AGRICULTURE: by Colin TeeseNews Weekly
Imports threaten $55 billion agricultural market
, December 16, 2000
The Queensland University of Technology School of Business is not in the habit of surrounding itself in controversy. But the opinions of its Mark McGovern - probably without meaning to - have changed all that in a paper entitled On The Unimportance of Exports to Australian Agriculture. Ministers, both State and Federal, along with other uninformed, have joined in the chorus of attack upon McGovern. Farmers, especially in Queensland, don't quite know what to make of his assertions; cautiously, they want more information. Essentially, McGovern accuses conventional analysts of Australian agriculture of failing to understand, and therefore misleading, those involved in making policy and conducting commerce in agriculture.
What exactly is McGovern's point? Contrary to orthodox belief, most of our agricultural output is sold on the domestic market and we are making agricultural policy (both domestic and international) as if the opposite were true. The figures are incontrovertible. Agricultural production at the farm gate in 1993-4 was $23.5 billion; exports were $5 billion.
Total raw and processed agricultural output is worth about $39 billion on the domestic market. Exports account for another $16 billion. Bearing in mind these magnitudes - and the attitudes of the US and EU to agricultural imports - the chances of significantly increasing the $16 billion of exports are extremely small and, in any case almost entirely outside Australia's control. McGovern asserts with telling accuracy that our international and domestic economic policy - which is apparantly aimed at linking increased exports with deregulation of the domestic market - makes no sense.
In effect, policy makers are in the process of opening the doors to our $55 billion market for domestic food and fibre products to the entire world, with little or no ability to manage the consequences.
Some will be inclined to insist that I overstate the risks to our market. Thus far, they will maintain, import competition for Australian food and fibre products, has achieved only low levels of market penetration. But remember this: it is only now that that the effects of deregulation and so-called competition policy - along with a more permissive policy towards quarantine - are pushing the gates fully open to imports. Be prepared for a surge in the imports of food and fibre products similar to what happened to manufacturing industry once we exposed it to the full blast of competition.
Now regular readers of News Weekly will no doubt wish to remind me that in the context of agricultural exports, I have myself pointed to the export dependence of some of our farm sectors. And so I have. The purpose then was to underline the enormous disadvantage our exports faced with subsidised competition (mostly from large economic powers) who exported only a small percentage of their output.
Now our farmers are being asked to accept nothing better than low world prices as they compete with heavily subsidised products on world markets.
Mark McGovern does not deny any of this: indeed he points out that while what he says applies overall, for some products, and in some regions, there is a heavy dependence upon exports. And obviously, that is an aspect of our agriculture for which policies are absolutely necessary. But McGovern is rightly drawing our attention to the wider issue, which touches all farmers (including those who are export dependent). In effect, he reminds us once more that farm prosperity begins at home.
Farmers will be well aware of the standard responses whenever these kinds of concerns are raised. "You must become internationally competitive; if we want access to the markets of others, we must open ours." And so on. Well, who says local farmers are not internationally competitive? And by what measure?
Nobody really knows what the phrase means, but what farmers know, and McGovern acknowledges, is that their returns are inadequate - even on the domestic market. They are unable to influence world markets. And contrary to well held opinion, domestic consmers are not getting cheaper food.
According to World Bank figures published in l993, Australians in the 1980's spent more of their income on food than did consumers in UK, US, Germany, and Hong Kong.
McGovern concludes, again rightly, that the paradox of farmer's returns being squeezed, while consumers are not benefiting, needs to be explained.
The question then for our political parties is why we are embracing free market policies, which disadvantage farmers and don't help consumers, instead of following the example of the European Union.
We have always known that their subsidy policies have achieved their aim of keeping farmers prosperously on the land; now, accordmg to the World Bank, it would seem that those policies better serve consumer interests as well.