Is Westland loan WTO compliant?

Trade expert Stephen Jacobi says he would be very surprised if the Government hadn’t made sure it does.

“But we need to consider both the letter of the law and the spirit,” he told Dairy News. He knows no details of the loan.

“It would be concerning if this were to undermine New Zealand’s long-standing advocacy for the elimination of trade-distorting subsidies and domestic support,” he says.

These were recently reaffirmed at a meeting of the Cairns Group involving NZ and 18 other countries on November 30.

The low-interest loan will be made from the Provincial Growth Fund.

It has come under attack by Opposition MPs. National’s economic and regional development spokesman Paul Goldsmith says the minister in charge of the Provincial Growth Fund, Shane Jones, couldn’t tell Parliament what terms he had in mind when he undercut commercial lenders to provide debt funding for a new processing plant.

“I wouldn’t blame any business like Westland Milk for accepting a cheap loan from a secure lender.

“But that’s no excuse for sloppy process when it comes to taxpayer money. Jones said the full terms of the loan were ‘yet to be settled’ but that it would be for a longer term than its existing private sector bank lenders would offer.

“That would be of interest to Westland’s rivals, particularly for milk pools in Canterbury, and underlines why such proposals need rigorous scrutiny,” says Goldsmith.

Westland welcomed the investment to help build a $22m plant at Hokitika. The specifically designed facilities for made-to-order segregation of milk types will have wide-ranging benefits for the West Coast region, Westland says.

The plant will allow Westland to separately process (segregate) multiple types of special quality milks into high-value products.

Chief executive Toni Brendish says segregated production of specialty milks is a key component of Westland’s five-year strategy.

“Westland needs to reduce its dependency on bulk dairy commodities with their volatile pricing cycles,” says Brendish.

“We’ll do this by expanding our capacity to produce high-value products, differentiated by the special qualities of the milk used to make them. This will include A2 milk and our new Ten Star Premium Standard milk.

“There is also potential, in later stages of the project, for other segregated products such as grass-fed, pure Jersey, goat or sheep milk, or even plant-based nutrition.”

Brendish says the Provincial Growth Fund investment allows the company to bring forward development of its segregation capacity -- bringing the benefits back to the company, its shareholders and the regional economy far sooner.

The new plant will also allow the co-operative to produce high value segregated product even during the peak milk season.

“Currently, while we can produce some segregated product on the shoulders of the season, at peak our existing plant capacity forces us to process low-value bulk commodities just to get the milk volume through.”

The plant will be operating in time for the 2019-20 season. It will create an additional eight to 10 jobs at Hokitika, but the benefits to the West Coast economy will go far beyond that.