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Thursday, 24 March 1994
Page: 2314


Senator BOSWELL (Leader of the National Party of Australia) (9.58 p.m.) —I want to relate to the Senate in today's appropriation debate a tragic story on how an Australian bureaucratic organisation has cost Australia the opportunity to enter a new guaranteed and lucrative export industry, how a bureaucratic decision flew in the face of all wisdom, advice and government policy, and how, despite united support from all sectors of the sugar industry, from the government departments whose role it was to address such proposals and which all gave it the thumbs up, still one powerful and unrepresentative commission could override all other opinions and, in turn, do so much damage to our future prospects.

  The new export industry I am speaking of is the $5 billion international refined sugar export industry. This could have meant at least half a billion dollars of export income for Australia—and think of the jobs that that would have created! It is an industry that Australia could have entered as a major player with the most advanced technology as a result of a refinery joint venture between CSR, Mackay sugar and the British company E.D. and F. Mann. The merger would have resulted in a more orderly restructuring of the Australian refined sugar industry and achieved the main objective of establishing Australia as a white sugar exporter in the long term.

  The Trade Practices Commission said that its role was to ascertain whether the anti-competitive detriment flowing from the merger proposal was outweighed by the public benefit. In this case, the commission found that there was not sufficient public benefit to let the proposal proceed. The commission specifically found that a public benefit from the export industry would not be realised. In the words of the commission, it decided that some of the export benefits, if not all, could be obtained short of the merger proposal.

  The Trade Practices Commission was plainly wrong in its conclusion. Firstly, there is no existing refinery, not even the new state-of-the-art Mackay refinery, which is to be now operated by Mackay Sugar with Mann, that can support a sustained entry into the refined sugar export market. Secondly, it was only through the creation of a merged identity such as the proposed merger between CSR, Mackay Sugar and E.D. and F. Mann that the necessary critical mass could have been achieved for Australia to become a permanent exporter of value added refined sugar.

  This was all pointed out to the Trade Practices Commission which decided to downplay it. The determination of the Trade Practices Commission has cut Australia out of entering a new export market, that of refined sugar—a growing market compared with the declining raw sugar market.

  The real facts were pointed out to the Trade Practices Commission—realities that a long-term export business could only be established on a domestic production base involving more than one refinery. But there was a need for a sufficient and widespread domestic share to exist to provide a cushion against periods of low export returns due to the volatile nature of the refined sugar export market.

  Yet, when commercial realities dictated that these factors exist to establish a long-term export industry, the Trade Practices Commission thought it knew better. Against all evidence, it stated that the commission is not satisfied that there are likely to be any significant additional benefits attributable to the proposed new co-joint venture which would not be achieved by the existing joint venture.

  When time dictated that Mackay Sugar and Mann had to go ahead and no longer pursue the larger joint venture project, the Trade Practices Commission in a press release showed its commercial naivety by saying that, because the refinery was proceeding, it justified the commission's refusal to authorise the joint venture.

  As a consequence of this decision, all Australians will be deprived of the benefits of the export earnings from a major involvement in a $5 billion industry. By limiting us to the raw sugar export market, the decision is dictating that we must stay in the Stone Age of commodity trading. This decision is a matter of the TPC getting it wrong—totally wrong. The consequences are so severe and costly that the government should seriously re-examine whether the decision should stand.

  Surely this was a case where the government should have made strong representations. There was an issue of national interest involved which should have required some sort of strong specific representation from the government. All sides of politics know that we must increase our export earnings.

  This week Senator McMullan, the Minister for Trade, is in Indonesia drumming up better access into the Australian-Indonesian market for Australian exporters. Yet, right on our doorstep Indonesia imports over 300,000 tonnes of refined sugar every year. Maybe Senator McMullan could have taken his order book out and written an order for some of that refined sugar if the venture was allowed to go ahead.

  Australia is one of the most efficient raw sugar producers in the world. We were the world's largest exporter of raw sugar last year. We produce about 4.3 million tonnes of raw sugar a year and export about 3.5 million tonnes. Yet we export only about 10,000 to 20,000 tonnes of refined sugar to the small South Pacific market.

  The Australian industry could do the same sterling effort if it had been allowed to enter into the refined sugar export market. There was tremendous support for the project from all sources. All sectors of the industry: the growers, the millers, and the refiners supported it. It is a landmark case when we can get all three sectors of industry supporting something.

  Many large buyers expressed support for the merger and were disappointed that it has been blocked. These major buyers included Cadbury Schweppes, Nestles, Arnotts and Kelloggs. Buyers gave overwhelming support for the benefits of an efficient rationalisation of the refined sugar industry which, at the same time, would create national economic benefit through the development of value added exports.

