• John Luxton
Associate Minister of International Trade


Special guests, ladies and gentlemen. It is a great pleasure to be here with you today as you celebrate completing twenty five successful years of the Meat Diploma course being offered.

It is always good coming back to Massey. It seams only a few years ago that I was graduating from Massey myself, keen to head off and make my way in the world. Graduations are a time of satisfaction for successfully completing studies, but also a time of excitement as we look to make progress with our careers and apply what we have learnt.

I have been asked to talk to you on moving the meat industry into the next millennium, the threats and opportunities from a political perspective. This is a huge topic, but I just want to touch on a few issues today.

Market Emphasis and Customer Focus not Politics
The first point I want to make is that I believe the biggest continuing threat to the meat industry and agriculture in general is politics. By politics I mean industry politics, national politics and international politics.

The meat industry is riddled with internal industry politics.

Unfortunately a key focus of those politics has been to allocate blame for non performance. The various participants in the New Zealand meat industry, including farmers, have a history of arguing amongst themselves and blaming others for their and the industry's misfortunes when they occur. They almost seem to like it.

The meat companies, the Meat Board, the Government, and the value of the dollar are frequently found to be handy as scapegoats.

It provides a major distraction from getting on with the job of marketing to the needs, wants and desires of the end consumer various parts of the world. This is where your course, the Diploma in Meat Technology has a big contribution to make.

All too often there is a lack of appreciation or knowledge of the true situation and of the degree of influence New Zealand has over it. This country's meat industry is highly dependent upon overseas markets.

It faces considerable competition in those markets not only from other nations' products but also from competing products such as poultry meat and pork. In addition there can also be various barriers to trade erected by other countries that we have to overcome.

Politics does have some part to play internationally, but the key to success in the meat industry is to get the consumer on the side of your product, rather than the politician on the side of your argument.

The New Zealand meat industry needs to use its energies constructively rather than to self destruct through trying to apportion blame internally.

The focus for the future must be market and customer oriented, it must be forward thinking and it must be positive if the industry is to succeed.

We cannot afford to be ideological, say that things cannot change, and that we must hang on to the political responses at all costs. This heads in the sand approach is shortsighted. And a big threat to the future of the industry. It is this view that ensures we continue to sell some of our world beating meat product as a commodity and with it fluctuating and ever reducing prices.

This view assumes that nothing changes. But there is nothing more certain than change. I am sure that the diploma teaches dramatically different courses today than 25 years ago. While the basic qualities of meat have stayed the same, our knowledge and ability to enhance it have changed along with rapid changes in the rest of society and consumer preferences

In today's market, competitive forces change and cause innovation at an ever increasing pace. The more competitive the local environment the greater the likelihood of leadership in the international marketplace. This is something too many of our primary producers have yet to recognise as they seek political instead of market solutions.

In a speech recently, I raised the issue of the America's Cup and New Zealand's ability to take on the technology and might of the world and beat them. What is startling perhaps for some in the meat industry is that Peter Blake and Team New Zealand's success was achieved without politics.

They didn't come to government to ask for legislation to set up a board whose representation was based on the number of sails in each harbour, or force people to do thing based on the great ideas of some important politician from Wellington who had a title, Minister of The Americas Cup. Although Mike Moore did have that title for a little while early on but we didn't win the Cup out of it.

No, instead Team NZ just got on and did it, concentrated on continuously improving the performance of their boat with their own competition and then beating the international competition. They knew that it was far more productive spending time sewing and improving the design of their sails rather than sailing to Wellington to make designs on sewing up politicians.

The consumer wants a meal not a meeting. Lets get rid of the politics out of the meat industry, and instead concentrate on providing the consumer with a delicious meal.

Branding and Quality Assurance:
From this perspective, I believe investment in branding is essential for market success. Coca-Cola, McDonald's, Nestle, and Heinz are examples. For a brand to be successful then consistent quality and reliable supply are essential.

Interestingly one of the most successful international brands ``McDonald's'' is in the red meat business. But what is the brand of the consistently succulent steak, or the product in today's fast food high quality market?

