CALLS for government intervention to restrict the export of “vital resources” like beef and butter, due to free trade expansion allegedly forcing up domestic food prices, have been dismissed as nonsensical and damaging to the national economy and farm sector.
Professor Samantha Hepburn – from Deakin University’s School of Law and an expert in mining and energy law – demanded more regulations to be imposed on farm exports, in the wake of free trade deals like the revamped Trans Pacific Partnership, during a radio interview on Adelaide radio yesterday.
She compared the economic scenario and need for political protection to the local gas industry’s issues with domestic supply requirements versus competing demand from international markets.
Professor Hepburn said meat and butter exports were creating higher prices for domestic consumers and questioned why no export controls were being imposed by government, given the growing demand internationally for products like Australian beef and milk fats.
“These changes mean that consumers are now subject to, much more than ever before, the variability of the global market,” she said.
“And yet food security is so critical for Australians and obviously for domestic consumers.”
Professor Hepburn said she could not explain why a “hands-off” policy approach existed in Australia when our international trading partners imposed export restrictions.
She said the market was changing – due to increased free trade – and therefore the regulatory framework should respond accordingly.
There are much stronger regulatory controls over food exports and imports in competing international markets like the US and Asian countries, she said.
“It’s hard to understand why that’s (increased regulatory control) not happening in the Australian context, because it means domestic consumers are directly impacted,” she said.
“That is the whole point of these types of controls and if you don’t have regulation you’re completely subject to the vicissitudes of the international market.”
Professor Hepburn agreed with the radio host’s proposition that unless regulatory controls over food exports were improved and changed, domestic food consumers would be forced to pay more.
She said 80pc of Australian beef was “going off-shore – that’s an enormous amount – and we’re left to deal with the remainder”.
“This is the strong discussion that needs to be had,” she said.
“Why aren’t we ensuring that domestic consumers are protected as we have massive growth in population and massive shifts in interest in different types of food products?
“We know that the butter market is being impacted by a shift in demand and less interest in skim milk so less production of milk fats; all these sorts of things.
“Domestic consumers need to be protected against this – the global price of butters has increased by 60pc over the past year and cream is also on the rise.
“We will see a lot more of this – it is not going to go away.”
But the Professor’s comments and regulatory demands drew a stinging response on social media and vigorous debate, with calls for expert analysis and response, from farm leaders.
Australian Farm Institute Executive Director head of the competition watch dog’s Agricultural Enforcement and Engagement Unit Mick Keogh said Professor Hepburn’s comments made “absolutely no sense” and if taken to their logical conclusion would result in a dramatic reduction in the size of, and the economic benefits generated by the Australian agriculture sector.
Mr Keogh said Australian agricultural exports were valued in excess of $48 billion in 2016-17, while food imports were valued at about $17b.
He said this $31b trade surplus represented the “excess” agricultural production Australia had available to export, which equalled about two thirds of total agricultural production by volume.
“If export restrictions were imposed to limit the volume of beef or butter exported with the aim of reducing the prices paid by domestic consumers, then this would reduce farmer returns and reduce the economic benefits flowing to regional Australia,” he said.
“There would also be other consequences, however.
“First, those farmers who are able to would simply switch to producing another, more valuable commodity that was not restricted.
“Beef producers in many regions could switch to grain or oilseeds or to running sheep for wool.
“Many dairy farmers could switch to prime lamb, grain or horticultural production.
“The result would be that the more restrictions were placed on the export of certain products, the greater would be the incentive for farmers to no longer produce those products.”
Mr Keogh said the only way to stop that situation happening would be to try and control what farmers produced and what they are paid for that produce.
“Both Russia and China tried that, and North Korea reportedly still does, and by any reasonable assessment that approach has been a spectacular failure,” he said.
“Of course, it might be counter-argued that if Australia also restricted food imports when restricting agricultural exports, then some of our agricultural surplus could be diverted to domestic markets, and that would reduce the negative impact of agricultural export restrictions on regional Australia.
“This sounds reasonable, until it is realised that our food imports are predominantly processed foods, wines and liquor from places like Europe and the USA.
“Those same Australian consumers demanding export restrictions on beef to reduce prices may not be so happy when informed that they will have to pay a lot more for their wine, cheese, prosciutto and whisky.”
Mr Keogh said the other flaw in Professor Hepburn’s argument was that she apparently ignored the fact that exposure to international markets was a two-edged sword for consumers.
“In times when global beef or dairy prices are low, for example, this very quickly flows back to the market here in Australia, to the benefit of consumers,” he said.
“If she is proposing that farmers forego the benefit of higher prices when export demand is high, then she will also need to propose that consumers forego the benefits of lower prices when export markets are over supplied.
“There is also a quite important strategic issue that Professor Hepburn’s proposal seems to ignore.
“Australia’s agricultural exports are very significant in terms of food availability in important regional nations such as Indonesia and China.
“If Australia imposed restrictions on agricultural exports, these nations would be forced to look elsewhere for their food, reducing or limiting the strategic value they place on having good diplomatic relations with Australia.
“This would have consequences that extend much more broadly than just agriculture, including into areas such as defence, security and long-term economic relations – including their level of investment in Australia.
“Given Australia’s chronic current account deficit - we spend more than we save - access to international finance and investment is quite crucial.”
Mr Keogh said the final flaw in Professor Hepburn’s logic was that she relied on a very old-fashioned notion of ‘food security’ implying that we can only eat what we produce.
“This makes no sense at the individual household level and it also makes no sense at a national level,” he said.
“Singapore provides a very successful case study of a nation that is almost totally bereft of agricultural production, but its population has plenty of food because the wealth it generates from trade and financial services is used to buy the food from other nations that have excess food production.
“In this way, the people of Singapore and the people of the nations it trades with are all better off – a living-breathing example of the theory of comparative advantage identified by David Ricardo almost exactly two hundred years ago.”
Professor Hepburn said free market proponents were effectively saying their approach continued to be a viable option because “economic prosperity is connected with the whole concept of free markets”.
But she said “that’s not necessarily the case”.
“There are so many changing variables and what’s actually happening is domestic consumers are being increasingly impacted – and we know the grocery bill is the bill that puts households under the most pressure,” she said.
“We should be asking them (Opposition leader Bill Shorten and Prime Minister Malcolm Turnbull) to take into account the fact that meat and butter are vital aspects of a family’s grocery bill, so how do we deal with this?” she said.
“We need to regulate the export market.
“Certainly we might need to farm cattle more efficiently and make sure that we take advantage of improved genetics, pasture management, technologies etc.
“But we also need to make sure that the domestic market is protected in vital resources.”
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The story Regulating beef and butter exports makes ‘absolutely no sense’ first appeared on Farm Online.