Cash cow or load of bull?

Globalco and Globalisation

- Dennis Small


When EF Schumacher argued for the "small is beautiful" approach to sustainable economics back in the early 1970s he had in mind the "study of economics as if people mattered" ("Small is Beautiful", Abacus, 1973). To quote the pithy blurb of his then highly creative book, Schumacher maintained that: "Man's current pursuit of profit and progress, which promotes giant organisations and increased specialisation, has in fact resulted in gross economic inefficiency, environmental pollution and inhumane working conditions". As an alternative, the far-sighted Schumacher called for "a system of intermediate technology, based on smaller working units, communal ownership, and regional workplaces utilising local labour and resources". But in the 21st Century capitalism still grinds on relentlessly to its inevitable, eventual global implosion.

The advent of Globalco, NZ's new giant dairy company, is the latest example here of what Schumacher so eloquently warned us about: a giant company dedicated to exuberant growth in a national industry now expanding in ways that are provoking accusations of increasing environmental abuse, inhumane treatment of animals, and the threat of consumer and even producer exploitation. Add to this, concern about damaging impacts on development in Third World countries, and we have a growing challenge for the future.

Globalco is the merger of the NZ Dairy Board with the Kiwi Co-operative Dairy Company (Kiwi) and the NZ Dairy Group (NZ Cooperative Dairy Company or NZ Dairy). It will be the 9th biggest dairy corporation in the world, have a turnover of around $12 billion dollars, and employ 18,000 people (at least initially). Easily now NZ's largest corporation - twice the size of Telecom - Globalco will handle almost all of the 95% of NZ's total milk supply exported as dairy produce, and generate about 7% of gross domestic product. Dairy products make up about 23% of the country's exports and NZ actually accounts for a third of international dairy trade. The new company starts formally operating as Globalco in October 2001. It will be active in 120 countries and is aiming to boost returns to farmers by $300 million a year through cost savings and increased prices. Aotearoa/NZ produces about 2% of the world's milk and so about a third of the 5% of world milk that goes into products traded internationally (Press, 25/5/99).

In the 1990s NZ's dairy industry was distinguished by quite rapid growth. By October 1998 the value of dairy exports had increased 160% over the past ten years and the share of export income had grown from 14% to 21% (Listener, 17/10/98, p28). In 2000 the NZ dairy industry could lay claim to "record production, improving prices for most of its exports, and a favourable exchange rate", fuelled by a good growing season (Press, 10/2/00). In 2001 dairy farming is experiencing exceptionally boom times. Globalco aims to take this momentum much further. "Within a decade Global Dairy (i.e. Globalco) is forecast to boost industry earnings from the present $12 billion to more than $30 billion" (Press, 11/4/01). Many dairy farmers have dollar signs in their eyes. Gigantism is looking good. Globalco is the culmination of a chain of dairy company amalgamations in NZ. "The industry's plan is to become one of the top three world dairy traders by integrating manufacturing and marketing at home, and growing rapidly by acquiring overseas businesses" (NZ Herald, 29:30/4/00). At the time of writing (early July 2001), legislative procedures had just got under way to institute Globalco in NZ law. But many questions and concerns revolve around the whole venture.


In mid-June 2001 the nation's dairy farmers voted decisively to accept the new Globalco but this particular decision had severe limitations in terms of real democracy. Most substantially, successive governments have long grossly perverted their mandate and worked assiduously to try and suppress debate on free trade/investment. CAFCA and GATT Watchdog have well documented this since the start of the last decade. Indeed, I experienced this sort of suppression on trade matters when the GATT * Uruguay Round was just getting under way. (For some relevant comment on previous Government censorship see Foreign Control Watchdog, no. 71, November 1992, for articles titled "Letting the GATT out of the Bag" and "The Secret Side of Free Trade"). GATT Watchdog, indeed, has even been the target of Security Intelligence Service dirty tricks. We have long warned about the destruction of the producer boards and the implications of this, well before the Government clearly showed its hand. (* GATT = General Agreement on Tariffs and Trade, now the World Trade Organisation – WTO. Ed.).

