Listener 10 January, 2004.
Keywords: Globalisation & Trade; Growth & Innovation;
The Netherlands produces annually about $9 billion of flowers and related products, of which it exports almost $8 billion (and imports and exports another billion). In contrast, New Zealand exports a paltry $70m. The difference is all the more astonishing because Michael Porter in The Competitive Advantage of Nations argues that the Dutch have no comparative advantage in the growing of flowers. Rather, they have built up a technological excellence and maintain a quality edge at the forefront of world production and distribution.
Each year 125,000 tourists visit the largest trade centre in the world –– it covers 165 football pitches –– at Aalsmer, on the edge of Amsterdam, which auctions and distributes flowers. The blooms come from all over the world –– even Australia sends roses –– and they go on to many other countries, notably Germany, Britain, France, Italy, Belgium and the United States. (Flowers fly in from Africa and fly on to the US.)
And yes, they use a “Dutch auction system”, where the price descends until someone bids. Casually dressed buyers seated in tiers look at a big “clock” on the front wall that starts at a price of 100 (euros a bunch) and falls rapidly until someone pushes their button for a sale. The buyers were men. I saw only three women, although all the technicians testing flower quality were female. The auction halls may be becoming obsolete, with offsite electronic sales rising, because the buyers hardly look at the flowers, instead relying on the reputation of the 7000-odd producers and the quality control by the central auction house. The cavernous space below, with its rattling trolleys of racks of flowers (130,000 of them), will be there longer, as bunches-in are repackaged to bunches-out. Perhaps the trade will shift to warehouses around the world one day, too, as quality testing is decentralised. (It requires roses –– their largest-selling flower, ahead of tulips and chrysanthemums –– to last at least eight days after they are sold.)
Is there a future for a serious flower industry in New Zealand –– say one that exports a billion dollars a year? Are our businesses too small? The typical Aalsmer supplier provides over 3000 flowers and plants every working day. Quality, too, is a problem. Some of the wretched specimens that straggle outside our corner dairies are no promise of a Dutch-quality industry. Pressures from the domestic market can be the foundation of exporting. Wine exports got under way when we gave up drinking sweet sherry.
In the 1960s we deliberately allowed imports of foreign cheeses to create a domestic market from which we could export specialist cheeses. Are there new flowers to send overseas? Kowhai and the rata and pohutukawa are promising local spectaculars. And the gloriously flowering manuka hillsides over the new year –– as close as we get to a white Christmas. Have we the research programme to turn the natives into sustainable commercial products? Perhaps the “next kiwifruit” is not an edible but a lookable.
But it is not just a research and production problem. Florafed, the industry organisation, lacks funds after a compulsory levy was rejected by growers. All today’s big primary exporters started off with producer boards or as some sort of monopoly. How is the industry going to get a collective agency that will lead the export way? Recall how big the typical Dutch export grower is.
The defeatists say that we are too far away from world markets. But the Dutch hardly send anything to Japan, and their US flowers go to the East Coast. Our market is the Pacific Basin. And although a typical European country spends over $80 a head on flowers each year, the Americans spend less than $60. That is a market with $5b waiting to be developed. Florafed says that New Zealanders purchase about $18 per head per year, although the figure may not be comparable. Heck, blokes, we buy only a couple of bunches a year?
To open up the Pacific markets we need better air freight. We may have to abandon the reliance on the aircraft holds under our tourists –– they won’t always go to where we want to send the flowers –– and develop a bulk goods air infrastructure.
What about China’s threat to enter the world flower market? It is real enough, but surely insufficient to undermine New Zealand’s prospects. We have a competitive advantage in being out of the northern hemisphere season –– and the sun is cheaper than heating glasshouses. Additionally, as the Dutch show, the international trade in flowers is not a commodity business. Developing new species and focusing on quality products is not easy –– but it will be easier for more skilled New Zealanders than for the Chinese. That is the point of competitive advantage. The value comes from being technologically advanced and technologically advancing.