Open for which business?

Blocking the acquisition of GrainCorp might make them feel warm, but it will do nobody any good

THE Prime Minister has set a working target of 12 months to sign free trade agreements (FTAs) with Australia's three biggest export markets, China, Japan and Korea.

His reasoning is, “if you can't get a multilateral agreement, better to get a plurilateral agreement, and if you can't get a plurilateral agreement, better to have a series of bilateral agreements”.

Several of Australia’s competitors already have FTAs with these countries, including New Zealand. Various agriculture sectors, especially dairy, claim this is costing us dearly. Everyone, even protectionists, is happy to see increased exports.

The Opposition argues no deal will be struck unless the Coalition dumps its plan to tighten regulation on foreign investment, including lowering the threshold for Foreign Investment Review Board (FIRB) review. That is probably true, at least for China. And if the Archer Daniels Midland (ADM) takeover of GrainCorp is blocked or unreasonable approval conditions are imposed, the Chinese will draw the obvious conclusion – Australia is not open for business at all.

That would leave the protectionist faction in the Liberals, led by Bill Heffernan, along with most of the Nationals, including Barnaby Joyce, in a bit of a quandary. Do they care more about keeping GrainCorp in Australian hands, or about better access to export markets?

Much has been said about foreign investment in Australian agriculture, and I have also discussed it, but there is not much said about the reason Australians are reluctant to invest in it themselves.

Suppose you bought shares in GrainCorp in 2011, perhaps when the producer group GrainGrowers sold its stake. Until three months ago when the share price rose sharply as a result of the takeover offer by ADM, you would have been better off investing in an index-tracking managed fund. While the value of your investment rose, the overall market did better.

The offer changed that. You could now sell the shares at a useful profit and beat the market. But if you choose not to sell and the government blocks the ADM offer, the share price will probably fall by at least half. Very likely it wouldn’t rise again for a long time and you would receive little if any dividends either. GrainCorp's assets have been deteriorating for years and it needs capital. Unprofitable spur lines and small silos need to close.

For fairly obvious reasons, I wouldn’t want any of my superannuation invested in it. And I am not alone in that view. Australian agriculture generally has a poor record as a source of investment returns. Add the risk that government policy will cut returns because of protectionism and it looks decidedly unattractive.

The problem for the protectionists is they have no plan B. Blocking the acquisition of GrainCorp might make them feel warm, but it will do nobody any practical good.

But there is a way in which they could help the economy while keeping GrainCorp in local hands. That is, by supporting unilateral free trade.

The popular notion that free trade requires reciprocal agreements is nonsense, and Tony Abbott’s claim that the best option is multilateral agreements is not correct. The best option for Australia’s economy would be to unilaterally remove all tariffs, import levies, duties and other import costs without waiting for corresponding action by our trading partners.

It does not matter that other countries subsidise their industries to make goods cheaper than ours. Indeed, we should welcome imports that are subsidised by the taxpayers of another country. It’s the equivalent of foreign aid.

Unilateral free trade has a proven record of promoting prosperity. Hong Kong and Singapore, both island nations with no mining or agriculture industries, have benefited immensely from freely buying and selling with the world.

Trade leads to prosperity, and free trade leads to more of it. Trade negotiations are effectively arguing that if you don't stop making your citizens poorer, then we'll just make ours poorer to spite you!

Unilateral free trade would also give us leverage with other countries to do the same. It would be much harder for China, or any other country for that matter, to deny us market access if we have already opened up our markets to them.

There is no shortage of entrepreneurs willing to invest their own money in new ventures that would compensate for any loss of jobs, helped by the fact that imported inputs would be cheaper.

And if GrainCorp was kept in Australian hands, grain storage and handling is an area in which they would invest. There would be numerous opportunities for new ventures as GrainCorp's capabilities decline.

So how about it Bill, Barnaby and the rest of the protectionist lobby? If they keep GrainCorp in local hands, why not support unilateral free trade? The market will do the rest.

  • David Leyonhjelm has been an agribusiness consultant for 25 years and was recently elected to the Senate for the Liberal Democrats. He may be contacted at
  • Page:
    David Leyonhjelm

    David Leyonhjelm

    has worked in agribusiness for 30 years and is a Senator for NSW representing the Liberal Democrats.
    Date: Newest first | Oldest first


    Ted O'Brien.
    11/11/2013 3:32:47 AM

    David, one of the beneficial effects of blocking this takeover would be its depressing effect on our exchange rate. One of the key factors in the inflation of our exchange rate since the "floating" (it was and still is a 'dirty float') of the exchange rate has been a demonstrated willingness to sell capital items to pay current accounts. This culminated with the Campbells Soups takeover of Arnotts biscuits, where to stave off "the recession we had to have" our government coerced institutional investors to hand control to Campbells Soups.
    11/11/2013 6:26:55 AM

    Couple of home truths here: 1. lets make investing in Ag by Australian funds even less attractive - OZ farmers lose !! 2. no bigger balance sheet/ no local capital means that the best option for Graincorp to increase financial performance is to close every underperforming receival point and spur line -OZ farmers lose !! 3. increase protectionism - no free trade agreements - nz dairy farmers, south American fruit growers, north American grain/beef growers win - OZ farmers lose !! Just saying !
    11/11/2013 7:45:41 AM

    David is missing the point. Before talking about foreigners being allowed to buy up Australian infrastructure, the whole foundation upon which our farming industries sit, compared with global competitors, needs looking at. The ADM/GC issue is just a symptom. ADM grew up in the USA which blatantly argues free trade and anti protectionism, while pumping billions of $$$'s in subsidies into its farmers, as do EU. Our farmers get a few tiny tax perks countered by a 2nd rate deal on national infrastructure. Unless we start addressing this O/S corruption, we will all be slaves to the ADM's and Co.
    Bushie Bill
    11/11/2013 8:54:24 AM

    This "O/S corruption" as you call it, LTF, is beyond our control, and in any event, works in our interest, as John points out. Ted, the impact of this takeover on the value of our currency is infinitesimal and totally irrelevant.
    11/11/2013 10:35:02 AM

    I have never seen a detailed analysis of the pros and cons of foreign investment impact on the Australian sector affected, and the effects of Australians in general. Does FIRB actually produce such reports for public viewing? It would be interesting to read a independent factual report of the effects of past foreign investment on Australians. Australian's cost of living increase every time a piece of Australia is sold off, and every time large corporations monopolise the market place. Australia's sustainability is in preserving our sovereignty and growing jobs through small business.
    11/11/2013 11:22:40 AM

    Overseas market corruption works in our interest does it bushie. Please explain just how, because I don't think you have a clue?
    Bushie Bill
    11/11/2013 11:28:43 AM

    Peter, why do you say "Australian's (sic) cost of living increase every time a piece of Australia is sold off"?
    Bushie Bill
    11/11/2013 12:41:26 PM

    David has already explained it to you, LTF.
    11/11/2013 4:22:28 PM

    As I said bb, you don't have a clue.
    eric hunt
    11/11/2013 6:50:07 PM

    David is just flying a kite bb, and if you think any one would seriously consider just swapping the multi billion Australian grain industry for that kite, you are out of your mind. The concept is totally without detail, research, justification, or planning.
    1 | 2 | 3 | 4  |  next >
    Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at


    light grey arrow
    I'm one of the people who want marijuana to be legalized, some city have been approved it but
    light grey arrow
    #blueysmegacarshowandcruise2019 10 years on Daniels Ute will be apart of another massive cause.
    light grey arrow
    Australia's live animal trade is nothing but a blood stained industry that suits those who