Wool Industry Restructuring Bill

I move, That the Wool Industry Restructuring Bill be now read a third time. The bill was introduced into the House on 11 December 2002. It had its first reading on 19 March 2003 and was referred to the Primary Production Committee on that day, with the instruction that it present its final report on, or before, 16 June. The select committee reported the bill back to the House on 16 June, as first indicated.

The bill restructures the New Zealand Wool Board into a company, New Zealand Wool Board Disestablishment Company Ltd, to wind up the affairs of the board, and to distribute its assets among woolgrowers. The board was originally established in 1945 to undertake wool research and development, technology transfer, education and training, wool promotion, and other issues. Since that time the board has operated under various legislation and with an assortment of functions, including operating a minimum prices scheme for wool from the late 1970s to the 1990s.

Today the board is engaged in industry-good activities and, through its subsidiary, Wool Equities Ltd, and its associate company, Meat and Wool Innovation Ltd, it is engaged in commercial wool activities. When the board was established, the industry was predominantly focused on the UK, which took the vast bulk of New Zealand’s wool. Today the main market for this country’s wool is China, which takes about 23 percent of our exports. The UK now takes 15 percent of New Zealand’s wool exports. Greater attention is now being given to innovation, and to adding value to our produce prior to export. We have seen developments in the wool industry, for example, with respect to keratin proteins in wool fibres, and now the time has come for its commercialisation through the new company, Keratec New Zealand Ltd, with its grower ownership stake through Wool Equities. The bill will enable growers to participate in the potential financial benefits from this commercialisation over the coming years, by being allocated shares in Wool Equities.

The bill not only facilitates regulatory and structural reform in the wool industry, it also enables separation of industry-good and commercial activities. This means that the industry can be more responsive to changes in the commercial environment facing its business, and to business opportunities. It should also mean that those businesses become more profit-focused.

The industry still faces challenges ahead. They are exciting challenges if growers get behind them. However, there can of course be no guarantees. The bill provides for the allocation of the Wool Board’s assets to growers, split between the grower companies, Wool Equities, and Merino Grower Investments. It is going to be over to the directors, management, and grower-shareholders of those companies to ensure that the decisions in future are such as to realise the potential returns that exist on growers’ investment.

The process of wool reform has not been a quick one. It was the Wool Board’s annual general meeting in 1999 that decided to hire McKinsey and Co. to undertake an independent review of the wool industry that has led ultimately to this bill. Some say that this process has taken too long, while others want to drag it out further. The Government is convinced that the majority of growers support the bill, and that is evidenced by the number of submissions the select committee received: a total of 33. Among those, Federated Farmers Meat and Fibre Producers supported the bill. I wish the Wool Board Disestablishment Co. well in winding up the affairs of the board, and allocating the board’s assets to growers. I also wish Wool Equities, Merino Grower Investments, and their subsidiary and associate companies all the best for the future. I would also, at this point, like to thank the officials for their very difficult work. I would particularly like to congratulate Ken Armstrong from the ministry, who has been a key part of this oversight process. He will be pleased to see this bill pass through the House and place responsibility in the hands of woolgrowers, instead, perhaps, of having it on his broad shoulders—as has happened from time to time.

Most of all I wish New Zealand woolgrowers well. Growers have waited patiently for Parliament to enact this bill. Non-merino growers will need to decide whether to convert their preference shares to ordinary shares in Wool Equities as a future investment, or to cash them in. Merino growers will get their preference shares in cash, in any case. In August, all growers will have an important vote to participate in, under the Commodity Levies Act, to determine whether they have a levy on wool, post 30 June 2004, that will be used to fund industry-good activities.

The future of the industry is in growers’ hands. As individuals, they have very little chance of having their wool compete with non-renewable, manmade fibres in the international marketplace. However, collectively, as an industry united in its objectives and vision, they can maintain their place in New Zealand agriculture through innovation and growth, and develop new, innovative, international-market opportunities. I commend the bill to the House.

On behalf of my National Party colleagues, particularly Shane Ardern and the Hon David Carter, and my former colleague the Hon John Luxton, I commend this bill to the House. We will be supporting it. Obviously we have voted for it through all its stages, and will be doing so now. It is enabling legislation. This bill, when passed very shortly, will require the Wool Board to present a restructuring plan to the Minister of Agriculture. The restructuring plan will have to be sound. I trust the ministry and the Minister to give it fair scrutiny and to address issues and concerns raised by other members of the House who are less confident about the future under the current proposals.

Fledgling companies such as Canesis, those on the horizon, and some developed ones such as Ovita and Covita, have opportunities in research and development and the promotion of new products, as does the industry as a whole. If some of those companies come to pass, I wish them well, as well.

I do commend this to the House. Many issues were raised and spoken about by members. The debate still has to be had, and the Minister still has to address those issues. We believe that as a select committee we have been diligent. We have beefed up the requirements to report to the Minister. Those requirements need to be met, and we trust the industry to do that. As I say, we will be supporting this bill.

