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Thursday, 10 October 1985
Page: 1026

Senator MICHAEL BAUME(8.00) —I wish to discuss a portion of the export market development grants scheme changes that will affect the wine industry. As Senator Short mentioned before the suspension of the sitting for dinner, it appears that this industry will be specifically disadvantaged. As a result, some points should be made and I think it proper that I should request the Government to reconsider at least one element of the changes it has in mind. I rely on advice from the Australian Wine and Brandy Producers Association, which I must say that I believe, that, in its words, there is no doubt that our export companies will be placed at a distinct disadvantage. I do not want to suggest that there is any sound reason why a more rational approach to these matters should not be pursued by the Government. I am not one who says that major increases in spending or the failure to make appropriate cuts in spending should be pursued. On the contrary, I congratulate the Government on those elements of its policy which involve a more rational approach to the spending of other people's money.

There is a degree of unfairness in the manner in which the wine industry is being dealt with in these changes. By way of background, it is worth mentioning that the wine industry has experienced a major degree of growth in the last 20 years. During that time production has increased by about 130 per cent and domestic sales by something like 400 per cent. Exports-certainly over the last ten years-have been no more than stagnant. This is evidenced by the fact that in 1983-84 exports of Australian wine were about 9 million litres, worth about $16m. There was very little change from the situation 10 years previously when I think exports were about 8.6 million litres. This has taken place despite the fact that there has been a collapse in the British market which provided the bulk of the market-something like two-thirds-20 years ago.

In 1963-64 the British market took about 4.7 million litres. That figure is now down to about 533,000 litres. The point is that the industry has had to enter a period of immense effort to replace the lost British markets. The wine industry should be commended for the way it has used effectively the previous Government's incentives to diversify its markets and help keep the industry alive-certainly to maintain the volume of exports which, regrettably, has not been able to keep pace with the growth of the industry domestically, but which at least has been maintained.

It strikes me as curious that we are obliged to suffer the consequences of the wine glut in Europe. Our own producers are being submerged in the European wine lake. Yet we are now telling them that we will not assist them, that the Government will not even look at a more reasonable, fairer way of withdrawing the support that has been so essential in assisting the industry. I must say that that support emerged in the policies of the previous Government. I have with me a telex from Brown Bros Milawa Vineyard Pty Ltd, a well known Victorian wine producer.

Senator Haines —They make a delightful Cabernet Malbec too.

Senator MICHAEL BAUME —They do indeed, even though there is no doubt that the general quality of Victorian wine does not match that of the Hunter Valley which is, of course, in my electorate--

Senator Haines —Or South Australia.

Senator MICHAEL BAUME —There the honourable senator and I may be at cross purposes. Brown Bros sent a telex to the Minister for Trade, Mr Dawkins, and copies of it to various other people, including Mr Ewen Cameron, the very effective member for Indi in the House of Representatives. The telex outlines the difficulties the company will face. It is a company that has tried very hard to promote its wines overseas. I seek leave to incorporate the telex in Hansard.

Leave granted.

The telex read as follows-

To: Hon. J. S. Dawkins

The changes to the export grants scheme, now the detail is known, will have devastating results to our export program if implemented in its proposed form.

The media release indicated changes were designed to continue to assist the genuine medium to small exporter. We fall into this category yet are completely disadvantaged by the changes.

1. We have been exporting for 7 years, developing probably the highest profile for quality Australian wine overseas.

2. We are pioneers in the export of quality Australian wine re-instating Australia's tarnished image of exporting poor quality product. This is a slow and tedious business and not yet profitable.

3. The only long term market areas for profitable export of Australian wine are at the quality end of the market. All other sales are quitting stock surplus to domestic production, with no long term goal of market development.

4. We have developed considerable expertise, professional resouorces and staff knowledgeable in exporting and overseas marketing which is budgeted to be self funding from 1989.

5. Our export efforts have been recognised by the Federal Government by way of an Australian award in 1983.

6. With the long lead times in the wine industry we have contracted growers to supply fruit for export market development.

The results of the changes announced will put us out of the export market at a time when real progress from 7 years investment is evident.

