CHAPTER 2

CUSTOMS TARIFF AMENDMENT BILL (NO. 2) 1997 (NO. 3)

CHAPTER 2

  • CHAPTER 2
  • COMMENT ON THE LEGISLATION
  • Overview
  • Growers Views
  • Millers Views
  • Manufacturers Views
  • The ACCC and the Refiners Agreement, 1997
  • CHAPTER 2

    COMMENT ON THE LEGISLATION

    Overview

    2.1 As noted in the Committee's Report, the Committee concentrated its inquiry on the effect of removal of the sugar tariff on canegrowers. It considered questions raised in the SIRWP Report relevant to the tariff issue, particularly as they relate to the pricing of domestic sugar.

    2.2 The Committee took evidence on the effects of the tariff removal from the range of interests in the sugar industry, growers, refiners, millers and end users.

    Growers Views

    2.3 The Committee's principal task was to assess the effect of the removal of the tariff on imported sugar and sugar by-products on sugar cane farmers. The Committee discussed this question in detail with three groups representing canefarmers: the Australian Cane Farmers' Association, a voluntary body representing canefarmers (ACFA); Canegrowers', the statutory body representing all Queensland canefarmers (Canegrowers); and the NSW Cane Growers' Association, representing NSW canefarmers (NSW Growers). In addition, the Committee also had submissions and heard evidence from several Canegrowers' branches in Queensland.

    2.4 ACFA told the Committee the sugar tariff, as it had stood before its removal in July 1997, was not offensive as it more than met Australia's obligations to the World Trading Organisation. The Canefarmers' Association also noted that removal of the tariff would cost canefarmers some $30m (and some $100m with multiplier effect).[1]

    2.5 ACFA stressed that the organisation supported the majority of the SIRWP recommendations, but had always opposed total removal of the tariff:

    2.6 The view taken by ACFA was that, with removal of the tariff, the price per tonne paid to canefarmers for delivered cane had dropped, by a yet indeterminate figure, but in the vicinity of 30 cents per tonne. The change to pricing policy on sugar sold for domestic consumption from a basis of import parity fixing to export parity fixing would, ACFA said, lead to a net reduction in price to growers.[3]

    2.7 ACFA's submission is that the tariff be restored, failing which an appropriate compensation package for canefarmers be paid.[4]

    2.8 By way of contrast, in its submission, Canegrowers' stressed to the Committee the importance it attached - especially during the SIRWP deliberations - that any removal of the tariff be connected to retention of the SDS arrangements.

    2.9 Canegrowers' maintained that removal of the sugar tariff was part and parcel of a viable package of measures which was intended to be implemented in an integrated program. Canegrowers' comments to the Committee can be summarised thus:

    2.10 Mr Harry Bonnano, a member of the SIRWP and Chairman of Canegrowers' told the Committee:

    2.11 In relation to a principal criticism of the decision to recommend removal of the tariff - that any consultation with canefarmers did not reflect a widely conducted consultation process - Mr Bonnano told the Committee how SIRWP had structured this process:

    2.12 It was also apparent from discussions with Canegrowers' that the question of whether the removal of the tariff was linked to retention of the SDS mechanism had been of central importance to SIRWP's deliberations, principally due to the apparent relationship between the SDS mechanism and National Competition Policy

    2.13 The position taken by Canegrowers' to the tariff did not coincide with other canefarmers' groups consulted by the Committee, but conceded that, if canefarmers stood to gain in the long-term from removal of the tariff, consumers may not.[9]

    2.14 NSW Growers' views on removal of the tariff were determined by the fact that NSW growers or their representatives were not represented on the SIRWP, though it did make written representations to SIRWP process. The SIRWP report did concede that the removal of the tariff would have a greater impact (for growers) or the NSW industry.[10]

    2.15 NSW Growers' submission advocated tariff retention for the following reasons -

    2.16 NSW Growers maintained that retention of the tariff would produce a greater advantage to NSW growers than Queensland growers, as even a modest tariff would act to inhibit the ability of opportunistic marketing from subsidised producer nations to corrupt the Australian domestic market; the major part of NSW sugar production.

