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Standing Committee on Economics
18/08/2011

DENNIS, Ms Kathy, Assistant Secretary, Research, Regulation and Food Branch, Department of Health and Ageing

MAY, Mr Peter, General Manager, Legal and Regulatory Affairs, Food Standards Australia New Zealand

McCUTCHEON, Mr Steve, Chief Executive Officer, Food Standards Australia New Zealand

MORRIS, Ms Megan, First Assistant Secretary, Australia New Zealand Therapeutic Products Agreement Task Force, Department of Health and Ageing

Committee met at 09:20

CHAIR ( Mr Craig Thomson ): I welcome witnesses, members of the public and the media. The committee is reviewing the Food Standards Amendment (Truth in Labelling—Palm Oil) Bill 2011, which seeks to mandate the labelling of palm oil in food where an amount of palm oil is present in the food or was used in its production. The bill also seeks to amend the Australian consumer law to stipulate that palm oil is a relevant characteristic of a good in determining whether a business has engaged in misleading conduct. This provision applies to all consumer products, not just food. At today's hearing the committee will have the opportunity to hear from the key government agencies which will implement and enforce the bill if it were to come into law. The Department of Health and Ageing, and Food Standards Australia New Zealand have this expertise for food labelling. Treasury and the Australian Competition and Consumer Commission will be able to comment on the amendments to the Australian consumer law. The committee will also hear from a number of other government agencies and business groups. Finally, I would like to acknowledge representatives from the Malaysian Ministry of Plantation Industries and Commodities and the Malaysian palm oil industry, many of whom have travelled from Malaysia to give evidence here today. I welcome them to this public hearing.

CHAIR: On behalf of the committee I now welcome representatives of the Department of Health and Ageing and Food Standards Australia New Zealand to this hearing. I remind you that, although the committee does not require you to give evidence under oath, the hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House or the Senate. The giving of false or misleading evidence is a serious matter and may be regarded as contempt of parliament. Welcome to all of you. You have provided us with a submission. I invite you to make an opening statement more generally, or in relation to that submission, and we will go to questions after that.

Mr McCutcheon : Thank you, Chair. I would like to make an opening statement very much based on our submission. Food Standards Australia New Zealand welcomes the opportunity to appear today. We also appreciate the opportunity to make a submission. I will not go through the details of our submission, but there are a number of points I would like to draw to the committee's attention. Firstly, the objects statement in the Food Standards Australia New Zealand Act makes it clear that FSANZ was established to: give consumers confidence in the quality and safety of the food supply chain, provide a regulatory framework that establishes an economically efficient environment for industry, give consumers information relating to food that enables them to make informed choices, and provide consistency in domestic and international food regulation in Australia and New Zealand without reducing the safeguards applying to public health and consumer protection.

If the purpose of the bill is to achieve the objects of the FSANZ Act—I am talking about the labelling bill here—the provisions of part 3 of the act which ensure evidence-based decision-making and good regulatory practice should be applied instead of negated. Part 3 of the act sets out an evidence-based decision-making process that assures the achievement of the objects. The primary method by which FSANZ achieves the object of the act is to regulate the supply of food in Australia and New Zealand by making food standards. When making food standards, FSANZ is required to achieve some particular objectives, in addition to achieving the objective of the act. The additional objectives are the protection of public health and safety, to provide adequate information relating to food to enable consumers to make informed choices, and to prevent misleading or deceptive conduct. Standards should also be based on risk analysis using the best available scientific evidence, promote consistency with international standards, promote an efficient internationally competitive food industry and promote fair trading in food products. They should also be developed with regard to policy guidelines developed by the ministerial council, good regulatory practice and relevant New Zealand standards. It is possible that a standard made in the manner required by the bill would be of no effect.

Standards developed by FSANZ do not have a direct legal effect; rather, the Food Regulation Agreement provides that the states and territories will adopt or incorporate the code into state or territory law. States and territories have enacted legislation to implement their part of the agreement.

