The Importance of Horticultural Exports
Wednesday 1 August 2007, 3:52PM
583 views
In the last twenty five years horticulture exports have grown twenty-fold.
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Address to the Second Annual Conference of Horticulture New Zealand, Christchurch Convention Centre
Horticulture is a four billion dollar industry for New Zealand. Last year more than half its production was exported to over a hundred countries around the world.
Its value is not only directly economic, though that is crucial. Horticulture also makes a crucial contribution to regional New Zealand and to jobs in our regional areas.
Horticulture employs fifty thousand New Zealanders in permanent jobs and another forty thousand seasonally.
When you look at the scale and sophistication of the sector, what stands out is that the industry has been growing very successfully. In the last twenty five years our horticulture exports have increased twenty-fold.
We need our primary industries to be successful − and if we want them to continue growing then we need to consider what it will take. The government's vision for our economy is for a high-value, job-rich economy connected to global markets.
Realising our vision will depend on innovation, knowledge and skills. It will depend on our responsiveness to consumer demand and on adequate market access as conditions change around the world. I want to spend some time going through these components of our future success.
Skills are crucial for an industry like yours. Horticulture is a major employer of people. Quality products for both domestic and international markets require a wide range of skills and input.
Like many sectors of the economy you are experiencing skills shortages that challenge your ability to grow. A focus on training, increasing productivity and mechanisation, where feasible and appropriate, will ensure that your work force is used to best effect.
You are not alone in having seasonal peaks and troughs that you must manage. Pruning, picking and packaging are labour intensive - it is critical to the quality of your product that pruning occurs on time, that fruit is picked at its peak and that grading and packaging maintains high standards.
I do not need to tell you that seasonal labour supply is challenging. This challenge is in part a factor of a low unemployment economy - more New Zealanders are in full time employment and are not available for seasonal work. For the foreseeable future, your seasonal work force will draw both New Zealanders and people visiting our shores.
Successfully managing this seasonal demand is a challenge for you and for the Government. Our partnership in the Seasonal Labour Strategy for Horticulture and Viticulture is a collective commitment to delivering appropriate arrangements and performance.
The Government, and society in general, are right to expect high standards of employment practice. It is also right to expect that visitors to our country will respect the conditions established by their immigration status. There is a collective responsibility to ensure people are working legally and fulfilling all of their obligations, including contributing to society through taxes.
The Recognised Seasonal Employer Scheme has been the subject of much discussion over recent weeks. The Government is firm in its intention to fully implement this Scheme. Success will need us to work together to the full intent of the Seasonal Labour Strategy for Horticulture and Viticulture partnership.
This programme is built on our experience of the past few years. Feedback from employers involved in the Approved in Principle pilot is that labour productivity is increased through stable arrangements - managers are able to think more about planning and how to get the best from people, rather than worry over whether they have enough people. This new Scheme provides similar opportunities.
Your leaders have been clear in voicing their concerns that the Scheme will not be fully implemented in time to provide for your needs next season. The Government is very much aware of these concerns. My Ministerial colleague David Cunliffe announced yesterday that work is well in hand to provide for the transition that is required.
Our collective challenge and responsibility is to work through a managed transition to these new arrangements. You have my commitment to work with you to achieve this. Any reasonable concerns will be heard and I will work with my Ministerial colleagues to address them.
Alongside skills, development of the industry depends on innovation. The government invests heavily in science in the primary sector, and tax breaks introduced in this year's budget will reward innovation, research and market development even more.
Innovation is important because it is all that gives us an edge in the market place.
We have natural advantages as a growing country − but other countries have temperate climates and favourable rainfall and sunshine too. Many of them, especially emerging competitors like Brazil, India and China, have cost structures we cannot and should not begin to compete with.
Instead we have to find a market niche that earns a premium in global markets. Every week I come across amazing examples on New Zealand farms − examples that improve production methods, varieties and distribution. Back when large scale commercial horticultural planting began in New Zealand, the farms serving our markets were in places like Epson in Auckland and then Hutt Valley in Wellington. Both are now highly desirable residential areas. Though many of the products might be familiar, horticulture's sophistication would be unrecognisable to those early growers.
