Pattrick Smellie: Ignoring friends takes the biscuit

Japan's Prime Minister Shinzo Abe shakes hands with President-elect Donald Trump in New York City. Photo / Pattrick Smellie.

Mugging it up on the pavement outside the Cookie Time store in Tokyo's centre of youth culture, Harajuku, this week were a couple of Kiwis who personify everything the New Zealand government wants you to know about the potential for trade with Japan.

Guy Pope-Mayell, 55, is based in Christchurch and has given much of the last 36 years to helping build a $50 million biscuit business that features a mildly crazed-looking red mascot known to any New Zealander who's entered a dairy since 1983 as 'the Cookie-Muncher'.

And Jason Allen, 42, has spent exactly half his life living in Japan, the last six as the representative director of Cookie Time, thanks a typically New Zealand-y two degrees of separation connection that drove the company's serendipitous entry into the world's third largest economy in the first place.

While it "dabbles" in Australia and one or two other export markets, Cookie Time is going quids-in on Japan. Its single store, in Harajuku, turns over around $1m a year on its corner site near a Metro station and is profitable.

As a flagship for the brand, it helped Cookie Time gain a toehold in Lawson's Natural, a high-end offshoot of Japan's ubiquitous Lawson's corner store chain.

Sales into Japanese retail stores are worth barely $500,000 a year so far. But in a market where retailers swap out new products from week to week, Cookie Time has survived a full year on Lawsons Natural's shelves and Pope-Mayell is bullish.

Japanese sales may only be 3 per cent of the company's current total, but he can see this moneyed, premium market becoming 25 per cent or more of Cookie Time's revenue over time.

That has only happened through hard work and entrepreneurial chutzpah.

However, the arrival of the CPTPP, the Comprehensive and Progressive Trans-Pacific Partnership trade agreement that came into force late last year, the company has options it couldn't contemplate before.

Instead of paying a 23.8 per cent tariff one every kilogram of cookie dough imported from New Zealand, Cookie Time now faces no tariff at all under new CPTPP quota arrangements.

In the Harajuku store, that means nearly a quarter of the revenue from every cookie sold goes straight to the company's bottom line.

But that's not the big win. The tariff elimination gives the company substantial wriggle room in price negotiations with the large-scale wholesale deals Cookie Time dreams of pursuing in Japan.

The CPTPP is not the only factor in Japanese market success.

Far large, longer-established players in Japan – Fonterra, meat exporter ANZCO, or Zespri – all play a complex and nuanced game to gain advantage through differentiation on quality, market insight, and, above all, the tenacity and balance sheets required to patiently create long term relationships.

But the CPTPP is also a major fillip for New Zealand trade with Japan, a country that has in the past been resistant to competition from Kiwi food producers.

Even a decade ago, Japanese agriculture regarded New Zealand as a competitive threat rather than a partner. A local farming lobby steeped in a culture of isolationism and a political culture committed to maximum self-sufficiency in food production used to mean Japan was a tough problem rather than an ally in global trade talks.

Japan's Prime Minister Shinzo Abe shakes hands with President-elect Donald Trump in New York City. SUPPLIED.

However, six years under Japanese Prime Minister Shinzo Abe has begun to change how Japan engages with other countries on trade.

The most dramatic demonstration of this was in November 2017 when, barely a month after being sworn in as Prime Minister, Jacinda Ardern travelled to her first APEC Leaders' Summit, in Viet Nam, where Japan and New Zealand led the revival of the much-maligned Trans-Pacific Partnership Agreement.

Assumed to be dead after US President Donald Trump nixed it as his first act after inauguration in January 2017, the TPPA phoenix re-emerged with some face-saving tweaks that allowed a newly elected Labour-led government to support a trade deal its supporters thought they were voting to bury.

That rebirth was partly thanks to the work before the New Zealand election in 2017 of the National-led government, and its Trade Minister Todd McClay, to keep the deal alive.

But a crucial part of the revival was Japan's decision that the TPPA was, by whatever name, important to its long-term national interests. Without the second most powerful country in the 12 country TPPA negotiations taking that view, it would likely never have bounced back.

All of which makes the failure of the National Party's international affairs discussion paper, launched at Parliament to a full cast of diplomatic corps note-scribblers, baffling. But for a caption on a photograph, the document fails to mention Japan..

Japan may be ageing. It may lack defence capability in a region fraught with potential for hot war brought on by the escalating cold war tensions between the US and China.

But it is a stable democracy, capable of rational international leadership, full of wealthy people willing to pay good money for the products New Zealand makes well, and is a long-time, high quality investor in this country.

It should not have been so glibly overlooked.

- Pattrick Smellie travelled to Japan at the invitation of the Ministry of Foreign Affairs.

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