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Dissenting Report by Senator Barnaby Joyce, Senator Fiona Nash and Senator Nigel Scullion
Introduction
The Wheat Export
Marketing Bill 2008 and Wheat Export Marketing (Repeal and Consequential
Amendments) Bill 2008 are deficient in many areas. Some of these deficiencies
have been raised during the committee process.
The draft bills
as proposed clearly do not satisfy the requirements necessary to ensure a wheat
marketing system that would deliver the best outcomes for wheat growers. More
dangerously, the draft bills lack sufficient safeguards to prevent regional
monopolies from arising. These deficiencies are compounded by a weak Trade
Practices Act which is failing to prevent the growing concentration of
Australian industries to the detriment of competition, farmers and consumers.
The draft bills
have not, in any way, taken into consideration that the majority of Australian
wheat growers want the retention of a grower owned and controlled wheat
marketing system.
The Nationals
Senators dissent from the report. We contend that the draft bill be withdrawn,
and be re-drafted to incorporate the following:
- a national pool in
recognition of the need for farmers to have countervailing power when dealing
with monopoly power in other areas of the wheat export market;
- a
receiver of last resort;
- restrictions against
Australian wheat competing against Australian wheat overseas;
- a regulatory process that
has resources and power to investigate and prosecute breaches of both the
legislation and regulations; and
- rhe
power of veto to be held by an independent body and exercised in both the
interest of the growers and the national interest
Background
The Oil-for-Food
scandal has been used very successfully as a means of leverage to destroy one
of Australia’s greatest wheat marketing advantages.
The motivation for the contrived uproar was far from the protestation of an
informed conscience but more of a financial opportunistic ploy for certain
market players to set themselves up as regional monopolies with the windfall
gain to those who had a financial interest in them.
Ramifications on Passage of
Current Bill
The same
organisations that lead the crusade on behalf of the free market are now
complaining bitterly against the access regimes required to truly bring about a
competitive market. Graincorp's Chief Executive, Mark Irwin, stated in The Australian Financial Review 23/04/08
"we would be happy for the legislation not to go through." This is
because of the access regime at the ports that would be imposed on them.
This is quite a
turn around from the previous pressing need to remove the inspired blight of
the oil-for-food scandal and it starts to give more transparency to the real
motivations at play. CBH, with 95% of WA's receival
infrastructure and 100% of the ports and soon a license to export, would have a
monopoly to dream of and knowledge there are no divestiture powers to break up
their stranglehold.
Without a clear
access regime their position would be a multiple billion dollar windfall to the
co-operative, which has already started on moves to corporatise so the owners
can collect on the gain. Graincorp and its association with US multinational,
Cargill, would have a very similar outcome in the east and ABB, to a lesser
extent, in the south.
The Undemocratic Consequences
Behind all this
is the travesty that the majority of wheat growers across the nation do not
want to lose the single desk marketing arrangement and neither the previous
government nor this one will let the democratic right of the people be assessed
or accepted, the refusal to table the Ralph report being but one of many
indications of this lack of transparency.
The ridiculous
situation, put in Canberra by WA Senators, that WA is in overwhelming support
of the removal of the Single Desk was categorically debunked by their largest
grower supported peak body, the WA Farmers Federation. Mr McMillian, Policy Director, at the Perth hearing said “WA Farmers members remain firm in their
support for a single seller, single desk wheat marketing system.”
The reality is
that 60% of our wheat is purchased by single desk buyers and there is only one
direction our price can go when two sellers turn up where one was before. The
US has despised our single desk because of its effectiveness and this goes
across the political divide in the US, from Sen Tom Harkin (D) to Sen Norm
Coleman (R) to Allan Tracey (US Wheat Associates President), but the Labor
party, supported by the Liberals, Greens and Democrats, it appears, is going to
hand it over to them.
Peculiar Alliances and
Consequences of the Current Bill
The Greens have
been breathtaking in their support of big business in this inquiry, especially US big business. If they want to know how the new controllers
of a large part of Australia’s wheat industry will play then a quick read of
"Merchants of Grain" would be suggested against which our sins with
AWB start to pale into insignificance.
