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Rural and Regional Affairs and Transport Legislation Committee
Meat & Livestock Australia

Meat & Livestock Australia


ACTING CHAIR: Welcome. We will start with Senator O'Sullivan.

Senator O'SULLIVAN: Whilst a significant component of MLA's funding comes from levies on the sale and processing of livestock, can you advise the committee of details of any other source of funding, the value of that funding and the percentage that that funding represents relative to the gross income for MLA?

Dr Barnard : I can give you a general answer on that and I will take the specifics on notice.

Senator O'SULLIVAN: That will be fine.

Dr Barnard : Our major source of income, as you said, is levies on transactions of livestock—cattle, sheep and goats. We also receive a substantial funding stream from government in terms of matching research and development funds. Each time a levy dollar is spent on research and development, the government matches that dollar. Fifty per cent of our R&D funds come from the government. We also get contributions from our program from three other major sources: AMPC, which is the processor company that invests in programs like market access and food safety; there are contributions from LiveCorp, which are exporters for the live export program undertaken by MLA; and there are contributions from private companies for assistance in marketing product overseas and in undertaking research and development.

ACTING CHAIR: I just remind senators that there is going to be an inquiry involving MLA.

Senator O'SULLIVAN: On the levies. I understand. I will leave that area alone.

Senator GALLACHER: Could you just give us the total operating budget of MLA?

Dr Barnard : It is about $170 million.

Senator O'SULLIVAN: The MLA state that their main charter is to provide services, tools and information that create tangible benefits for livestock producers—and, I would imagine, others—that flow back to the farm gate. Are you aware of that objective?

Dr Barnard : I certainly am as a member of the staff of MLA. It is very much imprinted on my mind.

Senator O'SULLIVAN: As a senator from Queensland, I have an interesting question. For the period between 2000 and 2012, income coming back to the farm gate has halved. It has reduced by 50 per cent.

Dr Barnard : I personally have no doubt that MLA has added value to cattle and sheep meat producers in Australia. I can point to all sorts of ways that we have added value. I can point to the MSA program, where we are now grading about 2.2 million cattle a year. Those cattle are each receiving premiums in excess of 20c per kilogram. I can point to our work with government to increase market access for the Australian industry—work that has been recently accommodated in the Korean FTA agreement. I can talk—

Senator O'SULLIVAN: As a general rule, I might not disagree with your statements—and I appreciate your position—but can I have us focus on Northern Australia and these incomes. Both the gross receipts and the value of profits have reduced by 50 per cent. That means people 10 years ago were getting double in receipts and profits on their farms despite—if we accept expenditure of $170 million annually over that somewhat 10-year period—a billion dollars having been spent. You might declare force majeure; you might declare that you should not run cattle in Northern Australia; you might have some other explanation for it. But, as a rule, do you accept that farm incomes have halved despite the efforts of the MLA and efforts of other agencies?

Dr Barnard : I do not underestimate the difficulties that cattle producers are experiencing across Australia, particularly during the present drought-affected circumstances. Of course, northern producers have also been affected by the difficulties in live trade—the difficulties in introducing ESCAS but also the difficulties imposed by Indonesia and access to their market. Those difficulties are being resolved. I can tell you that in Darwin at the moment they are fetching about $2.40, and those are historically very satisfactory prices. But that is not to underestimate the difficulties that many farmers are facing, particularly in the current circumstances.

Senator O'SULLIVAN: Thank you for your concession in relation to the live cattle trade, because that will help me dispose of the eight or 10 journey questions I had to arrive at that point.

ACTING CHAIR: I would have helped you anyway, Senator O'Sullivan. Do not worry about that.

Senator O'SULLIVAN: Thank you, Chair. Finally, as I focus on where I want to go with this, do you accept that the cessation of the live cattle trade in 2011 had a serious aggregating effect on producers who are otherwise struck by drought and a range of other typical issues that affect you as a producer?

Dr Barnard : Yes.

Senator O'SULLIVAN: My question then is: has the MLA devoted any part of their budget to gather data and present data that has specifically measured the impact on this sector and sectors within the sector?

Dr Barnard : We have certainly analysed that issue. For instance, if the trade totally stopped, what would be the impact on Australian cattle producers? It has a regional impact and a national impact. The national impact on our calculations was that cattle prices would drop by about four per cent, but the regional impact was a drop in cattle prices of around 25 per cent. The trade did not completely stop in 2011 but it was greatly curtailed. It was curtailed in part because of the introduction of ESCAS and the problems that followed, but there was also the reaction of the Indonesian government in terms of access to their markets.

ACTING CHAIR: Sorry to interrupt you. This is a very important issue, but I honestly believe that this can be followed up in another area and I do not mean Senate estimates today. I think we are going over a lot of old ground. There is not one full-time member of this committee who is not supportive of the live export trade, Senator O'Sullivan. While we appreciate your expertise and your representing of your constituency, for the purposes of Senate estimates I would ask that, if there are any other questions to go to MLA, you have only another couple of minutes.

Senator O'SULLIVAN: We can agree that despite funding and despite all of the contributing issues, we still have had a catastrophic collapse of farm incomes in northern Australian in particular over the last decade. My question to you is what is the plan that the MLA, as a very serious stakeholder, has to make a contribution to the resolution of those circumstances? That is my final question.

Dr Barnard : Could I suggest that that be answered next week? We are going to be appearing before the Senate again next week. I think that that is a general question and I would like our chairperson to answer that question.

ACTING CHAIR: I am keen to deal with it now.

Dr Barnard : I will give you a general answer now.

ACTING CHAIR: I guarantee it will be revisited next week.

