Corporatising NZ Agriculture

The Growing Costs At Home And Abroad

- by Dennis Small

“Globalisation of food markets is an instant strategy for creating hunger” (Vandana Shiva).

The changing face of NZ agriculture at the start of the second decade of the 21st Century reflects deepening corporate consolidation. In Watchdog 124 (August 2010, “Corporate Agriculture/Free Trade Contradictions Bite Home”, by Dennis Small, http://www.converge.org.nz/watchdog/24/08.htm), I looked at certain issues illustrating current trends. Growing foreign control over our still expanding dairy monoculture, our rural services industry, and the continuing travails of the meat industry got special attention. With the end of protection, Aotearoa/NZ threw itself open to the processes of corporate concentration and foreign usurpation. This article extends and elaborates the themes developed so far, and examines the implications of the globalist promotion of free trade in food in several cases involving NZ and trading partners.

Meat Industry Instability

The history of the NZ meat industry has a record of chronic instability. This has been evident both in changing domestic structures and changing international markets. As outlined in my previous article, the history of meat cooperatives seems to be going full circle. In the era following World War II, home grown NZ cooperatives arose to contest foreign control and win better returns for local farmers. But these days what remains of the cooperative ideal and practice is under continuing pressure, with capitalist concentration and even comprehensive foreign control looming again.

In May 2010, when corporate mover and shaker Craig Norgate of Pyne Gould Guinness Wrightson (PGGW) bowed out of any further attempts at agricultural industry mergers, he proclaimed that meat industry consolidation would now take a lot longer to achieve (Sunday Star Times, 9/5/10). The big question, however, is whether consolidation will actually benefit sheep and beef farmers in general or not. While the Alliance Group (AG) and Silver Fern Farms (SFF) still maintain farmer control and the former keeps its cooperative structure, market forces are gathering to further undermine stability with another major downturn in the sheepmeat industry in 2010. In a past epoch, producer boards could coordinate and protect the interests of a multitude of small family farmers. Today, capitalist globalisation dictates the imperatives of growth and greater size – so-called “economies of scale” as well as constant accumulation - which happen at the expense of community, social justice, and the environment. Economic gains are both increasingly inequitably spread and siphoned offshore.

Conglomerate Privatisation Process

In Aotearoa/NZ, private meat companies have re-emerged to have a very prominent place. For instance, in 2007, it was noted that: “Affco also used to be a cooperative [originally the Auckland Farmers Freezing Cooperative!], but now is a publicly listed company with majority shareholding by the Talley family. And then there is Anzco [Foods], majority Japanese- owned” (Sunday Star Times, 8/7/07). Affco is now NZ’s fourth largest meat processor and exporter, while Anzco was described in 2008 as a “billion dollar vertically integrated export giant”, supplying the Asian market (Press, 14/11/08). Anzco was also reported to be “the second largest beef processor and a small niche player in sheepmeat” (Press, 12/9/08). Chairperson Graeme Harrison was cited as having “spent 25 years nurturing Anzco from a small farmer-owned marketer” to the large company it is today (Press, 14/11/08).

Originally – and again both paradoxically and symbolically enough in light of what has happened since - “Anzco was set up by the Meat Board in 1984” as the Asia NZ Meat Company “to improve lamb sales to Japan” (Press, 22/3/94). Significantly too, in 1994, when the Meat Board still had a majority shareholding, Harrison predicted increased foreign ownership of our meat industry (ibid.). He observed that: “there had been significant changes in ownership of meat processing companies in Australia as major Japanese and US meat companies made their operations global” (ibid.). More recently, Harrison has predicted there would be “more intensive competition for a smaller livestock pool”, with commercial reality dictating more industry concentration (Press, 12/9/08). There are still quite a number of smaller players in the lamb business.

Some companies have been pursuing capital accumulation and diversifying in order to increase profitability. For instance, it was reported in late 2008 that Affco had a “shareholding in Dairy Trust, which launched a successful takeover of Open Country Cheese Company [OCC]. Singapore-based global agribusiness, commodities and dairy trader Olam International (OI) separately bought a 25% stake in Dairy Trust” (Press, 28/11/08). Affco owned about 35% of Dairy Trust. Earlier, in June 2007, Dairy Trust, as a subsidiary of Affco, had also competed with OI in a takeover bid for OCC (Press, 23/6/07). At the time, OI bought up 17% of OCC (ibid.), and so later came to spread its assets, as it were. OCC, the nation’s second largest milk processor, has been rebranded Open Country Dairy (OCD). By September 2010, OI had a one quarter stake in OCD. OI itself was in “merger discussions with rival Louis Dreyfus Commodities” (the huge rice, cotton, etc. trader) http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10676286.

Capitalist Gaming

Capitalist gaming in our meat industry has gone on with Affco being taken over by the privately owned Talley’s Group, which already has extensive fishing interests, and also produces vegetables and ice cream. Moreover, Talleys now not only has a substantial shareholding in OCD through Affco, but is itself the third biggest OCD shareholder with a 17% slice of this dairy company. Talley family business leaders, as investigative journalist Nicky Hager has shown, keenly support and donate to the National Party (“The Hollow Men: A Study In The Politics Of Deception”, Craig Potton Publishing, 2006, pp220 & 243/4; reviewed by Jeremy Agar in Watchdog 114, May 2007, http://www.converge.org.nz/watchdog/14/03.htm).