Growers might use sophisticated communications technology to monitor frosts, as well as high tech transport and logistics to move their products to distant markets. It takes world-leading science to develop crop varieties and soil management. These many innovations determine our competitive advantage.
At the same time, we need to be responsive to the way consumer demand is changing. If we don't respond to the market − it will respond to us. One of the most important changes occurring in our markets is the rising concern− especially in the UK and Europe − about the way New Zealand food producers manage our environment.
Supermarkets are soon going to be saying, 'Unless you're sustainably catching a fish or sustainably developing a dairy industry we're not interested in buying your product.' This should focus our minds.
Enter 'food miles' in an Internet search engine like Google and the first return − out of eighty-five million − is for a BBC cooking programme that has what purports to be a factual discussion of food miles. It starts off by declaring that the distance food travels from food to plate "adds substantially to the carbon dioxide emissions that are contributing to climate change."
What is left out of this sort of bogus environmentalism is that it is not the distance that is travelled alone that is important. The crucial question is the total carbon consumed in producing the product.
But when mainstream organisations like the BBC are spreading the message, we have to react and adapt. We are up against a huge new campaign that is explicitly targeted at produce from New Zealand.
The Independent newspaper had a huge feature story only two months ago where it listed products from virtually every country that exports to the UK and claims about the carbon used. It noted half our lamb goes to the EU, where the UK is the number one buyer − and then records that ten kilos of carbon are used to airfreight a kilo of lamb to the UK. You'll notice how the impression is left that most of our lamb is airfreighted to the UK. You'll also note they don't bother to show the carbon consumed by a UK farmer in getting a kilo of lamb onto a dinner plate.
The same report does a job on New Zealand blueberries. We're accused of using up food miles by air freighting Kiwifruit to the UK. We don't! We ship our fruit to the UK − and that uses less CO2 than hopping in your four wheel drive and puffing down to the supermarket to buy the kiwifruit.
What we are seeing here is a gigantic and cynical new protectionist movement, where consumers − especially UK and European consumers − are being manipulated by our competitors to focus only on one part of the production chain.
Climate change is not a trivial issue. No developed country is more exposed to the issue than we are. We are further from markets than any other producer, and so we are more vulnerable to the food miles issue. And because we are more dependent on primary production than any other country, we are more vulnerable to changing weather patterns.
If we want to defend our markets we have to be able to make a very convincing case that New Zealand's production is the most sustainable in the world. That's why the government has announced a goal of making New Zealand the first truly sustainable country in the world.
Environmental protectionism is joining old fashioned protectionism as a way of keeping our produce out of markets. Access to markets, and dealing with tariff and non-tariff barriers, is critical to our export industries and horticulture is in the frontline.
Earlier this year I released a report showing tariff barriers to our horticulture exports cost the average grower $25,000 a year in lost earnings. I've been in Korea, California and Mexico in recent weeks looking to open market access.
In Korea, for example, I met some of the farmers who fear access by New Zealand producers. They didn't realise that we are not large scale producers of the commodities they depend on − we don't export rice and we don't grow much chilli or ginger.
I pointed out our growing cycles are counter-seasonal so we can help to ensure a steady supply of high quality agricultural produce year-round. And if we can increase our trade relationship we can benefit consumers in both countries with more choice and better prices.
I pointed out we do not depend on exploitation of people or of our land for our competitive advantage. When you meet a near subsistence farmer who thinks we are a threat to their already meagre income, you had better have a sound response.
I was able to talk to them about the potential for their business from widening their partnerships with New Zealand producers. For example, we have technology and access to marketing networks that small farmers in those countries can only dream about at the moment.
So while I was there I witnessed the signing of a Memorandum of Understanding formalising a strategic partnership between Zespri and the Korean Kiwifruit Association. That is an example of how a partnership can deliver positive gains on both sides. We will complete a study into a trade deal with Korea this November.
But tariffs are only part of the story. We are also facing frustrating non-tariff barriers. Nowhere is this more obvious than in the cynicism and deliberate gamesmanship of Australia over apples.
