The Role of International Trade in the Rise of the New Zealand Dairy Industry from Its Beginnings to the Fonterra Era

CIGI Paper No. 37

August 13, 2014

Within the dairy industry, New Zealand is a giant. However, the neocooperative and free market management system has attracted the ire of larger competitors such as the United States and the European Union. This paper examines the history of the New Zealand dairy industry from the 1840s, through the precarious days of the First and Second World Wars, to the recent discussions of trade liberalization through multilateral mega deals. Aware of its geographic and size limitations, New Zealand has remained agile and receptive to change. Throughout most of the twentieth century, the United Kingdom was New Zealand’s most important customer, but cognisant of the need to diversify, New Zealand expanded its dairy trade into the Asia-Pacific, the Americas and the Middle East. In addition, after the failure of GATT and since the 1980s, New Zealand restructured its dairy industry with the New Zealand Dairy Board and later Fonterra as the sole exporter.

The result is that the New Zealand dairy industry has become, both in the field and in the boardroom, the most efficient dairy industry in the world. But perhaps New Zealand’s biggest challenges and obstacles lie ahead. While potential trade deals may have serious implications for competition and trade, their realisation is poor, and although most other countries are reluctant to compete with Fonterra, the United States, in particular, looks ready to roll up its sleeves and challenge New Zealand’s dairy industry dominance. As in the past, New Zealand must now be aggressive and innovative in finding new markets, maintaining their export base and standing their ground in the face of cut-throat and unapologetic international competition. 

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About the Author

Bruce Muirhead is a professor of history and associate vice president, external research, at the University of Waterloo.