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senate vote 2017-10-17#6

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on 2017-11-25 16:54:32


  • Regulations and Determinations Competition and Consumer (Industry Code — Sugar) Regulations 2017; Disallowance
  • Regulations and Determinations - Competition and Consumer (Industry Code — Sugar) Regulations 2017 - Disallowance


  • <p class="speaker">Peter Whish-Wilson</p>
  • <p>As senators may be aware, earlier today Senator Leyonhjelm sought to postpone business of the Senate notice of motion No. 1, relating to the disallowance of the Competition and Consumer (Industry Code&#8212;Sugar) Regulations 2017. At the request of a senator, the question was put and was negatived.</p>
  • <p class="speaker">David Leyonhjelm</p>
  • The majority voted against disallowing the [Competition and Consumer (Industry Code—Sugar) Regulations 2017]( Had this vote been successful, those Regulations would have stopped having effect in law, but since the vote failed they will continue as they are.
  • Senator [David Leyonhjelm]( introduced this motion to disallow because he believes that the Regulations were introduced too hastily in response to demands from the One Nation Party and that there was insufficient consultation on them. Read his [whole explanation]( for why he thinks they should be disallowed.
  • ### What do these Regulations do?
  • According to the [Explanatory Statement](
  • > *The purpose of the Competition and Consumer (Industry Code—Sugar) Regulations 2017 (the Regulations) is to regulate the conduct of growers, mill owners and marketers (of grower economic interest sugar) in relation to contracts or agreements for the supply of cane or the on‑supply of sugar. This includes establishing a process for pre‑contractual arbitration where the parties fail to agree to terms of contracts or agreements.*
  • > *In addition, the Regulations ensure that supply contracts between growers and mill owners have the effect of guaranteeing a grower’s choice of the marketing entity for the sale of sugar for which the grower bares the price exposure risk.*
  • <p>I move:</p>
  • <p class="italic">That the Competition and Consumer (Industry Code&#8212;Sugar) Regulations 2017, made under the Competition and Consumer Act 2010, be disallowed.</p>
  • <p>Tonight we're considering the unbalanced code of conduct covering the sugar industry. This unbalanced code was hastily prepared in response to One Nation saying that they would go on strike if such a code wasn't introduced. This threat not to vote on legislation was made back in March, when the government was seeking to legislate to lower the company tax rate, an issue of great significance to Australia. The code is also a response to the Nationals wanting to demonstrate that they can respond in knee-jerk fashion to short-sighted complaints as quickly as One Nation can.</p>
  • <p>Because it was hastily prepared, there was none of the usual consultation covering all the stakeholders that would be subject to the code. Because the code is so fundamental to the functioning of the industry, this is an irresponsible omission. Because the code was a response to short-sighted complaints, it is not like the codes of conduct found in other industries, which take an even-handed approach and make clear that negotiations are to be in good faith. Instead, this code tilts the scales heavily in favour of the blinkered demands of those who complain the most, to the long-term detriment of the entire sugar industry. With the Greens and some other crossbenchers willing to jump into bed with One Nation and the Nationals on this, it looks like the long-term decline in Australia's share of global sugar production is set to continue. Once again we see that the antibusiness, foreigner-fearing Greens and One Nation are more alike than either wants to admit.</p>
  • <p>This code is not a balanced code of conduct, because it allows arbitration pre contract and it is proscriptive about the arbitrator's role. The code refers to 'grower economic interest sugar', which is a concept set in Queensland legislation. The code forces the arbitrator to rule that the marketing entity for this sugar must be chosen by the canegrowers. Yet this is sugar made and owned by a miller. The decisions as to how that sugar will be sold will be taken out of the hands of the miller. Forcing a miller to negotiate with an input supplier over the sale of the miller's own products and to comply with the directives of an arbitrator should it fail to agree with those input suppliers is not a formula for business confidence.</p>
  • <p>It's a pretty safe bet that there won't be a rush of additional investment in sugar mills while this code remains. That's important because our international competitiveness is already marginal. If sugar milling becomes uncompetitive through lack of investment, canegrowers will suffer as much as anyone. What growers really need is competition for their cane. They ought to be doing everything possible to attract new entrants into milling, if not investing their own money. As it stands, the only people who say the canegrowers have a legitimate claim are those who are pandering to get their vote, plus a few who don't like foreign investment and don't understand the issues. Significantly, neither the Productivity Commission nor the Queensland Productivity Commission supported this sort of government intervention, noting that it would cost money and jobs.</p>