You really wonder about Australia's seriousness over the way it wants to manage the relationship with New Zealand when it treats our apples with all the seriousness of George Gregan feeding a ball under the second row of a rugby scrum. They've stalled for too long. It's yellow card time.
We have consistently argued that Australia's quarantine measures are not scientifically justified - apples in commercial trade do not transmit fire blight. Australia published its final Import Risk Analysis for apples from New Zealand last November, and issued its Final Policy Determination in March this year.
We believe, and have argued strongly, that the restrictions these documents still impose are scientifically unjustified, and unnecessarily trade restrictive. But at least, for the first time in 85 years, we had the possibility of exporting at least some apples into Australia. So we decided in good faith to explore whether the conditions set by Australia would, in fact, allow commercially meaningful access.
We instructed Biosecurity New Zealand to negotiate with its Australian counterpart a Work Plan and Standard Operating Procedure, in accordance with the regime prescribed by the Import Risk Analysis. We made it clear that this process could, and should, be concluded by now. But the Aussies have held things up even more.
There is not much sign we will see compliance before the general election over there, probably around November. By that time it will be well passed the point when any apple exports to Australia next season will be possible. Yesterday I met my Australian counterparts in Auckland. I had a message for them. It was blunt.
Now, we will go to Cabinet to look at further options, and a WTO case is the most likely outcome. I don't have a huge amount of faith in the WTO to solve the matter quickly − but at least Australia should be embarrassed, at a time when it lectures the rest of the world over trade access, that it is practising cynical protectionism.
I have no complaint about legitimate phyto-sanitary standards. As the most isolated country in the world, with the most unique natural environment, we demand the highest standards of biosecurity at our own border. So I understand why other countries want to be protected from biosecurity risks.
But what every country should be doing is adopting science based standards. We face too many restrictions on trade or management at the border in other countries that can not be justified in the name of science.
Industry has a role too. It's up to industry to maintain high standards, both in their products themselves and in the production process. Market access is hard gained and easily lost. The discovery of one live Codling Moth larvae at the border in Taiwan stopped trade in apples overnight. One small slip in practice, in one orchard, could well have seen long term exclusion from an important market. The day was saved by strong team work from MAF Biosecurity, Pip Fruit New Zealand and growers themselves.
They were able to identify the problem quickly and provide the Taiwanese with the assurances that they required for trade to resume. The Taiwanese are unlikely to be as accommodating if there is a repeat occurrence.
I am under no illusions about the challenges our growers already face from the recent increase value of our dollar. Let me say something about that: There are no simple solutions. Our dollar is high partly because the US dollar is weak − and there is not much we can do about that.
It's also high because of the high prices received in some areas. Dairy is getting returns on exports not seen since the wool boom during the Korean War. If you're not in dairy, that might not seem like much consolation, but is good for New Zealand.
And our dollar is also high partly because since 1999 we have enjoyed the longest period of economic growth in decades. When overseas investors look at us they see a good, reliable economy − and high interest rates.
The government is, however, tackling some of the causes of inflationary pressure that have helped to push interest rates up. For example, KiwiSaver will help to push more demand from inflationary spending into saving.
The government is playing its part also by maintaining strong fiscal surpluses. In other words, it is withdrawing demand from the economy overall. Every time you hear someone criticise the government's surplus − and call for it to be spent in tax cuts or more spending − they are actually saying we should boost inflationary pressure and interest rates further.
I mention that because I hear a lot of comment from our opponents suggesting we should spend more or give away more cash. But I want to ask how many exporters here are interested in the even higher dollar and higher interest rates that would result?
When we look at the future of the horticulture industry, I doubt the dollar will stay at quite the levels it has been recently − and there are encouraging signs this week that it is dropping a bit.
But the industry's long term health will not be built simply on a low exchange rate.
It has to be built on its strength in markets − on its innovation, its quality and the ability of our horticulture exporters to meet consumer demand in the marketplace.
I hope I have outlined today some of the ways I think we can deal with the issues ahead. And I know that because we are making progress on these issues, the horticulture sector will remain a very strong contributor to New Zealand's economic well-being.