Dr Barnard : We work in two areas. One is to improve the productivity of cattle producers, including the productivity of northern producers. Some of the initiatives that we have got there have to do with pasture utilisation. Some of the issues have to do with raising breeding rates. We have got a major project called the Cash Cow project. It looks at fertility rates in northern Australia.

But those productivity improvements have got to be matched by increases in demand. The other area that we are working on is marketing our product both in Australia and overseas—particularly overseas. That is where agreements such the Korean FTA are critically important. It is where the 150,000 tonnes that we sold into China last year is critically important. It is all about creating demand for Australian beef.

ACTING CHAIR: Thank you, Dr Barnard. We look forward to meeting again next week.

Senator GALLACHER: Dr Barnard, are you aware of a publicly advocated view that the price of Australian meat for Australian consumers is 20 per cent higher than the US? To take Senator O'Sullivan's position, the farm-gate return in the US is 50 per cent higher than what it is in Australia.

Dr Barnard : I am certainly aware of the price differences that exist between cattle values in the United States and Australia. That is something that we track on a regular basis and publish on a regular basis. It is absolutely true to say that US cattle prices, particularly for their feeder cattle, are significantly higher than Australian cattle prices.

Senator GALLACHER: And the result for Australian farmers is a poorer return. What does your organisation do about that?

Dr Barnard : Again, we work in two areas: raising productivity and improving demand for our product. But a lot of that difference occurs because of cost factors beyond the farm gate. So, processing costs in Australia are significantly greater than they are in the United States. The United States sells 90 per cent of their product into their domestic market. We have got to incur transport costs across our wharves and overseas. The retailing sector in the United States and the transport costs within the United States itself are so much cheaper than they are in Australia. So there is a whole lot of cost impediments in Australia that are significantly greater than in the United States, beyond the farm gate.

Senator FARRELL: What are your current staffing levels?

Dr Barnard : It is about 250, but I would have to take that on notice. I just do not have that figure in my head.

Senator FARRELL: 250 full-time equivalents or—

Dr Barnard : I think, but can I take it on notice?

Senator FARRELL: Sure.

Dr Barnard : That is worldwide, because we have officers overseas as well as in Australia.

Senator GALLACHER: Can we have the dollar value of that employment cost. It is 250, but how much does it cost out of your $170 million?

Dr Barnard : Can I take that on notice, too?

Senator GALLACHER: Absolutely.

CHAIR: I now call the Australian Livestock Export Corporation Ltd.

Senator PERIS: What has been the impact on animal welfare in the countries to which we export live cattle? Also, what is the view of the International Animal Welfare Organisation, which establishes the standards internationally, and to which the Australian export regulations comply?

Mr Galvin : I think it is a very important question. It is also important to note that we are not only exporting livestock around the world but we are also exporting best practice in animal welfare around the world. That is a key part of what Australia can contribute to animal welfare around the world. Through our involvement, the industry is transferring knowledge and skills to many countries that do not have the standards we have. It is very important, and that is done across the globe.

This is evidenced by significant improvements in Indonesia, for example. Before 2011 and the ban, only probably five per cent of cattle were stunned. At the moment, in 2014, we have 80-plus per cent and this is continuing to grow every day. When you look at it, that is a vast improvement in animal welfare standards in Indonesia and it is a credit to the Indonesian importers, the abattoirs there, and the cooperation they have between the exporters in Australia to get that outstanding job done. It is a credit to the live export program, which is jointly run between the MLA and LiveCorp. We have officers based in Indonesia and we have consultants in Indonesia going around to 110-odd abattoirs there under the ESCAS accreditation. They will be continuing to grow.

That dramatic lift is a combination of hard work by all people across the supply chain, with producers getting involved, and the whole lot. I think that is an outstanding effort. We have also trained about 4,000 people across the globe in animal welfare standards and in lifting those standards—be it Mauritius, the Middle East, Indonesia or Malaysia. We have a big presence across the globe through the live export program. It has taken on a very developmental side of things. You can see that in Indonesia and the Middle East, in particular, where I have been. Not only has the welfare standard of the Australian sheep been lifted but they have been lifted for sheep coming from the Middle East and from Africa. Similarly, in Indonesia, cattle standards in slaughter and animal welfare practices have taken place across the supply chain et cetera. I think that is a great benefit.

Senator EDWARDS: World leaders.

Mr Galvin : We are truly leading the way in the delivery of improved practices and interests in overseas countries. No other country is doing this. I think that was backed up by Dr Glyde today. No other country is putting in the effort we are. It is a credit to Australia for having lifted these standards.

Along the way we acknowledge that we will have some setbacks, whether it is leakages or some untoward practices, as we do in Australian abattoirs from time to time. Unfortunately human error occurs and bad practices do slip in. But what we are doing is exponentially improving. We might go backwards a little bit in some bad accident or bad practice, but we have exponentially improved animal welfare standards in these markets.

ACTING CHAIR: You should brag about it more often.

Mr Galvin : The industry will continue to address the challenges, with the cooperation of the countries involved. I think that is important. The countries have to be involved and have to be strong.

At the LIVEXchange conference in November, in Townsville, we had Dr Derek Belton, the head of international trade of the World Organisation for Animal Health, who made this statement, which I think is good to have read into Hansard:

The Australian live export industry has taken animal welfare improvements to the rest of the world and for this it has the OIE's unequivocal support.

They operate in 177 countries across the world and they have agreements to lift animal welfare standards, and he basically is saying that we are the major catalyst for lifting animal welfare standards around the world.

Also, we have an R&D program, of which 75 per cent of the funds are spent on animal welfare. We have 116 reports on R&D on our website, and these can be accessed from all around the world. So people in the shipping game in Uruguay and Paraguay, Pakistani feed lotters and Bangladeshi abattoir owners can go to this site and find advice on nutrition, animal welfare and handling practices. It demonstrates that we are not a closed industry. We want people to come to us and seek our advice. I think we have a very good team in delivering that across MLA and ourselves in the live export program.

