May 21st 2005

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Articles from this issue:

COVER STORY: CANBERRA OBSERVED: Costello's latest budget - do the figures add up?

EDITORIAL: Australia's economy after the Budget

SCHOOLS: Our failure to provide good books for boys

DRUGS: How to crack down on illicit drugs

ABORTION: Public turning against late-term abortions

IN VITRO FERTILISATION: Why Abbott is right about IVF funding

TRADE: New Trade Theory challenges free trade

SUPERMARKETS: Big retailers set to hit farmers even harder

COMMUNISM: Remembering the Vietnamese exodus

ENVIRONMENT: Kyoto Protocol unleashes the friendly atom

Support, don't abort (letter)

Cheaper insurance for pro-lifers? (letter)

Australia's trade woes (letter)

Public inaction over illicit drugs (letter)

OBITUARY: Vale Hugh Slattery: tireless fighter

OBITUARY: Tribute to Sir Joh Bjelke-Petersen

THE SUPREMACISTS: The Tyranny of Judges and How To Stop It, by Phyllis Schlafly

THE PELOPONNESIAN WAR: Athens, Sparta and the Struggle for Greece, by Nigel Bagnall

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Big retailers set to hit farmers even harder

by Patrick J. Byrne

News Weekly, May 21, 2005
A recent proposal to abolish mandatory country-of-origin labelling of imported fresh and packaged fruit, vegetables and seafood, will mean that Australian farmers will lose their local market advantage, writes Pat Byrne.

A proposal to abolish mandatory country-of-origin labelling of imported fresh and packaged fruit, vegetables and seafood comes as supermarkets move to expand to 30-40 per cent "home-brand" product.

Under a proposed new code by the Food Standards Australia New Zealand (FSANZ), labelling of these imports would then be optional. Only if requested by a consumer, will retailers be obliged to provide such information.

If the proposal is ratified later this year, the removal of country-of-origin labels from these products will occur as the major supermarkets multiply their home-brand products, making it much harder for consumers to distinguish between Australian and imported product.

Also, this is occurring as the Australian government is seeking a free trade agreement (FTA) with China, a move that could see a flood of fruit and vegetables imports at costs well below Australian production costs.

The labelling move highlights several significant problems:

  • It raises questions about the adequacy of testing procedures for unsafe chemical residue levels in food imports, which are growing rapidly.

  • It raises questions about how quickly and effectively health authorities could track the source of food contamination and organise the recall of a contaminated product if the country of origin of the contaminated food cannot be identified.

  • It reduces consumer choice, as shoppers will be unable to distinguish between imported and Australian product, particularly in home brand products.

  • Without import-labelling, farmers would lose their local market advantage.

The labelling move, along with the shift to more home-brand products and a possible FTA with China, poses a serious threat to the multi-billion dollar Australian horticulture industry, as imports of many fruits and vegetables can pour in from China, where farm wages are less than $2 a day.

According to Mark Panitz, of the Queensland fruit and vegetable organisation GroCom, "As free trade agreements get worked through, there's going to be more imported produce on the shelves, which increases the need for labelling." He said that it was extraordinary that Australian authorities were proposing to weaken the labelling laws, while the US and EU were doing all they could to tighten country of origin rules. (Weekly Times, May 4, 2005.)

According to a Weekly Times sampling, imported home-brand products include: green beans and canned asparagus from China; rice from Thailand; canola from Malaysia; baked beans from the United Arab Emirates; dried apricots from Turkey; sultanas from Greece; sliced peaches from South Africa; peas from Belgium; apricot jam from Denmark; tomato soup from Scotland; corn kernels from the US; and breakfast cereals from New Zealand.

The Australian Quarantine Inspection Service (AQIS) is responsible for testing imported foods for chemical residues that violate Australia's food safety standards.

The frequency of testing depends on a number of factors - such as the level of preconceived risk of a product; the track record of imports from a particular country or supplier in a country; and the practice that new imports are tested more frequently than those from established sources.

Most food fresh imports from China fall into the category where testing is done on 5 per cent of imports, for 25 chemical residues.

The problem is that AQIS does not test imports for "old world chemicals", such as DDT and dieldrin, or for heavy metals, with the exception of cadmium. And yet many developing countries still use such chemicals that are banned from use in countries such as Australia.

