One firm’s attempt to regain control of illegal cultivation shows Wellington’s lack of leverage over its largest trade partner
Last modified on Fri 18 Jun 2021 22.20 BST
It is the story of a global superpower, a smuggling operation, pestilence and a small hairy fruit.
Ubiquitous on supermarket shelves and in lunchboxes, the humble kiwi is New Zealand’s most valuable horticultural export. Recent battles for control of the fruit, however, have shone a light on tensions in New Zealand’s relationship with China.
In the mid 2010s, a kiwi grower took the lucrative secret of a New Zealand golden strain and smuggled it to China. Thousands of hectares of illicit orchards have since sprung up, and New Zealand has spent years scrambling to protect its intellectual property. Now the stark choices facing the country’s growers also reveal wider challenges for the country’s relationship with its largest trading partner.
The holy grail of kiwis
Kiwis are big business for New Zealand. Zespri, the country’s giant kiwi cooperative had operating revenues of NZ$3.9bn (£1.9bn) last year. Perhaps the most valuable of all is the Sungold, a new variety of golden kiwi that helped save the local industry from catastrophe. By 2010, the country’s kiwi orchards had been destroyed by a new disease called PSA. The vines oozed red fluid, flowers rotted and the fruit collapsed. It was a horticultural and economic nightmare that cost around NZ$900m, and the newly-popular golden varieties were among the worst hit.
Zespri joined other funders and invested millions of dollars in the search for an alternative. It winnowed down 50,000 varieties to a shortlist of 40, of which four made it to orchard trials. From those trials emerged Gold3, the strain that would eventually hit supermarket shelves as Sungold.
Its attributes represented a holy grail of kiwifruit properties: robust and attractive on the shelf, sweet with a pleasant tang, rich in vitamin C, cheap and plentiful to grow. Crucially, it was also resistant to the vine canker that had decimated the industry in New Zealand and Italy. Sungold was Zespri’s golden goose, and the company moved quickly to register exclusive ownership of it in countries around the world. Gold overtook green in kiwi exports, and New Zealand’s kiwi industry was rebuilt partly on Sungold’s back.
It might have been a golden end to years of strife for Zespri. But in 2016, an unpleasant rumour reached headquarters: Sungold had been spotted growing in China. The company hired private investigators and found the rumours were true.
An investigation traced the source to Haoyu Gao, an enterprising man who had bought a kiwi orchard in Opotiki, a tiny town in New Zealand’s Bay of Plenty. According to court documents, he smuggled a precious cargo of budwood to Sichuan, where he hawked female sprouts for NZ$60,000 a lot. In the end, however, the gamble did not pay off. He denied wrongdoing, but New Zealand’s high court ruled against him and ordered him to pay NZ$14m in damages.
Zespri won the courtroom battle, but it lost the war to control the spread of Gold3 through China. Its attempts to take subsequent legal action have fizzled without strong support from the government in Beijing, and in the meantime Gold3 vines have spread. In a recent report to growers, Zespri wrote that the area under illicit cultivation had doubled between 2019 and 2021 to more than 5,200 hectares.
“From the trajectory we see, it’s clear that unauthorised Gold3 is rapidly taking hold in China,” the report says, and the country is on track to produce between 30 and 90m trays of Gold3 fruit a year. At the lower end of those estimates, it would be producing as much as New Zealand exports to China, which stood at 30m trays to China last season.
An audacious proposition
There’s a certain irony to New Zealand having kiwi strains co-opted in China. The fruit was, after all, originally Chinese, and came to New Zealand in 1904. It thrived in the local climate, and the country began exporting it in the 1950s. In a moment of marketing genius, exporters coined the term “kiwifruit” after New Zealand’s iconic bird, with whom it shares a fuzzy brown exterior. In European and American eyes, the fruit gradually became synonymous with New Zealand.
Back then, China had little recourse against a fruit of local origin being mass-marketed as another nation’s motif. Today, however, it’s New Zealand that finds itself in a tough position and Zespri has proposed an audacious deal to growers: if you can’t beat ‘em, join ‘em – or at least buy ‘em. Rather than going after unlawful orchards, they propose a yearlong trial of buying up and marketing counterfeit kiwifruit grown in China under the Zespri brand.
The question will come to a head next week, as growers vote on whether to pursue a strategy of confrontation or cooperation with the new generation of Chinese growers.
Zespri’s proposal “would suggest that maybe the horse has bolted,” says Jason Young, an associate professor at Victoria University and director of the New Zealand Contemporary China Research Centre. “The Zespri question is really one of what happens if you lose control of your intellectual property in the Chinese market?”
Pragmatism or principle
The conflict over the fruit also highlights competing approaches of pragmatism and principle, at a time when New Zealand has been accused of treading lightly to avoid offending Beijing. It also shows the difficulty that a small geopolitical player faces in confronting a Goliath, and New Zealand’s lack of leverage with its largest trade partner.
“The word ‘small’ overemphasises how big we are,” says Andrew Gillespie, an international law professor. “We’re a dot.”
Pushing the matter hard could anger Beijing, he says: “It’s like with all law cases. You can win in theory, but often, the price of winning is greater than what you can achieve … They could find themselves in the middle of a very large storm and the ultimate consequences would be much greater than this one issue of intellectual property.”
That storm is a risk that New Zealand’s government and industry is acutely aware of. The foreign minister, Nanaia Mahuta, used the same word when she warned exporters of their vulnerability if New Zealand were to provoke Beijing’s anger.
“This is really a test for the relationship,” says Dr Hongzhi Gao, an associate professor at Victoria University’s international business school with a background in provincial government in China. “There’s also an opportunity here, for the New Zealand government to make a very clear case to Chinese central government.”
On China’s side, “it’s a question of political will more than anything else,” says Young. Central government has “a huge political emphasis on development, particularly rural development, and on addressing poverty issues within China”. That may mean Beijing is less inclined to crack down on rural farmers who have adopted a productive and popular new kiwivine.
Zespri has used this hypothesis to argue against more confrontational measures, but experts say the same dynamics could work against it if it were to take a gentler approach and then try to enforce licensing agreements down the line.
The company declined an interview, but said in a written statement that “seeking a commercial solution, and possibly an alignment with the Chinese industry, gives us the best chance of a successful outcome”. Such a solution “would also need to work for both sides in order to succeed,” it said.
“It’s very naive,” says Gao. “You are relying on local authorities to protect your interests. And if they don’t, what do you do?”
It is clear that the cultivation of Sungold in China is happening with the tacit permission of local governments, he says: “Such large-scale growing … it’s not individual.”
Beijing may feel a degree of pressure to protect its global image, but state and local government officials are far less likely to be driven by China’s international obligations or reputation, he says. “Local government officials do not care,” he says. “. They don’t care about a free trade agreement between New Zealand and China. You have very little leverage to really get local authorities on your side, because they are not on your side. They are on the side of local growers.”