ACTING CHAIR: This is great news. We are enjoying the positive news, but for the purposes of timing, we will proceed with questions.

Senator PERIS: So you have to say that the presence in these markets has certainly made a difference to the welfare standards of local animals.

Mr Galvin : I cannot reinforce that more. No other country is doing it. We are head and shoulder above everybody else and we should all be very proud of the efforts we are making.

Senator PERIS: The previous federal government made available to exporters and their clients a number of grants aimed at improving animal welfare through the supply chain. The main issue at the abattoir is the manner in which cattle are handled. I am interested in the level of investment that is being made in stunning, in terms of dollars spent and the number of stunning devices purchased. Also, how many Indonesian abattoirs have acquired stunning devices purchased by industry through the various government funding initiatives to improve animal welfare in South East Asia.

Mr Galvin : As I said, we have had the dramatic rise from under five per cent stunning before the ban. We have gone up to 80 per cent. Large amounts of money have been invested in it. I will hand over to Sam Brown, the CEO of LiveCorp, for the details of those funding allocations you have requested.

Mr Brown : Thank you, Senator Peris, for your question. There have been a wide range of activities, driven both by the live export program and by exporters themselves, aimed at implementing stunning and infrastructure upgrades throughout all of our export destinations. Our program has always maintained a strong focus at the point of slaughter and has undertaken work to improve design and infrastructure concepts for overseas countries.

We are in the process of completing an infrastructure grants program that was contracted to us through Meat & Livestock Australia, which was awarded some funds—under the former arrangement that you mentioned—to support improvements in the livestock supply chain. We constructed a merit based process for allocating these funds. We had $340,000 available. It was structured as a rebate process with 75 per cent government funding and 25 industry funding. It was available to licensed exporters. We received many applications from exporters. We established, as I mentioned, a merit based process with an independent panel to help guide and advise us on the allocation of those funds. You will be pleased to know that the advisory panel put a strong emphasis on investment in stunning equipment across all of those markets. Under that program, $282,000 has been allocated and we are in the process of finalising those reports across the three regions.

Senator BACK: We asked a question earlier about the number of cattle that have been exported to Indonesia. I wonder if it is possible for Mr Glyde to break those figures down for Queensland, the Northern Territory and Western Australia?

Mr Glyde : Yes, we can do that for you.

Senator BACK: When ESCAS was first developed, with the audit process that exporters have to go through, it became necessary—even if more than one exporter was using the same facility—that each of them had to go through the full audit compliance process. This meant that we were having multiple audits of exactly the same facility. Have we now seen a rationalisation of that so that the one abattoir, for example, gets audited and its compliance is then applicable to different people putting animals into it?

Mr Galvin : LiveCorp has certainly been advocating strongly a rationalisation of that duplication on duplication on duplication of audits for approved premises. I will hand over to Sam Brown, our CEO, who probably has a more recent update on this.

Mr Brown : Duplication across the audit process is something of great concern to us and our program. We see the great costs involved with auditing and have been advocating a risk based approach in that regard—to ensure that auditing is undertaken where it is most needed. We were very involved with the department's performance auditing policy, which has delivered some significant improvements. We are also working on research to try and overcome some of the obstacles to coordinating audits. But we are aware of the structure and the framework of ESCAS with regard to auditing. We are certainly working within that framework. We know that administration costs are enormous. If we can continue to make efficiencies, whilst not compromising the effectiveness of ESCAS, that will free up much-needed cash for the supply chain to flow back down or, alternatively, to be invested in areas of greater animal welfare advancement.

Senator BACK: Following on from a question from Senator Peris, you advised us of improvements in animal welfare standards for Australian animals being processed in facilities overseas. Do you have any evidence of local behaviours changing for locally bred and locally processed animals in those markets—in other words, evidence of the Australian practice flowing through to improvements in animal welfare at the domestic level in our target markets?

Mr Galvin : I can give you firsthand experience of myself in Doha, Qatar. I have been there two eids in a row. The sheep that are processed in a certain part of the abattoir run up a different race. One will be an Australian sheep and one will be a local sheep. I think the assistance we have put in under ESCAS has flowed directly onto the local sheep. They, in the end, are killed in the same abattoir. I believe that the handling has got better. I have been very impressed with it. I have seen firsthand how those practices that the Australian industry has put in place have transferred to local sheep.

Senator BACK: Thank you. Those are my questions.

Senator FARRELL: Mr Galvin answered a lot of the questions I was going to ask, when he answered a number of questions from Senator Peris. Could you give us a little bit more information about your staffing numbers and just how much that is costing per annum?

Mr Galvin : I will hand over, if I may, to the CEO. We are a very lean machine.

Mr Brown : We currently have five staff. Two of those are part-time staff. We outsource the vast majority of our activities to Meat Livestock Australia, as Dr Barnard mentioned. We invest in the Livestock Export Program, which co-funds those officers in markets. Corporate overheads is an area where we have been focusing on driving down costs. We have just recently reduced the size of the board from seven to five in order to create savings and efficiencies across corporate operations. If there is any specific question, I am happy to take that on notice.

Senator FARRELL: That is what I wanted to know.

Mr Galvin : I just want to add two more things, if I may, very briefly. It is identifying two things of importance. One is that sometimes the exporters in our industry can be maligned and, I think, totally unfairly by various media outlets and vested interest groups. The stats I have given in regard to improving animal welfare across the globe cannot be done without our exporters. Our exporters have to be front and centre of this improvement. They are our members and they are there, putting in a big effort. The effort they put in cannot be underestimated. As I said, some things do go astray and we heard about it today. But, on the whole, without our exporters extolling the importers, being there, working with the MLA, the lead programs, the national governments, it would not be occurring as it is in such a positive fashion.

