In New Zealand, dairy farmers produce far more milk than a nation of 5 million people can consume. In fact, there are about the same number of dairy cows in New Zealand as there are people.
- New Zealand’s dairy exports to China are worth more than $5 billion annually
- Farmers say the country is a “major player” and losing that business would have a “massive impact” on their lives
- Experts say New Zealand is “significantly exposed” to China on trade and is mindful of any reprisals
Farmers will say the land is naturally blessed when it comes to producing milk — the climate is cool and the rain can be relied on.
Cattle run in paddocks and can be mostly grass-fed throughout their lives.
The result is a highly sought after dairy product and New Zealand’s biggest customer is China.
Just outside of Auckland, Chris Guy runs a dairy farm that’s been in the family for six generations and he’s very aware of how his patch of land is connected to the country’s biggest trading partner.
The young farmer watches the global milk price, knowing any dip or volatility impacts the decisions his family makes for the property as well as the more personal parts of life.
Right now, things are good.
Increasing demand for milk from China throughout the pandemic pushed the global price higher and for a country that exports up to 96 per cent of its dairy product, that meant a boost for farmers.
“We are riding a bit of a high,” Chris said.
“We’re just hoping that it holds and it seems to be.”
Chris does pay mind to what would happen if China ever turned its back on New Zealand dairy.
“It always sticks in the back of your head that we are at the mercy of another country like China,” he said.
“We just respect they’re a major player and we just try and produce the best product for them to keep them interested.”
When it comes to that China-New Zealand trading relationship, things are good there too, but the world is watching how the small nation in the South Pacific is approaching the Asian superpower.
Early this month, New Zealand was absent from a joint statement that raised concerns over the World Health Organization report into the origins of COVID-19.
And tensions flared this week when Foreign Minister Nanaia Mahuta said New Zealand was “uncomfortable with expanding the remit” of the intelligence-sharing group Five Eyes.
The move signalled New Zealand was not prepared to take a joint position on China, preferring instead to engage on its own terms.
To understand the approach, experts suggest looking at just how vulnerable New Zealand is.
‘Australia punished, NZ rewarded’
In 2020, the value of all New Zealand exports to China was nearly $19 billion and dairy accounted for more than $5 billion of that.
Head of research at Rabobank Australia and New Zealand Tim Hunt said New Zealand was “significantly exposed” to China.
“New Zealand does export the vast majority of what it produces,” he said.
“And around a third of New Zealand’s exports, in terms of agriculture, head off to China.”
And as China warned Australia, trade relations are good so long as political relations are.
Early in the COVID-19 pandemic, Mr Hunt published analysis warning Australian producers were at risk of difficulty if the Chinese market contracted further.
“We have seen the increasing exposure Australia has had to the Chinese market and the likelihood that this would cause a problem down the track,” he said.
“More than two years ago, the Chinese trade ambassador himself said if political relations didn’t improve, we’d see trade ramifications.”
Those came thick and fast after the Chinese ambassador fired a warning, saying Australia’s push for an independent investigation into the origins of COVID-19 could lead to consumers in his country turning away from Australian beef and wine.
“This is now something New Zealand has to consider.
“Can it continue to maintain quiet diplomatic relations or will things go in a direction where it has to become more vocal and therefore risk being drawn into the same trade battle that Australia finds itself in now?”
‘We want to keep them on-side’
Associate Professor of politics and international relations at Auckland University Stephen Hoadley said New Zealand had just as much to lose.
As a small nation, and one of China’s smallest trading partners, he said New Zealand “would be easiest to dispense with”.
“If China wanted to make a point, it could punish New Zealand and suffer very little. It could live without New Zealand milk powder,” Mr Hoadley said.
“So there is this sense of vulnerability in the New Zealand Ministry of Foreign Affairs and that’s why New Zealand is fairly courteous in its relationship with China.”
Mr Hoadley said you would never hear the New Zealand government publicly and directly engage with China.
“There is quite a difference between the way New Zealand spokespeople present concerns to China compared to Australia.”
Mr Hoadley said he could understand the logic.
“Critics would say this is simply pandering to export income and to some extent it’s true,” he said.
“It’s simply common sense that you don’t gratuitously insult your best trade partner because in New Zealand, the standard of living is very much dependent on the trade picture.”
For the dairy industry, livelihoods rest on the knife’s edge of the relationship.
“They would be the first to say, ‘look let’s not insult China. Yes, let’s quietly object to their human rights practices, but don’t confront them to the point where they lose face and patience with New Zealand and carry out reprisals,” Mr Hoadley said.
“The Australian situation is a kind of lesson to New Zealand of what to avoid.”
For those people who rely on trade with China to pay their bills, the feeling is one of pragmatism.
“If they were to ever shut their doors, it would have a massive impact,” Chris said.
“They’re a major player in dairy exports for New Zealand and we want to keep them on-side.”
The expectation among producers in New Zealand is that the Government will maintain the status quo with their Chinese customers.
“They’re the face of the country, so we need them to be doing the right role for us,” he said.
“All those decisions are out of our control. We just have to ride the wave.”