We request the legislation be changed in order that all exports be treated equally, i.e. even though previous claims have been made, 1985-86 stands as year one for future claims.



Brown Brothers Milawa Vineyard Pty. Ltd.

14th June, 1985

C. C. Mr E. C. Cameron-Member for Indi



Senator MICHAEL BAUME —I thank the Senate. The purpose of my incorporating the telex is to ensure that the Senate is aware of the fact that many wine producers in Australia will suffer-in this case the company says that its exports will be devastated-as a result of this change in the law. It is worth the Senate recognising that the international overproduction of wine calls for some kind of rationalisation. But I am not quite certain why the Australian wine producer should be the person who suffers the greatest degree of assault as a result of that overproduction and why we should remove the great bulk of assistance that we give to wine producers in the international market place. The reality is that many of the countries with which we compete provide incentives to their exporters. Many of the countries to which we used to export now place protective barriers around their domestic markets. The problem with the Europeans is very simple. Not only was Europe one of our major markets but also, as with so many agricultural producers, it now is a major competitor dumping surplus wine products on the export markets we are seeking to develop in the world to replace the markets in Europe that have been so unfairly closed to us.

There is no doubt that trying to move into new markets is a very difficult process. As the Wine and Brandy Producers Association has pointed out on many occasions, considerable education is necessary for consumers in overseas countries to learn about Australian wine. To sell Australian wine on these markets, Australian wine exporters have to establish their own position and create a real awareness. As I understand it, in a submission to the Government the Wine and Brandy Producers Association has pointed out that this is a very expensive proposition. In these promotions advertising is not only costly but also must be sustained for a number of years in order to have any lasting benefit.

The Wine and Brandy Producers Association said that changes to the EMDG scheme will adversely affect the overseas marketing plans of many companies within the Australian wine industry. Companies will now have to either increase prices in order to fund promotions or reduce promotional expenditures. Either alternative would lead to reduced export sales. The Association makes the obvious point that consumers' tastes for wine are constantly changing. This occurs in all markets. Consequently, wine export opportunities require substantial research and development work in each separate market. Many Australian wine producers are involved in many different markets. So the reduction of the EMDG scheme will lessen the amount of development of overseas markets which Australian wine exporters will be prepared to take and will have an effect on the value of Australian exports.

Many industries could maintain that kind of view. I think it worth while that the complaint of the wine industry in general be recorded so we understand that the consequences of this change in the law will be to the disadvantage of an industry which has done the right thing by diversifying and taking advantage of the opportunities created by a sympathetic and supportive Australian Government which has changed to being a government which is not sympathetic or supportive.

I understand and sympathise with the need for governments to be very selective indeed about the manner in which they support industries that cannot compete. To that extent I repeat my earlier comment that I do not wish to see governments becoming more involved in this kind of activity, of supporting enterprises that cannot succeed on their own. But neither do I believe that one should remove support in a manner which is unfair and discriminatory and which, in a sense, has a sort of retrospective impact. The way the scheme is being changed is in fact grossly unfair to those very wine exporting companies that have got off their tails and done the right thing. The sliding scale of diminution of entitlement discriminates against those very companies which have sought to maximise their exports and to use the scheme in the past. I strongly support the view maintained by Brown Brothers that the Government should adopt a different method of scaling down this kind of support, if indeed it is committed to the view that the support should be scaled down.

The Government's scheme means that someone who receives a grant in the first year gets a maximum entitlement of $200,000. In year 2 that maximum grant remains the same, but in year 3 the limit is $200,000 or 50 per cent of export earnings, whichever is less. Over the years that diminishes and in the seventh year it is $200,000 or 7.5 per cent of export earnings, whichever is less. Of course that massively disadvantages those people who have already set out on a promotional campaign. I make this point very strongly, as does the Australian Wine and Brandy Producers Association: It takes many years to build up effective export markets in the wine industry. I cannot see why those people who have done preliminary work should be put at a disadvantage. For example, if they are in the fifth year of receiving export market development grants, why should they have their grant cut to 12.5 per cent of export earnings while someone who is starting off afresh and who has done nothing in the past remains entitled to a full grant of $200,000? It is simply unfair.

