The flip side of protectionism

February 5th, 2014 at 6:31 am by David Farrar

Tracy Watkins at Stuff reports:

Spurred on by an aggressive Buy campaign, the big Australian supermarkets are systematically stripping their shelves of New Zealand-produced goods sold under their ‘‘house brand’’ labels, in a move that threatens hundreds of millions  of dollars worth of exports.

Now hands up all those who have been saying that we should have a Buy NZ campaign, and that the NZ Government should only deal with NZ companies?

is bad for New Zealand. Consumers pay more, and exporters get shut out.

Key will raise the issue in his meeting with Abbott in Sydney this week and it is understood the Government has received advice the move could be in breach of the decades-old Closer Economic Relations agreement with Australia.

One option would be for the Government to lodge a formal objection but sources say the situation is complicated by the fact that is a government-to-government agreement, and it is not ‘‘straight forward’’ whether supermarkets are captured by that process.

With respect, I think it is straight forward. Private supermarkets are not captured. CER is an agreement between Governments.

’s economic development spokesman Shane Jones said  it was ‘‘essential’’ Key raise the plight of New Zealand food producers who were being ‘‘monstered’’ by the Australian supermarkets, who controlled 80 per cent of the market.

‘‘They are victimising Kiwi businesses and have created a culture of fear and menace. I have been told New Zealand food producers were warned not to complain about their poor treatment publicly or they would be blacklisted.’’

Is this the same Labour Party that has spent five years insisting that the New Zealand Government should discriminate against Australian businesses, and only let NZ companies win tenders? Isn’t it to complain when Australian businesses do exactly what they advocate?

My consistent view is that quality and price, rather than country of origin, are what you should decide things on. Only if the quality and price are identical or at least similar, should you then take into account country of origin.

But Woolworths Australia is a private company. If they think their customers want to pay more for inferior Australian food, then they can decide to use Australian suppliers only. I think it is a bad business decision, but it is their decision to make.

Where there could be an issue under CER is if the Australian Government is encouraging such protectionism. But I’ve not seen any details in this story that states they are.

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25 Responses to “The flip side of protectionism”

  1. OneTrack (2,558 comments) says:

    “Is this the same Labour Party that has spent five years insisting that the New Zealand Government should discriminate against Australian businesses,”

    Yeah. Nah. Again.

    How about Labour get their s**t together, get a room, decide what their policies are and stuck to them.

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  2. igm (1,413 comments) says:

    One big problem, we produce eff all, owing to unions’ restrictive practises during the time we did. There is no use going into the pros and cons of this, the answer lies totally with these Labour-supported mongrels, they were weeded out by Lange and Palmer, even they could see it was impossible to be competitive with these clowns at the helm of industry.

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  3. deadrightkev (273 comments) says:

    It should come down to the consumer watchdog in Australia pointing out to the consumer they are missing out on choice through lack of NZ competition.

    Have you been into a fish and chip shop in OZ lately? Look at the prices, up to $8 for a piece of their rubbish fish and most buy Hoki because it is about $5, bigger and tastes better. Its a closed shop in the OZ world, controlled by several family entities and it goes right to the top.

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  4. Yoza (1,511 comments) says:

    This is what ‘free trade’ means – big countries do whatever they want and little countries suck it up. Fantasising about what Australia should do doesn’t work.

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  5. All_on_Red (1,330 comments) says:

    Good morning Comrade Yoza, up early to weed the potato crop before the heat of the day I see. I guess on the Collective you don’t have to worry about markets and protectionism since your only client is the State and the price you get is fixed.
    That’s the dream you want for the rest of us isn’t it.
    Btw, how are your remedial math classes going?

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  6. Yoza (1,511 comments) says:

    All_on_Red (788 comments) says:
    February 5th, 2014 at 8:02 am

    Good morning Comrade Yoza, up early to weed the potato crop before the heat of the day I see. I guess on the Collective you don’t have to worry about markets and protectionism since your only client is the State and the price you get is fixed.

    As Farrar points out, if I were in Australia I wouldn’t have to worry as the big supermarkets would take my produce regardless of the quality or cost of any foreign competitors. Meanwhile All_on_Red can stand outside the Australian embassy frothing at the mouth and furiously waving a copy of Ayn Rand’s The Virtue of Selfishness

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  7. Psycho Milt (2,245 comments) says:

    Now hands up all those who have been saying that we should have a Buy NZ campaign, and that the NZ Government should only deal with NZ companies?

    I don’t know any of these men of straw, but as one of the commenters who suggested the government should take the benefits of buying from NZ companies into account when making purchasing decisions, I can only say that this story is completely irrelevant to it, unless Australia nationalised its supermarkets when I wasn’t looking.

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  8. Nigel Kearney (864 comments) says:

    Using xenophobia as a marketing tool is sadly rather common. Someone should ask Shane Jones what he would say if Abbott complained about the ads run by Kiwibank and TSB here.

