Other Arguments on Deregulation
There are a number of other arguments on deregulation. These are briefly noted below.
| Against | For |
|---|---|
| Research and development funding will be lost, thereby removing New Zealand’s ability to “lead the field” in product innovation in agricultural markets. | It is not necessarily the case that deregulation would lead to a reduction in R&D funding. If R&D were commercially profitable, there would be a strong incentive for producers and exporters to undertake their own R&D, and any “free-rider” problems can be addressed through the Commodity Levies Act. The South African deciduous fruit export industry has moved to a voluntary levy mechanism while increasing expenditure on R&D. |
| “Irresponsible exporters” will fail to deliver on promises of high returns. | Producers will have an incentive to check the credentials of exporters and, if some exporters do not meet expectations, producers will have the ability to change exporter. It is also unlikely that supermarkets would choose to deal with disreputable traders. |
| The industry will “fragment”. | The industry will only “fragment” if producers choose not to stay with the Boards. In South Africa, Unifruco (deciduous fruit exporter) has retained approximately 80% of supply while Capespan (European marketing joint venture for citrus and deciduous fruit) has retained considerably less due to poorer performance. It should also be noted that “fragmentation” is only “bad” if it leads to a decrease in overall returns (in fact, it might benefit producers as exporters compete for their supply); |
| Deregulated exporters will not buy all of what is produced or will pay low returns for some produce; and therefore deregulation will benefit a few at the expense of many. |
The Boards currently do not buy all of what is produced (in particular the fruit Boards) because they set high quality standards. The Apple and Pear Board has historically dumped or processed approximately 30% of the export crop; the Kiwifruit Board approximately 10%. All Boards are moving towards greater reflection of market conditions in farmgate returns regardless of deregulation (for example, prices for different varieties of apple are increasingly reflecting market demands). Producers will therefore need to adjust their production mix regardless of whether the Boards are deregulated. Faster adjustment would create additional costs but bring earlier benefits. |
| Deregulation will “destroy value” in the Boards. | |
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| “New Zealand” trade mark will be damaged. | The argument that there ought to be only one New Zealand trade mark is not convincing. A good trade mark does not have to be confined to a particular country, and overseas consumers are likely to be intelligent enough to distinguish between better and poorer trade marks emanating from one country, as they do in the case of clothing, motor vehicles and other products[25]; |
| The risk of “free riders” – where small exporters trade around a generally cooperative structure, benefiting from collectively-provided goods and services but not contributing to their cost. | Many of these goods and services can be structured so that those who don’t pay are excluded from their use. |
| The Boards have already improved considerably over recent times without loss of the single desk. | Without a competitive benchmark it is impossible to tell whether they have could have improved more. Much of this improvement may also be a result of the threat of deregulation, and may be lost if deregulation does not occur. |
| The type of change might be wrong. |
The status quo also presents very significant risks, not least of which is the risk that producer profitability will continue to be lower than it should otherwise be. Real returns for milk, apples, pears and kiwifruit have all consistently decreased over the past decade. There is a risk that failure to deregulate will generate complacency by preventing Producer Board industries from changing rapidly in response to a rapidly evolving market place. |