The moral
argument for the Oil for Food scandal, and review by the United Nations, found
270 names of individuals, political entities, and companies from across the
world with questions to answer. There are many who still state that to operate
in Saddam controlled Iraq with a clean sheet was to be completely
ignorant of the reality of Saddam controlled Iraq.
None the less, Australia conducted an investigation: the Cole
Inquiry. Eleven AWB executives were cited, of whom all have left the company
and of whom only six were charged.
If we still
talk about the disgraced AWB, then who in the organisation are we referring to?
Is it just the attachment to the name? If it is the previous association of the
organisation, then let us have a look at who currently is involved in other
sectors of the Australian wheat market and their previous record. In regard to
the 300 000 tonne export permit granted in February by Agriculture Minister Tony Burke:
‘The value of the
Glencore deal has not been disclosed, but this tonnage of wheat would be worth
more than $100 million at current prices. Ironically, Glencore’s Swiss parent
company, Glencore International, was also implicated in the UN oil-for-food
scandal that led to AWB losing its contract for the sale of wheat to Iraq during the Cole inquiry into kickbacks.’ (The
Australian Financial Review, 29
April 2008).
The Reality of Wheat Marketing
for Australia
The economics,
the nature of man and how markets are exploited are a constant and wheat has
for thousands of years been a mechanism for bending economics to your own
advantage. That wheat is a food staple is the cornerstone and, as Socrates was quoted in the Senate Inquiry, “No man qualifies as a
statesman who is entirely ignorant on the problems of wheat.”
In 2005/06 Australia produced a wheat crop of approximately
25 million tonnes (estimated value AUD$5.7 billion) and exported 16 million
tonnes. Seven million tonnes were retained for domestic use with 2 million
tonnes in bags and containers.
In a large
export year, the volume of wheat available for export in today’s infrastructure
climate would be virtually impossible to handle. Without a pooling system and
another crop in the field, there is little choice, especially after
encouragement from the bank manager, but to sell down the crop which, on a cash
basis, drags down the price. Traders, in this instance, react to the domestic
market, not the international market. South of Coonamble in NSW this problem is
anticipated and accentuated. The domestic price is not totally reliant on the
international price. Australia does not have a bio-fuel industry like
the US to supply.
The major
buyers of our wheat are in Yemen, Sudan, Japan, Indonesia, Egypt, Iraq, India and China.
India, Japan, China and Iraq
are single desk buyers, that is, the government has legislated only one buyer
has the authority to buy on behalf of the whole country.
The Demise of WEMA
The WEMA model
did not come to completion due of a range of factors including the factor of
lack of time, lack of government support, lack of funding from growers that
relied on voluntary payments, (saying that growers did not support the single
desk because they did not make a payment to WEMA is similar to expecting
voluntary taxes to raise money for the defence force) and a general lack of
grower knowledge into what was the process and purpose of WEMA. The final nail
in the WEMA coffin was the federal election and this has very little to do with
the marketing of wheat.
Socio-Economic Impact on Wheat
Growers
A Bill of this ramification to one of Australia’s major exports, and the predominate
income earner of many Australia’s farmers, deserves a forensic
socio-economic impact statement as part of its due diligence. To proceed with
such a Bill without a socio-economic impact
statement is irresponsible and would certainly call into question the integrity
of the whole Bill if delivered without such a report. The
integrity of the deliberations and capacity of those assigned to that job if
they let it pass without a forensic socio-economic statement would have to be
seriously questioned.
Response to Committee Conclusions and Recommendations
Status of current single-desk export arrangement for
Australian wheat
In paragraph 4.7,
the committee has noted the "pragmatic and proactive attitude" of the
industry in developing commercial responses to the changes proposed in the
bills.
Senators' response to 4.7
They have
certainly not considered the attitude of the majority of growers in this
statement, but it has been foreshadowed that something may be stated in the
final Government draft.
Industry goods services being
addressed by WIEG
In paragraph
4.10, the committee has noted the strength of feeling amongst growers about
their perception of a lack of consultation.
Senators' response to 4.10
The growers'
issues go far beyond consultation. Consultation is irrelevant if the view held
by the growers is diametrically opposed to that being proposed and the process
of deregulation will go forward regardless.