Many other entrepreneurs continue to add value to the value of a beef animal in New Zealand with on processing of hides, blood and other, formerly offal products.

By contrast to the traditional beef and lamb markets, the branding and product differentiation in the petfood sector is impressive. Why don't we see this approach for human consumption.

One could be forgiven for thinking that the highest value meat product is reserved for our cats and dogs. It certainly attracts the most advertising spending of any meat sector in New Zealand. Perhaps the answer is that politics are not involved in the petfood industry and consequently more market end investment is made.

It is perhaps useful to look at other industries from time to time to see what they are doing and pick up ideas that could be used elsewhere.

From this standpoint some of the things the deer industry in this country has underway could be adapted for the beef industry and benefit it over the longer term.

One area where the deer industry has adopted a progressive approach is in the field of quality assurance. Here the objective has been not only to produce quality products but also to differentiate them from others so that farmers in time will benefit through prices received.

A range of quality programmes have been put in place by the Game Industry Board including the ZEAL quality and Cervena and the Kiwifruit industry has recently introduced Kiwigreen and the Zespri brand.

But red meat is making progress. The Meat Board will be launching a Beef and Lamb Quality Mark for the domestic market in June. Recent TV advertising to raise awareness of iron deficiencies and the promotion of red meat as a solution is also progress.

Producer Board Acts Reform Bill
To progress the meat industry, the participants over the years have asked that Government continue to regulate it. I think it is because some believe that Government regulation will lead to higher profitability. It is interesting that some expect regulation in New Zealand to influence the behaviour of consumers overseas. In the latest round of politics we have the Producer Board Acts Reform Bill. Parliament referred this Bill to the Primary Production Select Committee on 6 March. Submissions are currently being held.

The Bill will provide completely new legislation for the Meat, Wool and Pork Boards.

The Bill is progressive in that it will remove the Meat, Wool and Pork Boards' outdated and draconian marketing and acquisition powers. The Boards will in future be expected to focus mostly on increasing demand for meat and wool through promotion and research.

The Meat Board will retain statutory powers to deal with markets where access is limited, such as the US beef market.

The Bill provides for 4 of the Board's 12 directors to be elected by processors and exporters. The Board and industry have taken the initiative and this has been partly implemented already. Getting the different parts of the industry sitting around the table in this way is a major step forward.

The new legislation will give farmers more ability to hold the Boards accountable for the way they spend farmers' levies, through AGMs, five yearly performance and efficiency audits, and more commercial financial reporting. The Boards have taken the initiative and started holding AGMs in advance of the legislation .

If the legislation is to be successful, people in the industry will have to play their part. Farmers need to ensure that they have input into what the Boards are doing, through AGMs and election of directors. Processors and exporters need to get on with the job of meeting market needs.

I believe the sooner you get the politics out of the meat industry the sooner it will make real progress. In the past the greatest barrier to innovation in the meat industry has been politics and a lack of competitive environment.

Carcass Description/Grading
The Bill currently provides for the Meat Board to continue with a compulsory carcass description or grading scheme. The scheme is limited to specifying age, sex, weight, and fat cover. But does the Board need this power?

Perhaps it is the view of the consumer that is important, their tastes, their wants of consistency, tenderness, presentation and easy preparation, rather than the view of a Producer Board in New Zealand that is important. Maybe the customer could determine that as they do for petfood! It is vital to progress that we do not institutionalise barriers to progress because of an inability to react to changing markets

Personally I am not convinced in my own mind that these proposed legislative changes go far enough to ensure the long term profitability of the meat industry. The trouble with trying to use the political system is that you tend to always be catching up. Legislation tend to be reactionary, trying to cure yesterdays problems, rather than allow innovation for the future. This approach tends to stifle innovation.

World Trends in Grading
If we look around the world we see that there is currently a mix of voluntary and compulsory grading systems, with either industry or government control. Worldwide, there are two types of systems:

1. Classification - this involves putting attributes such as sex, fat, etc in the same category. There is no differentiation between value, quality or price. This system does not stipulate whether one grade is better.