Secondly, with regard to the grants program that Mr Brown mentioned, we had an independent panel assess that and it was pleasing to note that the RSPCA was on that panel, cooperatively working with us to ensure animal welfare outcomes in overseas markets.

ACTING CHAIR: Very good. Thank you very much, Mr Galvin, Mr Brown and Dr Grimes.

Proceedings suspended from 13:09 to 14:10

ACTING CHAIR: We are on trade and market access questions.

Senator FARRELL: Thank you. I want to ask some questions about the free trade agreement that is currently being negotiated with Korea. Who would be the best person to ask that question to? Dr Grimes?

Dr Grimes : Yes, Mr Murnane or Mr Glyde would be the best people to answer questions on that.

Senator FARRELL: Can you indicate to the committee whether the department was consulted on the formulation of the free trade agreement, Mr Murnane, in particular, in relation to the tariff reductions for a range of Australian food exports, including apples, pears and honey, frozen pork and condensed milk.

Mr Murnane : The Department of Foreign Affairs and Trade is the lead negotiator on free trade agreements but it consults with relevant departments on aspects of portfolio interest.

Senator FARRELL: I understand that, yes.

Mr Murnane : We obviously work very closely with them on the agriculture market access issues in the free trade agreements. So, yes, we did work closely with the Department of Foreign Affairs and Trade in negotiating the Korean FTA.

Senator FARRELL: The thresholds on the value above which Korean purchases will attract scrutiny from the Foreign Investment Review Board are being cut from $53 million to $15 million on farm land and from $248 million to $53 million for agribusinesses. Is that your understanding?

Mr Murnane : That is correct.

Senator FARRELL: Again, have you consulted about these changes?

Mr Murnane : Those thresholds were part of the incoming government's election commitment about investment levels in agricultural land.

Senator FARRELL: So, there was no consultation with you? Were you simply presented with a fait accompli?

Mr Murnane : That was a policy position of the incoming government.

Senator FARRELL: Yes.

ACTING CHAIR: Sorry, it is just a bit hard to hear you.

Senator FARRELL: I could hear Mr Murnane quite well.

Mr Murnane : I would simply confirm that those issues were a policy position of the incoming government.

Senator FARRELL: I think you have answered the question, but was there no discussion with you? You were presented with these changes; is that a fair assessment of the situation?

Dr Grimes : I think he just said that.

Senator FARRELL: No, that is what I am saying. I just want the witness to confirm that.

ACTING CHAIR: Will that threshold apply to all new FTAs?

Mr Murnane : Yes. My understanding is that the government will negotiate the best outcome that it can, but that it will look at investment thresholds in each FTA.

ACTING CHAIR: So, each case could be different?

Mr Murnane : I believe that is the case.

ACTING CHAIR: Thank you. Senator Farrell?

Senator FARRELL: Can you tell us, Mr Murnane, what sort of feedback you are having from industry stakeholders in respect of these issues, if any?

Mr Murnane : By and large, the response from agricultural industries has been very positive, particularly for those areas of the FTA where Australia has achieved parity with the European Union and the United States in access to the Korean market. I understand that organisations like the National Farmers' Federation, the Cattle Council of Australia and the Sheepmeat Council of Australia have all welcomed the Korean FTA and the benefits that it will give to Australian agricultural producers.

Senator FARRELL: How have you received this information? Have they contacted you or have you made the effort to contact them?

Mr Murnane : Partly through discussions with different organisations. Partly through the media statements that different organisations have provided.

Senator FARRELL: Now, the European Commission released a report on 5 November of last year that stated that the Australian export meat inspection system did not meet the European food safety regulations. Are you familiar with that decision?

Mr Murnane : Yes, I am, but Mr Read is probably more familiar than I.

Senator FARRELL: Is he?

Mr Glyde : If I could just state for the committee that that item actually comes up under food export certification, and Mr Read is here for the food division. We did cover that a bit before lunch.

Senator FARRELL: We did.

Mr Glyde : But we can either deal with it here or deal with it under item 20.

Senator FARRELL: I am in your hands, Acting Chair. Are you happy if we deal with that now?

ACTING CHAIR: I am so sorry, I was just reading something.

Senator FARRELL: That would be a yes. So, you are familiar with that decision?

Mr Read : Yes, I am familiar with that decision.

Senator FARRELL: The report particularly criticised the practice of company paid inspectors examining animal carcasses. I think the concern was that there was a potential for a conflict of interest. What has the department done about this decision?

Mr Read : Just to be clear, the reform was implemented in about 2011. There had been a range of interactions—

Senator FARRELL: This is the original report, is it?

Mr Read : This is a system change.

Senator FARRELL: Yes.

Mr Read : The system change was not necessarily just about company based inspectors. It is a flexible system that allows any range of inspection procedures to occur within a framework, basically, within a system. The major change to the system was our capability to measure performance. The EU were engaged from day 1 in that concept and that design and that rollout and the ongoing status of that delivery. They came and reviewed that system, as you say, in late 2012. Again, at that exit meeting, at which I was present, there was nothing particularly raised of concern at that point.

They then went back to Brussels, effectively, and, if you like, they took a position which had not been articulated previously around their interpretation of official auxiliaries within the system and the criteria by which they operate. That official position was first made available to us in early 2013.

As a consequence of the clarity with that point, which had not been previously made to us, we have worked with the industry to identify potential models, potential changes, to the existing system for access into the European Union which will enable ongoing access while still providing a platform for continued reform to inspection in Australia.

Senator FARRELL: Was there something that provoked that? Was there an incident?

