Gulf games fail to deliver

John Key's dissembling over live sheep exports is a case study of why so many businesspeople have lost confidence in him.   Matthew Hooton discusses his latest column on NBR Radio and on demand on MyNBR Radio.

The prime minister’s successful visit to the Gulf has gone some way to repair the damage he has personally inflicted on New Zealand’s relationship with the region since 2009.

Back then, New Zealand diplomats finalised a free-trade agreement (FTA) with the Gulf Co-operation Council (GCC), consisting of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain. The deal would break down the impenetrable non-tariff barriers New Zealand exporters face to a market of nearly 50 million people with GDP approaching $US1.5 trillion. But six years on, it has never been formally signed.

The Hajj is one of the five pillars of Islam and all Muslims who are able must make the pilgrimage to Mecca at least once in their lives. While there, they must slaughter a sheep or other domestic animal for feasting.

There is of course some cheating by the less devout but enough of the two to three million pilgrims take it sufficiently seriously that it places enormous religious obligations on Saudi Arabia to ensure adequate livestock is available. The supply of live sheep to Saudi Arabia is therefore exponentially more theologically significant to the kingdom than the supply of, say, chocolate eggs to New Zealand for Easter. Depriving Saudi Arabia of live sheep is closer to depriving a Catholic country of access to wafers and wine. Those who want good relations with Saudi Arabia would not do it lightly.

Private assurances
In 2003, the Cormo Express was transporting nearly 60,000 sheep from Australia to Saudi Arabia when inadequate paperwork and allegations of disease caused it to be turned away. It then sailed around the region for three months before offloading in Eritrea but not before 6000 sheep had perished. Immediately, Australia’s Howard government and New Zealand’s Clark government placed a moratorium on the trade. Under the circumstances, the Saudis understood.

After procedures were improved, the Howard government allowed the trade to resume in 2005 and there have been no similar incidents since. For domestic political reasons, the Clark government took longer.

The Clark government’s delay frustrated a Saudi investor in New Zealand, Hmood Al-Khalaf, and his local partners. Since 1988, Mr Al-Khalaf had been developing the trade, including working with AgResearch to breed a sheep fully robust for the journey and with the big fatty tails pilgrims prefer. In 1995, he invested more than US$45 million into New Zealand in support of the venture.

Although not impressed with Helen Clark, Mr Al-Khalaf was reassured by the dealings he and his partners had with opposition leader John Key and his agriculture spokesman David Carter. They believe they received private assurances that the trade would resume forthwith if National won the 2008 election, and those assurances were reconfirmed soon afterwards.

The prime minister’s office will no doubt deny it now but everyone’s behaviour at the time clearly indicates Mr Key gave exactly those assurances. Mr Carter, by then agriculture minister, told Parliament in March 2009 that New Zealand would benefit from the resumption of the trade and said the government was negotiating with the Saudis to establish clear veterinary, transportation, quarantine and arrival processing guidelines to that end. Mr Al-Khalaf commissioned a ship to be refitted to comply with the new rules, taking his total investment in the venture to US$70 million. But then things unravelled.

Panicked decision
In August 2009, TVNZ’s Sunday programme revealed to the Beehive it was about to screen a programme critical of live sheep exporting. In a panic, and fearing further criticism from the Green Party’s Sue Kedgley, Mr Carter was ordered by Mr Key’s media staff to go on TV and rule out any resumption of the trade, ever. This was later confirmed to the Saudis as New Zealand’s new position and negotiations ceased. Furious, Mr Al-Khalaf used his influence with the Saudi royal family to ensure the FTA was put on ice.

Things were to have been straightened out in April 2010, but Mr Key cancelled his visit to the region at the last minute to fly back to New Zealand for the funerals of three Air Force personnel killed in a helicopter crash near Wellington. The local emirs did not take kindly to the snub. Lest it be thought Mr Key deserves credit for prioritising the funerals of servicemen, it did not escape the notice of GCC diplomats in Wellington two years later when Mr Key skipped the funerals of two New Zealand soldiers killed in action in Afghanistan to watch his son play baseball in the US.

Nor did it help relations when a 20-something Beehive political adviser took it upon himself, during a meeting in Rome, to lecture the Saudi agriculture minister on how democracy works in New Zealand. “The boy,” as the Saudis called him, was not reprimanded, let alone fired.

Mr Al-Khalaf may be $US70 million down as a result of relying on Mr Key’s word but he shouldn’t take it personally. He is a mere case study, no different from the hundreds of New Zealand businesspeople Mr Key has looked in the eye, promised to fix their specific barriers to business and then done nothing.

The left-wing conspiracy theorists who worry about people paying $20,000 to play golf with Mr Key can also relax: those donors don’t get anything for their money. Like Mr Al-Khalaf, Mr Key tells them what they want to hear on the day, and then worries about what might be on the 6pm news that night – even if it costs New Zealand a trade deal with a US$1.5 trillion economy.

See also: NZ Government gifts $6m to offended Saudi businessman (TVNZ)

Disclosure: Matthew Hooton’s company, Exceltium, pitched unsuccessfully in 2010 to assist Mr Al-Khalaf on this issue but remains sympathetic to his plight.

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