In the case of agricultural issues, the parameters of public discussion set for farmers have ultimately been determined by corporate interests, especially transnational corporations (TNCs) with the Business Round Table a key player on the NZ scene. Rightwing agencies like the Wellington-based Infometrics economics consultancy outfit have worked hard to facilitate corporate takeover. More widely, the US and other powers acting on behalf of their TNCs have kept up sustained pressure on Aotearoa/NZ to dismantle the boards and allow access for foreign control of our primary industry.

In more specific immediate terms, the recent decision in favour of Globalco was taken in the context of looming deregulation of the dairy industry. All the same, until any alternatives seemed absolutely foreclosed, there had still been some strong resistance to the corporate/governmental agenda to open up the NZ industry. Ministry of Agriculture and Forestry (MAF) Briefing Papers for the Incoming Minister (3/3/00), "Rockhead" Jim Sutton of the Labour/Alliance government, had noted that there was "division in the industry concerning the pace of change, and the industry restructuring proposals called for by Government. Generally there is poor understanding amongst dairy farmers of the restructuring proposals. Against proposals mooted by other commentators, many dairy farmers seek to retain the industry single-seller status and do not wish to see any opportunity for foreign shareholding in the ownership of dairy processing and marketing assets". Many farmers were thus continuing to contest the corporate/governmental programme.

As late as October 1998, Sir Dryden Spring, former chairperson of the Dairy Board, could say that the "view of farmers is that they overwhelmingly believe their interests are best served by having a single seller at export" (Listener, 17/10/98, p28). It was the single desk selling structure of the Dairy Board that the TNCs and their agents have been determined to replace with their own oligopolistic structure and practices. Getting rid of single desk selling by primary producer boards has long been the NZ government's bottom line as part of its commitment to the World Trade Organisation (WTO) Agreement on Agriculture. So far as Globalco is concerned the Government's support for the "mega-merger" has been conditional on farmers accepting deregulation (e.g. Press, 6/7/99 & 15/7/99). TNCs want primary producers stripped of any protection from market forces. If the real issue of the industry has been billed as to how to improve returns, then any gains are increasingly going to be siphoned offshore or into the pockets of a few.

Indeed, the Government's general aim in line with imperatives dictated overseas has been, as ever since the rot started in 1984, to sell off as much of NZ's assets as possible to foreign capital - one way or another. The dominant Labour Party is firmly committed to globalisation and all its works (whatever the occasional reservations and hedging around the edges) and, if challenged, can rely on its Tweedledee partner in free trade/investment issues, the nominally oppositionist National Party. These days Parliamentary politics has degenerated into so many personality spats, and even the ultimate trivialisation of posturing over dress codes, precisely because Labour and National as the two main parties share so much in common, above all their enthusiasm for the capitalist international market. MMP has helped slow down the application of free market economics but on the debit side promotes even more cynical performing, game-playing and manipulative trade-offs. Resistance in certain areas against the international corporate agenda is easily traded off in other respects.

In the case of Globalco the only real opposition in 2001 has come from the Right in the form of the ACT Party, wanting a more market solution. This was similarly so with a failed late run from certain farmers who challenged the project. In reality, however, Aotearoa/NZ's prime agricultural asset has been set up for foreign takeover with the limp acquiescence of party politicians on the nominal Left. The lack of concern, understanding and commitment in this central forum on such a key globalisation issue is indeed abysmal, reflecting once more the effective corporate capture of the Parliamentary process and the superficiality of any rhetorical dissent from the world market. Yet the Alliance, in mid-1999, was aptly predicting that the changes would lead to foreign ownership of the industry (Press, 15/7/99). Even within the Labour Party there was dissent from at least one MP, Damien O'Connor, who also warned on the Globalco proposal that: "While shares at this stage are restricted to trading between farmers, I suspect the inevitable outcome of these changes will lead to foreign ownership" (Press, 5/8/99). He added that the dairy industry faced the risk of being sold out by a few select politicians and industry leaders. Throw in some economists, "spin doctors", journalists, etc. and O'Connor's remarks are so very true.