Mr Read : No. I think it is more so the dynamics in Europe over the last three years. When we first took the reform of AEMIS forward we probably are the front-running country in terms of a high-performing, innovative, system that is providing fantastic capability for companies and the regulator to be able to oversight meat inspection, which is probably the most major change in 40 years to meat inspection internationally. They were certainly a close partner with us in those early phases of that because they also—

Senator FARRELL: When you say 'they', you are talking the European Union?

Mr Read : I am talking the European Union, because they also could see merit in that sort of reform with their member states. But from that inception point and those initial discussions, there was a combination of things, such as the global financial crisis and horse meat substitution. The global financial crisis impacts on them because of workforces in Spain and Italy, particularly with their government employees, and pressures that that would have then applied to their perception of outsourcing some of those services that normally occur in meat inspection.

Equally, with horse meat substitution, that elevated a level of consumer concern in the European Union around the need for more inspection and so forth. Now, that then has played to the European Union taking, in early 2013, with clarity in terms of official auxiliaries a position that has, if you like, slowed down the reform in that part of the world for the time being.

What we need to do is look to how we can modify the current system that we have got that dovetails into that change, yet still provides international market access for our plants, but equally continues to drive ongoing reforms in our regulatory oversight in the efforts of ensuring an ongoing competitive meat exporting sector.

Senator FARRELL: What steps in particular are you taking to bring that result about?

Mr Read : We have got continual consultations with the industry in terms of that direction. The concept of AEMIS was not just a model that stopped, the concept was that it is the meat inspection system, the delivery framework itself, but there is ongoing reforms such as how we do our regulatory oversight of those plants. So, in the last six months we are moving from the fact that we audited these plants every month to then every second month. Now we are actually doing system based audits on those plants twice a year and so forth. So that will continue to be less direct regulatory oversight, relying more on the measures seeking to change the way our veterinary officers operate on plants, so that they integrate closer with the company to look at what those issues of performance concerns in the business are that have a regulatory impact.

So, it is about how we bring in a partnership with the industry and our requirements and meeting importing country requirements closer together, better alignment, and more efficient delivery in those spaces. We have got these reforms happening in Australia. We have got this change now with the European Union, which in many ways provides opportunities for us, and we are looking at those potential opportunities with other countries, such as the US.

Senator FARRELL: What markets does the European Union decision potentially have an impact on?

Mr Read : The European Union.

Senator FARRELL: Just the—

Mr Read : Yes.

Senator FARRELL: Can you tell us whether there are any current reports on the port of entry issues with detections of microbiological contamination and macroscopic contamination?

Mr Read : Where? Anywhere?

Senator FARRELL: Anywhere, any of our ports.

Mr Read : There are, from time to time, instances identified at port of entry. The United States carefully monitors, from a microbiological perspective and a macroscopic faecal contamination perspective, product entering that market. China is a close observer of product. Russia has a very intensive monitoring program, and Europe is similar. So, occasionally we do get reports back in terms of—

Senator FARRELL: Are there any current ones that you are aware of?

Mr Read : I would say there probably are, but the incidents are quite sparse in the last year. So we have not had that many. All up there are probably 10 or 11 in terms of about 1.8 million tonnes of product exported.

Senator FARRELL: So, a very small percentage?

Mr Read : Very, very small.

Senator FARRELL: Are you able to get us some information on that? Is that information available?

Mr Read : Yes, we can provide that.

Senator FARRELL: Can you also update us on Indonesia's horticultural import regulations?

Mr Read : I would love to but—

Mr Glyde : That is not Mr Read's area.

Senator FARRELL: Who would like to answer that question?

Mr Glyde : That is probably Mr Murnane that can help you out there.

Senator FARRELL: Okay Mr Murnane, speak up loud so that Senator Colbeck can hear you.

Mr Murnane : In August/September last year Indonesia changed the way it was determining the volume of its imports in various products, particularly live cattle, boxed meat and some horticultural products. It had previously operated an import quota system but, as I say, in August/September last year it announced that it was changing to a reference price system for key commodities in markets in Jakarta. That was particularly the case for, red onions, chillies and cayenne pepper. As I say, it is allocating import permits on the basis of trying to stabilise the domestic price. That system is only now starting in the first part of 2014. It is issuing import permits for the first six months of 2014 for those key horticultural products. Given the growing season in Australia, it is too early to tell what the impact will be on our exports because we really have not started exporting commodities under the new system yet.

Senator FARRELL: What will be the first products that will be hit by the new regulations?

Mr Murnane : I expect they will be onions, chillies and garlic.

Senator FARRELL: How much of that do we export to Indonesia?

Mr Murnane : I do not think I have got those data with me. I can provide that to you later.

Senator FARRELL: Do you have that information?

Mr Murnane : No, we do not.

Senator FARRELL: Is it a substantial amount of product?

Mr Murnane : I am sorry, I would not have that.

Senator FARRELL: Can you also give us an update on where we are in respect of the free trade agreement with China and whether we are likely to meet the deadline for resolving that agreement?

Mr Murnane : You are better off directing those questions to the Department of Foreign Affairs and Trade because, as I said earlier, they are the lead negotiator of the free trade agreements.

Senator FARRELL: You said when we were talking about the Korean free trade agreement that you obviously have a very significant impact in the discussions as they relate to agriculture.

Mr Murnane : We work closely with DFAT, but I would not want to hazard a guess about timing and completion.

Senator FARRELL: But you are involved in those discussions?

Mr Murnane : Yes. We talk regularly and closely with the Department of Foreign Affairs and Trade and we take part in the relevant discussions with Chinese authorities.

Senator FARRELL: Is that you personally that does that?

Mr Murnane : It is sometimes me and sometimes one of our team here in Canberra or, if negotiations are held in China, we will draw on the agricultural counsellors that we have at our embassy in Beijing.

