Fran O'Sullivan: Zespri defensive salvo sends fur flying

The Government says Zespri's single desk status will remain unless a majority of growers request otherwise. Photo / Alan Gibson

Tony Gibbs is a master-player when it comes to lobbying New Zealand Governments to further the commercial interests of his companies and their shareholders.

But Zespri's allegation that a company Gibbs chairs has tried to enlist foreign Governments as part of its campaign to overturn Zespri's kiwifruit export monopoly has sent fur flying around the Beehive.

Irrespective of Gibbs' strenuous denials that Turners & Growers has in any way sought to collude with foreign powers to undermine the Government's trade policy on kiwifruit exports, the Government's suspicion that there might in fact be something to the Zespri claims was strengthened when news emerged from the Gibbs camp this week that the US had issued a "please explain" to New Zealand over allegations made in litigation Turners & Growers had lodged to overturn Zespri's export stranglehold.

Trade Minister Tim Groser does not mince words on the issue. "Having failed to persuade the growers [over the strength of Turners & Growers' arguments], having failed to persuade the Government - the allegation is they are attempting to persuade other Governments."

Groser makes it clear the Government will not change its stance on Zespri unless a majority of growers request the single-desk marketing status be abolished.

The allegation was launched by Zespri nearly two months back.

Business Herald inquiries disclose Zespri chief executive Lain Jager wrote two letters to Groser in the wake of a September 28 meeting at which he first alerted the Trade Minister to Zespri's concerns.

The first letter, sent on September 28, acknowledged Zespri's information involved an element of hearsay and speculation. It had been sent information on an unsolicited basis.

Among the specific claims that had clearly got up Zespri's nose: an allegation Turners & Growers had advised one grower that it planned to bring the existence of New Zealand's kiwifruit regulations to the attention of the US and Korean Governments in the context of free trade negotiations in order to pressure New Zealand to deregulate the kiwifruit industry; a presentation by Turners & Growers to the US Embassy in Wellington; and media statements by Turners & Growers managing director Jeff Wesley that under WTO rules Zespri would be deregulated by 2013 anyway.

The second letter - sent one day after the Groser meeting - was also copied to Foreign Affairs Minister Murray McCully. In this letter, Jager claimed to have information from an independent and credible source relating to the meeting between Turners & Growers executive Murray Malone and representatives from law firm Russell McVeagh and US Embassy officials.

Jager said Zespri had been advised that the Turners & Growers contingent had told the US officials they "had affiliations" with a Californian grower and North American distributors who were preparing submissions to the US Federal Trade Commission against New Zealand's kiwifruit regulations.

Gibbs strenuously denies that Turners & Growers has been orchestrating a campaign to undermine New Zealand's trade policy stance. He maintains all the information in US hands was on Turners & Growers' website weeks before. He maintains the company simply dropped off a complimentary copy of what was on the website to US Embassy officials. "We have clean hands - they have exactly the same papers you have got."

In relation to the suggestion that Turners & Growers was behind efforts to stir up US competition authorities, Gibbs said, "We understand there have been two importers who are pissed off with Zespri and lodged a complaint with competition."

He had also been told the US was likely to focus on the issue in the coming negotiations over the Trans Pacific Strategic Economic Partnership.

News of the US request - which was made at the World Trade Organisation - was distributed to journalists on Monday by a public relations operative working for Turners & Growers.

Initial media reports failed to identify the fact that the "question" had simply been circulated on behalf of the US delegation by the WTO's working party on state trading enterprises. It asked New Zealand to "please provide information on why it is that a key player in the NZ kiwifruit industry had to file legal proceedings in relation to collaborative marking arrangements".

It also asked: "Additionally we request New Zealand please expand on the court documents alleging anti-competitive behaviour and abuse of Zespri's dominant position."

Groser makes it clear that New Zealand will not be jumping over any hoops here. The Government clearly has no intention of prejudging the outcome of the domestic case that Turners & Growers had lodged against Zespri in its response to the WTO. The response is likely to be "fairly factual".

But Turners & Growers' statement of claim makes it clear that it believes Zespri has been engaged in lobbying ministers and officials of both NZ and foreign Governments to ensure it does not lose its state trading enterprise status during the negotiations on the Doha Round. It basically alleges that in the year to March 2009, Zespri paid for its executives to attend WTO meetings to lobby for the maintenance of "the monopsony". Zespri was in fact exempted from regulations concerning STEs.

Zespri's single desk has been under attack before.

Opponents argue that the one-size-fits-all approach is anti-competitive and results in unnecessarily high operating costs and artificially high food prices.

Supporters, particularly those from small nations like New Zealand, which are competing against much larger food producers, argue that it is sensible for producers to band together by using a single marketing arm to represent them offshore.

It's more efficient and gets them a better price as it removes the incentive to undercut domestic competitors offshore.

Gibbs is hardly likely to take the Zespri allegations lying down.

He has lobbied Groser and other Cabinet Ministers like Simon Power and David Carter directly as he presses Turners & Growers' campaign.

But it is clear he will have to have a good explanation on "national interest" issues if he wants a good hearing in the Beehive next time round.