Ironically for the acquiescence of the Greens in Globalco, one of the main reasons given for the mega-merger is to fully tap the potential of biotechnology, especially genetic engineering (e.g. Press, 31/5/99 & 19/10/00). Strategic positioning for the benefits of biotech is a prominent feature of Globalco's business plan ("Capital Structure", 22/3/01, p7: A big research boost was taken by the Dairy Board in 1999 to "investigate the potential" of biotechnology, including "engineered hormones, cloning and cattle with modified milk" [viz. the controversial human gene code trial] (Press, 10/8/99). When he was Finance Minister, National's Bill English gave the mega-merger a cynical spin as "the one opportunity we have to create a food company that can participate in the biotechnology revolution at a global level instead of just being a branch office" (Press, 22/5/99). The National Party, of course, is dedicated to the "branch office" mentality. Meanwhile, the current Labour/Alliance government has already clearly signalled its support for genetic engineering whatever the findings of the Royal Commission Inquiry.

Milking The Country

One perceptive farming leader, Ian Walker, president of Northland Federated Farmers, has pointed to the fact that Government policy has meant "selling off our assets and local businesses to overseas companies", thus ensuring "an increasing amount of the wealth created in NZ is now exported offshore" (Northern Advocate, 21/9/00). Mr Walker denounced the "economic ideological crusade" of the past decade and a half and appealed to the potential of small business. He warned of the dangers of becoming a banana republic. However individual dairy farmers voted on the Globalco issue, and whatever their particular motivations, the eventual outcome surely bodes ill on free trade/investment projections for the average producer.

Again, on the Globalco project, Mr Walker has been suitably forthright. He charged the Government and dairy industry leaders with having pushed the project forward "with little emphasis on the associated threats and risks" (Dargaville & Districts News, 20/6/01). He declared that: "The argument that we need to be big to compete is flawed"; and went on to praise the success of one of the two independent dairy companies left in Aotearoa/NZ, the Tatua Cooperative Dairy Company (the other is Westland Cooperative Dairy Company). Tatua Dairy has been able to sell in "high value niche markets" using its "unique intellectual capital" and so "has consistently outpaced the larger companies delivering consistently 24% greater returns" (ibid). While the Dairy Board's sales record and innovations have also been impressive, despite those critics who very misleadingly compare its growth with that of Nestle, Mr Walker correctly observes that: "The merger is a continuation of chasing economies of scale to compete as a low cost producer" (D. & D. News, 26/6/01). Where to from here?!

Although the Dairy Board's approach has been to develop value-added products rather than sell at the commodity end of the market, the amalgamation process is a path of capital accumulation aimed ultimately at squeezing the farmer whatever might be the protestations to the contrary. As Mr. Walker comments: "This proposed merger is a flimsy form of a cooperative attempting to retain farmer ownership. This is not likely to be the case long term. Setting up their offices in Auckland is a clear indication that farmer ownership is unlikely to be retained long term. From Auckland it is a short step to Sydney or London. Small shareholders in large corporations generally have little defence" (ibid).

Even advocates of the mega-merger can be quoted to illustrate the direction of this process of disenfranchisement. For instance, NZ Dairy Group's chairperson, Doug Leeder, indicated how his company's earlier merger with the South Island Dairy Cooperative would engender "more discipline in running the business and making decisions" (Press, 16/4/99). It would get rid of "consensus based on the lowest common denominator in what was now a global business and economy". More forthrightly, producer board critics like Dr Gareth Morgan and Andrew Gawith of Infometrics have openly attacked the rights of small farmer shareholders and called for outside investment through tradable shares to dilute such influence (e.g. Press, 17/1/01 & 17/4/01 - these articles incidentally reflect the corporate agenda at work in the Murdoch press). At one point, Dr Morgan, in attacking the Dairy Board as a monopoly/subsidy to protect NZ farmers, accused NZ of hypocrisy in advocating free trade. A spokesperson for Dairy Farmers of NZ retorted that Morgan's statement was "tantamount to treason" (Press, 21/9/99).

To be sure, arguments of the corporate brigade have often been very twisted in their logic. Again, Dr Morgan provides a vivid example. In criticising "dairy politics" as being based on the fear of "foreigners taking over", he alleged that the governmentally sanctioned agreement on Globalco "was set up to protect the interests of a few people with the result that the industry could not reach its potential" (Press, 17/4/01). It is obvious that Morgan is referring here to most NZ dairy farmers as the "few people" in the way of the greater realisation of corporate profits. Indeed, we have the marvellous examples of Tranz Rail and Telecom, among others, to illustrate the benefits of privatisation for overseas investors at NZ's expense.