  The Queensland government and the Queensland department of primary industry gave their full support. I ask: what has happened to the full support given by the Queensland Premier, Mr Goss, and the primary industry minister, Mr Ed Casey, now that the project has floundered? The support also extended to all relevant government departments.

  ABARE saw the benefit to the Australian raw sugar industry from Australia entering the refined sugar export market. In answer to my question, Senator Schacht told the Senate that his department, the Department of Industry, Technology and Regional Development, closely considered the joint venture and concluded that the application was likely to result in a significant increase in real value of exports, the fostering of business efficiency and rationalisation resulting in more efficient allocation of resources. Government policy clearly encourages value adding to our primary products and increased downstream processing.

  The TPC decision was extremely narrow in the attention given to public benefit. I am sure that all Australians would wish to see us enter a new export market as a major player rather than have a short-term concern about whether sugar prices temporarily went down, when they are capped by the import parity price anyway.

  The domestic price is set by the import parity price. I have told the Senate many times about the corrupt world price of sugar set by the massive subsidy schemes in the US, the EU and other major sugar producers. How did the TPC know better than the contrary view of all the other experts about the potential benefit of entering a new export industry?

  The TPC was also clearly wrong in one of its main determinations that enhanced sugar exports are likely to occur with or without the joint venture. The TPC said that because Mackay Sugar was committed to building the refinery and had a joint venture arrangement with E.D. and F. Mann, it could do the same job in entering the export market as the joint venture between Mackay, Mann and CSR would have achieved.

  Mackay Sugar knows what it is able to do, but did the TPC listen to that? The commission said that Mackay Sugar's present arrangement is neither able nor intending to develop a sustained export business for refined sugar. Surely the company knows more about its intended and possible actions than the Trade Practices Commission based in Canberra.

  The export market available to a refinery operated by such a strong merger as that proposed between Mackay Sugar, Mann and CSR was right for our entry. It has now been lost. The timing was just right for Australia's entry as a front runner. The world's raw sugar market is a declining market, whereas the refined sugar export market is expanding and vigorous.

  The decision of the Trade Practices Commission in this instance is nothing short of a tragedy for Australia and North Queensland. As shadow minister for northern Australia, it is also a tragedy for the sugar industry, which provides a strong economic basis for coastal Queensland. It was a project consistent with present government emphasis on regional development that would strengthen the sugar communities of Queensland. This decision has cost every canegrower around $3,000 a year, according to ABARE. It has cost the rationalisation of the refining industry and the upgrading of facilities.

  For a statutory body to be able to prevent an opportunity to enter the growing refined sugar export market is a national folly. It is said that opportunity knocks but once. It may be that this was the case. A perfect opportunity existed for Australia to enter the export industry with the advantages of a state-of-the-art refinery, superior technology of the Bibo shipping and critical mass for the merger to expand production sufficient to enter a market hugely corrupted by subsidies.

  This sort of narrow decision making that defies all other evidence and support must not be allowed to happen ever again. The ultimate cost, the loss of the involvement of a new export industry of $5 billion, is too much of a price to pay for Australia. All wisdom does not reside in the commissioners. There is no way they can always grasp the specifics of the industry and the markets they are dealing in. It is obvious that they did not hear and they got it totally wrong.

  The government must listen to the valid complaints of industry about decision making by the Trade Practices Commission, which expends enormous time and resources on educating commissioners about the industry and its condition. This bad, wrong and backward decision points to flaws in the make-up of the commission, which must be addressed by the government. Issues brought to the commission are enormously complex and cover an extensive range. The Trade Practices Commission should be treated the same way as the Industry Commission, with specialist commissioners who have an expertise and knowledge of the industry under examination. Also this sort of representation should extend to the successor to the Trade Practices Commission, the National Competition Commission, as proposed by the adopted Hilmer report.

  It is a sad day to have to stand and address the Senate on a successful new export earning industry being lost to the nation—an opportunity lost by the decision of a body, the Trade Practices Commission, which in the opinion of a majority of the industry, manufacturers and government departments is wrong and contrary to the future long-term benefit of the Australian economy. Unfortunately, we have seen an opportunity lost. It cannot be pursued now because both the CSR and Mackay Sugar are pursuing their own marketing agendas.

  I repeat, Australia can never again afford to be placed in a position where it loses an export industry that possibly would have been worth half a billion dollars with all the jobs that could have entailed for regional Australia and all the development that would have occurred as a result of that decision. I am totally surprised that the government, and some of the ministers who have some influence on the Trade Practices Commission, allowed this to occur.