New Zealand Dairy Industry Will Continue to Dominate Globally through Asian Growth, CIGI Paper Says

The country’s dairy products trade has diversified to include several Asian countries, including heavyweights China and India.

Source: Centre for International Governance Innovation

Waterloo, Canada – New Zealand’s global dairy dominance will continue through greater economic engagement with Asia-Pacific states, rather than with competing markets in Europe and America, according to a new paper issued by the Centre for International Governance Innovation (CIGI).

In CIGI Paper No. 37, The Role of International Trade in the Rise of the New Zealand Dairy Industry from its Beginnings to the Fonterra Era, Bruce Muirhead traces the rise of New Zealand’s innovative dairy industry, including the highly successful mega-cooperative Fonterra, and examines how it will overcome future challenges and competition.

He says that New Zealand’s most important export sector would not be greatly affected should the Trans Pacific Partnership negotiation collapse. The country’s dairy products trade has been diversified to include several Asian countries, including heavyweights China and India, and the country will participate in negotiations designed to lead the Regional Comprehensive Economic Partnership, which includes China. Such economic engagement means that New Zealand is not depending on trade with European and American markets.

"The much vaunted U.S. policy shift, its so-called ‘pivot to Asia,’ has already been accomplished by New Zealand in a relatively short time," he says.

He explains that if other countries "have a viable industry of their own…they are unwilling to consider competition with Fonterra because they cannot do so effectively without the use of government programs involving subsidies or tariff rate quotas, which block much of a national market through the use of very high tariffs once a certain threshold of imports has been reached."

"All countries with pretensions to a dairy industry, including the European Union and the United States, have balked at undertaking serious trade liberalization negotiations in the sector with New Zealand," says Muirhead. "The latter is perceived to be too efficient."

Muirhead concludes that "it will be left to the likes of DairyAmerica and its increasingly focused export crusade to East Asia to put dents into [New Zealand’s and] Fonterra’s ambitions, presumably with the help of the US government."

For more information on The Role of International Trade in the Rise of the New Zealand Dairy Industry from its Beginnings to the Fonterra Era, including a free PDF download.

Muirhead is professor of history and associate vice president, external research, at the University of Waterloo, and recipient of a CIGI Collaborative Research Award. He has written extensively on post World War II Canadian agricultural, political, diplomatic, financial, international and trade history, and has published four books and one edited book with university presses and numerous refereed chapters in books and journal articles on these topics. His ongoing work relates to dairy supply management in Canada and competing systems in Australia, the European Union, New Zealand and the United States. His current research focuses on the financialization of farmland in Canada’s West.