Certain market enthusiasts within the farming community have evinced contorted reasoning of this nature as well, whether influenced by conventional economics or for other reasons. A case in point is illustrated by an article written for the Press by Rod Thomson, a Canterbury farmer representative and a former economist for the Meat and Wool Boards (21/7/00). Mr Thomson acknowledged that his free market position (i.e. including an open dairy market within NZ) had little support from farmers and that no elected leader who valued his job would advocate it. But Thomson contended that no real progress would happen until full deregulation.

In the course of his general argument which was premised on a call for more efficient allocation of resources, Mr Thomson warned about the rapid growth of TNCs like Nestle. Curiously enough in this context, however, he pointed to the especially fast growth of the Italian dairy giant, Parmalat, which had already got a sizeable chunk of the recently "deregulated" Australian dairy industry. So Thomson's argument was for market deregulation even though he himself could indicate that the outcome of such policy is the loss of industry control to foreign TNCs. Even as Thomson was warning NZ farmers about TNCs while advocating deregulation as the solution, he not only recognised this argument has little support because it threatens farmer control but he actually illustrated how such deregulation would promote TNC takeover. For Mr Thomson his solution "would get politics out of the industry and expose the real financial questions". For some of us, on the other hand, Thomson's article serves as just one more example as to how political economy confounds classical economics.

Pulling The Wool Over The Dairy Farmers

The mega-merger was sold to NZ's 14,500 dairy farmers as a necessary response to globalisation whereby their collective interests would be protected in head-to-head competition with the likes of Nestle, Kraft and co. According to the chairperson of Globalco, John Roadley, farmers voted for cooperative unity in the market to contest the TNC giants (Holmes, TV1, 18/6/00). Straight Furrow editor Sean Stephens, similarly interviewed about such competition, said that this scenario was the big picture (ibid) - he should read GATT Watchdog's publication The Big Picture and get real! The Dairy Industry Restructuring Act was enacted in 1999 but its entry into force has been dependent on farmer agreement to the mega-merger of the main processing companies. Now the way is clear for the TNCs.

In line with this, the dominant trends, as we have long predicted, are towards heavily industrialised agriculture controlled by international big business. In 1996, Ian Ritchie, general manager of the consultancy firm, Agriculture NZ, predicted "that within the next decade, large corporate farms will be the main players on the agriculture scene and family farms carrying around 3,000 stock units (requiring about 300 hectares) will be run owners who work part-time on them and have significant off-farm income" (Rural News, 5/8/96). As the MAF Briefing Papers proudly state: "A feature of the changing nature of rural communities has been the growing number of corporate farming, horticultural and forestry enterprises". Overall, remarkably for a Ministry which is supposed to ensure agricultural benefit for NZ, the Briefing Papers clearly reveal the growing contradiction at the core of the Government's programme. As indicated, the documented trends demonstrate greater corporate control through: privatisation; foreign investment; land amalgamation; increasing size of dairy farms, as well as fewer and larger herds; plus, conventionally construed economic gains from greater scale of production; etc. But while the benefits of Globalco are supposed to be reaped by producers in particular, globalisation in fact means that independent farmers are becoming less in number all the time. Again, this sheds further light upon Dr Gareth Morgan's allegation about benefits for the few.

As the Briefing Papers observe: "The viability of many farms and orchards in NZ is marginal. There is a growing gap in the financial performance between the top and bottom performing dairy, beef and sheep farms, with the bottom farms showing significant losses"; and, later, "the profitability and return on investment of many farm and orchard businesses is low". Furthermore: "The opportunities to get established in farming are decreasing as average unit size (particularly dairy) and herd sizes are increasing in order to remain viable through economies of scale". The trendy dairy conversions in the South Island, especially Canterbury and Southland, epitomise these trends. The motto in the US of "Get big or get out" is hitting NZ. Family farmers are crushed in the middle between agribusiness costs, buying/financing dear and selling cheap. MAF argues that: "As farms and orchards increase in size and complexity, more management skills are needed to operate them profitably. The changing nature of the value chain also requires additional skills and entrepreneurial attitudes". Predictions that in less than a decade, traditional dairy farming will have become a thing of the past, replaced by corporate or syndicated megafarms, are fast taking shape in NZ (e.g see NZ Herald, 20-21/2/99).

