Wednesday, 4 March 2015
Regulations and Determinations
Competition and Consumer (Industry Code — Port Terminal Access (Bulk Wheat)) Regulation 2014; Disallowance
I rise to make a contribution to this debate on the disallowance motion and also to let the Senate know that the Greens will not be supporting it. The Greens and I personally have been engaged in this debate on wheat export deregulation for almost all of my time in this place and I have seen the gradual deregulation of the industry.
I would also like to put on the record that one of the issues around the deregulation process has been the difference in the sector between the wheat growers and producers across Australia, with the east coast market being very different to the west coast market. That is what divided this place probably more than anything during the debate on the deregulation process, on getting rid of the single desk, because we are different in Western Australia! We export almost all of our wheat crop, whereas the eastern states do not export as much and they produce, largely, into the domestic market. Therefore, that has always complicated this issue. It has not been straightforward over the years and, for the people who are reading this transcript later on, unless you are deeply involved in the discussions you probably will not understand the trajectory we have been on over the last number of years as the deregulation process has unfolded.
I know colleagues across the chamber, from both major parties, who, within their own parties have different views on the deregulation process. So it has been a complicated process to get to where we have now got to. Wheat growers across the country have certainly been divided on this issue as well.
The Greens believe that it has taken a long time to get the Competition and Consumer (Industry Code—Port Terminal Access (Bulk Wheat)) Regulation 2014 to the point that we are at. The code is an important step that helps address the impact of both the deregulation process and the potential monopolies in port access which the wheat industry is still currently exposed to and has been concerned about for some time.
However, having said that, I also believe that allowing the minister, as well as the ACCC, to make an exemption for cooperatives such as CBH, will support a port access regime that reflects the operation of the WA wheat market—and I have already explained why WA is different—and does not distort the market in a way that would hurt WA growers.
Before I continue my remarks, I do want to note that this code makes provisions for the minister to consider all cooperatives. The cooperative in question, which we are presently talking about, is CBH, in my home state of Western Australia. It is an important part of the grain industry in my home state, so I will talk more about the specifics of this example in a moment. But I would like to be clear that if other cooperatives are formed and follow a similar trajectory to the CBH experience, then they should also be considered for an exemption. The provisions in the regulation make allowance for that. This code, as it is written, does not privilege CBH and I would expect the minister to apply the objective criteria in determining exemptions for cooperatives.
The Greens will not be supporting this disallowance motion because it fails to acknowledge the work that has gone into developing the code over the years. The whole process to date, including the exemption for cooperatives, does not seem to respect the unique role that CBH has played and continues to play in the WA market as a grower cooperative that has operated in Western Australia since the 1920s.
During the deregulation process, the Greens amended the bill to introduce an independent industry advisory task force, which compiled a body of evidence and formulated recommendations for the good functioning of the industry. This task force used the residual fund from the dissolved WEA to investigate the next steps that government and industry should take towards better operational efficiency, as well as ensuring that future reforms provided a fair return to all wheat growers and producers, including those who are presently disadvantaged by the legacy of the single desk market arrangements and, in particular, the significant amount of infrastructure that is still under monopoly structures.
This compulsory port access code has been developed as a result of that work and has involved all aspects of the wheat industry, from growers to exporters and all those in between.
Given the vertically integrated supply chain, there are genuine competition concerns and the Greens continue to believe that, as I stated during the debate on the WEA repeal bill, in 2013, that the industry continues to require some oversight. Even CBH requires oversight. However, that oversight also comes from the WA government and so, even with an exemption, CBH will continue to be subject to state legislation that ensures that all growers can participate in the cooperative. It is still required to operate in a transparent, competitive manner and in alignment with many of the clauses in this code.
I would also like to say here that the issue was raised about CBH's apparent non-competitive behaviour over transport infrastructure. That question was asked during the grains inquiry and the consideration of this code and CBH actually provided an answer as to how that particular situation eventuated. I do not think it was fairly represented in the comments that Senator Leyonhjelm made in talking to his disallowance motion.
Ultimately, farm gate prices are the most important thing here, and we have seen the pressure that big players in the market can put on our farmers, particularly smaller operators. The Greens, as I said, continue to support a level of government oversight in the market that prevents duopolies from engaging in the sorts of price wars that have occurred over other produce.
We know that cooperatives are one of the best ways for farmers to guarantee good prices. In WA, CBH operates for the benefit of WA grain farmers. Under state law, CBH must take all grain, so no farmer is excluded. In effect, there is no price distortion for WA farmers, as explained by Mr Simpson—he is the President of the Grains Section of the WA Farmers Federation—to the Rural and Regional Affairs and Transport References Committee earlier this year. He said:
I can sell to whoever I want to, from my farm. I can sell to any one of 15 or 20 different buyers. That grain then goes to port through CBH's facilities, because they are the only ones there. And it all, whether I sell to CBH or whether I sell to anybody else, gets charged the same price.
CBH is mandated to sell everybody's grain. You do not need any extra regulation to provide that. It is there and has been there since the market was deregulated. Most of the exporters in that state are very happy with it. You can find people out there who still believe the world is flat. There will always be people who will disagree with whatever system you have in place. But I think that system works very well. Growers do have a choice about who they sell to and who handles it. Except for the amount of profit they can make, there is nothing stopping any company from setting up grain storage systems in the West.
So, in this case, it makes no sense to put an additional impost on CBH when the state legislation already ensures that it has to treat all exporters equally.
Furthermore, we were reminded again at the committee inquiry that there is competition in the WA grain market, with over 50 per cent of WA wheat being bought and exported by organisations other than CBH. When speaking to the grains inquiry, Mr Simpson said:
I do not think the issues are in access agreements. I think the issues go back to philosophical backgrounds and whether they believe in the difference between corporates and cooperatives. As I have said, they have wanted to corporatise CBH from day one, I think largely because they think they can make a dollar out of it. Perhaps some of them do not have kids who are going farming so they figure they can make a dollar on their exit. … The surveys done not so long ago amongst the younger growers indicate that they, and all growers, are realising, as the gap opens up between the costs of our handling system and the costs of equivalent handling systems in the country, how valuable CBH is to them.
The foresight of the CBH Group has been shown through their acquisition of supply chain assets and port terminals and should not be punished. We believe that supporting this disallowance motion would indeed do that—that is, punish WA farmers.
We believe that we have got to this point in our wheat deregulation process through a long process of engagement with wheat farmers across the country. I do not always agree with everything that has happened through that debate, but I think that, on balance, we have tried to meet the needs of all growers throughout Australia. As I said at the outset of my contribution, it has been a very complex and intricate process to get where we are, because of the different needs of growers across Australia. The Greens will not be supporting this disallowance motion. We do not think it is the right move. We do support the exemption and believe that there are appropriate checks and balances for CBH already.
Having said that, I do not agree with everything that CBH does—I am not here to do that or say that—but I believe that there are enough checks and balances in place to ensure that the best outcome for growers in Western Australia is to support this regulation process. I must say that I believe we have the overwhelming support of farmers in Western Australia, my home state, for this regulation. It is only a minority of farmers in Western Australia who are asking for this disallowance to proceed.