  • <p>It really comes down to the idea that you shouldn't control what you don't own. Once canegrowers deliver their cane to a railway siding or delivery point near their farm, it belongs to the mill, which processes it into sugar. In the past, when many sugar mills were owned by grower cooperatives, canegrowers felt they had some&#8212;albeit remote&#8212;influence over how the mill marketed its sugar. Australia has a very minor influence on world sugar prices, but growers liked the thought that they had a say. Those days are gone. Most mills now have no grower shareholders at all. However, despite having sold the cane and with no equity in either the sugar or the mill, growers are still demanding a say over who markets the sugar. Some of the owners of mills have vast access to international markets and have put real money into sugar communities. But it seems the main point people make about these owners is the complaint that they are foreigners.</p>
  • <p>This disallowance motion may well be defeated, but the real losers will be future generations of Queenslanders who will continue to see their share of the global sugar market fall to countries with a more business friendly approach. I commend the motion to the Senate.</p>
  • <p class="speaker">John Williams</p>
  • <p>Senator Leyonhjelm has it very wrong here. Leaving it to the market is fine when you have a fair, competitive market. But the fact is that, when canegrowers grow their cane, they must take it as quickly as possible to the nearest processing plant&#8212;the nearest mill. They can't say, 'Oh, the price today at this mill is such and such and down the road it's a better price.' You can't take it down the road.</p>
  • <p>Early in 2014 I met with sugarcane growers at Condong, near Murwillumbah. I spoke to my colleague Queensland Nationals Senator Barry O'Sullivan&#8212;welcome to the chamber&#8212;in June, and we instigated an inquiry through the Rural and Regional Affairs and Transport References Committee in June 2014. We held hearings at Murwillumbah, Mackay and Townsville. They were attended at various times by Senator O'Sullivan, Senator Canavan, Senator Macdonald, former Senator Bullock and committee chair Senator Sterle.</p>
  • <p>Sugarcane production contributes $2.5 billion to the Australian economy each year and is largely concentrated along Australia's eastern coastline in Queensland and New South Wales. That's where the sugar's mainly grown. Queensland has the bulk of the sugar produced by the states, at 95 per cent, and only five per cent is in New South Wales. While it is vastly different, there are some issues which are of common concern to both states.</p>
  • <p>Wilmar, MSF Sugar and Tully Sugar had given notice to terminate their RSS agreements with Queensland Sugar Limited in 2017. This caused great concern in the industry. As the inquiry progressed, it became clear that grower choice in relation to grower economic interest in sugar was an issue of central importance to growers and their representative bodies. Canegrowers and the Australian Cane Farm Association suggest any real choice for canegrowers would be removed if the large milling companies were to take control of the sugar marketing sector. Growers were acutely aware that they were at a disadvantage when it came to the amount of power the milling companies held at the time. The committee was told that, in fact, both sectors of the industry had been experiencing considerable difficulties in their attempts to decide on terms and reach agreements on new contracts.</p>
  • <p>Burdekin District Cane Growers Limited also argued that the tension between growers and millers such as Wilmar had more to do with the imbalance of bargaining power between growers and Wilmar Sugar than it does with Wilmar Sugar being a foreign-owned company. The committee was told there was no statutory or mandatory dispute resolution process which would assist sugar industry stakeholders, both canegrowers and millers, to resolve commercial disputes. The committee observed the strong interrelationship and interdependence which exists between sugarcane growers and sugar milling companies. It was clear that neither would be able to survive without the other remaining profitable and sustainable. There was a lack of trust on the part of the canegrowers in relation to the large milling companies, particularly Wilmar. It was agreed that Wilmar needed to come to the table prepared to engage in positive negotiations with canegrowers and their representatives and that the canegrowers needed to show they were prepared to negotiate in a positive way.</p>
  • <p>At the same time as the Senate inquiry, a task force was involved in the development of a code of conduct for the industry and there was only one recommendation, which stated:</p>
  • <p class="italic">The committee recommends the development and implementation of a mandatory sugar industry code of conduct acknowledging that provide appropriate stake holder consultation is undertaking the work of the sugar marketing code of conduct task force may provide a foundation on which a code of conduct may be established.</p>
  • <p>The code came into force April this year. Quotes from the correspondence received in my office from CANEGROWERS Mackay, which represents 1,100 members, said:</p>