It is very clear that MAF sees the family farm in Aotearoa/NZ on the decline, even though it is still the dominant form at present. Vertical integration is the name of the game anyway in which all links in the production and distribution chain come under an all-embracing corporate umbrella. Again, the Briefing Papers are explicit enough: "The number of steps in the value chain is also decreasing, as retailers vertically integrate with wholesale purchasers, and seek to deal directly with suppliers".

MAF is thus firmly behind the rise of foreign TNC control of NZ agriculture while purporting at the same time that this will benefit NZ farmers and the country generally. As a government ministry MAF has been especially affected by globalist influences and today this culture pervades its perspective. One of the great ironies of globalisation is how not only politicians but governmental bureaucracies have been corrupted by capitalist internationalisation. As well, this subversion of governmental function has been very evident in the Ministry of Foreign Affairs and Trade (MFAT). In particular, goals of protecting the interests of a small country and its people are repeatedly sacrificed for those of a globalised elite in conjunction with a relative few of the locals. In June 2001 around 14,500 dairy farmers voted for Globalco. But how many will dairy farmers number in 2010 if corporate globalisation goes on? Meantime, more and more wealth is extracted from the country by overseas corporates and their comprador associates.

There is a compounding complex of factors that point to the future loss of cooperative control by dairy farmers over their industry. Any idea of collective benefit runs absolutely counter to the trends we have already indicated. In the case of Globalco it is not only a specific response to the pressures of globalisation but also very much a product of them, indeed self-consciously so. Globalco has been instituted in the guise of a cooperative but more fundamentally in the model of a TNC: a national producer board has been eliminated and a huge worldwide business enterprise launched. Its proponents contend that various existing operations have simply been merged, whatever the functions or units discarded, and that far greater strength in the market has been gained. In actuality, the deeper observation is that there are serious inbuilt conflicts and glaring loopholes which will, if unattended, erode in the course of time any initial gains for producers and the national interest.

Think Big

In recent years, global capitalist accumulation has been very evident in agriculture and its concentration in agribusiness. To quote a typical view here: "Size matters. The future belongs to large market-driven companies and most believe the mega-merger . . . is vital to ensure NZ remains a major player in the world international dairy market . . ." (Listener, 22/4/00, p30). To similarly quote former National Party Minister, Sir William Birch of "Think Big" notoriety, the mega-merger would make our dairy industry "highly competitive and commercial" (Press, 15/7/99). It is certainly no coincidence that Birch is a top negotiator on free trade/investment deals for the Labour/Alliance government. While Sir Dryden Spring keenly supported the single-seller arrangement of the Dairy Board, John Storey as Board chairperson was most willing to trade-off the Board's statutory export monopoly as a requirement to clinch an American-NZ free trade agreement ( Press, 10/2/99). Storey saw such a deal as a "bright prospect" for the industry. Globalisation through free trade/investment is a commitment to aggrandizement on an unprecedented scale.

"Think Big" , now as before, means the express subjugation of Aotearoa/NZ - its people and resources - to foreign corporate rule. The Labour/Alliance government is eagerly exploring ways of effecting this with a particular emphasis at present on absorption into Australia through possible monetary union, harmonisation of standards, and other economic mechanisms (e.g. Press, 5/7/01). Selling off the farm is both the means and goal dictated by free market imperatives. The Closer Economic Relations (CER) Agreement with Australia is now taking on a whole new dimension with the ongoing integration of the dairy operations of the two countries. Yet there has been much concern by some about the threat of TNC inroads into the Australasian dairy industry. "Swiss-based multinational Nestle has long sought some of NZ's dairy industry" while Parmalat has spent hugely for a hold in Australia (Press, 16/4/99). Parmalat "entered the Australian market through its acquisition of Queensland-based Pauls in 1998" (Press, 22/3/00). Then, in 1999, Australia's biggest dairy cooperative, Dairy Farmers, resisted a takeover bid mounted by Parmalat, declaring it was committed to trans-Tasman alliances (Press, 23/9/99).