2. Grading - this system involves ranking value, quality and price in order of merit. This system involves stipulating which grade is better.

Different countries use different systems, for example:

United States: runs the grading system which is controlled by the USDA.(Dept of Ag) The USDA sets the grading standard. Product that is not graded is identified as not graded.

Australia: Compulsory grading controlled by AUS-MEAT exists for product for the international market but not for product intended for the domestic market. Australia operates the classification system.

European Union: Grading is not currently compulsory, but compulsory grading to be controlled by government is being advocated. The EU currently uses the classification system.

South Africa: A compulsory grading system exists in South Africa.

Chile: Chile has a compulsory system which is controlled by strict law. The law stipulates how to grade and how to make cuts. The classification system operates in Chile.

Except where required in our markets, there may be more to gain by not retaining this additional power to grade with the Meat Board. We would be better to let consumer preference guide any grading that might be required rather than use cumbersome legislative powers far removed from the end consumer.

Increasingly consumers will be guided by brands which have quality assurance systems that guarantee consistent tenderness, tastiness, mouthfeel and the like, not by the coloured lines stamped overtop of fat cover.

GATT Uruguay Round Implementation
Politics does have a place in the international arena and we as a Government are very actively pursuing New Zealand's interest on the world stage.

The GATT Uruguay Round outcome, with the exception of the commitments of developing countries, will be fully implemented by the end of 2000. New Zealand will need to ensure that the momentum of agricultural trade reform is continued beyond this.

In particular, it will be important for New Zealand to ensure that agriculture features prominently in the next multilateral round of trade negotiations under the World Trade Organisation, which superseded the GATT on 1 January 1995.

Negotiations on the agricultural component of the next round are scheduled to begin by the end of 1999.

Quite frankly the anti competitive approach and barriers of some international markets are unsustainable over the longer term. A Four-track Approach to Trade Policy Issues: Multilateral, Regional, Bilateral and Domestic is aimed at breaking down such barriers

Exports are crucial to New Zealand's economic well being and growth prospects. The ultimate goal of New Zealand's trade policy is to achieve completely free trade access for all our exported agricultural products, along with the elimination of all output-linked domestic support programmes by our trading partners.

In the shorter term, New Zealand's objectives include facilitating and securing market access and minimising distortions on world markets for farm products caused by export subsidies, and high tariff and non-tariff barriers to trade.

While New Zealand seeks the lowering of other countries' trade barriers, it is also important to ensure New Zealand's own border measures are in line with international standards or, if stricter, are fully justified in scientific terms.

Multilateral Trade Policy
The overall aim of multilateral trade policy is to secure further improvements in world trading rules, especially in areas such as agriculture and trade in services, where the GATT Uruguay Round results are partial at best. This will be pursued by participation in multilateral organisations, the most important of which is the World Trade Organisation (WTO).

But the OECD and the United Nations Food and Agriculture Organisations (FAO) are other fora in which the promulgation of the benefits of free trade could have a decisive influence. In all these fora, New Zealand will also need to play an active and positive role in negotiations on a new generation of trade issues.

This includes particularly the application of scientific (risk analysis) principles to trade in agricultural items, and trade and the environment.

International health standards for primary products and animals have acquired new relevance under the WTO commitments to greater alignment of its members' measures, thus raising the importance of the bodies that set these standards.

The governments specific agricultural trade goals currently being pursued are to ensure that:

the terms of the GATT Uruguay Round Agriculture and Sanitary and Phytosanitary Agreements are fully implemented particularly in the area of agriculture.

New Zealand's trade policy agenda for agriculture in the post-Uruguay Round is identified and our participation in targeted international fora is used to influence and shape future multilateral negotiations and agreements;

technical barriers to market access for New Zealand agriculture products are minimised;

agriculture is helped to increase its contribution to economic growth by identifying and publicising opportunities and risks from the GATT Uruguay Round and what follows;

closer trade relationships with key markets in the world are achieved through effective negotiation of trade rules in international fora and bilateral agreements on trade protocols.
Regional Trade Policy
Regional economic groupings - including the North American Free Trade Agreement, the European Union, ASEAN, and MERCOSUR (Southern America Common Market) - have a growing influence on New Zealand's trade policy.