The Australian government and the New Zealand government have also entered into an agreement by which New Zealand adopts the majority of FSANZ's food standards. New Zealand has agreed to adopt general food standards, for example, labelling and composition standards, with limited exceptions for special cultural or trade considerations. The treaty between Australia and New Zealand prescribes a procedure that facilitates the making of consistent standards.

The Food Standards Amendment (Truth in Labelling—Palm Oil) Bill seeks to establish a standard in a manner that is inconsistent with the interjurisdictional arrangements that operate within Australia and in Australia's relation with New Zealand. In particular, the bill removes a consideration of public health and safety from the process of establishing a food standard. That has the potential to compromise public confidence in the food regulatory system, which is founded on the proposition that food standards will be made with the protection of public health and safety as the paramount consideration and be based on the best available scientific evidence. The procedure established by the bill is also inconsistent with the current statutory and administrative requirements that FSANZ considers regulatory impacts. This includes consideration of all the costs and benefits of a proposed standard on consumers, industry and government.

The code currently maintains a standard requiring labelling and naming of ingredients in foods. In general terms, standard 1.2.4, labelling ingredients, requires that oils be qualified as to whether the source is animal or vegetable. Palm oil is a vegetable oil and is labelled accordingly. This is consistent with international standards and the practice in many trading partners. Certain vegetable oils, including peanut, soybean or sesame oils, need to be specifically declared on the label so as to inform consumers who may have an allergy to these foods. This is a health and safety consideration. Palm oil is not allergenic and does not have a specific labelling requirement. Finally, saturated fat levels must be specified in a nutrition information panel if saturated fats are in food. This is another health and safety requirement. Thank you.

Ms Morris : The Department of Health and Ageing will add some supplementary information to their comment.

CHAIR: Please go ahead.

Ms Morris : This goes to the nature of the food regulatory system in Australia, our relationship with the states and territories and with New Zealand, and the role of the Commonwealth government in setting food policy. The Commonwealth has limited powers under the Constitution in the food space. Food laws and their implementation and enforcement are mainly the responsibility of state and territory governments. However, the three levels of Australian governments have worked together over many decades in a cooperative manner to provide Australia with the benefit of consistent national food standards. The food regulation system, as my colleague from FSANZ mentioned, is also binational and includes the New Zealand government.

The primary aim of the system is to ensure a high standard of public health protection. While the system is open and transparent, it is also somewhat complex. Its operation is set out in a number of interrelated agreements and legislation. The Food Regulation Agreement, which was attached to the submission from the Department of Health and Ageing, gives effect to a commitment by Commonwealth, state and territory governments to a cooperative national approach to food regulation within Australia. The Australian and New Zealand governments have formalised the binational nature of the food standards system via a treaty and the Food Standards Australia New Zealand Act 1991 establishes FSANZ as an independent statutory authority. Mr McCutcheon has already talked in detail to the role of FSANZ in food.

The Food Regulation Agreement also establishes the Australia and New Zealand Food Regulation Ministerial Council. One of the most important features of Australia's food regulation system is a separation of policy decision making from the development of food standards. This is achieved through the mechanisms of the ministerial council, which is responsible for food regulation policy in Australia and New Zealand. FSANZ has a role in setting standards, which Mr McCutcheon has already been through. The ministerial council has an oversight role for the draft food standards developed by FSANZ because it is the ministers from the states and territories—

CHAIR: Sorry to interrupt you. We are having a division at the moment; we will have to adjourn. We will resume shortly. I apologise for the interruption.

Ms Morris : That is fine. I will mark my spot.

Pr oceedings suspended from 09:30 to 09:37

CHAIR: There is the potential for further divisions. I will let people know at the time. We will proceed as we can.