The obvious way to resolve this matter is to bring every exporter or potential exporter into the scheme on the basis of being in year 3. That would save the Government money. I would be very grateful if the Government would provide the Senate with-or the Minister would seek to find out-the financial consequences of putting everyone on the basis of year 3 where the maximum would be either $200,000 or 50 per cent of export earnings, whichever is less. That would not disadvantage those people who had entered into a pattern of export and promotion which depended on a 3, 4 or even 5 year course of action. Those people entered into these arrangements in the expectation that this support would continue for another two years at least in the same way as it had existed in the past. It seems to me that changing the rules once one is well into the game is not a proper way to run the laws of this nation.

I believe the Government is introducing a change which effectively has a retrospective impact on those people who were well and truly committed to a course of action before the Government changed the rules. I hope that the Minister will take very seriously my request that he advise the Senate of the financial consequences of putting everyone on the basis of year 3 so that no one is disadvanataged. I say this because, as I understand it, the industry has asked the Government to do exactly that. I think that the submissions to the Government did not just come from one producer. I know that I have received comments from at least three different producers who take exactly the same view-that they are being unfairly disadvantaged by the manner in which the Government is making the change. They recognised-and certainly I stressed to them-that there was merit in the view that the Government should cut its expenditure. I would not have entertained supporting their proposition had they simply opposed outright the whole question of the Government having the right and, indeed, the duty to hold down its expenditure and, where possible, to cut it.

That is not the issue here. These wine producers are very responsible and sensible people who understand the political and economic imperatives facing the Government. Within that context they have said: `Okay, if you have to do it just do it fairly'. What distresses me is the fact that the Government is not listening to that message. The Government could not give a damn whether this is done fairly or not and that, I think, is the matter that the Opposition has every right to protest about vigorously on behalf of the Australian wine producers.

Let us recognise that the wine industry has already been hit very severely by a change in the import arrangements whereby the degree of protection offered was removed by the Government last year. It is nonsensical for the Government now to say that this did not have a serious impact on the industry because of the increase in the volume of sales as a result. I assure the Government that if it wants to look at the volume of sales of Australian wine since then, it will find that the great volume of those sales has been at the cheaper end of the market. There has been incredible discounting and major companies which had been holding high quality wine for long periods in order to provide a premium end to the market-with red wines, for example, clearly the longer one holds them the better the product-are now entering into campaigns of removing their stock holdings. For example, Lindemans Wines Pty Ltd was quoted in the newspapers in the last couple of days as having to decide, because of the sort of treatment it is getting from this Government in particular, no longer to hold the stocks of good wines for long periods.

Those people who wish to buy wines of some age-those who are interested in the quality end of the Australian market-will now be disadvantaged. If one wants to drink quality aged wines in Australia in future, one will have to buy them and put them down oneself, rather than buy them in the market place. That is one consequence of the changed arrangements relating to stock holdings. That situation has been worsened in the past year by the Government's removal of the 10 per cent element, which I imagine one could call a protective element, against European wines which, in effect, have been dumped in Australia, even though it is very hard to claim a dumping price. The capacity to object to real dumping is limited in a situation where the Europeans play ducks and drakes with the real cost of production and the real market prices under their quaint financing arrangements behind one of the most disgraceful barriers-not by way of tariff, but by way of exclusion from their own market.

Senator Jessop —And inferior wines too.

Senator MICHAEL BAUME —As my friend from South Australia quite properly points out, the stuff being dumped in Australia from Europe is far inferior to the high quality wines available in Australia, and it is absurd to say that the market place should determine which succeeds-the poor quality imports or the high quality Australian wines-because the price structures for the poor quality imports are absurd, although it is very difficult to establish what the real costs are because of the phoneyness of the European pricing and production structure. It seems to me to be a gross dereliction of duty by the Government to ignore the quite proper request by the industry to phase out this support in a way that is not unfair. All I am asking is that the Government re-examine this in a coherent and rational way, and I would be most grateful if the costs of doing what I ask could be presented to the Senate.