Existing policy framework for agribusiness and forestry industries

Since the economic reforms of the mid-1980s the policy framework for agribusiness and forestry has been characterised by:

the removal of subsidies and other industry-specific “supporting” interventions
the move from industry-specific regulation to a more neutral and generic business environment
producer board reform and the removal of single desk marketing structures (with the exception of kiwifruit)
restructuring of food safety functions into a semi-autonomous New Zealand Food Safety Authority
increased regulatory interventions governing resource and environmental parameters
increased regulatory and compliance issues for business

Key policy foci currently include trade policy issues (dealt with above), improving the framework for biosecurity, producer board reform, the policy framework for biotechnology, and enhancing intellectual property legislation.

Framework for biosecurity

The Biosecurity Council is developing a biosecurity strategy that responds to concerns that our existing biosecurity capability is not meeting rising expectations and changing risks, including in relation to environmental and health risks as well as the more traditional focus on our agricultural and forestry biosecurity.

In December 2002, the Council released a draft biosecurity strategy that identified gaps in our current capability and reinforced concerns around governance structures, leadership and accountability arrangements. New Zealand’s biosecurity system needs mandated leadership and co-ordination that takes an integrated approach and can set priorities for where biosecurity effort must go. Biosecurity will always require a strong scientific and technical underpinning and the scientific base for border and pre-border biosecurity may need enhancement.

Since December there has been on-going work on the strategy, with key issues being risk management, decision-making processes, funding, governance and organisation. The Biosecurity Council is aiming to have a completed strategy ready to deliver to the Government by late June 2003. In parallel, officials are working on advice to the Government on how to respond to and implement the strategy.

Producer board reform

Fragmented industries made up of large numbers of small producers, none of whom exercise market power, are vulnerable to commodity pricing and lack contracting power with post-harvest service providers and with retailers. In the past, many agribusiness producers tried to create critical mass and market power through producer boards that had a range of functions, including single desk marketing, provision of post-harvest services, funding R&D and other industry good functions, and in some cases managing allocations in quota-managed markets.

From the mid-1990s it became obvious that producer board structures were, in many cases, less relevant to producer needs. Mergers between dairy companies meant that the single desk Dairy Board marketing system was no longer appropriate. Single desk marketers such as the Apple and Pear Board (later ENZA) were often unresponsive both to markets and to producers, and were unable to exploit many niche market opportunities.

In recent years, the Government principles that have been applied to producer board reform are that change should:

be broadly supported by producers;
be in the national interest; and
address minority interests.

These principles have provided effective guidance in recent reforms in industries such as dairy, pipfruit, and wool.

Historically, producer-funded R&D and significant extension activities were supported primarily through producer boards, often with a statutory levy in place (e.g. the Meat and Wool Board levies). In recent years producer board reform has meant industry-specific legislation has been replaced with generic commercial law, and funding of industry good R&D and innovation has moved from industry-specific statutory levies to the Commodity Levies Act (CLA) framework. The CLA framework allows producers to vote for a levy and to determine what it should fund, and therefore enhances the responsiveness of levy investment to producer priorities and improves accountability to them.

The move from industry-specific statutory levies to CLA levies should improve the focus and quality of that investment, however there are questions around whether it could reduce the total amount invested in R&D and focus it on short-term and reactive problem-solving rather than creating longer-term opportunities for the sectors. The CLA also involves high administrative and compliance costs for small and emerging sectors. It may be time to look at other ways in which smaller and emerging sectors can act collectively to address R&D and other industry good activities in an efficient and long-term way.

Policy framework for biotechnology

New Zealand is a biologically-based economy, and leading edge biotechnology is important to our future economic prospects. Genetic modification (GM) is only a subset of modern biotechnology, which itself is a subset of biotechnology disciplines and technologies encompassing traditional plant and animal breeding, fermentation, cheese making, pharmaceuticals and a host of other applications. Officials are heavily engaged in a wide array of biotechnology issues, many of which are in response to the recommendations made by the Royal Commission on Genetic Modification. Issues include amendments to the legislative framework governing biotechnology and the development of a regime addressing co-existence between GM and conventional production regimes.

The Government launched its Biotechnology Strategy in May 2003. This built from the Royal Commission on Genetic Modification’s principles of preserving opportunities and proceeding with care, and focuses on the three goals of:

building and sustaining public trust and confidence;
developing a world-class regulatory system that is also process efficient;
growing the sector.

The Biotechnology Taskforce set up under GIF has submitted its report and made recommendations relating to the regulatory framework, increasing public investment in biotechnology R&D, establishing a commercialisation fund, modifying Pharmac’s procedures, extending patent protection for pharmaceuticals and a number of other issues.

We support increased public funding for strategic biotechnology research. The Biotechnology Taskforce report tacitly discounts the opportunities for biotechnology to create new value through the agribusiness and forestry sectors. In particular, the report seems to envisage a proliferation of new biotechnology start-up companies that compete in markets such as pharmaceuticals rather than a proliferation of new business opportunities arising from the intersect between leading edge biotechnology and New Zealand’s incumbent biologically-based industries.

Biotechnology (and indeed other) research requires absorptive capacity (e.g skills and strategic management capability), physical assets and long-term investment capital to be commercialised successfully. This means we are likely to get greater economic benefits from R&D aligned to incumbent industries with capital, skills and marketing capabilities than through new “greenfields” businesses where R&D risk is compounded by the commercial and financing risks associated with start-up enterprises.

Experience with biotechnology-based industry internationally demonstrates that competitive advantage depends on a critical mass of skills, capital and markets. In Europe and the US the pharmaceutical industry has that critical mass, while in New Zealand biotechnology innovation is likely to centre around our agribusiness and forestry sectors.

Overall, the Taskforce’s report has the potential to make a valuable contribution, however it is unlikely to provide a comprehensive future basis for New Zealand to best exploit the economic opportunities biotechnology offers through leveraging off the existing industrial base. We are however supportive of many of the Taskforce’s recommendations and the Government needs to respond effectively to them.

Intellectual property rights

It is essential that New Zealand’s intellectual property legislation keep pace with changes in technologies and markets and that it is consistent with New Zealand being perceived as a modern developed country that is a world-class player in technology-based innovation. The Patents Act 1953 urgently needs modernisation. Its major shortcomings are its weak stringency tests, e.g. for utility, which means excessively tight protection compared to patent law in other jurisdictions. It is likely to be creating substantial economic loss to New Zealand and also creates future economic risk. For example, it provides a basis for enforcement of patents over gene-based testing techniques that in other countries are not protected and are treated as in the public domain and subject to prior art. The out-dated nature of our Patents Act also means that patent law skills built up in New Zealand are less easy to apply in the international environment.

The modernisation of the Patents Act has been delayed for over a decade largely because of concerns relating to the Wai 262 claim over indigenous flora and fauna. This Treaty claim has also delayed the revision of the Plant Variety Rights Act that is needed to make it consistent with the International Convention for the Protection of New Varieties of Plants (UPOV). Proposed amendments aim to strengthen protection of plant variety rights, for example protection of essential derivation that protects a breeder’s rights in chance mutations (“sports”) developed from a protected variety.

Contact for Enquiries

Monitoring and Evaluation
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Phone: +64 4 894 0623
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