Ms Morris : I only have a few more points to make, Chair. I will take up from where I stopped. The ministerial council has an oversight role for the draft food standards developed by FSANZ because it is the ministers from the states and territories that consider draft standards and whether to request FSANZ to review or amend them. Enforcement of the code is undertaken by state and territory governments and, in some instances, local governments. The Commonwealth has no role in the enforcement of the code, except in regard to food at the border through the Australian Quarantine and Inspection Service. The amendments proposed in this bill are inconsistent with the cooperative process for developing and reviewing food standards that is established under the Food Regulation Agreement with states and territories, the food treaty with New Zealand and the FSANZ Act. It is also probable that any standard resulting from the provisions of this bill may not be enforceable. Thank you, Chair.

CHAIR: Thank you both for your comments. Again, I apologise for the break in the proceedings. The question I want to ask goes to where you both were going about the enforceability, the result. If this legislation were passed in its current form, what effect would it have in the absence of the cooperative approach that has occurred in the past? For example, if the states decided that they were not of the same view as the Commonwealth parliament, what effect would that Commonwealth legislation have in actual terms?

Mr McCutcheon : The first thing to note if this bill were passed, which would oblige FSANZ to prepare the standard, is that the standard would not go into the Australia New Zealand Food Standards Code, because it has not been developed under the process that has been agreed through the intergovernmental agreements. Essentially that standard would go onto the website and would sit there. In that respect there would be no enforcement of the standard because states and territories would not have adopted it. The mechanism by which they adopt standards is that, once they go into the code, then they are automatically adopted into state and territory legislation under their food acts. In this instance that would not happen because the standard would not be in the code.

CHAIR: What if some states adopted it and others did not? Is there a possibility that that could occur, because it is a different approach—it is a top-down approach rather than the cooperative approach?

Mr McCutcheon : I guess there is no formal mechanism for that to happen. If an individual jurisdiction decided they wanted to adopt it through their food legislation then they could. There is no mechanism for that to happen under the current arrangements.

CHAIR: That would essentially be the start of a breaking down of those national standards because you would have different standards in different states if that occurred.

Mr McCutcheon : That is correct.

CHAIR: Let us say all the states in Australia adopt it but New Zealand does not; what happens then in terms of labelling?

Mr McCutcheon : Again, it would be inconsistent with the current arrangements, although there are differences. In the case of New Zealand there are some labelling standards that the New Zealand government has decided not to adopt—for example, country of origin. By and large you would essentially have all the Australian states and territories adopting that standard through their own mechanisms and New Zealand not. So there would be a difference.

CHAIR: I fear this is us again—another division. Unfortunately, we are going to have to adjourn again. I apologise for that.

Proceedings suspended from 0 9:41 am to 10 : 01

CHAIR: I was asking some questions about the enforceability and the effect of this legislation going through in a practical sense. I think we were up to talking about the effect in terms of New Zealand. You had given an answer in terms of that. The only other question relating to that from me is: given the way in which the arrangements work with New Zealand, if the Australian states were to adopt this legislation into their codes but New Zealand was not, would that enable goods to come into Australia via New Zealand without that labelling?

Mr McCutcheon : In a general sense, under the Trans-Tasman Mutual Recognition Arrangement, products produced in New Zealand that meet New Zealand law can be sold in Australia and vice versa. My sense is that products would be able to be sent from New Zealand to Australia if they comply with the New Zealand labelling arrangements, but that does not happen often. That is something I would need to consider a little bit further.

CHAIR: The reason it does not happen often is because of the cooperative regime in which these regulations have come into effect previously and historically?

Mr McCutcheon : Certainly. We are talking about the labelling area here. I guess in other areas, for example maximum residue limits on products where New Zealand have their own standard and the Australian states and territories use the code standard, again, products in New Zealand that meet the MRT standard there can be legally sold into Australia. I would expect the same principle would apply for other food laws.

CHAIR: Effectively, in terms of approach then, the approach by having this legislation come through in the way that it has goes against the approach that has been there in terms of food labelling but, more generally, the effect that that has is the enforceability issue and the ability to have a variety of results that may or may not have any effect.