  • <p class="italic">The code came into force in April 2017. Three years into a bitter dispute triggered by several mill owners attempting to unilaterally take control of all sugar marketing in their regions. Assisting a resolution in that dispute, the code is now a point of security for you in our future negotiations. The code addresses a power imbalance between millers and growers by requiring good faith, fair and honest negotiations without intimidation.. In the case of Wilmar sugar suppliers in 2017, the code of conduct forced the miller to complete a cane supplier agreement negotiations and prevented it from continuing to hold growers to ransom head of the start of the season.</p>
  • <p>CANEGROWERS Cairns Region said in a letter to me:</p>
  • <p class="italic">The sugar industry code of conduct is point of security for our organisation in all negotiations with our only available milling company, MSF Sugar Limited.</p>
  • <p>Senator Leyonhjelm talks about the market. I will repeat what they say:</p>
  • <p class="italic">&#8230; with our only available milling company, MSF Sugar Limited. Should the code be disallowed, our sugar cane producers would be put in an extremely vulnerable position in an area where the mill owners, MSF Sugar, has a regional monopoly.</p>
  • <p>Here's the point, senators, about monopolies. Tableland Canegrowers Limited, which represents 80 growers on the Atherton Tableland, told me:</p>
  • <p class="italic">This disallowance motion disregards a 2015 Senate committee's recommendation, pre-judges the code form review in 2018 and was introduced by a senator who has not taken the time to talk to sugar canegrowers, representatives of the industry or to understand its recent history.</p>
  • <p>CANEGROWERS Proserpine, which represents 200 growers, wrote to me asking that I not support this disallowance and pointing out that it fixes the imbalance between growers and millers.</p>
  • <p>Senator Leyonhjelm doesn't seem to understand how the sugar industry works. I note that in a new article on 15 September he said:</p>
  • <p class="italic">Growers need to accept the new reality of multinational companies owning Queensland sugar mills.</p>
  • <p>The manager of Proserpine CANEGROWERS, Mike Porter, said in the same article that his growers get about 60 per cent of the estimated value of the cane delivered to the mill, and for Senator Leyonhjelm to say that they get 90 per cent is stretching it. Senator Leyonhjelm says that spending $400 million on the regulation of the sugar industry was a waste, but this was shot down by Mr Porter, who said that rationalisation has created a lot of efficiencies and that the Australian industry is one of the most efficient in the world, and probably the envy of most countries that grow sugar.</p>
  • <p>It was Minister Barnaby Joyce who said to the sugar industry, 'Come to an agreement, get your act in order, make a decision, or we will.' He said that for months before this was released. Sure, it was backed by Senator Hanson and One Nation. We launched an inquiry in 2014, Senator O'Sullivan and I. We carried out the inquiry, along with other senators here, and we saw how the market is simply unfair in the sugar industry and how the big end of town has a monopoly and can dictate the terms to the canegrowers.</p>
  • <p>Once again, the canegrower, the primary producer, is a price taker not a price maker. Not many of you in this Senate would understand what I'm talking about, but I have lived it for most of my life. Now we have the situation where we now have surety and security and everyone is happy. As I said, Minister Joyce said to them, 'If you don't come to an agreement with the growers and companies like Wilmar, we will put a mandatory code of conduct in.' And we did. Thank you for honouring your word again, Minister Joyce.</p>
  • <p>Now we have someone, in the form of Senator Leyonhjelm, trying to disallow this&#8212;I believe he is backed by the Labor Party and probably the Greens as well. This is scary. Why have you got such a set on primary producers? If the market were fair I would totally support this, but the market is not fair. A canegrower must take their cane to the nearest mill within hours of cutting it. There's none of this: 'What's the price at this mill today?' 'It's such and such.' 'I'll get a quote down the road; I'll take it to the mill down the road.' You can't do that, you have to run it to the nearest mill. There is no competition as far as the mill goes, so the market is failing. It is unfair, and that's why it needs a code of conduct to deliver fairness to the canegrowers. I urge senators to vote against this disallowance motion.</p>
  • <p class="speaker">Cory Bernardi</p>
  • <p>I will only trouble the Senate for a few moments. I regret that this motion has been brought on at this time. I'd had some conversations with Senator Leyonhjelm about delaying or deferring it for the simple reason that I needed more information in order to make a decision.</p>
  • <p>I've met with some of the canegrowers and I have respect for their position, albeit that slightly nuanced positions have been put to me in some of the discussions with different interest groups. What I haven't been able to ascertain is the position of the 'alternative narrative' from the other side of the equation.</p>
  • <p>As I said, I regret that the government has brought this on. I still don't understand the particular reasoning for it but I will listen to the debate and make my decision accordingly.</p>
  • <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>