Zespri deal fails over leak fears
Zespri’s contentious China deal was rejected by the industry regulator due to concerns intellectual property would ‘‘leak’’ into China, and the company’s relationship its largest market could be damaged.
An independent assessment of the Kiwifruit giant’s China project – a trial of buying and branding counterfeit SunGold kiwifruit grown in China – also canvassed a ‘‘wider geo-political risk’’, but further details have been redacted in documents obtained by Stuff.
China expert Anne-Marie Brady says references to geo-political risk show China considers the proposal part of a political relationship, not business, risking the banning of exports if offence is caused.
However, Zespri remains convinced the trial won’t initially compromise its IP, and that its ‘‘up front’’ approach has gained it support within the country.
Zespri now expects that more than 4000ha of counterfeit SunGold kiwifruit is being grown in China on vines that were once stolen from the company.
The illicit growing threatens Zespri’s sizeable stake in the Chinese market, and the company hoped to partner with the growers, providing technology and skills to produce and sell some 1.95m trays of SunGold at its high standard, in a three-year trial.
But, after seeking sign off from industry regulator Kiwifruit New Zealand (KNZ), Zespri in January withdrew its proposal before KNZ could publish its findings and decline approval.
Documents obtained under the Official Information Act show KNZ and an independent review conducted by Sapere had deemed the proposal ‘‘more than low risk’’ to growers – a regulatory threshold – in three ways.
Former New Zealand ambassador to China John McKinnon advised Sapere that relations with provincial Chinese government could be damaged when exiting the arrangement, an outcome that could be worse than not entering the trial.
Such a risk could be mitigated, however Zespri’s application did not describe how it would manage this ‘‘other than a general comment about a stakeholder and communication strategy’’.
While details of a ‘‘wider geopolitical risk’’ mentioned in Zespri’s application were redacted, the report said the risk of ‘‘unpredictable government intervention and other geopolitical risks’’ would be much greater if the trial became a full-scale operation.
Brady, a professor at University of Canterbury, told Stuff: ‘‘What they’re saying is that China is treating this all politically rather than as a business relationship ... so that’s problematic.’’
‘‘What they mean is the political risk of China banning New Zealand exports for some reason, that [Zespri] might be affected by it, but that ... their own decision to protect their interests could cause offence and make things worse for them and New Zealand.’’
McKinnon also advised that IP leakage was a ‘‘medium to high’’ likelihood, and ‘‘a very common feature of direct investments in China’’.
KNZ agreed Sapere’s risk assessment, and said there was also a ‘‘more than low risk’’ to the reputation of New Zealand growers.
In a draft decision, KNZ said it ‘‘strongly’’ disagreed with Zespri that any food safety failures would not damage the reputation of New Zealand growers, as such ‘‘failures would be clearly linked to Chinese-grown fruit’’.