Given the mounting impact of market forces on our meat cooperatives - in line with long term market trends - and the global grab for food producing resources, more foreign control is shaping up in the wings, in conjunction with inroads into dairy, rural services, etc. It was observed in mid 2009 that: “The Brazilians have made some big moves into meat processing companies in Australia. And that could happen here if a company ended up having trouble” (Press, 23/5/09). Meat Industry Action Group (MIAG) Chairperson, Waimate sheep farmer “John Gregan, says imagine if there was eventually an industry merger and lamb profits took off like dairy, yet all those profits were heading overseas because we were too obsessed with settling old scores” (ibid.). As a result: “Rather than doing a Fonterra, the sheepmeat industry might have a Fonterra done to it” (ibid.). SFF in particular is seen as vulnerable to foreign takeover, although it has managed to get more financial support lately. Ironically, too, of course, Fonterra’s continual efforts at capital restructuring are paving the way to eventual foreign control over our major dairy company as it ever strives for greater growth. Converging transnational and local comprador* economic interests are tightening the coils of NZ’s political economy in a number of major sectors. *Comprador – local collaborators of colonisers, in this case the transnational corporations. Ed.

Beefing Up Cooperation Versus Lambasting Competition

A couple of years earlier, Gregan had remarked that: “NZ needs a cooperative, global approach to get better returns for farmers” (South Island Farmer [Press], August 2007). Aotearoa/NZ was failing in the marketplace despite supplying “about 75% of all of the world’s lamb” (ibid.). Multiple NZ marketers were being picked off by the big international buyers. It was especially evident how “the European supermarkets play the NZ meat companies off against each other” (Sunday Star Times, 8/7/07). Too many companies of varying size and product price offset any country bargaining power. Such bargaining power, it can be argued, could be effectively channelled via a national producer board.

According to Simon Gatenby, Chief Executive of the Wellington meat processing company Taylor Preston, farmers are pursuing an empty dream if they think that a big meat industry merger could extract “better lamb returns by screwing down giant overseas supermarket chains” (Press, 27/6/08). For example, the United Kingdom market was very tough. Instead, he called for removing more chains from the processing operation and increasing the efficiency of processing (ibid.). Whatever the assessment of Gatenby’s opinion, the lack of a strong, central marketing agency, as might have been served by an updated and modified producer board working in Aotearoa/NZ’s interest as a whole, remains a yawning gap for our country. NZ farmers are left open to the power and manipulations of supermarket chains and transnational corporations (TNCs).

For many years some sort of marketing coordination in the US has been provided by the NZ Lamb Company (Sunday Star Times, 8/7/07). Using this arrangement, “Alliance, Anzco and Richmond worked together”, with SFF (then PPCS) joining in 2007 (ibid.). But a visit to the US had demonstrated to MIAG’s Gregan the extent of supermarket buying power there (South Island Farmer, August, 2007). The supermarkets had “increased their margins by playing NZ companies off against each other. The situation is similar to that faced by NZ’s post-deregulated pip fruit industry where a swath of marketers undercut each other resulting in record low returns to growers” (ibid.). And in 2010 such marketing disarray applies across the board for a range of key agricultural products.

Procurement Problems

Besides the difficulties of overseas marketing, the lack of producer coordination has been continually eroding profitability at the domestic end with destructive “procurement competition” among the meat companies (ibid.). As well, small and medium farmers have been “highly critical of secret bonuses paid to large scale suppliers” (e.g. Sunday Star Times, 8/7/07). An example of procurement problems as highlighted by Press occurred when SFF voiced strong criticism of the South Island’s CRT, “a large rural retail farmer cooperative, for its foray into livestock trading” (19/8/09). SFF attacked CRT’s move as “a classic example of more fragmentation of the industry” and “destructive” disruption of “the supply chain” (ibid.). What really upset SFF was that CRT had “similar members” to SFF, or even the same farmer-owners (ibid.). In reply, CRT claimed that it was only “facilitating” trading of livestock for farmers in response to demand. It “had bought independent livestock trading business Alpine Livestock and so was owner of an existing player which would not have much influence over industry reform or consolidation” (ibid.).

CRT posted a tough commercial year but continued to expand its services and supply operations. It got “the licence for the Challenge fuel brand”, and took over “national distribution for its retail fuel station network”, besides buying the South Canterbury-based company of Annett Grain and Seed (Press, 16/710). Meanwhile, problems at both the overseas marketing end and the farm gate end help drive further attempts at meat industry consolidation.

Beyond The Meat Industry Muddle?

In July 2010, it was announced that: “A blueprint to improve sheep and beef profits will be drawn up by farmers and meat companies”, on the basis of a general consensus that the industry is “broken” (Press, 23/7/10). A meat industry strategy is being developed by Beef +Lamb NZ (formerly Meat & Wool NZ). “Phase One [of the strategy] is set to be completed in early 2011” (ibid.). While “changes to commercial structures” have been ruled out, market dynamics could still bring them about anyway. One Wairarapa sheep and beef farmer, Janette Walker, said farmers like herself have “got used to being peasants, just eking out a living” (Press, 9/7/10). She called for much more consolidation (ibid.). Echoing MIAG: “She would like to see 80% of meat processing done by one group and the marketing of all meat in the hands of one organisation, a marketing board that sets the price and who deals with overseas buyers” (ibid.).

So, joint efforts are now under way towards better coordination of the meat industry. SFF, NZ’s biggest meat processor, has “partnered with the largest rural services firm PGGW and State-owned farmer Landcorp” in order to try and turn round the fortunes of the red meat sector (Press, 18/8/10). Part funding of $59.5m will come from the Government’s Primary Growth Partnership fund while the three big agricultural firms will contribute $92m. A challenge for the new seven year, meat “plate-to-pasture” programme will be to effectively involve farmers in an integrated supply chain plan. Among the programme’s aims is the goal of encouraging farmers to commit to specific contracts, supplying “SFF’s key customers such as supermarket chains in Britain” (ibid.). The Government has also launched a $170m project “in the dairy industry led by DairyNZ and Fonterra in which the Government will contribute $84.6m” (ibid.). This new project is intended to raise farm productivity, improve livestock genetics, help create new products, and get “improved environmental performance from the dairy industry” (ibid; Press, 20/8/10).