    2.17 Adoption of import parity pricing would `add to the domestic market returns to producers in both Queensland and NSW' but would not achieve the transparency and simplicity offered by retention of the tariff.[11]

    2.18 In discussions with the Committee, NSW Growers highlighted estimated losses from the removal of the tariff to the towns within the NSW sugar growing area as some $8m directly, and some $425m as a multiplier effect:

    2.19 The NSW Government submission calculated the loss to NSW growers of removal of the tariff (and subsequent reduction in domestic sugar price) as $14,800 per grower, compared to a total loss of approximately $20m to Queensland, or approximately $3,400 per grower.[13]

    Millers Views

    2.20 The principal sugar millers in Australia held differing views on the tariff.

    2.21 Bundaberg Sugar, in its submission, maintained that while the SIRWP recommendations were accepted by the Queensland and Commonwealth Government, the effect on local areas of production - such as Bundaberg - was difficult to predict.

    2.22 Mackay Sugar submitted that any acceptance of removal of the tariff was under earlier circumstances, and that a case would be made out for payment of assistance to replace the tariff element in import parity pricing.

    2.23 Sugar North Ltd put its submission to the Committee that the tariff be retained in these terms:

    Manufacturers Views

    2.24 End-users of Australian sugar presented views to the Committee which were strongly in favour of permanent removal of the tariff.

    2.25 In its submission, the Australian Food Council noted that:

    2.26 In its submission the Australian Soft Drink Association noted that:

    2.27 In discussion with the Committee, the Chief Executive of the Association, Mr Tony Gentile - a member of the SIRWP - noted that the effect of the tariff removal followed careful evaluation of the benefits and losses to all parties in the industry

    2.28 He stated in evidence to the Committee:

    2.29 Mr Gentile also stressed to the Committee that the effect of removal of the tariff would be to reduce the price of sugar to the manufacturer, a reduction which would inevitably be passed on to the consumer, though unit costs of sugar in the industry were too low to quantify the gain.

    The ACCC and the Refiners Agreement, 1997

    2.30 In 1997, the ACCC found in favour of a merged refining entity combining refining plants owned by CSR Sugar and Mackay Sugar was permissible under the Trade Practices legislation.[20]

    2.31 The ACCC decision in 1997 followed an earlier decision, in 1993, to refuse authorisation to the joint venture. In its release, the ACCC noted that in 1993:

    2.32 In its July decision, the ACCC stated that the:

    2.33 The decision that the ACCC made in the sugar refiners' case was a matter of particular interest to the Committee, as the claim was consistently made that any reinstatement of the tariff would result in a reassessment of the ACCC decision. In its reasons for decision, the ACCC noted that the removal was a `.. significant development since it leads to a lowering of the import parity price, and a corresponding increase in the competitiveness of imports.'[23]

    2.34 In response to questions Professor Fels, Chairman of the ACCC, said:

    Later he said:

    2.35 During the Committee's discussions with the ACCC, the ACCC was asked about the effect of IPP as possibly anti-competitive:

    Footnotes:

    [1] ACFA, Submission 6, p. 2-3.

    [2] Evidence, Brisbane, pp. 165-6.

    [3] Evidence, Brisbane, p. 166-8.

    [4] Evidence, Brisbane, p. 172.

    [5] Canegrowers, Submission 13, p.5-6.

    [6] Evidence, Brisbane, p. 198.

    [7] Evidence, Brisbane, p. 200.

    [8] Evidence, Brisbane, p. 204.

    [9] Evidence, Brisbane, p. 204.

    [10] See SIRWP Report, pp. 80-1.

    [11] NSW Sugar Milling Co-operative and NSW Cane Growers' Association, Submission 8, pp. 6-8.

    [12] Evidence, Brisbane, p. 192.

    [13] NSW Cabinet Office, Submission 17, p. 2.

    [14] Evidence, Brisbane, 10 October 1997, p. 175.

    [15] Evidence, Brisbane, 10 October 1997, p. 180.

    [16] Evidence, Brisbane, 10 October 1997, p. 186.

    [17] Australian Food Council, Submission 7, p. 3.

    [18] Australian Soft Drink Association, Submission 2, p. 2.

    [19] Evidence, Brisbane, 10 October 1997, p.159.

    [20] `ACCC not to intervene in proposed sugar refining joint venture' (sourced to http://www.accc.gov.au/media/sugar.htm), 30 July 1997.

    [21] Ibid, para. 2.

    [22] Ibid, paras. 4 & 5.

    [23] Ibid, p. 2, para. 1.

    [24] Evidence, Canberra, p. 222.

    [25] Evidence, Canberra, p. 224. best answer to the question that I can give you.