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Are there any grains in the northern food bowl?

By Evan Jones - posted Tuesday, 3 September 2013


On the heels of sponsoring a Global Food Forum last April, the Australian newspaper has sponsored a discrete follow up in mid-August (the date is not reported). Opposition Finance spokesperson Andrew Robb, favourite son of the Australian, was again a favoured speaker.

Robb is reported on the 19th August as claiming that Australia needs decent-sized 'national champions' to foster an escalating level of production and exports in a competitive global economy. ('We are an oligopoly economy: Robb'; all cited articles unreferenced are from The Australian) Thus oligopolistic industries have to be accommodated as a necessary evil if such national champions are to thrive, with an assertive competition policy to keep them honest.

Robb is on the political front line of the push to make agriculture the next Big Thing for the Australian economy. As well as being Shadow Finance Minister, Robb is also chairman of the Coalition policy development committee. The successful resources sector is now vulnerable to decline, and food needs to take up the slack. Is Robb a strategic visionary or cargo cultist?

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The push emanates from a loose coalition, some of whose members align over a potential economic dreamtime in the deep North – including the resources-funded Institute of Public Affairs, the Reinhart/Kins ANDEV (Australians for Northern Development and Economic Vision) and successive Northern Territory Chief Ministers.

But, ah, this tropical gold rush is going to be had by the creation of a Special Economic Zone. And the SEZ will be built on 457 visa indentured ring-ins. So where's the trickle down to come from?

Ah, the boom is also going to sweep up the unemployed from indigenous communities. Well why hasn't this happened already, given the prescience of the free market and the support of its most ardent advocates? Rather, success depends upon special contributions and concessions from overbearing Canberra – in the IPA's John Roskam's words, "freer regulation and greater public investment"! ('Southern red tape hobbles Top End's great leap forward', 6 April 2013)

A complementary dimension involves hitching Australia to hungry Asia. Then trade Minister Craig Emerson (another News Limited favourite) said in February, "Australia has an abundance of arable land." ('Our role as feeder nation offers food for thought', 23 February 2013) Well, not quite, and what Australia has is generally being exploited intensively.

Someone should alert Emerson about NSW, where this abundant arable land is being supplanted by miners pursuing cheap coal in a declining market, now joined by ravenous coal seam gas explorers. Successive NSW governments have obliged by dismantling the primary industry bureaucracy under super Departments with a de facto mining priority.

Roskam also claims that the Northern Territory "has a moral obligation to help feed Asia's millions". Yet India has been undermining peasant agriculture for decades, and China is now engaged in a madcap thrust for urbanisation, based on a speculative building frenzy. Australian governments and producers have no 'moral obligation' to offset the distorted priorities of other countries through trade strategy, though this arena may be a matter for diplomacy.

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Then there's the financing problem. Australia's $1.6 trillion superannuation goliath is ill-disposed, although there is some industry funds investment via hands-on funds managers. The sector is not unproblematic. Returns are cyclical and, for producers, low on average; there are dodgy corporate players; ownership structures are highly fragmented. Add the more than occasional flood and drought. Agriculture is a long-term proposition or nothing.

However the envisaged White Knight is Chinese capital. Let 'er rip, thinks this coalition. China is pushing for any project up to $1 billion to be automatically processed without Foreign Investment Review Board scrutiny (already embarrassingly lax). Anybody querying the enthusiasm is tarred with the hackneyed 'xenophobia' brush.

The coalition, now including the current Trade Minister Richard Marles, also want an overnight unrestricted Free Trade Agreement with China, eyeing the New Zealand precedent.

This is colonial cringe par excellence. Redolent of the Japanese vertically integrated corporate structures of the 1980s in Australia (Mitsui, Mitsubishi, etc.) – everything diverted through their trading arms, with massive turnover, minimal reported profits and minimal taxes paid. Thus the omnipresent transfer pricing genie that the Australian Tax Office has never managed to successfully bottle.

As for the presumed meritorious FTAs, what are the pluses and minuses of the NZ-China FTA? Are not the failings of Australia's FTAs with the US and Thailand, for example, self-evident? The China FTA negotiations have been stalled to date under Labor for good reason.

The acid test is in the ultimate impact on the Current Account. Thanks to longstanding policy ineptitude, in 2011-12 the Services Trade deficit was $10 billion and the Income Payable deficit $42.6 billion, contributing to a $40.2 billion current account deficit. (Ireland's Current Account is comparable – the Celtic Tiger's glorious future was a hoax.) The Coalition's scenario of unmediated investment and trade, coupled with inevitable transfer pricing, will only enhance the sizeable deficits on Current Account.

Robb also supports the idea of large scale national champions Well, the first cab off the rank should be GrainCorp and its retention from the clutches of US giant Archer Daniels Midland. Robb should rally his Coalition colleagues to that cause.

There's already slim pickings in the food sector, with (according to ABARES) 'the ownership of about half of the nation's dairy, sugar and red meat sectors' in foreign hands – Kirin's takeover of the ex-cooperative Dairy Farmers is representative. ('Almost half Australia's food industry is owned by foreign investors', ausfoodnews, 19 January 2012)

Robb acknowledges that large firms, within oligopolistic sectors, need to be constrained by effective competition policy. But, short of unlikely divestment, the horse has bolted. The appalling tolerance of growth and abuse of market power by the ACCC under Graeme Samuel's chairmanship, 2003-11, has entrenched the problem.

Two significant sectors are retailing and banking. Corporate predation from both sectors has had dramatically adverse effects on the profitability and sustainability of agricultural production in Australia.

The retail duopoly has long exploited producers (and their corporate processors) in endless downward pressure on supply prices. At least this modus operandi has had exposure and the current ACCC chairman, Rod Sims, has it in his sights.

Not so with the banks. Regulatory and legal profession complicity, with little public exposure, has allowed the banks to default and foreclose on agricultural producers at will. Local SMEs, with comparable dependence on debt financing, likewise. The predation constitutes a national scandal. During a speech in July Robb himself recognised the general SME financing problem, but missed the attendant corruption in the industry ('Sector starved of finance: Robb', 26 July 2013).

Robb has also lamented the small number of recent agriculture graduates ('Time is ripe to cash in on Asian hunger, 19 April 2013). But rural children have witnessed firsthand the maltreatment and deprivations experienced by previous generations – why sign up for a comparable fate? Agricultural sector vibrancy requires sympathetic regulatory support – and it isn't there. A rural depopulation crisis is threatening and under the radar. Will this hoped-for food bonanza be generated on the backs of indentured labour (shades of the 19th Century) and backpackers?

Strange – Robb himself has an agricultural background with considerable experience, as his Wikipedia entry highlights. It doesn't show in the naiveté of his utterances.

Robb's ill-tutored mindset is reflected in the fact that he has blamed Labor red tape for BHP's shelving of the disaster-waiting-to-happen Olympic Dam project ('A Coalition government can drive a new resources boom with competitiveness the key', 13 July 2013).

No doubt well-intentioned, Andrew Robb's 'vision' is all over the place. He needs better informed advisers and less political partisanry. More, the agricultural political apparatus (centred on a decadent National Party) in which Robb himself has been involved may need a root and branch reconstruction.

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About the Author

Dr Evan Jones is an Honorary Associate Professor in Political Economy at the University of Sydney, where he has taught since 1973. His research interests are in Australian economic history and the political economy of comparative industry and economic policy structures in capitalist economies.

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