With Labour and Federated Farmers siding with Fonterra against a National government and the Greens, the issue of regulation of the dairy industry clearly cuts across traditional political lines. The Government is claiming that its proposed regulation is important for New Zealand consumers (see: RNZ: PM says changes to Fonterra legislation necessary), but John Key himself admits that there's no guarantee that it will have any effect, for example, on the price of milk in New Zealand - see: Key rejects farmers' milk concerns.
The Government's dairy industry proposals - as well as Fonterra's reactions - are summarized in Sally Rae's article Fonterra frothing at milk shake-up. A major objection seems to be that the regulations will directly advantage mostly foreign-owned companies. Both the lower price and additional milk Fonterra will be forced to provide these companies will end up offshore rather than in the fridges of New Zealand consumers.
The fundamental issue is that Fonterra is a legal monopoly, dominating an economy where the free market is supposed to rule. There are very good reasons for keeping New Zealand's dairy industry unified, as any comparison with the structure and performance of the other agricultural sectors shows. Monopolies however, need to be regulated and so Fonterra has to accept regulation as part of the deal. If the Government was going to use regulation to reduce the price of milk in New Zealand, then it could have taken a much more direct approach, which Fonterra says they could 'live with'. To ensure price reduction would also require some control over the cosy supermarket duopoly, which arguably has more influence over the retail price of milk than Fonterra. That is not going to happen under this government (and certainly didn't happen under Labour). Instead, National seems determined to assist privately owned dairy companies at the expense of the locally owned cooperative.
Control of the dairy industry is also the issue as the fate of the Crafar farms is about to be decided. Free market principles seem to have been put on the back burner by Michael Fay's consortium as it takes legal action to use the overseas investment office to knock out a higher Chinese bid - see: Richard Meadows' Crafar suitors launch legal action.
David Shearer is questioning the value of any Chinese investment in the farms, tapping into public unease about us becoming 'tenants in our own country' - see: Shearer: No value to New Zealand in Crafar bid. Given Michael Fay's record with New Zealand's strategic assets, particularly Kiwi Rail, it would be interesting to see if the local bid would pass the same character and national interest tests that Shangai Pengxin is expected to meet. Fran O'Sullivan also has an intelligent analysis of the issues in Fay's challenge improper and absurd.
Mr Dotcom is proving a bit of an embarrassment to the Government in more ways than one. John Banks' relationship with him has already been under the spotlight, and now former Immigration Minister Jonathon Coleman is being challenged by Winston Peters and David Shearer for letting the Megaupload boss into New Zealand, despite knowing about his previous convictions - see Danya Levy's Questions over Kim Dotcom's $10m investment and Derek Cheng's Peters calls for release of Dotcom residency info.