Ms Dennis : Basically that is correct. As you said, what you would be relying on to make the bill enforceable is the states and territories making individual decisions to adopt it into their legislation, because otherwise, as Mr McCutcheon said, it will not become part of the food standards code, so it will not automatically become part of their law. So they would have to make their own individual decision to do so.

Mr BILLSON: The process that you normally operate under provides the opportunity for others to activate through a notification process the development of some kind of food standards; is that correct?

Mr McCutcheon : Yes, Senator. There are a couple of avenues. One is that anyone can apply to have the food standards code amended or for a new standard to be developed or, alternatively, FSANZ can raise proposals to amend or develop new standards itself.

Mr BILLSON: So someone external to FSANZ can instigate that process?

Mr McCutcheon : Correct.

Mr BILLSON: Why could the parliament not do that?

Mr McCutcheon : As in parliament making an application?

Mr BILLSON: Let us go to the heart of the bill. There are two provisions, one which relates to the consumer law; the second one—I understand all the jurisdictional gymnastics that you have referred to and how complex that is, and thank you for explaining that—is there not scope for FSANZ, in goodwill, to recognise that the parliament of Australia would like some work done on this? This issue has moved at a glacial pace for eight or nine years and there is quite a degree of fatigue about a simple proposition that people would just like to know if they are ingesting palm oil or bathing in it, then they would like to know that and make an informed judgment accordingly. Is there not scope for FSANZ to simply embrace that provision, accepting its impurity, as a notification to FSANZ to get on with the task that it seeks to highlight?

Mr McCutcheon : Again, the FSANZ Act itself sets out the procedures under which we trigger amendment or development of new standards through applications or proposals. If this bill goes through, and parliament says 'FSANZ go and develop that standard', then we have an obligation to do that.

Mr BILLSON: Through your normal processes?

Mr McCutcheon : No, not through our normal processes. We would be doing it in response to the legislative amendments that are there.

Mr BILLSON: Forget the House of Representatives and say it is Harry Reid writing to you saying, 'I reckon a food standard that deals with palm oil is a good idea. What do you reckon?' If that happened, what process would you go through?

Mr McCutcheon : If it was an application we would take it through our normal process by putting that application onto our work plan and then taking it through the normal FSANZ process for assessing application.

Mr BILLSON: My proposition is: put a line through the word 'Harry Reid' and say 'House of Representatives'. Why is it not open to you to simply deal with this issue as if it was the parliament going through the process that Harry Reid would go through? I am bewildered about why that relatively straightforward responsive option does not seem to come into the discussion at all?

Mr McCutcheon : It might be worth mentioning that in 2008 we did have an application to include palm oil labelling. We took that through the normal process, assessed the evidence and conducted the regulatory impact statement and so on, and the FSANZ board, as the decision maker, came to the conclusion that there was not sufficient evidence to justify labelling for palm oil. So that application was rejected.

Mr BILLSON: And you say none of those circumstances have changed?

Mr McCutcheon : We do not believe circumstances have changed—certainly on the basis of what is in our legislation that we have to consider in assessing applications or doing proposals.

Mr BILLSON: Even though the senate made a conclusion that it believed there was some considerable net public benefit in the listing, you disagree with that conclusion?

Mr McCutcheon : It is not a matter of disagreeing with the conclusion. We have been through this process once and we do not believe there has been new evidence to emerge on either costs or benefits that would justify us raising a proposal to do this work.

Mr BILLSON: In the Senate the original bill that was being discussed had a notion of injecting in a sustainability concept into food standards administered against a set of metrics developed by an NGO outside government. Would you concur that the Senate was wise in deleting that provision from the original bill.

Mr McCutcheon : Our act makes it very clear it is around protecting the public's health and safety. That is the objective of the act. So I guess when we start moving into other areas of sustainability and the like, it is beyond FSANZ's remit, really, to be able to work into that area.