Ravaging The Rural Sector

During the transition to the neo-liberal, free market regime, a combination of TNC power and influence channelled in Aotearoa/NZ through such locally connected agencies as the Business Roundtable and Infometrics was very significant in eroding support for producer board protection. Subsequently, market competition has had some very destructive effects on the NZ agricultural industry. The absence of effective producer boards has relentlessly sapped efficient direction, coordination, resources, and energies from NZ agriculture. As a consequence, in rural sector after sector, industry participants and even the Government at times, have had to try and reinvent the wheel as it were, struggling to get better results from fragmented, even infighting participants.

Free trade ironies run rampant as usual. In 1997, economist John Pryde, once named by the Press as the original ideas man behind the genesis of the free trader Cairns Group of which NZ was a founder member (10/11/92), warned that: “Reducing the status of our producer boards by thinning their powers threatens to make them less influential in world trade forums” (Rural News, 18/8/97). At the time, Pryde was making a submission to Parliament’s Primary Production Select Committee on the Producer Board Acts Reform Bill. He was concerned about weakening the boards’ role given that “agricultural protection and restrictive trade practices are as prevalent as ever despite the Uruguay Round” (ibid.).

A case in point was the diminished powers and accountability of the Meat Board in both monitoring the activities of our trading partners and in adequately representing the interests of our own producers. But the Government proceeded to carry out what Pryde saw as objectives dictated by “pressures from producer interests in importing countries and some business lobbyists” (ibid.). The US, of course, spearheaded these “importing countries”. It should be registered here again that the Press version of the origins of the Cairns Group is largely euphemistic spin in line with its usual foreign policy propaganda.

Woolly Workings

Wool is a natural fibre. In an age when we need to “green” the economy as much as possible, it would surely seem to have plenty of potential. In the past, non-government organisations (NGOs) like Trade Aid and Corso even tried to encourage NZ farmers to use jute woolsacks from Bangladesh rather than oil-derived plastic woolsacks. For various reasons this project unfortunately lapsed but the inspiring idea of a NZ-Bangladeshi bond knit by wool and jute points to more environmentally sustainable possibilities for the future. An NZ firm, The Formary, has designed a furniture fabric “WoJo”, using a combination of wool and jute (from recycled coffee bags) for Starbucks (TVNZ, 6pm One News, 12/10/10; Press, 15/10/10). The International Wool Textile Organisation is working hard to try and counter the influence of synthetics.

Wool has ended up in 2010 as another, indeed the most problematic, rural industry. In June, Agriculture Minister David Carter announced that a new body would be set up to “represent the now fragmented sector, across the board, bringing together commercial and industry participants, delivering a united voice and providing a forum for members to work together constructively” (Sunday Star Times, 27/6/10). The newly formed Wool Group was launched at Parliament on 1st July 2010. Earlier, in February 2010, a Wool Taskforce had recommended the establishment of the new body, given all the problems and infighting in the industry.

Following the General Agreement on Tariffs & Trade (GATT)/World Trade Organisation (WTO) settlement in the mid-1990s during the conclusion of the Uruguay Round, the wool industry divested itself of its previous capacities for proper coordination. The Wool Board gave up the “woolgrower market support schemes of the past” (Press, 1/10/93). It withdrew from any “involvement in selling wool” (ibid.). This diminution of producer board powers led to a plethora of competing and conflicting interests and agencies operating in the wool industry. Eventually, Meat & Wool NZ (now Beef + Lamb NZ) “shed its wool responsibilities when farmers voted against a levy last year” (Press, 30/7/10). This gave impetus for the Government to step in and facilitate the establishment of the new Wool Group.

Division And Disorder

One of the many ironies of the marketing turmoil in the wool industry, and another example of the turning wheel, was that in 2008 sheep farmers bought back the Wools of NZ group of companies lost with the demise of the Wool Board earlier in 2003 (Press, 10/11/08). Wool Partners International (WPI) bought back the group from the Wool Research Organisation of NZ (ibid.). More recently, a new “farmer-controlled” Wool Partners’ Cooperative has taken over “the marketing assets of WPI”, with the role of PGGW, the other half owner of WPI, still to be clarified (Press, 15/10/10).

A central recommendation of the Wool Taskforce’s report in February 2010 was for the establishment of a marketing board to try and pull things together better (Press, 5/3/10). The main focus for the new wool marketing strategy is to try and improve returns from strong crossbred wools, by far the majority of NZ’s wool production. Sales of this type of wool have declined markedly since 1989. The new “farmer-controlled” venture cited above aims “to establish a completely farmer-owned cooperative” (ibid.). Good luck to it!

International Forays Against Food Security: Thailand And South Korea

The flip side of free trade/foreign investment here, and resulting exploitative corporate domination of Aotearoa/NZ’s agricultural sector, is the NZ government’s drive to help impose the same syndrome on poorer countries. Among several important cases relevant to NZ’s policy position are those of Thailand and South Korea. NZ formally joined the free trade/foreign investment regime, which so dramatically divided Thailand in 2010, with the institution of the NZ-Thailand Closer Economic Partnership (NZTCEP) that entered into force in July 2005. Dairy products rule NZ’s exports to this country. Even more pertinent with regard to NZ’s active role in pushing free trade is the case of South Korea where farmers have long been confronting unfair rural returns and threats to food security. Indeed, in these times NZ is said to be leading the charge against them. This NZ free trade incursion into South Korea’s agriculture has now quite a history of power politics behind it.

