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Mon, Apr. 5th, 2010, 01:48 pm
A land grab, or just free trade?

Originally published in The Spark and online

Ever since the global food crisis of 2008, countries such as China, as well as South Korea and the oil-rich but food-poor nations of the Middle East, have been buying up large amounts of land for agricultural production in places like sub-Saharan Africa, sparking concerns about a “new land grab” and “re-colonisation” of the continent. These terms certainly appear to be accurate, the neo-colonial relationship African countries have shared with the West since the end of colonialism proper has kept them poor and susceptible to unequal trade relationships, not just with the Western world, but with emerging economic powers as well. It is surprising however, that similar rhetoric has been used to describe the announcement that Chinese company Natural Dairy NZ plans to buy NZ$1.5 billion worth of farmland, cows and milk processing plants in New Zealand.

“It’s simply a new, Chinese, version of the British economic colonisation that dominated this country’s agriculture up until the 1970s” cried a press release from the Campaign Against Foreign Control of Aotearoa (CAFCA). Federated Farmers described the move as an “unintended consequence” of the free trade agreement between China and New Zealand. The Green Party said the New Zealand dairy industry “risked falling into the hands of overseas investors” if the government continued to loosen overseas investment rules. And 3 News repeated the claims, scaremongering that “all the milk will go to China.”

The impression that is given is that New Zealand has an economic situation in common with sub-Saharan Africa, and that China is coming to take the milk out our mouths. This view is at odds with the reality of dairying in New Zealand. All that Natural Dairy NZ is going to be taking is a share of the Chinese market for dairy products. The big losers will be the worlds largest dairy company, New Zealand based Fonterra. A large amount of dairy produced in New Zealand already goes to China, which is New Zealand’s fourth largest market for dairy exports. Dairy exports to China increased 72% in 2008 and a further 43% last year. The only way the general population of New Zealand – that is, those of us who aren’t Fonterra shareholders or suppliers – could be affected is if the growing market for dairy in China (and elsewhere) were to push up prices. Yet that would occur regardless of who owned the land Natural Dairy New Zealand is aiming to buy. As Fonterra sells its products at the global market price, it doesn’t actually matter if a particular dairy company is incorporated in New Zealand, China, or the Cayman Islands- as Natural Dairy NZ is for tax purposes.

The economic nationalism and calls for protectionism seem ironic given the fact that Fonterra itself is a large multinational, which in addition to having farms in China, has since 2002 been in partnership with global food giant Nestle in the Dairy Partners Americas (DPA). DPA produces milk products in South America for local markets as well as circumventing US protectionism that allows South American -but not New Zealand- dairy products to enter its markets. When DPA was formed then Prime Minister Helen Clark described the deal as allowing Fonterra to “go in behind the backs of tariff barriers” in the USA. If you’re a large New Zealand farmer, you might have something to lose when Natural Diary NZ arrives, otherwise, you shouldn’t be worried.