I rise on behalf of United Future to express our support for this third reading of the Wool Industry Restructuring Bill and to make just a few brief comments. It has been heartening to see the cross-party support throughout this phase. Although we have not had a person on the select committee, I know that the committee members worked very hard and I commend them today for the way they have addressed the particularly complex issues within this bill. Nothing is ever perfect, but I believe that the House has done the best job possible today to deliver the best legislation we can to protect the interests of woolgrowers and move them forward into the 21st century. I thank the officials for their hard work.

As I said in my second reading speech, I look forward to further clarification in the transition phase for Wool Equities so that the growers will have an opportunity to express their commitment to the new board members at some stage in the future, preferably at the next annual general meeting. I believe they should exercise that option and responsibility. It is now, however, in the hands of the Minister, as this bill is passed, to ensure that that takes place. United Future is happy to support the bill.

I am, naturally, sorry that the amendment that was put up in my name was lost. I think we have lost an important opportunity to pause for another look, and to have a further investigation of the common sense of the things that lie beyond this bill. However, New Zealand First will support the bill. I make no apology for believing that industries should be controlled and owned by the participants within them. I know that sometimes these days that is becoming an outmoded concept, but it has served this country well. I believe that in the guise of Fonterra it will continue to serve the dairy industry well, and I believe that it could have served the wool industry well also, but that is not to be. The wool industry is heading out into a brave new world, and I wish the industry all the best on that journey.

I want to particularly mention the emerging participation of Māori corporations in the farming world. At long last, Māori are banding together under a corporate identity to participate. They felt that by their numbers they were outvoted and not listened to in the structures that have just passed into history, shall we say. I know they will welcome the new world. I believe they could have been incorporated into a more cooperative world than the one that is going to be faced by the wool industry, but that is not to be.

I am sure that woolgrowers and sheep farmers right across the country will view the passing of this bill with immense relief, whatever side of the argument they came down on. I am sure they will pick up the challenge that I laid out to them earlier and participate with renewed vigour, to ensure that the democratic processes we have been at such pains to ensure remain in the bill are picked up and carried forth, so that farmers have delivered to them that which they aspire to.

The commodity levy that comes in will be an interesting test for farmer participation. There are some views around that farmers will reject it out of hand, but knowing farmers as I do—and I am sure as you have come to do over the years in this House, Mr Speaker—I am sure that common sense will prevail and they will engage with their industry, and go on to the better things that this allows.

So it is with some regret that I end this speech by saying that I would have liked to see a halfway house established so that another independent person could have looked at this industry. That was not to be, but we will not be dogs in the manger. We will vote for the bill and wish the industry, which is so valuable to New Zealand, all the best for the future.

I am delighted to have this final opportunity to speak on this bill in the third reading debate. I cannot stand here with my hand on my heart and say that I know exactly where the future of the wool industry is. I cannot say with absolute certainty that Mr Woolerton is absolutely wrong, and that I am absolutely right. I am not sure about that; I am not totally sure. But on the balance of probability, I believe it is appropriate that this bill go forward with the support of this House, and that we allow the industry to develop as it should.

I would like to make a few points to the House. The reality is, surely, that if there had been no Wool Board created whenever it was—50 years ago—we would not be standing here today to debate its demise and what should take its place. I think of the opportunity cost that we perhaps face today because we have had a structure that supposedly threw a security blanket over woolgrowers and told them they did not need to worry, because the Wool Board was there to look after them—and, of course, the wool industry went down, down, and down. That security blanket has now been totally removed—or in very large part removed—from the growers.

I can only reflect, too, on the traumatic events—as they were back in the 1980s—when subsidies were removed from the farming industry. I lamented deeply the loss of my subsidies because I was the backbone of the country, along with my farming colleagues, and I asked how this Parliament dared to remove my subsidies. I was receiving about $8 or $9 for a lamb, and I was going broke. The meat industry recognised that if farmers went broke, it would go broke. We saw the need for a commercial focus and the requirement, the absolute requirement of the industry—the farmers, the meat processors, and the whole lot of us—to recognise that if we wanted to have a future in this country, we had to get out there and do it out in the marketplace, and that is what happened. In recent years in the meat industry, farmers have been receiving a cheque for a single lamb of anywhere between $70 and $120. Within that 20-year time frame we have gone from receiving $8 per lamb to receiving $70, $80, or $100, and in some cases $120. How many other industries with a primary production focus can actually state that they have gone in from that very low level back in the mid-1980s to the high peak of around $120 by trading in what are, essentially, commodities? Certainly, the meat industry has much to be proud of.