South Korean farmers and their supporters have mounted many protests since the American-led “transnationalisation” drive for free trade cranked up in the late 1980s. The most dramatic single incident highlighting the problems that small farmers face was the tragic suicide of Lee Kyung Hae during the WTO’s conference in Cancun, Mexico, during September 2003. Lee, who headed South Korea’s Federation of Farmers and Fishermen, stabbed himself to death in ritualistic despair at the policies being forced on Korea to the detriment of its economy and agriculture, especially its rural population (www.commondreams.org/headlines03/0911-06.htm). Many of Korea’s farmers have been swamped by debt. Indeed, Korean farmers have suffered enormous attrition in number over the last decade. Lee was also making a symbolic, sacrificial stand for hundreds of millions of small farmers and other people around the globe adversely affected by free trade on their livelihoods and food security. In general, the NZ government, its industry drivers, media minders, and academia have proved to be very callous and indifferent to the plight of such small farmers in Korea and elsewhere.

Big Trouble In Thailand

During the first half of 2010 there were dramatic scenes of open rebellion in Bangkok, Thailand’s capital, when some of the country’s poorest inhabitants assembled in mass protest against the ruling urban aristocratic and corporate class. But the military-backed Government brutally crushed the protest with Western connivance as has happened so often in the past. With the retreat of the Red Shirt protesters, foreign investors and their comprador collaborators could then get on with the job of exploiting the country. Yet, ironically, Thailand’s implosion has also surprised and disappointed many such people regarding the future prospects there for foreign investment. Another free trade Asian “tiger” has bitten the dust with deepening political, socio-economic, and even cultural divisions.

Even though the Thai regime is quite repressively undemocratic, the Western media were again scrupulous in screening the underlying issues at stake from public scrutiny. In the context of the 2008 global food crisis, what is happening in Thailand, given its key exporting function, is of immense significance – both in itself, and as a warning of the dangerous trends impacting on the world’s food supply. As Jonathan Pincus, the United Nations’ Chief Economist in Vietnam, so pertinently commented at the time of the 2008 crisis: “The rice market is a good indicator for the political stability of Asia” (Press, 29/4/08). US efforts to further prise free the management of the rice market from the Thai government has been a sticking point in US-Thai trade negotiations,

Protesting Peasantry

The fact is that the protests expressed the despair and frustration of a suffering peasantry, especially in the north of the country; and much of their suffering directly stems from foreign-backed exploitation. At the start of the new millennium, it was observed that: “Thailand is Asia’s only net food exporter”; and yet that also almost a third of the country’s “population are chronically undernourished” (Focus on Trade, no. 57, Dec. 2000, p32). “Small peasant rice farmers are integrated into the world economy” with Thailand being indeed the biggest rice exporter (ibid.). But these Thai producers, some 30 million small farmers, “are caught in a cycle of vicious debt – between the borrowing from the Government banks and the loan sharks” (ibid.). Networks of middlemen take their cut. At the same time, imported costs as for fertilizer, pesticides and fuel continued to rise. A decade later, conditions for small farmers have worsened as free trade and foreign investment have grown the urban-rural divide, and further destabilised the Thai agrarian sector. Protesting farmers throughout this decade continually complained and agitated about unfair agricultural prices. As well, many of the urban poor joined the peasant-based Red Shirt movement.

Free Trade-Induced Agrarian Crisis In Thailand

Northern Thailand, and the northeast in particular, has been the source areas for most of the peasant activists. Free trade has had a lot of negative impacts on the farmer and rural communities in this whole region, as well as elsewhere to some extent throughout Thailand). Millions of vulnerable farmers have experienced lower incomes from agricultural trade liberalisation. At the same time, big agribusiness and TNCs have gained huge benefits from this economic approach. For instance, peasants in the poor northeast region were evicted from their communal forest lands in the 1980s “by companies intent on planting industrial tree plantations of the fast growing eucalyptus trees to meet Japan’s and Taiwan’s seemingly insatiable appetite for wood chips and paper pulp” (“Rekindling The Development Debate” – Robin Broad, Walden Bello & John Cavanagh, draft, 7/5/1990, pp16/17). In turn, this drew a vigorous local response in the form of “an explosion of rural activism”, reviving that of the mid-1970s (ibid.).

Since 1995 with the advent of the WTO, Third World farmers and rural communities have struggled to combat a range of challenges, and often strenuously agitated, as in South Korea and Thailand, to defend their rights. In Thailand, farmers have worked to stop the patenting of jasmine rice by US TNCs; resisted genetically modified (GM) plants; protected biodiversity; and promoted more sustainable agriculture. Yet in areas such as the upper Mekong River valley, food security has been significantly reduced despite such efforts. For sure, the ramifications run deep. Chinese dams on the upper Mekong and general interference with the natural pulse of the river are even affecting Tonle Sap fisheries in Cambodia (“When The Rivers Run Dry: Water – The Defining Crisis Of The 21st Century”, Fred Pearce, Beacon Press, 2006, ch.12). An egregious example of human and environmental damage is that caused by the World Bank-sponsored Pak Mun Dam (www.en.wikipedia.org/wiki/Pak_Mun_Dam).

The current Thai regime, like past regimes, promotes the privatisation of natural resources and the market commoditisation of everything possible. In an angry response, some of the Bangkok protesters in 2010 set fire to the Stock Exchange. If the north of Thailand is now nursing bitter resentment against the ruling oligarchy, southern Thailand is already home to a deep-rooted Muslim insurgency, with militant sentiments also simmering away in Malaysia (e.g. Press, 7/4/10 & 12/1/10).

