Hon Minister Jim Sutton’s comments on his recent visit to Chile

In May, Honourable Jim Sutton, ex-Minister of Agriculture and current Minister of State, visited Chile on a business mission to explore opportunities of economic cooperation, but also to convince the Senate of the Republic of Chile to ratify the Trans-Pacific Strategic Economic Agreement (P4), which has already been ratified by New Zealand and Singapore.

During his visit, Hon. Minister Sutton was interviewed by the Editor of Chile Potencial Alimentaria on May 15, 2006.

[Haga un clic aqui para leer la entrevista en español]

The following is a free translation of the interview:

What is New Zealand Government’s priority for agriculture?

The big issue is to open and maintain open the global markets. The priorities are fruit importers, particularly Asia; countries that have no land to cultivate. For example, China has 20% of the world population and only 7% of agricultural land that can be cultivated.

Are you sure Chile is going to ratify the P4 Agreement?

One can never be 100% sure of parliamentary processes until the events occur, but I believe that Chile will ratify. The agreement was negotiated in a competitive manner by Chile and the agreement is beneficial for both countries. Furthermore, President Bachelet is strongly committed to a prompt ratification. Although it is not anticipated that ratification will generate a despatch of products from New Zealand to Chile, due to the fact we produce more or less the same, the farmers of my country accept the agreement because it increases the possibilities that the New Zealand dairy farmers can enter into joint ventures with Chilean companies and together open new markets, especially in the American continent.

What are the ambitions of the dairy industry in your country?

We wish to be among the first two places in the most important markets in the world. One of these is South America, where consumption in increasing markedly. When I first came to Chile, Chile was importing milk products from New Zealand. At that time the Chilean farmers were scared that the market would be saturated, the prices would hit the floor and the small producers would bankrupt. But the New Zealand dairy industry never had any intention to drop the prices. We enjoy high prices. And from this point of view, the exportations to Chile have decreased and exportations from Chile to other countries have dramatically increased.

It that due to Fonterra’s interest in Soprole?

Partially, yes. I believe that the New Zealand influence has made a great difference in the modernization of the Chilean processing industry. And I also know that they are making incentive payments to the producers that are free of brucellosis and tuberculosis and that deliver their milk between 3-4 C°; that is to say, they are rewarding those farmers who work to increase product quality.

Ex-Agriculture Minister, Jaime Campos, represented the vision of the producers that wanted to protect the dairy industry from competition and importations. But, he confessed to me, upon leaving his position, that last year dairy exportations from Chile amounted to US$ 100 million. So things turned out as I had indicated, rather than as he had thought.

Where do you see the synergies between both countries?

For example, in kiwifruit, we are both Southern hemisphere countries; however, we have somewhat different seasons. Zespri, an entity that produces, sells and markets kiwifruit, has established contracts with horticulturalists in half a dozen countries, including Chile, to cultivate a unique variety, named the Gold Kiwifruit to supply product throughout the entire year to its markets, especially to Japan.

And in forestry?

There are many opportunities. We are both principal producers of radiata pine in the world. And although it is a very versatile wood, it is not as well known as the Douglas Fir variety, which is cultivated principally in the United States. The logical path is that both countries, together with other producers of radiata pine, such as Australia and South Africa, can work together to promote the virtues of this wood. We have been working on this in China, Korea and in Japan. For example, we obtained the acceptance of radiata pine in the Chinese Construction Code, that until now had all specifications designed for Douglas Fir. That was because the prior code was written with the assistance of Canada and the United States.

Is it difficult to join competitors to promote a product together?

Yes, it is. Obviously, we are going to continue competing, but it is more than possible that different countries can work together in the generic promotion of the commodity radiata pine. We have the experience of the generic promotion of wool, through the International Wool Secretariat, that included Australia, New Zealand and South Africa.

So, you are talking about radiata pine, golden kiwi, milk….What else?

You are doing what many do, talking about trading products, as if that was the only form of trade. But the type of trade that increases quickest in the world for New Zealand and probably most of the developing world is that of services.

Chile produces raw materials and New Zealand the technology?

I believe that will happen in both directions. We went to Fundación Chile and I am very impressed with their research and development model. Maybe the best example is the Chilean Salmon Industry that is the direct consequence of the research done by Fundación Chile, which subsequently incited state assistance and private investment. And now it is one of the largest industries in the world. That is not the story of a poor small country in development. It is the history of a very dynamic economy.

What services do you refer?

Our greatest services export is education. Chilean dairy farmers are technically a little behind, so they have much to benefit by adopting New Zealand technology. I come with a delegation of businessmen that are offering a range of services, from dairy equipment to medical supplies for livestock and software for the milk production management systems.

Are you concerned about the matter of intellectual property? Chile is not exactly known to respect intellectual property rights.

No, not at all. I don’t believe that we have had problems and Chile has a legal system that, as far as we know, protects the rights of persons.