In paragraph
4.11, the committee’s attention is drawn to the challenges involved in
consulting with, and gauging views of the grower community.
Senators' response to 4.11
The Ralph report was commissioned to gauge the
views of the grower community however the findings were never reviewed.
Assertion and wishful thinking have taken the place of empirical evidence.
Accreditation
process
In paragraph
4.14, the committee has noted issues in relation to the proposed accreditation
process and whether corporate and non-corporate entities should be eligible. It
also notes in a later point (4.19) the significance of the accreditation scheme
in providing a level of protection and confidence to growers and the broader
industry.
Senators' response to 4.14
Corporate
entities must operate to benefit shareholders; this is often at odds with
providing maximum benefit to growers. The constitution of the AWB was drafted
to ensure the purpose of the organisation was to provide the best return to
growers.
Doug Clarke
and Mike Chaseling
noted in their appearance before the committee that CBH already has a view to corporatise. Once
corporatised, CBH will be required to operate to benefit
shareholders rather than growers.
In paragraph
4.18, the committee notes that it expects the WEA
will have appropriate legislative, financial and human resources to undertake
its role as regulator. This expectation is confusing in the extreme when the
ACCC is demonstrably unable to deal with corporations in the Australian
marketplace. How will the WEA deal with multi-national grain traders
in an international marketplace?
Senators' response to 4.18
The
legislation, in its current form, is inadequate in structure and power and will
be run over in the marketplace by new players who will become ever present very
quickly. If the ACCC, under existing legislation, can't deal with the growing
market power oil industry and supermarket, how will this same legislation deal
with players such as Cargill in the wheat market?
Access to storage, handling and freight
In paragraph
4.22, the committee has noted the concerns raised regarding the formation of
regional monopolies.
Senators' response to 4.22
This is a
critical issue. The emergence of regional monopolies is the growers' greatest
threat. There has never been an example of a current market player providing a
better price to the grower in the long term nor a benefit to the Australian
economy in the long term than the wheat single desk. In the past, AWB was the
countervailing power bulk handlers were required to deal with. If this
countervailing power is removed, regional monopolies will result.
In paragraph
4.25, the committee notes concern from all quarters regarding the reliance on
the Trade Practices Act (TPA).
Senators' response to 4.25
The TPA is
weak and is currently an ineffective tool for dealing with unconscionable and
anti-competitive conduct. The TPA has been hopelessly inadequate in stopping
abuses of monopoly power, with the ACCC not having been able to take any s 46
cases to Court since the High Court’s Boral decision in 2003. The mergers law
under s 50 of the TPA has also failed to prevent the creation of monopoly power
and this has been detrimental to competition and consumers.
Recommendation 1
That the
legislation be withdrawn.
Recommendation 2
- AWBI to maintain the management of the single desk for the
forthcoming year with power of veto to remain with the Minister.
- AWBI to remain for that period with a constitutional requirement
to have primacy of the grower’s return.
- The bill be re-drafted to incorporate the following:
- a national pool, if
so required to be underwritten by the Australian Government;
- a receiver of last
resort, and if so required to be underwritten by the Australian Government;
- restrictions against
Australian wheat competing against Australian wheat overseas;
- a regulatory process
that has resources and power to investigate and prosecute breaches of both the
legislation and regulations;
- the power of veto to
be held by an independent body and exercised in both the interest of the growers
and the national interest;
- the code of access
to be mandatory and initiated from the passage of the bill at all points at and
between receipt and port;
- strong FIRB
oversight over any export relationships which could affect a larger section of
the wheat market; and
- a Socio-Economic
study into the consequences of the Bill be completed prior to its passage.
A failure of
the Bill to address these primary issues
necessitates the rejection of the whole Bill. The consequences of the outcome of
this Bill are firmly attached to the decisions
which will be made by those who now vote for it and fair warning has been given
so no excuses down the track should be accepted.
Senator Barnaby Joyce
The
Nationals’ Senator for Queensland
Senator Fiona Nash
The
Nationals’ Senator for New
South Wales
Senator Nigel Scullion
Country
Liberal Party Senator for the Northern
Territory
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