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International kiwifruit marketer Zespri has said it considers a recommendation by New Zealand's 2025 Productivity Taskforce to remove existing regulations governing exports of kiwifruit from the country as 'completely unacceptable'.

The Taskforce, which was established by the New Zealand government in July 2009 to investigate ways of closing the income gap between New Zealand and Australia by 2025, described Zespri's statutory monopoly on the export of kiwifruit to markets other than Australia as 'anachronistic' and called for the group's monopoly powers to be revoked.

'Competitive markets need to be promoted, not forestalled by government fiat,' the report said. 'Where there are legitimate reasons for companies to work together in international markets, it will be in their interests to find private vehicles to make that cooperation effective.'

The 2025 Productivity Taskforce is headed by former NZ Reserve Bank Governor and National Party leader Don Brash, who between 1982 and 1986 worked as managing director of the New Zealand Kiwifruit Authority.

John Loughlin ZespriZespri chairman John Loughlin (pictured left) said the recommendation would lead to a significant productivity drop and a reduction in New Zealand’s export earnings.

'In the last 10 years, the New Zealand kiwifruit industry has doubled in size and value, significantly contributing to the New Zealand economy and delivering wealth to New Zealand kiwifruit growers,' he told reporters.

Worth over NZ$987m in export earnings in 2009 and set to reach over NZ$2bn by 2020, the country's kiwifruit industry will continue to make a significant contribution to Horticulture New Zealand’s export earnings target of NZ$10bn by 2020, he commented.

'A change in the industry structure would prevent the realisation of these growth targets and would be a backwards step for the country. New Zealand growers realise the value of our industry structure every single day – growers do not trade in economic theory, they deal in economic reality.'

However, the Taskforce report said it was not convinced by the argument that Zespri's monopoly should only be removed when a majority of growers were in favour of such a change.

'It is not clear what public policy interest would justify a Zespri monopoly that prevented, say, 35 per cent of growers who wished to do so from selling their fruit abroad through other companies,' the report stated.

'The vines and the fruit are private property: in successful market economies governments need a compelling public interest case to constrain property rights in such a way.'


Success story

Mr Loughlin also pointed out that the success of the New Zealand kiwifruit industry was the envy of other primary producers.

'Deregulation would promote price competition amongst New Zealand exporters which would lead to a drop in export earnings with many orchardists forced to exit the industry – this is not a viable strategy for productivity growth,' he argued.

'An example close to home is the apple industry, which was deregulated in 2001,' he stated. 'Its export earnings have stagnated, remaining at similar levels to 2001 (NZ$339m).'

According to Mr Loughlin, the structure of the New Zealand kiwifruit industry is critical to the continued success of the industry and the horticulture sector.

The existing regulated structure puts Zespri as the primary exporter to countries other than Australia. Other companies can export kiwifruit through Collaborative Marketing arrangements, which are independently approved by industry regulator Kiwifruit New Zealand.

The New Zealand government, meanwhile, has previously stated that it will support Zespri and the regulated industry structure for as long as they have the support of growers.

Deregulation is therefore not on the agenda, Mr Loughlin said: 'Growers will appreciate the level of confidence this provides for continued investment in orchard productivity, research and innovation, and export market development.'

Tony Gibbs Turners and GrowersTurners & Growers chairman Tony Gibbs (pictured right), who has led a sustained campaign calling for Zespri's monopoly status to be removed, said the report underlined the need to dismantle the single-desk system.

“The report underscores the fact that the future of the kiwifruit industry is a future of competition and innovation and Zespri’s monopoly is not part of that future,” he told the National Business Review.