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  9. peterwn (3,138 comments) says:

    So it seems appealing to Aussie patriotism is a selling point with perhaps Aussie supermarkets with Coles and Woolworths trying to out-bid each other on that front. Which might help explain a wise and unwise decision Woolworths took with respect to its NZ operations. Discontinuing the Woolworths brand in NZ IMO was a wise decision, as it enables Woolworths to dispose of its NZ operation without potential branding issues and also allows Woolworths to be patriotic without appearing to be hypocritical in NZ. It was unwise as a ‘one type fits all’, while applying to Coles and Woolworths in Australia, puts Countdown at a disadvantage competing against Foodstuffs’ Pak’n’Save. This now seems to be hurting.

    So IMO people in NZ should keep banging away with Countdown = Woolworths and that Countdown stores are so rigidly managed that an experienced checkout operator approve liquor sales (thus delaying things) and despite that they succeed in selling alcholol to someone who is obviously very drunk.

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  10. Mark Thomson (84 comments) says:

    This is not protectionism. There is no indication that the Australian government are driving this. The campaign website states that they operate “with the cooperation of the Federal Government” – but “Australian Made Campaign Limited (AMCL), a not-for-profit public company established in 1999 by the Australian Chamber of Commerce & Industry (ACCI) and the network of state and territory chambers of commerce… is not a government body and does not receive government funding for its core operations, which are licensing companies to use the logo and promoting Australian products both in Australia and overseas.”

    Free companies are making their own merchandise decisions based on their perception of the preferences of their customers. Sure, those preferences may not necessarily be in their (the customers) best interests based on price or quality, but they’re perfectly entitled to the warm fuzzy feeling of believing that they’re supporting their own. Good luck to them.

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  11. burt (7,785 comments) says:

    Relax comrades, when Labour get into office we’ll close all existing supermarkets and the only choice will be KiwiFood and the unions will be running it.

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  12. All_on_Red (1,330 comments) says:

    Yoza,
    Actually no. We buy fruit and vege from a green grocer, meat from our butcher, fish from the fish shop. The rest from New World which is owned by a local .
    It’s called choice.

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  13. burt (7,785 comments) says:

    KiwiFood will be a glorious state run sheltered workshop. Only produce supplied by unionised producers will be sold. Being a monopoly will allow the state to use the store (1 per town ) to both control peoples shopping habits and collect revenue via “Glorious State Tax” ( GST ) when the government need more revenue to print billboards in election years.

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  14. Yoza (1,511 comments) says:

    Mark Thomson (71 comments) says:
    February 5th, 2014 at 8:51 am

    This is not protectionism. There is no indication that the Australian government are driving this.

    This is not entirely true. The Australian government will always be under pressure from Australian businesses to ensure Australian product receives preferential treatment in the Australian market. A recent article in The Australian illustrates the rock and the hard place between which the federal government must manage policy to benefit both small producers – farmers, market gardeners, orchardists – and massives corporates – supermarkets like Coles and Woolworths – while appearing to be ‘hands off’ to potential export markets.

    THE supermarket giants will be put on notice over harsh bargaining tactics that damage food producers as the Abbott government vows to help the “fragile” industry fight back against cheap imports.

    Firing a warning shot at Coles and Woolworths, the government will outline plans to tackle concerns about the retailers’ market power amid fears of further job cuts at grocery suppliers.

    It could almost be argued that the Australian supermarket’s sudden preference for Australian produce was as a direct consequence of the threat from the federal government to enact regulation which would favour local producers and threaten the profit of the duopoly.

    Airing the frustration within parts of the Coalition over Coles and Woolworths, rural Liberal MP Sharman Stone took aim at the two companies. “The unconscionable use of market power by the two supermarkets, who together own some 80 per cent of the market share for food retailing in Australia and the subsidies paid to most other food growers and manufacturers in the competing economies, makes it extraordinarily difficult for Australia’s food manufacturing sector to find a level playing field,” she wrote.

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  15. peterwn (3,138 comments) says:

    All_on_Red – while New Worlds and Pak’n’Saves are owned by locals, in reality the owners operate in an extremely tight environment. Foodstuffs develops the stores and spins them off to investors but retains the head lease and sub-leases them to the ‘owner operator’. You just cannot buy a New World that comes on the market – to be eligible you need to serve an extensive ‘apprenticeship’ including owning a Four Square and working at a New World for peanuts.

    Foodstuffs was originally a co-op of grocers and various four Squares etc own shares. But the vast majority of Foodstuffs NI shares are owned by Strategic Interchange Ltd which is in turn owned by five individuals who are presumably trustees. Similarly with Foodstuffs SI but either because of a Companies Office botch-up or misleading information, I could not identify the major shareholder(s).

    So New World and Pak’n’Save appear to be effectively owned by a secretive shareholding that lies low – possibly descendents of those who owned Four Squares 60+ years ago. The ‘owner-operator’ of a local New World appears to be in effect a glorified employee on a bonus.

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  16. spector (180 comments) says:

    Not many people know this, but when Labour/Greens spent a bunch of money running a Buy NZ campaign a few years back they used an Advertising Agency that was actually owned by Australians and Europeans. So essentially they gave New Zealand money directly to foreigners in an effort to get everyone else not too.

    So silly.

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  17. burt (7,785 comments) says:

    spector

    It’s different when Labour do it !