---------------------------------
Address to the Second Annual Conference of Horticulture New Zealand, Christchurch Convention Centre
Horticulture is a four billion dollar industry for New Zealand. Last year more than half its production was exported to over a hundred countries around the world.
Its value is not only directly economic, though that is crucial. Horticulture also makes a crucial contribution to regional New Zealand and to jobs in our regional areas.
Horticulture employs fifty thousand New Zealanders in permanent jobs and another forty thousand seasonally.
When you look at the scale and sophistication of the sector, what stands out is that the industry has been growing very successfully. In the last twenty five years our horticulture exports have increased twenty-fold.
We need our primary industries to be successful − and if we want them to continue growing then we need to consider what it will take. The government's vision for our economy is for a high-value, job-rich economy connected to global markets.
Realising our vision will depend on innovation, knowledge and skills. It will depend on our responsiveness to consumer demand and on adequate market access as conditions change around the world. I want to spend some time going through these components of our future success.
Skills are crucial for an industry like yours. Horticulture is a major employer of people. Quality products for both domestic and international markets require a wide range of skills and input.
Like many sectors of the economy you are experiencing skills shortages that challenge your ability to grow. A focus on training, increasing productivity and mechanisation, where feasible and appropriate, will ensure that your work force is used to best effect.
You are not alone in having seasonal peaks and troughs that you must manage. Pruning, picking and packaging are labour intensive - it is critical to the quality of your product that pruning occurs on time, that fruit is picked at its peak and that grading and packaging maintains high standards.
I do not need to tell you that seasonal labour supply is challenging. This challenge is in part a factor of a low unemployment economy - more New Zealanders are in full time employment and are not available for seasonal work. For the foreseeable future, your seasonal work force will draw both New Zealanders and people visiting our shores.
Successfully managing this seasonal demand is a challenge for you and for the Government. Our partnership in the Seasonal Labour Strategy for Horticulture and Viticulture is a collective commitment to delivering appropriate arrangements and performance.
The Government, and society in general, are right to expect high standards of employment practice. It is also right to expect that visitors to our country will respect the conditions established by their immigration status. There is a collective responsibility to ensure people are working legally and fulfilling all of their obligations, including contributing to society through taxes.
The Recognised Seasonal Employer Scheme has been the subject of much discussion over recent weeks. The Government is firm in its intention to fully implement this Scheme. Success will need us to work together to the full intent of the Seasonal Labour Strategy for Horticulture and Viticulture partnership.
This programme is built on our experience of the past few years. Feedback from employers involved in the Approved in Principle pilot is that labour productivity is increased through stable arrangements - managers are able to think more about planning and how to get the best from people, rather than worry over whether they have enough people. This new Scheme provides similar opportunities.
Your leaders have been clear in voicing their concerns that the Scheme will not be fully implemented in time to provide for your needs next season. The Government is very much aware of these concerns. My Ministerial colleague David Cunliffe announced yesterday that work is well in hand to provide for the transition that is required.
Our collective challenge and responsibility is to work through a managed transition to these new arrangements. You have my commitment to work with you to achieve this. Any reasonable concerns will be heard and I will work with my Ministerial colleagues to address them.
Alongside skills, development of the industry depends on innovation. The government invests heavily in science in the primary sector, and tax breaks introduced in this year's budget will reward innovation, research and market development even more.
Innovation is important because it is all that gives us an edge in the market place.
We have natural advantages as a growing country − but other countries have temperate climates and favourable rainfall and sunshine too. Many of them, especially emerging competitors like Brazil, India and China, have cost structures we cannot and should not begin to compete with.
Instead we have to find a market niche that earns a premium in global markets. Every week I come across amazing examples on New Zealand farms − examples that improve production methods, varieties and distribution. Back when large scale commercial horticultural planting began in New Zealand, the farms serving our markets were in places like Epson in Auckland and then Hutt Valley in Wellington. Both are now highly desirable residential areas. Though many of the products might be familiar, horticulture's sophistication would be unrecognisable to those early growers.
