Wednesday, 4 March 2015
Regulations and Determinations
Competition and Consumer (Industry Code — Port Terminal Access (Bulk Wheat)) Regulation 2014; Disallowance
Thank you. The disallowance motion moved by Senator Day and me will prevent the Minister for Agriculture, Barnaby Joyce, from exempting monopoly grain marketer, CBH, from port access conditions that will apply to other port operators. Passage of this disallowance motion would remove the minister's power to exempt cooperatives from the code. I would make CBH subject to the same conditions as GrainCorp—no more, no less. This would ensure fairness in that the same rules would apply to all who seek access to ports for the export of their grain.
The government might mouth words about free markets and capitalism, but in agriculture the lure of agrarian socialism is never far from the surface. Since the end of the single desk, in 2007, various changes to legislation were made that took the wheat export market towards deregulation. We have moved far beyond the old days of the single desk. I support this progress.
One of the interim measures in the transition was the adoption of mandatory port access codes for the export of grain. Following the expiry of undertakings to the ACCC last October, access to port services is now governed by the code and general competition law. Adoption of the code last year was seen by the government as:
… a significant step towards free and open competition in the wheat export industry, which is a longer-term goal to which we have committed.
However, CBH was exempted from the code.
My disallowance motion does not relate to the entire regulation. I have no concerns about that. It seeks to remove the part that implies CBH, as a grower and cooperative, is somehow more virtuous in its dealings with grain growers than, say, a company limited by shares, and should therefore be given special consideration. Those who claim to welcome competition, when the exporter is a profit-oriented business, especially if it is a foreign multinational, recoil in horror when it is suggested the same competition rules should apply to a farmer-owned cooperative. This is despite the fact that the grower-owned cooperative is just as committed to making money.
The Minister for Agriculture is an agrarian socialist, ready to use rules, regulations and special exemptions to protect his constituency. In Mr Joyce's eyes, all grain exporters are equal, but some are more equal than others. Government authority is being invoked to prevent grain growers from having the freedom to deal with CBH's evil corporate competitors.
Let us take a moment to look at the central player and sole beneficiary of the minister's exemption from regulation. CBH handles 90 to 95 per cent of the grain produced in Western Australia. It is a cooperative, owned by around 4,500 wheat growers. CBH owns and operates the only wheat export facilities in WA, apart from the recently opened Bunge facility. It has 197 receival points and four bulk export terminals. It employs 1,000 permanent staff and has a turnover of close to $2 billion. It is no minnow.
On the east coast, GrainCorp handles about 70 per cent of the grain produced. That proportion is declining. At least GrainCorp operates in a competitive environment. A new terminal at Newcastle has been established, owned by the same CBH, plus Olam and Glencore. All these bodies compete with each other. Another privately owned storage facility also operates at Newcastle.
All of these players operate without special exemptions, in a free and competitive market. This means that the port operator with the greatest market power in Western Australia, CBH, is exempted from the port access code, even though it has the most scope to squeeze out competitors. Notwithstanding the perception that a growers' cooperative would act in a virtuous manner, CBH has form as a corporate bully. In 2013, the Australian Competition Tribunal removed the company's ability to tell those WA growers and marketers who use CBH's up-country storage facilities that they must use CBH transport services to deliver grain to port.
If any of the wheat export markets requires protection from monopoly practices, it is Western Australia, and yet that is exactly where the Minister for Agriculture is proposing a special exemption applies. It is ridiculous. Shadow minister Joel Fitzgibbon wrote recently:
The government wants to leave it to Barnaby Joyce to decide who will be covered by the code and who will to be. Indeed, Barnaby thinks the largest vertically integrated player in the market, and the market where there are the least players should be exempt from the code because it is a cooperative. This is an extraordinary proposition. It raises the spectre of a code covering all the players on the east coast, where there are more players and more competition, but potentially covering no players on the west coast, where there are less players and less competition.
This demonstrates that he gets it. Mr Fitzgibbon called the exemption 'a new market distorting regime' and that 'exempting cooperatives generally, or CBH specifically, was hard to comprehend.' I agree. The proposed exemption is an extraordinary proposition and I encourage his Senate colleagues to support the disallowance.