The overall aim of New Zealand's regional trade policy is to continue to explore regional trade and economic relationships. New Zealand needs to remain open to investigating further trade liberalisation arrangements within regional trading groups.

Specific goals currently being pursued are:

to foster the development of the Asia-Pacific Economic Cooperation (APEC) group and New Zealand links with other regional groupings;

to ensure that guidelines established for regional trading blocs are consistent with multilateral objectives, especially those pertaining to openness and transparency;

to participate in regional organisations involved in developing sanitary and Phytosanitary (SPS) and related standards for agricultural trade, especially to encourage and adoption of aligned market access and health standards by Pacific rim countries; and

to participate in regional discussions on developing appropriate plant health, animal welfare and environmental standards.
Bilateral Trade Policy
The overall aim of New Zealand's bilateral trade policy is to continue to pursue bilateral channels for enhancing New Zealand's trade opportunities and resolving trade problems, on a country-by-country basis.

New Zealand has global trading interests and needs to continue developing closer relationships with all its major trading partners, identifying border measures that do not comply with the SPS Agreement, and working with trading partners to attain fairer access.

Specific goals include:

to strengthen and widen the scope of Closer Economic Relations (CER) with Australia; already one of the most broadly based bilateral free trade arrangements in the world, covering a single market of around 20 million people; and

to encourage the use of international SPS standards to facilitate trade while maintaining and appropriate level of protection for new Zealand's animal and plant health status.
Domestic Trade Policy
The overall aim of domestic trade policy is to maintain an outward-looking stance for New Zealand's domestic policies, which will enable New Zealand to retain its international competitiveness and take advantage of opportunities overseas.

Specific agricultural goals include:

to amend regulatory, infrastructural and institutional arrangements that are no longer cost-beneficial and that are prejudicial to the performance of the primary sector;

to implement the conclusions of reviews of exotic disease and pest response programmes for animals, animal health surveillance, meat inspection, and quarantine operations;

to reduce remaining protection given to industry in New Zealand such as tariffs, so as to minimise flow-on costs to the agriculture sector; and

to ensure that decision-makers have access to information on trade policy, market issues, product volume and price trends, technical standards and guides.
Trade Policy Issues on the International Scene
There are a range of other trade policy issue that Government is taking a very active interest in including: Domestic Agriculture Assistance in Major Producing Countries; Export Subsidies; Tariff Escalation; Tariff Quotas; Sanitary and Phytosanitary Measures in International Trade. We need to keep an eye on these issues and work hard to make progress

Other Aspects of Multilateral Negotiations
Government is also has goals in other areas of multilateral negotiations including:

to seek the effective use of the new dispute settlement procedures agreed in the Uruguay Round; and

to forestall possible attempts by lobbyists in countries with high labour costs to deny trade access to countries with different social systems.
Other priorities include the development of co-governance principles under CER, the servicing of international agencies and the continuing promotion of agricultural and trade policy reforms in bilateral and multilateral fora.

Another major agricultural issue that may be important for New Zealand in the coming year is the possible accession of China to the WTO.

So Central Government does have an important role to progress our trading interests in the international marketplace, by helping to remove the barriers to markets and ensure fairer trade so that our marketeers can get on with the job of supplying customers needs and wants.

We are one of the worlds lower cost producers of quality meat products. We need now to focus on encouraging increasing investment in the New Zealand meat industry by encouraging competition, not by trying to restrict it

I have only touched briefly on some issues. But if we are to make progress as we move toward the next century, I believe we need to get the politics out of the meat industry. We need to become more market and customer focused.

And Government needs to continue to work hard on the international political scene to progress our international trade interest in the area of fair access.

I would like to congratulate all those who have graduated from this course today and all those who have played a part in it over the last twenty five years. This diploma has played and will continue to play a very important role in the meat industry. All your efforts are a valuable part of the team effort as we work to progress our important meat industry into the next century. Congratulations. Well done. Thankyou.