Agri-business leaders fear loss of trade consensus, new regulation

Monday 9th June 2014

Leaders in the agri-business sector fear the loss of the traditional political consensus favouring free trade agreements if there's a change of government, but are equally fearful that a Labour-Greens coalition will see heavier regulation against environmental harm and will start charging farmers to use water and other "natural capital", says the annual KPMG Agri-Business Agenda publication.

While enthusiastic about Labour's research and development tax breaks, which could help develop new technologies to improve environmental outcomes, farming and food sector leaders fear the lack of visible progress towards environmental goals could see what the report coyly refers to as "a new coalition government" impose new costs and regulation on the industry to force a faster clean-up.

"The need for the primary sector to improve its performance around core sustainability issues, such as water quality and nutrient management, is not disputed," KPMG's global head of agri-business, Ian Proudfoot, writes following a series of "roundtable" meetings and surveys with sector leaders around the country.

"While significant investment has been made to address these issues, the benefits are not immediately apparent. There is a concern that the lack of runs on the scoreboard may result in a new coalition government increasing the regulation on the industry and imposing charging mechanisms for the use of natural capital."

A major concern is the prospect that the "time the industry needs to resolve its challenges may be reduced or completely removed."

Opposition parties' policies to encourage research and development through tax breaks, along with additional funding in areas of urgent need for environmental improvements by the agri-business sector "must be the counter-balance to any tightening in environmental regulation."

On trade policy, the report suggests that agri-business leaders regard the expansion of "high quality" free trade agreements as "higher priority" than in the past, at the same time as Opposition parties appear to be cooling towards them.

"This reflects the benefits that are being derived from the agreements in place, and constraints being experienced when competing in key markets, such as Europe and South Korea, where competitors have preferential market access over our companies."

However, there were indications the history of cross-party cooperation on trade policy "may no longer be guaranteed", especially given the extent of opposition to the proposed Trans-Pacific Partnership Agreement, currently under negotiation but apparently stalling.

The report also suggests the sector has a poor image among urban communities and needs to take a coordinated approach to communicating its importance to the country.

"It needs to tell the story about how it operates, what is is doing to improve, where it requires support, and the contribution it delivers to the economy.

"Without an active programme to communicate this in an open and honest way, the pre-election uncertainty expressed during this year's Roubtables will become the norm for industry leaders," KPMG's Proudfoot says, while noting industry leaders continue to see "minimal benefit in developing an industry umbrella body."

BusinessDesk.co.nz

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