Tuesday, 17 October 2017
Regulations and Determinations
Competition and Consumer (Industry Code — Sugar) Regulations 2017; Disallowance
That the Competition and Consumer (Industry Code—Sugar) Regulations 2017, made under the Competition and Consumer Act 2010, be disallowed.
Tonight we're considering the unbalanced code of conduct covering the sugar industry. This unbalanced code was hastily prepared in response to One Nation saying that they would go on strike if such a code wasn't introduced. This threat not to vote on legislation was made back in March, when the government was seeking to legislate to lower the company tax rate, an issue of great significance to Australia. The code is also a response to the Nationals wanting to demonstrate that they can respond in knee-jerk fashion to short-sighted complaints as quickly as One Nation can.
Because it was hastily prepared, there was none of the usual consultation covering all the stakeholders that would be subject to the code. Because the code is so fundamental to the functioning of the industry, this is an irresponsible omission. Because the code was a response to short-sighted complaints, it is not like the codes of conduct found in other industries, which take an even-handed approach and make clear that negotiations are to be in good faith. Instead, this code tilts the scales heavily in favour of the blinkered demands of those who complain the most, to the long-term detriment of the entire sugar industry. With the Greens and some other crossbenchers willing to jump into bed with One Nation and the Nationals on this, it looks like the long-term decline in Australia's share of global sugar production is set to continue. Once again we see that the antibusiness, foreigner-fearing Greens and One Nation are more alike than either wants to admit.
This code is not a balanced code of conduct, because it allows arbitration pre contract and it is proscriptive about the arbitrator's role. The code refers to 'grower economic interest sugar', which is a concept set in Queensland legislation. The code forces the arbitrator to rule that the marketing entity for this sugar must be chosen by the canegrowers. Yet this is sugar made and owned by a miller. The decisions as to how that sugar will be sold will be taken out of the hands of the miller. Forcing a miller to negotiate with an input supplier over the sale of the miller's own products and to comply with the directives of an arbitrator should it fail to agree with those input suppliers is not a formula for business confidence.
It's a pretty safe bet that there won't be a rush of additional investment in sugar mills while this code remains. That's important because our international competitiveness is already marginal. If sugar milling becomes uncompetitive through lack of investment, canegrowers will suffer as much as anyone. What growers really need is competition for their cane. They ought to be doing everything possible to attract new entrants into milling, if not investing their own money. As it stands, the only people who say the canegrowers have a legitimate claim are those who are pandering to get their vote, plus a few who don't like foreign investment and don't understand the issues. Significantly, neither the Productivity Commission nor the Queensland Productivity Commission supported this sort of government intervention, noting that it would cost money and jobs.
It really comes down to the idea that you shouldn't control what you don't own. Once canegrowers deliver their cane to a railway siding or delivery point near their farm, it belongs to the mill, which processes it into sugar. In the past, when many sugar mills were owned by grower cooperatives, canegrowers felt they had some—albeit remote—influence over how the mill marketed its sugar. Australia has a very minor influence on world sugar prices, but growers liked the thought that they had a say. Those days are gone. Most mills now have no grower shareholders at all. However, despite having sold the cane and with no equity in either the sugar or the mill, growers are still demanding a say over who markets the sugar. Some of the owners of mills have vast access to international markets and have put real money into sugar communities. But it seems the main point people make about these owners is the complaint that they are foreigners.
This disallowance motion may well be defeated, but the real losers will be future generations of Queenslanders who will continue to see their share of the global sugar market fall to countries with a more business friendly approach. I commend the motion to the Senate.