When our largest trading partner calls our national brand a "festering sore", as the Chinese government's Xinhua news agency did in an editorial last week, we know we are in deep trouble.

We've been pushing our luck for a long time with our 100% Pure NZ brand. We've kept growing the gap between our clean, green promise and the reality of our environmental degradation. We've ignored the charges of hypocrisy from the BBC, the Guardian, The New York Times and other critics over recent years.

But we can't ignore consumers in China and around the world. In their minds, botulism, a deadly form of food poisoning feared everywhere, is now linked with New Zealand food and will remain so for a long time.

Nobody yet has died or even fallen ill from Fonterra's contaminated whey protein concentrate, and hopefully nobody will. But consumers will forget that. They will remember the breach of trust by the co-op and country, and the fear inflicted on them.

Of all our customers around the world, it's the Chinese who have copped the worst news about New Zealand. In the past six months, they have heard of five damaging incidents involving our exporters:

* Fonterra's DCD residues in milk samples

* Fonterra's $900,000 fine following a dairy industry pricing investigation in China

* Fonterra's current whey powder crisis

* Zespri's $960,000 fine and the jailing of one of its local employees for under-reporting import duties

* Our Ministry of Primary Industries documentation cockup that caused NZ meat exports to pile up on Chinese wharves.

"Surely it's time to ask the New Zealand Government: ‘Where's the quality control?' " Xinhua asked in its editorial. "New Zealand's problems aren't mere ‘details'. They're starting to look systemic."

The Chinese feel particularly aggrieved. Many parents had turned to foreign suppliers for safety after six babies died and 294,000 became ill in 2008 because some Chinese dairy companies adulterated infant formula with melamine.

Fonterra was one of the main beneficiaries. Its infant formula sales to China have soared but only as a supplier of product to other companies under their brands. It seemed too shaken by the failure of its governance of its 43 per cent stake in Sanlu, one of the Chinese companies at the centre of the melamine scandal, and the resulting financial loss, to export under its own brands.

Fonterra announced earlier this year it would finally launch its own infant formula brand in selected Chinese cities later this year. It said last week it believed it would rebuild its reputation in China. But it won't be easy with its consumer brand or its large and rapidly growing investment in farming in China. It is no surprise Xinhua has put the boot in to Fonterra on behalf of Chinese companies.

A great deal is at stake, for Fonterra and New Zealand, because our country has become a Brand State. Peter van Ham of the Netherlands Institute of International Relations coined the term in 2001.

He wrote in Foreign Affairs, the distinguished US journal, countries such as "Singapore and Ireland are no longer merely countries one finds in an atlas. They have become ‘brand states', with geographical and political settings that seem trivial compared to their emotional resonance among an increasingly global audience of consumers."

Moreover, "brand states will compete not only among themselves but also with superbrands such as the EU, CNN, Microsoft and the Roman Catholic Church (boasting the oldest and most recognised logo in the world, the crucifix).

"In this crowded arena, states that lack the relevant brand equity will not survive."

We joined that race in 1999 when Tourism New Zealand launched the 100% Pure brand. It has worked very well for us. But it has taken a dirty pipe in a Fonterra plant in Waikato to sheet home our short-comings. We have a credibility problem on our hands. Broadly speaking, we have three ways to respond.

We could fix our immediate issues. On the surface, the heat will fade on Fonterra and the national brand. We'll still keeping selling dairy products and other food and drink.

But we will have become one of the pack, just another food exporter with no distinctive competitive advantage. We'll be poorer in terms of consumer loyalty, brand recognition and economic return. Other countries might displace us in this prized market niche, with Ireland the most likely candidate given its big ambitions once EU milk quotas end in 2015.

We could change our brand to something less challenging. Work is already under way by the Ministry of Business Innovation and Employment in the export market segment of the government's Business Growth Agenda. The aim is to broaden the brand to include other attributes such as "resourcefulness, integrity, quality and innovation".

But we'd lose our uniqueness. Plenty of other countries can say the same about themselves. And, anyway, we would still have to work very hard to deliver on those promises.

Or we can change our behaviour. Fonterra and the Government take food safety very seriously and work hard on it. But both are seriously under-resourced for the exacting task. This makes them woefully reactive. Neither organisation seems to have learnt anything from the DCD debacle in February about speeding up science, involving the supply chain and vastly improving communications in such crises.

Fonterra's management structure is excessively lean by comparison with its international competitors. Many of its staff are seriously stretched and stressed. Farmer-shareholders need to understand they have to invest more in people if they want an enduring and successful business. The same applies to the Government with its agencies.

The same issues apply across tourism, particularly adventure tourism, education and other exporters who are entrusted with people's safety and trade on the national brand.

By far the biggest risk is here, not overseas. Business strategies and government policies are piling on the risks of greater environmental, economic and reputation damage. The government for example is gutting the RMA and has delivered a joke of an oceans policy. A runaway deep-sea oil spill would ruin New Zealand, in every sense of the word. So, our biggest behaviour change is obvious: We must deliver on our promises to the world.