Senator FARRELL: Thank you.

Senator EDWARDS: Just on that line of questioning, has the agreement been discussed in any way, shape or form in the detail of anything that might be excluded? I think that is where you might have been going, Senator Farrell.

Mr Murnane : Again, I would not want to venture into that territory.

Senator EDWARDS: If I go to the Department of Foreign Affairs and Trade tomorrow, they are not going to refer me back to DAFF, are they?

Mr Murnane : I would expect not.

Senator EDWARDS: They are the lead agency?

Mr Murnane : That is correct.

Senator FARRELL: I have completed my questions.

Senator WHISH-WILSON: I just wanted to ask about TPPA.

ACTING CHAIR: Good luck!

Senator WHISH-WILSON: How many negotiation rounds have representatives from the department attended?

Mr Murnane : Just bear with me for a moment.

Senator WHISH-WILSON: I am happy for you to take it on notice.

ACTING CHAIR: You should get on the teamsters website. They are really concerned.

Mr Murnane : There have been 21 rounds of negotiations and our department has been represented at 19.

Senator WHISH-WILSON: So pretty much over a five-year process. Do you receive briefings or updates from DFAT or are you in between negotiations as well?

Mr Murnane : Yes. In the lead-up to the negotiating round we meet with DFAT and talk about the issues that are likely to arise at the next set of negotiations to make sure that negotiators are properly briefed. After a negotiating round, if we have not been represented there, they will give us a debrief and we will work through the next steps. Obviously if we are participating in a negotiating round we are already across the issues. If we are not at a particular set of negotiations there is certainly more than an open invitation, there is a sort of standing requirement that if there are issues that arise that DFAT think we either should be involved in or that they need our advice on then they just phone us.

Senator WHISH-WILSON: Has the department briefed the minister on the negotiations and possible implications if the agreement is agreed to and signed off on?

Mr Murnane : We have briefed the minister on the TPP matters relevant to our portfolio, yes.

Senator WHISH-WILSON: The issues such as quarantine?

Mr Murnane : Issues such as market access for agricultural products and issues around sanitary and phytosanitary agreements.

Senator WHISH-WILSON: Perhaps I will refine that a different way. Has the minister requested a briefing about anything specific himself, or is this something that you regularly do?

Mr Murnane : I am not sure if I can answer that in those specific terms. When we have provided a briefing the minister has sometimes asked supplementary questions of us which we have gone back to him on.

Senator WHISH-WILSON: Is food labelling part of the brief of this department?

Mr Glyde : Food labelling is the responsibility of the Department of Health. It has the regulatory framework for food labelling.

Senator WHISH-WILSON: So it is part of—

Mr Glyde : It is the Department of Health.

Senator WHISH-WILSON: I am sorry, I was just listening a bit earlier about regulations, so I was interested in that.

ACTING CHAIR: There was a reference inquiry on that. That is a rort.

Senator WHISH-WILSON: I know that is also part of the TPPA. They are looking at food labelling. I do not know but I have seen leaked texts, and that is all I have got to go on. Thank you.

Senator RUSTON: Does the PFA that is hopefully being negotiated with China come under your area?

Mr Murnane : The FPA?

Senator RUSTON: The pest-free area of status. I was talking to the biosecurity department earlier about some negotiations going on in relation to China recognising that South Australia is a pest-free area, particularly in relation to fruit fly. I had not heard whether that had progressed because prior to Christmas I was advised that there was a workshop in December in China and that there was some hope that maybe that might have been negotiated so I was wondering where it was at.

Mr Aldred : I can give you an update. We had hoped that that workshop would happen in December. Unfortunately, due to late notice and unavailability of some key staff, it did not occur in December. We are trying to get it as quickly as we can in the new year. Our expectations are that it will form part of discussions that I referred to earlier this morning when the chief plant protection officer is in China next week.

Senator RUSTON: Do we have a time frame?

Mr Aldred : It will be a matter for discussion next week.

Senator RUSTON: You said the hold-up in December was because some key officers were not available. Where did we fall down there, because there was a huge expectation that it was going to go ahead?

Mr Aldred : We had a couple of key people who were unable to attend due to personal circumstances.

Senator RUSTON: We, as in the Department of Agriculture?

Mr Aldred : Yes.

Senator RUSTON: Just as a broader issue, when we go on these negotiations, whether they be for specific and smaller status requirements like this or the broader issues of a free trade agreement, where does the farmer fit into the negotiations? How do we interface with the person whose commodity we are negotiating on behalf of? How do they fit into the negotiating space?

Mr Glyde : In general terms the Department of Foreign Affairs runs industry consultative processes right across the whole of the economy. The people here could give particular examples, but perhaps Mr Murnane could talk about the arrangements that occurred in relation to Korea where it is important for the industry to be aware of the offers that are being made as we move towards finalisation of these things and the processes that DFAT use to make sure that industry is aware of the pros and cons and the pluses and minuses of any negotiation.

Mr Murnane : That is correct. As the negotiations proceed and as different offers are put to us then the Department of Foreign Affairs and Trade leads the process, but we participate in consultations with representatives of industry organisations where we essentially say, 'This is what is on the table. What do you think?' They give us a reaction and then we go back to the next round. There is that sort of iterative engagement with industry organisations.

Senator RUSTON: Could that iterative process be short circuited in any way if you actually had the people who were able to make the decisions there instead of DFAT going to the table, they then contact you, you contact the industry, the industry comes back to you and you go back to the table? Would there be any benefit or is there any suggestion to get the people who are actually providing the advice and the people who are making the decisions actually a little bit closer together in the chain?