Capitalist Contradictions

While the protesters in Bangkok and various towns rallied in the name of ousted, multi-millionaire, former Prime Minister Thaksin Shinawatra, and indeed were evidently funded by him to a very considerable extent, the red shirted demonstrations reflected deep-rooted socio-economic grievances beyond the factional politics of the Thai ruling class. When in power, Thaksin had directed development funds into rural areas for health, welfare, and cheap loans to farmers, even though he too pushed free trade policies. There are also some huge buried ironies here. Back in the 1960s, Communist activity was brewing in northeast Thailand, building on peasant grievances. Ralph McGehee, a US Central Intelligence Agency (CIA) officer there at the time, carried out surveys showing a lot more Communist support than official estimates indicated. When CIA chief William Colby heard the news from McGehee, he commented bitterly that: “We always seem to be losing” (“Lost Crusader: The Secret Wars Of CIA Director William Colby”, by John Prados, Oxford University Press, 2003, p174). The community survey project that McGehee was heading soon got terminated (for more detail see McGehee’s chapter on Thailand in his “Deadly Deceits: My 25 Years In The CIA”, Sheridan Square Publishers, 1983; McGehee was hosted to Aotearoa/NZ in 1986 by the NZ Nuclear Free Zone Committee and proved to be most enlightening and invaluable on CIA strategy, techniques and tactics).

By the late 1990s, however, Thailand was singled out by a major World Bank study as a glowing example of free market success. This study noted that maize and cassava were competing “with rice as leading exports”, along with the rapidly increasing production of chicken broilers, prawns, and processed fruit and vegetables (“The World Food Outlook” by D Mitchell, et al, Cambridge University Press, 1997, p105). As in so many countries and places around the globe, in parts of Thailand poor, debt ridden, and malnourished farmers and fishers produce high quality foods for affluent consumers, both nationally and overseas. Heinz-Wattie in NZ has even been getting tomatoes from Thailand (Press, 21/7/00).

Although the World Bank - in its exemplar case of Thailand - actually celebrated “little direct Government intervention”, and the lack of “significant protection” for peasant farmers (ibid.), the purported free market success is very different on the ground to what the Bank has portrayed. A parade of Thai regimes have in fact sponsored and backed large scale agro-industry controlled by TNCs, foreign banks, and local capital. The forest evictions mentioned above comprise just one example. Sometimes the State’s role has even been commercially very “direct” and interventionist for certain capitalist interests. For example, some large tobacco and livestock “outgrower contracting schemes” were actually “public sector enterprises” in which the State was the dominant partner (“The Food Question: Profits Versus People?”, ed. H Bernstein et al, Earthscan Publishers, 1990, p151).

Protecting Agriculture In South Korea

As already indicated, NZ has a long history of battering away at protectionism on South Korea’s domestic food market and food sovereignty. During the concluding phase of the GATT Uruguay Round, one of the key benefits for NZ of the new deal formulated by the end of 1993 was seen as the: “removal of barriers on sheepmeat exports to Korea, and new beef opportunities there” (NZ Herald, 17/12/93). It is sadly ironic these days to also note that around the same time journalist John Draper remarked of Aotearoa/NZ: “Producer boards will be under increased pressure to give up their export monopolies as a result of GATT. But strong resistance will come from farmers fearful they will become serfs to international corporations” (Sunday Star, 26/12/93).

Later on, NZ Trade Minister Lockwood Smith observed that: “The US agreed with the Cairns Group’s objectives for the elimination of export subsidies, major progress on market access, and major reductions in domestic support for agriculture” (NZ Herald, 4/5/98). While South Korea, despite debilitating free trade attacks, has been oriented to protectionism in agriculture, the 19 member free trader Cairns Group comprises a significant number of other American client (or closely associated) states like Thailand, Indonesia, Uruguay, Colombia, Pakistan and the Philippines that are committed to exporting food products. Australia, Canada, and NZ have been the Western nations in charge of the Cairns Group agenda – at least until the breakdown of the Doha WTO Round, principally over these very issues of agricultural protectionism and free trade. Cairns Group/WTO commitments have often proven to be at the expense of food security. Even in Aotearoa/NZ, consumers have experienced the growing burden of higher basic food prices, especially for dairy products, due to international “free trade” priorities and requirements in tandem with the prevailing supermarket duopoly.

Back in the early days of the GATT Uruguay Round, South Korea was identified as incisively illustrating the problems of “developing” countries subject to American bullying to reduce their food security and independence. In particular, at the time, it was noted that: “The country’s beef producers are for the most part highly marginal, low income smallholders who have been steadily squeezed out of the domestic market and from the land by price pressures” (Food Matters Worldwide, no. 5, March 1990, p19). These farmers had largely “been victims rather than beneficiaries” of Korean economic development (ibid.). Obviously, they were also then being targeted as future victims of global market efficiency!

In December 1993 on the signing of the new world trade agreement, the Korean Prime Minister was toppled due to “public discontent” and protests “for failing to stop the opening of the sensitive rice market” (Press, 17/12/93). Ever since, the South Korean government has struggled to reconcile the glaring contradiction of fulfilling free trade requirements to reduce “domestic support for farming”, and its domestic duty to “develop rural communities” positively and sustainably (e.g. “A Handbook of Korea”, Korean Overseas Culture & Information Service, 10th ed, 1998, p278).

Fighting Free Trade Hypocrisy

The US has long been the big gun set on busting wide open the South Korean market while on the other hand assiduously protecting its own farmers and corporate interests. In addition, the broader American aim has entailed enforcing the demolition of any State support outside its own borders, including NZ’s producer boards, in order to enable TNC control, called the “free market”. Over the years, a carrot dangled for NZ has been the prospect of greater food sales to South Korea by latching onto Uncle Sam’s coat tails in trade negotiations.