I wonder, in these quiet moments, whether the same thing will not apply to the wool industry—whether, in 30 years’ time, the industry will go back to this very day and ponder what happened. Will farmers say: “Thank goodness that bill was passed. Those guys—and women too, of course—were not sure whether they were 100 percent right, but my goodness me, they gave us the opportunity.”? Today we are trying to give the wool industry—not just the growers but the whole wider industry—the opportunity to move forward. Yes, as Mr Woolerton has pointed out, it is a huge article of faith for us to stand here today and pass this bill, but surely that is part of our job. We have to make a judgment call from time to time, and we stand or fall on the results of our decision making. Woolgrowers may be so angry with me that I am never heard of again, and that, of course, is their choice.

R Doug Woolerton: We’re trying.

Some of my colleagues may help me along the way, too, but that is fine.

Without question, this restructuring is a huge article of faith. As a farmer of some 30 years’ standing, I realise that I live in hope. That is what I do as a farmer. On this very day, when huge storm warnings have been issued for my neck of the woods, I live in hope that nature will pass me by on this occasion and the storm will move out to sea. We live in hope of better days. That is what this bill does for the farming industry. It provides an opportunity. Could the restructuring have been done better? Undoubtedly it could have been, but there are times when we just have to say that we have done the best that we could do with the knowledge currently available to us.

We have had many, many submissions from very capable people indeed, including, even, the Inland Revenue Department. My colleague Rodney Hide would be apoplectic if he knew we were taking advice from that department. We invoked the department’s help to assist us with our deliberations because there are tax losses of $270 million, and that huge sum of money has to be utilised to the benefit of the wool industry. That is what the farming community is attempting to do with the passage of this bill.

We have also introduced a much greater commercial focus. Some hard-nosed business people are set to represent us and to assist the wool industry to move forward. My faith is not so much in the system or the structure that we have placed in the bill, but in the people who will, I hope, overcome the problems that we face with regard to low commodity prices. Who knows? Maybe, instead of receiving $3 or $4 for a kilogram of cross-bred wool, we may be looking at receiving $10. In 10 or 15 years’ time, we could well see pharmaceutical companies clamouring to buy our wool product because it contains a special enzyme that enables burn specialists to solve skin-grafting problems.

I do not know where the future of the wool industry lies. I do not know what the biotech companies will come up with, but I do know that the future is exciting if we allow it to be so, and allow—without getting into any political ideologies—the market, investment, and, most important, research and development to take place in that industry. The focus of research and development has been lost for so many years under the auspices of the Wool Board.

When something is taken away, as the Wool Board has been, a vacuum is created. But while I certainly do not profess to be a physicist, I know that a vacuum is always filled. Nature does not allow a vacuum to remain; it is always filled. As I said earlier, I cannot say with absolute certainty whether that vacuum should have been filled with the Wool Corporation, or whether it should be filled with the existing structures that we are promoting in this bill by means of Wool Equities. But I think the committee has worked very well together to achieve the very best possible outcome for the industry. Yes, there are areas of disagreement, but I do not think they are so huge that the industry will not overcome them. My time on the Primary Production Committee has been a rewarding one, and I thank my colleagues on the committee for what I think is a good job, and a job that has been well done.

I would like to start my final speech on this bill by thanking the officials who have helped the Primary Production Committee. I am aware that at times I was the bane of their lives, and I just want to thank them for their patience with, and tolerance of, me. They did fail to convince me, even in the end, that we were doing the right thing, but they did do their best. I would also like to join my colleague Gerrard Eckhoff in acknowledging the collegiality of the Primary Production Committee. I do think we all put our heads around this bill in a very non-partisan way in order to come up with the best possible solution.

I have always expressed my doubts about this bill. As time went by in the select committee my opposition to it grew, and I have not changed my mind. I think the growers really need to be very aware of what is going on. As I said in my second reading speech, I sincerely hope that I am wrong, but I have very grave fears about what will happen. I would urge woolgrowers to look at the ownership of Keratec. The figures and flow charts appear to show that Keratec ultimately remains in the ownership of farmers. However, if one looks through the way that governance is covered, one sees that there are votes that will outweigh the ownership percentages. I just think that the potential for farmers to lose control of Keratec, which is the jewel in the crown of the intellectual property of the wool industry, is very real.

I would also urge farmers to look at the mandate that the industry claims it has for this restructuring. I detailed that matter in my second-reading speech, so I will not go through it again. But if farmers believe that there was any premeditation in the consultation, then there is precedent in the law to say that that consultation was not actually consultation and can be legally challenged, with the result that the restructuring would go back to square one.

I do wish the industry well. My opposition to this bill should not in any way be interpreted as being opposition to the disestablishment of the Wool Board, which I think is an essential thing. I am just not convinced that the structure that has been put in place is the right solution, and I am particularly concerned about the very late arrival of Canesis and Canesis Venture Capital on to the scene. I wish the industry well, but unfortunately I really cannot see my way clear to supporting the bill on this occasion.