Mr Murnane : There have been occasions where industry representatives have not been at the table in the negotiations but in the same place; for example, at various TPP sessions there are representatives of the National Farmers Federation and some of the industry organisations who attend but not participate, if I can put it in those terms, so there can be consultation and feedback in real time. That has also happened sometimes in free trade agreement negotiations, but the negotiations are fundamentally government to government.

Senator RUSTON: I certainly understand that they have to be government to government. I am sure that there would be a lot of farmers out there who would probably be happy to pay their own way to sit in the next room if they thought the speed with which an agreement could be reached was accelerated by being there.

Senator WHISH-WILSON: Can I just ask for clarification? Mr Murnane, are you saying that the Farmers Federation, as an example, have attended or sat in on negotiations?

Mr Murnane : Not sat in on negotiations, no.

Senator RUSTON: But if we are doing a negotiation in Beijing they are in Beijing with you?

Mr Murnane : They could be.

Senator RUSTON: Is the visit encouraged?

Mr Glyde : It depends. It will vary from negotiation to negotiation. As we have heard, there were 21 rounds of the TPP that we have had to date and sometimes agriculture, for example, might not be discussed at all in one of those rounds, so there would be times when it makes sense to be there and there are times when it makes sense to be in contact. The other thing to put in play here is that the industry associations also have to have time to consult with their members. There is that process that has to go on that they have to organise because there is often not a unanimous view in an industry association and sometimes an industry association might not represent the breadth of views of a whole industry sector. There is a degree of difficulties that have to be negotiated, but at the end of the day it is a government-to-government negotiation and we think that it is very important for the industry to be a party to that, to give us their views about what they want to see come out of the negotiations before they start and also be able to react to interim outcomes as well.

Mr Aldred : I can just add a little bit more at the next level down, given the nature of some of your questions. If we are negotiating a specific biosecurity protocol as opposed to some of the broader processes, it is often the case that industry might be travelling with some of our people or there is a fair bit of dialogue going on at the time. A recent example would be trying to re-establish the table grape trade with China. There was daily, if not more than that, interaction between the Table Grape Association and our officers as we discussed the arrangements to re-establish that trade with our Chinese counterparts.

Senator RUSTON: In the department how do you choose the people that you are going to have sitting at the table who obviously are there on behalf of Australia's agricultural sector, as that is what your purpose is? How do you decide who those people are? How do you decide what skills they need to have, given that we all know that negotiating skills are a very specific and honed set of skills? Do you have specialists that you employ for that process?

Mr Murnane : In the Trade and Market Access Division we have people who are working on agricultural issues around specific countries. We organise ourselves around those geographic teams with some people dealing particularly with North-Asian countries and some people dealing particularly with South-East Asian countries so that we understand what those countries are likely to be bringing to the table.

Senator RUSTON: That was not quite my question. My question was: what are the skills that you look for when you employ someone like that? I understand what they do once they are there. If you were about to employ somebody to go on the Department of Agriculture Chinese protocol negotiating team on behalf of the table grape industry, how do you decide what skills that person has to go and negotiate?

Mr Glyde : It varies a lot between each individual negotiation. If we are having a major discussion about access arrangements at a technical level, we will take a delegation that will have technical expertise, people who understand phytosanitary conditions and things like that, and people who understand the industry from within our organisation with their skills sets that they have built up by working with those industries over many years. Similarly, we have to have people who understand the bilateral relationships, what it is that the other country might want and what sort of things that might drive them. When it is a major negotiation we might take a delegation of the right skill set sometimes accompanied by industry experts as well to help bolster the Australian side. In other cases it might be where we need someone who is very senior in order to be able to open a door to a more senior person to resolve a log jamb. Choosing depends on the nature of the incident or the issue that we are negotiating. There is a range of skill sets that we have to bring to bear right from the high level policy awareness of what we are trying to achieve in the Doha round through to understanding the microbial weights that are on different carcasses in our plants.

ACTING CHAIR: Tell us more about them?

Mr Glyde : Mr Read can inform you in great detail.

ACTING CHAIR: We will take it on notice.

Mr Glyde : We try to make sure that we match the skills that we have got with the situation.

Senator RUSTON: The only thing that worries me about your response is that at no time did you say that hard-core negotiating skills were a key skill that you were looking for. You have covered off on everything else that it would be reasonable to cover off on, but perhaps that is not something that is seen as important.

Mr Glyde : I was not trying to avoid going through each of the individual skills sets, but I would say that the people that have been doing this have very well developed negotiation skills, communication skills, diplomatic skills and so on. I think you could take that for granted.

Senator RUSTON: That is more reassuring.

Senator WHISH-WILSON: I would like to ask a follow-up question from Senator Rushton. Do any of them have previous industry experience in working for organisations?

ACTING CHAIR: You should be careful going down that path or we would never have a minister in this joint.

Mr Glyde : Yes, and we find that quite valuable. We have people not just in the international negotiation space but it helps us to have people who actually understand the industry that they are working with, so people move in and out of the organisation. We certainly are always on the look-out for people with that sort of skill set, in the same way that we are always on the look-out for people who can bring a different perspective sometimes to the organisation. There are certainly people who have industry experience who will end up negotiating for us as civil servants.

Senator RUSTON: I am wondering how your department reconciles the broad benefits of free trade agreement protocols and so on in terms of the trade space with the risks associated with biosecurity. That is only because you constantly hear out in the wider community comments like, 'DAFF is an expert at protecting the rest of the world from Australian primary produce.' Those sorts of comments raise some concerns, so I just wondered how you reconcile that and how you communicate that out because that is not a helpful thing to have said out there in the agricultural community?