In fact, even well before the institution of the WTO, heavy US-led inroads on Korea’s food sovereignty were rolling back the gains made from earlier progressive land reform and other family farmer-friendly policies. As the editors of The Ecologist once aptly commented, countries like South Korea may come to rue the day that they opted for “food security through trade”, with Korean self-sufficiency in crops like wheat and beans already having plummeted markedly by 1993 (no. 6, Nov/Dec. 1993, p221). Korea was then “the third highest importer of agricultural products from the US”, so placing “itself in a highly vulnerable bargaining position” (ibid.).

NZ’s recent initiative in 2010 on pressing for increased food exports into South Korea is thus yet another stage in this long, ongoing assault. The NZ government is currently negotiating a bilateral free trade deal with Korea. A TVNZ report on Prime Minister John Key’s visit to South Korea in July 2010 mentioned the concerns of farmers there about free trade (6pm One News, 5/7/10). However, the same report stressed that it was vital for us to try and get in first with our latest sally before the big exporting nations were able to get their act together (ibid.). In the last couple of years or so, the momentum of the US exporting push has stalled somewhat. American beef exports to South Korea were stopped in 2003 due to Korean concerns about the risk of importing “Mad Cow Disease”. While these exports resumed again in 2008, there were strong mass street protests against what was seen as the Korean government’s capitulation to US bullying. Such issues are still sensitive. It is widely acknowledged that agricultural protectionism reflects certain deep cultural values in South Korea.

Food Sovereignty, Agrarian Values, And Rural Life

A second TVNZ report in July 2010 again remarked on the threat seen to South Korean agriculture from NZ (6pm One News, 6/7/10). Whereas agriculture had formerly been off the table in negotiations between NZ and South Korea, NZ has succeeded in pushing it forward. For NZ, the barrier is “breaking down the 40% tariffs which Korea places on imported beef” (Press, 6/3/09). John Key is pushing “a top-down approach” with a hard line on agricultural access, “a bottom line for NZ” in the face of Korean resistance (Press, 5/7/10).

An elitist “Establishment” link seems to have developed to some extent between Korea and NZ, with the interests of Korean farmers and peasants being seen as expendable to larger political and economic aims. Food imports are being promoted as “important” for forging closer cooperation between the two countries and as actually enhancing food security (“NZ And South Korea: A 60-Year Link” by Paul Bellamy, NZ International Review, Jan-Feb, 2009). Korea seems to be in danger of swallowing the export myth still being pushed by NZ, the US, Australia, Canada, and co. This would be a very retrograde step. In a paper presented to the WTO Committee on Agriculture in 1998 in the Analysis & Exchange (AIE) series, the Korean government made “the case that relying on global supplies is risky since world demand is projected to increase by 40% by 2020 and arable land to decrease. Also weather anomalies threaten food security”.

For certain, in a world subject to unpredictable climate change, it would be very stupid to foster import dependence on food. This does not mean of course that trade cannot play a vital role – but only within an international system (and regional networks) committed to genuine food security, small farmer livelihoods, and sustainability. Moreover, an earlier financial crisis had already clearly shown the value of precautionary policy on food security. In late 1997 when Korea’s banks lost credit, “agricultural imports completely stalled” (Focus on Trade, no.33, Part 3, Jan. 1999, p8). The Government only succeeded in preventing “severe social unrest” due to its “assiduous pursuit of self-sufficiency in rice”, a lesson that the 2008 world food crisis should have again strongly reinforced. Such self-sufficiency is still borderline given that South Korea’s grain land area peaked back in the mid-1960s.

Korean Example

In January 2009, Christine Ahn of Korean Americans for Fair Trade observed that even only about ten years ago South Korea was still a largely agrarian economy with some ten million farmers compared with the current 3.5 million (www.dominionpaper.ca/articles/2424). She noted how urban migration has contributed to unemployment; how wages have been driven down; and how rural areas have suffered deprivation and reduced viability (ibid.). Korean rice farmers make up the largest number of peasants in the country but WTO regulations are lowering the tariffs on rice, fostering more food imports. Yet research has even shown that “the monetary value of flood control by rice paddy in Korea” can far exceed the monetary value of the total rice output (Focus on Trade, no. 33, op. cit.).

Christine Ahn has incisively emphasised the international influence that Koreans have had in developing the principles of food sovereignty and self-sufficiency: “Korean peasants have really galvanised a strong opposition to neo-liberal economic and trade policies within peasant movements in the country, but also throughout the Third World” (op. cit.). A county official in Korea remarked on Lee Kyung Hae’s suicide to the effect that: “Lee knew the Korean countryside is slowly dying, that farmers are living lonely, miserable lives. He wanted to tell the world. That is why he sacrificed himself and that is why we call him a hero” (NZ Herald, 20/9/03 – quoted in an unusually insightful newspaper article).

Undermining Rural Systems

The mechanisation of agriculture implemented by South Korea, coupled with the increasing liberalisation of food imports, is subverting a way of life vital for future sustainable development. Meantime, NZ pushes the advantages of our grass-fed beef against Korean import dependent grain-fed beef. Although the US is “pouring money into trying to re-enter the market” on a large scale, in mid-2010 NZ was said to be “holding onto its share of beef exports” (Press, 4/6/10). Indeed, “Korea is NZ’s third largest market for beef exports” (ibid.). But the US was making a comeback.

