“PEACE has broken out” in the closing stages of developing a mandatory code of conduct to manage port access for bulk wheat exports, says Liberal MP Angus Taylor.
The code regulations must be implemented by September 30 and represent the final vestiges of government legislation surrounding the controversial removal of AWB’s wheat export single desk monopoly in 2008.
Federal Agriculture Minister Barnaby Joyce has been refining the code’s final details with Small Business Minister Bruce Bilson over recent weeks, sparking allegations of Coalition infighting between Western Australian Liberals and east coast Coalition MPs.
WA Liberals have called for full deregulation, reflecting strong industry views in their home State, while eastern MPs have backed calls for regulations protecting their growers against potential market exploitation from restricted competition.
Last week, Prime Minister Tony Abbott closed down debate on the vexed issue in the Coalition’s joint party room meeting in Canberra, in the absence of an agreed code.
“A couple of people who don’t know anything about wheat exports have heard the word ‘regulation’ and decided to take up the fight,” one source said.
No east-west spilt: Coalition
But as the Coalition publicly rejected claims of disunity over the code’s development, Mr Joyce said final agreement had now been reached.
The regulations are expected to be signed off at the September 18 Federal Executive Council meeting, ahead of the code’s implementation deadline.
Mr Joyce said he and Mr Bilson had agreed to the final code, which would see co-operatives exempt - but only in their own market “because if they work in another market they’re inherently in the same position as any other operator”.
“There’s no exemption for a company – there are exemptions for certain conditions – all companies are treated the same (but) how they act will be assessed and not who they are,” he said.
It’s understood the code will also contain a three-year review, but no five-year sunset clause as demanded by the WA Liberals who supported full deregulation.
As argued strongly by Mr Taylor, growers will also have a “seat at the table” through inclusion of a mechanism ensuring their formal involvement in any arbitration issues.
'PGA was never going to be happy'
Mr Joyce said most farming groups would be happy with the final code except for Western Australia’s Pastoralists and Graziers Association (PGA), which has been a long-running champion of wheat export deregulation.
“PGA was never going to be happy,” he said.
“PGA will be happy when you corporatise CBH and a big fat cheque turns up in a few of their wallets.
“But all this is driven with the farmers’ views at the forefront because we need to work on the key principle of fair return to the farmgate and you can’t have a fair return without transparency.
“Any monopoly position, whether it’s a monopoly in telecommunications or in poles and wires or at the ports, inherently needs regulations, otherwise you’ll get exploitation in that market segment.
“We’re not going to work for a better return for the farmer to see it legally and appropriately consumed by a monopoly operator, because that’s just inherently counterproductive.”
Regulation not the preferred option
Mr Joyce said regulation was always second choice and “a clumsy mimic of market conditions”.
Be he said “a clumsy mimic of market conditions” was vastly preferable to having no market competition whatsoever “and that’s what a monopoly is”.
Mr Joyce said if growers benefited from any market exploitation there was less concern for regulators, hence the exemption for co-ops.
“But if that same organisation works outside their natural market, then that’s something entirely different,” he said.
He said sunset clauses generated complacency but an inbuilt review mechanism overcame that potential issue.
“I believe in reviews where after a period of time the review can determine how people are acting and if they’re acting in an appropriate way, different decisions can be made down the track,” he said.
Mr Taylor said competition issues still existed in the deregulated market – but the three-year review would “typically” consider whether the regulations should be removed.
He said the code only concerned bulk wheat exports and a comprehensive government review of competition rules and regulations would now consider whether it should include other grains.
“Peace has broken out and in the end we’ve settled on a really sensible solution that meets the needs of east and west coast growers,” he said.
“Certainly east coast farmers have done a lot of work to understand the real issues with competition within their market place and I’m positive they are doing that rather than engaging in ideological trench warfare.
“But there’s still some work to do with competition in agricultural supply chains; we haven’t got that right yet.”
Protection still needed
East coast farming groups expressed comfort with the code’s final contents. Grain Producers Australia chairman Andrew Weidemann said the eastern market was not yet mature enough to handle full deregulation.
“If we’re going to have deregulation of wheat exports we need some regulation to manage the competition issues and protect growers,” he said.
Mr Weidemann said if CBH operated in the east coast market, the co-op would need to adhere to the code of conduct.
He said other concerns with releasing grain stocks information would be “thrashed out” during a current federal Senate inquiry into Australian grain networks.
Having a seat at the table during arbitration over any competition issues would ensure grain growers “aren’t getting screwed”, he said.
Mr Weidemann also rejected suggestions the Coalition had been deeply divided during deliberations to develop the code.
“That’s not the case at all – everyone seems to have worked through the issues to reach the best outcome,” he said.
However, the PGA objected to the code based on concerns CBH’s exemption could discourage potential investment in supply chain competition.
PGA grains committee chair John Snooke said it was “a very bad outcome for the Western Australian grains industry”.
“It will reaffirm to those in the trade, that are questioning whether they should be in WA or not, that maybe given that CBH is going to be politically protected, that maybe we shouldn’t participate in the marketplace in WA,” he told ABC radio.
WA Liberal Senator Chris Back said full deregulation was the best option for his home State but the three-year review could still provide that result.
”You would hope like hell the review process is on track and the industry can move to full deregulation,” he said.
Senator Back said there was an exemption for co-operatives in the code but “everyone keeps forgetting” all companies remained subject to section 3a of the Trade Practices Act which empowers the ACCC to monitor “monopolistic behaviour”.
He said that meant any grain exporters could complain to the ACCC if CBH or any other port terminal operators were engaged in anti-competitive behaviour.
WA Liberal Senator Dean Smith has said the ultimate preference for WA Liberal backbench MPs and Senators was to repeal the Act.
But if that can’t occur, “then at the very least we must ensure any port access regime properly reflects the WA wheat market and does not add to the regulatory and cost burden on WA wheat growers”.
Code sees off WEA legacy
The previous parliament agreed to implement a mandatory code of conduct for port access by the end of this month to help pass legislation to scrap Wheat Exports Australia (WEA).
In late 2012, the Greens moved amendments in the Senate which established a seven member wheat export industry taskforce charged with developing the port access code by examining supply chain arrangements.
In early June, Mr Joyce released a regulatory impact statement offering four key options on a potential code.
Option one was to maintain the status quo; the second was introducing a mandatory code of conduct with a ‘one size fits all’ approach, the third was a mandatory code that can adjust to competition levels and vertical integration; and the fourth was to fully repeal the Wheat Export Marketing Act by September 30.
NSW Liberal Democratic Party Senator David Leyonhjelm said he agreed with Senator Smith that full deregulation was the best option for managing port access.
“The market for grain handling has become competitive now and there’s no case for the government to go stomping around in there regulating it,” he said.
“I’m convinced GrainCorp is nothing like the monopoly it’s painted to be; I don’t think it’s even vaguely a monopoly.
“CBH is closer to being a monopoly in the West but as the Bunbury port expands and other options become available CBH is less and less of a monopoly.
“So the idea that government needs to regulate port access only diminishes as monopoly power declines.
“I’m pretty much with Dean Smith – there’s less and less case for regulating ports.”