices, is about a third again as much as what we'd pay in Canada."

Dr Muirhead said he could not understand Mr Groser's desire to end the Canadian dairy sector's domestic focus.

"New Zealand of course is dependent upon dairy exports, primarily to China, particularly after your Free Trade Agreement in 2008. And I don't understand why New Zealanders seem to want Canada to get involved in the international market.

"Part of the problem, it seems to me, with these kinds of trade agreements, is that every single country in there thinks exports - we're going to export to Vietnam or Malaysia or Canada or the United States.

"Nobody thinks about the possibility of imports being foisted or forced upon them as well, it seems to me playing with fire if they think the Americans won't crank up, they have cranked up dairy production of course, and the TPP will open those markets to American dairy products too."

He said if Canada was forced to give up supply management, then the world could be its oyster too, in terms of milk exports.

"And I think we could cause disruptions in the world dairy market that would adversely affect New Zealand."

Dr Muirhead said United States milk producers want the Canadian market opened too - but he said they had also got their sights set on Fonterra and that's something, he said, New Zealanders should be concerned about.

Pak n Save employee stacking milk in Gisborne.

Canadians pay a third less than New Zealanders for milk. Photo: RNZ / Alexander Robertson

"They've gone on record as saying that if Fonterra isn't fundamentally changed, it represents an unfair competitive advantage for New Zealand and they're going to oppose New Zealand's inclusion, at least Fonterra's inclusion, in the Trans Pacific Partnership final agreement."

Earlier this week, Nathan Guy and the Consumer Affairs Minister Paul Goldsmith requested a report into competition in the New Zealand dairy industry from the Commerce Commission.

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