What former NZ Foreign Minister Winston Peters once dismissed as a vocal minority viewpoint in South Korea against our food exports should be respected for the agrarian values it represents. Today, many Koreans feel that their whole agriculture system – or at least what is left of it - is being undermined. NZ supposedly is to take such sensitivity into account in the ongoing negotiations on a free trade deal. More generally, the case of South Korea illustrates the impact of worldwide urban, industrial and corporate growth trends eating relentlessly into the global food supply, and the environmental basis for its sustainability. This consideration once more signals the importance of the struggle for food sovereignty in Korea.

It speaks volumes that: “Korean investors are looking at buying forestry plantations in NZ as natural forests become increasingly protected overseas and log prices rise” (Press, 4/6/10; see “Clearcut: Forestry in NZ” by Murray Horton, CAFCA, 1995, for the neo-liberal, TNC-driven background in this sector). Many countries in the Asia/Pacific region have been logged out, or have implemented protection of remaining forests. Consequently, Korea, China, India and other nations are looking to increasing wood imports. “There is a resource grab going on with these countries with burgeoning populations” (Press, ibid.). Certain nations like Korea “were adopting renewable energy policies”, including wood-based fuels that draw on overseas-sourced wood (ibid.).

Usurping Uruguayan Agriculture

As a member of the Cairns Group, Uruguay has been a big exporter of beef and rice. Yet by 2002 concerns were rising among Uruguayan farmers and peasants. At the June 2002 meeting of the Getting out of the Cairns Group campaign in Bali, it was noted that whereas: “Farmers used to support Uruguay being in the Cairns Group”, their attitudes had changed with increasing bankruptcies. Now they were instead “asking the Government to establish more protection of their local market”. Sectors that were adversely affected by debt included horticulture, potatoes and yams. Uruguay had become a net importing country.

PGGW spun off the Craig Norgate-initiated NZ Farming Systems Uruguay (NZFSU) venture in 2006 in a period of rapid globalisation of the dairy industry. A couple of years later, economics commentator Rod Oram recorded how this NZ-initiated enterprise had grown fast to become the largest dairy farmer in Latin America. Oram observed that: “NZ diplomats have worked hard to get to know Uruguayan politicians and Government officials”, and that a number have been official guests here (“Milking Greener Pastures”, Sunday Star Times, 7/12/08). The NZ government, PGGW, Gallagher and Livestock Improvement Corporation were working together on cultivating the political ground in Uruguay. Significantly again, Oram stressed that: “This relationship building will be critically important in 2009 when Uruguayans go to the polls. Two goals by some on the political Left are reforms to help landless peasants and restrictions on foreign land investment along the country’s border” (ibid.). Evidently, PGGW was grateful for the help from NZ diplomats in helping offset such local concerns. NZ government officials and corporates have had lots of experience and practice at screwing poor Third World farmers and facilitating TNC takeover!

The not so hidden hand of politico-economic players can certainly shape “free trade” outcomes. Shaping public perceptions and relations here is of course a critical dimension of this. Oram traveled to South America in September 2008 with help from NZ’s Ministry of Foreign Affairs & Trade (MFAT). In its propaganda back in 1994, MFAT proclaimed that those developing countries, “which organise their economies to take advantage of the new opportunities”, would gain most from free trade (“Trading Ahead: The GATT Uruguay Round: Results For NZ”, MFAT, April 1994, p16). In Uruguay, the NZ government has been helping to steer market forces to organise the economy there for our supposed comparative/competitive advantage, now usurped by OI, which has taken over the bulk of NZFSU’s shareholding (78%). Obviously, OI’s subsidiary NZFSU needs rebranding!

Facilitating Foreign Financial Takeovers

In recent years, NZFSU, like its parent company PGGW, got into financial difficulty and consequently sought overseas-based funding. Like PGGW, it grossly overreached itself in its process of capital accumulation. According to a deal between OI and PGGW, “the purchase of PGGW’s 11.5% stake [in NZFSU] . . . was “conditional on Olam gaining more than 50% of NZFSU” (Press, 25/8/10). Another bidder for NZFSU shares, Uruguay’s Union Agriculture Group (UAG), withdrew its offer when OI raised the stakes. The Norgate-led PGGW had driven NZFSU into a financial hole. NZFSU’s Chairperson, John Parker, has acknowledged that PGGW had “grossly overestimated the time it takes for dairy conversions”, with management badly failing its role (Press, 24/8/10). Parker still “maintained the business concept of converting Uruguayan land to the NZ dairy model was right, just poorly executed” (ibid.). OI agrees. NZFSU has bought itself out of its management contract with PGGW.

A Grant Samuel appraisal “shows NZFSU, managed by PGGW, went on a land buying spree rather than sticking to the prospectus plan. As a result, NZFSU ran out of cash and could not develop the farms to the level set out in the prospectus and has fallen far short of production targets” (Press, 26/8/10); for earlier reports on this buying spree, which included local businesses, see e.g. Press, 5/7/07 & 13/6/08). NZFSU has also grossly overspent on stock (Press, 26/810). Furthermore, it is now intending to irrigate half of the land it wants to convert to dairying (ibid.). Importantly and revealingly enough, NZFSU did not originally intend to use irrigation at all. While the pastoral livestock industry has traditionally been dominant in Uruguay and water has been abundant, the country has suffered from drought in recent years, even adversely affecting NZFSU’s own operations and profits. OI considers that NZFSU has too much of its land in the eastern part of the country where soils are less suitable for dairying (Press, 11/8/10).

Climate change could be impacting the country’s long term capacity for agricultural productivity. In 2008, Uruguay’s rainfall was about half the historic average, and rainfall was “at a three decade low in places” by the start of 2009 (Press, 14/1/09). This makes allocation of water to a foreign firm producing dairy products for higher income consumers - domestically and externally - both socially and environmentally a highly flawed project. Furthermore, the NZ pastoral experience cannot be directly replicated with “a significant amount of supplementary feed” needed in Uruguay (Press, 28/7/10). As well, even on its own narrowly construed criteria and goals, the venture is obviously struggling. According to the Grant Samuel appraisal, NZFSU is “unlikely” to produce any positive cash flow for several years (Press, 24/8/10).