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  18. All_on_Red (1,330 comments) says:

    Peterwn
    Yep, in reality Foodstuffs et al are just property companies. The groceries is just the medium to pay the rent. At least with NW and Pak n save the owner decides what stock to provide and the price.

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  19. Viking2 (11,125 comments) says:

    All_on_Red (791 comments) says:
    February 5th, 2014 at 12:22 pm

    Peterwn
    Yep, in reality Foodstuffs et al are just property companies. The groceries is just the medium to pay the rent. At least with NW and Pak n save the owner decides what stock to provide and the price.

    Why no. And do you know that Pak n Sav meat is Australian?

    Countdown butcher their meat in Auckland which explains it lousy quality.

    Like the big four banks they are ruthless and only interested in themselves. Even the customers don’t count with Countdown and as for their store hygiene, well that is another story.

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  20. All_on_Red (1,330 comments) says:

    Viking
    Agree with about meat quality from a supermarket . Our local butcher is great. If we do buy neat from New World is always NZ branded product- think venison sausages for example or free range NZ pork

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  21. labrator (1,742 comments) says:

    Don’t tell them that Countdown is Australian owned, you’ll never hear the end of it, like the constant bleating about the publicly listed “Australian” banks.

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  22. CharlieBrown (889 comments) says:

    If you are unhappy with this then boycott countdown – I know I will. This is the way the market works.

    It would be great to see some big NZ producers refuse to stock their products at countdown as a form of protest as well.

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  23. adze (1,855 comments) says:

    Australia has always been our biggest frenemy when it comes to business. Partly this is due to xenophobia and chauvanism, partly because they are ruthless bastards, and partly because some industries are forced to lobby their government to be protectionist due to the huge union influence over there.

    Our best hope is to continue to diversify our export markets so that Australia is not our 1st, 2nd or even third largest market.
    Then if they want to piss away their GDP on inferior products, they can.

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  24. Warren Murray (271 comments) says:

    Perhaps Im missing something, but i saw this as an attempt by the supermarkets to putting further pressure on their suppliers into offering their goods at yet lower prices, enabling the supermarkets to increase their margins.

    I strongly doubt this is a breach of CER, although latest reporting is that it is a breach of the principles of CER. Not sure I’d even agree with that.

    If I’m wrong about this being a strategy to boost the retailers’ margins, and they are actively preferring Australian produce, that suggests they are refusing to stock imported produce which includes NZ produce. Whether they are deliberately excluding all imports or only NZ sourced imports, the (dis)affected suppliers could have grounds for some action based on unlawful discrimination.

    I suspect the media have oversimplified the issue as they march to the beat of some nationalistic drum.

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  25. Ben Dover (526 comments) says:

    Only Idiots shop at the Stupid Market
    I can tell you something at Melbourne’s Food Markets You get Kiwi Snapper at a Better Price than in NZ eh? a?

    Hey maybe just get John Key to agree be photographed holding Kiwi Cowala Milk more often

    http://www.cowala.co.nz
    NZ mik powder with the Aussie Koala
    is my Favourite Kiwi Brand

    Maybe just adopt another cute aussie animal and use that in your branding
    see if that fools em

    All is Fair
    Kiwi Boot Polish which is where the colour black and “kiwi term” really originates from
    or was done in Melbourne

    So John Key with Cowala and the Bad strap line
    “Here is it”

    http://www.3news.co.nz/More-uses-of-Keys-image-on-milk-powder/tabid/1607/articleID/267697/Default.aspx

    The Rest of the world views it as one market it only the retards who make the laws
    that make trans tasman business torture

    AND THE FACT IS FOOD SUPPLY IN AUS IS BASICALLY A DUOPOLY

    Bob Katter the Dear ole Mad Hatter has some quite sound ideas
    like the Australian Government buying Australian Made vehicles?

    So they don’t have to shell out so much on Welfare (oops too late)
    Goodbye Car industry

    http://www.bobkatter.com.au/issues/supermarket-duopoly.html

    http://en.wikipedia.org/wiki/Kiwi_(shoe_polish)
    The polish was developed in Australia by William Ramsay who named it Kiwi after the flightless bird endemic to New Zealand, the home country of his wife, Annie Elizabeth Meek Ramsay. Its success in Australia expanded overseas when it was adopted by both the British and American armies in World War I.

    Bugger So even the Term “Kiwi” for a New Zealander has Australian Origins

    and arghhhhhh it gets worse for the CENTRE RIGHT

    http://en.wikipedia.org/wiki/Michael_Joseph_Savage
    Born in Tatong, Victoria, Australia,
    Was an Australian
    He was given the title New Zealander of the Century by The New Zealand Herald in 1999.

    I wonder if John Key can manage the same
    my Mother in law has his picture hanging in veneration

    >
    Both rebelled against the system that suppressed them. But whereas Kelly drifted into crime, and died on a Melbourne gallows on 11 November 1880, Savage went on to reform New Zealand. Years later Michael Savage observed, ‘Though I was born in the same district in which Ned Kelly did his bushranging, I did not inherit his methods.’

    http://home.vicnet.net.au/~tathg/Savage/michaelsavage.htm

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