Mr Glyde : That is a very good question. I might start at the export end if that is the end that you are referring to. Our job is to make sure that we guarantee that what the importing country wants we are delivering, so that is where that comment might come from. We are actually their agents. We are trying to make sure what goes over is exactly what they have asked for, nothing more and nothing less. On the importing side I might leave that to others to comment on, but we have an established level of protection insofar as biosecurity is concerned and we do our best to make sure that we do not breach that. That is all based on science and analysis and the sort of thing that the chief plant protection officer and the chief veterinary officer do to try to make sure that we are at the forefront of that science to make sure that we are protecting the country from pests and diseases. We build on our comparative advantage that we have because we are a relatively pest and disease free country because of the nature of our geography.

ACTING CHAIR: Just before we go I will clarify something. I will come back to you, Mr Murnane. Senator Farrell was talking along the thresholds for agricultural land to be purchased under the Korean trade agreement that had dropped from 248 to 15.

Mr Murnane : Under the Korean FTA the thresholds for foreign investment screening in agricultural land is at $15 million and for agribusiness at $53 million.

ACTING CHAIR: What about a US company? What is the deal there? Do you have those figures in front of you.

Mr Murnane : One billion.

ACTING CHAIR: I know that I did ask if the threshold refers to all FTAs, but I get a little bit lost. I am very pro foreign investment. I have no problems with foreign investment, but it has got to be done the right way. How does that help our farmers if we are putting a limit on the Koreans but it is all right for the Americans? How does that work?

Mr Murnane : It is the trigger for FIRB review of a particular investment proposal, it is not a limit on the investment.

ACTING CHAIR: I understand, but it is all right for the Americans. They can come in up to 243 or whatever, but we do not trust the Koreans.

Senator EDWARDS: Maybe we will review it when it reaches a certain value.

ACTING CHAIR: I still do not know how that helps our farmers. I am aware of the Archer Daniels business. I get all of that. That has come and gone. I thought we were open for business, but I find that very strange.

Senator EDWARDS: We are, but it is subject to review.

ACTING CHAIR: Why is it not consistent across everyone? Is it just the Koreans that we do not trust?

Senator WHISH-WILSON: Can I ask a question on this issue?


Senator WHISH-WILSON: In the negotiations with China has the issue come up that Chinese investment companies being government owned corporations have the lowest threshold? Has that come up as an issue in your negotiations with China?

Mr Murnane : I think you would be better off asking the Department of Foreign Affairs and Trade on that one?

Senator WHISH-WILSON: I have tried.

ACTING CHAIR: I am not asking you for an opinion.

Mr Murnane : I am still with your point. I would simply say that the Korean FTA is the first and only agreement that has been signed since the change of government. The other levels were negotiated under previous agreements.

ACTING CHAIR: I really understand that and I get that. I am sorry, Senator Rhiannon has a question. She is on her way and I want to give her the opportunity, but we do have a time schedule so if she is not here I am going to have to move on and get her to put it on notice. I will give her the opportunity to try to get here. What about New Zealand? What is their threshold before it attracts the Foreign Investment Review Board? With the way that food comes from China through to New Zealand, we should be worried about that track.

Mr Murnane : Yes. The general FIRB threshold for New Zealand is $1,078 million.

ACTING CHAIR: It is higher than the US?

Mr Murnane : No, it is the same as the US.

ACTING CHAIR: $1,078 million.

Senator EDWARDS: That is over one billion.

Senator WHISH-WILSON: It also raises a question of the other 10 negotiating countries in the TPP, whether they are also going to want an increase.

ACTING CHAIR: This was a question that was put in a roundabout sort of way to Mr Murnane. It was each one will be looked at, so we will have to watch and see this space. Senator Whish-Wilson and Senator Siewert, I am mindful that we do have timetables to move to and Senator Rhiannon is not here. She will have to put her questions on notice.

Senator WHISH-WILSON: I only have one quick question.

Senator SIEWERT: Let Senator Whish-Wilson ask his question.

ACTING CHAIR: She will not be able to mark it after all.

Senator SIEWERT: Senator Whish-Wilson had one more question.


Senator WHISH-WILSON: On this issue of trade as well. In relation to biosecurity and phytosanitary/quarantine, has it been put to the department in any negotiations around the TPP, or even the Korean free trade deal, that these are seen by other country's negotiators as being pseudo barriers to trade?

Mr Glyde : Perhaps we could answer that in the broad. If we do not ask about a particular negotiation at present, the question remains that pretty much every time we go overseas and try to negotiate something the other side will say that our barriers are not based on science, they are trade protection. We refute that and we continue to refute that. I think the evidence shows that through our process of input risk assessment and the like that our barriers are based on science. It is a general criticism of the Australian government. The Australian position is that whilst we are the second least subsidised agricultural economy in the world, our competitors see that we use biosecurity as an artificial trade barrier and that is not the case.

ACTING CHAIR: That could not be further from the truth.

Senator WHISH-WILSON: It might have been before that you said that there was criticism of the government, but have you had any ministerial directions to review this at all around the free trade deals that are being negotiated?

Mr Glyde : Not that I am aware of. Historically it is one of those things. Our level of protection has remained the same over many years.

Senator WHISH-WILSON: You have certainly got support here from all of us on that. I know politically to get these deals done often the nature of a negotiation is that you have to give up something to get something, and considering how consistent the criticism is about pseudo trade barriers I am concerned that governments may cave in on this, and I think a lot of people in the agricultural sector are.

ACTING CHAIR: Just one question and then we will move on.

Senator GALLACHER: Can you explain the science behind 15 and 53 versus 1,078 to 53? You basically said that you negotiate in an environment where you can justify your position. It is the first agreement signed by this government. Where is the science there?

Mr Glyde : The science I was talking about was the biological sciences behind our average level of protection insofar as biosecurity is concerned. All I can really do is reiterate what Mr Murnane said. This is a government policy formed on the back of concern in the community about the level of overseas investment in the farm sector and the agribusiness sector. That is the way it is. It is government policy.