Funding Follies

Keith Woodford, Professor of Farm Management & Agribusiness at Lincoln University, has been one of the pundits promoting NZFSU’s venture in Uruguay, as well as similar ventures elsewhere in Latin America (Sunday Star Times, 14/1/07). By 2007, New Zealanders had “been making significant land purchases in Uruguay, Chile and Brazil”, and a group was also involved in Paraguay (ibid.). On one of his South American trips, Professor Woodford accompanied “prospective NZ investors” to Uruguay in the early days of the PGGW-initiated dairy project (ibid.). He looked forward to the venture benefiting from Uruguay’s business-friendly, free market environment. Yet another NZ investment group was developing 4,000 hectares for dairy farms in eastern Uruguay. In Woodford’s opinion: “What we saw in NZ was that once the Government got out of the way”, commercial banks [and finance companies!] entered the market to the benefit of our farmers (ibid.). Uruguay “is much like NZ before the mid-1980s, when only the Rural Bank and its predecessor the State Advances Corporation lent to farmers” (ibid.). For Woodford, the change of financing for farming in NZ to private institutions has given our farmers a comparative advantage in the bankrolling of NZ farm ventures like NZFSU. In fact, NZFSU has “obtained debt funding” via Uruguayan banks as well as NZ investment (Press, 17/3/09). In addition, NZFSU has managed to get “tax benefits worth US$20m ($NZ28m) to US$25m under Uruguayan tax law” (Press, 13/8/10). Tellingly enough, in light of NZFSU’s drought woes, Professor Woodford, who has got public attention for his advocacy of the alleged health benefits of A2 milk, also pours cold water on the scientific consensus on global warming.

To be sure, too, the chickens - or rather the finance vultures - are now coming home to roost thick and fast in Aotearoa/NZ itself as the crushing debt burden piles up. Even in the most profitable farming sector, i.e. dairy, there is “a big debt issue” with the “bottom 10% of dairy farmers” needing a good payout this season to keep them farming (Press, 20/8/10). Meanwhile, finance company woes go on with South Canterbury Finance investors, substantially linked to dairy farming, having to be rescued by the taxpayer. Again, the ironies multiply. A salutary case in point is the fate of Allied Farmers. “The firm that tried, and failed, to convert itself into a big financier with the Hanover deal more than doubled its loss to $77.6 million in the year ended June 30 [2010], with even its rural services business falling into the red” (Press, 11/9/10). More generally, it is painfully evident – as so evident too today in Aotearoa/NZ - that the control of the planet’s food producing resources is steadily accumulating in relatively fewer and fewer hands.

Food Crisis In Niger And Beyond

It has been notorious for many years that people in the Sahel can starve while food and other agricultural commodities like cotton and peanuts are exported. In August 2010, Niger appealed for aid after “two years of drought and failed crops” (Press, 3/8/10). These dire conditions were forcing millions of villagers to eat weeds to survive (ibid.).Tragically, ironically, Niger later suffered from flooding too. Niger is one of the world’s very poorest countries, yet obscenely exploited by France for its uranium. Lately, China has joined in this exploitation. Only a tiny minority in Niger really benefits from this mineral wealth, and this is much the same for the livestock industry there. Traditional nomadic pastoralists have often got trapped in crippling debt (e.g. “Africa In Crisis: The Causes, The Cures Of Environmental Bankruptcy”, Lloyd Timberlake, Earthscan, 1988, p84). Well managed pastoralism can be successful, but as the fluctuating fortunes of the Maradi district in southern Niger indicate: “The desert margins remain perilous places” (“Confessions Of An Eco-Sinner: Travels To Find Where My Stuff Comes From”, Fred Pearce, Eden Project Books, 2008, p337).

Yet Christchurch construction company Apollo Projects is building a meat processing plant in Niger’s capital, Niamey, backed by NZ Trade & Enterprise (Press, 6/5/10).The plant will “service Niger’s local and export markets” (ibid.). Niger needs more sustainable food crop production and fairer distribution, not increased meat production with all its predictable deleterious social and environmental effects, including likely desertification. Western exploitation of Niger has provided fertile ground for al Qaeda-inspired activities. In September 2010, French special forces were deployed to hunt hostage-taking “terrorists” in Niger (Press, 22/9/10). Al Qaeda in the Islamic Maghreb (AQIM) had captured seven hostages, five of them French, “from a French mining colony [at Arlit] in northern Niger where they worked” (ibid.). These days, French President Sarkozy’s racist war on the world’s poor includes the expulsion of Roma from France. The Arlit uranium mine is vital “for the French power system and ultimately its [terrorist] nuclear arsenal” (ibid.). France itself is again under the potential threat of terrorist attack. Meanwhile, the volatile impact of global warming radiates out from heat waves and grass fires in Russia to massive flooding in Pakistan, even sparking food riots in Mozambique and problems elsewhere in conjunction with underlying and growing inequities (Press, 4/9/10 & 14/8/10; www.foodfirst.org/en/node/3081).

Safeguarding Food Security And Social Health

In the years to come, the issue of food security will inevitably demand far greater attention, commitment and action. Certainly, achieving sustainable food security is vital to any human future worth living. And keeping a close scrutiny of NZ government and corporate policies and activities abroad on this issue will be up to us. As well, the question of the sustainability and socio-economic benefits of agriculture in Aotearoa/NZ itself will demand perpetual vigilance and action.

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Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. August 2008.

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