Ms Dennis : I would just like to add to what Mr McCutcheon was saying. In terms of you talking about Harry Whoever asking for FSANZ to consider developing a standard, or anyone, for that point, whilst that can happen, the process is that whilst FSANZ can be asked to look at something, the outcome of that process cannot be predetermined. There is still a process that FSANZ has to go through, and in the end a decision is made by the ministerial council whether or not to accept, reject or review what FSANZ has put forward. So the outcome cannot be predetermined by whoever makes the request.

Mr BILLSON: In the context of the provision of the bill, you would think if the parliament wished to convey a clear and considered view about the need for some work in this area would that, in your mind, be better as a motion passed by the parliament in preference to a legislative provision? I am thinking: how do you get that notification process going that seems not that complicated but seems to be very complicated here?

Ms Dennis : I do not think that I can comment on the best process. Maybe Mr McCutcheon can. My comment would be that the issue is the fact that the bill basically already determines the outcome of what the standard will say. That is where the process is not being followed.

Mr BILLSON: Do you feel there is any upside in letting people know that there is palm oil in food? I brought along, if I may, some what I did not think were that complicated examples—admittedly it is not food—here is an herbal essence shampoo, and it says it has vegetable oil in it. That was a few years ago. It is an herbal essence shampoo. It says it has palm oil in it. Do you think that is too much to ask to let consumers know there is palm oil?

Ms Dennis : There are separate requirements in relation to cosmetics that require palm oil to be labelled—

Mr BILLSON: I appreciate that. I was just making a general point about awareness and consumer information.

Mr McCutcheon : From a food point of view, unless there are particular safety issues around palm oil then we would not see that as necessary to specifically list palm oil. As I mentioned in my statement, there are some vegetable oils where there are potential health and safety issues, through allergens and those sorts of things. In the case of palm oil and other saturated fats, certainly if they are saturated fats they need to be declared on the label, but as a generic 'contains saturated fats'.

Mr BILLSON: But 'contains saturated fats palm oil' would be a step too far in your sense?

Mr McCutcheon : That again would you subject to our consideration. We would have to look at the costs and benefits of that. My understanding is that if we move towards a label where you did identify specific oils, or the source of those oils, then that would impose quite considerable costs on industry. We would have to look at those costs. We would also have to look at and try and put some sort of value on the benefits this would provide to consumers.

Mr BILLSON: In fairness to Clairol and in fairness to coconuts, it does say 'coconuts and palm oil'. For the purpose of disclosure that is pretty straightforward consumer information and people can make their own judgments and be an informed consumer. I would have thought that could not be a bad thing.

Mr McCutcheon : Certainly my understanding is some companies actually do that now. They are members of organisations where they have agreed to provide additional information to consumers above what is regulated.

Ms Morris : Just to summarise what my colleagues have been saying, if FSANZ is going to consider specific labelling, they would need to take into account safety or public health grounds. There are no known safety issues with palm oil. Yes, it is a saturated fat, but my understanding is that it is no better or worse than a group of other saturated fats. For a consumer, for health reasons, they need to know if there are saturated fats. It does not matter what the source of those fats is.

Mr BILLSON: The idea that the bill then shifts, inspired by an informed consumer, into the consumer law, you would think that is a less offensive pathway to go down that the FSANZ process?

Ms Morris : I am not going to comment on whether consumer law is better. I understand that Treasury are appearing later. I think there are issues. They have a separate regulatory system, and they can talk about the issues with consumer law when they appear.

Ms OWENS: In terms of consistency, the whole point of food labelling is that when you pick something up you know what is in it, if this bill went through as it is, does that mean that I could pick up one jar of something that had the same ingredients as something else but came from a different state or came from New Zealand and one of them would say palm oil and one of them would not?

Mr McCutcheon : I guess that is a possibility. Again, we would develop the standard, as the bill would require. But in terms of adoption of that standard, if one state decided to adopt it then that scenario could unfold.

CHAIR: Thank you for your attendance here today. Again, I apologise for the disruptions. I do not think you have been asked to provide any other material. You will get a copy of the transcript of the evidence; if there are any errors or omissions, please get in touch with the committee straight away. Once again, thank you for your attendance here today.