Growers might use sophisticated communications technology to monitor frosts, as well as high tech transport and logistics to move their products to distant markets. It takes world-leading science to develop crop varieties and soil management. These many innovations determine our competitive advantage.
At the same time, we need to be responsive to the way consumer demand is changing. If we don't respond to the market − it will respond to us. One of the most important changes occurring in our markets is the rising concern− especially in the UK and Europe − about the way New Zealand food producers manage our environment.
Supermarkets are soon going to be saying, 'Unless you're sustainably catching a fish or sustainably developing a dairy industry we're not interested in buying your product.' This should focus our minds.
Enter 'food miles' in an Internet search engine like Google and the first return − out of eighty-five million − is for a BBC cooking programme that has what purports to be a factual discussion of food miles. It starts off by declaring that the distance food travels from food to plate "adds substantially to the carbon dioxide emissions that are contributing to climate change."
What is left out of this sort of bogus environmentalism is that it is not the distance that is travelled alone that is important. The crucial question is the total carbon consumed in producing the product.
But when mainstream organisations like the BBC are spreading the message, we have to react and adapt. We are up against a huge new campaign that is explicitly targeted at produce from New Zealand.
The Independent newspaper had a huge feature story only two months ago where it listed products from virtually every country that exports to the UK and claims about the carbon used. It noted half our lamb goes to the EU, where the UK is the number one buyer − and then records that ten kilos of carbon are used to airfreight a kilo of lamb to the UK. You'll notice how the impression is left that most of our lamb is airfreighted to the UK. You'll also note they don't bother to show the carbon consumed by a UK farmer in getting a kilo of lamb onto a dinner plate.
The same report does a job on New Zealand blueberries. We're accused of using up food miles by air freighting Kiwifruit to the UK. We don't! We ship our fruit to the UK − and that uses less CO2 than hopping in your four wheel drive and puffing down to the supermarket to buy the kiwifruit.
What we are seeing here is a gigantic and cynical new protectionist movement, where consumers − especially UK and European consumers − are being manipulated by our competitors to focus only on one part of the production chain.
Climate change is not a trivial issue. No developed country is more exposed to the issue than we are. We are further from markets than any other producer, and so we are more vulnerable to the food miles issue. And because we are more dependent on primary production than any other country, we are more vulnerable to changing weather patterns.
If we want to defend our markets we have to be able to make a very convincing case that New Zealand's production is the most sustainable in the world. That's why the government has announced a goal of making New Zealand the first truly sustainable country in the world.
Environmental protectionism is joining old fashioned protectionism as a way of keeping our produce out of markets. Access to markets, and dealing with tariff and non-tariff barriers, is critical to our export industries and horticulture is in the frontline.
Earlier this year I released a report showing tariff barriers to our horticulture exports cost the average grower $25,000 a year in lost earnings. I've been in Korea, California and Mexico in recent weeks looking to open market access.
In Korea, for example, I met some of the farmers who fear access by New Zealand producers. They didn't realise that we are not large scale producers of the commodities they depend on − we don't export rice and we don't grow much chilli or ginger.
I pointed out our growing cycles are counter-seasonal so we can help to ensure a steady supply of high quality agricultural produce year-round. And if we can increase our trade relationship we can benefit consumers in both countries with more choice and better prices.
I pointed out we do not depend on exploitation of people or of our land for our competitive advantage. When you meet a near subsistence farmer who thinks we are a threat to their already meagre income, you had better have a sound response.
I was able to talk to them about the potential for their business from widening their partnerships with New Zealand producers. For example, we have technology and access to marketing networks that small farmers in those countries can only dream about at the moment.
So while I was there I witnessed the signing of a Memorandum of Understanding formalising a strategic partnership between Zespri and the Korean Kiwifruit Association. That is an example of how a partnership can deliver positive gains on both sides. We will complete a study into a trade deal with Korea this November.
But tariffs are only part of the story. We are also facing frustrating non-tariff barriers. Nowhere is this more obvious than in the cynicism and deliberate gamesmanship of Australia over apples.
