Wednesday 27 July 2011

Export monopolies

I'm usually pretty smug about New Zealand's free trading agriculture sector, especially as compared to Canada's mess of mandatory marketing boards and quota management systems.

At the margin, I'm going to have to get a bit less smug. And that hurts me. The National Post reports that the Harper government is going to allow western Canadian wheat farmers to sell the wheat they grow to the buyer of their choice.

Meanwhile, New Zealand still has the Zespri export monopoly. If you grow kiwifruit and you want to sell it someplace other than Australia or New Zealand, you're compelled by legislation to sell through Zespri. Writes Roger Kerr in the National Business Review (not online as far as I can tell here): is an illusion to think that New Zealand can manipulate world markets. More important, there is intense competition from other fruits.
The former Dairy Board export monopoly was justified on similar arguments. Deregulation has shown them to have no validity.
In short, it is unlikely that Zespri has any exploitable market power as a monopoly seller. In reality it is a monopoly buyer (a monopsonist) and it is growers who are at risk of 'exploitation'.
Kerr calls for the Productivity Commission to hold an inquiry into whether Zespri's monopoly ought to be maintained, noting that the OECD and 2025 Taskforce already have recommended an end to the monopoly. I'm not sure what additional good is done by having another agency find that monopsonies are bad, but I suppose truth bears repeating.

1 comment:


    Online version.