For example, Chinese snow-peas are flooding the Australian market. Local snow-pea producers are asking: why should imported Chinese snow-peas be tested for only 25 chemical residues, and not even old world chemicals, while Australian producers are tested for 61 chemical residues?

In many less developed and emerging economies:

  • There are no laws governing the use of pesticides and chemicals;

  • There is no training and accreditation of farmers in the use of pesticides and chemicals;

  • Many farmers lack education and have little or no knowledge of how to use pesticides and chemicals;

  • There is frequent overuse of chemicals and pesticides, some of which are banned in Australia, leading to dangerous residue levels in food;

  • Heavy metals contaminate farm lands and foods in some Asian countries;

  • There are few, and often no, food-testing facilities in these countries to ensure the safety of food products to consumers, be they local or overseas.

  • Some use raw human and animal sewage to fertilise their product.

Therefore, Australian importers and consumers can have no firm assurance that imported foods from these countries are safe to consume (i.e., that they satisfy Australian food safety standards on pesticide, bio-toxin, heavy metal and other chemical contaminants in imported foods) unless these foods are comprehensively tested by Australian authorities.

Even with developed countries, there are issues with food imports. Some developed countries still use chemicals and pesticides that are banned from use in Australia. Some allow chemical residues at levels that are not permitted under Australian safety rules.

Food safety

Country-of-origin labelling is important in the event of a food scare occurring from a product after it has been purchased by consumers. Food safety authorities have to be able to track the source of the product, identify what batches are contaminated, track the distribution of the product and then manage a recall and safe disposal.

For this to occur, country-of-origin labelling is considered important in identification and tracing of a product, alongside the address of the importer and local supplier/distributor.

The change to labelling laws comes as the major supermarkets, with 75 to 80 per cent of the grocery market, plan to expand their home-brand range of products and reduce their range of stock to the top-selling two or three brands.

Woolworths home-brands include "Home Brand" and "Woolworths". Coles home brands are "Farmland," "Savings", "Reliance", "Persona" and "Coles Organic".

Coles plans to treble its share of home brands to 30 to 40 per cent of products over two years. Woolworths plans to expand its home brands to 200 different products. They are following the example set by US retail giant, WalMart, and Britain's Tesco.

The Tesco supermarket chain has 27 per cent of the grocery market. Interviewed on the Seven Network's Today Tonight programme recently, UK retail consultant, Robert Clark, said that almost all of Tesco's home brands include cheap, medium and expensive labels.

Clark said, "What tended to happen was that smaller manufacturers got squeezed. They couldn't get shelf-space because of the growth of own labels [home brands]".

As Barry Flanagan of Retail World magazine described to Today Tonight, the supermarkets "can go to a manufacturer, get a price they can set themselves, and sell it at their own price."

Robert Stockdill of Foodweek magazine also told Today Tonight, "Coles and Woolworths are basically screwing suppliers to the wall", but suppliers had to deal with them because of their overwhelming dominance in the grocery market.

"We've had some companies tell us on a no-name basis that they've been asked to pay as much as $800,000 a year to keep their full range in one of the two chains," Mr Stockdill said.

News Weekly has pointed out before that the major supermarkets make minimal profits out of retailing. Their cost of doing business is 23 to 25 per cent of gross sales. In comparison, an independent liquor store's cost of business is 14 to 15 per cent of gross sales.

The overwhelming bulk of supermarket shareholders' returns comes from supplier rebates and discounts. Suppliers are required to pay rebates to the supermarkets for shelf space, favoured aisle positioning, refrigeration, etc. For some industries such as dairying, rebates cost suppliers tens of million of dollars a year.

Powerless farmers

Farmers have been left with no market power to bargain a fair price with the supermarkets. National Competition Policy has done away with the marketing and other arrangements that once gave farmers and processors the market power to bargain a fair price with supermarkets.

In this brave new deregulated economy, the Australian Competition and Consumer Commission (the ACCC) was supposed to ensure fair, competitive practices in the production and distribution chain. But it has lacked the muscle needed to stop many uncompetitive practices, and there has been no political will to arm the ACCC with the powers needed to ensure fair competition.

At least in the UK, the Office of Fair Trading last year admitted that its voluntary code of practise, which is supposed to shield farmers from the excessive power of the supermarkets, is not working. But, like its Australian counterpart, its remedy is just "more research".

  • Pat Byrne

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