You really wonder about Australia's seriousness over the way it wants to manage the relationship with New Zealand when it treats our apples with all the seriousness of George Gregan feeding a ball under the second row of a rugby scrum. They've stalled for too long. It's yellow card time.
We have consistently argued that Australia's quarantine measures are not scientifically justified - apples in commercial trade do not transmit fire blight. Australia published its final Import Risk Analysis for apples from New Zealand last November, and issued its Final Policy Determination in March this year.
We believe, and have argued strongly, that the restrictions these documents still impose are scientifically unjustified, and unnecessarily trade restrictive. But at least, for the first time in 85 years, we had the possibility of exporting at least some apples into Australia. So we decided in good faith to explore whether the conditions set by Australia would, in fact, allow commercially meaningful access.
We instructed Biosecurity New Zealand to negotiate with its Australian counterpart a Work Plan and Standard Operating Procedure, in accordance with the regime prescribed by the Import Risk Analysis. We made it clear that this process could, and should, be concluded by now. But the Aussies have held things up even more.
There is not much sign we will see compliance before the general election over there, probably around November. By that time it will be well passed the point when any apple exports to Australia next season will be possible. Yesterday I met my Australian counterparts in Auckland. I had a message for them. It was blunt.
Now, we will go to Cabinet to look at further options, and a WTO case is the most likely outcome. I don't have a huge amount of faith in the WTO to solve the matter quickly − but at least Australia should be embarrassed, at a time when it lectures the rest of the world over trade access, that it is practising cynical protectionism.
I have no complaint about legitimate phyto-sanitary standards. As the most isolated country in the world, with the most unique natural environment, we demand the highest standards of biosecurity at our own border. So I understand why other countries want to be protected from biosecurity risks.
But what every country should be doing is adopting science based standards. We face too many restrictions on trade or management at the border in other countries that can not be justified in the name of science.
Industry has a role too. It's up to industry to maintain high standards, both in their products themselves and in the production process. Market access is hard gained and easily lost. The discovery of one live Codling Moth larvae at the border in Taiwan stopped trade in apples overnight. One small slip in practice, in one orchard, could well have seen long term exclusion from an important market. The day was saved by strong team work from MAF Biosecurity, Pip Fruit New Zealand and growers themselves.
They were able to identify the problem quickly and provide the Taiwanese with the assurances that they required for trade to resume. The Taiwanese are unlikely to be as accommodating if there is a repeat occurrence.
I am under no illusions about the challenges our growers already face from the recent increase value of our dollar. Let me say something about that: There are no simple solutions. Our dollar is high partly because the US dollar is weak − and there is not much we can do about that.
It's also high because of the high prices received in some areas. Dairy is getting returns on exports not seen since the wool boom during the Korean War. If you're not in dairy, that might not seem like much consolation, but is good for New Zealand.
And our dollar is also high partly because since 1999 we have enjoyed the longest period of economic growth in decades. When overseas investors look at us they see a good, reliable economy − and high interest rates.
The government is, however, tackling some of the causes of inflationary pressure that have helped to push interest rates up. For example, KiwiSaver will help to push more demand from inflationary spending into saving.
The government is playing its part also by maintaining strong fiscal surpluses. In other words, it is withdrawing demand from the economy overall. Every time you hear someone criticise the government's surplus − and call for it to be spent in tax cuts or more spending − they are actually saying we should boost inflationary pressure and interest rates further.
I mention that because I hear a lot of comment from our opponents suggesting we should spend more or give away more cash. But I want to ask how many exporters here are interested in the even higher dollar and higher interest rates that would result?
When we look at the future of the horticulture industry, I doubt the dollar will stay at quite the levels it has been recently − and there are encouraging signs this week that it is dropping a bit.
But the industry's long term health will not be built simply on a low exchange rate.
It has to be built on its strength in markets − on its innovation, its quality and the ability of our horticulture exporters to meet consumer demand in the marketplace.
I hope I have outlined today some of the ways I think we can deal with the issues ahead. And I know that because we are making progress on these issues, the horticulture sector will remain a very strong contributor to New Zealand's economic well-being.