At this stage of concentration in the Australasian dairy industry, existing cooperative enterprises have been merging, forming joint ventures or carrying out takeovers. The NZ dairy industry has been quite aggressive in approach with its companies acquiring substantial shares in several listed Australian companies: National Foods, Peters and Brownes in Western Australia, and Bonlac in Victoria. NZ, in fact, has the bigger dairy industry, bringing in about $NZ10 billion a year as compared with the Australian figure of about $NZ8.75b. (Press, 17/1/01). The cross-ties have been getting intricate, e.g. Peters and Brownes is the biggest ice-cream firm on the NZ scene and is in turn controlled by Kiwi, one of the mega-merger partners. Dairy industry insiders have even indicated that NZ is seeking control of the Australian industry as Australia becomes more competitive. While Australia has a much bigger domestic market than NZ, milk production is increasing for export (Press, 10/2/00 & 20/1/01). In early 2001, Globalco chairperson (then designate), John Roadley, said that: "What was starting in Australasia was in line with a rapid move towards dairy company and buyer group (supermarket) mergers around the world" (Press, 20/1/01). He advocated an Australasian alliance in marketing to the rest of the world but observed that: "Because of tariff and other barriers, US, European and Japanese markets would be difficult for a trans-Tasman partnership to crack". It should be noted that export rights to designated markets (quota) will be allocated to Globalco for only about six years ("Global Dairy Company: The Regulatory Package", p5, key information).

Dairy Farmers of NZ is encouraging a new form of CER in milk production. It has been telling its Australian counterparts that the NZ industry does not want to exploit them with any mergers. Indeed, the "two countries could reduce duplication by working together on on-farm food safety, environmental issues, animal welfare and trade". This type of closer cooperation would involve the institution of more joint standards and thus reflect the influence of free trade's general trend to lower regional and international standards. Moreover, the clout of the NZ dairy industry is very unusual in trans-Tasman relations and exceptional in terms of the wider food industry. Already NZ is only a minor player in setting joint food standards through the Australia New Zealand Food Authority (ANZFA) and the momentum is mounting for even greater TNC control of our food and food system through the agency of this particular body. Australia is wanting to formally reduce the role in ANZFA of NZ even further and is implementing changes to this effect (e.g. Press, 11/6/01). Meantime, some Australians are expressing doubts about the role of NZ interests in the Australian dairy industry. One industry leader there has questioned the merger between the NZ Dairy Board and the financially-troubled Bonlac Foods, saying that: "You cannot serve two masters" well; and warning that "history tells us it doesn't work" (Press, 31/5/01).

The entanglements and implications run deep as the dairy industries of Australia and NZ become more integrated. One of the conditions of the mega-merger for Globalco is that it sell off part of its consumer sales operation. As Globalco itself puts it: "The 50% share of NZ Dairy Foods Limited currently owned by NZ Dairy will be sold to ensure that there continues to be strong competition in the NZ domestic market" ("Capital Structure", p2). NZ Dairy owns the Anchor consumer brand and it is intended that this should continue to compete with Globalco's Mainland consumer brand brought into the new firm by the former Kiwi. However, "Australia's only publicly traded dairy company, National Foods", is negotiating to buy the 50% in NZ Dairy Foods (NZFD) (Press, 3/7/01). Yet, as previously noted, National Foods is one of the Australian companies in which NZ investment has been made. National Foods itself expanded to NZ in 2000 with the "acquisition of the assets of Auckland-based manufacturer and distributor International Fine Foods" (Press, 9/5/00).

Some Market Challenges

Regulatory barriers might still stop National Foods from buying the half share in NZDF that Globalco has to sell. At present, National Foods is 18% held by NZDF's owner, NZ Dairy (Press, 22/6/01). Although the Government prevented the Commerce Commission from assessing the Globalco merger the Commission does have a job to do on this particular matter. "The process had to achieve the best possible price for the Globalco shares but also had to ensure the new owner helped NZDF provide genuinely viable competition to Globalco in the domestic market" (Press, 22/6/01). To complicate the problem further, the other 50% of NZDF is owned by 6,000 individual Waikato region dairy farmers (via NZ Dairy) who are Globalco shareholders as well. As a consequence of all this then, there is a big question as to what the Commerce Commission will make of an obviously very complex situation. According to the terms of the new Takeovers Code that came into effect on 1 July 2001, the buyer from Globalco of the 50% stake in NZDF is obliged to make an offer for the balance of the shares even if NZDF is not a listed company. Evidently the code entails this provision because of the number of shareholders and the size of the business (Press, 22/6/01). Indeed, NZDF wanted provision for such extended ownership. Since sales advisers are contacting "major international food groups", NZDF could even be in the hands of one of the really big foreign TNCs by the end of the year. NZDF is looking for the "right owner" to increase its export base (Press, 19/4/01).

Threat of monopolistic control of the NZ domestic market is a major concern voiced about Globalco. David Russell, chief executive of the Consumers' Institute, has called for a "Kiwi share", i.e. a provision for a degree of NZ governmental ownership and conditions, to protect the consumer (Press, 18/4/01). Such a share deal would constrain the amount by which the Globalco could boost its prices or profit margins in the domestic market. Mr Russell said that implementation of a Kiwi share would require careful thought since: "You can bet that other milk-producing countries would have a field day with claims of a non-tariff barrier, breaches of world trade agreements and the like" (Press, 18/4/01). However, Globalco's chairperson, John Roadley, has rejected the call, maintaining that the dairy industry was privately owned by milk-producing farmers who had always got "world prices" for their products. Farmers would not run a cartel to squeeze the NZ consumer (Press, 19/4/01). Whatever we might think of Mr. Roadley's assertion in this regard, the way is certainly open for a future TNC owner (or owners) to do so as globalisation continues to erode farmer control. Besides, as Mr. Russell rightly says: "Globalco will dominate the local market in that it, along with a small number of other large companies, will be setting the international price of milk and the products" (Press, 18/4/01).

Even without loss of farmer control, the monopolistic position of Globalco clearly raises important issues both at the consumer end of the market and at the producer end. As recorded, the sale of NZDF is intended to safeguard consumer interests by guaranteeing some measure of local competition in dairy products. Central to the questions implicated in this issue is the capacity of Globalco to manipulate the price of raw milk to its own advantage, whoever owns the company. The Government has stipulated a heavy regulatory package to supposedly prevent this. Key principles include the requirement that Globalco supplier/shareholders can provide up to 20% of their milk to competitors of Globalco without fear of retaliation (Press, 11/4/01). Likewise, Globalco must supply up to 400 million litres of raw milk to competitors at a "fair price". But at the very time that the dairy industry was assuring consumers Globalco would not force up the cost of milk the two major companies involved were raising prices and very conveniently, if quite unconvincingly, blaming it all on the international market (Press, 11/4/01).

A Treasury report in December 1997 had criticised the Globalco proposal when it was first seriously offered (the idea had been round for a lot longer) as further decreasing transparency and accountability. In Treasury's view the proposal "increases the bargaining power of the board over farmers, and may lead to a breach of the Commerce Act in the domestic market" (Press, 7/7/99). Again, during the early phase of the project, the Commerce Commission had found in an interim decision that the proposal's implementation would cost the country more than $500 million a year (Press, 28/8/99). It said the proposal could lead to reduced payouts to farmers and at the same time an increase in the price of milk and cheese for consumers. So in the Commission's judgement both consumers and producers would be adversely affected. Consequently, the Commission ruled out the mega-merger on the grounds there would be insufficient public benefit to outweigh lack of competition in domestic markets (Press, 18/1/01). Although these were obviously very serious implications of the mega-merger the Government still saw fit to sidestep any more in-depth scrutiny in pursuit of its deregulation programme. In sum: "The Government rejected Treasury advice in allowing the dairy industry merger to bypass the Commerce Commission" despite the fact that "public interest analysis of such a big merger was exactly the work for which the Commission was established" (Press, 22/5/01).

Whatever concerns we might have about the roles that Treasury and the Commerce Commission have played in selling out Aotearoa/NZ over the years, formal organisational capacity for official scrutiny to safeguard the "public interest" was once more set aside to fulfill the Government's free trade objectives. Dairy industry heads had called for the mega-merger in response to the Government's previously ineffectual efforts to deregulate markets within NZ (Press, 6/5/99). The Board's producer base was threatened as the NZ government moved "to destroy producer board monopolies" (Press, 19/1/99). Consequently, Globalco was born out of a "compromise between the Government's wish to remove the (Dairy) Board's statutory